<PAGE>   1
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
(MARK ONE)
 
     [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
 
                                       OR
 
     [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934
 
         FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
 
   
                         COMMISSION FILE NUMBER 1-8456
    
 
                            THE CERPLEX GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                     <C>
               DELAWARE                               75-1539534
     (STATE OR OTHER JURISDICTION                  (I.R.S. EMPLOYER
  OF INCORPORATION OR ORGANIZATION)              IDENTIFICATION NO.)
</TABLE>
 
                   1382 BELL AVENUE, TUSTIN, CALIFORNIA 92780
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
 
                                 (714) 258-5300
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                     COMMON STOCK, $.03 PAR VALUE PER SHARE
                                (TITLE OF CLASS)
 
   
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes [X]  No [ ]
    
 
     Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [ ]
 
   
     The aggregate market value of the voting stock held by non-affiliates of
the registrant on December 15, 1998, based on the average of the bid and ask
price per share of the Common Stock as quoted on the Nasdaq OTC Bulletin Board
on such date was approximately $2,649,096.
    
 
     Indicated below is the number of shares outstanding of each class of the
registrant's Common Stock, as of December 15, 1998.
 
   
<TABLE>
<CAPTION>
   TITLE OF EACH CLASS OF COMMON STOCK                NUMBER OF OUTSTANDING
   -----------------------------------                ---------------------
<S>                                         <C>
       Common Stock, $.03 par value                         7,367,518
</TABLE>
    
 
   
                      DOCUMENTS INCORPORATED BY REFERENCE
    
 
   
     Part III of this Form 10-K incorporates information by reference from the
registrant's definitive Proxy Statement for the Annual Meeting of Stockholders,
to be filed within 120 days after the registrant's fiscal year ended September
30, 1998.
    
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
                            THE CERPLEX GROUP, INC.
 
                      INDEX TO ANNUAL REPORT ON FORM 10-K
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
 
   
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>         <C>                                                             <C>
                                     PART I
Item 1.     Business....................................................      2
Item 2.     Properties..................................................      9
Item 3.     Legal Proceedings...........................................      9
Item 4.     Submission of Matters to a Vote of Security Holders.........      9
 
                                    PART II
Item 5.     Market for Registrant's Common Equity and Related
            Stockholder Matters.........................................      9
Item 6.     Selected Financial Data.....................................     11
Item 7.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations...................................     13
Item 7A.    Quantitative and Qualitative Disclosures About Market
            Risk........................................................     19
Item 8.     Financial Statements and Supplementary Data.................     19
Item 9.     Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure....................................     19
 
                                    PART III
Item 10.    Directors and Executive Officers of the Registrant..........     20
Item 11.    Executive Compensation......................................     20
Item 12.    Security Ownership of Certain Beneficial Owners and
            Management..................................................     20
Item 13.    Certain Relationships and Related Transactions..............     20
 
                                    PART IV
Item 14.    Exhibits, Financial Statement Schedules and Reports on Form
            8-K.........................................................     21
</TABLE>
    
 
                                        1
<PAGE>   3
 
                                     PART I
 
ITEM 1. BUSINESS
 
OVERVIEW
 
     The Cerplex Group, Inc., a Delaware corporation ("Cerplex" or the
"Company"), formerly known as Aurora Electronics, Inc., provides repair and
logistics services, and spare parts sourcing and service management for
manufacturers of computer, communications and electronic office equipment. In
the computer marketplace, the Company primarily services display terminals,
printed circuit boards, laptops, networking equipment and workstations. In the
telecommunications marketplace, the Company primarily services switching
systems, payphones, video conferencing products, multiplexers, mobile
communications, transmission equipment, hubs and modems. In the office
automation marketplace, the Company services printers, scanners, fax machines
and high value products such as copiers, automatic teller machines (ATMs) and
other paper-handling equipment. The Company operates through its two principal
subsidiaries, Cerplex, Inc. and Aurora Electronics Group, Inc., and their
subsidiaries. Based in Tustin, California, the Company has locations across the
United States, in France and in the United Kingdom.
 
   
     The Company entered the computer and electronics industry in 1992, and has
expanded its operations through the acquisition of companies that supply,
refurbish and recycle electronic parts and equipment. The Company's most recent
acquisition was completed on April 30, 1998, when the Company, then known as
Aurora Electronics, Inc., acquired The Cerplex Group, Inc., a publicly-held,
Tustin, California, based provider of electronic parts repair, spare parts sales
and service management ("Old Cerplex"). The acquisition was completed through a
merger of a wholly-owned subsidiary of the Company into Old Cerplex, in which
each share of Old Cerplex's Common Stock was converted into 1.070167 shares of
the Company's Common Stock (or .1070167 shares, after giving effect to the
Company's recent one-for-ten reverse stock split, discussed elsewhere herein).
As a result of the merger, Old Cerplex became a wholly-owned subsidiary of the
Company. The Company then changed its name to The Cerplex Group, Inc., and Old
Cerplex changed its name to Cerplex, Inc. Following the merger, the Company's
headquarters were relocated from San Diego, California, to the Tustin,
California, headquarters of Old Cerplex.
    
 
   
     In connection with the merger with Old Cerplex, the Company obtained a new
bank line of credit, consisting of a $36.0 million term loan and a revolving
line of credit with available borrowings of up to $10.0 million, and sold $15.0
million of newly issued 10% Series A and Series B Senior Subordinated Notes and
$21.55 million of newly issued 7% Senior Cumulative Convertible Preferred Stock,
primarily to its principal stockholder, an investment fund managed by the
investment firm of Welsh, Carson, Anderson & Stowe ("WCAS"). Funds from the new
bank line of credit and the sale of the 10% Series A and Series B Senior
Subordinated Notes and the 7% Senior Cumulative Convertible Preferred Stock were
used to repay bank loans to the Company and Old Cerplex, to repay certain other
indebtedness of the Company and Old Cerplex and to provide working capital to
the Company. WCAS has guaranteed $25.0 million of indebtedness under the new
line of credit. In addition, subsequent to the merger, WCAS has loaned an
additional $7.5 million to the Company. The terms of the merger, the related
financing from WCAS and new line of credit are described in greater detail in
Item 1 of this Annual Report under the heading "Merger with Old Cerplex, WCAS
Financing and New Senior Loan."
    
 
SERVICES PROVIDED
 
     Cerplex's lines of business include the following:
 
   
     Repair Services. Through an infrastructure of transportation hubs and
specialized depot repair facilities, Cerplex provides original equipment
manufacturers ("OEMs") and service providers a complete process for product
repair, remanufacturing, refurbishment, conversion and upgrades. Large
manufacturers and multivendor service organizations ("MVSOs") historically have
maintained in-house repair centers dedicated to servicing specific proprietary
products or product lines. Frequently, these repair centers are cost centers
with dedicated resources. Cerplex provides an outsourced solution for some or
all of the repair requirements of an
    
 
                                        2
<PAGE>   4
 
OEM. To support and complement its repairs services, Cerplex also provides a
variety of other ancillary services, including instant exchange of products to
be repaired, product assembly and contract manufacturing.
 
     Logistics Services. Cerplex provides outsourced logistics services,
including inventory and shipping control, order fulfillment, and returns to
ensure its OEM customers have the necessary parts and products at the right
place at the right time. Logistics management is critical in ensuring the
availability of spare parts and repaired products to meet the OEM's customer
demands. This is especially true in the global marketplace as the inability of
an OEM to provide an international customer with timely repair services in that
market can adversely affect an OEM's sales efforts.
 
   
     Spare Parts Business. Cerplex provides repaired, new and reclaimed parts to
OEMs and third-party maintainers ("TPMs") and other customers both as an
independent business and as a complement to its depot repair services. Cerplex
provides components, sub-systems and full systems for sale, lease or for use as
spares in repair programs. Cerplex provides full outsourcing solutions in this
area giving customers the benefit of reduced overhead and the ability to
reallocate internal resources toward their core capabilities. Cerplex has two
main spare parts programs:
    
 
   
          Parts Sales. The parts sales program provides multivendor parts
     sourcing on industry commodity items. Upon receiving an order from a
     customer, Cerplex will access parts and provide for delivery through a
     nationwide network of parts brokers.
    
 
          Advanced Exchange. The advanced exchange program offers OEMs and TPMs
     fixed rate or lease programs on swaps for new and refurbished parts.
     Cerplex provides same or next day shipping on these products, which are
     exchanged with field replaceable units that are processed in Cerplex's
     depot repair programs for repair, remanufacturing, conversion or upgrade.
 
EUROPEAN OPERATIONS
 
   
     Cerplex serves the European market through Cerplex Ltd., a United Kingdom
subsidiary, and through Cerplex SAS, a French subsidiary. Through Cerplex Ltd.
and Cerplex SAS, Cerplex offers its European customers an array of repair
services similar to those that it offers domestically. Cerplex's European
operations also offer calibration services supporting the telecommunications and
service industries in the United Kingdom and in Western Europe. Remanufacturing
and contract assembly are provided by Cerplex SAS.
    
 
CUSTOMERS, SALES AND MARKETING
 
   
     Cerplex markets primarily to large manufacturers and service providers in
the computer and peripheral, office automation and telecommunications
industries. Cerplex's direct sales teams are geographically located in the
United States, United Kingdom and France. Cerplex's representative customers
include Rank Xerox, British Telecommunications plc ("BT"), Gateway 2000, Cisco
Systems, Inc., Compaq, Hewlett-Packard Company, IBM, Siemens and Unisys.
    
 
   
     For the fiscal year ended September 30, 1998, Cerplex's two largest
customers were Rank Xerox and BT. For the fiscal year ended September 30, 1998,
the Rank Xerox and BT accounted for approximately 17% and 11% of Cerplex's
revenues, respectively. These revenues were almost entirely attributable to the
business of Old Cerplex.
    
 
COMPETITION
 
   
     Cerplex competes with the in-house repair centers of OEMs and TPMs for
repair services. In certain instances, these entities compete directly with
Cerplex for the services of unrelated OEMs and TPMs. In addition to competing
with OEMs and TPMs, Cerplex also competes in the repair business with a small
number of independent organizations similar in size to Cerplex and a large
number of smaller companies. Cerplex believes that the key competitive factors
for the repair business include: (i) scope and quality of service; (ii) price;
and (iii) ability to offer rapid delivery and sophisticated logistics programs.
The spare parts business is fragmented with widespread competition from a
variety of small independent suppliers. Cerplex believes that the key
competitive factors for the parts business include: (i) breadth of parts
distributed;
    
                                        3
<PAGE>   5
 
(ii) ability to offer rapid delivery and sophisticated logistics programs; and
(iii) price. Many of the companies with which Cerplex competes for repair, parts
and logistics services have significantly greater financial resources than
Cerplex.
 
REGULATION
 
   
     Cerplex's business is subject to various federal, state and local laws,
including antitrust laws, occupational health and safety laws and environmental
laws relating to the disposal of waste material, as well laws of this nature in
the European countries in which Cerplex operates. Because Cerplex's business
includes handling, recycling and disposing of electronic parts which contain
hazardous materials, Cerplex's compliance with environmental laws and
regulations relating to the disposal of waste material is particularly
important. Such environmental laws and regulations are complex and may change
from time to time in a manner that imposes more stringent requirements on
Cerplex and imposes greater liability on Cerplex for violating such laws and
regulations. Cerplex believes that it is currently in material compliance with
such laws and is not aware of any current situation or condition that could
reasonably be expected to have a material adverse affect on Cerplex's financial
condition or competitive position.
    
 
EMPLOYEES
 
   
     As of November 22, 1998, Cerplex had a work force of approximately 1,350
employees, of which 860 are employees of Cerplex Ltd. and Cerplex SAS. The
approximately 860 employees of Cerplex Ltd. and Cerplex SAS are currently
covered by collective bargaining agreements. Almost all recruitment activity is
focused locally in the surrounding communities, representing all skill levels
and positions ranging from entry-level trainee to skilled professional and
senior-level management.
    
 
MERGER WITH OLD CERPLEX, WCAS FINANCING AND NEW SENIOR LOAN
 
   
     On April 30, 1998, Holly Acquisition Corp. ("Merger Sub"), a wholly-owned
subsidiary of the Company, merged with and into Old Cerplex (the "Merger"). As a
result of the Merger, Old Cerplex became a wholly-owned subsidiary of the
Company. The Company changed its name to The Cerplex Group, Inc., and Old
Cerplex changed its name to Cerplex, Inc. The Company now conducts its
operations through two wholly-owned subsidiaries, Cerplex, Inc. and Aurora
Electronics Group, Inc., and their subsidiaries. Following the Merger, the
Company's headquarters were relocated from San Diego, California, to the Tustin,
California, headquarters of Old Cerplex.
    
 
   
     The Merger occurred pursuant to an Agreement and Plan of Merger, dated as
of January 30, 1998 (the "Merger Agreement"), among the Company, Merger Sub and
Old Cerplex. As a result of the Merger, each share of Old Cerplex's Common Stock
was converted into the right to receive 1.070167 shares of the Company's Common
Stock (or .1070167 shares, after giving effect to the Company's recent
one-for-ten reverse stock split, discussed elsewhere herein). Old Cerplex
stockholders who otherwise were entitled to fractional shares of the Company's
Common Stock received cash in lieu thereof. Old Cerplex stockholders received in
the aggregate approximately 38.9 million shares of the Company's Common Stock as
a result of the Merger (or 3.89 million shares, after giving effect to the
Company's recent one-for-ten reverse stock split, discussed elsewhere herein).
The stock received by the Old Cerplex stockholders constituted approximately 25%
of the Company's Common Stock on a fully diluted basis after giving effect to
the Merger and related financings. The ratio used to exchange Old Cerplex Common
Stock for the Company's Common Stock was determined through negotiations between
Old Cerplex and the Company, and was approved by the respective Board of
Directors of the Company and Old Cerplex. The Merger was approved at a special
meeting of Old Cerplex's stockholders. An increase in the number of authorized
shares of the Company's Common Stock necessary to enable the Company to issue
stock in the Merger to the Old Cerplex stockholders, and the name change to The
Cerplex Group, Inc., was approved at a special meeting of the Company's
stockholders.
    
 
   
     In connection with the Merger, the Company received a line of credit from
Greyrock Business Credit ("Greyrock"), a division of NationsCredit Commercial
Corporation (the "Greyrock Line of Credit"). The Greyrock Line of Credit
consists of a $36.0 million term loan, the proceeds of which were advanced to
the Company in full at the closing of the Merger, and a revolving line of credit
with available borrowings of up to $10.0 million depending on certain financial
conditions of the Company. WCAS has guaranteed the repayment
    
 
                                        4
<PAGE>   6
 
   
of $25.0 million of the principal amount owing by the Company at any time under
the Greyrock Line of Credit. In addition, in connection with the Merger, the
Company sold an aggregate of $15.0 million of newly issued 10% Series A Senior
Subordinated Notes and 10% Series B Senior Subordinated Notes (collectively, the
"10% Senior Subordinated Notes") and $21.55 million of newly issued 7% Senior
Cumulative Convertible Preferred Stock (the "7% Convertible Preferred Stock")
primarily to its principal stockholder, WCAS (the "WCAS Financing"). The
aggregate consideration paid by WCAS and other purchasers for the 10% Senior
Subordinated Notes and the 7% Convertible Preferred Stock consisted of
approximately $12.0 million in cash, the cancellation of $21.0 million of
combined indebtedness of Old Cerplex and the Company to WCAS, and the surrender
of warrants held by WCAS to purchase capital stock of Old Cerplex. The cash
proceeds from the WCAS Financing (approximately $12.0 million) and from
borrowings under the Greyrock Line of Credit upon the closing of the Merger
(approximately $38.5 million) totaled approximately $50.5 million. The $50.5
million was used in full to repay $30.0 million of indebtedness of Old Cerplex
under a line of credit from Citibank, N.A., to repay $16.5 million of the
Company's indebtedness under a line of credit with The Chase Manhattan Bank,
N.A., and the balance to pay investment banking and other transactional fees in
connection with the Merger. In addition, subsequent to the Merger, WCAS loaned
the Company an additional $7.5 million, and the Company borrowed an additional
$7.0 million under the Greyrock Line of Credit, both for working capital.
    
 
     The terms of the 10% Senior Subordinated Notes, the 7% Convertible
Preferred Stock, the Greyrock Line of Credit and other Company debt are
described in greater detail in Item 7 of this Annual Report under, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
 
REVERSE STOCK SPLIT, CONVERSION OF PREFERRED STOCK, AND CURRENT CAPITALIZATION
 
   
     On October 5, 1998, a majority of the outstanding capital stock of the
Company entitled to vote, voted at a Special Meeting of Stockholders to effect a
one-for-ten reverse stock split (the "One-for-Ten Reverse Split"), in which each
ten shares of the Company's Common Stock were converted into one share of the
Company's Common Stock. Stockholders who would have received fractional shares
of Common Stock as a result of the One-for-Ten Reverse Split, were paid, in lieu
of receiving fractional shares, cash in an amount equal to $0.104 per share.
Unless otherwise stated, figures as to the number of shares outstanding,
earnings per share, exercise price to convert the 7% Convertible Preferred Stock
and other per share figures stated in this Annual Report and in the Financial
Statements included herein, reflect the One-for-Ten Reverse Split. Immediately
following the One-for-Ten Reverse Split, the outstanding capital stock of the
Company consisted of 215,500 shares of 7% Convertible Preferred Stock, 44,000
shares of Series A Convertible Preferred Stock and 7,118,285 shares of Common
Stock. Subsequent to the One-for-Ten Reverse Split, on November 19, 1998,
249,233 shares of the Company's Common Stock were issued as a result of the
conversion of 44,000 shares of Preferred Stock of the Company that had been
issued to WCAS and other stockholders prior to the Merger. A majority of such
Preferred Stock was held by WCAS. As a majority holder of such Preferred Stock,
WCAS elected to cause all of the shares of such Preferred Stock to be converted
to the Common Stock of the Company. As of December 15, 1998, there were
7,367,518 shares of the Company's Common Stock outstanding.
    
 
RISK FACTORS
 
     This Annual Report contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended. The words
"expect," "estimate," "anticipate," "believe" and similar words constitute
forward-looking statements. Readers are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ significantly from those
projected in the forward-looking statements. Risks and uncertainties that may
have a significant detrimental impact on the Company's performance include, but
are not limited to, the following:
 
   
     Inability to Repay Greyrock Line of Credit; Threat to Status as a Going
Concern. As of December 15, 1998, the Company had outstanding $36.0 million in
term debt and $9.5 million in revolving debt under the Greyrock Line of Credit.
No additional borrowings are available under the Greyrock Line of Credit. WCAS
has guaranteed the repayment of $25.0 million of the principal amount owing by
the Company at any time
    
                                        5
<PAGE>   7
 
   
under the Greyrock Line of Credit. All amounts owing under the Greyrock Line of
Credit are due to be repaid by April 30, 1999. The Company's cash flow from
operations is anticipated to be insufficient to repay the amounts due on the
Greyrock Line of Credit by April 30, 1999. If the Company does not repay the
loan, Greyrock has the ability to foreclose on the loan. The Company is
currently in discussions with Greyrock to extend the repayment date, however,
there is no assurance that the extension will be obtained, or, if obtained, that
the extension will give the Company sufficient time to obtain replacement
financing to repay Greyrock. If additional funds are not obtained, the Company
will experience severe liquidity problems. This matter raises substantial doubt
about the Company's ability to continue as a going concern. See Note A to the
Consolidated Financial Statements -- "Current Financial Condition."
    
 
   
     High Degree of Leverage; Future Capital Requirements. As of December 15,
1998, the Company had approximately $82.2 million principal amount of
indebtedness outstanding, which consisted of: (i) $45.5 million indebtedness
under the Greyrock Line of Credit; (ii) $25.4 combined indebtedness under the
Company's 10% Senior Subordinated Notes and 7 3/4% Convertible Subordinated
Debentures; (iii) $7.5 million combined indebtedness under two loans from WCAS;
(iv) $3.1 million indebtedness under a promissory note to BT; and (v) $0.7
million of other indebtedness consisting primarily of equipment leases. In
addition, the Company also had as of December 15, 1998, $21.55 million
outstanding (excluding accrued dividends) of its mandatorily redeemable 7%
Convertible Preferred Stock. The payment terms of the debt and preferred stock
are described in Item 7 of this Annual Report under, "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." It is anticipated that the Company's cash from operations
will not be sufficient to enable it to meet its debt service and preferred stock
redemption requirements, and the Company will be required to obtain additional
funds through equity or debt financings in order not to default on its debt. In
many cases, if the Company defaults on a particular debt, the default will cause
other debts of the Company to be in default and come due early. The degree to
which the Company is leveraged could adversely affect its ability to obtain
additional financing and could make it more vulnerable to economic downturns and
competitive pressures. The terms of any equity financings have in the past been,
and may in the future be, dilutive to the Company's stockholders, and the terms
of any debt financings are likely to contain restrictive covenants which limit
the Company's ability to pursue certain courses of action. There can be no
assurance that additional funding will be available on acceptable terms, if at
all. If adequate funds are not available, the Company will experience severe
liquidity problems. This matter raises substantial doubt about the Company's
ability to continue as a going concern.
    
