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                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


                                  Form 10-KSB

[X]  Annual report under Section 13 or 15(d) of the Securities Exchange Act of
     1934 for the fiscal year ended September 30, 1998

[_]  Transition report under Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the transition period from ___________ to ____________

Commission File Number:  1-11883

                                EMB CORPORATION
                                ---------------
                (Name of small business issuer in its charter)

                Hawaii                               95-3811580
                ------                               ----------
    (State or other jurisdiction of     (I.R.S. Employer Identification No.)
     incorporation or organization)

         3200 Bristol Avenue, 8th Floor, Costa Mesa, California  92626
         -------------------------------------------------------------
                   (Address of principal executive offices)

Issuer's telephone number:  (714) 437-0738

Securities registered under Section 12(b) of the Exchange Act:

     Title of each class             Name of each exchange on which registered
     -------------------             -----------------------------------------
             N/A                                       N/A

Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, no par value

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes  [_]
No [X]

     Check if there is no disclosure of delinquent filers in response to Item
405 of 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.  [X]

     The issuer's revenues for its most recent fiscal year:  $14,739,642

     The aggregate market value of voting stock held by non-affiliates of the
     registrant as of September 30, 1999:
          Common stock, no par value:  $11,172,617

     The number of shares of the registrant's common stock outstanding as of
September 30, 1999:  26,340,955 shares

     Documents incorporated by reference: Certain exhibits to the Forms 10-KSB
for the fiscal years ended September 30, 1996 and September 30, 1997, and the
Registration Statement on Form SB-2 (File No. 333-21719) and amendments thereto
of the registrant are incorporated herein by reference.

     Transitional Small Business Disclosure Format:

                             Yes  [_]      No  [X]
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                                 PART I

Item 1.  Description of Business.
         -----------------------

          General. The Company, formerly called "Pacific International, Inc.", a
Hawaii corporation, was incorporated in 1960, and was originally organized to
acquire and manage developed and undeveloped real estate.  However, the Company
had not conducted significant operations for a number of years until it agreed
to acquire substantially all of the assets and assume certain liabilities of
Sterling Alliance Group, Ltd. ("SAG") in December 1995. Subsequently, the
Company changed its name to EMB Corporation to reflect the change in the purpose
and nature of its business.

          As of September 30, 1998, the principal business of the Company was
the origination and processing of residential mortgages.  Mortgages originated
and/or purchased by the Company, through its wholly owned subsidiary, EMB
Mortgage Corporation ("EMB Mortgage") were resold primarily to Impac Funding
Corporation, a division of Impac Mortgage Holdings, Inc. although some mortgages
were sold to other third parties.  The Company also engaged in the origination
and processing of commercial mortgage loans.

          As of September 30, 1998, the Company, through EMB Mortgage,
originated loans through its executive office in Costa Mesa, California and
through its branch offices located in California, Colorado, Florida, Nevada and
Texas.  The Company's strategy of originating, as compared to purchasing, a
substantial portion of its loan volume resulted in the generation of origination
fees, service release fees, and other fees which were the principal source of
revenue to the Company.  The Company sold all of its mortgage loans, and did not
retain any servicing rights.

          Beginning in July 1998, the Company began to consolidate its
operations in order to reduce overhead costs and to strengthen its quality
control of the loans being underwritten and funded by the Company. Between July
1998 and September 30, 1998, the Company closed its branch offices in Las Vegas,
Nevada, Houston, Texas and Ft. Lauderdale, Florida.

          Beginning in October 1998, the Company was informed by Impac Funding
Corporation ("IMPAC"), the purchaser of a majority of the Company's mortgage
loans, that IMPAC, due to problems associated with its resale of loans through
mortgage securitizations, was intending to restrict the number of loans that it
would purchase from the Company. In addition, IMPAC advised the Company that its
underwriting guidelines would be tightened and its pricing to the Company would
be changed.  As a result of these events, on December 22, 1998, the Company was
forced to terminate the majority of the staff of EMB Mortgage at its Costa Mesa,
California office.  EMB Mortgage, since December 31, 1998, has not utilized any
warehouse lines of credit to fund loans for resale, but has continued to employ
a small staff to originate, process and broker loans to various mortgage
lenders.

          On or about December 31, 1998, the Company sold it Daytona Beach,
Florida office to the management of the branch office.  In January 1999, the
Company closed its offices in Dallas, Texas and Sherman Oaks, California.  In
March 1999, the Company sold the assets

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comprising the Denver operations to management located in Denver. As a result,
as of March 1999, the only office of the Company was located in Costa Mesa,
California.

          In May 1999, the Company acquired all of the issued and outstanding
stock of two mortgage companies: American Residential Funding, Inc. a Nevada
corporation ("AMRES") and Residential Mortgage Corporation, a Nevada corporation
("RMC").

          At the time of the acquisition, AMRES operated four company-owned
offices and licenses 10 Net Branch offices, all of which were located in
Southern California.  With respect to company-owned offices, AMRES pays all
operational expenses and retains all of the income generated from that office.
A Net Branch differs in that AMRES entered into an agreement with an
independent, third party mortgage or real estate broker, licensing it to use the
AMRES name and to operate an AMRES-branded branch. The owner-manager of the Net
Branch pays all expenses of the Net Branch, including a payment to AMRES of a
pre-established fee for each closed mortgage loan.  All net income is retained
by and all net loss is borne by, the Net Branch owner-manager.  The amount of
the fee paid to AMRES varies depending upon the loan type and amount.  In
addition, AMRES receives various costs for associated with the loans which are
charged to the borrower(s).  AMRES currently intends to expand its business
through the development of additional Net Branch offices.  As of September 30,
1999, AMRES had four Company owned offices located in Southern California.  In
addition, it had approximately 50 Net Branch offices which were located in
Southern California, Hawaii, Arizona and Florida.

          Prior to its acquisition by the Company in May 1999, RMC had not
actively engaged in business for approximately one year.  The Company has
reactivated RMC's warehouse lines of credit of RMC and renewed RMC's approvals
with the various government and government-affiliated lenders: FHA, VA, FNMA
("Fannie Mae") and FHLMC ("Freddie Mac").  The Company intends for RMC to
operate as a traditional mortgage banker, funding loans brokered to it by AMRES
and other independent mortgage brokers.  In addition, the RMC currently operates
and Internet-based, direct-to-consumer retail mortgage operation.

          On June 7, 1999, the Company entered into a Letter of Intent to
acquire Titus Capital Corporation, a California Real Estate Investment Trust. At
present, the transaction has not been completed, but management intends to do
so.

          For more information on the Company's acquisition and/or disposition
of subsidiaries and assets subsequent to September 30, 1998, please see Note 3
and 17 to Consolidated Financial Statements.

Residential Mortgage Lender

          General.  The Company, through its wholly-owned subsidiary, EMB
Mortgage, had, since 1995, engaged in business as a retail mortgage broker. In
1997, it commenced its operations as a wholesale mortgage banker. As of
September 1998, EMB Mortgage originated its own loans and those of its licensees
on a retail basis and provided wholesale lending services to approved mortgage
brokers.  Its primary correspondent lending relationship was with IMPAC, a
national mortgage lender.  EMB Mortgage underwrote and funded its mortgage loans
through a wholesale line of credit from an affiliate of IMPAC, IMPAC Warehouse
Lending Group Inc., and then resold such loans to IMPAC.   Beginning in October
1998, EMB was advised by IMPAC that it intended to restrict the dollar volume of
loans purchased from EMB Mortgage due to the financial instability of the
mortgage loan securitization market.  At

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that time, IMPAC also modified its underwriting guidelines to make funded loans
somewhat less risky for investors. As a result, EMB Mortgage was forced to
consolidate its operations, further completing the closure or sale of all branch
offices and reducing its staff in its Costa Mesa, California headquarters
office.

          In May 1999, the Company acquired AMRES and RMC.   Subsequent to May
1999, AMRES and RMC have been the principal operating mortgage subsidiaries of
the Company.  It is the intent of the Company for AMRES to operate primarily as
a mortgage broker through an expansion of its existing company-owned and Net
Branch operations.  At present, RMC is operating as a mortgage broker. Upon
obtaining all necessary government approvals, the Company intends for RMC to
function as a wholesale mortgage banker, funding loans for AMRES and for third-
party mortgage brokers.

          Loan Standards.  Mortgage loans made by AMRES and RMC are loans with
fixed or adjustable rates of interest, secured by first mortgages, deeds of
trust or security deeds on residential properties with original principal
balances that, generally, do not exceed 95% of the value of the mortgaged
properties, unless such loans are FHA-insured or VA-guaranteed.  Generally, each
mortgage loan having a loan-to-value ratio, as of the date of the loan, in
excess of 80%, or which is secured by a second or vacation home, will be covered
by a Mortgage Insurance Policy, FHA Insurance Policy or VA Guaranty insuring
against default of all or a specified portion of the principal amount thereof.

          The mortgage loans are "one to four-family" mortgage loans, which
means permanent loans (as opposed to construction or land development loans)
secured by mortgages on non-farm properties, including attached or detached
single-family or second/vacation homes, one to four-family primary residences
and condominiums or other attached dwelling units, including individual
condominiums, row houses, townhouses and other separate dwelling units even when
located in buildings containing five or more such units.  Each mortgage loan
must be secured by an owner occupied primary residence or second/vacation home,
or by a non-owner occupied residence.  The mortgaged property may not be a
mobile home.

          In general, no mortgage loan has expected to have an original
principal balance less than $30,000.  While most loans will be less than
$700,000, loans of up to $2,000,000 may be funded through their own wholesale
credit lines or by brokering such loans to unaffiliated third-party mortgage
lenders.  Fixed rate mortgage loans must be repayable in equal monthly
installments which reduce the principal balance of the loans to zero at the end
of the term.

          Credit, Appraisal and Underwriting Standards.  Each mortgage loan must
(i) be an FHA-insured or VA-guaranteed loan meeting the credit and underwriting
requirements of such agency, or (ii) meet the credit, appraisal and underwriting
standards established by the Company.  For certain mortgage loans which may be
subject to a mortgage pool insurance policy, the Company may delegate to the
issuer of the mortgage pool insurance policy the responsibility of underwriting
such mortgage loans, in accordance with the Company's credit appraisal and
underwriting standards.  In addition, the Company may delegate to one or more
lenders the responsibility of underwriting mortgage loans offered to the Company
by such lenders, in accordance with the Company's credit, appraisal and
underwriting loans.

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<PAGE>

          The Company's underwriting standards are intended to evaluate the
prospective mortgagor's credit standing and repayment ability, and the value and
adequacy of the proposed mortgaged property as collateral.  In the loan
application process, prospective mortgagors will be required to provide
information regarding such factors as their assets, liabilities, income, credit
history, employment history and other related items.  Each prospective mortgagor
will also provide an authorization to apply for a credit report which summarizes
the mortgagor's credit history.  With respect to establishing the prospective
mortgagor's ability to make timely payments, the Company will require evidence
regarding the mortgagor's employment and income, and of the amount of deposits
made to financial institutions where the mortgagor maintains demand or savings
accounts.  In some instances, mortgage loans may be made by the Company under a
Limited Documentation Origination Program.  For a mortgage loan to qualify for
the Limited Documentation Origination Program, the prospective mortgagor must
have a good credit history and be financially capable of making a larger cash
down payment in a purchase, or be willing to finance less of the appraised
value, in a refinancing, than would otherwise be required by the Company.
Currently, only mortgage loans with certain loan-to-value ratios will qualify
for the Limited Documentation Origination Program.  If the mortgage loan
qualifies, the Company waives some of its documentation requirements and
eliminates verification of income and employment for the prospective mortgagor.
The Limited Documentation Origination Program has been implemented relatively
recently and accordingly its impact, if any, on the rates of delinquencies and
losses experienced on the mortgage loans so originated cannot be determined at
this time.

          The Company's underwriting standards generally follow guidelines
acceptable to FNMA and FHLMC.  The Company's underwriting policies may be varied
in appropriate cases.  In determining the adequacy of the property as
collateral, an independent appraisal is made of each property considered for
financing.  The appraiser is required to inspect the property and verify that it
is in good condition and that construction, if new, has been completed.  The
appraisal is based on the appraiser's judgment of values, giving appropriate
weight to both the market value of comparable homes and the cost of replacing
the property.

          Certain states where the mortgaged properties may be located are
"anti-deficiency" states, where, in general, lenders providing credit on one to
four-family properties must look solely to the property for repayment in the
event of foreclosure.  See "Certain Legal Aspects of the Mortgage Loans-Anti-
Deficiency Legislation and Other Limitations on Lenders".  The Company's
underwriting standards in all states (including anti-deficiency states) require
that the underwriting officers be satisfied that the value of the property being
financed, as indicated by the independent appraisal, currently supports and is
anticipated to support in the future the outstanding loan balance, and provides
sufficient value to mitigate the effects of adverse shifts in real estate
values.

          Each mortgage broker agrees to indemnify the Company against any loss
or liability incurred by the Company on account of any breach of any
representation or warranty made by the borrower, any failure to disclose any
matter that makes any such representation and warranty misleading, or any
inaccuracy in information furnished by the borrower to the Company.

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          Upon the breach of any misrepresentation or warranty made by a
borrower, the Company may require the mortgage broker to repurchase the related
mortgage loan.

          Title Insurance Policies.  The Company will usually require that, at
the time of the origination of the mortgage loans and continuously thereafter, a
title insurance policy be in effect on each of the mortgaged properties and that
such title insurance policy contain no coverage exceptions, except those
permitted pursuant to the guidelines established by FNMA.

Current Markets and Expansion Plans

          The Company believes that its strategy of originating loans through
the AMRES Net Branch relationships represents the most profitable loan
origination strategy due to the significant level of loan origination and other
fees.  The AMRES Net Branch system, in turn, may provide RMC with wholesale loan
funding opportunities.  Additionally, such a strategy allows the Company to
maintain its underwriting quality standards when compared to competitors that
rely primarily on independent mortgage brokers.  The Company also intends to
offer direct-to-consumer retail mortgage lending by means of the Internet.
Loans originated from this source will be brokered through AMRES or funded
directly by RMC.

          At the present time nearly all of the loans originated by the Company
are for properties located in California.  While California properties will
always remain a significant part of the Company's business, the Company
anticipates that the development of the AMRES Net Branch network will dilute the
share of mortgages attributable to properties located in California.

