<PAGE>

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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                    FORM 10-K

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

                    FOR THE FISCAL YEAR ENDED MARCH 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 0-22698

--------------------------------------------------------------------------------
                              GOLDEN SYSTEMS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------------------------------------------------------------------


          CALIFORNIA                                      95-4021568
 (State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                       Identification No.)

                               2125-C MADERA ROAD
                              SIMI VALLEY, CA 93065
                    (Address of principal executive offices)
                                 (805) 582-4400
              (Registrant's telephone number, including area code)

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

         SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                  COMMON STOCK
                                (Title of Class)
                                OVER THE COUNTER
                     (Name of exchange on which registered)

     INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS:   YES   NO  X
                                        ---   ---

     INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K.


     THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT, BASED ON THE CLOSING PRICE AT JANUARY 31, 2000, WAS
APPROXIMATELY $265,000. THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S
COMMON STOCK AT JANUARY 31, 2000 WAS 5,299,998.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE
<PAGE>



                              GOLDEN SYSTEMS, INC.
                            INDEX TO ANNUAL REPORT ON
                                    FORM 10-K

                            For the fiscal year ended
                                 March 31, 1999

<TABLE>
<CAPTION>
                                                                                                            PAGE
<S>                                                                                                       <C>
                                     PART I
Item 1.   Business............................................................................................3
Item 2.   Properties.........................................................................................15
Item 3.   Legal Proceedings..................................................................................15
Item 4.   Submission of Matters to a Vote of Security Holders................................................16

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters..............................16
Item 6.   Selected Financial Data............................................................................17
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations..............17
Item 8.   Financial Statements and Supplementary Data........................................................24
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............24

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.................................................25
Item 11.  Executive Compensation.............................................................................26
Item 12.  Security Ownership of Certain Beneficial Owners and Management.....................................31
Item 13.  Certain Relationships and Related Transactions.....................................................32

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................................33
          Signatures.........................................................................................34
          Index to Consolidated Financial Statements........................................................F-1
          Financial Statements and Supplementary Data.......................................................F-1
          Reports of Independent Public Accountants.........................................................F-2

</TABLE>

<PAGE>


                                     PART I

         Unless otherwise indicated as used in this Form 10-K all references to
a fiscal year shall mean the fiscal year of Golden Systems, Inc. ("Golden
Systems" or the "Company") that ends in such year (for example, the fiscal year
commencing April 1, 1998 and ending March 31, 1999 is referred to herein as
"fiscal 1999" or "1999").

         This Annual Report on Form 10-K contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Discussions containing such forward-looking
statements may be found in the material set forth under "Business-General,"
"Business-Marketing and Sales," "Legal Proceedings" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," as well as
within this Form 10-K generally. Such statements are subject to a number of
risks and uncertainties. Actual results in the future could differ materially
from those described in the forward-looking statements (as a result of the risk
factors set forth below under "Risk Factors"). The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.

ITEM 1   BUSINESS

BACKGROUND

         Golden Systems was incorporated in October 1985 and commenced operating
in February 1991. Since then the Company has engaged in the marketing of power
supplies to personal computer and peripheral equipment original equipment
manufacturers ("OEMs") and to distributors of standard power supply products.
During the fiscal year ended March 31, 1992, the Company entered into its first
high volume OEM sales arrangement. The engineering, sales and distribution
operations of the Company were integrated with the engineering and manufacturing
operations of its newly acquired subsidiary, Ultra Tek Devices, Ltd. ("Ultra
Tek"), effective on July 1, 1993, in contemplation of the Company's Initial
Public Offering. Prior to the integration, Ultra Tek manufactured power supplies
for sale primarily to Tandon Corporation or Tandon Associates for use in
personal computers and peripheral equipment manufactured by companies affiliated
with the Tandon family. J. L. Tandon, a United States resident and citizen, is
the Chief Executive Officer and a director of the Company. M. L. Tandon, a
resident and citizen of India, has been Chairman of the Board of Ultra Tek since
its incorporation on August 9, 1985 and is J. L. Tandon's brother. The Company
began doing business as "Cortech Systems" in August 1996.

GENERAL

         The Company is in the business of designing, manufacturing and
marketing switching power supplies. Historically, its customers have been OEMs
of personal computers and peripheral equipment. The Company's principal
customers in the past were Compaq Computer Corporation ("Compaq") and
International Business Machines Corporation ("IBM"). Sales to Compaq declined
significantly during fiscal 1996 and 1997. Although the Company expanded its
business activity with IBM during fiscal 1996, IBM ceased to be a customer
during fiscal 1997. Since fiscal 1997, the Company's primary customer has been
Iomega Corporation ("Iomega"). However, since December 1999, the Company has not
received any new orders from Iomega, nor has Iomega provided any explanation for
this action.

         The Company uses low-cost manufacturing and labor at its manufacturing
facilities to produce its products, which it designs specifically to meet the
quality requirements and other specifications of its OEM customers. During
fiscal 1999, the Company's manufacturing operations were located in a foreign
export processing zone in Mumbai (formerly Bombay), India. Manufacturing in two
other facilities located in Chennai (formerly Madras), India and Sri Lanka were
discontinued in fiscal 1996 and fiscal 1998 as part of the Company's
restructuring and cost reduction efforts. During fiscal 1997, the Company
relocated its product design and development engineering, along with its
self-certifying product safety laboratory, to Scotland. Both were moved back to
the Company's headquarters office in California during the fourth quarter of
fiscal 1998, as part of the Company's ongoing effort to cut costs, because
anticipated sales

                                       3
<PAGE>

volume to support these activities did not develop.

         As was previously reported in the Company's annual and quarterly
reports filed with the Securities and Exchange Commission (the "Commission") and
in timely press releases issued in December 1994, the Company's cash flow was
significantly impacted by the product rejection by Compaq, its then-largest
customer, that took place in the last few months of fiscal 1995, which cost the
Company $4.2 million of lost accounts receivable directly related to the sales
of the rejected units and $2.2 million related to other direct costs stemming
from the rejection. This additionally placed the Company in an unfavorable
position with its raw material vendors due to limited cash, high short-term
debt, and a severe deferral of payments to its banking institutions and vendors.
Existing and potential new customers were very aware of the significant product
return and the unfavorable financial position the Company was experiencing.

         In recognition of the unfavorable circumstances created by this event
(high short-term debt, limited capital, vendor problems, and negative perception
by its existing and potential customer base), the Company was required in fiscal
1996 to develop and implement a strategy to overcome its severe cash
difficulties. The strategy included utilization or sale of its raw material
inventory, cost reductions, organizational restructuring, price increases,
volume growth, and obtaining more favorable payment terms from its existing
customers. The Company recognized that these measures would be both difficult to
achieve in the very competitive personal computer component market and would be
short-term solutions under the best of circumstances and results. Based on this,
the Company recognized the necessity, on a longer term basis, of pursuing new
equity investment primarily through a merger or acquisition.

         The Company was successful in achieving certain portions of its cash
recovery strategy as is demonstrated in its fiscal 1996 year-end financial
statements. In particular, $2,161,000 in cash was provided by a decrease in
accounts receivable as a result of specific customers granting the Company
accelerated payment terms and an additional $2,270,000 in cash was provided by a
reduction in inventory primarily as a result of using existing raw materials in
new power supply products. These same activities resulted in cash in the amounts
of $838,000 and $1,046,000, respectively, as reported in the Company's Annual
Report on Form 10-K for fiscal 1997. During fiscal 1996, selling, general and
administrative expenses were reduced by $1,129,000 resulting from the eventual
shut-down of the manufacturing facility located in Chennai, India, staff and
cost reductions in the Simi Valley corporate offices, and cost reductions in the
England and Singapore sales offices. But, while achieving some success, the
Company did not generate the anticipated amounts of cash recovery from inventory
reduction, had only limited success in its efforts to resell the reworked,
rejected product, and failed to rebuild the volume of its business.

         Sales to Compaq decreased significantly in fiscal 1996 and fiscal 1997.
Although the Company was successful in increasing its volume with IBM through
the third quarter of fiscal 1996, it was not successful in building its sales
volumes to other existing customers or to new customers. The Company also was
notified by IBM in the latter half of fiscal 1996 that it was reducing its
number of vendors for power supplies to those larger and best financially
prepared to support its activities and that the Company no longer met its vendor
selection criteria. Sales to IBM ceased during fiscal 1997.

         The Board of Directors concluded during the fourth quarter of fiscal
1996 that, if the Company were to remain operational, it must evaluate all
measures to obtain additional capital from sources outside the Company or, if
none were found, that the Company must engage in a transaction that would change
its fundamental structure. On February 13, 1996, the Board of Directors
established an Independent Directors Committee, made up of non-management
directors, to evaluate financing and restructuring options and opportunities
available to the Company.

         The Independent Directors Committee was unable to identify any outside
sources of capital. The Company pursued an equity investment by an outside
investment group; discussed strategic alliances with two different companies;
considered an acquisition proposal by an investment banker; and explored a
merger with another electronics manufacturer. However, the Company found that
the following factors made it unattractive to potential investors and
traditional lenders: (i) the size of its Indian bank debt relative to the
Company's consolidated assets; (ii) the fact that the Indian banks' liens on
Ultra Tek's assets are first in priority over all other debt, as well as over
shareholders' equity rights; (iii) the Company's

                                       4
<PAGE>

operating losses since the fiscal 1995 product rejection by Compaq; and (iv) the
fact that the Company had consumed the totality of its resources simply to
survive during the four quarters of fiscal 1996. In May 1996, J. L. Tandon, the
Company's CEO, informed the Independent Directors Committee that the Tandon
family, which owned approximately 38.2% of the outstanding shares of the
Company's common stock (the "Common Stock") and has personally guaranteed Ultra
Tek's bank debt in India (amounting to approximately $7.5 million at March 31,
1996), was prepared to invest additional equity in the Company and to support
the Company in negotiations with the Indian banks. A number of discussions of
terms, amounts and timing took place, leading to an initial proposal from the
Tandon family dated July 31, 1996. During August 1996, the Independent Directors
Committee informed J. L. Tandon that, in addition to financial terms, an
acceptable proposal must include (i) a business plan showing that the investment
would be sufficient to restart the Company with new products, and (ii) an
organization chart showing that the Company had in place, or had identified, the
management and engineering talent necessary to implement the plan.

         During September 1996, the Company prepared and delivered a business
plan and reviewed personnel issues. The Independent Directors Committee pointed
out the weakness in senior financial management as a result of the resignation
of Michael D. Thomas, the Company's president and chief financial officer,
effective July 1, 1996. Prakash Thanky had become the Company's president,
effective that same date, but no senior financial executive was then employed by
the Company. The committee directed management to initiate a search for a chief
financial officer and indicated its willingness to accept an interim consultant
in that position while the search was under way. Harvey Marsh was hired as a
part-time interim financial consultant in October 1996 and continued in that
capacity until April 6, 1998, at which time he became an employee of the
Company. On September 8, 1998, the Board of Directors elected Mr. Marsh a
director and appointed him Chief Financial Officer of the Company.