 
   
     Losses and Accumulated Deficit. For the fiscal year ended September 30,
1998, the Company reported a net loss of $29.1 million and an operating loss of
$22.0 million. As of September 30, 1998, the Company had a stockholders' deficit
of $59.2 million. The Company is expecting to experience losses for the
foreseeable future, and will require additional funding and financial support.
Continued losses and/or the failure to obtain such additional funding and
financial support could materially and adversely affect the business and
financial condition of the Company and the value of, and the market for, the
Company's equity and debt securities.
    
 
   
     Integration with Old Cerplex; New Management. The Company's success will
depend, to a large extent, upon whether the Company effectively integrates its
business with the business of Old Cerplex following the Merger with Old Cerplex
in April 1998. The Company is subject to the risks normally involved in the
integration of each company's operating, administrative, finance, sales and
marketing organizations, as well as each company's communication technologies
and the coordination of sales efforts and streamlining of facilities and back
office operations. In addition, following the Merger, certain key executives
left the management team and others joined. As a result, the Company became
dependent upon a new management group, some members of which had not been
previously involved in managing the Company. While the Company's key executives
have business experience, they are still in the process of familiarizing
themselves with the specific operations of the Company. There can be no
assurance that the Company will be able to successfully integrate with Old
Cerplex in a manner that will result in the synergies intended as a result of
the Merger. These difficulties could have a material adverse impact on the
Company's financial condition and results of operations.
    
 
   
     Control by WCAS. WCAS owns approximately 70% of the Company's voting
capital stock, which consists of WCAS's ownership of shares of the Company's
outstanding Common Stock, and shares of the
    
                                        6
<PAGE>   8
 
   
Company's 7% Convertible Preferred Stock (which give the holders thereof the
right to vote on all matters on which the holders of Common Stock are entitled
to vote, as if the 7% Convertible Preferred Stock had been converted to Common
Stock). As a result, WCAS is able to control all matters requiring approval by
the Company's stockholders, including the election of directors. The Company's
Board of Directors has the authority to issue additional shares of preferred
stock in one or more series and fix the rights, preferences, privileges and
restrictions granted to or imposed upon any such shares of preferred stock. The
issuance of such preferred stock may adversely affect voting and dividend
rights, rights upon liquidation and other rights of holders of the Company's
Common Stock and may result in immediate and substantial dilution to the holders
of the Common Stock. The issuance of such preferred stock and the control by
WCAS of the Company may also have the effect of delaying, deferring or
preventing a change in control of the Company.
    
 
   
     Dependence on Key Customers. For the fiscal year ended September 30, 1998,
Rank Xerox and BT accounted for approximately 17% and 11% of the Company's
revenues, respectively. These revenues were almost entirely attributable to the
business of Old Cerplex. There can be no assurance that such customers will not
terminate any or all of their arrangements with the Company, significantly
change, reduce or delay the amount of services ordered from the Company, or
significantly change the terms upon which the Company and these customers do
business. Any such termination, change, reduction, or delay could have a
material adverse effect on the Company's business. It is anticipated that the
Company's contract with Rank Xerox, which accounted for approximately 17% of the
Company's revenues for the 1998 fiscal year, will be phased out by June 2000. In
addition, unit volumes from BT have been declining and are expected to continue
to decline due to, among other things, product evolution. The future success of
the Company's European operations is dependent upon replacing these declining
volumes with new revenue from either these or new customers. There can be no
assurance that the Company will be able to replace these declining volumes with
sales to either these or new customers.
    
 
   
     Competition. The Company competes with the in-house repair and service
centers of OEMs and TPMs. There is no indication that these companies will
choose to outsource their repair and service needs. In certain instances, these
companies compete directly with the Company to provide services to third party
OEMs and TPMs. Moreover, the industry in which the Company operates is
fragmented, and the Company faces competition from a variety of small
independent suppliers. Competition for business from OEM, TPM and MVSO customers
is based on a number of factors, including breadth of services provided and
price. Certain of the Company's competitors have greater revenue or larger
capitalizations than the Company. There can be no assurance that the Company
will be able to compete effectively in its target markets.
    
 
   
     Reliance on International Sales. For the fiscal year ended September 30,
1998, approximately 42% of the Company's sales were outside of North America.
These revenues were almost entirely attributable to the business of Old Cerplex.
There can be no assurance that the Company will be able to successfully market,
sell, and deliver its products and services in these markets. Moreover, it is
anticipated that the Company's contract with Rank Xerox, which accounted for
approximately 17% of the Company's revenues for the 1998 fiscal year, will be
phased out by June 2000. In addition to the uncertainty as to the Company's
ability to maintain or expand its international presence, there are certain
risks inherent in doing business on an international level, such as unexpected
changes in regulatory requirements, export restrictions, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable, political
instability, severance and other costs associated with work force reductions,
fluctuations in currency exchange rates, and potentially adverse tax
consequences, any of which could adversely impact the success of the Company's
international operations. There can be no assurance that one or more of such
factors will not have a material adverse effect on the Company's international
operations and, consequently, on the Company's business, operating results and
financial condition.
    
 
   
     Reliance on Short Term Purchase Orders and Contracts. The Company generally
distributes spare parts to, and receives its recyclable material from customers
pursuant to non-exclusive contracts that do not contain guaranteed or minimum
quantities and are subject to cancellation on short notice at the customer's
discretion. Similarly, the Company's repair contracts are typically subject to
termination on short notice at the customer's discretion, and purchase orders
under such contracts typically only cover services over a 90-day period.
    
 
                                        7
<PAGE>   9
 
   
     Dependence on the Electronics and Computer Industry. The Company's
businesses are dependent upon the growth, viability and financial stability of
its customers and potential customers in the electronics and the computer
industry. The electronics and computer industry have been characterized by rapid
technological change, compressed product life cycles and pricing and margin
pressures. The factors affecting segments of the electronics and computer
industry in general, and the Company's OEM customers in particular, could have
an adverse effect on the Company's business. There can be no assurance that
existing customers or future customers will not experience financial difficulty,
which could have a material adverse effect on the Company's business.
    
 
   
     Risks Associated with Intangible Assets. As of September 30, 1998,
approximately $37.7 million of the Company's total assets consisted of
intangible assets. The intangible assets consist primarily of goodwill resulting
from the Merger with Old Cerplex. The goodwill must be amortized over a number
of years and deducted from the Company's earnings, even though the goodwill may
not generate earnings to offset such deduction. There can be no assurance that
the value of the Company's intangible assets will ever be realized by the
Company, particularly in any sale or liquidation of the Company. Any significant
decrease in the value of such intangible assets or increase in the rate of
amortization thereof would adversely affect the Company's financial condition
and results of operations.
    
 
     Limited Trading Market and Possible Volatility of Stock Price. The volume
of trading of the Company's Common Stock has been very limited and there can be
no assurance of an active trading market for the Common Stock in the future. In
addition, the trading price of the Company's Common Stock has been, and in the
future could be, subject to significant fluctuations in response to variations
in quarterly operating results of the Company, the depth and liquidity of the
market for the Company's Common Stock, investor perception of the Company and
the industry within which it competes, the gain or loss of significant
contracts, changes in management or new products or services offered by the
Company or any competitors, general trends in the industry and other events or
factors. In addition, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market price for many
companies in similar industries and which have often been unrelated to the
operating performance of these companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock.
 
     Shares Available for Future Sale. No prediction can be made as to the
effect, if any, that future sales of shares, or the availability of shares for
future sale by WCAS, will have on the market price of the Company's Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock
(including shares issued upon the exercise of stock options and the conversion
of preferred stock), or the perception that such sales could occur, may
adversely affect prevailing market prices for the Company's Common Stock.
 
   
     Year 2000 Risks. The Year 2000 risk is the result of computer programs,
microprocessors and embedded date reliant systems using two digits rather than
four to define the applicable year. This may result in the incorrect processing
of dates prior to, during and after the Year 2000. Incorrect processing may
result in claims against the Company if it is unable to properly manage data
related to the Year 2000. In addition to Year 2000 errors on the part of the
Company, the Company is vulnerable to its key suppliers' failure to remedy their
own Year 2000 issues, which could delay shipments of essential components,
thereby disrupting or halting the Company's operations. The Company also relies,
both domestically and internationally, upon governmental agencies, utility
companies, telecommunication service companies and other service providers
outside of the Company's control. The Company is in the process of remediating
potential Year 2000 problems in its systems and has communicated with certain of
its significant suppliers to evaluate their Year 2000 readiness plans. There is
no assurance that the Company or parties with whom it deals will not suffer
business disruption caused by a Year 2000 issue. Such failures could have a
material adverse effect on the Company's financial condition and results of
operations. This is described in greater detail in Item 7 of this Annual Report
under, "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Year 2000 Compliance."
    
 
                                        8
<PAGE>   10
 
ITEM 2. PROPERTIES
 
   
     The Company leases certain office and warehouse facilities under operating
leases and subleases which expire at various dates during the next seven years.
The Company believes that its existing facilities are adequate for its current
business. The Company's executive offices are located at the Tustin, California,
facility listed below. A description of the facilities leased and subleased by
the Company as of December 15, 1998 is as follows:
    
 
<TABLE>
<CAPTION>
                                                   SQUARE
                    LOCATION                       FOOTAGE    LEASE EXPIRATION
                    --------                       -------    ----------------
<S>                                                <C>        <C>
Jeffersontown, Kentucky..........................   77,000    December 2001
Tewksbury, Massachusetts.........................  250,180    May 2005
Livermore, California............................  124,914    June 2003
Marina del Rey, California.......................  106,715    November 1999
Rancho Cucamonga, California.....................   68,900    June 2003
Tustin, California...............................  120,300    December 2001
Middleton, Leeds, England........................   22,000    June 2000
</TABLE>
 
   
     In addition, the Company's European subsidiaries own land and buildings in
Enfield, England, and Lille, France.
    
 
ITEM 3. LEGAL PROCEEDINGS
 
     The Company is a party to legal proceedings relating to routine matters
incidental to its business. While the Company does not believe that any of these
proceedings, individually or in the aggregate, will have a material adverse
effect on its business or its results of operations, there can be no assurance
that such proceedings, individually or in the aggregate, will not have a
material adverse effect on the Company's financial position, results of
operations or liquidity.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
   
     No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended September 30, 1998, as
required to be reported herein. Subsequent to the fiscal year end, on October 5,
1998, holders of a majority of the capital stock of the Company entitled to vote
approved the following matters:
    
 
   
          1. The amendment of the Company's Certificate of Incorporation to
     effect the One-for-Ten Reverse Split whereby every ten shares of the
     Company's Common Stock was converted into one share of the Company's Common
     Stock;
    
 
   
          2. The adoption of the Company's 1998 Stock Option and Restricted
     Stock Purchase Plan, which provides for the grant to employees, directors,
     and consultants of the Company of options and awards to purchase up to
     2,835,500 shares (post-reverse split) of the Company's Common Stock; and
    
 
   
          3. The approval of KPMG LLP as the Company's independent public
     accountants and auditors.
    
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     Until December 12, 1997, the Company's Common Stock was traded on the
American Stock Exchange ("AMEX") under the symbol "AUR." Commencing December 15,
1997, the Company's Common Stock was listed for quotation on the Nasdaq OTC
Bulletin Board (the "OTC Bulletin Board") under the symbol "AURU." Following the
Merger with Old Cerplex, the Company's Common Stock has been reported on the OTC
Bulletin Board under the symbol "CPLX." For the period during the last two
fiscal years in which the Common Stock was traded on the AMEX, the following
table sets forth the range of the high and low closing
 
                                        9
<PAGE>   11
 
sales prices per share for the Common Stock on the AMEX. For the period during
the last two fiscal years in which the Common Stock was listed for quotation on
the OTC Bulletin Board, the following table sets forth the range of the high and
low bid quotations per share for the Common Stock as reported on the OTC
Bulletin Board. Figures for the OTC Bulletin Board reflect inter-dealer prices,
without mark-up, mark-down or commission, and may not necessarily represent
actual transactions.
 
   
     The per share prices set forth in the table below have been adjusted to
reflect the One-for-Ten Reverse Split for the Company's Common Stock that took
place following approval by the stockholders of the Company on October 5, 1998.
As a result of the One-for-Ten Reverse Split, each ten shares of the Company's
Common Stock was converted into one share of the Company's Common Stock.
    
 
   
<TABLE>
<CAPTION>
                                      FISCAL YEAR 1998          FISCAL YEAR 1997
                                     (OCTOBER 1, 1997 TO      (OCTOBER 1, 1996 TO
                                     SEPTEMBER 30, 1998)      SEPTEMBER 30, 1997)
                                     -------------------      --------------------
                                      HIGH         LOW         HIGH          LOW
                                     -------      ------      -------      -------
<S>                                  <C>          <C>         <C>          <C>
First Quarter......................  $16.00       $7.50       $23.80       $15.00
Second Quarter.....................  $11.10       $2.70       $21.90       $13.80
Third Quarter......................  $ 6.10       $2.50       $20.00       $13.80
Fourth Quarter.....................  $ 4.20       $0.90       $21.30       $ 7.50
</TABLE>
    
 
   
     On December 15, 1998, the closing bid price per share of the Common Stock
as reported on the OTC Bulletin Board was $0.59. As of December 15, 1998, the
Company had 955 holders of record of its Common Stock.
    
 
   
     The Company has not paid any cash or stock dividends on its Common Stock
since September 30, 1993. At present, it is the policy of the Company to retain
all earnings for reinvestment into the Company. In addition, the Greyrock Line
of Credit prohibits payment of cash dividends.
    
 
                                       10
<PAGE>   12
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The following table sets forth selected financial data regarding the
Company's results of operations and financial position. This information should
be read in conjunction with Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements and related Notes included elsewhere herein.
 
     Information for the fiscal year ended September 30, 1998 reflects the
addition of the results of operations of Old Cerplex for the five months ended
September 30, 1998, subsequent to the Merger with Old Cerplex on April 30, 1998.
 
   
<TABLE>
<CAPTION>
                                               (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
                                                   FOR THE YEAR ENDED SEPTEMBER 30,
                                        -------------------------------------------------------
                                          1998       1997        1996        1995        1994
                                        --------   --------    --------    --------    --------
<S>                                     <C>        <C>         <C>         <C>         <C>
OPERATING DATA
Net revenues..........................  $ 66,423   $ 64,892    $ 98,019    $141,852    $120,386
                                        --------   --------    --------    --------    --------
Gross profit..........................     4,869     12,986      24,443      34,582      26,350
Selling, general and administrative
  expenses............................    23,145     23,466      25,943      28,170      17,573
Amortization of intangibles...........     3,701     34,044(1)   18,042(2)    9,073(3)    4,539(4)
Restructuring charge and other........        --         --          --       5,643(5)    2,161
Litigation settlement.................        --         --          --          --       1,943
                                        --------   --------    --------    --------    --------
Operating loss........................   (21,977)   (44,524)    (19,542)     (8,304)        134
Interest expense......................    (5,465)    (4,050)     (6,221)     (5,522)     (4,449)
Other income (expense), net...........    (1,653)      (498)     (1,284)        116         197
                                        --------   --------    --------    --------    --------
Loss from continuing operations before
  taxes...............................   (29,095)   (49,072)    (27,047)    (13,710)     (4,118)
Net loss..............................  $(29,095)  $(49,605)   $(30,353)   $(15,030)   $ (6,518)
                                        ========   ========    ========    ========    ========
Loss from continuing operations per
  share(6)............................  $  (7.57)  $ (73.57)   $ (37.78)   $ (16.36)   $  (5.50)
Net loss per share(6).................  $  (7.57)  $ (74.37)   $ (42.39)   $ (17.94)   $ ( 8.70)
Net loss applicable to common
  shareholders(6).....................  $  (8.26)  $ (78.60)   $ (44.40)   $ (17.94)   $  (8.70)
Weighted average number of common
  shares(6)...........................     3,843        667         716         838         749
</TABLE>
    
 
---------------
   
(1) During the fourth quarter of fiscal 1997, approximately $29,602 relating to
    a write-down of intangible assets acquired in fiscal 1994 in connection with
    the Century acquisition and $3,390 of computer systems and software
    development costs were charged to operations.
    
 
(2) During the fourth quarter of fiscal 1996, approximately $16,580 relating to
    a write-down of intangible assets acquired in fiscal 1992 in connection with
    the Micro-C Corporation acquisition was charged to operations.
 
(3) During fiscal 1995, approximately $7,400 relating to a write-down of
    intangible assets associated with the repair business acquired in fiscal
    1993 in connection with the FRS, Inc. acquisition was charged to operations.
 
(4) During fiscal 1994, approximately $2,400 relating to a write-down of
    intangible assets associated with a covenant not to compete was charged to
    operations.
 
   
(5) During fiscal 1995, the Company substantially completed a major corporate
    reorganization into two core businesses operating through the integrated
    circuits recycling and recovery division and the spare parts distribution
    division.
    
 
   
(6) Per share figures and figures for the number of shares outstanding have been
    adjusted to reflect the One-for-Ten Reverse Split that occurred on October
    5, 1998.
    
 
                                       11
<PAGE>   13
 
   
<TABLE>
<CAPTION>
                                                               AS OF SEPTEMBER 30,
                                               ---------------------------------------------------
                                                 1998       1997       1996      1995       1994
                                               --------   --------   --------   -------   --------
<S>                                            <C>        <C>        <C>        <C>       <C>
BALANCE SHEET DATA
Working capital..............................  $(55,415)  $ (3,113)  $    610   $   196   $  9,013
Total assets.................................   100,541     14,629     52,788    80,716    102,927
Long-term obligations (less current
  maturities)................................    25,782     36,585     25,842    46,183     51,761
Redeemable convertible preferred stock.......    34,150     46,722     40,000        --         --
Stockholders' equity (deficit)...............   (59,208)   (83,320)   (31,690)   12,338     26,903
Dividends declared...........................        --         --         --        --         --
</TABLE>
    
 
                                       12
<PAGE>   14
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
OVERVIEW
 
     The Company provides repair and logistics services, and spare parts
sourcing and service management for manufacturers of computer, communications
and electronic office equipment. In the computer marketplace, the Company
primarily services display terminals, printed circuit boards, laptops,
networking equipment and workstations. In the telecommunications marketplace,
the Company primarily services switching systems, payphones, video conferencing
products, multiplexers, mobile communications, transmission equipment, hubs and
modems. In the office automation marketplace, the Company services printers,
scanners, fax machines and high value products such as copiers, automatic teller
machines (ATMs) and other paper-handling equipment. The Company operates through
its two principal subsidiaries, Cerplex, Inc. and Aurora Electronics Group,
Inc., and their subsidiaries. Based in Tustin, California, the Company has
locations across the United States, in France and in the United Kingdom
 
     Prior to the Merger with Old Cerplex which is discussed in more detail
below, the Company's business consisted primarily of two divisions, the Asset
Recovery Services Division (the "ARS Division") and the Parts Services Supply
Division (the "PSS Division"). The Merger was accounted for under the purchase
method of accounting and, as such, the operations of Old Cerplex are not
included in the Company's financial statements prior to April 30, 1998. The
majority of the Company's revenues subsequent to April 30, 1998 are attributable
to the repair operations of Old Cerplex acquired in the Merger. Due to this and
the fact that the Company's ARS and PSS Divisions experienced declining revenues
from fiscal 1997 to fiscal 1998, the Company's historical results, especially as
they relate to the ARS and PSS Divisions, may not be indicative of future
results.
 
     The primary factors affecting the Company's repair business include, but
are not limited to, the pricing of the Company's services and the utilization of
the Company's resources that constitute fixed costs. Pricing in the Company's
industry is very competitive and price discounting could adversely affect the
Company's operating results. In addition, the Company has made a significant
investment in facilities, equipment and personnel. While the Company's
facilities have the capability of generating significantly more repair services
volume than current levels, the Company and Old Cerplex have, due to a variety
of factors, experienced decreasing revenues which have resulted in significant
operating losses. In particular, BT and Rank Xerox constituted Old Cerplex's and
the Company's largest customers in the last fiscal year. Revenues from these
customers have declined from fiscal 1997 to fiscal 1998 on a pro forma basis. It
is anticipated that revenues from Rank Xerox will decline in the future, and
there can be no assurance that revenues from BT or other customers will not
decline in the future. The failure of the Company to develop additional business
from new and existing customers could have a material adverse effect on the
Company's business.
 