Certain Legal Aspects of Mortgage Loans

          General.  The mortgages originated by the Company and its licensed
affiliates are either mortgages or deeds of trust, depending upon the prevailing
practice in the state in which the property subject to a mortgage loan is
located.  A mortgage creates a lien upon the real property encumbered by the
mortgage.  It does not, generally, have priority over liens for real estate
taxes and assessments.  Priority between mortgages depends on their terms and
generally on the order of filing with a state or county office.  There are two
parties to a mortgage, the mortgagor, who is the borrower and homeowner (the
"Mortgagor"), and the mortgagee, who is the lender.  Under the mortgage
instrument, the Mortgagor delivers to the mortgagee a note or bond and the
mortgage.  Although a deed of trust is similar to a mortgage, a deed of trust
formally has three parties, the borrower-homeowner called the trustor (similar
to a Mortgagor), a lender (similar to a mortgagee) called the beneficiary, and a
third-party grantee called the Trustee.  Under a deed of trust, the borrower
grants the property, irrevocably until the debt is paid, in trust, generally
with a power of sale, to the Trustee to secure payment of the obligation.  The
Trustee's authority under a deed of trust and the mortgagee's authority under a
mortgage are governed by law, the express provisions of the deed of trust or
mortgage, and, in some cases, the directions of the beneficiary.

          Foreclosure.  Foreclosure of a deed of trust is generally accomplished
by a non-judicial Trustee's sale under a specific provision in the deed of trust
which authorizes the Trustee to sell the property to a third party upon any
default by the borrower under the terms

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of the note or deed of trust. In some states, the Trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a requests for a copy of a notice of default and notice of sale. In
addition, the Trustee must provide notice in some states to any other individual
having an interest in the real property, including any "junior lienholders". The
borrower, or any other person having a junior encumbrance on the real estate,
may, during a reinstatement period, cure the default by paying the entire amount
in arrears, plus the costs and expenses incurred in enforcing the obligation.
Generally, state laws require that a copy of the notice of sale be posted on the
property and sent to all parties having an interest in the real property.

          Foreclosure of a mortgage is generally accomplished by judicial
action.  The action is initiated by the service of legal pleadings upon all
parties having an interest in the real property.  Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties.  Judicial foreclosure proceedings are often not contested by any of the
parties.  However, even when the mortgagee's right to foreclose is contested,
the court generally issues a judgment of foreclosure and appoints a referee or
other court officer to conduct the sale of the property.

          In the case of foreclosure under either a mortgage or a deed of trust,
the sale by the referee or other designated officer or by the Trustee is a
public sale.  However, because of the difficulty a potential buyer at the sale
would have in determining the exact status of title and because the physical
condition of the property may have deteriorated during the foreclosure
proceedings, it is uncommon for a third party to purchase the property at the
foreclosure sale.  Rather, it is common for the lender to purchase the property
from the Trustee or referee for an amount equal to the principal amount of the
mortgage or deed of trust, accrued and unpaid interest and the expense of
foreclosure.  Thereafter, the lender will assume the burdens of ownership,
including obtaining casualty insurance and making such repairs at its own
expense as are necessary to render the property suitable for sale.  The lender
will commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale of the property.  Depending upon market
conditions, the ultimate proceeds of the property may not equal the lender's
investment in the property.  Any loss may be reduced by the receipt of any
mortgage insurance proceeds.

          Rights of Redemption.  In some states, after sale pursuant to a deed
of trust or foreclosure of a mortgage, the borrower and foreclosed junior
lienors are given a statutory period in which to "redeem" the property from the
foreclosure sale.  In some states, redemption may occur only upon a payment of
the entire principal balance of the loan, accrued interest and expenses of
foreclosure.  In other states, redemption may be authorized if the former
borrower pays only a portion of the sums due.  The effect of a statutory right
of redemption is to diminish the ability of the lender to sell the foreclosed
property.  The rights of redemption would defeat the title of any purchaser from
the lender subsequent to foreclosure or sale under a deed of trust.
Consequently, the practical effort of the redemption right is to force the
lender to retain the property and pay the expenses of ownership until the
redemption period has expired.

          Anti-Deficiency Legislation and Other Limitations on Lenders.  Certain
states have imposed statutory prohibitions which limit the remedies of a
beneficiary under a deed

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of trust or a mortgage. In some states, statutes limit the right of the
beneficiary or mortgagee to obtain a deficiency judgment against the borrower
following foreclosure or sale under a deed of trust. A deficiency judgment would
be a personal judgment against the former borrower equal in most cases to the
difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Other statutes require the
beneficiary or mortgagee to exhaust the security afforded under a deed of trust
or mortgage by foreclosure in an attempt to satisfy the full debt before
bringing a personal action against the borrower. Finally, other statutory
provisions limit any deficiency judgment against the former borrower following a
judicial sale to the excess of the outstanding debt over the fair market value
of the property at the time of the public sale. The purpose of these statutes is
generally to prevent a beneficiary or a mortgagee from obtaining a large
deficiency judgment against the former borrower as a result of low or no bids at
the judicial sale.

          In addition to laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the federal bankruptcy laws and
state laws affording relief to debtors, may interfere with or affect the ability
of a secured mortgage lender to realize upon collateral and/or enforce a
deficiency judgment.  For example, with respect to federal bankruptcy law, a
court with federal bankruptcy jurisdiction may permit a debtor through his or
her Chapter 11 or Chapter 13 rehabilitative plan to cure a monetary default in
respect of a mortgage loan on a debtor's residence by paying arrears within a
reasonable time period and reinstating the original Mortgage Loan payment
schedule even though the lender accelerated the mortgage loan and final judgment
of foreclosure had been entered in state court (provided no sale of the
residence had yet occurred) prior to the filing of a debtor's petition.  Some
courts with federal bankruptcy jurisdiction have approved plans based on the
particular facts of the reorganization case, that effected the curing of a
mortgage loan default by paying arrearages over a number of years.

          Courts with federal bankruptcy jurisdiction have also indicated that
the terms of a mortgage loan secured by property of the debtor may be modified.
These courts have suggested that such modification may include reducing the
amount of each monthly payment, changing the rate of interest, altering the
repayment schedule, and reducing the lender's security interest to the value of
the residence, thus leaving the lender a general unsecured creditor for the
difference between the value of the residence and the outstanding balance of the
loan.

          The Internal Revenue Code of 1986, as amended, provides priority to
certain tax liens over the lien of a mortgage.  In addition, substantive
requirements are imposed upon mortgage lenders in connection with the
origination and the servicing of mortgage loans by numerous Federal and some
state consumer protection laws.  These laws include the federal Truth-In-Lending
Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair
Credit Billing Act, Fair Credit Reporting Act, and related statutes.  These
federal laws impose specific statutory liabilities upon lenders who originate
mortgage loans and who fail to comply with the provisions of the law.  In some
cases, this liability may affect assignees of the mortgage loans.

          Enforceability of Certain Provisions.  Certain of the mortgage loans
contain due-on-sale clauses.  These clauses permit the lender to accelerate the
maturity of the loan if

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the borrower sells, transfer or conveys the property. The enforceability of
these clauses has been the subject of legislation and litigation in many states,
and in some cases the clauses have been upheld, while in other cases their
enforceability has been limited or denied.

          Upon foreclosure, courts have imposed general equitable principles.
These equitable principles are generally designed to relieve the borrower from
the legal effect of a default under the loan documents.  Examples of judicial
remedies that have been fashioned include judicial requirements that the lender
undertake affirmative and expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan.  In some cases, courts have substituted their judgment for
the lender's judgment and have required that lenders reinstate loans or recast
payment schedules in order to accommodate borrowers who are suffering from
temporary financial disability.  In other cases, courts have limited the right
of the lender to foreclose if the default under the mortgage instrument is not
monetary, such as the borrower failing to maintain the property adequately or
the borrower executing a second mortgage or deed of trust affecting the
property.  Finally, some courts have been faced with the issue of whether
federal or state constitutional provisions reflecting due process concerns for
adequate notice require that borrowers under deeds of trust or mortgages receive
notices in addition to the statutorily-prescribed minimum.  For the most part,
these cases have upheld the notice provision as being reasonable or have found
that the sale by a trustee under a deed of trust, or under a mortgage having a
power of sale, does not involve sufficient state action to afford constitutional
protections to the borrowers.

          Applicability of Usury Laws.  Title V of the Depository Institutions
Deregulation and Monetary Control Act of 1980 ("Title V"), provides that state
usury limitations do not apply to certain types of residential first mortgage
loans originated by certain lenders after March 31, 1980.  The Federal Home Loan
Bank Board is authorized to issue rules and regulations and to publish
interpretations governing implementation of Title V, the statute authorizes any
state to reimpose interest rate limits by adopting a law or constitutional
provision which expressly rejects application of the federal law.  In addition,
even where Title V is not so rejected, any state is authorized by the law to
adopt a provision limiting discount points or other charges on mortgage loans
covered by Title V.  As of the date hereof, certain states have taken action to
reimpose interest rate limits and/or to limit discount points or other charges.

Mortgage Software and Technology

          AMRES currently uses loan origination software developed by an
independent third party, which is accessible by its Company-owned offices and at
Net Branch offices through an Intranet system.  This software can quickly review
the underwriting guidelines for a vast number of loan products, including those
offered by Fannie Mae and Freddie Mac and select the appropriate loan product
for the borrower.  The software then allows the routing of pertinent information
to the automated underwriting systems employed by Fannie Mae and Freddie Mac,
the primary secondary-market purchasers of mortgages, and the automated systems
of independent lenders such as IndyMac.  Thus, in less than one hour, a borrower
can receive loan approval, subject only to verification of financial information
and appraisal of the

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subject property. The software also permits the contemporaneous ordering and
review of preliminary title reports and escrow instructions.

          The AMRES Intranet system allows Net Branch offices around-the-clock
access to the system.  Loan officers can also access the AMRES Intranet
utilizing Intel(R) Corporation's ProShare(R) video conferencing system which
permits the loan officer or borrower to see and talk directly to an underwriting
staff member or other individuals involved in the mortgage loan transaction.

          The Company intends to continue the development and refinement of its
software and Intranet systems and continuing evaluation of electronic
information gathering and communication equipment.  The Company intends to
continue to focus on its technology and marketing relationship with Intel
Corporation.  This relationship has accelerated the development of the Company's
delivery system and has enhanced its marketing program through exhibitions,
trade shows and seminars with real estate brokers, credit unions, residential
real estate developers, mortgage brokers, and others.  An objective of the
Company is to become a leader in advanced electronic communications to
facilitate mortgage loans.  To the extent that the Company achieves its
objective in this technological area, the Company believes that it will
complement and increase its mortgage lending business.

          Customer Service and Support.  The Company's customer service and
support organization provides Net Branch owners with on-line technical support,
training, consulting and implementation services. These services consist of the
following:

          Customer Education and Training.  The Company offers training courses
designed to meet the needs of end users, integration experts and system
administrators.  The Company also trains customer personnel who in turn may
train end-users in larger deployments.  Training classes are provided at the
customers' offices or on-line with an on-line tutorial.  No fees are charged the
to Net Branch for these services.

          System Maintenance and Support.  The Company offers telephone,
electronic mail and facsimile customer support through its central technical
support staff at the Company's headquarters.  The Company also provides
customers with product documentation and release notes that describe features in
new products, known problems and workarounds, and application notes.

          Sales and Marketing.  As of September 30, 1998, the Company marketed
and sold its mortgage banking services primarily through a direct sales force
based in Costa Mesa, California.  The Company's sales and marketing organization
consisted of approximately 25 employees as of September 30, 1998.  As of
September 30, 1998, the Company had regional marketing representatives based in
California, Colorado, Connecticut, Florida, Nevada, Texas and Connecticut.  To
support its sales force, the Company conducts a number of marketing programs,
which includes public relations, telemarketing, seminars, and trade shows.

          Following the scaling back of the operations of EMB Mortgage and the
acquisition of AMRES and RMC, the Company markets its mortgage loan products
through its four Company-owned offices in Southern California and 50 Net Branch
offices in

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California, Hawaii, Arizona and Florida. The sales efforts of the Company to
market its Net Branch opportunities are located primarily in the Company's Costa
Mesa, California headquarters office.

          The Company's strategy is to expand its marketing efforts to reach a
broad customer base in its targeted mortgage industry.  The Company's field
sales force conducts multiple presentations and demonstrations of the Company's
mortgage products and Net Branch opportunities to users at the customer site as
a part of the direct sales effort.

          Strategic Relationships.  The Company believes that, in order to
provide comprehensive component and supplier management solutions, it will be
necessary to develop, maintain and enhance close associations with vendors of
hardware, software, database, and professional services.  Through its technology
subsidiary, Ameritelecon, Inc., the Company has established marketing and
strategic relationships with Intel Corporation, White Pine Software and Data
Telemark, among others.  The Company's relationships with these technology firms
have enabled it to integrate mortgage software with standard hardware platforms
for its own needs. In addition, these strategic relationships have allowed
Ameritelecom to market the products of these strategic partners to other third-
party technology users, specifically in the area of ISDN and satellite
encryption, video conferencing and computer hardware.  The Company believes
these relationships can enhance the Company's ability to create revenues through
the sales and marketing efforts of Ameritelecon to independent users of these
technologies.  In addition, these relationships allow the Company's mortgage
subsidiaries to deliver mortgage solutions that support their customers'
existing management architecture while being tailored to the specific
requirements of the mortgage industry.  Although the Company seeks to maintain a
close relationship with Intel Corporation and the other strategic partners, if
the Company is unable to develop and retain effective, long-term relationships
with other third parties, the Company's competitive position could be adversely
affected.

          Research and Development.  The Company has committed resources for its
mortgage product delivery system development.  Research and development efforts
are directed at increasing the effectiveness of the electronic delivery of
mortgage products and improving the overall performance of the Company's
operating subsidiaries.

          The Company's future success may depend, in part, upon its ability to
enhance its current electronic mortgage product delivery systems and to develop
and introduce new systems on a timely basis that keep pace with technological
developments, emerging industry standards and the increasingly sophisticated
needs of its customers.  There can be no assurance that the Company will be
successful in developing or marketing such systems enhancements or new systems
that respond to technological change or evolving industry standards, nor that
the Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these products or
enhancements which will adequately meet the requirements of the marketplace and
achieve market acceptance.  If the Company is unable, for technological or other
reasons, to develop and introduce new systems or enhancements, the Company's
business, financial condition or results of operations could be materially
adversely affected.

                                       10
<PAGE>

          Competition. The Company will continue to face intense competition in
the origination, acquisition and liquidation of its mortgage loans.  Such
competition can be expected from banks, savings and loan associations and other
entities, including real estate investment trusts.  Many of the Company's
competitors have greater financial resources than the Company.

          Proprietary Rights and Licensing.  The Company's success is dependent,
to a degree, upon proprietary technology.  The Company may rely on a combination
of copyright and trademark laws, trade secrets, confidentiality procedures and
contractual provisions with its employees, consultants and business partners to
protect its proprietary rights.  The Company may seek to protect its electronic
mortgage product delivery systems, documentation and other written materials
under trade secret and copyright laws, which afford only limited protection.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's systems or to obtain and
use information that the Company regards as proprietary.  While the Company is
not aware that any of its systems infringe upon the proprietary rights of third
parties, there can be no assurance that third parties will not claim
infringement by the Company with respect to current or future products.  Certain
components of the electronic mortgage products delivery system currently
employed by the Company are not proprietary to the Company and other competitors
may acquire such components and develop similar or enhanced systems for the
electronic delivery of mortgage products to mortgage brokers and borrowers.

