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                                  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 25, 1999

                                       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)

            DELAWARE                                             75-1539534
  (STATE OR OTHER JURISDICTION                                (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)

            111 PACIFICA AVENUE, SUITE 300, IRVINE, CALIFORNIA 92618
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (949) 754-5300
              (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. [ ]


<PAGE>

    The aggregate market value of the voting stock held by non-affiliates of the
registrant  on December 29, 1999,  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 $8,758,899.

    Indicated  below is the  number of shares  outstanding  of each class of the
registrant's Common Stock, as of December 29, 1999.

TITLE OF EACH CLASS OF COMMON STOCK                        NUMBER OF OUTSTANDING
   Common Stock, $.03 par value                                 7,375,915

                       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
25, 1999.

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                                       2
<PAGE>

                             THE CERPLEX GROUP, INC.

                       INDEX TO ANNUAL REPORT ON FORM 10-K
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 25, 1999

<TABLE>
<CAPTION>
                                                                                                                           Page
                                                                                                                           ----
                                                                PART I
<S>            <C>                                                                                                           <C>
Item 1.        Business..................................................................................................     4
Item 2.        Properties................................................................................................    10
Item 3.        Legal Proceedings.........................................................................................    11
Item 4.        Submission of Matters to a Vote of Security Holders.......................................................    11

                                                                PART II

Item 5.        Market for Registrant's Common Equity and Related Stockholder Matters.....................................    11
Item 6.        Selected Financial Data...................................................................................    12
Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations.....................    14
Item 7A.       Quantitative and Qualitative Disclosures About Market Risk................................................    18
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........................................................    19
Item 11.       Executive Compensation....................................................................................    19
Item 12.       Security Ownership of Certain Beneficial Owners and Management............................................    19
Item 13.       Certain Relationships and Related Transactions............................................................    19

                                                               PART IV

Item 14.       Exhibits, Financial Statement Schedules and Reports on Form 8-K...........................................    20
</TABLE>


                                       3
<PAGE>

                                     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 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.  Until  November  1999,  the Company  operated
through its two principal  subsidiaries,  Cerplex,  Inc. and Aurora  Electronics
Group,  Inc.,  and  their  subsidiaries.  In  connection  with a bank  financing
arrangement that closed in November 1999, the Company merged Aurora  Electronics
Group,  Inc. into Cerplex,  Inc.  Based in Irvine,  California,  the Company has
locations in the United States and 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  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,  and subsequent to that the Company's
headquarters were relocated to Irvine, California.

    In connection with the merger with Old Cerplex,  the Company  obtained a new
bank line of credit from  Greyrock  Capital  ("Greyrock")  consisting of a $36.0
million  term  loan and a  revolving  line of  credit  (the  "Greyrock   Line of
Credit") 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 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.

    On June 25, 1999 the Company  consented to an  assignment by Greyrock of its
rights and  interests  under the  Greyrock  Line of Credit to WCAS in return for
payment  in  full  of  all  outstanding   balances  of  principal  and  interest
thereunder.  WCAS repaid principal and interest  outstanding  under the Greyrock
Line of Credit  totaling $45.4 million.  Concurrent  with the  assignment,  WCAS
advanced to the Company an additional $4.6 million for working capital purposes,
resulting  in $50.0  million of total  indebtedness  outstanding  under the WCAS
Senior  Secured Notes as of June 25, 1999.  The terms of the WCAS Senior Secured
Notes are the same as those  under the  Greyrock  Line of Credit  except (i) the
interest rate was reduced to LIBOR plus 1 3/4%;  (ii) principal and interest are
due on April 1, 2001; (iii) collateral  consisting of the stock of the Company's
subsidiaries  in the UK and France that had secured the Greyrock  Line of Credit
was released;  (iv) the negative  pledge agreements covering assets owned by the
Company's  subsidiaries  in the UK and  France  were  terminated;  and  (v)  the
Company's  obligations  were no longer subject to minimum  collateral  borrowing
base requirements previously established in the Greyrock Line of Credit. On June
30, 1999 the Company  issued  approximately  58,643 shares of Series B Preferred
Stock at a price of $1,000 per share. The Series B Preferred Stock was issued as
repayment of various  obligations  owed to WCAS which  included $25.0 million of
principal  outstanding  under the WCAS Senior  Secured  Notes,  $16.5 million of
principal of the 10% unsecured  promissory notes ( "WCAS Notes"),  approximately
$15.6 million of principal of the 10% Series A Senior  Subordinated  Debentures,
and approximately $1.5 million of accrued interest owed to WCAS under these


                                       4
<PAGE>
obligations.   The  Series  B  Preferred   Stock   consist  of  7%   cumulative,
non-convertible  preferred  shares  that are  redeemable  by the  Company at its
option and  redeemable  by the holders  upon a change of control of the Company.
The terms of the merger, the related financing from WCAS, the old line of credit
and the WCAS  Refinancing  are  described  in  greater  detail in Item 1 of this
Annual Report under the heading "Merger with Old Cerplex, WCAS Financing and New
Senior Loans."

     On July 20,  1999,  the  management  of Cerplex  S.A.S.  ("SAS")  requested
assistance from the Commercial Court of Lille, France to structure a social plan
for a portion of the work force. Upon review,  the Commercial Court declared SAS
insolvent as of July 15, 1999 and opened bankruptcy  proceedings with respect to
SAS.  A  judicial  administrator  was  appointed  by the  Court  to  assist  the
management  of SAS in all its  activities  pending the  Court's  decision on the
development  of the  proceedings.  The  terms  of  assignment  of  the  judicial
administrator  included  reviewing  SAS's  condition and prospects and issuing a
recommendation relating to a plan of reorganization developed by SAS management.
While the administrator  was overseeing SAS's  operations,  the Company believed
that  a  plan  of  reorganization  would  be  adopted.  In the  event  that  the
administrator  could  not  support  a plan of  reorganization,  it would  become
necessary  to refer  the  case to a  liquidator  pursuant  to  Commercial  Court
guidelines.

     On October 12, 1999, the Commercial Court,  acting upon the  recommendation
of the judicial  administrator,  ordered the  liquidation  of SAS. Prior to this
decision,  management  believed it would realize its investment in SAS through a
reorganization.  However,  after the liquidation of SAS was ordered, the Company
realized its  investment in SAS was lost and should  therefore be written off as
of July 20,  1999,  the date  Cerplex,  Inc.  effectively  lost  control  of its
subsidiary.  As  a  consequence  of  this  order,  the  Company  terminated  the
operations of SAS, and the liquidator has laid off  substantially all employees.
The  liquidator is responsible  for selling the company's  assets and paying off
SAS's debts.  As the result of the cost of laying-off  all employees of SAS, the
value of the SAS assets may not exceed the value of its  liabilities.  There can
be no assurance that Cerplex, Inc., as shareholder, will receive any liquidation
proceeds. Accordingly, Cerplex, Inc. has written off its investment in SAS which
totaled  $6.2  million at July 20,  1999.  Since the  Company  effectively  lost
management control as of July 20, 1999,  Cerplex S.A.S. has been  deconsolidated
from the Company's  financial  statements as of that date. Based on Management's
understanding and outside legal counsel's assessment of the situation in France,
the Company  believes there is no additional  financial  exposure related to the
SAS liquidation,  but there can be no assurances that a deficiency judgment will
not be  entered  against  Cerplex,  Inc.,  the parent  company.  This is further
described in Item 1 of this Annual Report under "European Operations."

SERVICES PROVIDED

    Cerplex's lines of business include the following:

    Repair  Services.   Through  an  infrastructure of 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 OEM. To support and complement its repairs services,  Cerplex
also  provides a variety of other  ancillary  services,  including  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.

    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 parts programs:

        Parts Sales. The parts sales program provides multivendor parts sourcing
    to the  information  technology  industry.  Upon  receiving  an order from a
    customer,  Cerplex  will procure  parts and provide for  delivery  through a
    nationwide network of parts brokers and distributors, or will pick, pack and
    ship parts consigned to Cerplex for warehousing and sale.

        Advanced  Exchange.  An 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 most  products,  which are  exchanged
    with field  replaceable  units that are processed in Cerplex's  depot repair
    programs for repair, remanufacturing, conversion or upgrade.


                                       5
<PAGE>
EUROPEAN OPERATIONS

    Cerplex serves the European  market  through  Cerplex Ltd., a United Kingdom
subsidiary.  Through Cerplex Ltd. Cerplex offers its European customers an array
of repair  and parts  services  similar  to those  that it offers  domestically.
Cerplex's  European operation also offers  calibration  services  supporting the
telecommunications  and service  industries in the United Kingdom and in Western
Europe.

     On October 12, 1999, the Commercial Court,  acting upon the  recommendation
of the  judicial  administrator,  ordered  the  liquidation  of SAS.  After  the
liquidation of SAS was ordered,  the Company  realized its investment in SAS was
lost and should  therefore be written off as of July 20, 1999, the date Cerplex,
Inc.  lost  control of its  subsidiary.  As a  consequence  of this  order,  SAS
discontinued its operations,  and the liquidator has laid off  substantially all
employees of SAS. The  liquidator  is  responsible  for selling SAS's assets and
paying off SAS's debts.  As the result of the cost of laying-off  all employees,
the value of the SAS assets may not exceed the value of its  liabilities.  There
can be no  assurance  that  Cerplex,  Inc.,  as  shareholder,  will  receive any
liquidation proceeds. Accordingly,  Cerplex, Inc. has written off its investment
in Cerplex S.A.S. which totaled $6.2 million at July 20, 1999. Since the Company
effectively  lost  management  control  as  of  July  20,  1999,  SAS  has  been
deconsolidated from the Company's financial statements as of that date. Based on
Management's  understanding  and  outside  legal  counsel's  assessment  of  the
situation  in France,  the Company  believes  there is no  additional  financial
exposure related to the SAS  liquidation,  but there can be no assurances that a
deficiency  judgment  will not be  entered  against  Cerplex,  Inc.,  the parent
company.

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 and the United Kingdom. Cerplex's representative customers include
British   Telecommunications   plc  ("BT"),   Cisco   Systems,   Inc.,   Compaq,
Hewlett-Packard Company, IBM, Siemens-Nixdorf and Dell Financial Services.

     For the  fiscal  year ended  September  25,  1999,  Cerplex's  two  largest
customers were Rank Xerox and BT. For the fiscal year ended  September 25, 1999,
Rank  Xerox and BT  accounted  for  approximately  18% and 15% of net  revenues,
respectively.  These revenues were almost entirely  attributable to the business
of Old Cerplex. The Rank Xerox business was terminated on July 20, 1999 when the
Company lost control of SAS.

COMPETITION

    Cerplex  competes with the in-house repair centers of OEMs, TPMs and certain
contract manufacturers 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 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;  (ii)  sophisticated  search  capabilities  to enable  customers to
locate parts; (iii) ability to offer rapid delivery and sophisticated  logistics
programs;  and (iv) 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 September  25,  1999,  Cerplex had a work force of  approximately  579
employees,  of which 215 were  employees of Cerplex Ltd. The  approximately  215
employees  of  Cerplex  Ltd.  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 LOANS

    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.  Following the Merger,  the Company's
headquarters  were  relocated  from  San  Diego,  California,   to  the  Tustin,
California,  headquarters  of Old  Cerplex,  and  subsequently  to  the  current
headquarters  in Irvine,  California.  On November 24, 1999,  the Company merged
Aurora Electronics  Group, Inc. into Cerplex,  Inc. and the Company now conducts
its  operations  through its  wholly-owned  subsidiary,  Cerplex,  Inc.  and its
subsidiaries.

                                       6
<PAGE>

     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  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  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.  The Greyrock  Line of Credit  consisted 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  borrowings of up to $10.0 million
depending on certain  financial  conditions of the Company.  WCAS had guaranteed
the repayment 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.

    On June 25, 1999 the Company  consented to an  assignment by Greyrock of its
rights and  interests  under the  Greyrock  Line of Credit to WCAS in return for
payment  in  full  of  all  outstanding   balances  of  principal  and  interest
thereunder.  WCAS repaid principal and interest  outstanding  under the Greyrock
Line of Credit  totaling $45.4 million.  Concurrent  with the  assignment,  WCAS
advanced to the Company an additional $4.6 million for working capital purposes,
resulting  in $50.0  million of total  indebtedness  outstanding  under the WCAS
Senior Secured Notes as of June 25, 1999 (the "WCAS Refinancing").  The terms of
the WCAS Senior  Secured  Notes are the same as those under the Greyrock Line of
Credit  except (i) the  interest  rate was  reduced  to LIBOR plus 1 3/4%;  (ii)
principal and interest are due on April 1, 2001; (iii) collateral  consisting of
the stock of the  Company's  subsidiaries  in the UK and France that had secured
the Greyrock Line of Credit was released;  (iv) the negative  pledge  agreements
covering  assets owned by the Company's  subsidiaries  in the UK and France were
terminated;  and (v) the Company's obligations were no longer subject to minimum
collateral  borrowing base requirements  previously  established in the Greyrock
Line of Credit. On June 30, 1999 the Company issued  approximately 58,643 shares
of  Series B  Preferred  Stock at a price of  $1,000  per  share.  The  Series B
Preferred  Stock was issued as  repayment  of various  obligations  owed to WCAS
which  included  $25.0  million of principal  outstanding  under the WCAS Senior
Secured Notes,  $16.5 million of principal of the 10% WCAS Notes,  approximately
$15.6 million of principal of the 10% Series A Senior  Subordinated  Debentures,
and  approximately  $1.5  million of accrued  interest  owed to WCAS under these
obligations.   The  Series  B  Preferred   Stock   consists  of  7%  cumulative,
non-convertible  preferred  shares  that are  redeemable  by the  Company at its
option and redeemable by the holders upon a change of control of the Company.




                                       7
<PAGE>
     On November 24, 1999 the Company and its subsidiary entered into a Loan and
Security   Agreement   ("Congress  Line  of  Credit")  with  Congress  Financial
Corporation (Western)  ("Congress") providing for a $13.0 million senior secured
revolving  credit  facility.  Concurrent  with this  financing,  WCAS  agreed to
subordinate its security interest in the Company's assets.  The Congress Line of
Credit which matures in February 2001, will provide  additional  working capital
and  financing  for the  Company's  domestic  operations.  Loans  under the loan
agreement  bear  interest  at  fluctuating  rates of either the Prime  Rate,  as
defined,  plus 1/2% or the Adjusted  Eurodollar  Rate, as defined,  plus 2-3/4%.
Borrowing availability pursuant to the Congress Line of Credit is limited by the
value,  as defined in the credit  agreement,  of assets  pledged as  collateral,
namely accounts receivable and inventory.  The agreement also contains customary
financial  covenants  and events of default  for  financings  of this type.  The
liquidation of Cerplex  S.A.S.  caused a default and a  cross-default  under the
Congress  loan.  The  Company  is in  discussions  with  Congress  regarding  an
amendment or waiver to the loan agreement which will bring the Company back into
compliance  with the loan  covenants.  Cerplex,  Inc. is the borrower  under the
Congress  Line of  Credit  and  the  Company  guarantees  the  repayment  of its
obligations thereunder.

