================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


                    For the Fiscal Year Ended December 31, 1999

                           Commission File No. 0-7100


                             BASE TEN SYSTEMS, INC.
                             ----------------------
             (Exact name of registrant as specified in its charter)


New Jersey                                          22-1804206
----------                                          ----------
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                   Identification No.)

One Electronics Drive
Trenton, New Jersey                                    08619
-------------------                                    -----
(Address of principal executive offices)             (Zip Code)


       Registrant's telephone number, including area code: (609) 586-7010

           Securities registered pursuant to Section 12(g) of the Act:

          Title of each class                              Outstanding at
                                                           March 17, 2000
                                                           --------------

          Class A Common Stock                                5,106,048
          Class B Common Stock                                    9,450

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-K under the  Securities  Exchange Act of 1934 is not contained
herein, and will not be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated in Part III of this Form
10-K or any amendments to this Form 10-K (X).

As of March 17, 2000,  5,106,048 shares of Class A Common Stock and 9,450 shares
of Class B Common  Stock were  outstanding,  and the  aggregate  market value of
shares held by  unaffiliated  stockholders  was  approximately  $16,650,000  and
$57,000, respectively.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain  portions of the Proxy  Statement  for the 2000  Annual  Meeting of
Shareholders are incorporated by reference into Part III of this Report.

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<PAGE>

                                     PART I

Item 1.  Business
-----------------


Forward Looking Statement
-------------------------

     The following  contains forward looking  information  within the meaning of
The Private  Securities  Litigation  Reform Act of 1995.  Such  forward  looking
statements and paragraphs may be identified by such forward looking  terminology
as "may",  "will",  "believe",  "anticipate",  or  similar  words or  variations
thereof. Such forward looking statements involve certain risks and uncertainties
including the  particular  factors  described  more fully above in this business
discussion and throughout this annual report and in each case actual results may
differ materially from such forward looking statements.  Successful marketing of
BASE10(R)ME, BASE10(R)CS, BASE10(R)FS, BASE10(R)ADLS and BASE10(R)ADMS and their
future  contribution to Company revenues depends heavily on, among other things,
successful   early   completion  of  current  test  efforts  and  the  necessary
corrections to the software  permitting  timely  delivery to customers,  none of
which can be assured.  Other  important  factors  that the Company  believes may
cause actual results to differ  materially from such forward looking  statements
are  discussed  in the "Risk  Factors"  sections in the  Company's  Registration
Statement  on Form S-3 (File No.  333-70535)  as well as  current  and  previous
filings with the  Securities  and  Exchange  Commission.  In  assessing  forward
looking statements  contained herein,  readers are urged to read carefully those
statements and other filings with the Securities  and Exchange  Commission.  The
Company  does not  undertake  to publicly  update or revise its forward  looking
statements even if experience or future changes make it clear that any projected
results or events (expressed or implied) will not be realized.


Overview
--------

     Base Ten Systems,  Inc.  (the  "Company" or "Base Ten") was founded in 1966
and became publicly traded in 1968.  Through its earlier history,  the Company's
focus was  designing  and  producing  products  for defense  and space  programs
ranging  from  airborne  telemetry  installed in the Apollo  spacecraft  to high
performance  weapons  controllers used during operation Desert Storm through its
Government  Technology  Division  ("GTD").  As the  "cold  war"  came to an end,
management recognized that declines in U.S. and NATO spending required that Base
Ten develop commercial lines of business.

     As an outgrowth of strategic planning work begun in 1990,  management began
looking at new business lines  leveraging  its  experience in developing  safety
critical  technology  applications.  With the promise of significant growth, the
pharmaceutical   and  medical  device  markets  emerged  as  likely  targets  of
opportunity for the "new" Base Ten. Specifically,  the development and marketing
of software  solutions for the manufacture of products regulated by the Food and
Drug  Administration  ("FDA")  addressed a totally  unserved  market niche.  The
Company  established  the  Medical  Technology  Division  ("MTD") to address the
differing  development,  manufacturing,  marketing,  and  sales  needs  of  this
commercial sector.

     Losses  resulting from reduced  revenues from the shrinking  defense market
coupled with considerable  product  development and marketing expense in the MTD
produced  increasing  operating  losses  for Base Ten as a whole.  In 1997,  the
decision was reached to sell the defense related business and focus  exclusively
on the opportunities  offered in the FDA-regulated market. On December 31, 1997,
following  shareholder  approval,  Base  Ten  completed  the  sale of the GTD to
Strategic  Technology  Systems,  Inc.  ("Strategic").  On January 29, 1998,  the
Company  elected to change its fiscal  year to an  accounting  period  January 1
through December 31.

     Since  the   establishment  of  the  MTD,  Base  Ten  has  been  designing,
developing,   and  marketing  comprehensive  software  solutions  for  regulated
manufacturing  industries.  Management  focused on the  Manufacturing  Execution
Systems ("MES")  markets,  as it believes there is a strong potential for growth
over the next few years.  Factors  contributing  to this  decision  include  the
growing pressure on the Company's customer base to manage the costs of complying
with  regulations  promulgated  by the FDA.  In  addition,  our  customers  face
increasing competitive influences brought on by (a) recent business combinations
occurring in the customer  market,  and (b) the rise in  purchasing  power among
HMOs and other benefit programs,  have underscored the need for manufacturers in
the industry to be even more cost efficient.

      Base Ten's products are used in applications requiring consistent,  highly
reliable outcomes where an out-of-specification  event could have a catastrophic
result. The Company's first product was PHARMASYSTTM.  It was a computerized MES
designed specifically for the FDA-regulated  manufacturing industry.  Based upon
the  technology  used in  PHARMASYSTTM,  the Company  developed the  BASE10(R)ME
product line (formerly known as PHARM2TM). The FlowStream product, a similar MES
offering,  was purchased  from  Consilium,  Inc., in February  1998, and renamed
BASE10(R)FS  (refer to Note D to the  Consolidated  Financial  Statements).  The
clinical supplies market, a subset of the pharmaceutical  manufacturing segment,
was identified as an attractive business  opportunity.  In September 1998, using
software  similar  to  BASE10(R)ME,   the  Company  introduced  BASE10(R)CS.  In
addition,  the Company purchased Almedica  Technology Group Inc., a wholly-owned
subsidiary of Almedica  International,  Inc. on June 11, 1999. Simultaneous with
the closing of the  transaction,  the subsidiary was renamed BTS Clinical,  Inc.
Through this purchase,  the Company acquired  BASE10(R)ADLS  and  BASE10(R)ADMS,
formerly known as ADLS and ADMS,  respectively,  as additional  offerings in its
suite of clinical supplies products.

                                       1
<PAGE>

     BASE10(R)ME operates on a PC-based network using a distributed WindowsTM NT
client-server  architecture.  BASE10(R)FS  uses a  distributed  HP-UX or Digital
VAX/VMS  client-server   architecture.   They  are  both  scalable  and  may  be
implemented in a single operation,  department,  or across an entire enterprise.
The advantages of gradual integration are maximized  user-level  performance and
the  ability to adjust  quickly to  ever-changing  demands.  An  intuitive  user
interface  eases the task of data  entry and  retrieval  with  icons,  selection
boxes,  and an intelligent form designer.  In addition,  Base Ten's MES products
are  designed and  marketed as standard  applications.  Both MES products act as
electronic controls and monitors,  ensuring that the production process complies
with a  predefined  set of  specifications  in order  to  produce  a  consistent
product.

     BASE10(R)CS,  a Clinical Supplies Materials Management System, is an analog
of BASE10(R)ME. It was designed for clinical supplies management and is based on
a distributed  Windows NT  client-server  platform for  application  within high
volume  clinical  trials.  BASE10(R)CS  helps to ensure that a secure and steady
flow  of  the  trial  product  is  available  for  distribution.  The  effective
management of patient pack supply is critical for obtaining  regulatory approval
as well as for meeting or exceeding  time to market  goals.  BASE10(R)CS  allows
rapid  fulfillment  of requests  and full support of  traceability  requirements
while  maintaining  full compliance with FDA procedures.  Historical  operations
data is stored  in a  relational  database,  which can be  readily  accessed  to
support a new drug application,  real-time production analyses,  and ultimately,
timely scale-up to commercial production.

     As part of a strategic  shift in focus to boost Base Ten's  overall  market
presence in the  FDA-regulated  industries,  the Company will not issue a formal
release of version 3.2 of  BASE10(R)ME  or  BASE10(R)CS.  These products will be
available  on  a  limited  release  basis  for  customers  requiring  customized
development.

     BASE10(R)ADLS is designed to provide a windows-based, intuitive application
for clinical  trial  design,  randomization  and  labeling  for  clinical  trial
testing.  The user is prompted  through a set of screens designed to capture the
clinical study design and randomization  data. A unique numbering  convention is
applied to ensure traceability of all study materials. A fast and flexible label
design and  generation  capability  is built into the  application  to ready the
study for distribution.

     BASE10(R)ADMS is a distribution  management  system for the distribution of
clinical trials.  The system maintains forward and backward  traceability of all
trial materials throughout the life-cycle of the study. Features include:  order
requests, pick tickets,  shipment verification,  order processing and reporting.
Through the automation of clinical trial design and distribution, users have the
tools necessary to increase throughput,  increase quality and decrease the costs
associated with clinical trials.

     The  Company   believes   that   BASE10(R)ME,   BASE10(R)CS,   BASE10(R)FS,
BASE10(R)ADLS and  BASE10(R)ADMS  address many of the unique challenges faced by
FDA-regulated industries. Many companies have difficulty managing,  controlling,
and  documenting  the  manufacturing  process and  pre-approved  product testing
process, in real-time,  while reducing costs, and remaining in compliance.  Base
Ten's products offer state-of-the-art  software solutions that reduce paperwork,
human  error,  and the time  required  to review,  approve,  and  analyze  batch
records.  More  importantly,  since  customers and prospects have indicated that
compliance with industry  standards is imperative,  efforts have been focused on
ensuring that the products and  processes  are also in  compliance  with the FDA
current Good Manufacturing  Practice ("cGMP"),  ISO 9000, and Generally Accepted
Manufacturing Practices ("GAMP").

     To appreciate  the  advantages of Base Ten's  products,  it is important to
understand  the functions  that an MES is designed to perform.  MES are software
programs designed to create conformity in a production  sequence by defining the
elements of each production  step. MES essentially  institutes a checklist to be
followed,  defining the raw material inputs,  equipment operating  instructions,
and  procedures  to be  followed  in order  to  maintain  consistency  in an end
product.  Historically,  manufacturers have used paper forms that follow a batch
through the  production  sequence,  requiring  signatures to verify that defined
procedures were followed.  Paper-based processes are susceptible to human error,
leading to an increased  possibility  of corrupted  batches.  The  production of
certain  products  effecting  health and  safety,  such as  pharmaceuticals  and
consumer  products,  require greater  production process control to decrease the
possibility  of an  adulterated  end  product.  Paper based  processes  are also
expensive to manage.

     Base  Ten  believes  there  is a  compelling  and  immediate  need  for the
FDA-regulated manufacturing industries to implement MES that are cost effective,
flexible,   and  facilitate  the  demonstration  of  compliance  with  FDA  cGMP
regulations.


Other Products
--------------

     Ultrasound Imaging Products.  Base Ten introduced  uPACS(TM),  a system for
archiving  ultrasound images, in 1994. The system digitizes records,  and stores
ultrasound  images on  CD-ROMs  as an  alternative  to  existing  film and video
storage  systems.  In April 1996,  the Company  determined  that uPACS was not a
commercially  viable  product in its current state of  development,  despite the
fact that it expected  to receive FDA  clearance  of a  pre-market  notification
application ("510(k) clearance"), which was ultimately granted in 1996.

                                       2
<PAGE>

     The Company  continued  development  efforts of uPACS(TM) and, in May 1997,
entered  into an  agreement  whereby it became a minority  owner of uPACS LLC, a
limited  liability  company (the "LLC").  Under the terms of the agreement,  the
Company made a capital  contribution  to the LLC of its rights to its  uPACS(TM)
technology. In exchange for such capital contribution, the Company received a 9%
interest  in the LLC. A then  outside  investor,  who is  currently  a principal
shareholder of the Company,  made a total capital  contribution of $3 million in
return for a 91% interest in the LLC. See Note M to the  Consolidated  Financial
Statements for further information on this arrangement. During 1998, the Company
determined  that it did not have the  required  resources  to devote to both its
core manufacturing  execution software business and the uPACS(TM) business,  and
as a  result,  initiated  a  search  for a  potential  buyer  of the LLC and its
technology. For the year ended December 31, 1999, the Company paid approximately
$0.7 million of the LLC's expenses.  The Company intends to continue funding the
LLC  operation  only  through  the  first  quarter  of 2000.  After  that  time,
management  intends  to either  sell the LLC or abandon  the  efforts to further
develop its  technology.  Costs of funding the LLC after December 31, 1999 total
less than $50,000.


Government Technology Division
------------------------------

     On December 31, 1997, following shareholder approval, the Company completed
the  sale of the GTD to  Strategic.  Strategic  was a newly  formed  corporation
managed and  partially  owned by  individuals  who were,  prior to the GTD Sale,
members of the Company's senior management (the "Management Group").  Members of
the Management Group were significantly involved in the business and development
of the GTD while  employed by the Company and left the Company's  employ to join
Strategic  concurrently with the GTD Sale. Strategic acquired  substantially all
of the net  operating  assets of the GTD in exchange for certain  consideration,
pursuant to the terms and conditions  set forth in an Asset  Purchase  Agreement
between the Company and Strategic dated October 27, 1997.


Sales and Marketing
-------------------

     Base Ten's sales and  marketing  efforts  are  focused on MES and  clinical
supplies materials management applications for the FDA-regulated industries. The
Company  currently  markets its  products  through a direct sales force in North
America and Europe.  The sales staff is  currently  based  domestically  at Base
Ten's corporate  headquarters in New Jersey,  and abroad in England,  France and
Belgium. The Company's sales force conducts  presentations and demonstrations to
management  and end  users  at the  customer  site as part of the  direct  sales
effort.

     Base Ten  supplements  its direct sales efforts with a variety of marketing
initiatives  including  public  relations  activities,  advertising  in industry
periodicals,  trade shows,  industry  symposiums and  workshops,  and user group
conferences.  In addition,  the  Company's  website is actively  being used as a
sales  and  marketing  tool.  While the  website  is a  valuable  communications
conduit,  it has  also  been  useful  in  making  initial  Company  and  product
introductions  to  prospective  customers.  The website has also proven to be an
effective  and  efficient  tool  for  presenting  annotated  product  demos  for
potential customers.


Research and Development
------------------------

     Base Ten's  research  and  development  efforts are  currently  directed at
evolving its existing products into a web-based architecture.

     In fiscal years 1997, 1998 and 1999, Base Ten expensed  approximately  $0.1
million,  $2.0  million  and  $1.2  million,   respectively,   in  research  and
development  expenditures.  The development  staff consists of  approximately 15
software engineers supported by test, project, quality and administrative staff.


Competition
-----------

     The Company  competes in the MES and Clinical  Supplies  software  markets.
Base  Ten  faces  three  major  sources  of  competition:  paper-based  systems,
commercial  vendors of software  products  that develop one or more elements for
pharmaceutical manufacturing, and in-house computer programs.

     The Company's  main  competitors  include POMS,  ProPack GmbH and Werum AG.
Several of the competitors  offer products that are either  toolkits,  requiring
significant  customization or provide only specific pieces of MES  applications,
and/or  focus on other  vertical  markets.  The  Company  feels  that it gains a
competitive   advantage  by  staying  focused  on  the  FDA-regulated   vertical
industries and by its continued development of functionality and support for the
evolving Clinical Supplies business.

     Base Ten believes that internal  Information System  departments  provide a
source of competition for product sales. In addition,  the Company competes with
system integrators who develop custom solutions.

     Competition  among  providers  of software for  manufacturers  is likely to
increase  as the  industry  starts  to focus  on  productivity  improvement  and
compliance  with 21 CFR  Part  11,  under  which  the FDA  regulates  the use of
electronic  signatures and records during the  manufacturing  process.  However,
Base Ten's premier  client base and  well-established  domain  knowledge  should
provide effective barriers to the newer entrants.

                                       3
<PAGE>

     Despite the Company's  belief that it ranks ahead of the known  competition
in suitability for FDA-regulated  manufacturing,  there can be no assurance that
it  will  compete   successfully  with  new  or  existing  competitors  or  that
competitive pressures faced by Base Ten will not materially and adversely affect
its business and financial results.


Proprietary Rights
------------------

     While the Company has received  certain patent  protection for its Base Ten
products, there can be no assurances that any additional patents will be issued,
that the scope of any patent protection will be adequate, or that any current or
future issued  patents will be held valid if  challenged.  The Company  believes
that its products and  technology do not infringe upon any existing  proprietary
rights of others.

     The Company  regards its software as proprietary and attempts to protect it
with  copyrights,  trademarks,  trade secret law, and contractual  arrangements.
However,  existing  copyright laws offer only limited  practical  protection for
software.  Furthermore,  the  laws  of some  foreign  countries  do not  protect
proprietary rights to the same extent as do the laws of the United States. There
can be no  assurance  that the means of  protecting  the  Company's  proprietary
software will be adequate or that  competitors  will not  independently  develop
technologies similar to that of the Company.

     Under  certain  circumstances,  customers  of Base Ten may be  entitled  to
limited access of the source code.  Customer  access to source code may increase
the  possibility  of  misappropriation  of the product or other  misuses of Base
Ten's software.  Accordingly,  it may be possible for unauthorized third parties
to copy certain portions of Base Ten's software or to obtain and use information
that the Company  regards as  proprietary.  In  addition,  the Company has filed
applications  for a patent  covering  certain  aspects  of the  safety  critical
technology.


Regulation
----------

     Base Ten's software products do not require  pre-marketing FDA clearance or
approval.  However,  those  products are intended to  facilitate  compliance  by
pharmaceutical  manufacturers  with FDA cGMP and are  designed to be  integrated
into  a  manufacturer's  production  systems.  A  pharmaceutical  manufacturer's
systems,  including any BASE10(R)ME,  BASE10(R)FS,  and BASE10(R)CS application,
must be capable of  sufficiently  documenting  the  production  of each batch of
product to be in compliance with cGMP. Further, the manufacturer must be able to
demonstrate to the FDA that its systems have that capability  under a variety of
circumstances.  Base  Ten  is  engaged  in  a  continuous  program  to  maintain
compliance with GAMP.

     Other  products Base Ten has developed  are  considered,  and the archiving
software  for  ultrasound   images  that  the  Company  is  supporting  will  be
considered, "medical devices" under FDA regulations. Before such products may be
marketed in the U.S.,  they must receive 510(k)  clearance or FDA clearance of a
pre-market  approval  application  ("PMA").  Obtaining  such  clearance can take
substantial time and can require substantial expenditures.  Many other countries
regulate the  manufacture,  marketing and use of medical devices in ways similar
to the U.S.  There  can be no  assurance  that  Base Ten will be able to  obtain
required  clearances for any products it develops on a timely or  cost-effective
basis, if at all.


Employees
---------

     The Company currently  employs a total work force of 71 persons,  including
45  engineers.  None  of the  Company's  employees  are  covered  by  collective
bargaining  agreements.  The Company has never experienced any labor disruptions
or work stoppages and considers its employee relations to be good.


Product Liability Insurance
---------------------------

     Base Ten maintains product  liability  insurance of at least $5 million for
its products in the event a claim is made that the Company's  products failed to
prevent  defects  in  pharmaceutical   products  which  resulted  in  injury  to
consumers.  There can be no  assurances  that the Company's  existing  insurance
would be adequate to cover any claims or that the Company will be able to obtain
and maintain adequate  insurance in the future. The Company and Strategic agreed
to each obtain insurance  protecting the other from liabilities that could occur
because of defense products now in the field  manufactured by the GTD while part
of the Company.


Foreign Operations
------------------

     Information on operations in different geographic areas is provided in Note
J to the Consolidated Financial Statements.



                                       4
<PAGE>


Executive Officers of the Company
---------------------------------

     The current executive officers of the Company are as follows:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------
Name                       Age          Offices Held with Base Ten                 Period Served
------------------------------------------------------------------------------------------------

<S>                         <C>        <C>                                        <C>
Robert Hurwitz              56         Chairman of the Board                      1999 to present

Stephen A. Cloughley        39         Chief Executive Officer and President      1999 to present
                                       (and director since April 11, 2000)

William F. Hackett          49         Senior Vice President, Chief Financial
                                       Officer and Secretary                      1997 to present

-------------------------------------------------------------------------------------------------

</TABLE>

     A summary  of the  business  experience  and  background  of the  Company's
officers is set forth below.

     Mr.  Hurwitz was elected a director of the Company in May 1999. In November
1999,  Mr.  Hurwitz was appointed  Chairman of the Board.  From 1994 to 1999 Mr.
Hurwitz  was  chairman  and  co-founder  of  HomePlace  Stores,  Inc.,  which is
wholly-owned by HomePlace Holdings,  Inc., of which Mr. Hurwitz was the chairman
and chief executive officer. In January 1998,  HomePlace Holdings,  Inc. filed a
voluntary  petition  in  bankruptcy  under  Chapter  11  of  the  United  States
Bankruptcy  Act. From 1998 to 1994,  Mr. Hurwitz was the chairman and co-founder
of  OfficeMax,  Inc.  Prior to 1988,  Mr.  Hurwitz  served as chairman and chief
executive  officer  of  Professional  Housewares  Distributors,  Inc.,  which he
co-founded in 1977. Mr.  Hurwitz has also been a general  partner and a director
of Coral Company, Inc., a real estate development company, since 1987.

     Mr.  Cloughley  joined the  Company in  February  1994 as head of sales for
European  operations.  In 1996, Mr. Cloughley relocated to the corporate offices
in Trenton where he served as Senior Vice  President  responsible  for corporate
strategy  and  marketing.  Mr.  Cloughley  left the  Company  in April  1999 but
rejoined  Base Ten as President  and Chief  Executive  Officer of the Company in
November 1999.  Mr. Cloughly was elected as a director, to fill a vacancy, on
April 11, 2000.

     Mr.  Hackett  joined  the  Company  in  December  1997 and  serves as Chief
Financial  Officer and Senior Vice  President of Human  Resources  and Corporate
Strategy. Prior to joining the Company, Mr. Hackett served as Senior Manager for
the Princeton Data Division of Bloomberg Financial Markets from 1991 to 1997 and
was responsible for the collection,  analysis,  and  distribution of information
and product development.


Item 2.  Properties
-------------------

     The  Company's  principal  office in the United  States is in Trenton,  New
Jersey.  Base Ten  leases an 82,000  square  foot  facility,  which  houses  its
corporate headquarters and development and support activities. The lease for the
building expires in October 2009. Base Ten occupies  approximately 42,000 square
feet of this property.  Strategic  occupies the remaining  approximately  40,000
square feet, pursuant to a five-year sublease with the Company expiring in 2002.
Base Ten also leases  approximately  7,200 square feet of space at its European,
Middle East, and African  headquarters in Mechelen,  Belgium.  The lease for the
office space in Mechelen expires in 2008. In addition, the Company leases office
facilities  in the United  States in  Parsippany,  New  Jersey and Santa  Clara,
California,  as well as  internationally in Camberley,  England.  The Company is
currently working to dispose of the Parsippany and Camberley leases.

     Management  believes that the Company's  facilities are currently  adequate
for its operations.