         In October 1996, the Tandon family proposed a recapitalization plan
(the "Recapitalization Plan") to the Independent Directors Committee. This
proposal called for an investment in newly issued shares of the Company's Common
Stock in the amount of $2 million by the Tandons, together with a commitment
from the Tandon family to obtain a standstill arrangement with Ultra Tek's
Indian bank lenders whereby such banks would agree not to demand payment of any
interest or principal from the Company or Ultra Tek, or declare a default
despite the Company's failure to comply with its debt covenants, for a period of
not less than one year. The Company expected that the standstill arrangement
would give it enough time to demonstrate its viability as an ongoing business so
that it could negotiate a reasonable payment schedule with the Indian banks,
rather than having the banks foreclose on Ultra Tek's assets. The
Recapitalization Plan did not require that a formal standstill agreement be
reached with the Indian Banks. Instead, it required that the Tandon family loan
to the Company any funds necessary to meet any payment demands by the Indian
Banks. The proposed per-share stock purchase price was $0.15, which exceeded the
public bid price of $0.07 and the public asked price of $0.14 at the time of the
proposal. The terms presented by the Tandon family would result in Tandon
interests in the Company increasing from approximately 38.2% (as of March 1,
1997) to approximately 77.3% of the Company's outstanding shares.

         Because implementation of the Recapitalization Plan would cause an
increase in ownership by the Tandon family relative to other shareholders, the
Recapitalization Plan represents a conflict of interest as a related party
equity investment. The Independent Directors Committee, as a result of the
Company's lack of success in identifying and consummating a transaction with an
unrelated party, concluded that the Company must confront and resolve the
conflict of interest. The Committee recognized that the Company's ability to
continue its Indian manufacturing operations was dependent upon the involvement
of the Tandon family. The Tandon family provided expertise in Indian operations
and had personally guaranteed the debts to the Indian banks. As a practical
matter, no resolution of the Company's situation would be achievable without the
cooperation and participation of the Tandon family. In fact, proposals received
from third parties and rejected by the Company (as described above) had provided
for separate treatment of the Tandon family and its interests relative to the
Indian bank debt. Consequently, the Independent Directors Committee determined
that any potential conflict of interest presented by the Recapitalization Plan
could be minimized by the function of the Committee itself in reviewing and
negotiating the terms of the Recapitalization Plan on the Company's behalf with
the Tandon family. Further, the Company appeared to have no practical
alternative in order to obtain the cash necessary for it

                                       5
<PAGE>

to continue to exist. Shareholder approval for the Recapitalization Plan would
be necessary because of the substantial number of shares issuable under its
terms.

         On February 21, 1997, the Independent Directors Committee determined to
recommend to the Board of Directors that the Recapitalization Plan and the
transactions contemplated thereby be approved. On February 27, 1997, the Board
of Directors approved the Recapitalization Plan. The Company prepared a proxy
statement describing the Recapitalization Plan, which was to be presented to the
Company's shareholders for a vote at the 1996 Annual Meeting of Shareholders.
The document was filed with the Commission, as required by federal securities
law, on April 8, 1997. One month later, the Company received comments from the
Commission, which the Company needed to address before the proxy statement could
be delivered to the shareholders. As a result of the time taken by the
Commission to prepare its comments and the time necessary for the Company to
respond to them, the financial information included in the proxy statement
became too old to use under federal securities rules. Because the information
provided was from the third quarter of fiscal 1997, updating the financial
disclosure required the completion of the 1997 fiscal year end audit.
Unfortunately, the Company's worsening financial situation prevented it from
undertaking this audit for some time and then, upon undertaking the audit,
prevented the audit from being completed until June 1998. Having its fiscal 1997
audit in place and having filed the fiscal 1997 year end report with the
Commission in June 1998, the Company proceeded to prepare quarterly reports on
Form 10-Q for each of the first three quarters of fiscal 1998, which were filed
with the Commission in September 1998. Because of the foregoing delays, a change
in auditors, and delays in completing the audit in India using Generally
Accepted Accounting Principles, the fiscal 1998 audit was not completed until
August 1999, which delayed the filing of this fiscal 1999 annual report on Form
10-K with the Commission. Before the Company will be able to solicit the
approval of its shareholders for the Recapitalization Plan or any other matters
requiring shareholder approval, fiscal 2000 quarterly and annual reports will
have to be filed.

         In order to ease the Company's worsening cash situation while the
shareholder approval process was being pursued, the Tandon family agreed to
invest immediately the $2,000,000 contemplated by the Recapitalization Plan. On
or about March 31, 1997, the Tandon family contributed $2,000,000 consisting of
cash and canceled promissory notes from the Company in exchange for 850,000
shares of the Company's Common Stock that had been authorized for issuance but
never issued and a bridging promissory note from the Company in the principal
amount of $1,873,000 that would be canceled when the remaining 12,483,333 shares
of Common Stock issuable under the terms of the Recapitalization Plan had been
authorized by the Company's shareholders and issued to the Tandon family. By its
terms, the original bridge note has converted into an 8% per annum demand
promissory note. All of the proceeds were used for the Company's working
capital. The balance owing under that note as of March 31, 1999, was $2,173,000,
including accrued interest. Further, as of that date, the Company had borrowed,
net of repayments, an additional $2,234,000 from the Tandon family. This cash
allowed the Company to continue operations, but aside from related party
financing, the Company currently has no viable source of financing to continue
its current revenue growth and achieve profitable operations and positive cash
flow. At January 31, 2000, the outstanding balance, including accrued interest,
due to the Tandon family was $2,353,000, in addition to $2,298,000 owing on the
note payable under the Recapitalization Plan. All additional loaned amounts have
either been under the terms of a factoring agreement at a monthly interest rate
of 1% on the average outstanding daily balance, or been under the terms of
unsecured loans, payable on demand at an interest rate of 15% per annum,
commencing April 1, 2000.

         In the third quarter of fiscal 1998, the Company began implementing
additional cost reductions, including the discontinuance of manufacturing
operations at the Sri Lanka facility, in an effort to overcome its negative cash
flow. Also, Prakash Thanky resigned and J. L. Tandon assumed the title of
President. In the fourth quarter of fiscal 1998, the Company sold its Singapore
and Sri Lanka subsidiaries to related parties, closed its Scotland office and
initiated additional employee reductions. In addition, the Company commenced
discussions with its Indian banks regarding a financial rehabilitation plan
pursuant to guidelines established by the Board for Industrial and Financial
Reconstruction ("BIFR"), which is an Indian authority that adjudicates all
matters of financially distressed companies.

         The BIFR appointed an Operating Agency ("OA") to examine the Company's
viability and

                                       6
<PAGE>

prepare a viability study report. Accordingly, the Company prepared a draft
rehabilitation proposal, which was submitted to the OA. The OA reviewed the
proposal and forwarded the same to the BIFR along with the minutes of a joint
meeting convened by the OA in March 1999. Based on the minutes of the joint
meeting, the BIFR prepared its Draft Rehabilitation Scheme and advised all
concerned, inviting suggestions/objections to the scheme. The Draft Scheme is
subject to ongoing discussion and envisages restructuring of existing debts
(unpaid principal amount of $5,129,047 to banks and financial institutions as of
September 30, 1999), conversion of simple interest into a Funded Interest Term
Loan amounting to $2,132,801 as of September 30, 1999, infusion of funds by way
of contribution by the Tandon family amounting to $938,527 which has already
occurred, and additional working capital facilities from the Indian banks of
$1,642,421, which would enable the Company to generate enough resources to
continue its operations and repay the restructured debts over a period of time.
The BIFR held a hearing on August 16, 1999 and, after hearing all interested
parties, has advised the Company and the banks to discuss further and modify the
Draft Scheme to take into account the various points made at the hearing. The
BIFR also instructed the OA to conduct joint meetings with the banks and the
Company and to forward a modified scheme. The Company is in the process of
discussing with the banks ways to modify the Draft Scheme to take into account a
potential conversion of compound interest and liquidated damages into redeemable
preference stock. As of January 31, 2000, the debt to the Indian lenders
amounted to approximately $11,000,000.

         During February 1999, a major customer notified the Company that the
plastic housing on approximately 150,000 external power supplies manufactured by
the Company is subject to separation under some circumstances. The Company has
worked with the customer in their recall of 60,000 units at risk of separation
and in the hands of consumers. Through January 31, 2000, the cost of the recall
to the Company has been approximately $50,000.

         During the second quarter of fiscal 1997, the Company began doing
business as "Cortech Systems." Pending shareholder approval of a change in the
Company's name, Cortech Systems is a fictitious business name.

UNITED STATES OPERATIONS

         The Company's operations in the United States are focused on
administration and marketing, product design and development, and the
coordination of product engineering and manufacturing between the Company's
customers and its Indian manufacturing facilities. The Company markets its
products directly to OEMs through its established network of contacts in the
electronics industry. Product development and design engineers work closely with
OEMs, visiting their facilities and organizing lines of communication (typically
through the use of electronic mail). Concurrently, the design engineers
communicate with process and manufacturing engineers in India, also via
electronic mail, to coordinate the design and manufacture of products. Finally,
the Company has a self-certifying product safety laboratory, which allows it to
obtain safety certification for its products on an expedited basis.

OFFSHORE OPERATIONS

         The electronics industry is extremely competitive, with price being a
major competitive factor. The Company seeks a competitive advantage by
attempting to offer high-quality, low-cost products to existing and potential
customers by capitalizing on lower cost offshore manufacturing capabilities.
During fiscal 1999, the Company maintained its manufacturing facility in Mumbai,
India. India's large population and high unemployment rate enable the Company to
employ relatively well-educated workers at low wages. The Company believes its
workers are well educated relative to workers performing similar manufacturing
duties in other third world countries. Most of the Company's workers are
graduates of secondary school (high school equivalent), which the Company
believes enables more extensive and effective worker training, permitting
greater productivity. The Company further benefits from these low wages by
manufacturing many power supply components in-house. The Company also employs
executives who reside in India, thereby minimizing travel expense as well as
salary expense.

                                       7
<PAGE>

INDIA OPERATIONS

         Ultra Tek currently manufactures all of its power supplies in a leased
facility located in the Santa Cruz Electronics Export Processing Zone ("SEEPZ")
in Mumbai, India. SEEPZ was established in Mumbai in 1974 as part of a series of
incentive programs by the government of India to encourage domestic manufacture
of products for export. These programs began in the early 1970s and, to date,
the Indian government has created a number of free trade zones. Recent
amendments to these programs continue the trend of expanding export incentives.
The Company believes that the Indian government will continue to support these
export processing zones.

