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                                  UNITED STATES
                       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 July 31, 1999

                                       OR

               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

         For the transition period from ____________ to ________________

                         Commission file number 0-19404

                          AMERICAN UNITED GLOBAL, INC.
             (Exact name of registrant as specified in its charter)

         Delaware                                         95-4359228

(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                        Identification No.)

11130 NE 33rd Place, Suite 250
Bellevue, Washington                                          98004
(Address of principal executive offices)                    (Zip Code)

       (425) 803-5432 (Registrant's telephone number, including area code)

      Securities registered pursuant to Section 12 (b) of the Exchange Act

Title of each class                        Name of exchange on which registered

None                                                 None
          Securities registered pursuant to Section 12 (g) of the Act:
                          Common Stock, $.01 par value
                                (Title of Class)

     Check 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,  and (2) has been subject to such filing  requirements  for
the past 90 days. Yes |X| No |_|

         Transitional Small Business Disclosure Format    Yes  |_|  No |X|

     Check if there is no disclosure  of  delinquent  filers in response to item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. |_|

     The aggregate  market value of the voting stock held by  non-affiliates  of
the issuer as of November 4, 1999 was approximately $2,210,000.

      ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS
<PAGE>

     Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes |_| No |_|


                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

     The number of shares outstanding of the registrant's Common Stock, $.01 Par
Value, on November 12, 1999 was 11,921,528.50 shares.

         Documents incorporated by reference: None


     PART I

         ITEM 1.     DESCRIPTION OF BUSINESS

         SUMMARY

     American  United  Global,  Inc., a Delaware  corporation  (the  "Company"),
through its operating  subsidiaries,  was engaged primarily in the distribution,
rental and servicing of  construction  equipment (the  "Distribution  Business")
during the fiscal year ending July 31,  1999  ("Fiscal  1999").  The Company has
been engaged in site acquisition, zoning, architectural and engineering services
for the  wireless  communication  and  telecommunications  industry  and general
construction  engineering  services  (the  "Telecommunication  and  Construction
Businesses")  through its minority-share  ownership of IDF  International,  Inc.
("IDF")  during  Fiscal  1999.  The  Company  disposed of the  remaining  assets
relating to its business of the design,  development  and  marketing of computer
software and software related products and services (the "Technology  Business")
during  Fiscal 1999.  The Company was engaged in active  operations  at July 31,
1999 in only the Distribution Business.

         The Distribution Business

     The  Distribution  Business  operates  through  the  Company's  60.6%-owned
subsidiary, Western Power & Equipment Corp., a Delaware corporation ("Western").
Western is engaged in the sale,  rental,  and servicing of light,  medium-sized,
and heavy construction, agriculture, and industrial equipment, parts and related
products which are manufactured by Case  Corporation  ("Case") and certain other
manufacturers.  The Company  believes,  based upon the number of locations owned
and  operated,   that  Western  is  the  largest   independent  dealer  of  Case
construction equipment in the United States. Products sold, rented, and serviced
by Western include  backhoes,  excavators,  crawler dozers,  skid steer loaders,
forklifts,  compactors, log loaders,  trenchers, street sweepers, sewer vacuums,
and mobile highway signs.

     Western  operates  out of 24  facilities  located  in  Washington,  Oregon,
Nevada,  California,  and  Alaska.  The  equipment  distributed  by  Western  is
furnished to contractors,  governmental  agencies, and other customers primarily
for use in the  construction  of residential  and commercial  buildings,  roads,
levees,  dams,   underground  power  projects,   forestry  projects,   municipal
construction, and other projects.



                                       3
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     Western's    strategy    focuses   on   acquiring    additional    existing
distributorships  and rental operations,  opening new locations,  and increasing
sales at its existing locations.  In connection with this strategy,  it may seek
to operate additional Case or other equipment retail distributorships, and sell,
lease  and  service  additional  lines of  construction  equipment  and  related
products not manufactured by Case.  Western reduced its acquisition  activity in
Fiscal 1999 due to market  conditions  affecting  the industry in which  Western
conducts its business.

     Western sustained a net loss of approximately  $1.8 million on net sales of
approximately  $163.7 million in the fiscal year ended July 31, 1999, whereas it
earned net income of  approximately  $1.8 million on net sales of  approximately
$163.5  million in the fiscal year ended July 31,  1998 and $1.0  million on net
sales of  approximately  $148.1  million in fiscal year ended July 31, 1997. The
Distribution  Business has in Fiscal 1999, Fiscal 1998 and Fiscal 1997 accounted
for 100% of the Company's net sales due to the  discontinuation of operations of
all  entities  engaging  in the  Technology  Business.  In all  likelihood,  any
material  adverse effect upon the  Distribution  Business or Western will have a
material  adverse effect upon the business,  financial  condition,  results from
operations and prospects of the Company.

         The Technology Business

     During the year  ending  July 31,  1999 the  Company  did not engage in the
Technology  Business.  In April  1998,  the  Company  approved a formal  plan to
dispose  of,  or  discontinue,  the  remaining  operations  of its  subsidiaries
constituting the Technology  Business.  In June 1999, the sale by the Company of
such assets constituting its Technology Business, which had not theretofore been
discontinued,  to eGlobe, Inc. was completed.  In connection with such sale, the
Company  received   convertible   preferred  stock  of  eGlobe,   Inc.  ("eGlobe
Preferred"),  valued at $2,000,000,  and eGlobe assumed approximately $5,182,000
in liabilities and lease  obligations of  subsidiaries of the Company,  of which
$2,900,000 of lease  obligations  have been guaranteed by the Company.  Although
eGlobe  will be  responsible  for  payment  of those  assumed  liabilities,  the
assumption of such  liabilities will not relieve the Company from its guarantees
until  such  liabilities  have been  paid.  The  eGlobe  Preferred  carries a 5%
cumulative  dividend  and is  convertible  at $1.56 per share of common stock of
eGlobe, or, in the aggregate,  into 1,920,000 shares of eGlobe common stock. The
Company has  realized a remaining  net gain on the sale of eGlobe  (gain on sale
less total costs, expenses and closure costs) of approximately $1,989,000, which
has been  reflected  as a net gain on the  disposal  of assets in the  Company's
consolidated statement of operations for Fiscal 1999.

         STRATEGIC GOALS

     The Company  continues to engage in the  Distribution  Business through its
subsidiary,  Western,  of which  the  Company  owns  approximately  60.6% of the
outstanding  Common  Stock.  The Company is currently  considering  focusing its
strategy  on  acquisitions  into  other  businesses,  although  it has  not  yet
identified any definitive acquisition candidate.

     Western's  growth  strategy  focuses  on  acquiring   additional   existing
distributorships  and rental operations,  opening new locations,  and increasing
sales at its existing locations. The Company reduced its acquisition activity in
Fiscal 1999 due to market  conditions in the industry in which Western  conducts
its business. When market conditions improve and as opportunities arise, Western
intends to make strategic  acquisitions of other  authorized  Case  construction
equipment retail dealers located in established or growing  markets,  as well as
dealers or distributors of construction,  industrial, or agricultural equipment,
and related  parts,  manufactured  by companies  other than Case. In addition to
acquisitions,  Western plans to open new retail outlets.  Western's strategy has
been to test market areas by placing sales,  parts, and service personnel in the
target  market  through  the efforts of  salespeople.  If the results are deemed
favorable, Western may open a retail outlet with its own inventory of equipment.
Western  believes this  approach  reduces both the business risk and the cost of
market development.


                                       4
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     The third prong of  Western's  growth  strategy  is to expand  sales at its
existing locations,  which it believes can be done in three ways. First, Western
will continue to broaden its product line by adding equipment and parts produced
by  manufacturers  other than Case.  Western has already  added  products to its
inventories  produced  by  such  quality  manufacturers  as  Dynapac,  Champion,
Link-Belt,  Takeuchi,  Tymco, Vactor,  Kawasaki,  Kubota,  Daewoo, and Stewart &
Stevenson.  Second,  Western  will seek to  increase  sales of parts and service
fees,  categories which have  considerably  higher margins than equipment sales.
The Company  believes  Western can accomplish  this growth through the continued
diversification  of its parts  product  lines  and the  servicing  of  equipment
produced  by  manufacturers  other than Case.  Third,  Western  plans to further
develop  its  fleet of rental  equipment.  As the cost of  purchasing  equipment
escalates,  short and  long-term  rental  is  predicted  to become  increasingly
attractive to Western's customers.  Western's management anticipates that rental
of equipment will make up an increasing share of revenues.

         HISTORY AND RECENT ACQUISITIONS AND DIVESTITURES

     The Company was initially  organized as a New York  corporation on June 22,
1988 under the name Alrom Corp.,  and  completed an initial  public  offering of
securities in August 1990. The Company  effected a statutory  merger in December
1991,  pursuant to which the Company was reincorporated in the State of Delaware
under the name American United Global, Inc.

         Western

     Western commenced  business in November 1992 with the acquisition from Case
of seven  retail  distribution  facilities  located  in Oregon  and  Washington.
Western   became  a  subsidiary  of  the  Company,   simultaneously   with  such
acquisition. The Company holds 60.6 percent of the outstanding shares of Western
as of July 31, 1999.

     In September 1994 and February 1996, in two different transactions, Western
acquired  from  Case  four  retail  construction  equipment  stores  located  in
California and Nevada. In addition,  in June 1996 and January 1997, Western made
two additional  acquisitions of distributorships of predominantly  non-competing
lines of equipment, with locations in California, Oregon, Washington and Alaska.
From Fiscal 1993 through Fiscal 1997, Western also opened nine new stores in the
states served by the acquired stores, ending Fiscal 1997 with 24 stores.

     In  Fiscal  1998,  Western  acquired  four  additional  facilities  through
acquisition,  located in California and Alaska. The pre-existing Alaska facility
was  discontinued  as it was combined  with the  acquired  Alaska  facility.  In
addition, in Fiscal 1998 Western opened one new store in Washington. On December
11, 1997,  Western  acquired  substantially  all of the operating assets used by
Case in  connection  with  its  business  of  servicing  and  distributing  Case
agricultural equipment at a facility located in Yuba City, California.

         Business Strategy

     The  Company's  business  strategy  has  focused  on  acquiring  additional
existing  distributorships  and rental  operations,  opening new locations,  and
increasing sales at its existing locations.  The Company reduced its acquisition
activity in Fiscal 1999 due to market conditions.

     When market conditions improve and opportunities arise, the Company intends
to make strategic  acquisitions of other authorized Case construction  equipment
retail dealers located in established or growing markets,  as well as dealers or
distributors of construction, industrial, or agricultural equipment, and related
parts, manufactured by companies other than Case.

     In addition to acquisitions,  the Company plans to open new retail outlets.
The strategy in opening  additional retail outlets has been to test market areas
by placing sales,  parts,  and service  personnel in the target  market.  If the
results  are  favorable,  a retail  outlet is opened with its own  inventory  of
equipment.  This approach  reduces both the business risk and the cost of market
development.


                                       5
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     The third prong of the  Company's  business  strategy is to expand sales at
its  existing  locations  in three ways.  First,  the Company  will  continue to
broaden its product line by adding equipment and parts produced by manufacturers
other than Case.  The  Company  has already  added  products to its  inventories
produced  by  such  quality  manufacturers  as  Dynapac,  Champion,   Link-Belt,
Takeuchi,  Tymco,  Vactor,  Kawasaki,  Kubota,  Daewoo, and Stewart & Stevenson.
Second,  the Company will seek to increase  sales of parts and service - both of
which have considerably  higher margins than equipment sales. This increase will
be  accomplished  through the continued  diversification  of the Company's parts
product lines and the  servicing of equipment  produced by  manufacturers  other
than Case.  Third,  the  Company  plans to further  develop  its fleet of rental
equipment.  As the cost of purchasing equipment  escalates,  short and long-term
rental  will  become  increasingly   attractive  to  the  Company's   customers.
Management anticipates that rental of equipment will make up an increasing share
of the Company's revenues.

         Products

         Case Construction Equipment

     The construction  equipment (the "Equipment")  sold, rented and serviced by
the Company  generally  consists of: backhoes (used to dig large,  wide and deep
trenches);  excavators  (used to dig deeply for the construction of foundations,
basements,  and other  projects);  log  loaders  (used to cut,  process and load
logs); crawler dozers (bulldozers used for earth moving,  leveling and shallower
digging  than  excavators);  wheel  loaders  (used for loading  trucks and other
carriers with  excavated  dirt,  gravel and rock);  roller  compactors  (used to
compact  roads and other  surfaces);  trenchers  (a  smaller  machine  that digs
trenches for sewer lines,  electrical  power and other utility pipes and wires);
forklifts (used to load and unload pallets of materials); and skid steer loaders
(smaller version of a wheel loader,  used to load and transport small quantities
of  material-e.g.,  dirt and rocks-around a job site).  Selling prices for these
units range from $15,000 to $350,000 per piece of equipment.

     In Fiscal 1998, Western acquired four additional facilities,  in California
and  Alaska,  and  opened  one  new  store  in  the  state  of  Washington.  The
pre-existing  Alaska  facility  was  discontinued  as it was  combined  with the
acquired Alaska facility.  On December 11, 1997, Western acquired  substantially
all of the  operating  assets used by Case in  connection  with its  business of
servicing and distributing Case agricultural  equipment at a facility located in
Yuba City, California.  On April 30, 1998, Western acquired substantially all of
the operating  assets of Yukon  Equipment,  Inc.  ("Yukon") in  connection  with
Yukon's business of servicing and  distributing  construction,  industrial,  and
agricultural equipment in Alaska. Yukon has facilities in Anchorage,  Fairbanks,
and Juneau, Alaska.

     In Fiscal  1999,  the Company  closed three of its smaller  facilities  and
began  servicing  the  territories  served  by  these  small  stores  by  larger
facilities  in the region.  The Company  ended  Fiscal 1999 with 24 stores.  The
Company has  consolidated  an additional four facilities in the first quarter of
Fiscal 2000 into larger  stores in each  region.  The  closures  are intended to
increase efficiencies and reduce costs.


                                       6
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National O-Ring and Stillman Seal

     In January 1996, the Company sold all of the assets of its National  O-Ring
and Stillman  Seal  businesses,  comprising  the  manufacturing  business of the
Company,   to  Hutchinson   Corporation   ("Hutchinson")  for  $24,500,000  (the
"Hutchinson  Transaction"),  of  which  $20,825,000  was  paid in  cash  and the
aggregate  $3,675,000 balance was paid by delivery of two 24-month  non-interest
bearing promissory notes due and paid in January 1998.

Connectsoft
-----------

     Effective as of July 31, 1996, the Company acquired,  through a merger with
an  acquisition  subsidiary  of the  Company  consummated  in  August  1996 (the
"Connectsoft Merger"), all of the outstanding capital stock of Connectsoft, Inc.
a closely-held company located in Bellevue, Washington ("Old Connectsoft") which
provided a variety of computer  products and services.  In  connection  with the
Connectsoft Merger, Old Connectsoft  stockholders received, on a pro rata basis,
an aggregate of 976,539 shares of the Company's  Series B-1 Preferred Stock (the
"Preferred Stock"). Such Preferred Stock does not pay a dividend, is not subject
to  redemption,  has a liquidation  preference of $3.50 per share over Company's
Common  Stock and votes  together  with the  Company's  Common Stock as a single
class on a one share  for one vote  basis.  Each  share of  Preferred  Stock was
convertible  into either one, two or three shares of Common Stock of the Company
if certain benchmarks for pre-tax income of Old Connectsoft and its consolidated
subsidiaries, and Exodus Technologies, Inc., a direct subsidiary of the Company,
were achieved.  As such  benchmarks  were not achieved,  the Preferred Stock has
been and is only convertible into Common Stock on a one-for-one  basis. To date,
550,919  shares of Preferred  Stock have been  converted into an equal number of
shares  of  Common  Stock,   and  425,620  shares  of  Preferred   Stock  remain
outstanding.

     On  July  10,  1998,  the  Company   entered  into  an  agreement  to  sell
substantially  all of the assets of its Connectsoft  Communications  Corporation
subsidiary,  including the network operations center, to eGlobe. The transaction
was amended and closed on June 17,  1999 and was  further  amended in  September
1999. As consideration,  eGlobe issued  approximately  $2,000,000 (as valued) of
its  convertible  preferred  stock  to the  Company  and  assumed  approximately
$5,182,000  of  Connectsoft  liabilities  and  leases,  of  which  approximately
$2,900,000 are lease obligations guaranteed by the Company. Although eGlobe will
be responsible for payment of those assumed liabilities,  the assumption of such
liabilities  will not  relieve  the  Company  from  its  guarantees  until  such
liabilities  have been paid.  The sale to eGlobe was  consummated  in June 1999.
Thereafter,  in August 1999,  the  agreement  with eGlobe was amended.  Although
eGlobe  will be  responsible  for  payment  of those  assumed  liabilities,  the
assumption of such  liabilities will not relieve the Company from its guarantees
until  such  liabilities  have been  paid.  See also  "Item 1 -  Description  of
Business-Summary-Technology Business." InterGlobe

     In September  1996,  the Company  acquired  InterGlobe for a purchase price
paid to the InterGlobe  stockholders in the aggregate of approximately $400,000,
plus 800,000 shares of the Company's  Common Stock.  The former  stockholders of
Interglobe also received four-year employment agreements with Interglobe and the
Company,  pursuant  to which they  received  seven-year  options to  purchase an
additional aggregate 800,000 shares of the Company's Common Stock at an exercise
price  of  $6.00  per  share  (the  "Interglobe  Options"),  of  which  all such
Interglobe  Options  have since  been  canceled.  In August  1998,  the  Company
discontinued the operations of InterGlobe.


                                       7
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     On November 4, 1997,  Artour Baganov,  the former principal  stockholder of
InterGlobe,  tendered his  resignation  as a member of the Board of Directors of
the Company and InterGlobe.  The Company and InterGlobe  reached an agreement on
July 22, 1998 with Mr. Baganov under which he agreed to terminate his employment
agreement  with  InterGlobe  and  cancel his  698,182  performance  options.  In
consideration,  the Company and  InterGlobe  paid Mr.  Baganov an  aggregate  of
$300,000 in full  settlement of obligations  under his employment  agreement and
released such  stockholder from his  non-competition  agreement with InterGlobe.
Mr. Baganov also agreed to vote his 550,000 shares of the Company's Common Stock
in favor  of  management's  nominees  for  election  to the  Company's  Board of
Directors.  Two other former  stockholders of InterGlobe had previously resigned
as InterGlobe  employees and their employment  agreements and InterGlobe Options
were canceled.

     Exodus

     The Company,  through its Exodus  subsidiary,  had designed and developed a
proprietary software program,  marketed as NTerprise.  TM, which allows users to
run WindowsTM  application server software programs designed for the MicrosoftTM
Windows NTTM  operating  system  developed  by Microsoft on (i) users'  existing
UnixTM workstations, X-terminals and other X-widows devices, Macintosh terminals
and  Java-enabled  network  computers,  which  would  otherwise  not be  Windows
compatible,  and (ii) on older versions of Windows compatible workstations which
are  otherwise  incapable  of running  newer  versions of  Microsoft  compatible
software,   such  as  Office95TM  or  Lotus  NotesTM.  The  Company  decided  to
discontinue its Exodus operations in January 1998 following Microsoft's decision
not to renew its suncontractor's license with Exodus.

     Seattle OnLine

     In November 1996, the Company  acquired the assets of Seattle OnLine,  Inc.
("Seattle OnLine"), a company engaged in providing a regional  Internet/Intranet
telecommunication  service in the form of high bandwidth  Internet  connectivity
and hosting for businesses in the Pacific  Northwest.  The Company purchased the
Seattle OnLine assets for the sum of $147,000 and 16,000 shares of the Company's
Common Stock which were used to settle certain creditor claims. The Company also
issued to the former  stockholders of such  corporation  warrants to purchase an
aggregate of 333,333 shares of the Company's Common Stock. Seattle OnLine ceased
operations in August 1997 and its remaining assets were sold to a privately held
company for $25,000 cash and a sufficient number of shares of preferred stock of
the acquiring  company so as to equal $50,000 in value on the date of receipt of
the shares.

TechStar and IDF
----------------

     Effective  December 11, 1996, the Company acquired TechStar  Communications
Corp.  ("TechStar").  In connection  therewith the Company  issued to the former
TechStar  stockholders  an aggregate of 507,246  shares of Company Common Stock,
paid  $780,000  in cash and  delivered  three  year  Company  notes  aggregating
$600,000.  In a related  transaction,  in April 1997 the Company  also  acquired
Arcadia Consulting, Inc., a company formed by Solon L. Kandel for the purpose of
providing  consulting  services  to clients in the  wireless  telecommunications
industry.  The Company paid $220,000 and issued to Mr. Kandel  192,754 shares of
Common  Stock.  Subsequent  to such  acquisitions,  the former  stockholders  of
TechStar  publicly  sold an  aggregate  of  331,346 of their  507,246  shares of
Company  Common Stock and Mr. Kandel  publicly sold all of his 192,754 shares of
Company Common Stock.


                                       8
<PAGE>




     In August 1997, the Company sold TechStar to IDF,  pursuant to an agreement
and plan of merger, dated July 31, 1997 (the "IDF Merger Agreement"),  among the
Company,  TechStar,  IDF and an acquisition subsidiary of IDF. Upon consummation
of the transaction,  the Company received  6,171,553 shares of IDF common stock,
representing  approximately  58% of the fully  diluted  outstanding  IDF  common
stock, and as a result, for accounting purposes,  the Company was deemed to have
acquired IDF. Solon D. Kandel,  Sergio Luciani and Simontov Moskona,  the senior
executive  officers  of  TechStar,  received  three year  options to purchase an
aggregate  of  856,550   shares  of  IDF  common  stock  (the  "IDF   Options"),
representing  approximately  an additional 8% of such fully diluted  outstanding
IDF common stock.  In connection with the transaction (i) all options granted by
the Company under their employment agreements entitling Messrs.  Kandel, Luciani
and Moskona to purchase an aggregate of 780,000  shares of Company  Common Stock
(subject to  achievement  of certain  financial  performance  targets),  and all
related  120,000  performance  options held by other  TechStar  employees,  were
cancelled,  (ii) each of Messrs.  Luciani and Kandel tendered their resignations
as directors  of the  Company,  and (iii)  Messrs.  Luciani,  Moskona and Kandel
utilized  $600,000 of the net proceeds from the sale of their Company  shares to
invest in convertible securities of IDF.

     Messrs.  Kandel,  Luciani and Moskona were the senior executive officers of
IDF and each resigned their positions between January 1999 and May 1999. Each of
such officers had employment agreements with IDF pursuant to which they had been
entitled to receive, in addition to their base salaries and annual bonuses,  IDF
Options which vest based upon IDF and its consolidated  subsidiaries,  including
TechStar and Hayden/Wegman (a subsidiary of TechStar),  achieving all or certain
pro-rated  portions of annual  pre-tax  income  targets in each of fiscal  years
ending July 31, 1998, 1999 and 2000.  However,  as none of such IDF Options have
vested as of the end of Fiscal  1999,  the number of shares of IDF common  stock
that would have been issued upon the exercise of such  unvested IDF Options have
reverted back to the Company as additional consideration.

     Robert M. Rubin, the Chief Executive  Officer and Chairman of the Board and
a Director of the  Company,  is also a principal  stockholder  and member of the
board  of  directors  of  IDF.  Prior  to  consummation   of  the   transactions
contemplated by the IDF Merger  Agreement,  Mr. Rubin converted an $800,000 loan
previously made to IDF into preferred stock  convertible  into 400,000 shares of
IDF common stock.

     During Fiscal 1999,  the Company  loaned IDF a total of $992,000.  However,
IDF has in the last two fiscal quarters of Fiscal 1999 experienced a significant
decrease  in revenue  and has been unable to obtain  further  financing.  Due to
these  circumstances  and the  uncertainty of recovery,  the Company has taken a
full reserve against the advances of $992,000 made to IDF.

     During  the third  fiscal  quarter of Fiscal  1999,  IDF  discontinued  the
operations of TechStar.

Conese Enterprises Transaction

     Effective  March 24,  1998,  the  Company,  Western and IDF entered  into a
securities purchase agreement with Conese Enterprises, Ltd. ("Enterprises").  As
a result of subsequent  discussions,  however,  the parties  mutually  agreed to
terminate  the  securities  purchase  agreement.  On June 27, 1998,  the parties
entered into an agreement  releasing each other from any  obligations  under the
securities purchase agreement,  and pursuant to the "break up" provisions of the
agreement which the Company reimbursed  Enterprises  $150,000 for their expenses
in connection with the proposed transactions.


                                       9
<PAGE>





         THE DISTRIBUTION BUSINESS

         General

     The Company engages in the Distribution  Business through Western, of which
it owns approximately 60.6% of its outstanding Common Stock.  Western is engaged
in  the  sale,  rental,  and  servicing  of  light,   medium-sized,   and  heavy
construction,   agricultural,  and  industrial  equipment,  parts,  and  related
products which are  manufactured  by Case and certain other  manufacturers.  The
Company believes, based upon the number of locations owned and operated, that it
is the largest  independent dealer of Case construction  equipment in the United
States.  Products sold,  rented,  and serviced by the Company include  backhoes,
excavators,  crawler  dozers,  skid steer loaders,  forklifts,  compactors,  log
loaders, trenchers, street sweepers, sewer vacuums, and mobile highway signs.

     Western  operates  out of 24  facilities  located  in  Washington,  Oregon,
Nevada,  California,  and  Alaska.  The  equipment  distributed  by  Western  is
furnished to contractors,  governmental agencies, and other customers, primarily
for use in the  construction  of residential  and commercial  buildings,  roads,
levees,  dams,   underground  power  projects,   forestry  projects,   municipal
construction, and other projects.

     Western's  growth  strategy  consists  of  acquiring   additional  existing
distributorships  and rental operations,  opening new locations,  and increasing
sales at its  existing  locations.  In such  connection,  it may seek to operate
additional Case or other equipment retail distributorships, and sell, lease, and
service  additional  lines of  construction  equipment and related  products not
manufactured by Case. See "Growth Strategy".

         Growth Strategy

     Western's  growth  strategy  focuses  on  acquiring   additional   existing
distributorships,  opening new  locations and  increasing  sales at its existing
locations.   As   opportunities   arise,   Western  intends  to  make  strategic
acquisitions of other  authorized  Case  construction  equipment  retail dealers
located in established or growing markets, as well as of dealers or distributors
of industrial or  construction  equipment,  and related parts,  manufactured  by
companies  other than Case. In addition to  acquisitions,  Western plans to open
new retail outlets.  Western's strategy has been to test market areas by placing
sales,  parts,  and service  personnel in the target market.  If the results are
deemed favorable, a retail outlet is opened with its own inventory of equipment.
Western  believes this  approach  reduces both the business risk and the cost of
market development.