CORPORATE HISTORY
 
   
     The Company, as it exists today, was formed on September 30, 1992. Prior to
September 30, 1992, the Company was known as BSN Corp. and was engaged in the
sporting goods industry. From 1990 through 1992, BSN divested itself of a
majority of its sporting goods assets and, effective September 30, 1992,
announced that all of its remaining sporting goods assets would be accounted for
as discontinued operations and that such operations would be sold. Effective
September 30, 1992, the Company entered the computer and electronics industry
through the acquisition of Micro-C Corporation, a San Diego, California based
company founded in 1985, which provided both integrated circuits ("IC")
recycling services to computer OEMs and memory IC distribution services for
semiconductor manufacturers. Effective September 30, 1993, the Company acquired
FRS, Inc., a Sacramento, California, based company founded in 1984, which
provided depot repair services to computer and peripheral OEMs. Effective March
1, 1994, the Company acquired Century Computer Marketing, a Marina del Rey,
California, based company founded in 1984, which was a leading supplier of new
and refurbished spare parts to the computer maintenance market.
    
 
     In the third quarter of the fiscal year ended September 30, 1995, the
Company completed a corporate reorganization, in which it: (a) exited the memory
upgrade manufacturing and supply business formerly
 
                                       13
<PAGE>   15
 
known as the Premier Division; and (b) substantially downsized its depot repair
services operation acquired in the FRS, Inc. acquisition, and refocused these
operations to support the Company's remaining spare parts distribution and
electronic recycling services business.
 
   
     In March 1996, the Company completed a recapitalization in which the
Company (a) acquired approximately 4,268,000 shares of its Common Stock, (b)
issued $40.0 million of convertible preferred stock and $10.0 million of
subordinated debt to WCAS, (c) established a $35.0 million credit facility, (d)
repaid $26.0 million of senior bank debt and (e) redeemed approximately $9.3
million of Senior Subordinated Notes.
    
 
   
     In October 1997, the Company completed the sale of the remainder of its
then-existing depot repair services operation and sold its Irvine, Scotland,
recovery processing facility. Losses from these transactions were accrued into
fiscal 1997 operating results.
    
 
   
     In April 1998, the Company completed the Merger with Old Cerplex, in which
a wholly-owned subsidiary of the Company merged into Old Cerplex and each share
of Old Cerplex's Common Stock was converted into 1.070167 shares of the
Company's Common Stock (or .1070167 shares after giving effect to the Company's
recent One-for-Ten Reverse Split). As a result of the Merger, Old Cerplex became
a wholly-owned subsidiary of the Company. The Company changed its name to The
Cerplex Group, Inc., and Old Cerplex changed its name to Cerplex, Inc. The
Company now conducts its operations through two wholly-owned subsidiaries,
Cerplex, Inc. and Aurora Electronics Group, Inc., and their subsidiaries.
    
 
RESULTS OF OPERATIONS YEAR ENDED SEPTEMBER 30, 1998 COMPARED WITH YEAR ENDED
SEPTEMBER 30, 1997
 
   
     Net revenues for the year ended September 30, 1998 for the Company were
$66,423,000 as compared to $64,892,000 for the year ended September 30, 1997.
The Company's increase in revenues was due principally to the acquisition of Old
Cerplex. This increase is offset by a substantial decline in revenues due to the
subsequent closing of the DRAM segment of the ARS Division and an overall
decline in the prices and volume of computer repair parts in its PSS Division.
    
 
   
     Gross profit for fiscal 1998 was $4,869,000 (7.3% of net revenues) as
compared to gross profit of $12,986,000 (20.0% of net revenues) for fiscal 1997.
The decrease in gross profit was due primarily to the decline in revenues from
the ARS and PSS Division mentioned above, and by the lower gross profit
contribution of Old Cerplex ($1,849,000 or 4.3% of Old Cerplex's net revenue
contribution).
    
 
   
     Selling, general and administrative expenses for fiscal 1998 were
$23,145,000 (34.8% of revenue) as compared to $23,466,000 (36.2% of net
revenues) for fiscal 1997. The decrease as a percentage of revenues was due to
the reduction in employees related to the sale of its remaining depot repair
service operation and its Irvine, Scotland recovery processing facility.
    
 
   
     Amortization expense for fiscal 1998 was $3,701,000 as compared to
$34,044,000 for fiscal 1997. Fiscal 1997 included writeoffs of goodwill and
system development costs totaling approximately $32,992,000.
    
 
   
     Net interest expense for fiscal 1998 was $5,465,000 (8.2% of net revenues)
as compared to $4,050,000 (6.2% of net revenues) for fiscal 1997. The increase
in interest expense is due to higher loan balances on the Greyrock Line of
Credit.
    
 
   
     Other expense for fiscal 1998 was $1,653,000 primarily for expenses
incurred to close the San Diego former headquarters. Other expense for fiscal
1997 was $498,000 which included approximately $450,000 loss from the sales of
the Sacramento Repair Facility and the Asset Recovery Facility in Scotland.
    
 
   
     Provision for income tax was $0 in fiscal 1998 as compared to $533,000 in
fiscal 1997. The fiscal 1997 provision includes a $500,000 valuation allowance
provided for a deferred tax asset that was not expected to be realized.
    
 
   
     Net loss for fiscal 1998 was $29,095,000 as compared to $49,605,000 in
fiscal 1997. The fiscal 1997 loss includes $32,992,000 of write-offs of goodwill
and information system development costs. If this $32,992,000 of write-offs is
excluded from the loss for fiscal 1997, the loss for fiscal 1997 was $16,613,000
as compared to
    
 
                                       14
<PAGE>   16
 
   
$29,095,000 for fiscal 1998. The increase in loss for fiscal 1998 is due to
continued operating losses from the operations of the electronics recycling and
spare parts distribution operations mentioned above.
    
 
RESULTS OF OPERATIONS YEAR ENDED SEPTEMBER 30, 1997, COMPARED WITH YEAR ENDED
SEPTEMBER 30, 1996
 
   
     Net revenues for the year ended September 30, 1997 for the Company were
$64,892,000 as compared to $98,019,000 for the year ended September 30, 1996.
Gross profit for fiscal 1997 was $12,986,000 (20.0% of net revenues) as compared
to gross profit for fiscal 1996 of $24,443,000 (24.9% of net revenues). The
Company's decline in revenues and gross profit was due to a continued decline in
the average sales prices for DRAM memory chips in the ARS Division and to an
overall decline in the prices of computer repair parts in its PSS Division.
    
 
   
     Selling, general and administrative expenses for fiscal 1997 were
$23,466,000 (36.2% of revenue) as compared to $25,943,000 (26.5% of revenue) for
fiscal 1996. Included in the 1996 selling, general and administrative expenses
were approximately $725,000 in one time charges related to a recapitalization.
The increase of the selling, general and administrative expenses as a percentage
of revenue was due to the reduction in revenues described in the preceding
paragraph.
    
 
   
     Amortization expense for fiscal 1997 was $34,044,000 as compared with
$18,042,000 in fiscal 1996. The 1997 amount included the write-offs of
$29,602,000 of unamortized goodwill remaining from the acquisition of Century
Computer marketing and $3,390,000 of computer system software and development
costs in PSS. With the continued decline in computer repair parts prices,
management's projections of non-discounted cash flows were insufficient to
recover these assets over their amortization life. The fiscal 1996 amortization
included the write-off of $16,580,000 of goodwill related to the acquisition of
Micro-C Corporation, Inc. Management wrote off the goodwill related to the
Micro-C acquisition due to the deterioration of the pricing levels in the
integrated circuit market and their negative effects on the Company's business
prospects.
    
 
     Net interest expense for fiscal 1997 was $4,050,000 or 6.2% of revenue as
compared to $6,221,000, or 6.3% of revenue, for fiscal 1996. The interest
expense for fiscal 1996 includes approximately $2,243,000 of charges related to
the Company's recapitalization, including approximately $1,070,000 of previously
capitalized financed charges, $917,000 of interest, fees and expenses due to the
Company's previous lenders and $256,000 relating to the 9 1/4% Senior
Subordinated Notes.
 
   
     Other expense for 1997 was $498,000 including approximately a $450,000 loss
from the sales of the Sacramento Repair Facility and the Asset Recovery Facility
in Irvine, Scotland. Other expense for fiscal 1996 was $1,284,000 including
write downs and disposal of property and equipment totaling $1,369,000.
    
 
   
     Provision for income taxes for fiscal 1997 was $533,000 as compared to
$3,306,000 for fiscal 1996. The fiscal 1997 provision includes the increase in a
valuation allowance of $500,000 for a deferred tax asset not anticipated to be
realized. The fiscal 1996 provision includes the increase of the deferred income
tax valuation allowance in the amount of $3,234,000 due to management's
determination that the deferred tax asset will not be fully realized. Management
reached this conclusion as a result of the limitation in the utilization of the
Company's net operating loss carryforwards caused by the change of ownership
pursuant to the 1996 recapitalization.
    
 
   
     Net loss for fiscal 1997 was $49,605,000 as compared to $30,353,000 for
fiscal 1996. The fiscal 1997 loss included write downs of information system
software and development costs of approximately $3,390,000 and the write off of
goodwill from the Century acquisition of approximately $29,602,000.
    
 
LIQUIDITY AND CAPITAL RESOURCES
 
   
     The Company's primary requirements for capital are directly related to its
levels of accounts receivable, inventories, additions to its property and
equipment and required debt principal payments. The Company had a working
capital deficit of $55.4 million as of September 30, 1998 as compared to a
working capital deficit of $3.1 million as of September 30, 1997. See Note A of
Notes to Consolidated Financial Statements -- "Current Financial Condition."
    
 
                                       15
<PAGE>   17
 
   
     The Company's most immediate liquidity concern is its ability to repay its
indebtedness under the Greyrock Line of Credit, which approximated $45.5 million
in principal amount as of December 15, 1998. All amounts owing Greyrock are due
to be repaid by April 30, 1999, and the Company's cash on hand and cash flow
from operations is anticipated to be insufficient to repay the amounts due by
such date. The Company is currently in discussions with Greyrock to extend the
repayment date of the Greyrock Line of Credit, however, there is no assurance
that the extension will be obtained, or, if obtained, that the extension will
give the Company sufficient time to obtain replacement financing to repay
Greyrock. If satisfactory extension and/or additional funds are not obtained,
the Company will experience severe liquidity problems. If the Greyrock Line of
Credit is not repaid, Greyrock has the ability to foreclose on the Greyrock Line
of Credit. This matter raises substantial doubt as to the Company's ability to
continue as a going concern. See Note A of Notes to Consolidated Financial
Statements -- "Current Financial Condition."
    
 
   
     In addition to the need for capital to repay Greyrock, management believes
the Company will require substantial additional working capital during fiscal
1999 to fund operations and to repay the BT promissory note and the $5.0 million
loan from WCAS. Management believes that the Company will continue to experience
operating losses and negative cash flow in fiscal 1999. Because the Company does
not have availability to borrow additional amounts pursuant to the Greyrock Line
of Credit, management anticipates that the only potential source of additional
working capital available to the Company will be from WCAS, the Company's
largest stockholder. There is no assurance, however, that the Company will
attain results that WCAS will regard as sufficient to support the infusion of
additional capital.
    
 
   
     In addition to the fact that the Company has limited access or no access to
additional working capital, the Company has limited ability to obtain working
capital from the operations of its Cerplex SAS subsidiary. The ability to obtain
working capital from Cerplex SAS is limited due to the internal capital needs of
Cerplex SAS and due to restrictions placed on Cerplex SAS in connection with the
Company's acquisition of Cerplex SAS from Rank Xerox. In May 1996, Old Cerplex
acquired Cerplex SAS from Rank Xerox. Under the terms of the acquisition, future
payments are owed to Rank Xerox and the Company therefore agreed to certain
financial covenants over a four-year period that limit the amount of dividends
and other payments Cerplex SAS can make to the Company, and impose certain other
financial restrictions on the Company and Cerplex SAS. Accordingly, of the
Company's consolidated cash of $14.2 million at September 30, 1998, the cash of
Cerplex SAS of $6.5 million is generally not available to Cerplex for financing
operations outside of Cerplex SAS.
    
 
   
     The Company is highly leveraged, and has significant debt repayment
obligations and preferred stock redemption obligations. As of December 15, 1998,
the Company had approximately $82.2 million principal amount of indebtedness
outstanding, which consisted of: (i) $45.5 million indebtedness under the
Greyrock Line of Credit; (ii) $15.0 million indebtedness under the Company's 10%
Senior Subordinated Notes; (iii) $10.4 million indebtedness under the Company's
7 3/4% Convertible Subordinated Debentures; (iv) $7.5 million combined
indebtedness under two loans from WCAS; (v) $3.1 million indebtedness under a
promissory note to BT; and (vi) $0.7 million of other indebtedness consisting
primarily of equipment leases. In addition, the Company also had as of December
15, 1998, $21.55 million outstanding (excluding accrued dividends) of its
mandatorily redeemable 7% Convertible Preferred Stock. Set forth below is a
summary of the terms of such indebtedness, as well as redemption and other
obligations of the Company's outstanding preferred stock.
    
 
   
     Greyrock Line of Credit. In connection with the Merger with Old Cerplex,
the Company received the Greyrock Line of Credit. The Greyrock Line of Credit
consists of a $36.0 million term loan, and a revolving line of credit with
available borrowings of up to $10.0 million depending on certain financial
conditions of the Company. As of December 15, 1998, the entire balance of the
$36.0 million term loan was outstanding and $9.5 million of the revolving line
of credit was outstanding. WCAS has guaranteed the repayment of $25.0 million of
the principal amount owing by the Company at any time under the Greyrock Line of
Credit. The amount available under the Greyrock Line of Credit is based on the
Company's eligible receivables and inventory. Currently, no additional
borrowings are available. The Greyrock Line of Credit is secured by all of the
Company's assets, including the Company's interest in its wholly-owned
subsidiary in the United Kingdom and 65% of the Company's interest in the
Company's wholly-owned subsidiary in France. The outstanding
    
                                       16
<PAGE>   18
 
   
balance of the Greyrock Line of Credit bears interest each month at the highest
London Interbank Offered Rate (LIBOR) in effect during such month, plus 4.875%
per annum on the line of credit and 4.50% per annum on the term loan, provided
that the interest rate in effect in each month shall not be less than 9% per
annum, and provided that the interest charged for each month is a minimum of
$25,000, regardless of the amount of the outstanding principal balance. This
line also prohibits the Company from paying out cash dividends.
    
 
   
     All amounts owing Greyrock are due to be repaid by April 30, 1999. The
Company's cash and cash from operations is anticipated to be insufficient to
repay the amounts due by April 30, 1999. The Company is currently in discussions
with Greyrock to extend the repayment date, however, there is no assurance that
the extension will be obtained, or, if obtained, that the extension will give
the Company sufficient time to obtain replacement financing to repay Greyrock.
If a satisfactory extension and/or additional funds are not obtained, the
Company will experience severe liquidity problems. This raises substantial doubt
about the Company's ability to continue as a going concern.
    
 
   
     10% Series A and Series B Senior Subordinated Notes. As of December 15,
1998, there was approximately $15.0 million principal amount outstanding of the
Company's 10% Senior Subordinated Notes, issued in two series, Series A and
Series B. Almost the entire amount of the $15.0 million principal of such notes
consists of Series A notes sold to WCAS, and the balance of the principal amount
consists of Series B notes sold to certain public stockholders. The terms of the
Series A and Series B notes, as described herein, are substantially similar. The
10% Senior Subordinated Notes are subordinate in right of payment to all bank
debt and other senior indebtedness of Cerplex but rank senior to all outstanding
subordinated indebtedness. The 10% Senior Subordinated Notes are general,
unsecured obligations of the Company and bear interest at 10% per annum, payable
semi-annually in arrears in cash on June 30 and December 31 of each year,
beginning on June 30, 1998. The 10% Senior Subordinated Notes mature in three
equal annual installments commencing on December 31, 2002. The 10% Senior
Subordinated Notes may be prepaid at any time at the option of the Company in
whole or in part, upon not less than 20 or more than 60 days' notice at the
unpaid principal amount thereof plus accrued and unpaid interest.
    
 
   
     7 3/4% Convertible Subordinated Debentures. As of December 15, 1998, there
was approximately $10.4 million principal amount outstanding of the Company's
7 3/4% Convertible Subordinated Debentures (the "Debentures"). The Debentures
mature April 15, 2001 and are convertible into Common Stock of the Company at a
conversion price, subject to adjustment in certain instances, of approximately
$116.60 per share, and are redeemable at the option of the Company at face value
plus accrued interest thereon. The Company is required to make partial sinking
fund payments of approximately $117,000 and $2,516,000 in 1999 and 2000,
respectively, on the Debentures. The Debentures bear interest at 7 3/4% payable
on April 14 and October 14 of each year through maturity.
    
 
   
     10% Short Term WCAS Notes. As of December 15, 1998, there was $7.5 million
aggregate principal amount outstanding under two promissory notes to WCAS
evidencing recent loans by WCAS to the Company. The notes were issued on
September 30, 1998 and December 9, 1998, in the respective principal amounts of
$5.0 million and $2.5 million. The principal amount of each note must be repaid
in full on the one year anniversary of its issue date ($5.0 million is due
September 30, 1999, and $2.5 million is due December 9, 1999). The notes are
general, unsecured obligations of the Company and bear interest at 10% per
annum, payable in arrears in cash on March 30, 1999 with the balance at
maturity.
    
 
   
     Secured Note Payable to BT. As of December 15, 1998, there was $3.1 million
principal amount outstanding under a promissory note to BT (the "BT Note"). In
July 1994 Old Cerplex purchased the operating assets of BT Repair Services for
cash and assumed the BT Note in an original principal amount of L2.5 million.
The BT Note is a non-interest bearing note, secured by the land and buildings
purchased from BT. The BT Note is payable at the earlier of the point when
orders from the customers of the business purchased by the Company from BT reach
a cumulative L78.0 million (approximately $122.0 million as of December 15,
1998) or May of 1999. As of December 15, 1998, required sales volumes had not
yet been met. Management currently estimates that sales volumes will not be high
enough to require repayment of the BT Note before the outside maturity date in
May of 1999.
    
 
                                       17
<PAGE>   19
 
   
     Other Debt. As of December 15, 1998, there was $0.7 million principal
amount of other debt outstanding, consisting primarily of secured equipment
financing and capital lease obligations with interest rates ranging from 8.9% to
12.9%, due in monthly installments through 1999.
    
 
   
     7% Senior Cumulative Convertible Preferred Stock. As of December 15, 1998,
there was $21.55 million amount outstanding (excluding accrued dividends) of the
Company's 7% Convertible Preferred Stock (215,500 shares at $100 per share).
Holders of the 7% Convertible Preferred Stock are entitled to receive dividends
of $7.00 per share per annum (or 7% of the face amount), payable when and as
declared by the Company's Board of Directors. Unpaid dividends are cumulative
and accrue. Accrued but unpaid dividends do not bear interest. The 7%
Convertible Preferred Stock must be redeemed by the Company in equal
installments on each of December 31, 2006 and 2007. In addition, the 7%
Convertible Preferred Stock is redeemable at the option of the holders thereof
upon a change of control of the Company, which includes the sale of 50% or more
of the voting power of all outstanding shares of the Company to a party other
than WCAS. In the event of a liquidation, dissolution or winding up of the
affairs of the Company, the holders of the 7% Convertible Preferred Stock are
entitled to receive a liquidation preference in the amount of $100 per share of
the 7% Convertible Preferred Stock, plus accrued and unpaid dividends thereon,
prior and in preference to any distribution to holders of any class of capital
stock of the Company junior to such 7% Convertible Preferred Stock. The 7%
Convertible Preferred Stock is convertible in whole or in part at the option of
the holders thereof. Each share of 7% Convertible Preferred Stock is convertible
into 40 shares of the Company's Common Stock upon payment of the conversion
price of $2.50 (subject to anti-dilution adjustment under certain
circumstances).
    
 
YEAR 2000 COMPLIANCE
 
     The Company faces Year 2000 risks as the result of computer programs,
microprocessors and embedded date reliant systems using two digits rather than
four to define the applicable year. If such programs or microprocessors are not
corrected, date data concerning the Year 2000 could cause many systems to fail,
lock up or generate erroneous results. A computer system is considered to be
"Year 2000 compliant" if the system's performance and functionality are
unaffected by the processing of dates prior to, during and after the Year 2000,
but only if all products (for example hardware, software and firmware) used with
the system properly exchange accurate date data with it.
 