         SEEPZ is 100 acres in area and is located in a northern suburb of
Mumbai. It is less than five miles away from both Mumbai's domestic and
international airports and less than twenty miles from its commercial docks.
Almost two hundred companies employing over ten thousand people currently
operate in SEEPZ. Under Indian regulations relating to SEEPZ, businesses in
SEEPZ are required to export a substantial part of production.

         Major benefits provided by the Indian government to businesses
operating within SEEPZ include:

         INFRASTRUCTURE. In addition to developed land parcels for
self-constructed facilities, ready-built space is available in
government-constructed Standard Design Factories ("SDFs"). Ultra Tek currently
does all of its manufacturing in an SDF. SDFs are typically leased for five-year
periods, with the tenant responsible for the construction of all internal
improvements, including partitions, air conditioning and internal wiring. The
zones are exempt from scheduled electrical power cuts, common in India, and also
have on-site telecommunications switching facilities and bank offices. The
Indian government typically renews such leases absent unusual circumstances.

         INCENTIVES. The Indian government waives licensing and duties on
imported capital goods, raw materials, other production materials, office
equipment and supplies, and also waives the excise tax applicable on the
purchase of goods and materials in India. Sales tax on goods purchased in India
is eligible for reimbursement. The government has adopted policies that do not
require any domestic ownership to establish and operate a facility within SEEPZ.
These policies are intended to encourage the investment of foreign capital. To
operate within SEEPZ, all products manufactured by a company therein must be
exported, although with prior governmental approval up to 25% of products
manufactured may be sold within India. Income derived from export sales is
exempt from income tax. Income derived from domestic sales, however, is subject
to income tax.

         ADMINISTRATIVE SUPPORT. An on-site Development Commissioner is
empowered to grant a number of government approvals, widely required in India,
including a range of permits and licenses, and is available to coordinate
others. Export processing zones also are special customs areas that allow
customs clearance on-site, with bonded shipment to nearby harbor and airport
facilities.

         In addition, restricted access to export processing zones means that
the risk of labor unrest from outside organizers is reduced. The businesses in
the zones also have the advantage of "public utility" status under Indian law,
which restricts the rights of their workers to strike.

STRATEGY

         Since fiscal 1996, the Company's strategy has been continued cost
control and cash conservation as it seeks to rebuild its manufacturing
operations. New credit lines and other sources of working capital are also being
explored. Since the fourth quarter of fiscal 1995, the Company has pursued
relationships with a broad range of OEMs of electronic products. The Company has
sought to shift its product focus away from manufacturers of personal computers
and to focus instead on manufacturers of computer peripheral equipment and other
electronics products where the Company believes the margins of profit are
higher. Manufacturers of these products typically require lower volumes but are
not subject to the commodity price pressure that exists in the personal computer
market. The Company believes that, with

                                       8
<PAGE>

improved production management, higher margins can be obtained on shorter
production runs because these circumstances lower the portion of the customer's
price that is represented by the components in the product units. The Company's
lower labor and engineering costs should thus provide an opportunity to offer
competitive prices while retaining enough margin to allow the Company to
generate positive cash flow. Achieving positive cash flow from operations would
make the Company more attractive to existing and potential customers and should
give the Company a better opportunity to reach a settlement with its Indian
banks that will allow the Company to continue to operate.

         It is crucial to the Company's prospects that it develop a level of
revenues from customers offering sufficient opportunities for positive profit
margins that will allow the Company to be cash flow positive on an operating
basis and to report operating income. As of January 31, 2000, this has not yet
occurred. In addition to the production management, inventory management,
customer satisfaction and new business development risks the Company faces in
achieving its objectives, the Company also faces national and world economy
risks, industry downturn risks and specific customer well-being risks. For
example, the economic crisis that began affecting some countries in Asia in 1997
was helpful to some of the Company's competitors and harmful to some of its
customers. It also disrupted the supply of raw materials from the affected
countries. Further, the slump in business of the Company's largest customer in
the first half of fiscal 1998, caused this customer to cut back its orders by
approximately 50% from projected levels for the fourth quarter of fiscal 1998.
For fiscal 1999, sales to this customer were approximately 17% less than sales
for fiscal 1998, and since December 1999 through March 31, 2000, no new orders
have been received.

POWER SUPPLIES

         Manufacturers of certain types of electronic equipment do not design
their products for use with alternating current such as that provided by an
electrical outlet. Instead, these products require the use of a power supply to
convert the alternating current to a direct current of appropriate voltage.
Power supplies are either linear or switching. Linear power supplies are
relatively simple devices having low electromagnetic interference and low output
ripple, but tend to be large and heavy because the necessary voltage conversion
transformers must operate at below the frequency (50 or 60 Hz) of the
alternating input current. The scientific and engineering communities use linear
power supplies in technical instrumentation where output regulation is extremely
important and size and efficiency are of less importance. Linear power supplies
also tend to produce a great amount of heat, making them undesirable for many
industrial and consumer applications. The Company sells an insignificant number
of linear power supplies.

         Switching power supplies are more complex devices than linear power
supplies and produce greater power in relation to their physical size, described
as greater "power density". In a switching power supply, alternating current is
first converted to direct current by diodes, and is then reconverted to much
higher frequency alternating current before being passed through the voltage
conversion transformers, which are therefore much smaller and permit greater
power densities. A switching power supply typically consists of a printed
circuit board with the appropriate electronic components, an on/off switch, and
leads or cables to send power to the electronic equipment. Switching power
supplies are much more efficient and therefore produce less heat than equally
powerful linear power supplies, making them preferable for a wide array of
applications. The Company manufactures three types of switching power supply
products--closed frame, open frame and A/C adapters.

         CLOSED FRAME. Closed frame power supplies have a case enclosing the
power supply components and are used in product applications where end users may
need access to the interior of the product and in products requiring greater
power than can safely be provided by open frame power supplies. Encasing the
power supply minimizes the risk of injury to end users from the high voltage
components of the power supply. The Company manufactures closed frame power
supplies ranging from 25 watts to 350 watts, with the 200 watt units accounting
for a majority of sales. The Company offers these power supplies in a variety of
configurations and works closely with its customers to modify or customize the
power supplies to adapt them to particular customer specifications. Sales of
closed frame power supplies accounted for approximately 21% of the Company's
sales in fiscal 1998 and approximately 10% in fiscal 1999.

         OPEN FRAME. Open frame power supplies are not enclosed in a case. They
tend to be used in

                                       9
<PAGE>

products that require lower wattage and that are unlikely to be opened by end
users. For example, open frame power supplies are used in tape and disk drives,
monitors, printers and other peripheral equipment. Open frame power supplies
tend to be more standardized in configuration than closed frame power supplies.
The Company produces open frame power supplies ranging from 25 watts to 200
watts, with the 65 watt unit accounting for a majority of sales. Open frame
power supplies accounted for approximately 2% of the Company's sales in fiscal
1998 and approximately 17% in fiscal 1999.

         A/C ADAPTERS. A/C adapters are external power supplies that connect
electronic products to wall outlets. A/C adapters are used with a variety of
products, including notebook and portable computers. The A/C adapters produced
by the Company contain a battery recharging circuit. The Company produces A/C
adapters ranging from 15 watts to 70 watts, with the 15 watt unit accounting for
a majority of sales. Sales of A/C adapters accounted for approximately 75% of
the Company's sales in fiscal 1998 and approximately 72% in fiscal 1999.

         Parts and License Fees. In addition to providing customers with
finished power supplies, the Company has also been selling parts on hand in its
efforts to reduce inventories. This activity, along with minor import license
fees, accounted for 2% of the Company's sales in fiscal 1998 and approximately
1% in fiscal 1999.

MANUFACTURING

         The manufacture of power supplies is labor intensive and will probably
remain so in the near future. It necessarily involves relatively large, heavy,
or irregularly shaped items such as transformers, heat sinks and high voltage
capacitors. Additionally, the manufacture of transformers involves winding wire
in complex sequences, involving four or more winding and insulating steps. For
this reason, the Company has chosen to manufacture its products in India. The
Company believes that the work force there is inexpensive and relatively
well-educated. Moreover, because the Company's management team has extensive
experience in manufacturing computer components in India, the Company believes
that it is well positioned to benefit from the advantages India provides. That
being said, however, the largest component of the production cost of a power
supply is the materials that go into each unit. The Company's financial
condition has made advantageous relationships with the Company's vendors
unavailable, which has decreased the Company's ability to produce low-priced
products.

         The Company uses its low-cost labor to manufacture magnetics, to
configure sheet metal, and to mold plastic components, which enables the Company
to respond quickly to design changes and reduces the risk of shipping delays.
Other purchased parts and raw materials are normally readily available and are
supplied to the Company under normal circumstances by various vendors, each of
which must be approved by the Company's OEM customers. Many of the Company's
purchased components are supplied by manufacturers located in the United States,
Japan and Taiwan.

         Through fiscal 1996, the Company saw a continuation of price increases
and a tightening of supply for purchased parts (components) and other raw
material due to a steep growth in world-wide demand for personal computers and
other consumer electronics products, as well as the continued strength of the
Japanese yen relative to the U.S. dollar. The Company was more severely impacted
by this occurrence than its competitors due to its financial condition and
extended deferral of payments to its vendors. This unfavorable situation, with
its vendors in an already tight market, caused the Company to pay premium costs
and to receive poor delivery schedules. The overall effect of these
circumstances further reduced the Company's gross margins in an already low
margin OEM product and adversely affected the Company's ability to meet its
committed delivery schedules to its customers.

         During fiscal 1996, the Company placed significant emphasis on
improving the control of its manufacturing functions. Because of the significant
decline in production in fiscal 1997, primary emphasis was placed on controlling
variable expenses and liquidating existing inventories. The Company's strategy
to redirect its business to supplying the needs of lower-volume OEMs that offer
higher margins means that, if those customers can be secured, the Company would
be manufacturing a larger number of product runs, each representing a smaller
number of units. As a consequence, effective management of the

                                       10
<PAGE>

manufacturing and inventory control processes is critical if these lower-volume
production runs are to generate acceptable gross margins. Since fiscal 1997, the
Company began to perform on this strategy. The Company achieved general market
acceptance of its product design and production capabilities and began shipping
A/C adapters and closed frame power supplies during the second and third
quarters of fiscal 1998 to newly acquired customers. Unfortunately, the market
for certain customer products began to diminish and other customers began
transitioning to new product designs. The Company's limited resources did not
allow it to react promptly to those changes, which caused a significant slowdown
in sales during the final quarter of fiscal 1998. During fiscal 1999, sales
remained soft. However, the Company believes that there is opportunity in the
marketplace to obtain orders from newly acquired customers, that offer
acceptable margins. Because of an evolving market and the Company's lack of
capital resources, there is no assurance that sales volume can be built up to
levels that would provide the Company with positive cash flow.