    On December 15, 1999,  Cerplex,  Ltd.  closed a financing  arrangement  (the
"Burdale Loans") with Burdale  Financial  Limited  ("Burdale"),  an affiliate of
Congress.  The credit facility  provides for advances to Cerplex Ltd. up to $2.9
million under a line of credit secured by accounts  receivable  (due in February
2001)  and up to $3.5  million  under a loan  secured  by  real  estate  (due in
December 2003). This credit facility was used to repay existing  indebtedness to
BT and will be used to finance the working  capital  needs of Cerplex  Ltd.  The
Burdale Loans bear interest at  fluctuating  rates of LIBOR plus 2%. The Burdale
Loans are covered by an agreement that provides  customary  financial  covenants
and events of default  for  financing  arrangements  of this type.  Indebtedness
under this agreement is guaranteed by the Company.

    The terms of the Congress Line of Credit,  the Burdale Loans, the 10% Senior
Subordinated  Notes, the 7% Convertible  Preferred Stock, 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  Common  Stock  of  the  Company.   On  June  30,  1999  the  Company  issued
approximately 58,643 shares of Series B Preferred Stock at a price of $1,000 per
share.  The  Series B  Preferred  Stock  was  issued  as  repayment  of  various
obligations  owed to WCAS which included $25.0 million of principal  outstanding
under the WCAS Senior Secured Notes,  $16.5 million of principal of the 10% WCAS
Notes,  approximately  $15.6  million  of  principal  of the 10% Series A Senior
Subordinated Debentures, and approximately $1.5 million of accrued interest owed
to WCAS under these  obligations.  The Series B Preferred  Stock  consists of 7%
cumulative,  non-convertible preferred shares that are redeemable by the Company
at its option and  redeemable at the option of the holders only upon a change of
control of the Company.  As of December 29, 1999, there were 7,375,915 shares of
the Company's Common Stock outstanding.



                                       8
<PAGE>
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:

     High Degree of Leverage;  Future Capital  Requirements.  As of December 15,
1999  the  Company  had   approximately   $42.3  million   principal  amount  of
indebtedness  outstanding,  which  consisted of: (i) $25.9 million  indebtedness
under the WCAS secured loan; (ii) $0.4 million  indebtedness under the Company's
10% Series B Senior Subordinated  Notes; (iii) $10.4 million  indebtedness under
the  Company's 7 3/4%  Convertible  Subordinated  Debentures;  (iv) $3.0 million
indebtedness  under the Burdale Loans; (v) $2.4 million  indebtedness  under the
Congress Line of Credit; and (vi) $0.2 million of other indebtedness  consisting
primarily  of  equipment  leases.  The Company also had as of December 15, 1999,
$21.55 million  outstanding  (excluding  accrued dividends of $8,942,000) 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 or mandatorily  redeemable  preferred stock. 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 liquidation
of  Cerplex  S.A.S.  may  cause  the  acceleration  of  all  the  material  debt
instruments  of  the  Company,  either  because  it  triggers  a  default  or  a
cross-default under such instruments. Unless appropriate waivers are obtained by
the Company,  the acceleration of such debt would have a material adverse effect
on the  Company.  The Company is  currently in the process of preparing a waiver
request  from its debt  holders  and is engaged in  discussions  with its senior
lenders  regarding  the  default.  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 25,
1999, the Company  reported a net loss of $50.6 million and an operating loss of
$47.1 million. As of September 25, 1999, the Company had a stockholders' deficit
of $47.5  million.  The  Company  is  expecting  to  experience  losses  for the
foreseeable future, and will require additional funding. Continued losses and/or
the failure to obtain such  additional  funding 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.

    Control by WCAS. WCAS owns approximately 69% 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 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 25, 1999,
Rank  Xerox and BT  accounted  for  approximately  18% and 15% of the  Company's
revenues,  respectively. These revenues were almost entirely attributable to the
business of Old  Cerplex.  The Rank Xerox  business was  terminated  on July 20,
1999, when the Company lost control of Cerplex S.A.S.  This is described in Item
1 of this Annual Report under "European Operations."

                                       9
<PAGE>
While  certain  multi-year  contracts  are in effect  which  govern the work the
Company  performs for BT, there can be no assurance  that BT 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 BT does  business.  Any  such
termination, change, reduction, or delay could have a material adverse effect on
the Company's business.

    Competition.  The  Company  competes  with the  in-house  repair and service
centers of OEMs, TPMs and certain contract manufacturers. 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 25,
1999,  approximately 21% of the Company's sales were from its U.K. subsidary and
approximately 29% of the Company's sales were from its French subsidiary,  which
has been deconsolidated. 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, as a result of the liquidation of Cerplex S.A.S., the Company
terminated its contract with Rank Xerox,  which accounted for  approximately 18%
of the  Company's  revenues  for  the  1999  fiscal  year.  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  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.

    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  25,  1999,
approximately $9.6 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  has  implemented  programs to
remediate  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.  Subsequent to January 1, 2000, the Company has encountered  only
minimal problems related to Year 2000 issues. However, there can be no assurance
that future Year 2000 issues, if any, will be inconsequential. 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."

ITEM 2. PROPERTIES

     The Company leases certain office and warehouse  facilities under operating
leases and  subleases  which expire at various  dates during the next six years.
The Company  believes that its existing  facilities are adequate for its current
business. The Company's executive offices are located at the Irvine, California,
facility  listed below. A description of the facilities  leased and subleased by
the Company as of December 15, 1999 is as follows:

<TABLE>
<CAPTION>
                                             SQUARE
LOCATION                                     FOOTAGE  LEASE EXPIRATION
--------                                    --------- ----------------
<S>                                         <C>       <C>
Jeffersontown, Kentucky.................     77,000   November 2001
Tewksbury, Massachusetts................    250,180   May 2005
Livermore, California...................    124,914   June 2003
Irvine, California - Headquarters.......     23,660   February 2004
Irvine, California - Warehouse..........     10,240   March 2002
</TABLE>


                                       10
<PAGE>
  In addition,  the Company's  European  subsidiary owns land and buildings in
Enfield, England.

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

    On June 30,  1999 a  requisite  number  of the  Company's  security  holders
approved,  by written  consent,  the  designation  and  issuance of the Series B
Senior Cumulative Preferred Stock.

                                     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  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 1999          FISCAL YEAR 1998
                                  (OCTOBER 1, 1998 TO       (OCTOBER 1, 1997 TO
                                  SEPTEMBER 25, 1999)       SEPTEMBER 30, 1998)
                                  -------------------       -------------------
                                   HIGH          LOW         HIGH         LOW
                                ---------    ---------     -------      ------
<S>                             <C>          <C>           <C>          <C>
First Quarter..............     $    1.75    $    0.09     $ 16.00      $ 7.50
Second Quarter.............     $    1.16    $    0.53     $ 11.10      $ 2.70
Third Quarter..............     $    1.00    $    0.38     $  6.10      $ 2.50
Fourth Quarter.............     $    2.06    $    0.88     $  4.20      $ 0.90
</TABLE>

                                       11
<PAGE>
    On December 16, 1999,  the closing bid price per share of the Common Stock
as reported on the OTC Bulletin Board was $1.125. As of December 16, 1999, the
Company had 1,018 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 Congress Line
of Credit prohibits payment of cash dividends.

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          FOR THE YEAR ENDED SEPTEMBER 30,
                                          25,      -----------------------------------------------
                                          1999        1998         1997         1996         1995
                                        ---------   ---------  ---------    ---------    ---------
<S>                                     <C>         <C>        <C>          <C>          <C>
 OPERATING DATA
 Net revenues......................     $  93,346   $  66,423  $  64,892    $  98,019    $ 141,852
                                        ---------   ---------  ---------    ---------    ---------
 Gross profit......................         3,685       4,869     12,986       24,443       34,582
 Selling, general and administrative
   expenses........................        22,304      23,145     23,466       25,943       28,170
 Amortization of intangibles.......        24,295(1)    3,701     34,044(2)    18,042(3)     9,073(4)
 Restructuring charge and other....         4,170(5)       --         --           --        5,643(6)
                                        ---------   ---------  ---------    ---------    ---------
 Operating loss....................       (47,084)    (21,977)   (44,524)     (19,542)      (8,304)
 Interest expense..................        (6,415)     (5,465)    (4,050)      (6,221)      (5,522)
 Other income (expense), net.......         1,617      (1,653)      (498)      (1,284)         116
                                        ---------   ---------  ---------    ---------    ---------
 Loss  from   continuing   operations
    before taxes...................       (51,882)    (29,095)   (49,072)     (27,047)     (13,710)
 Net loss..........................     $ (50,606)  $ (29,095) $ (49,605)   $ (30,353)   $ (15,030)
                                        =========   =========  =========    =========    =========
 Loss from continuing operations before
   taxes per share(6)..............     $   (7.08)  $   (7.57) $  (73.57)   $  (37.78)   $   (16.36)
 Net loss per share(6).............     $   (6.90)  $   (7.57) $  (74.37)   $  (42.39)   $   (17.94)
 Net loss applicable to common
   shareholders(6).................     $   (7.25)  $   (8.26) $  (78.60)   $  (44.40)   $   (17.94)
 Weighted average number of common
   shares(6).......................         7,333       3,843        667          716          838
</TABLE>
--------------------------------------------------------------------------------

(1)  During the third quarter of fiscal 1999,  approximately $18,375 relating to
     a write-down  of  intangible  assets  acquired in fiscal 1998 in connection
     with the merger with Old Cerplex was charged to operations.

(2)  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.

(3)  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.

(4)  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.

(5)  During  fiscal  1999,  approximately  ($2,006)  related to a  reduction  in
     accruals,  offset by $6,176  related  to the loss due to loss of control of
     SAS were charged to operations.

(6)  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.

(7)  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.

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                        AS OF                 AS OF SEPTEMBER 30,
                                      SEPTEMBER  --------------------------------------------
                                         25,
                                         1999       1998        1997       1996       1995
                                      ---------- ----------  ---------  ---------   --------
<S>                                              <C>         <C>        <C>         <C>
BALANCE SHEET DATA
Working capital (deficit).........     $(36,496) $ (55,415)  $  (3,113) $     610   $    196
Total assets......................       35,631    100,541      14,629     52,788     80,716
Long-term obligations (less current
  maturities).....................           --     25,782      36,585     25,842     46,183
Redeemable convertible preferred
  stock...........................       30,492     34,150      46,722     40,000         --
Stockholders' equity (deficit)....      (47,539)   (59,208)    (83,320)   (31,690)    12,338
Dividends declared................           --         --          --         --         --
</TABLE>


                                       13
<PAGE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

     The Company provides repair and logistics services,  and 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.  Until  November  1999 the  Company
operated  through  its two  principal  subsidiaries,  Cerplex,  Inc.  and Aurora
Electronics  Group,  Inc.,  and their  subsidiaries.  In connection  with a bank
financing  arrangement  that closed in November 1999, the Company  merged Aurora
Electronics  Group,  Inc. into Cerplex,  Inc. Based in Irvine,  California,  the
Company has locations in the United States and 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. The contract with Rank
Xerox  has  been  terminated  as a  result  of  the  liquidation  and  resultant
deconsolidation of SAS. 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  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  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.

                                       14
<PAGE>
    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
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. Until
November 1999, the Company  conducted its  operations  through two  wholly-owned
subsidiaries,  Cerplex,  Inc.  and Aurora  Electronics  Group,  Inc.,  and their
subsidiaries.  In November 1999, the Company  merged Aurora  Electronics  Group,
Inc. into Cerplex, Inc.

    On June 25, 1999 the Company  consented to an  assignment by Greyrock of its
rights and  interests  under the  Greyrock  Line of Credit to WCAS in return for
payment  in  full  of  all  outstanding   balances  of  principal  and  interest
thereunder.  WCAS repaid principal and interest  outstanding  under the Greyrock
Line of Credit  totaling $45.4 million.  Concurrent  with the  assignment,  WCAS
advanced to the Company an additional $4.6 million for working capital purposes,
resulting  in $50.0  million of total  indebtedness  outstanding  under the WCAS
Senior  Secured Notes as of June 25, 1999.  The terms of the WCAS Senior Secured
Notes are the same as those  under the  Greyrock  Line of Credit  except (i) the
interest rate was reduced to LIBOR plus 1 3/4%;  (ii) principal and interest are
due on April 1, 2001; (iii) collateral  consisting of the stock of the Company's
subsidiaries  in the UK and France that had secured the Greyrock  Line of Credit
was released;  (iv) the negative pledge agreements  covering assets owned by the
Company's  subsidiaries  in the UK and  France  were  terminated;  and  (v)  the
Company's  obligations  were no longer subject to minimum  collateral  borrowing
base requirements previously established in the Greyrock Line of Credit. On June
30, 1999 the Company  issued  approximately  58,643 shares of Series B Preferred
Stock at a price of $1,000 per share. The Series B Preferred Stock was issued as
repayment of various  obligations  owed to WCAS which  included $25.0 million of
principal  outstanding  under the WCAS Senior  Secured  Notes,  $16.5 million of
principal of the 10% unsecured  promissory notes ( "WCAS Notes"),  approximately
$15.6 million of principal of the 10% Series A Senior  Subordinated  Debentures,
and  approximately  $1.5  million of accrued  interest  owed to WCAS under these
obligations.   The  Series  B  Preferred   Stock   consist  of  7%   cumulative,
non-convertible  preferred  shares  that are  redeemable  by the  Company at its
option and redeemable by the holders upon a change of control of the Company.

     As  of  April  30,  1998   following  the  merger  of  Cerplex  and  Aurora
Electronics,  Inc.,  the Company  recorded an excess of purchase  price over net
assets  acquired  totaling  approximately  $40.6  million.  Since that time, the
Company has closed and  consolidated  several of its operations,  exited certain
lines of business and has revised its estimates  for expected  future cash flows
from continuing  operations.  Based on these estimates and the goodwill ascribed
to closed and discontinued  operations,  the Company determined,  in the quarter
ended June 30, 1999, that an impairment  charge of  approximately  $18.4 million
was  necessary.  The carrying  value of goodwill as of June 30, 1999,  after the
impairment charge,  was approximately $9.7 million.  The blended average life of
the goodwill  attributable to all operations originally acquired was five years.
However,  subsequent to the write-off of  terminated  operations,  the remaining
operations have a 15 year remaining useful life.

     On July 20, 1999,  the  management  of SAS  requested  assistance  from the
Commercial  Court of Lille,  France to  structure a social plan for a portion of
the work force.  Upon review,  the Commercial Court declared SAS insolvent as of
July 15, 1999 and opened bankruptcy  proceedings with respect to SAS. A judicial
administrator  was appointed by the Court to assist the management of SAS in all
its  activities   pending  the  Court's  decision  on  the  development  of  the
proceedings.  The terms of  assignment  of the judicial  administrator  included
reviewing SAS's condition and prospects and issuing a recommendation relating to
a plan of  reorganization  developed by SAS management.  While the administrator
was  overseeing  SAS's   operations,   the  Company  believed  that  a  plan  of
reorganization  would be adopted.  In the event that the administrator could not
support a plan of reorganization, it would become necessary to refer the case to
a liquidator pursuant to Commercial Court guidelines.

