<PAGE>

===============================================================================
                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           -------------------------
 
                                   FORM 10-K
 
 X  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
 
                                       OR
 
 ___  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
 
                         COMMISSION FILE NUMBER 0-29026
                                 ENSTAR INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S>                                     <C>
            MINNESOTA                   41-1831611
 (STATE OR OTHER JURISDICTION OF     (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)    IDENTIFICATION NO.)
     6479 CITY WEST PARKWAY
         EDEN PRAIRIE, MN                  55344
 (ADDRESS OF PRINCIPAL EXECUTIVE        (ZIP CODE)
            OFFICES)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (612) 941-3200
                           -------------------------
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
                           -------------------------
 
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.25
                                   PAR VALUE
 
     INDICATE BY CHECK MARK WHETHER REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING TWELVE 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  __ .
 
     THE AGGREGATE MARKET VALUE OF THE COMMON STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT AT MARCH 12, 1999 WAS APPROXIMATELY $8.5 MILLION BASED ON THE
LAST SALE PRICE FOR THE COMMON STOCK AS REPORTED BY THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS AUTOMATED QUOTATION SYSTEM ON THAT DATE.
 
     AT MARCH 12, 1999, 2,976,723 SHARES OF THE REGISTRANT'S COMMON STOCK WERE
OUTSTANDING.







<PAGE>

                      DOCUMENTS INCORPORATED BY REFERENCE:
 
     CERTAIN PORTIONS OF THE DOCUMENTS LISTED BELOW HAVE BEEN INCORPORATED BY
REFERENCE INTO THE INDICATED PART OF THIS FORM 10-K.
 
<TABLE>
<CAPTION>
     DOCUMENT INCORPORATED                                PART OF FORM 10-K
     ---------------------                                -----------------
<S>                                                             <C>
PROXY STATEMENT FOR 1999 ANNUAL MEETING OF SHAREHOLDERS  ITEMS 10, 11, 12 AND 13
</TABLE>
 
     INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]
================================================================================










































<PAGE>   
                                    PART I
 
ITEM 1. BUSINESS.

INTRODUCTION

THE COMPANY

     ENStar Inc., a Minnesota corporation formed in 1995 ("ENStar" or the
"Company"), is a holding company.  Its principal subsidiaries are Americable,
Inc. ("Americable") and Enstar Networking Corporation ("Enstar Networking").
Americable is a distributor of premise wiring, connectivity products and
low-end networking electronics.  Enstar Networking is a network security
integrator providing solutions to design, manage and secure corporate
network infrastructures.  ENStar also owns 1,025,000 shares of common stock of
CorVel Corporation ("CorVel"), or an approximate 25% interest in CorVel, a
provider of cost containment and managed care services designed to address the
medical costs of workers' compensation.

     On December 10, 1998, ENStar sold Transition Networks, Inc. ("Transition")
to Communications Systems, Inc. ("Communications Systems"), a telecommunication
company, for approximately $9 million which was received in cash.  The
transaction involved the sale of all of Transition's common stock.  Transition
designs, manufactures, and markets connectivity devices and network
applications.  The gain on disposition was approximately $2.5 million, net of
income taxes of approximately $1.6 million.

     Effective December 31, 1998, ENStar sold the assets of the Midwest region
of Enstar Networking to Vicom, Incorporated ("Vicom").  The transaction involved
the sale of substantially all of the assets of the business in exchange for
1,350,000 shares of Vicom common stock and a $750,000 promissory note to ENStar
bearing interest at an annual rate of 9%, interest payable quarterly, with the
principal due on or before December 2003.  There was no gain or loss on this
transaction.  As a result of this transaction, ENStar owns a 38.5% ownership
interest in Vicom, which is accounted for as an unconsolidated subsidiary using
the equity method of accounting.

     ENStar was formerly a wholly owned subsidiary of North Star Universal, Inc.
("NSU"). In connection with transactions (the "Reorganization Transactions")
consummated pursuant to a reorganization agreement entered into between NSU and
Michael Foods, Inc. ("Michael"), NSU transferred, on or prior to February 28,
1997, to ENStar certain of its assets, including its shares of common stock of
Americable and Transition and its shares of CorVel, and certain other assets.
Pursuant to the Reorganization Transactions, (i) NSU merged with Michael and 
(ii) the outstanding common stock of ENStar was distributed to the shareholders
of NSU (the "Distribution").  As a result of the Distribution, ENStar ceased to
be a subsidiary of NSU and became a publicly owned company whose stock is quoted
on the Nasdaq National Market under the symbol "ENSR."  In connection with the
Reorganization Transactions, ENStar agreed to indemnify Michael against certain
losses arising from the Reorganization Transactions and to assume certain
liabilities of Michael.  See "-Reorganization Transactions."

     The Company directly employed five management and administrative employees
as of March 12, 1999.

                                 -1-






<PAGE>

UNCONSOLIDATED SUBSIDIARIES

     CorVel. Since its initial public offering in June 1991, CorVel has been
operated as an independent company.  As a less-than-majority-owned subsidiary of
ENStar, CorVel's operations have not been consolidated with ENStar, and ENStar's
investment in CorVel is accounted for under the equity method of accounting.
The following summary of CorVel's business has been prepared from information
reported by CorVel.  Additional information regarding CorVel is available from
the reports and other documents prepared and filed by CorVel with the
Commission.

     CorVel is an independent nationwide provider of medical cost containment
and managed care services designed to address escalating medical costs.
CorVel's services include preferred provider organizations, automated medical
fee auditing, medical case management, independent medical examinations,
utilization review and vocational rehabilitation services.  Such services are
provided to insurance companies, third party administrators and employers to
assist them in managing the medical costs and monitoring the quality of care
associated with medical claims.
 
     Since its initial public offering in June 1991, Jeffrey J. Michael and
Peter E. Flynn, officers of ENStar, have been members of the Board of Directors
of CorVel.  Based on the past service of Messrs.  Michael and Flynn on CorVel's
Board of Directors and the Company's position as a significant shareholder of
CorVel, the Company believes that Messrs.  Michael and Flynn will continue to
serve as members of the CorVel Board of Directors and be nominated for
re-election to the CorVel Board at the next annual meeting of stockholders of
CorVel.  There are no agreements, however, between ENStar and CorVel or any of
CorVel's stockholders requiring the nomination of Messrs.  Michael and Flynn or
any designees of ENStar for election as directors of CorVel.

     In connection with the Distribution, ENStar transferred all of its CorVel
Common Stock to Americable to satisfy certain federal income tax requirements
relating to the Reorganization Transactions.  Neither ENStar nor Americable has
any agreement with CorVel requiring CorVel to register the shares of CorVel
Common Stock.  In the absence of registration of its CorVel Common Stock, the
ability of ENStar to sell the holdings of CorVel Common Stock will be limited to
sales pursuant to Rule 144 of the Securities Act, and the volume limitations
thereof, and to private negotiated sales, which may adversely affect the ability
of ENStar to sell a large portion of holdings of CorVel Common Stock at a given
time.

     Vicom.  Vicom is a telecommunications company that provides services to
integrate voice, data and video solutions. As a less-than-majority-owned
subsidiary of ENStar, Vicom's operations have not been consolidated with ENStar,
and ENStar's investment in Vicom is accounted for under the equity method of
accounting.  The Company's investment in Vicom accounts for approximately 1% of
its consolidated assets.






                                 -2-






<PAGE>

     Following the sale of the Midwest region of Enstar Networking to Vicom,
Peter Flynn, Officer of ENStar, was named to the Board of Directors of Vicom,
pursuant to the terms of the Asset Purchase Agreement.  Per the Agreement, a
representative of ENStar will serve as a member of the Vicom Board of Directors
for so long as ENStar continues to hold not less than 10% of the Vicom
outstanding common stock.

OPERATING SUBSIDIARIES

GENERAL

     Americable. Americable was organized as a Minnesota corporation in 1981
and was acquired by NSU in December 1986.

     Americable is a provider of value-added connectivity products and custom
OEM manufacturing solutions to the telecommunications, Category 5, and premise
wiring markets.  Americable manufactures a wide variety of copper and fiber
optic cable assemblies, subassemblies and specialty products for its customers.
Some of these products are manufactured to standard specifications for sale by
Americable and others are custom designed and manufactured by Americable to
customer specifications.  These customer-designed products are manufactured for
both end-users and OEMs.  Americable is also a value-added provider of premise
wiring, connectivity products, and low-end networking electronics.  Americable
supplies a wide array of voice and data communication related products such as
cable (both copper and fiber optic), cable assemblies, components (blocks,
jacks, connectors, patch cords, patch panels) and networking hardware.
Americable's goal is to provide quality products, prompt reliable delivery of
such products and strong customer service both before and after the products are
sold.  Americable sells to a wide range of customers throughout the United
States in the voice and data communications aftermarket, including contractors,
resellers, systems integrators, and OEMs.

     Enstar Networking. Enstar Networking is a network security integrator
providing solutions to design, manage and secure corporate network
infrastructures.  The company's mission is "to provide our clients with
technical services and solutions that improve the performance and integrity of
their networks."  The company offers customized, integrated solutions through
two strategic business units:

          Security Integration Group (SIG) is a team of consultants that provide
     information security consulting services for customers using Internet,
     extranet and intranetwork applications.  These services include policy
     development, architecture design, business impact analysis, access,
     auditing, continuity and custom training services.  Additionally, this
     group provides network security awareness training as well as
     certification training on security software products.

          Network Integration Services (NIS) include a variety of customized,
     integrated solutions to build, manage and maintain high performance local
     area networks ("LAN") and wide area networks ("WAN").  These service
     offerings include design services such as requirements definition and
     project planning along with the implementation and support of a select
     platform of networking hardware and software.

                                 -3-






<PAGE>

     Enstar Networking also provides a variety of solutions to remotely manage
and maintain LAN's and WAN's for its customers.

     Enstar Networking previously operated as the network integration business
of Americable.  As part of its business strategy since the early 1990's,
Americable had expanded the level of network integration services provided to
end-user customers such as network design, implementation, management and
maintenance.  Enstar Networking was organized in April 1997 to distinctly focus
the networking service activities from the traditional distribution and
manufacturing operations of Americable.

     Historically, Enstar Networking operated in various regional locations in
the Southwest, Southeast and Midwest, and has added and deleted locations on the
basis of business opportunities and operating performance of each location.  
Following the sale of the Midwest region to Vicom on December 31, 1998, and the
shutdown of certain other regional operations during 1998, Enstar Networking's
business is focused on the Southwest region of the United States.

     For additional information regarding the Company's business segments, see
the Company's Consolidated Financial Statements and the Notes thereto included
in this report.

BUSINESS STRATEGY

     Americable. Americable's  objective is to be a leading provider of
value-added connectivity products and custom OEM manufacturing solutions
throughout the United States.  To meet this goal, Americable believes it must
seek to maintain its current customer relationships and expand its customer base
in the regions in which it operates, develop strong relationships with its key
suppliers, and develop and enhance its value-added offerings.

     During 1998, approximately 2,700 customers purchased products from
Americable.  Management at Americable believes that preserving and enhancing
these relationships is a constant priority. Continuous quality improvement in
its operations along with expansion of its fiber optic product offerings are
some of the means that Americable utilizes to enhance its customer
relationships.

     Management at Americable also believes that developing strong relationships
with the leading manufacturers allows Americable to offer its customers name
brand products that provide the best value in meeting their needs.  Americable
believes that utilizing a select range of suppliers allows it to provide
superior customer service because its technical personnel are more familiar with
the products sold and because such high quality products are generally more
reliable.  Further, such strong relationships result in greater continuity of
product supply.

     Enstar Networking. Enstar Networking's objective is to be a leading
provider of information technology (IT) services to manage and secure corporate
networks.  Its focus is on medium to large sized enterprises that deploy complex
network infrastructures involving public networks such as the Internet for



                                 -4-






<PAGE>

critical business applications.  Enstar Networking believes that its expertise
in the design and implementation of networks along with its specialized
understanding of security requirements uniquely positions it as a comprehensive
solutions provider for its customers.  To achieve its objectives, the company is
pursuing the following strategies:

          - Develop and market its comprehensive SecureForce Methodology
            to a focused group of customers.  The SecureForce Methodology
            is a comprehensive approach to the complex world of enterprise
            corporate security management.  SecureForce includes services
            from its consulting organization, products for the security
            infrastructure and complete integration of the entire managed
            solution.

          - Build its consulting services organization.  The company's Security
            Integration Group was formed in April 1997 and currently provides
            fee-based, on-site consulting services that can provide an
            evaluation of existing network security systems, analyze potential
            exposures to security breaches and suggest corrective action.
            During 1999, the company plans to expand the number of SIG
            consultants in order to service its customers' demand for security
            services.

          - Continue to build its support services organization through the 24x7
            Technical Assistance Center (TAC) located at the corporate office in
            Irving, Texas.  The TAC services are centered around providing
            organizations with both technical phone support and on-site support
            to mission critical network security infrastructures.

          - Develop and implement comprehensive Virtual Private Networking (VPN)
            solutions to corporations and institutions who plan to use the
            Internet and Web commerce in their business applications.

          - Maintain strong relationships with the leading manufacturers in the
            networking industry in order to offer its customers high quality
            solutions. Enstar Networking has developed relationships with
            Check Point Software Technologies, Ltd., Cisco Systems, Inc.,
            Internet Security Systems, Inc.,  Security Dynamics, Inc.,
            NetPartners, Inc., Finjan Inc. and Entrust, Inc.















                                 -5-






<PAGE>

PRODUCTS AND SERVICES

     Americable. The following is a summary of Americable's sales by principal
product group for 1998:

<TABLE>
<CAPTION>
                                                  AS A PERCENT OF SALES
                                                  ---------------------
     <S>                                           <C>
     Fiber Optic Products..........................       21%
     Copper Products...............................       54%
     Networking Products...........................       24%
     Other Connectivity Products...................        1%

</TABLE>

     Americable provides value-added connectivity products and custom OEM
manufacturing solutions to the telecommunications, Category 5 and premise
wiring markets.  Americable designs and manufactures fiber optic and
copper cable management solutions differentiated by (i) measurable high
performance attributes, (ii) tested long-term reliability and (iii) cost
effective design.  By partnering with leading manufactures of supporting
products, Americable maintains a balance between unique OEM custom specific
products and standard industry products.

     Americable maintains a wide variety of high-quality products in its
inventory.  Product inventory includes copper and fiber optic cable assemblies,
connectivity products, such as bulk cable, connectors, patch panels, racks and
other cable accessories.  Americable generally inventories products from
multiple manufacturers. Principal manufacturers of connectivity products include
Amp Incorporated, Berk-Tek, Inc., General Cable Corp. and Leviton Manufacturing,
Inc.

     Americable also maintains an integrated, real-time, on-line computerized
system for order entry, fulfillment and inventory control.  This on-line
computer system allows sales personnel to advise customers over the phone of
product specifications, availability and order status.  All orders are normally
shipped within 24 hours of receipt and, when necessary, can be shipped on a
"same-day" basis.
 
     Americable seeks to add value for its customers by providing superior
customer service.  All of Americable's sales representatives are trained to
assist customers in product selection.  The sales representatives are supported
by technical personnel who have a broad range of expertise in various cabling
and networking technologies.








                                 -6-






<PAGE>

     Americable, working to its customers' specifications, can manufacture
custom designed products such as copper, fiber-optic, small computer system
interface (SCSI) and AS/400 cable assemblies and subassemblies.  All Americable
manufactured products are subject to strict quality control standards to insure
that they are of the same high quality as other, vendor manufactured,
distributed products. 

     Enstar Networking.  The following is a summary of the company's revenues by
principal business unit for 1998, excluding any amounts from the Midwest
region sold to Vicom:

<TABLE>
<CAPTION>
                                               PERCENT
                                             OF REVENUES
                                             -----------
     <S>                                         <C>
     Security Integration Group
          Consulting and Training............      4%
          Products...........................      9%

     Network Integration Services
          Networking Products................     61%
          Services...........................      4%
          Structured Wiring..................     22%

</TABLE>

     Set forth below is a description of each business unit's operations.

     Security Integration Group

          Enstar Networking has been involved in the network security market
     since June 1996 when it became an authorized value-added reseller of Check
     Point Software Technologies, Ltd.'s ("Check Point") FireWall-1-TM.  During
     1998, it expanded its network security operation through the creation
     of the Enstar SecureForce comprehensive security program which offers the
     following solutions including the combination of several software products:

          Content Control - The increasing use of the Internet brings challenges
          for management.  Policies concerning Internet access must be created
          and enforced.

          Enstar Networking utilizes, WebSENSE, a software product designed to
          promote professional use of the Internet by effectively allowing an
          organization  to monitor, report and manage internal Internet use.
          WebSENSE gives users the flexibility to fine-tune Internet access
          policy, allowing them to monitor, block or screen access, define and
          enforce access privileges and preserve bandwidth and server space.





                                 -7-






<PAGE>

          In addition, Enstar Networking utilizes the software tool SurfinGate
          offered by Finjan Software, Ltd. to minimize exposures to potentially
          dangerous "content based applications."  SurfinGate protects the
          computer network from hostile Internet attacks carried out through
          ActiveX, Java, JavaScript and other mobile code technologies,
          preventing undetected costly attacks such as industrial espionage,
          data modification, and denial of service intrusions.

          Public Key Infrastructure (PKI) - Organizations are increasingly
          relying on secure e-mail, electronic forms, intranets, extranets,
          and virtual private networks (VPNs) to maximize their effectiveness
          in a competitive global economy.  Public-key cryptography is an
          accepted mechanism to provide the foundation of network security
          through encryption and digital signatures.  Together, encryption and
          digital signatures provide confidentiality, access control,
          authentication, data integrity and non-repudiation.

          The system required to deliver public-key cryptography capabilities is
          referred to as a Public-Key Infrastructure (PKI).  The purpose of a
          PKI is to manage the keys and certificates required to enable
          encryption and digital signature services across a variety of
          applications and platforms.  Enstar Networking supports the public-key
          infrastructure solutions offered by Entrust Technologies and Security
          Dynamics.

          Access Control - Within enterprise network systems, access control
          is an important part of the overall security program.  User
          authentication and identification provides accountability for 
          usage policies.

          Enstar Networking offers authentication products manufactured by
          Security Dynamics.  Security Dynamics' ACE/Server and SecurID
          solutions provide centralized, strong, two-factor authentication
          services for enterprise networks and operating systems, ensuring
          that only authorized users gain access to network files, applications
          and communications.