          In addition, the Company relies on certain software that it licenses
from third parties, including software which is used in conjunction with the
Company's mortgage products delivery systems.  There can be no assurance that
such firms will remain in business, that they will continue to support their
products or that their products will otherwise continue to be available to the
Company on commercially reasonable terms.  The loss or inability to maintain any
of these software or data licenses could result in delays or cancellations in of
contracts with Net Branch operations until equivalent software can be identified
and licensed or developed and integrated with the Company's product offerings.
Any such delay or cancellation could materially adversely affect the Company's
business, financial condition or results of operations.

Environmental Matters

          The Company has not been required to perform any investigation or
clean up activities, nor has it been subject to any environmental claims. There
can be no assurance, however, that this will remain the case in the future.

          In the course of its business, the Company may acquire properties
securing loans that are in default. Although the Company primarily lends to
owners of residential properties, there is a risk that the Company could be
required to investigate and clean up hazardous or toxic substances or chemical
releases at such properties after acquisition by the Company, and may be held
liable to a governmental entity or to third parties for property damage,
personal injury and investigation and cleanup costs incurred by such parties in
connection with the contamination.  In addition, the owner or former owners of a

                                       11
<PAGE>

contaminated site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination emanating from such
property.

Trade Names and Service Marks

          The Company has filed various applications to register its service
marks on the principal register of the United States Patent and Trademark
Office.  The Company intends to register its service marks in such states as it
deems necessary and desirable.

          The Company will devote substantial time, effort and expense toward
developing name recognition and goodwill for its tradenames for its operations.
The Company intends to maintain the integrity of its trade names, service marks
and other proprietary names against unauthorized use and to protect the
licensees' use against claims of infringement and unfair competition where
circumstances warrant.  Failure to defend and protect such trade name and other
proprietary names and marks could adversely affect the Company's sales of
licenses under such trade name and other proprietary names and marks.  The
Company knows of no current materially infringing uses.

Employees

          As of September 30, 1999, the Company employed a total of 28 persons.
Of the total, 16 officers and employees were employed at the principal executive
offices of the Company in Costa Mesa, California, of whom 3 were engaged in
sales and marketing, 3 were in the loan operations staff, 1 was in product
development and technical support and 9 were in finance and administration.
There were 12 employees in the four branch offices of the Company, of whom 7
were engaged in loan operations, and 5 in finance and administration.  None of
the Company's employees are represented by a labor union with respect to his or
her employment by the Company.


Item 2.    Description of Property.
           -----------------------

          Executive Offices.  The Company currently leases its executive offices
located at 3200 Bristol, 8th Floor, Costa Mesa, California 92626.  The lease
covers approximately 15,000 square feet at a monthly rental of approximately
$18,937 per month.  The rental obligation increases to $20,394 per month
commencing in May 1999 and $21,851 per month commencing in May 2000.  The lease
expires in 2002.  The Company believes that its new facilities are in excess of
its current needs, however, management believes that these premises will be
suitable for its intended operations.

          Undeveloped Land and Water Rights.  The Company previously owned
approximately 61 acres of undeveloped real property with extensive water and
electrical improvements, and extensive water producing wells, located on Paris
Valley Road in the San Ardo area of Monterey County, California.  This property
was appraised at an estimated market value of the fee simple interest as of
April 20, 1996, at $3,860,000.  The property is located close to Highway 101, a
major California highway.  The area is rural in nature, used primarily for
cattle and sheep raising and agricultural purposes, including vineyards and

                                       12
<PAGE>

wineries to the north and to the south.  The property is comprised of two
parcels separated by Paris Valley Road.  The zoning for the property is for
agriculture/grazing in the lower half, and for heavy mineral extraction on the
upper half.  The water and electrical improvements are provided primarily for
farming use.  Because of the producing water wells on the property, commercial
water production for agricultural use is available to provide adjacent farms
with water.  The property formerly also produced crude oil; but such wells have
been shut-in and the power plant substation, natural gas pipeline system, pumps,
tanks and used pipe on the property are considered obsolete.  The water
producing wells, as described in the appraisal, are capable of producing
approximately 2,700,000 gallons per 24-hour production period.  The water is
naturally replenished annually from the run-off of the surrounding mountains.
Because this property was held for sale, the Company made no efforts nor
expended any material funds to commercially develop or market the water
resources of the property.  Effective December 30, 1996, this property was sold
by the Company for $4,000,000, payable by a down payment of $800,000, and an
installment contract for $3,200,000, with annual payments amortized over 20
years, due and payable in 10 years.  The Company received the $800,000 down
payment on December 31, 1996 and a payment of $422,867 for principal and
interest in December 1997.  On June 30, 1998, the Company and the purchaser of
the property agreed to rescind the transaction.  As a result, on August 15,
1998, ownership of the property reverted to the Company.  As consideration for
the rescission, the Company returned the first installment payment of $422,867
and issued a convertible note as reimbursement of the initial down payment of
$800,000, plus a severance fee of $200,000, for an aggregate of $1,000,000.  The
note accrues interest at fifteen percent (15%) with principal and interest all
due and payable on September 1, 2000.

          The Company has a 4.89 acre undeveloped parcel of property in
Riverside County, California, that was appraised as of December 7, 1994, at a
value of $170,000.  This property is held subject to a Note secured by Deed of
Trust dated March 15, 1995, in the principal amount of $65,000. The Note was due
and payable in March 1999.  The Company and the lender have agreed to extend the
Note on a month by month basis.  This property is held by the Company for sale
and not for development purposes.

          The Company may also hold real estate for sale from time to time as a
result of its foreclosure on mortgage loans that may become in default.

Item 3.  Legal Proceedings.
         -----------------

          On or about November 17, 1998, the Company entered into a Stipulated
Judgment in the matter of Yamaichi International (America) Inc., vs. EMB
                          ----------------------------------------------
Corporation, USDC, Southern District of New York, Case No. 98-7152 (DLC).  The
-----------
lawsuit arose out of the obligation of the Company to pay rent for its branch
corporate office in New York City.  The total amount of the judgment was
$186,000.  As of September 30, 1999, the Company has paid approximately $5,500
toward the judgment.

          On or about August 4, 1999, a judgment was entered against the Company
in the matter of Resource Bancshares Mortgage Group, Inc. vs. EMB Mortgage
                 ---------------------------------------------------------
Corporation, Circuit Court for Palm Beach County, Florida, Case No. 99-2106-AO.
-----------
The amount of the judgment was $129,518.57, and arose out of a mortgage loan
which Resource Bancshares

                                       13
<PAGE>

Mortgage Group, Inc. ("RBMG") had requested the Company to repurchase due to
underwriting deficiencies. The mortgage loan in question had been underwritten
by Republic Mortgage Insurance Company and/or RMIC Corporation (collectively,
"RMIC") pursuant to a contract underwriting agreement by and between RMIC and
the Company. This agreement provided for RMIC to provide certain remedies,
including indemnification, to the Company in the event of the failure of the
RMIC underwriters to underwrite the Company's mortgage loans in accordance with
investor guidelines. The effectiveness of the indemnification provisions of the
agreement is dependent upon the result of negotiations between the Company and
RMIC, as further discussed in the following paragraph.

          The Company and RMIC are currently engaged in litigation, Republic
                                                                    --------
Mortgage Insurance Corporation and RMIC Corporation vs. EMB Mortgage
--------------------------------------------------------------------
Corporation, Forsyth County, North Carolina Superior Court, Civil Action No. 98
-----------
CVS 11380 and a judgment was filed in favor of RMIC in April 1999.  This lawsuit
arises out of fees allegedly owed RMIC by the Company for underwriting services
provided by RMIC to the Company in its Daytona Beach, Florida office.
Management of the Company believes that RMIC and/or Joseph K. Brick, former Vice
President of the Company and former manager of its Daytona Beach operations, may
be liable to indemnify the Company for the losses incurred by the Company in
connection with the mortgage loan which is the basis for the RBMG litigation and
any other potential losses involving loans underwritten by RMIC at the Daytona
Beach office.  The Company and RMIC are currently engaged in settlement
discussions which, the Management of the Company believes, will result in RMIC
assuming such liability.

          In September 1999, the Company entered into a Stipulation for Judgment
in the matter of Southern Pacific Thrift & Loan vs. EMB Corporation, et al.,
                 -----------------------------------------------------------
Orange County, California Superior Court, Case no. 807620. The case arose out of
money due IMPAC Warehouse Lending Group, Inc., on a pledge account towards the
warehouse line of credit in favor of EMB Mortgage Corporation. The agreement
provides for payment by the Company to Southern Pacific Thrift & Loan of the sum
of $100,431.13. At present the Company has paid $25,000.00 toward such sum.

          The Company is not engaged in any other legal proceedings except
litigation in the ordinary course of its business.  In the opinion of
management, the amount of ultimate liability with respect to those proceedings
will not be material to the Company's financial position or results of
operations.


Item 4.   Submission of Matters to a Vote of Security Holders.
          ---------------------------------------------------

          No matters were submitted during the fourth quarter of the fiscal year
ended September 30, 1998, of the Company.

                                       14
<PAGE>

                                    PART II

Item 5.   Market for Common Equity and Related Stockholder Matters.
          --------------------------------------------------------

          Market for Common Equity. The Common Stock of the Company is currently
          ------------------------
quoted in the over-the-counter market on the electronic bulletin board
maintained by the National Association of Securities Dealers, Inc. under the
symbol "EMBUE".

          When the trading price of the Company's Common Stock is below $5.00
per share, the Common Stock is considered to be "penny stock" that are subject
to rules promulgated by the Securities and Exchange Commission (Rule 15g-1
through 15g-9) under the Securities Exchange Act of 1934.  These rules impose
significant requirements on brokers under these circumstances, including: (a)
delivering to customers the Commission's standardized risk disclosure document;
(b) providing to customers current bid and offers; (c) disclosing to customers
the brokers-dealer and sales representatives compensation; and (d) providing to
customers monthly account statements.

          For several years prior to January 1, 1996, the market price of the
Common Stock of the Company was either nominal or non-existent because the
Company had no substantial assets and had little or no operations.  However,
after the Company entered into an acquisition agreement regarding the purchase
of certain assets of Sterling Alliance Group, Ltd. in December 1995, the Common
Stock of the Company began actively trading.

          The following table sets forth the range of high and low closing bid
prices per share of the Common Stock as reported by National Quotation Bureau,
L.L.C. for the periods indicated.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1997:                           High Bid(1)                         Low Bid(1)
--------------------------------------------------   ---------------------------------   ---------------------------------
<S>                                                  <C>                                 <C>
1st Quarter.......................................                          $ 5.125                             $ 2.375
2nd Quarter.......................................                          $  3.75                             $ 2.125
3rd Quarter.......................................                          $  3.25                             $ 1.375
4th Quarter.......................................                          $3.3125                             $ 1.375
Fiscal Year Ended September 30, 1998:
--------------------------------------------------
1st Quarter.......................................                          $  3.25                             $  1.75
2nd Quarter.......................................                          $2.5156                             $1.2031
3rd Quarter.......................................                          $ 1.625                             $ .8125
4th Quarter.......................................                          $1.4062                             $ .6562
</TABLE>

(1)  The Company is unaware of the factors which resulted in the significant
     fluctuations in the bid prices per share during the periods being
     presented, although it is aware that there is a thin market for the Common
     Stock, that there are frequently few shares being traded and that any sales
     significantly impact the market.

          On October 29, 1999, the closing bid and asked prices of the Common
Stock of the Company were $0.34 bid and $.038 asked per share.  The foregoing
prices represent inter-

                                       15
<PAGE>

dealer quotations without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions. On October 29, 1999, there were
approximately 19 broker-dealers publishing quotes for the Common Stock of the
Company.

          As of  September 30, 1999, there were 26,340,955 shares of Common
Stock issued and outstanding which were held by approximately 696 holders of
record; 13,514 shares of 8% Series A Convertible Preferred Stock held by one
owner of record which are not traded in any market;  and 97,500 shares of 10%
Series B Convertible Preferred Stock held by one owner of record which are not
traded in any market.

          Dividends. The Company has not paid any dividends on its Common Stock
          ---------
and does not expect to do so in the foreseeable future.  The Company intends to
apply its earnings, if any, in expanding its operations and related activities.
The payment of cash dividends in the future will be at the discretion of the
Board of Directors and will depend upon such factors as earnings levels, capital
requirements, the Company's financial condition and other factors deemed
relevant by the Board of Directors, and is subject to the dividend rights of the
8% Convertible Preferred Stock, Series A and 10% Convertible Preferred Stock,
Series B of the Company to the extent such shares are not converted into the
Common Stock of the Company.  In addition, the Company's ability to pay
dividends may be limited under future loan agreements of the Company which
restrict or prohibit the payment of dividends.

Item 6.   Management's Discussion and Analysis or Plan of Operation

General

EMB Mortgage, which, prior to May 1999, was the Company's principal operating
subsidiary, was a specialty finance company engaged in the business of
originating and selling residential mortgage loans secured by one-to-four family
residences.  In the first quarter of fiscal 1998, the Company aggressively
expanded its mortgage banking operations through its acquisition of all of the
capital stock of Investment Consultants, Inc., doing business as Equityline,
Inc. ("ICI"), in Denver, Colorado, and the acquisition of certain of the assets
of Deposit Guaranty Mortgage, in Dallas, Texas.  In addition, it also opened a
branch office in Sherman Oaks, California.  The Company increased its funding
consistently in fiscal 1998 peaking at $40,000,000 in closed loans for the month
of July 1998.  In late August 1998, an already competitive industry was impacted
by increased bond yields and disrupted financial markets.  Due to this increase
in mortgage interest rates and disruption of financial markets, the primary
purchaser of mortgage loans from EMB Mortgage modified its underwriting
guidelines and restricted the purchase of loans.  As a result, on December 22,
1998, the Company laid-off approximately 50 employees, which reduced its
headcount to approximately 32 employees.  Effective January 1, 1999, the Company
substantially ceased its mortgage banking operations with the exception of its
Denver office and limited operations in its Costa Mesa office.  The Company
terminated its acquisition agreement with ICI in March 1999 and ceased its
operations in Denver as of such date.  Pursuant to the agreement with management
of the Denver office, management of the Denver office retained the 400,000
shares of common stock issued to them in connection with the acquisition as well
as the assets acquired.  The Company retained all of the capital stock of ICI,
including certain liabilities.

                                       16
<PAGE>

During September 1999, the Company completed its cessation of operating under
the name EMB Mortgage.  The Company was licensed to fund mortgages in
approximately 30 states. By law, EMB Mortgage was required to renew its licenses
with the various state agencies.  Management has determined not to renew these
licenses and to allow the state approvals to terminate upon their respective
annual expiration dates.