PRODUCT DESIGN AND DEVELOPMENT

         In fiscal 1999, the Company maintained engineering departments in Simi
Valley, California and Mumbai, India. The California engineering department is
principally responsible for the design development of the Company's products,
while the Mumbai department is principally responsible for production and
manufacturing engineering of the Company's products. The Company's product
design development team in California work closely with the OEMs to design
products that meet each OEM's specifications for power, price, size, and
quality. Typically such a design development will start with one of the
Company's standard power supplies, which will then be modified to meet the OEM's
requirements. Prototypes of the OEM's product are often sent to the Company so
that the Company may test the effectiveness of its proposed power supply
design.

         Concurrently with the power supply design, the Company's engineers in
Bombay develop the manufacturing processes the Company will need for production.
These engineers remain in close communication with the Company's design
development team and with the OEM's engineering team, typically through the use
of electronic mail. Throughout the design process, the manufacturing
applications team advises both the design development team and the customer
concerning the probable cost, speed of manufacture and ease of quality control
of various proposed designs and modifications, suggesting alternatives where
appropriate. Development of a prototype typically takes approximately eight
weeks from the start of the design process.

         Once the OEM approves the product design, the Company subjects a
prototype to those testing procedures necessary to obtain product safety
certification by Underwriters Laboratories, Canadian Standards Association,
T.U.V. Rhineland, and Nemko. This process normally takes approximately twelve
weeks. However, the Company has acquired approval to act as a self-certifying
laboratory for Nemko, which facilitates the approval process by all these safety
agencies, thus reducing the typical approval time required by four to six weeks.
The Company's self-certification laboratory, located in Simi Valley, California,
is subject to regular inspection and review by each agency. Customers typically
pay all new product safety certification costs as incurred.

QUALITY CONTROL

         Personal computers, computer peripheral devices and other electronic
equipment are precision products requiring each component to function as
specified. The Company endeavors to manufacture power supplies to exacting
standards and with very high reliability to minimize both return/replacement
costs and inspection time.

         In pursuit of quality control, the Company tests each product
individually at a number of points in the manufacturing process. Completed
products are subjected to load tests and burn-ins prior to being packaged and
shipped. Because the Company currently inserts electronic components into
printed circuit boards manually, one of the more prevalent problems discovered
during testing is erroneous component placement. The Company has improved its
manufacturing efficiency by installing pin-in-hole equipment, which automates
the process of inserting small electronic components into circuit boards. By
fiscal 1996, the Company had installed a sufficient number of pin-in-hole units
to accommodate its entire production

                                       11
<PAGE>


capacity. This automated process has eliminated most misplacement defects. The
Company's manufacturing facilities are regularly inspected by its OEM customers.

         Despite the Company's best efforts, quality problems do arise from time
to time. For example, during fiscal 1999 the Company discovered that the plastic
housing on approximately 150,000 external power supplies is subject to
separation at unacceptably high levels. In these situations, the Company works
closely with its customer to determine a course of action and to implement it
quickly in order to reduce the risk of a widespread product failure and to
resolve the matter while most of the units in question are still in the
distribution channel.

MARKETING AND SALES

         The Company markets and sells its products directly to OEMs of
computers, peripherals, and other electronic equipment primarily through its
U.S.-based sales force and manufacturing representatives and distributors with
an established network of contacts in the electronics industry. The Company
attends several industry trade shows, including the annual COMDEX trade show, as
a means of developing customer relationships. Once the Company has established
contact with an OEM, the Company targets several departments of the OEM for its
sales efforts, usually giving special emphasis to the development engineering
department, but with emphasis also on the purchasing and quality control
departments.

         The Company's strategy for marketing and sales during fiscal 1999 was,
and continues to be, directed at lower-volume OEM manufacturers that require
more engineering support and smaller product volumes, but offer significantly
higher prices and attractive gross margins. At present, the Company has a
limited number of customers that fit this profile and there can be no assurance
that it will be able to obtain a sufficient number of this type of customer or
orders for a sufficient number of units to implement its strategy effectively.
Further, because of the Company's precarious financial condition, potential
customers have expressed concern regarding the Company's ability to provide
on-going support for their product programs.

         Historically, the Company has marketed a small portion of its products
through distributors. Since fiscal 1998, the Company has retained a contract
sales representative, entered into private label agreements, and engaged
manufacturing sales representatives and distributors. As of January 31, 2000,
sales resulting from these arrangements accounted for approximately 20% of the
Company's sales volume.

COMPETITION

         The electronics industry is extremely competitive, with price and
quality being critical competitive factors. In recent years, price competition
has become particularly intense. This competition has affected vendors to OEMs,
including those that manufacture power supplies. The Company believes that the
primary competitive factors in the power supply industry are price, reliability,
and the ability to timely modify and deliver products to meet customer
requirements. The Company believes that it has improved its operations
management so that it has the ability to compete favorably with respect to these
factors. The Company's lack of financial resources, however, has been a major
constraint on its ability to compete effectively with its major competitors,
many of whom are larger and better financed than the Company. The Company's
inability to satisfy the financial strength and stability requirements IBM
applied to its vendors was in large part responsible for the loss of IBM as a
customer in fiscal 1997. Further, the largest portion of the Company's cost in
producing a power supply is the cost of materials. The Company's financial
condition has made it very difficult for the Company to obtain advantageous
arrangements with its raw material suppliers, which reduces the Company's
ability to compete effectively.

         The Company's principal competitors also conduct many of their
manufacturing operations in countries with low-cost labor forces, but the
Company believes its labor costs are competitive. Given India's large population
and high unemployment rate, the Company does not anticipate rising labor costs.
Moreover, the Company believes it benefits from a relatively well-educated labor
force as well as a local process and manufacturing engineering group, thereby
minimizing the need for costly expatriate engineers. Although the Company has
automated a portion of its manufacturing processes, even with the installation

                                       12
<PAGE>

of the pin-in-hole equipment, the manufacture of power supplies will continue to
be labor intensive, requiring the use of skilled workers to install transformers
and other components and to wind transformer coils.

         The Company's primary competitors in the OEM power supply market
include Astec America, Inc., Delta, API, and Lite-on, all of which are privately
held and based overseas. Additionally, management believes that many personal
computer OEMs that currently purchase power supplies from third party vendors
continue to have the capability to manufacture their own power supplies
in-house.

BACKLOG

         Although the Company's OEM customers provide estimated annual power
supply requirements, the Company usually purchases supplies and manufactures its
products only against firm orders. Arrangements between the Company and its OEM
customers typically provide that the customer must furnish the Company with a
purchase order for the customer's power supply requirements for a three-month
period. The customer must purchase 100% of the power supplies ordered for
delivery within one month of the date of the purchase order. The customer may
increase or decrease the number of power supplies estimated to be purchased in
the second and third months from the date of the purchase order by no more than
20% and 30%, respectively. The Company's ability to enforce these provisions,
however, is limited by the good faith and the market power of the customer. The
Company's non-OEM customer orders also generally provide for delivery within a
period of three months or less. Therefore, the Company operates without a
significant backlog, relying primarily on monthly purchase orders. At January
31, 2000, firm backlog was estimated at approximately $1,000,000. Iomega, the
Company's primary customer since fiscal 1997, had only minor orders in backlog
at January 31, 2000, and has not provided the Company with any new orders since
December 1999.

PATENTS AND PROPRIETARY RIGHTS

         The Company believes that patent rights are not significant in the
power supply industry. Generally the industry's customer base is more responsive
to suppliers that promptly meet its changing needs than to those that offer
proprietary technology.

WARRANTIES

         The Company generally provides its customers with a one-year warranty
on its power supplies and, through the end of fiscal 1999, had not experienced
any significant warranty claims, except for the following event. In the fourth
quarter of fiscal 1999, a major customer discovered a housing separation issue
on one model of external power supply manufactured by the Company. As of January
31, 2000, the Company has spent approximately $50,000 making modifications to
all the affected units. No assurances can be given as to future warranty claim
levels. The Company ordinarily repairs or replaces defective goods.

EMPLOYEES

         At March 31, 1999, the Company employed 10 people in its U.S.
operations, including two in engineering and operations, and eight in
administration and finance. Approximately 116 people were employed in India,
including 73 in manufacturing and planning, 32 in design engineering, and 11 in
administration. There were no part-time employees. The Company also contracts
for the services of workers through independent agencies in India. At the end of
fiscal 1999, there were 379 agency workers who were engaged primarily in
manufacturing and planning.

         As of January 31, 2000, full-time employees in the United States and
India were 13 and 114, respectively, and there were no part-time employees.

         None of the Company's employees are represented by a union, and
management believes the Company's relations with employees are good. Moreover,
under Indian Law, businesses operating in the

                                       13
<PAGE>

duty free export processing zones are considered public utilities, which
restricts the rights of their workers to strike.

RISK FACTORS

SIGNIFICANT LOSSES

         The Company has incurred significant losses from operations over the
past four years. It lost its two largest historical customers in fiscal 1996 and
1997, and has been unsuccessful in rebuilding its base of customer
relationships. In addition to the promissory note of $2,298,000 (including
accrued interest) outstanding under the terms of the Recapitalization Plan, the
Company has additional loan balances of $2,353,000, including accrued interest,
with the Tandon family, as of January 31, 2000. The only unrelated party
financing available to the Company has been a receivables factoring arrangement
at unfavorable rates. The Company has been unsuccessful in its efforts over the
last four fiscal years to reestablish its business at levels approaching
financial breakeven or approaching positive cash flow. At March 31, 1999, the
Company had a shareholders' deficit of $16,737,000. Without a material change in
the economics of the Company's business and the viability of its financial
position, the Company's prospects as a going concern are limited.

INDIA AND INTERNATIONAL ISSUES

         The Company manufactures all of its products in India and sells to OEMs
that operate in a number of foreign countries, including countries in Asia. The
Company procures a significant amount of raw materials and components from
vendors located in Asia. The economic uncertainties that have affected Asia over
the last several years have seriously disrupted the Company's ability to deal
with its vendors and its customers on an advantageous basis. These events have
had an adverse effect on the Company's ability to procure raw materials and
components, manufacture its products, and export its products from India to
customers in the United States and Western Europe. In general, foreign
manufacturing and sales are subject to risks, including changes in governmental
policy, economic disruptions, transportation delays and interruptions, political
turmoil, protective labor laws, currency restrictions, and the imposition of
tariffs and import/export controls. Any disruption of the Company's activities,
for example because of international economic sanctions against India, tensions
between India and Pakistan, economic uncertainties affecting Japan, Korea and
other Asian nations, or political unrest in Indonesia, could adversely affect
the Company. The Company's products are not currently subject to any duties upon
import to the United States or other countries to which the Company ships. Any
change in this duty-free status, as a result, for example, of economic
sanctions, could adversely affect the Company.