     The third  aspect of  Western's  growth  strategy is to expand sales at its
existing  locations in three ways.  First,  Western will continue to broaden its
product line by adding equipment and parts produced by manufacturers  other than
Case. Western has already added to its inventories  products produced by quality
manufacturers such as Dynapac,  Champion,  Link-Belt,  Takeuchi,  Tymco, Vactor,
Kawasaki,  Kubota, Daewoo and Stewart & Stevenson.  Second, Western will seek to
increase  sales of parts and  service  fees,  categories  which the  Company and
Western have found to have considerably higher margins than equipment sales. The
Company  believes  Western  can  accomplish  this growth  through the  continued
diversification  of the parts  product  lines  and the  servicing  of  equipment
produced  by  manufacturers  other than Case.  Third,  Western  plans to further
develop  its  fleet of rental  equipment.  As the cost of  purchasing  equipment
escalates, short and long-term rental will become increasingly attractive to the
Western's customers.  Western's management  anticipates that rental of equipment
will make up an increasing shares of Western's revenues.



                                       10
<PAGE>




         Case Construction Equipment

     The construction  equipment (the "Equipment")  sold, rented and serviced by
Western  generally  consists  of:  backhoes  (used to dig  large,  wide and deep
trenches);  excavators  (used to dig deeply for the construction of foundations,
basements,  and other  projects);  log  loaders  (used to cut,  process and load
logs); crawler dozers (bulldozers used for earth moving,  leveling and shallower
digging  than  excavators);  wheel  loaders  (used for loading  trucks and other
carriers with  excavated  dirt,  gravel and rock);  roller  compactors  (used to
compact roads and other surfaces); trenchers (a small machine that digs trenches
for sewer lines, electrical power and other utility pipes and wires);  forklifts
(used to load and  unload  pallets  of  materials);  and skid  steer  loaders (a
smaller version of a wheel loader,  used to load and transport small  quantities
of material such as dirt and rocks around a job site).  Selling  prices for this
Equipment ranges from $15,000 to $350,000 per piece of equipment.

     Under  the  terms  of  standard  Case  dealer  agreements,  Western  is  an
authorized  Case dealer for sales of equipment and related parts and services at
locations  in  Oregon,   Washington,   Nevada  and  Northern   California   (the
"Territory").  The dealer  agreements have no defined term or duration,  but are
reviewed on an annual basis by both parties, and can be terminated without cause
at any time either by Western on 30 days' notice or by Case on 90 days'  notice.
Although the dealer  agreements do not prevent Case from arbitrarily  exercising
its right of  termination,  based  upon  Case's  established  history  of dealer
relationships  and industry  practice,  Western does not believe that Case would
terminate its dealer agreement without good cause.

     The dealer  agreements  do not contain  requirements  for specific  minimum
purchases from Case. In consideration for Western's  agreement to act as dealer,
Case  supplies  to  Western  items  of  Equipment  for sale  and  lease,  parts,
cooperative advertising benefits,  marketing brochures related to Case products,
access to Case product  specialists  for field  support,  the ability to use the
Case name and logo in connection  with  Western's  sales of Case  products,  and
access to Case floor plan financing for Equipment purchases. Such floor planning
arrangements  currently  provides  Western  with  interest  free credit terms of
between  one month and twelve  months on  purchases  of  specified  types of new
Equipment.  Principal  payments are  generally due at the earlier of sale of the
equipment or six months from the date of shipment by Case.

         Other Products

     Although the principal  products  sold,  leased and serviced by Western are
manufactured by Case, Western also sells, rents and services equipment and sells
related parts (e.g., tires, trailers and compaction  equipment)  manufactured by
others.  Approximately  42% of Western's net sales for fiscal year 1999 resulted
from sales,  rental and servicing of products  manufactured  by companies  other
than Case, a higher  percentage  than the 35% of total net sales for fiscal year
1998 from this category as Western continued its planned growth in product lines
other than Case.  Manufacturers  other than Case  represented  by Western  offer
various levels of supplies and marketing  support along with purchase terms that
vary from cash upon delivery to interest-free 12-month floor plans.

     Western's  distribution business is generally divided into three categories
of activity:  (i) equipment sales, (ii) equipment  rentals,  and (iii) equipment
service and support.


                                       11
<PAGE>




         Equipment Sales

     At each of its distribution  outlets,  Western maintains a fleet of various
equipment  for sale.  The  equipment  purchased  for each  outlet is selected by
Western's  marketing staff based upon the types of customers in the geographical
areas  surrounding  each outlet,  historical  purchases  as well as  anticipated
trends.  Subject to applicable  limitations in Western's  manufacturers'  dealer
contracts,  each  distribution  outlet has access to Western's full inventory of
equipment.  Western provides only the standard  manufacturer's  limited warranty
for new  equipment,  which is  generally  a one-year  parts and  service  repair
warranty. Customers can purchase extended warranty contracts.

     Western sells used Equipment that has been reconditioned in its own service
shops.  It generally  obtains such used Equipment as "trade-ins"  from customers
who purchase new items of Equipment and from Equipment previously rented and not
purchased. Unlike new Equipment,  Western's used Equipment is generally sold "as
is" and without a warranty.

         Equipment Rentals

     Western  maintains a separate  fleet of equipment  that it holds solely for
rental. Such equipment is generally held in the rental fleet for 12 to 36 months
and then sold as used  equipment with  appropriate  discounts  reflecting  prior
rental usage. As rental equipment is taken out of the rental fleet, Western adds
new  equipment  to its rental fleet as needed.  The rental  charges  vary,  with
different  rates for  different  types of  equipment  rented.  In October  1998,
Western opened its first rental-only store,  located in the Seattle,  Washington
area,  under the name Western Power Rents.  This store rents a wide range of pro
ducts including  equipment from Case and other  manufacturers  with whom Western
has dealer agreements as well as equipment from companies with which Western has
had no prior relationship.

         Product Support and Service

     Western  operates  a service  center and yard at each  retail  distribution
outlet for the repair and storage of Equipment.  Both warranty and  non-warranty
service work is performed,  with the cost of warranty  work being  reimbursed by
the manufacturer following the receipt of invoices from Western. Western employs
approximately 140 manufacturer-trained service technicians who perform Equipment
repair,  preparation  for  sale,  and  other  servicing  activities.   Equipment
servicing is one of the higher  profit  margin  businesses  operated by Western.
Western has expanded this business by hiring additional personnel and developing
extended warranty  contracts to be purchased by customers for Equipment sold and
serviced  by  Western,  and  independently   marketing  such  contracts  to  its
customers.  Western  services  items and types of Equipment  which include those
that are neither sold by Western nor manufactured by Case.

     Western  purchases a large inventory of parts,  principally  from Case, for
use in its Equipment  service  business,  as well as for sale to other customers
who are independent servicers of Case Equipment.  Generally, parts purchases are
made on standard net 30 day terms.

     Western  employs one or more  persons who take  orders from  customers  for
parts purchases at each retail distribution  outlet. The majority of such orders
are placed in person by walk-in  customers.  Western  provides only the standard
manufacturer's  warranty on the parts that it sells, which is generally a 90-day
replacement guaranty.


                                       12
<PAGE>



         Sales and Marketing

     Western's  customers  are typically  residential  and  commercial  building
general contractors, road and bridge contractors,  sewer and septic contractors,
underground  power line contractors,  persons engaged in the forestry  industry,
equipment  rental  companies  and  state  and  municipal  authorities.   Western
estimates  that it has  approximately  9,000  customers,  with most being  small
business owners, none of which accounted for more than three percent (3%) of its
total sales in the fiscal year ended July 31, 1999.

     For fiscal years 1999, 1998, and 1997, the approximate revenue breakdown by
source for the business operated by the Company were as follows:


                                       FY 1999      FY 1998      FY 1997
                                       -------      -------      -------
                  Equipment Sales        60%          69%          69%
                  Equipment Rental       16%           8%           9%
                  Product Support        24%          23%          22%
                                        ---          ---           ---
                                        100%         100%          100%
                                        ===          ===           ===

     Western  advertises  its  products  in  trade  publications  and its  sales
representatives  appear  at  trade  shows  throughout  the  Territory.  It  also
encourages  its  salespersons  to  visit  customer  sites  and  offer  Equipment
demonstrations when requested.

     Western  believes  its sales and  marketing  activities  do not result in a
significant  backlog of orders.  Although  Western has  commenced  acceptance of
orders from customers for future delivery following manufacture by Case or other
manufacturers,  during  Fiscal  1999  substantially  all of its  sales  revenues
resulted  from  products  sold  directly out of  inventory,  or the providing of
services upon customer request.

     All of Western's  sales  personnel  are  employees of Western,  and all are
under the general  supervision  of C. Dean McLain,  the Executive Vice President
and a director of the Company, and the President of Western.  Western assigns to
each Equipment  salesperson a separate  exclusive  territory,  the size of which
varies based upon the number of potential  customers and  anticipated  volume of
sales as well as the geographical characteristics of each area. Western employed
approximately 70 Equipment salespersons on July 31, 1999.

     On July 31, 1999,  Western employed seven product support  salespersons who
sell Western's parts and repair  services to customers in assigned  territories.
Western has no independent distributors or non-employee sales representatives.

         Suppliers

     Western purchases the majority of its inventory of Equipment and parts from
Case. No other  supplier  currently  accounts for more than ten percent (10%) of
such inventory  purchases in Fiscal 1999.  While  maintaining  its commitment to
Case to  primarily  purchase  Case  Equipment  and parts as an  authorized  Case
dealer,  in the  future  Western  plans to expand  the  number of  products  and
increase the aggregate  dollar value of those products  which Western  purchases
from manufacturers other than Case in the future.



                                       13
<PAGE>




         Competition

     Western  competes  with  distributors  of  construction,  agricultural  and
industrial  equipment and parts manufactured by companies other than Case on the
basis of price,  the  product  support  (including  technical  service)  that it
provides  to its  customers,  brand  name  recognition  for  its  products,  the
accessibility  of its  distribution  outlets and the overall quality of the Case
and other products that it sells. Western management believes that it is able to
effectively  compete with  distributors of products  produced and distributed by
such other manufacturers  primarily on the basis of overall product quality, and
the superior product support and other customer services provided by Western.

     Case's  two  major  competitors  in  the  manufacture  of a  full  line  of
construction   equipment  of  comparable   sizes  and  quality  are  Caterpillar
Corporation  and Deere &  Company.  In  addition,  other  manufacturers  produce
specific  types of equipment  which  compete with the Case  Equipment  and other
Equipment   distributed  by  Western.   These   competitors  and  their  product
specialties   include   JCB   Corporation   (backhoes),    Kobelco   Corporation
(excavators),  Dresser  Industries (light and medium duty  bulldozers),  Komatsu
Corporation  (wheel  loaders and crawler  dozers) and Bobcat,  Inc.  (skid steer
loaders).

     Western is  currently  the only Case dealer for  construction  equipment in
Washington,  Alaska,  Nevada and in the  Northern  California  area  (other than
Case-owned distribution outlets), and is one of two Case dealers in Oregon. None
of the Case dealers in Western's territory are owned by Case. However,  Case has
the right to establish other  dealerships in the future in the same  territories
in which the Company operates.  In order to maintain and improve its competitive
position,  revenues and profit  margins,  Western plans to increase its sales of
products produced by companies other than Case.

         Environmental Standards and Government Regulation

     Western's  operations are subject to numerous rules and  regulations at the
federal, state and local levels which seek to protect the environment, including
regulating the discharge of hazardous materials into the environment. Western is
subject to federal  environmental  standards  because,  in  connection  with its
operations,  it handles and disposes of hazardous materials and discharges sewer
water in its equipment rental and servicing operations.  Western is also subject
to local rules and regulations regarding the discharge of waste water into sewer
systems.  Western's  internal staff is trained to keep appropriate  records with
respect to its handling of hazardous  waste,  to establish  appropriate  on-site
storage  locations  for hazardous  waste,  and to select  regulated  carriers to
transport  and  dispose  of  hazardous  waste.   Based  upon  current  laws  and
regulations,  Western  believes that its policies,  practices and procedures are
properly  designed to prevent an unreasonable  risk of environmental  damage and
the  resultant  financial  liability to Western.  No assurance can be given that
future changes in such laws, regulations, or interpretations thereof, changes in
the nature of Western's  operations,  or the effects of former  occupants'  past
activities  at the  various  sites at which  Western  operates,  will not have a
material adverse effect upon the Company's operations.



                                       14
<PAGE>




         Insurance

     Western currently has general,  product  liability,  and umbrella insurance
policies  with  limits,  terms,  and  conditions  which  Western and the Company
believe to be consistent with reasonable business practice, although there is no
assurance  that such  coverage  will  prove to be  adequate  in the  future.  An
uninsured or partially  insured claim, or a claim for which  indemnification  is
not available, or a change in or lapse of any previously existing coverage could
have a material  adverse  effect upon  Western,  and in such event would  likely
materially adversely affect the Company's business, financial condition, results
from operations and prospects.

Employees

     At July 31, 1999, Western employed  approximately 420 full-time  employees,
or  approximately  30 fewer than at July 31,  1998.  Of that  number,  29 are in
corporate  administration,  27 are  involved  in  administration  at the  branch
locations,  111 are employed in Equipment  sales and rental,  86 are employed in
parts sales,  and 167 are employed in servicing  construction  equipment.  Staff
reductions during the year ending July 31, 1999 were considered to be relatively
even across all departments.

     At  July  31,  1999,  approximately  19 of  Western's  service  technicians
employed in the  Sacramento,  California  operation  were being  represented  by
Operating  Engineers Local Union No. 3 of the  International  Union of Operating
Engineers,  AFL-CIO under the terms of a five-year  contract expiring August 31,
2001. As of May 1999, approximately 19 service technicians employed at Western's
facility  in  Auburn,  Washington  had  voted to be  represented  in  collective
bargaining  by  Operating  Engineers  Local  Union  Nos.  302  and  612  of  the
International  Union of Operating  Engineers,  AFL - CIO.  Western and the local
unions'  representatives are currently in contract negotiations as to a contract
for these employees.  Western believes that its relations with its employees are
satisfactory.

     The Company has three executive  officers and no administrative  employees,
but uses some consultants to perform certain administrative duties.

Future Performance and Risk Factors

     The future  performance,  operating results and financial  condition of the
Company's  Distribution Business are subject to various risks and uncertainties,
including those described below.

     Competition.

  The  Company's  Distribution  Business  operates  in a highly
competitive  industry  and market in which many  companies  have  financial  and
personnel resources  significantly  greater than those of Western,  and in which
Western faces a great deal of  competition  on the basis of price.  Such intense
price  competition  has the effect of holding down  Western's  profit margins on
product sales. The retail construction equipment industry,  including the states
of Washington,  Oregon, California, Alaska and Nevada in which Western operates,
is also highly fragmented with many brands of equipment and distributors of such
brands active in the market,  thus presenting Western with intense  competition.
Moreover,  Western's  dealership  arrangements  with Case do not provide Western
with exclusive  dealerships in any territory.  Although management believes that
it is  unlikely  that Case will  create  additional  independent  dealers in the
states of Oregon, Washington,  California, Alaska or Nevada, or will reinstitute
its own proprietary  dealerships in that  territory,  there is no assurance that
Case will not elect to do so in the future. If Western cannot adequately compete
with competing companies or adopt to changes in the marketplace or industry, the
business,  financial condition, results from operations and prospects of Western
will  be  materially   adversely   affected.   See  "Business-The   Distribution
Business-Competition."

                                       15
<PAGE>

     Government Regulation and Environmental Standards.

     Western's  operations are subject to numerous rules and  regulations at the
federal,  state and local levels which are designed to protect the  environment,
including  regulating  the  discharge of certain  hazardous  materials  into the
environment.  Western's  internal staff is trained to keep  appropriate  records
with  respect to its  handling of  hazardous  waste,  to  establish  appropriate
on-site storage locations for hazardous waste, and to select regulated  carriers
to transport and dispose of hazardous waste.  There is always the risk that such
materials might be mishandled, or that there might occur equipment or technology
failures, which could result in significant claims for personal injury, property
damage  and  clean-up  or  remediation.  Any such  claims  could have a material
adverse  effect on  Western.  If such  claims are upheld and Western is fined or
sanctioned,  the business,  financial  condition and results from  operations of
Western, and the Company, may be materially adversely affected. No assurance can
be given  that  future  changes in such laws,  regulations,  or  interpretations
thereof, changes in the nature of Western's operations, or the effects of former
occupants' past activities at the various sites at which Western operates,  will
not have a material  adverse  effect upon the  Company's  operations,  financial
condition,    business   or   prospects.    See    "Business-The    Distribution
Business-Environmental Standards and Government Regulation."



     Risk of  Termination  of Case  Dealership.

     Under the  terms of the  standard  Case  construction  equipment  sales and
services agreement with its dealers,  including Western, Case reserves the right
to terminate Western as an authorized Case dealer at any retail  locations,  for
any reason,  upon 90 days notice to Western.  In the  Agreement  of Purchase and
Sale by and between Case and Western, dated December 4, 1992 (the "Case Purchase
Agreement"),  Case  acknowledged  that its corporate  business  policy is not to
exercise such discretionary right of termination arbitrarily, and agreed that if
Western's  operations at a particular location acquired from Case are profitable
and are terminated by Case for any reason other than "for cause" (defined as any
grounds which Case shall  determine in the exercise of its  reasonable  business
judgment) it would not  reinstate  its own retail  operations  at such  location
through December 1997.  Should its Case dealerships at any one or more locations
be terminated by Case, the Company's business, financial condition, results from
operations and prospects could be materially adversely affected. In the event of
such  termination,  Western's  liquidity  position  and cash  reserves  would be
materially adversely affected as all of Western's indebtedness to Case under its
various secured financing  agreements would become  immediately due and payable.
All of  Western's  indebtedness  to its  institutional  lenders  could  also  be
accelerated  at that time.  Furthermore,  in the event that Western  accelerates
growth of its  Distribution  Business,  dependence  upon  Case as its  principal
supplier,  at least in the near term, will increase.  In the event of any of the
foregoing,  the  business,  financial  condition,  results from  operations  and
prospects  of  Western  will  likely  be  materially  adversely  affected.   See
"Business-The Distribution Business-The Equipment."

     Importance of Case Corporation to Operations. During Fiscal 1998 and Fiscal
1999 the Company's Western  subsidiary  accounted for all of the Company's total
net sales from continuing  operations.  Approximately 58% of Western's  revenues
result from sales,  leasing and servicing of equipment and parts manufactured by
Case. As a result, the ability of Case to continue to manufacture  products that
Western can successfully market and distribute, largely based on the quality and
pricing of such products,  is of material importance to the business,  financial
condition,  results from  operations and prospects of the Company.  In the event
that Case should cease to manufacture  equipment for the construction  equipment
industry, fail to produce sufficient products to stock the Company's inventories
adequately,  fail to maintain certain product price levels on its products or to
maintain a good reputation for quality in such industry, the Company's business,
results from  operations,  financial  condition and prospects will be materially
adversely affected.

                                       16
<PAGE>

     Effects  of  Downturn  in  General  Economic  Conditions,  Cyclicality  and
Seasonality.

     Demand for all of Western's  construction equipment distributed through its
retail  operations  is  significantly  affected  by  general  domestic  economic
conditions.  All  of  such  products  and  services  are  either  capital  goods
themselves,  principally sold for inclusion in capital equipment or used for the
provision of  construction  services by others.  Sales of capital  goods tend to
fluctuate widely along with trends in overall economic  activity in the national
economy. A general  inflationary  spiral or a continuing  increase in prevailing
interest rates could adversely affect new construction,  and consequently result
in a  significant  reduction in demand for the  construction  equipment  sold by
Western.  The  construction   equipment  business  has  also  historically  been
cyclical,  and is subject to periodic  reductions in the levels of  construction
(especially  housing starts) and levels of total industry capacity and equipment
inventory,  irrespective  of the effects of  inflation  or  increasing  interest
rates. In addition,  housing  construction in the northwest slows down beginning
in November and continuing through to January. Accordingly, Western's operations
may be materially adversely affected by any general downward economic pressures,
adverse cyclical trends, or seasonal factors.



     Dependence on Key Personnel.

     Western's  success in its  Distribution  Business  depends to a significant
degree upon the continuing  contributions of its senior management and other key
employees. The Company believes that the future prospects and success of Western
will  also   depend  in  large  part  on  its  ability  to  attract  and  retain
highly-skilled sales and marketing personnel.  Competition for such personnel is
intense,  and there can be no  assurance  that  Western  will be  successful  in
attracting,  integrating  and retaining  such  personnel.  Failure to attract or
retain  existing and  additional  key  personnel  could have a material  adverse
effect on the Company's  Distribution  Business,  operating  results,  financial
condition or prospects.

Risk Factors Relating to the Company in General

     Volatility  of Market Prices for the  Company's  Common  Stock.

     The market prices for the Company's  publicly  traded Common Stock has been
historically  volatile and there is limited  liquidity  in such  market.  Future
announcements   concerning   the  Company's   Distribution   Business,   or  its
competitors, including operating results, government regulations, or foreign and
other  competition,  could have a significant  impact on the market price of the
Common  Stock  in  the  future.  See  "Market  for  Common  Equity  and  Related
Stockholder Matters."

     Forward Looking Statements and Associated Risks.

     This  annual   report  on  Form  10-K  contains   certain   forward-looking
statements,  including  among  others (i)  anticipated  trends in the  Company's
financial  condition and results of operations,  and (ii) the Company's business
strategy.  These  forward-looking  statements are based largely on the Company's
current  expectations  and are  subject to a number of risks and  uncertainties.
Actual results could differ materially from these forward-looking statements. In
addition to other risks described  elsewhere in this "Risk Factors"  discussion,
important  factors to consider in  evaluating  such  forward-looking  statements
include (i) changes in external  competitive  market factors or in the Company's
internal budgeting process which might impact trends in the Company's results of
operations; (ii) unanticipated working capital or other cash requirements; (iii)
changes in the  Company's  business  strategy  or an  inability  to execute  its
strategy due to  unanticipated  changes in the  industries in which it operates;
and (iv) various competitive factors that may prevent the Company from competing
successfully in the marketplace. In light of these risks and uncertainties, many
of which are  described  in greater  detail  elsewhere  in this  "Risk  Factors"
discussion,   there  can  be  no   assurance   that  the  events   predicted  in
forward-looking statements will, in fact, transpire.


                                       17
<PAGE>





ITEM 2.  Properties

     The following  table sets forth  information  as to each of the  properties
which the Company owns or leases (all of which are retail sales, rental service,
storage and repair  facilities expect as otherwise noted) in connection with its
Distribution  Business  at July 31,  1999.  The  properties  located in Salinas,
California; Bend and Portland (Whitaker location), Oregon; and Moxee, Washington
were closed in the first quarter of Fiscal 2000.
<TABLE>
<CAPTION>


     Location and Use               Lessor              Lease      Annual Rental    Size/Square Feet  Purchase
                                                      Expiration                                      Options
                                                         Date
<S>                        <C>                      <C>           <C>             <C>                 <C>

1745 N.E. Columbia Blvd.    Carlton O. Fisher, CNJ   12/31/2000    $83,649(1)      Approx. 4 Acres;    No
Portland, Oregon 97211      Enterprises                            plus CPI        Building 17,622
                                                                   adjustments     sq.ft.

1665 Silverton Road, N.E.   LaNoel Elston Myers      7/10/20001    $33,600(1)      Approx. 1 Acre;     No
Salem, Oregon 97303         Living Trust                                           Buildings 14,860
                                                                                   sq.ft.

1702 North 28th Street      McKay Investment         6/14/2001     $69,000(1)      Approx. 5 Acres;    No
Springfield, Oregon 97477   Company                                                Building 17,024
                                                                                   sq.ft.

West 7916 Sunset Hwy.       US Bank                  9/30/2003     $69,600(1)      Approx. 5 Acres;    No
Spokane, Washington 99204                                                          Building 19,200
                                                                                   sq.ft.

12406 Mukilteo Speedway     Phil & Jana Pickering    10/31/2008    $114,000(1)     Approx. 2.1         No
Mukilteo, Washington 98275                                                         Acres; Building
                                                                                   13,600 sq.ft.

1901 Frontier Loop          The Landon Group         4/30/2002     $40,500(1)      Approx. 7 Acres;    No
Pasco, Washington 99301                                                            Building 14,200
                                                                                   sq.ft.

13184 Wheeler Road, N.E.    Maiers Industrial park   Month to      $38,400(1)      Approx. 10 Acres;   No
Building 4                                           Month                         Building 13,680
Moses Lake, Washington                                                             sq. ft.
98837

63291 Nels Anderson Road    B&K Management Corp.     10/31/99      $31,800(1)      Approx. 1.9 acres   No
Bend, Oregon 97701                                                                 building 3,600
                                                                                   sq. ft.

4601 N.E. 77th Avenue       Parkway Limited          1/31/2001     $157,200        8,627 sq. ft.       No
Suite 200                   Partnership
Vancouver, Washington
98662

2702 W. Valley Hwy No.      Avalon Island LLC        11/30/2015    $204,000(1)     Approx. 8 Acres;    No
Auburn, Washington 98001                                                           Building 33,000
                                                                                   sq. ft.


500 Prospect Lane           Frederick Peterson       9/15/2002     $26,496(1)     Approx. 1.9         Yes
Moxee, Washington 98936                                                            Acres; Building
                                                                                   6,200 sq. ft.

1455 Glendale Avenue        McLain-Rubin Realty      1/31/2019     $252,000(2)     Approx. 5 Acres;    No
Sparks, Nevada 89431        Group (3)                                              Building 22,475
                                                                                   sq.ft.

25886 Clawiter Road         Fred Kewel II, Agency    11/30/99      $110,088(1)     Approx. 2.8         No
Hayward, California 94545                                                          Acres; Building
                                                                                   21,580 sq.ft.

                                       18
<PAGE>

3540 D Regional Parkway     Soiland                  2/28/99       $48,234(1)      5,140 sq. ft.       No
Santa Rosa, California                                             plus CPI        approximately
95403                                                              adjustments     1.25 acres

1751 Bell Avenue            McLain-Rubin Realty      2/2/2016      $168,000(2)     Approx. 8 Acres;    No
Sacramento, California      Company LLC(2)(3)                                      Buildings 35,941
95838                                                                              sq. ft.


1041 S. Pershing Avenue     Raymond Investment       3/14/2001     $44,000(1)      Approx. 2 Acres;    No
Stockton, California 95206  Corp.                                  plus annual     Buildings 8,000
                                                                   CRI             sq. ft.
                                                                   adjustments
                            M.E. Robinson            3/31/2001
8271 Commonwealth Avenue,                                          $81,600(1)      Approx. 1 acre;     Yes
Buena Park, California                                                             Building 11,590
90621                                                                              sq.ft.

672 Brunken Avenue          R. Jay De Serpa, Ltd.    7/31/2001     $31,644(1)      Approx. 8 Acres;    No
Salinas, California 93301                                                          Building 4,000
                                                                                   sq.ft.

13691 Whitaker Way          D&J Enterprises          5/1/2001      $77,700         Approx. 2 Acres;    No
Portland, Oregon 97230                                                             Building 11,760
                                                                                   sq. ft.

2535 Ellis Street           Hart Enterprises         2/15/2002     $33,600         Approx. 2 Acres;    Yes
Redding, Oregon 96001                                                              Building 6,200
                                                                                   sq. ft.

913 S. Central              McLain-Rubin Realty III  5/31/2017     $205,200(2)     Approx. 4.4         No
Kent, WA 98032 (Rental      (3)                                    plus CPI        Acres; Building
only)                                                              adjustments     21,400 sq. ft.
                                                                                                       Yes
723 15TH Street                                      11/02/2002    $18,600         Approx. 1.2
Clarkston, WA 99403         Mark Flerchinger                                       Acres; Building
                                                                                   3,750 sq. ft.