     On October 12, 1999, the Commercial Court,  acting upon the  recommendation
of the judicial  administrator,  ordered the  liquidation  of SAS. Prior to this
decision,  management  believed it would realize its investment in SAS through a
reorganization.  However,  after the liquidation of SAS was ordered, the Company
realized its  investment in SAS was lost and should  therefore be written off as
of July 20, 1999, the date Cerplex,  Inc. lost control of its  subsidiary.  As a
consequence of this order, the Company terminated the operations of SAS, and the
liquidator  has  laid  off  substantially  all  employees.   The  liquidator  is
responsible  for  selling  the assets  and  paying off the debts of SAS.  As the
result of the cost of laying-off all employees,  the value of the SAS assets may
not exceed the value of its liabilities. There can be no assurance that Cerplex,
Inc.,  as  shareholder,  will  receive any  liquidation  proceeds.  Accordingly,
Cerplex,  Inc. has written off its  investment in SAS which totaled $6.2 million
at July 20, 1999.

    Since the Company  effectively lost management  control as of July 20, 1999,
SAS has been deconsolidated  from the Company's financial  statements as of that
date. Based on Management's understanding and outside legal counsel's assessment
of the  situation  in  France,  the  Company  believes  there  is no  additional
financial  exposure  related  to  the  SAS  liquidation,  but  there  can  be no
assurances that a deficiency  judgment will not entered against  Cerplex,  Inc.,
the parent  company.  This is further  described in Item 1 of this Annual Report
under "European Operations."

RESULTS OF  OPERATIONS  YEAR ENDED  SEPTEMBER  25, 1999 COMPARED WITH YEAR ENDED
SEPTEMBER 30, 1998

     Net  revenues  for the year ended  September  25, 1999 for the Company were
$93,346,000  as compared to $66,423,000  for the year ended  September 30, 1998.
The  Company's  increase in revenues  was  attributable  to the  revenues of Old
Cerplex  which were  included  for the full  fiscal  year in 1999 as compared to
fiscal 1998, which recorded revenues from the date of the merger in April 1998.

     Gross  profit for fiscal  1999 was  $3,685,000  (4.0% of net  revenues)  as
compared to gross profit of  $4,869,000  (7.3% of net revenues) for fiscal 1998.
The  decrease  in gross  profit  was due  primarily  to the lower  gross  profit
contribution of Old Cerplex which is included for a full year in fiscal 1999.

     Selling,   general  and  administrative   expenses  for  fiscal  1999  were
$22,304,000  (23.9% of revenue) as compared  $23,145,000  (34.8% of revenue) for
fiscal 1998.  The decrease as a percentage  of revenues was due to the reduction
in employees primarily related to the closing and consolidation of certain depot
repair facilities coupled with the increase in revenues.

     Amortization  expense  for  fiscal  1999 was  $24,295,000  as  compared  to
$3,701,000 for fiscal 1998. Fiscal 1999 included write-offs of goodwill totaling
approximately  $18,375,000 and amortization  related to the goodwill  associated
with Old  Cerplex  for the  entire  fiscal  year.  Additionally,  the  remaining
goodwill after the write-off,  began amortization over the remaining 15 years of
useful life in June, 1999.

     Reduction  in accruals  for fiscal 1999 was  $(2,006,000)  due to estimates
related to certain Aurora  accruals  established in 1998 and earlier years which
were reduced by approximately $1.2 million and accruals related to inventory and
accounts  payable  established in 1998 and earlier years which were analyzed and
reduced by  approximately  $0.8 million  during the quarter ended June 30, 1999.
The estimates were reduced based on the receipt of new information, negotiations
and settlements, which became available or occurred at that time.

     Loss due to loss of control of  subsidiary  for fiscal 1999 was  $6,176,000
due to the  write-off of the  investment  in SAS. As a result of the  Commercial
Court in France  appointing  an  administrator  and  subsequently  appointing  a
liquidator  during the fourth  quarter of 1999,  the Company lost control of SAS
and  management  determined  that it was unlikely that the Company would receive
any net proceeds from the  liquidation  of SAS.  Prior to the  Commercial  Court
appointing a liquidator,  management believed it would realize its investment in
SAS through a reorganization.  The loss of control of subsidiary will materially
reduce revenues and reduce some selling,  general and administrative expenses in
future periods.

     Net interest  expense for fiscal 1999 was $6,415,000 (6.9% of net revenues)
as compared to $5,465,000  (8.2% of net revenues) for fiscal 1998.  The increase
in interest  expense is due to higher  loan  balances  on the  Greyrock  Line of
Credit.

     Other income for fiscal 1999 was  $1,617,000  and other  expense for fiscal
1998 was $1,653,000, consisting of miscellaneous non-operating items each year.

     Provision  for income tax was  $10,000 in fiscal  1999 as compared to $0 in
fiscal  1998.  Both  provisions  include a valuation  allowance  provided  for a
deferred tax asset that was not expected to be realized.

     Gain on  discontinued  operations  was $1,286,000 in fiscal 1999 due to the
Company  subleasing the property  related to the sporting  goods  operations and
eliminating the need for the remaining reserve.

     Net loss for fiscal 1999 was  $50,606,000  as compared  to  $29,095,000  in
fiscal 1998.  The fiscal 1999 loss includes  $18,375,000  of  write-offs  due to
goodwill  impairment,  $6,176,000  loss due to loss of  control  of  subsidiary,
offset by $2,006,000  income from reduction of accruals.  If this $22,545,000 of
net  write-offs is excluded  from the loss for fiscal 1999,  the loss for fiscal
1999 was $28,061,000 as compared to $29,095,000 for fiscal 1998.

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).

                                       15
<PAGE>

     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  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 $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.


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,  level of operating losses and required debt principal payments.  The
Company had a working  capital deficit of $36.5 million as of September 25, 1999
as compared to a working  capital  deficit of $55.4  million as of September 30,
1998.  See Note A of Notes to  Consolidated  Financial  Statements  --  "Current
Financial Condition."

     The Company's most immediate  liquidity concern is its potential  inability
to  repay  its  indebtedness  under  the  sinking  fund  payment  for the 7 3/4%
Convertible  Subordinated  Debentures.  This  matter  raises  doubt  as  to  the
Company's  ability to continue as a going  concern.  The  liquidation of Cerplex
S.A.S.  may cause the  acceleration of all the material debt  instruments of the
Company,  either  because it  triggers a default or a  cross-default  under such
instruments.  Unless  appropriate  waivers  are  obtained  by the  Company,  the
acceleration  of such debt would have a material  adverse effect on the Company.
The Company is currently  in the process of preparing a waiver  request from its
debt holders and is engaged in discussions with its senior lenders regarding the
default.  See Note A of Notes to Consolidated  Financial  Statements -- "Current
Financial Condition."

     In addition  to the  possible  need for  capital to make the  sinking  fund
payment,  management  believes the Company will require  substantial  additional
working  capital during fiscal 2000.  Management  believes that the Company will
continue to  experience  operating  losses and negative cash flow during part or
all of fiscal 2000.

     The  Company  is  highly  leveraged,  and has  significant  debt  repayment
obligations and preferred stock redemption obligations.  As of December 15, 1999
the Company had  approximately  $42.3 million  principal  amount of indebtedness
outstanding,  which consisted of: (i) $25.9 million  indebtedness under the WCAS
secured loan;  (ii) $0.4 million  indebtedness  under the Company's 10% Series B
Senior Subordinated Notes; (iii) $10.4 million  indebtedness under the Company's
7 3/4% Convertible Subordinated Debentures; (iv) $3.0 million indebtedness under
the Burdale  Loans;  (v) $2.4 million  indebtedness  under the Congress  Line of
Credit;  and (vi) $0.2  million of other  indebtedness  consisting  primarily of
equipment  leases.  The Company also had as of December 15, 1999, $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.

<PAGE>

     10% Series B Senior  Subordinated Notes. As of December 15, 1999, there was
approximately  $0.4 million  principal  amount  outstanding of the Company's 10%
Series B Senior  Subordinated  Notes.  These  notes were sold to certain  public
stockholders.  The Series B 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  Series B 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 Series B 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, 1999, 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 a partial sinking
fund  payment of  $1,826,000  in 2000 on the  Debentures.  The  Debentures  bear
interest  at 7 3/4%  payable  on April 14 and  October  14 of each year  through
maturity.


     WCAS Senior Secured Notes. As of December 15, 1999, there was $25.9 million
principal and interest  outstanding  under the WCAS Senior  Secured  Notes.  The
notes were issued on June 25, 1999 as part of a capital  restructuring  in which
the Company  consented to an assignment to WCAS by Greyrock of Greyrock's rights
and interest  under the Greyrock Line of Credit to WCAS in return for payment in
full of all  outstanding  balances of principal  and interest  thereunder.  WCAS
repaid  principal  and interest  outstanding  under the Greyrock  Line of Credit
totaling $45.4 million.  Concurrent  with the  assignment,  WCAS advanced to the
Company an additional  $4.6 million for working capital  purposes,  resulting in
$50.0 million of total  indebtedness  outstanding  under the WCAS Senior Secured
Notes as of June 25, 1999.  The terms of the WCAS Senior  Secured  Notes are the
same as those under the Greyrock Line of Credit except (i) the interest rate was
reduced to LIBOR plus 1 3/4%;  (ii)  principal  and interest are due on April 1,
2001; (iii) collateral consisting of the stock of the Company's  subsidiaries in
the UK and France  that had secured the  Greyrock  Line of Credit was  released;
(iv) the negative  pledge  agreements  covering  assets  owned by the  Company's
subsidiaries  in the UK and  France  were  terminated;  and  (v)  the  Company's
obligations  were  no  longer  subject  to  minimum  collateral  borrowing  base
requirements  previously established in the Greyrock Line of Credit. On June 30,
1999 the Company issued  approximately 58,643 shares of Series B Preferred Stock
at a price of $1,000  per  share.  The  Series B  Preferred  Stock was issued as
repayment of various  obligations  owed to WCAS which  included $25.0 million of
principal  outstanding  under the WCAS Senior  Secured  Notes,  $16.5 million of
principal of the 10% unsecured  promissory  notes ("WCAS Notes"),  approximately
$15.6 million of principal of the 10% Series A Senior  Subordinated  Debentures,
and  approximately  $1.5  million of accrued  interest  owed to WCAS under these
obligations.   The  Series  B  Preferred   Stock   consist  of  7%   cumulative,
non-convertible  non-voting  preferred shares that are redeemable by the Company
at its  option and  redeemable  by the  holders  upon a change of control of the
Company.  On November 24, 1999, WCAS agreed to release their collateral to allow
the Company to pledge the collateral to Congress Financial.

     Congress  Line  of  Credit.  On  November  24,  1999  the  Company  and its
subsidiary  entered into a Loan and  Security  Agreement  providing  for a $13.0
million  senior  secured   revolving  credit  facility.   Concurrent  with  this
financing,  WCAS agreed to  subordinate  its security  interest in the Company's
assets.  The  Congress  Line of Credit,  which  matures in February  2001,  will
provide  additional  working  capital and financing  for the Company's  domestic
operations. Loans under the loan agreement bear interest at fluctuating rates of
either the Prime Rate, as defined, plus 1/2% or the Adjusted Eurodollar Rate, as
defined,  plus 2-3/4%.  Borrowing  availability pursuant to the Congress Line of
Credit is limited by the value,  as defined in the credit  agreement,  of assets
pledged as collateral,  namely accounts receivable and inventory.  The agreement
also contains customary financial covenants and events of default for financings
of this type.  Cerplex,  Inc. is the borrower  under the Congress Line of Credit
and the Company guarantees the repayment of its obligations thereunder.

    Secured Note Payable to BT. As of September 25, 1999, there was $3.0 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 GBP2.5 million.
The BT Note was paid off in full,  including accrued  interest,  on December 15,
1999 with proceeds from the Burdale Debenture. (See Burdale Line of Credit.)

     Burdale  Line of Credit.  On December 15, 1999,  Cerplex,  Ltd.  closed the
Burdale Loans with Burdale, an affiliate of Congress. The credit facility, which
matures in February  2001,  provides  for  advances  to Cerplex  Ltd. up to $2.9
million  under a line of credit  secured by  accounts  receivable.  The  Burdale
Debenture,  which matures in December 2003,  provides up to $3.5 million under a
loan secured by real estate.  The Burdale  Debenture was used to repay  existing
indebtedness  to BT and the line of credit  will be used to finance  the working
capital  needs of Cerplex Ltd. The Burdale  Loans bear  interest at  fluctuating
rates of LIBOR plus 2%. The  Burdale  Loans are  covered  by an  agreement  that
provides  customary  financial  covenants  and events of default  for  financing
arrangements  of this type.  Indebtedness  under this agreement is guaranteed by
the Company.

     Other Debt.  As of  September  25, 1999,  there was $0.2 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 2000.

    7% Senior Cumulative  Convertible Preferred Stock. As of September 25, 1999,
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


                                       17
<PAGE>

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).

     During  1999,  the Company  refinanced  debt or  converted  debt to equity,
totaling  $104.0  million,  consisting  of $45.4 million  outstanding  under the
Greyrock Line of Credit and $58.6 million of indebtedness  owed to WCAS pursuant
to the $25.0 million of senior secured indebtedness,  $15.6 million of principal
of the 10% Series A Senior Subordinated Debentures,  and $16.5 million principal
of the 10% unsecured  promissory  notes,  plus $1.5 million of accrued  interest
thereon. The funding sources for the repayment of such indebtedness consisted of
a $50.0  million WCAS Senior  Secured Note and the issuance of $58.6  million of
Series B senior cumulative preferred stock.

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  implemented  a program that was intended to enable the Company
to become Year 2000 compliant.  The Company used 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  purchased and installed  certain
software and hardware intended to upgrade its networked personal computer system
to be Year 2000 compliant.  More significantly,  the Company obtained the source
code for the Company's main operating systems software that the Company modified
to be Year 2000  compliant.  In addition,  the Company has  discussed  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's  internal  systems,  equipment and processes are now
substantially  Year 2000  compliant.  The Company has completed the analysis and
remediation of potential Year 2000 problems with its  significant  suppliers and
customers. 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 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.
Subsequent to January 1, 2000, the Company has encountered only minimal problems
related to Year 2000 issues. The cost of remediation has been immaterial and the
cost of future remediation efforts is expected to be immaterial.

    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  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 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.

NEW ACCOUNTING  PRONOUNCEMENTS

     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.  In August 1999,  the
Financial  Accounting  Standards Board issued Statement of Financial  Accounting
Standards  No.  137,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities--Deferral  of the  Effective  Date of FASB  Statement  No.  133.,  An
Amendment of FASB  Statement No. 133," which defers the  effective  date of SFAS
133 to all fiscal  quarters or fiscal years  beginning after June 15, 2000. 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.