          Intrusion Detection - Once security controls have been identified
          and documented in the security policy and standards, they must be
          implemented and monitored.  Enstar Networking uses several software
          tools, two of which are described below:

          Security Dynamics' Kane Security monitor software is a real-time
          intrusion detection system that filters through security and audit
          data to identify unauthorized activities, including compromised user
          IDs, password cracking attempts, privileged ID abuse and curious
          users.







                                 -8-






<PAGE>

          Internet Security Systems, Inc. (ISS), is the leading supplier of
          adaptive security management systems, providing enterprise-wide 
          information protection software.  The ISS SAFEsuite (R) family of
          products allows organizations to proactively monitor, detect and
          respond to the growing number of network vulnerabilities and threats
          to enterprise information.

     Network Integration Services

          Enstar Networking offers the following customized networking services:

          Network Design - Enstar Networking assists its customers with network
          discovery programs including business requirements definition, 
          requirements design, detailed technology design, preparation of 
          request for proposal (RFP) specifications and materials acquisition
          management.  These services are designed to provide a customer with
          an RFP including the documentation of user requirements, network
          design and specific technology design alternatives.  These services
          are either offered as part of an overall project or arranged
          separately as a billable service.

          Network Architecture Discovery & Analysis - Enstar Networking can
          assist its customers with detailed information regarding its existing 
          network.  A detailed on-site survey by a systems engineer will
          provide comprehensive network documentation and a current network
          map to assist a customer in mapping the future direction of its
          network.  This program includes the inventorying and mapping of
          current equipment along with identification of potential single
          points of failure and bottlenecks.

          Network Migration - Enstar Networking supplies, implements and
          supports a select range of suppliers of electronics and software
          platforms from manufacturers such as Cisco Systems Inc.  Enstar
          Networking's line of network products include concentrators, hubs,
          switches and routers for both existing and emerging technologies such
          as Ethernet, Token Ring, FDDI, Fast Ethernet and Asynchronous Transfer
          Mode ("ATM"). Enstar Networking purchases a number of networking
          products through large distributors such as Tech Data Corporation
          and Ingram Micro, Inc.

          Network Maintenance - Enstar Networking provides a broad line of
          maintenance services including fixed fee network support, telephone
          support, guaranteed response times, next business day on-site response
          for problem resolution, "spare-in-the-air" hardware replacement and
          cabling system diagnosis and repair. Through its Technical Assistance
          Center (TAC), Enstar Networking can provide remote diagnostic
          capabilities as part of its maintenance services.  The TAC is capable
          of receiving a customer call, remotely diagnosing the problem,
          searching for an application solution and, if necessary, dispatching
          an engineer to perform on-site troubleshooting. 




                                 -9-






<PAGE>

          Remote Security Management - This program is designed to provide
          customers with an outsourced firewall solution for their network.
          From hardware to software configuration, Enstar Networking provides
          its customers a solution to protect their corporate data via dial-up
          connections and the Internet, without the capital and personnel costs
          to maintain the firewall.

          Structured Wiring Services ("SWS") - Enstar Networking provides
          solutions to build network cabling infrastructure for voice and data
          communications.  Enstar Networking will oversee the design and
          implementation of projects involving multiple LANs across a WAN,
          consisting of multi-vendor hardware products and several thousand
          nodes.

MARKETING AND CUSTOMERS

     Americable. Americable sells products to a number of end users, OEMs,
contractors, and other system integrators.  Customer relationships are developed
both face-to-face and via the telephone.
 
     Americable currently employs 24 telemarketing and sales support
representatives.  The sales force is currently supplemented by 3 technical
service and product managers. Americable sales representatives undergo regular
training and attend company-sponsored classes in order to enhance their
technical knowledge. 

     Americable uses direct mailings, brochures and catalogs in marketing the
products that it sells.  Americable's catalog, which generally is
published every 18 to 24 months, is designed to provide its customers with not
only product specifications, but additional technical information to assist them
in connection with their system design.

     During 1998 and 1997, Mayo Clinic accounted for 11% and 14%, respectively,
of Americable's sales.  No other customers accounted for more than 10% of its
sales.  In addition, in 1998 and 1997, Americable derived approximately 71% and
80% respectively, of its sales from its largest 100 customers.

     Enstar Networking. Enstar Networking provides its products and services to
customers in various industries including health care, financial services,
legal, manufacturing and education.  Customer relationships are generally
developed by its outside sales representatives within a 100 mile radius
of its regional service center and satellite locations.  Marketing efforts
are generally focused on customers located in the states in which the company 
has offices and are directed at Fortune 1000 and middle market corporations, and
institutional users such as hospitals and universities.  Through its primary
regional service center, Enstar Networking provides its customers a full array
of services from each of its business units throughout its current locations in
Texas and Colorado.  Enstar Networking adds and deletes locations on the basis
of business opportunities.





                                 -10-






<PAGE>

     Enstar Networking currently employs 16 outside sales representatives in
addition to 7 sales support representatives.  The sales force is currently
supplemented by 14 regional systems engineers and consultants.  Enstar
Networking sales representatives undergo continuous training and attend
company-sponsored classes in order to enhance their technical expertise and
marketing techniques.  Many of Enstar Networking sales and technical
personnel also attend vendor-sponsored training and education programs mandated
by such vendors in order for the company to qualify as an authorized reseller
of their products.

     During 1998 and 1997, Enstar Networking had sales to unrelated customers
who represented 13% and 11% of sales in the respective years.  Enstar
Networking derived approximately 74% and 81%, respectively, of its sales from
its largest 25 customers.

MANUFACTURING

     Americable. Americable's manufacturing operations consist of the
manufacture of custom or specialty cable assemblies including copper, fiber
optic, small computer system interface (SCSI) and AS/400 cable assemblies
and subassemblies.

     Americable's assemblies are differentiated in the marketplace by their
measurable high-performance attributes, tested long-term product reliability,
and cost-effective design.  Americable offers quick turnaround for both its
standard and custom assemblies.  

     Americable manufactures a wide variety of singlemode, multimode, and hybrid
fiber optic cable assemblies prepared by experienced fiber optic technicians.
All of the company's fiber optic assemblies can be terminated with a variety of
connector types.

     In addition, Americable helps customers in the design and manufacturing of
custom fiber optic assemblies for telecommunications, data communications, and
other industrial applications.  Americable's pre-terminated multifiber cable 
assemblies, including outside plant, break-out, and distribution/IFC cable
assemblies, can minimize labor-intensive field terminations and improve overall
reeliability.  Americable has the technical expertise to fabricate a solution
to meet a customer's specifications in a wide variety of applications and
configuration options.

     Americable manufactures an extensive line of copper assemblies including
Category 5 and Enhanced Category 5 patch cords, 734 and 735 coaxial cable
assemblies, and small computer systems interface (SCSI) cables.  Americable's
copper cable assemblies are 100 percent electrically tested for continuity,
shorts and configuration.

COMPETITION

     Americable. Americable faces substantial competition from a large number
of companies, some of which are larger, have greater financial resources,
broader name recognition and, in many cases, lower product and operating costs


                                 -11-






<PAGE>

than Americable.  Significant competitors include Anicom, Inc., Anixter
International, Inc., Graybar, Inc., Kent Electronics Corporation, and a number
of smaller domestic companies, as well as product manufacturers outside the
United States.  The principal competitive factors in the manufacturing 
industry include price, quality and responsive service.  Americable believes
that it can compete favorably in the marketplace to which it sells.

     Enstar Networking. Enstar Networking faces substantial competition from a
large number of companies, some of which are larger, have greater financial
resources, broader name recognition and, in many cases, lower product and
operating costs than Enstar Networking.  Enstar Networking faces competition
from large system integrators and consulting firms such as Electronic Data
Systems, Ernst and Young, GE Capital Information Technology Services, Inacom
Corporation and a significant number of smaller regional network integrators.

REORGANIZATION TRANSACTIONS

     Pursuant to the Reorganization Transactions, NSU merged with Michael and
the outstanding ENStar Common Stock was distributed to the shareholders of NSU
in the Distribution. As a result of the Distribution, ENStar ceased to be a
subsidiary of NSU and became a publicly owned company.
 
     In connection with the Reorganization Transactions, Michael paid in full
all Michael Assumed Indebtedness within six months of consummation of the
Reorganization Transactions.  Michael also agreed to pay, perform and discharge
all liabilities of NSU arising at any time prior to February 28, 1997 (the
effective date of the Reorganization Transactions (the "Effective Date"), other
than the following liabilities retained by NSU: (i) liabilities arising from the
assertion of dissenters rights by NSU shareholders in connection with the
Reorganization Transactions, and (ii) obligations under certain agreements
entered into in connection with the Reorganization Transactions.

     In connection with the Reorganization Transactions, ENStar agreed to
indemnify Michael and any subsidiaries of Michael against certain liabilities
including: (i) all liabilities (other than the liabilities assumed by Michael)
of NSU or any NSU subsidiary, arising out of: (a) the liabilities transferred to
ENStar by NSU and (b) the transactions contemplated by the agreement governing
the Distribution (the "Distribution"), including the Distribution and any taxes
resulting from the Distribution; (ii) all liabilities arising from any claim
made by any shareholder of ENStar or by any shareholder or former shareholder of
NSU prior to the Effective Date relating to any act or omission of NSU on or
prior to the Effective Date in connection with the Reorganization Transactions;
(iii) all liabilities assumed by ENStar relating to the employee benefit plans
of NSU; (iv) any breach of the Distribution Agreement by ENStar; and (v)
damages, costs, and expenses including attorney's fees incurred in defending and
settling claims for such liabilities.  As of December 31, 1998, the Company has
received no notification of indemnification related to this transaction.







                                 -12-






<PAGE>

     In connection with the Reorganization Transactions, Michael agreed to
indemnify ENStar against: (i) all liabilities of NSU, Michael or any subsidiary
of NSU or Michael arising out of transactions or events entered into or
occurring after the Effective Date, or any action or inaction, including but not
limited to, contracts, commitments and litigation, with respect to, entered into
or based upon transactions or events occurring after the Effective Date with
respect to NSU, Michael, any subsidiary of NSU after the Effective Date or any
subsidiary of Michael, other than any liability arising out of liabilities
transferred to ENStar by NSU; (ii) all liabilities assumed by Michael; (iii) all
liabilities of Michael or any subsidiary of Michael; (iv) all liabilities
arising from any claim made by any current or former Michael stockholder or
shareholder of NSU after the Effective Date who was a Michael stockholder or NSU
shareholder immediately prior to the Effective Date relating to any act or
omission of Michael in connection with the Reorganization Transactions; (v) any
breach of the Distribution Agreement by NSU; and (vi) damages, costs and
expenses including attorney's fees incurred in defending and settling claims for
such obligations, expenses or liabilities.

PROPOSED TRANSACTION

     On March 8, 1999, the Company reported in a press release that its Board of
Directors had established a Special Committee consisting of one of its outside
directors to consider a proposal by James Michael and Jeffrey Michael to acquire
the shares of Common Stock of ENStar Inc. not already owned by members of the
Michael family and certain entities controlled by the Michael family.  James
Michael is a member of the Board of Directors of the Company and Jeffrey Michael
is the President and Chief Executive Officer of the Company and a member of the
Board of Directors.  The Michael family and its controlled entities own
1,919,556 shares of the Company's Common Stock, or approximately 65% of the
outstanding shares.

     The structure of the proposed transaction is expected to be determined
through negotiations between the Michael family and the Special Committee of
the Board of Directors.  The Michael family has preliminarily proposed that the
shares of the non-Michael family shareholders be acquired for a cash price of
$10.00 per share, however, the proposal is subject to change based on a number
of factors including determination of the structure of the transaction.

     The Special Committee will evaluate the fairness of any proposed
transaction to all shareholders of the Company, and will engage counsel and
financial advisors in connection with its role.  

     ENStar Inc. does not anticipate making further announcements regarding the
proposed transaction until such time as an agreement has been reached regarding
the definitive terms of the proposed transaction or until negotiations are
terminated.








                                 -13-






<PAGE>

EXECUTIVE OFFICERS

     The executive officers of the Company are as follows:
 
<TABLE>
<CAPTION>
               NAME           AGE               POSITION
               ----           ---               --------
     <S>                      <C>                 <C>
     Jeffrey J. Michael......  42   President and Chief Executive Officer
     Peter E. Flynn..........  39   Executive Vice President
     Thomas S. Wargolet......  35   Chief Financial Officer and Secretary
     Ronald D. Newman........  34   President and Chief Operating Officer, Enstar
                                    Networking

</TABLE>

     Mr. Jeffrey J. Michael has served as President and Chief Executive Officer
of the Company since March 1996.  Prior to such time, Mr. Michael served as
President and Chief Executive Officer of NSU since December 1990.  Mr. Michael
served as Vice President-Finance from April 1989 to December 1990.  Prior to
April 1989, Mr. Michael was employed by NSU in various capacities.  Jeffrey J.
Michael is the son of James H. Michael (Chairman of the Board of ENStar). Mr.
Michael is also a director of Michael and CorVel.

     Mr. Peter E. Flynn has served as Executive Vice President of the Company
since March 1996.  In addition, Mr. Flynn has served as President of Americable
since June 1997.  Prior to such time, Mr. Flynn served as Executive Vice
President, Chief Financial Officer and Secretary of NSU.  Prior to joining NSU
in 1989, Mr. Flynn was an Audit Manager with Arthur Andersen & Co.  Mr. Flynn
also serves as a director of CorVel and as a director of Vicom.

     Mr. Thomas S. Wargolet has served as Chief Financial Officer and Secretary
of the Company since March 1996.  Prior to such time, Mr. Wargolet served as
Controller of NSU since September 1989.  Mr. Wargolet was also the Director of
Finance of Americable from September 1991 until January 1995 and Vice President
of Finance and Operations from January 1995 to September 1997.  Since September
1997, Mr. Wargolet has been the Vice President of Finance and Operations of
Enstar Networking.  Prior to joining NSU in 1989, Mr. Wargolet was an Audit
Senior with Arthur Andersen & Co.  Effective March 31, 1999, Mr. Wargolet is
expected to discontinue employment with the Company and to be employed by
Vicom.

     Mr. Ronald D. Newman has served as President of Enstar Networking since
September 1997 and as Chief Operating Officer of Enstar Networking since March
1997.  Mr. Newman was the Regional Manager - Southwest Operations from March
1993 to February 1997 and prior to that served in various sales capacities for
Americable.

     Officers of the Company are elected annually by the Board of Directors.
The current officers of the Company are expected to be re-elected to serve in
the same positions for the coming year.


                                 -14-






<PAGE>

ITEM 2. PROPERTIES.

     Americable. Americable's principal sales and manufacturing operations are
located in Minneapolis, Minnesota (39,000 square feet).  This facility includes
office, warehouse and manufacturing space.  Americable also has facilities in
Raleigh, North Carolina and Rochester, Minnesota.

     Enstar Networking. Enstar Networking has its corporate headquarters in
Irving, Texas, (11,000 square feet), along with satellite offices in Austin
and Houston, Texas.

     All of the Company's facilities are leased.  ENStar believes that the
leased facilities of its operating companies are adequate for their intended
use.

ITEM 3. LEGAL PROCEEDINGS.

     The Company is engaged in routine litigation incidental to its business,
which management believes will not have a material adverse effect upon its
business.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     None.






























                                 -15-






<PAGE>

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     ENStar Inc.'s common stock began trading on the Nasdaq National Market
under the symbol ENSR effective March 3, 1997.  The following stock prices were
obtained from Nasdaq reports:

<TABLE>
<CAPTION>
                                                Low        High
                                                ---        ----
<S>                                             <C>         <C>
     BY QUARTER

          1998
          First..............................$5 15/16    $7 3/4
          Second............................. 6 3/8       7 5/8
          Third.............................. 5 7/8       8 7/16
          Fourth............................. 6 13/16     9 1/4

          1997
          First..............................$6          $9
          Second............................. 4 3/4       6 1/2
          Third.............................. 6           9 3/8
          Fourth............................. 7 3/8       9

</TABLE>

     The last sale price on March 12, 1998 was $9 3/16.  The number of common
shareholders of record as of March 12, 1999 was 158.
 
     Management does not anticipate that cash dividends will be paid on ENStar's
common stock in the foreseeable future.
 



















                                 -16-






<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.
 
<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                                   -----------------------------------------------
                                   1998       1997       1996       1995       1994
                                   ----       ----       ----       ----       ----
                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                <C>        <C>        <C>        <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA (1)
Revenues........................$43,358   $38,632    $48,667    $42,159    $36,940
Operating income (loss)......... (3,689)   (4,767)        44        110     (1,053)
Interest expense, net........... (1,336)     (722)      (169)      (232)      (337) 
Income (loss) before income
  taxes and equity in earnings
  of unconsolidated subsidiary.. (5,025)   (5,489)      (125)      (122)    (1,390)
Income (loss) from:
  Continuing operations......... (1,663)   (2,062)     1,154      1,024         86
  Discontinued operations.......  3,436      (199)       (82)       548        200
                                -------   -------    -------    -------    -------
Net income (loss)...............$ 1,773   $(2,261)   $ 1,072    $ 1,572    $   286
                                =======   =======    =======    =======    =======
Basic and diluted net income
  (loss) per share(2)
    Income (loss) from:
      Continuing operations.....$ (0.53)  $ (0.63)   $  0.34    $  0.32    $  0.03
      Discontinued operations...   1.09     (0.06)     (0.02)      0.17       0.06
                                -------   -------    -------    -------    -------
Net income (loss) per share.....$  0.56   $ (0.69)   $  0.32    $  0.49    $  0.09
                                =======   ========   ========   =======    =======
Basic and diluted weighted
  average common and
  common equivalent
  shares outstanding (2)........  3,152     3,289      3,309      3,217      3,235

CONSOLIDATED BALANCE SHEET DATA (1) (END OF PERIOD)

Total assets....................$43,573   $41,106    $32,817    $33,603    $30,520
Long-term debt, including
  current maturities............ 19,003    16,127        944      1,071      3,607
Shareholders' equity............ 13,585    14,937     20,947     19,694     18,176

</TABLE>
---------------------------
     (1) Amounts are restated for discontinued operations as discussed in 
         Note 3 to Consolidated Financial Statements.

