<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                 FORM 10-KSB/A

     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
        THE SECURITIES AND EXCHANGE ACT OF 1934

     [ ]  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, 8/TH/ FLOOR, COSTA MESA, CALIFORNIA  92626
        ---------------------------------------------------------------
                   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

ISSUER'S TELEPHONE NUMBER:  (714) 437-0715

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:


                                           NAME OF EACH EXCHANGE ON WHICH 
        TITLE OF EACH CLASS                          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 X  No 
                                                                      ---   ---

     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.  [    ]
     State issuer's revenues for its most recent fiscal year:  $276,419
     The aggregate market value of voting stock held by non-affiliates of the
     registrant as of January 10, 1997 :
          Common stock, no par value:  $48,230,429
     The number of shares of the registrant's common stock outstanding as of
     December 31, 1996: 5,732,801 shares

     Documents incorporated by reference:   none

     Transitional Small Business Disclosure Format:

                            Yes             No   X
                                ---             ---
<PAGE>
 
ITEM 7.  FINANCIAL STATEMENTS.
         -------------------- 

             With this amendment to the Form 10-KSB of EMB Corporation is its
restated audited consolidated financial statements for its fiscal year ended
September 30, 1996.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
         -------------------------------- 

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

        23.1*  Consent of Harlan & Boettger.

        27     Financial Data Schedule
<PAGE>
 
                                  SIGNATURES

             In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this Amendment to its Form 10-KSB report for its fiscal
year ended September 30, 1996, 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 Exchange Act, 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:  January 26, 1998


By:    /s/ James E. Shipley                     /s/ William V. Perry
       -------------------------------          ---------------------------
       James E. Shipley                         William V. Perry
       Director and President                   Director and Executive Vice
                                                President
                                                
                                                
       /s/ B. Joe Wimer                         /s/ Bruce J. Brosky
       -------------------------------          -------------------------------
       B. Joe Wimer                             Bruce J. Brosky
       Director, Secfretary, Treasurer,         Director and Vice President-
       Chief Financial Officer and               Marketing and Public Relations
        Principal Accounting officer


       /s/ Joseph K. Brick                      /s/ Michael P. Roth
       ------------------------------           ---------------------------
       Joseph K. Brick                          Michael P. Roth
       Director and Vice President of           Director and Vice President
        EMB Mortgage Corporation
 
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                         AUDITED FINANCIAL STATEMENTS

                       AS OF SEPTEMBER 30, 1996 AND 1995
<PAGE>
 
                                C O N T E N T S

<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                    <C>
INDEPENDENT AUDITORS' REPORT                                                              F-1
                                                                                
CONSOLIDATED FINANCIAL STATEMENTS:                                              
                                                                                
 CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1996 AND 1995                            F-2
                                                                                
 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1996    
   AND 1995                                                                               F-3
                                                                                
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED   
   SEPTEMBER 30, 1996 AND 1995                                                            F-4
                                                                                
 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 1996    
   AND 1995                                                                               F-5
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                            F-6 - F-13
</TABLE>
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT



TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
EMB CORPORATION AND SUBSIDIARY:

We have audited the accompanying consolidated balance sheets of EMB Corporation
(a Hawaii corporation) and subsidiary as of September 30, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for the years ended September 30, 1996 and 1995.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EMB Corporation and
subsidiary as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.

As discussed in Note O to the financial statements, an error resulting in the
understatement of previously reported net loss, common stock to be issued,
operating expenses and retained earnings as of September 30, 1996, was
discovered by management of the Company during the current year.  Accordingly,
the September 30, 1996 financial statements have been restated to correct the
error.