     In 1998, the AICPA issued  Statement of Position No. 98-1,  "Accounting for
the Costs of Computer  Software  Developed or Obtained for Internal Use",  which
provides  guidance  concerning  recognition and measurement of costs  associated
with developing or acquiring  software for internal use. This  pronouncement  is
effective for financial  statements of years  beginning after December 31, 1998,
with  earlier  application  encouraged.  The Company  does not believe  that the
adoption  of this  pronouncement  will have a material  impact on its  financial
statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is subject to market risks with  respect to its  variable  rate
debt and its  cash  flows,  receivables  and  payables  denominated  in  foreign
currencies.

                                       18
<PAGE>

     Of  the  Company's  $39.4  million  principal  amount  of  indebtedness  at
September  25,  1999,  $25.4  million  principal  amount  of  such  debt  (which
represents total principal  indebtedness on the WCAS Senior Secured Notes) 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 $254,000  change in the
annual amount of interest payable on such debt.

     The Company's overseas subsidiary operates in the United Kingdom.  Both the
trade  receivables  and the trade payables for this unit 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 year ended  September  30, 1997 were audited by Arthur  Andersen LLP, and
the Consolidated  Financial  Statements for the fiscal years ended September 30,
1998 and September 25, 1999 were audited by KPMG LLP. In connection  with Arthur
Andersen's audits for fiscal year 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.

                                    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 25, 1999 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 25, 1999.

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 25, 1999.

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 25, 1999.

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 25, 1999.


                                       19
<PAGE>

                                     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>

         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      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
                  (incorporated  by reference from Exhibit 4.18 of the Company's
                  Annual Report on Form 10-K for the fiscal year ended September
                  30, 1998 and filed on January 12, 1999).

         4.2      Certificate  of Elimination  of  Convertible  Preferred  Stock
                  filed on December 15, 1998  (incorporated  by  reference  from
                  Exhibit 4.19 of the  Company's  Annual Report on Form 10-K for
                  the fiscal year ended  September 30, 1998 and filed on January
                  12, 1999).

          4.3     Certificate of Designations,  preferences and Rights of Series
                  B Senior  Cumulative  preferred  Stock  filed on June 30, 1999
                  designating  a  series  of  60,000  shares  (incorporated   by
                  reference from Exhibit 4.3 of the Company's  Quarterly  Report
                  on Form 10-Q for the quarter  ended June 30, 1999 and filed on
                  August 16,1999).

         10.1     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  (incorporated  by reference  from Exhibit
                  10.3 of the  Company's  Annual  Report  on Form  10-K  for the
                  fiscal year ended  September 30, 1998 and filed on January 12,
                  1999).

         10.2     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  (incorporated  by reference  from Exhibit
                  10.4 of the  Company's  Annual  Report  on Form  10-K  for the
                  fiscal year ended  September 30, 1998 and filed on January 12,
                  1999).

          10.3    10% Senior  Subordinated Note for $2,000,000,  due January 26,
                  2000, between the Company,  Aurora Electronics Group, Inc. and
                  Cerplex,  Inc. as payors and Welsh,  Carson,  Anderson & Stowe
                  VII,  L.P. as payee  (incorporated  by reference  from Exhibit
                  10.3 of the  Company's  Quarterly  Report on Form 10-Q for the
                  quarter ended March 31, 1999 and filed on May 17, 1999).
</TABLE>

                                       20
<PAGE>
<TABLE>
<CAPTION>
         EXHIBIT
         NUMBER                    DESCRIPTION OF EXHIBITS
         ------                    -----------------------
<S>               <C>

          10.4    10% Senior Subordinated Note for $1,000,000,  due February 26,
                  2000, between the Company,  Aurora Electronics Group, Inc. and
                  Cerplex,  Inc. as payors and Welsh,  Carson,  Anderson & Stowe
                  VII,  L.P. as payee  (incorporated  by reference  from Exhibit
                  10.4 of the  Company's  Quarterly  Report on Form 10-Q for the
                  quarter ended March 31, 1999 and filed on May 17, 1999).

         10.5     10% Senior  Subordinated  Note for  $2,000,000,  due March 25,
                  2000, between the Company,  Aurora Electronics Group, Inc. and
                  Cerplex,  Inc. as payors and Welsh,  Carson,  Anderson & Stowe
                  VII,  L.P. as payee  (incorporated  by reference  from Exhibit
                  10.5 of the  Company's  Quarterly  Report on Form 10-Q for the
                  quarter ended March 31, 1999 and filed on May 17, 1999).

         10.6     10% Senior  Subordinated  Note for  $2,000,000,  due April 21,
                  2000, between the Company,  Aurora Electronics Group, Inc. and
                  Cerplex,  Inc. as payors and Welsh,  Carson,  Anderson & Stowe
                  VII,  L.P. as payee  (incorporated  by reference  from Exhibit
                  10.6 of the  Company's  Quarterly  Report on Form 10-Q for the
                  quarter ended March 31, 1999 and filed on May 17, 1999).

         10.7     Lease of the Company's primary  headquarters  facility located
                  at  111  Pacifica  Avenue,   Suite  300,   Irvine,   CA  92618
                  (incorporated  by reference from Exhibit 10.7 of the Company's
                  Quarterly  Report on Form 10-Q for the quarter ended March 31,
                  1999 and filed on May 17, 1999).

         10.8     Consent and Amendment to the Loan and Security Agreement dated
                  June 25, 1999 between the Company,  Aurora  Electronics Group,
                  Inc.,  Cerplex,  Inc.  and Cerplex  Mass.,  Inc. as payors and
                  Welsh,  Carson,  Anderson & Stowe VII,  L.P. as  successor  in
                  interest  to   Greyrock   Business   Credit,   a  division  of
                  NationsCredit Commercial Corporation as payee (incorporated by
                  reference from Exhibit 10.8 of the Company's  Quarterly Report
                  on Form 10-Q for the quarter  ended June 30, 1999 and filed on
                  August 16, 1999).

         10.9     Assignment  of Loan  dated  June  25,  1999  between  Greyrock
                  Capital, a division of NationsCredit Commercial Corporation as
                  assignor  and Welsh,  Carson,  Anderson & Stowe VII,  L.P.  as
                  assignee  (incorporated  by reference from Exhibit 10.9 of the
                  Company's  Quarterly Report on Form 10-Q for the quarter ended
                  June 30, 1999 and filed on August 16, 1999).

         10.10    Acknowledgement,  Consent and Release by the  Company,  Aurora
                  Electronics Group, Inc., Cerplex, Inc. and Cerplex Mass., Inc.
                  (incorporated by reference from Exhibit 10.10 of the Company's
                  Quarterly  Report on Form 10-Q for the quarter  ended June 30,
                  1999 and filed on August 16, 1999).


         10.11    Release  by  Welsh,   Carson,   Anderson  &  Stowe  VII,  L.P.
                  (incorporated by reference from Exhibit 10.11 of the Company's
                  Quarterly  Report on Form 10-Q for the quarter  ended June 30,
                  1999 and filed on August 16, 1999).

         10.12    Release of Continuing Guaranty by Greyrock Capital, a division
                  of  NationsCredit  Commercial  Corporation   (incorporated  by
                  reference from Exhibit 10.12 of the Company's Quarterly Report
                  on Form 10-Q for the quarter  ended June 30, 1999 and filed on
                  August 16, 1999).

         10.13    Consent by Silicon  Valley  Bank to the  assignment  documents
                  (incorporated by reference from Exhibit 10.13 of the Company's
                  Quarterly  Report on Form 10-Q for the quarter  ended June 30,
                  1999 and filed on August 16, 1999).

         10.14    Form  of  the  Secured   Promissory  Note  in  the  amount  of
                  $25,000,000  originally  issued on April 30, 1998  amended and
                  restated  on  June  25,  1999  between  the  Company,   Aurora
                  Electronics Group, Inc., Cerplex Mass., Inc. and Cerplex, Inc.
                  as  payors  and  Welsh,  Carson,  Anderson  & Stowe  VII L.P.,
                  affiliates  of Welsh  Carson,  Anderson & Stowe VII,  L.P. and
                  individual  investors as payee (incorporated by reference from
                  Exhibit 10.14 of the Company's  Quarterly  Report on Form 10-Q
                  for the  quarter  ended June 30,  1999 and filed on August 16,
                  1999).

         10.15    Amended and Restated Secured  promissory Note in the amount of
                  $9,024,896.72  issued on June 25, 1999  between  the  Company,
                  Aurora  Electronics  Group,  Inc.,  Cerplex  Mass.,  Inc.  and
                  Cerplex,  Inc. as payors and Welsh,  Carson,  Anderson & Stowe
                  VII,  L.P. as payee  (incorporated  by reference  from Exhibit
                  10.15 of the Company's  Quarterly  Report on Form 10-Q for the
                  quarter ended June 30, 1999 and filed on August 16, 1999).

         10.16    Demand   Promissory  Note  in  the  amount  of  $11,000,000.00
                  originally  issued on April 30, 1998  amended and  restated on
                  June 25, 1999 between the Company,  Aurora  Electronics Group,
                  Inc. and Cerplex, Inc. as payors and Welsh, Carson, Anderson &
                  Stowe VII,  L.P.  as payee  (incorporated  by  reference  from
                  Exhibit 10.16 of the Company's  Quarterly  Report on Form 10-Q
                  for the  quarter  ended June 30,  1999 and filed on August 16,
                  1999).

         10.17    Demand   Promissory  Note  in  the  amount  of   $4,975,103.28
                  originally  issued on April 30, 1998  amended and  restated on
                  June 25, 1999 between the Company,  Aurora  Electronics Group,
                  Inc. and Cerplex, Inc. as payors and Welsh, Carson, Anderson &
                  Stowe VII,  L.P.  as payee  (incorporated  by  reference  from
                  Exhibit 10.17 of the Company's  Quarterly  Report on Form 10-Q
                  for the  quarter  ended June 30,  1999 and filed on August 16,
                  1999).

         10.18    Loan and  Security  Agreement  dated  November 24, 1999 by and
                  among Congress Financial  Corporation  (Western) as lender and
                  Cerplex,  Inc. as  borrower  and The  Cerplex  Group,  Inc. as
                  Guarantor (incorporated by reference from Exhibit 4.1 of the
                  Company's Report on Form 8-K dated December 1, 1999).

        *10.19    Deed of  Debenture  dated  December  15, 1999  between  Cerplex
                  Limited as borrower and Burdale Financial Limited as lender.

        *10.20    Guarantee  and  Indemnity  agreement  dated  December 14, 1999
                  between The Cerplex  Group,  Inc.  as a guarantor  and Burdale
                  Financial Limited as lender.


        *10.21    Facility  Agreement  dated  December 14, 1999 between  Cerplex
                  Limited as borrower and Burdale Financial Limited as lender.

         *23.1    Consent of KPMG LLP.

         *23.2    Consent of Arthur Andersen LLP.

         *27      Financial Data Schedule.

         *99.1    Liquidation of Cerplex S.A.S. - Unaudited pro froma  financial
                  information

--------------------
</TABLE>

* Filed herewith.

(b) Reports on Form 8-K.



                                       21
<PAGE>

     The  following  current  reports  on Form  8-K were  filed  by the  Company
subsequent to the last quarter of the fiscal year ended September 25, 1999:

    1.  Current  report  on Form  8-K  filed  December  1,  1999  regarding  the
        liquidation of Cerplex S.A.S.

    2.  Current report on Form 8-K filed December 1, 1999 regarding the loan and
        security  agreement  with  Congress  Financial   Corporation   (Western)
        providing for a $13 million senior secured revolving credit facility.


                                       22
<PAGE>

                                   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 10, 2000
                                          THE CERPLEX GROUP, INC.


                                          By:  /s/      DEBBI ANDERS
                                               -----------------------------
                                                        Debbi Anders
                                                   Vice President, Finance

                                                (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 10, 2000
-----------------------------------------------------                 and Chief Executive Officer
George L. McTavish                                                   (Principal Executive Officer)

/s/   RICHARD ALSTON                                              President & Chief Operating Officer              January 10, 2000
-----------------------------------------------------
Richard Alston

/s/   DEBBI ANDERS                                                      Vice President, Finance                    January 10, 2000
-----------------------------------------------------
Debbi Anders
                                                                     (Principal Financial Officer)

/s/   ROBERT M. NELSON                                             Corporate Controller (Controller)               January 10, 2000
-----------------------------------------------------
Robert M. Nelson

/s/   THOMAS E. MCINERNEY                                                      Director                            January 10, 2000
-----------------------------------------------------
Thomas E. McInerney

/s/   BRUCE ANDERSON                                                           Director                            January 10, 2000
-----------------------------------------------------
Bruce Anderson
</TABLE>


                                       23
<PAGE>

                    THE CERPLEX GROUP, INC. AND SUBSIDIARIES

          INDEX TO THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULE

<TABLE>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                            <C>
Reports of Independent Auditors..........................................................................      F-2
Consolidated Balance Sheets as of September 25, 1999 and September 30, 1998..............................      F-4
Consolidated Statements of Operations for the year ended  September 25, 1999 and the years ended
   September 30, 1998 and 1997...........................................................................      F-5
Consolidated Statements of Stockholders' Deficit for the year ended September 25, 1999 and
   the years ended September 30, 1998 and 1997...........................................................      F-6
Consolidated Statements of Cash Flows for the year ended September 25, 1999 and the years ended
   September 30, 1998 and 1997...........................................................................      F-7
Notes to Consolidated Financial Statements...............................................................      F-8
Schedule II -- Valuation and Qualifying Accounts for the year ended September 25, 1999 and the years
   ended September 30, 1998 and 1997.....................................................................      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>

                          INDEPENDENT AUDITORS' REPORTS

The Board of Directors
The Cerplex Group, Inc.