3199 E. Onstott Road                                 12/31/2017    $54,000 (2)     Approx. 13 Acres;   No
Yuba City, CA 95991         McLain-Rubin Realty                                    Building 23,900
                            III (2)(3)                                             sq. ft.



2020 E.Third Avenue         Owned                    N/A           N/A             Approx. 4 Acres;    N/A
Anchorage, AK 99501                                                                Building 15,650
                                                                                   sq. ft.


3510 International Way,     C & N Partners           12/15/99      $46,978         Approx. 2 Acres;    No
Fairbanks, AK 99701                                                                Building 4500 sq.
                                                                                   ft.

2275 Brandy Lane            Excaliber Drill          2/29/2000     $30,000         Approx. .5 Acres;   No
Juneau, AK 99801                                                                   Building 1,500
                                                                                   sq. ft.
</TABLE>

(1)  Net lease with payment of insurance,  property taxes and maintenance  costs
     by the Company.


(2)  Net lease with payment of insurance,  property taxes and maintenance  costs
     by the Company, which also pays for structural repairs.

     (3) C. Dean McLain and Robert M. Rubin are (i) the Executive Vice President
and Director of the Company and Chief Executive Officer of Western, and (ii) the
President,  Chief Executive  Officer and Chairman of the Company,  respectively.
Messrs.  Rubin and McLain are the equity owners of McLain-Rubin  Realty Company,
LLC. The terms of its lease with  McLain-Rubin  Realty Company LLC provide for a
"triple net"  arrangement  under which Western  pays,  in addition to rent,  all
insurance, property taxes, maintenance costs and structural and other repairs.

                                       19
<PAGE>

     Western's  operating  facilities  are separated into nine "hub" outlets and
fourteen "sub-stores" and one "rental-only" store in Kent,  Washington.  The hub
stores are the main distribution  centers located in Auburn,  Pasco and Spokane,
Washington;  Portland  and  Springfield,  Oregon;  Sparks,  Nevada;  Hayward and
Sacramento,  California;  and Anchorage,  Alaska. The sub-stores are the smaller
retail  facilities  in  Mukilteo,   Moses  Lake,  Kent,  Clarkston  and  Yakima,
Washington;  Portland,  Salem and Bend, Oregon; Santa Rosa, Stockton Buena Park,
Redding, Yuba City and Salinas, California; and Fairbanks, Alaska.

     All of the leased and owned  facilities  used by Western are believed to be
adequate in all material  respects for the current and anticipated  needs of the
Distribution Business.



     ITEM 3. LEGAL PROCEEDINGS

     Except as set forth below,  there are no pending material legal proceedings
in which the Company or any of its  subsidiaries  is a party, or to which any of
their  respective  properties are subject,  which either  individually or in the
aggregate  may have a material  adverse  effect on the results of  operations or
financial position of the Company.

     In May 1998 a purported  derivative  lawsuit (the "Derivative  Action") was
brought on behalf of the Company  against Robert M. Rubin,  the Company's  Chief
Executive  Officer,  and the Company's  other  directors and officers who served
between November 1996 and February 1998. The Derivative  Action alleged breaches
of fiduciary duty and waste of corporate  assets.  Final judicial  approval of a
settlement  of the  Derivative  Action was received in August 1999,  pursuant to
which the Company  will receive a payment  (the "Rubin  Payment") of  $2,800,000
from Mr. Rubin.

     The  settlement  will consist of the  following:  (a) the assignment by Mr.
Rubin to the Company of his right to $600,000 from Hutchinson which is due under
the Consulting  Agreement and Non-Competition  Agreement to Mr. Rubin, and which
Mr. Rubin believes will be immediately  available upon stockholder  ratification
of the Hutchinson  Transaction;  (b) the assignment of approximately $500,000 as
the "net present  value" of the  remaining  payments  (originally  to be made in
installments   through   2002)   due   under  the   Consulting   Agreement   and
Non-Competition  Agreement  to Mr.  Rubin;  (c) the transfer by Mr. Rubin to the
Company of a securities account (valued at approximately $941,000 as of the date
of  transfer)  containing  both cash and  unrestricted  common  stock of various
publicly-traded  companies, with the actual value of each component common stock
to be  calculated  as the  product of (i) the number of shares of each  security
actually  transferred,  multiplied  by (ii) the  average  closing  price of each
security  for the ten  trading  days  preceding  the date on which  the  Company
receives  the  securities  account;  and (d) the  transfer  by Mr.  Rubin to the
Company of such number of shares of common stock of Response USA ("Response"), a
publicly-traded  company,  as equals the quotient of (i) the dollar value of the
Rubin Payment after  subtracting the actual value of the payments in (a),(b) and
(c) above,  divided by (ii) the average  closing  price of the  Response  common
stock during the ten trading days preceding the final  judicial  approval of the
Settlement.  Hutchinson has withheld payments under the Consulting Agreement and
Non-Competition  Agreement to Mr. Rubin pending stockholder  ratification of the
Hutchinson  Transaction,  and  has  agreed  to make  these  payments  upon  such
stockholder   ratification.   The  payments  by  Hutchinson  will  constitute  a
significant portion of the Rubin Payment.

                                       20
<PAGE>

     In connection with the settlement of the Derivative Action, the Company has
agreed to (a) immediately appoint two new independent  directors to the Board of
Directors  pending  stockholder  approval,  (b) have its chief financial officer
report on the Company's  financial condition and prospects at each regular board
meeting,  (c)  establish  an audit  committee  of the Board of  Directors  to be
comprised  entirely of  independent  directors,  (d)  establish  a  compensation
committee  to be  composed of a majority of  independent  directors,  (e) pass a
board resolution regarding the review of unsolicited bona fide offers to acquire
at least a  controlling  stake in the Company,  and (f) pass a board  resolution
regarding "related party" transactions.



     If the Hutchinson  Transaction  is ratified by the Company's  stockholders,
the Company will release Mr. Rubin,  the Company's  Chairman and Chief Executive
Officer,  from the obligation to repay a $1,000,000  principal amount promissory
note  (the  "Note")  issued by Mr.  Rubin to the  Company.  In  return  for such
release,  Mr.  Rubin will assign to the  Company his rights to receive  payments
under the  Non-Competition  Agreement and Consulting  Agreement with Hutchinson,
and a portfolio of marketable  securities with an approximate  aggregate  market
value as of June 1999 of approximately $941,000.  Hutchinson has conditioned its
payments  under  the  Consulting  Agreement  and  Non-Competition  Agreement  on
stockholder ratification of the Hutchinson Transaction. In the event the Company
stockholders  do not ratify the  Hutchinson  Transaction,  Mr. Rubin will remain
responsible  for  repayment  of the  Note  to the  Company.  In  return  for his
assigning to the Company his rights to receive  payments from  Hutchinson  under
the  Non-Competition  Agreement and the Consulting  Agreement,  the Company will
agree to  reduce  his  indebtedness  under  the Note by an  amount  equal to the
payments by Hutchinson to the Company.

     The Class Action

     In June 1998 a  stockholder  class  action (the "Class  Action")  was filed
against the Company's  directors alleging breaches of fiduciary duty and loyalty
to the Company and its  stockholders  in connection  with (i) a letter of credit
guarantee  by the  Company  for ERD Waste  Corp.  ("ERD"),  (ii) the  Hutchinson
Transaction  and  (iii)  the  delisting  of  the  Company's   Common  Stock  and
publicly-traded  warrants  from  NASDAQ in February  1998.  The Company has paid
$4,400,000  pursuant to its  guarantee  for ERD,  which sought  protection  from
creditors under Chapter 11 of the federal bankruptcy laws on September 30, 1997.
Final judicial approval of a settlement,  pursuant to which the company will pay
$2,500,000  (the  "Class  Payment")  to members of the  stockholder  class,  was
received in August 1999.  The Class  Payment will be in the amount of $2,500,000
and will be paid in the form of $600,000 in cash and  $1,900,000 in common stock
of Western  Power & Equipment  Corp.  ("Western").  The Western  common stock is
presently  owned by the Company and will be transferred to a segregated fund for
the benefit of the stockholder  class. The Company presently owns  approximately
60.6% of the outstanding common stock of Western and, after the Class Payment is
made (and  assuming  no  subsequent  ownership  changes or  transfers)  will own
approximately  35% of the Western common stock.  The number of shares of Western
common  stock  to be  transferred  will be  calculated  as the  quotient  of (i)
$1,900,000  divided by (ii) the average  closing  price of Western  common stock
during the ten trading days  preceding the final  approval of the  settlement of
the Class Action.  Pursuant to such calculation  777,414 shares of Western owned
by the  Company  have been  allocated.  In  addition,  two of the  officers  and
directors of the Company are officers or directors of Western.  As a result, the
Company  will remain able to  materially  influence  the outcome of votes by the
directors and  stockholders  of Western on matters before its board of directors
and stockholders.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not required.

                                       21
<PAGE>



     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     On February 4, 1998, The Nasdaq Stock Market,  Inc. ("Nasdaq") delisted the
Company's common stock and warrants (the "Public  Warrants") from Nasdaq for (i)
failure to hold an annual stockholders meeting for fiscal year 1997 in violation
of Nasdaq's rules requiring an annual stockholder meeting, (ii) adopting a stock
option  plan  without  stockholder  approval  in  violation  of  Nasdaq's  rules
requiring such  stockholder  approval,  and (iii) the issuance of the Series B-1
Convertible  Preferred Stock to the Old Connectsoft  stockholders in August 1996
and the private placement of Series B-2 Convertible  Preferred Stock in the 1997
private  placement  violation  of  Nasdaq's  rules  which,  in  effect,  require
stockholder  approval for any  transactions  involving  the present or potential
issuance of voting  securities  representing more than 20% of the voting capital
stock outstanding immediately before such transaction.  The principal market for
trading the  Company's  securities  is the National  Association  of  Securities
Dealers Over-the-Counter Bulletin Board ("OTCBB"). The following is a table that
lists the high and low selling  prices for shares of the Company's  Common Stock
and for the Company's  Public  Warrants on the Nasdaq National Market System and
the OTCBB during the periods identified:


                     Common Stock                       Public Warrants
                     ------------                       ---------------

                     High                Low              High              Low
                     ----                ---              ----              ---

Fiscal 1997
-----------
First Quarter        10.875              5.25              5.25            2.875

Second Quarter       11.375             7.563             4.875            3.875

Third Quarter        8.1875              3.44              4.50             3.75

Fourth Quarter       6.0000            4.3875              4.50             3.25

Fiscal 1998
-----------

First Quarter        7.8125            1.9375              5.25             2.25

Second Quarter        3.625              1.75              1.75             1.00

Third Quarter         2.125               .78               *                 *

Fourth Quarter         .875               .33

Fiscal 1999
-----------

First Quarter           .88               .63

Second Quarter          .59               .28

Third Quarter           .33               .28

Fourth Quarter          .32               .25


                                       22
<PAGE>

     * Since the Public  Warrants were delisted from the Nasdaq  National Market
on  February  4,  1998,   they  have  been   extremely   thinly  traded  on  the
Over-The-Counter Bulletin Board. It is the Company's opinion that since February
4, 1998  price  information  for the Public  Warrants  is either  unreliable  or
unavailable,  and that  trading  activity  since  such  date has been  extremely
sporadic,  and that for such  reasons any such price  information  may either be
misleading, inaccurate, or not indicative of the true market price of the Public
Warrants  since  such  date.  However,   according  to  the  most  recent  price
information  provided to the Company, the Public Warrants had a bid/ask price on
November 5, 1999 of $.25 and $.63,  respectively,  and that  cumulative  trading
volume in the Public  Warrants  between  August  1999 and October  1999  totaled
approximately 6,500 Public Warrants.


     The Company  extended the exercise  period of the Public Warrants from July
31, 1999 to July 31, 2001. On November 5, 1999 the last sale price of the Common
Stock was $0.23.  As of November 11,  1999,  the Company had  approximately  112
record holders of its Common Stock and 6 record holders of its Public Warrants.



Dividend Policy

     In the foreseeable future, the Company intends to retain earnings,  if any,
to assist in financing the expansion of its business. In the future, the payment
of  dividends  by the  Company  on its  Common  Stock  will  also  depend on its
financial  condition,  results of operations and such other factors as the Board
of  Directors  of the  Company  may  consider  relevant.  The  Company  does not
currently intend to pay dividends on its Common Stock.


         ITEM 6.  SELECTED FINANCIAL DATA

     The  following  summary  financial  information  for the fiscal years 1999,
1998, 1997, 1996 and 1995 have been derived from the financial statements of the
Company  which have been  audited  by  PricewaterhouseCoopers  LLP,  independent
accountants.

                                       23
<PAGE>

<TABLE>
<CAPTION>

                Income Statement Data (all figures in thousands):


                                                                       Year ended July 31,
                                                                       -------------------

                                                  1999       1998(1)         1997(2)        1996           1995
                                                  ----       -------         -------        ----           ----

<S>                                           <C>           <C>           <C>             <C>            <C>
 Net sales                                     $163,650      $163,478      $148,130        $106,555       $86,173

(Loss) income from continuing operations         (5,054)       (4,901)       (9,078)            685         1,164

 Net (loss) income                               (3,065)       (9,615)      (27,257)         (1,835)(1)     2,268

 Basic and Diluted (Loss) Earnings Per Share:

(Loss) income from continuing operations         (0.43)         (0.43)        (1.16)           0.12          0.20

 Net (loss) income                               (0.26)         (0.85)        (2.75)          (0.32)         0.40
</TABLE>
<TABLE>
<CAPTION>
                 Balance Sheet Data (all figures in thousands):

                                                      July 31,
                                                      --------

                                  1999         1998           1997           1996          1995
                                  ----         ----           ----           ----          ----

<S>                           <C>             <C>           <C>            <C>           <C>
Total assets                  $142,409        $146,904      $144,723       $119,055      $76,829

Total liabilities             $121,700         121,914       110,742         87,015       56,575

Working capital (deficit)      (18,751)         (5,972)        2,467         17,218       10,022

Stockholders' equity            12,797          15,862        24,101         22,581       20,254

</TABLE>

(1)  Includes   loss  from   discontinued   operations   for  Old   Connectsoft,
     Connectsoft, Seattle OnLine, InterGlobe, and Exodus.

(2)  Includes  income from  discontinued  operations and the gain on the sale of
     the  manufacturing  business  of $7.8  million,  net of tax,  the loss from
     discontinued  operations of Old Connectsoft for the day ended July 31, 1996
     of $10.0 million, net of tax and the discontinued operations of TechStar of
     $1.1 million.

                                       24
<PAGE>




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

     The following discussion and analysis of the Company's financial conditions
and results of  operations  contains  certain  "forward-looking  statements"  as
defined in the Private Securities Litigation Reform Act of 1995. Such statements
relating  to  future  events  and  financial   performance  are  forward-looking
statements that involve certain risks and  uncertainties,  detailed from time to
time in the Company's various commission filings. Such statements are subject to
risks and  uncertainties  that could cause actual  results to differ  materially
from those  projected,  including,  but not limited to,  projected sales levels,
expense reductions,  reduced interest expense, and increased inventory turnover,
any one or more of which may not be  realized.  See  "Description  of Business -
Future  Performance  and Risk  Factors." No assurance can be given that any such
matters will be realized.

         General Overview

     In previous  years the Company  engaged in three distinct  businesses:  the
Distribution  Business,  the Technology Business and the  Telecommunications and
Construction Businesses. The Company formerly was a stockholder of a majority of
the  outstanding  common stock of a subsidiary  through  which it engaged in the
Telecommunication  and  Construction  Businesses,  but  is now  only a  minority
stockholder.  The Company has also,  during Fiscal 1998 and Fiscal 1999,  either
divested itself of all assets of, or otherwise  discontinued  all operations of,
the Technology Business.  Consequently, the Company's current operations and its
operations  during Fiscal 1999  consisted  almost  entirely of the  Distribution
Business which the Company engages in through its subsidiary,  Western, of which
it owns approximately  60.6% of the outstanding Common Stock.  Accordingly,  the
following  discussion  consists  primarily of a discussion  of Western.  Western
acquired its first seven retail  distribution  stores in November 1992.  Western
expanded to 18 stores in four states by the end of the year ending July 31, 1996
("Fiscal 1996"),  to 23 stores in five states by the end of the year ending July
31, 1997 ("Fiscal 1997"), and to 27 stores in five states by the end of the year
ending July 31, 1998 ("Fiscal 1998").  However,  during the year ending July 31,
1999 ("Fiscal  1999") the Company closed its Milton - Freewater,  Oregon,  Elko,
Nevada and  Juneau,  Alaska  stores.  At the end of Fiscal  1999  Western had 24
stores.  Western's  growth has been  accomplished  through a combination  of new
store  openings,  strategic  acquisitions,  and to a lesser  extent,  comparable
stores revenue increases.

                                       25
<PAGE>

     Store activity for the last three fiscal years is summarized as follows:

<TABLE>
<CAPTION>

            Fiscal        No. of Stores at
          Year Ending      Beginning of        No. of Stores     No. of Stores    No. of Stores     No. of Stores at
           July 31,         Fiscal Year           Opened           Closed           Acquired          End of Year
           --------         -----------           ------           ------           --------          -----------

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

           1997                 18                  2                 0                3                  23

           1998                 23                  1                 1                4                  27

           1999                 27                  0                 3                0                  24
</TABLE>



     Western plans to open and acquire additional  distribution outlets for Case
products,  as well as for products which may be manufactured by other companies.
Western's  results  can be  impacted  by the timing of,  and costs  incurred  in
connection with, new store openings and acquisitions.

     Subsequent  to the  end of  Fiscal  1999,  Western  had  consolidated  four
additional stores into larger neighboring  stores. The four stores  consolidated
are Salinas,  California,  Bend, Oregon, Portland, Oregon and Moxee, Washington.
Western  plans to open and  acquire  additional  distribution  outlets  for Case
products,  as well as for products which may be  manufactured by other companies
as circumstances permit. Western's results can be impacted by the timing of, and
costs incurred in connection  with, new store openings and  acquisitions as well
as the costs of closing existing stores.

Results of Operations

Fiscal 1999 as Compared with Fiscal 1998

     The  Company  reported  net revenue  for Fiscal  1999 of  $163,650,000,  an
increase of 0.1 percent over net revenue of $163,478,000  for Fiscal 1998 and an
increase of  $15,520,000  (10.5%) over  comparable  1997 sales of  $148,130,000.
Approximately  $17.4  million of revenue came from stores  opened or acquired in
Fiscal 1998 by  Western.  Stores  opened  prior to Fiscal 1998 showed an overall
revenue decrease of 3.9% from prior year revenue  reflecting a general softening
in economic conditions in the Northwest,  increased competitive  pressures,  and
some weather-related business interruptions.

     Western's gross margin was 8.9 percent during Fiscal 1999,  which was lower
than its 11.7 percent  gross margin  during  Fiscal 1998.  Margins  decreased in
Fiscal 1999 due mainly to continued  competitive pressures and the first quarter
equipment reserve.  The Company believes that Western's  management continues to
place a high priority on improving  overall gross margins by working to increase
its higher margin segments such as service, parts and rental revenues,  focusing
more sales efforts on specialty and niche product lines, and by obtaining higher
prices for new and used equipment.

                                       26
<PAGE>

     Selling,  general,  and  administrative  expenses were $15,175,000,  or 9.3
percent of revenues for Fiscal 1999 as compared to  $13,183,000,  or 8.1 percent
of revenues for Fiscal  1998.  The  increase is  primarily  attributable  to net
expenses related to the shareholder  litigation of approximately $310,000 and an
increase  in bad debt  expense  related  to  advances  to IDF of  $992,000.  The
remaining  increase  in  selling,  general,  and  administrative  expenses  as a
percentage  of revenues  resulted  in part from  Western's  lower than  expected
revenue  levels and full year  expenses for stores  opened or acquired in Fiscal
1998.

     Net interest  expense for Fiscal 1999 was $5,329,000 up from  $4,197,000 in
Fiscal  1998.  This was due to the  Company's  decreased  interest  income  from
decreasing cash reserves in part and to an increase in rental  equipment  levels
at Western.  In addition,  effective with  deliveries  after July 1, 1998,  Case
changed factory to dealer terms, lowering from three percent (3%) to two percent
(2%) the cash  payment  discount  if the dealer  pays for the  machine  outright
rather than utilizing the interest-free floor planning. Western was able to take
advantage of the cash  discounts  on a majority of its Case  purchases in Fiscal
1998.

     In June  1997,  Western  obtained  a $75  million  inventory  flooring  and
operating line of credit  facility  through  Deutsche  Financial  Services.  The
facility is a  three-year,  floating  rate  facility at rates as low as 50 basis
points  under the prime rate.  Western's  management  has used this  facility to
allow  Western to take  advantage of more  purchase  discounts  and to lower the
overall interest rate on borrowings.


     The gain on disposal of  $1,989,000  in Fiscal 1999  reflects the gain from
the disposal of the remaining assets of Connectsoft Communications Corp. in June
1999 to eGlobe.  Loss from  discontinued  operations  of $4.7 million for Fiscal
1998 arises from the  discontinuation  of the operations of the Old Connectsoft,
Connectsoft,   Exodus   Technologies,   Seattle  OnLine  Acquisition  Corp.  and
InterGlobe  subsidiaries.  Effective during the third quarter of Fiscal 1998 the
Company discontinued the operations of these subsidiaries.  Losses of $2,320,000
from the  discontinued  operations  after the measurement date of April 30, 1998
have been offset against an anticipated  gain from the sale of certain assets of
Connectsoft  and Old  Connectsoft  to eGlobe Inc.  in the amount of  $3,800,000,
resulting in a deferred gain of $1,480,000.  The change in the amount of gain is
due primarily to changes in the consideration  given by eGlobe for the assets of
Connectsoft.

Fiscal 1998 Compared with Fiscal 1997

     The  Company  reported  net revenue  for Fiscal  1998 of  $163,478,000,  an
increase  of  $15,348,000   (10.4  percent)  over   comparable   1997  sales  of
$148,130,000.  Approximately $17.4 million of revenue came from stores opened or
acquired in fiscal 1998 by Western. Stores opened prior to Fiscal 1998 showed an
overall  revenue  decrease of 3.9% from prior year revenue  reflecting a general
softening  in  economic  conditions  in  the  northwest,  increased  competitive
pressures, and some weather related business interruptions.

     Western's gross margin was 11.7 percent during Fiscal 1998, which is higher
than their 10.7 percent gross margin during  Fiscal 1997.  Margins  increased in
Fiscal  1998  on  new  unit  sales,  rental,  and  service  business.  Western's
Management continues to place a high priority on improving overall gross margins
by working to  increase  higher  margin  service,  parts,  and rental  revenues,
focusing  more sales  efforts  on  specialty  and niche  product  lines,  and by
obtaining higher prices for new equipment.

     Selling,  general,  and  administrative  expenses were  $13,183,000  or 8.1
percent of revenues for Fiscal 1998 compared to  $22,605,000  or 15.3 percent of
sales for Fiscal 1997.  The decrease is due largely to the 1997 amounts  charged
for ERD totaling  $4,985,000.  The remaining decrease in selling,  general,  and
administrative   expenses   resulted  in  part  from   significantly   decreased
professional  fees  and  other  corporate  administrative  expenses  due  to the
discontinuation  of the technology group and from  management's cost control and
efficiency improvement efforts.

                                       27
<PAGE>

     Net interest  expense for Fiscal 1998 was  $4,197,000,  up $1,572,000  from
$2,625,000  in Fiscal 1997. A total of $1,169,000 of this increase was due to an
increase in Western's  inventory  levels,  particularly  inventory  dedicated to
rentals. In addition, effective with deliveries after July 1, 1998, Case changed
factory to dealer terms lowering from 3% to 2% the cash payment  discount if the
dealer pays for the machine  outright  rather than  utilizing the  interest-free
floor  planning.  Western was able to take  advantage of the cash discounts on a
majority of its Case purchases in fiscal 1998. In June 1997,  Western obtained a
$75,000,000  inventory  flooring and operating line of credit  facility  through
Deutsche  Financial  Services.  The  facility  is a  three-year,  floating  rate
facility  at rates as low as 50 basis  points  under the prime  rate.  Western's
management  has used this  facility to allow  Western to take  advantage of more
purchase discounts and to lower the overall interest rate on borrowings. Western
believes  that the positive  impact of the  discounted  cost of new inventory on
gross margins has more than offset the  increased  interest  expense  related to
foregoing the  interest-free  flooring  periods.  The remaining  increase in net
interest  expense of $403,000 is primarily  due to decreases in interest  income
earned on investments as a result of lower principle  invested amounts in Fiscal
1998.



     Loss from discontinued operations of $4,690,000 for Fiscal 1998 arises from
the  discontinuation  of the  operations  of the Old  Connectsoft,  Connectsoft,
Exodus  Technologies,  Seattle  OnLine,  InterGlobe  and TechStar  subsidiaries.
Effective  during the third quarter of Fiscal 1998 the Company  discontinued the
operations of these  subsidiaries.  Losses of $2,300,000  from the  discontinued
operations after the measurement date of April 30, 1998 have been offset against
an  anticipated  gain from the sale of  certain  assets of  Connectsoft  and Old
Connectsoft to eGlobe Inc. in the amount of $3,800,000,  resulting in a deferred
gain  of  $1,500,000.   In  Fiscal  1997,  the  Company  incurred  a  loss  from
discontinued  operations of $15,700,000  primarily  comprised of $8,200,000 from
its Exodus  subsidiary  and a net loss of $3,000,000  from the operations of Old
Connectsoft.  In addition,  the Free agent development and marketing  activities
conducted by  Connectsoft  incurred an  additional  $2,800,000  of net losses in
Fiscal 1997.  InterGlobe incurred a net loss of $2,224,000  including $1,600,000
of  write-offs  of goodwill and  investment)  on total  revenues of  $1,040,590,
Seattle  OnLine  incurred a net loss of $1,575,000 on total  revenues of $87,000
and TechStar had net income of $1,134,000 on sales of  $3,891,000.  These losses
were slightly offset by tax benefits recognized of $1,000,000.

Fiscal 1997 Compared with Fiscal 1996

     Western's  revenues  for  Fiscal  1997  increased  by  $41.6  million,   or
approximately  39% over Fiscal  1996.  The  increase  was due  primarily  to the
contribution of the stores  acquired or opened in the last year,  accounting for
$21.4  million  (51%) of the increase in sales.  Western's  same store  revenues
increased  $10.2 million or 25% for Fiscal 1997, as compared to Fiscal 1996. For
Fiscal 1997, Western's sales in all departments were up at least 25% compared to
the same period in Fiscal 1996.

     Selling,  general and  administrative  ("SG&A") expenses were $22.6 million
(15.3% of sales) in Fiscal 1997,  compared to $9.5  million  (8.9% of sales) for
the comparative prior year period. The substantial  increase in SG&A expenses of
$13.1  million  for Fiscal 1997 were  attributable  to an increase at Western of
$3.4 million and an increase of $4.7 million of corporate SG&A, and included the
ERD bad debt of $5.0  million  which had no  comparable  expense in Fiscal 1996.
Interest  expense  for the Fiscal  1997 was $2.625  million  compared  to $1.137
million for Fiscal 1996,  predominantly  due to increased  inventory  carried by
Western to  support  higher  equipment  sales  level,  including  a  significant
investment in equipment dedicated to the rental fleet.