   
     The Company is implementing a program intended to enable the Company to
become Year 2000 compliant. The Company is using management information systems
(MIS) personnel knowledgeable regarding Year 2000 problems to determine the
extent of work necessary for the Company to become Year 2000 compliant and
attempt to remedy such problems. The Company has purchased and is in the process
of installing certain software and hardware intended to upgrade its networked
personal computer system to be Year 2000 compliant. More significantly, the
Company is in discussions with its primary software vendor to obtain the source
code for the Company's main operating systems software so that the Company can
modify the software to be Year 2000 compliant. In addition, the Company has
begun discussing Year 2000 issues with certain of its significant suppliers and
customers to evaluate their Year 2000 readiness, and to determine whether any
Year 2000 issues will impede the ability of such suppliers to continue to
provide goods and services to the Company, and the ability of such customers to
continue to provide business to the Company. The Company anticipates that its
internal systems, equipment and processes will be substantially Year 2000
compliant by July 1999, and intends to complete the analysis and remediation of
potential Year 2000 problems with its significant suppliers and customers by
July 1999. The Company estimates that the total dollar amount that the Company
will spend to remediate its Year 2000 issues will not exceed $500,000. Despite
the Company's efforts to become Year 2000 compliant, there is no assurance that
the Year 2000 issue will not pose significant problems. There may be delays in
the Company's remediation efforts, a failure to fully identify all Year 2000
problems in the systems, equipment or processes of the Company or its vendors or
customers, or unanticipated remediation expenses, all of which could have
material adverse consequences on the Company's financial position and results of
operations.
    
 
   
     The Company believes that the most likely worst case scenario with respect
to Year 2000 problems would be that the Company or the third parties with whom
the Company does business would fail to successfully
    
                                       18
<PAGE>   20
 
   
complete their Year 2000 remediation efforts, in which case the Company would
encounter disruptions to its business that could have a material adverse effect
on its financial position and results of operations. In addition to specific
problems that the Company may encounter with its own systems and those of the
third parties with whom the Company does business, the Company may be materially
impacted by widespread economic or financial market disruptions caused by Year
2000 problems. The Company has not at this time established Year 2000
contingency plans in the event that there is a failure of the Company's Year
2000 remediation efforts or the Year 2000 remediation efforts of third parties
with whom the Company does business. The Company intends to consider contingency
plans in the event that its Year 2000 remediation efforts and those of such
third parties appear to be ineffective or unduly delayed.
    
 
   
     NEW ACCOUNTING PRONOUNCEMENTS. In June 1997, the FASB issued SFAS Nos. 130
and 131 "Reporting Comprehensive Income" and "Disclosures about Segments of an
Enterprise and Related Information." SFAS Nos. 130 and 131 are effective for
fiscal years beginning after December 15, 1997, with earlier adoption permitted.
The Company does not believe that adoption of these new standards will have a
material effect on the Company.
    
 
   
     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters or fiscal years beginning after June 15, 1999. SFAS 133 establishes
accounting and reporting standards for derivative instruments embedded in other
contracts and for hedging activities. Application of this accounting standard is
not expected to have a material impact on the Company's consolidated financial
position, results of operations or liquidity.
    
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
   
     The Company is subject to market risks with respect to its variable note
debt and its cash flows, receivables and payables denominated in foreign
currencies.
    
 
   
     Of the Company's $82.2 million principal amount of indebtedness at December
15, 1998, $45.5 million principal amount of such debt (which represents total
principal indebtedness on the Greyrock Line of Credit) bears interest at a rate
that fluctuates based on changes in the LIBOR rate. A 1% change in the
underlying LIBOR rate would result in a $455,000 change in the annual amount of
interest payable on such debt.
    
 
   
     The Company's overseas subsidiaries operate in England and France. Both the
trade receivables and the trade payables for these units are denominated in the
local currency. The Company does not hedge these balances. See Note O to the
Consolidated Financial Statements -- "Foreign Operations and Major Customers."
    
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
   
     The Company's Consolidated Financial Statements and Schedule appear in a
separate section of this Annual Report, beginning on pages F-1 and S-1,
respectively.
    
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
   
     On September 16, 1998, the Board of Directors of the Company dismissed
Arthur Andersen LLP as the Company's independent accountants, and on September
17, 1998 engaged KPMG LLP as the Company's independent accountants, who had been
the independent accountants for Old Cerplex prior to the Company's acquisition
of Old Cerplex. The Consolidated Financial Statements included herein for the
fiscal years ended September 30, 1996 and September 30, 1997 were audited by
Arthur Andersen LLP, and the Consolidated Financial Statements for the fiscal
year ended September 30, 1998, were audited by KPMG LLP. In connection with
Arthur Andersen's audits for fiscal years 1996 and 1997, and through Arthur
Andersen's dismissal on September 16, 1998, there were no disagreements with
Arthur Andersen LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Arthur Andersen LLP, would
have caused them to make reference thereto in their report on the financial
statements for such years. The dismissal of Arthur Andersen LLP was reported in
greater detail in the Company's Report on Form 8-K filed on September 22, 1998.
    
 
                                       19
<PAGE>   21
 
                                    PART III
 
   
     The information required by Part III is omitted from this Annual Report
because the Company will file a definitive proxy statement pursuant to
Regulation 14A (the "Proxy Statement") within 120 days of the Company's fiscal
year ended September 30, 1998 in connection with the Company's Annual Meeting of
Stockholders. The Proxy Statement will contain the information that would
otherwise be included in Part III of this Annual Report.
    
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Information with respect to Item 10 will be provided in the Company's Proxy
Statement, to be filed within 120 days of the Company's fiscal year ended
September 30, 1998.
 
ITEM 11. EXECUTIVE COMPENSATION
 
     Information with respect to Item 11 will be provided in the Company's Proxy
Statement, to be filed within 120 days of the Company's fiscal year ended
September 30, 1998.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     Information with respect to Item 12 will be provided in the Company's Proxy
Statement, to be filed within 120 days of the Company's fiscal year ended
September 30, 1998.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Information with respect to Item 13 will be provided in the Company's Proxy
Statement, to be filed within 120 days of the Company's fiscal year ended
September 30, 1998.
 
                                       20
<PAGE>   22
 
                                    PART IV
 
   
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
    
 
     (a) The following documents are filed as part of this report:
 
   
          1. Financial Statements -- See Index to Consolidated Financial
     Statements and Financial Statement Schedule on page F-1.
    
 
   
          2. Financial Statement Schedule -- See Index to Consolidated Financial
     Statements and Financial Statement Schedule on Page F-1.
    
 
          3. Exhibits:
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
  2        Agreement and Plan of Merger, dated as of January 30, 1998,
           among the Company, Holly Acquisition Corp. and Old Cerplex
           (incorporated by reference from Appendix A to the Prospectus
           contained in the Company's Registration Statement on Form
           S-4 (File No. 333-48725)).
  3.1.1    The Restated Certificate of Incorporation of the Company, as
           amended (incorporated by reference from Exhibit 3.1 to the
           Company's Transition Report on Form 10-K for the transition
           period from December 31, 1991 to September 30, 1992).
  3.1.2    The Certificate of Amendment to the Restated Certificate of
           Incorporation of the Company, filed on April 28, 1998
           (incorporated by reference from Exhibit 4.1.1 of the
           Company's Post-Effective Amendment No. 2 to the Company's
           Registration Statement on Form S-3, filed on May 13, 1998
           (Registration No. 333-47973)).
  3.1.3    The Certificate of Amendment to the Restated Certificate of
           Incorporation of the Company, filed on April 30, 1998
           (incorporated by reference from Exhibit 4.1.2 of the
           Company's Post-Effective Amendment No. 2 to the Company's
           Registration Statement on Form S-3, filed on May 13, 1998
           (Registration No. 333-47973)).
 *3.1.4    Certificate of Amendment to Certificate of Incorporation of
           the Company filed on October 6, 1998.
  3.2.1    Bylaws of the Company, as amended (incorporated by reference
           from Exhibit 4.2 of the Company's Registration Statement on
           Form S-8 (Registration No. 33-79426)).
  3.2.2    Resolutions adopted by the Board of Directors on April 30,
           1998, amending the Bylaws of the Company (incorporated by
           reference from Exhibit 4.2.1 of the Company's Post-Effective
           Amendment No. 2 to the Company's Registration Statement on
           Form S-3, filed on May 13, 1998 (Registration No.
           333-47973)).
  4.1      Amended and Restated Registration Rights Agreement, dated
           January 30, 1998, among the Company and the purchasers named
           on Schedules I and II thereto (incorporated by reference
           from Exhibit 4.17 to the Company's Current Report on Form
           8-K filed on February 6, 1998).
  4.2      Certificate of Designations, Preferences and Rights of
           Senior Cumulative Convertible Preferred Stock of the Company
           filed on April 29, 1998 (incorporated by reference from
           Exhibit 4.3 of the Company's Post-Effective Amendment No. 2
           to the Company's Registration Statement on Form S-3, filed
           on May 13, 1998 (Registration No. 333-47973)).
  4.3      Form of Indenture for 10% Series B Senior Subordinated Notes
           between the Company and U.S. Trust Corporation (incorporated
           by reference from Exhibit 4.4 of the Company's
           Post-Effective Amendment No. 1 to the Company's Registration
           Statement on Form S-3, filed on March 27, 1998 (Registration
           No. 333-47973)).
</TABLE>
    
 
                                       21
<PAGE>   23
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
  4.4      Form of the Company's 10% Series B Senior Subordinated
           Notes, due December 31, 2004 (included as Exhibit A to the
           form of Indenture filed as Exhibit 4.4 of the Company's
           Post-Effective Amendment No. 1 to the Company's Registration
           Statement on Form S-3, filed on March 27, 1998 (Registration
           No. 333-47973)).
  4.5      Form of Letter to Stockholders of the Company (incorporated
           by reference from Exhibit 4.6 of the Company's
           Post-Effective Amendment No. 1 to the Company's Registration
           Statement on Form S-3, filed on March 27, 1998 (Registration
           No. 333-47973)).
  4.6      Form of Subscription Certificate (incorporated by reference
           from Exhibit 4.7 of the Company's Post-Effective Amendment
           No. 1 to the Company's Registration Statement on Form S-3,
           filed on March 27, 1998 (Registration No. 333-47973)).
  4.7      Form of Instructions as to Use of Subscription Certificate
           (incorporated by reference from Exhibit 4.8 of the Company's
           Post-Effective Amendment No. 1 to the Company's Registration
           Statement on Form S-3, filed on March 27, 1998 (Registration
           No. 333-47973)).
  4.8      Form of Letter to Brokers (incorporated by reference from
           Exhibit 4.9 of the Company's Post-Effective Amendment No. 1
           to the Company's Registration Statement on Form S-3, filed
           on March 27, 1998 (Registration No. 333-47973)).
  4.9      Form of Letter to Clients (incorporated by reference from
           Exhibit 4.10 of the Company's Post-Effective Amendment No. 1
           to the Company's Registration Statement on Form S-3, filed
           on March 27, 1998 (Registration No. 333-47973)).
  4.10     Form of Notice of Guaranteed Delivery (incorporated by
           reference from Exhibit 4.11 of the Company's Post-Effective
           Amendment No. 1 to the Company's Registration Statement on
           Form S-3, filed on March 27, 1998 (Registration No.
           333-47973)).
  4.11     Form of Nominee Holder Certification (incorporated by
           reference from Exhibit 4.12 of the Company's Post-Effective
           Amendment No. 1 to the Company's Registration Statement on
           Form S-3, filed on March 27, 1998 (Registration No.
           333-47973)).
  4.12     Guidelines to Form W-9 (incorporated by reference from
           Exhibit 4.13 of the Company's Post-Effective Amendment No. 1
           to the Company's Registration Statement on Form S-3, filed
           on March 27, 1998 (Registration No. 333-47973)).
  4.13     Indenture between the Registrant and MBank Dallas, National
           Association relating to the Company's 7 3/4% Convertible
           Subordinated Debentures due 2001, including form of
           Debenture (incorporated by reference from Exhibit 4.1 to the
           Company's Registration Statement on Form S-2 (Registration
           No. 33-4276)).
  4.14     First Supplemental Indenture relating to the Company's
           7 3/4% Convertible Subordinated Debentures, dated December
           1, 1987, between the Company and MTrust Corp., National
           Association, appointing MTrust Corp. as successor trustee to
           MBank Dallas (incorporated by reference from Exhibit 4.2 to
           the Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1993).
  4.15     Tripartite Agreement relating to the Company's 7 3/4%
           Convertible Subordinated Debentures, dated as of January 7,
           1990, between Mtrust Corp., National Association, Ameritrust
           Texas N.A., and the Company (incorporated by reference from
           Exhibit 4.3 to the Company's Annual Report on Form 10-K for
           the fiscal year ended December 31, 1989).
  4.16     Second Supplemental Indenture relating to the Company's
           7 3/4% Convertible Subordinated Debentures, dated to be
           effective as of November 30, 1992, between the Company and
           Society National Bank (incorporated by reference from
           Exhibit 4.4 to the Company's Post-Effective Amendment No. 1
           to Registration Statement on Form S-3 (No. 33-32377)).
</TABLE>
    
 
                                       22
<PAGE>   24
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
 *4.17     Third Supplemental Indenture relating to the Company's
           7 3/4% Convertible Subordinated Debentures, dated to be
           effective as of April 30, 1998, between the Company and
           Chase Manhattan Trust Company, National Association.
 *4.18     Certificate of Designations, Preferences and Rights of
           Convertible Preferred Stock filed on November 19, 1998
           eliminating the Series B, C and D Convertible Preferred
           Stock.
 *4.19     Certificate of Elimination of Convertible Preferred Stock
           filed on December 15, 1998.
 10.1      The Cerplex Group, Inc. and its Subsidiaries Stock Option
           and Restricted Stock Purchase Plan (the "Plan"), dated July
           28, 1998 (incorporated by reference from the Company's Proxy
           Statement filed on September 9, 1998).
*10.2.1    Loan and Security Agreement, dated April 30, 1998, between
           Greyrock Business Credit, the Company, Aurora Electronics
           Group, Inc., Cerplex, Inc. and Cerplex Mass, Inc.
*10.2.2    Continuing Guaranty, dated April 30, 1998, by Welsh, Carson,
           Anderson & Stowe VII, L.P., for the benefit of Greyrock
           Business Credit.
*10.2.3    Streamlined Facility Agreement, dated April 30, 1998,
           between the Company, Aurora Electronics Group, Inc.,
           Cerplex, Inc. and Cerplex Mass, Inc.
*10.2.4    Negative Pledge Agreement, dated April 30, 1998, between
           Cerplex Inc. and Greyrock Business Credit.
*10.2.5    Secured Promissory Note for $36,000,000, due April 30, 1999,
           between the Company, Aurora Electronics Group, Inc.,
           Cerplex, Inc. and Cerplex Mass, Inc. as payors and Greyrock
           Business Credit as payee.
*10.2.6    Cross-Corporate Continuing Guaranty, dated April 30, 1998,
           between the Company, Aurora Electronics Group, Inc.,
           Cerplex, Inc. and Cerplex Mass, Inc., for the benefit of
           Greyrock Business Credit.
*10.3      10% Senior Subordinated Note for $5,000,000, due September
           30, 1999, between the Company, Aurora Electronics Group,
           Inc. and Cerplex, Inc. as payors and Welsh, Carson, Anderson
           & Stowe VII, L.P. as payee.
*10.4      10% Senior Subordinated Note for $2,500,000, due December 9,
           1999, between the Company, Aurora Electronics Group, Inc.
           and Cerplex, Inc. as payors and Welsh, Carson, Anderson &
           Stowe VII, L.P. as payee.
 10.5      Securities Purchase and Exchange Agreement, dated January
           30, 1998, between the Company, Welsh, Carson, Anderson &
           Stowe VII, L.P., WCAS Capital Partners II, L.P., and the
           several purchasers named in Annex I thereto (incorporated by
           reference from Exhibit 10.47 to the Company's Current Report
           on Form 8-K filed on February 6, 1998).
 10.6      Form of Irrevocable Proxy and Option Agreement executed by
           certain stockholders of Old Cerplex for the benefit of the
           Company (incorporated by reference from Exhibit 10.45 to the
           Company's Current Report on Form 8-K filed on February 6,
           1998).
 10.7      Interim Management Agreement, dated January 30, 1998,
           between the Company and Old Cerplex (incorporated by
           reference from Exhibit 10.51 to the Company's Current Report
           on Form 8-K filed on February 6, 1998).
 10.8      10% Senior Subordinated Bridge Note between the Company, as
           payor, and Welsh, Carson, Anderson & Stowe VII, L.P., as
           payee (incorporated by reference from Exhibit 10.48 to the
           Company's Current Report on Form 8-K filed on February 6,
           1998).
 10.9      Form of 10% Senior Subordinated Note, due December 31, 2004,
           of the Company, as payor (incorporated by reference from
           Exhibit 10.49 to the Company's Current Report on Form 8-K
           filed on February 6, 1998).
</TABLE>
    
 
                                       23
<PAGE>   25
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
 10.10     Stockholders Agreement, dated January 30, 1998, among Welsh,
           Carson, Anderson & Stowe VII, L.P., the Company and Old
           Cerplex (incorporated by reference from Exhibit 10.50 to the
           Company's Current Report on Form 8-K filed on February 6,
           1998).
 10.11     Cerplex Note Purchase Agreement, dated January 30, 1998,
           between the Company and Old Cerplex (incorporated by
           reference from Exhibit 10.52 to the Company's Current Report
           on Form 8-K filed on February 6, 1998).
 10.12     Form of 10% Subordinated Note, due June 30, 1998, between
           the Company and Old Cerplex (incorporated by reference from
           Exhibit 10.53 to the Company's Current Report on Form 8-K
           filed on February 6, 1998).
 10.13     Form of Affiliates Letter to be executed in accordance with
           the Agreement and Plan of Merger, dated January 30, 1998
           (incorporated by reference from Exhibit 10.46 to the
           Company's Current Report on Form 8-K filed on February 6,
           1998).
 10.14     Amendment No. 1 to Interim Management Agreement, dated as of
           February 25, 1998, between Old Cerplex and the Company
           (incorporated by reference to the Company's Registration
           Statement on Form S-4, filed on March 26, 1998 (File No.
           333-48725)).
 10.15     Standard Lease Agreement, dated October 27, 1992, between
           Crow-Brindell-Mitchell and Aurora Electronics Group, Inc. as
           Assignee of CCB Computer Brokers, Inc. d/b/a Century
           Computer Services, Inc. (incorporated by reference from
           Exhibit 10.10 to the Company's Annual Report on Form 10-K
           for the fiscal year ended September 30, 1994).
 10.16     Lease dated July 14, 1988, between American National Bank
           and Trust Registrant of Chicago and BSN Corp. (now the
           Company) (incorporated by reference from Exhibit 10.12 to
           the Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1994).
 10.17     Form of Tax Indemnity Agreement between the Company and SSG
           (incorporated by reference from Exhibit 10.9 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended December 31, 1991).
 10.18     Stock Purchase Agreement, dated as of September 30, 1992,
           between the Company, Robert E. Morris and Norma J. Morris,
           Trustees of the Robert and Norma Morris Family Trust and The
           Robert and Norma Morris Charitable Remainder Unitrust
           (incorporated by reference from Exhibit 2.1 to the Company's
           Form 8-K filed on October 19, 1992).
 10.19     Merger Agreement and Plan of Reorganization, dated September
           12, 1993, between the Company and FRS, Inc. (incorporated by
           reference from Exhibit 2.1 to the Company's Current Report
           on Form 8-K filed on October 15, 1993).
 10.20     Asset Purchase Agreement, dated March 15, 1994, to be
           effective as of March 1, 1994, as amended, between the
           Company, Aurora Electronics Group, Inc. and CCB Computer
           Brokers, Inc. and CCM Computers International, Ltd.
           (incorporated by reference from Exhibit (b)(1) to the
           Company's Quarterly Report on Form 10-Q for the quarter
           ended March 31, 1994).
 10.21     The Company's 401-K Plan (incorporated by reference from
           Exhibit 10.13 to the Company's Annual Report on Form 10-K
           for the fiscal year ended September 30, 1993).
 10.22     Securities Purchase Agreement between the Company, Welsh,
           Carson, Anderson & Stowe VII, L.P., WCAS Capital Partners
           II, L.P. and the several purchasers named therein, dated
           February 21, 1996 (incorporated by reference from Exhibit
           (b)(2) of the Company's Issuer Tender Offer Statement on
           Schedule 13E-4, which was filed with the Securities and
           Exchange Commission on February 23, 1996).
 10.23     The Company's Offer to Purchase for Cash up to 6,500,000
           Shares of its Common Stock at $2.875 Per Share, dated
           February 23, 1996 (incorporated by reference from Exhibit
           (a)(1) of the Company's Issuer Tender Offer Statement on
           Schedule 13E-4, which was filed with the Securities and
           Exchange Commission on February 23, 1996).
</TABLE>
    
 
                                       24
<PAGE>   26
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
 10.24     Amended and Restated Financial Support Agreement, between
           the Company, Aurora Electronics Group, Inc., Welsh, Carson,
           Anderson & Stowe VII, L.P., and WCAS Capital Partners II,
           L.P. (incorporated by reference from Exhibit 10.39 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.25     Securities Purchase Agreement, dated August 14, 1997,
           between the Company and Welsh, Carson, Anderson & Stowe VII,
           L.P. for the purchase of the Company's Series B Preferred
           Stock (incorporated by reference from Exhibit 10.40 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.26     Securities Purchase Agreement, dated October 2, 1997,
           between the Company and Welsh, Carson, Anderson & Stowe VII,
           L.P. for the purchase of the Company's Series C Preferred
           Stock (incorporated by reference from Exhibit 10.41 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.27     Securities Purchase Agreement, dated October 24, 1997,
           between the Company and Welsh, Carson, Anderson & Stowe VII,
           L.P. for the purchase of the Company's Series D Preferred
           Stock (incorporated by reference from Exhibit 10.42 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.28     Senior Subordinated Note Purchase Agreement, between the
           Company and Welsh, Carson, Anderson & Stowe VII, L.P.
           (incorporated by reference from Exhibit 10.43 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.29     Form of $2,800,000 10% Senior Subordinated Demand Note,
           dated December 5, 1997, between the Company, as payor, and
           Welsh, Carson, Anderson & Stowe VII, L.P., as payee
           (incorporated by reference from Exhibit 10.44 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.30     Form of Indemnity Agreement (incorporated by reference from
           Exhibit 10.15 to Old Cerplex's Registration Statement on
           Form S-1 (File No. 33-75004)).
 10.31     Letter from Nightingale & Associates, LLC to the Company,
           dated June 30, 1997, together with Letter from Nightingale &
           Associates, LLC to the Company, dated August 18, 1997,
           amending terms of the June 30, 1997 Letter (incorporated by
           reference from Exhibit 10.37 to the Company's Quarterly
           Report on Form 10-Q for the quarter ended September 30,
           1997).
*21.1      Subsidiaries of the Company.
*23.1      Consent of KPMG LLP.
*23.2      Consent of Arthur Andersen LLP.
*27        Financial Data Schedule.
</TABLE>
    
 
---------------
* Filed herewith.
 