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

     The Company is involved from time to time in various claims and proceedings
including  customer and employee  claims in the normal  course of business.  The
Company has certain  agreements  with some of its customers which contain damage
or penalty clauses for non-delivery or delays beyond certain dates.  Such damage
clauses  vary by customer  and may provide for a fixed amount of damages per day
or per week, and may or may not contain  limitations on the aggregate  amount of
such damage  payments.  At December  31,  1999,  the Company has missed  certain
delivery  dates which  provide,  in one case,  for the  possible  imposition  of
payments  by  the  Company  of  $10,000  per  week.  Management  has  maintained
discussions with its customers in an effort to satisfy  customers'  requirements
while   minimizing   exposure  to  damage  claims.   The  Company  has  reserved
approximately  $500,000 for such matters at December 31, 1999.  While management
believes  this amount is sufficient  to cover all damage  claims,  if any, it is
possible that customer claims may exceed this amount and such additional amounts
could  be  material  to  the  Company's  financial  position  and  statement  of
operations when such amounts are finally determined.


                                       5
<PAGE>


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

     No matters  were  submitted to a vote of the  security  holders  during the
fourth quarter of the fiscal year ended December 31, 1999.


                                       6
<PAGE>


                                     PART II


Item 5.  Market for the Company's Common Stock and Related Shareholder Matters
------------------------------------------------------------------------------

     On May 14, 1999,  the NASD  notified the Company that it intended to delist
the Class A Common  Stock from  NASDAQ NMS because  the NASD  believed  that the
Company had failed to meet the NASDAQ NMS continued listing  criteria.  The NASD
specifically  inquired  about the  Company's  ability to meet the NASDAQ NMS net
tangible asset  requirement  and its minimum bid  requirement.  In response to a
hearing before the NASD in which the Company appealed the NASD's  determination,
the listing of the Company's  Class A Common Stock was transferred to the NASDAQ
SmallCap Market, effective September 10, 1999. In addition, the Company executed
a one-for-five reverse stock split on September 24, 1999 in order to comply with
the NASD's $1.00 minimum bid price  requirements.  The Company's  Class A Common
Stock is listed on the NASDAQ  SmallCap Market under the trading symbol "BASEA".
At December 31, 1999, the Company's net tangible assets were below that required
for  continued  listing  on  the  NASDAQ  SmallCap  Market.  See  Note  A to the
Consolidated Financial Statements.

     The Company's Class B Common Stock,  which traded under the symbol "BASEB",
was delisted from the NASDAQ  SmallCap Market in the second quarter of 1998. The
Company also executed a one-for-five reverse stock split of Class B Common Stock
effective,  for  business  purposes,  September  24,  1999.  See  Note  N to the
Consolidated Financial Statements.

     The table  below sets forth the high and low sale  prices of the  Company's
Class A Common  Stock and Class B Common  Stock as  reported  by NASDAQ  for the
periods  indicated,  after adjustment for the one-for-five  reverse stock split.
The OTC market quotations reflect inter-dealer prices, retail mark-up, mark-down
or commission and may not necessarily  represent actual transactions;  thus, the
listing of sales prices for Class B Common Stock after delisting from the NASDAQ
SmallCap Market in 1998 is not applicable, as denoted in the chart below.

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------

                                                Class A Common Stock                       Class B Common Stock
                                                      Bid Price                                  Bid Price
                                                      ---------                                  ---------
                                             High                 Low                    High                  Low
                                             ----                 ---                    ----                  ---
<S>                                       <C>                <C>                     <C>                 <C>
Fiscal 1998:
------------
First quarter.......................      $   52 1/2         $   25                  $   52 1/2          $    35
Second quarter......................          33 1/8             10 5/16                 39 3/8               35 5/8
Third quarter.......................          25 15/16            7 13/16                   N/A                  N/A
Fourth quarter......................          20                  9 11/16                   N/A                  N/A

Fiscal 1999:
------------
First quarter.......................      $   16 1/4         $    5 5/8                     N/A                  N/A
Second quarter......................          10 5/8              2 1/2                     N/A                  N/A
Third quarter.......................           5 5/16             1 1/2                     N/A                  N/A
Fourth quarter......................           6 1/2              5/8                       N/A                  N/A

</TABLE>

     As of March 17, 2000, there were  approximately 697 record holders of Class
A Common Stock and 108 record holders of Class B Common Stock.

     Base Ten has not paid cash  dividends on its Common  Stock since 1985.  The
present  policy of the Board of  Directors  is to retain any future  earnings to
provide for the Company's growth.


                                       7
<PAGE>


Item 6.   Selected Financial Data
---------------------------------

     The following table presents  selected  financial data for Base Ten and its
consolidated  subsidiaries.  The selected  consolidated  financial  data for the
fiscal years ended  December 31, 1999,  December 31, 1998,  and October 31, 1997
the two  month  period  ended  December  31,  1997 have  been  derived  from the
Company's audited  Consolidated  Financial Statements included elsewhere in this
Report  and should be read in  conjunction  with  those  Consolidated  Financial
Statements and related Notes. The selected  consolidated  financial data for the
fiscal years ended  October 31, 1996 and October 31, 1995 have been derived from
our audited consolidated financial statements that do not appear in this report.


<TABLE>
<CAPTION>


------------------------------------------------------------------------------------------------------------------------------------

                     Base Ten Systems, Inc. and Subsidiaries
                  (dollars in thousands except per share data)

 ------------------------------------------ -------------- -------------- ------------- -------------- ------------- --------------
                                                                           Two-Months
                                             Year Ended     Year Ended       Ended       Year Ended     Year Ended    Year Ended
                                            Dec 31, 1999   Dec 31, 1998   Dec 31, 1997  Oct 31, 1997   Oct 31, 1996  Oct 31, 1995
 ------------------------------------------ -------------- -------------- ------------- -------------- ------------- --------------
 <S>                                        <C>            <C>            <C>           <C>            <C>           <C>
 Summary of Operations:
 Revenues                                   $     4,364    $     7,550    $       181   $     2,512    $     1,262   $     2,710
 Loss from continuing operations before
      income tax benefit(1) (2)             $   (21,326)   $   (19,020)   $    (3,714)  $   (15,980)   $    (9,097)  $    (2,616)
 Income taxes (benefit)                     $         --   $         --   $         --  $         --   $      (684)  $      (707)
 Net loss from continuing operations        $   (21,326)   $   (19,020)   $    (3,714)  $   (15,980)   $    (8,413)  $    (1,909)
 Net earnings (loss) from discontinued      $     1,086    $         --   $      (222)  $    (6,027)   $      (546)  $       532
      operations
 Net earnings (loss)                        $   (20,240)   $   (19,020)   $    (3,936)  $   (22,007)   $    (8,959)  $    (1,377)
 ------------------------------------------ -------------- -------------- ------------- -------------- ------------- --------------
 Net earnings (loss) per common share
      from: (5)
      Continuing operations                 $     (6.07)   $    (10.45)   $     (2.25)  $    (10.12)   $     (5.45)  $     (1.40)
      Discontinued operations               $       .23    $         --   $      (.13)  $    ( 3.82)   $      (.35)  $       .40
 ------------------------------------------ -------------- -------------- ------------- -------------- ------------- --------------
 Net earnings (loss) per share              $     (5.84)   $    (10.45)   $     (2.38)  $    (13.94)   $     (5.80)  $     (1.00)
 ------------------------------------------ -------------- -------------- ------------- -------------- ------------- --------------
 Summary Balance Sheet
 ------------------------------------------ -------------- -------------- ------------- -------------- ------------- --------------
 As of :                                    Dec 31, 1999   Dec 31, 1998   Dec 31, 1997  Oct 31, 1997   Oct 31, 1996  Oct 31, 1995
 ------------------------------------------ -------------- -------------- ------------- -------------- ------------- --------------
 Working capital (3)                        $      3,827   $     15,482   $      6,080  $      2,671   $     14,115  $     13,270
 Total assets                               $     19,077   $     33,821   $     24,413  $     21,217   $     30,397  $     28,005
 Long term debt, net of current             $      3,204   $     13,341   $     18,916  $     18,925   $     13,478  $      3,525
      maturities (4)
 Redeemable Preferred Stock                 $     19,004   $     12,914   $      6,155  $         --   $         --  $         --
 Shareholders' equity (deficit)             $     (7,019)  $      2,372   $     (6,054) $     (4,982)  $     12,140  $     20,261
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1)        Included in financial  data are  write-offs of  capitalized  software
           costs  of  $1.2   million   and  $2.4   million  in  1999  and  1996,
           respectively.

(2)        Included in fiscal year October 31, 1997  financial  data is the $2.7
           million of  expense  relating  to fair  market  value of options  and
           warrants  issued  to  non-employee  consultants  (see  discussion  in
           Results of Operations - Continuing Operations).

(3)        Included in fiscal 1997 is the reclassification of the assets and
           liabilities  of GTD as net assets  held for sale.

(4)        Included in 1995 to 1999 financial information is a long-term
           financing obligation.

(5)        Adjusted in 1995 to 1998 to reflect the 1999 one-for-five reverse
           stock split.




                                       8
<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations
         -------------

General
-------

     On December 31, 1997,  following approval by the shareholders,  the Company
sold the GTD (the  "GTD  Sale")  to  Strategic  Technology  Systems,  Inc.  , as
discussed in Item 1 hereof.  On January 29, 1998, the Company  elected to change
its fiscal year to an accounting period from January 1 through December 31. This
Annual Report on Form 10-K,  for the fiscal year ended  December 31, 1999,  does
not include, except as indicated herein, the operations of the GTD.

     The Company's initial MES product was PHARMASYST(TM),  which was introduced
in 1993.  Utilizing the  PHARMASYST(TM)  technology,  the Company  developed and
released  the  BASE10(R)ME  product  line.  In  June  1998,  Base  Ten  released
BASE10(R)ME version 2.3. The Company followed in September 1998 with the release
of  BASE10(R)CS,  which is an analog of BASE10(R)ME,  designed for  pre-approval
product  testing.  As a result of the  February  1998  purchase  of assets  from
Consilium,  Inc.,  the Company  acquired the rights to develop,  distribute  and
support the FlowStream product, which is now known as BASE10(R)FS.

     In June 1999, the Company  purchased all of the  outstanding  shares of the
Almedica Technology Group, Inc. from Almedica International,  Inc., renaming the
group  BTS  Clinical,   Inc.  The  Company   acquired  the   BASE10(R)ADLS   and
BASE10(R)ADMS  products  through  this  acquisition.  Refer  to  Note  D to  the
Consolidated Financial Statements and the "Continuing Operations Overview" below
for more information about this acquisition.


Cost Reduction Measures
-----------------------

     As a result of the purchase of BTS Clinical, Inc. in June 1999, the Company
experienced  an increase  in total  personnel  of  approximately  25  employees,
bringing  the  total  for  Base Ten to  approximately  120  employees  as of the
acquisition  date.  Since the  acquisition  of BTS Clinical,  Inc.,  the Company
eliminated  approximately  45  positions  through  a staff  reduction  plan  and
attrition.  This  decrease  in  staff  subsequent  to  the  BTS  Clinical,  Inc.
acquisition should result in a reduction in the Company's compensation and other
related costs of approximately $4 million per year.


Discontinued Operations
-----------------------

     The  consolidated  financial  statements  of the  Company  account  for the
operations  of the GTD as  discontinued  operations  in view of the GTD Sale, as
discussed in Item 1 hereof. In the financial statements, all items of income and
expense   attributable  to  GTD's  operations  for  all  periods  presented  are
separately identified as gain or loss from discontinued operations. Accordingly,
the following discussion of the Company's financial condition and the results of
operations  excludes  the  results  of the  discontinued  operations,  except as
otherwise indicated.


Continuing Operations Overview
------------------------------

     Since  1991,  Base  Ten,  through  its  then  existing  Medical  Technology
Division,  has  been  engaged  in the  design,  development,  and  marketing  of
comprehensive software solutions for the regulated manufacturing industries, and
most   recently,   computerized   manufacturing   execution   systems   for  the
pharmaceutical  and medical  device  industries.  Management  believes  that the
demand for MES in these markets is poised for  significant  growth over the next
few years due to several  factors.  One factor is the  growing  pressure  on the
Company's  customer base to comply with regulations  promulgated by the FDA, ISO
9000,  and  other  industry  standards  such as GAMP.  In  addition,  increasing
competitive  influences brought on by (a) recent business combinations occurring
in the  customer  market,  and (b) the rise in  purchasing  power among HMOs and
other benefit programs,  have underscored the need for manufacturers to increase
cost efficiency.

     The  Company's  acquisition  of certain  assets  from  Consilium,  Inc.  in
February  1998  broadened  the Company's  reach into these  industries  with the
addition of the FlowStream  product  (BASE10(R)FS)  a UNIX-based MES targeted at
pharmaceutical,  medical device and specialty chemical customers.  The June 1999
acquisition of BTS Clinical,  Inc. enabled the Company to expand its offering of
clinical  supply  chain  product  with the  addition  of  BASE10(R)ADLS,  a drug
labeling and materials  management  system,  and  BASE10(R)ADMS,  a distribution
management system.

     The Company believes that its products are premier,  standardized  PC-based
systems running on Microsoft Windows-NT (BASE10(R)ME, BASE10(R)CS, BASE10(R)ADLS
and  BASE10(R)ADMS)  and HP-UX or Digital VAX/VMS  (BASE10(R)FS)  with requisite
functionality and documented  support required by the pharmaceutical and medical
device industries to assist in reducing costs while remaining FDA, ISO 9000, and
GAMP  compliant.  The Company will  continue to pursue a leadership  position in
this market, primarily through its BASE10(R)FS product.

                                       9
<PAGE>

     The Company has received  indications  from  customers and  prospects  that
compliance with industry standards is imperative to sales. As such, efforts have
been focused on  compliance  with  certain  industry  standards  and the Company
believes that both BASE10(R)ME and BASE10(R)FS are compliant with FDA, ISO 9000,
and GAMP. As described  above,  there is a need for  pharmaceutical  and medical
device  manufacturers  to have MES  products  compliant  with cGMP.  The Company
considers  the  additional  costs  of  compliance  with  ISO 9000 and GAMP to be
prudent investments.

     Personnel  are in place to address  product  development  and  enhancement,
sales and marketing,  and customer support.  Management believes absorbing these
expenses in advance of revenue  generation is essential to  facilitating  market
emergence and near term growth of the Company.

     For use in a manufacturing  environment,  a system generally has to undergo
validation in accordance with defined procedures determining its fitness for use
in a regulated environment.  While Base Ten has continued to provide a migration
path  for  many of its  product  offerings,  validation  requires  that  project
implementation  be  documented  and  tested  as a  complete,  installed  system.
Projects based upon  BASE10(R)ME and BASE10(R)CS are implemented  using its core
functionality  and are then configured,  customized,  documented,  and tested to
meet  the  overall  requirements  of  the  particular  program.   This  approach
drastically  reduces the need to include an extensive list of special  functions
in the core product.  The core  BASE10(R)ME and BASE10(R)CS  product release has
matured to include many of the functional requirements as represented by a large
cross-section  of our customer base.  Version 3.2 of BASE10(R)ME and BASE10(R)CS
will not result in a formal release but will result in a set of components to be
configured  and   customized  to  meet  the  goals  of  a  particular   customer
application.

     Subsequent  to  December  31,  1999,  a contract  to provide  software  and
services to one customer was terminated  due to the Company's  inability to meet
delivery  deadlines  for  version  3.2 of  BASE10(R)ME  which was  caused by the
substantial  customization of the core product  required for the project.  Under
the  terms of this  contract,  the  Company  was to  receive  revenues  totaling
approximately  $1.4  million.  The  termination  of this contract will allow the
Company to reallocate  resources to other projects  requiring  less  substantial
customization.

     To reduce its dependence on the BASE10(R)ME and BASE10(R)CS  products,  the
Company plans to more aggressively  market the BASE10(R)ADLS,  BASE10(R)ADMS and
BASE10(R)FS  products.  While the timely  delivery  of product to the  Company's
customers cannot be completely assured,  management believes the Company will be
able to meet its remaining delivery commitments. The financial statements of the
Company  have been  adjusted as of December 31, 1999 and for the year then ended
to reflect the impact of the terminated  contract and concerns over the delivery
of BASE10(R)ME and BASE10(R)CS.


Results of Discontinued Operations
----------------------------------

     As discussed above, the GTD was sold to Strategic on December 31, 1997, and
as such, its results of operations are not included in the Company's  results of
operations  for fiscal years 1998 and 1999.  During 1999,  Strategic was sold to
Smiths  Industries  ("Smiths"),  a defense  industry  competitor.  The  Company,
pursuant to the terms of the agreement to sell the GTD,  received  approximately
$1.1  million  in  1999,  which  has  been  reflected  as a gain  from  sale  of
discontinued operations.


Fiscal 1999 Compared to Fiscal 1998
-----------------------------------


     Continuing Operations
     ---------------------


     Revenues
     --------

     Company  revenues  decreased  to $4.4  million in 1999 from $7.5 million in
1998. Of this decrease, $1.5 million is due to a decrease in license and related
revenues,  and $1.7  million  is  attributable  to a  decrease  in  service  and
maintenance  revenues.  The decreases in both license revenues and services were
due in part to delays in successful development of version 3.2 of BASE10(R)ME as
well as customers'  concerns over Year 2000 corporate issues.  Revenues for 1999
were  derived 29% from  licenses  and related  revenues and 71% from service and
related  revenues,  as  compared  to 1998,  when  revenue  was  derived 36% from
licenses and related revenues and 64% from service and related revenues.


                                       10
<PAGE>

     Cost of Revenues
     ----------------

       Cost of revenues in 1999 was $7.0 million  compared  with $9.6 million in
1998.  Cost of  revenues  decreased  primarily  as a result  of a  reduction  in
headcount  and  outsourced  labor.  In 1999,  the  Company  incurred  an unusual
non-cash  charge  of $1.2  million  for  accelerated  amortization  of  software
development  costs  capitalized prior to 1999 that were determined in the fourth
quarter of 1999 to be greater than net realizable value.


     Research and Development Costs
     ------------------------------

     Research and development  costs decreased in 1999 to $1.2 million from $2.0
million in 1998. This decrease was due to the reduction of headcount in 1999.


     Sales and Marketing Expenses
     ----------------------------

     The  Company's  sales  and  marketing  expenses  increased  in 1999 to $6.3
million compared with $5.0 million in 1998. The increase was mainly attributable
to the hiring of additional  sales personnel which increased  salary and related
expenses.


     General and Administrative Expenses
     -----------------------------------

     Company general and  administrative  expenses  decreased to $7.8 million in
1999 from $8.9 million in 1998. Decrease is primarily due to a reduction of $1.2
million in outside  consulting  costs,  partially  offset by an increase of $0.7
million in costs of funding the LLC.


     Other Income and Expense
     ------------------------

     Other income and expense  improved from a loss of $1.0 million in 1998 to a
gain of $0.2 million in 1999. Interest expense decreased by $0.9 million in 1999
as a result of the  conversion  in March of debt  securities  for Class A Common
Stock.  Interest income  increased in the 1999 period as a result of higher cash
balances available to earn interest.


     Continuing Losses
     -----------------

     The Company incurred a net loss from continuing operations of $21.3 million
in 1999 compared to a $19.0 million net loss from continuing operations in 1998.
The Company's  increased  loss in 1999 was primarily due to (a) the $2.6 million
reduction in revenues which was caused by delays in the  development and release
of BASE10(R)ME  software and customer concerns over Year 2000 issues, (b) a $3.5
million  unusual  non-cash  charge  associated  with the  conversion  of debt to
equity,  and (c) a $1.2 million  unusual  non-cash  charge for the  write-off of
capitalized  software  development costs. These factors were partially offset by
decreases in: headcount,  certain outside  professional and consulting services,
and interest expense due to the conversion of long term debt to equity.


Fiscal 1998 Compared to Fiscal 1997
-----------------------------------


     Continuing Operations
     ---------------------


     Revenues
     --------

     Company  revenues  increased  to $7.6  million in 1998 from $2.5 million in
1997. The increase is due to an increase in license and related revenues of $1.5
million, and service and maintenance revenues of $3.5 million. Revenues for 1998
were derived 36% from  licenses and related  revenues,  and 64% from service and
related revenues, as compared to 1997 when revenue was derived 49% from licenses
and related  revenues and 51% from service and related  revenues.  Revenues from
FlowStream  licenses,  services and  maintenance  during 1998 accounted for $2.7
million of the $5.1 million increase in 1998.


     Cost of Revenues
     ----------------

       Cost of revenues in 1998 was $9.6 million  compared  with $6.4 million in
1997. Cost of revenues increased as a result of increased sales of the Company's
MES products and increased labor charges associated with the Company's increased
service and  maintenance  related  revenues.  These  increased costs were partly
offset  by   decreased   amortization   of   software   development   costs  for
PHARMASYST(TM)  and  BASE10(R)ME  of $2.6  million in 1998 from $3.0  million in
1997.


                                       11
<PAGE>

     Research and Development Costs
     ------------------------------

     Research and  development  costs  increased  significantly  in 1998 to $2.0
million from $0.1 million in 1997. This increase relates to additional personnel
and related  expenses  being  dedicated  to  developing  future  versions of the
Company's products.


     Sales and Marketing Expenses
     ----------------------------

     The Company's sales and marketing expenses increased  significantly in 1998
to $5.0  million  compared  with $2.7  million in 1997.  The increase was mainly
attributable  to salaries  and  related  expenses  resulting  from the hiring of
additional  personnel  and  increased  sales  commissions  which  resulted  from
increased revenues.


     General and Administrative Expenses
     -----------------------------------

     Company general and  administrative  expenses  increased to $8.9 million in
1998 from $7.7 million in 1997. Costs rose primarily as a result of increases in
administrative salary and related expenses,  legal,  professional and consulting
fees and  integration  costs related to the addition of the  FlowStream  product
line.  These  increases were partly offset by a decrease of $2.4 million expense
related to the fair market value of options and warrants  issued to non-employee
consultants  for services  rendered  during 1997.  The fair market value in each
year was determined using the Black-Scholes option pricing model.


     Other Income and Expense
     ------------------------

     Other expense  decreased from $1.5 million in 1997 to $1.0 million in 1998.
In 1998,  other  expense is  primarily  comprised  of  interest  expense of $1.6
million, partially offset by $0.5 million of interest income and $0.1 million of
other income. In the 1997 period, other expense was comprised of $1.6 million of
interest expense,  partially offset by $0.1 million of interest income. Interest
expense  remained  consistent in the 1998 period as a result of similar  average
levels of debt.  Interest  income  increased  in the 1998  period as a result of
higher cash balances  available to earn interest.  Other income increased in the
1998 period  largely  due to rental  income  earned on the  sublease of building
space to Strategic,  which was not present in this 1997 period, partially offset
by foreign currency exchange losses.


     Continuing Losses
     -----------------

     The Company incurred a net loss from continuing operations of $19.0 million
in 1998 compared to a $16.0 million net loss from continuing operations in 1997.
The increased loss in 1998 was largely  attributable to increases in:  headcount
and related  expenses,  legal,  professional and consulting fees and integration
costs related to the addition of the FlowStream  product.  These  increases were
partly offset by a decrease of $2.4 million  expense  related to the fair market
value of options and warrants  issued to  non-employee  consultants for services
rendered during 1997.


Readiness for the Year 2000
---------------------------


     Year 2000 Issues
     ----------------


      Historically,  software,  and other equipment included programming code in
which calendar year data was abbreviated to only two digits. As a result of this
design  decision,  some of these  systems  were at risk of failing to operate or
failing to produce correct results if "00" was interpreted to mean 1900,  rather
than 2000. The Company,  in  anticipating  the year 2000, kept the potential for
this problem (the "Y2K Problem") in mind when purchasing new computers, software
and equipment  during the two years prior to December 31, 1999. The Company also
considered the Y2K Problem when developing new products for sale to customers.