San Diego, California
January 8, 1997

                                      F-1
<PAGE>
 
                         EMB CORPORATION AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

<TABLE> 
<CAPTION> 
  ASSETS
                                                                                    September 30,               
                                                                                         1996          September 30,     
CURRENT ASSETS                                                                      (As restated)          1995    
                                                                                    ------------       ------------
<S>                                                                                 <C>                <C>
  Cash                                                                               $       395          $  26,071
  Accounts receivable (no allowance deemed necessary)                                     14,582                  -
  Inventory, net                                                                          35,324                  -
  Note receivable                                                                         14,000             14,000
                                                                                     -----------          ---------
                                                                                                  
     TOTAL CURRENT ASSETS                                                                 64,301             40,071
                                                                                                  
PROPERTY AND EQUIPMENT, net (Note D)                                                     149,363             25,692
                                                                                                  
RELATED PARTY RECEIVABLE (Note G)                                                        129,687             54,889

LAND HELD FOR SALE (Notes A and E)                                                       843,000             43,000

OTHER ASSETS                                                                               4,128              1,177
                                                                                     -----------          ---------
                                                                                                  
                                                                                     $ 1,190,479          $ 164,829
                                                                                     ===========          =========
                                                                                                  
     LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                                               
                                                                                                  
CURRENT LIABILITIES                                                                               
  Accounts payable                                                                   $   195,374          $   4,684
  Bank overdrafts                                                                         27,177                  -
  Accrued expenses                                                                        48,888              2,249
  Notes payable - current portion (Note F)                                               293,793             60,000
  Capital lease obligations - current portion (Note I)                                    28,553              7,821
                                                                                     -----------          ---------
                                                                                                  
     TOTAL CURRENT LIABILITIES                                                           593,783             74,754
                                                                                                  
RELATED PARTY PAYABLE (Note G)                                                                 -            235,171
                                                                                                  
NOTES PAYABLE, net of current portion (Note F)                                            65,000             65,000
                                                                                     
CAPITAL LEASE OBLIGATIONS, net of current portion (Note I)                                30,096             10,247
                                                                                     -----------          ---------
                                                                                     
     TOTAL LIABILITIES                                                                   688,879            385,172
 
COMMITMENTS (Note I)
 
SHAREHOLDERS' EQUITY (DEFICIT)
  Preferred stock, no par value, 5,000,000 shares authorized, no shares
     issued or outstanding                                                                     -                  -
  Common stock, no par value, 30,000,000 shares                                                  
     authorized; 5,311,817 and 1,644,350 shares issued                                           
     and outstanding, respectively                                                     3,910,391            345,250
  Common stock to be issued                                                              585,000                  -
  Common stock subscribed                                                               (200,000)                 -
  Retained deficit                                                                    (3,793,791)          (565,593)
                                                                                     -----------          --------- 
                                                                                                 
     TOTAL SHAREHOLDERS' EQUITY (DEFICIT)                                                501,600           (220,343)
                                                                                     -----------          --------- 
                                                                                                 
                                                                                     $ 1,190,479          $ 164,829
                                                                                     ===========          =========
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-2
<PAGE>
 
                         EMB CORPORATION AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                        

<TABLE>
<CAPTION>
                                                         Years ended September 30,                                         
                                                        --------------------------                                        
                                                          1996                                                        
                                                      (As restated)          1995
                                                      ------------        ----------                                       
<S>                                                    <C>                <C>                                          
REVENUES                                                                                                                  
  Mortgage loan revenue                                $   244,874        $   97,400                                 
  Product sales                                             31,545                 -                                 
                                                       -----------        ----------                                 
                                                                                                                          
     TOTAL REVENUES                                        276,419            97,400                                 
                                                                                                                          
COST OF SALES                                               29,636                 -                                 
                                                       -----------        ----------                                  
 
  Gross profit                                             246,783            97,400

OPERATING EXPENSES
  General and administrative                             3,375,244           531,818
  Depreciation                                              31,056             2,662
                                                       -----------        ----------
 
     TOTAL OPERATING EXPENSES                            3,406,300           534,480
                                                       -----------        ----------
 
LOSS FROM OPERATIONS                                    (3,159,517)         (437,080)
 
OTHER INCOME (EXPENSES)
  Interest expense                                         (64,393)           (2,164)
  Other                                                     (2,688)            9,989
                                                       -----------        ----------
 