     We have audited the accompanying consolidated balance sheets of The Cerplex
Group, Inc. and subsidiaries (formerly known as Aurora Electronics,  Inc.) as of
September  25,  1999  and  September  30,  1998,  and the  related  consolidated
statements  of  operations,  stockholders'  deficit and cash flows for the years
then ended, as listed in the  accompanying  index. In connection with our audits
of the consolidated financial statements,  we also have audited the consolidated
financial  statement  schedule as of and for the years ended  September 25, 1999
and 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
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 The Cerplex
Group,  Inc. and  subsidiaries  as of September 25, 1999 and September 30, 1998,
and the  results  of their  operations  and their  cash flows for the years 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,  is in
default  on  substantially  all of its  debt  obligations  and does not have the
necessary funds to pay  substantially  all of its debt obligations  which are in
default or which mature in fiscal year 2000. 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 20, 1999


                                       F-2
<PAGE>

                         REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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 (not separately presented herein), and the related consolidated  statements
of operations,  stockholders' equity (deficit), and cash flows for the year then
ended.  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 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 Aurora
Electronics,  Inc. and subsidiaries as of September 30, 1997, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

    The  accompanying  consolidated  financial  statements  have  been  prepared
assuming that the Company will continue as a going concern. As discussed in Note
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 audit was 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 audit 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>

                             THE CERPLEX GROUP, INC.
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)

                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                     ASSETS


                                                                                   September 25, 1999    September 30, 1998
                                                                                   ------------------    ------------------
<S>                                                                                     <C>                   <C>
Current assets:
  Cash and cash equivalents........................................................     $     382             $  14,196
  Trade receivables, less allowance for doubtful accounts of
     $912 ($2,511 in 1998).........................................................         9,234                12,416
  Inventories......................................................................         5,375                 6,626
  Other current assets.............................................................         1,191                 4,628
                                                                                        ---------             ---------
  Total current assets.............................................................        16,182                37,866
Property, p\lant and equipment, net.................................................         9,406                25,021
Goodwill, net......................................................................         9,560                37,202
Intangible and other assets, net...................................................           483                   452
                                                                                        ---------             ---------
          Total assets.............................................................     $  35,631             $ 100,541
                                                                                        =========             =========

                                    LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Current portion of long-term debt................................................     $  39,406             $  53,886
  Accounts payable.................................................................         6,674                 9,903
  Accrued liabilities..............................................................         4,802                14,165
  Accrued interest.................................................................           458                 1,424
  Current portion of reserve for discontinued operations...........................            --                   154
  Income taxes payable.............................................................            --                 1,271
  Other current liabilities........................................................         1,338                12,478
                                                                                        ---------             ---------
Total current liabilities..........................................................        52,678                93,281
Long-term debt.....................................................................            --                25,782
Reserve for discontinued operations................................................            --                 1,822
Other long-term liabilities........................................................            --                 4,714
Commitments and contingencies (notes Q and R)
Subsequent events (notes H and S)

Redeemable convertible preferred stock, 216 shares issued
  (260 shares in 1998).............................................................        30,492                34,150
Stockholders' deficit:
  Series B senior cumulative preferred stock, 58,643 shares issued.................        59,669                    --
  Common stock, 75,000 shares authorized, 7,850 shares
     issued (7,601 shares issued in 1998)..........................................         2,270                 2,262
  Additional paid-in capital.......................................................       121,601               116,400
  Accumulated deficit..............................................................      (214,415)             (161,232)
  Treasury stock, at cost, 474 shares (474 shares in
     1998).........................................................................       (16,675)              (16,675)
  Accumulated other comprehensive income...........................................            11                    37
                                                                                        ---------             ---------
Total stockholders' deficit........................................................       (47,539)              (59,208)
                                                                                        ---------             ---------
          Total liabilities and stockholders' deficit..............................     $  35,631             $ 100,541
                                                                                        =========             =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>
                            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,
                                                                  September 25, --------------------
                                                                      1999        1998        1997
                                                                    --------    --------    --------

<S>                                                                 <C>         <C>         <C>
Net revenues ....................................................   $ 93,346    $ 66,423    $ 64,892
Cost of sales ...................................................     89,661      61,554      51,906
                                                                    --------    --------    --------
Gross profit ....................................................      3,685       4,869      12,986
Selling, general and administrative expense: ....................     22,304      23,145      23,466
Amortization of intangibles, including write-offs of $18,375,
     $405 and $32,992 in 1999, 1998 and 1997, respectively ......     24,295       3,701      34,044
Reduction in accruals ...........................................     (2,006)         --          --
Loss on loss of control of subsidiary ...........................      6,176          --          --
                                                                    --------    --------    --------
Operating loss ..................................................    (47,084)    (21,977)    (44,524)
Interest expense ................................................     (6,415)     (5,465)     (4,050)
Other income (expense), net .....................................      1,617      (1,653)       (498)
                                                                    --------    --------    --------
Loss from continuing operations before provision for income taxes    (51,882)    (29,095)    (49,072)
Provision for incomes taxes .....................................         10          --         533
                                                                    --------    --------    --------
Loss from continuing operations .................................    (51,892)    (29,095)    (49,605)
Discontinued operations, net of income taxes and valuation
     allowance:
     Gain on discontinued operations ............................      1,286          --          --
                                                                    --------    --------    --------
Net loss ........................................................    (50,606)    (29,095)    (49,605)
Accrued dividends on preferred stock ............................     (2,577)     (2,665)     (2,822)
                                                                    --------    --------    --------
Net loss applicable to common shareholders ......................   $(53,183)   $(31,760)   $(52,427)
                                                                    ========    ========    ========

Gain (Loss) per share of common stock applicable to common
  shareholders:
     Basic and diluted loss on continuing operations ............   $  (7.43)   $  (8.26)   $ (78.60)
     Basic and diluted gain on discontinued operations ..........       0.18          --          --
                                                                    --------    --------    --------
Net loss per basic and diluted share of common stock applicable
     to common shareholders......................................   $  (7.25)   $  (8.26)   $ (78.60)
                                                                    ========    ========    ========

Weighted average number of common shares outstanding ............      7,333       3,843         667
                                                                    ========    ========    ========
</TABLE>
                                      F-5
<PAGE>

                             THE CERPLEX GROUP, INC.

                   (formerly known as Aurora Electronics, Inc)

                       STATEMENT OF STOCKHOLDERS' DEFICIT
                    (in thousands, except per share figures)

<TABLE>
<CAPTION>

                                                            SERIES B   SENIOR       ADDITIONAL
                                                         CUMULATIVE   CONVERTIBLE
                                     COMMON STOCK           PREFERRED   STOCK         PAID IN      ACCUMULATED      TREASURY
                                  SHARES      AMOUNT       SHARES      AMOUNT       CAPITAL        DEFICIT         STOCK
                                --------------------------------------------------------------------------------------------
<S>                                 <C>          <C>         <C>        <C>        <C>           <C>            <C>
Balances at September 30,
1996.......................           1,049       $ 315        --         --       $ 61,679      $  (77,045)    $ (16,639)
Comprehensive Loss:
  Net loss.................                                                                      $  (49,605)           --
  Currency Translation ....                                                                              --            --
Comprehensive Loss ........                                                                              --            --
Issuance of common stock -
acquisitions...............              23      $   7         --         --      $     380              --            --
Issuance of common stock -
employee bonuses...........               9      $   3         --         --      $     151              --            --
Issuance of common stock -
litigation.................              78      $  23         --         --      $     (23)             --            --
Financing costs - warrants
issued for guarantees on
 bank debt.................              --         --         --         --      $     256              --            --
Accretion of dividends on
redeemable convertible
preferred..................              --         --         --         --             --     $    (2,822)           --
                                ---------------------------------------------------------------------------------------------
Balances at September 30,
1997.......................          1,159     $   348         --         --      $  62,443     $  (129,472)    $ (16,639)
                                =============================================================================================
Comprehensive Loss:
  Net loss.................             --          --         --         --             --     $   (29,095)           --
  Currency Translation.....             --          --         --         --             --              --            --
Comprehensive Loss.........             --          --         --         --             --              --            --
Issuance of common stock -
acquisition................          3,890     $ 1,167         --         --      $   6,616              --            --
Conversion of Series A, B, C,
D redeemable convertible
preferred stock...........           2,544     $   747                    --      $  47,341              --            --
Repurchase of common
stock.....................               8          --         --         --             --              --     $     (36)
Accretion of dividends on
Redeemable Convertible
Preferred Stock...........              --          --         --         --             --     $    (2,665)           --
                                --------------------------------------------------------------------------------------------
Balances at September 30,
1998.......................          7,601     $ 2,262         --     $   --      $ 116,400     $  (161,232)    $ (16,675)
                                ============================================================================================
Comprehensive Loss:
  Net loss................              --          --         --         --             --     $   (50,606)           --
  Currency Translation....              --          --         --         --             --              --            --
Comprehensive Loss........              --          --         --         --             --              --            --
Conversion of Preferred
Stock into Common Stock...             249     $     8         --         --      $   5,201              --            --
Dividends Cumulative
Preferred Series A........              --          --         --         --             --     $    (1,551)           --
Issuance of Series B
senior cumulative
preferred stock...........             --           --     58,643   $ 58,643             --              --            --
Accretion of dividends on
Series B Preferred Stock..             --           --         --   $  1,026             --     $    (1,026)           --
                               ----------------------------------------------------------------------------------------------
Balances at September 25,
1999.......................         7,850      $ 2,270     58,643   $ 59,669      $ 121,601     $  (214,415)    $ (16,675)
                               ==============================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                 ACCUMULATED OTHER
                                   COMPREHENSIVE                      COMPREHENSIVE
                                    INCOME(LOSS)       TOTAL          INCOME(LOSS)
                                ---------------------------------   --------------------
<S>                                  <C>              <C>           <C>
Balances at September 30,
1996.......................          $     --          $(31,690)                     --
Comprehensive Loss:
  Net loss.................                --          $(49,605)            $   (49,605)
  Currency Translation ....                --          $     --                      --
                                                                    -------------------
Comprehensive Loss ........                --                --             $   (49,605)
                                                                    ===================
Issuance of common stock -
acquisitions...............                --          $    387                      --
Issuance of common stock -
employee bonuses...........                --          $    154                      --
Issuance of common stock -
litigation.................                --                --                      --
Financing costs - warrants
issued for guarantees on
 bank debt.................                --          $    256                      --
Accretion of dividends on
redeemable convertible
preferred.................                 --          $ (2,822)                     --
                              ---------------------------------------------------------
Balances at September 30,
1997.......................                --          $(83,320)                     --
                              =========================================================
Comprehensive Loss:
  Net loss.................                --          $(29,095)            $   (29,095)
  Currency Translation.....          $     37          $     37                      37
                                                                   --------------------
Comprehensive Loss.........                --                --             $   (29,058)
Issuance of common stock -                                         ====================
acquisition................                --          $  7,783                      --
Conversion of Series A, B, C,
D redeemable convertible
preferred stock...........                 --          $ 48,088                      --
Repurchase of common
stock.....................                 --          $    (36)                     --
Accretion of dividends on
Redeemable Convertible
Preferred Stock...........                 --          $ (2,665)                     --
                              -------------------------------------
Balances at September 30,
1998.......................          $     37           $(59,208)                   --
                              =====================================
Comprehensive Loss:
  Net loss................                --           $(50,606)            $  (50,606)
  Currency Translation....           $   (26)          $    (26)                   (26)
                                                                    ------------------
Comprehensive Loss........                --                 --             $  (50,632)
                                                                    ==================
Conversion of Preferred
Stock into Common Stock...                --           $  5,209                     --
Dividends Cumulative
Preferred Series A........                --           $ (1,551)                    --
Issuance of Series B
senior cumulative
preferred stock...........                --           $ 58,643                     --
Accretion of dividends on
Series B Preferred Stock..                --           $      0                     --
                              ---------------------------------
Balances at September 25,
1999.......................         $     11           $(47,539)                    --
                              =================================
</TABLE>

    The accompanying notes are an integral part of these financial statements.

                                       F-6

<PAGE>

                             THE CERPLEX GROUP, INC.
                  (FORMERLY KNOWN AS AURORA ELECTRONICS, INC.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                  YEARS ENDED
                                                                                       ------------------------------------
                                                                                       SEPTEMBER          SEPTEMBER 30,
                                                                                                    -----------------------
                                                                                       25, 1999        1998        1997
                                                                                       ---------    ----------- -----------
<S>                                                                                     <C>         <C>         <C>
         CASH FLOWS USED BY OPERATING ACTIVITIES:
         Net loss..................................................................     $(50,606)   $ (29,095)  $ (49,605)
           Adjustments to reconcile net loss to net cash flows
             used by operating activities:
             Depreciation and amortization, including write-offs of intangibles....       27,893        4,994      32,322
             Noncash interest expense..............................................        3,732        2,008       2,044
             Loss on disposition of assets.........................................        1,030          224       3,390
             Foreign currency translation..........................................          (26)          37          --
             Changes in assets and liabilities, net of acquisitions:
               Trade receivables, inventories and other assets.....................          965        8,202       4,227
               Accounts payable, accrued compensation and other
                  liabilities......................................................      (12,476)     (12,730)     (1,389)
               Accrued interest and income taxes
                  receivable/payable...............................................         (587)        (489)         70
               Deferred income taxes...............................................           --           --         500
                                                                                        --------    ---------   ---------
           Net cash flows used by continuing operations............................      (30,075)     (26,849)     (8,441)
           Net cash flows used by discontinued operations..........................       (1,976)        (614)       (478)
           Loss on loss of control of subsidiary, net of cash......................        3,548           --          --
                                                                                        --------    ---------   ---------
           Net cash flows used by operating activities.............................      (28,503)     (27,463)     (8,919)
                                                                                        --------    ---------   ---------
         CASH FLOWS FROM (USED BY) INVESTING ACTIVITIES:
           Acquisition of property, plant and equipment............................       (1,411)      (1,106)     (3,053)
           Purchase of treasury stock, net.........................................           --          (36)         --
           Purchase of Old Cerplex, net of cash acquired...........................           --       13,681          --
                                                                                        --------    ---------   ---------
           Net cash flows from (used by) investing activities......................       (1,411)      12,539      (3,053)
                                                                                        --------    ---------   ---------
         CASH FLOWS FROM FINANCING ACTIVITIES:
           Payments on debt........................................................           --      (59,500)     (1,405)
           Issuance of redeemable convertible preferred stock......................           --       22,750       2,500
           Issuance of senior subordinated debentures..............................           --       15,000          --
           Proceeds from senior secured notes......................................        4,600           --          --
           Proceeds from promissory notes..........................................       11,500        5,000          --
           Proceeds from LIBOR revolving line of credit and term
             debt..................................................................           --       45,547          --
           Advances under line of credit...........................................           --           --       9,663
                                                                                        --------    ---------   ---------
           Net cash flows from financing activities................................       16,100      28,797      10,758
                                                                                        --------    ---------   ---------
           Net change in cash and cash equivalents.................................      (13,814)      13,873      (1,214)
         Cash and cash equivalents at beginning of period..........................       14,196          323       1,537
                                                                                        --------    ---------   ---------
         Cash and cash equivalents at end of period................................          382    $  14,196   $     323
                                                                                        ========    =========   =========
         SUPPLEMENTAL DISCLOSURES:
           Cash paid for:
             Interest..............................................................     $  2,725    $   3,456   $   1,907
                                                                                        ========    =========   =========
             Income taxes..........................................................     $    150    $      30   $      42
                                                                                        ========    =========   =========
         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   $      --
                                                                                        ========    =========   =========
           Issuance of common stock for employee bonuses...........................     $     --    $      --   $     154
                                                                                        ========    =========   =========
           Accretion of dividends on redeemable convertible preferred
             stock.................................................................     $  2,577    $   2,665   $   2,882
                                                                                        ========    =========   =========
           Conversion of redeemable convertible preferred stock into
             common stock..........................................................     $  5,209    $  48,088   $      --
                                                                                        ========    =========   =========
           Conversion of various WCAS debt instruments and accrued interest into
             series B cumulative preferred stock...................................     $ 58,643    $      --   $      --
                                                                                        ========    =========   =========
           Net long term assets written off due to loss of control of subsidiary...     $  6,946           --          --
                                                                                        ========    =========   =========
           Reduction in goodwill due to reduction in accruals                           $  3,738           --          --
                                                                                        ========    =========   =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-7
<PAGE>

                    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 1998 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 year ended  September 25, 1999 and the years ended  September 30,
1998, and 1997, the Company experienced  recurring operating losses. As a result
of these  losses,  at September 25, 1999 the Company has a deficit of $47,539 in
stockholders' equity and negative working capital of $36,496. In addition, since
a  recapitalization  of the  Company  in March  1996,  the  Company  has  relied
primarily upon the financial  support of its largest  stockholder for additional
capital.  On September 25, 1999 the Company had $3.0 million outstanding under a
secured note payable to one of its customers. This note was subsequently paid in
full on December 15, 1999. In fiscal 2000,  the Company will be required to make
a sinking fund payment of $1.8  million on the 7 3/4%  convertible  subordinated
debentures.  The liquidation of Cerplex S.A.S. may cause the acceleration of all
the  material  debt  instruments  of the Company,  either  because it triggers a
default or a cross-default  under such instruments.  Unless appropriate  waivers
are obtained by the Company, the acceleration of such debt would have a material
adverse  effect on the  Company.  The  Company is  currently  in the  process of
preparing a waiver  request from its debt holders and is engaged in  discussions
with its senior  lenders  regarding the default.  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. 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 and logistics services and parts
sourcing and service  management 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.