      Company  Readiness.  During  1998,  the  Company  formed an  internal  Y2K
committee whose goal was to minimize any  disruptions of the Company's  business
and to limit the  Company's  liabilities  resulting  from the Y2K Problem.  As a
result,  throughout  1998 and 1999, the Company  reviewed its internal  computer
programs and  systems,  as well as the  software  that the Company  develops and
sells to customers, to determine if the programs and systems were Y2K compliant.
In 1998, the Company replaced its existing financial accounting software system,
which the Company deemed to be a  business-critical  system, with a system which
is vendor-certified as being Y2K compliant. The Company also reviewed all of the
computers, major software applications, and related equipment used in connection
with its  internal  operations  to ensure  that the  possibility  of a  material
disruption to its business was minimized.  All hardware or software systems that
were not Y2K compliant were either replaced or remediated. In addition, the risk
of business  interruption  resulting  from the failure of office and  facilities
equipment,  such as fax machines,  photocopiers,  telephone  switches,  security
systems, and other common devices was assessed and deemed to be minimal.


                                       12
<PAGE>

      Software Sold to  Customers.  The Company  believes that it  substantially
identified  and resolved all potential  Y2K Problems  with its MES software,  as
well as with version 3.4 and later versions of BASE10(R)FS.  However, management
believes that it is not possible to determine  with complete  certainty that all
Y2K Problems  affecting the Company's  software products have been identified or
corrected  due to the  complexity  of these  products  and the fact  that  these
products interact with other third party vendor products and operate on computer
systems which are not under the Company's control.


      Certain  customers  have earlier  versions of the  Company's MES software,
PHARM2(TM) (prior to version 2.3) and  PHARMASYST(R)  which have not been tested
by the Company for Y2K  compliance.  All of the  customers  that have  purchased
these earlier versions have had substantial  customization  done, which dictates
that Y2K testing and modifications  must be done on a case by case basis.  These
customers were notified of the Company's  willingness and ability to provide Y2K
test  specifications  and/or  assistance for a fee. The number of customers that
still operate these earlier versions is small, and the Company believes that Y2K
issues,  if any,  related to these earlier  versions of the  Company's  software
product will not require any material financial or human resources.


      Costs of Compliance. The Company noted no failure of internal equipment or
systems due to Y2K  Problems  after  December 31,  1999.  No Y2K  Problems  were
reported by customers  using the Company's  software.  Accordingly,  the Company
does not anticipate that the cost of unforeseen Y2K Problems,  if any, will have
a material adverse affect on its operations.


Liquidity and Capital Resources
-------------------------------

    The Company's  financial  statements have been prepared on the basis that it
will continue as a going concern. The Company has incurred significant operating
losses and  negative  cash flows in recent  years.  At December  31,  1999,  the
Company was below the $2 million  minimum net tangible  assets  required for its
current listing on the NASDAQ SmallCap Market System,  which could result in the
Company's  shares being delisted from the NASDAQ SmallCap Market System.  If the
Company's  Class A Common  Stock is  suspended  from  trading or delisted for an
aggregate of 30 trading days in any 18 month period,  or upon the  occurrence of
any other Redemption  Event, as defined in the terms of the Series B Convertible
Preferred Stock,  holders of the Company's Series B Convertible  Preferred Stock
may require the Company to redeem the Series B Convertible  Preferred  Stock for
cash of 1.25 times the Mandatory  Redemption  Price.  Such cash redemption would
aggregate at a minimum, $19 million, plus any other penalty payments that may be
due under the terms of the Series B Convertible  Preferred Stock. (See Note L to
the  Consolidated  Financial  Statements.)  The Company does not currently  have
sufficient  cash to pay such amounts  should  there be a demand for payment.  To
further  increase the Company's  net tangible  assets and in order to ensure the
Company's compliance with NASDAQ listing requirements, management is seeking the
infusion  of  additional  capital  financing  or  investment  from  a  strategic
investor.  If such  financing is obtained,  then  management  believes  that the
Company's  liquidity would be sufficient to meet its cash needs for its existing
business  through  fiscal  2000.  However,   there  can  be  no  assurance  that
management's efforts in this regard will be successful.

    As discussed above, if certain  Redemption  Events occur, the holders of the
Company's  Series B  Convertible  Preferred  Stock have  rights to  require  the
Company to purchase their shares for cash, which would severely adversely affect
the  Company.  (See  Note  L to  the  Consolidated  Financial  Statements.)  The
Redemption  Events  include,  but are not limited to, the  Company's  failure to
retain  its  ongoing  listing  on  the  NASDAQ  SmallCap  Market  System.  If no
Redemption Event occurs, or if the holders of the Company's Series B Convertible
Preferred Stock elect not to exercise their redemption rights,  then the Company
may  increase  net tangible  assets in December  2000 by $19.0  million upon the
conversion  at maturity of the Series B Convertible  Preferred  Stock to Class A
Common  Stock.  However,  there  can be no  assurance  that the  holders  of the
Company's Series B Convertible Preferred Stock will choose not to exercise their
redemption  rights if a Redemption  Event  occurs.  Such  conversion of Series B
Convertible Preferred Stock to Class A Common Stock will not provide the Company
with any additional funds for operations.

                                       13
<PAGE>
     Company  working  capital  decreased  to $3.8  million  at fiscal  year end
December 31, 1999 from $15.5 million at December 31, 1998.  The Company had $5.8
million of cash and cash  equivalents  at  December  31,  1999,  down from $17.4
million at December 31, 1998.  The decrease in cash during the fiscal year ended
December 31, 1999 resulted primarily from the use of cash in operations of $12.6
million  partially  offset by the receipt of $1.1 million related to the sale of
Strategic to Smiths Industries.

     In 1999,  cash used in operations  has been  affected  primarily by the net
loss of $20.2  million and a  reduction  of $2.3  million in  accounts  payable,
accrued  expenses and deferred  revenue.  The net loss includes certain non-cash
charges such as amortization  and  depreciation of $4.8 million and the non-cash
debt  conversion  charge of $3.5  million.  The decrease in accounts  receivable
provided $1.8 million for operations.

     On  March  5,  1999,  the $10  million,  9.01%  convertible  debenture  was
converted into 2,500,000  shares (500,000 after adjustment for the reverse stock
split)  of  Class A  Common  Stock,  which  increased  shareholders'  equity  by
approximately  $9.6 million,  including a non-cash charge of approximately  $3.5
million.  As a result of these debenture  conversions,  the Company  realized an
annual  interest  expense  savings of  approximately  $1.3 million.  For further
discussion  of  these  debentures  see  Note  L to  the  Consolidated  Financial
Statements.

    On March 5, 1999, the outstanding Series A Preferred Stock and warrants were
exchanged for Series B Convertible  Preferred Stock,  $1.00 par value ("Series B
Preferred  Stock").  As a  result,  approximately  15,203  shares  of  Series  B
Preferred  Stock,  with a principal  amount of  approximately  $15,203,000  were
exchanged for the outstanding  shares of Series A Preferred  Stock. In addition,
632,000 new warrants (126,400 after adjustment for the reverse stock split) were
issued to Series B Preferred  Stockholders,  and 720,000 warrants (144,000 after
adjustment for the reverse stock split) were issued to replace certain  original
warrants issued in December 1997. The Series B Preferred Stock and warrants were
recorded at December 31, 1999 at their estimated fair value of $19,004,000.  The
difference  between  this  estimated  fair value and the  carrying  value of the
Series A Preferred  Stock has been recorded as a debit to net loss  available to
common shareholders and accumulated deficit.

    The terms of the  Series B  Preferred  Stock  are  similar  to the  Series A
Preferred Stock, except that: (a) the Series B Preferred Stock have a conversion
price of that number of shares  determined by dividing the Mandatory  Redemption
Price, as defined in the terms of the Series B Preferred Stock, by $4.00 ($20.00
after  adjustment  for the  September  1999 reverse  stock  split),  whereas the
conversion  price of the  Series A  Preferred  Stock was equal to the  Mandatory
Redemption Price divided by the lesser of (i) $16.25 or (ii) the Weighted Volume
Average  Price (as defined) of the Class A Common Stock prior to the  conversion
date limited to  3,040,000  shares  (608,000  shares  after  adjustment  for the
September 1999 reverse stock split);  (b) the Series B Preferred  Stock does not
provide the holder with the option to receive a subordinated  8% promissory note
because of the  elimination of the 3,040,000  share  limitation  (608,000 shares
after adjustment for the September 1999 reverse stock split); and (c) the Series
B Preferred  Stock does not provide for a dividend  payment  based on the market
price of the  Class A Common  Stock.  As a result  of the  exchange  of Series A
Preferred Stock for Series B Preferred  Stock,  preferred stock dividends are no
longer required to be paid by the Company.

    The Series B Preferred Stock is convertible at any time or from time to time
into  Class A  Common  Stock  at a  conversion  price  of  $4.00  ($20.00  after
adjustment for the September 1999 reverse stock split).

    The Series B Preferred  Stock  matures on December 15, 2000. On the maturity
date, the Company must redeem the  outstanding  preferred stock at its Mandatory
Redemption  Price,  which is the sum of the purchase  price,  accrued but unpaid
dividends and other contingent payments as provided pursuant to the terms of the
Series  B  Preferred  Stock.  The  portion  of the  Mandatory  Redemption  Price
constituting  such other  contingent  payments  is payable in cash  whereas  the
purchase  price and accrued but unpaid  dividends  are payable in cash or common
stock at the  option  of the  Company.  If the  Company  elects  to  settle  the
redemption in Class A Common Stock the Mandatory  Redemption Price is 1.25 times
the purchase price. The Company was accreting the carrying value of the Series B
Preferred Stock to the purchase price and  recognizing the accretion  charges to
retained  earnings  (accumulated  deficit)  over the  period  from  issuance  to
maturity. Since the Company was below the $2 million minimum net tangible assets
required  for its  current  listing  on the  NASDAQ  SmallCap  Market  System at
December 31, 1999 and remains below this  requirement for ongoing listing of its
stock, the Company has recorded the Series B Convertible  Preferred Stock at its
Redemption Price of $19.0 million and has recorded  corresponding charges to net
loss available for common  shareholders  and accumulated  deficit as of December
31,  1999.  As  such,  the  total  accretion  in 1999  aggregated  approximately
$6,930,000.

     For further  discussion  of the Series A and B Preferred  Shares and Common
Stock see Notes A, L and N to the Consolidated Financial Statements.
                                       14
<PAGE>

    As discussed  elsewhere in this Annual Report on Form 10-K, the Company is a
9% shareholder in uPACS LLC, a limited  liability  company which has developed a
system for  archiving  ultrasound  images  with  networking,  communication  and
off-line measurement  capabilities.  During 1998, the Company determined that it
did not have the  required  resources  to devote to both its core  manufacturing
execution  software  business  and  the  uPACS(TM)  business,  and as a  result,
initiated  a search  for a  potential  buyer of the LLC and its  technology.  At
December 31, 1998,  the LLC had  substantially  exhausted its capital  resources
and, the  operations of the LLC were funded by the Company during the search for
a buyer.  The Company intends to continue funding the LLC operation only through
the first quarter of 2000.  After that time,  management  intends to either sell
the LLC or abandon  the  efforts to further  develop  its  technology.  Costs of
funding the LLC after December 31, 1999 total less than $50,000.

    The  Company  is   continually   monitoring   and  evaluating  its  selling,
administrative   and  development   functions  with  the  intention  of  further
streamlining operations and reducing operating expenses. The Company anticipates
that  decisions  based on this  evaluation  may result in  certain  nonrecurring
charges during 2000, but the extent of such charges is not yet quantifiable.

    The Company is relying on its leading products,  BASE10(R)FS,  BASE10(R)ADLS
and BASE10(R)ADMS to stimulate new orders. Neither the additional development of
the Company's MES and clinical studies products nor the consequential generation
of cash can be  assured,  either in time or amount,  nor is there any  assurance
that such amounts will be sufficient for the Company's  needs. In the absence of
such orders or the promise thereof,  neither of which can be assured, as well as
in connection with its expected capital needs for the year 2000 and beyond,  the
Company  may elect to seek  additional  sources of capital and may also elect to
reduce the pace of its development of its products  and/or  establish other cost
reduction  measures,  which could adversely impact the Company. In the event the
Company  elects to seek  additional  capital there can be no assurance that such
funds or capital would be available on the terms or in the amounts needed.


Income Taxes
------------

    At December 31, 1999,  the Company had incurred net  operating  loss ("NOL")
carryforwards  for federal income tax purposes of  approximately  $65.8 million,
which  expire  in  the  years  2004  through  2019.   Research  and  development
carryforwards  of $0.5 million expire in the years 2000 through 2006. As certain
changes in the  Company's  ownership  occur there is a limitation  on the annual
amount of such NOL carryforwards and credits which can be utilized. Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("FAS 109")
requires that a valuation  allowance be created and offset  against the deferred
tax assets if, based on existing facts and circumstances, it is more likely than
not that some portion or all of the deferred tax asset will not be realized. The
valuation  allowance  will be adjusted when the credits are realized or when, in
the  opinion of  management,  sufficient  additional  positive  evidence  exists
regarding the likelihood of their realization.  The reductions,  if any, will be
reflected as a component of income tax expense.


New Accounting Pronouncements
-----------------------------

    Statement  of  Financial  Accounting  Standards  No.  133,  "Accounting  for
Derivative Instruments and Hedging Activities" ("FAS 133") will be effective for
the  Company  in the  first  quarter  of 2001  and  establishes  accounting  and
reporting standards for derivative  instruments and for hedging  activities.  It
requires  companies to recognize all derivatives as either assets or liabilities
in the  statement of financial  position and measure those  instruments  at fair
value.  It is  expected  that the  adoption  of FAS 133 will not have a material
effect on the Company's financial statements.

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting   Bulletin   ("SAB")  No.  101  "Revenue   Recognition  in  Financial
Statements".  This SAB  summarizes  certain of the SEC staff's views in applying
generally  accepted  accounting  principles to revenue  recognition in financial
statements.  As amended by SAB 101A,  this SAB must be implemented no later than
June 30,  2000.  The  Company  does not expect the  accounting  and  disclosures
discussed in SAB 101 to have a material impact on its financial statements.


                                       15
<PAGE>


Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

<TABLE>
<CAPTION>


                          Index to Financial Statements
                                                                                                              Page
                                                                                                              -----
<S>                                                                                                            <C>
Report of Independent Accountants............................................................................  F-1

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

Consolidated Balance Sheets - December 31, 1999 and December 31, 1998........................................  F-3

Consolidated Statements of Operations  - Years ended December 31, 1999 and 1998 and October 31, 1997
   and the Two Month Transition Period from November 1, 1997 through December 31, 1997.......................  F-4

Consolidated Statements of Common Stock and Other Shareholders' Equity (Deficit) - Years ended
   December 31, 1999 and 1998 and October 31, 1997 and the Two Month  Transition
   Period from November 1, 1997 through December 31, 1997....................................................  F-5

Consolidated Statements of Cash Flows  - Years ended December 31, 1999 and 1998 and October 31, 1997
   and the Two Month Transition Period from November 1, 1997 through December 31, 1997.......................  F-7

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

</TABLE>


Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure
         --------------------

    On  March  13,  1998,  the  Company   engaged   PricewaterhouseCoopers   LLP
("PricewaterhouseCoopers"),  independent  certified public  accountants,  as the
Company's  auditors for the 1998 fiscal year. During the Company's two preceding
fiscal years and the subsequent interim period preceding March 13, 1998, neither
the  Company  (nor  anyone  acting  on  the  Company's  behalf)  consulted  with
PricewaterhouseCoopers  regarding the application of accounting  principles to a
specified  transaction,  either  completed  or  proposed;  or the  type of audit
opinion  that might be  rendered  on the  Company's  financial  statements,  and
neither  a written  report  nor oral  advice  was  provided  to the  Company  by
PricewaterhouseCoopers;  or matters which would require  disclosure  pursuant to
Items 304(a)(1)(iv) and 304(a)(1)(v) of Regulation S-K.

    On March 3, 1998, the Company  dismissed  Deloitte & Touche LLP ("Deloitte &
Touche")  as the  principal  accountant  to  audit  the  Registrant's  financial
statements.  The  reports  of  Deloitte  &  Touche  on the  Company's  financial
statements for the past two fiscal years did not contain an adverse opinion or a
disclaimer  of  opinion,  nor were such  reports  qualified  or  modified  as to
uncertainty,  audit  scope or  accounting  principles.  The  decision to dismiss
Deloitte & Touche was approved by the Company's Board of Directors.

    During the two  preceding  fiscal years and the  subsequent  interim  period
preceding March 3, 1998, there were no  disagreements  with Deloitte & Touche on
any  matter  of  accounting   principles  or  practices,   financial   statement
disclosure,  or auditing scope or procedure which, if not resolved to Deloitte &
Touche's satisfaction,  would have caused Deloitte & Touche to make reference to
the subject matter of the disagreement in connection with its report. During the
two preceding fiscal years and the subsequent  interim period preceding March 3,
1998,  Deloitte & Touche did not advise the  Company of any matters set forth in
Item  304(a)(1)(v)  of Regulation S-K.  Deloitte & Touche  furnished the Company
with a letter addressed to the Securities and Exchange  Commission  stating that
it agreed with this  disclosure,  which was filed as an exhibit to the Company's
Current Report on Form 8-K, dated March 3, 1998.


                                       16
<PAGE>


                                    PART III


Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

     Information  concerning  the Company's  executive  officers is set forth in
Part I, Item 1, under the  caption  "Executive  Officers,"  and is  incorporated
herein by  reference.  The  information  called  for by Item 10  concerning  the
Company's directors will be included in the Company Proxy Statement for its 2000
Annual Meeting of Shareholders,  under the caption, "Election of Directors," and
is incorporated herein by reference.


Item 11.  Executive Compensation
--------------------------------

     The  information  called for by Item 11 concerning  Executive  Compensation
will be included in the Company's Proxy Statement for its 2000 Annual Meeting of
Shareholders,  under the caption,  "Executive Compensation," and is incorporated
herein by reference.


Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

     The information  called for by item 12 concerning  beneficial  ownership of
certain beneficial owners and management will be included in the Company's Proxy
Statement  for its 2000  Annual  Meeting  of  Shareholders,  under the  caption,
"Security  Ownership  of  Certain  Beneficial  Owners  and  Management,"  and is
incorporated herein by reference.


Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

     The information called for by Item 13 concerning certain  relationships and
related  transactions  will be included in the Company's Proxy Statement for its
2000 Annual Meeting of  Shareholders  under the caption,  "Certain  Transactions
with Related Parties," and is incorporated herein by reference.




                                       17
<PAGE>

                                     PART IV


Item 14.  Exhibits, Financial Statements and Reports on Form 8-K
----------------------------------------------------------------


           (a)  Financial Statements and Schedules:

           1.   Financial  Statements:  The Financial  Statements  listed in the
                Index under Item 8 are  included  in this  Annual  Report at the
                pages indicated.

           2.   Financial Statement Schedules: The financial statement schedules
                for which  provision is made in Regulation S-X have been omitted
                because the  required  information  is either  presented  in the
                Financial Statements or the Notes thereto or is not applicable.

           3.   Exhibits:  See the Exhibit  Index on pages 49 through 56 of this
                Annual Report.

           (b)  Reports on Form 8-K: The Company filed a Current  Report on Form
                8-K, on November  10,  1999,  announcing  the election of Robert
                Hurwitz  as  Chairman  of  the  Board  of   Directors   and  the
                appointment  of  Stephen A.  Cloughley  as  President  and Chief
                Executive  Officer.  On April  12,  2000,  the  Company  filed a
                Current  Report  on Form  8-K  regarding  the  execution  of the
                employment   agreement   between  the  Company  and  Stephen  A.
                Cloughley  dated  as of  October  28,  1999 and  disclosing  the
                termination  agreement between the Company and Thomas E. Gardner
                dated as of October 28, 1999.


                                       18
<PAGE>


                        Report of Independent Accountants





The Board of Directors and Shareholders
Base Ten Systems, Inc.
Trenton, New Jersey 08619


In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of operations,  of common stock and other shareholders'
equity (deficit) and of cash flows present fairly, in all material respects, the
financial  position of Base Ten Systems,  Inc. and its  subsidiaries at December
31, 1999 and  December  31, 1998 and the  results of their  operations  and cash
flows for the years  ended  December  31,  1999 and  December  31,  1998 and the
two-months  ended  December 31, 1997 in conformity  with  accounting  principles
generally  accepted in the United  States.  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 of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States,  which 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,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion expressed above. The financial
statements of Base Ten Systems,  Inc., and its  subsidiaries  for the year ended
October 31, 1997 were  audited by other  independent  accountants  whose  report
dated February 6, 1998 expressed an unqualified opinion on those statements.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note A to the
financial statements,  the Company has suffered recurring losses from operations
and has  redeemable  preferred  stock that  raise  substantial  doubt  about its
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note A. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.




PricewaterhouseCoopers LLP



Florham Park, New Jersey
April 3, 2000

                                      F-1

<PAGE>



                          Independent Auditors' Report




The Board of Directors and Shareholders
Base Ten Systems, Inc.
Trenton, New Jersey 08619


      We have audited the consolidated statements of operations, of common stock
      and other  shareholders'  equity (deficit),  and of cash flows of Base Ten
      Systems,  Inc. and  subsidiaries  as of October 31, 1997.  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 audit.

      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 results of their operations
      and their cash flows of Base Ten Systems,  Inc. and  subsidiaries  for the
      year  ended  October  31,  1997  in  conformity  with  generally  accepted
      accounting principles.