DEBT IN INDIA

         As of January 31, 2000, the Company owed its Indian lenders
approximately $11,000,000. While the Company is attempting to restructure its
Indian debt, the amount of debt and the cost of servicing that debt is beyond
the Company's capability to afford at its current level of operations. If the
Company is not able to generate sufficient levels of revenue and positive cash
flow from sales to existing and new customers to service its debt, it is within
the power of the Indian lenders to seize virtually all of Ultra Tek's assets in
India. Further, the level of debt has been a major impediment to disposition of
the Company, the sale of Ultra Tek, a business combination, or other
restructuring that could change the fundamental prospects of the Company.
Because the Company imports a good portion of its raw materials and components
into India and exports virtually all of its sales from India, the availability
of letter of credit and letter of guarantee facilities and of a positive working
relationship with its lenders is more important to the Company than to
businesses not so dependent upon international transactions. While the Company's
Indian lenders have continued to work with the Company, there can be no
assurance that they will continue to do so in the future.

AFFILIATE CONTROL

         As of January 31, 2000, the Tandon family beneficially owned
approximately 48% of the

                                       14
<PAGE>

Common Stock and has, to a substantial extent, the ability to effectively
control substantially all matters requiring approval by the shareholders of the
Company. Such matters could include the election of members of the Board of
Directors, proxy contests, mergers or the sale of substantially all the assets
of the Company, tender offers, open market purchase programs or other
transactions that could give shareholders of the Company the opportunity to
realize a premium over the then-prevailing market price for their shares of the
Common Stock.

SHORT PRODUCT LIFE CYCLES

         The personal computer industry in general, and the market for products
made by the Company's OEM customers in particular, is characterized by rapidly
changing technology, evolving industry standards, frequent new product
introductions, and intense price competition, resulting in short product life
cycles and regular reductions of unit average selling prices over the life of
personal computer products. Products produced by the Company's OEM customers
typically have a life cycle of eight to twelve months and dictate the Company's
product life cycles. Changes in demand for personal computers, computer
peripherals and other electronic products, or other negative factors affecting
the electronics industry in general, or any of the Company's OEM customers in
particular (including, for example, the recent downturn in the business of
Iomega, the Company's largest customer in fiscal 1999), have had in the past and
in the future could have a material adverse effect on the Company. The Company's
financial position makes it less able than most of its competitors to deal
effectively with these issues or to withstand the economic hardships they may
entail.

ITEM 2            PROPERTIES

         The Company currently rents on a month-to-month basis its 7,000 square
foot California facility for $4,750 per month, including utilities, from SDJ
Partners, a related entity. A previous lease was renewed on January 1, 1997,
amended July 1, 1997 and expired December 31, 1999. Ultra Tek leases an
aggregate of 83,325 square feet of manufacturing space in an SDF in SEEPZ from
the Indian government under five-year leases expiring at various dates though
December 31, 2000. The Indian government typically renews such leases absent
unusual circumstances. Monthly rent for Ultra Tek's SEEPZ facilities aggregates
approximately $3,400, but is subject to change at will by the Indian government.

ITEM 3            LEGAL PROCEEDINGS

         During fiscal 1995, the Company's importing of computer components for
final assembly and sale into the domestic tariff area ("DTA") of India (i.e.,
outside the export processing zone) came under investigation by the Indian
customs authorities. Subsequently, inventories of $1,088,000 (47,447,000 Indian
rupees) were seized by the authorities. On May 30, 1995, the authorities issued
a notice to the Company alleging misdeclaration of purported imports of complete
computer systems as imports of computer system components. The notice called
upon the Company to explain why the authorities should not (a) confiscate all
the goods so imported, (b) levy additional duty of $1,121,000 (48,885,000 Indian
rupees) on the goods already sold into the DTA, and (c) take penal action
against the Company under the law. The Company has paid an advance of $700,000,
included in cost of goods sold in its fiscal 1995 financial statements, against
customs duty that may ultimately be levied by the authorities. During fiscal
1996, the authorities released the inventories seized earlier.

         In September 1997, the Indian customs authorities issued a "show cause"
notice alleging that Ultra Tek had not provided valid explanations for shortages
of raw material in its inventories. The notice called upon the Company to
explain why the authorities should not (a) impose duty of $590,000 (25,725,000
Indian rupees) leviable on imported components which were alleged not accounted
for in the terms of bond executed, (b) why penal action should not be initiated
against the Company, and (c) why a penalty equal to the duty held to be
leviable, $590,000 (25,725,000 Indian rupees), in respect of unaccounted goods
should not be imposed.

         In fiscal 1997, the Company came under investigation by the Indian
Department of Revenue Intelligence ("DRI") in connection with the import and
export of certain components and goods used in the

                                       15
<PAGE>

manufacture of power supplies and customer returns. The investigation focused on
the alleged discrepancy noted between the physical stock records and books in
respect of the work-in-process inventory at March 31, 1996 and 1997, and
customer returned product at March 31, 1992 through March 31, 1997. In May 1998,
the DRI issued a "show cause" notice requesting that the Company explain why the
DRI should not impose duties of $590,000 (25,720,000 Indian rupees). Penalties
relating to the investigation, if any, have not yet been determined.

         The aggregate of threatened duties and penalties to the Company is
approximately $2,442,000 (106,474,000 Indian rupees), using the Indian rupee
translation rate at January 31, 2000. The Company is contesting the allegations
of the authorities and the outcomes of all of these matters are uncertain.
Accordingly, no provisions for any losses that may ultimately result have been
made in the Company's financial statements. In addition, penal action under
Indian law, which the Company believes is very unlikely, could result in
possible monetary fines of up to approximately $16,897,000 at January 31, 2000.

ITEM 4            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted to a vote of the Company's shareholders during
the fourth quarter of the fiscal year ended March 31, 1999.

                                     PART II

ITEM 5            MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS

STOCK PRICE DATA

         The Company's Common Stock is traded in the over-the-counter market
under the symbol "CRTSE". On March 31, 1999, the closing bid price for the
Company's Common Stock was $.04. The following sets forth the high and low bid
prices for the Common Stock over the two most recent fiscal years. These prices
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.


       FISCAL QUARTER                                      HIGH          LOW

       1999 Fourth quarter                               $0.109       $0.047
       1999 Third quarter                                   N/A        0.016
       1999 Second quarter                                0.016        0.016
       1999 First quarter                                 0.031        0.016

       FISCAL QUARTER                                      HIGH          LOW

       1998 Fourth quarter                               $0.031       $0.031
       1998 Third quarter                                 0.047        0.031
       1998 Second quarter                                0.094        0.031
       1998 First quarter                                 0.219        0.047

         The approximate number of holders of record of the Company's Common
Stock on January 31, 2000 was 63. The Company has not paid dividends on its
Common Stock and has no present intention of doing so in the foreseeable future.
Instead, the Company intends to utilize its cash resources in the operation of
its business.

                                       16
<PAGE>

ITEM 6            SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>


                                                                  Years Ended March 31,
                                                   1995        1996         1997         1998        1999
                                                --------------------------------------------------------------
SUMMARY OF OPERATIONS:                                      (in thousands except share data)
<S>                                          <C>           <C>        <C>             <C>          <C>
Net sales                                     $ 24,539      $16,814      $  2,568       $ 4,581      $3,935
Net income (loss)                              (13,308)      (4,890)      (12,627)       (3,700)        113
Net income (loss) per share                      (2.99)       (1.10)        (2.84)         (.70)        .02

</TABLE>

<TABLE>
<CAPTION>

                                                                     As of March 31,
                                                   1995        1996         1997         1998        1999
                                                --------------------------------------------------------------
BALANCE SHEET DATA:                                                  (in thousands)
<S>                                          <C>           <C>        <C>             <C>          <C>
Working capital                               $  2,589      $(2,282)      $(12,489)    $(15,383)  $(14,766)
Total assets                                    22,649       14,483          4,155        2,527      2,048
Long-term debt                                     856          934            ---          ---        ---
Minority interest                                2,599        2,599          2,599        2,599      2,599
Total shareholders' equity (deficit)             3,355       (2,010)       (14,168)     (17,317)   (16,737)
</TABLE>

         In reviewing this data, please refer to the more detailed financial
information disclosed pursuant to Item 8 "Financial Statements and Supplementary
Data." Please also refer to the discussions in Item 7 "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Item 3 "Legal
Proceedings."

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

GENERAL

         Since commencing operations in February 1991, the Company has engaged
in the marketing of power supplies to personal computer and peripheral equipment
OEMs and to distributors of standard power supply products. During the fiscal
year ended March 31, 1992, the Company entered into its first high volume OEM
sales arrangement. Prior to fiscal 1993, during which it was acquired by the
Company, Ultra Tek sold power supplies primarily to Tandon Corporation or Tandon
Associates for use in personal computers and peripheral equipment manufactured
by companies affiliated with the Tandon family. During fiscal 1993, the
Company's net sales increased significantly, due primarily to the commencement
of shipments to Compaq. The Company began shipments to IBM in the second quarter
of the fiscal year ended March 31, 1994. Net sales continued to increase in
fiscal 1994 primarily due to additional sales to Compaq, new sales to IBM, and
continued development of additional OEM customers.

         The Company's cash flow was significantly impacted by Compaq's product
rejection that took place during the third quarter of fiscal 1995. Those returns
cost the Company $4,200,000 in uncollected accounts receivable as a result of
the issuance of credits for the rejected units and $2,200,000 relating to other
direct costs, as well as additional costs for transportation, unutilized
capacity, business interruption, reorganization, inventory carrying costs, and
interest on short-term borrowings.

         In fiscal 1996, the Company implemented a program to overcome its cash
difficulties through inventory reduction, organizational restructuring, price
increases, volume growth and more favorable payment terms from the Company's
existing customers. While a number of elements of that program were successfully
implemented, the Company has not been able to generate anticipated amounts of
cash from inventory reduction and, through the end of fiscal 1999, was
unsuccessful in its efforts to resell the reworked rejected product. In
addition, the Company has not yet been successful in significantly building its
sales volumes to its existing customers or to new customers. While the Company
has implemented a

                                       17
<PAGE>

plan to transition its business focus to power supplies for products that are
less price sensitive and therefore provide a greater opportunity to develop
positive profit margins, it has not been successful in doing so. There can be no
assurance that the Company will have sufficient resources to carry out its plan
in the future or, even if the resources are available, that the Company will be
able to successfully develop the necessary customer relationships and obtain
enough product contracts to allow it to continue to operate its business. As of
December 31, 1999, the Company has received orders for power supplies that yield
an average gross margin of approximately 28%. Assuming gross margins remain at
that level, it is estimated that the Company will need to achieve approximately
$7 million in annual net sales to achieve a break-even from operations (before
interest expense and other income/expense).

         In fiscal 1997, the Tandon family invested $2,000,000 as part of the
Recapitalization Plan. As of March 31, 1999, the Company had borrowed, net of
repayments, an additional $2,234,000 from the Tandon family. This cash has
allowed the Company to continue operations, but aside from related party
financing, the Company currently has no viable source of financing to continue
its current revenue growth and achieve profitable operations and positive cash
flow. At January 31, 2000, the outstanding balance, including accrued interest,
due the Tandon family was $2,353,000, exclusive of the $2,298,000 demand
promissory note payable under the Recapitalization Plan.