   
(b) Reports on Form 8-K.
    
 
   
     The following current reports on Form 8-K were filed by the Company in the
last quarter of the fiscal year ended September 30, 1998:
    
 
   
     1. Current report on Form 8-K filed July 22, 1998 regarding the acquisition
        of Old Cerplex and related Rights Offering.
    
 
   
     2. Current report on Form 8-K filed September 17, 1998 regarding the
        dismissal of Arthur Andersen LLP as independent accountants.
    
 
   
     3. Current report on Form 8-K/A filed September 22, 1998 regarding the
        dismissal of Arthur Andersen LLP as independent accountants.
    
 
                                       25
<PAGE>   27
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
 
   
Dated: January 11, 1999
    
                                          THE CERPLEX GROUP, INC.
 
                                          By: /s/ STEVEN L. KORBY
                                            ------------------------------------
                                                      Steven L. Korby
   
                                                  Executive Vice President
    
   
                                                and Chief Financial Officer
    
                                               (Principal Financial Officer)
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed on the dated indicated below by the
following persons on behalf of the registrant and in the capacities indicated.
 
   
<TABLE>
<CAPTION>
              SIGNATURE                                TITLE                        DATE
              ---------                                -----                        ----
<S>                                    <C>                                    <C>
 
/s/ GEORGE L. MCTAVISH                  Chairman of the Board of Directors    January 11, 1999
-------------------------------------       and Chief Executive Officer
George L. McTavish                         (Principal Executive Officer)
 
/s/ STEVEN L. KORBY                          Executive Vice President         January 11, 1999
-------------------------------------       and Chief Financial Officer
Steven L. Korby                            (Principal Financial Officer)
 
/s/ ANTHONY E. PALUMBO                   Corporate Controller (Controller)    January 11, 1999
-------------------------------------
Anthony E. Palumbo
 
/s/ THOMAS E. MCINERNEY                              Director                 January 11, 1999
-------------------------------------
Thomas E. McInerney
 
/s/ RICHARD H. STOWE                                 Director                 January 11, 1999
-------------------------------------
Richard H. Stowe
 
/s/ WILLIAM A. KLEIN                                 Director                 January 11, 1999
-------------------------------------
William A. Klein
 
/s/ ROBERT A. FINZI                                  Director                 January 11, 1999
-------------------------------------
Robert A. Finzi
</TABLE>
    
 
                                       26
<PAGE>   28
 
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
 
   
          INDEX TO THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND
    
   
                          FINANCIAL STATEMENT SCHEDULE
    
 
   
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Reports of Independent Auditors.............................  F-2
Consolidated Balance Sheets as of September 30, 1998 and
  September 30, 1997........................................  F-4
Consolidated Statements of Operations for the years ended
  September 30, 1998, 1997 and 1996.........................  F-5
Consolidated Statements of Stockholders' Equity (Deficit)
  for the years ended September 30, 1998, 1997 and 1996.....  F-6
Consolidated Statements of Cash Flows for the years ended
  September 30, 1998, 1997 and 1996.........................  F-7
Notes to Consolidated Financial Statements..................  F-8
Schedule II -- Valuation and Qualifying Accounts for the
  years ended September 30, 1998, 1997 and 1996.............  S-1
</TABLE>
    
 
   
     All other financial statement schedules are omitted as the required
information is presented in the consolidated financial statements or the notes
thereto or is not necessary.
    
 
                                       F-1
<PAGE>   29
 
   
                         INDEPENDENT AUDITORS' REPORTS
    
 
The Board of Directors
The Cerplex Group, Inc.
 
   
     We have audited the accompanying consolidated balance sheet of The Cerplex
Group, Inc. and subsidiaries (formerly known as Aurora Electronics, Inc.) as of
September 30, 1998, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the year then ended, as listed
in the accompanying index. In connection with our audit of the consolidated
financial statements, we also have audited the consolidated financial statement
schedule as of and for the year ended September 30, 1998, as listed in the
accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of Cerplex's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule 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 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 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 The Cerplex
Group, Inc. 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. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
    
 
   
     The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that The Cerplex Group, Inc. will continue
as a going concern. As discussed in Note A to the consolidated financial
statements, The Cerplex Group, Inc. has suffered recurring losses from
operations, has net stockholders' and working capital deficiencies and does not
have the necessary funds to pay certain debt obligations which mature in fiscal
year 1999. In addition, the Company's losses are expected to continue for the
forseeable future, and the Company will require additional funding and financial
support. These factors raise substantial doubt about The Cerplex Group's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note A. The consolidated financial statements and
financial statement schedule do not include any adjustments that might result
from the outcome of this uncertainty.
    
 
   
                                          /s/ KPMG LLP
    
 
Orange County, California
   
December 28, 1998
    
 
                                       F-2
<PAGE>   30
 
   
                         INDEPENDENT AUDITORS' REPORTS
    
 
   
To the Stockholders of Aurora Electronics, Inc.:
    
 
   
     We have audited the accompanying consolidated balance sheet of Aurora
Electronics, Inc. (a Delaware Corporation) and subsidiaries as of September 30,
1997, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for each of the two years in the period ended
September 30, 1997. These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the schedule based on our audits.
    
 
   
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
    
 
   
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Aurora
Electronics, Inc. and subsidiaries as of September 30, 1997, and the results of
their operations and their cash flows for each of the two years in the period
ended September 30, 1997 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
A to the consolidated financial statements, the Company has experienced
declining revenues, significant operating losses, has negative working capital
and a deficit in stockholders' equity. In addition, since a recapitalization of
the Company in March 1996, the Company has relied upon the financial support of
its largest shareholder for additional capital and to maintain its existing
credit facilities. The Company's losses are expected to continue for the
foreseeable future and the Company will require additional funding and financial
support from its largest shareholder or another third party. There can be no
assurance that such additional funding and financial support will be available
on acceptable terms, or that such funds, if available, would enable the Company
to continue operating. These matters raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern.
    
 
   
     Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index to the consolidated financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
    
 
   
                                          ARTHUR ANDERSEN LLP
    
 
   
Orange County, California
    
   
January 12, 1998
    
 
                                       F-3
<PAGE>   31
 
                            THE CERPLEX GROUP, INC.
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
 
                                     ASSETS
 
   
<TABLE>
<CAPTION>
                                                                  SEPTEMBER 30,
                                                              ----------------------
                                                                1998         1997
                                                              ---------    ---------
<S>                                                           <C>          <C>
Current assets:
  Cash and cash equivalents.................................  $  14,196    $     323
  Trade receivables, less allowance for doubtful accounts of
     $2,511 ($736 in 1997)..................................     12,416        5,480
  Inventories...............................................      6,626        3,389
  Other current assets......................................      4,628          449
                                                              ---------    ---------
Total current assets........................................     37,866        9,641
Property, plant and equipment, net..........................     25,021        3,023
Goodwill, net...............................................     37,202          496
Intangible and other assets, net............................        452        1,469
                                                              ---------    ---------
          Total assets......................................  $ 100,541    $  14,629
                                                              =========    =========
 
                       LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Current portion of long-term debt.........................  $  53,886    $   1,177
  Accounts payable..........................................      9,903        6,846
  Accrued liabilities.......................................     14,165        1,904
  Accrued interest..........................................      1,424          503
  Current portion of reserve for discontinued operations....        154          702
  Income taxes payable......................................      1,271           --
  Other current liabilities.................................     12,478        1,622
                                                              ---------    ---------
Total current liabilities...................................     93,281       12,754
Long-term debt..............................................     25,782       36,585
Reserve for discontinued operations.........................      1,822        1,888
Other long-term liabilities.................................      4,714           --
Commitments and contingencies (note Q)
Subsequent events (notes H, J, K, and L)
Redeemable convertible preferred stock, 260 shares issued
  (425 shares in 1997)......................................     34,150       46,722
Stockholders' deficit:
  Preferred stock, 1,000 shares authorized, none issued.....         --           --
  Common stock, 75,000 shares authorized, 7,601 shares
     issued (1,159 shares issued in 1997)...................      2,262          348
  Additional paid-in capital................................    116,400       62,443
  Accumulated deficit.......................................   (161,232)    (129,472)
  Treasury stock, at cost, 483 shares (474 shares in
     1997)..................................................    (16,675)     (16,639)
  Cumulative translation adjustment.........................         37           --
                                                              ---------    ---------
Total stockholders' deficit.................................    (59,208)     (83,320)
                                                              ---------    ---------
          Total liabilities and stockholders' deficit.......  $ 100,541    $  14,629
                                                              =========    =========
</TABLE>
    
 
   
   The accompanying notes are an integral part of these financial statements.
    
 
                                       F-4
<PAGE>   32
 
                            THE CERPLEX GROUP, INC.
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
<TABLE>
<CAPTION>
                                                                YEARS ENDED SEPTEMBER 30,
                                                             --------------------------------
                                                               1998        1997        1996
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Net revenues...............................................  $ 66,423    $ 64,892    $ 98,019
Cost of sales..............................................    61,554      51,906      73,576
                                                             --------    --------    --------
Gross profit...............................................     4,869      12,986      24,443
Selling, general and administrative expenses...............    23,145      23,466      25,943
Amortization of intangibles, including write-offs of $405,
  $32,992 and $16,580 in 1998, 1997 and 1996,
  respectively.............................................     3,701      34,044      18,042
                                                             --------    --------    --------
Operating loss.............................................   (21,977)    (44,524)    (19,542)
Interest expense...........................................    (5,465)     (4,050)     (6,221)
Other expense, net.........................................    (1,653)       (498)     (1,284)
                                                             --------    --------    --------
Loss from operations before provision for income taxes.....   (29,095)    (49,072)    (27,047)
Provision for income taxes.................................        --         533       3,306
                                                             --------    --------    --------
Net loss...................................................   (29,095)    (49,605)    (30,353)
Accrued dividends on redeemable preferred stock............    (2,665)     (2,822)     (1,400)
                                                             --------    --------    --------
Net loss applicable to common stockholders.................  $(31,760)   $(52,427)   $(31,753)
                                                             ========    ========    ========
Basic and diluted loss per common share....................  $  (8.26)   $ (78.60)   $ (44.40)
                                                             ========    ========    ========
Weighted average number of common shares outstanding.......     3,843         667         716
                                                             ========    ========    ========
</TABLE>
    
 
   
   The accompanying notes are an integral part of these financial statements.
    
 
                                       F-5
<PAGE>   33
 
                            THE CERPLEX GROUP, INC.
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
   
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
    
                                 (IN THOUSANDS)
 
   
<TABLE>
<CAPTION>
                                           COMMON STOCK     ADDITIONAL                            CUMULATIVE
                                          ---------------    PAID-IN     ACCUMULATED   TREASURY   TRANSLATION
                                          SHARES   AMOUNT    CAPITAL       DEFICIT      STOCK     ADJUSTMENT     TOTAL
                                          ------   ------   ----------   -----------   --------   -----------   --------
<S>                                       <C>      <C>      <C>          <C>           <C>        <C>           <C>
Balances at September 30, 1995..........    806    $ 242     $ 61,932     $ (44,683)   $ (5,153)     $ --       $ 12,338
  Issuance of common stock/treasury
    stock - acquisitions................    148       45           66          (601)        771        --            281
  Issuance of common stock for notes
    payable.............................     61       18        1,029            --          --        --          1,047
  Repurchase of common stock............     --       --           --            --     (12,271)       --        (12,271)
  Issuance of common stock..............     34       10          903            (8)         14        --            919
  Financing costs from issuance of
    redeemable convertible preferred
    stock...............................     --       --       (2,254)           --          --        --         (2,254)
  Accretion of dividends on redeemable
    convertible preferred stock.........     --       --           --        (1,400)         --        --         (1,400)
  Exercise of stock options.............     --       --            3            --          --        --              3
  Net loss..............................     --       --           --       (30,353)         --        --        (30,353)
                                          -----    ------    --------     ---------    --------      ----       --------
Balances at September 30, 1996..........  1,049      315       61,679       (77,045)    (16,639)       --        (31,690)
  Issuance of common
    stock -- acquisitions...............     23        7          380            --          --        --            387
  Issuance of common stock -- employee
    bonuses.............................      9        3          151            --          --        --            154
  Issuance of common stock -- litigation
    settlement..........................     78       23          (23)           --          --        --             --
  Financing costs -- warrants issued for
    guarantees on bank debt.............     --       --          256            --          --        --            256
  Accretion of dividends on redeemable
    convertible preferred stock.........     --       --           --        (2,822)         --        --         (2,822)
  Net loss..............................     --       --           --       (49,605)         --        --        (49,605)
                                          -----    ------    --------     ---------    --------      ----       --------
Balances at September 30, 1997..........  1,159      348       62,443      (129,472)    (16,639)       --        (83,320)
  Issuance of common stock --
    acquisition.........................  3,890    1,167        6,616            --          --        --          7,783
  Conversion of Series A, B, C, D
    redeemable convertible preferred
    stock...............................  2,544      747       47,341            --          --        --         48,088
  Repurchase of common stock............      8       --           --            --         (36)       --            (36)
  Accretion of dividends on redeemable
    convertible preferred stock.........     --       --           --        (2,665)         --        --         (2,665)
  Translation adjustment................     --       --           --            --          --        37             37
  Net loss..............................     --       --           --       (29,095)         --        --        (29,095)
                                          -----    ------    --------     ---------    --------      ----       --------
Balances at September 30, 1998..........  7,601    $2,262    $116,400     $(161,232)   $(16,675)     $ 37       $(59,208)
                                          =====    ======    ========     =========    ========      ====       ========
</TABLE>
    
 
   
   The accompanying notes are an integral part of these financial statements.
    
 
                                       F-6
<PAGE>   34
 
                            THE CERPLEX GROUP, INC.
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
   
<TABLE>
<CAPTION>
                                                                  YEAR ENDED SEPTEMBER 30,
                                                              --------------------------------
                                                                1998        1997        1996
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
CASH FLOWS FROM (USED BY) OPERATING ACTIVITIES:
 
  Net loss..................................................  $(29,095)   $(49,605)   $(30,353)
  Adjustments to reconcile net loss to net cash flows from
    (used by) operating activities:
    Depreciation and amortization...........................     4,994      32,322      19,686
    Noncash interest expense................................     2,008       2,044       1,340
    Loss on disposition of assets...........................       224       3,390       1,369
    Foreign currency translation............................        37          --          --
    Changes in assets and liabilities, net of acquisitions:
      Trade receivables, inventories and other assets.......     8,202       4,227       7,133
      Accounts payable, accrued compensation and other
         liabilities........................................   (12,730)     (1,389)       (729)
      Accrued interest and income taxes
         receivable/payable.................................      (489)         70         632
      Deferred income taxes.................................        --         500       3,234
                                                              --------    --------    --------
  Net cash flows from (used by) continuing operations.......   (26,849)     (8,441)      2,312
  Net cash flows used by discontinued operations............      (614)       (478)     (1,005)
                                                              --------    --------    --------
  Net cash flows from (used by) operating activities........   (27,463)     (8,919)      1,307
                                                              --------    --------    --------
CASH FLOWS USED BY INVESTING ACTIVITIES:
  Acquisition of property, plant and equipment..............    (1,106)     (3,053)     (2,072)
  Purchase of treasury stock, net...........................       (36)         --     (12,271)
  Purchase of Old Cerplex, net of cash acquired.............    13,681          --          --
                                                              --------    --------    --------
  Net cash flows used by investing activities...............    12,539      (3,053)    (14,343)
                                                              --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on debt..........................................   (59,500)     (1,405)    (30,741)
  Issuance of redeemable convertible preferred stock........    22,750       2,500      37,747
  Issuance of senior subordinated debentures................    15,000          --          --
  Proceeds from promissory note.............................     5,000          --          --
  Proceeds from LIBOR revolving line of credit and term
    debt....................................................    45,547          --          --
  Advances under line of credit.............................        --       9,663       7,486
                                                              --------    --------    --------
  Net cash flows from financing activities..................    28,797      10,758      14,492
                                                              --------    --------    --------
  Net change in cash and cash equivalents...................    13,873      (1,214)      1,456
Cash and cash equivalents at beginning of period............       323       1,537          81
                                                              --------    --------    --------
Cash and cash equivalents at end of period..................  $ 14,196    $    323    $  1,537
                                                              ========    ========    ========
SUPPLEMENTAL DISCLOSURES:
  Cash paid for:
    Interest................................................  $  3,456    $  1,907    $  5,368
                                                              ========    ========    ========
    Income taxes............................................  $     30    $     42    $     72
                                                              ========    ========    ========
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING
  ACTIVITIES:
  Issuance of common stock to acquire Old Cerplex...........     7,783          --          --
                                                              ========    ========    ========
  Conversion of 10% senior debt to redeemable convertible
    preferred stock.........................................  $ 10,101    $     --    $     --
                                                              ========    ========    ========
  Reduction in 7% debt as a result of common stock sale.....  $     --    $     --    $    956
                                                              ========    ========    ========
  Reduction in 9 1/4% debt as a result of issuance of
    Notes...................................................  $     --    $     --    $  8,593
                                                              ========    ========    ========
  Issuance of common stock for employee bonuses.............  $     --    $    154    $     --
                                                              ========    ========    ========
  Accretion of dividends on redeemable convertible preferred
    stock...................................................  $  2,665    $  2,882    $  1,400
                                                              ========    ========    ========
  Conversion of redeemable convertible preferred stock into
    common stock............................................  $ 48,088    $     --    $     --
                                                              ========    ========    ========
</TABLE>
    
 
   
   The accompanying notes are an integral part of these financial statements.
    
                                       F-7
<PAGE>   35
 
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
GENERAL
 
     The Cerplex Group, Inc. (the "Company") was formerly named Aurora
Electronics, Inc. The Company changed its name during the year in connection
with its acquisition of The Cerplex Group ("Old Cerplex"). See Note C.
 