Deloitte & Touche LLP

Parsippany, New Jersey
February 6, 1998

                                      F-2

<PAGE>


<TABLE>
<CAPTION>

                     Base Ten Systems, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                    (dollars in thousands, except par value)
                                     Assets
                                                                                      December 31,     December 31,
                                                                                           1999             1998
                                                                                   ------------------ -----------------
<S>                                                                                   <C>                <C>
Current Assets:
   Cash   and cash equivalents..................................................      $      5,843       $     17,437
   Accounts receivable, net.....................................................               559              2,372
   Current portion of notes receivable..........................................               658                  -
   Other current assets.........................................................               441                639
                                                                                   ------------------ -----------------
         Total Current Assets...................................................             7,501             20,448

Property, plant and equipment, net..............................................             4,564              5,026
Note receivable.................................................................             1,317              1,975
Acquired intangible assets......................................................             5,210              2,131
Other assets....................................................................               485              4,241
                                                                                   ------------------ -----------------
         Total Assets                                                                 $     19,077       $     33,821
                                                                                   ================== =================


              Liabilities, Redeemable Convertible Preferred Stock,
                                Common Stock and
                      Other Shareholders' Equity (Deficit)

Current Liabilities:
   Accounts payable.............................................................      $        345       $        984
   Accrued expenses.............................................................             1,770              3,152
   Deferred revenue.............................................................             1,423                756
   Current portion of financing obligation......................................               136                 74
                                                                                   ------------------ -----------------
         Total Current Liabilities..............................................             3,674              4,966
                                                                                   ------------------ -----------------
Long-Term Liabilities:
   Long-term debt...............................................................                 -             10,000
   Financing obligation.........................................................             3,204              3,341
   Other long-term liabilities..................................................               214                228
                                                                                   ------------------ -----------------
         Total Long-Term Liabilities............................................             3,418             13,569
                                                                                   ------------------ -----------------
Commitments and Contingencies - (Notes A and K)

Redeemable Convertible Preferred Stock:
   Series A Preferred  Stock,  $1.00 par value,  issued and
    outstanding  14,942 shares at December 31, 1998, aggregate
    liquidation value of $14,942 at December 31, 1998...........................                 -             12,914

   Series B Preferred Stock, $1.00 par value, issued and
    outstanding 15,203 shares at December 31, 1999; aggregate
    liquidation value of $15,203 at December 31, 1999...........................            19,004                  -
                                                                                   ------------------ -----------------
                                                                                            19,004             12,914
                                                                                   ------------------ -----------------
Common Stock and Other Shareholders' Equity (Deficit):
   Class A Common Stock, $5.00 par value,  12,000,000 shares
    authorized;  issued and outstanding 5,102,096 shares at
    December 31, 1999 and 3,731,950 shares at December 31, 1998.................            25,510             18,660

   Class B Common Stock, $5.00 par value, 400,000 shares
    authorized; issued and outstanding  14,181  shares at
    December 31, 1999 and 14,282 shares at December 31, 1998....................                71                 71

   Additional paid-in capital...................................................            63,527             52,885
   Accumulated Deficit..........................................................           (95,754)           (68,767)
                                                                                   ------------------ -----------------
                                                                                            (6,646)             2,849

   Accumulated other comprehensive income (loss)................................               (92)              (196)
   Treasury Stock, 20,000 Class A Common Shares, at cost........................              (281)              (281)
                                                                                   ------------------ -----------------
         Total Common Stock and Other Shareholders' Equity (Deficit)............            (7,019)             2,372
                                                                                   ------------------ -----------------
         Total Liabilities, Redeemable Convertible Preferred Stock,
          and Common Stock and Other Shareholders' Equity (Deficit).............      $     19,077       $     33,821
                                                                                   ================== =================

</TABLE>

               See Notes to the Consolidated Financial Statements

                                      F-3
<PAGE>


<TABLE>
<CAPTION>

                     Base Ten Systems, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                  (dollars in thousands, except per share data)
                                                                     Year              Year        Two Months             Year
                                                                     ended             ended          ended              Ended
                                                                  December 31,     December 31,    December 31,       October 31,
                                                                     1999              1998            1997               197
                                                             -----------------  ---------------  --------------- ----------------

<S>                                                            <C>              <C>              <C>              <C>
 License and related revenue................................   $      1,262     $      2,727     $         --     $      1,221
 Services and related revenue...............................          3,102            4,823              181            1,291
                                                             ---------------- ----------------- --------------- -----------------
                                                                      4,364            7,550              181            2,512
                                                             ---------------- ----------------- --------------- -----------------

 Cost of revenues...........................................          6,961            9,639            1,457            6,387
 Research and development...................................          1,240            2,002               25              147
 Selling and marketing......................................          6,315            5,003              569            2,736
 General and administrative.................................          7,828            8,944            1,647            7,743
 Non-cash debt conversion charge............................          3,506               --               --               --
                                                             ---------------- ----------------- --------------- -----------------
                                                                     25,850           25,588            3,698           17,013
                                                             ---------------- ----------------- --------------- -----------------

 Loss from continuing operations before other income
  (expense) and income tax benefit..........................        (21,486)         (18,038)          (3,517)         (14,501)

 Other income (expense), net................................            160             (982)            (197)          (1,479)
                                                             ---------------- ----------------- --------------- -----------------

 Loss from continuing operations before income tax benefit..
                                                                    (21,326)         (19,020)          (3,714)         (15,980)
                                                             ---------------- ----------------- --------------- -----------------

 Income tax benefit.........................................             --               --               --               --

                                                             ---------------- ----------------- --------------- -----------------
 Net loss from continuing operations........................        (21,326)         (19,020)          (3,714)         (15,980)
                                                             ---------------- ----------------- --------------- -----------------

 Discontinued operations:
 Loss from operations of Government Technology Division.....
                                                                         --               --             (222)          (4,854)
 Gain (loss) on sale........................................          1,086               --               --           (1,173)
                                                             ---------------- ----------------- --------------- -----------------
 Gain (loss) from discontinued operations...................          1,086               --             (222)          (6,027)
                                                             ---------------- ----------------- --------------- -----------------

 Net loss...................................................   $    (20,240)    $    (19,020)    $     (3,936)    $    (22,007)
                                                             ---------------- ----------------- --------------- -----------------

 Less:   Dividends on Redeemable Convertible Preferred Stock           (262)          (1,740)              --               --
         Accretion on Redeemable Convertible Preferred Stock         (6,930)          (1,424)              --               --
         Credit on exchange of  Redeemable Convertible                  445               --               --               --
         Preferred Stock....................................
                                                             ---------------- ----------------- --------------- -----------------
 Net loss available for common shareholders.................   $    (26,987)    $    (22,184)    $     (3,936)    $    (22,007)
                                                             ================ ================= =============== =================

 Basic and diluted gain (loss) per share:
 Continuing operations......................................   $      (6.07)    $     (10.45)    $      (2.25)    $     (10.12)
 Discontinued operations....................................            .23               --            (0.13)           (3.82)
                                                             ---------------- ----------------- --------------- -----------------
 Net loss per share.........................................   $      (5.84)    $     (10.45)    $      (2.38)    $     (13.94)
                                                             ---------------- ----------------- --------------- -----------------
 Weighted average common shares outstanding - basic and
    diluted.................................................      4,624,000        2,124,000        1,652,000        1,579,000
                                                             ---------------- ----------------- --------------- -----------------

</TABLE>

               See Notes to the Consolidated Financial Statements

                                      F-4
<PAGE>

<TABLE>
<CAPTION>


                     Base Ten Systems, Inc. and Subsidiaries
 Consolidated Statements of Common Stock and Other Shareholders' Equity (Deficit)
                             (dollars in thousands)



                                                                                                       Accumulated
                                   Class A                   Class B        Additional                    Other
                                 Common Stock              Common Stock      Paid-In    Accumulated    Comprehensive
                             Shares       Amount       Shares       Amount   Capital      Deficit      Income (Loss)
-------------------------- ------------ ------------ ------------ --------- ----------  ------------ ----------------
<S>                          <C>         <C>          <C>          <C>        <C>        <C>          <C>
Balance

October 31, 1996 .........   1,471,793   $ 7,359      89,077       $    445   $25,086   $(20,640)     $ (110)
Conversions:
    Common B to
    Common A .............          53        --         (53)            --        --         --         --
Exercise of
options ..................      18,646        93          --             --       506         --         --
Exercise of
warrants .................      61,000       305          --             --     1,017         --         --
Issuance of
Common Stock:
    Interest payments ....       2,298        12          --             --        99         --         --
Compensation
related to warrants
and options issuance .....        --          --          --             --     2,750         --         --
Comprehensive
Income (Loss):
    Net loss .............        --          --          --             --        --    (22,007)        --
    Foreign currency
    translation ..........        --          --          --             --        --         --          9
    Unrealized gain on
    securities available
    for sale .............        --          --          --             --        --         --         94
Total Comprehensive
Income (Loss) ............        --          --          --             --        --         --         --
--------------------------   ---------      ------   -------       --------   -------   --------      -----
Balance
October 31, 1997 .........   1,553,790       7,769    89,024            445    29,458    (42,647)        (7)
==========================   =========      ======   =======       ========   =======   ========      =====
Exercise of options ......      10,117          51        --             --       445         --         --
Issuance of
Common Stock:
    Interest payments ....       1,837           9        --             --       102         --         --
Common Stock Warrants,
net of subscription
receivable of $ 851 ......        --            --        --             --     1,840         --         --
Compensation
related to warrants
and options issuance .....        --            --        --             --       543         --         --
Comprehensive
Income (Loss):
    Net loss .............        --            --        --             --        --     (3,936)        --
    Foreign currency
    translation ..........        --            --        --             --        --         --        (45)
    Unrealized loss on
    securities available
    for sale .............        --            --        --             --        --         --        (81)
Total Comprehensive
Income (Loss): ...........        --            --        --             --        --         --         --
--------------------------   ---------     -------   -------       --------   -------   --------      -----
Balance at
December 31, 1997 ........   1,565,744     $ 7,829    89,024       $    445   $32,388   $(46,583)   $  (133)
==========================   =========     =======   =======       ========   =======   ========      =====

<CAPTION>



                                                            Total
                                                         Shareholders'
                                Treasury Stock              Equity
                                   Shares      Amount     (Deficit)
                                ----------- ------------ ------------

<S>                             <C>       <C>            <C>
Balance

October 31, 1996 .........      --     $       --        $ 12,140
Conversions:
    Common B to
    Common A .............      --             --              --
Exercise of
options ..................      --             --             599
Exercise of
warrants .................      --             --           1,322
Issuance of
Common Stock:
    Interest payments ....      --             --             111
Compensation
related to warrants
and options issuance .....      --             --           2,750
Comprehensive
Income (Loss):
    Net loss .............      --             --         (22,007)
    Foreign currency
    translation ..........      --             --               9
    Unrealized gain on
    securities available
    for sale .............      --             --              94
Total Comprehensive
Income (Loss) ............      --             --         (21,904)
--------------------------   -------   ------------      --------
--------------------------   -------   ------------      --------
Balance
October 31, 1997 .........      --             --          (4,982)
==========================   =======   ============      ========
Exercise of options ......      --             --             496
Issuance of
Common Stock:
    Interest payments ....      --             --             111
Common Stock Warrants,
net of subscription
receivable of $ 851 ......      --             --           1,840
Compensation
related to warrants
and options issuance .....      --             --             543
Comprehensive
Income (Loss):
    Net loss .............      --             --          (3,936)
    Foreign currency
    translation ..........      --             --             (45)
    Unrealized loss on
    securities available
    for sale .............      --             --             (81)
Total Comprehensive
Income (Loss): ...........      --             --          (4,062)
--------------------------   -------   ------------       --------
--------------------------   -------   ------------       --------
Balance at
December 31, 1997 ........      --     $       --        $ (6,054)
==========================   =======   ============       ========

</TABLE>

               See Notes to the Consolidated Financial Statements
                                      F-5

<PAGE>

<TABLE>
<CAPTION>


                     Base Ten Systems, Inc. and Subsidiaries
 Consolidated Statements of Common Stock and Other Shareholders' Equity (Deficit)(continued)
                             (dollars in thousands)




                                   Class A                   Class B           Additional
                                 Common Stock              Common Stock          Paid-In    Accumulated
                             Shares       Amount       Shares       Amount       Capital      Deficit
-------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S>                          <C>          <C>          <C>          <C>          <C>          <C>
Balance
at December 31, 1997 .....   1,565,744   $ 7,829    89,024    $ 445    $ 32,388    $(46,583)   $(133)
==========================   =========   =======   =======    =====    ========    ========    =====
Conversions:
    Common B to
    Common A .............     113,596       568   (75,731)    (379)       (189)       --       --
    Preferred A to
    Common A .............     383,561     1,918      --       --         3,016        --       --
    Debenture to
    Common A .............     298,161     1,491      --       --         3,680        --       --
Exercise of options ......      30,046       150       989        5         525        --       --
    Issuance of
    Common Stock:
    Private placement ....   1,333,333     6,666      --       --        12,127        --       --
    Interest payments ....       6,152        31      --       --           157        --       --
    Employee stock
    purchase plan ........       1,357         7      --       --             8        --       --
Compensation related
to warrants and
options issuance .........        --        --        --       --           322        --       --
Dividends on Redeemable
Preferred Stock ..........        --        --        --       --          --        (1,740)    --
Accretion on Redeemable
Preferred Stock ..........        --        --        --       --          --         (1424)    --
Collection of
Subscription Receivable ..        --        --        --       --           851        --       --
Treasury stock
purchase .................        --        --        --       --          --          --       --
Comprehensive
Income (Loss):
    Net loss .............        --        --        --       --          --       (19,020)    --
    Foreign currency
    translation ..........        --        --        --       --          --          --        (55)
    Unrealized gain on
    securities available
    for sale .............        --        --        --       --          --          --         (8)
Total Comprehensive
Income (Loss) ............        --        --        --       --          --          --       --
--------------------------   ---------   -------   -------    -----    --------    --------    -----
Balance at
December 31, 1998 ........   3,731,950   $18,660    14,282    $  71    $ 52,885    $(68,767)   $(196)
==========================   =========   =======   =======    =====    ========    ========    =====
Conversions:
    Common B to
    Common A .............         153      --        (101)    --          --          --       --
    Preferred A to
    Common A .............       5,739        29      --       --           (29)       --       --
    Debenture to
    Common A .............     500,000     2,500      --       --        10,626        --       --
Issuance of
Common Stock:
    Acquisition of
    Almedica Technology
    Group, Inc. ..........     790,000     3,950      --       --          (370)       --       --
    Exercise of options ..          50      --        --       --          --          --       --
    Employee stock
    purchase plan ........      24,204       121      --       --           (38)       --       --
    Non-cash employee
    compensation .........      50,000       250      --       --          (206)       --       --
Dividends on Redeemable
Preferred Stock ..........        --        --        --       --          --          (262)    --
Accretion on Redeemable
Preferred Stock ..........        --        --        --       --          --        (6,930)    --
Credit on Exchange of
Redeemable Preferred
Stock ....................        --        --        --       --           659         445     --
Comprehensive
Income (Loss):
    Net loss .............        --        --        --       --          --       (20,240)    --
    Foreign currency
    translation ..........        --        --        --       --          --          --        127
    Unrealized loss on
    securities available
    for sale .............        --        --        --       --          --          --        (23)
Total Comprehensive
Income (Loss) ............        --        --        --       --          --          --       --
--------------------------   ---------   -------   -------    -----    --------    --------    -----
Balance at
December 31, 1999 ........   5,102,096   $25,510    14,181    $  71    $ 63,527    $(95,754)   $ (92)
==========================   =========   =======   =======    =====    ========    ========    =====


<CAPTION>


                                                           Total
                                                        Shareholders'
                                 Treasury Stock            Equity
                              Shares         Amount       (Deficit)
                             ------------- ----------- ------------
<S>                           <C>             <C>         <C>
Balance
at December 31, 1997 .....       --      $--      $ (6,054)
==========================   ========    =====    ========
Conversions:
    Common B to
    Common A .............       --       --          --
    Preferred A to
    Common A .............       --       --         4,934
    Debenture to
    Common A .............       --       --         5,171
Exercise of options ......       --       --           680
    Issuance of
    Common Stock:
    Private placement ....       --       --        18,793
    Interest payments ....       --       --           188
    Employee stock
    purchase plan ........       --       --            15
Compensation related
to warrants and
options issuance .........       --       --           322
Dividends on Redeemable
Preferred Stock ..........       --       --        (1,740)
Accretion on Redeemable
Preferred Stock ..........       --       --        (1,424)
Collection of
Subscription Receivable ..       --       --           851
Treasury stock
purchase .................   (100,000)    (281)       (281)
Comprehensive
Income (Loss):
    Net loss .............       --       --       (19,020)
    Foreign currency
    translation ..........       --       --           (55)
    Unrealized gain on
    securities available
    for sale .............       --       --            (8)
Total Comprehensive
Income (Loss) ............       --       --       (19,083)
--------------------------   --------    -----    --------
Balance at
December 31, 1998 ........   (100,000)   $(281)   $  2,372
==========================   ========    =====    ========
Conversions:
    Common B to
    Common A .............       --       --          --
    Preferred A to
    Common A .............       --       --          --
    Debenture to
    Common A .............       --       --        13,126
Issuance of
Common Stock:
    Acquisition of
    Almedica Technology
    Group, Inc. ..........       --       --         3,580
    Exercise of options ..       --       --          --
    Employee stock
    purchase plan ........       --       --            83
    Non-cash employee
    compensation .........       --       --            44
Dividends on Redeemable
Preferred Stock ..........       --       --          (262)
Accretion on Redeemable
Preferred Stock ..........       --       --        (6,930)
Credit on Exchange of
Redeemable Preferred
Stock ....................       --       --         1,104
Comprehensive
Income (Loss):
    Net loss .............       --       --       (20,240)
    Foreign currency
    translation ..........       --       --           127
    Unrealized loss on
    securities available
    for sale .............       --       --           (23)
Total Comprehensive
Income (Loss) ............       --       --       (20,136)
--------------------------   --------    -----    --------
Balance at
December 31, 1999 ........   (100,000)   $(281)   $ (7,019)
==========================   ========    =====    ========

</TABLE>

            See Notes to the Consolidated Financial Statements

                                      F-6
<PAGE>


<TABLE>
<CAPTION>

                     Base Ten Systems, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                             (dollars in thousands)

                                                                                                         Two Months      Year Ended
                                                                  Year Ended          Year Ended           Ended         October 31,
                                                              December 31, 1999   December 31, 1998   December 31, 1997       1997
------------------------------------------------------------- ------------------- ------------------- ------------------ -----------
<S>                                                              <C>                 <C>                <C>              <C>
Cash Flows from Operating Activities:
     Net loss ...............................................    $  (20,240)      $     (19,020)      $    (3,936)     $    (22,007)
Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities of Continuing Operations:
     Bad debt expense........................................           185                 449                --                --
     Depreciation and amortization...........................         4,866               3,295               360             3,703
     Stock-based compensation................................            44                 322               543             2,750
     Deferred gain on sale of building.......................           (14)                (19)               (3)              (19)
     Non-cash debt conversion charge.........................         3,506                  --                --                --
     Gain on sale of discontinued operations.................        (1,086)                 --                --                --
Changes in operating assets and liabilities,  excluding
 effects of discontinued business:
     Accounts receivable.....................................         1,828              (1,238)              225             2,008
     Other current assets....................................           257                (117)              433               305
     Other assets............................................           500                  --                --                --
     Accounts payable, accrued expenses and deferred revenue.
                                                                     (2,326)               (802)           (1,657)            3,792
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------
Net Cash Used in Operations..................................       (12,712)            (17,130)           (4,035)           (9,468)
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------
Cash Flows from Investing Activities:
     Additions to property, plant and equipment .............          (153)               (592)             (244)             (617)
     Additions to capitalized software costs.................            --                (724)             (148)           (3,360)
     Purchase of assets related to FlowStream product .......            --              (2,099)               --                --
     Acquisition of Almedica Technology Group, net of .......                                                                    --
cash acquired ...............................................           (66)                 --                --
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------
Net Cash Used in Investing Activities........................          (219)             (3,415)             (392)           (3,977)
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------
Cash Flows from Financing Activities:
     Repayment of amounts borrowed...........................           (75)                (53)              (14)              (59)
     Proceeds from issuance of long-term debt................            --                  --                --             5,500
     Proceeds from issuance of redeemable preferred stock                --               9,380             7,995                --
     Proceeds from issuance of common stock..................            83              19,592               607             2,032
     Proceeds from sale of discontinued business.............         1,086                  --             3,500                --
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------
Net Cash Provided from Financing Activities                           1,094              28,919            12,088             7,473
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------
Effect of Exchange Rate Changes on Cash......................            11                 (55)              (45)                9
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------
Net (Decrease)/Increase In Cash and Cash Equivalents.........       (11,594)              8,319             7,616            (5,963)
Cash and Cash Equivalents, beginning of year.................        17,437               9,118             1,502             7,465
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------
Cash and Cash Equivalents, end of year.......................    $    5,843       $      17,437       $     9,118      $      1,502
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------

Supplemental Disclosures of Cash Flow Information:
     Cash paid during the year for interest..................    $      641       $       1,401       $        88      $        937
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------
Supplemental Disclosures of Non-Cash Investing and Financing
Activities:
     Acquisition of BTS Clinical, Inc........................    $    3,580       $          --       $        --      $         --
     Treasury stock purchase obligation......................    $       --       $         281       $        --      $         --
------------------------------------------------------------- ---------------- ------------------- ---------------- ----------------

</TABLE>

               See Notes to the Consiidated Financial Statements
                                      F-7
<PAGE>

                  Base Ten Systems, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
     Years Ended December 31, 1999, December 31, 1998, October 31, 1997 and
                       Two Months Ended December 31, 1997

A.   Basis of Presentation and Liquidity
----------------------------------------

    The financial  statements of Base Ten Systems,  Inc. and  subsidiaries  (the
"Company" or "Base Ten") have been  prepared on the basis that it will  continue
as a going concern.  The Company has incurred  significant  operating losses and
negative cash flows in recent years.  Also, at December 31, 1999 the Company was
below the $2 million minimum net tangible assets,  as defined,  required for its
current listing on the NASDAQ  SmallCap Market System which,  unless the Company
raises sufficient  additional  capital in the immediate future,  could result in
the Company's  shares being delisted from the NASDAQ SmallCap Market System.  If
the Company's  Class A Common Stock is suspended from trading or delisted for an
aggregate of 30 trading days in any 18 month period,  or upon the  occurrence of
any other  Redemption  Event,  holders  of the  Company's  Series B  Convertible
Preferred  Stock may  require  the  Company to redeem  the Series B  Convertible
Preferred Stock for cash of 1.25 times the Mandatory Redemption Price. Such cash
redemption  would  aggregate   approximately  $19.0  million,   plus  any  other
contingent  payments  which may become due pursuant to the terms of the Series B
Convertible  Preferred  Stock.  (See  Note  L  to  the  Consolidated   Financial
Statements.)  The Company does not currently have  sufficient  cash or credit to
pay such amounts should there be a demand for payment.  To further  increase the
Company's net tangible  assets and in order to ensure the  Company's  compliance
with  NASDAQ  listing  requirements  and to  enable  the  Company  to  fund  its
operations  through  2000,  management  is seeking the  infusion  of  additional
capital financing or investment from a strategic  investor.  If such efforts are
not  successful,  there  would be a  material  adverse  effect on the  Company's
financial  position  and  operations  and its  ability  to  continue  as a going
concern.  These financial  statements do not include any adjustments  that could
result therefrom.

B.   Description of Business
----------------------------

    The Company  develops,  manufactures and markets  computer  software systems
that  assist  manufacturers  in  industries  regulated  by  the  Food  and  Drug
Administration   ("FDA").  The  Company's  software  systems  aid  customers  in
complying with FDA current Good Manufacturing Practice ("cGMP") guidelines,  and
improve their overall  productivity by automating certain manual processes.  The
Company's  software  systems  include  BASE10(R)ME  and  BASE10(R)FS,  which are
"Manufacturing Execution Systems." BASE10(R)ME uses Windows NT operating systems
and BASE10(R)FS uses HP-UX and Digital VAX/VMS operating systems.  The Company's
software  systems also include  BASE10(R)CS,  BASE10(R)ADLS  and  BASE10(R)ADMS,
which are "Clinical Supply Chain Management  Solutions."  These software systems
assist  clinical   specialists  in  managing   supplies  for  clinical   trials.
BASE10(R)CS uses Windows NT operating systems.  BASE10(R)ADLS and BASE10(R)ADMS,
formerly  known as ADLS and ADMS,  respectively,  were  acquired  from  Almedica
International, Inc. See Note D to the Consolidated Financial Statements.

    The Company  also  develops and markets  other  medical  devices,  including
uPACs(TM).  uPACs(TM) is an ultrasound picture archiving  communications systems
that  digitizes,  records and stores images on CD-ROM as an  alternative to film
and video  storage.  In 1997,  the Company  formed a limited  liability  company
("LLC") with an individual investor who is currently a principal  stockholder of
the Company.  The Company contributed  uPACs(TM)  technology to the LLC, and the
investor  contributed $3 million to the LLC to fund required further development
of the technology.  Base Ten has a 9% interest in the LLC and the investor has a
91% interest in the LLC.

    For the periods  ended  October 31, 1997 and December 31, 1997,  the Company
was also engaged,  through its Government  Technology  Division ("GTD"),  in the
design and manufacture of electronic  systems employing safety critical software
for the defense industry.  Effective  December 31, 1997, the GTD was sold by the
Company. See Note R to the Consolidated Financial Statements.

C.   Summary of Significant Accounting Policies
-----------------------------------------------

1.    Principles  of  Consolidation  -  The  consolidated  financial  statements
      include the  accounts of Base Ten and its wholly owned  subsidiaries.  All
      significant  inter-company  accounts,  transactions  and profits have been
      eliminated.

2.    Discontinued  Operations - As discussed  more  thoroughly in Note R to the
      Consolidated  Financial Statements,  the results of operations and the net
      assets of the Government Technology Division have been reported separately
      as discontinued  operations for all periods  presented in the accompanying
      financial statements.

                                      F-8
<PAGE>

3.    Change  of  Fiscal  Reporting  Period  - In  January  1998,  the  Board of
      Directors  approved a change of the Company's fiscal year end from October
      31 to December 31.