     (2) Basic and diluted net income (loss) per share for 1994 to 1996 was
         computed using the weighted average number of outstanding shares of NSU
         Common Stock during each period presented adjusted for the Distribution
         of one share of ENStar Common Stock for every three shares of NSU
         Common Stock outstanding.

                                 -17-






<PAGE>

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

     The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included elsewhere in this report.

FORWARD-LOOKING STATEMENTS
 
     This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and are made in reliance under the
safe harbor provisions of the Securities Litigation Reform Act of 1995.  These
statements include statements regarding intent, belief or current expectations
of the Company and its management.  Shareholders and prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in the
forward-looking statements.  Among the factors that could cause actual results
to differ materially from those indicated by such forward-looking statements
are general economic conditions, computer and computer networking industry
conditions, the rapid technological changes occurring in the markets in which
the Company operates, failure to successfully execute Enstar Networking's
service strategy, dependence on and the need to recruit and retain key
personnel, the concentration of the Company's revenues with certain customers,
dependence on key suppliers and product supply, the substantial competition in
the markets in which the Company operates and certain indemnification
obligations relating to the Reorganization Transactions. Each of these factors
is more fully discussed in Exhibit 99 to the Company's Annual Report on Form
10-K for the year ended December 31, 1998.

GENERAL

     ENStar is a holding company.  Its principal subsidiaries are Americable
and Enstar Networking.  ENStar also owns 1,025,000 shares of common
stock of CorVel, or an approximate 25% interest.  CorVel is a provider of cost
containment and managed care services designed to address the medical costs of
workers' compensation.  ENStar's investment in CorVel is accounted for as an
unconsolidated subsidiary using the equity method of accounting. The common
stock of CorVel is included on the Nasdaq National Market under the symbol CRVL.

     ENStar's financial condition and results of operation have been 
significantly affected by the following transactions:

     On December 10, 1998, ENStar sold Transition to Communications Systems for
approximately $9 million which was received in cash.  The transaction involved
the sale of all of Transition's common stock.  Transition designs, manufactures,
and markets connectivity devices and network applications.  The gain on
disposition was approximately $2.5 million, net of income taxes of approximately
$1.6 million.




                                 -18-






<PAGE>

     Effective December 31, 1998, ENStar sold the assets of the Midwest
region of Enstar Networking to Vicom.  The transaction involved the sale of
substantially all of the assets of the business in exchange for 1,350,000 shares
of Vicom common stock and a $750,000 promissory note to ENStar.  There was no
gain or loss on this transaction.  As a result of this transaction, ENStar owns
a 38.5% interest in Vicom, which is accounted for as an unconsolidated
subsidiary using the equity method of accounting.

     Historically, Enstar Networking operated in various regional locations in
the Southwest, Southeast and Midwest, and has added and deleted locations on the
basis of business opportunities and operating performance of each location.  
Following the sale of the Midwest region to Vicom on December 31, 1998, Enstar
Networking's business is focused on the Southwest region of the United States.

     Prior to 1997, Enstar Networking operated as the network integration
business of Americable.  Enstar Networking was organized in April 1997 to
distinctly focus the networking service activities from the traditional
distribution and manufacturing operations of Americable.  Enstar Networking
was incorporated on January 1, 1998.  The separate results of operations for
Enstar Networking have been prepared from the books and records of Americable
for all periods presented.  The results of operations include an allocation of
general and administrative expenses for certain items such as accounting, human
resources and information systems along with facility related expenses.
Management believes these allocations are reasonable and present the operations
of Enstar Networking and Americable as though they had operated as separate
businesses.

     Since its organization in 1997, Enstar Networking has made significant
investments in new sales, consulting, engineering and technical personnel as
part of an effort to build its network security integration business. As part of
this strategy in 1998, Enstar Networking has shifted its focus from historical
commodity-based networking and structured wiring product sales towards more
security integrated solutions.  As part of this change, the company experienced
a significant increase in operating expenses resulting in operating losses in
1997 and 1998.  Enstar Networking expects to incur an operating loss in 1999 as
it continues to build its network security consulting practice.

     As described in Note 2 to the Consolidated Financial Statements of ENStar,
the Consolidated Statements of Operations of ENStar include an allocation of
general and administrative costs incurred by NSU prior to the consummation of
the Reorganization Transactions in the management of the operating companies,
investment holding and other assets of ENStar. Management believes these
allocations are reasonable and present the operations of ENStar as though it has
been operated on a stand alone basis prior to the consummation of the
Reorganization Transactions.









                                        -19-






<PAGE>

     The accompanying management discussion and analysis of results of operation
reflects pro forma operating results of Enstar Networking exclusive of the
Midwest region sold to Vicom ("ENC - business disposition").  In addition,
results of operations are restated to give effect to discontinued operations
as discussed in Note 3 to the Consolidated Financial Statements.  The following
are summarized operating results for ENStar's operating subsidiaries for the
years ended December 31, 1998, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>                                        YEARS ENDED DECEMBER 31,
                                              -----------------------------
                                               1998       1997       1996
                                               ----       ----       ----
<S>                                            <C>        <C>        <C>
Revenues
  Americable................................$19,275    $18,694    $22,338
  Enstar Networking......................... 14,271      7,331      5,933
                                            -------    -------    -------
                                             33,546     26,025     28,271

  ENC - business disposition................ 11,560     16,037     23,799
  Eliminations.............................. (1,748)    (3,430)    (3,403)
                                            -------    -------    -------
                                            $43,358    $38,632    $48,667
                                            =======    =======    =======
Gross Profit
  Americable................................$ 4,596    $ 3,964    $ 4,779
  Enstar Networking.........................  2,317      1,331      1,286
                                            -------    -------    -------
                                              6,913      5,295      6,065

  ENC - business disposition................  2,129      3,222      4,935
                                            -------    -------    -------
                                            $ 9,042    $ 8,517    $11,000
                                            =======    =======    =======

Selling, General and Administrative Expenses
  Americable................................$ 4,107    $ 3,585    $ 3,265
  Enstar Networking.........................  4,464      3,311      2,153
  Corporate.................................  1,018      1,305      1,127
                                            -------    -------    -------
                                              9,589      8,201      6,545

  ENC - business disposition................  3,142      5,083      4,411
                                            -------    -------    -------
                                            $12,731    $13,284    $10,956
                                            =======    =======    =======
Operating Income (Loss)
  Americable................................$   489    $   379    $ 1,514
  Enstar Networking......................... (2,147)    (1,980)      (867)
  Corporate................................. (1,018)    (1,305)    (1,127)
                                            -------    -------    -------
                                             (2,676)    (2,906)      (480)
                                            
  ENC - business disposition................ (1,013)    (1,861)       524
                                            -------    -------    -------
                                            $(3,689)   $(4,767)   $    44
                                            =======    =======    =======




Interest Expense (Income)
  Americable................................$   111    $   135    $   184
  Enstar Networking..........................   123         --         --
  Corporate.................................  1,102        587        (15)
                                            -------    -------    -------
                                            $ 1,336    $   722    $   169
                                            =======    =======    =======

</TABLE>                         -20-






















































<PAGE>

RESULTS OF OPERATIONS

1998 VERSUS 1997

     Revenues at Americable increased $581,000, or 3.1%, in 1998, to
approximately $19.3 million from $18.7 million in 1997.  Sales of fiber optic
products increased approximately $1.2 million due to increased focus and
expansion of its fiber optic manufacturing operation along with higher demand.
This was offset by decreased sales of networking products of approximately
$270,000, due to lower demand and decreased sales of copper and other
connectivity products of approximately $350,000, due primarily to lower volume
of sales to commercial accounts.

     Revenues at Enstar Networking increased approximately $7 million, or
95%, in 1998, to $14.3 million from $7.3 million in 1997.  This includes
increased revenues of $5.7 million resulting from higher demand for networking
products and services. Of this amount, approximately $2.9 million of sales were
attributable to three large network installation projects.  The increase in
revenue at Enstar Networking also includes approximately $1.2 million of higher
volume of network security revenues due to increased focus on services, the
addition of consulting personnel and higher demand.  Enstar Networking expects
its revenue growth in 1999 will be adversely impacted by a decreased focus on
structured wiring services in certain regional locations.  Accordingly, the
company does not expect that the revenue growth experienced during 1998 is
reflective of growth to be experienced in the future.

     Consolidated pro forma gross profit, as a percent of revenues, increased
slightly to 20.6% in 1998 as compared to 20.3% in 1997.  Increased margins at
Americable are primarily attributable to an increased volume of higher margin
fiber optic products.  Margins at Enstar Networking decreased to 16.2% in
1998 compared to 18.2% in 1997, which is primarily due to unfavorable labor
variances on certain installation projects during the year. ENStar anticipates
its gross profit margins may continue to decline in 1999 due to expected
competitive pricing pressures on products and services sold by each of its
operating companies.

     ENStar's pro forma selling, general and administrative expenses increased
approximately $1.4 million, or 17%, to $9.6 million from $8.2 million in 1997.
Operating expenses at Americable increased $522,000, or 14.6%, in 1998, compared
to $4.1 million in 1997, which is primarily attributable to the addition of
product engineering and sales support personnel associated with the expansion of
its fiber optic operations.

     The increase in operating expenses of approximately $1.2 million, or 35%,
at Enstar Networking in 1998 compared to 1997, reflects increased selling
expenses of approximately $660,000 due to higher sales salaries, commissions and
related expenses and approximately $250,000 of higher expenses due to the
addition of consulting and engineering personnel.  In addition, this increase
includes approximately $240,000 of higher facility related and other expenses
associated with the increased level of personnel.




                                 -21-






<PAGE>

     Corporate expenses decreased $287,000, or 22%, primarily due to lower
costs associated with the Company's debenture program.

     Net interest expense increased by $614,000 to approximately $1.3 million
from $722,000 in 1997, due primarily to the higher level of ENStar
subordinated debentures in addition to additional borrowings under the
Americable credit facility.

     The income tax benefit in 1998 and 1997 reflects ENStar's effective annual
income tax rate. See Note 7 to the Consolidated Financial Statements of ENStar.

     Equity in earnings of the Company's unconsolidated subsidiary increased
$163,000 to approximately $1.5 million, which is a result of higher earnings
at CorVel. CorVel's net earnings for the twelve months ended December 31, 1998
were approximately $10.1 million, an increase of approximately $800,000, or 9%,
from the previous year.  Further information with respect to the results
of operations of CorVel is contained in the Management's Discussion and Analysis
of Financial Condition and Results of Operations section of its Annual and
Quarterly reports as filed on Forms 10-K and 10-Q with the Securities and
Exchange Commission.

     Discontinued operations include the results of operations and a disposition
gain associated with the sale of Transition.  For the eleven months prior to
disposition in 1998, Transition recorded net income from operations of $946,000,
net of an income tax provision of $600,000, as compared with a net loss of
$199,000, net of an income tax benefit of $100,000 in 1997.  The gain on
disposition of approximately $2.5 million is net of income taxes of
approximately $1.6 million and reflects approximately $600,000 of estimated
costs associated with the transaction.

1997 VERSUS 1996
 
     Revenues at Americable decreased approximately $3.6 million, or 16.3%, to
approximately $18.7 million.  This includes approximately $2 million of
decreased sales of networking products due primarily to lower demand from one
customer.  In addition, sales of bulk cable and other connectivity products
decreased approximately $1.2 million, due primarily to lower volume to
contractors and resellers.  Sales of cable assemblies decreased approximately
$400,000, due primarily to lower demand of custom OEM assemblies.

     Revenues at Enstar Networking increased approximately $1.4 million, or
23.5%, to $7.3 million.  This includes approximately $1.2 million of increased
revenues from network integration products and services along with approximately
$600,000 of revenue from network security products due to higher demand.  This 
was offset by decreased sales of structured wiring products of approximately
$400,000 which reflects the company's shift from a distribution/reseller of 
products, towards more service oriented solutions.







                                 -22-






<PAGE>

     Consolidated pro forma gross profit, as a percent of revenues, decreased
to 20.3% in 1997 as compared to 21.4% in 1996.  Decreased margins at
Americable, are primarily due to unfavorable labor variances resulting from the
expansion of its fiber optic manufacturing operation.  Margins at Enstar
Networking decreased to 18.2% from 21.7%, primarily due to increased
competition for structured wiring and network hardware products.

     ENStar's pro forma selling, general and administrative expenses increased
approximately $1.6 million or 25.3%, to $8.2 million from $6.5 million in
1996.  The increase in operating expenses at Americable reflects increased
expenses of approximately $170,000 primarily due to the addition of sales, 
purchasing and product management personnel along with higher catalog and
marketing related expenses.  In addition, there was approximately $150,000
of higher rent, depreciation and other related expenses associated with its
facility remodeling.

     Enstar Networking had increased operating expenses of approximately
$1.2 million, or 53.8%.  This includes approximately $540,000 of increased
salaries, benefits, training and other related expenses due to the addition
of new sales, consulting and engineering personnel.  The company also had
approximately $205,000 of increased expenses due to marketing related costs
associated with the introduction of Enstar Networking and approximately $210,000
of higher costs related to the reorganization of its branch operations.  In
addition, this increase includes approximately $260,000 of higher facility
related and other general and administrative expenses associated with the
increased level of personnel.

     Corporate expenses increased $178,000, or 15.8% primarily due to higher
professional fees.
 
     Net interest expense increased $553,000 to $722,000 from $169,000 in 1996,
due primarily to the higher level of ENStar subordinated debentures in addition
to higher borrowings under the Americable credit facility.

     The income tax provision (benefit) in 1997 and 1996 reflects ENStar's
estimated effective annual tax rate. See Note 7 to Consolidated Financial
Statements of ENStar.
 
     Equity in earnings of unconsolidated subsidiary increased $45,000 to
approximately $1.3 million, which is a result of higher earnings at CorVel
offset slightly by the effect of a lower ownership interest during the first
half of 1997.  CorVel's net earnings for the twelve months ended December 31,
1997 were approximately $9.3 million, an increase of approximately $1 million
or 12% from the previous year.  

     The loss from discontinued operations in 1997 and 1996, reflect the
operating losses of Transition.







                                 -23-






<PAGE>

CAPITAL RESOURCES AND LIQUIDITY

     ENStar has experienced cash flow deficits from operations due primarily to
the losses incurred at its operating companies.  In addition, ENStar has
experienced fluctuations in its working capital, which are primarily
attributable to the increase in receivables associated with growth in sales.
Cash used in operations was approximately $3.8 million in 1998 versus $1.7 
million in 1997.

     ENStar does not have the use of cash generated by CorVel.  Also, since its
initial public offering in 1991, CorVel has not declared any dividends and has
indicated that it does not anticipate doing so for the foreseeable future.
ENStar may from time to time, depending on market conditions and other factors,
sell a portion of its CorVel holdings.  The ability of ENStar to sell its CorVel
holdings is limited, however, to sales pursuant to Rule 144 of the Securities
Act of 1933 and the volume limitations thereof, and to private negotiated sales,
which may adversely affect the ability of ENStar to sell a large portion of the
CorVel holdings at a given time.

     The Company maintains a program (the "Debenture Program") whereby it sells
subordinated debentures of various maturities to primarily individual investors.
The debentures are offered on a continuous basis at interest rates that change
from time to time depending on market conditions. At December 31, 1998, the
Company had approximately $19 million principal amount of subordinated
debentures outstanding with weighted average interest rate of 9.6%. Long-term
debt proceeds includes approximately $2.4 million of new debentures sold and
$600,000 of compounded interest for the year ended December 31, 1998.
Approximately $4.9 million of debentures are scheduled to mature during 1999.

     Americable and Enstar Networking maintained a revolving line of credit
facility which provided borrowings up to $4 million during the year ended
December 31, 1998 and is due in October 1999.  Borrowings under this facility
were based on eligible accounts receivable and inventory with interest at prime
(7.75% at December 31, 1998).  At December 31, 1998, there were outstanding
borrowings of $1,680,000, and approximately $1.3 million of available
borrowings.  The note contains certain restrictive covenants, the most
significant of which are capital expenditure limitations and limitations on
operating losses.  Under the terms of the credit agreement, ENStar is required
to make capital contributions to Americable to the extent Americable (including
Enstar Networking) incurs pretax losses in excess of specified levels.  At
December 31, 1998, the companies were in compliance with all covenants under
this agreement.

     During 1998, ENStar provided an aggregate of approximately $2.5 million
in cash Enstar Networking pursuant to the terms of the amended credit agreement.
Additional cash investments from ENStar are expected in 1999 to fund anticipated
operating losses at Enstar Networking and capital expenditures.

     Effective January 1, 1999, this agreement was amended to provide a maximum
lending limit of $3 million based upon a borrowing base of eligible accounts
receivable, with an effective interest rate of prime plus 1% (8.75% at January
1, 1999).  The Company believes it will be able to renew or obtain new
agreements at substantially the same terms and conditions.

                                 -24-






<PAGE>

     In June 1997, the Company commenced a modified "Dutch Auction" self tender
offer for the repurchase of shares of its common stock.  This tender offer,
which expired in July 1997, resulted in the Company's purchase and retirement of
37,290 shares of its common stock at $6.25 per share or an aggregate cost of
approximately $233,000. 

     In March 1998, the Company announced a stock repurchase plan pursuant to
which the Company could repurchase up to 350,000 shares of its common stock
from time-to-time in open market or privately negotiated transactions.  Through
December 31, 1998, 290,266 shares had been repurchased at an average price of
$6.46 per share or an aggregate cost of approximately $1,875,000.

     On March 8, 1999, the Company reported in a press release that its Board of
Directors had established a Special Committee consisting of one of its outside
directors to consider a proposal by James Michael and Jeffrey Michael to acquire
the shares of Common Stock of ENStar Inc. not already owned by members of the
Michael family and certain entities controlled by the Michael family.  See Note
12 to the Consolidated Financial Statements of ENStar.

     ENStar expects to be able to fund its working capital and capital
expenditures along with any repurchases of common stock for 1999 with cash flow
from operations along with available cash and cash equivalents and amounts
available under the credit facilities of its operating companies.  At March 12,
1999, ENStar had approximately $16.6 million of cash and cash equivalents,
excluding cash of its operating subsidiaries.  

YEAR 2000 ISSUES

     General.  The Company has completed a preliminary assessment of Year 2000
compliance with respect to the holding company as well as its operating
subsidiaries and is currently modifying its systems to accommodate the Year
2000.  The Year 2000 problem relates to the fact that many computer systems
and applications were developed to recognize the year as a two-digit number,
with the digits "00" being recognized as the year 1900.  The Company
commenced its assessment of Year 2000 Compliance in January 1998, and expects
to complete its Year 2000 remediation efforts in the third quarter of 1999.