In May 1999, the Company acquired the issued and outstanding common stock of
AMRES and RMC in order to resume business in the originating of consumer loans.
At present, AMRES is closing approximately $17,000,000 in residential loans
monthly.  The Company will require substantial cash to fund its operations and
satisfy certain obligations, and there are no assurances that the Company will
be able to expand the operations of AMRES, or commence the operations of RMC.
Both RMC and AMRES are obtaining approvals and licensing with various federal
and state agencies in order to do business in a number of states.

Fiscal 1998 Compared to Fiscal 1997

Revenues are derived primarily from cash gain on sales of loans and interest
income from loans held for sale. The major components of the Company's revenues
were (i) the volume of loans originated, (ii) the premium over principal amount
received in loan sales, (iii) origination points received or paid, (iv)
origination fees received and (v) the differential between the interest rate on
borrowings under revolving warehouse credit facilities and the interest rate of
loans held for sale.  Cash gain on sale of mortgage loans is affected by, among
other things, borrower credit risk classification, loan-to-value ratio, interest
rate and margin of the loans.  Revenues increased 255% and 1,404% for the years
ended September 30 1998 and 1997, respectively.  This increase was due to the
Company expanding their operations through acquisitions and marketing.

Loan origination costs, commissions and other fees were $10,107,485 during the
current fiscal year from $2,331,815 in fiscal 1997, an increase of $7,775,670 or
234%.  The increase is directly related to the Company's increase in loan volume
through acquisitions and the expansion of EMB Mortgage.

During the current fiscal year, general and administrative expenses were
$11,247,168, and increase of $6,828,460, or 155%, from $4,418,708.  A portion of
this increase was due to the increase in salaries and wages which increased by
$2,453,713, or 200%, from $1,229,689 in fiscal 1997.  Additionally, during the
year ended September 30, 1998 and 1997, the Company issued approximately 1.4
million shares and approximately 992,000 shares of its common stock, valued at
$2.4 million and $1.03 million, respectively, and charged to operations.  The
services rendered for these shares of common stock related to financial
advisory, marketing, regulatory, and business planning. Total expenses were
$22.6 million and $6.7 million for the years ended September 30, 1998 and 1997,
respectively.

Interest expense for fiscal 1998 increased by $1,299,023, or 3,513%, to
$1,336,002.  The increase is attributed to the value of the beneficial
conversion feature attached to the convertible debt, which was $508,333.

                                       17
<PAGE>

The Company's net losses increased to $7.9 million for the year ended September
30, 1998 compared to $2.6 million in fiscal 1997.

Year 2000

The Company evaluated the internal information technology ("IT") and non-IT
systems that could be affected by Year 2000 issues and also identified the
external systems that may be critical to the Company's operations.  The Company
has also assessed the readiness of the Company's suppliers.  Management believes
there are no critical systems, which will have a material adverse impact on its
operations. The Company will finalize its contingency plans before January 1,
2000.  The Company does not anticipate the cost of addressing all the issues
associated with becoming Year 2000 compliant will have a material impact on its
financial condition, results of operations or liquidity in any single year.  The
Company's estimates are based upon the assumption that its major third party
suppliers are or will become Year 2000 compliant within the time frame outlined
above.  Efforts to modify the Company's IT systems have substantially been
performed internally, however, the Company does not separately track such costs.
These costs primarily relate to salaries and wages, which are expensed as
incurred. The Company estimates its costs associated with becoming Year 2000
compliant will be less than $10,000, exclusive of system upgrades incurred in
the normal course of business.

Liquidity, Capital Resources and Capital Expenditures

During fiscal 1998 and 1997, the Company has incurred substantial losses from
operations.  In fiscal 1998, the Company's sources of cash flows were from debt
and equity borrowings, as well as the increase in certain payables and payroll
taxes withheld from employees.  The Company has also received loans from its
chairman and chief executive during fiscal 1998, continuing into fiscal 1999.
The Company's uses of cash were from operations, consisting of the funding of
mortgage loan originations, payment of interest, operating and administrative
expenses.

As of September 30, 1998, borrowings under the warehouse credit facility were
$14.5 million and the interest rate was prime plus 0.5%.  The warehouse line of
credit with IMPAC was fully satisfied in March 1999.

At September 30, 1998, the Company had a working capital deficit amounting to
$4.1 million. The Company's working capital deficit has continued to grow in
fiscal 1999 and currently exceeds $5.0 million.  The Company continues to
require substantial financing of debt or equity capital to meet its obligations.
These factors raise substantial doubt about the Company's ability to continue as
a going concern.  Management has, as of September 1999 ceased its operations of
EMB Mortgage, and affiliates, to reduce operating losses.  The Company has
raised capital to meet a small portion of its obligations in fiscal 1999;
however, significant funds are required to continue as a going concern.
Management is negotiating the sale of its undeveloped land in Monterey,
California to satisfy the federal and state payroll tax obligations, as well as
other obligations.  The Company currently has no formal agreements with regard
to any potential funding sources or for the sale of its undeveloped land, and
there

                                       18
<PAGE>

can be no assurance that future funds, if any, will be consummated. No
adjustments have been made to the consolidated financial statements as a result
of this uncertainty.

Capital expenditures totaled $218,459 and $377,240 for the years ended September
30, 1998 and 1997, respectively.  Management does not expect to incur any
significant capital expenditures in fiscal 1999.


Item 7.   Financial Statements.
          --------------------

          Information with respect to this Item is set forth in "Index to
Financial Statements".


Item 8.   Changes In and Disagreements with Accountants on Accounting and
          ---------------------------------------------------------------
          Financial Disclosure.
          --------------------

          On May 20, 1998, the Company dismissed its independent accountants,
Harlan & Boettger. The reports of Harlan & Boettger for the fiscal years ended
September 30, 1996 and September 30, 1997 contained no adverse opinion,
disclaimers of opinion nor were they modified as to uncertainty, audit scope or
accounting principles. The decision to dismiss the firm of Harlan & Boettger was
made by the Board of Directors of the Company. At no time during the engagement
of Harlan & Boettger as independent accountants for the Company were there any
disagreements, whether or not resolved, on any matter of accounting principles
or practices, financial statement disclosure or auditing scope of procedure.
Disclosure of this dismissal was first contained in the Form 10-QSB for the
period ended March 31, 1998, which was filed by the Company with the Securities
and Exchange Commission on May 21, 1998. On May 20, 1998, the Company, as
required by Item 304 (a) (3) of Regulation S-B, advised Harlan & Boettger of
this disclosure. At no time has Harlan & Boettger responded to the Company
concerning this disclosure nor, to the best knowledge of the Company, has Harlan
& Boettger responded directly to the Securities and Exchange Commission
concerning this disclosure.

          On May 20, 1998, the Company engaged the firm of Corbin & Wertz of
Irvine, California as independent accountants for the Company. Prior to May 20,
1998, neither the Company, nor anyone on its behalf, had consulted with Corbin &
Wertz concerning the accounting principles of any specific completed or
contemplated transaction, any type of audit opinion on the Company's financial
statements nor any other material factor which was considered by the Company in
reaching a decision as to any accounting, auditing or financial reporting issue.

          On January 13, 1999, the Company's independent accountants, Corbin &
Wertz of Irvine, California resigned due to the departure of the members of the
audit department of Corbin & Wertz to another accounting firm. At the time of
their resignation, Corbin & Wertz had not prepared any reports nor rendered any
other services for the Company. At no time during the engagement of Corbin &
Wertz as independent accountants for the Company were there any disagreements,
whether or not resolved, on any matter of accounting principles or practices,
financial statement or disclosure or auditing scope or procedure. Disclosure of
this resignation was first contained, together with the response and concurrence
of Corbin &

                                       19
<PAGE>

Wertz to this disclosure, in Form 8-K filed with the Securities and Exchange
Commission on or about January 26, 1999.

         On January 22, 1999, the Company engaged the firm of McKennon Wilson &
Morgan LLP, of Irvine, California, as independent accountants for the Company.
Prior to January 22, 1999, neither the Company, nor anyone on its behalf, had
consulted with McKennon Wilson & Morgan LLP concerning the accounting principles
of any specific completed or contemplated transaction, any type of audit opinion
on the Company's financial statements nor any other material factor which might
be considered by the Company in reaching a decision as to any accounting,
auditing or financial reporting issue.

                                 PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         -------------------------------------------------------------
         Compliance with Section 16(a) of the Exchange Act.
         --------------------------------------------------

     The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
Name(1)(2)                           Age   Position
----------                           ---   --------
<S>                                  <C>   <C>
Donald E. Hannabarger                 72   Director
William V. Perry(3)(4)                75   Director and Executive Vice President,
                                           and President of EMB Mortgage Corporation
Ann L. Petersen                       61   Director
Michael P. Roth (5)                   59   Director and Vice President
James E. Shipley(3)(4)                63   Director and President
</TABLE>

(1)  The Company presently has no executive committee, nominating committee or
     audit committee of the Board of Directors.
(2)  The officers of the Company hold office until their successors are elected
     and qualified, or until their death, resignation or removal.
(3)  Member of the Company's Stock Option Committee.  See "1996 Stock Option,
     SAR and Stock Bonus Plan", below.
(4)  Member of the Company's Compensation Committee.  See "Compensation
     Committee", below.
(5)  This individual resigned as Vice President effective March 1, 1999, but
     remains a Director.

         The background and principal occupations of each director and
executive officer of the Company are as follows:

         Mr. Hannabarger has been a Director of the Company since April 9, 1998.
Mr. Hannabarger is currently retired. From 1984 to 1989, he was Director-
Scheduling and Material Control office of the Convair Division of General
Dynamics Corporation; and was the managing director of a subsidiary in Mexico
and another subsidiary near El Centro,

                                       20
<PAGE>

California from 1989 to 1992. From 1983 to 1984, Mr. Hannabarger was a
management consultant with Ivanhoe Consulting and Financial. From 1973 to
1982,he held various executive positions with Ford Motor Company. in Latin
America. Mr. Hannabarger graduated with a B.S. Industrial Engineering degree
from the University of Illinois in 1948, and received a M.B.A. - Production
Management degree from the University of Chicago in 1950.

          Mr. Perry has been the Executive Vice President of the Company since
April 29, 1996, and became a director of the Company on May 21, 1996.  He is
also the Chairman of the Board and President of EMB Mortgage.  From 1994 to
March 20, 1999, he was a director and Vice President of Sterling Alliance Group,
Ltd.  From 1990 to October 1993, he was a director and Vice President of
Ameri-West Funding, Inc., engaged in residential, multi-family and commercial
mortgages.  From 1988 to 1990, Mr. Perry was the President of First Marine
Mortgage Company.  From 1985 to 1987, he was the Chief Financial Officer of
Mobile Medical Group, Inc.; and was the Chief Financial Officer and a director
of Oceanic Opera, Inc. from 1984 to 1985.  From 1970 to 1984, Mr. Perry was
engaged in the real estate brokerage business with several real estate brokerage
companies.  From 1962 to 1970, he was an electronics engineer with Lockheed
Missile and Space Corporation.  Mr. Perry graduated from Pacific States
University in 1948 with a degree in electrical engineering.

          Mrs. Petersen became a director of the Company on November 25, 1992.
She is a resident of Hawaii and has not been employed outside of the house since
1958.  She attended Marquette University for two years

          Mr. Roth has been Director of the Company since April 9, 1998.  From
April 9, 1998, he also served as a Vice President of the Company.  From 1993 to
the present, he has been the Assistant Branch Manager and Sales Associate with
Coldwell Banker Real Estate, Inc., a real estate brokerage company, at its
branch office in South Laguna, California.

          Mr. Shipley has been a director of the Company since January 15, 1996,
and became the President of the Company on April 29, 1996.  From 1993 to July 2,
1998, he was a director and President of Sterling Alliance Group,
Ltd., an affiliate of the Company which sold substantially all of its assets and
operations to the Company in exchange for Common Stock.  He was the Managing
Director of EMB Mortgage from October 1993 to April 1996.  Mr. Shipley has
served as the Managing Director of ERA Sterling Real Estate, a real estate
brokerage firm, from 1987 to the present.  Mr. Shipley received a Bachelor of
Science degree from Eastern Illinois University in 1960.

          Compliance with Section 16(a) of Securities Exchange Act of 1934.  To
the best of the knowledge of the Company, its directors, officers and 10%
beneficial owners have filed all reports in compliance with the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934 during the
fiscal year ended September 30, 1998.

Item 10.  Executive Compensation.
          ----------------------

          The following table sets forth the compensation required to be
reported pursuant to Item 402 of Regulation S-B.  No other executive officer or
director of the Company

                                       21
<PAGE>

received compensation in excess of $100,000 during its fiscal year ended
September 30, 1998. In addition, the Chief Executive Officer, James E. Shipley,
did have not other compensation required to be reported other than that set
forth herein.

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
    Name and Principal Position        Fiscal Year               Salary
    ---------------------------        -----------               ------
<S>                                    <C>                       <C>
James E. Shipley, CEO                  1996                      $     0
                                       1997                      $     0
                                       1998                      $45,000
</TABLE>

          Compensation Committee.  The Compensation Committee of the Board of
Directors is comprised of Messrs. James E. Shipley and William V. Perry.  The
Committee makes decisions regarding the Company's employee stock plan and makes
decisions concerning salaries and incentive compensation for the executive
officers, employees and consultants of the Company.

          1996 Stock Option, SAR and Stock Bonus Plan. The Company has reserved
shares of Common Stock for issuance under the Company's 1996 Stock Option, SAR
and Stock Bonus Plan (the "Plan"), as amended.  At September 30, 1998, no
options or stock bonuses covering shares of Common Stock had been granted and
issued under the Plan.  Options may be granted to employees, officers or
directors.  As of September 30, 1998, the Company had issued 1,434,000 shares of
common stock as stock bonuses in consideration of various consulting agreements
with third parties, and as payment for legal fees and costs incurred by the
Company.  These stock bonuses were issued pursuant to that certain Registration
Statement on Form S-8 which became effective on January 30, 1998.  Subsequent to
fiscal year 1998, a total of 3,250,000 options to purchase Common Stock were
issued in connection with certain acquisition agreements. The members of the
Stock Option Committee that administer the Plan are presently James E. Shipley
and William V. Perry.

          401(k) Plan.  In August 1997, the Company adopted a Section 401(k)
Retirement Savings Plan (the "401(k) Plan").  The 401(k) Plan is a tax-qualified
plan covering Company employees who, as of the enrollment eligibility dates
under the 401(k) Plan, have completed at least six months of service with the
Company and elect to participate in the 401(k) Plan.  The Company may make
discretionary matching cash contributions to each participant based upon his or
her elective deferrals in a percentage determined by the Company prior to the
end of each plan year, and may make additional contributions in its sole
judgment.  All employee contributions are fully vested at all times and
contributions by the Company to the 401(k) Plan vest over a six-year period
based upon years of service.  Benefits will normally be distributed to an
employee upon (i) the employee reaching age 65, (ii) the employee's retirement
with the Company, (iii) the employee's death or disability, (iv) the termination
of the employee's employment with the Company, or (v) the termination of the
401(k) Plan.  As of January 1, 1999, the Company terminated the 401(k) Plan with
respect to additional contributions and/or new participants.  The 401(k) Plan
continues to be in effect for employees and former employees who have not
elected to withdraw their accounts.  As of September 30, 1999, there were 14
remaining participants in the 401(k) Plan.