4.    Risks and  Uncertainties - The Company operates in the software  industry,
      which is highly  competitive and rapidly  changing.  The Company has had a
      history of significant losses from operations and is subject to all of the
      risks  inherent in a technology  business,  including  but not limited to:
      claims by customers  for  contractual  or other  unfulfilled  commitments,
      potential  for  significant  technological  changes  in  the  industry  or
      customer  requirements,  potential for emergence of  competitive  products
      with new  capabilities or  technologies,  ability to manage future growth,
      ability  to attract  and retain  qualified  employees,  dependence  on key
      personnel,  limited senior management  resources,  success of its research
      and development,  protection of intellectual property rights,  potentially
      long  sales and  implementation  cycles,  ongoing  satisfaction  of NASDAQ
      minimum net tangible asset requirements  required for continued listing of
      the Company's stock on the NASDAQ SmallCap Market System and potential for
      Redemption Events related to the Company's Series B Convertible  Preferred
      Stock. (See Notes A and L to the Consolidated Financial Statements).

      The  preparation  of financial  statements  in accordance  with  generally
      accepted  accounting  standards requires  management to make estimates and
      assumptions that affect the amounts  reported in the financial  statements
      and  accompanying  notes.  Significant  estimates  include  allowance  for
      doubtful  accounts  receivable,  the  total  costs  to be  incurred  under
      software  license  agreements  requiring  significant   customizations  or
      modifications,  reserves for claims by customers for  contractual or other
      unfulfilled commitments, the useful lives of capitalized computer software
      costs and deferred tax asset valuation reserves.  Actual costs and results
      could differ from these estimates.

5.    Revenue  Recognition - The Company has adopted AICPA Statement of Position
      97-2,  "Software Revenue  Recognition" ("SOP 97-2"), as amended in 1998 by
      SOP  98-4  and  further  amended  by SOP  98-9,  which  is  effective  for
      transactions  entered into after fiscal  years  beginning  after March 15,
      1999.  The SOPs provide  guidance on when revenue should be recognized and
      in  what  amounts  as  well as what  portion  of the  Company's  licensing
      transactions should be deferred.

      The Company  licenses  software  under  license  agreements  and  provides
      services  including  maintenance,  training  and  consulting.  In general,
      software  license revenues are recognized upon shipment of the software to
      the   customer   where  there  are  no   significant   customizations   or
      modifications  required or other  obligations of the Company.  Revenues on
      all  software   license   transactions  in  which  there  are  significant
      customizations  or modifications  or other  obligations of the Company are
      recognized  on  the  percentage  of  completion   basis.   Progress  under
      percentage of completion  method is measured  based on  management's  best
      estimate  of the cost of work  completed  in relation to the total cost of
      work to be performed under the contract. Maintenance contract revenues are
      deferred  and  recognized  ratably  over the  maintenance  period which is
      generally one year.  Revenues from  consulting  services are recognized as
      such services are performed and are on a time and material basis.

6.    Property,  Plant and Equipment - Property, plant and equipment are carried
      at cost and depreciated  over estimated  useful lives,  principally on the
      straight-line   method.   The   estimated   useful   lives  used  for  the
      determination of depreciation and amortization are:

      Leased asset - building                       30 years
      Leasehold improvements                   5 to 10 years
      Furniture, fixtures and equipment        3 to 10 years

      Maintenance  and repairs are charged to expense as incurred;  expenditures
      for  leasehold  improvements  are  generally  capitalized.  Upon  sale  or
      retirement of an asset, the related costs and accumulated depreciation are
      removed from the accounts and any gain or loss is recognized.

7.    Research,  Development  and Computer  Software Costs - In accordance  with
      Statement of Financial  Accounting Standards No. 86, "Accounting for Costs
      for  Computer  Software to be Sold,  Leased or Otherwise  Marketed"  ("FAS
      86"), the Company capitalizes  certain software  development costs for new
      products once it is determined that technological feasibility is achieved.
      Costs incurred prior to the determination of technological feasibility and
      costs  associated  with  maintenance of existing  products are expensed as
      incurred.  The cost of purchased software is capitalized when related to a
      product  which  has  achieved  technological  feasibility  or that  has an
      alternative  future use.  Commencing upon initial product  release,  these
      costs are amortized  based on the greater of actual to total sales, or the
      straight-line  method over the  estimated  useful life of not greater than
      four years.

                                      F-9

8.    Long-Lived  Assets  -  The  Company  accounts  for  long-lived  assets  in
      accordance  with the  provisions  of  Statement  of  Financial  Accounting
      Standards No. 121,  "Accounting  for  Impairment of Long-Lived  Assets and
      Long Lived Assets to be Disposed Of" ("FAS  121").  FAS 121 requires  that
      long-lived  assets and certain  identifiable  intangibles  be reviewed for
      impairment  whenever events or changes in circumstances  indicate that the
      carrying amount of an asset may not be recoverable.  The Company  performs
      annual reviews of the recoverability of its capitalized software costs and
      other long lived assets based on anticipated  revenues and cash flows from
      sales of these products.  The Company considers historical performance and
      future  estimated  results in its  evaluation of potential  impairment and
      then  compares the carrying  amount of the asset to the  estimated  future
      cash flows  expected to result from the use of the asset.  If the carrying
      amount of the asset exceeds estimated  expected  undiscounted  future cash
      flows,  the Company measures the amount of the impairment by comparing the
      carrying  amount of the asset to its fair value.  The  estimation  of fair
      value is generally  measured by discounting  expected future cash flows at
      the rate the  Company  utilizes  to evaluate  potential  investments.  The
      Company  estimates  fair  value  based on the best  information  available
      making  whatever  estimates,  judgments  and  projections  are  considered
      necessary.  As a result  of its  evaluation  of  long-lived  assets  as of
      December  31, 1999,  the Company  determined  that the carrying  amount of
      capitalized  development  costs of BASE10(R)ME  and  BASE10(R)CS  software
      exceeded its net  realizable  value.  Accordingly,  the Company  wrote off
      $1,225,000 of such capitalized costs at that date.

9.    Cash and Cash Equivalents - The Company  considers all investments with an
      original  maturity of three  months or less at date of  acquisition  to be
      cash equivalents.

10.   Earnings  Per  Share  - The  Company  calculates  earnings  per  share  in
      accordance  with the  provisions  of  Statement  of  Financial  Accounting
      Standard No. 128,  "Earnings Per Share" ("FAS 128").  FAS 128 requires the
      Company to present Basic  Earnings Per Share which  excludes  dilution and
      Diluted Earnings Per Share which includes potential dilution.

11.   Fair Value of Financial  Instruments - The fair value of certain financial
      instruments,  including cash, accounts  receivable,  accounts payable, and
      other accrued liabilities, approximates the amount recorded in the balance
      sheet because of the  relatively  current  maturities  of these  financial
      instruments.  The fair market value of long term debt at December 31, 1999
      and December  31, 1998  approximates  the amounts  recorded in the balance
      sheet  based on  information  available  to the  Company  with  respect to
      interest rates and terms for similar financial instruments.

12.   Foreign Currency  Translation - The accounts of the  consolidated  foreign
      subsidiaries  are translated into United States dollars in accordance with
      Statement  of Financial  Accounting  Standard  No. 52,  "Foreign  Currency
      Translation"  ("FAS 52"). All balance sheet accounts have been  translated
      using the current rate of exchange at the balance  sheet date.  Results of
      operations  have  been  translated  using  the  average  rates  prevailing
      throughout  the  year.  Translation  gains or  losses  resulting  from the
      changes in the  exchange  rates from  year-to-year  are  accumulated  in a
      separate  component  of  shareholders'  equity.  Transaction  losses  were
      $162,000 for the year ended December 31, 1999 and immaterial for the years
      ended  December 31, 1998 and October 31, 1997 and for the two months ended
      December 31, 1997.

13.   Income  Taxes -  Deferred  income  taxes are  determined  based on the tax
      effect of the differences between the financial statement and tax bases of
      assets and liabilities. Deferred tax assets and liabilities are classified
      as either current or noncurrent based generally on the  classification  of
      the related asset or liability.

14.   Investments - The Company accounts for its investments  using Statement of
      Financial Accounting Standard No. 115, "Accounting for Certain Investments
      in Debt and Equity  Securities"("FAS  115").  This standard  requires that
      certain debt and equity  securities be adjusted to market value at the end
      of each accounting  period.  Unrealized  market value gains and losses are
      charged to earnings if the securities  are traded for  short-term  profit.
      Otherwise,  such unrealized  gains and losses are charged or credited to a
      separate component of shareholders' equity.

      Management  determines  the  proper   classifications  of  investments  in
      obligations with fixed maturities and marketable  equity securities at the
      time of purchase  and  reevaluates  such  designations  as of each balance
      sheet date.  At December 31, 1999 and December  31, 1998,  all  securities
      covered by FAS 115 were  designated  as available  for sale.  Accordingly,
      these  securities  are stated at fair  value,  with  unrealized  gains and
      losses  reported  in  a  separate   component  of  shareholders'   equity.
      Securities  available  for sale at December 31,  1999,  December 31, 1998,
      consisted  of common  stock with a cost basis of $50,000 for each year and
      are included in other current assets.  Differences between cost and market
      of $30,000 and $54,000 were included as a component of "accumulated  other
      comprehensive  income (loss)" in shareholders'  equity, as of December 31,
      1999 and December 31, 1998, respectively.

                                      F-10

<PAGE>

15.   Segment Information - On January 1, 1998, the Company adopted Statement of
      Financial Accounting Standards No. 131,  "Disclosures about Segments of an
      Enterprise  and  Related  Information"  ("FAS  131").  FAS 131  supersedes
      Statement of Financial  Accounting  Standards No. 14, "Financial Reporting
      for Segments of a Business  Enterprise" ("FAS 14") replacing the "industry
      segment" approach with the "management"  approach. The management approach
      designates the internal organization that is used by management for making
      operating  decisions  and  assessing  performance  as  the  source  of the
      Company's  reportable  segments.  FAS 131 also requires  disclosures about
      products and services,  geographic areas and major customers. The adoption
      of FAS 131 did not affect results of operations or the financial  position
      but did affect the disclosure of segment information.

16.   Comprehensive  Income - On January 1, 1998, the Company adopted  Statement
      of  Financial  Accounting  Standards  No.  130,  "Reporting  Comprehensive
      Income"  ("FAS 130").  FAS 130  establishes  standards  for  reporting and
      presentation of  comprehensive  income and its components in a full set of
      financial statements.  Comprehensive income consists of net income and net
      unrealized   gains   (losses)  on  securities  and  is  presented  in  the
      consolidated  statements of shareholders'  equity.  The Statement requires
      only additional disclosures in the consolidated  financial statements;  it
      does not affect the Company's financial position or results of operations.
      Prior year financial  statements have been  reclassified to conform to the
      requirements of FAS 130.

17.   Reclassifications - Certain reclassifications have been made to prior year
      financial statements to conform to the current year presentation.

18.   Recently Issued Accounting  Standards - Statement of Financial  Accounting
      Standards No. 133,  "Accounting  for  Derivative  Instruments  and Hedging
      Activities"  ("FAS  133") will be  effective  for the Company in the first
      quarter of 2001 and  establishes  accounting  and reporting  standards for
      derivative  instruments and for hedging activities.  It requires companies
      to  recognize  all  derivatives  as either  assets or  liabilities  in the
      statement of  financial  position and measure  those  instruments  at fair
      value.  It is  expected  that  the  adoption  of FAS 133  will  not have a
      material effect on the Company's financial statements.

      In December  1999, the  Securities  and Exchange  Commission  issued Staff
      Accounting  Bulletin  ("SAB") No. 101  "Revenue  Recognition  in Financial
      Statements".  This SAB  summarizes  certain  of the SEC  staff's  views in
      applying generally accepted  accounting  principles to revenue recognition
      in  financial  statements.  As  amended  by SAB  101A,  this  SAB  must be
      implemented  no later than June 30, 2000.  The Company does not expect the
      accounting and disclosures  discussed in SAB 101 to have a material impact
      on its financial statements.

D.   Acquisitions
-----------------

From Consilium, Inc.

    On February  19,  1998,  the  Company  acquired  certain  assets and assumed
certain liabilities of Consilium, Inc. ("Consilium"),  a software developer that
specialized in manufacturing execution systems for the pharmaceutical,  chemical
and  semi-conductor  industries.  The assets purchased related to the FlowStream
product line of  Consilium,  which was sold to the  pharmaceutical  and chemical
markets.  Under the terms of the  agreement,  the Company  paid  Consilium  $1.5
million in cash and assumed certain FlowStream-related liabilities of Consilium,
which  together  with  transaction  costs  in  cash of  approximately  $600,000,
resulted in a total  purchase cost of $3.0 million.  The agreement also provided
for additional  payments based upon a percentage of the excess of targeted sales
of the FlowStream product, as defined, for the years ended December 31, 1998 and
1999,  respectively.  No additional  payments were required for either year. The
cash portion of the acquisition  was financed with the Company's  available cash
balance. The acquisition has been accounted for under the purchase method, under
which assets and liabilities  acquired are recorded by the Company at their fair
market value as of the purchase date.

    The  purchase  price was  allocated  to the assets  acquired  based on their
estimated fair values.  Equipment and furniture were purchased at estimated fair
value and are being  depreciated  over  estimated  lives of three to ten  years.
Management  estimated the value of certain amortizable assets to be $2.5 million
as of the purchase date. These assets are included in acquired intangible assets
and are being  amortized on a straight line basis over their  estimated lives of
three to seven years.

    Unaudited Pro-forma Results

    The  following  unaudited  pro-forma  information  presents  the  results of
operations of the Company as if the  acquisition of the FlowStream  product line
had taken  place on November 1, 1996  (dollars  in  thousands,  except per share
data):

                                      F-11
<PAGE>

<TABLE>
<CAPTION>

                   -----------------------------------------------------------------------------------------------------------------
                                                                 Year Ended      Two Months Ended         Year Ended
                                                                 December 31,        December 31,         October 31,
                                                                   1998                 1997                1997
                   -----------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                  <C>                 <C>
Revenue                                                         $     8,259          $     1,044         $     7,839
Net loss                                                            (19,869)              (4,969)            (28,207)
-------------------------------------------------------------------------------------------------------------------------
Net loss per common share - basic and diluted                   $    (10.85)         $     (3.00)        $    (17.85)
Weighted average common shares - basic and diluted (after
adjustment for September, 1999 reverse stock split)
                                                                2,124,000            1,652,000           1,579,000
-------------------------------------------------------------------------------------------------------------------------

</TABLE>

    These  pro-forma  results of operations  have been prepared for  comparative
purposes  only and do not purport to be  indicative of the results of operations
which  actually  would have  resulted had the  acquisition  occurred on the date
indicated, or which may result in the future.

From Almedica International, Inc.

    On June 11,  1999,  the Company  acquired  all of the  outstanding  stock of
Almedica   Technology   Group  Inc.,  a  wholly-owned   subsidiary  of  Almedica
International,  Inc.  Simultaneous  with the  closing  of the  transaction,  the
subsidiary,  which develops and distributes  clinical  studies  software for the
pharmaceutical  industry,  was  renamed  BTS  Clinical,  Inc.  The  stock of the
subsidiary was acquired in exchange for 3,950,000 shares of Class A Common Stock
(790,000 after adjustment for the September,  1999 reverse stock split).  At the
time of the purchase, Class A Stock traded for $.90625 per share ($4.53125 after
adjustment for the September, 1999 reverse stock split).

    This acquisition was accounted for by the purchase method of accounting. The
purchase  price was allocated to the assets  acquired  based on their  estimated
fair values.  Management  estimated the value of certain intangible assets to be
$4.1 million as of the purchase date.  These assets are included in other assets
and are being  amortized on a straight line basis over their  estimated lives of
three to seven years.

Acquired Intangible Assets

    Accumulated amortization related to the acquired intangibles at December 31,
1999 and 1998 was  $1,606,000 and $351,000,  respectively.  Included in acquired
intangible assets is a Covenant Not to Compete with the Company (the "covenant")
signed by an executive  who joined Base Ten as part of the 1999  acquisition  of
BTS Clinical,  Inc. The covenant covers the period of the executive's employment
with Base Ten plus two years thereafter. The covenant was valued at $1.9 million
at the time of the acquisition and was being written off over four years,  which
management  estimated  was the useful life of the  agreement.  During 1999,  the
company amortized $257,000 of the value of the covenant.  Subsequent to December
31, 1999, the executive left the employment of the Company and the covenant will
continue to be amortized over its remaining contractual life.

E.   Accounts Receivable
------------------------

    Accounts  receivable  are  comprised  of  billed  receivables  arising  from
recognized  and deferred  revenues and unbilled  receivables,  which result from
consulting  services.  All of the unbilled receivables are expected to be billed
during the  following  year.  The Company  does not require  collateral  for its
receivables.  Reserves are maintained for potential credit losses. The principle
components of accounts receivables are as follows (dollars in thousands):

                                      F-12

<PAGE>

<TABLE>
<CAPTION>

---------------------------------------------------------- ------------------- --------------------
                                                              December 31,        December 31,
                                                                  1999                1998
---------------------------------------------------------- ------------------- --------------------
<S>                                                        <C>                 <C>
Billed receivables                                         $         612       $       2,456
Unbilled receivables                                                  13                 236
---------------------------------------------------------- ------------------- --------------------
                                                                     625               2,692
Less:  Allowance for doubtful accounts                                66                 320
---------------------------------------------------------- ------------------- --------------------
                                                           $         559       $       2,372
---------------------------------------------------------- ------------------- --------------------

</TABLE>

    Bad debt  expense  amounted to $185,000  during the year ended  December 31,
1999,  $449,000  during the year ended December 31, 1998 and $140,000 during the
year ended October  31,1997.  There was no bad debt expense  recorded during the
two-month period ended December 31, 1997.

F.   Property, Plant and Equipment
----------------------------------

    Property,  plant and  equipment at December  31, 1999 and 1998  includes the
following amounts (dollars in thousands):

<TABLE>
<CAPTION>

----------------------------------------------------- ------------------- --------------------
                                                         December 31,        December 31,
                                                             1999                1998
----------------------------------------------------- ------------------- --------------------
<S>                                                   <C>                 <C>
Leasehold improvements                                $         370       $         343
Furniture, fixtures and equipment                             5,774               5,160
Land and building                                             3,600               3,600
----------------------------------------------------- ------------------- --------------------
                                                              9,744               9,103
Less:  Accumulated depreciation                               5,180               4,077
----------------------------------------------------- ------------------- --------------------
                                                      $       4,564       $       5,026
----------------------------------------------------- ------------------- --------------------

</TABLE>

    Depreciation expense amounted to $749,000, $412,000, $203,000, $530,000, and
$462,000, in fiscal 1999 and 1998, the two month period ended December 31, 1997,
and fiscal 1997, respectively.

G.   Other Assets
-----------------

    Other  assets at December 31, 1999 and 1998  include the  following  amounts
(dollars in thousands):

<TABLE>
<CAPTION>

------------------------------------------------------------- -------------------------- -------------------------
                                                                    December 31,               December 31,
                                                                        1999                       1998
------------------------------------------------------------- -------------------------- -------------------------
<S>                                                               <C>                         <C>
Capitalized software costs, net                                   $         103               $        2,943
Patents, net                                                                332                          355
Debenture issue costs, net                                                   --                          393
Deposits                                                                     50                          550
------------------------------------------------------------- -------------------------- -------------------------

                                                                  $         485               $        4,241
------------------------------------------------------------- -------------------------- -------------------------

</TABLE>

    Accumulated  amortization  related to the patents at  December  31, 1999 and
1998 was $61,000 and $37,000, respectively.

    Accumulated  amortization  related to the debenture  issue costs at December
31, 1999 and 1998 was $0 and $207,000, respectively.


    Accumulated  amortization  related  to the  capitalized  software  costs  at
December  31,  1999  and  1998  was  $9,814,000  and  $7,050,000,  respectively.
Amortization   of  capitalized   software   development   costs  of  $2,763,000,
$2,274,000,  $415,000  and  $2,951,000  are included in cost of revenues for the
years ended  December 31, 1999 and 1998, the two month period ended December 31,
1997 and the year ended October 31, 1997, respectively.

                                      F-13

<PAGE>



H.  Income Taxes
----------------


The  provision  (benefit) for income taxes  includes the  following  (dollars in
thousands):

<TABLE>
<CAPTION>

--------------------------------- --------------------- -------------------- --------------------- --------------------
                                                                               Two Months Ended
                                  Year Ended December       Year Ended        December 31, 1997    Year Ended October
                                        31, 1999         December 31, 1998                              31, 1997
--------------------------------- --------------------- -------------------- --------------------- --------------------
<S>                                   <C>                   <C>                  <C>                   <C>
Current:
                Federal               $           --        $           --       $           --        $           --
                State                             --                    --                   --                    --
                Foreign                           --                    --                   --                    --
--------------------------------- --------------------- -------------------- --------------------- --------------------
Total Current                         $           --        $           --       $           --        $           --
--------------------------------- --------------------- -------------------- --------------------- --------------------
Deferred:
                Federal               $        5,879        $        5,192       $        1,179        $        6,373
                State                          1,729                 1,507                  342                   972
                Foreign                          488                    --                   --                    --
--------------------------------- --------------------- -------------------- --------------------- --------------------
Total Deferred                                 8,096                 6,699                1,521                 7,345
--------------------------------- --------------------- -------------------- --------------------- --------------------
Valuation Allowance                           (8,096)               (6,699)              (1,521)               (7,345)
--------------------------------- --------------------- -------------------- --------------------- --------------------
Net                                   $           --        $           --       $           --        $           --
--------------------------------- --------------------- -------------------- --------------------- --------------------

</TABLE>


     A reconciliation of the Company's effective rate to the U.S. statutory rate
is as follows:

<TABLE>
<CAPTION>

----------------------------------------------------------------- -----------------------------------------------------------------
                                                                                   Percentage of Pre-Tax Earnings
                                                                  -----------------------------------------------------------------
                                                                                                     Two Months
                                                                    Year Ended       Year Ended    Ended December     Year Ended
                                                                   December 31,     December 31,      31, 1997       October 31,
                                                                       1999             1998                             1997
----------------------------------------------------------------- ---------------- --------------- ---------------- ---------------
----------------------------------------------------------------- ---------------- --------------- ---------------- ---------------
<S>                                                                    <C>              <C>             <C>              <C>
Federal tax (benefit)/provisions at applicable statutory rates         (34.0%)          (34.0%)         (34.0%)          (35.0%)
Increases (decreases) in income taxes  resulting from:
    State tax benefit, net of Federal tax effect                        (6.0)            (6.0)           (6.0)           --
    Valuation allowances                                                40.0             40.0            40.0             35.0
----------------------------------------------------------------- ---------------- --------------- ---------------- ---------------
                                                                         --               --                --               --
----------------------------------------------------------------- ---------------- --------------- ---------------- ---------------

</TABLE>

                                      F-14

<PAGE>


    The  components  of the deferred tax assets and  liabilities  are as follows
(dollars in thousands):


<TABLE>
<CAPTION>

--------------------------------------------------- ------------------- -------------------- -------------------- ------------------
                                                                                              Two Months Ended
                                                        Year Ended          Year Ended        December 31, 1997       Year Ended
                                                    December 31, 1999    December 31, 1998                         October 31,1997
--------------------------------------------------- ------------------- -------------------- -------------------- ------------------
<S>                                                    <C>                <C>                   <C>                  <C>
Current
    Vacation                                           $           51      $          154       $          221       $          136
    Other                                                         247                 605                   56                   16
--------------------------------------------------- ------------------- -------------------- -------------------- ------------------
Total current assets                                              298                 759                  277                  152
--------------------------------------------------- ------------------- -------------------- -------------------- ------------------

Noncurrent
    Deferred gain on sale leaseback                    $           86      $           91       $           91       $           90
    Compensation                                                1,255               1,255                1,100                1,100
    Depreciation and amortization                                (450)               (107)                  78                   86
    Net operating loss carryforward                            26,115              17,210               10,963                9,560
    Research and development
                     carryforward                                 519                 519                  519                  519
--------------------------------------------------- ------------------- -------------------- -------------------- ------------------
Total non-current assets                                       27,525              18,968               12,751               11,355
--------------------------------------------------- ------------------- -------------------- -------------------- ------------------
    Valuation allowance                                       (27,823)            (19,727)             (13,028)             (11,507)
--------------------------------------------------- ------------------- -------------------- -------------------- ------------------
Net deferred tax assets                                $           --      $           --       $           --       $           --
--------------------------------------------------- ------------------- -------------------- -------------------- ------------------

</TABLE>

    At December 31, 1999,  the Company had incurred net  operating  loss ("NOL")
carryforwards  for federal income tax purposes of  approximately  $65.3 million,
which  expire  in  the  years  2004  through  2019.   Research  and  development
carryforwards  of $0.5 million expire in the years 2000 through 2006. As certain
changes in the  Company's  ownership  occur there is a limitation  on the annual
amount of such NOL carryforwards and credits which can be utilized. Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("FAS 109")
requires that a valuation  allowance be created and offset  against the deferred
tax assets if, based on existing facts and circumstances, it is more likely than
not that some portion or all of the deferred tax asset will not be realized. The
valuation  allowance  will be adjusted when the credits are realized or when, in
the  opinion of  management,  sufficient  additional  positive  evidence  exists
regarding the likelihood of their realization.  The reductions,  if any, will be
reflected as a component of income tax expense.