     The effective  tax rate for Fiscal 1997 was  approximately  6.4%,  which is
lower than the 37%  effective  tax rate for the prior year  comparative  period.
This decrease is a result of the  recognition of a valuation  allowance  against
the net operating loss carryforward and deferred tax assets.

                                       28
<PAGE>

     In Fiscal 1997, the Company incurred a loss from discontinued operations of
$16.9  million  comprised of $8.2 million from its Exodus  subsidiary  and a net
loss of $3.1 million from the operations of Old  ConnectSoft.  In addition,  the
free  agent  development  and  marketing  activities  conducted  by  Connectsoft
incurred an  additional  $2.8 million of net losses in Fiscal  1997.  InterGlobe
incurred a net loss of $2.224 million  (including  $1.6 million of write-offs of
goodwill  and  investment)  on total  revenues  of  $1,040,590,  Seattle  OnLine
incurred a net loss of $1.575  million on total revenues of $87,000 and TechStar
had net income of $1,134,000 on sales of  $3,891,000..  These losses were offset
by  tax  benefits   recognized  of  approximately  $1.0  million.   Losses  from
discontinued  operations  for Fiscal 1996 of $2.5  million are  comprised of the
gain from the sale of the manufacturing  division of $7.8 million (net of tax of
5.0 million) offset by losses of Old Connectsoft  from Fiscal 1996 in the amount
of $10.3 million.



     Although Western's sales increased, the increase in Western's operating and
interest  expenses  and warranty  problems  with Case  backhoe  equipment  which
Western elected to absorb,  resulted in net income of approximately $1.0 million
in Fiscal 1997, as compared with $2.0 million in the prior year.

     As a result of the  foregoing,  in Fiscal  1997,  the  Company  reported  a
consolidated  net  loss of $27.3  million  on total  net  consolidated  sales of
approximately $154.5 million.

         Liquidity and Capital Resources

         General

     During Fiscal 1999 the Company's cash, cash equivalents and marketable debt
securities decreased by $4,526,000, from $7,811,000 to $3,285,000, primarily due
to its partial  fundings of the  discontinued  operations of Connectsoft and its
advances to IDF,  losses from  operations  and  increased  selling,  general and
administrative expenses.

     The Company's  cash and cash  equivalents of $2,914,000 as of July 31, 1999
and available credit facilities of Western are considered  sufficient to support
current levels of operations  for at least the next twelve  months.  The Company
had by November 12, 1999 received securities, cash and notes with an approximate
value of  $1,700,000  from  Robert M. Rubin,  and  approximately  $1,100,000  in
payments  from  Hutchinson  are  due to  the  Company  in  connection  with  the
settlement  of  the  derivative  stockholder   litigation.   The  payments  from
Hutchinson are contingent upon  ratification by the Company  stockholders of the
Hutchinson  Transaction.  However,  there can be no assurance that such payments
will ever be received.

     The Company invests  substantially  all cash and cash  equivalents in money
market funds,  United States Treasury  securities and similar  instruments.  The
Company seeks to provide a high current  return on its  investments  of cash and
cash equivalents  while  preserving both liquidity and capital.  The established
policy guidelines for its investment  portfolio include investments that include
United States Treasury securities,  United States government agency obligations,
deposit-type  obligations  of United  States  banking  institutions,  repurchase
agreements,  United States denominated A1 grade commercial paper,  United States
money market funds and interests in mutual funds that invest in the above listed
instruments.  Concentration  of the portfolio is limited to not more than 20% of
the  investment  portfolio in the  securities  of any one bank,  corporation  or
non-government issuer.

                                       29
<PAGE>

         Western

     During the year ended July 31, 1999,  Western's  cash and cash  equivalents
increased  by  $74,000  primarily  due  to  the  increased  accounts  receivable
collections. Western had positive cash flow from operating activities during the
year of  $15,055,000  reflecting  net  income  for the year  after  adding  back
depreciation and amortization. Total purchases of new property and equipment and
rental  equipment in Fiscal 1999  approximated  $16,000,000.  Purchases of fixed
assets during the period were related mainly to the ongoing  replacement of aged
operating assets and the purchase of the Anchorage, Alaska facility.

     Western's  primary needs for liquidity and capital resources are related to
its  inventory  for sale and its  rental  and  lease  fleet  inventories,  store
openings,  and acquisitions of additional  stores.  Western's  primary source of
internal liquidity has been its profitable  operations.  As more fully described
below,  Western's primary sources of external liquidity are equipment  inventory
floor plan financing  arrangements  provided to Western by the  manufacturers of
the products Western sells and by Deutsche  Financial Services ("DFS") and, with
respect to acquisitions, secured loans from Case.



     Under inventory floor planning  arrangements the  manufacturers of products
sold by Western  provide  interest free credit terms on new equipment  purchases
for periods ranging from one to twelve months, after which interest commences to
accrue  monthly at rates ranging from zero percent to two percent over the prime
rate of interest.  Principal  payments are typically made under these agreements
at scheduled  intervals and/or as the equipment is rented,  with the balance due
at the earlier of a specified date or sale of the  equipment.  At July 31, 1999,
Western was indebted under manufacturer  provided floor planning arrangements in
the aggregate  amount of  $17,128,000.  As of September 30, 1999,  approximately
$15,413,000  was  outstanding  under  these  manufacturer  provided  floor  plan
arrangements.

     In June  1997,  Western  obtained  a  $75,000,000  inventory  flooring  and
operating line of credit  through DFS. The DFS credit  facility is a three-year,
floating  rate  facility  based on prime with rates between 0.50% under prime to
1.00% over prime  depending on the amount of total borrowing under the facility.
Amounts are advanced against Western's assets,  including  accounts  receivable,
parts, new equipment,  rental fleet, and used equipment.  Western expects to use
this borrowing  facility to lower  flooring  related  interest  expense by using
advances  under such line to finance  inventory  purchases  in lieu of financing
provided by suppliers,  to take  advantage of cash purchase  discounts  from its
suppliers,  to provide  operating  capital for further growth,  and to refinance
some of its  acquisition  related debt at a lower  interest rate. As of July 31,
1999,  approximately  $70,863,000 was outstanding under the DFS credit facility.
As of September 30, 1999,  approximately  $68,443,000 was outstanding under this
facility.  At July 31, 1999,  Western was in  technical  default of the leverage
covenant in its loan agreement with DFS, and has requested,  but not obtained, a
waiver letter regarding its default for the period since July 31, 1999. There is
no guarantee  that  Deutsche  Financial  Services will not call this debt at any
time.  Western and DFS have reached a  preliminary  agreement to revise  certain
leverage  covenants and provide for financial  penalties for  violations of such
covenants.  Finalization  of this  increase is expected  by November  30,  1999.
Amounts owing under the DFS credit  facility are secured by inventory  purchases
financed by DFS, as well as all  proceeds  from their sale or rental,  including
accounts receivable thereto.

                                       30
<PAGE>

     Inventory;  Effects of  Inflation  and  Interest  Rates;  General  Economic
Conditions

         Distribution Business

     Controlling  inventory is a key  ingredient  to the success of an equipment
distributor  because  the  equipment  industry  is  characterized  by long order
cycles,  high ticket prices,  and the related  exposure to "flooring"  interest.
Western's  interest  expense may  increase if  inventory is too high or interest
rates rise. The Company manages its inventory through  company-wide  information
and inventory  sharing  systems  wherein all locations  have access to Western's
entire inventory.  In addition,  Western closely monitors  inventory turnover by
product categories and places equipment orders based upon targeted turn ratios.

     All of the  products and  services  provided by Western are either  capital
equipment or included in capital equipment,  which are used in the construction,
agricultural, and industrial sectors. Accordingly,  Western's sales are affected
by  inflation  or  increased   interest  rates  which  tend  to  hold  down  new
construction,  and consequently adversely affect demand for the construction and
industrial  equipment  sold  and  rented  by  Western.  In  addition,   although
agricultural  equipment  sales are less than two percent (2%) of Western's total
revenues, factors adversely affecting the farming and commodity markets also can
adversely affect Western's agricultural equipment related business.

     Western's  business can also be affected by general economic  conditions in
its  geographic  markets  as  well  as  general  national  and  global  economic
conditions that affect the construction,  agricultural,  and industrial sectors.
An erosion in North American and/or other  countries'  economies could adversely
affect the Company's  business.  Market  specific  factors could also  adversely
affect one or more of Western's target markets and/or products.



         The Technology Business

     During  Fiscal  1999,  the  Company  had no  operations  in its  Technology
Business. During Fiscal 1999, the Company consummated the sale of certain assets
comprising the remaining  Technology Business to eGlobe.  Prior to such sale the
Company had either  discontinued or divested itself of all assets comprising the
Technology Business.

         Impact of Year 2000 Related Problems

     Year 2000  related  problems  are the  result of  computer  programs  being
written using two digits rather than four to define the applicable  year. Any of
the Company's  computer programs that have date sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000.  This could result
in a system  failure  or  miscalculations  causing  disruptions  of  operations,
including,  among other things, a temporary  inability to process  transactions,
send invoices, or engage in similar normal business activities.

     Western has  determined  that it will be  required  to  upgrade,  modify or
replace  significant  portions of its software so that its computer systems will
properly utilize dates after December 31, 1999.  Western is completing  upgrades
of its  enterprise  application  to account for and alleviate  Year 2000 related
problems  uncovered  during  internal  testing of some  software  from  vendors.
Western presently believes that with these upgrades to existing  software,  Year
2000 related problems can be mitigated.  However, if such upgrades are not made,
are not  timely  completed,  or do not work as  anticipated,  Year 2000  related
problems could have a material impact on the operations of Western.

                                       31
<PAGE>

     Western has initiated its plan to contact all of its significant  suppliers
to determine the extent to which  Western is vulnerable to those third  parties'
failure  to  remediate  their own Year 2000  related  problems.  There can be no
guarantees that the systems of third parties on which Western's  systems rely or
which influence the business of Western's  customers will be timely  remediated,
that any attempted  remediation  will be  successful,  or that such  conversions
would be compatible with Western's  systems.  Western has not yet determined the
projected  costs of its Year 2000  project  and  cannot  yet  determine  whether
Western  has any  exposure  to  contingencies  related to the Year 2000  related
problems for the products it has previously sold.

     There  can  be  no  assurance  that  Western  will  finish  its  Year  2000
remediation  efforts in time to prevent  related  problems  whenever  or if they
occur. As the Company's  business  consists almost entirely of the  Distribution
Business  which it engages in through  Western,  any  failure by Western to have
software  and  systems  which are Year 2000  compliant  in time to  prevent  the
occurrence of related  problems will materially  adversely  affect the business,
financial  condition,  results of  operations  and  prospects of Western and the
Company.

     Western will utilize both internal and external resources to reprogram,  or
replace,  and test its software for Year 2000  modifications.  Western  plans to
complete its Year 2000  remediation on or before December 1999.  Funding for the
costs of the program are anticipated to come from operating cash flows.

     Western's current plan to complete the Year 2000  modifications is based on
management's  best estimates,  which were derived using numerous  assumptions of
future events including the continued  availability of certain resources,  third
party  modification  plans, and the ability to meet projected time lines.  There
can be no guarantee  that these  estimates  will be achieved and actual  results
could differ materially from those plans. Specific factors that might cause such
material  differences include, but are not limited to, the availability and cost
of  personnel  trained in this area,  the  ability  to locate  and  correct  all
relevant computer codes, and other uncertainties.



ITEM 7A. QUANTITATIVE AND QUALITATIVE MARKET RISK

         Not Applicable



                                       32
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS




                          AMERICAN UNITED GLOBAL, INC.

                              FINANCIAL STATEMENTS


                                      INDEX



                                                                   Page

Report of Independent Accountants .......................           F-2

Consolidated Balance Sheets .............................           F-3

Consolidated Statements of Operations ...................           F-4

Consolidated Statements of Shareholders' Equity .........           F-5

Consolidated Statements of Cash Flows ...................           F-6

Notes to Consolidated Financial Statements ..............           F-7



                                      F-1
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors
and Shareholders of
American United Global, Inc.


In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly,  in all material  respects,  the financial  position of American
United  Global,  Inc. and its  subsidiaries  at July 31, 1999 and 1998,  and the
results of their  operations and their cash flows for each of the three years in
the period ended July 31, 1999, in conformity with generally accepted accounting
principles.  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 generally accepted auditing standards 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 the opinion  expressed
above.



PricewaterhouseCoopers LLP





Portland, Oregon
October 22, 1999






                                      F-2
<PAGE>

<TABLE>
<CAPTION>

                  AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                                                                                      JULY 31,
                                                                                                      --------
                                                                                                1999           1998
                                                                                                ----           ----
                                         ASSETS
<S>                                                                                     <C>             <C>

Current assets:
  Cash and cash equivalents.............................................................  $    2,914,000  $   3,362,000
   Investment in marketable debt securities.............................................         371,000      4,449,000
   Trade accounts receivable, less allowance
    for doubtful accounts of $724,000 and $670,000, respectively........................      15,500,000     23,708,000
   Inventories (Note 4).................................................................      67,068,000     73,491,000
   Prepaid expenses and other receivables...............................................         885,000        287,000
   Deferred tax asset (Note 7)..........................................................       1,410,000      1,298,000
   Receivable from Chairman (Note 10)...................................................       1,700,000          -
   Notes receivable ....................................................................       1,140,000      1,200,000
                                                                                               ---------      ---------

       Total current assets.............................................................      90,988,000    107,795,000

   Property and equipment, net (Note 5).................................................       9,818,000      8,695,000
   Rental equipment fleet, net (Note 5).................................................      31,366,000     23,080,000
   Leased equipment fleet, net (Note 5).................................................       5,264,000      2,760,000
   Intangibles and other assets, net of accumulated
    amortization of $1,263,000 and $1,460,000, respectively (Note 12)...................       2,952,000      3,613,000
   Investment in unconsolidated subsidiary (Note 3).....................................            -           961,000
   Investment in preferred stock (Note 9)...............................................       2,000,000           -
   Note Receivable, net of current portion .............................................         521,000           -
                                                                                              ----------      ---------

                                                                                          $  142,909,000  $ 146,904,000
                                                                                          ==============  =============
                          LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Borrowings under floor financing lines (Note 6)......................................  $   17,128,000  $  11,038,000
   Short-term borrowings (Note 6).......................................................      72,383,000     76,769,000
   Current portion of capital lease obligations (Note 10)...............................          17,000         67,000
   Accounts payable.....................................................................      13,038,000     18,027,000
   Accrued liabilities..................................................................       4,046,000      5,336,000
   Income taxes payable (Note 7)........................................................         627,000      1,050,000
   Deferred gain on discontinued operations (Note 9)....................................           -          1,480,000
   Due to shareholders (Note 10)........................................................       2,500,000         -
                                                                                             -----------    -----------
       Total current liabilities........................................................     109,739,000    113,767,000

Long-term borrowings (Note 6)...........................................................          48,000      1,156,000
Capital lease obligations, net of current portion (Note 10).............................       4,755,000      2,827,000
Deferred taxes (Note 7).................................................................         837,000        690,000
Deferred gain...........................................................................         140,000         -
Deferred lease income...................................................................       6,181,000      3,474,000
                                                                                               ---------      ---------
       Total liabilities                                                                     121,700,000    121,914,000

Minority interest.......................................................................       8,412,000      9,128,000

Commitments and contingencies (Note 10)

Shareholders' equity (Notes 8 and 11):

   Series B-1 convertible preferred stock, convertible to common, $3.50 per share
     liquidation value, $.01 par value; 1,000,000 shares authorized; 425,620 and
     723,862 shares issued and outstanding, respectively................................           4,000          7,000
   Common stock, $.01 par value; 40,000,000 shares authorized; 11,921,529 and 11,617,286
     shares issued and outstanding, respectively........................................         119,000        116,000
   Common stock, Class B, non-voting, .01 par value, 25,000,000
     shares authorized, no shares issued and outstanding ...............................           -              -
   Additional contributed capital.......................................................      49,954,000     49,954,000
   Accumulated deficit..................................................................     (37,280,000)   (34,215,000)
                                                                                             -----------    -----------
       Total shareholders's equity......................................................      12,797,000     15,862,000
                                                                                              ----------     ----------
                                                                                          $ 142,909,000    $146,904,000
                                                                                          ==============   ============

</TABLE>

         The accompanying notes are an integral part of this statement.

                                      F-3
<PAGE>



<TABLE>
<CAPTION>


                             AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES


                                 CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                                        YEAR ENDED JULY 31,
                                                                                        -------------------

                                                                                1999           1998           1997
                                                                                ----           ----           ----
<S>                                                                       <C>            <C>            <C>

Net sales................................................................  $ 163,650,000  $  163,478,000 $  148,130,000
Cost of goods sold.......................................................    149,056,000     144,302,000    132,260,000
                                                                             -----------     -----------    -----------

       Gross profit......................................................     14,594,000      19,176,000     15,870,000

Selling, general and administrative expenses.............................     15,175,000      13,083,000     22,605,000
                                                                              ----------      ----------     ----------

       Operating income (loss)...........................................       (581,000)      6,093,000     (6,735,000)

Interest expense, net....................................................      5,329,000       4,197,000      2,625,000
                                                                               ---------       ---------      ---------

Income (loss) from continuing operations before income taxes, equity
       in loss of unconsolidated subsidiary and minority interest........     (5,910,000)      1,896,000     (9,360,000)

Benefit (provision) for income taxes (Note 7)............................      1,101,000      (1,354,000)       703,000
Equity in loss of unconsolidated subsidiary..............................       (961,000)     (4,730,000)         -
Minority interest in loss (earnings) of consolidated subsidiaries........        716,000        (713,000)      (421,000)
                                                                                 -------        --------       --------

       Loss from continuing operations ..................................     (5,054,000)     (4,901,000)    (9,078,000)


Discontinued operations, net of taxes (Note 9):
   Loss from operations, (net of tax benefit of $1,423,000 in 1998 and
   $966,000 in 1997).....................................................          -          (4,690,000)   (15,776,000)
   Gain on disposal......................................................      1,989,000          -             -
                                                                               ---------      ----------    ------------

                                                                               1,989,000      (4,690,000)   (15,776,000)

Net loss ................................................................     (3,065,000)     (9,591,000)   (24,854,000)
Dividends on preferred stock.............................................         -              (24,000)    (2,403,000)
                                                                              -----------     ----------     ----------

Net loss available for common shareholders...............................  $  (3,065,000) $   (9,615,000)$  (27,257,000)
                                                                           =============  ============== ==============

Basic and diluted earnings (loss) per share:
   (Loss) earnings from continuing operations............................  $       (0.43) $       (0.43)  $  (1.16)
   Gain (loss) from discontinued operations..............................           0.17          (0.42)     (1.59)
                                                                           -------------  -------------   -------------

Basic and diluted loss per share.........................................  $       (0.26) $       (0.85)  $  (2.75)
                                                                           =============  =============    ============


Weighted average number of shares........................................     11,748,210      11,311,791      9,919,626
                                                                              ==========      ==========      =========
</TABLE>



             The accompanying notes are an integral part of this statement.


                                      F-4
<PAGE>



<TABLE>
<CAPTION>


                                       AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                                      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY



                                                                   PREFERRED STOCK                 COMMON STOCK
                                                                   ---------------                 ------------

                                                              NUMBER OF                      NUMBER OF
                                                               SHARES          AMOUNT         SHARES         AMOUNT
                                                               ------          ------         ------         ------
<S>                                                       <C>             <C>                <C>         <C>

Balance at July 31, 1996..................................        -        $     -             6,267,000  $      63,000
Net loss .................................................
Dividend on preferred stock...............................
Issuance of common shares.................................                                     1,886,000         19,000
Issuance of preferred stock...............................      1,377,000         14,000
Conversion of preferred stock to common...................       (280,000)        (3,000)      2,031,000         20,000
Tax benefit related to stock option plans and warrants....
Amortization of deferred compensation.....................
Exercise of stock options.................................                                       243,000          2,000
Stock options issued to non-employees.....................
Warrants issued in connection with acquisition............      ---------      ---------     -----------      ---------
Balance at July 31, 1997..................................      1,097,000         11,000      10,427,000        104,000
Net loss .................................................
Dividend on preferred stock...............................
Issuance of common shares.................................                                       250,000          3,000
Conversion of preferred stock to common...................       (373,000)        (4,000)        838,000          8,000
Amortization of deferred compensation.....................
Exercise of stock options.................................                                       102,000          1,000
                                                               -----------      ----------     ---------       ---------
Balance at July 31, 1998..................................        724,000          7,000      11,617,000        116,000
Net loss .................................................
Conversion of preferred stock to common...................       (298,000)        (3,000)        304,000          3,000
                                                                 --------         ------         -------          -----
Balance at July 31, 1999..................................        426,000  $       4,000      11,921,000  $     119,000
                                                                  =======  =============      ==========  =============



                                                             ADDITIONAL                      RETAINED         TOTAL
                                                             CONTRIBUTED                     EARNINGS     SHAREHOLDERS'
                                                               CAPITAL          OTHER        (DEFICIT)       EQUITY

Balance at July 31, 1996..................................     20,654,000       (793,000)      2,657,000     22,581,000
Net loss .................................................                                   (24,854,000)   (24,854,000)
Dividend on preferred stock...............................      2,286,000                     (2,403,000)      (117,000)
Issuance of common stock..................................      8,525,000                                     8,544,000
Issuance of preferred stock...............................     15,411,000                                    15,425,000
Conversion of preferred stock to common...................        (17,000)
Tax benefit related to stock option plans and warrants....        356,000                                       356,000
Amortization of deferred compensation.....................                       597,000                        597,000
Exercise of stock options.................................        854,000                                       856,000
Stock options issued to non-employees.....................        571,000                                       571,000
Warrants issued in connection with acquisition............        142,000                                       142,000
                                                                  -------       --------     -----------        -------
Balance at July 31, 1997..................................     48,782,000       (196,000)    (24,600,000)    24,101,000
Net loss .................................................                                    (9,591,000)    (9,591,000)
Dividend on preferred stock...............................        141,000                        (24,000)       117,000
Issuance of common stock..................................        473,000                                       476,000
Conversion of preferred stock to common...................         (4,000)                                         -
Amortization of deferred compensation.....................                       196,000                        196,000
Exercise of stock options.................................        562,000                                       563,000
                                                                  -------       --------     ------------    ----------
Balance at July 31, 1998..................................     49,954,000         -          (34,215,000)    15,862,000
Net loss .................................................                                    (3,065,000)    (3,065,000)
                                                              ----------        --------      ----------     ----------
Balance at July 31, 1999..................................  $  49,954,000  $      -       $  (37,280,000) $  12,797,000
                                                            =============  ============   ==============  =============
</TABLE>


         The accompanying notes are an integral part of this statement.

                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                       AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                        YEAR ENDED JULY 31,
                                                                                        -------------------

                                                                                1999           1998           1997
                                                                                ----           ----           ----
<S>                                                                       <C>            <C>             <C>
Cash flows from operating activities:
   Net loss from continuing operations...................................  $  (5,054,000) $   (4,901,000) $  (7,944,000)
   Net gain (loss) from discontinued operations .........................      1,989,000      (4,690,000)   (16,910,000)
Adjustments to reconcile net loss to net cash
     used in operating activities:
     Depreciation and amortization.......................................     11,779,000       1,448,000      2,646,000
     Long-term asset impairment..........................................          -               -          5,725,000
     Loss on settlement..................................................        310,000           -          1,800,000
Loss on standby letter of credit.........................................          -               -          4,985,000
     Amortization of deferred compensation...............................          -             196,000        597,000
     Gain on disposal of business........................................     (1,989,000)       (220,000)        -
     Gain on sale of fixed assets........................................        (45,000)          -             -
     Deferred tax provision..............................................           -              -            (11,000)
     (Loss) income applicable to minority interest.......................       (716,000)        713,000        421,000
     Undistributed loss of affiliate.....................................      1,553,000       4,730,000          -
     Stock option compensation...........................................           -              -            271,000
     Imputed interest....................................................           -              -            305,000
     Change in assets and liabilities, net of effects of acquisition
       and dispositions:
       Trade accounts receivable.........................................      8,208,000     (10,584,000)    (7,255,000)
       Inventories.......................................................      1,299,000      (2,280,000)   (17,673,000)
       Notes receivable..................................................       (500,000)      3,503,000          -
       Intangible and other assets.......................................          -           1,638,000          -
       Prepaid expenses and other receivable.............................          1,000          70,000     (1,646,000)
       Lease equipment, net..............................................     (2,504,000)
       Accounts payable..................................................     (5,295,000)     (2,122,000)    14,181,000
       Accrued liabilities...............................................     (1,290,000)     (5,462,000)     6,588,000
       Income taxes payable..............................................       (164,000)     (2,254,000)    (3,329,000)
       Change in deferred revenue........................................      2,707,000        (950,000)       950,000
       Change in deferred gain on disposition of Technology Group........          -           1,480,000          -
       Borrowings under term loans.......................................     (4,286,000)     67,179,000        242,000
     Inventory floor financing...........................................      6,090,000     (47,246,000)     1,126,000
                                                                               ---------     -----------      ---------
       Net cash provided by (used in) operating activities...............     12,093,000         248,000    (14,931,000)

Cash flows from investing activities:
   Purchase of property and equipment....................................     (2,711,000)     (6,332,000)    (1,222,000)
   Purchase of rental equipment, net.....................................    (13,315,000)
   Sale (purchase) of debt securities....................................      4,078,000       5,569,000     (3,750,000)
   Proceeds on sales of fixed assets.....................................      2,235,000           -              -
   Acquisition of businesses, net of cash acquired.......................         -                -         (1,497,000)
                                                                             -----------     ------------    ----------
       Net cash used in investing activities.............................     (9,713,000)       (763,000)    (6,469,000)

Cash flows from financing activities
   Long term debt repayments.............................................     (1,068,000)          -              -
   Net borrowings (payments) under revolving credit agreements...........           -         (7,323,000)     7,287,000
   Principal payments under capitalized lease obligations................        (60,000)       (348,000)      (327,000)
   Proceeds from sale of stock...........................................           -            480,000      9,182,000
          Subsidiary purchase of treasury stock..........................           -         (1,816,000)        -
   Exercise of stock options.............................................           -            562,000        856,000
   Collections (increase) of receivable from shareholder, net............     (1,700,000)         38,000       (400,000)
                                                                              ----------      ----------     ----------
       Net cash (used in) provided by financing activities...............     (2,828,000)     (8,407,000)    16,598,000
                                                                              ----------      ----------     ----------
Net (decrease) in cash and cash equivalents..............................       (448,000)     (8,922,000)    (4,802,000)
Cash and cash equivalents beginning of year..............................      3,362,000      12,284,000     17,086,000
                                                                               ---------      ----------     ----------
Cash and cash equivalents end of year....................................  $   2,914,000  $    3,362,000  $  12,284,000
                                                                           =============  ==============  =============
</TABLE>

         The accompanying notes are an integral part of this statement.