   
     On October 5, 1998, the Company effected a one for ten reverse common stock
split. All share and per share amounts in the accompanying consolidated
financial statements have been restated to reflect this split. At this time the
amount of authorized Common Stock was established at 75,000.
    
 
NOTE A -- CURRENT FINANCIAL CONDITION
 
   
     During the years ended September 30, 1998, 1997 and 1996, the Company
experienced recurring operating losses. As a result of these losses, at
September 30, 1998 the Company has a deficit of $59,208 in stockholders' equity
and negative working capital of $55,415. In addition, since a recapitalization
of the Company in March 1996, the Company has relied upon the financial support
of its largest stockholder for additional capital and to maintain its existing
credit facilities. The Company has approximately $45,500 in principal amount
outstanding under its term debt and line of credit which matures on April 30,
1999. The Company is currently in discussions with its lender to extend the
repayment date. Furthermore, as of September 30, 1998, the Company has $5.0
million and $3.1 million outstanding related to its promissory note to its
largest stockholder and a secured note payable to one of its customers,
respectively, which are also due in fiscal year ending 1999. Though the Company
intends to make efforts to increase revenues to improve operations, the
Company's losses are expected to continue for the foreseeable future and the
Company will require additional funding and financial support from its largest
stockholder or another third party. There can be no assurance that such
additional funding and financial support will be available on acceptable terms,
or that such funds, if available, would enable the Company to continue
operating, or that the Company will be successful in increasing revenues. In
addition, there can be no assurance that the Company will be successful in
extending the repayment date of its term debt and line of credit. These matters
raise substantial doubt about the Company's ability to continue as a going
concern.
    
 
   
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    
 
   
     Organization. The Company provides repair services and spare parts
distribution to major personal computer manufacturers and field service
organizations.
    
 
     Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
 
   
     Use of Estimates. The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions that affect the reported amounts of 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.
    
 
     Cash and Cash Equivalents. The Company considers all liquid investments
with a maturity of three months or less at the date of purchase to be cash
equivalents.
 
   
     In May 1996, Old Cerplex acquired Cerplex SAS. As part of the acquisition,
sufficient cash was provided to fund certain liabilities of Cerplex SAS. Under
the terms of the Stock Purchase Agreement, Old Cerplex agreed to certain
financial covenants over a four year period that limit the amount of dividends
and payments in the nature of corporate charges paid by Cerplex SAS.
Accordingly, the cash of Cerplex SAS is generally not available for financing
operations outside of Cerplex SAS. The cash balance of Cerplex SAS at September
30, 1998 was $6.5 million.
    
 
                                       F-8
<PAGE>   36
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
     Inventories. Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Write-downs for cost in excess
of net realizable value are determined periodically by comparing sales prices
and volumes to cost and quantity of inventory on hand.
    
 
     Property, Plant and Equipment. Property, plant and equipment is recorded at
cost and is depreciated over the estimated useful lives of the related assets by
the straight-line method for financial reporting purposes, and accelerated
methods with respect to certain assets for income tax purposes. Property, plant
and equipment includes computer hardware, software and implementation costs
which are purchased, acquired and modified for internal use. The Company's
policy is to capitalize and accumulate such costs as incurred and to commence
amortization when placed in service. Leasehold improvements are amortized over
the terms of the related leases or their useful lives, whichever is shorter.
 
   
     Intangible and Other Long-Lived Assets. Goodwill, which represents the
excess of purchase price over fair value of net assets acquired, is being
amortized on a straight-line basis over the expected periods to be benefited.
Goodwill associated with the acquisition of Old Cerplex is being amortized over
five years. MicroLine goodwill has been written off in the current year.
Goodwill resulting from other acquisitions has been previously written off.
Long-lived assets and certain identifiable intangibles to be held and used by
the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the 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. Further, any such
assets that are to be disposed of are reported at the lower of carrying amount
or fair value less cost to sell, except for assets covered by the Accounting
Principles Board ("APB") Opinion No. 30, "Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions."
    
 
   
     Revenue Recognition. Revenue is recognized upon completion of services,
normally represented by the shipment of products to customers. The Company
warrants products against defects and has policies permitting the return of
products under certain circumstances. Provisions are made for warranty costs and
returns. Such costs generally have not been material. The Company does not offer
price protection to its customers. The Company performs ongoing credit
evaluations of its customers and has established provisions for potential credit
losses.
    
 
   
     Earnings Per Share. In February 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
128 "Earnings Per Share," which requires companies to present basic earnings per
share (EPS) and diluted earnings per share, instead of primary and fully diluted
EPS that was previously required. The new standard requires additional
informational disclosures, and also makes certain modifications to the currently
applicable EPS calculations defined in APB Opinion No. 15. The new standard was
required to be adopted by all public companies for reporting periods ending
after December 15, 1997, and required restatement of EPS for all prior periods
reported. Basic earnings per share and diluted earnings per share are the same
as to previously reported primary and fully diluted earnings per share.
    
 
   
     Basic earnings (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding after adding
to loss from operations cumulative dividends to holders of the Company's
redeemable convertible preferred stock.
    
 
   
     Diluted earnings per share is computed by dividing net income (loss)
available to common stockholders by the sum of the weighted average number of
common shares outstanding and dilutive stock options. For all years presented,
common stock equivalents (stock options) were excluded from calculations as they
were considered to be anti-dilutive.
    
 
                                       F-9
<PAGE>   37
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
     Foreign Currency Translation. The functional currency for each of the
Company's foreign subsidiaries is their respective local currency. Assets and
liabilities of foreign subsidiaries are translated at year-end rates of exchange
and net sales and expenses are translated at the average rates of exchange for
the year. Translation gains and losses are excluded from the measurement of net
loss and are recorded as a separate component of stockholders' equity (deficit).
Gains and losses resulting from foreign currency transactions are included in
operations, and were not material during all years presented.
    
 
   
     Stock-Based Compensation. In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation." This standard, if fully adopted,
requires the accounting for employee stock-based compensation using a fair value
methodology. For stock options, fair value is determined using an option pricing
model that takes into account the stock price at the date of grant, the exercise
price, the expected life of the option, the volatility of the underlying stock,
the expected dividends and the risk-free interest rate. For stock-based
compensation issued to non-employees, the standard requires measurement based on
the value of the related services performed or the stock-based compensation
issued, whichever is more reliably measurable.
    
 
   
     The adoption of the accounting methodology of SFAS 123 related to employees
is optional and as permitted under SFAS 123, the Company continues to account
for employee stock options using the methodology in accordance with APB Opinion
No. 25; however, pro forma disclosure as if the Company adopted the accounting
methodology of SFAS 123 are required to be presented. See Note L -- "Employee
Stock and Savings Plans.".
    
 
   
     Fair Value of Financial Instruments. SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments," requires all entities to disclose the fair
value of financial instruments, both assets and liabilities recognized and not
recognized on the balance sheet, for which it is practicable to estimate fair
value. SFAS No. 107 defines fair value of a financial instrument as the amount
at which the instrument could be exchanged in a current transaction between
willing parties. As of September 30, 1998 and 1997, the carrying value of all
debt approximates fair value as the related interest rates approximate rates
currently available to the Company. The carrying value of all other financial
instruments approximates fair value due to the short-term nature of such
instruments.
    
 
   
NOTE C -- ACQUISITIONS
    
 
   
MICROLINE, INC.
    
 
   
     Effective March 31, 1997, the Company acquired MicroLine, Inc., the
developer and operator of PowerSource On-line, an internet-based information
service that matches computer parts buyers to available inventories from
distributors that participate in the on-line parts data base of PowerSource. The
consideration to the former shareholders of MicroLine was 23 shares of Common
Stock of the Company. The business operated as the PowerSource Division of the
Company.
    
 
                                      F-10
<PAGE>   38
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
     The estimated fair value of assets and liabilities as of the date of the
acquisition of MicroLine is summarized as follows:
 
   
<TABLE>
<S>                                                         <C>
Current assets............................................    $  78
Property, plant and equipment.............................       21
Other assets..............................................        3
Goodwill..................................................      496
Liabilities...............................................     (211)
                                                              -----
          Net purchase price..............................    $ 387
                                                              =====
</TABLE>
    
 
   
     Goodwill from the MicroLine acquisition has been written off as the Company
disposed of this division in the current year. See Note G -- "Goodwill,
Intangibles and Other Assets."
    
 
   
OLD CERPLEX
    
 
   
     On April 30, 1998, the Company, formerly known as Aurora Electronics, Inc.,
merged with Old Cerplex, a provider of electronic parts repair, spare parts
sales and management and logistics to the electronics industry. As a result of
the merger, Old Cerplex became a wholly-owned subsidiary of the Company, and the
current equity holders of Old Cerplex received, in a tax-free exchange,
approximately 3,890 shares of the Company's Common Stock or approximately 25% of
the post-merger, fully-diluted Common Stock of the Company, after giving effect
to the financing from Welsh, Carson, Anderson & Stowe ("WCAS"), described in
Note H -- "Long-Term Debt." Under the terms of the agreement, each share of Old
Cerplex Common Stock was converted into .1070167 shares of the Company's Common
Stock. The Company changed its name to The Cerplex Group, Inc. and the combined
company is operating under that name.
    
 
   
     Management estimated that the fair value of the Common Stock issued was
approximately 80% of the negotiated conversion price of the 7% Senior Cumulative
Convertible Preferred Stock. Based upon a $2.50 per share conversion price for
the 7% Senior Cumulative Convertible Preferred Stock, the fair value of the
Common Stock issued to Old Cerplex stockholders was valued at $2.00 per share.
    
 
   
     The merger with Old Cerplex has been accounted for using the purchase
method of accounting. Accordingly, the operating results of Old Cerplex have
been included in the Company's consolidated financial statements since the date
of the merger. The allocation of the purchase price was as follows:
    
 
   
<TABLE>
<S>                                                     <C>
Current assets........................................      $ 38,721
Property, plant and equipment.........................        22,519
Other assets..........................................           113
Goodwill..............................................        40,583
Net current liabilities...............................       (75,600)
Long term liabilities.................................       (15,698)
                                                            --------
          Net purchase price..........................      $ 10,638
                                                            ========
</TABLE>
    
 
   
     Goodwill resulting from the merger has been determined as the excess of:
(i) the fair value of the shares issued to Old Cerplex shareholders totaling
$7,783, plus merger costs incurred of approximately $2.9 million over; (ii) the
fair value of the identifiable assets less the liabilities of Old Cerplex.
    
 
                                      F-11
<PAGE>   39
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
     The following table presents unaudited pro forma consolidated results of
operations for the years ended September 30, 1998 and 1997 assuming the
acquisition of Old Cerplex occurred as of October 1, 1996 (in thousands, except
per share data). These results are not necessarily indicative of future
operations:
    
 
   
<TABLE>
<CAPTION>
                                                   1998        1997
                                                 --------    --------
<S>                                              <C>         <C>
Net sales......................................  $ 95,654    $225,741
Net earnings (loss)............................   (32,250)    (76,513)
Loss per share -- basic and diluted............     (8.39)     (19.94)
</TABLE>
    
 
   
     Considering the historical operating losses of the Company and Old Cerplex,
and the volatility of the acquired operations, management is amortizing the
resulting goodwill over five years. Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long Lived Assets and Long Lived
Assets to be Disposed of" (FAS 121), requires that the carrying value of
long-lived assets be reviewed for impairment whenever circumstances indicate
that the carrying amount may not be recoverable based upon estimates of
undiscounted future cash flows. If future review indicates that the asset value
is not likely to be recoverable from these cash flows, the carrying value will
be reduced to fair value. It is possible that a subsequent FAS 121 review may
require a reduction in the carrying value of the goodwill resulting from the
merger.
    
 
   
     In connection with the Merger, the Company sold an aggregate of $15.0
million of newly issued 10% Series A Senior Subordinated Notes and $21.55
million of newly issued 7% Senior Cumulative Convertible Preferred Stock
primarily to its principal stockholder, WCAS. The aggregate consideration paid
for the 10% Senior Subordinated Notes and the 7% Senior Cumulative Convertible
Preferred Stock consisted of approximately $12.0 million in cash, the
cancellation of $21.0 million of combined indebtedness of Old Cerplex and the
Company to WCAS, and the surrender of warrants held by WCAS to purchase capital
stock of Old Cerplex. The cash proceeds of approximately $12.0 million and
borrowings under the Greyrock Line of Credit of $38.5 million was used in full
to repay $30.0 million of indebtedness of Old Cerplex under a line of credit
from Citibank, N.A., to repay $16.5 million of the Company's indebtedness under
a line of credit with The Chase Manhattan Bank, N.A., and the balance to pay
investment banking and other transactional fees in connection with the Merger.
    
 
NOTE D -- DISCONTINUED OPERATIONS
 
   
     Commencing in 1990, the Company began to discontinue its sporting goods
operations and divest itself of the related assets. Effective September 30,
1992, the Company announced that its remaining sporting goods operations would
be accounted for as discontinued operations and the remaining assets would be
sold. As of September 30, 1998, no material assets remained related to the
discontinued operations. Obligations and contingencies relating to discontinued
operations consists primarily of a leased building. See Note H -- "Long-Term
Debt."
    
 
   
NOTE E -- INVENTORIES
    
 
     Inventories at September 30, 1998 and 1997 consisted of the following:
 
   
<TABLE>
<CAPTION>
                                                      1998      1997
                                                     ------    ------
<S>                                                  <C>       <C>
Spare and repair parts.............................  $5,569    $  377
Work in process....................................     113        94
Finished goods.....................................     944     2,918
                                                     ------    ------
          Total inventories........................  $6,626    $3,389
                                                     ======    ======
</TABLE>
    
 
                                      F-12
<PAGE>   40
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
NOTE F -- PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment at September 30, 1998 and 1997 consisted of
the following:
 
   
<TABLE>
<CAPTION>
                                            ESTIMATED LIFE     1998       1997
                                            --------------    -------    -------
<S>                                         <C>               <C>        <C>
Land......................................                    $ 5,482    $    --
Buildings.................................   20 years           2,135         --
Furniture, fixtures and equipment.........   3-5 years         20,205      6,707
Leasehold improvements....................   1-5 years          1,196      1,112
                                                              -------    -------
                                                               29,018      7,819
Less accumulated depreciation and
  amortization............................                     (3,997)    (4,796)
                                                              -------    -------
          Total property, plant and
            equipment.....................                    $25,021    $ 3,023
                                                              =======    =======
</TABLE>
    
 
   
     In connection with changes in the Parts Services Division, the Company
charged $3,390 of capitalized information systems software and development costs
to operations in the fourth quarter of fiscal 1997. See Note G -- "Goodwill,
Intangibles and Other Assets."
    
 
NOTE G -- GOODWILL, INTANGIBLES AND OTHER ASSETS
 
     Intangibles and other assets at September 30, 1998 and 1997 consisted of
the following:
 
   
<TABLE>
<CAPTION>
                                                     1998       1997
                                                    -------    ------
<S>                                                 <C>        <C>
Goodwill..........................................  $40,583    $  496
Debt issuance costs...............................      601     1,741
Other.............................................      557       518
                                                    -------    ------
Total goodwill, intangibles and other assets......   41,741     2,755
Less accumulated amortization.....................   (4,087)     (790)
                                                    -------    ------
          Net goodwill, intangibles and other
            assets................................  $37,654    $1,965
                                                    =======    ======
</TABLE>
    
 
   
     Due to the closure of the PowerSource Division business during fiscal 1998,
management charged the remaining goodwill of $405 to operations in the second
quarter. This charge was necessary as management decided to shut down the
PowerSource Division and disposed of the operation in exchange for $36 of
treasury stock.
    
 
   
     In fiscal 1997, due to continuing declines in the prices for replacement
and repair parts, the Parts Services Division (formerly Century) experienced a
continued decrease in inventory values and increasing levels of operating
losses. As a result, management decided to reorganize its parts business to
reduce inventory exposure and to more cost effectively deliver parts to its
customers. The Company replaced Century's inventory and labor intensive
operating methods with MicroLine's internet-based electronic processing
technology. As a result, management charged the remaining balance of goodwill
and the database valuation resulting from the acquisition of Century,
aggregating $29,602, to operations in the fourth quarter of fiscal 1997. These
charges were determined necessary as management estimated that the amortization
of the respective intangible balances over their remaining lives would not be
recovered through the projected non-discounted future cash flows over their
respective remaining amortization periods. Also, the new internet technology
made obsolete much of the Company's capitalized information systems software and
development costs and, therefore, $3,390 of such formerly capitalized costs were
charged to operations in the fourth quarter of fiscal 1997.
    
 
                                      F-13
<PAGE>   41
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
     Due to the deterioration of the pricing levels in the integrated circuit
market in the latter part of fiscal 1996 and their related negative effects on
the Company's business prospects, management charged the remaining balance of
goodwill related to the acquisition of Micro-C, totaling $16,580, to operations
in the fourth quarter of fiscal 1996. This charge was determined to be necessary
as management estimated that the amortization of the respective goodwill
balances over their remaining lives would not be recovered through the projected
non-discounted future cash flows over their respective remaining amortization
periods.
    
 
NOTE H -- LONG-TERM DEBT
 
     Long-term debt at September 30, 1998 and 1997 consists of the following:
 
   
<TABLE>
<CAPTION>
                                                              1998      1997
                                                            --------   -------
<S>                                                         <C>        <C>
LIBOR revolving line of credit............................  $  9,547   $    --
LIBOR term debt...........................................    36,000        --
Credit agreement..........................................        --    16,292
10% Senior subordinated notes.............................    15,000     9,727
7 3/4% Convertible subordinated debentures................    10,381    10,353
7% Subordinated convertible promissory notes..............        --       883
Secured note payable to customer..........................     3,064        --
Promissory note...........................................     5,000        --
Other.....................................................       676       507
                                                            --------   -------
          Total long-term debt............................    79,668    37,762
          Less current portion of long-term debt..........   (53,886)   (1,177)
                                                            --------   -------
          Total long-term portion.........................  $ 25,782   $36,585
                                                            ========   =======
</TABLE>
    
 
LIBOR FINANCING
 
   
     In connection with the acquisition of Old Cerplex, the Company entered into
a financing relationship with a financial institution. This arrangement provides
for two elements, a $10,000 revolving loan and a $36,000 term loan. The amount
available under the revolving loan is based upon eligible receivables and
inventory, as defined in the agreement. Interest accrues at the highest LIBOR
rate in effect during the month plus 4.875% per annum on the revolving loan or
4.5% per annum on the term loan, but not less than 9% per annum provided that
the interest charged for each month is a minimum of $25. At September 30, 1998
the rates were 10.5% and 10.125% respectively.
    
 
   
     These loans are secured by essentially all assets of the Company including
the Company's interest in its wholly-owned United Kingdom subsidiary and 65% of
its interest in its French subsidiary. Furthermore, WCAS, the Company's
principal stockholder, has guaranteed $25,000 of indebtedness under this
revolving line of credit and the term loan. These loans also prohibit the
payment of dividends.
    
 
   
     The loans mature on April 30, 1999. Thus, all amounts are shown as current
maturities of long term debt in the accompanying consolidated financial
statements. The Company is currently negotiating with the financial institution
to extend the payment date.
    
 
   
CREDIT AGREEMENT
    
 
     In March 1996, in conjunction with the recapitalization of the Company
("Recapitalization"), the Company's operating subsidiary, Aurora Electronics
Group, Inc. ("AEG"), entered into a Credit Agreement with a group of lenders
which provided for up to $35,000 of borrowings for working capital and for
approved
 
                                      F-14
<PAGE>   42
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
acquisitions. Borrowings under the Credit Agreement were secured by
substantially all of the assets of AEG. The term of the Credit Agreement was
originally five years. The interest rate was based on LIBOR plus 2.75% or the
Bank's Base Rate plus 1.25%, with interest rate adjustments based on the ratio
of total funded senior debt to the Company's earnings before interest, taxes,
amortization and depreciation.
    
 
   
     At June 30, 1996, and at various subsequent dates, AEG was not in
compliance with certain financial covenants under the Credit Agreement. To
obtain waivers of noncompliance from the lenders, on September 30, 1996, the
Company, AEG and WCAS (the Company's largest stockholder) entered into a
Financial Support Agreement, pursuant to which, with subsequent amendments, WCAS
guaranteed $16,292, the total borrowings then outstanding under the Credit
Agreement, and the Company granted WCAS warrants to purchase 223 Common Shares
of the Company, at prices ranging from $10.25 to $20.90 per share. At September
30, 1997 the Credit Agreement was amended to waive all events of non-compliance
with financial covenants, to eliminate future financial covenants and to
establish the maturity date for the facility as April 30, 1999. This obligation
was paid off as part of the transaction with Old Cerplex.
    