     Fiscal  Year.  In  fiscal  1999,  the  Company  adopted  a fiscal  year for
reporting  purposes  ending on the last  Saturday of  September  (September  25,
1999).  The  Company's  fiscal  quarters  are on a 13-week  basis  ending on the
Saturday  nearest  to the  quarter  end.  Previously  the  fiscal  year ended on
September 30. The effect of this change is insignificant.

    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.

     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 expected 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

                                      F-8

<PAGE>

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 was initially  being
amortized based on a blended average of five years. As discussed  below,  and in
Note C, events  during fiscal 1999 resulted in the write-off of a portion of the
goodwill associated with the acquisition of Old Cerplex.  The remaining goodwill
is related to operations  with a remaining  useful life of 15 years.  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  undiscounted  cash flows expected to be generated by the
assets.  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."
In accordance  with these  policies,  on April 30, 1998  following the merger of
Cerplex and Aurora Electronics,  Inc. ("Merger"), the Company recorded an excess
of purchase price over net assets acquired totalling approximately $40.6 million
("Goodwill").  Management  allocated  Goodwill based on estimates of future cash
flows expected from the Company's  operations at that time. Since that time, the
Company has closed and  consolidated  several of its operations,  exited certain
lines of business and has revised its estimates  for expected  future cash flows
from the remaining continuing operations. Refer to Note C for further details.

    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. SFAS No. 128 required additional informational
disclosures, and also made 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  (loss)  per share are the same as to
previously reported primary and fully diluted earnings (loss) 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 common stock equivalents. For all years presented,
common stock equivalents (stock options) were excluded from calculations as they
were considered to be anti-dilutive.

         Other Comprehensive  Income /(Loss).  The Company has adopted Statement
of Financial  Accounting  Standards No. 130,  "Reporting  Comprehensive  Income"
("SFAS 130").  SFAS 130  establishes  standards  for reporting of  comprehensive
income  and  its  components  in  annual  and  interim   financial   statements.
Reclassification or restatement of financial statements or financial information
for earlier  periods is required  upon adoption of SFAS 130. For fiscal 1999 and
1998, the Company possessed one of the components of other comprehensive  income
as defined in SFAS 130,  namely foreign  currency  translation  adjustment.  The
amount of other comprehensive  income/(loss) was $(26) and $37 in 1999 and 1998,
respectively.  At the time the  Company  lost  control of SAS,  the  translation
adjustment  related to that  subsidiary  was eliminated and included in the loss
related to the loss of control of the subsidiary.

    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 disclosures as if the Company adopted the accounting
methodology  of SFAS 123 are  required  to be  presented.  See Note L --  "Stock
Option and Savings Plans."

         Segment  Reporting.  The  Company has adopted  Statement  of  Financial
Accounting Standards No. 131,  "Disclosures about Segments of and Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes  standards for reporting
financial and descriptive  information about an enterprise's  operating segments
in its annual financial  statements and selected segment  information in interim
financial  reports.  Reclassification  or restatement  of comparative  financial
statements  or  financial  information  for  earlier  periods is  required  upon
adoption  of SFAS 131. In fiscal  1999,  the  Company  operated in one  industry
segment,  the outsourcing of services to the computer and electronics  industry,
and in accordance  with SFAS 131,  only  enterprise-wide  disclosures  have been
provided (see Note O of Notes to Consolidated Financial Statements).

     Computer  Software.  In 1998,  the AICPA  issued  Statement of Position No.
98-1, " Accounting for the Costs of Computer Software  Developed or Obtained for
Internal Use", which provides guidance concerning recognition and measurement of
costs  associated with  developing or acquiring  software for internal use. This
pronouncement  is effective for financial  statements of years  beginning  after
December 31, 1998,  with earlier  application  encouraged.  The Company does not
believe that the adoption of this  pronouncement  will have a material impact on
its consolidated financial statements.

                                      F-9

<PAGE>

     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 25, 1999 and September 30, 1998, the carrying
value of all debt and redeemable  convertible  preferred stock 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.

    The  estimated  fair value of assets and  liabilities  as of the date of the
acquisition of MicroLine is summarized as follows:

<TABLE>
<CAPTION>
<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  during  fiscal  1998.  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  (after  giving  effect to the  Company's
one-for-ten  reverse  stock  split,  discussed  elsewhere  herein).  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 issued  simultaneous  to the merger.  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 determined to be $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>
<CAPTION>
<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>
                                      F-10
<PAGE>

    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.

    The following  table presents  unaudited pro forma  consolidated  results of
operations for the year ended September 30, 1998 assuming the acquisition of Old
Cerplex  occurred as of October 1, 1997 (in  thousands,  except per share data).
These results are not necessarily indicative of future operations:

                                                           1998
                                                           ----
                     Net sales......................    $  95,654
                     Net loss.......................      (32,250)
                     Loss per share-- basic and
                        diluted.....................        (8.39)


     The Company  reviews the carrying  value of goodwill  and other  long-lived
assets  whenever  circumstances  indicate  that the  carrying  amount may not be
recoverable based upon estimates of undiscounted  future cash flows.  During the
quarter ended June 30, 1999,  management evaluated the recoverability of the Old
Cerplex goodwill based on revised  estimates and the goodwill ascribed to closed
and terminated operations. Based on this evaluation, the Company determined that
an impairment charge of approximately  $18.4 million was necessary.  The Company
recorded this charge  during the three months ended June 30, 1999.  The carrying
value of  goodwill as of June 30, 1999 after the  impairment  was  approximately
$9.7 million.  This intangible  asset is being amortized over a remaining useful
life of 15 years. The blended average life of all operations originally acquired
was five years. However,  subsequent to the write-off of terminated  operations,
the  remaining  operations  have a remaining 15 year useful life. It is possible
that a subsequent  review may require a further  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

         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 25, 1999, no material assets
remained  related  to  the  discontinued  operations.  Obligations  relating  to
discontinued  operations  consist  primarily of a leased  building.  The Company
initially  accrued an estimated loss on the lease;  however in 1999, the Company
was able to sublease the building which resulted in a reduction in the estimated
accrual of $1,286 for the amount of probable  sub-lease  income.  Such amount is
reflected as a gain on discontinued operations in the accompanying  consolidated
statement of operations.

NOTE E -- INVENTORIES

    Inventories  at September 25, 1999 and  September 30, 1998  consisted of the
following:

<TABLE>
<CAPTION>
                                                                         1999     1998
                                                                         ----     ----
<S>                                                                    <C>      <C>
                                            Spare and repair parts.    $ 4,687  $5,569
                                            Work in process........        493     113
                                            Finished goods.........        195     944
                                                                       -------  ------
                                               Total inventories...    $ 5,375  $6,626
                                                                       =======  ======
</TABLE>
                                      F-11

<PAGE>

NOTE F -- PROPERTY, PLANT AND EQUIPMENT

    Property,  plant and  equipment at September 25, 1999 and September 30, 1998
consisted of the following:

<TABLE>
<CAPTION>
                                                                 ESTIMATED LIFE     1999     1998
                                                                 --------------     ----     ----
<S>                                                               <C>           <C>       <C>
                               Land..........................                    $  2,464  $  5,482
                               Buildings.....................       20 years        2,210     2,135
                               Furniture, fixtures and
                               equipment.....................      3-5 years       12,862    20,205
                               Leasehold improvements........      1-5 years          828     1,196
                                                                                 --------  --------
                                                                                   18,364    29,018
                               Less accumulated depreciation
                               and amortization..............                      (8,958)   (3,997)
                                                                                 --------  --------
                                         Total property, plant
                                           and equipment......                   $  9,406  $ 25,021
                                                                                 ========  ========
</TABLE>

     The Property,  plant and equipment balances at September 25, 1999 have been
affected  primarily  by the  loss  of  control  of  SAS  which  resulted  in the
elimination  of  approximately  $10.0  million in fixed assets (See Note R for a
further discussion).

                                      F-12
<PAGE>


NOTE G -- GOODWILL, INTANGIBLES AND OTHER ASSETS

    Intangibles  and other assets at September  25, 1999 and  September 30, 1998
consisted of the following:

<TABLE>
<CAPTION>
                                                                                1999      1998
                                                                                ----      ----
<S>                                                                          <C>        <C>
                                   Goodwill..............................    $  9,722   $40,583
                                   Debt issuance costs...................          --       601
                                   Other.................................         483       557
                                                                             --------   -------
                                   Total goodwill, intangibles and other
                                   assets................................    $10,205     41,741
                                   Less accumulated amortization.........       (162)    (4,087)
                                                                             -------    -------
                                             Net goodwill, intangibles and
                                              other assets................   $ 10,043   $37,654
                                                                             ========   =======
</TABLE>


    Due to the closure of the PowerSource  Division business during fiscal 1998,
management charged the remaining  unamortized  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.

     As  of  April  30,  1998   following  the  merger  of  Cerplex  and  Aurora
Electronics,  Inc. ("Merger"),  the Company recorded an excess of purchase price
over net assets  acquired  totaling  approximately  $40.6 million  ("Goodwill").
Since  that  time,  the  Company  has  closed  and  consolidated  several of its
operations,  exited  certain lines of business and has revised its estimates for
expected future cash flows from continuing operations.  Based on these estimates
and the goodwill ascribed to closed and discontinued operations, the Company has
determined  that  an  impairment  charge  of  approximately  $18.4  million  was
necessary  (after a reduction  in goodwill of $3.7 million due to a reduction in
Old Cerplex  accruals during the three months ended June 30, 1999).  The Company
recorded this charge  during the three months ended June 30, 1999.  The carrying
value  of  Goodwill  as of June 30,  1999,  after  the  impairment  charge,  was
approximately  $9.7  million.  The $9.7  million  value is the  result  of $40.6
million initial value,  net of $12.5 million of accumulated  amortization,  less
the $18.4 million  write-off.  This  intangible  asset is being amortized over a
remaining useful life of 15 years.

                                      F-13
<PAGE>

NOTE H -- LONG-TERM DEBT

    Long-term  debt at September 25, 1999 and September 30, 1998 consists of the
following:

<TABLE>
<CAPTION>
                                                                                 1999       1998
                                                                                 ----       ----
<S>                                                                           <C>        <C>
                                 LIBOR revolving line of credit.............. $      --  $  9,547
                                 LIBOR term debt.............................        --    36,000
                                 WCAS LIBOR term debt........................    25,439        --
                                 10% Senior subordinated notes...............       387    15,000
                                 7 3/4% Convertible subordinated debentures..    10,408    10,381
                                 Secured note payable to customer............     2,957     3,064
                                 Promissory note.............................        --     5,000
                                 Other.......................................       215       676
                                                                              ---------  --------
                                           Total long-term debt..............    39,406    79,668
                                           Less current portion of
                                             long-term debt..................   (39,406)  (53,886)
                                                                              ---------  --------
                                           Total long-term portion........... $      --  $ 25,782
                                                                              =========  ========
</TABLE>

     The  liquidation of Cerplex S.A.S.  may cause the  acceleration  of all the
material debt  instruments of the Company,  either because it triggers a default
or a  cross-default  under such  instruments.  The Company is  currently  in the
process of  preparing a waiver  request  from its debt holders and is engaged in
discussions with its senior lenders regarding the default. As a result, all debt
instruments have been classified as current as of September 25, 1999.

     On June 25, 1999 the Company  consented to an assignment by Greyrock of its
rights and  interests  under the  Greyrock  Line of Credit to WCAS in return for
payment  in  full  of  all  outstanding   balances  of  principal  and  interest
thereunder.  WCAS repaid principal and interest  outstanding  under the Greyrock
Line of Credit  totaling $45.4 million.  Concurrent  with the  assignment,  WCAS
advanced to the Company an additional $4.6 million for working capital purposes,
resulting  in $50.0  million of total  indebtedness  outstanding  under the WCAS
Senior Secured Notes as of June 25, 1999 (the "WCAS Refinancing").  The terms of
the WCAS Senior  Secured  Notes are the same as those under the Greyrock Line of
Credit  except (i) the  interest  rate was  reduced  to LIBOR plus 1 3/4%,  (ii)
principal and interest are due on April 1, 2001; (iii) collateral  consisting of
the stock of the  Company's  subsidiaries  in the UK and France that had secured
the Greyrock Line of Credit was released,  (iv) the negative  pledge  agreements
covering  assets owned by the Company's  subsidiaries  in the UK and France were
terminated;  and (v) the Company's obligations were no longer subject to minimum
collateral  borrowing base requirements  previously  established in the Greyrock
Line of Credit. On June 30, 1999 the Company issued  approximately 58,643 shares
of  Series B  Preferred  Stock at a price of  $1,000  per  share.  The  Series B
Preferred  Stock was issued as  repayment  of various  obligations  owed to WCAS
which  included  $25.0  million of principal  outstanding  under the WCAS Senior
Secured Notes, $16.5 million of principal of the 10% unsecured  promissory notes
("WCAS  Notes"),  approximately  $15.6  million of principal of the 10% Series A
Senior  Subordinated  Debentures,  and  approximately  $1.5  million  of accrued
interest owed to WCAS under these  obligations.  The Series B Preferred Stock is
7%  cumulative,  non-convertible  preferred  shares  that is  redeemable  by the
Company at its option and  redeemable by the holders upon a change of control of
the Company. On November 24, 1999 WCAS agreed to subordinate their collateral to
the liens of Congress to allow the Company to pledge the  collateral to Congress
Financial  Corporation  (Western).  The Company  accrued  dividends of $1,026 in
fiscal 1999 on these preferred shares.