                                      F-6
<PAGE>

                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       DESCRIPTION OF BUSINESS

     American  United Global,  Inc., a Delaware  corporation  (the "Company") is
engaged, through its operating subsidiary,  in the distribution business through
its 60.6% owned subsidiary, Western Power & Equipment Corp. ("Western"). Western
is  engaged  in the  sale,  rental  and  service  of  light,  medium  and  heavy
construction,  industrial and  agricultural  equipment and related parts.  These
sales are conducted from 24 regional  distribution  operations  owned by Western
located in the states of Washington,  Oregon,  California,  Alaska and Nevada. A
majority of this equipment is manufactured by Case Corporation ("Case").

     The Company is also involved in the  engineering,  design and  construction
business through a minority owned subsidiary, IDF International, Inc. ("IDF").

     The  Company  had  been  engaged  in  the   technology   business   through
subsidiaries,   which  provided  telecommunications  products  and  services,  a
proprietary   intelligent   communications  system,  as  well  as  software  and
networking  products.  Such products and services were provided by the Company's
wholly and majority owned subsidiaries as follows:

     Connectsoft  Communications  Corp.  ("CCC"),  a wholly owned subsidiary had
been  developing  a  telephony  server  product  that reads email and select web
content over the telephone which was marketed under the name "Vogo Server".  The
assets of CCC have been sold to an unrelated third party as discussed in Note 9.

     Exodus  Technologies,  Inc.,  an  80.4%-owned  subsidiary,  had developed a
proprietary application server software,  marketed as NTERPRISE, allows users to
run Windows  application server software programs designed for Microsoft Windows
NT operating system on users' existing Unix workstations.

     InterGlobe Networks,  Inc. provided network consulting services and managed
a network operations center providing internet connectivity services.

     The technology  business has been accounted for as discontinued  operations
for the years ending July 31, 1999, 1998 and 1997.


2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Consolidation

     The consolidated  financial  statements include the accounts of the Company
and  its  wholly  owned  and   majority-owned   subsidiaries.   All  significant
intercompany  balances and transactions  have been eliminated in  consolidation.
Minority interest represents the minority  shareholders'  proportionate share of
the equity of Western, which was 39.4% at July 31, 1999 and 1998.

     Cash Equivalents

     For financial reporting  purposes,  the Company considers all highly liquid
investments  purchased  with an original  maturity of three months or less to be
cash equivalents.

                                      F-7
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     Restricted Cash

     In accordance with Western's  borrowing  agreement with Deutsche  Financial
Services ("DFS"),  Western has a cash account  restricted by DFS for the purpose
of paying down the line of credit. Restricted cash included in the cash balances
totaled $724,000 and $865,000 at July 31, 1999 and 1998, respectively.

     Inventory Valuation

     Inventories  are stated at the lower of cost or market.  Cost is determined
based upon the first-in,  first-out  method for parts inventory and the specific
identification for equipment inventories.


     Investment Securities

     Investments in marketable  debt  securities  represent  primarily  treasury
notes and are carried at market value as these  investments have been classified
as available for sale securities at July 31, 1999 and 1998.




     Property and Equipment

     Property,  plant,  and  equipment  are  stated  at  cost  less  accumulated
depreciation. Depreciation and amortization are computed using the straight-line
method  over the  estimated  useful  lives of the assets,  ranging  from 5 to 20
years.  Expenditures for  replacements  and major  improvements are capitalized.
Repairs  and  maintenance  costs are  expensed as  incurred.  The cost of assets
retired or otherwise  disposed of and the related  accumulated  depreciation are
eliminated  from the  accounts;  any gain or loss  thereon  is  included  in the
results of operations.




     Intangible Assets and Investment in Unconsolidated Subsidiary

     Intangible assets acquired in business  acquisitions such as goodwill,  and
noncompete agreements represent value to the Company.  Intangibles are amortized
using the  straight-line  method over the assets' estimated useful lives ranging
from 20 to 40  years.  Such  lives  are  based on the  factors  influencing  the
acquisition decision and on industry practice.

     The  carrying  value of  intangible  assets is assessed  for any  permanent
impairment by evaluating the operating  performance and future undiscounted cash
flows of the underlying assets.  Adjustments are made if the sum of the expected
future net cash flows is less than book value.

     Investments in unconsolidated subsidiary represents the Company's 38.5% and
47.6% ownership in IDF International, Inc. ("IDF") as of July 31, 1999 and 1998.
Net losses for IDF for the years ended July 31, 1999 and 1998 were approximately
$2,250,000 and $9,930,000.  The loss for 1998 includes impairment of goodwill of
$7,500,000.  Accordingly,  the Company reduced its investment in  unconsolidated
subsidiary by $866,000 and $4,727,000,  representing the Company's share of such
loss  during the years  ended July 31, 1999 and 1998.  In  addition,  because of
IDF's  financial  condition  described  more  fully in Note 3, the  Company  has
written  off its  remaining  investment  in IDF of  $95,000  for a total loss in
fiscal 1999 of $961,000.

                                      F-8
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     Income Taxes


     The Company accounts for income taxes using an asset and liability approach
which requires the  recognition of deferred tax  liabilities  and assets for the
expected  future  consequences  of  temporary  differences  between the carrying
amounts  for  financial  reporting  purposes  and the tax  bases of  assets  and
liabilities.

     Revenue Recognition

     Revenue  on  equipment  and parts  sales is  recognized  upon  shipment  of
products and passage of title. Equipment rental and service revenue is generally
recognized over the period such services are provided.

     Advertising Expense

     Western  expenses  all  advertising  costs as incurred.  Total  advertising
expense for the years ended July 31, 1999, 1998 and 1997 was $311,000,  $434,000
and $501,000, respectively.

     Fair Value of Financial Instruments

     The recorded  amounts of cash and cash  equivalents,  accounts  receivable,
short term borrowings,  accounts payable and accrued liabilities as presented in
the  consolidated  financial  statements  approximate  fair  value  based on the
short-term  nature of these  instruments.  The recorded amount of long-term debt
approximates  fair  value  as the  actual  interest  rates  approximate  current
competitive   rates.   The  fair  value  of  marketable   debt  securities  held
approximates the carrying value at July 31, 1999 and 1998.

     Use of Estimates

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


     Employee Stock Options

     The Company accounts for stock based employee  compensation plans under the
provisions of Statement of Financial  Accounting  Standards No. 123, "Accounting
for Stock-Based  Compensation."  This standard defines a fair value-based method
of accounting for these equity  instruments.  This method measures  compensation
cost based on the value of the award and  recognizes  that cost over the service
period.  The Company  elected to continue  using the rules of APB Opinion No. 25
and  provides  pro forma  disclosures  of net income and earning per share as if
Statement No. 123 had been applied.

     Earnings Per Share

     Statement of Financial  Accounting  Standards No. 128, "Earnings Per Share"
has been adopted by the Company  during fiscal 1998.  Applying the provisions of
the  statement  had no  material  effect  on the  Company's  earnings  per share
computations for the years ending July 31, 1999, 1998 and 1997.

                                      F-9
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     The following table sets forth the  computations of basic and fully diluted
earnings per share for the years ending July 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                            YEAR ENDED JULY 31,
                                                                            -------------------

                                                                  1999               1998            1997
                                                                 ----               ----            ----
<S>                                                         <C>              <C>               <C>
Numerators:
  Net loss from continuing operations.....................   $    (5,054,000) $    (4,901,000)  $    (9,078,000)
  Dividend on preferred stock.............................            -               (24,000)       (2,403,000)
                                                                  ----------     -------------       -----------

  Net loss after preferred dividends......................        (5,054,000)      (4,925,000)      (11,481,000)

  Discontinued operations.................................         1,989,000       (4,690,000)      (15,776,000)
                                                                   ---------       ----------       -----------

  Net loss ...............................................        (3,065,000)      (9,615,000)      (27,257,000)
                                                                  ==========       ==========       ===========


Denominator:
 Denominator for basic and diluted earnings per share -
  Weighted average outstanding shares.....................        11,748,210       11,311,791          9,919,626
                                                                  ==========       ==========          =========

Basic and diluted earnings (loss) per share:

Loss from continuing operations...........................             (0.43)          (0.43)            (1.16)
Income (loss) from discontinued operations................              0.17           (0.42)            (1.59)
                                                                        ----           -----             -----
Basic and diluted net loss per share......................             (0.26)          (0.85)            (2.75)
                                                                       =====           =====             =====

</TABLE>

     Diluted and basic  earnings per share are the same,  since the inclusion of
common stock equivalents in the computation would be antidilutive.

     Reclassifications

     Certain  reclassifications  have been made to the fiscal year 1998 and 1997
financial  statements to conform to the  financial  statement  presentation  for
fiscal 1999. Such reclassifications have had no effect on the Company's net loss
or shareholders' equity.

                                      F-10
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.   ACQUISITIONS


     Distribution Business Acquisitions

     On January 17,  1997  Western  acquired  the  operating  assets of Sahlberg
Equipment, Inc. ("Sahlberg"), a four-store Northwest distributor of noncompeting
lines of  equipment  with  facilities  in Kent,  Washington,  Portland,  Oregon,
Spokane, Washington and Anchorage,  Alaska. The purchase price for the assets of
Sahlberg was an aggregate of approximately $5,290,000,  consisting of $3,844,000
for  equipment  inventory,  $797,000 for parts  inventories,  $625,000 for fixed
assets, and $24,000 for work-in-process.  The acquisition was accounted for as a
purchase.

     On December 11, 1997,  Western acquired  substantially all of the operating
assets  used  by  Case  in  connection   with  its  business  of  servicing  and
distributing  Case  agricultural  equipment at a facility  located in Yuba City,
California.  The acquisition was consummated for approximately $142,000 in cash,
$628,000 in  installment  notes payable to Case and the assumption of $1,175,000
in inventory floor plan debt with Case and its  affiliates.  The acquisition was
accounted for as a purchase.

     On April 30, 1998,  Western  acquired  substantially  all of the  operating
assets of Yukon  Equipment,  Inc. (Yukon) in connection with Yukon's business of
servicing and distributing construction,  industrial, and agricultural equipment
in Alaska. Yukon has facilities in Anchorage, Fairbanks, and Juneau, Alaska. The
acquisition was consummated for approximately $4,766,000 in cash, the assumption
of approximately $2,786,000 in floor plan debt with Case and its affiliates, and
50,000 shares of Western's  common stock. The acquisition was accounted for as a
purchase.


     Technology acquisitions

     During  the year ended  July 31,  1997,  the  Company  acquired  InterGlobe
Networks,  Inc. and the assets of Seattle  OnLine,  Inc. These  operations  were
discontinued in the year ended July 31, 1998. See Note 9.

     During  August 1997 the Company  merged  TechStar  Communications  Corp,  a
wholly owned  subsidiary,  into IDF, pursuant to an agreement and plan of merger
dated July 31, 1997 among the Company, IDF and an acquisition  subsidiary of IDF
(the "IDF Merger Agreement").  Upon Consummation of the transaction, the Company
received 6,171,553 shares of IDF common stock, representing approximately 63% of
the  then  outstanding  shares  and  approximately  58%  of  the  fully  diluted
outstanding  IDF common stock,  as a result of which,  the Company was deemed to
have acquired IDF. In connection with the transaction,(i) all options granted by
the Company under employment  agreements entitling Messrs.  Kandel,  Luciani and
Moskona to purchase  an  aggregate  of 780,000  shares of the  Company's  common
stock,  and all additional  authorized but ungranted  employee stock options for
120,000 shares were cancelled,  (ii) Messrs.  Kandel and Luciani  tendered their
resignations as directors of the Company,  (iii) each of Messrs. Kandel, Luciani
and Moskona  publicly sold all but 174,900 of their remaining  shares of Company
stock and  utilized  $600,000  of the net  proceeds  to  invest  in  convertible
securities of IDF.

     Messrs. Kandel, Luciani and Moskona were the senior executives and officers
of IDF and had  each  entered  into  employment  agreements  with  IDF  expiring
November 30, 2000.  Pursuant to such  agreements,  Messrs.  Kandel,  Luciani and
Moskona are entitled to receive,  in addition to their base  salaries and annual
bonuses,  options  to  acquire  IDF  shares  which  vest  based upon IDF and its
consolidating subsidiaries,  including TechStar and Heyden Wegman, achieving all
or certain pro-rated portions of annual pre-tax income targets in each of fiscal
years ending July 31, 1998,  1999 and 2000. In the event that any or all of such
IDF  Options do not vest,  the  number of shares of IDF common  stock that would
have been  issued upon the  exercise of such IDF Options  shall be issued to the
Company as additional  merger  consideration.  In September 1998 Messr.  Luciani
tendered his resignation  with IDF. Messr.  Kandel tendered his  resignations in
January of 1999.

                                      F-11
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Messrs.  Robert M. Rubin and Lawrence Kaplan,  the Chief Executive  Officer
and Chairman of the Board and a Former  Director of the  Company,  respectively,
are also principal stockholders and members of the board of directors of IDF and
were such prior to the consummation of the IDF merger.  Pursuant to the terms of
the IDF Merger  Agreement,  Mr. Rubin converted an $800,000 loan previously made
to IDF into Preferred  Series B stock of IDF which is  convertible  into 400,000
shares of IDF common stock.  In addition,  through GV Capital Inc., an affiliate
of Mr. Kaplan,  IDF offered $3,000,000 of five year, 8.0% notes convertible into
IDF Series A  Convertible  Preferred  Stock at 1.25 per share.  $600,000 of such
notes were  purchased  by Messrs.  Kandel,  Luciani and  Moskona.  Mr.  Kaplan's
affiliate  received  separate  compensation  for  acting as  placement  agent in
connection with such private offering of IDF securities.

     During the year ended July 31, 1998 IDF's five year Convertible  Notes were
converted  into 1,400,000  shares of IDF Series A Preferred  Stock and 1,080,000
shares of IDF Convertible Series C Preferred stock at $1.25 per share.

     The Series A, B and C Convertible Preferred Stock of IDF have voting rights
that are the same as IDF Common Stock, thus subsequent to the conversion of said
Notes,  the Company owns 62% of the outstanding  common stock,  which represents
47.6%  of the  voting  capital  stock as of July 31,  1998.  As a result  of the
decrease  in the  ownership  percentage  by the  Company  to less than 50%,  the
Company has accounted for the results of the  operations of IDF using the equity
method of accounting effective as of August 1, 1997.

     During the past two fiscal  quarters,  IDF has  experienced  a  significant
decrease  in  revenue  and has been  unable to obtain  further  financing.  As a
result,  IDF has  severe  cash  flow and  other  financial  difficulties  and is
pursuing  alternative measures which include the possible sale of Hayden-Wegman,
its New York City based operating subsidiary.

     Due to the  circumstances  described above and the uncertainty of recovery,
the Company has taken a full reserve  against the  advances of $992,000  made to
IDF this fiscal year and the remaining investment in IDF.


         Pro Forma

     The following unaudited pro forma summary combines the consolidated results
of operations as if the aforementioned  acquisitions had been acquired as of the
beginning of each period presented, including the impact of certain adjustments.
<TABLE>
<CAPTION>

                                                YEAR ENDED JULY 31,
                                                -------------------

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

Net sales............................   $   173,414,000   $   171,505,000
Net loss ...........................         (9,654,000)      (25,885,000)

Basic and diluted loss per share.....   $          (.85)  $        (2.61)

</TABLE>

     The pro forma results are not necessarily indicative of what actually would
have  occurred  if the  acquisitions  had been in effect for the entire  periods
presented.  In  addition,  they are not  intended to be a  projection  of future
results of combined operations.

                                      F-12
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.       INVENTORIES

          Inventories consist of the following:
<TABLE>
<CAPTION>


                                                     JULY 31,
                                                     --------

                                              1999            1998
                                              ----            ----
<S>                                   <C>               <C>
Parts    ............................  $    10,101,000   $     8,535,000
Equipment new and used...............       56,967,000        64,956,000
                                            ----------        ----------

                                         $  67,068,000    $   73,491,000
                                         =============    ==============

</TABLE>


5.       FIXED ASSETS

         Fixed assets consist of the following:

<TABLE>
                                                             JULY 31,
                                                             --------

                                                      1999            1998
                                                      ----            ----
<S>                                           <C>               <C>

Machinery and equipment......................  $     3,869,000   $     3,236,000
Furniture and office equipment...............        2,291,000         2,309,000
Computer equipment...........................        1,299,000         1,146,000
Land.........................................          420,000           840,000
Building and leasehold improvements..........        5,486,000         4,280,000
Vehicles ....................................        1,841,000         1,291,000
                                                     ---------         ---------

 ..                                                 15,206,000        13,102,000
Less:  Accumulated depreciation..............       (5,388,000)       (4,407,000)
                                                    ----------        ----------

Property plant & equipment, net..............  $     9,818,000   $     8,695,000
                                                    ==========        ==========

Rental equipment fleet.......................       36,395,000        23,080,000
Less:  Accumulated depreciation..............       (5,029,000)           -
                                                   -----------        ----------

Rental equipment fleet, net..................  $    31,366,000   $    23,080,000
                                                   ===========       ===========


Leased equipment fleet, net..................  $     5,264,000   $     2,760,000
                                                   ===========       ===========
</TABLE>



                                      F-13
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6.       BORROWINGS

          The Company is in default on an  unsecured  note payable in the amount
     of  $1,500,000  to an unrelated  third party.  The note bore interest at 8%
     through April 30, 1999. While in default, the note bears interest at 12%.


          Western has  inventory  floor plan  financing  arrangements  with Case
     Credit Corporation, an affiliate of Case, for Case inventory and with other
     finance companies affiliated with other equipment manufacturers.  The terms
     of these  agreements  generally  include a one-month to six-month  interest
     free term  followed by a term during which  interest is charged.  Principal
     payments  are  generally  due at the  earlier of sale of the  equipment  or
     twelve to forty-eight months from the invoice date.

          In June 1997,  Western obtained a $75,000,000  inventory  flooring and
     operating  line of  credit  through  DFS.  The  DFS  credit  facility  is a
     three-year,  floating rate facility based on prime with rates between 0.50%
     under prime to 1.00% over prime  depending on the amount of total borrowing
     under the  facility.  Amounts may be  advanced  against  Western's  assets,
     including accounts receivable, parts, new equipment, rental fleet, and used
     equipment. Interest payments on the outstanding balance are due monthly.

          All floor plan debt is  classified  as current  since the inventory to
     which it relates is  generally  sold  within  twelve  months of the invoice
     date.

          The  following  table  summarizes  the debt and  inventory  floor plan
     financing arrangements:
<TABLE>
<CAPTION>


                                                                 Maturity               July 31,
                                          Interest Rate          Date            1999            1998
                                          -------------          ----            ----            ----
<S>                                    <C>                     <C>          <C>                <C>

       Note Payable                     8%(12% default           4/30/99     $1,500,000         $1,500,000
                                            rate)


       Case Credit Corporation              Prime + 2%           8 - 48      17,128,000         11,038,000
                                              (10.00%)            months


       Deutsche Financial Services         Prime - 0.5%         12 - 36      70,883,000         75,886,000
                                              (7.50%)             months


       Other                                variable            12 - 48          48,000            133,000
                                        (8.00%-10.00%)            months
                                                                            -----------        -----------
                                                                            $89,559,000        $88,557,000
                                                                            ===========        ===========
</TABLE>

                                      F-14
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          At July 31,  1999,  Western was in  technical  default of the leverage
     covenant  and the  minimum  tangible  net worth  covenant  in the  Deutsche
     Financial  Services Loan Agreement.  Western asked for but did not obtain a
     waiver  letter as of July 31, 1999 and  thereafter.  There is no  assurance
     that Deutsche  Financial Services will not call this debt at any time after
     July 31, 1999.  If DFS does call the debt, it will become  immediately  due
     and  payable in full.  The amount due to  Deutsche  Financial  Services  is
     therefore included as a current liability.




7.       INCOME TAXES

          The provision  (benefit) for income taxes from  continuing  operations
     comprises the following:
<TABLE>
<CAPTION>

                                                          YEAR ENDED JULY 31,
                                                          -------------------

                                                1999              1998               1997
                                                ----              ----               ----
<S>                                     <C>              <C>               <C>
Current:

   Federal............................   $      (978,000) $     1,227,000   $      (422,000)
   State .............................          (156,000)         162,000           119,000
                                                --------          -------           -------

                                              (1,134,000)       1,389,000          (303,000)
Deferred:
   Federal............................            29,000          (32,000)         (357,000)
   State .............................             4,000           (3,000)          (43,000)
                                                   -----           ------           -------

                                                  33,000          (35,000)         (400,000)
                                                  ------          -------          --------

                                         $    (1,101,000) $     1,354,000   $      (703,000)
                                         ===============  ===============   ===============
</TABLE>



                                      F-15
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          The   principal   reasons  for  the   variation   from  the  customary
     relationship  between  income taxes at the statutory  federal rate and that
     shown in the consolidated statement of income are as follows:
<TABLE>
<CAPTION>


                                                                              YEAR ENDED JULY 31,
                                                                              -------------------

                                                                  1999               1998            1997
                                                                  ----               ----            ----

<S>                                                         <C>              <C>               <C>
Statutory federal income tax rate..........................  $    (2,009,000) $       495,000   $    (2,797,000)
Valuation allowance........................................        1,011,000          590,000         1,966,000
State income taxes, net of federal income tax benefit......         (152,000)         159,000            76,000
Other    ..................................................           49,000          110,000            52,000
                                                                  ----------      -----------       -----------

                                                             $    (1,101,000) $     1,354,000   $      (703,000)
</TABLE>

          Temporary   differences  and  carryforwards   which  give  rise  to  a
     significant portion of deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>

                                                             JULY 31,

                                                      1999            1998
                                                      ----            ----
<S>                                           <C>               <C>

Depreciation and amortization................  $      (837,000)  $      (780,000)
Valuation allowance..........................       (5,387,000)       (4,377,000)
                                                    ----------        ----------

Gross deferred tax liabilities...............       (6,224,000)       (5,157,000)
                                                    ----------        ----------

Inventory reserve............................          918,000           775,000
Bad debt reserve.............................          282,000           261,000
Accrued vacation and bonuses.................           96,000            98,000
Other    ....................................          482,000           532,000
Loss carryforwards...........................        4,107,000         3,186,000
Loss on Western initial public offering......          131,000           131,000
Stock options................................          782,000           782,000
                                                       -------           -------

Gross Deferred Tax Assets....................        6,798,000         5,765,000
                                                     ---------         ---------

                                               $       574,000   $       608,000
                                               ===============   ===============
</TABLE>

     At July 31, 1999, the Company had federal income tax loss  carryforwards of
$12,303,000  which  will  begin  to  expire  in  2011.  Utilization  of such net
operating losses will be subject to annual  limitations in the event of a change
in ownership of the Company of more than 50%.

                                      F-16
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




8.       SHAREHOLDERS' EQUITY

     A total of 976,539 shares of the Company's Series B-1 convertible preferred
stock were  issued in  September  1996 in  connection  with the  acquisition  of
ConnectSoft,  Inc. Such shares have a $3.50 per share  liquidation value and are
convertible  into shares of the Company's  common stock at a conversion ratio of
one for one. Through the year ended July 31, 1999 a total of 550,869 shares were
converted to common stock at the ratio of one for one,  leaving  425,670  shares
outstanding at July 31, 1999.


     In  January  of 1997,  the  Company  issued  400,000  shares of Series  B-2
preferred  stock in a private  placement.  Proceeds  from the private  placement
totaled  $10,000,000.  The Series B-2  preferred  stock  carried a $25 per share
liquidation preference over the Company's common stock, and paid a 7% cumulative
quarterly  dividend in additional  shares of Series B-2 preferred  stock.  As of
July 31, 1997,  a total of 280,000 of the  preferred  shares had been  converted
into approximately 2,031,000 common share at prices ranging from $3.31 to $3.80.
All of the remaining 120,000 preferred shares  outstanding at July 31, 1997 were
converted  into  approximately  585,000  shares at a price of $5.37 per share in
September, 1997, leaving no shares outstanding at July 31, 1998.


     The shares had provided for a discount  conversion  feature  which has been
accounted  for as an  imputed  dividend  to the  preferred  shareholders.  Total
dividend expense was $24,000 and $2,403,000 for the fiscal years ending July 31,
1998 and 1997, respectively.  A total of $2,121,000 was recognized as a dividend
imputed by the discount  conversion feature of the preferred shares for the year
ended July 31, 1997.  All of the  dividends  were paid in  additional  shares of
common stock  concurrent  with the conversion of the preferred  shares to common
stock.


     In addition,  purchasers of the preferred shares acquired 350,000 five-year
warrants  at a purchase  price of $.01 per  warrant,  entitling  the  holders to
purchase 350,000 shares of Company common stock at $8.58 per share.

     On February 25, 1994,  the Company  completed a public  offering of 920,000
units at $5.25 per unit, each unit consisting of one share of common stock, $.01
par value,  and one  redeemable  common  stock  purchase  warrant.  Each warrant
entitled  the holder to purchase  one share of common stock until July 31, 1998,
at an exercise price of $7.50.  During fiscal 1999, the exercise  period for the
920,000  warrants  was  extended to July 31,  2001.  The warrants are subject to
redemption  by the  Company  at a  redemption  price of $.10 per  warrant  under
certain circumstances.

     Western has been  authorized  to issue  10,000,000  shares of "blank check"
preferred stock, with respect to which all the conditions and privileges thereof
can be  determined  solely by action of  Western's  Board of  Directors  without
further  action of its  shareholders.  As of July 31,  1999 none were issued and
outstanding.

                                      F-17
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     9. DISCONTINUED OPERATIONS

     In April,  1998, the Company  approved a formal plan to dispose of or close
down the remaining  operations of the  Technology  Group of Companies  including
Exodus Technologies,  Connectsoft,  Inc.,  Connectsoft  Communications Corp. and
InterGlobe  Networks,  Inc.  Although  the  results of these  subsidiaries  have
previously  been  included  in  the  consolidated   financial  statements,   the
subsidiaries operated as a separate line of business whose products,  activities
and  customers  differed from other  operations of the Company.  Based upon this
determination,  the  results  of  operations  of these  subsidiaries  have  been
accounted  for as  discontinued  operations  and  accordingly,  their  operating
results are segregated in the accompanying statements of operations.

     In  April  1999,  IDF,  the  minority  owned   subsidiary  of  the  Company
discontinued  the  operations of TechStar  Communications,  Inc. The Company has
therefore treated the operations of TechStar for the year ended July 31, 1997 as
discontinued,  since during this time TechStar was a wholly owned  subsidiary of
the Company.

     Revenues for the  Technology  group of companies  for the years ending July
31, 1999, 1998 and 1997 were $67,000, $2,108,000 and $6,415,000, respectively.


     Sale of the assets of Connectsoft Communications Corporation

     On  July  10,  1998,  the  Company   entered  into  an  agreement  to  sell
substantially  all of the assets of its  Connectsoft  subsidiary,  including the
network operations center ("NOC") to eGlobe,  Inc.,  formerly known as Executive
TeleCard, Ltd. ("eGlobe"). The agreement, as amended June 17 and September, 1999
provided  consideration  for the assets of eGlobe  Convertible  Preferred  Stock
valued by the Company at approximately $2,000,000.  eGlobe assumed approximately
$5,182,000  of  Connectsoft  liabilities  and  leases,  of  which  approximately
$2,900,000 are lease obligations guaranteed by the Company. Although eGlobe will
be responsible for payment of those assumed liabilities,  the assumption of such
liabilities  will not  relieve  the  Company  from  its  guarantees  until  such
liabilities  have been paid. The Company  provided eGlobe with a working capital
loan of  $500,000  secured  by a  promissory  note.  The  Promissory  note bears
interest  at  prime  (8.0%  at July  31,  1999)  and is  payable  in 12  monthly
installments beginning September 1, 1999 or upon eGlobe achieving certain equity
or debt financing  milestones as defined in the note. The Company and eGlobe are
presently negotiating revised payment terms.