                                       22
<PAGE>

          Board Compensation.  Directors of the Company may be compensated by
the Company for meeting attendance by an annual directors' fee of $2,500, and
are entitled to reimbursement for their travel expenses.  From time to time,
directors who are not employees of the Company will receive grants of options to
purchase the Company's Common Stock or stock bonuses.  The Company does not pay
additional amounts for committee participation or special assignments of the
Board of Directors.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.
          --------------------------------------------------------------

          The total number of shares of Common Stock of the Company beneficially
owned by each of the officers and directors, and all of such directors and
officers as a group, and their percentage ownership of the outstanding capital
stock of the Company as of September 30, 1998, are as follows:

<TABLE>
<CAPTION>
                                                       Shares       Percent of
              Management                            Beneficially   Outstanding
           Shareholders(1)                            Owned(1)        Stock
           ---------------                          ------------   -----------
<S>                                                 <C>            <C>
William V. Perry...................................   290,470(2)       1.10%
   3200 Bristol, 8th Floor
   Costa Mesa, California 92626
Ann L. Petersen....................................     6,250          0.02%
   Star Route 5080
   Keaau, Hawaii 96749
Donald E. Hannabarger..............................    94,280          0.36%
   3200 Bristol, 8th Floor
   Costa Mesa, California
Michael P. Roth....................................         0(5)          0%
  3200 Bristol, 8th Floor
  Costa Mesa, California 92626
James E. Shipley...................................   813,375(4)       9.94%
   3200 Bristol, 8th Floor
   Costa Mesa, California 92626
Vincent Rinehart................................... 2,600,000(3)       9.87%
   3200 Bristol, 8th Floor
   Costa Mesa, California 92626

Directors and officers as a group
  (6) persons, including the above)................ 3,804,375         14.44%
                                                    =========         =====
</TABLE>

(1)  Except as otherwise noted, it is believed by the Company that all persons
     have full voting and investment power with respect to the shares, except as
     otherwise specifically indicated.  Under the rules of the Securities and
     Exchange Commission, a person (or group of persons) is deemed to be a
     "beneficial owner" of a security if he or she, directly or indirectly, has
     or shares the power to vote or to direct the voting of such security, or
     the power to dispose of or to direct the disposition of such security.
     Accordingly, more than one person may be deemed to be a beneficial owner of
     the same

                                       23
<PAGE>

     security. A person is also deemed to be a beneficial owner of any security
     which that person has the right to acquire within 60 days, such as warrants
     or options to purchase the Common Stock of the Company.
(2)  Represents shares of the Company owned by Win, Win, Solver Group, Inc., a
     corporation owned by Mr. Perry.  It also includes 13,688 shares held by a
     trust of which Mr. Perry is the trustee.  He is not a beneficiary of the
     trust, and disclaims any ownership of its securities.
(3)  Represents shares of the Company owned by AMRES Holdups, LLC, a corporation
     beneficiary owned by Mr. Rinehart.  Mr. Rinehart is President of the
     Company's subsidiaries, American Residential Funding, Inc. and Residential
     Mortgage Corporation.
(4)  Represents shares of the Company owned by World Trends Financial, Ltd., a
     corporation beneficially owned by Mr. Shipley.
(5)  Effective March 1, 1999, this individual resigned as an officer of the
     Company, but he   remains as a Director.

Security Ownership of Certain Beneficial Owners

     The following table sets forth information with respect to the beneficial
ownership of each class of equity securities of the Company by each shareholder
who beneficially owns more than five percent (5%) of each class of the Company's
equity securities, the number of shares beneficially owned by each and the
percent of such class of equity securities so owned of record as of September
30, 1998.  The Company has three outstanding classes of equity securities:
Common Stock, Series A preferred stock and Series B preferred stock.  It is
believed by the Company that all persons listed have sole voting and investment
power with respect to their shares, except as otherwise indicated.

                                       24
<PAGE>

<TABLE>
<CAPTION>
  Name and Address                                        Amount and Nature
        of                                                  of Beneficial          Percent of Class of
  Beneficial Owner                  Title of Class            Ownership             Equity Securities
  ----------------                  --------------        -----------------        -------------------
<S>                                 <C>                   <C>                      <C>
Sterling Alliance Group, Ltd. (1)     Common Stock             3,375,000                  12.81%
   575 Anton Blvd.
   Suite 300
   Costa Mesa, California 92626
AMRES Holdings , LLC                  Common Stock             2,600,000                   9.87%
   4425 Atlantic Avenue
   Suite A-15
   Long Beach, California 90807
Millenco, L.P.                        Warrants to                600,000                   5.9%
   111 Broadway, 20th Floor            purchase
   New York, New York 10006          Common Stock


                                   8% Conv. Preferred             13,514                   100%
                                     Stock, Series A

                                       10% Conv.                  97,500                   100%
                                       Preferred
                                     Stock, Series B
</TABLE>
(1)  Sterling Alliance Group, Ltd., ("SAG") is a Colorado corporation.  Certain
     directors and officers of the Company are stockholders.
(2)  Represents shares of the common stock of Sterling Alliance Group, Ltd.
     which owns 3,375,000 shares of the Common Stock of the Company

Item 12.  Certain Relationships and Related Transactions.
          -----------------------------------------------

          Effective March 12, 1997, the Company issued a promissory note in the
principal amount of $100,000 to James E. Shipley for advances made to the
Company. The note bears interest at 7% per annum and is due on March 12, 1998.
Mr. Shipley also made additional advances to the Company. As a result, the
Company was indebted to Mr. Shipley in the amount of $104,404 as of
September 30, 1998.

          During the fiscal year ended September 30, 1997, the Company incurred
unreimbursed expenses regarding ERA Sterling Real Estate, a real estate
brokerage company owned by the family of James E. Shipley, a director and
officer of the Company. As of September 30, 1998, the balance remaining on these
unreimbursed expenses totalled $166,214.

                                       25
<PAGE>

Item 13.  Exhibits and Reports on Form 10-KSB.
          -----------------------------------

     (a)    Exhibits:
            --------

     3.1    Restated Articles of Incorporation of EMB Corporation are
            incorporated by reference to Exhibit 3(i) to the Registrant's
            registration statement on Form 10-SB (No. 1-11883), filed with the
            Commission on June 28, 1996 (the "Form 10-SB").

     3.2    The Bylaws of the Registrant are incorporated by referenced to
            Exhibit 3(ii) of Form 10-SB of the Registrant.

     10(a)  The Asset Acquisition Agreement dated December 16, 1995, with
            Sterling Alliance Group, Ltd. is incorporated herein by reference to
            Exhibit 10(a) to the Form 10-SB of the Registrant.

     10(b)  The Appraisal Report dated April 22, 1996, of real property (61
            acres) in County of Monterey, California by National Appraisal
            Service is incorporated herein by reference to Exhibit 10(b) to the
            Form 10-SB of the Registrant.

     10(c)  The Appraisal Report as of December 7, 1994, of 4.89 acres in
            Counter of Riverside, California, by Tyna M. Stopnik is incorporated
            herein by reference to Exhibit 10(c) to the Form 10-SB of the
            Registrant.

     10(d)  The License Agreement with Virtual Lending Technology, Inc. is
            incorporated herein by reference to Exhibit 10(d) to the Form 10-SB
            of the Registrant.

     10(e)  The Seller Agreement between ICI Funding Corporation and EMB
            Mortgage Banc, Ltd. is incorporated herein by reference to Exhibit
            10(e) to the Form 10-SB of the Registrant.

     10(f)  The 1996 Stock Option, SAR and Stock Bonus Plan is incorporated
            herein by reference to Exhibit 10(f) to the Form 10-SB of the
            Registrant.

     10(g)  The Sublease covering the executive offices of the Registrant
            expiring March, 1997 is incorporated herein by reference to Exhibit
            10(g) to the Form 10-SB of the Registrant.

     10(h)  The form of license agreement with customers of the Registrant is
            incorporated herein by reference to Exhibit 10(h) to the Form 10-SB
            of the Registrant.

     10(i)  Residential Mortgage Loan Origination Agreement dated July 31, 1996,
            with Orange County Federal Credit Union is incorporated by reference
            to Exhibit 10(i) of Amendment No. 1 to the Form 10-SB of the
            Registrant.

                                       26
<PAGE>

     10(j)  The Long Form Security (Installment) Land Contract with Power of
            Sale dated December 30, 1996, is incorporated herein by reference to
            Exhibit 7(c)(1) to the Form 8-K report of the Registrant filed on
            January 9, 1997.

     10(k)  Stock Purchase Agreement dated November 1, 1997, regarding
            acquisition of Investment Consultants, Inc., is incorporated herein
            by reference to Exhibit 10(k) to Form 10-KSB report of the
            Registrant for the period ended September 30, 1998 filed on January
            13, 1998.

     10(l)  ICI Master Commitment to purchase loans under ConformPlus program
            dated October 21, 1997 is incorporated herein by reference to
            Exhibit 10(l) to Form 10-KSB report of the Registrant for the period
            ended September 30, 1998 filed on January 13, 1998.

     10(m)  ICI Master Commitment to purchase second deed trust mortgage deeds
            dated September 12, 1997 is incorporated herein by reference to
            Exhibit 10(m) to Form 10-KSB report of the Registrant for the period
            ended September 30, 1998 filed on January 13, 1998.


     10(n)  ICI Master Commitment to purchase jumbo and conforming residential
            mortgages dated September 4, 1997 is incorporated herein by
            reference to Exhibit 10(n) to Form 10-KSB report of the Registrant
            for the period ended September 30, 1998 filed on January 13, 1998.

     10(o)  Master agreement for sale of mortgages with ContiMortgage
            Corporation is incorporated herein by reference to Exhibit 10(o) to
            Form 10-KSB report of the Registrant for the period ended September
            30, 1998 filed on January 13, 1998.

     10(p)  Sale agreement for purchase of mortgage loans with the Mortgage
            Authority, Inc. dated April 3, 1997 is incorporated herein by
            reference to Exhibit 10(p) to Form 10-KSB report of the Registrant
            for the period ended September 30, 1998 filed on January 13, 1998.

     10(q)  Mortgage loan Seller/Servicer Agreement with First Union National
            Bank of North Carolina dated March 16, 1997 is incorporated herein
            by reference to Exhibit 10(q) to Form 10-KSB report of the
            Registrant for the period ended September 30, 1998 filed on January
            13, 1998.

     10(r)  Mortgage Purchase Agreement with Resource Bancshares Mortgage Group,
            Inc. dated March 10, 1997 is incorporated herein by reference to
            Exhibit 10(r) to Form 10-KSB report of the Registrant for the period
            ended September 30, 1998 filed on January 13, 1998.

     10(s)  Stock Purchase Agreement with Linda K. Gregg dated November 1, 1997,
            regarding agreement of Preferred Holding Group, Incorporated is
            incorporated

                                       27
<PAGE>

            herein by reference to Exhibit 10(s) to Form 10-KSB report of the
            Registrant for the period ended September 30, 1998 filed on January
            13, 1998.

     11  *  Statement re: computation of per share earnings --Reference is made
            to the Statements of Operations of the Registrant for its fiscal
            year ended September 30, 1998, which are incorporated by reference
            herein.

     21.1*  Description of the subsidiaries of the Registrant.

     23.1*  Consent of McKennon Wilson & Morgan LLP

     27  *  Financial Data Schedule.

     *Filed herewith

     (b) Reports on Form 8-K.  The Registrant did not file any reports on Form
         -------------------
8-K during the last quarter of the period covered by this report.

                                       28
<PAGE>

                                  SIGNATURES

          In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


Registrant:    EMB Corporation


          By:  /s/ JAMES E. SHIPLEY
               ---------------------------
               James E. Shipley, President


          In connection with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Date:  November 12, 1999


By:    /s/ JAMES E. SHIPLEY                    /s/ WILLIAM V. PERRY
       ---------------------------------       --------------------------------
       James E. Shipley                        William V. Perry
       Director, President and Principal       Director and Executive Vice
       Financial and Accounting Officer        President


       /s/ MICHAEL P. ROTH
       ---------------------------------
       Michael P. Roth
       Director

                                       29
<PAGE>

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


Independent Auditors' Report..............................................F-2

Consolidated Financial Statements:

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

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

    Consolidated Statements of Shareholders' Deficit for the years ended
      September 30, 1998 and 1997.........................................F-5

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

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

                                      F-1
<PAGE>

                         INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Shareholders of
EMB Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheet of EMB Corporation
(a Hawaii corporation) and subsidiaries (the "Company") as of September 30,
1998, and the related consolidated statements of operations, shareholders'
equity (deficit), and cash flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EMB Corporation and
subsidiaries as of September 30, 1998, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company incurred recurring losses from
operations, had a significant working capital deficiency as of the date of this
report and significantly curtailed its operations in fiscal 1999.  These
conditions, among others, raise substantial doubt as to the Company's ability to
continue as a going concern. Management's plans in regards to these matters are
also described in Note 2.  The accompanying consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.