     TOTAL OTHER INCOME (EXPENSE)                          (67,081)            7,825
                                                       -----------        ----------
 
LOSS BEFORE INCOME TAXES                                (3,226,598)         (429,255)
  Income taxes (Note H)                                      1,600               800
                                                       -----------        ----------
 
NET LOSS                                               $(3,228,198)       $ (430,055)
                                                       ===========        ==========
 
NET LOSS PER COMMON SHARE                              $      (.89)       $     (.29)
                                                       ===========        ==========
 
WEIGHTED AVERAGE NUMBER OF SHARES
  OUTSTANDING                                            3,641,421         1,469,225
                                                       ===========        ==========
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-3
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                             
                                         Common Stock      Preferred Stock      Stock       Common                      Total     
                                     --------------------  ----------------  Subscription Stock to be Retained      Shareholders'  
                                      Shares    Amounts    Shares   Amount    Receivable    Issued     Deficit     Equity (Deficit) 
                                     --------- ----------  ------  --------  ------------  --------  ------------  ----------------
<S>                                  <C>       <C>         <C>     <C>       <C>           <C>       <C>           <C>
BALANCE, SEPTEMBER 30, 1994          1,288,600 $  150,000       -   $     -    $     -           -   $  (135,538)     $    14,462
  Shares issued for Riverside land       8,250     33,000       -         -          -           -             -           33,000
  Shares issued for services           172,500    155,250       -         -          -           -             -          155,250
  Shares issued to founders for   
   services                            175,000      7,000       -         -          -           -             -            7,000
  Net loss                                   -          -       -         -          -           -      (430,055)        (430,055)
                                     --------- ----------  ------  --------   --------    --------   -----------      -----------
BALANCE, SEPTEMBER 30, 1995          1,644,350    345,250       -         -          -           -      (565,593)        (220,343)
  Proceeds from sale of shares         412,707  1,017,914       -         -          -           -             -        1,017,914
  Shares issued for services           836,389  1,279,460       -         -          -           -             -        1,279,460
  Shares issued to founders for   
   services                            893,712     35,749       -         -          -           -             -           35,749
  Shares issued for Monterey land      200,000    800,000       -         -          -           -             -          800,000
  Shares issued for note receivable     50,000    200,000       -         -   (200,000)          -             -                -
  Shares issued for debt               116,009    232,018       -         -          -           -             -          232,018
  Shares issued for net assets of 
    Sterling Alliance Group, Ltd.    1,158,650          -       -         -          -           -             -                -
  Shares to be issued for services           -          -       -         -          -     585,000             -          585,000
  Net loss                                   -          -       -         -          -           -    (3,228,198)      (3,228,198)
                                     --------- ----------  ------  --------   --------    --------   -----------      -----------
BALANCE, SEPTEMBER 30, 1996
 (As restated)                       5,311,817 $3,910,391       -   $     -  $(200,000)   $585,000   $(3,793,791)     $   501,600
                                     ========= ==========  ======  ========  =========    ========   ===========      ===========
</TABLE> 

   The accompanying notes are an integral part of these financial statements

                                      F-4
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        
<TABLE>
<CAPTION>
                                                                Years ended September 30,
                                                                -------------------------
                                                                    1996
                                                                (As restated)     1995
                                                                -------------   ---------
<S>                                                               <C>           <C>  
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                        $(3,228,198)  $(430,055)
  Adjustments to reconcile net income to net cash   
    used in operating activities:                   
      Common stock issued for services                              1,315,209     162,250
      Common stock to be issued for services                          585,000           -
      Depreciation                                                     31,056       2,662
      Changes in operating assets and liabilities:  
        Increase in:                                
          Accounts receivable                                         (14,582)          -
          Inventory                                                   (35,324)          -
          Prepaid expenses and other assets                            (2,951)     (1,177)
          Accounts payable                                            217,867         349
          Accrued expenses                                             46,637       1,449
                                                                  -----------   ---------
                                                    
NET CASH USED IN OPERATING ACTIVITIES                              (1,085,286)   (264,522)
                                                                  -----------   ---------
                                                    