     For the year ending July 31, 1998,  the net deferred gain of $1,480,000 had
been included under the caption Deferred gain on discontinued  operations in the
accompanying  consolidated  balance  sheets  and the final gain on  disposal  of
$1,989,000 has been  recognized in the  accompanying  consolidated  statement of
operations for the year ended July 31, 1999.


                                      F-18
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10.      COMMITMENTS AND CONTINGENCIES

         LEASE COMMITMENTS

     The Company and  Western  lease  certain  facilities  and certain  computer
equipment and software  under  non-cancelable  lease  agreements.  As more fully
described in Note 14, the  building  portion of five of the  Western's  facility
leases  qualify under SFAS 13 as "capital  leases"  (i.e.,  an acquisition of an
asset and incurrence of a liability).  The remaining  facility lease  agreements
have terms ranging from  month-to-month  to nine years.  Certain of the facility
lease agreements  provide for options to renew and generally require the Company
to pay property taxes,  insurance,  and maintenance and repair costs. Total rent
expense  under all  operating  leases  aggregated  $2,000,000,  $1,833,000,  and
$1,971,000 for the years ended July 31, 1999, 1998, and 1997, respectively.  The
computer equipment lease expires August 1999 and meets certain specific criteria
to be accounted for as a capital lease.


     Assets recorded under capital leases are as follows:

<TABLE>
<CAPTION>

                                                                   JULY 31,

                                                     1999             1998             1997
                                                     ----             ----             ----
<S>                                         <C>              <C>               <C>

Capitalized asset value....................  $     4,978,000  $     3,036,000   $     3,836,000
Less:  Accumulated amortization............         (550,000)        (315,000)         (448,000)
                                                    --------         --------          --------
                                             $     4,428,000  $     2,721,000   $     3,388,000
                                             ===============  ===============   ===============
</TABLE>

     Future minimum lease payments  under all  non-cancelable  leases as of July
31, 1999 are as follows:

<TABLE>
<CAPTION>

                                                                                     CAPITAL        OPERATING
YEAR ENDING JULY 31,                                                                  LEASES          LEASES
--------------------                                                                  ------          ------
<S>                                                                               <C>            <C>
2000     ..........................................................................$  442,000     $   1,720,000
2001     ...........................................................................  459,000         1,374,000
2002     ...........................................................................  485,000           882,000
2003     ...........................................................................  510,000           726,000
2004     ...........................................................................  525,000           572,000
Thereafter..........................................................................8,875,000         6,642,000
                                                                                   ----------         ---------

Total annual lease payments........................................................11,926,000   $    11,916,000
                                                                                                    ===========
Less:  Amount representing interest with imputed rates from 6% to 15%.............. 6,524,000
                                                            -     --                ---------

Present value of minimum lease payments............................................ 4,772,000

Less:  Current portion.............................................................    17,000
                                                                                  -----------

Long-term portion.................................................................$ 4,755,000
                                                                                  ===========
</TABLE>


                                      F-19
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     Other Contingencies

     The Company is  guarantor  on certain  liabilities,  including  the capital
lease obligations assumed by eGlobe as described in Note 9.

     Western issues purchase orders to Case Corporation for equipment purchases.
Upon acceptance by Case, these purchases become  non-cancellable by Western.  As
of July 31, 1999 the total of such purchase orders was $5,923,000.

     The Company has entered into sales  contracts  under which the customer may
require the Company to  repurchase  equipment at specified  dates and  specified
prices.  The Company  records the proceeds from such sales contracts as deferred
lease income. The difference between the sale contract amount and the repurchase
obligation  is  recognized  as  revenue  over  the  period  of  the   repurchase
obligation.  The  remaining  repurchase  obligation is recorded as a sale if and
when the customer  does not exercise the  repurchase  option.  At July 31, 1999,
repurchase obligations aggregated $5,602,000.

         Legal Proceedings

     Except as set forth below,  there are no pending material legal proceeds in
which the  Company  or any of its  subsidiaries  is a party,  or to which any of
their  respective  properties are subject,  which either  individually or in the
aggregate,  may have a material  adverse  effect on the results of operations or
financial position of the Company.

     In May 1998,  a lawsuit  was filed on behalf of the  Company in a purported
shareholder  derivative  action against Mr. Rubin and certain other directors of
the Company. In June 1998, a shareholder class action was filed against the same
directors.

     On June 1, 1999 an agreement  was entered  into by all parties  whereby the
class  action was settled for  $2,500,000  which is  payable,  net of costs,  to
approved claimant shareholders.  The settlement will consist of $600,000 in cash
from  insurance  proceeds and $1,900,000 in shares of Western Power common stock
owned  by  the  Company.   When  the  Western  shares  are  distributed  to  the
stockholders,  the Company will no longer own greater  than 50% of Western,  and
will account for Western using the equity method.  In addition,  on June 1, 1999
the derivative action was also settled for $2,800,000 which amount is payable by
Robert M. Rubin to the Company.  This settlement consists of $1,100,000 from Mr.
Rubin's assignment of his rights to certain consulting  payments from Hutchinson
Corporation  and the transfer by Mr. Rubin to the Company of $1,700,000 of cash,
securities and notes in a brokerage  account.  Both  settlement  agreements were
approved by the court on August 23, 1999 and the settlements have been reflected
in the financial  statements as of July 31, 1999. All amounts due from Mr. Rubin
to the Company  pursuant to the derivative  action  settlement  were received by
November 12, 1999 except for the  Hutchinson  payments,  the receipt of which is
conditioned upon shareholder approval of the Hutchinson Transaction.


11.      STOCK OPTION PLANS

     The 1991  Employee  Incentive  Stock  Option Plan (The "1991  Stock  Option
Plan")

     Key employees of the Company can receive  incentive  options to purchase an
aggregate of 750,000 shares of common stock at initial  exercise prices equal to
100% of the market price per share of the Company's  common stock on the date of
grant.  The 1991 Stock Option Plan was  approved by the Board of  Directors  and
shareholders in June 1991 and became  effective from May 21, 1991. In the fiscal
year  ending  July 31,  1997,  126,550  options  were  granted to the  principal
shareholder  under this plan. No additional  options were issued under this plan
in the fiscal years ending July 31, 1999 and 1998.

                                      F-20
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     1996 Employee Stock Option Plan (The "1996 Plan")

     In April 1996, the Company's Board of Directors authorized and approved the
creation of the 1996 Plan for which two million  shares of the Company's  common
stock has been reserved.  Concurrent with the 1996 Plan's  adoption,  options to
acquire  800,000  shares at an exercise price of $3.78 per share were granted to
the Company's  principal  shareholder  and  management.  In May, 1996 options to
acquire an additional  250,000 shares at an exercise price of $5.25 were granted
to two other employees. All exercise prices represented the fair market value of
the  Company's  common  stock on the date of grant.  Options for 100,000  shares
granted at $5.25 have been canceled and options for 126,550 shares issued to the
principal  shareholder  at an exercise  price of $3.78 have been  canceled.  The
250,000 shares issued to two other employees have been cancelled.

     There were no additional  options  issued under the 1996 plan for the years
ending July 31, 1999 and 1998.  During the year ended July 31,  1997, a total of
605,000  options were granted to employees under the 1996 Plan at prices ranging
from $4.375 to $5.125.  All exercise prices represented the fair market value of
the Company's  common stock on the date of grant.  These options  generally vest
one third upon issuance and one-third upon the first and second anniversary date
of the  issuance.  The life of the  options  issued  under the 1996 plan is five
years from the date of the grant.

     During the year ending July 31, 1998, certain of the consultants  exercised
warrants  at a  price  of  $6.30,  which  resulted  in the  issuance  of  57,600
additional   shares  of  common  stock  and  57,600  publicly  traded  warrants.
Additionally,  50,000 options were exercised at a price of 4.75 resulting in the
issuance of 50,000 shares of common stock.

     Pursuant to the  acquisition  of  Connectsoft  Inc.,  the  Company  granted
300,000  options at a price of $6.625.  At July 31,  1999,  a total of 15,000 of
these options remain  outstanding.  The decrease is due to the  cancellation  of
285,000 options.

     Pursuant to the terms of a settlement  agreement the Company issued 150,000
options in fiscal 1998 to non-employees resulting in a $300,000 charge which was
accrued in 1997, representing their estimated fair value using the Black Scholes
method of option valuation.

     Western Stock Option Plan

     In March 1995, the Company,  as the sole  shareholder of Western,  approved
Western's  1995  Stock  Option  Plan,  as  previously  adopted  by the  Board of
Directors  (the  "Plan"),  under which key  employees,  officers,  directors and
consultants  of Western can receive  incentive  stock options and  non-qualified
stock options to purchase up to an aggregate of 300,000  shares of common stock.
In  December  1995,  the  shareholders  amended  the 1995 stock  option  plan to
increase  the  number of shares  underlying  the plan from  300,000  to  850,000
shares. In December 1996 the stockholders  amended the 1985 stock option plan to
increase the number of shares underlying the plan to 1,500,000 shares.  The Plan
provides that the exercise price of incentive stock options be at least equal to
100 percent of the fair market  value of the common  stock on the date of grant.
With respect to non-qualified stock options, the Plan requires that the exercise
price be at least 85 percent of fair value on the date such  option is  granted.
Upon approval of the Plan,  Western's Board of Directors  awarded  non-qualified
stock  options for an aggregate of 200,000  shares,  all of which provide for an
exercise  price of $6.50 per share.  On December 28, 1995, the exercise price of
the options  previously granted was lowered to $4.50 per share, the market price
as of that date. All options  granted upon approval of the Plan are  exercisable
commencing August 1, 1996 and expire on July 31, 2005.

                                      F-21
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     On August 1, 1996,  Western's  Board of Directors  approved the grant of an
additional 347,000 options to employees, directors and consultants of Western at
an exercise price of $4.375 per share, the market price as of the date of grant.
These options vest ratably over a two-year period commencing August 1, 1996.

     In January, 1998, Western's shareholders approved an amendment to this plan
providing  for the  grant on  August  1 of each  fiscal  year,  a total of 5,000
options to each non-employee  director of Western.  The options have an exercise
price  equal to the market  price on the date of the grant and a term of 5 years
from the date of the grant.

     During  the  fiscal  year ended  July 31,  1998  Western  issued a total of
714,000  options at average  exercise price of $4.62 and an expiration date of 5
years from the date of grant.

     The following table includes option information for the Company's plans:

<TABLE>
<CAPTION>


                                                                         WEIGHTED
                                                                          AVERAGE
                                                                       FAIR VALUE OF
                                     NUMBER OF         WEIGHTED           OPTION
         STOCK OPTION ACTIVITY         SHARES       EXERCISE PRICE        GRANTED
         ---------------------         ------       --------------        -------
        <S>                          <C>              <C>                <C>

         July 31, 1996                1,705,000        $5.07

           Options granted            3,015,000         5.79               $3.032
           Options exercised           (236,000)        3.57
           Options canceled            (346,000)        5.39
                                       --------         ----

         July 31, 1997                4,138,000         5.55

           Options granted              150,000         6.50               2.000
           Options exercised            (50,000)        4.75
           Options canceled          (2,366,000)        5.97
                                     ----------         ----

           July 31, 1998              1,872,000         4.55

           Options granted                -              -                   -
           Options exercised              -              -
           Options canceled            (190,000)        5.50
                                       --------         ----


         July 31, 1999                1,682,000        $4.48
                                      =========        =====

</TABLE>


                                      F-22
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The following table  summarizes  stock options  outstanding and exercisable
for the Company at July 31, 1999:

<TABLE>
<CAPTION>

                                              OUTSTANDING                    EXERCISABLE
                                              -----------                    -----------

                             Weighted          Weighted                Weighted
                              Average           Average                 Average
                             Remaining         Exercise                Exercise
Exercise Price Range          Shares             Life       Price       Shares           Price
--------------------          ------             ----       -----       ------           -----
<S>                          <C>                <C>        <C>       <C>               <C>

$3.13 to 3.78                    857,000          1.8       $3.64        857,000         $3.64

$4.38 to 4.75                    175,000          2.8        4.38        175,000          4.38

$5.13 to 5.50                    407,000          2.2        5.16        407,000          5.16

$6.00 to 6.63                    243,000          2.5        6.37        243,000          6.37

$3.13 to 6.63                  1,682,000          2.0        4.48      1,682,000         $4.48

</TABLE>


     The Company has adopted the  disclosure-only  provisions  of  Statement  of
Financial   Accounting   Standards   No.  123.   "Accounting   for   Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for options
granted to employees and directors. If compensation cost for the Company's stock
option plans had been  determined  based on the fair value at the grant date for
awards in fiscal 1999 and fiscal 1998 in accordance  with the provisions of SFAS
No. 123,  the  Company's  net loss per share would have changed to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED JULY 31,

                                                                    1999            1998
                                                                    ----            ----
<S>                                                         <C>               <C>

Net loss, as reported......................................  $    (3,065,000)  $    (9,615,000)
Net loss, pro forma........................................  $    (3,202,000)  $   (10,284,000)
Net basic and diluted loss per share, as reported..........  $         (0.26)  $         (0.85)
Net basic and diluted loss per share, pro forma............  $         (0.47)  $         (0.91)
</TABLE>

                                      F-23
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>

                                                     YEAR ENDED JULY 31,

                                                   1999            1998
                                                   ----            ----
<S>                                               <C>            <C>
Expected volatility........................         .79             .79
Risk-free interest rate....................        6.11%          6.11%
Expected life of options in years..........         5.0             5.0
Expected dividend yield....................        0.00%           0.00%

</TABLE>


12.      INTANGIBLE ASSETS

         Intangible and other assets consist of the following:

<TABLE>
<CAPTION>

                                                            JULY 31,

                                                  1999            1998
                                                  ----            ----
<S>                                       <C>              <C>

Goodwill ..................................$  2,952,000     $   3,044,000
Non-compete agreement......................       -                42,000
Other assets...............................       -               527,000
                                              ---------        ----------

                                           $  2,952,000     $   3,613,000
                                              =========        ==========
</TABLE>


     Goodwill  is  amortized  over  lives  ranging  from 20 to 40 years  and the
non-compete agreement is amortized over 2 years.



                                      F-24
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.  SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION AND SCHEDULE OF NON-CASH
     INVESTING AND FINANCING ACTIVITIES INTANGIBLE ASSETS


     The Company paid interest of $5,482,000,  $5,221,000  and 4,307,000  during
the fiscal years 1999,  1998, and 1997,  respectively.  The Company  received an
income tax refund of  $834,000  during  fiscal  1999,  and paid  $1,097,000  and
$1,621,000  in  income  taxes,  net of  refunds,  during  fiscal  1998 and 1997,
respectively.

     In December  1997 a capital  lease  obligation  of $397,000 was incurred by
Western  when they  entered  into a 20 year lease for the Yuba City,  California
facility.

     In July 1997 a capital lease obligation of $292,000 was incurred by Western
when they entered into a lease for computer equipment and software.

     In June 1997 a capital lease obligation of $680,000 was incurred by Western
when they entered into a 20 year lease for the Kent, Washington facility.

     Western has consummated various acquisitions using, in part, the assumption
of notes  payable and the issuance of Western  common  stock and notes  payable.
Such non-cash transactions have been excluded from the statements of cash flows.

     Capital lease  obligations of $356,000 were incurred  during the year ended
July 31, 1997 when the Company entered into various leases for computer hardware
and software.

     14. RELATED PARTIES

     The real property and  improvements  used in connection with the Sacramento
Operations,  and upon which the  Sacramento  Operation is located,  were sold by
Case for $1,500,000 to the McLain-Rubin Realty Company,  LLC ("MRR"), a Delaware
limited liability  company the owners of which are Messrs.  C. Dean McLain,  the
President  and a director of Western,  and Robert M. Rubin,  the  Chairman and a
director  of  Western.  Simultaneous  with  its  acquisition  of the  Sacramento
Operation  real  property and  improvements,  MRR leased such real  property and
improvements to Western under the terms of a 20 year commercial  lease agreement
dated March 1, 1996 with  Western  paying an initial  annual  rate of  $168,000.
Under the lease,  such annual rate increases to $192,000 after five years and is
subject to fair market  adjustments at the end of ten years. In addition to base
rent,  Western is  responsible  for the payment of all  related  taxes and other
assessments,  utilities,  insurance  and repairs  (both  structural  and regular
maintenance)  with  respect to the leased real  property  during the term of the
lease.  In accordance  with SFAS 13, the building  portion of the lease is being
accounted  for as a capital  lease  (see Note 9) while the land  portion  of the
lease qualifies for treatment as an operating lease.

                                      F-25
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     On June 1, 1997, the real property and improvements used in connection with
the  Sahlberg   operation  located  in  Kent,   Washington,   was  purchased  by
McLain-Rubin  Realty  Company II, LLC ("MRR II"), a Delaware  limited  liability
company,  the owners of which are Messrs.  C. Dean McLain,  the  President and a
director  of  Western,  and Robert M.  Rubin,  the  Chairman  and a director  of
Western.  Simultaneous  with  its  acquisition  of the  Kent,  Washington,  real
property and improvements,  MRR II leased such real property and improvements to
Western under the terms of a 20-year  commercial  lease  agreement dated June 1,
1997 with Western  paying an initial  annual rate of $205,000.  Under the lease,
such  annual  rate  increases  to  $231,000  after  five years and is subject to
additional  adjustments at the end of ten and fifteen years. In addition to base
rent,  Western is  responsible  for the payment of all  related  taxes and other
assessments,  utilities,  insurance,  and repairs (both  structural  and regular
maintenance)  with  respect to the leased real  property  during the term of the
lease.  In accordance  with SFAS 13, the building  portion of the lease is being
accounted  for as a capital  lease  (see Note 9) while the land  portion  of the
lease qualifies for treatment as an operating lease.

     On December 11, 1997, the real property and improvements used in connection
with Case's Yuba City,  California  operation,  was  purchased  by  McLain-Rubin
Realty Company III, LLC ("MRR III"), a Delaware limited liability  company,  the
owners of which are Messrs.  C. Dean  McLain,  the  President  and a director of
Western,  and  Robert  M.  Rubin,  the  Chairman  and  a  director  of  Western.
Simultaneous with its acquisition of the Yuba City, California real property and
improvements,  MRR III leased such real  property  and  improvements  to Western
under the terms of a 20-year commercial lease agreement dated effective December
11, 1997 with Western paying an initial annual rate of $54,000. Under the lease,
such  annual  rate  increases  to  $59,000  after  five  years and is subject to
additional  adjustments at the end of ten and fifteen years. In addition to base
rent,  Western is  responsible  for the payment of all  related  taxes and other
assessments,  utilities,  insurance,  and repairs (both  structural  and regular
maintenance)  with  respect to the leased real  property  during the term of the
lease.  In accordance  with SFAS 13, the building  portion of the lease is being
accounted  for as a capital  lease  (see Note 9) while the land  portion  of the
lease qualifies for treatment as an operating lease.

     In February,  1999, the real property and  improvements  used in connection
with  Western's  Sparks,  Nevada  operation  and upon  which such  operation  is
located,  were sold to McLain-Rubin  Realty,  L.L.C.  (MRR) under the terms of a
real property  purchase and sale agreement.  MRR is a Delaware limited liability
company  the owners of which are  Messrs.  C. Dean  McLain,  the  President  and
Chairman of Western,  and Robert M. Rubin, a director of Western. The sale price
was  $2,210,000  in cash at  closing.  Subsequent  to the  closing  of the sale,
Western  entered  into a 20-year  commercial  lease  agreement  with MRR for the
Sparks,  Nevada  facility at an initial  rental  rate of $252,000  per year with
increases at five,  ten, and fifteen years  resulting in a maximum annual rental
rate of  $374,000.  The  present  value of the  minimum  lease  payments  at the
commencement of the lease back transaction aggregated $3,052,000. The lease is a
net lease with payment of insurance,  property taxes and maintenance  costs paid
by Western.  The sale resulted in a deferred  gain which will be amortized  over
the life of the lease pursuant to generally accepted accounting  principles.  In
accordance  with SFAS 13, the building  portion of the lease is being  accounted
for as a  capital  lease  (see  Note 10)  while  the land  portion  of the lease
qualifies for treatment as an operating lease.


                                      F-26
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     Pursuant to an Agreement,  dated May 30, 1996 (the "ERD Agreement") between
the Company and ERD Waste Corp.  ("ERD"),  the Company agreed to provide certain
financial accommodation to ERD by making available a $4.4 million standby letter
of credit  expiring May 31, 1998 issued by  Citibank,  N.A. in favor of Chemical
Bank (the "Letter of Credit") on behalf of ERD.  Chemical  Bank is the principal
lender to ERD and its  subsidiaries,  and upon  issuance  of the Letter of Chase
Bank (formerly  Chemical Bank) made available $4.4 million of additional funding
to ERD under ERD's existing lending facility.  The funding was used to refinance
certain  outstanding  indebtedness of  Environmental  Services of America,  Inc.
("ENSA"),  a wholly owned  subsidiary of ERD. Robert M. Rubin,  the Chairman and
Chief Executive Officer, and a principal  stockholder of the Company is also the
Chairman,  Chief Executive  Officer,  a director and a principal  stockholder of
ERD, owning approximately 23.0% of the outstanding ERD Common Stock.

     In consideration for making the Letter of Credit available,  in addition to
repayment  by ERD of all amounts  drawn under the Letter of Credit and the grant
of a security interest in certain machinery and equipment of ENSA to secure such
repayment, ERD agreed (i) to pay to the Company all of the Company's fees, costs
and expenses in connection with making the Letter of Credit  available,  as well
as the amount of all interest  paid by the Company on drawings  under the Letter
of Credit prior to their repayment by ERD.

     In September  1996, a subsidiary of ERD which  operated a waste facility in
Nassau  County,  New  York  was  cited  by the  New  York  State  Department  of
Environmental  Conservation ("DEC") for violating certain DEC regulations.  Such
waste  facility  had  accounted  for  approximately  13% of  ERD's  consolidated
revenues.  The  Company  has been  advised  by ERD  that  under  the  terms of a
Settlement  Agreement  reached with the State of New York in November  1996, all
violations  alleged by the DEC have been resolved in  consideration  for,  among
other things,  ERD's agreement to voluntarily cease  incineration  operations at
the waste  facility on or before March 31, 1997.  Such  incineration  operations
ceased on April 15, 1997.

     On November  8, 1996,  the  Company  and ERD  amended  and  restated  their
agreements  to  provide  that if and to the  extent  that the  Letter  of Credit
provided by the Company is called for payment, ERD will issue to the Company its
convertible note bearing interest at 12% per annum, payable monthly, and payable
as to  principal  on the  earliest  to occur of:  (i) May 30,  1999,  (ii) ERD's
receipt of the initial proceeds from any public or private  placement of debt or
equity securities of ERD, or (iii) completion of any bank refinancing by ERD, to
the  extent  of  all  proceeds   available   after   payment  of  other  secured
indebtedness. In addition, the ERD notes, if issued, will be convertible, at any
time at the option of the Company,  into ERD Common Stock at a conversion  price
equal to $4.40 per  share,  or a maximum of  1,000,000  ERD shares if the entire
$4.4 million note is issued and converted into ERD Common Stock.  In addition to
the collateral provided under the May 30, 1996 agreement,  ERD also provided the
Company with a junior mortgage on the waste facility owned by ERD's  subsidiary,
subordinated to existing indebtedness encumbering such facility.


     Under the terms of an indemnity  agreement,  dated May 30, 1996,  Robert M.
Rubin agreed to indemnify  the Company for all losses,  if any,  incurred by the
Company as a result of  issuance of the Letter of Credit for the benefit of ERD.
In consideration  of his negotiating the  modification of the ERD agreement,  on
November 8, 1996, the Company's Board of Directors (Mr. Rubin abstaining) agreed
to amend  the  indemnity  agreement  with Mr.  Rubin  to  limit  his  contingent
liability  thereunder to the extent of 23% (Mr. Rubin's  approximate  percentage
beneficial ownership in the outstanding Company Common Stock as of May 30, 1996)
of all losses that the Company may incur in connection  with its having provided
the  Letter of Credit  financial  accommodation  on behalf of ERD.  Mr.  Rubin's
reimbursement  obligations  are also subject to pro rata reduction to the extent
of any repayments made directly by ERD or from proceeds  received by the Company
from the sale of ERD capital stock described above.

                                      F-27
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     In February of 1997,  the Company  loaned  $500,000 to ERD Waste Corp.  The
loan was  secured by a short term note  bearing  interest  at 2% above the prime
lending  rate of the  Company's  commercial  bank (8.5% at April 30, 1997) and a
second  collateral  and  security  position on all  accounts  receivable  of ERD
subject to the primary collateral position held by Chase Bank and was personally
guaranteed  by Mr.  Rubin.  Principal  together  with  accrued  interest was due
October 5, 1997.

     In September 1997 ERD filed for protection  from creditors under Chapter 11
of federal bankruptcy laws. In October, 1997 Chemical bank drew the $4.4 million
available on the standby letter of credit.  As a result,  the Company recorded a
loss of  approximately  $5.0  million,  related  to the  February  Note  and the
September letter of credit.  Mr. Rubin had personally  guaranteed  approximately
$1.6 million of the ERD loss.

     On June 28, 1996 the Company entered into a credit agreement with Mr. Rubin
pursuant  to  which  Mr.  Rubin  delivered  a demand  promissory  note for up to
$1,200,000 and payment in full was due July 31, 1998.  Mr. Rubin's  indebtedness
was  secured  by his pledge of 150,000  shares of company  common  stock and his
collateral  assignment of all payments to him under the terms of his  consulting
and  non-competition  agreements  with  Hutchinson,  in the aggregate  amount of
$1,200,000.  Such  collateral  assignment  was  converted  to a  payment  rights
assignment  agreement in July 1998 calling for  Hutchinson  to make all payments
pursuant to Mr. Rubin's consulting and non-competition agreement directly to the
company. Simultaneously the due date of the note was extended from July 31, 1998
to the earlier of shareholder approval of the Hutchinson transaction or July 31,
1999. On June 1, 1999 all payments due to Mr. Rubin  pursuant to the  consulting
agreement were formally assigned to the Company as part of the derivative action
settlement.  Shareholder  approval of the Hutchinson  transaction is required in
order for the Company to receive these payments and a proposal  calling for such
approval  will be included in the fiscal 1999 proxy and voted upon at the fiscal
1999 shareholders' meeting.

     As of July 31, 1998 the Company  owned  50,000  shares of common stock in a
publicly traded company that Mr. Rubin serves as a director and holds a minority
interest.

15.EMPLOYEE SAVINGS PLAN

     The Company has a voluntary  savings plan pursuant to Section 401(k) of the
Internal Revenue Code, whereby eligible participants may contribute a percentage
of compensation  subject to certain  limitations.  The Company has the option to
make  discretionary  qualified  contributions to the plan,  however,  no Company
contributions were made for fiscal 1999, 1998 or 1997.