     Company Systems.  The Company has determined that through normal recurring
system upgrades, the majority of the Company's computer hardware and software
systems covering its operations, including business processes and financial
systems, are currently, or will be by September 30, 1999, Year 2000 compliant.

     Products.  Americable sells products to customers under non-exclusive
agreements with its suppliers.  Americable is not an agent for its suppliers and
cannot make representations regarding the Year 2000 compliance or readiness of
its suppliers.








                                 -25-






<PAGE>

     Third Parties.  The potential impact of Year 2000 issues will depend
to a large extent on the Year 2000 efforts of the Company's vendors,
customers, service providers, utilities, governmental agencies and other
entities with which the Company does business.  The Company is communicating
with certain of these parties to determine their efforts to prepare for
the Year 2000 and to evaluate any likely impact on the Company.  These
communications are focused on third parties that the Company believes
could have the greatest impact on its business and operations.  This process
will continue throughout 1999.  The efforts of third parties are not within
the control of the Company and their failure to remedy Year 2000 issues
successfully could result in business disruption, loss of revenue and 
increased operating cost for the Company.

     Contingency Plans.  The Company has not yet established contingency
plans in the event that it is unable to complete its remediation efforts by
December 31, 1999.  These contingency plans are expected to be developed
by September 30, 1999.

     Costs.  The total cost to upgrade the Company's systems to Year 2000
compliance are expected to be approximately $35,000, of which
approximately $4,000 has been spent to date.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK SENSITIVE INSTRUMENTS

     The Company's operations are subject to certain market risk changes,
primarily relating to fluctuations in interest rates. The Company's interest
income and expense is affected by changes in the general level of U.S. interest
rates.  Changes in interest rates affect the interest earned on the Company's
cash equivalents and the interest paid on its debt.  The Company maintains
significantly all of its debt with a fixed rate of interest.  The Company does
not anticipate exposure to interest rate market risk will have a material impact
on the Company's future earnings, cash flow, or fair value of debt instruments.
The market risk on cash equivalents related to interest income, as well as the
fair value of cash equivalents, is not expected to have a material impact on the
Company.  The Company has no history of, and does not anticipate in the future,
investing in derivative financial instruments, derivative commodity instruments
or other such financial instruments.















                                 -26-






<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
     The Consolidated Financial Statements of the Company listed in the index
under Item 14(a)(1) and (2) hereof are filed as part of this Annual Report on
Form 10-K and are incorporated by reference in this Item 8. See also "Index to
Financial Statements" on page F-1 hereof. Certain quarterly financial data is
set forth below.
<TABLE>
<CAPTION>                                             UNAUDITED
                                      FIRST      SECOND      THIRD     FOURTH
                                      -----      ------      -----     ------
                                      (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                    <C>        <C>         <C>        <C>
1998
Revenues.............................$ 9,834    $11,639    $10,887    $10,998
Gross profit.........................  1,982      2,302      2,109      2,649
Interest expense, net................   (273)      (338)      (369)      (356)
Income (loss) from -
  Continuing operations.............. (1,117)      (922)      (408)       784
  Discontinued operations............   (195)       227        543      2,861
                                     -------    -------    -------    -------
       Net income (loss).............$(1,312)   $  (695)   $   135    $ 3,645
                                     =======    =======    =======    =======
Basic and diluted income
  (loss) per share
  Continuing operations..............$  (.34)   $  (.28)   $  (.13)   $   .26
  Discontinued operations............   (.06)       .07        .17        .96
                                     -------    -------    -------    -------
       Net income (loss) per share...$  (.40)   $  (.21)   $   .04    $  1.22
                                     =======    =======    =======    =======
1997
Revenues.............................$ 8,382    $ 9,555    $11,906    $ 8,789
Gross profit.........................  2,046      2,081      2,472      1,918
Interest expense, net................    (62)      (152)      (232)      (276)
Income (loss) from -
  Continuing operations..............   (447)      (701)      (364)      (550)
  Discontinued operations............   (135)        99          8       (171)
                                     -------    -------    -------    -------
       Net income (loss).............$  (582)   $  (602)   $  (356)   $  (721)
                                     =======    =======    =======    =======
Basic and diluted income
  (loss) per share
  Continuing operations..............$  (.14)   $  (.22)   $  (.12)   $  (.17)
  Discontinued operations............   (.04)       .03        .01       (.05)
                                     -------    -------    -------    -------
       Net income (loss)per share....$  (.18)   $  (.19)   $  (.11)   $  (.22)
                                     =======    =======    =======    =======
</TABLE>






                                 -27-






<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
     None.


                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     Pursuant to General Instruction G(3), except for the information relating
to the executive officers of the Company set forth in Part I of this report, the
information called for by Items 10, 11, 12 and 13 is incorporated herein by
reference to the information contained in the Company's Proxy Statement for its
1999 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A
with the Securities and Exchange Commission on or prior to April 30, 1999.


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
 
<TABLE>
<S>      <S>                                                             <C>
(a)l.    CONSOLIDATED FINANCIAL STATEMENTS
         ENStar Inc.
         Consolidated Statements of Operations.......................        F-2
         Consolidated Balance Sheets.................................        F-3
         Consolidated Statements of Shareholders' Equity.............        F-4
         Consolidated Statements of Cash Flows.......................        F-5
         Notes to Consolidated Financial Statements..................F-6 to F-21
         Report of Independent Certified Public Accountants..........       F-22
         Schedule II -- Valuation and Qualifying Accounts............       F-23

   2.    CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
  (i)    CorVel Corporation
         Report of Independent Auditors..............................        S-1
         Consolidated Statements of Income...........................        S-2
         Consolidated Balance Sheets.................................        S-3
         Consolidated Statements of Stockholders' Equity.............        S-4
         Consolidated Statements of Cash Flows.......................        S-6
         Notes to Consolidated Financial Statements..................S-7 to S-18
         Schedule II -- Valuation and Qualifying Accounts............       S-19

</TABLE>



                                 -28-






<PAGE>

     All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.

3. EXHIBITS
<TABLE>
<C>       <S>
  2.1     Agreement and Plan of Reorganization, dated as of December
          21, 1995, by and among North Star Universal, Inc., Michael
          Foods, Inc. and NSU Merger Co. (filed as Exhibit 2 to the
          Company's Registration Statement on Form S-4, Registration
          No. 333-1925 and incorporated herein by reference (schedules
          omitted -- the Company agrees to furnish a copy of any
          schedule to the Commission upon request)).
  2.2     Asset Purchase Agreement, dated as of December 31, 1998
          by and between Vicom, Inc. and Enstar Networking
          Corporation.
  2.3     Stock Purchase & Registration Rights Agreement, dated as of
          December 31, 1998, by and between Americable, Inc.,
          and Vicom, Inc.
  2.4     Stock Purchase Agreement dated December 10, 1998, between
          Communications Systems, Inc., Ameriable, Inc., and ENStar Inc.
          (filed as Exhibit 2.1 to the Company's current report on
          Form 8-K, filed December 22, 1998, and incorporated herein by
          reference).
  3.1     Articles of Incorporation of the Company (filed as Exhibit
          3.1 to the Company's Registration Statement on Form S-4,
          Registration No. 333-1925 and incorporated herein by
          reference).
  3.2     Bylaws of the Company (filed as Exhibit 3.2 to the Company's
          Registration Statement on Form S-4, Registration No. 333-1925
          and incorporated herein by reference).
  4.1     Indenture, dated as of November 7, 1996, between the Company
          and National City Bank of Minneapolis, as trustee (filed as
          Exhibit 4.1 to the Company's Registration Statement on Form
          S-1, Registration No. 333-24007 and incorporated herein by
          reference).
  4.2     Form of Supplemental Indenture, dated as of November 7, 1996,
          between the Company and National City Bank of Minneapolis, as
          trustee (filed as Exhibit 4.2 to the Company's Registration
          Statement on Form S-1, Registration No. 333-24007 and
          incorporated herein by reference).
+10.1     1996 Stock Incentive Plan, including forms of option
          agreements (filed as Exhibit 10.1 to the Company's
          Registration Statement on Form S-4, Registration No.
          333-1925, and incorporated herein by reference).
 10.2     Amended and Restated Loan and Security Agreement, dated 
          June 1, 1993, among Americable, Inc., Transition Networks, Inc.,
          Cable Distribution Systems, Inc., and First Bank National
          Association (filed as exhibit 10.31 to the Quarterly Report on
          Form 10-Q of North Star Universal, Inc. for the quarter ended
          June 30, 1993, and incorporated herein by reference).


                                 -29-






<PAGE>

 10.3     First Amendment to the Amended and Restated Loan and Security
          Agreement, dated November 29, 1993, among Americable, Inc.,
          Transition Networks, Inc., Cable Distribution Systems, Inc.,
          and First Bank National Association (filed as exhibit 10.26 to
          the Annual Report on Form 10-K of North Star Universal, Inc.
          for the year ended December 31, 1994, and incorporated herein
          by reference).
 10.4     Waiver and Second Amendment to the Amended and Restated Loan
          and Security Agreement, dated March 3, 1995, among Americable, Inc.,
          Transition Networks, Inc., Cable Distribution Systems, Inc., and
          First Bank National Association (filed as exhibit 10.27 to the 
          Annual Report on Form 10-K of North Star Universal, Inc. for the
          year ended December 31, 1994, and incorporated herein by reference).
 10.5     Amendment to Supplement A to Amended and Restated Loan and Security
          Agreement dated as of June 1, 1993 among Americable, Inc., Transition
          Networks, Inc., Cable Distribution Systems, Inc. and First Bank
          National Association (filed as exhibit 10.28 to the Annual Report on
          Form 10-K of North Star Universal, Inc., and incorporated herein by
          reference.)
 10.6     Sixth Amendment to the Amended and Restated Loan and Security
          Agreement, dated August 9, 1996, among Americable, Inc.,
          Transition Networks, Inc., Cable Distribution Systems, Inc.,
          and First Bank National Association, amending the terms of
          the Amended and Restated Loan and Security Agreement (filed
          as Exhibit 10.1 to the Quarterly Report on Form 10-Q of
          North Star Universal, Inc. for the quarter ended June 30, 1996,
          and incorporated herein by reference).
 10.7     Lease Agreement dated June 13, 1995 between Transition and
          West Life & Annuity Insurance Company for lease of premises
          at 6475 City West Parkway, Eden Prairie, Minnesota. (Filed
          as Exhibit 10.11 to the Company's Registration Statement on
          Form S-4, Registration No. 333-1925, and incorporated herein
          by reference).
 10.8     Lease Agreement dated February 21, 1989 between Americable and
          Ryan/Flying Cloud Associates Limited Partnership, including amendments
          thereto, for the lease of premises at 7450 Flying Cloud Drive, Eden
          Prairie, Minnesota. (Filed as Exhibit 10.12 to the Company's
          Registration Statement on Form S-4, Registration No. 333-1925, and
          incorporated herein by reference).
 10.9     Distribution Agreement between North Star Universal, Inc., and the
          Company (Filed as an Exhibit to Agreement and Plan of Reorganization,
          dated as of December 21, 1995, by and among North Star Universal,
          Inc., Michael Foods, Inc. and NSU Merger Co., which agreement was
          filed as Exhibit 2 to the Company's Registration Statement on Form
          S-4, Registration No. 333-1925, and is incorporated herein by
          reference).
 10.10    Commercial Lease Agreement between Americable, Inc. and LaSalle
          National Trust (filed as Exhibit 10.4 to the Quarterly Report on
          Form 10-Q of North Star Universal, Inc. for the quarter ended
          September 30, 1996 and incorporated herein by reference).


                                 -30-








<PAGE>

 10.11    Commercial Lease Agreement between Americable, Inc. and Petroleum,
          Inc. (filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q of
          North Star Universal, Inc. for the quarter ended June 30, 1996 and
          incorporated herein by reference).
 10.12    Separation and General Release, dated February 17, 1997, between
          Americable and Gary L. Eizenga (filed as Exhibit 10.8 to the Company's
          Annual Report on Form 10-K for the year ended December 31, 1996 and
          incorporated herein by reference).
 10.13    First Amendment to Loan and Security Agreement, dated May 29, 1997,
          among Transition Networks, Inc., and First Bank National Association,
          amending the terms of the Loan and Security Agreement dated August 9,
          1996 (filed as Exhibit 10.9 to the Company's Quarterly Report on
          Form 10-Q for the quarter ended June 30, 1997 and incorporated herein
          by reference).
 10.14    Seventh Amendment to Amended and Restated Loan and Security
          Agreement, dated May 29, 1997, among Americable, Inc., Cable
          Distribution Systems, Inc., and First Bank National Association,
          amending the terms of the Amended and Restated Loan and Security
          Agreement dated August 9, 1996 (filed as Exhibit 10.10 to the
          Company's Quarterly Report on Form 10-Q for the quarter ended
          June 30, 1997 and incorporated herein by reference).
 10.15    Second Amendment to Loan and Security Agreement, dated September 30,
          1997, among Transition Networks, Inc., and First Bank National
          Association, amending the terms of the Loan and Security Agreement
          dated August 9, 1996 (filed as Exhibit 10.11 to the Company's
          Quarterly Report on Form 10-Q for the quarter ended September 30,
          1997 and incorporated herein by reference).
 10.16    Eighth Amendment to Amended and Restated Loan and Security Agreement,
          dated September 30, 1997, among Americable, Inc., Cable Distribution
          Systems, Inc., and First Bank National Association, amending the terms
          of the Amended and Restated Loan and Security Agreement dated
          August 9, 1996 (filed as Exhibit 10.12 to the Company's Quarterly
          Report on Form 10-Q for the quarter ended September 30, 1997 and
          incorporated herein by reference).
 10.17    Assumption Agreement And Ninth Amendment To Amended And Restated Loan
          and Security Agreement And Waiver dated as of March 5, 1998, among
          Americable, Inc., Cable Distribution Systems, Inc., Enstar Networking
          Corporation, and U.S. Bank National Association, amending the terms
          of the Amended and Restated Loan and Security Agreement dated 
          September 30, 1997 (filed as exhibit 10.13 to the Company's Annual
          Report on Form 10-K for the year ended December 31, 1997, and
          incorporated herein by reference).
 10.18    Third Amendment to Loan and Security Agreement and Waiver, dated 
          March 27, 1998, among Transition Networks, Inc., and U.S. Bank
          National Association, amending the terms of the Amended and Restated
          Loan and Security Agreement and Waiver dated September 30, 1997 (filed
          as exhibit 10.13 to the Company's Annual Report on Form 10-K for the
          year ended December 31, 1997, and incorporated herein by reference).
 10.19    Assignment of Lease, dated as of January 1999, by and among Enstar
          Networking Corporation, Vicom Incorporated and Lexmark Office One
          Partners LLP.



                                 -31-






<PAGE>

+10.20    Americable, Inc. 1999 Stock Option Plan (filed as Exhibit 10.9 to the
          Company's Registration Statement on Form S-1, Registration No.
          333-24007 and incorporated herein by reference).
+10.21    Enstar Networking Corporation Stock Option Plan.
 10.22    Fourth Amendment to Loan and Security Agreement dated as of June 30,
          1998, among Transition Networks, Inc., and U.S. Bank National 
          Association, amending the terms of the Amended and Restated Loan and
          Security Agreement and Waiver dated September 30, 1997 (filed as
          exhibit 10.22 to the Company's Quarterly Report on Form 10-Q for the
          quarter ended June 30, 1998, and incorporated herein by reference).
 10.23    Tenth Amendment to Amended and Restated Loan and Security Agreement
          dated as of June 30, 1998, among Americable, Inc., Cable 
          Distribution Systems, Inc., Enstar Networking Corporation, and
          U.S. Bank National Association, amending the terms of the Amended
          and Restated Loan and Security Agreement dated September 30, 1997
          (filed as exhibit 10.23 to the Company's Quarterly Report on Form 10-Q
          for the quarter ended June 30, 1998, and incorporated herein by
          reference).
 10.24    Eleventh Amendment to Amended and Restated Loan and Security Agreement
          dated as of August 31, 1998, among Americable, Inc., Cable 
          Distribution Systems, Inc., Enstar Networking Corporation, and
          U.S. Bank National Association, amending the terms of the Amended
          and Restated Loan and Security Agreement dated June 30, 1997
          (filed as exhibit 10.24 to the Company's Quarterly Report on Form 10-Q
          for the quarter ended September 30, 1998, and incorporated herein by
          reference).
 10.25    Lease Agreement dated September 23, 1998, by and between Lexmark
          Office One Partners, LLP, a North Dakota limited liability
          partnership, and Enstar Networking Corporation of Eden Prairie,
          Minnesota (filed as exhibit 10.25 to the Company's Quarterly Report on
          Form 10-Q for the quarter ended September 30, 1998, and incorporated
          herein by reference).
 10.26    Lease Agreement dated September 14, 1998, by and between PYLON, INC.,
          a North Carolina corporation, and Americable, Inc., a Minnesota
          corporation (filed as exhibit 10.26 to the Company's Quarterly Report
          on Form 10-Q for the quarter ended September 30, 1998, and
          incorporated herein by reference).
 10.27    Twelfth Amendment to Amended and Restated Loan and Security Agreement
          dated November 30, 1998, among Americable, Inc., Cable
          Distribution Systems, Inc., Enstar Networking Corporation, and
          U.S. Bank National Association, amending the terms of the Amended
          and Restated Loan and Security Agreement dated August 31, 1998.
 10.28    Thirteenth Amendment to Amended and Restated Loan and Security
          Agreement and Consent dated January 8, 1999, among Americable, Inc.,
          Enstar Networking Corporation, and U.S. Bank National Association,
          amending the terms of the Amended and Restated Loan and Security
          Agreement dated November 30, 1998.