CASH FLOWS FROM INVESTING ACTIVITIES                
  Purchases of property and equipment                                 (96,846)     (6,720)
  Payment for land purchase                                                 -     (10,000)
  Loans made on notes receivable                                            -     (14,000)
  Loans made on related party receivable                              (74,798)    (29,092)
                                                                  -----------   ---------
                                                    
NET CASH USED IN INVESTING ACTIVITIES                                (171,644)    (59,812)
                                                                  -----------   ---------
                                                    
CASH FLOWS FROM FINANCING ACTIVITIES                
  Proceeds from issuance of notes payable                             268,893     355,776
  Payments under capital lease obligations                            (17,300)          -
  Payments on borrowings                                              (38,253)          -
  Proceeds from sale of common stock                                1,017,914           -
                                                                  -----------   ---------
                                                    
NET CASH PROVIDED BY FINANCING ACTIVITIES                           1,231,254     355,776
                                                                  -----------   ---------
                                                    
NET INCREASE (DECREASE) IN CASH                                       (25,676)     31,442
                                                    
CASH, BEGINNING OF PERIOD                                              26,071      (5,371)
                                                                  -----------   ---------
                                                    
CASH, END OF PERIOD                                               $       395   $  26,071
                                                                  ===========   =========
 
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-5
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


A.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     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. ("EMB") and land held for sale. For
     financial statement purposes the transaction has been recorded as a
     recapitalization of SAG and the issuance of shares for the net assets of
     the Company due to the fact that SAG provides substantially all of the
     historic and on-going operations (See Note C). The historical and on-going
     financial statements primarily represent the assets, liabilities and
     operations which were acquired from SAG. All significant intercompany
     accounts and transactions have been eliminated.

     The Company has an interactive software system for the origination and
     processing of mortgage loans which it calls Mortgage Approval Xpress
     ("M.A.X."). This system has been linked to the ProShare software developed
     by Intel Corporation that provides direct teleconferencing and interaction
     between prospective mortgage borrowers and mortgage lenders. The Company
     licenses its mortgage software system to real estate brokers, builders,
     credit unions, mortgage brokers and others. The Company also independently
     originates and processes mortgage loans, and intends to engage in the
     secondary placement of real estate mortgages.

     Basis of Accounting

     The Company's policy is to use the accrual method of accounting and to
     prepare and present financial statements which conform to generally
     accepted accounting principles. The preparation of financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of contingent assets and
     liabilities at the date of the financial statements and reported amounts of
     revenues and expenses during the reporting periods. Actual results could
     differ from those estimates. 

     Cash

     Cash includes cash on hand and cash in checking and savings accounts.

     Inventory 

     Inventory is stated at the lower of cost or market, cost being determined
     on the first-in, first-out (FIFO) method. Inventory consists of mortgage
     loan processing and teleconferencing software and equipment. 

     Property and Equipment

     Property and equipment is stated at cost, and depreciated using the
     straight-line method over the estimated useful lives of the assets, which
     range from five to ten years. Maintenance and repairs are charged to
     operations as incurred, and major improvements are capitalized. Upon
     retirement, sale, or other disposition, the related cost and accumulated
     depreciation are eliminated from the respective accounts and any gain or
     loss on disposition is reflected in operations.


A.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     Revenue Recognition - Mortgage Brokerage

     Revenue from mortgage brokerage transactions are recognized when the loan
     is funded and escrow on the related real estate transaction is closed.

     Revenue and Cost Recognition - Land Held for Sale

                                      F-6
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


     The Company expects that it will from time to time hold real estate for
     sale. Revenue from such sales will be recognized upon closing of the sale.
     Land acquisition costs have been capitalized and they will be charged to
     earnings when the related revenue is recognized. Other costs incurred in
     connection with the land are charged to earnings when incurred. The basis
     of the land held for sale has been determined based on cash paid of $10,000
     and 208,250 shares of common stock given as consideration. A $4.00 per
     share value was determined by management to be a more clearly evident value
     in determining the basis for the land held for sale.