16.      SEGMENT INFORMATION

     In fiscal 1999,  the Company  adopted  Statement  of  Financial  Accounting
Standards No. 131 (SFAS 131),  "Disclosures  about Segments of an Enterprise and
Related   Information,"  which  requires  the  reporting  of  certain  financial
information  by  business   segment.   For  the  purpose  of  providing  segment
information, management believes that all of the Company's operations consist of
one segment.  However,  the Company  evaluates  performance based on revenue and
gross margin of three distinct business components.  Revenue and gross margin by
component are summarized as follows:

                                      F-28
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>



Business Component              Year Ended        Year Ended       Year Ended
Net Revenues                   July 31, 1999    July 31, 1998     July 31, 1997
------------                   -------------    -------------     -------------
<S>                                <C>                <C>              <C>

Equipment Sales                      $ 98,450          $112,061         $102,349

Equipment Rental                       25,771            13,389           12,464

Product Support                        39,429            38,028           33,317
                                       ------            ------           ------
    Totals                          $ 163,650          $163,478         $148,130
                                    =========          ========         ========


Gross Margins


Equipment Sales                        $2,591            $8,334           $7,172

Equipment Rental                        5,017             3,555            2,046

Product Support                         6,986             7,287            6,652
                                        -----             -----            -----

    Totals                           $14,594            $19,176          $15,870
                                     =======            =======          =======
</TABLE>


                                      F-29
<PAGE>


                 AMERICAN UNITED GLOBAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






     SCHEDULE II

                          AMERICAN UNITED GLOBAL INC.

                       VALUATION AND QUALIFYING ACCOUNTS
                For the Fiscal Years Ended July 31, 1999 and 1998

<TABLE>
<CAPTION>



                                              Balance at      Charged to    Charged to                  Balance at
                                              Beginning       Costs and        Other                      End of
               Description                    of Period        Expenses      Accounts     Deductions      Period
               -----------                    ---------        --------      --------     ----------      ------

Accounts Receivable Reserve:
<S>                                         <C>             <C>           <C>          <C>              <C>

  Fiscal year ended July 31, 1999            $726,000        $732,000      $ ---        $(734,000)        $724,000

  Fiscal year ended July 31, 1998             807,000         825,000        ---         (906,000)         726,000

  Fiscal year ended July 31, 1998             652,000         875,000        285,000   (1,005,000)         807,000

Inventory Reserve:

  Fiscal year ended July 31, 1999            2,833,000        884,000        ---       (1,204,000)       2,513,000

  Fiscal year ended July 31, 1998            1,597,000      1,734,000        ---         (498,000)       2,833,000

  Fiscal year ended July 31, 1997            1,212,000        598,000        ---         (293,000)       1,597,000

</TABLE>


                                      F-30
<PAGE>


     ITEM 9. CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
FINANCIAL DISCLOSURE

                  None.



     PART III

     ITEM 10.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS AND CONTROL  PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Officers, Directors and Key Employees

     The  following  table sets forth  information  with  respect to  directors,
nominees for directors,  executive  officers and key employees of the Company as
of  November  1, 1999.  Except for  matters  discussed  in Item 3 of this Annual
Report,  there are no pending legal  proceedings to which any director,  nominee
for  director  or  executive  officer of the  Company is a party  adverse to the
Company.


Name                Age                           Position
----                ---                           --------

Robert M. Rubin      59        Chairman of the Board of Directors, President
                               and Chief Executive Officer

C. Dean McLain       44        Director and Executive Vice President of the
                               Company; President and Chief Executive
                               Officer of Western

Howard Katz          56        Executive Vice President, Chief Operating
                               Officer and Director

David M. Barnes      56        Vice President of Finance, Chief Financial
                               Officer and Director


     Robert M.  Rubin.  Mr.  Rubin has  served as the  Chairman  of the Board of
Directors of the Company  since May 1991,  and was its Chief  Executive  Officer
from May 1991 to January 1, 1994.  Between October 1990 and January 1, 1994, Mr.
Rubin  served as the  Chairman of the Board and Chief  Executive  Officer of the
Company  and its  subsidiaries;  from  January 1, 1994 to January 19,  1996,  he
served only as Chairman of the Board of the Company and its  subsidiaries.  From
January 19, 1996 to the present,  Mr. Rubin has served as Chairman of the Board,
President and Chief Executive Officer of the Company. Mr. Rubin was the founder,
President, Chief Executive Officer and a Director of Superior Care, Inc. ("SCI")
from its inception in 1976 until May 1986. Mr. Rubin  continued as a director of
SCI (now known as Olsten Corporation  ("Olsten")) until the latter part of 1987.
Olsten,  a New York Stock Exchange listed company,  is engaged in providing home
care and institutional  staffing  services and health care management  services.
Mr.  Rubin  was  Chairman  of  the  Board,  Chief  Executive  Officer  and  is a
stockholder of ERD Waste Technology, Inc., a diversified waste management public
company  specializing  in the management and disposal of municipal  solid waste,
industrial and commercial  non-hazardous waste and hazardous waste. In September
1997, ERD filed for protection under the provisions of Chapter 11 of the federal
bankruptcy act. Mr. Rubin is a former director and Vice Chairman,  and currently
a minority stockholder, of American Complex Care, Incorporated ("ACC"), a public
company  formerly engaged in providing  on-site health care services,  including
intra-dermal infusion therapies. In April 1995, ACC, operating subsidiaries made
assignments  of their  assets for the  benefit of  creditors  without  resort to
bankruptcy  proceedings.  Mr.  Rubin is also the  Chairman  of the Board of both
Western  and IDF, a  publicly  held  company of which the  Company is a minority
stockholder.  The Company owns  approximately  60.6% of the  outstanding  common
stock of Western.  Mr. Rubin owns  approximately  13% of the  fully-diluted  IDF
common stock. Mr. Rubin is also a director and minority  stockholder of Diplomat
Direct  Marketing  Corporation,  a public  company  principally  engaged  in the
women's apparel catalog retailing business and Med-Emerg,  Inc., a publicly-held
Canadian  management  company  for  hospital  emergency  rooms  and  out-patient
facilities.

                                       33
<PAGE>


     C. Dean McLain. Mr. McLain has served as an Executive Vice President of the
Company  since March 1, 1993,  as a director of the Company  since March 7, 1994
and  President  of Western  since June 1, 1993.  From 1989 to 1993,  Mr.  McLain
served as Manager of Privatization of Case  Corporation.  From 1985 to 1989, Mr.
McLain served as General Manager of Lake State Equipment,  a distributor of John
Deere  construction  equipment.  Mr. McLain holds a B.S.  degree in Business and
Economics,  and a Master's  of  Business  Administration  from West Texas  State
University.

     David M. Barnes.  Mr. Barnes has functioned as the chief financial  officer
of the Company  since May 15, 1996,  and has been a director  since  November 8,
1996.  Mr.  Barnes is also  presently  the chief  financial  officer  of Nextron
Communications,  a  privately-held  Internet yellow pages designer and developer
based in San Jose, CA, and of Interactive  Imagination,  Inc., a  privately-held
start-up  video game  developer  based in Seattle,  WA. Mr.  Barnes  served as a
Director of Universal Self Care,  Inc., a distribution  and retailer of products
and service principally for diabetes from May 1991 to June 1995. Mr. Barnes is a
director,  the President and a minority stockholder of ACC. In April 1995, ACC's
operating  subsidiaries  made  assignments  of their  assets for the  benefit of
creditors without resort to bankruptcy proceedings.

     Howard  Katz.  Mr. Katz has been  Executive  Vice  President of the Company
since April 15, 1996.  From December 1995 through April 15, 1996, Mr. Katz was a
consultant  for, and from January  1994  through  December  1995 he held various
executive  positions,  including  Chief  Financial  Officer from  December  1994
through   December   1995,   with   National   Fiber  Network  (a  fiber  optics
telecommunications  company).  From January 1991 through December 1993, Mr. Katz
was the President of Katlaw  Construction Corp., a company that provides general
contractor  services to foreign  embassies and foreign  missions  located in the
United States. Prior to joining Katlaw Construction Corp., Mr. Katz was employed
as a  management  consultant  by Coopers and  Lybrand,  LLP and as a  divisional
controller for several large public companies.


                                       34
<PAGE>



     ITEM 11. EXECUTIVE COMPENSATION

     SUMMARY COMPENSATION TABLE

     The following table sets forth the amount of all  compensation  paid by the
Company  for  services  rendered  during each of the three  fiscal  years of the
Company ended July 31, 1999, 1998, and 1997 to each of the Company's most highly
compensated  executive  officers  and key  employees  whose  total  compensation
exceeded  $100,000,  and to all  executive  officers  and key  employees  of the
Company as a group.
<TABLE>
<CAPTION>






                             ANNUAL COMPENSATION              LONG-TERM COMPENSATION
                             -------------------              ----------------------
                                                              AWARDS
                                                              ------
NAME AND           FISCAL    SALARY     BONUS    OTHER        RESTRICTED   SECURITIES     LTIP          ALL OTHER
PRINCIPAL          YEAR           ($)            ANNUAL       STOCK        UNDER-LYING    PAYOUTS       COMPEN-SATION
POSITION                                         COMPEN-SATIONAWARD(S)     OPTIONS/       ($)           SATION ($)
--------          -----     -------   -------    ---------------------     --------       ---           ----------
<S>               <C>       <C>         <C>     <C>          <C>          <C>            <C>           <C>
                                                 ($)          ($)          SARS(#)
Robert M. Rubin    1999      375,000    -0-      -0-          -0-          -0-            -0-           -0-
Chairman,          1998      350,000    -0-      -0-          -0-          -0-            -0-           -0-
President and      1997      325,000    -0-      -0-          -0-          -0-            -0-           -0-
Chief Executive
Officer


Howard Katz        1999        91,738   -0-      -0-          -0-          -0-            -0-           -0-
Executive Vice-    1998      197,000    -0-      -0-          -0-          -0-            -0-           -0-
President and      1997      131,968    -0-      -0-          -0-          200,000        -0-           -0-
Director


David M. Barnes    1999      127,000    -0-      -0-          -0-          -0-            -0-           -0-
Chief Financial    1998      156,000    -0-      -0-          -0-          -0-            -0-           -0-
Officer and        1997      129,807    -0-      -0-          -0-          100,000        -0-           -0-
Director


C. Dean McLain (1) 1999      290,000    -0-      -0-          -0-          -0-            -0-           -0-
Executive Vice     1998      280,000    68,935   -0-          -0-          -0-            -0-           -0-
President and      1997      268,587    18,658   -0-          -0-          -0-            -0-           -0-
Director;
President of
Western
</TABLE>


(1) Paid by Western.


                                       35
<PAGE>



     STOCK OPTION PLANS

Option Grants in Fiscal Year 1999

     No options were issued in fiscal year 1999.

     The following table provides  information  concerning the exercise of stock
options during the last completed fiscal year by each executive officer named in
the Summary  Compensation  Table,  and the fiscal  year-end value of unexercised
options held by each such person.

                          Aggregated Options Exercised
                         in Last Fiscal Year and Fiscal
                             Year-End Option Values

                                                                  Value of
                                                Number of        Unexercised
                                               Unexercised      In-the-Money
                       Shares                  Options/SARs     Options/SARs
                     Acquired on    Value       at FY-End        at FY-End
Name                 Exercise (#)  Realized    Exercisable      Exercisable


Robert Rubin              -0-        -0-        560,000            $0

Howard Katz                -0-       -0-        350,000            $0

David Barnes               -0-       -0-        200,000            $0

C. Dean McLain             -0-       -0-        233,000            $0



Employment, Incentive Compensation and Termination Agreements

         Robert M. Rubin

     Mr.  Rubin is  employed  by the  Company  as the  Chairman  of the Board of
Directors  of the  Company  and of its  subsidiaries.  Mr.  Rubin is so employed
pursuant to an amended and restated  employment  agreement,  dated as of June 3,
1998 (the "Restated  Agreement") for a term expiring July 31, 2001. The Restated
Agreement was amended in connection  with the initial public offering of Western
(the "Western IPO"). The Restated  Agreement  provides for a base salary payable
to Mr. Rubin of $175,000 for the fiscal year ending July 31, 1997,  $200,000 for
the fiscal year ending July 31,  1998,  $225,000 for the fiscal year ending July
31,  1999,  and a base salary for the fiscal years ending July 31, 2000 and July
31, 2001 as determined by the  Compensation  Committee of the Company's Board of
Directors  and  ratified by a majority of the entire  Board of  Directors of the
Company  (other than Mr.  Rubin).  The base  salary in each of the fiscal  years
ending  July 31,  2000 and 2001 will not be less than the annual  base salary in
effect in the immediately preceding fiscal year, as adjusted for any increase in
the annual cost of living as published by the Bureau of Labor  Statistics of the
United  States  Department  of Labor  for  wage  earners  in the New  York  City
metropolitan  area measured over the course of the immediately  preceding fiscal
year. The Restated  Agreement also provides for incentive  bonuses to be paid to
Mr.  Rubin  of (i)  $75,000  on  November  1,  1997,  if  the  net  income  (the
"Consolidated  Net Income") of the Company,  including  all of its  consolidated
subsidiaries  other than Western,  as  determined  by the Company's  independent
auditors using generally accepted accounting  principles,  consistently applied,
is  greater  than or equal to  $2,000,000  for Fiscal  1997;  (ii)  $100,000  on
November  1, 1998 if the  Consolidated  Net Income is  greater  than or equal to
$2,500,000  for Fiscal  1998;  and (iii)  $125,000  on  November  1, 1999 if the
Consolidated  Net Income is greater than or equal to $3,000,000 for Fiscal 1999.
Incentive  compensation  for each of the fiscal  years  ending July 31, 2000 and
July 31,  2001  shall be as  determined  by the  Compensation  Committee  of the
Company's  Board of Directors  and ratified by a majority of the entire Board of
Directors (other than Mr. Rubin).

                                       36
<PAGE>

     Following  the  amendment  of Mr.  Rubin's  employment  agreement  with the
Company, which is now in effect as the Restated Agreement,  Western entered into
a separate  employment  agreement  with Mr. Rubin,  effective  June 14, 1995 and
which expired on July 31, 1998. Pursuant to such agreement,  Mr. Rubin served as
Chairman of the Board of Western and received an annual base salary of $150,000,
payable  at the  rate of  $12,500  per  month  from the  effective  date of such
agreement. In addition to his base annual salary, Mr. Rubin shall be entitled to
receive an annual  bonus equal to $50,000 per annum,  payable  only in the event
that the "consolidated pre-tax income" of Western (as defined below) shall be in
excess of $3,000,000  for the fiscal year ending July 31, 1996,  $3,500,000  for
the fiscal year ending July 31, 1997,  and $4,000,000 for the fiscal year ending
July 31, 1998,  respectively.  Under the terms of his employment  agreement with
Western,  Mr.  Rubin is only  obligated  to devote a portion of his business and
professional  time  to  Western  (estimated  at  approximately  20%).  The  term
"consolidated  pre-tax  income"  is defined  as  consolidated  net income of the
Company and any subsidiaries of Western subsequently created or acquired, before
income  taxes and gains or losses from  disposition  or  purchases  of assets or
other extraordinary items.

         John Shahid

     John Shahid is the former  president,  Chief Executive Officer and director
of the Company.  Upon the closing of the  Hutchinson  Transaction on January 19,
1996, the Company  entered into a termination  agreement with Mr. Shahid whereby
he resigned as an officer and director of the Company and its  subsidiaries  and
received severance payments totaling $815,833. These payments represented salary
payments under his employment  agreement through December 31, 1998, as well as a
bonus  payment for  Fiscal1996  in the amount of $90,000.  This  agreement  also
provided  that the Company  retained Mr.  Shahid as a  consultant  for two years
ending  April 1, 1998,  for which he was paid an  aggregate of $200,000 in equal
quarterly installments.

         C. Dean McLain

     C. Dean  McLain  serves as the  President  and Chief  Executive  Officer of
Western pursuant to a ten-year employment agreement expiring July 31, 2005. This
employment  agreement  superseded Mr. McLain's earlier employment agreement with
the Company,  which is further described below and which was terminated upon the
execution of his employment agreement with Western.  Pursuant to such agreement,
Mr. McLain received an annual base salary,  payable monthly, of $250,000 through
the end of Fiscal 1996, $265,000 per annum in Fiscal 1997, $280,000 per annum in
Fiscal 1998 and $290,000 per annum in Fiscal 1999 and will receive  $300,000 per
annum in Fiscal 2000. For each of the fiscal years ending 2001, 2002, 2003, 2004
and 2005,  Mr.  McLain's  base salary shall be  determined  by the  Compensation
Committee of Western and ratified by the full Board of Directors of Western.  In
each of the five fiscal years from 2001 through 2005, such base salary shall not
be less than the  annual  base  salary in  effect in the  immediately  preceding
fiscal year plus a cost of living adjustment.  In addition,  Mr. McLain has been
entitled to receive bonus  payments in each of the fiscal years from Fiscal 1996
through and including Fiscal 2000, inclusive, equal to five percent (5%) of such
fiscal year  consolidated  pre-tax  income of Western in excess of $1,750,000 in
each such fiscal year (the "Incentive Bonus"); provided, that the maximum amount
of the  Incentive  Bonus  payable  by  Western  to Mr.  McLain  shall not exceed
$150,000  in any  such  fiscal  year,  without  regard  to the  amount  by which
Western's  consolidated  pre-tax income shall exceed  $1,750,000 in each of such
fiscal  years.  For each of the fiscal  years  ending  2001  through  2005,  Mr.
McLain's  incentive bonus shall be determined by the  Compensation  Committee of
Western's  Board of Directors and ratified by Western's full Board of Directors.
The maximum annual incentive bonus which Mr. McLain shall be entitled to receive
under his Employment  Agreement shall not be less than $150,000.  As used in Mr.
McLain's Employment Agreement, the term "consolidated pre-tax income" is defined
as  consolidated   net  income  of  Western  and  any  subsidiaries  of  Western
subsequently  created or acquired,  before the Incentive Bonus, income taxes and
gains or losses from  disposition or purchases of assets or other  extraordinary
items.

                                       37
<PAGE>



     Under the terms of his amended  employment  agreement,  the  150,000  stock
options exercisable at $6.50 per share awarded in March 1995 to Mr. McLain under
Western's  1995 Stock Option Plan were canceled and on August 1, 1995 Mr. McLain
was granted options to purchase  300,000 shares of Western common stock at $6.00
per share,  the closing  sale price of the  Company's  common stock on August 1,
1995.  These options were  subsequently  repriced at $4.50 per share in December
1995.  The grant of all stock  options to Mr.  McLain  pursuant  to his  amended
employment agreement was ratified at Western's 1995 Annual Meeting. In the event
that Western does not meet the  accumulated  consolidated  pre-tax income levels
described  above,  Mr. McLain shall still be entitled to options to purchase the
125,000  Western shares should the  accumulated  consolidated  pre-tax income of
Western for the five years from Fiscal 1996  through and  including  Fiscal 2000
equal or  exceed  $16,000,000.  In the event  such  additional  incentive  stock
options become available to him, Mr. McLain may exercise such options during the
nine  -year  period  ending  July 31,  2005 at $4.50  per  share.  Mr.  McLain's
employment  agreement  also  provides for fringe  benefits as are  customary for
senior  executive  officers  in the  industry  in which  the  Company  operates,
including  medical  coverage,  excess  life  insurance  benefits  and  use of an
automobile supplied by the Company.

     Prior to the  Western  IPO, C. Dean McLain  served as  President  and Chief
Executive  Officer  of Western  and  Executive  Vice  President  of the  Company
pursuant to the terms of an  employment  agreement  with the  Company  effective
March 1, 1993, which was to terminate on July 31, 1998. Such agreement  entitled
Mr.  McLain to  scheduled  increases  in his base salary up to $172,300 per year
during  the fiscal  year  ending  July 31,  1998.  The terms of such  employment
agreement also provided for the issuance to Mr. McLain of an aggregate of 20,000
shares of the Company's Common Stock at $.01 per share. In addition,  Mr. McLain
received  options to  acquire an  aggregate  of 45,000  shares of the  Company's
Common  Stock at fair market  value ($4.75 per share) on the date of grant under
the Company's 1991 Stock Option Plan, and additional options under the Company's
1991 Stock  Option Plan to purchase  150,000  shares of Company  Common Stock at
fair market  value  ($5.50 per share) on the date of grant.  These  options have
since been repriced to $3.125 per share.

         Howard Katz

     Howard Katz is an Executive  Vice  President and a director of the Company.
Mr. Katz is presently  receiving  severance  payments of  approximately  $75,000
annually, plus benefits, under a severance agreement which provides for payments
over a three-year  period ending July 31, 2001. Prior to July 31, 1998, Mr. Katz
served as the  Company's  Executive  Vice  President  since  April 15,  1996 and
received an annual base salary of $185,000 through July 31, 1998.

         David M. Barnes

     David M. Barnes is a director of the  Company  and  functions  as its Chief
Financial  Officer.  In Fiscal 1999 Mr. Barnes received a base salary of $50,000
plus severance payments  aggregating $75,000 and certain executive benefits.  In
Fiscal 2000 Mr. Barnes will continue in these  capacities  with a base salary of
$75,000 plus certain executive benefits.  Between May 15, 1996 and July 31, 1998
Mr.  Barnes  served as the  Company's  Chief  Financial  Officer and received an
annual salary of $150,000.



                                       38
<PAGE>

         Amended Employee Stock Option Plans

     In December 1995, the Company amended each of its then-outstanding employee
stock  option  plans  in  anticipation  of the  consummation  of the  Hutchinson
Transaction.  Under the  original  terms of the plans,  all  options  granted to
employees  would  have   terminated   within  ninety  days  of  such  employees'
termination  of  employment  with the  Company or any of its  subsidiaries.  The
amended plans extended the options'  expiration  dates and permitted all options
to vest upon  consummation of the Hutchinson  Transaction.  As a majority of the
Company's employees, other than those of Western, were to be terminated upon the
consummation of the Hutchinson Transaction,  the Company felt that it was in its
best  interests to so amend the Plans.  All of these  options  granted under the
Plans were  exercisable  through  January  19, 1998 (two years after the closing
date of the Hutchinson  Transaction) at which time any unexercised  options held
by terminated  employees expired, and options held by retained Company employees
reverted  back to their old vesting  terms and original  expiration  dates.  One
effect of these  amendments  is to change the federal  income tax  treatment  of
incentive options held by non-employees of the Company, such that upon exercise,
these options shall be treated as non-qualified  stock options for tax purposes.
As a result of such option exercise period  extension,  the Company  incurred an
additional  compensation  expense for the fiscal year ended July 31, 1996 in the
amount of $332,293. Such amount is equal to the product of the number of options
whose exercise  periods were extended and the aggregate  difference  between the
exercise price of each "extended" option and the closing bid price of the Common
Stock on January 19, 1996 (the closing date of the  Hutchinson  Transaction  and
the effective date of the option extension).

         Compensation Committee Interlocks and Insider Participation

     During  Fiscal  1998 and Fiscal 1999 the Board of  Directors'  Compensation
Committee  (the  "Compensation  Committee")  did not meet.  During this time the
Company's Board of Directors  decided all  compensation  matters relating to the
Company's executive officers.

     Mr. Rubin's  annual  compensation,  identified in the Summary  Compensation
Table, was determined by his employment  agreements executed in August 1994, and
his amended and restated  employment  agreement dated as of June 3, 1996,  which
were both approved by the Board of Directors. In June 1995, following completion
of Western's  IPO, Mr.  Rubin's 1994  employment  agreement with the Company was
amended to (i) eliminate his guaranteed  annual bonus, and (ii) limit his annual
incentive  bonus to $50,000 for each of Fiscal 1996 and Fiscal 1997, and make it
payable only if Consolidated  Net Income of the Company  exceeded  $1,500,000 in
each fiscal year. For  information  concerning Mr. Rubin's June 1996 amended and
restated  employment  agreement,  see  "Employment,  Incentive  Compensation and
Termination  Agreements."  Mr.  Rubin also  entered  into a separate  employment
agreement with Western.  Mr. McLain's annual compensation was set by his amended
employment agreement with Western. See "Employment,  Incentive  Compensation and
Termination Agreements."

     During  Fiscal 1998 and Fiscal 1999,  other than Messrs.  Rubin and McLain,
who during such time were  officers  and members of the Board of  Directors,  no
officers or  employees  of the  Company or any  subsidiary  participated  in the
Board's compensation  decisions.  In Fiscal 1998 and Fiscal 1999, other than Mr.
Rubin,  no  Compensation  Committee  member was an officer  or  employee  of the
Company or any of its  subsidiaries.  While Mr. Rubin serves on the Compensation
Committees of the Boards of Directors of other  publicly held  corporations,  no
executive  officers  or  directors  of such  companies  serve  on the  Company's
Compensation  Committee.  The  Company's  Audit,  Compensation  and Stock Option
Committees are presently each comprised of Messrs. Rubin and Katz.

                                       39
<PAGE>



     No director of the Company is paid to attend Board meetings,  although they
are reimbursed for their actual expenses.

     Upon the  closing  of the  Hutchinson  Transaction  in  January  1996,  the
Company,  Robert Rubin and Hutchinson  (as  guarantor)  entered into a five-year
Non-Competition Agreement in favor of Hutchinson and its affiliates, pursuant to
which Mr.  Rubin and the  Company  agreed  not to  compete  with the  businesses
acquired in the Hutchinson  Transaction.  Under the terms of the Non-Competition
Agreement,  Mr. Rubin is to receive payments  aggregating  $200,000 over a seven
year  period.  In  addition,  at the Closing  Hutchinson  engaged Mr. Rubin as a
consultant to provide advisory services  relating to the acquired  manufacturing
business over a seven year period,  for which  services Mr. Rubin was to receive
payments aggregating $1,000,000.  Such payments are pledged as collateral by Mr.
Rubin for his  $1,200,000  loan.  No payments  have or will be made to Mr. Rubin
under  his  agreements  with   Hutchinson,   unless  and  until  the  Hutchinson
Transaction  and such payments are ratified by the Company's  stockholders  at a
special  Meeting  or  any  subsequent  special  or  annual  meeting  of  Company
stockholders.  These payments are also necessary to effectuate the settlement of
the Derivative Action.

     Transactions with Diplomat Corporation

     On  February  9, 1996,  the  Company  loaned an  aggregate  of  $450,000 to
Diplomat Corporation  ("Diplomat") in connection with Diplomat's  acquisition of
BioBottoms,  Inc. Diplomat is a public company of which Robert Rubin serves as a
director. Before the BioBottoms transaction, Mr. Rubin held approximately 22% of
Diplomat's  outstanding capital stock. Such loan (i) bears interest at the prime
rate  of  CoreStates  Bank,  N.A.  plus  2%  and is  payable  monthly,  (ii)  is
subordinated to a $2,000,0000  revolving credit loan agreement  between Diplomat
and Congress Financial Corporation, (iii) is payable in full on or before May 4,
1996 and (iv) is  secured  by a second  priority  lien in all of the  assets  of
Diplomat and its wholly-owned subsidiary,  BioBottoms,  Inc. The loan was repaid
in full in May 1996.  In addition to repayment  of principal  and its receipt of
accrued interest, the Company received a facilities fee of $50,000.