McKennon, Wilson & Morgan, LLP
Irvine, California
October 30, 1999

                                      F-2
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEET

                           As of September 30, 1998


                                    ASSETS

Current assets:
   Cash                                                        $    41,568
   Restricted cash (Note 2)                                         68,992
   Mortgage loans held for sale (Note 7)                        14,718,588
   Other current assets                                            347,737
                                                               -----------
       Total current assets                                     15,176,885

Property and equipment, net (Note 4)                             1,253,372
Related party receivable (Note 11)                                 168,441
Land held for sale (Note 5)                                        843,000
Goodwill, net of accumulated amortization of $58,592 (Note 3)      956,293
Other assets                                                       189,728
                                                               -----------

                                                               $18,587,719
                                                               ===========

                     LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
   Accounts payable                                            $   781,354
   Warehouse line of credit                                     14,530,588
   Accrued liabilities                                             605,700
   Payroll taxes payable (Note 8)                                2,006,394
   Current portion of capital lease obligations                    129,520
   Notes payable, current (Note 9)                                 337,391
   Other current liabilities                                       406,530
                                                               -----------
       Total current liabilities                                18,797,477

Capital lease obligations, net of current portion                  341,043
Notes payable, net current portion                                  75,000
Convertible notes payable (Note 11)                              1,700,000
                                                               -----------
       Total liabilities                                        20,913,520
                                                               -----------

Commitments and contingencies (Note 12)

Shareholders' deficit: (Notes 11 and 13)
   Series A convertible preferred stock, no par value;
    107,297 shares issued and outstanding                          166,465
   Series B convertible preferred stock, no par value;
    500,000 shares issued and outstanding                          931,750
   Common stock, no par value; 30,000,000 shares authorized,
    10,550,308 shares issued and outstanding                    11,749,076
   Accumulated deficit                                         (15,173,092)
                                                               -----------
       Total shareholders' deficit                              (2,325,801)
                                                               -----------

                                                               $18,587,719
                                                               ===========


          See accompanying notes to consolidated financial statements

                                      F-3
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

               For the Years Ended September 30, 1998 and 1997

<TABLE>
<CAPTION>
                                                                 1998            1997
                                                                 ----            ----
<S>                                                          <C>            <C>
Revenues:
 Loan origination and other fees, net of commitment fees     $14,820,459    $  4,156,193
                                                             -----------    ------------

Operating expenses:

 Loan origination costs, commissions and other fees           10,107,485       2,331,815
 General and administrative                                   11,247,168       4,418,708
                                                              ----------    ------------

                                                              21,354,653       6,750,523
                                                              ----------    ------------

Loss from operations                                          (6,534,194)     (2,594,330)

Other income (expense):

 Interest income                                                  17,858          15,146
 Interest expense                                             (1,336,002)        (36,979)
 Loss on impairment of fixed assets                              (52,629)              -
 Other                                                            43,641          65,938
                                                             -----------    ------------

                                                              (1,327,132)         44,105
                                                             -----------    ------------

Loss before income taxes                                      (7,861,326)     (2,550,225)

 Provision for income taxes                                        1,600           1,600
                                                             -----------    ------------

Net loss                                                     $(7,862,926)   $ (2,551,825)
                                                             ===========    ============


Basic and dilutive net loss per common share                      $(0.87)         $(0.42)
                                                             ===========    ============

</TABLE>

         See accompanying notes to consolidated financial statements

                                      F-4
<PAGE>


                       EMB CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

                For the Years Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
                                 Series A Convertible      Series B Convertible
                                       Preferred                 Preferred                 Common Stock
                                 Shares       Amount       Shares       Amount        Shares         Amount
                                 ------       ------       ------       ------        ------         ------
<S>                             <C>         <C>           <C>       <C>           <C>           <C>
Balances, October 1, 1996             -       $    -           -    $        -     5,311,817    $ 4,495,391
Proceeds from sale of
 shares for cash                      -            -           -             -        50,000        137,500
Shares issued for services            -            -           -             -       991,750      1,032,778
Shares issued for exercise
 of warrants                          -            -           -             -        96,250        140,938
Warrants exercised for
 subscription receivable              -            -           -             -        86,125        172,250
Shares issued for investment
 in joint venture                     -            -           -             -     1,000,000      1,137,500
Proceeds from issuance of A
 Preferred                      648,648    1,009,000           -             -            -               -
Payment of stock subscription
 receivable                           -            -           -             -            -               -
Establish bad debt reserve            -            -           -             -            -               -
Net loss                              -            -           -             -            -               -
                               --------    ----------    --------    ----------    ----------    -----------
Balances, September 30, 1997    648,648    1,009,000           -             -     7,535,942      7,116,357
Shares issued for acquisition
 of PHG                               -            -           -             -       100,000        191,000
Shares issued for acquisition
 of ICI                               -            -           -             -       400,000        684,000
Shares issued for acquisition
 of ATC, as amended                   -            -           -             -       100,000        171,000
Cancellation of shares issued
 in connection with joint
 venture                              -            -           -             -    (1,000,000)    (1,137,500)

<CAPTION>
                                  Common
                                   Stock       Accumulated       Shareholders'
                                Subscribed       Deficit        Equity (Deficit)
                                -----------   -------------     ----------------
<S>                             <C>           <C>               <C>
Balances, October 1, 1996        $(200,000)   $ (3,793,791)         $   501,600
Proceeds from sale of
 shares for cash                         -               -              137,500
Shares issued for services               -               -            1,032,778
Shares issued for exercise
 of warrants                             -               -              140,938
Warrants exercised for
 subscription receivable          (212,875)              -              (40,625)
Shares issued for investment
 in joint venture                        -               -            1,137,500
Proceeds from issuance of A
 Preferred                               -               -            1,009,000
Payment of stock subscription
 receivable                        125,000               -              125,000
Establish bad debt reserve         187,875               -              187,875
Net loss                                 -      (2,551,825)          (2,551,825)
                                ----------    ------------          -----------
Balances, September 30, 1997      (100,000)     (6,345,616)           1,679,741
Shares issued for acquisition
 of PHG                                  -               -              191,000
Shares issued for acquisition
 of ICI                                  -               -              684,000
Shares issued for acquisition
 of ATC, as amended                      -               -              171,000
Cancellation of shares issued
 in connection with joint
 venture                                 -               -           (1,137,500)
</TABLE>
          See accompanying notes to consolidated financial statements

                                      F-5
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

                For the Years Ended September 30, 1998 and 1997

<TABLE>
<CAPTION>
                               Series A Convertible  Series B Convertible
                                     Preferred             Preferred             Common Stock
                                Shares     Amount     Shares     Amount      Shares       Amount
                               --------   ---------  --------  ----------  ----------  -----------
<S>                            <C>        <C>        <C>       <C>         <C>         <C>
Shares issued for services
  rendered                            -           -         -           -   1,434,000    2,311,897
Shares issued for capital
  raising activities                  -           -         -           -     350,000      273,000
Shares issued in connection
  with master funding
  agreements                          -           -         -           -     405,000      450,000
Redemption of A Preferred      (486,486)   (756,972)        -           -           -            -
Issuance of B Preferred               -           -   675,000   1,281,750           -            -
Shares issued for conversion
  of convertible notes                -           -         -           -     693,152      390,320
Shares issued for conversion
  of A Preferred                (54,865)    (85,563)        -           -     182,214       85,563
Shares issued for conversion
  of B Preferred                      -           -  (175,000)   (350,000)    350,000      350,000
Write off of subscriptions
  receivable                          -           -         -           -           -     (287,875)
Valuation of beneficial
  conversion feature on
  convertible notes                   -           -         -           -           -      733,333
Valuation of beneficial
  conversion feature on
  B Preferred                         -           -         -           -           -      225,000
Value of warrants issued
  with convertible notes              -           -         -           -           -       40,050
Value of warrants issued
  with B Preferred                    -           -         -           -           -      152,931
Net Loss for year                     -           -         -           -           -            -
                               --------   ---------  --------  ----------  ----------  -----------
Balances, September 30, 1998    107,297   $ 166,465   500,000  $  931,750  10,550,308  $11,749,076
                               ========   =========  ========  ==========  ==========  ===========
<CAPTION>
                                 Common
                                 Stock      Accumulated     Shareholders'
                               Subscribed     Deficit     Equity (Deficit)
                               ----------   -----------   ----------------
<S>                            <C>          <C>           <C>
Shares issued for services
  rendered                             -               -       2,311,897
Shares issued for capital
  raising activities                   -               -         273,000
Shares issued in connection
  with master funding
  agreements                           -               -         450,000
Redemption of A Preferred              -        (586,619)     (1,343,591)
Issuance of B Preferred                -               -       1,281,750
Shares issued for conversion
  of convertible notes                 -               -         390,320
Shares issued for conversion
  of A Preferred                       -               -               -
Shares issued for conversion
  of B Preferred                       -               -               -
Write off of subscriptions
  receivable                     100,000               -        (187,875)
Valuation of beneficial
  conversion feature on
  convertible notes                    -               -         733,333
Valuation of beneficial
  conversion feature on
  B Preferred                          -        (225,000)              -
Value of warrants issued
  with convertible notes               -               -          40,050
Value of warrants issued
  with B Preferred                     -        (152,931)              -
Net Loss for year                      -      (7,862,926)     (7,862,926)
                                --------    ------------     -----------
Balances, September 30, 1998    $      -    $(15,173,092)    $(2,325,801)
                                ========    ============     ===========
</TABLE>
          See accompanying notes to consolidated financial statements

                                      F-6
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASHFLOWS

                For the Years Ended September 30, 1998, and 1997
<TABLE>
<CAPTION>
                                                                    1998            1997
                                                                    ----            ----
<S>                                                              <C>            <C>
Cash flows from operating activities:
 Net loss                                                        $(7,862,926)   $(2,551,825)
 Adjustments to reconcile net loss to net cash used in
   operating activities:
    Common stock issued for services                               2,311,897        838,861
    Amortization of common stock issued for debt financings          310,125              -
    Fair value of beneficial conversion for debt                     508,333              -
    Provision for settlement of Monterey land agreement              200,000              -
    Related party note payable issued for services                         -         63,750
    Write-off of notes receivable from officers and employees        245,600              -
    Increase in reserves                                                   -        493,833
    Depreciation and amortization                                    199,713         71,461
     Changes in operating assets and liabilities:
     Restricted cash                                                 (34,992)      (129,809)
     Inventory                                                             -         35,324
     Mortgage loans held for sale                                 (6,125,267)    (7,092,238)
     Other current assets                                            110,968       (362,563)
     Other assets                                                     (3,419)             -
     Accounts payable                                                129,113        316,937
     Accrued liabilities                                             434,958        121,858
     Payroll taxes payable                                         1,919,850              -
     Other current liabilities                                       279,630              -
                                                                 -----------    -----------

 Net cash used in operating activities                            (7,376,417)    (8,194,411)
                                                                 -----------    -----------
Cash flows from investing activities:
 Purchases of property and equipment                                (218,459)      (377,240)
 Purchases of intangible assets                                            -       (113,736)
 Loans made on notes receivable                                            -       (112,707)
 Payments (Loans) made on related party receivable                    39,139       (264,125)
 Cash received from acquisitions                                      16,607              -
 Proceeds from sale of land held for investment                            -        800,000
                                                                 -----------    -----------

 Net cash used in investing activities                              (162,713)       (67,808)
                                                                 -----------    -----------
Cash flows from financing activities:
 Proceeds on line of credit, net                                   6,186,984      7,029,738
 Payments under capital lease obligations                            (70,311)       (30,821)
 Borrowings (Payments) on debt                                       264,457       (154,777)
 Proceeds from issuance of common stock, net                               -        278,438
 Proceeds from related party borrowings                                    -         66,655
 Proceeds from issuance of A Preferred, net                                -      1,009,000
 Repurchase of A Preferred                                        (1,343,591)             -
 Proceeds from issuance of B Preferred, net                        1,281,750              -
 Proceeds from issuance of convertible notes payable               1,200,000              -
 Proceeds from common stock subscribed                                     -        125,000
                                                                 -----------    -----------

 Net cash provided by financing activities                         7,519,289      8,323,233
                                                                 -----------    -----------

Net (decrease) increase in cash                                      (19,841)        61,014

Cash at beginning of period                                           61,409            395
                                                                 -----------    -----------
</TABLE>

                                      F-7
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASHFLOWS

                For the Years Ended September 30, 1998, and 1997

<TABLE>
<S>                                                              <C>            <C>
Cash at end of period                                            $    41,568    $    61,409
                                                                 ===========    ===========
</TABLE>

                                      F-8
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND HISTORY

Organization and Nature of Operations

EMB Corporation (formerly called Pacific International, Inc.) (the "Company")
was incorporated under the laws of the State of Hawaii on May 5, 1960.
Effective December 16, 1995, the Company acquired the net assets of Sterling
Alliance Group, Ltd. ("SAG") which included 100% ownership in Electronic
Mortgage Banc, Ltd. now EMB Mortgage Corporation ("EMB Mortgage") and certain
land held for sale in Monterey County, California.  The Company was inactive at
the time of the acquisition.  For financial statement purposes, the transaction
was recorded as a recapitalization of SAG.

In the first quarter of fiscal 1998, the Company expanded its mortgage banking
operations through its acquisitions of Investment Consultants, Inc. ("ICI") and
Preferred Holding Group, Inc. ("PHG").  In fiscal 1999, the Company ceased its
mortgage banking operations of EMB Mortgage and divested itself of the assets of
ICI and PHG due to an economic downturn in the mortgage banking industry.  Later
in fiscal 1999, the Company began slowly to recommence its mortgage banking
operations through acquisitions of American Residential Funding ("AMRES") and
Residential Mortgage Corporation ("RMC").  AMRES operates four branch offices in
the United States, and 52 net branches to originate loans.  Net branches are an
origination extension of AMRES through independent real estate brokers.  EMB
Mortgage is no longer in operation.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  Since 1996, the Company has
incurred significant losses from operations and at September 30, 1998, the
Company had a working capital deficit of $4.1 million, which has increased in
fiscal 1999 to approximately $5.0 million.  Subsequent to fiscal 1998,
management has funded its operations through loans from affiliates.  The Company
requires immediate proceeds from a financing or from the sale of its land to
fund meet its current obligations.  Management is seeking private equity and
debt capital, as well as seeking to find a buyer for its land in Monterey
County, California.  There are no assurances that proceeds from the sources
discussed above will be available on acceptable terms or available at all.
These factors raise substantial doubt about the Company's ability to continue as
a going concern.  The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Principles of Consolidation

The consolidated financial statements include the accounts of EMB Corporation
and its subsidiaries.  All material inter-company accounts and transactions have
been eliminated in consolidation.

Significant Estimates

Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and reported
revenues and expenses.  Actual results may differ from these estimates.

                                      F-9
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mortgage Loans Held for Sale

Mortgage loans held for sale represent the Company's mortgage loans funded
through its warehouse credit facility.  Loan are generally sold within 10 days
from the date of funding.

Mortgage loans held for sale have been stated at lower of cost or market
determined on an aggregate loan basis.  Market value for mortgage loans covered
by investor commitments has been based on commitment prices.  Mortgage loans
held for sale include deferred loan origination costs of $249,250 at September
30, 1998.  Credit has been granted to individuals located throughout the United
States.  The loans were collateralized and secured by first deeds on real
property.  The interest rates on these mortgage loans were at market, which
generally ranged from 7.0% to 9.5%.

Subsequent to September 30, 1998, the Company has sold all subject loans,
without recourse.  Management believes that no material liabilities will arise
as a result of the sales.

Loan Origination Fees

Loan origination fees and costs are shared with referring brokers.  The
Company's portion of the loan origination fee is included in the loan production
revenue when the loan is sold.

Mortgage Servicing Rights

Included with the mortgage loans that are held for sale is the mortgage
servicing rights which are sold with the mortgage loans.

Property and Equipment

Property and equipment is stated at cost, and depreciation is computed using the
straight-line method for financial reporting and tax purposes over the following
estimated useful lives:

Equipment                         Five to seven years
Furniture and fixtures            Seven to ten years
Leasehold improvements            Life of lease or asset which ever is shorter

In the year of acquisition of property and equipment, one-half year's
depreciation is taken regardless of the actual date placed into service.
Maintenance and repairs are charged to operations as incurred, and major
improvements are capitalized. Upon retirement, sale, or other disposition, the
related cost and

                                      F-10
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


accumulated depreciation are eliminated from the respective accounts and any
gain or loss on disposition is reflected in operations.