     Income Taxes

     Income taxes, are provided for using the liability method of accounting in
     accordance with Statement of Financial Accounting Standards No. 109 (SFAS
     109), "Accounting for Income Taxes." A deferred tax asset or liability is
     recorded for all temporary differences between financial and tax reporting.
     Deferred tax expense (benefit) results from the net change during the year
     of deferred tax assets and liabilities.

     Per Share Information

     Net loss per common share amounts are computed by dividing net loss by the
     weighted average number of common and common equivalent shares outstanding
     in the period. Common stock equivalents consist of warrants granted. For
     the net loss per common share calculation there were no dilutive common
     stock equivalents.

     Use of Estimates

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

B.   DEVELOPMENT STAGE BUSINESS:

     During the Company's fiscal year ended September 30, 1995, its operations
     were not significant; therefore, the Company was considered in the
     development stage. During its fiscal 1996 year, the Company's operations
     were sufficient to now be considered an operating Company. The Company's
     efforts are concentrated in two areas in the mortgage loan industry. First,
     the development of the Company's M.A.X. software system. Second, the
     development of residential mortgage lending on a retail basis directly to
     consumers and on a wholesale basis to other mortgage brokers.

C.   RECAPITALIZATION:

     Effective December 16, 1995, the Company acquired the net assets of
     Sterling Alliance Group, Ltd. for 3,375,000 shares of the Company's common
     stock.
     
     The Company previously did not have an operating business and, accordingly,
     has treated the transaction as a recapitalization of SAG and recorded the
     transaction at historical cost. Accordingly, the net assets acquired were
     accounted for in a manner similar to a pooling of interest.

D.   PROPERTY AND EQUIPMENT:

     Property and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                               September 30,  September 30,
                                                   1996           1995
                                               -------------  -------------
        <S>                                    <C>            <C>
        Machinery and equipment                     $112,532        $30,160
        Furniture & fixtures                          71,317              -
                                                    --------        -------
</TABLE> 

                                      F-7
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


<TABLE> 
        <S>                                         <C>             <C>      
                                                     183,849         30,160
        Less accumulated depreciation                 34,486          4,468
                                                    --------        -------
                                        
        Property and equipment, net                 $149,363        $25,692
                                                    ========        =======
</TABLE>

E.   LAND HELD FOR SALE:

     SAG acquired approximately five acres of undeveloped land in Riverside
     County, California on February 24, 1995 from Rancho Brisa Corp., an
     unrelated third party. SAG paid $10,000 cash, and issued 8,250 shares of
     their common stock as consideration. The land was subsequently
     collateralized against the $65,000 note payable to Howard C. Kuhle (See
     Note F).

     SAG also acquired approximately 61 acres of undeveloped land with water
     producing rights and three wells in Monterey County, California on December
     11, 1995 from Golden River Corp., an unrelated third party. Each well can
     produce approximately 900,000 gallons of water per 24 hour period and the
     water supply is replenished annually from the run-off of the surrounding
     mountains. SAG issued 200,000 shares of their common stock as
     consideration.

                                      F-8
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


F.   NOTES PAYABLE:

     Notes payable are summarized as follows:

<TABLE>  
<CAPTION> 
                                                                        September 30,  September 30,
                                                                            1996           1995
                                                                        -------------  ------------- 
     <S>                                                                <C>            <C>
     Note payable due to Frederic R. Weeth, interest at 10%,          
     no established repayment schedule, note past due, principal      
     and any unpaid interest due on demand                                   $ 26,250       $ 30,000
                                                                 
     Note payable due to Thomas J. Donahue, interest at 10%           
     no established repayment schedule, note past due, principal      
     and any unpaid interest due on demand                                     26,250         30,000
                                                                 
     Note payable to Howard C. Kuhle, interest at 12%, interest       
     only payable monthly, principal and any unpaid interest due      
     March 1998, secured by deed of trust on Riverside County 
     land                                                                      65,000         65,000
                                                                 