         In light of these facts, and the operating results discussed below, the
Company continues to look at opportunities to obtain additional capital from
sources outside the Company and at transactions that would change its
fundamental structure.

RESULTS OF OPERATIONS

         Results of operations for fiscal 1999 have been determined assuming
that the Company will continue as a going concern. However, the Company is
currently facing significant issues which raise substantial doubt that the
Company has the ability to continue as a going concern. These issues are
summarized as follows:

     -    At March 31, 1999, the Company had outstanding amounts due to four
          separate Indian lenders in the amount of $9,579,000, all of which are
          currently in default. Of that amount, three banks have issued notices
          to the Company demanding immediate repayment of $8,617,000. At January
          31, 2000, the amounts due to the four separate Indian lenders was
          approximately $11,000,000, including accrued interest. The Company has
          insufficient funds available to repay the lenders. Because the Indian
          debt is secured by the assets of Ultra Tek, alternatives available to
          the lenders include closing the operations of Ultra Tek and forcing
          Ultra Tek into liquidation.

    -     In fiscal 1995, Ultra Tek's importing of computer components into
          India came under investigation by the Indian customs authorities. In
          September 1997, the Indian customs authorities issued a separate "show
          cause" notice alleging that Ultra Tek has not provided valid
          explanations for shortages of imported raw material in its
          inventories. In fiscal 1997, Ultra Tek came under the investigation of
          the Indian Department of Revenue Intelligence concerning the import
          and export of certain components used in the manufacture of power
          supplies and customer returned product. Subsequently, a separate "show
          cause" notice was issued requesting explanation of why duties should
          not be assessed. The above governmental allegations and investigations
          could lead to additional duty and penalties being assessed against
          Ultra Tek in the amount of approximately $2,500,000 (106,474,000
          Indian rupees), using the Indian rupee translation rate at January 31,
          1999. In addition, penal action under Indian law, which the Company
          believes is very unlikely, could result in possible monetary fines of
          up to approximately $16,897,000. The Company is contesting these
          allegations, but currently, the matters remain unresolved and the
          outcomes uncertain.

                                       18
<PAGE>


    -     The Company has incurred significant losses from operations over the
          past four years; has lost its two main historical customers, which has
          significantly impacted its revenues; and at March 31, 1999, had a
          shareholders' deficit of $16,737,000. During fiscal 2000, the Company
          continued to incur significant losses, and management has not
          successfully executed on its efforts to achieve profitable operations
          and positive cash flows. Outside of related party financing, the
          Company has identified no viable source of financing.

         Due to the significance of these factors in the Company's financial
statements at March 31, 1999, all assets have been stated at their estimated
realizable values. Costs of resolving the contingencies noted above or settling
amounts due to Indian banks or Company creditors have not been recorded as
management is currently unable to estimate these amounts. Accounts receivable
and inventories were valued at their subsequently realized amounts (inventories
at cost), and property, plant and equipment were valued based on estimates by
management and in accordance with the guidelines of Statement of Financial
Accounting Standards No. 121 "Accounting for Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" ("SFAS 121"). The estimated realizable
values and settlement amounts may be different from the proceeds ultimately
received or payments made.

         NET SALES. The Company records substantially all sales of finished
goods in the United States. Sales originating outside of the United States were
not material during fiscal 1997, 1998 and 1999. During fiscal 1997, 1998 and
1999, export sales from the United States were 11%, 12%, and 35% of total sales,
respectively, representing sales to foreign subsidiary companies of United
States companies located primarily in Europe and Asia. All product shipments to
fill customer orders are made from the Company's manufacturing facility in
India. Until manufacturing was discontinued there in the third quarter of fiscal
1998, certain components were produced at the Company's facility in Sri Lanka
and sent to India for the final assembly of the finished power supply units.

         Sales in fiscal 1997 were $2,568,000, an 85% decrease from fiscal 1996
sales. The Company essentially lost its two major customers, Compaq and IBM,
during fiscal 1997. The primary reasons were the fiscal 1995 product rejection
by Compaq and the Company's ineligibility for new programs under IBM's vendor
selection criteria. Net sales to Compaq and IBM were 19% and 36% of net sales,
respectively, with Nexar, a new customer, accounting for an additional 21%.

         Fiscal 1998 sales were $4,581,000, a 78% increase over fiscal 1997
sales. This increase was due almost entirely to shipments to Iomega, a new
customer in fiscal 1998. Net sales to Iomega and Nexar were 65% and 15% of net
sales, respectively. There were no sales to Compaq or IBM.

         Sales in fiscal 1999 were $3,935,000, a 14% decrease from fiscal 1998
sales. This decrease was due almost entirely to the Company's decision to no
longer do business with Nexar, and a decline in the volume of shipments to
Iomega. These declines in sales were partially offset by sales to one new
customer and increased sales to two existing customers, none of which were major
customers of the Company during fiscal 1999.

         GROSS PROFIT. Gross loss for fiscal 1997 was $4,537,000 compared to a
gross profit of $45,000 in fiscal 1996. As a consequence of not selling certain
inventory, including $1,300,000 (47,447,000 Indian rupees using the translation
rate at March 31, 1997) of inventory of computers previously seized and
subsequently released by Indian customs authorities, and declining sales volumes
in fiscal 1997, the Company reduced the carrying value of inventories by
$4,325,000, which charge is included in cost of goods sold. Partially offsetting
the negative impact of this charge on gross profit was the sale of 38,000
reworked units for $628,000, which had been written off after the fiscal 1995
product rejection. The only cost associated with these sales was $144,000 for
rework.

         Gross profit for fiscal 1998 was $249,000 compared to a gross loss of
$4,537,000 in fiscal 1997. The improved gross margin in fiscal 1998 over fiscal
1997 is due primarily to the reduction in carrying value of inventories in
fiscal 1997 in the amount of $4,325,000, which charge was included in cost of
goods sold. The Company achieved only a slight gross profit on increased sales
because of low overall gross margins and unabsorbed production overhead due to
excess plant capacity and inefficient production runs

                                       19
<PAGE>

resulting from small monthly orders.

         Fiscal 1999 gross profit was $1,301,000 compared to $249,000 in fiscal
1998. The improved gross margin in fiscal 1999 on a 14% decrease in sales is due
to significantly improved sales margins resulting in part from the use of slow
moving inventory, the carrying value of which was reduced in fiscal 1997, a
reduction in production start-up costs, and a decrease in unabsorbed indirect
manufacturing overhead due to cost reductions and the sale of the manufacturing
facility in Sri Lanka in the fourth quarter of fiscal 1998.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $3,348,000 in fiscal 1997 compared to $3,435,000 in
fiscal 1996. These expenses did not change significantly from the prior year due
principally to cost containment actions and employee attrition in the United
States, India and Sri Lanka.

         Selling, general and administrative expenses were $2,246,000 in fiscal
1998 compared to $3,348,000 in fiscal 1997, or a 33% decrease. This decrease
resulted from several factors, the most significant of which includes a
restructure of the Company's marketing strategy that resulted in the use of
sales representatives and the elimination of salaried employees, and other cost
containment actions in fiscal 1998, as well as the nonrecurrence of expenses
relating to the Recapitalization Plan in fiscal 1997.

         Selling, general and administrative expenses were $1,525,000 in fiscal
1999 compared to $2,246,000 for fiscal 1998. This 32% decrease in expenses was
due to the Company's continuing actions to reduce costs, the most significant of
which were the decision to restructure its marketing strategy resulting in the
use of sales representatives, the elimination of salaried employees, and the
sale of the Sri Lanka subsidiary.

         RESEARCH AND DEVELOPMENT. Research and development expenses were
$865,000 in fiscal 1997 compared to $430,000 in fiscal 1996. This 101% increase
resulted from the establishment of a research and product development facility
in Scotland during the second quarter of fiscal 1997. This action was part of
the Company's strategy to develop higher gross margin power supplies for OEMs of
electronic equipment other than personal computers.

         Research and development expenses were $976,000 in fiscal 1998 compared
to $865,000 in fiscal 1997. The 13% increase in these expenses was due to the
Company's research and product development facility in Scotland being fully
staffed for the first nine months of fiscal 1998. During the prior year, the
facility began staffing during the second fiscal quarter and did not become
fully operational until the final quarter of fiscal 1997. Because of a lack of
funding, this facility was discontinued in December 1997, and the research and
development engineering was relocated to the United States at a much reduced
level.

         Research and development expenses for fiscal 1999 were $341,000
compared to $976,000 in fiscal 1998, a 65% decrease. This significant decrease
resulted from the Company's decision during the third quarter of fiscal 1998 to
shut down its product research and development facility in Scotland and relocate
the research and product engineering to Simi Valley, California at a
significantly reduced level.

         PROPERTY, PLANT AND EQUIPMENT IMPAIRMENT LOSS. Because of the
continuing decline in sales volume and the difficulties encountered during
fiscal 1997 by the Company in implementing its marketing strategies, it was
determined that an impairment of the value of property, plant and equipment may
exist. Accordingly, a charge of $2,495,000 was taken as of March 31, 1997 to
record the assets at estimated current value.

         EXTINGUISHMENT OF ACCOUNTS PAYABLE. In fiscal 1999, the Company decided
to credit income for certain accounts payable aggregating $2,174,000 for which
no demand has been made against the Company. Creditors owed on those accounts
became barred in fiscal 1999 under the Indian Limitation Act from making any
future demand on the Company to make payment on these obligations.

         INTEREST EXPENSE. Interest expense in fiscal 1997 was $1,585,000
compared to $1,253,000 in

                                       20
<PAGE>

fiscal 1996. The 26% increase is primarily due to the higher interest rates
being charged by the Company's Indian banks on short-term debt that is currently
delinquent.

         Interest expense in fiscal 1998 was $1,998,000 compared to $1,585,000
in fiscal 1997. The 26% increase over the prior year was due to interest accrued
on the demand promissory note payable to the Tandon family under the
Recapitalization Plan, entered into in March 1997, interest on other related
party financing that was implemented in order to continue the operations of the
Company, and accounts receivable factoring with a United States bank at monthly
interest rates ranging from 2.25% to 1.75%, plus administration fees ranging
from 1% to .75%.

         Interest expense in fiscal 1999 was $1,828,000 compared to $1,998,000
in fiscal 1998. The 9% decrease was due principally to the change in the value
of the Indian rupee, which affected the translation of interest expense on the
debt in India.