                                 -32-






<PAGE>

 21.1     Subsidiaries of the Company.
 23.1     Consent of Independent Auditors - Ernst & Young LLP.
 27.1     Financial Data Schedule.
 99.1     Cautionary Statement Regarding Forward Looking Statements.
</TABLE>
--------------------------
 +  Management contract or compensatory plan or arrangement required to be filed
    as an Exhibit to this Annual Report on Form 10-K pursuant to Item
    601(b)(10)(iii)(A) of Regulation S-K.
(b) Reports on Form 8-K.  On December 22, 1998, the Company filed a current
    report on Form 8-K to report the disposition of assets in connection
    with the sale of the stock of Transition Networks, Inc. (Item 2).  The
    filing included the Company's pro forma financial statements reflecting
    the disposition (Item 7).
(c) See the Exhibits set forth above.
(d) See the Financial Statement Schedules of the Company, and Subsidiaries
    Consolidated Financial Statements and the CorVel Corporation Financial
    Statement Schedule attached as a separate section of this report.




































                                 -33-







<PAGE>

                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
Date: March 30, 1999
 
                                          ENSTAR INC.
 
                                          By      /s/ JEFFREY J. MICHAEL
 
                                            ------------------------------------
                                             Jeffrey J. Michael, President and
                                                  Chief Executive Officer
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
 
<TABLE>
<S>  <C>                                               <C>      <C>
By                /s/ JEFFREY J. MICHAEL               Dated:   March 30, 1999
     ------------------------------------------------
                    Jeffrey J. Michael
     President, Chief Executive Officer and Director
              (principal executive officer)
 
By                 /s/ THOMAS S. WARGOLET              Dated:   March 30, 1999
     ------------------------------------------------
                     Thomas S. Wargolet
     Chief Financial Officer and Secretary (principal
            financial and accounting officer)
 
By                  /s/ MILES E. EFRON                 Dated:   March 30, 1999
     ------------------------------------------------
                      Miles E. Efron
                         Director
 
By                 /s/ JAMES H. MICHAEL                Dated:   March 30, 1999
     ------------------------------------------------
                     James H. Michael
                         Director
 
By                                                     Dated:   March 30, 1999
     ------------------------------------------------
                     Richard J. Braun
                         Director
</TABLE>





                                 -34-






<PAGE>
                                  ENSTAR INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
               FINANCIAL STATEMENTS OF ENSTAR                 PAGE
               ------------------------------                 ----
<S>                                                           <C>
Consolidated Statements of Operations for the years ended
  December 31, 1998, 1997 and 1996..........................   F-2
Consolidated Balance Sheets as of December 31, 1998
  and 1997..................................................   F-3
Consolidated Statements of Shareholders' Equity for the
  years ended December 31, 1998, 1997, and 1996.............   F-4
Consolidated Statements of Cash Flows for the 
  years ended December 31, 1998, 1997, and 1996.............   F-5
Notes to Consolidated Financial Statements..................   F-6
Report of Independent Certified Public Accountants..........  F-22
Schedule II -- Valuation and Qualifying Accounts............  F-23

</TABLE>
 
<TABLE>
<CAPTION>
               FINANCIAL STATEMENTS OF CORVEL
               ------------------------------
<S>                                                           <C>
Report of Independent Auditors..............................   S-1
Consolidated Statements of Income for the three years 
  ended March 31, 1996, 1997, and 1998......................   S-2
Consolidated Balance Sheets as of March 31, 1997 and 1998...   S-3
Consolidated Statements of Stockholders' Equity for the
  three years ended March 31, 1996, 1997, and 1998..........   S-4
Consolidated Statements of Cash Flows for the three years
  ended March 31, 1996, 1997, and 1998......................   S-6
Notes to Consolidated Financial Statements..................   S-7
Schedule II -- Valuation and Qualifying Accounts............  S-19


</TABLE>














                                 F-1







<PAGE>

                                  ENSTAR INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31,
                                                  -----------------------------
                                                    1998       1997       1996
                                                    ----       ----       ----
                                                          (IN THOUSANDS,
                                                     EXCEPT PER SHARE AMOUNTS)
<S>                                                 <C>        <C>        <C>
Revenues.........................................$43,358    $38,632    $48,667
Operating and product costs...................... 34,316     30,115     37,667
                                                 -------    -------    -------
Gross profit.....................................  9,042      8,517     11,000
Selling, general and administrative expenses..... 12,731     13,284     10,956
                                                 -------    -------    -------
Operating income (loss).......................... (3,689)    (4,767)        44
Interest expense, net............................ (1,336)      (722)      (169)
                                                 -------    -------    -------
Loss before taxes and equity in earnings
  of unconsolidated subsidiary................... (5,025)    (5,489)      (125)
Income tax provision (benefit)................... (1,850)    (2,078)        25
                                                 -------    -------    -------
Loss before equity in earnings
  of unconsolidated subsidiary................... (3,175)    (3,411)      (150)
Equity in earnings of
  unconsolidated subsidiary......................  1,512      1,349      1,304
                                                 -------    -------    -------
Income (loss) from continuing operations......... (1,663)    (2,062)     1,154

Discontinued operations, net of taxes
  Income (loss) from operations..................    946       (199)       (82)
  Gain on disposition............................  2,490        ---        ---
                                                 -------    -------    -------
                                                   3,436       (199)       (82)
                                                 -------    -------    -------
Net income (loss)....... ........................$ 1,773    $(2,261)   $ 1,072
                                                 =======    =======    =======

Basic and diluted income (loss) per share
  Continuing operations..........................$ (0.53)   $ (0.63)   $  0.34
  Discontinued operations........................$  1.09    $ (0.06)   $ (0.02)
                                                 -------    -------    -------
Net income (loss) per share......................$  0.56    $ (0.69)   $  0.32
                                                 =======    =======    =======
Basic and diluted
  weighted average shares outstanding............  3,152      3,289      3,309
                                                 =======    =======    =======
</TABLE>

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

                                 F-2





<PAGE>
                                  ENSTAR INC.
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                    ----------------------
                                                       1998         1997
                                                       ----         ----
                                                        (IN THOUSANDS)
<S>                                                     <C>         <C>
ASSETS
Current assets
  Cash and cash equivalents.........................$17,155      $12,563
  Accounts receivable, net of allowance
    for doubtful accounts ($374 in 1998
    and $289 in 1997)...............................  4,769        4,979
  Inventories.......................................  1,734        2,630
  Prepaid expenses and other........................    161          285
  Net assets of discontinued operations.............     --        3,295
                                                    -------      -------
     Total current assets........................... 23,819       23,752
Property and equipment, net.........................  1,072        1,390
Goodwill............................................  4,486        4,642
Investment in unconsolidated subsidiaries........... 13,293       11,170
Other...............................................    903          152
                                                    -------      -------
                                                    $43,573      $41,106
                                                    =======      =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Notes payable to bank.............................$ 1,680      $ 2,380
  Current maturities of long-term debt..............  4,899          134
  Accounts payable..................................  3,186        2,827
  Accrued expenses..................................  4,580        4,835
                                                    -------      -------
       Total current liabilities.................... 14,345       10,176
Long-term debt, less current maturities............. 14,104       15,993
Deferred income taxes...............................  1,539           --
Commitments and contingencies.......................     --           --
Shareholders' equity................................ 13,585       14,937
                                                    -------      -------
                                                    $43,573      $41,106
                                                    =======      =======
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.












                                 F-3


<PAGE>
                                  ENSTAR INC.
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                       COMMON STOCK
                      ---------------  ADDITIONAL          OPERATING  TOTAL
                      SHARES            PAID-IN    RETAINED   UNIT SHAREHOLDERS'
                      ISSUED   AMOUNT   CAPITAL    EARNINGS  EQUITY   EQUITY
                      ------   ------  ----------  --------  ------   ------
<S>                   <C>      <C>     <C>         <C>       <C>      <C>
Balance at
 January 1, 1996          --   $ --     $    --    $    --  $ 19,694  19,694
 Net income...........    --     --          --         --       868     868
 Effect of equity
  transactions of
  unconsolidated
  subsidiary..........    --     --          --         --       (45)    (45)
 Constructive
  dividend............    --     --          --         --      (309)   (309)
                      ------   ----     -------    -------  --------  ------

Balance at
 November 6, 1996         --     --          --         --    20,208  20,208
 Contribution of common
  stock of Americable,
  Transition and CorVel
  to ENStar Inc. by
  North Star Universal,
  Inc. (NSU)..........    --     --      20,208         --   (20,208)     --
 Additional capital
  invested............    --     --         660         --        --     660
 Net income from
  November 7, 1996
  through December 31,
  1996................    --     --          --        204        --     204
 Effect of equity
  transactions of
  unconsolidated
  subsidiary..........    --     --        (125)        --        --    (125)
 Issuance of shares of
  ENStar common stock
  to shareholders...3,304,279    33         (33)        --        --      --
                    ---------  ----     -------    -------  --------  ------

Balance at
 December 31, 1996  3,304,279    33      20,710        204        --  20,947

 Net loss.............     --    --          --     (2,261)       --  (2,261)
 Effect of equity
  transactions of
  unconsolidated
  subsidiary..........     --    --      (1,434)        --        --  (1,434)
 Constructive dividend
  to NSU..............     --    --      (2,082)        --        --  (2,082)
 Purchase of
  common stock....... (37,290)   --        (233)        --        --    (233)
                    ---------  ----     -------    -------  --------  ------

Balance at
 December 31, 1997  3,266,989    33      16,961     (2,057)       --  14,937

 Net income...........     --    --          --      1,773        --   1,773
 Effect of equity
  transactions of
  unconsolidated
  subsidiaries........     --    --        (640)        --        --    (640)
 Adjustment of net
  operating loss
  carryforward
  allocation..........     --    --        (610)        --        --    (610)
 Purchase of
  common stock...... (290,266)   (3)     (1,872)        --        --   (1,875)
                    ---------  ----     -------    -------  --------   ------

Balance at
 December 31, 1998  2,976,723  $ 30     $13,839    $  (284) $     --  $13,585
                    =========  ====     =======    =======  ========  =======
</TABLE>
 The accompanying notes are an integral part of these consolidated statements.

                                 F-4









<PAGE>
                                  ENSTAR INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                                      --------------------------------
                                                        1998        1997        1996
                                                        ----        ----        ----
                                                               (IN THOUSANDS)
<S>                                                     <C>         <C>         <C>
Cash flows from operating activities
  Net income (loss)..................................$  1,773    $(2,261)    $ 1,072
  Adjustments to reconcile net income (loss)
    to net cash provided by (used in)
    operating activities:
     Equity in earnings of unconsolidated
       subsidiary....................................  (1,512)    (1,349)     (1,304)
     Depreciation and amortization...................   1,204        815         683
     Deferred income taxes...........................  (1,855)    (2,078)         34 
     Gain on sale of discontinued operation..........  (2,490)        --          --
     Net (income) loss from discontinued operation...    (946)       199          82
     Discontinued operation - other..................     518        808       1,112
     Changes in operating assets and liabilities,
       net of effects from business dispositions
       Accounts receivable...........................  (1,263)     1,204         751
       Inventories...................................     731       (205)        721
       Accounts payable, accrued expenses and other..     132      1,195      (2,331)
                                                     --------    --------    ------
  Net cash provided by (used in)
       operating activities..........................  (3,708)    (1,672)        820

Cash flows from investing activities
  Capital expenditures...............................    (832)    (1,145)       (627)
  Collections on notes receivable....................      --         --         258
  Proceeds from sale of discontinued operations......   8,903         --          --
  Other..............................................      (1)       (79)       (240)
                                                     --------    -------     -------
  Net cash provided by (used in)
    investing activities.............................   8,070     (1,224)       (609)

Cash flows from financing activities
  Long term debt repayments.......................... (50,591)   (47,671)    (56,411)
  Long term debt borrowings..........................  49,891     49,341      56,396
  Proceeds from long-term debt.......................   3,004     15,183         944
  Payments on long-term debt.........................    (128)        --      (1,071)
  Purchase of common stock...........................  (1,875)      (233)         --
  Additional capital invested
    (constructive dividends).........................      --     (2,082)        351
  Other..............................................     (71)       192          52
                                                     --------    --------    --------
  Net cash provided by financing activities..........     230     14,730         261
                                                     --------    --------    --------
  Net increase in cash 
    and cash equivalents.............................   4,592     11,834         472

Cash and cash equivalents at
  beginning of year..................................  12,563        729         257
                                                     --------    --------    --------
Cash and cash equivalents at end of year.............$ 17,155    $12,563     $   729
                                                     ========    ========    ========


Cash paid during the year for:
  Interest...........................................$ 1,336     $   722     $   169
  Taxes..............................................     20          69          --

See Note 2.
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.

                                 F-5



















































<PAGE>

                                  ENSTAR INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 -- ORGANIZATION AND BUSINESS
 
     ENStar Inc. ("ENStar" or the "Company") is a holding company principally
comprised of two operating companies, Americable, Inc. ("Americable") and Enstar
Networking Corporation ("Enstar Networking"), and equity investments in CorVel
Corporation ("CorVel") and Vicom, Incorporated ("Vicom").  ENStar was formerly
an operating unit of North Star Universal, Inc. ("North Star").  In November
1996, North Star contributed the operating unit's assets to ENStar.  On
February 28, 1997 North Star, in connection with its merger with Michael Foods,
Inc. ("Michael Foods"), distributed its ownership interest in ENStar to North
Star's shareholders through a tax free dividend, thus causing ENStar to become
a publicly held company.

     In December 1998, ENStar sold Transition Networks, Inc. ("Transition") for
approximately $9 million cash.  As described further in Note 3, the accompanying
consolidated financial statements and related notes have been restated for all
periods to reflect the effects of this discontinued operation.  Also, effective
December 31, 1998, ENStar sold certain assets of Enstar Networking to Vicom in
exchange for common stock of Vicom and a promissory note (see Note 4).  As a
result of this transaction, ENStar owns a 38.5% ownership interest in Vicom,
which is accounted for as an unconsolidated subsidiary using the equity method
of accounting.  Vicom is a telecommunications company providing services to
integrate voice, data and video solutions.

     Americable is a distributor of premise wiring, connectivity products, and
low-end networking electronics, with sales throughout the United States.  
Americable's sales represents approximately 43% of the Company's consolidated
sales.  Enstar Networking is a security integrator providing solutions to
design, manage, and secure corporate network infrastructures and makes up the
remaining 57% of sales.  CorVel is a health care services company.  At December
31, 1998 and 1997, the Company had a 25% ownership interest in CorVel, which is
accounted for as an unconsolidated subsidiary using the equity method of
accounting.
 
NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES
 
     PRINCIPALS OF CONSOLIDATION AND BASIS OF PRESENTATION The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries.  All significant intercompany accounts and transactions have been
eliminated.  For the period prior to November 1996, financial statements are
those of the combined operating units described in note 1.  Operating unit
equity was converted to contributed capital at the time North Star contributed
the capital stock of Americable, Transition, and CorVel to ENStar.  There was no
change in the historical cost basis of the assets and liabilities of any of the
entities or investment contributed to ENStar.  The consolidated, and formerly
combined, financial statements include an allocation of general and





                                 F-6



<PAGE>

                                  ENSTAR INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES (Continued)

administrative costs incurred by North Star in the management of the operating
companies.  Management believes these allocations are reasonable and present the
operations of the Company as though it had operated on a stand-alone basis.
Previously, operating unit equity included the historical equity of each entity,
the net investment in CorVel and intercompany payables owed to North Star.  The
net annual advances between the former operating unit and North Star were
considered additional capital invested from, or constructive dividend to, North
Star. Accordingly, the accompanying consolidated financial statements may not
necessarily be indicative of the results that would have been obtained if the
Company had been operated as a stand alone entity throughout all periods
presented.
 
     CASH AND CASH EQUIVALENTS The Company considers its highly liquid temporary
investments with original maturities of three months or less to be cash
equivalents. The carrying value of cash and cash equivalents approximate fair
value because of the short-term maturity of these investments.

     ACCOUNTS RECEIVABLE The Company grants credit to customers in the normal
course of business, but generally does not require collateral or any other
security to support amounts due.  Management performs ongoing credit evaluations
of customers.  The Company maintains an allowance for potential credit losses
which when realized, have been within management expectations.

     INVENTORIES Inventories are stated at the lower of average cost (determined
on a first-in, first-out basis) or market. Inventories consist exclusively of
finished goods.

     PROPERTY AND EQUIPMENT Property and equipment are recorded at cost.
Depreciation and amortization for financial reporting purposes are provided on
the straight-line method over the estimated useful lives of the respective
assets which are generally three to five years. Accelerated methods are used
for income tax reporting. Property and equipment consist of the following
(in thousands):
 
<TABLE>
<CAPTION>                                                       DECEMBER 31,
                                                              ---------------
                                                               1998     1997
                                                               ----     ----
<S>                                                           <C>      <C>
     Leasehold improvements..................................$  126   $  167
     Office and computer equipment........................... 3,257    3,230
                                                             ------   ------
                                                              3,383    3,397
     Less -- accumulated depreciation and amortization....... 2,311    2,007
                                                             ------   ------
                                                             $1,072   $1,390
                                                             ======   ======
</TABLE>
                                 F-7










<PAGE>
                                 ENSTAR INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES (Continued)

     GOODWILL Goodwill is amortized on a straight-line basis over a period of 40
years. Accumulated amortization was $1,858,000 and $1,701,000 at December 31,
1998 and 1997.  The Company maintains separate financial records for each of its
acquired entities and evaluates its goodwill annually to determine potential
impairment by comparing the carrying value to the undiscounted future cash flows
of the related assets.  The Company adjusts the value of a subsidiary's goodwill
if an impairment is identified.
 
     ACCRUED EXPENSES Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>                                                         DECEMBER 31,
                                                                ----------------
                                                                 1998      1997
                                                                 ----      ----
<S>                                                              <C>       <C>
     Payroll and related benefits..............................$1,011    $  550
     Insurance reserves........................................   397       544
     Business disposition obligations.......................... 2,117     1,974
     Other..................................................... 1,055     1,767
                                                               ------    ------
                                                               $4,580    $4,835
                                                               ======    ======
</TABLE>

     The business disposition obligations primarily represent a lease commitment
of a business disposed by North Star.  These obligations were part of the
liabilities assumed by ENStar under the indemnification agreement discussed in
Note 8.

     REVENUE RECOGNITION The Company recognizes revenue from product sales at
the time product is shipped to a customer. Service revenue is recognized at the
time service is provided or ratably over the contractual service period.

     ADVERTISING The Company expenses advertising costs as incurred. 
Advertising costs charged to expense were approximately $217,000 in 1998,
$329,000 in 1997, and $138,000 in 1996. 