     Transactions with ERD Waste Corp.

     The Company has incurred a loss of approximately  $5,000,000 as a result of
certain  transactions  it entered  into with ERD Waste  Corp.  ("ERD") in Fiscal
1997. On September 30, 1997,  ERD filed for  reorganization  under Chapter 11 of
the federal  bankruptcy  laws. The Company has recorded a $5,000,000 net loss in
connection with these  transactions,  which included making  available for ERD's
benefit a $4,400,000  letter of credit and making an additional  $500,000  loan,
for Fiscal 1997.

     Robert M. Rubin,  the Chairman and Chief Executive  Officer and a principal
stockholder of the Company,  is also the Chairman,  Chief Executive  Officer,  a
director and a principal stockholder of ERD, and owns approximately 25.1% of the
outstanding ERD Common Stock.

                                       40
<PAGE>


     Pursuant to an agreement dated May 30, 1996 (the "ERD  Agreement")  between
the  Company  and  ERD,  the  Company  agreed  to  provide   certain   financial
accommodations to ERD by making available a $4,400,000  standby letter of credit
(the "Letter of Credit")  originally issued by Citibank,  N.A.  ("Citibank") and
later  assumed  by North  Fork  Bank in favor of Chase  Bank ( "Chase  Bank") on
behalf of ERD. Chase Bank was the principal lender to ERD and its  subsidiaries,
and upon  issuance  of the Letter of Credit,  Chase Bank made  available  to ERD
$4,400,000 of additional  funding under ERD's  existing  lending  facility.  The
funding was used to refinance certain outstanding  indebtedness of Environmental
Services  of  America,  Inc.  ("ENSA"),  a  wholly-owned  subsidiary  of ERD. In
consideration for the Company making the Letter of Credit available,  ERD agreed
that,  in addition to repaying all amounts  drawn under the Letter of Credit and
granting to the Company a security  interest in certain  machinery and equipment
of ENSA to secure such repayment, it would (i) pay all the Company's fees, costs
and expenses payable to Citibank,  N.A. and others in connection with making the
Letter of Credit  available,  as well as all  interest  paid by the  Company  on
monies drawn upon the Letter of Credit prior to repayment by ERD, and (ii) issue
to the  Company  an  aggregate  of 25,000  shares of ERD  common  stock for each
consecutive period of 90 days or any portion thereof, commencing August 1, 1996,
that the  Letter  of  Credit  remains  outstanding.  Pursuant  to the  foregoing
agreement,  ERD paid  nothing in fees and  expenses to Citibank on behalf of the
Company,  but issued  100,000  shares of ERD Common  Stock to the  Company.  ERD
Common Stock was then traded on the NASDAQ  National  Market and, at the time of
closing of the  transaction  with ERD, the closing price of ERD Common Stock, as
traded on NASDAQ was $9.25 per share.

     Under the terms of an indemnity  agreement,  dated May 30, 1996,  Robert M.
Rubin  agreed to indemnify  the Company for any and all of its losses  resulting
from  issuance  of  the  Letter  of  Credit  to  ERD.  In  consideration  of his
negotiating  the  modification  of the ERD  agreement,  on November 8, 1996, the
Company's  Board of  Directors  (Mr.  Rubin  abstaining)  agreed  to  amend  the
indemnity agreement with Mr. Rubin to limit his contingent  liability thereunder
to the extent of 23% (Mr. Rubin's approximate percentage beneficial ownership in
the  outstanding  Company Common Stock as of May 30, 1996) of any and all losses
incurred  by the  Company in  connection  with the Letter of Credit to ERD.  Mr.
Rubin's reimbursement  obligations are also subject to pro rata reduction to the
extent of any repayments made directly by ERD or from proceeds  received by AUGI
from the sale of ERD capital  stock  described  above.  In  addition,  Mr. Rubin
personally guaranteed the $500,000 additional advance from the Company to ERD.

     In August 1996, a subsidiary of ERD that operated a waste  facility in Long
Beach,  New York was cited by the New York  State  Department  of  Environmental
Conservation  ("DEC") for  violating  certain DEC  regulations.  ERD and the DEC
reached an agreement in November 1996 to settle such violations,  which resulted
in the closing of the Long Beach,  New York  facility  on April 15,  1997.  As a
result, the business of ERD was materially and adversely affected.

     On November  8, 1996,  the  Company  and ERD  amended  and  restated  their
agreements to provide that if and to the extent that the Company demands payment
on the Letter of Credit, ERD will issue to the Company its $4,400,000  principal
amount convertible note bearing interest at 12% per annum,  payable monthly, and
payable as to  principal  on the  earliest to occur of: (i) May 30,  1999,  (ii)
ERD's receipt of the initial  proceeds  from any public or private  placement of
debt or equity securities of ERD, or (iii) completion of any bank refinancing by
ERD, to the extent of all  proceeds  available  after  payment of other  secured
indebtedness. In addition, the ERD Notes, if issued, will be convertible, at any
time at the option of the Company,  into ERD Common Stock at a conversion  price
equal to $4.40 per  share,  or a maximum of  1,000,000  ERD shares if the entire
$4,400,000 principal amount of the convertible note is issued and converted into
ERD  Common  Stock.  In  addition  to the  collateral  provided  under  the  ERD
Agreement,  ERD also  provided the Company  with a junior  mortgage on the waste
facility  owned by  ERD's  subsidiary,  subordinated  to  existing  indebtedness
encumbering such facility.

                                       41
<PAGE>



     In February  1997,  the Company  advanced  an  additional  $500,000 to ERD,
payable on demand (the "Advance Loan").

     The Advance Loan is secured by a short-term promissory note, due October 5,
1997,  bearing  interest at two percent (2%) above the prime lending rate of the
Company's  commercial  bank  (which  was 8.5% on April  30,  1997)  and a second
collateral and security  position on all accounts  receivable of ERD, subject to
the priority interests of Chase Bank.

     On September 30, 1997, ERD filed for reorganization under Chapter 11 of the
federal  bankruptcy  laws. On October 29, 1997,  Chase Bank drew $4,400,000 from
the Letter of Credit. As a result, the Company became liable to North Fork Bank,
the  issuer of the Letter of  Credit,  for such  amount,  which  obligation  the
Company  paid in full on October  31,  1997.  As a result,  the Company is now a
creditor in the ERD reorganization,  holding approximately  $5,000,000 of claims
and a lien on certain ERD assets.  However,  the federal  bankruptcy courts will
not  sustain or honor this lien on the basis of the common  control  between the
Company and ERD resulting from Mr. Rubin's offices with each. If the lien is not
sustained,  the Company will be only a general  unsecured  creditor of ERD. As a
result of the foregoing development,  the Company recorded a $5,000,000 net loss
in  connection  with the Letter of Credit and  Advance  Loan to ERD for the year
ended July 31,  1997.  In the event that the Company does not recoup any portion
of such loss in connection with the ERD bankruptcy proceedings or otherwise, Mr.
Rubin has agreed to personally indemnify the Company for the first $1,600,000 of
such loss.

     The Company's 1996 Stock Option Plan

     As of November 1, 1999, the directors and executive  officers  listed below
hold outstanding non-qualified options to acquire shares of Common Stock granted
under the  Company's  1996 Stock  Option  Plan,  adopted  on April 25,  1996 and
amended as of July 30, 1996 (the "1996 Plan"), as follows:

<TABLE>
<CAPTION>



Recipient          Date of Grant     Number of Options (3)    Exercise Price (1)(2)
---------          -------------     ---------------------    ---------------------
<S>               <C>                    <C>                     <C>
Robert M. Rubin    April 25, 1996         450,000                 $3.78125
                   October 4, 1996         30,000                 $5.125
C. Dean McLain     April 25, 1996         150,000                 $3.78125
Howard Katz        April 25, 1996         150,000                 $3.78125
                   October 4, 1996        100,000                 $5.125
                   May 21, 1997           100,000                 $4.375
David M. Barnes    May 15, 1996           100,000                 $5.25
                   October 4, 1996         50,000                 $5.125
                   May 21, 1997            50,000                 $4.375

</TABLE>


(1)  The exercise prices of all options equal the average of the closing bid and
     ask prices of the Common Stock as reported on the NASDAQ National Market on
     the date of grant.


(2)  As the market value of the Common Stock underlying options issued under the
     1996 plan  (measured  as the  average of the  closing bid and ask price) on
     November 4, 1999, which was $0.23 per share,  none of the foregoing options
     issued  under  the  1996  Plan   (including   unexercisable   options)  are
     "In-the-money."

(3)  These options are fully exercisable.

                                       42
<PAGE>


     On July 30,  1996,  the Board of  Directors  amended  the terms of the 1996
Stock Option Plan to make all options  granted  thereunder  exercisable  without
stockholder  approval.  On that date the market  price of the  Company's  Common
Stock was $6.0125 per share. As a result of the amendment,  the Company incurred
a compensation  charge equal to $1,670,667,  representing the aggregate value of
such unexercised  in-the-money (i.e.,  options for which the market price of the
underlying  Common Stock is above the exercise  price) options issued under such
option plan (including unexercisable options) to the named persons.

     All options granted to each of Messrs.  Rubin and McLain in April 1996, and
100,000  options  granted to Mr. Katz at $5.125 per share in October 1996,  were
immediately  exercisable.  The options granted to Mr. Barnes in May 1996 and the
remaining  150,000 options granted to Mr. Katz are fully vested.  The options to
acquire  156,550  shares  granted to Mr. Rubin and 50,000 shares  granted to Mr.
Barnes in October 1996 are fully vested.

     In June 1996, the Company agreed to loan Mr. Rubin up to $1,200,000,  at an
interest rate equal to one percent above the  fluctuating  Prime Rate offered by
Citibank,  N.A. All borrowings  under the loan are repayable on demand and in no
event  later than July 31,  1998.  Mr.  Rubin's  indebtedness  is secured by his
pledge of 150,000  shares of Common Stock and his assignment of all payments due
to him  under  his  Consulting  Agreement  and  Non-Competition  Agreement  with
Hutchinson, which currently aggregate $1,200,000.

     Mr.  Rubin is  currently a director of IDF and owns  874,659  shares of IDF
common stock, representing  approximately 13.0% of the currently outstanding IDF
common stock after giving effect to the IDF Merger,  and  including Mr.  Rubin's
conversion  of an $800,000  loan  previously  made to IDF into  preferred  stock
convertible  into an additional  400,000 shares of IDF common stock.  Subsequent
the IDF Merger,  Mr.  Rubin has served as Chairman of the Board of  Directors of
IDF and has also  received  a three  year  employment  agreement  from IDF at an
annual salary of $75,000.

     The Company has agreed to provide up to  $1,000,000  in financing to IDF, a
minority-owned  subsidiary.  As of June 18,  1999,  the Company had provided IDF
with $992,000. These funds were used for working capital, the payment of certain
delinquent taxes and other liabilities of Hayden Wegman, an IDF subsidiary,  and
costs related to the discontinuation of operations of TechStar.  The Company has
now taken a full  reserve  against the  $992,000 in advances to IDF due to IDF's
significant  decrease in revenue and its inability to obtain further  financing,
which have made recovery uncertain.

     Lawrence Kaplan, a former director of the Company,  is also a member of the
Board of Directors of IDF and directly and through  affiliates owns an aggregate
of 497,859  shares of IDF common  stock.  In  addition,  GV  Capital,  Inc.,  an
affiliate of Mr. Kaplan, has acted as placement agent in connection with the IDF
private placement and received additional compensation for such services, in the
form of commission of 7.5%, a 2.5% non-accountable expense allowance and 180,000
shares of IDF common stock for nominal consideration.

The Company's 1991 Stock Option Plan

     As of November 1, 1999  certain  directors  and  executive  officers of the
Company hold outstanding  non-qualified options granted under the Company's 1991
Stock Option Plan (the "1991 Plan") to acquire an aggregate of 289,550 shares of
Common Stock.

     The Company  granted to Mr.  McLain  options to purchase  38,000  shares of
Common Stock at $3.125 per share and options to purchase 45,000 shares of Common
Stock at $4.875  per  share,  under the 1991 Plan.  All such  options  are fully
exercisable.

     The  Company  granted to Mr.  Rubin  options to purchase  80,000  shares of
Common  Stock at $3.125 per share and  options  to  purchase  126,550  shares at
$5.125 per share. All such options are fully exercisable.

                                       43
<PAGE>

     Compensation Committee Report On Executive Compensation

     The Board of Directors believes that offering its senior executive officers
employment  agreements  is the best way to  attract  and retain  highly  capable
employees on a basis that will encourage them to perform at increasing levels of
effectiveness  and  to  use  their  best  efforts  to  promote  the  growth  and
profitability of the Company and its subsidiaries.  During Fiscal 1998,  Messrs.
Rubin and McLain were both under  contract  with the Company (Mr.  McLain was no
longer under  contract as of and since July 23, 1998).  The Board  believes this
enabled it to concentrate on negotiating  particular employment contracts rather
than  establishing  more general  compensation  policies for all  management and
other personnel.  The Company believes that its compensation levels as to all of
its employees were comparable to industry standards. Currently, Mr. Rubin is the
Company's only senior executive  officer  employed under a contract  approved by
the full Board of Directors. See "Executive  Compensation-Employment,  Incentive
Compensation and Termination Agreements." Upon the effective date of the Western
IPO Mr. McLain's  employment  agreement was terminated.  Mr. Shahid's employment
agreement was terminated upon  consummation of the Hutchinson  Transaction.  See
"Employment Incentive Compensation and Termination Agreements."

     In setting levels of compensation  under such  employment  contracts and in
approving management's compensation of all other Company employees, the Board of
Directors  evaluates the Company's  overall  profitability,  the contribution of
particular  individuals to the Company's  performance and industry  compensation
standards.  A significant percentage of the compensation paid to each of Messrs.
Rubin and McLain under their  respective  employment  agreements  is tied to the
Company's achievement of prescribed levels of pre-tax income of the Company as a
whole or of the  subsidiary for which each such  executive is  responsible.  See
"Employment, Incentive Compensation and Termination Agreements," above.

     Compliance with Section 16(a) of the Exchange Act.

     To the knowledge of the Company, no officers,  directors,  beneficial owner
of more  than 1  percent  of any  class  of  equity  securities  of the  Company
registered  pursuant to Section 12 of the  Securities  Exchange Act of 1934,  as
amended (the "Exchange  Act"),  or any other person subject to Section 16 of the
Exchange  Act with  respect  to the  Company,  failed to file on a timely  basis
reports  required by Section  16(a) of the  Exchange  Act during the most recent
fiscal year, which ended July 31, 1999.

                                       44
<PAGE>


     ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth certain  information as of November 1, 1999
with respect to the  beneficial  ownership of the Common Stock of the Company by
each  beneficial  owner of more than five  percent  (5%) of the total  number of
outstanding  shares of the Common  Stock of the Company,  each  director and all
executive  officers and  directors of the Company as a group.  Unless  otherwise
indicated,  the owners have sole  voting and  investment  power with  respect to
their respective  shares.  The table does not include  options or SARs that have
not yet vested or are not exercisable within 60 days of the date hereof.
<TABLE>
<CAPTION>

Name and Address*                                              Number of Shares                Percentage of
of Beneficial Owner               Office(s)                    Beneficially Owned(1)           Common Stock (1)
-------------------               ---------                    ---------------------           ----------------
<S>                              <C>                           <C>                                <C>
Robert M. Rubin                   Director, President, Chief    782,798 (2)(3)(7)(9)               6.3
                                  Executive Officer


C. Dean McLain                    Director, Executive           233,000 (4)(5)                     1.9
4601 N.E. 77th Avenue             Vice-President and
Suite 200                         President of Western
Vancouver, WA 98662               Power and Equipment Corp.
                                  ("Western")

Howard Katz                       Executive Vice President      350,000 (6)(8)                     2.9
                                  and
                                  Director

David M. Barnes                   Vice President of Finance     200,000 (6)(8)                     1.6
                                  and Director                 (6)(8)


Rubin Family Irrevocable
Stock Trust                                                    1,025,000(7)                        8.8
25 Highland Blvd.                                              ---------                         ------
Dix Hills, NY 11746

All Directors and Executive                                    1,565,798 (2)(3)(5)(6)(9)          11.8
                                                               =========                          ====
Officers as a Group (4 persons)

</TABLE>

                                       45
<PAGE>

*    Unless  otherwise  indicated,  the address of each such beneficial owner is
     11130 NE 33rd Place, Bellevue, WA 98004.

(1)  Pursuant  to the rules  and  regulations  of the  Securities  and  Exchange
     Commission,  shares of Common Stock that an individual or group has a right
     to acquire  within 60 days pursuant to the exercise of options  or warrants
     are deemed to be outstanding  for the purposes of computing  the percentage
     ownership of such individual or group, but are not deemed to be outstanding
     for the purposes of computing the percentage  ownership of any other person
     shown in the table.

(2)  Includes   222,798  shares  of  Common  Stock  owned  by  Mr.  Rubin,   and
     non-qualified  options to purchase 80,000 shares granted to Mr. Rubin at an
     exercise  price of $3.125 per share and 126,550 shares at an exercise price
     of $5.125 per share issued under the Company's 1991 Stock Option Plan which
     are fully exercisable.

3)   Includes  non-qualified  options to acquire  323,450  shares granted to Mr.
     Rubin  under the 1996 Stock  Option  Plan on April 25,  1996 at an exercise
     price of $3.78125  per share,  the fair market value of the Common Stock on
     the date of option  grant.  Options  to  acquire  30,000  shares  were also
     granted to Mr.  Rubin on October 4, 1996 under the 1996 Stock  Option Plan.
     The 1996 Stock Option Plan was amended in July 1996 to make options granted
     under  the plan  exercisable  without  stockholder  approval.  Mr.  Rubin's
     continuing  employment  by the  Company  is  governed  by the  terms of his
     employment agreement.

(4)  Includes  non-qualified  options to acquire  150,000  shares granted to Mr.
     McLain  under  the 1996  Stock  Option  Plan.  See Note (3).  Mr.  McLain's
     continuing  employment  by the  Company  is  governed  by the  terms of his
     employment agreement.

(5)  Includes  (i) options to purchase  38,000  shares of the  Company's  Common
     Stock at $3.125 per share  granted  under the  Company's  1991 Stock Option
     Plan, (ii) options to purchase 45,000 shares of the Company's  Common Stock
     at $4.875 per share under the 1991 Stock Option Plan,  and (iii) options to
     purchase 150,000 shares of the Company's Common Stock at $3.78125 per share
     granted under the 1996 Stock Option Plan, all of which are exercisable.

(6)  Includes  options  granted  to Mr.  Katz  under the 1996  Plan to  purchase
     100,000  shares  at an  exercise  price of $5.125  per  share,  options  to
     purchase  100,000  shares at an  exercise  price of $4.375 per  share,  and
     options to purchase 150,000 shares at an exercise price of $3.78125, all of
     which are exercisable.


(7)  Robert M. Rubin, a grantor of the Rubin Family Irrevocable Stock Trust (the
     "Trust")  disclaims  beneficial  ownership of the shares held by the Trust.
     See "Insider Participation," "Executive Compensation-Employment,  Incentive
     Compensation and Termination  Agreements" and "Management's  Discussion and
     Analysis of Financial Condition and Results of Operations."


(8)  Includes  options  granted to Mr.  Barnes to purchase  50,000  shares at an
     exercise price of $4.375 per share,  options to purchase  100,000 shares at
     an exercise price of $5.25 per share and options to purchase  50,000 shares
     at $5.125 per share, all of which are exercisable.

(9)  Excludes  shares of Common  Stock  beneficially  owned by the Trust,  as to
     which Mr. Rubin disclaims beneficial ownership.


                                       46
<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     See "Executive  Compensation-Compensation  Committee Interlocks and Insider
Participation" and "Executive  Compensation-Employment,  Incentive  Compensation
and  Termination  Agreements",  and  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations."



PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  1.  Financial  Statements  are included in Part II Item 8 beginning at page
          F-1.

     2. Financial Statement Schedule

          Schedule II Valuation and Qualifying Accounts



(b) Reports on Form 8-K.

                  None.


(c) Exhibits.


Exhibit
Number                  Description

3.1  Certificate of Incorporation of Registrant.(1)

3.2  By-laws of Registrant. (2)

4.1  Specimen Certificate of Common Stock. (3)

4.2  1991 Employee Stock Option Plan. (1)

10.1 Asset  Purchase  Agreement,  dated July 10,  1998,  by and among  Executive
     TeleCard,  Ltd., American United Global, Inc.,  Connectsoft  Communications
     Corporation, Connectsoft Holding Corp., and C-Soft Acquisition Corp.*

10.2 Amendment No. 1 to Asset  Purchase  Agreement,  dated July 30, 1998, by and
     among Executive TeleCard,  Ltd., American United Global, Inc.,  Connectsoft
     Communications   Corporation,   Connectsoft   Holding  Corp.,   and  C-Soft
     Acquisition Corp.*

10.3 Amendment No. 2 to Asset Purchase  Agreement,  dated August _, 1998, by and
     among Executive TeleCard,  Ltd., American United Global, Inc.,  Connectsoft
     Communications   Corporation,   Connectsoft   Holding  Corp.,   and  C-Soft
     Acquisition Corp.*

                                       47
<PAGE>


10.4 Amendment No. 3 to Asset  Purchase  Agreement,  dated June 17, 1999, by and
     among Executive TeleCard,  Ltd., American United Global, Inc.,  Connectsoft
     Communications   Corporation,   Connectsoft   Holding  Corp.,   and  C-Soft
     Acquisition Corp.*

10.5 Assignment  and  Assumption  Agreement,  dated as of June 17, 1999,  by and
     among Vogo  Networks,  LLC,  Connectsoft  Communications  Corporation,  and
     Connectsoft Holding Corp.*

10.6 Certificate of Designations,  Rights and Preferences of Series G Cumulative
     Convertible Redeemable Preferred Stock of Executive TeleCard, Ltd.*

10.7 Form of  Promissory  Note payable to American  United  Global,  Inc. in the
     aggregate principal amount of $500,000.*

10.8 Form of Promissory Note payable to Connectsoft  Communications  Corporation
     in the aggregate principal amount of $200,000.*

10.9 Registration  Rights  Agreement,  dated as of June 17, 1999, by and between
     Executive TeleCard, Ltd. and American United Global, Inc.*

10.10Security  Agreement,  dated as of June 17,  1999,  by and between  American
     United Global, Inc. and Vogo Networks, LLC.*

21   Subsidiaries of the Company*.

27   Financial Data Schedule*


(1)  Included  with the filing of the Company's  Registration  Statement on Form
     S-1 on October 18, 1991, as amended by Amendment No. 1, dated  December 18,
     1991,  Amendment  No. 2,  dated  January 9,  1990,  Amendment  No. 3, dated
     January 24, 1992 and Amendment No. 4, dated January 28, 1992.

(2)  Filed as an Exhibit to the Definitive Proxy Materials of Alrom Corp., a New
     York  corporation  (the  Company's  predecision),  as filed on December 10,
     1991.

(3)  Filed as an Exhibit to the  Company's  Registration  Statement on Form S-18
     (Registration  No.  3303330  81-NY) and  incorporated  herein by  reference
     thereto.

*        Filed herewith

                                       48
<PAGE>

     SIGNATURES


     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

         Dated: November 12, 1999


     AMERICAN UNITED GLOBAL, INC.



                 By:./s/ Robert M. Rubin
                 -----------------------
                  Robert M. Rubin, Chairman

     In accordance with the Securities and Exchange Commission,  this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.



Signature               Title                              Date


/s/ Robert M. Rubin     Chairman of the Board, Chief        November 12, 1999
--------------------    Executive Officer and Director
Robert M. Rubin




/s/ C. Dean McLain      Executive Vice President and        November 12, 1999
------------------      Director
C. Dean McLain



/s/ David M. Barnes     Vice President--Finance and Chief   November 12, 1999
--------------------    Financial and Chief Accounting
David M. Barnes         Officer



/s/ Howard Katz         Executive Vice President and        November 12, 1999
-------------------     Director
Howard Katz


                                       49
<PAGE>


                                  EXHIBIT LIST


3.1  Certificate of Incorporation of Registrant.(1)

3.2  By-laws of Registrant. (2)

4.1  Specimen Certificate of Common Stock. (3)

4.2  1991 Employee Stock Option Plan. (1)


10.1 Asset  Purchase  Agreement,  dated July 10,  1998,  by and among  Executive
     TeleCard,  Ltd., American United Global, Inc.,  Connectsoft  Communications
     Corporation, Connectsoft Holding Corp., and C-Soft Acquisition Corp.*

10.2 Amendment No. 1 to Asset  Purchase  Agreement,  dated July 30, 1998, by and
     among Executive TeleCard,  Ltd., American United Global, Inc.,  Connectsoft
     Communications   Corporation,   Connectsoft   Holding  Corp.,   and  C-Soft
     Acquisition Corp.*

10.3 Amendment No. 2 to Asset Purchase  Agreement,  dated August _, 1998, by and
     among Executive TeleCard,  Ltd., American United Global, Inc.,  Connectsoft
     Communications   Corporation,   Connectsoft   Holding  Corp.,   and  C-Soft
     Acquisition Corp.*

10.4 Amendment No. 3 to Asset  Purchase  Agreement,  dated June 17, 1999, by and
     among Executive TeleCard,  Ltd., American United Global, Inc.,  Connectsoft
     Communications   Corporation,   Connectsoft   Holding  Corp.,   and  C-Soft
     Acquisition Corp.*

10.5 Assignment  and  Assumption  Agreement,  dated as of June 17, 1999,  by and
     among Vogo  Networks,  LLC,  Connectsoft  Communications  Corporation,  and
     Connectsoft Holding Corp.*

10.6 Certificate of Designations,  Rights and Preferences of Series G Cumulative
     Convertible Redeemable Preferred Stock of Executive TeleCard, Ltd.*

10.7 Form of  Promissory  Note payable to American  United  Global,  Inc. in the
     aggregate principal amount of $500,000.*

10.8 Form of Promissory Note payable to Connectsoft  Communications  Corporation
     in the aggregate principal amount of $200,000.*

10.9 Registration  Rights  Agreement,  dated as of June 17, 1999, by and between
     Executive TeleCard, Ltd. and American United Global, Inc.*

10.10Security  Agreement,  dated as of June 17,  1999,  by and between  American
     United Global, Inc. and Vogo Networks, LLC.*


21   Subsidiaries of the Company*.

27   Financial Data Schedule*


                                       50
<PAGE>


(1)  Included  with the filing of the Company's  Registration  Statement on Form
     S-1 on October 18, 1991, as amended by Amendment No. 1, dated  December 18,
     1991,  Amendment  No. 2,  dated  January 9,  1990,  Amendment  No. 3, dated
     January 24, 1992 and Amendment No. 4, dated January 28, 1992.

(2)  Filed as an Exhibit to the Definitive Proxy Materials of Alrom Corp., a New
     York corporation, as filed on December 10, 1991.

(3)  Filed as an Exhibit to the  Company's  Registration  Statement on Form S-18
     (Registration  No.  3303330  81-NY) and  incorporated  herein by  reference
     thereto.

*          Filed herewith

                                       51
<PAGE>