    The components of loss before income taxes were as follows:

<TABLE>
<CAPTION>

------------------------------------- ---------------------- ---------------------- --------------------- ----------------------
                                       Year Ended December    Year Ended December     Two Months Ended         Year Ended
                                            31, 1999               31, 1998          December 31, 1997      October 31, 1997
------------------------------------- ---------------------- ---------------------- --------------------- ----------------------
------------------------------------- ---------------------- ---------------------- --------------------- ----------------------
<S>                                      <C>                    <C>                    <C>                   <C>
Domestic                                 $      (19,020)        $      (16,679)        $       (3,803)       $      (20,632)
Foreign                                          (1,220)                (2,341)                  (133)               (1,375)
------------------------------------- ---------------------- ---------------------- --------------------- ----------------------
                                         $      (20,240)        $      (19,020)        $       (3,936)       $      (22,007)
------------------------------------- ---------------------- ---------------------- --------------------- ----------------------

</TABLE>

I.   Accrued Expenses
---------------------

    Accrued  expenses  at  December  31, 1999 and 1998  includes  the  following
amounts (dollars in thousands):

<TABLE>
<CAPTION>

 -------------------------------------------------------------- ---------------------- -----------------------
                                                                    December 31,            December 31,
                                                                        1999                    1998
 -------------------------------------------------------------- ---------------------- -----------------------
 <S>                                                               <C>                    <C>
 Wages & benefits                                                  $          803         $        1,297
 Accrued contract costs and warranty                                          577                    394
 Accrued Interest                                                              --                    301
 Other                                                                        390                  1,160
 -------------------------------------------------------------- ---------------------- -----------------------
                                                                   $        1,770         $        3,152
 -------------------------------------------------------------- ---------------------- -----------------------

</TABLE>

                                      F-15

J.   Segment Information
------------------------

    The Company is organized  and operates as a single  segment.  The  following
tabulation  details the Company's  operations in different  geographic areas for
the years ended December 31, 1999 and 1998, the two-month  period ended December
31, 1997 and the year ended October 31, 1997 (dollars in thousands):

<TABLE>
<CAPTION>

---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
                                                   United States             Europe             Eliminations           Consolidated
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
<S>                                               <C>                    <C>                   <C>                    <C>
Year Ended December 31, 1999:
Revenues from unaffiliated sources                $        1,743         $        2,385        $           --         $        4,128
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
Identifiable assets at December 31, 1999          $       25,124         $        1,857        $       (7,904)        $       19,077
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
Year Ended December 31, 1998:
Revenues from unaffiliated sources                $        4,019         $        3,531        $           --         $        7,550
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
Identifiable assets at December 31, 1998          $       39,350         $        1,353        $       (6,882)        $       33,821
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
Two-Months Ended December 31, 1997:
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
Revenues from unaffiliated sources                $           82         $           99        $           --         $          181
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
Identifiable assets at December 31, 1997          $       27,567         $        1,137        $       (4,291)        $       24,413
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
Year Ended October 31, 1997:
Revenues from unaffiliated sources                $        2,510         $            2        $           --         $        2,512
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------
Identifiable assets at October 31, 1997           $       24,979         $        1,205        $       (4,967)        $       21,217
---------------------------------------------- ---------------------- --------------------- ---------------------- -----------------

</TABLE>


    At December 31,  1999,  four  customers  represented  $295,000  (53%) of the
accounts receivable balance.

    In fiscal year 1999, one customer accounted for sales of $593,000. In fiscal
year 1998,  one customer  accounted for sales  amounting to $1,655,000  and four
customers accounted for sales of $136,000 in the two-month period ended December
31,  1997.  In  fiscal  year  1997,  three  customers  accounted  for  sales  of
$1,221,000.

K.   Commitments and Contingencies
----------------------------------


Legal Proceedings

    The Company is involved from time to time in various claims and  proceedings
including  customer and employee  claims in the normal  course of business.  The
Company has certain  agreements  with some of its customers which contain damage
or penalty clauses for non-delivery or delays beyond certain dates.  Such damage
clauses  vary by customer  and may provide for a fixed amount of damages per day
or per week, and may or may not contain  limitations on the aggregate  amount of
such damage  payments.  At December  31,  1999,  the Company has missed  certain
delivery  dates which  provide,  in one case,  for the  possible  imposition  of
payments  by  the  Company  of  $10,000  per  week.  Management  has  maintained
discussions with its customers in an effort to satisfy  customers'  requirements
while   minimizing   exposure  to  damage  claims.   The  Company  has  reserved
approximately  $500,000 for such matters at December 31, 1999.  While management
believes  this amount is sufficient  to cover all damage  claims,  if any, it is
possible that customer claims may exceed this amount and such additional amounts
could  be  material  to  the  Company's  financial  position  and  statement  of
operations when such amounts are finally determined.


Employment Agreements

    At December 31, 1999, the Company had employment  severance  agreements with
seven employees.  Subsequent to December 31, 1999, one of the employees  covered
by the severance  agreements  entered into an employment  termination  agreement
under which the Company paid severance in the amount of $200,000.  The remaining
severance  agreements  provide for up to six months of severance payments in the
aggregate of $163,000 plus normal  benefits and any amounts due under  incentive
compensation  plans in the event the employee is terminated  without  cause.  In
addition,  subsequent to year end, the Company  entered into similar  agreements
with four additional employees with aggregate benefits amounting to $61,000.

    At  December  31,  1999,  the  Company had  agreements  with two  executives
providing severance payments if the executive's  employment is terminated within
three  years  after a change in control of the  Company  (i) by the  Company for
reasons other than death, disability, or cause or (ii) by the executive for good
reason.  The  amount  of the  severance  payment  is 2.99  times  total  average
compensation  and cost of employee  benefits for each of the five years prior to
the change in control, subject to the amount deductible by the Company under the
Internal  Revenue  Code.  One of the  executives  covered  under these change of
control  agreements  terminated  employment  after December 31, 1999 without the
Company  incurring  any  liability  in  accordance  with the  change of  control
agreement.

                                      F-16

<PAGE>

Financing Obligation and Leases


    The Company  entered into a sale and  leaseback  arrangement  on October 28,
1994.  The  buyer/lessor  of the building was a partnership  in which two of the
partners  are  former   officers  and  directors  of  the  Company.   Under  the
arrangement,  the Company  sold its main  building  in  Trenton,  New Jersey and
agreed to lease it back for a period of 15 years  under  terms that  qualify the
arrangement.  The Company also has an option to purchase the building at the end
of the lease  and,  accordingly,  has  accounted  for this sale  leaseback  as a
financing  transaction.  Interest is  calculated  under the  effective  interest
method and depreciation is taken using the straight-line  method. In addition, a
non-interest  bearing security deposit of $550,000 was paid at closing which was
included in other  non-current  assets on the balance  sheet.  During 1999,  the
Trenton facility was sold by the partnership to an unrelated third party.  Under
the terms of the lease, the $550,000 deposit was returned to the Company.


    In 1997, the Company sub-leased a portion of the building in connection with
the sale of the Government  Technology Division.  Rental payments to be received
in conjunction with the sublease will total  approximately  $240,000 in 2000 and
$264,000 per year in 2001 and 2002.  The  Company's  future  minimum gross lease
payments  related to the  sale-leaseback  arrangement  in effect at December 31,
1999 are as follows (dollars in thousands):

<TABLE>
<CAPTION>

------------------------------------------------------- ---------------------
Year Ending December 31,
------------------------------------------------------- ---------------------
<S>                                                       <C>
2000                                                      $         615
2001                                                                615
2002                                                                615
2003                                                                615
2004                                                                628
2005 and thereafter                                               3,335
------------------------------------------------------- ---------------------
                                                                  6,423
Less interest portion                                            (3,083)
------------------------------------------------------- ---------------------
Present value of net minimum payments                     $       3,340
------------------------------------------------------- ---------------------

</TABLE>

    At December  31, 1999 and 1998,  the gross  amount of the  building  and the
related accumulated depreciation recorded under the financing obligation were as
follows (dollars in thousands):

<TABLE>
<CAPTION>

 ------------------------------------------ ---------------------- ----------------------
                                                December 31,           December 31,
                                                    1999                   1998
 ------------------------------------------ ---------------------- ----------------------
 <S>                                            <C>                    <C>
 Land and building                              $      3,600           $      3,600
 Less:    Accumulated depreciation                       620                    500
 ------------------------------------------ ---------------------- ----------------------
                                                $      2,980           $      3,100
 ------------------------------------------ ---------------------- ----------------------

</TABLE>
                                      F-17
<PAGE>


    The Company also has several noncancelable operating leases that expire over
the next eight  years.  These  leases  generally  require the Company to pay all
executory costs such as maintenance and insurance.  Rental expense for operating
leases  during  fiscal  years  1999,  1998,  1997 were  $574,000,  $423,000  and
$307,000,  respectively.  Rental expense for operating  leases for the two-month
period ended December 31, 1997 was $51,000.  Future minimum lease payments under
noncancelable  operating  leases  as  of  December  31,  1999  are  (dollars  in
thousands):

<TABLE>
<CAPTION>

------------------------------------------ --------------------
Year Ending December 31,
------------------------------------------ --------------------
<S>                                           <C>
2000                                          $          591
2001                                                     292
2002                                                     224
2003                                                     128
2004                                                      97
2005 and thereafter                                      336
------------------------------------------ --------------------
Total minimum lease payments                  $        1,668
------------------------------------------ --------------------

</TABLE>

    During 1999, the Company was released of its obligations totaling $1,234,000
under an operating lease expiring in 2009 for office space in Newbury, England.

L.   Redeemable Convertible Preferred Stock and Convertible Debt
----------------------------------------------------------------

$ 5.5 million Convertible Debenture

    On May 30, 1997,  the Company sold 55 Units  ("Units") at $100,000 per Unit,
for an aggregate of $5,500,000, to two accredited purchasers ("Purchasers") in a
private  offering (the  "Offering").  Each Unit consisted of (i) an 8% five-year
convertible  debenture  ("Convertible  Debenture")  in the  principal  amount of
$100,000  convertible into shares of the Company's Class A Common Stock and (ii)
a warrant  ("Warrant")  to acquire  1,800 shares (360 after  adjustment  for the
reverse  stock split) of Class A Common  Stock.  The number of shares of Class A
Common Stock that was issuable upon conversion of the Convertible Debentures was
variable.  The number of shares were to be  calculated at the time of conversion
and were to be the lesser of (i) the  product  obtained by  multiplying  (x) the
lesser of the average of the closing bid prices for the Class A Common Stock for
the (A) five or (B) thirty  consecutive  trading  days ending on the trading day
immediately  preceding the date of determination by (y) a conversion  percentage
equal to 95% with  respect to any  conversions  occurring  prior to February 24,
1998 and 92% with respect to any conversions  occurring on or after February 24,
1998 and (ii) $13.50 ($67.50 after  adjustment for the reverse stock split) with
respect to any  conversions  occurring  prior to May 30, 1998 or $14.00  ($70.00
after  adjustment  for the reverse stock split) with respect to any  conversions
occurring on or after May 30, 1998.  These prices were  subsequently  revised to
$13.05 ($65.25 after  adjustment for the reverse stock split) and $13.53 ($67.65
after  adjustment for the reverse stock split) pursuant to an agreement  between
the holders and the Company in  consideration  of the  holders'  willingness  to
grant the Company a waiver to sell the GTD. The Convertible  Debentures were not
convertible  prior to December 16, 1997.  From December 16, 1997 until  February
23, 1998 one-half of the  Convertible  Debentures  could have been converted and
after February 23, 1998, the Convertible Debentures were fully convertible.  The
Warrants may be exercised at any time through May 30, 2002 at an exercise  price
of $12.25 ($61.25 after  adjustment for the reverse stock split) per share.  The
Company received net proceeds of  approximately  $4,950,000 from the sale of the
Units after deduction of fees and expenses related to the Offering. During 1998,
the $5.5 million  Convertible  Debentures  were fully  converted  into 1,490,805
(298,161 after  adjustment for the reverse stock split) shares of Class A Common
Stock.


$ 10 Million Convertible Subordinate Debenture

    In August 1996 the Company sold $10.0 million 9.01% Convertible  Subordinate
Debentures  due August 31,  2003 in a private  offering.  Under the terms of the
debentures  the holder could convert the debentures  into the Company's  Class A
Common Stock at $12.50 per share ($62.50 after  adjustment for the reverse stock
split),  125% of the closing price on August 9, 1996.  The Company had the right
to call the debentures  after February 28, 1998 if the Company's  Class A Common
Stock  price  traded  between  $15.00-$17.50  per share  ($75.00 - $87.50  after
adjustment for the reverse stock split).

    On November 10, 1998, the shareholders  approved a proposal to authorize the
Company to decrease the conversion  price from $12.50  ($62.50 after  adjustment
for the reverse stock split) to $4.00 ($20.00 after  adjustment  for the reverse
stock split) per share of Class A Common Stock upon conversion of the debenture.
On March 5, 1999, the debentures were converted at the reduced  conversion price
of $4.00 per share ($20.00 after adjustment for the September 1999 reverse stock
split). The market value of the additional  conversion shares issued as a result
of the reduced conversion price was approximately $3,506,000.

Redeemable Convertible Preferred Stock

    On  December  4,  1997,  the  Company  entered  into a  securities  purchase
agreement  to sell 19,000 of Series A  Convertible  Preferred  Stock,  $1.00 par
value, ("Series A Preferred Stock") and common stock warrants for gross proceeds
of  $19,000,000.  The  closing  of the  Series A  Preferred  Stock and  warrants
occurred in two tranches.  On December 9, 1997,  the Company issued 9,375 shares
of Series A Preferred Stock and 375,000  warrants  (75,000 after  adjustment for
the reverse stock split). An additional 346,000 (69,200 after adjustment for the
reverse stock split) warrants were issued to consultants valued at approximately
$1,011,000.  The  transaction  resulted in net  proceeds of  $6,984,000,  net of
offering  costs of  $1,380,000.  The Company  allocated  the net proceeds of the
first  tranche of Series A  Preferred  Stock and the  warrants  based upon their
relative fair values resulting in $6,155,000  assigned to the Series A Preferred
Stock and $829,000 to the warrants. On December 31, 1997, 9,625 shares of Series
A Preferred Stock and 385,000  warrants (77,000 after adjustment for the reverse
stock split) were issued to the holders of the Series A Preferred  Stock, net of
cash  offering  costs of  approximately  $245,000,  resulting in net proceeds of
$9,380,000.  The Company  allocated  the net  proceeds of the second  tranche of
Series A Preferred  Stock and the warrants based upon their relative fair values
resulting in $8,529,000 assigned to the Series A Preferred Stock and $851,000 to
the warrants.  Such proceeds were received on January 2, 1998, and were recorded
as subscriptions receivable at December 31, 1997.

    During 1998,  5,798 shares of Series A Preferred  Stock were  converted into
1,917,806  shares of Class A Common  Stock  (383,561  after  adjustment  for the
September 1999 reverse stock split) and 1,740 shares of Series A Preferred Stock
were issued as dividends  resulting in 14,942 shares of Series A Preferred Stock
outstanding at December 31, 1998.

    On March 5, 1999, the outstanding Series A Preferred Stock and warrants were
exchanged for Series B Convertible  Preferred Stock,  $1.00 par value ("Series B
Preferred  Stock").  As a  result,  approximately  15,203  shares  of  Series  B
Preferred  Stock,  with a principal  amount of  approximately  $15,203,000  were
exchanged for the outstanding  shares of Series A Preferred  Stock. In addition,
632,000 new warrants (126,400 after adjustment for the reverse stock split) were
issued to Series B Preferred  Stockholders,  and 720,000 warrants (144,000 after
adjustment for the reverse stock split) were issued to replace certain  original
warrants issued in December 1997. The Series B Preferred Stock and warrants were
recorded at December 31, 1999 at their estimated fair value of $19,004,000.  The
difference  between  this  estimated  fair value and the  carrying  value of the
Series A Preferred  Stock has been recorded as a debit to net loss  available to
common shareholders and accumulated deficit.

    The terms of the  Series B  Preferred  Stock  are  similar  to the  Series A
Preferred Stock, except that: (a) the Series B Preferred Stock have a conversion
price of that number of shares  determined by dividing the Mandatory  Redemption
Price, as defined in the terms of the Series B Preferred Stock, by $4.00 ($20.00
after  adjustment  for the  September  1999 reverse  stock  split),  whereas the
conversion  price of the  Series A  Preferred  Stock was equal to the  Mandatory
Redemption Price divided by the lesser of (i) $16.25 or (ii) the Weighted Volume
Average  Price (as defined) of the Class A Common Stock prior to the  conversion
date limited to  3,040,000  shares  (608,000  shares  after  adjustment  for the
September 1999 reverse stock split);  (b) the Series B Preferred  Stock does not
provide the holder with the option to receive a subordinated  8% promissory note
because of the  elimination of the 3,040,000  share  limitation  (608,000 shares
after adjustment for the September 1999 reverse stock split); and (c) the Series
B Preferred  Stock does not provide for a dividend  payment  based on the market
price of the  Class A Common  Stock.  As a result  of the  exchange  of Series A
Preferred Stock for Series B Preferred  Stock,  preferred stock dividends are no
longer required to be paid by the Company.

    The Series B Preferred Stock is convertible at any time or from time to time
into  Class A  Common  Stock  at a  conversion  price  of  $4.00  ($20.00  after
adjustment for the September 1999 reverse stock split).

    The Series B Preferred  Stock  matures on December 15, 2000. On the maturity
date, the Company must redeem the  outstanding  preferred stock at its Mandatory
Redemption  Price,  which is the sum of the purchase  price,  accrued but unpaid
dividends and other contingent payments as provided pursuant to the terms of the
Series  B  Preferred  Stock.  The  portion  of the  Mandatory  Redemption  Price
constituting  such other  contingent  payments  is payable in cash  whereas  the
purchase  price and accrued but unpaid  dividends  are payable in cash or common
stock at the  option  of the  Company.  If the  Company  elects  to  settle  the
redemption in Class A Common Stock the Mandatory  Redemption Price is 1.25 times
the purchase price. The Company was accreting the carrying value of the Series B
Preferred Stock to the purchase price and  recognizing the accretion  charges to
retained  earnings  (accumulated  deficit)  over the  period  from  issuance  to
maturity. Since the Company was below the $2 million minimum net tangible assets
required  for its  current  listing  on the  NASDAQ  SmallCap  Market  System at
December 31, 1999 and remains below this  requirement for ongoing listing of its
stock, the Company has recorded the Series B Convertible  Preferred Stock at its
Redemption Price of $19.0 million and has recorded  corresponding charges to net
loss available for common  shareholders  and accumulated  deficit as of December
31,  1999.  As  such,  the  total  accretion  in 1999  aggregated  approximately
$6,930,000.

                                      F-19
<PAGE>

    Holders  of the  Series B  Preferred  Stock  have the right to  require  the
Company to purchase  their shares for cash upon the  occurrence  of a Redemption
Event.  Redemption  Events include:  (a) suspension of trading or delisting from
the NASDAQ  NMS or NASDAQ  SmallCap  Markets of the Class A Common  Stock for an
aggregate of 30 trading days in any 18 month period;  (b) failure by the Company
to cause the holders to be able to utilize the registration  statement filed for
the  resale of the  shares of the Class A Common  Stock  shares  into  which the
Series B  Preferred  Stock is  convertible;  (c) failure to issue Class A Common
Stock upon  exercise of  conversion  rights by a preferred  shareholder;  or (d)
failure to pay any  amounts due to  preferred  shareholders.  The cash  purchase
price upon occurrence of a Redemption Event (which would approximate $19 million
at December 31, 1999 plus any other contingent payments which may become due) is
the  greater  of (a) 1.25  times  the  Mandatory  Redemption  Price,  or (b) the
Mandatory  Redemption  Price divided by the product of the effective  conversion
price and the market value of the common shares.

    The Series B Preferred  Stock is mandatorily  redeemable upon the occurrence
of a  Redemption  Event at the  election  of the  holder  and,  accordingly,  is
classified as Redeemable Convertible Preferred Stock, rather than as a component
of Shareholders' Equity (Deficit).

    Series B Preferred  Stockholders  have the same voting rights as the holders
of Class A Common  Stock,  calculated as if all  outstanding  shares of Series B
Preferred  Stock had been  converted  into shares of Class A Common Stock on the
record date for  determination  of  shareholders  entitled to vote on the matter
presented, subject to limitations applicable to certain holders.

    For each $1  million of the  Series A  Preferred  Stock held by the Series B
Preferred  Stockholders  on  September  1, 1998 and  thereafter  converted  at a
conversion price of $4.00 or more, the Series B Preferred  Stockholders received
four-year  warrants to purchase  80,000 shares (16,000 after  adjustment for the
reverse stock split) of Class A Common Stock  exercisable at $3.00 ($15.00 after
adjustment  for the reverse stock split) per share.  The issuance of one-half of
the warrants was effected by modifying  certain  provisions of existing warrants
held by the Series B Preferred Stockholders.  The Company may force the exercise
of the warrants if, among other things, the Class A Common Stock trades at $4.00
($20.00 after adjustment for the reverse stock split) or more for 20 consecutive
trading days and the  aggregate of cash (and cash  equivalents)  as shown on the
Company's  most recent balance sheet is $5,000,000 or more. If there is a forced
exercise,  the exercise  price of certain  other  existing  warrants held by the
Series B  Preferred  Stockholders  would be modified to the lesser of (i) market
value and (ii) the exercise price then in effect.

M.   Other Arrangements
-----------------------

     In May 1997 the  Company  entered  into an  agreement  whereby  it became a
minority owner of uPACS(TM) LLC, a limited liability company (the "LLC").  Under
the terms of the agreement the Company made a capital contribution to the LLC of
its  rights  to  its  uPACS(TM)  technology  which  is a  system  for  archiving
ultrasound  images  with  networking,  communication  and  off-line  measurement
capabilities. In exchange for such capital contribution,  the Company received a
9% interest in the LLC. A then  outside  investor,  who is currently a principal
shareholder of the Company,  made an initial capital  contribution of $2 million
and later made a further capital  contribution of $1 million in return for a 91%
interest in the LLC. In  connection  with the  formation  of the LLC the Company
entered  into a services  and license  agreement  whereby the Company  agreed to
complete the  development  of the uPACS(TM)  technology and undertake to market,
sell, and distribute systems using the uPACS(TM)  technology.  The LLC agreed to
pay the Company its expenses in  connection  with such  services and the Company
agreed to pay royalties to the LLC in connection  with the sale of systems using
the uPACS  technology.  At such time as the LLC has  distributed  to the outside
investor  an  aggregate  amount  equal to $4.5  million of its net cash flow the
Company would become a 63% owner of the LLC and the outside investor would own a
37% interest in the LLC.