     NET INCOME (LOSS) PER SHARE Basic net earnings (loss) per share is computed
by dividing net earnings (loss) by the weighted average number of outstanding
common shares.  Diluted net earnings (loss) per share is computed by dividing
net earnings (loss) by the weighted average number of outstanding common shares
and common share equivalents relating to stock options, when dilutive.  Options
to purchase 291,750 and 90,750 shares of common stock with weighted average
exercise prices of $7.87 and $8.97 were outstanding during 1998 and 1997, but
were excluded from the computation of common share equivalents because they were
antidultive.



                                 F-8






<PAGE>
                                  ENSTAR INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES (Continued)

     For 1996, net income (loss) per share was computed based on the weighted
average number of shares of North Star common stock outstanding (9,927,000).
This weighted average number of shares was adjusted to reflect the distribution
of ENStar Inc. common stock to North Star shareholders whereby one share of
ENStar Inc. common stock was issued to each holder of three shares of North
Star common stock.

     NEW ACCOUNTING PRONOUNCEMENTS  The American Institute of Certified Public
Accountants issued Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use."  SOP 98-1 is
effective for the Company beginning in 1999.  SOP 98-1 should not have a
material effect on the financial position, results of operations, or cash flows
of the Company when adopted.

     CAPITAL STOCK The Company has available for issue 100,000,000 shares,
consisting of 20,000,000 shares of preferred stock, par value of $.01 per share,
of which none have been issued or are outstanding at December 31, 1998, and
80,000,000 shares of common stock, par value of $.01 per share, of which
3,304,279 were issued in February 1997 in connection with the distribution of
ENStar common stock to NSU shareholders. These shares have been reported in the
Company's financial statements as if they were outstanding at December 31, 1996.
During 1997, the Company repurchased 37,290 shares of its common stock using a
modified "Dutch Auction" self tender offer at an average share price of $6.25.
In March of 1998, the Company's Board of Directors authorized the repurchase of
up to 350,000 shares of common stock.  During 1998, the Company purchased
290,266 shares for approximately $1,875,000.

     SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - NON-CASH ITEMS During
1998, in connection with the sale of the Midwest division of Enstar Networking
to Vicom in a non-cash transaction, the company sold net operating assets of
$1,486,000 to Vicom for 1,350,000 shares of Vicom stock and a $750,000
note receivable.  Corvel periodically has transactions in its own capital stock
(stock repurchases and the issuance of additional shares due to stock option
exercises) that affect the Company's investment in unconsolidated subsidiary.
As a result of these transactions, the Company has experienced a reduction in
its investment in unconsolidated subsidiary of $938,000, $2,349,000 and $337,000
during 1998, 1997 and 1996.  These transactions, net of tax, are also reflected
as a reduction in the Company's additional paid-in capital of $640,000,
$1,434,000, and $170,000 for 1998, 1997, and 1996. 

     STOCK BASED COMPENSATION The Company utilizes the intrinsic value method of
accounting for its employee stock based compensation plans. Information related
to the fair value based method of accounting is contained in Note 10.






                                 F-9











<PAGE>

                                ENSTAR INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES (Continued)

     USE OF ESTIMATES In the preparation of the consolidated financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and related revenues and
expenses. Actual results could differ from the estimates used by management.

     RECLASSIFICATIONS Certain 1997 and 1996 amounts have been reclassified to
conform to the 1998 presentation.

NOTE 3 - DISCONTINUED OPERATIONS

     On December 10, 1998, ENStar sold all of Transition's common stock to
Communications Systems, a telecommunications company, for approximately 
$9 million which was received in cash.  Transition designs, manufactures, and
markets connectivity devices and network applications.  The gain on disposition
was approximately $2.5 million, net of income taxes of approximately $1.6
million.

     Results of operations of Transition are reflected in discontinued
operations in the accompanying consolidated statement of operations.  Operating
results of Transition through the date of sale were as follows:

<TABLE>
<CAPTION>
                                              1998        1997        1996
                                              ----        ----        ----
<S>                                           <C>         <C>         <C>
     Revenues..............................$21,134     $15,720     $15,456
                                           =======     =======     =======

     Income (loss) before income taxes.....$ 1,546     $  (299)    $  (132)
     Income tax provision (benefit)........    600        (100)        (50)
                                           -------     -------     -------
     Net income (loss) from
       discontinued operations.............$   946     $  (199)    $   (82)
                                           =======     =======     =======
</TABLE













                                 F-10


<PAGE>

                                  ENSTAR INC.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3 - DISCONTINUED OPERATIONS (Continued)

     At December 31, 1997, the net asset of discontinued operations consist of
the following (in thousands):


</TABLE>
<TABLE>
<CAPTION>

<S>                                           <C>
     Working capital.......................$ 2,665
     Property and equipment................    774
     Other assets..........................     31
     Long term debt........................   (175)
                                           -------
                                           $ 3,295
                                           =======
</TABLE>

NOTE 4 - SALE OF ASSETS

     Effective December 31, 1998, ENStar sold the assets of the Midwest region
of Enstar Networking to Vicom.  The transaction involved the sale of
substantially all of the assets of the business in exchange for 1,350,000 shares
of Vicom common stock and a $750,000 promissory note to ENStar bearing interest
at an annual rate of 9%, interest payable quarterly, with the principal due on
or before December 2003.  There was no gain or loss on this transaction.  As a
result of this transaction, ENStar owns a 38.5% ownership interest in Vicom,
which is accounted for as an unconsolidated subsidiary using the equity method
of accounting.

     The following sets forth the unaudited consolidated results of operations
as if this transaction had occurred as of January 1, 1998 (in thousands):

<TABLE>
<CAPTION> 
                                              1998        
                                              ----        
<S>                                           <C>         
     Revenues..............................$33,546     
     Loss from continuing operations....... (1,050)     

     Basic and diluted loss per share
       from continuing operations..........$  (.33) 
</TABLE>

NOTE 5 -- INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES
 
     The Company's unconsolidated subsidiaries consist of its investments in
CorVel and Vicom.  CorVel is a health care services company with a fiscal year
end of March 31.  Vicom is a telecommunications company with a December 31,

                                 F-11


<PAGE>

                                   ENSTAR INC.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES (Continued)

year end.  For the year ended December 31, 1997, Vicom had total assets of 
approximately $4,418,000 and net earnings of $56,000 on revenues of $6,639,000.
The Vicom financial information for the year ended December 31, 1998, is not yet
available.  The following is unaudited summarized balance sheet and income
statement information for CorVel as of, and for the twelve month period ended
December 31, 1998 (in thousands):
 
<TABLE>
<CAPTION>                                             
                                             CorVel
                                             ------
<S>                                         <C>      
     Current assets.......................$ 40,329   
     Total assets.........................  64,538   
     Current liabilities..................  11,466   
     Noncurrent liabilities...............   2,649   
     Revenues............................. 159,500   
     Gross profit.........................  28,331   
     Net income (loss)....................  10,087   

</TABLE>

     At December 31, 1998, shareholders' equity includes approximately $4.8
million of unremitted earnings related to the Company's investment in CorVel.
At December 31, 1998, the fair value of the Company's investments in CorVel, 
based on the closing market price, was approximately $36.1 million.  As the
Vicom stock is not widely traded on the local over-the-counter market, the
market value of the Company's investment in Vicom was determined in a
non-cash transaction to be approximately $600,000 based upon the net fair value
of the assets sold, less the proceeds received from Vicom and the costs
related to the transaction.

NOTE 6 -- NOTES PAYABLE AND LONG-TERM DEBT
 
     Americable and Enstar Networking maintained a revolving line of credit
facility which provided borrowings up to $4 million during the year ended
December 31, 1998 and is due in October 1999.  Borrowings under this facility
were based on eligible accounts receivable and inventory with interest at prime
(7.75% at December 31, 1998).  At December 31, 1998, there were outstanding
borrowings of $1,680,000, and approximately $1.3 million of available
borrowings.  The note contains certain restrictive covenants, the most
significant of which are capital expenditure limitations and limitations on
operating losses.  Under the terms of the credit agreement, ENStar is required
to make capital contributions to Americable to the extent Americable
(including Enstar Networking) incurs pretax losses in excess of specified
levels.  At December 31, 1998, the company was in compliance with all
covenants under this agreement.


                                 F-12


<PAGE>

                                 ENSTAR INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- NOTES PAYABLE AND LONG-TERM DEBT (Continued)

     During 1998, ENStar provided an aggregate of approximately $2.5 million
in cash to Americable pursuant to the terms of the credit agreement.
Additional cash investments from ENStar may be required in 1999 to fund
operations and capital expenditures of Americable and Enstar Networking.

     Effective January 1, 1999, this agreement was amended to provide a maximum
lending limit of $3 million based upon a borrowing base of eligible accounts
receivable, with an effective interest rate of prime plus 1% (8.75% at January
1, 1999).  The Company believes it will be able to renew or obtain new
agreements at substantially the same terms and conditions.

     The carrying value of long-term debt, which approximates fair value,
consists of (in thousands):
 
<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                             ------------------
                                              1998        1997
                                              ----        ----
<S>                                            <C>         <C>
     Subordinated debentures...............$19,003     $16,127
     Less current maturities...............  4,899         134
                                           -------     -------
                                           $14,104     $15,993
                                           =======     =======
</TABLE>

     During 1997, the Company registered with the Securities and Exchange
Commission $25 million of debentures, of which approximately $6 million remain
unissued at December 31, 1998. Subordinated debentures are unsecured and due in
varying monthly installments through 2003 with a weighted average interest rates
of 9.60% and 9.62% at December 31, 1998 and 1997.
















                                 F-13






<PAGE>

     Aggregate minimum annual principal payments of long-term debt are as
follows (in thousands):
 
<TABLE>
<CAPTION>
           YEARS ENDING DECEMBER 31,
           -------------------------
<S>                                        <C>
     1999..................................$ 4,899
     2000..................................    647
     2001..................................     44
     2002..................................  5,936
     2003..................................    989
     Thereafter............................  6,488
                                           -------
                                           $19,003
                                           =======
</TABLE>

NOTE 7 -- INCOME TAXES

     The activity of the Company through February 1997, was included in the
income tax return of North Star. For financial reporting purposes, the Company
has been allocated a provision for income taxes in an amount generally
equivalent to the provision that would have resulted had the Company filed
separate income tax returns.  The provision for income taxes from continuing
operations consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                               ----------------------------
                                               1998        1997        1996
                                               ----        ----        ----
<S>                                            <C>         <C>         <C>
     Current
       Federal..............................$    --     $    --     $    (8)
       State................................      5          --          (1)
                                            -------     -------     -------
                                                  5          --          (9)
                                            -------     -------     -------
     Deferred
       Federal.............................. (1,617)     (1,812)         30
       State................................   (238)       (266)          4
                                            -------     -------     -------
                                             (1,855)     (2,078)         34
                                            -------     -------     -------
                                            $(1,850)    $(2,078)    $    25
                                            =======     =======     =======
</TABLE>




                                 F-14





<PAGE>

                                    ENSTAR INC.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7 -- INCOME TAXES (Continued)

     The following is a reconciliation of the income tax provision (benefit)
at the federal statutory rate to the effective rate:
 
<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                               ----------------------------
                                               1998        1997        1996
                                               ----        ----        ----
<S>                                            <C>         <C>         <C>
     Federal statutory rate.................. (34.0)%     (34.0)%     (34.0)%
     State income taxes......................  (4.6)       (4.9)        2.4
     Goodwill amortization...................   1.1         1.0        43.2
     Other...................................   0.7          --         8.4
                                             ------      ------      ------
                                              (36.8)%     (37.9)%      20.0%
                                             ======      ======      ======
</TABLE>

     The tax effects of the cumulative temporary differences resulting in the
net deferred tax asset (liability) are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                                               ----------------
                                               1998        1997
                                               ----        ----
<S>                                            <C>         <C> 
     Investment in CorVel...................$(4,801)    $(4,187)
     Accrued expenses not
       deductible until paid................  1,789       1,634
     Net operating loss carryforwards.......  1,898       3,158
     Other..................................   (425)       (571)
                                            -------     -------
                                             (1,539)         34
     Valuation allowance....................     --         (34)
                                            -------     -------
                                            $(1,539)    $    -- 
                                            =======     =======
</TABLE>








                                 F-15






<PAGE>

                                    ENSTAR INC.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7 -- INCOME TAXES (Continued)

     To the extent the Company's financial reporting basis in its investment in
its unconsolidated subsidiary exceeds its tax basis, and is not expected to be
realized in a tax-free manner, the Company records a deferred tax liability.
The Company's deferred tax liability includes, among other things, the initial
tax effect of $1.8 million for the difference in the financial reporting and tax
basis of the Company's investment in CorVel following the initial public
offering along with the income taxes recorded on the equity in earnings of
CorVel of $1,008,000 in 1998, $897,000 in 1997, and $869,000 in 1996.

     In 1997, the Company was allocated, as required under the federal
consolidated income tax regulations, approximately $8,100,000 of net operating
loss carryforwards from North Star at the time of its merger with Michael Foods,
Inc.  The tax benefit of a portion of these available carryforwards $2,532,000
was treated as additional capital invested by North Star and the Company's
deferred tax liability was reduced by a like amount.  In 1998, the net operating
loss previously allocated was adjusted to agree with the final tax return filed
by North Star for the period ending February 28, 1997 (the date of the merger).
The $610,000 tax effect of the correction was treated as a reduction in
additional paid-in capital and an increase in the Company's deferred tax
liability.  At December 31, 1998, the entire remaining Federal operating loss
carryforward of $3,974,000 was available to the Company.  These loss
carryforwards begin to expire in 2009.

NOTE 8 -- COMMITMENTS AND CONTINGENCIES
 
     LEASING COMMITMENTS The Company leases certain equipment and facilities
under operating leases. The future aggregate minimum rental payments under such
leases which expire at various dates through 2001 are $408,000 in 1999, 
$277,000 in 2000 and $99,000 in 2001.

     Certain of the leases provide for payment of taxes and other expenses.
Total rent expense on all leases including month-to-month leases for the years
ended December 31 was $654,000 in 1998, $782,000 in 1997, and $795,000 in 1996.

     CONTINGENCIES As a result of the transfer of a substantial portion of the
assets of North Star to ENStar, ENStar entered into a supplemental indenture
agreement with North Star in which ENStar assumed the obligations of North Star
with respect to certain debenture indebtedness of North Star. North Star
however, separately agreed to satisfy, and hold ENStar harmless from, all
payment and other obligations with respect to such debenture indebtedness.  The
amount of such indebtedness, net of cash transferred to Michael Foods, was
$21,250,000 at the date of the North Star merger with Michael Foods.  During
1997, Michael Foods repaid all outstanding indebtedness under the old North






                                 F-16






<PAGE>

                                    ENSTAR INC.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 -- COMMITMENTS AND CONTINGENCIES

Star debenture program.  In addition, ENStar, through the operation of an
indemnification agreement, is contingently liable for any, and all, liabilities
arising from the activities of North Star, through, and including, the
reorganization of North Star and Michael Foods. Under the terms of the
indemnification agreement, the Company is required to maintain certain minimum
levels of market capitalization or net worth for a period of five years.

NOTE 9 -- EMPLOYEE RETIREMENT PLAN
 
     ENStar maintains an incentive savings plan for its employees. Full-time
employees that meet certain requirements are eligible to participate in the
plan. Contributions are made annually, primarily at the discretion of ENStar's
Board of Directors. Contributions of $208,000, $205,000, and $138,000, were
charged to operations in the years ended December 31, 1998, 1997 and 1996.

NOTE 10 -- STOCK OPTION PLANS
 
     The Company and each of its operating subsidiaries maintain non-qualified
stock option plans in their own stock for the benefit of selected officers and
key employees.  The ENStar and Americable plans were approved by the respective
Company's Board of Directors in 1996.  The ENStar plan reserved 300,000 shares
for issuance while Americable's plan reserved 600,000 shares.  In 1998, the
ENStar shareholders approved an additional 200,000 shares for issuance related
to the ENStar stock option plan raising the total available shares to 500,000.
The Enstar Networking plan was approved in 1998 and reserved 600,000 shares.
Options granted under these plans have an exercise price equal to the fair
market value on the date of the grant, generally have a ten year term, vest
ratably over four years and provide that the options shall expire at the end of
such period.

    Option transactions under these plans since adoption are summarized as
follows:
[CAPTION]
<TABLE>
                             ENStar           Americable      Enstar Networking
                        ----------------   ----------------   -----------------
                                Weighted           Weighted           Weighted
                         Number   average   Number   average   Number   average
                           of    exercise     of    exercise     of    exercise
                         shares    price    shares    price    shares    price
                        ------------------------------------------------------
<S>                       <C>      <C>       <C>      <C>       <C>      <C>
Outstanding at 
  January 1, 1996            --   $  --         --   $  --         --    $  --
     Granted............ 89,250    9.00    345,000    0.82         --       --
                        ------------------------------------------------------










<PAGE>


Outstanding at
  December 31, 1996      89,250    9.00    345,000    0.82         --       --
     Granted............270,000    7.38     45,000    0.82         --       --
     Cancelled..........     --      --   (240,000)   0.82         --       --
                        ------------------------------------------------------
Outstanding at
  December 31, 1997.....359,250    7.78    150,000    0.82         --       --
     Granted............ 53,000    7.33     83,000    1.25    435,000     1.00
     Cancelled..........     --      --   (125,000)   0.82   (143,000)    1.00
                        ------------------------------------------------------
Outstanding at
  December 31, 1998.....412,250   $7.72    108,000   $1.23    292,000    $1.00
                        ======================================================
Options exercisable
  at December 31:
     1996...............     --   $  --    101,000   $0.82         --    $  --
                        ======================================================
     1997............... 31,313   $9.00     40,000   $0.82         --    $  --
                        ======================================================
     1998...............118,125   $8.07      5,000   $1.15         --    $  --
                        ======================================================
</TABLE>

                                 F-17




































<PAGE>

                                  ENSTAR INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- STOCK OPTION PLANS (Continued)

     The following table summarizes information concerning currently outstanding
options:
[CAPTION]
<TABLE>
                                          OPTIONS OUTSTANDING

                                          Weighted average     
                              Number         remaining         Weighted average
                            of shares     contractual life    and exercise price
                            ----------------------------------------------------
<S>                            <C>             <C>                  <C>
     ENStar.................   3,000         9.5 years             $6.50
                             320,000         9.1 years              7.38
                              89,250         7.2 years              9.00
                             -------
                             412,250
                             =======

     Americable.............  25,000         8.5 years             $1.15
                              83,000         9.2 years              1.25
                             -------
                             108,000
                             =======

     Enstar Networking...... 292,000         9.1 years             $1.00
                             =======
</TABLE>

     Had the Company or its operating subsidiaries elected to use the fair
value method for valuing options granted, the pro forma effect on net
income would have been additional expense of $190,000, or 4 cents per
share in 1998, $69,000, or 1 cent per share in 1997, and $73,000, or
2 cents per share in 1996.
