         LITIGATION SETTLEMENT. During the third quarter of fiscal 1995, the
Company experienced a product rejection by Compaq, its then largest customer,
which cost the Company $4,200,000 of lost accounts receivable directly related
to the sales of the rejected units and $2,200,000 related to other direct costs
stemming from the rejections. The Company engaged the services of an outside
contractor to address the customer complaint and rework the rejected product.
After rework, the product was again rejected as a result, in the Company's view,
of poor workmanship in the rework process. In fiscal 1996, the Company filed a
complaint against the rework contractor alleging, among other things, that the
contractor improperly performed rework services and thereby breached the
contract with the Company. The Company sought damages in excess of $3,000,000.
Also, in fiscal 1996, the contractor filed a cross-complaint against the Company
alleging breach of contract by the Company for failure to pay for rework
services rendered. The contractor sought $108,000 and unspecified damages. In
April 1996, the Company settled the lawsuits with the contractor. Under the
agreement terms, the Company received a cash settlement of $592,000, of which
$163,000 related to the reimbursement of legal expenses incurred in fiscal 1996.
Accordingly, $163,000 was recorded as a reduction of legal expenses in fiscal
1996 and the balance of the settlement was recorded in fiscal 1997.

         OTHER INCOME. Other income of $224,000 in fiscal 1997 increased
approximately 22% over the prior year, due to product development fees and scrap
sales in fiscal 1997, offset in part by a decline in interest income on lower
restricted cash deposits required to secure letters of credit and letters of
guarantee.

         For fiscal 1998, substantially all of the Company's other income of
$285,000, an increase of 27% over 1997, resulted from the sale of property and
equipment, which had been recorded at estimated fair value in fiscal 1997, as
determined by applying SFAS 121.

         Other income in fiscal 1999 was $164,000 or approximately 42% lower
than the prior year. This decrease was due to a significant reduction in the
sale of property and equipment.

         NET INCOME (LOSS). For fiscal 1997, 1998 and 1999 the Company's net
income (loss) was $(12,627,000), $(3,700,000), and $113,000, respectively.
Before giving effect to the $2,174,000 extinguishment of accounts payable in
fiscal 1999, net income (loss) from operations was ($2,061,000).

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES

         During fiscal 1997 the Company used cash of $2,461,000 in operating
activities compared to $1,461,000 of cash used in fiscal 1996. While the fiscal
1997 balance sheet includes non-cash reserves to record assets at estimated
realizable values pursuant to the guidelines of SFAS 121, actual cash of
$1,046,000 was generated by sale of inventories and of $838,000 through
collection of accounts receivable. Cash was also generated by reducing prepaid
expenses and other current assets by $459,000 and increasing accrued liabilities
by $416,000.

                                       21
<PAGE>

         During fiscal 1998, the Company used cash of $4,194,000 in operating
activities compared to $2,461,000 of cash used in fiscal 1997. Unlike fiscal
1997, there were no substantial non-cash valuation reserves recorded for
inventories and property, plant and equipment. In addition, cash was consumed by
an increase in accounts receivable resulting from an increase in sales volume.

         During fiscal 1999, cash used in operating activities was $1,947,000
compared to $4,194,000 of cash used in fiscal 1998. This reduction in cash
consumed in fiscal 1999 was due primarily to a reduction in the net loss to
$2,061,000 (before giving effect to a $2,174,000 extinguishment of accounts
payable) for the current year versus a loss of $3,700,000 in fiscal 1998. During
fiscal 1999, the Company also generated cash from a decrease in accounts
receivable because of the decline in sales, whereas in fiscal 1998, there was an
increase in accounts receivable resulting from an increase in sales.

INVESTING ACTIVITIES

         In fiscal 1997, cash generated by investing activities was $795,000,
compared to $92,000 in cash used by investing activities in fiscal 1996. This
increase in cash was due to the decrease in restricted cash as a consequence of
the continuing decline in manufacturing and shipping activity in India, which
resulted in lower restricted cash deposits required to secure letters of credit
and letters of guarantee. As of March 31, 1997 there was virtually no activity
in India requiring deposits on letters of credit and letters of guarantee.
Purchases of property, plant and equipment were also severely curtailed.

         In fiscal 1998, cash provided by investing activities was $319,000
compared to $795,000 provided in fiscal 1997. The primary source of this cash in
fiscal 1998 was from the sale of property and equipment.

         In fiscal 1999, $78,000 in cash was used in investing activities,
compared to $319,000 in cash being provided during fiscal 1998. As previously
stated, the fiscal 1998 cash resulted from the sale of property, plant and
equipment, whereas such sales during fiscal 1999 were significantly reduced.

FINANCING ACTIVITIES

         Cash provided by financing activities for fiscal year 1997 was
$2,003,000 compared to $760,000 in fiscal 1996. This increase is due principally
to the infusion of $2,000,000 in cash during fiscal 1997 by the Tandon family
pursuant to the terms of the Recapitalization Plan. This Plan resulted in the
issuance of 850,000 Common Stock shares and a note payable in the amount of
$1,873,000, which is convertible into an additional 12,483,333 shares of Common
Stock upon approval of the Recapitalization Plan by the Company's shareholders.

         Cash provided by financing activities for fiscal 1998 was $3,168,000
compared to $2,003,000 in fiscal 1997. This increase was due principally to
loans received from Tandon Associates, Inc., a related party, to provide the
Company with working capital and to the transfer of bank debt as a result of the
sale of the Company's subsidiary in Sri Lanka. During November and December
1997, the Company factored a total of $713,000 of its accounts receivable to
provide working capital. Subsequently, the borrowings were repaid and there was
no outstanding balance at March 31, 1998.

         Cash provided by financing activities for fiscal 1999 was $2,300,000
compared to $3,168,000 in fiscal 1998. This decrease is due primarily to the
reduction in working capital loans being made to the Company by related party
entities.

         In summary, the Company has suffered a considerable decline in cash
flow over the last three years for the aforementioned reasons. At March 31,
1999, the Company had negative working capital of $14,766,000 and a retained
deficit of $16,737,000. While current actions are being taken to implement a
viable operating plan to increase sales, renegotiate the terms of short-term
obligations with the Indian banks, and raise additional capital, there can be no
assurance that any of these actions will be successfully completed.

         Since March 31, 1996, the Company has been negotiating with its Indian
banks for an extension of

                                       22
<PAGE>

payment terms of existing debt as well as an extension of credit to support
planned production and sales. In July 1997, the banks' legal counsel issued
notices to Ultra Tek and the Company calling upon them to pay the outstanding
amounts due. The banks have not initiated any legal action against the Company
for non-payment of the amounts due, since Ultra Tek has been declared a sick
company by the Board of Industrial and Financial Reconstruction ("BIFR") of the
Government of India.

         The BIFR appointed an Operating Agency ("OA") to examine the Company's
viability and prepare a viability study report. Accordingly, the Company
prepared a draft rehabilitation proposal, which was submitted to the OA. The OA
reviewed the proposal and forwarded the same to the BIFR along with the minutes
of a joint meeting between the Indian banks and the Company convened by the OA
in March 1999. Based on the minutes of the joint meeting, the BIFR prepared its
Draft Rehabilitation Scheme and advised all concerned inviting
suggestions/objections to the scheme. The Draft Scheme is subject to ongoing
discussion and envisages restructuring of existing debts (unpaid principal
amount of $5,129,047 to banks and financial institutions as of September 30,
1999), conversion of simple interest into a Funded Interest Term Loan amounting
to $2,132,801 as of September 30, 1999, infusion of funds by way of contribution
by the Tandon family amounting to $938,527 which has already occurred, and
additional working capital facilities from the Indian banks of $1,642,421, which
would enable the Company to generate enough resources to continue its operations
and repay the restructured debts over a period of time. The BIFR held a hearing
on August 16, 1999 and after hearing all interested parties, has advised the
Company and the banks to discuss further and modify the Draft Scheme to take
into account the various points made at the hearing. The BIFR also instructed
the OA to conduct joint meetings with the banks and the Company and to forward a
modified scheme. The Company is in the process of discussing with the banks ways
to modify the Draft Scheme to take into account a potential conversion of
compound interest and liquidated damages into redeemable preference stock.
Essentially all of the Ultra Tek short-term borrowing agreements and facilities
are secured by the assets of Ultra Tek and are covered by corporate guarantees
from the Company, Fairplay Group, Inc. ("Fairplay"), an intermediate holding
company, and Tandon Associates, a related party. They are also covered by the
personal guarantee of the Chairman and Managing Director of Ultra Tek for the
amount of approximately $10,030,000.

         Subsequent to the fiscal year ended March 31, 1999, the Company
continues to experience negative cash flow as a result of continuing losses and
sporadic ramp-ups of production in India. In order to obtain the necessary cash
to operate, the Company has a factoring agreement with a United States bank at a
monthly financing fee of 1.75% and an administration fee applied to the total of
factored accounts of .75%. Under the terms of the agreement, the bank may
purchase up to $1,333,333 in accounts receivable from the Company in return for
cash equal to 80% of the face value of the purchased accounts receivable. At
January 31, 2000, the Company had factored accounts receivable invoices totaling
$240,000.

YEAR 2000 COMPLIANCE

         The Company has in place a plan to address Year 2000 readiness of its
internal computer systems and key suppliers. It is not anticipated that the
Company's products will affect its customers' Year 2000 compliance. The Year
2000 readiness team consists entirely of internal personnel, as the Company's
lack of resources does not permit the use of external consultants. The team's
activities are directed to ensure that there will be no material adverse effects
on the Company's business operations and that transactions with customers and
suppliers will not be materially interrupted by the advent of Year 2000. The
Company estimates costs to assure Year 2000 compliance will approximate $50,000.
It is expected that some of these costs will be financed, to the extent that
suppliers offer financing arrangements, and the balance will come either from
cash from operations or accounts receivable financing.

         The Company has upgraded its accounting and telecommunications software
to ensure Year 2000 compliance in the United States. In India, personal
computers have been upgraded to allow for software upgrades.

         While the Company believes its planning efforts have been adequate to
address known Year 2000 concerns, there can be no assurance that all internal
systems, as well as those of third parties upon which the Company relies, will
be Year 2000 compliant on a timely basis and will not have a material affect on

                                       23
<PAGE>

the Company's operations, especially those located in a third-world country. As
of January 31, 2000 the Company has not experienced any significant computer
failures due to the advent of Year 2000.


ITEM 8            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Information required by this item is included in Part IV of this
report.


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

         On October 5, 1998, the Company received the written resignation of
Arthur Andersen LLP, as its auditors, effective immediately.

         For each of the fiscal years ended March 31, 1996 and March 31, 1997,
the accountant's report on the financial statements was qualified as to the
uncertainty of the Company's ability to continue as a going concern. This
uncertainty was based on (1) the Company's default on payments due lenders in
the amount of $8,306,000, as of March 31, 1997 (2) Indian Customs and Department
of Revenue Intelligence allegations and investigations that could lead to
additional duty and penalties against the Company's Indian subsidiary in an
amount then believed to be approximately $8,400,000 (since revised to
approximately $2,442,000) and possible penal action, (3) continuing significant
losses from operations, which resulted in a shareholder deficit of $14,168,000
at March 31, 1997 and (4) a lack of a viable source of financing, other than
from a related party.