    During  1998,  the  Company  determined  that it did not have  the  required
resources to devote to both its core  manufacturing  execution software business
and the uPACS(TM) business, and as a result,  initiated a search for a potential
buyer of the LLC and its  technology.  For the year ended December 31, 1999, the
Company  paid  approximately  $0.7  million of the LLC's  expenses.  The Company
intends to continue  funding the LLC operation only through the first quarter of
2000. Costs of funding the LLC after December 31, 1999 total less than $50,000.

                                      F-20
<PAGE>

N.   Equity Transactions
------------------------

Common Stock

    On April 16, 1998,  the  shareholders  amended the Company's  Certificate of
Incorporation  to modify  certain  terms of the Class A Common Stock and Class B
Common Stock.  The  modifications to the terms of the Class A and Class B Common
Stock  increased the exchange  ratio for conversion of Class B Common Stock into
Class A Common Stock from 1:1 to 1:1.5; changed the voting rights of the Class A
Common  Stock and the Class B Common  Stock  with  respect  to the  election  of
directors  so that the  directors  of the Company  will be elected by holders of
Class A Common Stock and Class B Common Stock voting together as a single class;
made the  voting  rights  of both  classes  the same so that  they have the same
voting power;  eliminated a separate  class vote of Class B Common Stock holders
on certain corporate transactions;  and changed the dividend restriction so that
Class A Common Stock and Class B Common Stock receive the same dividends.

    In December  1997,  the National  Association  of Securities  Dealers,  Inc.
("NASD"),  notified  the Company  that it proposed to de-list the Class B Common
Stock  from  NASDAQ  SmallCap  Market  because  the number of holders of Class B
Common Stock  appeared to have fallen below 300 beneficial  owners.  The Company
proposed the amendments to alleviate  certain negative impact of such de-listing
of the Class B Common  Stock,  and the NASD  granted to the  Company a temporary
exception,  until May 1, 1998,  in order to permit the  Company to effect  these
amendments.  Following the close of business on May 1, 1998,  the Class B Common
Stock was no longer listed on the NASDAQ SmallCap Market.

    Also on April 16,  1998,  the  shareholders  approved  the adoption of three
equity  plans and an increase  in the  authorized  Class A Common  Stock from 22
million shares to 40 million shares.

    On  November  10,  1998,  the  shareholders  approved  an  increase  in  the
authorized  Class A Common  Stock from 40  million to 60 million  shares and the
sale and issuance of up to 6,666,666 (1,333,333 after adjustment for the reverse
stock split) shares of Class A Common Stock at a purchase price of $3.00 ($15.00
after  adjustment  for the  reverse  stock  split) per share,  and  Warrants  to
purchase up to 1,000,000  shares (200,000 after adjustment for the reverse stock
split)  of Class A Common  Stock at an  exercise  price of $3.00  ($15.00  after
adjustment for the reverse stock split) per share.

    In order to provide additional capital to the Company, the Company agreed to
sell 6,666,666  (1,333,333  after adjustment for the reverse stock split) shares
of Class A Common Stock at a purchase  price of $3.00 ($15.00  after  adjustment
for the reverse  stock split) per share for aggregate  proceeds of  $20,000,000.
For each $1 million of Class A Common Stock  purchased,  the purchaser  received
seven-year  warrants  to  purchase  50,000  shares  of  Class  A  Common  Stock,
exercisable  at $3.00 ($15.00 after  adjustment for the reverse stock split) per
share;  a total of 1,000,000  (200,000  after  adjustment  for the reverse stock
split) warrants were,  therefore,  issued to the purchaser.  The placement agent
also received  warrants to purchase up to 250,000  (50,000 after  adjustment for
the reverse stock split) shares of Class A Common Stock.

    On  September  10,  1999,  the  listing  of  Base  Ten's  common  stock  was
transferred from NASDAQ National Market System to the NASDAQ SmallCap Market.

Reverse Stock Split

    On September 24, 1999, the Company executed a one-for-five  reverse split of
the Company's  Class A Common and Class B Common  Stock.  Under the terms of the
split, each shareholder  received one share of Class A Common $5 par value stock
for every five shares, or fraction thereof, of Class A Common $1 par value stock
owned as of the transaction date. In addition,  shareholders  received one share
of Class B Common $5 par value stock for every five shares, or fraction thereof,
of Class B Common $1 par value stock owned as of September 24, 1999. As a result
of the reverse stock split,  the Company  retired  20,161,883  shares of Class A
Common Stock and 56,917 shares of Class B Common Stock. The prices for shares of
the Company's  Class A Common Stock traded  through the NASDAQ  SmallCap  Market
reflected  the reverse  stock split as of September  24, 1999,  while trading of
Class B Common Stock on the Bulletin Board  reflected the reverse stock split as
of November 8, 1999. All references in the consolidated  financial statements to
shares and per share data have been adjusted  retroactive to November 1, 1996 in
response to the reverse stock split.


                                      F-21

<PAGE>


O.  Earnings Per Share
----------------------

    The following is a reconciliation of the numerators and denominators used to
calculate loss per share in the Consolidated  Statements of Operations  (dollars
in thousands, except per share data):

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Two Months
                                                      Year Ended           Year Ended             Ended               Year Ended
                                                   December 31, 1999    December 31, 1998    December 31, 1997    October 31, 1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                 <C>                   <C>                 <C>
Loss per common share-basic:
Net loss                                            $        (20,240)   $        (19,020)     $     (3,936)       $      (22,007)
Less: Dividends on Preferred Stock                              (262)             (1,740)               --                   --
       Accretion on Preferred Stock                           (6,930)             (1,424)               --                   --
Plus:  Credit on Exchange of Preferred Stock                     445               --                   --                   --
------------------------------------------------------------------------------------------------------------------------------------
Net loss to common shareholders (numerator)         $        (26,987)   $        (22,184)     $     (3,936)       $      (22,007)
------------------------------------------------------------------------------------------------------------------------------------
Weighted average shares - basic (denominator)              4,624,000           2,124,000         1,652,000             1,579,000
------------------------------------------------------------------------------------------------------------------------------------
            Net loss per common share-basic         $         (5.84)    $        (10.45)      $      (2.38)       $      (13.94)
------------------------------------------------------------------------------------------------------------------------------------

Loss per common share-fully diluted:
Net loss                                            $        (20,240)   $        (19,020)     $     (3,936)       $      (22,007)
Less: Dividends on Preferred Stock                              (262)             (1,740)               --                   --
       Accretion on Preferred Stock                           (6,930)             (1,424)               --                   --
Plus:  Credit on Exchange of Preferred Stock                     445               --                   --                   --
------------------------------------------------------------------------------------------------------------------------------------
Net loss to common shareholders (numerator)         $        (26,987)   $        (22,184)     $     (3,936)       $      (22,007)
------------------------------------------------------------------------------------------------------------------------------------
Weighted average shares                                    4,624,000           2,124,000         1,652,000             1,579,000
Effect of dilutive options / warrants                             --                 --                --                     --
------------------------------------------------------------------------------------------------------------------------------------
Weighted average shares-fully diluted (denominator)        4,624,000           2,124,000         1,652,000             1,579,000
------------------------------------------------------------------------------------------------------------------------------------
           Net loss per common share-diluted        $         (5.84)    $        (10.45)      $      (2.38)       $      (13.94)
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

    Stock  options,  warrants and rights would have an  anti-dilutive  effect on
earnings per share for the years ended December 31, 1999 and 1998, the two month
period  ended  December  31,  1997 and the year  ended  October  31,  1997  and,
therefore,  were not included in the  calculation of fully diluted  earnings per
share.


P.   Stock Option Plans, Warrants and Rights
--------------------------------------------

    The Company's 1990 Incentive Stock Option Plan reserves 96,800 shares (after
adjustment for the reverse stock split) (after  adjustment for the reverse stock
split) of either Class A or Class B Common Stock for purchase  upon the exercise
of options  that may not be granted at less than the fair market value as of the
date of grant and that are  exercisable  over a period  not to exceed ten years.
There are no further shares available for option under this plan.

    The  Company's  1992  Incentive  Stock Option Plan reserves  140,000  shares
(after  adjustment  for the  reverse  stock  split) of Class A Common  Stock for
purchase  upon the exercise of options that may not be granted at less than fair
market value as of the date of grant and that are exercisable  over a period not
to exceed ten years. There are no further shares available for option under this
plan.

    The Company's  Discretionary  Deferred  Compensation  Plan reserves  230,000
shares  (after  adjustment  for the reverse stock split) of Class A Common Stock
for issuance  upon the exercise of options.  There are no options  available for
grant under this plan. Options may not be granted at less than fair market value
as of the date of grant and are  exercisable  over a period  not to  exceed  ten
years.

    The  Company's  1995  Incentive  Stock Option Plan reserves  150,000  shares
(after  adjustment  for the  reverse  stock  split) of Class A Common  Stock for
issuance  upon the exercise of options.  Options may not be granted at less than
fair market value as of the date of grant and are exercisable  over a period not
to exceed ten years. There are no options available for grant under this plan.

    The  Company's  Base Ten Stock Option Plan  reserves  16,000  shares  (after
adjustment  for the reverse  stock  split) of Class A Common  Stock for purchase
upon the  exercise  of options  that may not be granted at less than fair market
value as of the date of grant  and  that are  exercisable  over a period  not to
exceed ten years. There are no options available for grant under this plan.

                                      F-22

<PAGE>

    The Company's 1998 Stock Option and Stock Award Plan reserves 642,409 shares
(after  adjustment  for the  reverse  stock  split) of Class A Common  Stock for
purchase  upon the exercise of options.  Options may not be granted at less than
fair market value as of the date of grant and are exercisable  over a period not
to exceed ten years.  This plan allows for the  re-issuance  of any  canceled or
expired options.  Approximately 286,000 options remain available for grant under
this plan.

    A summary of the status of the Company's  aforementioned  stock option plans
as of October 31, 1997 and December 31, 1997,  1998 and 1999 and changes  during
the periods ending on those dates is presented below:

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------------
                                                    Class A                             Class B
                                    -----------------------------------------------------------------------------
                                                                   Weighted-                         Weighted-              Total
                                           Number of           Average Exercise    Number of      Average Exercise         Number of
                                             Shares                 Price            Shares             Price               Shares
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                <C>                  <C>            <C>                  <C>
Outstanding at October 31, 1997               380,933            $   48.30            989            $   15.00             381,922
------------------------------------------------------------------------------------------------------------------------------------
Granted                                            --                --                --                --                     --
Exercised                                     (10,117)               48.35             --                                  (10,117)
Canceled
------------------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1997              370,816                48.25            989            $   15.00             371,805
------------------------------------------------------------------------------------------------------------------------------------
Granted                                       509,220                14.70             --                                  509,220
Exercised                                     (25,046)               19.20           (989)               15.00             (26,035)
Canceled                                      (80,865)               45.75                                                 (80,865)
------------------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1998              774,125                27.35             --                --                774,125
------------------------------------------------------------------------------------------------------------------------------------
Granted                                       155,360                 3.91             --                --                155,360
Exercised                                         (50)               17.50             --                --                    (50)
Canceled                                     (437,975)               24.74             --                --               (437,975)
------------------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1999              491,460                22.27             --                --                491,460
------------------------------------------------------------------------------------------------------------------------------------
Exercisable at December 31, 1999              344,720            $   29.22             --             $  --                344,720
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

     The  following  tables  summarizes  information  about  the  stock  options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------------
                                                    Options Outstanding                              Options Exercisable
                                  --------------------------------------------------------   -------------------------------------
                                                     Weighted-Average
                                        Number           Remaining                                Number
                                    Outstanding at   Contractual Life   Weighted-Average      Exercisable at    Weighted-Average
    Range of Exercise Prices      December 31, 1999     (in years)       Exercise Price      December 31, 1999   Exercise Price
----------------------------------------------------------------------------------------------------------------------------------
      <S>             <C>               <C>                 <C>              <C>                   <C>               <C>
       $1.00     -    $10.00            267,280             9.15              $6.71                138,550            $9.31
      $12.50     -    $20.00             29,816             5.79             $17.22                 19,306           $17.46
      $25.63     -    $43.13             95,044             5.80             $34.68                 87,544           $35.45
      $51.25     -    $58.16             99,320             6.99             $53.78                 99,320           $53.78
----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

    The Company's 1998 Employee Stock Purchase  Program  authorizes the issuance
of up to  200,000  shares  of Class A  Common  Stock  for  purchase  by  Company
employees.  Shares are  purchased  at 85% of the fair  market  value on standard
quarterly  purchase dates as defined in the plan.  Approximately  174,000 shares
were available for issuance and purchase at December 31, 1999.

    At December  31,  1999,  the Company has  outstanding  761,709  warrants and
167,300  options to  consultants  and five  non-management  directors  at prices
ranging  from $3.906 to $90.00,  expiring  from 2000 to 2009.  In 1999,  820,000
warrants and 162,000 options  expired.  The remaining  options and warrants were
issued at fair market value at the date of grant.

    The Company  has adopted the  disclosure-only  provisions  of  Statement  of
Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
("FAS 123") for its stock options plans for employees. Had compensation cost for
these plans been  determined  under FAS 123, the  Company's  net loss would have
been increased to $20,904,000,  $20,192,000 and $24,898,000  with a net loss per
common share of $4.52,  $2.20 and $3.22 for years ended December 31, 1999,  1998
and  October  31,  1997,  respectively.  There  were no  options  granted in the
two-month period ended December 31, 1997. For purposes of this calculation,  the
fair  value of each  option  grant was  estimated  on the grant  date  using the
Black-Scholes  option-pricing  model with the  following  assumptions:  expected
volatility of between 43-77 percent; weighted average risk free interest rate of
between 5.08-6.35 percent;  and weighted average expected lives of 1 to 5 years.
All options  granted to date under the stock option plans for employees  have an
exercise  price equal to the market  price of the  Company's  stock on the grant
date.

                                      F-23
<PAGE>

    In addition,  the Company has  recorded  charges to earnings for years ended
December 31, 1998 and October 31, 1997 of $322,000 and $2,750,000  respectively,
representing  the value of the options and warrants issued to  consultants.  The
Company  also  incurred  a charge of  $543,000  in the  two-month  period  ended
December 31, 1997 as a result of extending option expiration dates to terminated
employees of the GTD. These charges have been computed  using the  Black-Scholes
option-pricing model.

Q.   Employee Benefit Plan
--------------------------

    The Company has a 401(k) plan which allows all  eligible  employees to defer
up to 17% of their pre-tax  income through  contributions  to the plan. The plan
allows  for a 1% base  annual  salary  Company  matching  contribution  for each
eligible employee. The Company's contribution was $47,000 and $51,000 for fiscal
years  1999 and 1998,  respectively,  $23,000  for the  two-month  period  ended
December 31, 1997 and $34,000, in fiscal year 1997.

R.   Discontinued Operations
----------------------------

    On October 27, 1997 the Company entered into an agreement to sell the GTD to
Strategic Technology Systems, Inc.  ("Strategic").  The sale between the Company
and  Strategic  was closed on December  31,  1997.  Accordingly,  the  operating
results  of  the  Government  Technology  Division  have  been  segregated  from
continuing  operations and reported as a separate line item on the  consolidated
statements of operations for all periods presented.

    Results of operations of the GTD are as follows:

<TABLE>
<CAPTION>

------------------------------------------------- --------------------- --------------------
                                                    Two Month Ended     Year Ended October
                                                    December 31, 1997        31, 1997
------------------------------------------------- --------------------- --------------------
<S>                                               <C>                   <C>
Net revenues                                      $          --         $         9,981
Cost and expenses                                           222                  14,835
------------------------------------------------- --------------------- --------------------

</TABLE>

    The net loss on disposal of  $1,173,000  for the year ended October 31, 1997
included a provision for estimated  losses of the GTD of $1,068,000  through the
date of  sale.  The  actual  expenses  of the GTD  through  the date of the sale
exceeded the provision for estimated losses by $222,000.

    In accordance with the agreement  between the Company and Strategic,  and in
consideration  for the  value  of the net  assets  sold,  the  Company  received
$3,500,000 in cash, and an unsecured  promissory  note in a principal  amount of
$1,975,000. The note has a five year term bearing interest at a rate of 7.5% per
annum.  Principal  payments  under the note  amortize  over a three year  period
beginning on the second  anniversary of the closing dated December 31, 1997. The
terms of the note  also  provide  for  accelerated  payments  of  principal  and
interest pending the occurrence of certain events.

    The Company also  received a warrant  from  Strategic  exercisable  for that
number  of  shares  of the  voting  common  stock as  equals  5% of  issued  and
outstanding  shares of common  stock and common  stock  equivalents  immediately
following  and giving  effect to any  initial  underwritten  public  offering by
Strategic,  with respect to which there can be no assurance.  On April 30, 1999,
Strategic  was  sold  to  Smiths  Industries  ("Smiths"),   a  defense  industry
competitor. The Company, as per the terms of the agreement noted above, received
income in 1999 in the form of cash payments of approximately  $1.1 million which
has been reflected as a gain from sale of discontinued operations. The unsecured
promissory  note issued by  Strategic  to the Company  for  $1,975,000  has been
assumed by, and the sublease has been guaranteed by, Smiths as of the sale date.
The Company's  warrant to purchase  shares of Strategic,  described  above,  was
cancelled as of the sale date.

    The Company has subleased to Strategic approximately 30,000 square feet plus
allowed the use of 10,000 square feet of common areas for a period of five years
at an annual rental of $240,000  through 2000 and $264,000 per year for 2001 and
2002.

                                      F-24

<PAGE>

S.  Comprehensive Income (Loss)
-------------------------------

    The accumulated  balances for each  classification  of comprehensive  income
(loss) are as follows (dollars in thousands):

<TABLE>
<CAPTION>

------------------------------------------------------ -------------------- ----------------- ---------------------
                                                                               Unrealized      Accumulated Other
                                                        Foreign Currency    Gains (Loss) on      Comprehensive
                                                              Items            Securities        Income (Loss)
------------------------------------------------------ -------------------- ----------------- ---------------------
<S>                                                        <C>                <C>                <C>
Balance October 31, 1996                                   $      (159)       $        49        $          (110)
------------------------------------------------------- ------------------- ------------------ ---------------------
FY 1997 change                                                       9                 94                    103
------------------------------------------------------- ------------------- ------------------ ---------------------
Balance October 31, 1997                                          (150)               143                     (7)
------------------------------------------------------- ------------------- ------------------ ---------------------
1997 Transition Period change                                      (45)               (81)                  (126)
------------------------------------------------------- ------------------- ------------------ ---------------------
Balance December 31, 1997                                         (195)                62                   (133)
------------------------------------------------------- ------------------- ------------------ ---------------------
FY 1998 change                                                     (55)                (8)                   (63)
------------------------------------------------------- ------------------- ------------------ ---------------------
Balance December 31, 1998                                         (250)                54                   (196)
------------------------------------------------------- ------------------- ------------------ ---------------------
FY 1999 change                                                     127                (23)                   104
------------------------------------------------------- ------------------- ------------------ ---------------------
Balance December 31, 1999                                  $      (123)       $        31        $           (92)
------------------------------------------------------- ------------------- ------------------ ---------------------

</TABLE>


T.   Related Party Transactions
-------------------------------

     Almedica  International,  Inc., a shareholder of the Company and the former
owner of BTS  Clinical,  Inc.,  is a customer of the Company.  During 1999,  the
company recorded revenues from Almedica International,  Inc. of $236,000.  Also,
see Note M for expenses incurred by the Company related to its investment in the
LLC.


U.   Subsequent Events
----------------------

     Subsequent  to  December  31,  1999,  a contract  to provide  software  and
services to one customer was terminated  due to the Company's  inability to meet
delivery  deadlines  for  version  3.2 of  BASE10(R)ME  which was  caused by the
substantial  customization of the core product  required for the project.  Under
the  terms of this  contract,  the  Company  was to  receive  revenues  totaling
approximately  $1.4  million.  The  termination  of this contract will allow the
Company to reallocate  resources to other projects  requiring  less  substantial
customization.  In addition,  to reduce its  dependence on the  BASE10(R)ME  and
BASE10(R)CS  products,  the  Company  plans  to  more  aggressively  market  the
BASE10(R)ADLS, BASE10(R)ADMS and BASE10(R)FS products. While the timely delivery
of product to the Company's customers cannot be completely  assured,  management
believes the Company will be able to meet its  remaining  delivery  commitments.
The  financial  statements  reflect the impact of the  terminated  contract  and
concerns over the delivery of BASE10(R)ME and BASE10(R)CS.

                                      F-25

<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,  this 11th day of
April, 2000.

<TABLE>
<CAPTION>
                             Base Ten Systems, Inc.


<S>                              <C>                            <C>
By:/s/ Stephen A. Cloughley      By:/s/ William F. Hackett      By:   /s/ William F. Hackett
   -------------------------        -----------------------        -------------------------
     Stephen A. Cloughley             William F. Hackett                William F. Hackett
    Chief Executive Officer         Chief Financial Officer        Principal Accounting Officer

</TABLE>

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant in the capacities and on the date indicated.


                                        Title                    Date

                                      Directors             April 11, 2000
Stephen A. Cloughley
Alan S. Poole
John C. Rhineberger




By:   /s/ William F. Hackett
      -----------------------------------
      William F. Hackett, as attorney-in-fact

                                       48
<PAGE>

<TABLE>
<CAPTION>


                                            Exhibit Index

Exhibit Number                          Exhibit                                             Page
--------------                          -------                                             ----
<S>              <C>          <C>                                                           <C>
2.               (a)          Asset Purchase  Agreement  between  Registrant                *(A)
                              and  Strategic  Technology  Systems,   Inc.  dated
                              October 27,  1997,  (incorporated  by reference to
                              Exhibit 2.1 of Registrant's Current Report on Form
                              8-K (File No. 0-7100) dated November 17, 1997).

                 (b)          Asset Purchase  Agreement dated as of February 19,            *
                              1998 by and  among  Base Ten    FlowStream,  Inc.,
                              Base  Ten  Systems,   Inc.  and  Consilium,   Inc.
                              (incorporated  by  reference  to  Exhibit  2(b) to
                              Registrants'  Current Report on Form 8-K (File No.
                              0-7100) dated March 6, 1998).

3.               (a)          Restated  Certificate  of  Incorporation,  as                 *
                              amended,   of   Registrant   (incorporated   by
                              reference to Exhibit  4(a) to  Amendment  No. 1 to
                              Registrant's  Registration  Statement  on Form S-8
                              (File No. 2-84451) filed on July 31, 1990).

                 (b)          Certificate   of   Amendment   of   the   Restated            *
                              Certificate of Incorporation  dated   September 1,
                              1992 (incorporated by reference to Exhibit 4(b)(2)
                              to Amendment  No. 3 to  Registrant's  Registration
                              Statement on Form S-1 (File No. 33-48404) filed on
                              September 3, 1992).

                 (c)          Amended By-Laws of the Registrant (incorporated by            *
                              reference  to Exhibit  4(d)(2)  to    Registrant's
                              Registration  Statement  on  Form  S-8  (File  No.
                              33-60454) filed on April 1, 1993).

                 (d)           Certificate of Amendment of Restated  Certificate            *
                               of  Incorporation   filed  December  2,     1997,
                               (incorporated  by  reference  to Exhibit  99.3 of
                               Registrant's Current Report on Form 8-K (File No.
                               0-7100) dated October 27, 1997).

                 (e)           Amended  By-laws of Registrant  dated October 13,            *
                               1997  (incorporated  by  reference  to    Exhibit
                               10(ee) to Registrant's Annual Report on Form 10-K
                               (File  No.  0-7100)  for the  fiscal  year  ended
                               October 31, 1997).