                                 F-18






<PAGE>

                                  ENSTAR INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- STOCK OPTION PLANS (Continued)

     The following represents the weighted average fair value of options
granted for the respective entities and the weighted average assumptions
used in the Black-Scholes option pricing model:

[CAPTION]
<TABLE>                                                                         Enstar 
                                   ENStar                 Americable          Networking
                           ---------------------     ---------------------   -------------
                            1998    1997    1996      1998    1997    1996       1998
                           ---------------------     ---------------------   -------------
<S>                         <C>     <C>     <C>      <C>     <C>     <C>        <C> 
Fair value of
  options granted..........$2.82   $2.76   $3.89     $0.48   $0.41   $0.52      $0.38

Assumptions used:
  Dividends................$  --   $  --   $  --     $  --      --   $  --      $  --
  Volatility............... 50.0%   49.6%   57.5%     50.0%   70.0%   98.0%      50.0%
  Risk-free interest rate..  5.1%    5.5%    5.5%      5.1%    5.9%    5.9%       5.1%
  Expected option term.....3 years 3 years 3 years   3 years 3 years 3 years    3 years
</TABLE>

NOTE 11 - BUSINESS SEGMENTS

     ENStar consists of two operating segments: Americable and Enstar
Networking (Enstar Networking's assets and balance sheet activity for 
1996 were included within Americable as it was formerly a division of
Americable).  The operating results of Enstar Networking are segregated
with respect to the Midwest operations sold to Vicom (see Note 4)
("ENC - business disposition").

     The Company identifies its segments based on the Company's organizational
structure, which is by operating company (see Note 1 for a description of the
businesses).  Operating profit represents earnings before interest expense,
interest income, income taxes, and equity in earnings of unconsolidated
subsidiary.  Intersegment sales are made at market prices.  Corporate allocates
costs of certain general and administrative expenses to the various segments
based primarily upon the percentage of services performed, which approximates
the costs associated with each segment.











                                 F-19






<PAGE>

                                  ENSTAR INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 - BUSINESS SEGMENTS (Continued)

     Certain financial information on the Company's segments is as follows:
<TABLE>
<CAPTION>                                       YEARS ENDED DECEMBER 31,
                                              ----------------------------
                                               1998       1997       1996
                                               ----       ----       ----
<S>                                            <C>        <C>        <C>
Revenues - external
  Americable................................$17,673    $15,264    $18,935
  Enstar Networking......................... 14,271      7,331      5,933
                                            -------    -------    -------
                                             31,944     22,595     24,868

  ENC - business disposition................ 11,414     16,037     23,799
                                            -------    -------    -------
     Total Revenues - external..............$43,358    $38,632    $48,667
                                            =======    =======    =======

Revenues - intersegment
  Americable................................$ 1,602    $ 3,430    $ 3,403
  ENC - business disposition................    146         --         --
                                            -------    -------    -------
     Total Revenues - intersegment..........$ 1,748    $ 3,430    $ 3,403
                                            =======    =======    =======

Operating Income (Loss)
  Americable................................$   489    $   379    $ 1,514
  Enstar Networking......................... (2,147)    (1,980)      (867)
  Corporate................................. (1,018)    (1,305)    (1,127)
                                            -------    -------    -------
                                             (2,676)    (2,906)      (480)
                                            
  ENC - business disposition................ (1,013)    (1,861)       524
                                            -------    -------    -------
     Total Operating Income (Loss)..........$(3,689)   $(4,767)   $    44
                                            =======    =======    =======
Interest Expense
  Americable................................$   111    $   135    $   184
  Enstar Networking.........................    123         --         --
  Corporate.................................  1,102        587        (15)
                                            -------    -------    -------
     Total Interest Expense.................$ 1,336    $   722    $   169
                                            =======    =======    =======






                                 F-20






<PAGE>

                                  ENSTAR INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 - BUSINESS SEGMENTS (Continued)

Assets -
  Americable................................$11,633    $ 9,130    $14,547
  Enstar Networking.........................  2,101      5,115         --
  Corporate................................. 29,839     26,861     18,771
                                            -------    --------   -------
     Total Assets...........................$43,573    $41,106    $33,318
                                            =======    =======    =======

Depreciation and Amortization -
  Americable................................$   574    $   747    $   669
  Enstar Networking.........................    612         52         --
  Corporate.................................     18         16         14
                                            -------    -------    -------
     Total Depreciation and Amortization....$ 1,204    $   815    $   683
                                            =======    =======    =======

Capital Expenditures -
  Americable................................$   311    $   150    $   556
  Enstar Networking.........................    517        992         --
  Corporate.................................      4          3         71
                                            -------    -------    -------
     Total Capital Expenditures.............$   832    $ 1,145    $   627
                                            =======    =======    =======

</TABLE>

NOTE 12 - SUBSEQUENT EVENT 

     On March 8, 1999, the Company announced that it had established a Special
Committee to consider a proposal by the majority shareholders to acquire the
outstanding shares of ENStar common stock not already owned by them or certain
entities under their control.  The majority shareholders have preliminarily
proposed that the shares not controlled by them be acquired for a cash price of
$10.00 per share, however, the proposal is subject to change based on a
number of factors including determination of the structure of the transaction.
The Special Committee will evaluate the fairness of any proposed transaction to
all shareholders of the Company, and will engage counsel and financial advisors
in connection with its role.  The majority shareholders and their controlled
entities own approximately 1,920,000 shares, or 65%, of the Company's common
stock.









                                 F-21






<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
Board of Directors
ENStar Inc.
 
     We have audited the accompanying consolidated balance sheets of ENStar Inc.
and subsidiaries, as of December 31, 1998 and 1997 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1998.  These financial statements
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of ENStar Inc. and subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.  

     We have also audited Schedule II for each of the three years in the period
ended December 31, 1998.  In our opinion, this schedule, when considered in
relationship to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.





                                          /s/ GRANT THORNTON LLP
 
Minneapolis, Minnesota
February 19, 1999 (except
for Note 12 as to which
the date is March 8, 1999)










                                 F-22






<PAGE>

                                  ENSTAR INC.

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                        FOR THE YEARS ENDED DECEMBER 31,
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     ADDITIONS
                                              -----------------------
                                                            CHARGES
                                  BALANCE AT   CHARGED TO   TO OTHER                  BALANCE
                                   BEGINNING   COSTS AND    ACCOUNTS   DEDUCTIONS-   AT END OF
              DESCRIPTION          OF PERIOD    EXPENSES    DESCRIBE   DESCRIBE(1)    PERIOD
              -----------         ----------   ----------   --------   -----------   ---------
<S>                                  <C>          <C>         <C>        <C>           <C>
Allowance for Doubtful Accounts:
1996..............................       297           92         --          (42)         347
1997..............................       347          106         --         (164)         289
1998..............................       289          127         --          (42)         374
</TABLE>

--------------------------
(1) Write off of accounts deemed uncollectible.






























                                     F-23






<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
 
Stockholders and Board of Directors
CorVel Corporation
 
     We have audited the accompanying consolidated balance sheets of CorVel
Corporation as of March 31, 1997 and 1998, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended March 31, 1998.  Our audits also included the
financial statement schedule listed in the Index at Item 14(a).  These financial
statements and schedule are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements and
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 consolidated financial position of
CorVel Corporation at March 31, 1997 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1998, in conformity with generally accepted accounting
principles.  Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
 
                                         /s/ ERNST & YOUNG LLP
 
Orange County, California
May 11, 1998
















                                 S-1







<PAGE>

                               CORVEL CORPORATION
 
                       CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                           Years Ended March 31
                              ------------------------------------------
                                   1996           1997           1998
                              ------------------------------------------
<S>                                <C>            <C>            <C>
REVENUES                      $109,052,000   $121,704,000   $141,709,000

COSTS AND EXPENSES
Cost of revenues                88,937,000     99,323,000    115,553,000
General and administrative       8,106,000      8,645,000     11,029,000
                              ------------------------------------------
                                97,043,000    107,968,000    126,582,000
                              ------------------------------------------
Income before income taxes      12,009,000     13,736,000     15,127,000
Income tax provision             4,684,000      5,220,000      5,670,000
                              ------------------------------------------
NET INCOME                    $  7,325,000   $  8,516,000   $  9,457,000
                              ==========================================

Net income per share:
Basic                         $       1.65   $       1.86   $       2.26
                              ==========================================
Diluted                       $       1.57   $       1.82   $       2.21
                              ==========================================

Shares used in computing 
 net income per share:
Basic                            4,435,000      4,585,000      4,193,000
Diluted                          4,660,000      4,685,000      4,286,000

</TABLE>


        See accompanying notes to consolidated financial statements.













                                 S-2






<PAGE>

                              CORVEL CORPORATION
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           March 31
                                                ---------------------------
                                                        1997           1998
                                                ---------------------------
<S>                                                     <C>            <C>
ASSETS
Current Assets
 Cash and cash equivalents                      $ 15,665,000   $  8,430,000
Accounts receivable (less allowance
 for doubtful accounts of $1,686,000
 in 1997 and $2,082,000 in 1998)                  22,294,000     25,633,000
Prepaid taxes and expenses                           124,000        736,000
Deferred income taxes                              1,746,000      2,376,000
                                                ---------------------------
     Total current assets                         39,829,000     37,175,000
                                                ---------------------------
Property and equipment, net                       13,100,000     16,542,000

Other assets                                       5,895,000      6,774,000
                                                ---------------------------
                                                $ 58,824,000   $ 60,491,000
                                                ===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts and taxes payable                      $  6,603,000   $  6,078,000
Accrued liabilities                                4,630,000      6,371,000
                                                ---------------------------
     Total current liabilities                    11,233,000     12,449,000
                                                ---------------------------
Deferred income taxes                              1,504,000      2,271,000

Commitments and Contingencies
Stockholders' Equity
Common Stock, $.0001 par value: 20,000,000
 shares authorized; 4,697,853 and 4,853,472
 shares issued and outstanding in 1997 and
 1998, respectively

Paid-in Capital                                   28,122,000     30,615,000

Treasury Stock, at cost (357,000 and 730,600
 shares in 1997 and 1998, respectively)           (9,461,000)   (21,727,000)

Retained Earnings                                 27,426,000     36,883,000
                                                ---------------------------
     Total stockholders' equity                   46,087,000     45,771,000
                                                ---------------------------
                                                $ 58,824,000   $ 60,491,000
                                                ===========================
</TABLE>

        See accompanying notes to consolidated financial statements.

                                 S-3


<PAGE>


                                  CORVEL CORPORATION
                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Years Ended March 31, 1996, 1997, and 1998
<TABLE>
<CAPTION>
                                                Common stock
                                   Common        and paid in        Treasury
                                stock-shares       capital           shares
                             -------------------------------------------------
<S>                                 <C>              <C>               <C>    

Balance - March 31, 1995         4,238,250      $ 24,169,000           ---    

Stock issued under employee
 stock purchase plan                18,384           444,000           ---    

Stock issued and income tax
 benefits under stock option
 plan, net of shares repurchased   337,041         1,788,000           ---    

Net income                             ---               ---           ---    
                             -------------------------------------------------
Balance - March 31, 1996         4,593,675      $ 26,401,000           ---    
                             -------------------------------------------------

Stock issued under employee
 stock purchase plan                23,039           536,000           ---    

Stock issued and income tax
 benefits under stock option
 plan                               81,139         1,185,000           ---    

Purchase of common stock               ---               ---      (357,000)   

Net income                             ---               ---           ---    
                             -------------------------------------------------
Balance - March 31, 1997         4,697,853      $ 28,122,000      (357,000)   
                             -------------------------------------------------

Stock issued under employee
 stock purchase plan                20,520           540,000           ---    

Stock issued and income tax
 benefits under stock option
 plan, net of shares repurchased   135,099         1,953,000           ---    

Purchase of common stock               ---               ---      (373,600)   

Net income                             ---               ---           ---    
                             -------------------------------------------------
Balance - March 31, 1998         4,853,472      $ 30,615,000      (730,600)   
                             =================================================


             See accompanying notes to consolidated financial statements.
</TABLE>
                                 S-4



<PAGE>


                            CORVEL CORPORATION
              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                Years Ended March 31, 1996, 1997, and 1998
<TABLE>
<CAPTION>
                                                                      Total
                                       Treasury       Retained     shareholders'
                                      shares-cost     earnings        equity
                                   ---------------------------------------------
<S>                                       <C>           <C>             <C>    

Balance - March 31, 1995           $         ---    $ 11,585,000    $ 35,754,000

Stock issued under employee
 stock purchase plan                         ---             ---         444,000

Stock issued and income tax
 benefits under stock option
 plan, net of shares repurchased             ---             ---       1,788,000

Net income                                   ---       7,325,000       7,325,000
                                   ---------------------------------------------
Balance - March 31, 1996                     ---      18,910,000    $ 45,311,000
                                   ---------------------------------------------

Stock issued under employee
 stock purchase plan                         ---             ---         536,000

Stock issued and income tax
 benefits under stock option
 plan                                        ---             ---       1,185,000

Purchase of common stock              (9,461,000)            ---      (9,461,000)

Net income                                   ---       8,516,000       8,516,000
                                   ----------------------------------------------
Balance - March 31, 1997              (9,461,000)   $ 27,426,000      46,087,000
                                   ----------------------------------------------

Stock issued under employee
 stock purchase plan                         ---             ---         540,000

Stock issued and income tax
 benefits under stock option
 plan, net of shares repurchased             ---             ---       1,953,000

Purchase of common stock             (12,266,000)            ---     (12,266,000)

Net income                                   ---       9,457,000       9,457,000
                                   ----------------------------------------------
Balance - March 31, 1998           $(21,727,000)    $ 36,883,000    $ 45,771,000
                                   ==============================================

</TABLE>

             See accompanying notes to consolidated financial statements.

                                 S-5


<PAGE>

                                 CORVEL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                     Years Ended March 31
                                         ---------------------------------------
                                             1996            1997         1998
                                         ---------------------------------------
<S>                                       <C>          <C>         <C>

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                              $ 7,325,000  $ 8,516,000  $ 9,457,000
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
     Depreciation and amortization          3,048,000    4,215,000    5,349,000
     Deferred income taxes                    (79,000)     420,000      137,000
     Loss on write down and disposal
      of property and equipment                23,000       96,000      124,000
     Changes in operating assets 
      and liabilities:
       Accounts receivable                 (2,526,000)  (3,900,000)  (3,339,000)
       Prepaid taxes and expenses            (363,000)     421,000     (612,000)
       Accounts and taxes payable             700,000    3,546,000     (525,000)
       Accrued liabilities                   (382,000)     384,000    1,741,000
       Other assets                          (511,000)  (1,607,000)  (1,069,000)
                                         ----------------------------------------
  Net cash provided by
   operating activities                     7,235,000   12,091,000   11,263,000
                                         ----------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment      (5,565,000)  (5,799,000)  (8,725,000)
                                         ----------------------------------------

  Net cash used in investing activities    (5,565,000)  (5,799,000)  (8,725,000)
                                         ----------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds and tax benefits from 
   exercise of stock options                2,232,000    1,721,000    2,493,000
  Purchase of common stock                        ---   (9,461,000) (12,266,000)
                                         ----------------------------------------
  Net cash provided by (used in)
   financing activities                     2,232,000   (7,740,000)  (9,773,000)
                                         ----------------------------------------
Net increase (decrease) in cash 
 and cash equivalents                       3,902,000   (1,448,000)  (7,235,000)
Cash and cash equivalents
 at beginning of year                      13,211,000   17,113,000   15,665,000
                                         ----------------------------------------
CASH AND CASH EQUIVALENTS
 AT END OF YEAR                           $17,113,000  $15,665,000  $ 8,430,000
                                         ========================================

</TABLE>
                See accompanying notes to consolidated financial statements.

                                 S-6

<PAGE>

                                     CORVEL CORPORATION
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                       MARCH 31, 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION:  CorVel Corporation (CorVel or the Company) provides
services and programs nationwide that are designed to enable insurance
carriers, third party administrators and employers with self-insured programs
to administer, manage and control the cost of worker's compensation and other
healthcare benefits.  

     BASIS OF PRESENTATION:  The consolidated financial statements include the
accounts of CorVel and its subsidiaries.  Significant intercompany accounts
and transactions have been eliminated in consolidation.

     USE OF ESTIMATES:  The preparation of financial statements in conformity 
with generally accepted accounting principles requires management to make 
estimates and assumptions that affect the amounts reported in the accompanying 
financial statements.  Actual results could differ from those estimates.

     CASH AND CASH EQUIVALENTS:   Cash and cash equivalents consists of 
short-term, highly-liquid investments with maturities of 90 days or less when
purchased.   The carrying amounts of the Company's financial instruments 
approximate their relative fair values at March 31, 1997 and 1998.

     CONCENTRATIONS OF CREDIT RISK:  The Company performs periodic credit 
evaluations of its customers' financial condition and does not require 
collateral. No customer represented 10% of accounts receivable at March 31,
1997 and 1998.  Receivables generally are due within 60 days.  Credit losses
relating to customers in the worker's compensation insurance industry
consistently have been within management's expectations.

     PROPERTY AND EQUIPMENT:  Additions to property and equipment are recorded
at cost.  Depreciation and amortization are provided using the straight-line
and accelerated methods over the estimated useful lives of the related assets
which range from three to seven years.

     LONG-LIVED ASSETS:  The carrying amount of all long-lived assets is
evaluated whenever events and circumstances indicated that the assets might be
impaired.  Such evaluation is based principally on the expected utilization of
the long-lived assets and the projected, undiscounted cash flows of the
operations in which the long-lived assets are deployed.  

     OTHER ASSETS:  Other assets consists primarily of the excess of the
purchase price over the estimated fair value of the net assets of businesses
acquired (goodwill) and is being amortized using the straight-line method over
periods not exceeding 40 years.  Goodwill amounted to $4,886,000 (net of
accumulated amortization of $898,000) at March 31, 1997 and $5,342,000 (net of
accumulated amortization of $1,088,000) at March 31, 1998.