 
   
10% SENIOR SUBORDINATED NOTES
    
 
   
     In connection with the acquisition of Old Cerplex, the Company issued
$15,000 of 10% Series A and Series B Senior Subordinated Notes to WCAS.
Subsequently, approximately 3% of this amount was purchased by the public. These
Notes are subordinate to all bank debt and other senior debt but senior to all
outstanding subordinated indebtedness. This obligation is unsecured and bears
interest at 10% annually payable semi-annually on June 30 and December 31. The
debentures mature in three equal installments on December 31, 2002, 2003 and
2004. Payment is accelerated in case of a change of control as defined in the
agreement.
    
 
   
     In connection with the Recapitalization, the Company issued 10% Senior
Subordinated Notes to WCAS with a face value of $10,000 due September 30, 2001.
The Notes are shown net of the value of 61 shares of common stock issued
simultaneously with the Notes which is reflected as a discount to the related
debt. The discount was being amortized through the maturity date of the 10%
Senior Subordinated Notes. Interest on the Notes was payable on March 31 and
September 30 of each year beginning September 30, 1996 through maturity. Unpaid
interest totaling $500 was added to the principal balance of the Notes in the
fourth quarter of fiscal 1997, pursuant to the terms of the Notes. The proceeds
of the Notes were used to repay the 9 1/4% Senior Subordinated Notes due
November 1996. See Note K -- "Stockholders' Equity."
    
 
   
     During 1998, the $10,000 notes were exchanged for 33 shares of the 7%
Senior Cumulative Convertible Preferred Stock. See Note J -- "Redeemable
Convertible Preferred Stock."
    
 
7 3/4% CONVERTIBLE SUBORDINATED DEBENTURES
 
   
     The 7 3/4% Convertible Subordinated Debentures mature April 15, 2001
("Convertible Debentures") and are shown net of unamortized discount of
approximately $70 and $98 at September 30, 1998 and 1997, respectively. The
Company is required to make partial sinking fund payments of approximately $117
and $2,516 in 1999 and 2000, respectively. The Convertible Debentures are
convertible into Common Stock of the Company at a conversion price, subject to
adjustment in certain instances, of $116.60 per share, and are
    
 
                                      F-15
<PAGE>   43
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
redeemable at the option of the Company at face value plus accrued interest
thereon. Interest on the Convertible Debentures is payable on April 14 and
October 14 of each year through maturity.
    
 
7% SUBORDINATED CONVERTIBLE PROMISSORY NOTES
 
     In connection with the acquisition of Micro-C, the Company issued 7% Notes
to the sellers aggregating approximately $7,379. In April 1995, the Company was
awarded in arbitration a final settlement which reduced the outstanding balance
of the notes to $2,648. These notes were paid at maturity during 1998.
 
SECURED NOTE PAYABLE TO CUSTOMER
 
   
     In July 1994, Old Cerplex acquired the operating assets of BT Repair
Services for cash and a L2.5 million non-interest bearing note (approximately
$3.9 million at December 31, 1994) secured by the land and buildings. The note
is payable at the earlier of the point when orders from the customers reach a
cumulative L78.0 million (approximately $122.0 million) or five years from the
acquisition date. Cerplex is committed to pay BT L1.8 million (approximately
$3.1 million as of September 30, 1998) in 1999 or earlier if certain sales
volumes are reached. As of September 30, 1998, required sales volumes had not
yet been met. Management currently estimates that the note will be repaid in
1999.
    
 
   
PROMISSORY NOTES
    
 
   
     On September 30, 1998 the Company borrowed $5,000 from WCAS, under a 10%
unsecured promissory note due September 30, 1999. Subsequent to September 30,
1998, the Company borrowed $2,500 from WCAS under the terms of a 10% unsecured
promissory note which matures on December 9, 1999.
    
 
OTHER LONG-TERM DEBT
 
   
     Additional long-term debt consists primarily of secured equipment financing
and capital lease obligations with interest rates ranging from 8.9% to 12.9%,
due in monthly installments through 2001.
    
 
   
     Aggregate maturities of long-term debt for the fiscal years ending
September 30 are as follows: 1999 -- $53,886; 2000 -- $2,740; and
2001 -- $8,042; 2002 -- $0; 2003 -- $5,000; thereafter -- $10,000.
    
 
   
NOTE I -- INCOME TAXES
    
 
   
     Components of loss from continuing operations before taxes consist of the
following:
    
 
   
<TABLE>
<CAPTION>
                                                      FOR THE YEARS ENDED SEPTEMBER 30,
                                                     -----------------------------------
                                                       1998         1997         1996
                                                     ---------    ---------    ---------
<S>                                                  <C>          <C>          <C>
United States......................................  $(25,094)    $(49,161)    $(27,429)
Foreign............................................    (4,001)          89          382
                                                     --------     --------     --------
                                                     $(29,095)    $(49,072)    $(27,047)
                                                     ========     ========     ========
</TABLE>
    
 
                                      F-16
<PAGE>   44
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
     The provision for income taxes consists of the following:
    
 
   
<TABLE>
<CAPTION>
                                                          FOR THE YEARS ENDED SEPTEMBER 30,
                                                          ---------------------------------
                                                           1998        1997         1996
                                                          -------    ---------    ---------
<S>                                                       <C>        <C>          <C>
Current benefit:
  Federal...............................................   $  --      $    --      $    --
  Foreign...............................................    (362)          --           --
  State.................................................      --           --           --
                                                           -----      -------      -------
Total current benefit...................................    (362)          --           --
Deferred provision:
  Federal...............................................      --          455        2,822
  Foreign...............................................     362           --           --
  State.................................................      --           78          484
                                                           -----      -------      -------
          Total deferred provision......................     362          533        3,306
                                                           -----      -------      -------
          Total provision for income tax expense:.......   $  --      $   533      $ 3,306
                                                           =====      =======      =======
</TABLE>
    
 
   
     The provision for income taxes in the accompanying consolidated statements
of operations differs from the amount of tax based on the statutory federal
income tax rate as follows:
    
 
   
<TABLE>
<CAPTION>
                                                      FOR THE YEARS ENDED SEPTEMBER 30,
                                                      ----------------------------------
                                                        1998         1997         1996
                                                      ---------    ---------    --------
<S>                                                   <C>          <C>          <C>
Benefit for income taxes at statutory rate..........  $ (9,892)    $(16,684)    $(9,196)
Nondeductible expenses..............................     1,178           30       5,794
Deferred benefit not currently recognized...........     7,009        3,860       2,045
Permanent effect of book/tax adjustments............        --       14,104       1,747
Increase in valuation allowance of deferred tax
  asset due to uncertainty..........................     4,195          500       3,234
State taxes, net of federal benefit.................    (1,289)      (1,310)       (614)
Other...............................................    (1,201)          33         296
                                                      --------     --------     -------
          Total provision for income taxes..........  $     --     $    533     $ 3,306
                                                      ========     ========     =======
</TABLE>
    
 
                                      F-17
<PAGE>   45
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
     The components of the Company's deferred income tax assets are as follows:
    
 
   
<TABLE>
<CAPTION>
                                                              AS OF SEPTEMBER 30,
                                                              --------------------
                                                                1998        1997
                                                              --------    --------
<S>                                                           <C>         <C>
Reserves for discontinued operations........................  $  1,539    $  1,040
Allowance for doubtful accounts and notes...................     3,362         410
Inventory reserves..........................................       705         374
Nondeductible accruals......................................       396         899
Warranty reserve............................................        85          --
Valuation allowance -- current..............................    (6,087)     (2,723)
                                                              --------    --------
Current deferred income tax benefit.........................        --          --
                                                              --------    --------
Depreciation................................................     2,265         659
Net operating loss carryforwards -- long-term...............    50,594      18,381
Capital loss carryback......................................        --       2,084
Tax credits.................................................     6,023         273
Goodwill amortization and other amortization................     9,495       8,541
Other.......................................................        39          --
Valuation allowance -- long-term............................   (68,416)    (29,938)
                                                              --------    --------
Long-term deferred income tax benefit.......................        --          --
                                                              --------    --------
                                                              $     --    $     --
                                                              ========    ========
</TABLE>
    
 
   
     At September 30, 1998, the Company had tax basis net operating losses
("NOLs") of approximately $140 million available to offset future ordinary
taxable income. The utilization of the Company's NOLs will be substantially
limited due to the Recapitalization and the acquisition of Old Cerplex, among
other things. These carryforwards begin to expire during 2007. The income tax
benefit related to these NOLs, as well as to certain reserves recorded by the
Company, have been reflected in the deferred income tax asset accounts to the
extent they are considered realizable.
    
 
     The Company has established a valuation allowance for the entire deferred
tax asset because it is not likely to be realized in the foreseeable future.
 
   
NOTE J -- REDEEMABLE CONVERTIBLE PREFERRED STOCK
    
 
   
     The Company has issued, in series, Redeemable Convertible Preferred Stock
(the "Shares"), primarily to its largest stockholder, WCAS. The Company has
authorized 230 of the 1,000 total authorized preferred stock for this series.
The Shares have a par value of $.01 per share and were issued for $100 per
share. The Shares have a liquidation preference of $100 per share plus accrued
and unpaid dividends. Dividends accrue at 7% per annum. The Shares (including
all unpaid dividends) are convertible into Common Stock of the Company and are
subject to mandatory redemption by the Company on September 30, 2006 at the
price of $100 per share plus all accrued and unpaid dividends to the redemption
date. The holders of the Shares have voting rights equivalent to the holders of
Common Stock on an "as converted" basis. The issues were:
    
 
   
          7% Senior Cumulative Convertible Preferred -- 216 shares were issued
     in connection with the acquisition of Old Cerplex and exchange of the 10%
     Senior Subordinated Notes. Dividends are cumulative at 7%, payable when
     declared by the Board of Directors. Each share is convertible into 40
    
 
                                      F-18
<PAGE>   46
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
     shares of Common Stock at $2.50 per share at the option of the holder
     subject to certain requirements. These shares must be redeemed in equal
     installments on December 30, 2006 and 2007. Upon a change of control of the
     Company, as set forth in the certificates, the shares must be redeemed at
     the option of the holders.
    
 
   
          Old Series A -- 400 shares issued concurrent with the Recapitalization
     with a current conversion price of $1.91 as adjusted for anti-dilution
     adjustments. In connection with the acquisition of Old Cerplex 356 of those
     shares were converted into approximately 1.9 million shares of Common
     Stock. In November 1998, the remaining 44 shares with a carrying value of
     $4.837 were converted into 249 shares of Common Stock. See Note
     K -- "Stockholders' Equity."
    
 
   
          Series B, C, D -- 25 shares of Series B, 25 shares of Series C and 20
     shares of Series D were issued on August 14, 1997, October 2, 1997 and
     October 24, 1997, respectively. All shares were converted into
     approximately $0.6 million shares of Common Stock in connection with the
     Old Cerplex Acquisition.
    
 
NOTE K -- STOCKHOLDERS' EQUITY
 
   
     On October 5, 1998, the Company effected a one for ten reverse common stock
split ("One-for-Ten Reverse Split"). All share and per share amounts in the
accompanying consolidated financial statements have been restated to reflect
this split. At this time the amount of authorized Common Stock was established
at 75,000 shares.
    
 
   
     Subsequent to the One-for-Ten Reverse Split, 249 shares of the Company's
Common Stock were issued as a result of the conversion of 44 shares of the
Series A Preferred Stock.
    
 
   
     The Company has 1,000 shares of authorized, $.01 par value Preferred Stock,
with none issued or outstanding. The Company has 75,000 shares of authorized,
$.03 par value, Common Stock 7,118 shares outstanding at September 30, 1998,
(compared to 685 at September 30, 1997, respectively).
    
 
     In October 1995, the Company sold 34 shares of Common Stock to investors in
a private placement of equity securities in exchange for proceeds totaling $883,
net of issuance costs. Proceeds from the offering were used to make the
principal payment due September 30, 1996 on the 7% notes payable.
 
     In March 1996, the Company completed a comprehensive Recapitalization of
the Company, pursuant to which the Company (a) sold (i) 400 shares of Redeemable
Convertible Preferred Stock, $.01 par value, to WCAS and certain other investors
for an aggregate purchase price of $40,000 and (ii) 61 shares of Common Stock,
along with a $10,000 10% Senior Subordinated Note due September 2001, to WCAS
Capital Partners II, L.P. ("WCAS CP II") for an aggregate purchase price of
$10,000, and (b) repurchased 427 shares of the Company's Common Stock at $2.875
per share pursuant to a tender offer for up to 650 shares of Common Stock.
 
   
     In consideration for WCAS guaranteeing certain borrowings, the Company has
granted WCAS warrants to purchase 223 Common Shares at prices ranging from
$20.90 to $10.25 per share. See Note H -- "Long-term Debt."
    
 
   
     In connection with the merger with Old Cerplex, warrants held by Old
Cerplex note holders and certain principals of Old Cerplex were converted into
warrants to purchase 98 Common Shares at prices ranging from $0.94 to $82.23.
    
 
                                      F-19
<PAGE>   47
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
NOTE L -- EMPLOYEE STOCK AND SAVINGS PLANS
 
     Employee stock purchase plan. Effective October 1, 1994, the Company
established an employee stock purchase plan for all eligible employees. Under
the plan, shares of the Company's Common Stock may be purchased at three-month
intervals at 85% of the lower of the fair market value on the first or the last
day of each three-month period. Employees may purchase shares having a value not
exceeding 15% of their gross compensation during an offering period.
 
   
     Savings plan. The Company has a savings plan, which qualifies under Section
401(k) of the Internal Revenue Code. Under the plan, participating U.S.
employees may defer up to 15% of their pretax salary, but not more than
statutory limits. The Company contributes a discretionary amount, set by the
Board of Directors, for each dollar contributed by a participant, with a maximum
of 6% of participant earnings. There was no matching contribution in fiscal
1998. The Company's matching contribution to the savings plan was $207 and $252
for the years ended September 30, 1997 and 1996, respectively.
    
 
   
     Stock option plan. The Company has a stock option plan for directors,
officers, and key employees which provides for incentive and nonqualified stock
options. A committee comprised of disinterested directors determines the option
price (not less than the fair market value of the stock at the date of grant).
The options generally expire ten years from the date of grant and generally vest
over four years. As of September 30, 1998, options for 219 shares were issued
and 302 shares were available for future grants under the plan. This stock
option plan was instituted at the time of the Recapitalization. At that time,
the Company offered to exchange options issued under prior stock option plans
for options under the new plan at the market price per share at the time of the
Recapitalization.
    
 
   
     The Company accounts for its stock option plans under APB Opinion No. 25,
under which no compensation cost has been recognized. The following pro forma
disclosures represent what the Company's net loss and loss per share would have
been had the Company recorded compensation cost for these plans in accordance
with the provisions of FASB Statement No. 123, "Accounting for Stock-Based
Compensation." (SFAS No. 123).
    
 
   
<TABLE>
<CAPTION>
                                                           1998        1997
                                                         --------    --------
<S>                                                      <C>         <C>
Pro forma net loss applicable to common stockholders...  $(32,621)   $(53,497)
Pro forma basic and diluted loss per share.............  $  (8.47)   $  (8.01)
</TABLE>
    
 
     Because the method of accounting required under Statement No. 123 has not
been applied to options granted prior to October 1, 1995, the resulting pro
forma compensation cost may not be representative of that to be expected in
future years.
 
                                      F-20
<PAGE>   48
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
<TABLE>
<CAPTION>
                                                          OUTSTANDING OPTIONS
                                                 --------------------------------------
                                                     SHARES          RANGE OF OPTION
                                                 (IN THOUSANDS)          PRICES
                                                 --------------   ---------------------
<S>                                              <C>              <C>      <C>  <C>
Outstanding at September 30, 1995..............        114         33.80     -   117.50
Granted........................................        490         21.30     -    41.90
Forfeited......................................       (201)        33.80     -   117.50
                                                 --------------   ---------------------
Outstanding at September 30, 1996..............        403         21.30     -   117.50
Granted........................................        166         10.00     -    17.50
Forfeited......................................       (127)        21.30
                                                 --------------   ---------------------
Outstanding at September 30, 1997..............        442        $10.00     -  $117.50
Issued in connection with Old Cerplex merger...         72         15.60
Forfeited......................................       (295)         3.00     -   117.50
                                                 --------------   ---------------------
Outstanding at September 30, 1998..............        219          2.70     -  $117.50
                                                 ==============   =====================
</TABLE>
    
 
   
     The weighted-average fair value of options granted and forfeited were
$3.00, and $33.43 for fiscal 1998, $11.80 and $21.30 for fiscal 1997, and $16.70
and $33.80 for fiscal 1996, respectively.
    
 
   
     The shares outstanding at September 30, 1998 have a weighted average
exercise price of $25.40 and a weighted average contractual life of 5.0 years.
    
 
   
     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1998 and 1997: risk-free interest rates of 6.5%
in 1998 and 1997 and 6.6% in 1996; no expected dividend yield; expected lives of
4 years; expected volatility of 117% for all three years.
    
 
   
     On October 5, 1995 the Company adopted its 1998 Stock Option and Restricted
Stock Plan, which provides for the grant to eligible employees and others the
right to purchase up to 2,836 shares of the Company's Common Stock.
    
 
NOTE M -- INVESTMENT AND RETIREMENT PLANS
 
   
     In October 1996, Old Cerplex established a defined contribution plan for
the employees of Cerplex Ltd., a wholly-owned subsidiary of Old Cerplex
operating in the United Kingdom ("U.K. Plan"), not covered by the U.K. Pension
Plan (see below). Participating employees are allowed to contribute either 3% or
6% of their annual compensation subject to maximum limitations based on
compensation and Internal Revenue Service regulations. The Company contributes
an amount equal to 100% of the employee's contributions in connection with the
U.K. Plan. The Company contributions vest immediately. In the event the U.K.
Plan is terminated, all participants are entitled to receive a distribution
equal to their account balance at that date. Contributions to the U.K. Plan were
approximately $258 for 1998.
    
 
   
     Certain employees of Cerplex Ltd. are also covered by a defined benefit
pension plan. The Company's contribution rates have been actuarially assessed
and are being amortized over the estimated employees' working lives with the
Company. Benefits are determined based on employee's final pensionable pay. The
net assets and benefit obligation, as well as pension costs relating to this
plan are not significant to the consolidated financial statements as of
September 30, 1998 and for the year then ended, respectively.
    
 
NOTE N -- CONCENTRATION OF CREDIT RISK
 
   
     The Company's revenues are primarily with Original Equipment Manufacturers
("OEMs") or Third Party Maintainers ("TPMs") in the computer and peripheral,
telecommunications and office automation
    
 
                                      F-21
<PAGE>   49
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
industries located principally in the United States and Europe. The Company
performs ongoing credit evaluations of its customers' financial condition and,
generally, requires no collateral from its customers. Credit risk is affected by
conditions or occurrences within the economy and the computer and peripheral,
telecommunications and office automation markets.
    
 
NOTE O -- FOREIGN OPERATIONS AND MAJOR CUSTOMERS
 
   
     Revenues, operating losses and assets of the Company's operations as of and
for the years ended September 30, 1998, 1997 and 1996 are as follows:
    
 
   
<TABLE>
<CAPTION>
                                               1998        1997        1996
                                             --------    --------    --------
<S>                                          <C>         <C>         <C>
United States
  Revenues.................................  $ 38,470    $ 56,201    $ 88,741
  Operating loss...........................   (18,973)    (46,168)    (19,950)
  Assets...................................    58,861      12,113      50,290
Foreign
  Revenues.................................    27,953       8,691       9,278
  Operating income (loss)..................    (3,004)      1,644         408
  Assets...................................    41,680       2,516       2,498
</TABLE>
    
 
   
     In fiscal 1998 two customers accounted for approximately 17% and 11% of net
revenues. One customer accounted for 11% percent or more of net revenues in
fiscal 1997 and 19% of net revenues in 1996.
    
 
NOTE P -- LOSS PER SHARE
 
   
     In fiscal 1998, the Company adopted SFAS No. 128, as discussed in Note B.
The following table illustrates the computation of basic and diluted loss per
share under the provisions of SFAS No. 128.
    