Goodwill

Goodwill represents the excess of purchase price over the fair value of the net
assets of acquired businesses.  Goodwill is amortized on a straight-line basis
over the expected periods to be benefited.  For transactions effected in fiscal
1998, management originally estimated the period to be benefited at
approximately seven (7) years.  The Company assesses the recoverability of this
intangible asset quarterly, by determining whether the amortization of the
goodwill balance over its remaining life can be recovered through projected
undiscounted cash flows.  The amount of goodwill impairment, if any, is measured
based on projected undiscounted cash flows and is charged to operations in the
period in which goodwill impairment is determined by management. During the year
ended September 30, 1998, amortization of goodwill amounted to $58,592.  See
Note 3 for further discussion.

Impairment of Long-Lived Assets

The Company accounts for impairment of long-lived assets under the provisions of
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of."  This statement requires that long-lived assets and goodwill be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset.  If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets.  Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. See Note 4 for discussion of
Impairment.

Revenue Recognition

Origination fees, service release fees and other fees, net of direct costs, are
deferred and recognized at the time the loan is sold.  The Company records
revenues net of commitment fees, which amounted to $262,000 during the current
fiscal year.

Revenue and Cost Recognition - Land Held for Sale

Land acquisition costs have been capitalized and they will be charged to
earnings when the related sale is recognized. Other costs incurred in connection
with the land are charged to earnings when incurred.

Debt Issue Costs

Fees incurred in connection with the issuance of debt instruments are
capitalized and amortized using the effective interest method over the
contractual life of such agreement.  Debt issue costs are included in other
current assets in the accompanying consolidated balance sheet.

Income Taxes

                                      F-11
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Income taxes are provided using the liability method of accounting in accordance
with SFAS 109, "Accounting for Income Taxes."  A deferred tax asset or liability
is recorded for temporary differences between financial and tax reporting bases.
A valuation allowance is recorded when it is unlikely that the net deferred tax
assets will be realized through future operations.

Per Share Information

In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
128, "Earnings per Share".  SFAS 128 simplifies the standards for computing
Earnings per Share ("EPS"), eliminating the presentation of primary EPS and
requiring dual presentation of basic and diluted EPS on the face of the income
statement for all public corporations with complex capital structures.  In
fiscal 1998, the Company adopted SFAS 128; there was no impact on per-share data
for the periods presented as a result of adoption of this accounting principle.
Common stock equivalents have been excluded from the calculation of the weighted
average shares outstanding as their effects are anti-dilutive.

Stock-Based Compensation

During 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which defines a fair value based method of accounting for stock-
based compensation.  However, SFAS No. 123 allows an entity to continue to
measure compensation cost related to stock and stock options issued to employees
using the intrinsic method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."
Entities electing to remain with the accounting method of APB 25 must make pro
forma disclosures of net income and earnings per share, as if the fair value
method of accounting defined in SFAS No. 123 had been applied.  The Company has
elected to account for its stock-based compensation to employees under APB 25.

Comprehensive Income

In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income."  This
statement establishes standards for reporting the components of comprehensive
income and requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be included in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income includes net income, as well as
certain non-shareholder items that are reported directly within a separate
component of stockholders' equity and bypass net income.  The Company has
adopted the provisions of this statement during the current fiscal year, with no
impact on the accompanying financial statements.

Disclosures about Segments of an Enterprise and Related Information

In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information."  The provisions of this statement require
disclosures of financial and descriptive information about an enterprise's
operating segments in annual and interim financial reports issued to
stockholders. This statement defines an operating segment as a component of an
enterprise that engages in business activities that generate revenue and incur
expense, whose operating results are reviewed by the chief operating decision-
maker in the determination of resource allocation and assessing performance, and
for which discrete financial information is available.  The Company has one
segment however, the Company may have an additional segment in the future
related to ATC (Note 3) when such assets and operations are material.

                                      F-12
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


as defined under SFAS 131.

Financial Statement Reclassifications

Certain amounts reflected in the consolidated financial statements for the year
ended September 30, 1997 have been reclassified to conform to the presentation
for the year ended September 30, 1998.

NOTE 3 - ACQUISITIONS

Effective December 31, 1997, the Company consummated a stock purchase agreement
to acquire all of the issued and outstanding capital stock of ICI in exchange
for the issuance of 400,000 shares of the Company's common stock fairly valued
at $684,000.  The agreement was accounted for under the purchase method with the
excess of cost over the fair value of the net assets acquired of $732,376
allocated to goodwill (see Note 2).

Pursuant to this agreement, if, as of the close of the business day eighteen
months following closing of this transaction, the aggregate fair market value of
the Shares is less than $2,000,000, ICI may elect one of two options.  ICI may
either elect that additional common shares be issued equivalent to the
difference between the sum of $2,000,000 and the aggregate fair market value of
the Shares, or rescind the transaction.  On March 13, 1999, the Company and ICI
rescinded the stock purchase agreement, whereby the Company would forfeit the
400,000 shares of common stock issued in connection with the original agreement.
Accordingly, the Company charged operations for unamortized goodwill totaling
$631,126 in fiscal 1999.

Effective December 31, 1997, the Company entered into a stock purchase agreement
for all of the outstanding shares of capital stock of PHG in exchange for
100,000 shares of the Company's common stock fairly valued at $191,000. The
agreement was accounted for under the purchase method with the excess of cost
over the fair value of the net assets acquired of $156,376 allocated to
goodwill.  Upon consummation of the acquisition, PHG changed its name to EMB
Financial Services, Inc.  As discussed in Note 1, the Company ceased operations
of its mortgage banking operations, which included the operations of PHG.
Accordingly, the Company charged operations for unamortized goodwill totaling
$145,517 in fiscal 1999.

Effective December 23, 1997, the Company entered into a stock purchase agreement
to acquire all the outstanding shares of capital stock of AmerTeleCon, Inc.
("ATC").  In connection with this agreement, as amended, the Company issued
100,000 shares of common stock, fairly valued at $171,000. The agreement was
accounted for under the purchase method with the excess of cost over the fair
value of the net assets acquired of $135,133 allocated to goodwill.

                                      F-13
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The unaudited proforma statement of operations data for the years ended
September 30, 1998 and 1997, assuming the acquisition of ICI, PHG and ATC
occurred on October 1, 1996, are as follows:

<TABLE>
<CAPTION>
                                                                              1998                   1997

<S>                                                               <C>                     <C>
Revenues                                                                   $16,662,760           $10,895,165
                                                                           ===========           ===========
Net loss                                                                   $(7,555,777)          $(2,783,430)
                                                                           ===========           ===========
Basic and dilutive net loss per share                                      $     (0.88)          $     (0.46)
                                                                           ===========           ===========
</TABLE>

The above unaudited proforma amounts are not necessarily indicative of what the
actual results might have been if the acquisitions had occurred on October 1,
1996.

See Note 17 for acquisitions which were consummated subsequent to September 30,
1998.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30, 1998:
<TABLE>
<CAPTION>

<S>                                                                                      <C>
Machinery and equipment, including automobiles                                                   $1,078,610
Furniture and fixtures                                                                              384,196
Leasehold improvements                                                                               55,496
                                                                                                 ----------

                                                                                                  1,518,302
Less accumulated depreciation                                                                      (264,930)
                                                                                                 ----------

                                                                                                 $1,253,372
                                                                                                 ==========
</TABLE>

As of September 30, 1998, the Company had $506,504 of assets under capital
leases, at cost.  During the years ended September 30, 1998 and 1997,
depreciation expense totaled $141,121, and $63,611, respectively.

During the 2nd Quarter of fiscal 1999 the Company evaluated its assets for
impairments due to the significant decline in operations. As a result of this,
the Company recorded a $500,000 provision for these assets.

NOTE 5 - LAND HELD FOR SALE

SAG acquired approximately 61 acres of undeveloped land with water producing
rights and three wells in Monterey, California on December 11, 1995 from Golden
River Corp., an unrelated party.  Each well can produce approximately 900,000
gallons of water per 24-hour period and the water supply is replenished from the
run-off of the surrounding mountains.  SAG issued 200,000 shares valued at $4.00
per share of its common stock as consideration.  This land was sold on December
30, 1996 to an unrelated party for $4,000,000.  The Company received a down
payment of $800,000 and a note receivable for $3,200,000 with interest at 12%
per annum.  The Company reported this sale based on the deposit method,
recovering the initial cost of the land with the down payment.

On June 30, 1998, the Company and the unrelated party agreed to rescind the
sale.  As a result of the rescission which became effective on August 15, 1998,
the Company returned the first installment payment received totaling $422,867,
and issued a convertible note as reimbursement of the initial down payment made
of $800,000, plus a severance fee of $200,000, aggregating $1,000,000 (see Note
8).  The Company recorded the carrying value of the land at $800,000 and charged
operations in the amount of $200,000 relating to the settlement.

                                      F-14
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The Company currently possesses five (5) acres of undeveloped land in Riverside
County, California zoned for residential construction.  The carrying value of
this land is approximately $43,000.  The land is encumbered by a $65,000 note,
which is included in the current portion of notes payable.

NOTE 6 - INVESTMENT IN JOINT VENTURE

On August 29, 1997, the Company entered into a joint venture with an unrelated
company.  The Company obtained a 50% interest in the joint venture to further
its real estate mortgage business throughout Europe, Australia and New Zealand.
The Company contributed 1,000,000 restricted common shares to fulfill its
investment.  On June 30, 1998, by mutual consent of the parties, the joint
venture agreement was rescinded.  As a result, the 1,000,000 shares of Company's
common stock issued in connection with the joint venture were returned to the
Company for cancellation, with no gain or loss recorded in connection with this
rescission.

NOTE 7 - WAREHOUSE LINE OF CREDIT

In 1996, the Company entered into an agreement with a national lender whereby
the lender extended a $3,000,000 warehouse line of credit to the Company solely
for the purpose of funding residential mortgage loans.  In February 1998, this
agreement was amended to provide for a $10,000,000 warehouse line of credit and
later increased to $25,000,000.  Interest was charged based on the lender's
referenced prime rate plus 0.5% per annum.  The agreement was terminated during
the second quarter of 1999 when the Company ceased operations. The outstanding
balance on September 30, 1998, was $14,030,587.  The obligation was fully
satisfied upon termination of the agreement.

The Company also entered into master commitment with such lender totaling
$150,000,000 during fiscal 1998 which was subsequently increased to
$500,000,000.  The master commitment allowed the Company to fund loans of jumbo
and conforming residential first and second mortgages, and sell the loans to the
lender.  The master loan commitment was terminated concurrently with the
warehouse line of credit above.   See Note 13 for common stock issued in
connection with this agreement.

NOTE 8 - PAYROLL TAXES PAYABLE

At September 30, 1998, the Company has unpaid federal and state payroll tax
liabilities of approximately $2.1 million, including estimated penalties and
interest.  Subsequent to September 30, 1998, additional payroll tax deposits
were not made through the date the Company ceased operations of EMB Mortgage.
Penalties and interest continue to accrue in fiscal 1999.  Certain officers may
be held personally liable in the event the Company does not satisfy these
obligations.

NOTE 9 - NOTES PAYABLE

The Company currently has various unsecured notes payable that bear interest at
rates ranging from 10.5% to 12.75% per annum and are due on demand.  As of
September 30, 1998, the Company owed approximately $478,247 in connection with
these notes.  In addition, the Company has a note payable for $75,000 which is
due in June 2000, interest is calculated at 12.75% and paid monthly, such amount
has been classified as long term debt on the accompanying balance sheet.

                                      F-15
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 10 - RELATED PARTY TRANSACTIONS

At September 30, 1998, the Company has a non-interest bearing, unsecured
receivable from a related corporation of $61,810.  This receivable was reduced
during the year through an offset of $104,404, which was an amount due to an
officer of the Company for contributions.  During fiscal 1999 this officer has
contributed approximately $910,116 to the Company, which will be treated as a
reduction to the receivable.

In addition, the Company has a receivable totaling $106,631 due from two
shareholders of ICI.  The note is net of amounts due to the respective
shareholders.  The receivable is due in September 1999.

During the current fiscal year, the Company wrote off various notes receivables
from officers and directors of the Company amounting to $245,600.  Such amounts
were classified as compensation expense.  There were no borrowings or payments
received in connection with these notes during the current fiscal year.

NOTE 11 - CONVERTIBLE NOTES PAYABLE

8% Convertible Notes

On January 30, 1998, the Company issued 8% convertible notes totaling $500,000
to non-U.S. persons in reliance upon Regulation S under the Securities Act of
1933.  The principal amount of the notes were convertible into the Company's
common stock at a conversion rate of $2.375 per share or 75% of the average
closing bid price five (5) days after the date of election, whichever was lower.
As additional consideration for the issuance of these notes, the Company issued
warrants to purchase 100,000 shares of common stock at an exercise price of
$2.375 per share, fairly valued at $40,050.   Costs incurred related to this
offering amounted to $183,750, exclusive of the value of the warrants above.  At
the time of issuance of such notes, the Company recorded $166,667 for the value
of the beneficial common stock conversion feature as an increase to additional
paid-in capital, with a corresponding charge to operations for interest, as
these notes were immediately convertible.

Interest was payable on the notes at 8% per annum.  The notes, originally due on
January 30, 2000, were fully satisfied through the issuance of 693,152 shares of
common stock during the year ended September 30, 1998.  The unamortized debt
issue costs of $109,680, were netted against the principal balance of $500,000,
and reflected in shareholders' equity at the time of conversion.  The effective
interest rate on this note was in excess of 100% per annum.

15% Convertible Notes

On or about July 6, 1998, the Company issued 15% convertible notes totaling
$700,000.  The principal amount of the note is convertible into shares of the
Company's common stock at a conversion rate of $1.50 per share or 75% of the
closing bid price of the Company's common stock at the time of issuance,
whichever is lower.  Interest is payable at maturity, or upon conversion on the
notes, at 15% per annum.  The notes are due on July 6, 2000. At the time of
issuance of such notes, the Company recorded $233,333 for the value of the
beneficial common stock conversion feature as an increase to additional paid-in
capital, with a corresponding charge to operations for interest, as these notes
were immediately

                                      F-16
<PAGE>

convertible.  Costs and fees related to this offering amounted
to $151,787.  The effective interest rate on this note is approximately 42% per
annum.