LIBOR FINANCING

                                      F-14
<PAGE>

    In connection with the acquisition of Old Cerplex,  the Company entered into
a financing relationship with a financial institution. This arrangement provided
for two elements,  a $10,000  revolving loan and a $36,000 term loan. The amount
available  under the  revolving  loan was based upon  eligible  receivables  and
inventory,  as defined in the agreement.  Interest  accrued 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 was a minimum of $25. This loan was paid in
full on June 25, 1999 in connection with the WCAS Refinancing.

WCAS LIBOR TERM DEBT

    In  connection  with the WCAS  Refinancing  on June 25,  1999,  the  Company
consented to an  assignment  by Greyrock of its rights and  interests  under the
Greyrock  Line of Credit to WCAS.  The  balance  of the WCAS  LIBOR term debt is
$25,439 as of September 25, 1999.  Interest  accrues at the LIBOR rate in effect
on the last day of the month  plus  1.75% per  annum.  Interest  is paid in kind
monthly.  This note  matures on April 1, 2001 and is  secured  by the  Company's
domestic assets.

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.  On
April 30, 1999 the WCAS Series A Notes in the amount of $16.4 million, including
accrued interest,  were exchanged for Series B senior cumulative preferred stock
in connection with the WCAS Refinancing. 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 the event of a change of control as defined in the agreement.

    During 1998,  previously issued 10% senior subordinated notes to WCAS with a
face value of $10,000 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  $43 and  $70 at  September  25,  1999  and  September  30,  1998,
respectively.  The Company is required to make a partial sinking fund payment of
$1,826 in 2000. 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  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.


SECURED NOTE PAYABLE TO CUSTOMER

     In July 1994,  Old  Cerplex  purchased  the  operating  assets of BT Repair
Services for cash and assumed a promissory  note to BT in an original  principal
amount of GBP2.5  million  (approximately  $3.9  million at December  31,  1994)
secured by the land and  buildings.  The  Company  repaid this note in full plus
accrued  interest on December 15, 1999 using the proceeds of the Burdale  Loans.
See Note S for a full description of the Burdale Loans.

                                      F-15
<PAGE>

PROMISSORY NOTES

    At various times  throughout 1998 and 1999, the Company  borrowed a total of
$16,500 from WCAS under 10% unsecured  promissory notes.  These notes,  totaling
$17.2 million including  accrued  interest,  were all exchanged for Series B
senior cumulative preferred stock in connection with the WCAS Refinancing.

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
25 are as follows: 2000 -- $39,406; and thereafter -- $0.

NOTE I -- INCOME TAXES

    Components of loss from continuing  operations  before taxes consists of the
following:

<TABLE>
<CAPTION>

                                        FOR THE YEARS ENDED
                                 -------------------------------------
                                                   SEPTEMBER 30,
                                SEPTEMBER 25,   ------------------------
                                    1999         1998         1997
                                -----------  -----------  -----------
        <S>                      <C>           <C>          <C>
        United States.......     $(48,323)     $(25,094)    $(49,161)
        Foreign.............       (3,559)       (4,001)          89
                                 --------      --------     --------
                                 $(51,882)     $(29,095)    $(49,072)
                                 ========      ========     ========
</TABLE>

    The provision for income taxes consists of the following:

<TABLE>
<CAPTION>

                                                                                FOR THE YEARS ENDED
                                                                      ----------------------------------------
                                                                                           SEPTEMBER 30,
                                                                      SEPTEMBER 25,   ------------------------
                                                                          1999            1998         1997
                                                                      -------------   -----------  -----------
<S>                                                                   <C>             <C>          <C>
                        Current benefit:
                        Federal...................................     $   --         $   --       $  --
                          Foreign.................................         --           (362)         --
                          State...................................         10             --          --
                                                                       ------         ------       -----
                        Total current benefit.....................         10           (362)         --
                                                                       ------         ------       -----
                        Deferred provision:
                          Federal.................................         --             --         455
                          Foreign.................................         --            362          --
                          State...................................         --             --          78
                                                                       ------         ------       -----

                                  Total deferred provision........         --            362         533
                                                                       ------         ------       -----
                                  Total provision for income tax
                                    expense:......................     $   10         $   --       $ 533
                                                                       ======         ======       =====
</TABLE>
                                      F-16
<PAGE>

    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,
                                                                       SEPTEMBER 25,    ------------------------
                                                                           1999            1998         1997
                                                                       -------------    -----------  -----------
<S>                                                                      <C>             <C>          <C>
                         Benefit for income taxes at statutory rate      $(17,204)       $(9,892)      $(16,684)
                         Nondeductible expenses...................             16          1,178             30
                         Deferred benefit not currently recognized             --          7,009          3,860
                         Permanent effect of book/tax adjustments.         18,474             --         14,104
                         Change in deferred tax valuation
                         allowance................................         (2,413)         4,195            500
                         State taxes, net of federal benefit......             (7)        (1,289)        (1,310)
                         Other....................................          1,144         (1,201)            33
                                                                         --------        -------       --------
                                   Total provision for income taxes      $     10       $     --       $    533
                                                                         ========       ========       ========
</TABLE>

    The components of the Company's deferred income tax assets are as follows:

<TABLE>
<CAPTION>
                                                                           SEPTEMBER 25,         SEPTEMBER 30,

                                                                                1999                 1998
                                                                                ----                 ----
<S>                                                                            <C>                <C>
                                Reserves for discontinued operations....       $ --               $  1,539
                                Allowance for doubtful accounts and notes       321                  3,362
                                Inventory write-downs...................        572                    705
                                Nondeductible accruals..................         38                    396
                                Warranty reserve........................         --                     85
</TABLE>

                                      F-17
<PAGE>

<TABLE>
<S>                                                                           <C>         <C>
                                Valuation allowance-- current...........        (931)     (6,087)
                                                                            --------    --------
                                Current deferred income tax benefit.....          --          --
                                                                            --------    --------
                                Depreciation............................          --       2,265
                                Net operating loss carryforwards--
                                   long-term............................      64,234      50,594
                                Capital loss carryback..................         736          --
                                Tax credits.............................       5,954       6,023
                                Goodwill amortization and other
                                   write-offs...........................         181       9,495
                                Other...................................          55          39
                                Valuation allowance-- long-term.........     (71,160)    (68,416)
                                                                            --------    --------
                                Long-term deferred income tax benefit...          --          --
                                                                            --------    --------
                                                                            $     --    $     --
                                                                            ========    ========
</TABLE>

    At  September  25,  1999,  the  Company had tax basis net  operating  losses
("NOLs") of  approximately  $185.0 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  more  likely  than  not 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 260 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.  Dividends  accrued in fiscal 1999, 1998
    and 1997  were  $1,551,  $2,665  and  $2,822,  respectively.  Each  share is
    convertible  into 40 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 $5,209
    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  and  related  notes have been
restated to reflect  this split.  At that 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 B Senior Cumulative Preferred Stock in October 1998.

    The Company has  approximately  58,643 shares  authorized and outstanding of
the Series B senior cumulative  preferred stock, $1,000 par value. WCAS owns all
of these shares,  which were issued on June 30, 1999 in connection with the WCAS
Restructuring (see Note H, Long Term Debt for more details).

                                      F-18
<PAGE>

    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.

    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.

NOTE L -- STOCK OPTION AND SAVINGS PLANS

    Savings plan. The Company has two savings plans, which qualify under Section
401(k) of the  Internal  Revenue  Code.  Under  the  plans,  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 1999
or 1998. The Company's  matching  contribution  to the savings plan was $207 for
the year ended September 30, 1997.

    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 77% of options
generally  vest over three years,  with the  remaining  23% of options  becoming
exercisable  upon the earlier of the Company's  achievement  of earnings  before
interest,  taxes,  depreciation  and amortization of $12,000 on a rolling twelve
month period basis or 2004.  As of September  25, 1999,  options for shares were
issued and 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.

    On October 5, 1998 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.

    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>
                                                                                  1999        1998        1997
                                                                                  ----        ----        ----
<S>                                                                            <C>         <C>          <C>
                              Pro forma net loss applicable to common
                                 stockholders................................  $ (55,303)  $ (32,621)   $(53,497)
                              Pro forma basic and diluted loss per share.....  $   (7.54)  $   (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-19
<PAGE>

        The following  table  summarizes  activity under the stock option plans,
    (in thousands except per share amounts).

<TABLE>
<CAPTION>
                                                                         OUTSTANDING OPTIONS
                                                                 ----------------------------------
                                                                     SHARES      RANGE OF OPTION
                                                                 (IN THOUSANDS)      PRICES
                                                                 --------------  ------------------
<S>                                                                    <C>         <C>
                     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)        30.00-  117.50
                                                                      ----      -----------------
                     Outstanding at September 30, 1998.......          219       $ 10.00-$ 117.50
                     Granted.................................        3,075          .44 -    1.63
</TABLE>

                                      F-20
<PAGE>

<TABLE>
<S>                                                                    <C>         <C>
                     Forfeited...............................         (327)          .88-  21.25
                                                                      ----      -------- --------
                     Outstanding at September 25, 1999.......        2,967       $   .44-$ 21.25
</TABLE>

    The weighted-average  fair value of options granted and forfeited were $0.87
and $1.26 for fiscal  1999,  $3.00 and $33.43  for fiscal  1998,  and $11.80 and
$21.30 for fiscal 1997, respectively.

    The  options  outstanding  at  September  25,  1999 have a weighted  average
exercise price of $2.15 and a weighted  average  contractual  life of 9.9 years.
There were 769  exercisable  options as of  September  25,  1999 with a weighted
average contractual life of 9 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 1999, 1998 and 1997:  risk-free interest rates of
6.3% in 1999 and 6.5% in 1998 and 1997;  no expected  dividend  yield;  expected
lives of 4 years; expected volatility of 117% for all three years.

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  Inland   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 $58 for 1999, and $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 25, 1999 and September 30, 1998 and for the years then ended.

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  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 -- BUSINESS SEGMENT AND FOREIGN OPERATIONS

     The Company currently operates in one industry segment,  the outsourcing of
services to the computer and  electronics  industry.  The  Company's  operations
outside  the  United  States  include a  manufacturing  facility  in the  United
Kingdom. The Company's facility in France was deconsolidated  during fiscal 1999
upon the Company losing control of the  subsidiary.  (See Note R of the Notes to
Consolidated Financial Statements.)

    The following table summarizes revenues,  operating losses and assets of the
Company by geographic area for the past three years. The United States operating
loss  includes  the  $6,176  loss  related  to the loss of control of the French
subsidiary.
<TABLE>
<CAPTION>
                                                                  1999       1998       1997
                                                               ---------  ---------  -------
<S>                                                            <C>        <C>        <C>
                                    United States
                                      Revenues.............    $  46,502  $  38,470  $  56,201
                                      Operating loss.......      (41,135)   (18,973)   (46,168)
                                      Assets...............       24,192     58,861     12,113
                                    Foreign
                                      Revenues.............       46,844     27,953      8,691
                                      Operating income (loss)     (5,949)    (3,004)     1,644
                                      Assets...............       11,439     41,680      2,516
</TABLE>
    In fiscal 1999 two customers  accounted for approximately 18% and 15% of net
revenues.  In fiscal 1998 two customers  accounted for approximately 17% and 11%
of net  revenues.  One  customer  accounted  for 11% percent of net  revenues in
fiscal 1997.

NOTE P -- LOSS PER SHARE
                                      F-21
<PAGE>

    The following  table  illustrates  the computation of basic and diluted loss
per share under the provisions of SFAS No. 128.

<TABLE>
<CAPTION>
                                                                              1999        1998       1997
                                                                           ---------   ---------  -------
<S>                                                                          <C>         <C>        <C>
                        Numerator for basic and diluted loss per share --
                          Loss from continuing operations...............    $(51,892)   $(29,095)  $(49,605)
                          Accrued dividends on preferred stock..........      (2,577)     (2,665)    (2,822)
                                                                           ---------   ---------  ---------
                          Numerator for basic and diluted loss per share
                            on continuing operations....................    $(54,469)   $(31,760)  $(52,427)
                                                                           =========   =========  =========
                          Numerator for basic and diluted loss per share
                            on discontinued operations..................    $  1,286    $     --   $     --
                                                                           =========   =========  =========
                          Numerator for net loss per basic and diluted
                            share.......................................    $(53,183)   $(31,760)  $(52,427)
                                                                           =========   =========  =========
                        Denominator for basic and diluted loss per
                          share --
                          Weighted average number of common shares
                          outstanding during the period.................       7,333       3,843        667
                                                                           =========   =========  =========
                        Basic and diluted loss per share from
                          continuing operations.........................    $  (7.43)   $  (8.26)  $ (78.60)
                        Basic and diluted loss per share from
                          discontinuing operations......................        0.18          --         --
                                                                           ---------   ---------  ---------
                        Net loss per basic and diluted share............    $  (7.25)   $  (8.26)  $ (78.60)
                                                                           =========   =========  =========
</TABLE>

     The  computation  of  diluted  loss per  share for each of the years in the
three-year   period  ended  September  25,  1999  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.  As of September 25, 1999, all stock
options and warrants were  antidilutive.  See Note B -- "Summary of  Significant
Accounting Principles", Note K -- "Stockholders' Equity" and Note L -- "Employee
Stock and Savings Plans."

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 year ended September 25,
1999 and the years ended September 30, 1998 and 1997 was  approximately  $3,032,
$1,265,  and $1,531,  respectively.  Future minimum lease payments and sub-lease
income as of September 25, 1999 are as follows:

<TABLE>
<CAPTION>
         YEARS ENDING                               MINIMUM                 MINIMUM
         SEPTEMBER 25                            LEASE PAYMENT          SUB-LEASE INCOME
        --------------                         ----------------         ----------------
        <S>                                       <C>                    <C>
             2000..........................           3,672                    349
             2001..........................           3,588                    176
             2002..........................           3,271                    141
             2003..........................           2,922                    141
             2004..........................           1,725                    141
             Thereafter....................           4,156                     18
                                                   --------                --------
                                                   $ 19,334                    966
                                                   ========                ========
</TABLE>

REDUCTION IN ACCRUALS

     During  1999,  the  Company  reduced  accruals  by $2,006 due to  estimates
related to certain Aurora  accruals  established in 1998 and earlier years which
were reduced by approximately $1.2 million and accruals related to inventory and
accounts  payable  established in 1998 and earlier years which were analyzed and
reduced by  approximately  $0.8 million  during the quarter ended June 30, 1999.
The estimates were reduced based on the receipt of new information, negotiations
and settlements, which became available or occurred at that time.

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, results of operations or liquidity.

NOTE R--LOSS ON LOSS OF CONTROL OF SUBSIDIARY

    On July 20,  1999,  the  management  of SAS  requested  assistance  from the
Commercial  Court of Lille,  France to  structure a social plan for a portion of
the work force.  Upon review,  the Commercial Court declared SAS insolvent as of
July 15, 1999 and opened bankruptcy  proceedings with respect to SAS. A judicial
administrator  was appointed by the Court to assist the management of SAS in all
its  activities   pending  the  Court's  decision  on  the  development  of  the
proceedings.  The terms of  assignment  of the judicial  administrator  included
reviewing SAS's condition and prospects and issuing a recommendation relating to
a plan of  reorganization  developed by SAS management.  While the administrator
was  overseeing  SAS's   operations,   the  Company  believed  that  a  plan  of
reorganization  would be adopted.  In the event that the administrator could not
support a plan of reorganization, it would become necessary to refer the case to
a liquidator pursuant to Commercial Court guidelines.