                 (f)           Amendment to Certificate of  Incorporation  filed            *
                               on March 31, 1998 (incorporated by   reference to
                               Exhibit 3(d) to  Registrants'  Current  Report on
                               Form 8-K (File No. 0-7100) dated April 23, 1998).

                 (g)           Amendment to Certificate of  Incorporation  filed            *
                               on April 21, 1998 (incorporated by   reference to
                               Exhibit 3(e) to  Registrants'  Current  Report on
                               Form 8-K (File No. 0-7100) dated April 23, 1998).

                 (h)           Certificate   of  Amendment  of   Certificate  of            *
                               Incorporation  dated  June 30,  1998 filed   with
                               the  Treasurer of the State of new Jersey on July
                               9, 1998  (incorporated  by  reference  to Exhibit
                               3(g) to  Registrants'  Current Report on Form 8-K
                               (File No. 0-7100) dated January 13, 1999).

                 (i)           Certificate   of  Amendment  of   Certificate  of            *
                               Incorporation  dated  September  30, 1998   filed
                               with the  Treasurer of the State of New Jersey on
                               October 13, 1998  (incorporated  by  reference to
                               Exhibit 3(h) to  Registrants'  Current  Report on
                               Form 8-K  (File No.  0-7100)  dated  January  13,
                               1999).

                 (j)           Certificate   of  Amendment  of   Certificate  of            *
                               Incorporation  dated  November  18,  1998   filed
                               with the  Treasurer of the State of new Jersey on
                               November 19, 1998  (incorporated  by reference to
                               Exhibit 3(i) to  Registrants'  Current  Report on
                               Form 8-K  (File No.  0-7100)  dated  January  13,
                               1999).


                                       49
<PAGE>

<CAPTION>

                                             Exhibit Index cont'd

Exhibit Number                          Exhibit                                             Page
--------------                          -------                                             ----
<S>              <C>          <C>                                                           <C>


                 (k)           Certificate   of  Amendment  of   Certificate  of            *
                               Incorporation dated January 11, 1999  filed with
                               the  Treasurer  of the  State  of new  Jersey  on
                               January 11, 1999  (incorporated  by  reference to
                               Exhibit 3(j) to  Registrants'  Current  Report on
                               Form 8-K  (File No.  0-7100)  dated  January  13,
                               1999).

                 (l)           Form of  Certificate  of  Amendment  of  Restated            *
                               Certificate  of  Incorporation  providing    for
                               designation,   preferences   and  rights  of  the
                               Convertible Preferred Shares, Series B (Exhibit A
                               to the  Exchange  Agreement  dated as of December
                               31, 1998)  (incorporated  by reference to Exhibit
                               10 (yy) to  Registrants'  Current  Report on Form
                               8-K (File No. 0-7100) dated January 13, 1999)>

                 (m)          Certificate   of  Amendment  of   Certificate   of
                              Incorporation  dated  March 3, 1999 filed with the
                              Treasurer of New Jersey on March 4, 1999.

                 (n)           Certificate  of Correction to the  Certificate of
                               Amendment    of    Restated     Certificate    of
                               Incorporation    providing    for    designation,
                               preferences   and   rights  of  the   Convertible
                               Preferred  Shares,   Series  B,  filed  with  the
                               Treasurer of the State of New Jersey on March 18,
                               1999.

                 4.           (a) Purchase  Agreement filed as of August 8, 1996            *
                              between  the  Registrant  and Jesse L.   Upchurch
                              (incorporated  by  reference  to  Exhibit 4 (a) to
                              Registrant's  Current Report on Form 8-K (File No.
                              0-7100) dated August 12, 1996).

10.              (a)          1980 Deferred  Compensation  Agreement between                *(A)
                              the  Registrant   and  certain   executive
                              officers  (incorporated  by  reference  to Exhibit
                              10.3 to  Registrant's  Registration  Statement  on
                              Form S-1 File No.  2-70259  filed on December  16,
                              1980).

                 (b)          1981 Incentive Stock Option Plan of Registrant, as            *(A)
                              amended  and  restated  on January  12,  1990
                              (incorporated  by  reference  to  Exhibit  4(c) to
                              Amendment  No.  1  to  Registrant's   Registration
                              Statement on Form S-8 (File No.  2-84451) filed on
                              July 31, 1990).

                 (c)          1992 Stock Option Plan of Registrant (incorporated            *(A)
                              by reference to Exhibit  10(ai) to  Amendment
                              No. 3 to  Registrant's  Registration  Statement on
                              Form S-1 (File No. 33-48404) filed on September 3,
                              1992).

                 (d)           Change in Control  Agreement  dated  October  23,            *(A)
                               1991  between  Registrant  and  Myles  M.
                               Kranzler  (incorporated  by  reference to Exhibit
                               10(e) to Registrant's  Annual Report on Form 10-K
                               (File  No.  0-7100)  for the  fiscal  year  ended
                               October 31, 1991).

                 (e)           Change in Control  Agreement  dated  October  23,            *(A)
                               1991  between  Registrant  and James A.  Eby
                               (incorporated  by reference  to Exhibit  10(f) to
                               Registrant's Annual Report on Form 10-K (File No.
                               0-7100)  for the fiscal  year ended  October  31,
                               1991).

                 (f)           Change in Control  Agreement  dated  October  23,            *(A)
                               1991  between  Registrant  and  Edward  J.
                               Klinsport  (incorporated  by reference to Exhibit
                               10(f) to Registrant's  Annual Report on Form 10-K
                               (File  No.  0-7100)  for the  fiscal  year  ended
                               October 31, 1991).


                                       50
<PAGE>


<CAPTION>

                              Exhibit Index (con't)

Exhibit Number                          Exhibit                                             Page
--------------                          -------                                             ----
<S>              <C>          <C>                                                           <C>


                 (g)          Employment  Agreement  dated as of March 26,  1992            *(A)
                              between the Registrant and Myles M.  Kranzler
                              (incorporated  by  reference  to Exhibit  28(b) to
                              Registrant's  Current Report on Form 8-K (File No.
                              0-7100) filed on April 10, 1992).

                 (h)          Employment  Agreement  dated as of March 26,  1992            *(A)
                              between  the  Registrant  and  James  A.  Eby
                              (incorporated  by  reference  to Exhibit  28(c) to
                              Registrant's  Current Report on Form 8-K (File No.
                              0-7100) filed on April 10, 1992).

                 (i)           Employment  Agreement  dated as of March 26, 1992            *(A)
                               between  the  Registrant  and  Edward  J.
                               Klinsport  (incorporated  by reference to Exhibit
                               28(d) to Registrant's  Current Report on Form 8-K
                               (File No. 0-7100) filed on April 10, 1992).

                 (j)           Employment  Agreement  dated as of March 26, 1992            *(A)
                               between  the   Registrant   and  Alan  J.
                               Eisenberg  (incorporated  by reference to Exhibit
                               28(e) to Registrant's  Current Report on Form 8-K
                               (File No. 0-7100) filed on April 10, 1992).

                 (k)          Amended  Agreement dated July 28, 1992 between the            *(A)
                              Registrant    and   Alexander    Adelson
                              (incorporated  by reference  to Exhibit  10(ar) to
                              the   Registrant's   Registration   Statement   on
                              Amendment   No.   3.  to  Form  S-2  on  Form  S-1
                              (Registration  No. 33-48404) filed on September 3,
                              1992).

                 (l)          Modification  of Amended  Agreement  dated January            *(A)
                              11,  1993  between  the   Registrant   and
                              Alexander M. Adelson.

                 (m)          Amended  Modification  of Amended  Agreement dated            *(A)
                              January 28, 1994 between the   Registrant and
                              Alexander M. Adelson.

                 (n)          Amended  Consulting  Agreement made as of February            *(A)
                              24, 1992 between the Registrant and  Bruce D.
                              Cowen (incorporated by reference to Exhibit 10(as)
                              to  the  Registrant's  Registration  Statement  on
                              Amendment   No.   3.  to  Form  S-2  on  Form  S-1
                              (Registration  No. 33-48404) filed on September 3,
                              1992).

                 (o)          Modification of Amendment  Agreement dated January            *(A)
                              11, 1993 between the Registrant  and Bruce D.
                              Cowen.

                 (p)          Consulting  Agreement  dated March 1, 1994 between            *(A)
                              the Registrant and Bruce D. Cowen.

                 (q)          Option  Agreement  dated as of  November  9,  1992            *
                              between  the  Registrant  and  Donald M.  Daniels
                              (incorporated  by reference  to Exhibit  10(as) to
                              the Registrant's  Annual Report on Form 10-K (File
                              No.  0-7100) for the fiscal year ended October 31,
                              1992).

                 (r)          Option  Agreement dated as of June 5, 1992 between            *
                              the    Registrant    and    Strategic      Growth
                              International,  Inc. (incorporated by reference to
                              Exhibit 10(at) to the  Registrant's  Annual Report
                              on Form 10-K (File No. 0-7100) for the fiscal year
                              ended October 31, 1992).


                                       51
<PAGE>

<CAPTION>

                              Exhibit Index (con't)

Exhibit Number                          Exhibit                                             Page
--------------                          -------                                             ----
<S>              <C>          <C>                                                           <C>


                 (s)          Acquisition   Agreement  dated  October  28,  1994            *
                              between the Registrant and CKR  Partners,  L.L.C.
                              (incorporated  by  reference  to  Exhibit  2(a) to
                              Registrant's  Current Report on Form 8-K (File No.
                              0-7100) dated November 11, 1994).

                 (t)          Lease  dated   October   28,   1994   between  the            *
                              Registrant    and   CKR   Partners,    L.L.C.
                              (incorporated  by  reference  to Exhibit  10(b) to
                              Registrant's  Current Report on Form 8-K (File No.
                              0-7100) dated November 11, 1994).

                 (u)           Operating  Agreement  between the  Registrant and            *
                               Jesse   L.   Upchurch   dated   May  1,   1997
                               (incorporated  by  reference  to  Exhibit  (u) of
                               Registrant's Current Report on Form 8-K (File No.
                               0-7100) dated May 1, 1997).

                 (v)          License  and   Services   Agreement   between  the            *
                              Registrant and uPACS,  L.L.C. dated May 1,  1997,
                              (incorporated  by  reference  to Exhibit  10(v) of
                              Registrant's  Current  Report  Form 8-K  (File No.
                              0-7100) dated May 1, 1997).

                 (w)          Compensation Agreement among uPACS, L.L.C., Andrew            *(A)
                              Garret,  Inc. and Andrew  Sycoff dated May 1,
                              1997,  (incorporated by reference to Exhibit 10(w)
                              of  Registrant's  Current Report on Form 8-K (file
                              No. 0-7100) dated May 1, 1997).

                 (x)           Securities   Purchase   Agreement   between   the            *
                               Registrant and certain purchasers dated  May 30,
                               1997,  (incorporated by reference to Exhibit 99.1
                               of Registrant's  Current Report on Form 8-K (File
                               No. 0-7100) dated May 30, 1997).

                 (y)           Convertible   Term   Debenture   issued   by  the            *
                               Registrant to certain  purchasers dated May 30,
                               1997,  (incorporated by reference to Exhibit 99.2
                               of Registrant's  Current Report on Form 8-K (File
                               No. 0-7100) dated May 30, 1997).

                 (z)           Stock  Purchase  Warrant issued by the Registrant            *
                               to  certain  purchases  dated  May  30,  1997,
                               (incorporated  by  reference  to Exhibit  99.3 of
                               Registrant's Current Report on Form 8-K (File No.
                               0-7100) dated May 30, 1997).

                 (aa)          Registration   Rights   Agreement   between   the            *
                               Registrant and certain purchasers dated  May 30,
                               1997,  (incorporated by reference to Exhibit 99.4
                               of Registrant's  Current Report on Form 8-K (File
                               No. 0-7100) dated May 30, 1997).

                 (bb)          Securities   Purchase   Agreement   between   the            *
                               Registrant   and  certain   purchasers   dated
                               December 4, 1997,  (incorporated  by reference to
                               Exhibit 99.1 of  Registrant's  Current  Report on
                               Form 8-K (File No.  0-7100) filed dated  December
                               9, 1997).

                 (cc)          Registration   Rights   Agreement   between   the            *
                               Registrant   and  certain   purchasers   dated
                               December 4, 1997,  (incorporated  by reference to
                               Exhibit 99.1 of  registrant's  Current  Report on
                               Form 8-K  (File  No,  0-7100)  dated May 30 filed
                               December 9, 1997).


                                       52
<PAGE>

<CAPTION>

                              Exhibit Index (con't)

Exhibit Number                          Exhibit                                             Page
--------------                          -------                                             ----
<S>              <C>          <C>                                                           <C>

                 (dd)         Common Stock Purchase Warrant issued by Registrant            *
                              and  certain  purchasers  dated  December 4, 1997
                              (incorporated  by  reference  to  Exhibit  99.4 of
                              Registrant's  Current  Report  Form 8-K  (File No.
                              07100) dated December 9, 1997).

                 (ee)          Warrant   Agreement   between    Registrant   and            *(A)
                               Strategic Growth  International  dated April
                               15, 1997  (incorporated  by  reference to Exhibit
                               10(ee) to Registrant's Annual Report on Form 10-K
                               (File  No.  0-7100)  for the  fiscal  year  ended
                               October 31, 1997).

                 (ff)         Consultant  Agreement  between  Registrant and RTS            *(A)
                              Research  Lab,  Inc.,  dated  June  9,    1997
                              (incorporated  by reference  to Exhibit  10(ff) to
                              Registrant's  Annual Report on Form 10-K (File No.
                              0-7100)  for the  fiscal  year ended  October  31,
                              1997).

                 (gg)         Warrant Agreement between Registrant and Strategic            *(A)
                              Growth  International,  Inc.  dated   June 20,
                              1997  (incorporated by reference to Exhibit 10(gg)
                              to  Registrant's  Annual Report on Form 10-K (File
                              No.  0-7100) for the fiscal year ended October 31,
                              1997).

                 (hh)          Option Agreement between  Registrant and David C.            *(A)
                               Batten dated October 13, 1997   (incorporated
                               by  reference to Exhibit  10(hh) to  Registrant's
                               Annual Report on Form 10-K (File No.  0-7100) for
                               the fiscal year ended October 31, 1997).

                 (ii)          Option Agreement  between  Registrant and Alan S.            *(A)
                               Poole dated  October 13, 1997   (incorporated
                               by  reference to Exhibit  10(ii) to  Registrant's
                               Annual Report on Form 10-K (File No.  0-7100) for
                               the fiscal year ended October 31, 1997).

                 (jj)          Employment   Agreement  between   Registrant  and            *(A)
                               Thomas E.  Gardner  dated  October  17, 1997
                               (incorporated  by reference to Exhibit  10(jj) to
                               Registrant's Annual Report on Form 10-K (File No.
                               0-7100)  for the fiscal  year ended  October  31,
                               1997).

                 (kk)          Change of Control  Agreement  between  Registrant            *(A)
                               and Thomas E. Gardner dated October  17, 1997
                               (incorporated  by reference to Exhibit  10(kk) to
                               Registrant's Annual Report on Form 10-K (File No.
                               0-7100)  for the fiscal  year ended  October  31,
                               1997).

                 (ll)          Performance-Based  Stock Option Agreement between            *(A)
                               Registrant  and  Thomas  E.  Gardner    dated
                               October 17, 1997  (incorporated  by  reference to
                               Exhibit 10(ll) to  Registrant's  Annual Report on
                               Form 10-K (File No.  0-7100)  for the fiscal year
                               ended October 31, 1997).

                 (mm)          Service-Based   Stock  Option  Agreement  between            *
                               Registrant  and Thomas E. Gardner dated  October
                               17, 1997  (incorporated  by  reference to Exhibit
                               10(mm) to Registrant's Annual Report on Form 10-K
                               (File  No.  0-7100)  for the  fiscal  year  ended
                               October 31, 1997).

                 (nn)          Separation  and  Consulting   Agreement   between            *(A)
                               Registrant  and  Myles  M.  Kranzler  dated
                               October 20, 1997  (incorporated  by  reference to
                               Exhibit 10(nn) to  Registrant's  Annual Report on
                               Form 10-K (File No.  0-7100)  for the fiscal year
                               ended October 31, 1997).


                                       53
<PAGE>

<CAPTION>

                              Exhibit Index (con't)

Exhibit Number                          Exhibit                                             Page
--------------                          -------                                             ----
<S>              <C>          <C>                                                           <C>

                 (oo)         Omnibus  Convertible  Term Debenture Holder Waiver            *
                              and  Consent  Regarding  Sale of the   Government
                              Technology   Division  and   Amendment  No.  1  to
                              Convertible term Debenture between  Registrant and
                              RGC International Investors, LDC and the Tail Wind
                              Fund, LTD.,  dated October 20, 1997  (incorporated
                              by  reference  to Exhibit  10(oo) to  Registrant's
                              Annual  Report on Form 10-K (File No.  0-7100) for
                              the fiscal year ended October 31, 1997).

                 (pp)          Employment  Agreement  between  Registrant and C.            *(A)
                               Richard  Bagshaw  dated  November  26,   1997
                               (incorporated  by reference to Exhibit  10(pp) to
                               Registrant's Annual Report on Form 10-K (File No.
                               0-7100)  for the fiscal  year ended  October  31,
                               1997).

                 (qq)         Promissory Note from Strategic Technology Systems,            *
                              Inc.,  to  Registrant  dated  December  31,  1997
                              (incorporated  by reference  to Exhibit  10(gg) to
                              Registrant's  Annual Report on Form 10-K (File No.
                              0-7100)  for the  fiscal  year ended  October  31,
                              1997).

                 (rr)         Warrant Agreement between Registrant and Strategic            *
                              Technology  Systems,  Inc.,  dated  December  31,
                              1997  (incorporated by reference to Exhibit 10(rr)
                              to  Registrant's  Annual Report on Form 10-K (File
                              No.  0-7100) for the fiscal year ended October 31,
                              1997).

                 (ss)         Transition   Agreement   between   Registrant  and            *
                              Strategic   Technology  Systems,   Inc.,    dated
                              December  31, 1997  (incorporated  by reference to
                              Exhibit  10(ss) to  Registrant's  Annual Report on
                              Form 10-K (File No.  0-7100)  for the fiscal  year
                              ended October 31, 1997).

                 (tt)         Sublease   between    Registrant   and   Strategic            *
                              Technology  Systems,  Inc.,  dated  December  31,
                              1997  (incorporated by reference to Exhibit 10(tt)
                              to  Registrant's  Annual Report on Form 10-K (File
                              No.  0-7100) for the fiscal year ended October 31,
                              1997).

                 (uu)         Fifth  Amendment to Lease between  Registrant  and            *
                              CKR PARTNERS,  L.L.C.,  dated  December 31, 1997
                              (incorporated  by reference  to Exhibit  10(uu) to
                              Registrant's  Annual Report on Form 10-K (File No.
                              0-7100)  for the  fiscal  year ended  October  31,
                              1997).

                 (vv)          Consulting   Agreement  between   Registrant  and            *(A)
                               Edward J. Klinsport  dated December 31,  1997
                               (incorporated  by reference to Exhibit  10(vv) to
                               Registrant's Annual Report on Form 10-K (File No.
                               0-7100)  for the fiscal  year ended  October  31,
                               1997).

                 (ww)         Stock Purchase  Agreement dated as of November 12,            *
                              1998 by and between  Base Ten  Systems,  Inc. and
                              Jesse L.  Upchurch  (incorporated  by reference to
                              Exhibit  3(d) to  Registrants'  Current  Report on
                              Form 8-K  (File No.  0-7100)  dated  November  20,
                              1998).

                 (xx)          Exchange  Agreement dated as of December 31, 1998            *
                               by and between Base Ten  Systems,   Inc. and the
                               holders of the outstanding  Series A, Convertible
                               Preferred  Stock  (incorporated  by  reference to
                               Exhibit 10(xx) to Registrants'  Current Report on
                               Form 8-K  (File No.  0-7100)  dated  January  13,
                               1999).


                                       54
<PAGE>

<CAPTION>

                              Exhibit Index (con't)

Exhibit Number                          Exhibit                                             Page
--------------                          -------                                             ----
<S>              <C>          <C>                                                           <C>

                 (yy)         Form  of  Certificate  of  Amendment  of  Restated            *
                              Certificate  of  Incorporation   providing    for
                              designation,   preferences   and   rights  of  the
                              Convertible  preferred Shares, Series B (Exhibit A
                              to the Exchange Agreement dated as of December 31,
                              1998) (incorporated by reference to Exhibit 10(yy)
                              to  Registrants'  Current Report on Form 8-K (File
                              No. 0-7100) dated January 13, 1999).

                 (zz)          Form of Common Stock Purchase Warrant Certificate            *
                               (Exhibit B to the  Exchange  Agreement  dated as
                               of December 31, 1998)  (incorporated by reference
                               to Exhibit 10(zz) to Registrants'  Current Report
                               on Form 8-K (File No.  0-7100)  dated January 13,
                               1999).

                 (aaa)         Form of Common Stock Purchase Warrant Certificate            *
                               9Exhibit C to the  Exchange  Agreement  dated as
                               of December 31, 1998)  (incorporated by reference
                               to Exhibit 10(aaa) to Registrants' Current Report
                               on Form 8-K (File No.  0-7100)  dated January 13,
                               1999).

                 (bbb)         Irrevocable  Consent  dated  December 22, 1998 by            *
                               the holder of the  Company's  9.01%  Convertible
                               Subordinated    Debentures    (incorporated    by
                               reference  to  Exhibit  10(bbb)  to  Registrants'
                               Current  Report  on Form 8-K  (File  No.  0-7100)
                               dated January 13, 1999).

                 (ccc)         Offer  Letter  by the  Registrant  to C.  Richard            *(A)
                               Bagshaw    dated    November    26,   1997
                               (incorporated  by reference to Exhibit 10(ccc) to
                               Registrants' Annual Report on Form 10-K (File No.
                               0-7100) dated April 15, 1999).

                 (ddd)         Change   in   Control   Agreement   between   the            *(A)
                               Registrant  and C.  Richard  Bagshaw  dated
                               January 13, 1998  (incorporated  by  reference to
                               Exhibit 10(ddd) to Registrants'  Annual Report on
                               Form  10-K  (File  No.  0-7100)  dated  April 15,
                               1999).

                 (eee)         Offer  Letter by the  Registrant  to  William  F.            *(A)
                               Hackett dated December 8, 1997  (incorporated
                               by reference to Exhibit  10(eee) to  Registrants'
                               Annual  Report  on Form 10-K  (File  No.  0-7100)
                               dated April 15, 1999).

                 (fff)         Change   in   Control   Agreement   between   the            *(A)
                               Registrant  and William F. Hackett dated May
                               26, 1998  (incorporated  by  reference to Exhibit
                               10(fff)  to  Registrants'  Annual  Report on Form
                               10-K (File No. 0-7100) dated April 15, 1999).

                 (ggg)         Employment   Termination  Agreement  between  the            *
                               Registrant  and Thomas E. Gardner dated  October
                               28,   1999    (incorporated   by   reference   to
                               Registrants' Current Report on Form 8-K (File No.
                               0-7100) dated April 12, 2000).

                 (hhh)         Employment  Agreement  between the Registrant and            *(A)
                               Stephen A. Cloughley  dated October  28, 1999
                               (incorporated   by  reference   to   Registrants'
                               Current  Report  on Form 8-K  (File  No.  0-7100)
                               dated April 12, 2000).

                 (iii)        Termination  Agreement  between the Registrant and
                              Robert J. Bronstein dated as of March 31, 2000.

</TABLE>

                                       55
<PAGE>


21.                           Subsidiaries of the Registrant.

23.1                          Consent of Independent Accountants.

23.2                          Independent Auditors' Consent.

24.1                          Power of Attorney.

27.1                          Financial  Data Schedule for the fiscal year ended
                              December 31, 1999, submitted to the Securities and
                              Exchange Commission in electronic format.


---------------

*     Incorporated by reference.

(A)   A management contract or compensatory plan or arrangement.


                                       56