On or about September 1, 1998, the Company issued 15% convertible notes in the
principal amount of $1,000,000, as part of the termination of the sale of land
located in Monterey, California in fiscal 1997 (see Note 5).  The principal
amount of the note is convertible into shares of the Company's common stock at a
conversion rate of $1.50 per share, or 75% of the closing bid price of the
Company's common stock at the time of issuance, whichever is lower.  Interest is
payable quarterly on the notes at 15% per annum.  The notes are due on September
1, 2000.  At the time of the issuance of such notes, the Company recorded
approximately $340,000 for the beneficial common stock conversion feature as an
increase to additional paid-in capital, with a corresponding charge to
operations for interest as these notes were immediately convertible.  The
Company incurred a cancellation fee totaling $200,000 which was charged to
operations.  The effective interest rate on this note is approximately 32% per
annum.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases its office facilities located in Costa Mesa, Dallas, New
York, Sherman Oaks and Denver, under operating leases from unrelated third
parties that expire at various dates, ranging from one to three years.  The
Company also has various equipment leases that expire at various dates ranging
from one to four years.  Rental expense for the years ended September 30, 1998
and 1997, was $497,994 and $155,022, respectively.

Minimum future annual rental payments under the lease agreements are summarized
as follows:

<TABLE>
<CAPTION>
   Years Ending
   September 30
-------------------

<S>                   <C>
       1999                     $  418,954
       2000                        360,616
       2001                        369,356
       2002                        204,813
       2003                         23,557
                                ----------

                                $1,377,296
                                ==========
</TABLE>

Capital Leases

The Company acquired part of its equipment and furniture under capital lease
obligations.  The economic substance of the capital lease agreements is that the
Company finances the acquisition by making monthly payments over a thirty-six to
forty-eight month period.  The assets are reflected as part of property and
equipment.

The future annual minimum lease payments under capitalized leases and the
present value of the net minimum lease payments are as follows:

                                      F-17
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
    Years Ending
    September 30
---------------------

<S>                     <C>
        1999                  $ 243,809
        2000                    231,932
        2001                    184,395
        2002                     14,321
                              ---------
                                674,457

Less - Interest                (203,894)
                              ---------
                                470,563

Less current portion           (129,520)
                              ---------
Long-term portion             $ 341,043
                              =========
</TABLE>

Litigation

On or about November 17, 1998, the Company settled a lawsuit with a prior lessor
of rental space.  Under the terms of the judgement the Company is required to
pay $176,000 plus interest of 4.2% on the unpaid portion, plus the plaintiff's
attorney fees amounting to $10,000.  Such amounts have been included in accrued
liabilities at September 30, 1998.  In fiscal 1999, the Company has paid $5,500
in connection with this obligation.

On or about August 17, 1999 a judgement of $129,519 was entered against the
Company.  The suit was with a prior purchaser of loans who had requested that
the Company repurchase a loan due to underwriting deficiencies made by the
Company.

The Company is involved in certain claims and legal proceedings in which
monetary damages and other relief are sought.  In some cases, the Company is
vigorously contesting these claims. However, these claims are preliminary, and
their ultimate outcome cannot presently be predicted.  In other cases, the
Company has settled or agreed to such demands.  The majority of these claims
were already reflected as a liability in the financial statements due to
services provided or goods received prior to the claim.  In any event, it is the
opinion of management that any liability of the Company for claims or
proceedings will not materially affect its financial position.

See Note 17 for additional subsequent events.

NOTE 13 - SHAREHOLDERS' EQUITY

General

The Company amended its Articles of Incorporation on May 21, 1996, which
authorized the issuance of 35,000,000 shares of capital stock; 30,000,000 shares
are no par value common stock and 5,000,000 shares are preferred stock. The
preferred stock may be divided into and issued in one or more series.

                                      F-18
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

From time to time, the Board of Directors have approved the issuance of common
stock for services and assets.  The Company follows a policy of using the
closing bid price or the average closing bid prices near the transaction closing
date, less a discount of approximately 15% for transferability restrictions, to
estimate the fair value of the services or assets received.  In rare cases, the
Company uses the value of the assets received.

Series A, Convertible Preferred Stock

In August 1997, the Company designated 1,066,666 shares of its authorized
preferred stock as Series A, 8% Convertible Preferred Stock (the "A Preferred").
The Company sold a total of 648,648 shares of A Preferred for $1,009,000 (at
$1.85 per share), net of fees and commissions of $191,000 in a private placement
that was consummated in August 1997. As additional consideration, the Company
issued warrants to purchase 150,000 shares of the Company's common stock at an
initial exercise price of $1.85 per share. The A Preferred has a stated value of
$1.85 and is entitled to receive cumulative dividends at an annual rate of
$0.148 per share (rate of 8% per annum), payable quarterly when and if declared
by the Board of Directors and is convertible, at any time at the option of the
holder, into shares of the Company's common stock at a conversion price equal to
the lesser of (a) $1.85 per share or (b) 75% of the average closing bid price of
the common stock during the five trading days immediately preceding such
conversion. In the event of any noticed conversion of the A Preferred at a
conversion price of less than $1.125 per common share, the Company may, at its
option, redeem the shares of the A Preferred, in whole or in part, at an amount
equal to 117% of the purchase price of the holder's A Preferred plus an amount
equal to accrued and unpaid dividends, if any, to (and including) the date fixed
for redemption, whether or not earned or declared. Each share of A Preferred is
entitled to vote on any matter submitted to the shareholders as if the A
Preferred had been converted into common stock, and each share has a liquidation
Preference equal to $2.16.

On December 31, 1997, the Company repurchased 486,486 A Preferred shares in
connection with the issuance of B Preferred (see below).  The effective price of
the redemption was $2.57 per share.  The Company increased its Accumulated
Deficit totaling $493,297 as reflected in the accompanying statement of
stockholders' equity, based on the difference between the original purchase
price and the repurchase price.  In the fourth quarter of fiscal 1998, holders
of 54,865 shares of A Preferred elected to convert their interests into 182,214
shares common stock, as provided under the terms of the A Preferred.  At
September 30, 1998, the Company had 107,297 shares of its A Preferred
outstanding with a carrying value of $166,465.  Subsequent to September 30,
1998, the holders elected to convert 93,784 shares of A Preferred into 741,960
shares of common stock.

Series B, Convertible Preferred Stock

Effective December 31, 1997, the Company issued 175,000 shares of Series B, 10%
Convertible Preferred Stock (the "B Preferred") for $2.00 per share or $350,000,
and issued 500,000 shares of B Preferred for the repurchase of 486,486 shares of
its outstanding A Preferred.

Series B Preferred has a stated value of $2.00 per share and is entitled to
receive cumulative dividends at an annual rate of $0.16 per share (rate of 10%
per annum), payable quarterly when and if declared by the Board of Directors and
is convertible, at any time at the option of the holder, into shares of the
Company's common stock at a conversion price equal to the lesser of (a) $1.50
per share or (b) 75% of

                                      F-19
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the average closing bid price of the common stock during the five trading days
immediately preceding such conversion. In the event of any noticed conversion of
the B Preferred at a conversion price of less than $1.125 per common share then
the Company may, at its option, redeem the shares of the B Preferred, in whole
or in part, at an amount equal to 117% of the purchase price of the holder's B
Preferred plus an amount equal to accrued and unpaid dividends, if any, to (and
including) the date fixed for redemption, whether or not earned or declared.
Each share of B Preferred is entitled to vote on any matter submitted to the
shareholders as if the B Preferred had been converted into common stock, and
each share has a liquidation Preference equal to $2.375.

As additional consideration for the issuance of the B Preferred, the Company
issued warrants to purchase 400,000 shares of the common stock of the Company
exercisable at $2.375 per share.  The estimated fair value of these warrants,
based on the Black-Scholes valuation model, amounted to $74,800 and,
accordingly, the Company charged Accumulated Deficit and increased Additional
Paid-in Capital in the accompanying statement of stockholders equity.  In
connection with the issuance of the B Preferred shares in fiscal 1998, the
Company recorded $225,000 for the beneficial common stock conversion feature to
Additional Paid-in Capital and a corresponding charge to Accumulated Deficit in
the accompanying statement of stockholders' equity.  Total fees incurred in
connection with the B Preferred amounted to approximately $68,250.

During the fourth quarter of fiscal year 1998, certain holders of B Preferred
elected to convert 175,000 shares into 350,000 shares of common stock, as
entitled under the terms of the B Preferred.  At September 30, 1998, the Company
had 500,000 shares of B Preferred outstanding with a carrying value of $931,750.
Subsequent to September 30, 1998, the holders of 402,500 shares of B Preferred
elected to convert into 3,023,224 shares of common stock as provided under the
terms of the Preferred B.

Common Stock

In fiscal 1997, the Company issued shares of common stock to certain officers
and employees valued at $101,278 for services rendered.

In fiscal 1997, the Company issued shares of common stock to certain unrelated
parties valued at $1,456,903, for services rendered.

During the first quarter of 1998, the Company issued 405,000 shares of common
stock, valued at $610,875, in connection with its master funding commitment.

During fiscal 1998, the Company issued 1,434,000 shares of common stock to
various non-affiliated persons or entities as consideration for consulting
services pursuant to various consulting agreements between the Company and those
persons or entities.  The value of such transactions amounted to $2,311,897 and
was charged to operations in fiscal 1998

For additional common stock transactions in fiscal 1998, refer to Note 3 for
acquisitions of businesses, Note 11 for conversion of the 8% convertible notes
and above for conversion of certain A Preferred and B Preferred shares.

Common Stock Purchase Warrants

                                      F-20
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table summarizes common stock warrant activity during the years
ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
                                                     1998                    1997
                                            ----------------------   --------------------

<S>                                         <C>                      <C>
Beginning balance                                         212,500                108,750

Issued                                                    618,750                286,125
Exercised                                                       -               (182,375)
Expired                                                  (212,500)                     -
                                                         --------               --------

Ending balance                                            618,750                212,500
                                                         ========               ========
</TABLE>

As of September 30, 1998, the exercise price of outstanding warrants range from
$1.59 - $2.50 and expire at various times through December 2001. Also, see Note
17 for issuance of additional warrants to purchase common stock.

NOTE 14 - INCOME TAXES

At September 30, 1998, the Company had net operating loss carry-forwards for
federal and state income tax purposes totaling approximately $12.6 million and
$6.3 million, respectively, which for federal reporting purposes, begin to
expire in 2009 and fully expire in 2013.  For state purposes, the net operating
loss carry-forwards begin to expire in 2000 and fully expire in 2002.  The net
deferred tax assets at September 30,1998, before considering the effects of the
Company's valuation allowance amounted to approximately $4.7 million.  The
Company provided an allowance substantially all its net deferred tax assets
since they are unlikely to be realized through future operations.  The valuation
allowance for net deferred tax assets increased approximately $2.0 million and
$1.3 million during the years ended September 30, 1998 and 1997, respectively.
The Company's provision for income taxes differs from the benefit that would
have been recorded, assuming the federal rate of 34%, due to the valuation
allowance for net deferred tax assets.

NOTE 15 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
                                                                           1998                 1997
                                                                    -------------------   ----------------

Cash paid for interest ad income taxes:
<S>                                                                 <C>                   <C>
 Interest                                                                  $    65,437          $   18,506
 Income taxes                                                                        -               1,600

Non-cash investing and financing transactions:
 Capital lease obligations incurred for property and equipment                 430,555                   -
 Common stock issued (canceled) for investment                              (1,137,500)          1,137,500
   in joint venture
 Conversion of notes into common stock, net of                                 390,320                   -
   of unamortized debt issue costs of $109,680
 Common stock issued for acquisition of ICI                                    684,000                   -
 Common stock issued for acquisition of PHG                                    191,000                   -
 Common stock issued for acquisition of ATC                                    171,000                   -
</TABLE>

                                      F-21
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
<S>                                                                        <C>                  <C>
 Common stock issued for master funding agreement                              610,875                   -
 Common stock issued for services rendered in connection                       273,000                   -
   with capital raising activities
 Warrants issued in connection with capital raising activities                 192,981                   -
 Value of beneficial common stock conversion features                          958,333                   -
 Common stock issued for services                                          $ 2,311,897          $1,032,778
</TABLE>

The Company acquired all the capital stock of ICI, PHG and ATC for common stock
issued at a value of $1,146,000, in conjunction with the acquisition,
liabilities were assumed as follows:

     Fair value of assets acquired                         $ 3,065,229
     Value of common stock issued for capital stock         (1,046,000)
                                                           -----------
      Liabilities assumed                                  $ 2,019,229
                                                           ===========

NOTE 16 - RETIREMENT PLAN

The Company adopted a 401(k) retirement plan effective August 1, 1997. As of the
adoption date, the plan covers all employees who are at least 21 years of age.
Thereafter, an employee must have four months of service and be at least 21
years of age to be eligible. Under the plan, the employees may contribute up to
15% of their compensation. The Company holds the right to make a discretionary
contribution.  There were no contributions to the plan made by the Company for
the years ended September 30, 1998 and 1997.

NOTE 17 - SUBSEQUENT EVENTS

On October 23, 1998, the Company entered into a joint venture with Equicomm
Corporation ("ECC"), for the purposes of providing financial services and
guarantees for the benefit of licensed long distance data and voice
telecommunications carriers.  The Company issued 450,000 shares of its common
stock valued at $292,842 in connection with the joint venture.

During December 1998, the Company terminated the majority of the employees of
EMB Mortgage due to the reduction of operations of EMB Mortgage.  In most cases
the employees were not given their final wages upon termination.  There have
been various claims made by these employees and the labor board has taken action
against the Company.  These amounts have been accrued in fiscal 1999.

On May 7, 1999, the Company entered into a stock purchase agreement whereby it
has agreed to purchase all of the outstanding shares of capital stock of AMRES
in exchange for 2,000,000 shares of the Company's common stock fairly valued at
$1,567,230. Pursuant to such agreement the shareholder of AMRES received options
to purchase the Company's common stock at various exercise prices.  1,250,000
options were issued on the date of acquisition, exercisable at 110% of the fair
market value of the stock the week prior to close or $0.85 per share. These
options expire on May 31, 2002. Additionally, 500,000 options will be granted
every June 1 from the year 2000 to 2003. The exercise price of these options
starts at $1.50 for the first yearly grant, and increases by $0.50 every
issuance thereafter to a maximum price of $3.00 per share. The options vest each
year as described above and expire three years from the grant date. The Company
estimated the aggregate value of such warrants at $1,442,500 and will be
included as additional purchase price. The agreement was accounted for under the
purchase method with the excess of the fair value over the net assets acquired
of $2,943,413 allocated to goodwill.

On May 7, 1999, the Company entered into a stock purchase agreement whereby it
has agreed to purchase all of the outstanding shares of capital stock of RMC in
exchange for 600,000 shares of the Company's common stock fairly valued at
$470,169.  The agreement was accounted for under the purchase method with the
excess of the fair value over the net assets acquired of $470,169 allocated to
goodwill.

                                      F-22
<PAGE>

                       EMB CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In fiscal 1999, the Company issued 8,699,000 shares valued at $5,065,197 for
various services rendered by consultants for marketing, regulatory, legal and
financial advisory services.

Also see Note 13 for discussion of certain conversions of A Preferred and B
Preferred into common stock.

                                      F-23