     Note payable to Baronin Enterprises, Inc., interest at 8%,       
     note past due, principal and any unpaid interest due on demand            50,000              -
                                                                 
     Various notes payable to unrelated parties, no established       
     repayment schedule, interest ranging from 8% to 11%                      191,293              -
                                                                        -------------  ------------- 
                                                                 
                                                                              358,793        125,000
                                                                 
        Less current portion                                                  293,793         60,000
                                                                        -------------  ------------- 
                                                                 
                                                                             $ 65,000       $ 65,000
                                                                         ============  =============
</TABLE>

G.   RELATED PARTY TRANSACTIONS:
     
     Related party receivable at September 30, 1996 and 1995 consists of amounts
     due from a related corporation of $129,687 and $54,889, respectively.

     Related party payable consists of certain operating expenses that were paid
     on behalf of the Company by a related corporation. During the year ended
     September 30, 1996 the Company issued common stock in lieu of payment.

                                      F-9
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


H.   INCOME TAXES:

     As discussed in Note A, the Company accounts for income taxes in accordance
     with SFAS 109. The provision for income taxes for the years ended September
     30, 1996 and 1995 consists solely of the $800 minimum California franchise
     tax.

     Provisions for income taxes are summarized as follows:

<TABLE>
<CAPTION>
                                             Year ended
                                      --------------------------
                                      September 30  September 30
                                          1996          1995
                                      ------------  ------------
        <S>                           <C>           <C>
        Current income taxes              $1,600        $ 800   
        Deferred income taxes                  -            -   
                                          ------        -----   
                                                               
        Provision for income taxes        $1,600        $ 800   
                                          ======        =====   
</TABLE>

     As a result of adopting SFAS 109, the Company has recognized deferred tax
     assets for the tax effects of temporary differences for the years ended
     September 30, 1996 and 1995 as follows:

<TABLE>
<CAPTION>
                                            1996
                                        (As restated)     1995
                                        -------------  ----------
     <S>                                <C>            <C>
     Deferred tax assets:              
      Net operating losses               $ 1,354,600   $ 120,000
                                         -----------   ---------
                                       
      Gross deferred tax assets            1,354,600     120,000
      Valuation adjustment                (1,354,600)   (120,000)
                                         -----------   ---------
                                       
        Net deferred tax assets          $         -   $       -
                                         ===========   =========
</TABLE>

     The Company has net operating loss carryforwards remaining of approximately
     $2,800,000. The regular net operating loss carryforwards, which are
     approximately the same as the alternative net operating loss carryforwards,
     if not utilized, will expire as follows:

<TABLE>
<CAPTION>
        <S>                             <C>
        2009                            $  100,000
        2010                               200,000
        2011                             2,500,000
                                        ----------
                                        $2,800,000
                                        ==========
</TABLE> 




I.   COMMITMENTS AND CONTINGENCIES:

     Operating Leases

     The Company subleases its facilities under an operating lease from an
     unrelated third party which expires in March, 1997. Rental expense for the
     year ended September 30, 1996 was $90,132.

                                      F-10
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


     Minimum future rental payments under the sublease total approximately
     $45,064.

     The noncancelable operating lease provides that the Company pays for
     property taxes, insurance and certain other operating expenses applicable
     to the leased premises.

     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 month period. The assets are reflected as part of
     property and equipment. The following is an analysis of the book value of
     the leased assets included in property and equipment as of:

<TABLE>
<CAPTION>
                                            September 30,   September 30,
                                                 1996            1995
                                            --------------  --------------
                <S>                         <C>             <C>
                Cost                           $ 75,949         $18,068  
                                                                 
                Accumulated depreciation        (23,450)         (1,506)  
                                               --------         -------  
                                                                 
                       Net Book Value          $ 52,499         $16,562  
                                               ========         =======   
</TABLE>

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

<TABLE>
<CAPTION>
        Year ending September 30,
        -------------------------
        <S>                                                     <C>
                 1997                                           $39,927
                 1998                                            30,356
                 1999                                             3,469
                                                                -------
 
                                                                 73,752
 
           Less amount representing interest                     15,103
                                                                -------
 