     On October 12, 1999, the Commercial Court,  acting upon the  recommendation
of the judicial  administrator,  ordered the  liquidation  of SAS. Prior to this
decision,  management  believed it would realize its investment in SAS through a
reorganization.  However,  after the liquidation of SAS was ordered, the Company
realized its  investment in SAS was lost and should  therefore be written off as
of July 20,  1999,  the date  Cerplex,  Inc.  effectively  lost  control  of its
subsidiary. As a consequence of this order, SAS discontinued its operations, and
the  liquidator  has  laid  off  substantially  all  employees.  As the  Company
effectively  lost control of its  subsidiary on July 20, 1999, the Company wrote
off its investment in SAS as of that date.  Based on Management's  understanding
and outside legal counsel's  assessment of the situation in France,  the Company
believes  there  is  no  additional   financial  exposure  related  to  the  SAS
liquidation,  but there can be no assurances that a deficiency judgment will not
be entered against Cerplex, Inc., the parent company.

    The  liquidator  is  responsible  for  selling the assets and paying off the
debts of SAS. As a result of the cost of laying-off all employees,  the value of
the SAS assets may not exceed its  liabilities.  There can be no assurance  that
Cerplex,   Inc.,  as  shareholder,   will  receive  any  liquidation   proceeds.
Accordingly,  Cerplex,  Inc. has written off its investment in SAS which totaled
$6.2  million at July 20,  1999.  The $6.2  million  write-off  is  comprised of
writing  off  assets  carried  at $20.9  million,  liabilities  carried at $13.8
million and  intercompany  balances  for SAS of $0.9  million.  Through July 20,
1999,  SAS had  sales of $27.6  million  and a net loss of $0.9  million.  These
amounts are included in the  Company's  financial  statements  reported  herein.
Thereafter, results from SAS operations have been excluded.

NOTE S--SUBSEQUENT EVENTS

     On November 24, 1999 the Company and its subsidiary entered into a Loan and
Security   Agreement   ("Congress  Line  of  Credit")  with  Congress  Financial
Corporation (Western)  ("Congress") providing for a $13.0 million senior secured
revolving  credit  facility.  Concurrent  with this  financing,  WCAS  agreed to
subordinate its security interest in the Company's assets.  The Congress Line of
Credit,  which matures in February 2001, will provide additional working capital
and financing for the Company's  domestic  operations.  As of December 15, 1999,
the  Company  had $2.9  million  (unaudited)  available  to  borrow  under  this
facility.  Loans under the loan agreement bear interest at fluctuating  rates of
either the Prime Rate, as defined, plus 1/2% or the Adjusted Eurodollar Rate, as
defined,  plus 2-3/4%.  Borrowing  availability pursuant to the Congress Line of
Credit is limited by the value,  as defined in the credit  agreement,  of assets
pledged as collateral,  namely accounts receivable and inventory.  The agreement
also contains customary financial covenants and events of default for financings
of this  type.  The  liquidation  of  Cerplex  S.A.S.  caused  a  default  and a
cross-default  under the  Congress  loan.  The  Company is in  discussions  with
Congress regarding an amendment or waiver to the loan agreement which will bring
the Company back into compliance with the loan covenants.  Cerplex,  Inc. is the
borrower  under the  Congress  Line of Credit  and the  Company  guarantees  the
repayment of its obligations thereunder.

    On December 14, 1999,  Cerplex,  Ltd. closed a financing  arrangement  ("the
"Burdale Loans") with Burdale  Financial  Limited  ("Burdale"),  an affiliate of
Congress.  The credit facility  provides for advances to Cerplex Ltd. up to $2.9
million  under a line of credit  secured by accounts  receivable  and up to $3.5
million under a loan secured by real estate.  This credit  facility will be used
to repay existing indebtedness to BT and to finance the working capital needs of
Cerplex Ltd. The Burdale Loans bear interest at fluctuating  rates of LIBOR plus
2%. The  Burdale  Loans are  covered by an  agreement  that  provides  customary
financial  covenants  and events of default for financing  arrangements  of this
type. Indebtedness under this agreement is guaranteed by the Company.

                                      F-22
<PAGE>

                                   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 25, 1999
           Allowance for doubtful accounts..........        $2,511      $ 1,561      $    --     $3,160(1)      $  912
                                                            ======      =======      =======     ======         ======
           Reserve for discontinued operations.......       $1,976      $    --      $(1,286)(2) $  690         $   --
                                                            ======      =======      =======     ======         ======
         FOR THE YEAR ENDED SEPTEMBER 30, 1998
           Allowance for doubtful accounts..........        $  736      $ 1,246      $ 1,775     $1,246(1)      $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
                                                            ======      =======      =======     ======         ======
</TABLE>
----------

(1)  Uncollectible accounts written off, net of recoveries.

(2)  Reduction in accrual for estimated loss on operating  lease due to probable
     sub-lease income.

                                       S-1
<PAGE>

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                           DESCRIPTION OF EXHIBITS
      ------                           -----------------------
<S>                   <C>
      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             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  (incorporated by reference from Exhibit 4.18 of the
                      Company's  Annual  Report on Form 10-K for the fiscal year
                      ended September 30, 1998 and filed on January 12, 1999).

      4.2             Certificate of Elimination of Convertible  Preferred Stock
                      filed on December 15, 1998 (incorporated by reference from
                      Exhibit 4.19 of the  Company's  Annual Report on Form 10-K
                      for the fiscal year ended  September 30, 1998 and filed on
                      January 12, 1999).

      4.3             Certificate  of  Designations,  preferences  and Rights of
                      Series B Senior  Cumulative  preferred Stock filed on June
                      30,   1999   designating   a  series  of   60,000   shares
                      (incorporated   by  reference  from  Exhibit  4.3  of  the
                      Company's  Quarterly  Report on Form 10-Q for the  quarter
                      ended June 30, 1999 and filed on August 16, 1999).

     10.1             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  (incorporated  by
                      reference from Exhibit 10.3 of the Company's Annual Report
                      on Form 10-K for the fiscal year ended  September 30, 1998
                      and filed on January 12, 1999).

     10.2             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  (incorporated  by
                      reference from Exhibit 10.4 of the Company's Annual Report
                      on Form 10-K for the fiscal year ended  September 30, 1998
                      and  filed  on  January   12,   1999).

     10.3             10% Senior Subordinated Note for $2,000,000,  due  January
                      26, 2000,  between the Company,  Aurora Electronics Group,
                      Inc.  and  Cerplex,  Inc.  as payors  and  Welsh,  Carson,
                      Anderson  & Stowe  VII,  L.P.  as payee  (incorporated  by
                      reference  from  Exhibit 10.3 of the  Company's  Quarterly
                      Report on Form 10-Q for the  quarter  ended March 31, 1999
                      and filed on May 17, 1999).

     10.4             10% Senior Subordinated Note for $1,000,000,  due February
                      26, 2000,  between the Company,  Aurora Electronics Group,
                      Inc.  and  Cerplex,  Inc.  as payors  and  Welsh,  Carson,
                      Anderson  & Stowe  VII,  L.P.  as payee  (incorporated  by
                      reference  from  Exhibit 10.4 of the  Company's  Quarterly
                      Report on Form 10-Q for the  quarter  ended March 31, 1999
                      and filed on May 17, 1999).
</TABLE>

                                        1
<PAGE>

<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                           DESCRIPTION OF EXHIBITS
      ------                           -----------------------
<S>                   <C>
     10.5             10% Senior Subordinated Note for $2,000,000, due March 25,
                      2000, between the Company,  Aurora Electronics Group, Inc.
                      and Cerplex, Inc. as payors and Welsh, Carson,  Anderson &
                      Stowe VII, L.P. as payee  (incorporated  by reference from
                      Exhibit  10.5 of the  Company's  Quarterly  Report on Form
                      10-Q for the quarter ended March 31, 1999 and filed on May
                      17, 1999). .

     10.6             10% Senior Subordinated Note for $2,000,000, due April 21,
                      2000, between the Company,  Aurora Electronics Group, Inc.
                      and Cerplex, Inc. as payors and Welsh, Carson,  Anderson &
                      Stowe VII, L.P. as payee  (incorporated  by reference from
                      Exhibit  10.6 of the  Company's  Quarterly  Report on Form
                      10-Q for the quarter ended March 31, 1999 and filed on May
                      17, 1999). .

     10.7             Lease  of  the  Company's  primary  headquarters  facility
                      located at 111  Pacifica  Avenue,  Suite 300,  Irvine,  CA
                      92618  (incorporated by reference from Exhibit 10.7 of the
                      Company's  Quarterly  Report on Form 10-Q for the  quarter
                      ended March 31, 1999 and filed on May 17, 1999).

     10.8             Consent and  Amendment to the Loan and Security  Agreement
                      dated  June  25,   1999   between  the   Company,   Aurora
                      Electronics Group, Inc., Cerplex,  Inc. and Cerplex Mass.,
                      Inc.  as payors and Welsh,  Carson,  Anderson & Stowe VII,
                      L.P. as successor in interest to Greyrock Business Credit,
                      a division  of  NationsCredit  Commercial  Corporation  as
                      payee  (incorporated by reference from Exhibit 10.8 of the
                      Company's  Quarterly  Report on Form 10-Q for the  quarter
                      ended June 30, 1999 and filed on August 16, 1999).

     10.9             Assignment  of Loan dated June 25, 1999  between  Greyrock
                      Capital,   a   division   of   NationsCredit    Commercial
                      Corporation  as  assignor  and Welsh,  Carson,  Anderson &
                      Stowe VII,  L.P. as assignee  (incorporated  by  reference
                      from Exhibit  10.9 of the  Company's  Quarterly  Report on
                      Form 10-Q for the quarter ended June 30, 1999 and filed on
                      August 16, 1999).

     10.10            Acknowledgement,  Consent  and  Release  by  the  Company,
                      Aurora Electronics Group, Inc., Cerplex,  Inc. and Cerplex
                      Mass., Inc.  (incorporated by reference from Exhibit 10.10
                      of the  Company's  Quarterly  Report  on Form 10-Q for the
                      quarter ended June 30, 1999 and filed on August 16, 1999).

     10.11            Release  by Welsh,  Carson,  Anderson  & Stowe  VII,  L.P.
                      (incorporated  by  reference  from  Exhibit  10.11  of the
                      Company's  Quarterly  Report on Form 10-Q for the  quarter
                      ended June 30, 1999 and filed on August 16, 1999).

     10.12            Release of  Continuing  Guaranty  by Greyrock  Capital,  a
                      division   of   NationsCredit    Commercial    Corporation
                      (incorporated  by  reference  from  Exhibit  10.12  of the
                      Company's  Quarterly  Report on Form 10-Q for the  quarter
                      ended June 30, 1999 and filed on August 16, 1999).

     10.13            Consent by Silicon Valley Bank to the assignment documents
                      (incorporated  by  reference  from  Exhibit  10.13  of the
                      Company's  Quarterly  Report on Form 10-Q for the  quarter
                      ended June 30, 1999 and filed on August 16, 1999).

     10.14            Form  of the  Secured  Promissory  Note in the  amount  of
                      $25,000,000  originally  issued on April 30, 1998  amended
                      and restated on June 25, 1999 between the Company,  Aurora
                      Electronics  Group, Inc., Cerplex Mass., Inc. and Cerplex,
                      Inc.  as payors  and Welsh,  Carson,  Anderson & Stowe VII
                      L.P.,  affiliates of Welsh  Carson,  Anderson & Stowe VII,
                      L.P. and individual  investors as payee  (incorporated  by
                      reference  from Exhibit 10.14 of the  Company's  Quarterly
                      Report on Form 10-Q for the  quarter  ended June 30,  1999
                      and filed on August 16, 1999).

     10.15            Amended and Restated Secured promissory Note in the amount
                      of  $9,024,896.72  issued  on June 25,  1999  between  the
                      Company,  Aurora  Electronics  Group, Inc., Cerplex Mass.,
                      Inc.  and  Cerplex,  Inc.  as payors  and  Welsh,  Carson,
                      Anderson  & Stowe  VII,  L.P.  as payee  (incorporated  by
                      reference  from Exhibit 10.15 of the  Company's  Quarterly
                      Report on Form 10-Q for the  quarter  ended June 30,  1999
                      and filed on August 16, 1999).

     10.16            Demand  Promissory  Note in the  amount of  $11,000,000.00
                      originally  issued on April 30, 1998  amended and restated
                      on June 25, 1999 between the Company,  Aurora  Electronics
                      Group, Inc. and Cerplex, Inc. as payors and Welsh, Carson,
                      Anderson  & Stowe  VII,  L.P.  as payee  (incorporated  by
                      reference  from Exhibit 10.16 of the  Company's  Quarterly
                      Report on Form 10-Q for the  quarter  ended June 30,  1999
                      and filed on August 16, 1999).
</TABLE>

                                        2
<PAGE>

<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                           DESCRIPTION OF EXHIBITS
      ------                           -----------------------
<S>                   <C>
     10.17            Demand  Promissory  Note in the  amount  of  $4,975,103.28
                      originally  issued on April 30, 1998  amended and restated
                      on June 25, 1999 between the Company,  Aurora  Electronics
                      Group, Inc. and Cerplex, Inc. as payors and Welsh, Carson,
                      Anderson  & Stowe  VII,  L.P.  as payee  (incorporated  by
                      reference  from Exhibit 10.17 of the  Company's  Quarterly
                      Report on Form 10-Q for the  quarter  ended June 30,  1999
                      and filed on August 16, 1999).

     10.18            Loan and Security Agreement dated November 24, 1999 by and
                      among Congress Financial  Corporation  (Western) as lender
                      and Cerplex,  Inc. as borrower and The Cerplex Group, Inc.
                      as guarantor (incorporated by refeence from Exhibit 4.1 of
                      the Company's Report on Form 8-K dated December 1, 1999).

    *10.19            Deed  of  Debenture   dated   December  15,  1999  between
                      Cerplex,Limited  as borrower and Burdale Financial Limited
                      as lender.

    *10.20            Guarantee and Indemnity  agreement dated December 14, 1999
                      between The Cerplex  Group,  Inc. as guarantor and Burdale
                      Financial Limited as lender.

    *10.21            Facility Agreement dated December 14, 1999 between Cerplex
                      Limited  as  borrower  and  Burdale  Financial  Limited as
                      lender.

    *23.1             Consent of KPMG LLP.

    *23.2             Consent of Arthur Andersen LLP.

    *27               Financial Data Schedule.

    *99.1             Liquidation  of  Cerplex  S.A.S.  --  Unaudited  pro forma
                      financial information

</TABLE>
----------

* Filed herewith.

                                       3