                                 S-7




<PAGE>

                              CORVEL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     REVENUE RECOGNITION:  The Company's revenues are recognized primarily as
services are rendered based on time and expenses incurred.  A certain portion
of the Company's revenues are derived from fee schedule auditing which is
based on the number of provider charges audited and, to a limited extent, on a
percentage of savings achieved for the Company's clients.  Accounts receivable
includes $1,580,000 and $1,582,000 of unbilled receivables at March 31, 1997 and
1998, respectively.  No one customer accounted for more than 10% of consolidated
revenues during the years ended March 31, 1996, 1997 and 1998.

     INCOME TAXES:   The consolidated financial statements reflect the
application of Statement of Financial Accounting Standards No. 109 -
"Accounting for Income Taxes".

     EARNINGS PER SHARE:   The Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (SFAS No. 128) in 1998.  SFAS No. 128
replaced the calculation of primary and fully diluted earnings per share with 
basic and diluted earnings per share.  Basic earnings per share is computed
by dividing income available to common shareholders by the weighted-average
number of common shares outstanding for the period.  Diluted earnings per share
reflects the assumed conversion of all dilutive securities.  Earnings per share
amounts for all periods presented have been calculated in accordance with the
requirements of SFAS No. 128.

     STOCK OPTION PLANS:  Effective April 1, 1996, the Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123) and accordingly, is
continuing to account for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
and related interpretations.  The adoption of SFAS No. 123 had no impact on the
Company's consolidated results of operations or financial position.

     RECENT ACCOUNTING PRONOUNCEMENT:  In June 1997, the FASB issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
(SFAS No. 131) which requires publicly-held companies to report financial and
descriptive information about its operating segments in financial statements
issued to shareholders for interim and annual periods.  The statement also
requires additional disclosures with respect to products and services, 
geographical areas of operations, and major customers.  SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented.








                                 
                                 S-8






<PAGE>

                             CORVEL CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE B - PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at March 31: 

<TABLE>
<CAPTION>

                                                   1997              1998
                                               -----------------------------
<S>                                                 <C>               <C>

     Office equipment and computers            $ 19,875,000     $ 24,930,000
     Computer software                            5,186,000        7,808,000
     Leasehold improvements                         784,000        1,154,000
                                               -----------------------------
                                                 25,845,000       33,892,000
     Less: accumulated depreciation
      and amortization                           12,745,000       17,350,000
                                               -----------------------------
                                               $ 13,100,000     $ 16,542,000
                                               =============================

</TABLE>

NOTE C - ACCRUED LIABILITIES

<TABLE>
<CAPTION>

     Accrued liabilities consists of the following at March 31:

                                                   1997              1998
                                                ----------------------------
<S>                                                <C>                <C>

     Payroll and related benefits               $ 2,891,000      $ 3,303,000
     Self-insurance reserves                        599,000          650,000
     Other                                        1,140,000        2,418,000
                                                ----------------------------
                                                $ 4,630,000      $ 6,371,000
                                                ============================

</TABLE>







                                 S-9







<PAGE>

                             CORVEL CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE D - INCOME TAXES

<TABLE>
<CAPTION>

     The income tax provision consists of the following for the three years
ended March 31:
                                  1996              1997             1998
                              ----------------------------------------------
<S>                                <C>              <C>              <C>
Current - Federal             $ 4,045,000      $ 4,212,000       $ 5,427,000
Current - State                   718,000          588,000           380,000
                              ----------------------------------------------
     Subtotal                   4,763,000        4,800,000         5,807,000
                              ----------------------------------------------
Deferred - Federal               (102,000)         368,000          (127,000)
Deferred - State                   23,000           52,000          (100,000)
                              ----------------------------------------------
     Subtotal                     (79,000)         420,000          (137,000)
                              ----------------------------------------------
                              $ 4,684,000      $ 5,220,000       $ 5,670,000
                              ==============================================

</TABLE>

     Income tax benefits associated with the exercise of stock options were
$4,245,000, $228,000 and $1,212,000 for fiscal 1996, 1997 and 1998, 
respectively.

<TABLE>
<CAPTION>

     The following is a reconciliation of the income tax provision from the
statutory federal income tax rate to the effective rate for the three years
ended March 31:

                                   1996               1997             1998
                               ----------------------------------------------
<S>                                 <C>                <C>              <C>
Income taxes at federal
 statutory rate                $ 4,203,000       $ 4,808,000      $ 5,294,000
State income taxes, net
 of federal benefit                446,000           423,000          453,000
Goodwill amortization               37,000            40,000           42,000
Other                               (2,000)          (51,000)        (119,000)
                               -----------------------------------------------
                               $ 4,684,000       $ 5,220,000      $ 5,670,000
                               ===============================================
</TABLE>

                                 S-10





<PAGE>

                            CORVEL CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE D - INCOME TAXES (Continued)

     Income taxes paid totaled $1,193,000, $1,683,000 and $5,690,000 for the
years ended March 31, 1996, 1997 and 1998, respectively. 

<TABLE>
<CAPTION>

      Deferred taxes at March 31, 1997 and 1998 consists of:

                                                   1997              1998
                                                ----------------------------
<S>                                                 <C>               <C>

Deferred tax assets:
  Accrued liabilities not currently deductible  $   939,000      $ 1,427,000
  Allowance for doubtful accounts                   580,000          814,000
  Other                                             227,000          135,000
                                                ----------------------------
    Deferred assets                             $ 1,746,000      $ 2,376,000

Deferred tax liabilities:
  Excess of tax under book basis
   of fixed assets                               (1,504,000)      (2,271,000)
                                                ----------------------------
  Deferred liability                             (1,504,000)      (2,271,000)
                                                ----------------------------
  Net deferred tax asset                        $   242,000      $   105,000
                                                ============================

</TABLE>



















                                 S-11






<PAGE>

                             CORVEL CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE E - STOCK OPTION PLANS

     The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB No. 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
SFAS No. 123 requires use of option valuation models that were not developed
for use in valuing employee stock options.  Under APB No. 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.

     Under the Company's Restated 1988 Executive Stock Option Plan ("the Plan"),
as amended, options for up to 1,735,000 shares of the Company's common stock may
be granted to key employees, nonemployee directors and consultants at prices
not less than 85% of the fair value of the stock at the date of grant as
determined by the Board.  Options granted under the Plan may be either
incentive stock options or non-statutory stock options and are generally
exercisable beginning one year from the date of grant and vest monthly
thereafter for three years.  As of March 31, 1998, all of these options have






























                                 S-12






<PAGE>

                             CORVEL CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE E - STOCK OPTION PLANS (Continued)

vested and have been exercised.  Summarized information for all stock options
for the past three fiscal years follow:

<TABLE>
<CAPTION>
                              ------------------------------------------
                                      1996          1997            1998
                              ------------------------------------------
<S>                                    <C>           <C>            <C>
Options outstanding at the
 beginning of the year             827,018        423,411        455,832
Options granted                     81,300        126,450        102,750
Options exercised                 (468,572)       (81,139)      (158,937)
Options cancelled                  (16,335)       (12,890)       (18,679)
                              ------------------------------------------
Options outstanding at the
 end of the year                   423,411        455,832        380,966
                              ==========================================
During the year:
 Weighted average fair value
  of options granted during 
  the year                           $7.43         $8.67           $9.29
 Weighted average price of
  options granted                 $  25.19       $  28.48       $  32.31
 Weighted average price of
  options exercised               $   2.54       $  11.71       $  10.28
 Weighted average price of
  options cancelled               $  18.40       $  22.80       $  27.63
 
At the end of the year:
Price range of
  outstanding options               $.0001-        $.0001-        $10.75-
                                    $31.50         $31.50         $37.75
Weighted average price
  per share                         $15.73         $19.77         $26.75
Options available for
 future grants                     202,444        288,884        404,813
Exercisable options                242,575        244,881        167,895

</TABLE>








                                 S-13






<PAGE>

                             CORVEL CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE E - Stock Option Plans (continued)

<TABLE>
<CAPTION>

     The following table summarizes the status of stock options
outstanding and exercisable at March 31, 1998:

                                          Outstanding                Exercisable
                               Weighted     Options-    Exercisable   Options-
                                Average     Weighted      Options-    Weighted
                  Number of    Remaining    Average     Number of     Average
    Range of     Outstanding  Contractual   Exercise    Exercisable   Exercise
Exercise Prices    Options       Life        Price       Options       Price
- ----------------------------------------------------------------------------
<S>   <C>           <C>           <C>        <C>           <C>          <C>
 $10.75-$18.50      40,538    1.88 years    $16.20        37,930      $16.06
  19.50- 25.75     111,983    2.20 years     23.01        76,193       22.52
  26.50- 29.63     133,855    4.04 years     28.09        46,778       28.29
  30.63- 37.75      94,590    5.08 years     33.78         6,994       31.42
                  ----------------------------------------------------------
 Total             380,966    3.53 years    $26.75       167,895      $23.04
                  ==========================================================

</TABLE>

     The Company has adopted the disclosure-only provisions of SFAS No. 123.
Had compensation cost for the Company's stock option and stock purchase plans
been recorded consistent with the provisions of SFAS No. 123, pro forma net
income would have been reduced to $7,251,000, $8,315,000 and $9,185,000
from $7,325,000, $8,516,000 and $9,457,000 for the years ended March 31, 1996,
1997 and 1998, respectively.  Pro forma diluted earnings per share would have
been reduced to $1.56, $1.77 and $2.14 for the three years ending March 31,
1996, 1997 and 1998, respectively.  Pro forma basic earnings per share would
have been reduced to $1.63, $1.81, and $2.19 for the three years ending
March 31, 1996, 1997, and 1998.

     The fair value of each plan is estimated on the date of grant using the
Black-Scholes option-pricing model.  The following weighted average
assumptions were used for fiscal 1996: expected volatility of 0.45; risk free
interest rate of 6.4%.  The following weighted average assumptions were used
for fiscal 1997: expected volatility of 0.41; risk free interest rate of 6.4%.
The following weighted average assumptions were used for fiscal 1998: expected







                                 S-14






<PAGE>

                             CORVEL CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE E - STOCK OPTION PLANS (Continued)

volatility of 0.34; risk free interest rate of 5.5%.  The assumptions for
all three years reflect no dividend yield and a weighted average option life of
three years.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable.  In addition, option valuation
models require the input of highly subjecting assumptions including the
expected stock price volatility.  Because the Company's employee stock options
have characteristics significantly different from those of traded options,
and because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.  Because SFAS No. 123 is applicable only to the
Company's options granted subsequent to April 1, 1995, its pro forma effect
will not be fully reflected until 1999.  The aforementioned results are not
likely to be representative of the effects of applying SFAS No. 123 on reported
net income for future years as these amounts reflect the expense for only one
to three years of vesting.

NOTE F - EMPLOYEE STOCK PURCHASE PLAN

     The Company maintains an Employee Stock Purchase Plan which allows
employees of the Company and its subsidiaries to purchase shares of common
stock on the last day of two six-month purchase periods (i.e. March 31 and
September 30) at a purchase price which is 85% of the closing sale price of
shares as quoted on NASDAQ on the first or last day of such purchase period,
whichever is lower.  Employees are allowed to participate up to 20% of their
gross pay.  A maximum of 250,000 shares has been authorized for issuance under
the plan, as amended.  As of March 31, 1998, 134,000 shares had been issued


















                                 S-15






<PAGE>

                             CORVEL CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE F - EMPLOYEE STOCK PURCHASE PLAN (Continued)

pursuant to the plan.  Summarized plan information is as follows:

<TABLE>
<CAPTION>
                              ------------------------------------------
                                      1996           1997           1998
                              ------------------------------------------
<S>                                  <C>           <C>             <C>
Employee contributions           $ 444,000      $ 536,000      $ 540,000
Shares acquired                     18,384         23,039         20,520
Average purchase price              $24.15         $23.27         $26.32

</TABLE>

NOTE G - TREASURY STOCK 

     During fiscal 1997, the Company's Board of Directors approved a plan to
repurchase up to 100,000 shares of the Company's common stock, and subsequently
increased the number of shares authorized to repurchase to a total of 850,000
shares. The share repurchases for fiscal years ending March 31, 1997 and 1998,
are as follows:

<TABLE>
<CAPTION>
                                    1997            1998            Cumulative
                                    ----            ----            ----------
<S>                                 <C>             <C>                 <C>
     Shares repurchased          357,000         373,600               730,600
     Cost                     $9,461,000     $12,266,000           $21,727,000
     Average price                $26.50          $32.83                $29.74

     The repurchased shares were recorded as treasury stock, at cost, and is
available for general corporate purposes.  The repurchases were financed from
cash generated from operations and on hand cash balances.














                                 S-16






<PAGE>

                             CORVEL CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE H - COMMITMENTS AND CONTINGENCIES 

     The Company leases office facilities under noncancelable operating leases.
Future minimum rental commitments under operating leases at March 31, 1998 are
$5,489,000 in fiscal 1999, $4,646,000 in fiscal 2000, $3,507,000 in fiscal 2001,
$2,623,000 in fiscal 2002, $1,218,000 in fiscal 2003, and $329,000, thereafter.
Total rental expense of $3,901,000, $4,573,000, and $5,022,000 was charged to
operations for the years ended March 31, 1996, 1997, and 1998, respectively.

     The Company is involved in litigation arising in the normal course of
business.  The Company believes that resolution of these matters will not
result in any payment that, in the aggregate, would be material to the
financial position and results of the operations of the Company.

NOTE I - SAVINGS PLAN

     The Company maintains a retirement savings plan for its employees which
is a qualified plan under section 401(k) of the Internal Revenue Code.
Full-time employees that meet certain requirements are eligible to participate
in the plan.   Contributions are made annually primarily at the discretion of
the Company's Board of Directors.  Contributions of $50,000, $135,000 and
$143,000, were charged to operations for the years ended March 31, 1996, 1997
and 1998, respectively.

NOTE J - SHAREHOLDER RIGHTS PLAN

     During fiscal 1997, the Company's Board of Directors approved the
adoption of a Shareholder Rights Plan.  The Rights Plan, which is similar to
rights plans adopted by numerous other public companies, provides for a
dividend distribution to CorVel stockholders of one preferred stock purchase
"Right" for each outstanding share of CorVel's common stock.  The Rights are
designed to assure that all stockholders receive fair and equal treatment in
the event of any proposed takeover of the Company and to encourage a potential
acquirer to negotiate with the Board of Directors prior to attempting a
takeover.  The Rights have an exercise price of $125.00 per Right, subject to
subsequent adjustment.  Initially, the Rights will trade with the Company's
common stock, and will not be exercisable until the occurrence of certain
takeover-related events.  Unless earlier redeemed or exchanged in accordance
with the Rights Agreement, the Rights are due to expire on February 10, 2007.
The issuance of the Rights has no dilutive effect on the Company's earnings per
share.









                                 S-17






<PAGE>

                             CORVEL CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               MARCH 31, 1998

NOTE K - QUARTERLY RESULTS

     The following is a summary of unaudited results of operations for the two
years ended March 31, 1997 and 1998:


</TABLE>
<TABLE>
<CAPTION>

                                                         Net income  Net income
FISCAL YEAR                                               per basic per diluted
ENDED MARCH 31,                     Gross          Net     common      common
1997:                  Revenues     Margin        income    share      share
                       --------     ------        ------    -----      -----
<S>                      <C>         <C>           <C>       <C>        <C>
First Quarter      $ 29,851,000  $ 5,390,000  $ 2,042,000  $ .44      $ .43
Second Quarter       29,719,000    5,488,000    2,092,000    .45        .44
Third Quarter        30,441,000    5,681,000    2,177,000    .47        .46
Fourth Quarter       31,693,000    5,822,000    2,205,000    .50        .49

FISCAL YEAR
ENDED MARCH 31,
1998:

First Quarter      $ 34,024,000  $ 6,467,000  $ 2,275,000  $ .53      $ .52
Second Quarter       34,683,000    6,475,000    2,381,000    .57        .55
Third Quarter        35,558,000    6,595,000    2,395,000    .58        .56
Fourth Quarter       37,444,000    6,619,000    2,406,000    .58        .57

</TABLE>





















                                 S-18






<PAGE>

<TABLE>
<CAPTION>

Schedule II

                                CORVEL CORPORATION

                          VALUATION AND QUALIFYING ACCOUNTS

                                              Additions
                                              ---------
                                 Balance at   Charged to               Balance at
                                 Beginning    Costs and                 End of
                                  of Year     Expenses     Deductions     Year
                                  -------     --------     ----------     ----
<S>                                 <C>         <C>           <C>         <C>  
Allowance for doubtful accounts:

Year Ended March 31, 1998:       $1,686,000   $2,437,000  $(2,041,000) $2,082,000
Year Ended March 31, 1997:        1,268,000    1,763,000   (1,345,000)  1,686,000
Year ended March 31, 1996:          825,000      500,000      (57,000)  1,268,000



</TABLE>





























                                 S-19







<PAGE>

                              EXHIBIT INDEX

Exhibit
Number
--------

   2.2          Asset Purchase Agreement, dated as of December 31, 1998
                by and between Vicom, Inc. and Enstar Networking
                Corporation.

   2.3          Stock Purchase & Registration Rights Agreement, dated as of
                December 31, 1998, by and between Americable, Inc.,
                and Vicom, Inc.

  10.19         Assignment of Lease, dated as of January 1999, by and among
                Enstar Networking Corporation, Vicom Incorporated and Lexmark
                Office One Partners LLP.

  10.21         Enstar Networking Corporation Stock Option Plan 

  10.27         Twelfth Amendment to Amended and Restated Loan and Security
                Agreement dated November 30, 1998, among Americable, Inc.,
                Cable Distribution Systems, Inc., Enstar Networking Corporation,
                and U.S. Bank National Association.

  10.28         Thirteenth Amendment to Amended and Restated Loan and Security
                Agreement and Consent dated January 8, 1999, among Americable,
                Inc., Enstar Networking Corporation, and U.S. Bank National
                Association, amending the terms of the Amended and Restated Loan
                and Security Agreement dated November 30, 1998.

  21.1          Subsidiaries of ENStar Inc.

  23.1          Consent of Independent Auditors

  27.1          Financial Data Schedule

  99.1          Cautionary Statement