                                                                 58,649
 
                Less current portion of capital lease            28,553
                                                                -------

                                                                $30,096
                                                                =======
</TABLE> 

                                      F-11
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


J.   SUPPLEMENTAL CASH FLOW INFORMATION:

     Supplemental disclosures of cash flow information are summarized as
     follows:

<TABLE>
<CAPTION>
                                                                    Years ended September 30,
                                                                    -------------------------
                                                                      1996              1995
                                                                    --------          -------  
        <S>                                                         <C>               <C>
        Cash paid for interest and income taxes:           
            Interest                                                $ 52,232          $ 2,164
            Income taxes                                            $      -          $     -
                                                           
        Noncash investing and financing activities:        
            Capital lease obligations incurred                      $ 57,881          $18,068
                                                           
            Common stock issued for land                            $800,000          $33,000
                                                           
            Common stock issued for related party          
                payable                                             $232,018          $     -
</TABLE>

K.   CAPITAL STOCK:

     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. As of September 30, 1996 there were no shares of preferred stock
     issued or outstanding.

     On September 27, 1996 the Company effectuated a one for four (1:4) reverse
     stock split. The effect of this event has been retroactively applied for
     financial statement presentation on the statement of stockholders' equity
     (deficit).

     Common stock to be issued relates to a stock for services agreement wherein
     the services have been performed as of September 30, 1996, but the shares
     have not been issued.

L.   STOCK OPTION, SAR AND STOCK BONUS PLAN:

     On April 29, 1996 the Board of Directors approved the "EMB Corporation 1996
     Stock Option, SAR and Stock Bonus Plan." Options and SAR's may be granted
     to employees and independent consultants. No options and SAR's shall be
     exercisable within six months from date of grant or more than ten years
     after date of grant. The option price of stock options shall in no event be
     less than 85%, and for incentive stock options shall in no event be less
     than 100% of the "fair market value" of the stock on the date of grant.

     The Company has reserved a total of 250,000 shares of common stock for
     issuances under the plan. As of September 30, 1996 no shares have been
     granted under the plan.


M.   WARRANTS:

     As of September 30, 1996 there are 108,750 outstanding warrants to purchase
     108,750 shares of no par value common stock at $2.00- $3.00 per share. No
     warrants have been exercised as of September 30, 1996.

N.   MAJOR CUSTOMER:

     A major source of revenue for the Company is derived from the resale of
     retail mortgage loans to a single national mortgage lender. The loss of
     this business would have a material effect on the Company.

                                      F-12
<PAGE>
 
                        EMB CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


O.   RESTATEMENT:

     An error, resulting in the understatement of net loss, common stock to be
     issued, operating expenses and retained deficit in the Company's previously
     issued financial statements for the year ended September 30, 1996, has
     resulted in the restatement of these financial statements. The changes to
     retained deficit as of September 30, 1996 and the related statement of
     operations for the year then ended are summarized as follows:

<TABLE>
<CAPTION>
                                                              Retained 
                                                               Deficit       Net Loss
                                                            ------------  ------------
        <S>                                                 <C>           <C>
        As previously reported, September 30, 1996          $(3,208,791)  $(2,643,198)
                                                     
        Omission of stock for services transaction             (585,000)     (585,000)
                                                            -----------   -----------
                                                     
        As restated, September 30, 1996                     $(3,793,791)  $(3,228,198)
                                                            ===========   ===========
</TABLE>

     The income tax effect of this error was to increase the deferred income tax
     asset and the valuation allowance $234,600 at September 30, 1996.

P.   SUBSEQUENT EVENT:

     On December 30, 1996 the Company sold the Monterey land (which has been
     held for sale) to an unrelated third-party for $4,000,000. The Company
     received $800,000 cash and a note receivable for $3,200,000. The note
     receivable is secured by the property, bears interest at 12% per annum, and
     calls for ten equal annual installments of principal and interest of
     $422,867 commencing December 30, 1997, with the balance due on December 30,
     2006.

                                      F-13