 
   
<TABLE>
<CAPTION>
                                                               1998        1997        1996
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Numerator for basic and diluted loss per share -- net
  loss.....................................................   (29,095)    (49,605)    (30,353)
Preferred stock dividends..................................    (2,665)     (2,822)     (1,400)
                                                             --------    --------    --------
Numerator for basic and diluted earnings per share.........  $(31,760)   $(52,427)   $(31,753)
                                                             ========    ========    ========
Denominator for basic and diluted loss per share --weighted
  average number of common shares outstanding during the
  period...................................................     3,843         667         716
                                                             --------    --------    --------
Basic and diluted loss per share...........................  $  (8.26)   $ (78.60)   $ (44.40)
                                                             ========    ========    ========
</TABLE>
    
 
   
     The computation of diluted loss per share for each of the years in the
three-year period ended September 30, 1998 excluded the effect of all
incremental common shares attributable to the exercise of outstanding Common
Stock options and warrants and conversions of the Convertible Preferred Stock
because their effect would be antidilutive. See Note B -- "Summary of
Significant Accounting Principles", Note K -- "Stockholders' Equity" and Note
L -- "Employee Stock and Savings Plans."
    
 
                                      F-22
<PAGE>   50
                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE FIGURES)
 
   
NOTE Q -- COMMITMENTS AND CONTINGENCIES
    
 
   
LEASE COMMITMENTS
    
 
   
     The Company leases the majority of its office and warehousing facilities
and certain equipment under noncancellable operating leases which expire at
various dates through 2008.
    
 
   
     Rental expense, net of sublease income, for the years ended September 30,
1998, 1997 and 1996 was approximately $1,265, $1,531 and $1,246, respectively.
Future minimum lease payments as of September 30, 1998 are as follows:
    
 
   
<TABLE>
<CAPTION>
                       YEARS ENDING
                       SEPTEMBER 30                         (DOLLARS IN THOUSANDS)
                       ------------                         ----------------------
<S>                                                         <C>
1999......................................................         $ 4,176
2000......................................................           3,525
2001......................................................           2,981
2002......................................................           2,487
2003......................................................           2,180
Thereafter................................................           5,589
                                                                   -------
                                                                   $20,938
                                                                   =======
</TABLE>
    
 
   
CONTINGENCIES
    
 
   
     The Company and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. In the opinion of
management, the resolution of these matters will not materially affect the
Company's consolidated financial position and results of operations or
liquidity.
    
 
                                      F-23
<PAGE>   51
 
                                  SCHEDULE II
 
                            THE CERPLEX GROUP, INC.
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)
 
                       VALUATION AND QUALIFYING ACCOUNTS
   
                                 (IN THOUSANDS)
    
 
   
<TABLE>
<CAPTION>
                                                                ADDITIONS
                                                         -----------------------
                                           BALANCE AT    CHARGED TO   CHARGED TO
                                          BEGINNING OF   COSTS AND      OTHER                   BALANCE AT END
                                             PERIOD       EXPENSES     ACCOUNTS    DEDUCTIONS     OF PERIOD
                                          ------------   ----------   ----------   ----------   --------------
<S>                                       <C>            <C>          <C>          <C>          <C>
FOR THE YEAR ENDED SEPTEMBER 30, 1998
  Allowance for doubtful accounts.......     $  736        $1,246       $1,775       $1,246         $2,511
                                             ======        ======       ======       ======         ======
  Reserve for discontinued operations...     $2,590        $   --       $   --       $  614         $1,976
                                             ======        ======       ======       ======         ======
FOR THE YEAR ENDED SEPTEMBER 30, 1997
  Allowance for doubtful accounts.......     $1,209        $  372       $   --       $  845(1)      $  736
                                             ======        ======       ======       ======         ======
  Reserve for discontinued operations...     $3,068        $   --       $   --       $  478         $2,590
                                             ======        ======       ======       ======         ======
FOR THE YEAR ENDED SEPTEMBER 30, 1996
  Allowance for doubtful accounts.......     $1,414        $  410       $   --       $  615(1)      $1,209
                                             ======        ======       ======       ======         ======
  Reserve for discontinued operations...     $4,073        $   --       $   --       $1,005         $3,068
                                             ======        ======       ======       ======         ======
</TABLE>
    
 
---------------
(1) Uncollectible accounts written off, net of recoveries.
 
                                       S-1
<PAGE>   52
 
   
                               INDEX TO EXHIBITS
    
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
  2        Agreement and Plan of Merger, dated as of January 30, 1998,
           among the Company, Holly Acquisition Corp. and Old Cerplex
           (incorporated by reference from Appendix A to the Prospectus
           contained in the Company's Registration Statement on Form
           S-4 (File No. 333-48725)).
  3.1.1    The Restated Certificate of Incorporation of the Company, as
           amended (incorporated by reference from Exhibit 3.1 to the
           Company's Transition Report on Form 10-K for the transition
           period from December 31, 1991 to September 30, 1992).
  3.1.2    The Certificate of Amendment to the Restated Certificate of
           Incorporation of the Company, filed on April 28, 1998
           (incorporated by reference from Exhibit 4.1.1 of the
           Company's Post-Effective Amendment No. 2 to the Company's
           Registration Statement on Form S-3, filed on May 13, 1998
           (Registration No. 333-47973)).
  3.1.3    The Certificate of Amendment to the Restated Certificate of
           Incorporation of the Company, filed on April 30, 1998
           (incorporated by reference from Exhibit 4.1.2 of the
           Company's Post-Effective Amendment No. 2 to the Company's
           Registration Statement on Form S-3, filed on May 13, 1998
           (Registration No. 333-47973)).
 *3.1.4    Certificate of Amendment to Certificate of Incorporation of
           the Company filed on October 6, 1998.
  3.2.1    Bylaws of the Company, as amended (incorporated by reference
           from Exhibit 4.2 of the Company's Registration Statement on
           Form S-8 (Registration No. 33-79426)).
  3.2.2    Resolutions adopted by the Board of Directors on April 30,
           1998, amending the Bylaws of the Company (incorporated by
           reference from Exhibit 4.2.1 of the Company's Post-Effective
           Amendment No. 2 to the Company's Registration Statement on
           Form S-3, filed on May 13, 1998 (Registration No.
           333-47973)).
  4.1      Amended and Restated Registration Rights Agreement, dated
           January 30, 1998, among the Company and the purchasers named
           on Schedules I and II thereto (incorporated by reference
           from Exhibit 4.17 to the Company's Current Report on Form
           8-K filed on February 6, 1998).
  4.2      Certificate of Designations, Preferences and Rights of
           Senior Cumulative Convertible Preferred Stock of the Company
           filed on April 29, 1998 (incorporated by reference from
           Exhibit 4.3 of the Company's Post-Effective Amendment No. 2
           to the Company's Registration Statement on Form S-3, filed
           on May 13, 1998 (Registration No. 333-47973)).
  4.3      Form of Indenture for 10% Series B Senior Subordinated Notes
           between the Company and U.S. Trust Corporation (incorporated
           by reference from Exhibit 4.4 of the Company's
           Post-Effective Amendment No. 1 to the Company's Registration
           Statement on Form S-3, filed on March 27, 1998 (Registration
           No. 333-47973)).
  4.4      Form of the Company's 10% Series B Senior Subordinated
           Notes, due December 31, 2004 (included as Exhibit A to the
           form of Indenture filed as Exhibit 4.4 of the Company's
           Post-Effective Amendment No. 1 to the Company's Registration
           Statement on Form S-3, filed on March 27, 1998 (Registration
           No. 333-47973)).
  4.5      Form of Letter to Stockholders of the Company (incorporated
           by reference from Exhibit 4.6 of the Company's
           Post-Effective Amendment No. 1 to the Company's Registration
           Statement on Form S-3, filed on March 27, 1998 (Registration
           No. 333-47973)).
  4.6      Form of Subscription Certificate (incorporated by reference
           from Exhibit 4.7 of the Company's Post-Effective Amendment
           No. 1 to the Company's Registration Statement on Form S-3,
           filed on March 27, 1998 (Registration No. 333-47973)).
</TABLE>
    
<PAGE>   53
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
  4.7      Form of Instructions as to Use of Subscription Certificate
           (incorporated by reference from Exhibit 4.8 of the Company's
           Post-Effective Amendment No. 1 to the Company's Registration
           Statement on Form S-3, filed on March 27, 1998 (Registration
           No. 333-47973)).
  4.8      Form of Letter to Brokers (incorporated by reference from
           Exhibit 4.9 of the Company's Post-Effective Amendment No. 1
           to the Company's Registration Statement on Form S-3, filed
           on March 27, 1998 (Registration No. 333-47973)).
  4.9      Form of Letter to Clients (incorporated by reference from
           Exhibit 4.10 of the Company's Post-Effective Amendment No. 1
           to the Company's Registration Statement on Form S-3, filed
           on March 27, 1998 (Registration No. 333-47973)).
  4.10     Form of Notice of Guaranteed Delivery (incorporated by
           reference from Exhibit 4.11 of the Company's Post-Effective
           Amendment No. 1 to the Company's Registration Statement on
           Form S-3, filed on March 27, 1998 (Registration No.
           333-47973)).
  4.11     Form of Nominee Holder Certification (incorporated by
           reference from Exhibit 4.12 of the Company's Post-Effective
           Amendment No. 1 to the Company's Registration Statement on
           Form S-3, filed on March 27, 1998 (Registration No.
           333-47973)).
  4.12     Guidelines to Form W-9 (incorporated by reference from
           Exhibit 4.13 of the Company's Post-Effective Amendment No. 1
           to the Company's Registration Statement on Form S-3, filed
           on March 27, 1998 (Registration No. 333-47973)).
  4.13     Indenture between the Registrant and MBank Dallas, National
           Association relating to the Company's 7 3/4% Convertible
           Subordinated Debentures due 2001, including form of
           Debenture (incorporated by reference from Exhibit 4.1 to the
           Company's Registration Statement on Form S-2 (Registration
           No. 33-4276)).
  4.14     First Supplemental Indenture relating to the Company's
           7 3/4% Convertible Subordinated Debentures, dated December
           1, 1987, between the Company and MTrust Corp., National
           Association, appointing MTrust Corp. as successor trustee to
           MBank Dallas (incorporated by reference from Exhibit 4.2 to
           the Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1993).
  4.15     Tripartite Agreement relating to the Company's 7 3/4%
           Convertible Subordinated Debentures, dated as of January 7,
           1990, between Mtrust Corp., National Association, Ameritrust
           Texas N.A., and the Company (incorporated by reference from
           Exhibit 4.3 to the Company's Annual Report on Form 10-K for
           the fiscal year ended December 31, 1989).
  4.16     Second Supplemental Indenture relating to the Company's
           7 3/4% Convertible Subordinated Debentures, dated to be
           effective as of November 30, 1992, between the Company and
           Society National Bank (incorporated by reference from
           Exhibit 4.4 to the Company's Post-Effective Amendment No. 1
           to Registration Statement on Form S-3 (No. 33-32377)).
 *4.17     Third Supplemental Indenture relating to the Company's
           7 3/4% Convertible Subordinated Debentures, dated to be
           effective as of April 30, 1998, between the Company and
           Chase Manhattan Trust Company, National Association.
 *4.18     Certificate of Designations, Preferences and Rights of
           Convertible Preferred Stock filed on November 19, 1998
           eliminating the Series B, C and D Convertible Preferred
           Stock.
 *4.19     Certificate of Elimination of Convertible Preferred Stock
           filed on December 15, 1998.
 10.1      The Cerplex Group, Inc. and its Subsidiaries Stock Option
           and Restricted Stock Purchase Plan (the "Plan"), dated July
           28, 1998 (incorporated by reference from the Company's Proxy
           Statement filed on September 9, 1998).
*10.2.1    Loan and Security Agreement, dated April 30, 1998, between
           Greyrock Business Credit, the Company, Aurora Electronics
           Group, Inc., Cerplex, Inc. and Cerplex Mass, Inc.
</TABLE>
    
<PAGE>   54
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
*10.2.2    Continuing Guaranty, dated April 30, 1998, by Welsh, Carson,
           Anderson & Stowe VII, L.P., for the benefit of Greyrock
           Business Credit.
*10.2.3    Streamlined Facility Agreement, dated April 30, 1998,
           between the Company, Aurora Electronics Group, Inc.,
           Cerplex, Inc. and Cerplex Mass, Inc.
*10.2.4    Negative Pledge Agreement, dated April 30, 1998, between
           Cerplex Inc. and Greyrock Business Credit.
*10.2.5    Secured Promissory Note for $36,000,000, due April 30, 1999,
           between the Company, Aurora Electronics Group, Inc.,
           Cerplex, Inc. and Cerplex Mass, Inc. as payors and Greyrock
           Business Credit as payee.
*10.2.6    Cross-Corporate Continuing Guaranty, dated April 30, 1998,
           between the Company, Aurora Electronics Group, Inc.,
           Cerplex, Inc. and Cerplex Mass, Inc., for the benefit of
           Greyrock Business Credit.
*10.3      10% Senior Subordinated Note for $5,000,000, due September
           30, 1999, between the Company, Aurora Electronics Group,
           Inc. and Cerplex, Inc. as payors and Welsh, Carson, Anderson
           & Stowe VII, L.P. as payee.
*10.4      10% Senior Subordinated Note for $2,500,000, due December 9,
           1999, between the Company, Aurora Electronics Group, Inc.
           and Cerplex, Inc. as payors and Welsh, Carson, Anderson &
           Stowe VII, L.P. as payee.
 10.5      Securities Purchase and Exchange Agreement, dated January
           30, 1998, between the Company, Welsh, Carson, Anderson &
           Stowe VII, L.P., WCAS Capital Partners II, L.P., and the
           several purchasers named in Annex I thereto (incorporated by
           reference from Exhibit 10.47 to the Company's Current Report
           on Form 8-K filed on February 6, 1998).
 10.6      Form of Irrevocable Proxy and Option Agreement executed by
           certain stockholders of Old Cerplex for the benefit of the
           Company (incorporated by reference from Exhibit 10.45 to the
           Company's Current Report on Form 8-K filed on February 6,
           1998).
 10.7      Interim Management Agreement, dated January 30, 1998,
           between the Company and Old Cerplex (incorporated by
           reference from Exhibit 10.51 to the Company's Current Report
           on Form 8-K filed on February 6, 1998).
 10.8      10% Senior Subordinated Bridge Note between the Company, as
           payor, and Welsh, Carson, Anderson & Stowe VII, L.P., as
           payee (incorporated by reference from Exhibit 10.48 to the
           Company's Current Report on Form 8-K filed on February 6,
           1998).
 10.9      Form of 10% Senior Subordinated Note, due December 31, 2004,
           of the Company, as payor (incorporated by reference from
           Exhibit 10.49 to the Company's Current Report on Form 8-K
           filed on February 6, 1998).
 10.10     Stockholders Agreement, dated January 30, 1998, among Welsh,
           Carson, Anderson & Stowe VII, L.P., the Company and Old
           Cerplex (incorporated by reference from Exhibit 10.50 to the
           Company's Current Report on Form 8-K filed on February 6,
           1998).
 10.11     Cerplex Note Purchase Agreement, dated January 30, 1998,
           between the Company and Old Cerplex (incorporated by
           reference from Exhibit 10.52 to the Company's Current Report
           on Form 8-K filed on February 6, 1998).
 10.12     Form of 10% Subordinated Note, due June 30, 1998, between
           the Company and Old Cerplex (incorporated by reference from
           Exhibit 10.53 to the Company's Current Report on Form 8-K
           filed on February 6, 1998).
 10.13     Form of Affiliates Letter to be executed in accordance with
           the Agreement and Plan of Merger, dated January 30, 1998
           (incorporated by reference from Exhibit 10.46 to the
           Company's Current Report on Form 8-K filed on February 6,
           1998).
</TABLE>
    
<PAGE>   55
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
 10.14     Amendment No. 1 to Interim Management Agreement, dated as of
           February 25, 1998, between Old Cerplex and the Company
           (incorporated by reference to the Company's Registration
           Statement on Form S-4, filed on March 26, 1998 (File No.
           333-48725)).
 10.15     Standard Lease Agreement, dated October 27, 1992, between
           Crow-Brindell-Mitchell and Aurora Electronics Group, Inc. as
           Assignee of CCB Computer Brokers, Inc. d/b/a Century
           Computer Services, Inc. (incorporated by reference from
           Exhibit 10.10 to the Company's Annual Report on Form 10-K
           for the fiscal year ended September 30, 1994).
 10.16     Lease dated July 14, 1988, between American National Bank
           and Trust Registrant of Chicago and BSN Corp. (now the
           Company) (incorporated by reference from Exhibit 10.12 to
           the Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1994).
 10.17     Form of Tax Indemnity Agreement between the Company and SSG
           (incorporated by reference from Exhibit 10.9 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended December 31, 1991).
 10.18     Stock Purchase Agreement, dated as of September 30, 1992,
           between the Company, Robert E. Morris and Norma J. Morris,
           Trustees of the Robert and Norma Morris Family Trust and The
           Robert and Norma Morris Charitable Remainder Unitrust
           (incorporated by reference from Exhibit 2.1 to the Company's
           Form 8-K filed on October 19, 1992).
 10.19     Merger Agreement and Plan of Reorganization, dated September
           12, 1993, between the Company and FRS, Inc. (incorporated by
           reference from Exhibit 2.1 to the Company's Current Report
           on Form 8-K filed on October 15, 1993).
 10.20     Asset Purchase Agreement, dated March 15, 1994, to be
           effective as of March 1, 1994, as amended, between the
           Company, Aurora Electronics Group, Inc. and CCB Computer
           Brokers, Inc. and CCM Computers International, Ltd.
           (incorporated by reference from Exhibit (b)(1) to the
           Company's Quarterly Report on Form 10-Q for the quarter
           ended March 31, 1994).
 10.21     The Company's 401-K Plan (incorporated by reference from
           Exhibit 10.13 to the Company's Annual Report on Form 10-K
           for the fiscal year ended September 30, 1993).
 10.22     Securities Purchase Agreement between the Company, Welsh,
           Carson, Anderson & Stowe VII, L.P., WCAS Capital Partners
           II, L.P. and the several purchasers named therein, dated
           February 21, 1996 (incorporated by reference from Exhibit
           (b)(2) of the Company's Issuer Tender Offer Statement on
           Schedule 13E-4, which was filed with the Securities and
           Exchange Commission on February 23, 1996).
 10.23     The Company's Offer to Purchase for Cash up to 6,500,000
           Shares of its Common Stock at $2.875 Per Share, dated
           February 23, 1996 (incorporated by reference from Exhibit
           (a)(1) of the Company's Issuer Tender Offer Statement on
           Schedule 13E-4, which was filed with the Securities and
           Exchange Commission on February 23, 1996).
 10.24     Amended and Restated Financial Support Agreement, between
           the Company, Aurora Electronics Group, Inc., Welsh, Carson,
           Anderson & Stowe VII, L.P., and WCAS Capital Partners II,
           L.P. (incorporated by reference from Exhibit 10.39 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.25     Securities Purchase Agreement, dated August 14, 1997,
           between the Company and Welsh, Carson, Anderson & Stowe VII,
           L.P. for the purchase of the Company's Series B Preferred
           Stock (incorporated by reference from Exhibit 10.40 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.26     Securities Purchase Agreement, dated October 2, 1997,
           between the Company and Welsh, Carson, Anderson & Stowe VII,
           L.P. for the purchase of the Company's Series C Preferred
           Stock (incorporated by reference from Exhibit 10.41 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
</TABLE>
    
<PAGE>   56
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBITS
-------                      -----------------------
<S>        <C>
 10.27     Securities Purchase Agreement, dated October 24, 1997,
           between the Company and Welsh, Carson, Anderson & Stowe VII,
           L.P. for the purchase of the Company's Series D Preferred
           Stock (incorporated by reference from Exhibit 10.42 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.28     Senior Subordinated Note Purchase Agreement, between the
           Company and Welsh, Carson, Anderson & Stowe VII, L.P.
           (incorporated by reference from Exhibit 10.43 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.29     Form of $2,800,000 10% Senior Subordinated Demand Note,
           dated December 5, 1997, between the Company, as payor, and
           Welsh, Carson, Anderson & Stowe VII, L.P., as payee
           (incorporated by reference from Exhibit 10.44 to the
           Company's Annual Report on Form 10-K for the fiscal year
           ended September 30, 1997).
 10.30     Form of Indemnity Agreement (incorporated by reference from
           Exhibit 10.15 to Old Cerplex's Registration Statement on
           Form S-1 (File No. 33-75004)).
 10.31     Letter from Nightingale & Associates, LLC to the Company,
           dated June 30, 1997, together with Letter from Nightingale &
           Associates, LLC to the Company, dated August 18, 1997,
           amending terms of the June 30, 1997 Letter (incorporated by
           reference from Exhibit 10.37 to the Company's Quarterly
           Report on Form 10-Q for the quarter ended September 30,
           1997).
*21.1      Subsidiaries of the Company.
*23.1      Consent of KPMG LLP.
*23.2      Consent of Arthur Andersen LLP.
*27        Financial Data Schedule.
</TABLE>
    
 
---------------
   
* Filed herewith.