         Because of the resignation of the Company's former auditors, the
Company engaged Farber & Hass LLP as its new independent accountants. This
engagement for the audit of the financial statements for the fiscal year ended
March 31, 1998, was effective October 8, 1998.

         For the same reasons referred to above, the accountant's reports on the
Company's financial statements for the fiscal year ended March 31, 1998 and 1999
were qualified as to the uncertainty of the Company's ability to continue as a
going concern.

         The Audit Committee of the Board of Directors was advised of the former
accountant's resignation and approved the engagement of the new independent
accountant, Farber & Hass LLP, on October 8, 1998.


                                       24

<PAGE>


                                    PART III

ITEM 10           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

             The following table sets forth certain information concerning each
person who is an executive officer, director or significant employee of the
Company:
<TABLE>
<CAPTION>

NAME                                             AGE              POSITION
----                                             ---              --------
<S>                                            <C>              <C>
J.L. Tandon                                       50              Chairman,  Chief  Executive  Officer  and
                                                                  Director
M.L. Tandon                                       60              Chairman of the board of directors of
                                                                  Ultra Tek, the Company's manufacturing
                                                                  subsidiary
Naren Bansal                                      43              President and Chief Operating Officer
Harvey A. Marsh                                   61              Chief  Financial  Officer,  Secretary and
                                                                  Director
R.D. Middlebrook, Ph.D.                           70              Director*
Robert Sherburne                                  79              Director*

</TABLE>

     *Member  of  the  Audit  Committee,  Compensation  Committee,  Subsidiary
Securities  Committee  and Independent Directors Committee

         J. L. Tandon has been Chief Executive Officer and a director of the
Company since February 1991 and served as President from February 1991 to April
1995, and again from November 1997 to October 1999. On October 11, 1996, J.L.
Tandon was elected Chief Financial Officer of the Company and served in that
position until September 1998. From December 1978 to July 1993, J. L. Tandon was
President of Tandon Associates, an affiliate of the Company. From March 1992 to
August 1993, J. L. Tandon was President of Tantec, Inc., an affiliated company.
From 1983 to present, J. L. Tandon has been President and a director of Clady
International Corporation, Fairplay and Lunenburg S. A., all affiliated
companies. J. L. Tandon is M. L. Tandon's brother.

         M. L. Tandon served as a director of the Company from August 1993
through April 1995. M. L. Tandon has been a director and Chairman of Ultra Tek,
a subsidiary of the Company, since October 1985. From June 1988 to March 1995,
M.L. Tandon was Managing Director of Ultra Tek. M. L. Tandon was Managing
Director of Tandon Motors P. Ltd., an affiliated company, from June 1982 to
August 1989. M. L. Tandon is J. L. Tandon's brother.

         Naren Bansal became President and Chief Operating Officer of the
Company on October 15, 1999. Mr. Bansal has been an employee of the Company
since 1990 and most recently held the position Vice President, Operations and
Sales.

         Harvey A. Marsh became Vice President, Chief Financial Officer,
Secretary and director in September 1998. From October 1996 to April 1998,
Mr. Marsh acted as a financial consultant to the Company and other Tandon
affiliated companies and joined the Company as an employee in April 1998. From
January 1993 to June 1996, Mr. Marsh was Vice President, Finance and Chief
Financial Officer of FACT Retirement Services. Mr. Marsh is also a director of
Bender Growth Fund.

         R. D. Middlebrook, Ph.D. joined the Company as a director in
August 1993. From 1955 to present, Dr. Middlebrook has been a professor of
Electrical Engineering at California Institute of Technology.

         Robert Sherburne joined the Company as a director in August 1993. From
January 1992 to present, Mr. Sherburne has been a merger and acquisition
consultant. From November 1990 to December 1991, Mr. Sherburne was the Chairman
of the Board of Everest & Jennings International and remained a director until
December 1996.

         All directors are elected annually and serve until the next annual
meeting of shareholders or until

                                       25
<PAGE>

the election and qualification of their successors. Executive officers of the
Company are elected by and serve at the discretion of the Board of Directors.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Naren Bansal became President of the Company on October 21, 1999, and a
Form 3 was not filed on Mr. Bansal's behalf on a timely basis.

ITEM 11    EXECUTIVE COMPENSATION

COMPENSATION

             The following table sets forth information concerning the annual
and long-term compensation for services in all capacities to the Company paid or
accrued by the Company to the Chief Executive Officer and to each of the four
other most highly compensated officers of the Company for each of the fiscal
years in the three-year period ended March 31, 1999.

<TABLE>
<CAPTION>


                           SUMMARY COMPENSATION TABLE



                                                                        Long-Term Compensation
                                                                   ---------------------------------
                                         Annual Compensation               Awards           Payouts
                                   ------------------------------  --------------------    ---------
                                                                               Securities
                                                                    Restricted Underlying
                                                      Other Annual   Stock       Options/    LTIP      All Other
  Name and Principal         Fiscal   Salary   Bonus  Compensation   Awards       SARs      Payouts   Compensation
      Positions               Year   (1) ($)    ($)       (2) ($)      ($)        (#)         ($)          ($)
  ------------------         -----   --------  -----  ------------  ---------  ----------  --------   ------------
<S>                     <C>         <C>        <C>    <C>           <C>        <C>         <C>        <C>
J.L. Tandon                  1999     198,000    0       15,355         0         ---          0           ---
  President, Chief           1998     198,000    0       22,676         0         ---          0           ---
  Executive Officer          1997     198,000    0       22,282         0         ---          0           ---
  and Chief Financial
  Officer
Harvey A. Marsh(3)           1999     68,938     0         0            0         ---          0           ---
  Chief Financial
  Officer
David B. Barton(4)           1997     51,230     0         0            0         ---          0           ---
  Senior Vice President,
  Sales and Marketing
Michael D. Thomas(4)         1997    151,661     0       60,000         0         ---          0           ---
  President, Chief                               0
  Operating Officer &
  Chief Financial
  Officer
Prakash Thanky(5)            1998     118,200    0         0            0         ---          0           ---
  President                  1997     117,000    0         0            0         ---          0           ---

</TABLE>


(1)  Includes compensation deferred at the officer's election. J.L. Tandon has
     deferred compensation of $96,500 in fiscal 1999.

(2)  Represents supplemental income bonus, automobile allowance, club dues and
     payments made toward medical and group life insurance on behalf of
     executive officers.

(3)  Mr. Marsh became an employee of the Company on April 6, 1998 and was
     appointed Chief Financial Officer on September 8, 1998.

(4)  Messrs. Barton and Thomas resigned from the Company in July 1996.

(5)  Mr. Thanky resigned from the Company in November 1997. His salary includes
     vacation and salary continuation pay through December 31, 1997.

                                       26

<PAGE>

EMPLOYMENT AGREEMENT

         In April 1995, the Company hired Michael D. Thomas as President, Chief
Operating Officer, Chief Financial Officer, and Secretary at an annual salary of
$105,000 pursuant to a letter agreement. Additionally, the Company agreed to
grant Mr. Thomas an option to purchase 100,000 shares of Common Stock which was
to vest over five years and have a ten-year term. The Company also agreed to
grant Mr. Thomas an additional option to purchase 50,000 shares which would vest
and become exercisable if the Company's fiscal 1996 performance substantively
conformed to a financial and cash management plan prepared by Mr. Thomas and
approved by the Board of Directors. However, these performance targets were not
met and, consequently, Mr. Thomas' right to purchase the additional 50,000
shares did not vest.

         Mr. Thomas' agreement called for him to receive deferred compensation
at the end of each fiscal year he remained an executive of the Company in the
amount of $50,000. Mr. Thomas also was entitled to an annual bonus, not to
exceed $50,000, if the Company had met certain sales and profitability targets.
Those targets were not met for fiscal 1996 and no bonus was paid. Mr. Thomas'
letter agreement with the Company had no term and was terminable by either party
at any time. Mr. Thomas resigned in July 1996 and received six months of
severance pay and the pro rata portion of his deferred compensation. His 100,000
share stock option expired without exercise.

CHANGE IN CONTROL ARRANGEMENTS

         Under the terms of his employment letter agreement, Mr. Thomas was
entitled to treat a termination of his employment in connection with a change in
control of the Company as a termination without cause. His agreement terminated
upon his resignation in July 1996.

         Under the terms of the Company's 1994 Stock Option Plan (the "1994
Plan"), upon a change in control or liquidation of the Company, the Compensation
Committee, in its discretion, may allow each person holding an option (who did
not receive a replacement stock option from the Company's successor entity) to
exercise that option without regard to its vesting provisions.

DIRECTOR COMPENSATION

         Each outside director receives $1,500 for each board meeting attended
and $1,000 for each committee meeting attended; provided, however, that if two
committee meetings are held on the same day, outside directors in attendance
only receive $1,000. In August 1993, the Board of Directors established an Audit
Committee, a Compensation Committee and a Subsidiary Securities Committee, each
comprised of the outside directors.

         In September 1993, the Board of Directors granted each outside director
an option to purchase 20,000 shares of Common Stock at the initial offering
price to the public of $7.00. The Company's policy through fiscal 1996 was to
issue its outside directors options to purchase 20,000 shares upon election to
the Board and options to purchase 5,000 additional shares after each two years
of subsequent service. A proposal to adopt a formula grant amendment to the
Company's 1994 Plan implementing this policy was approved by the Company's
shareholders at the 1995 Annual Meeting of Shareholders. All such grants would
be at fair market value. No options have been granted since fiscal 1996.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         None.

1994 STOCK OPTION PLAN

         Key employees, including Directors who are key employees, who are
chosen by the Compensation Committee are eligible to participate in the 1994
Plan. Messrs. J. L. Tandon and M. L. Tandon have agreed that they will not be
eligible to receive grants of options under the 1994 Plan.

                                       27
<PAGE>

         There were no stock options granted or exercised during the fiscal year
ended March 31, 1999, nor were there any unexercised stock options at March 31,
1999, held by any executive officer.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

         The Compensation Committee of the Board for fiscal 1999 was comprised
of Messrs. Middlebrook and Sherburne. The Compensation Committee establishes the
general compensation policies of the Company, establishes the compensation plans
and specific compensation levels for executive officers, and administers the
1994 Plan.

         As required by Commission rules designated to enhance the disclosure of
the Company's executive compensation policies and practices, the following is
the Compensation Committee's report submitted to the Board of Directors
addressing the compensation of the Company's executive officers for fiscal 1999.

                      REPORT OF THE COMPENSATION COMMITTEE

         The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, establishes the compensation
plans, establishes the specific compensation of Mr. J.L. Tandon, the Company's
Chief Executive officer, reviews the Chief Executive Officer's recommendations
as to the specific compensation levels for the other executive officers, and
administers the Company's incentive plans. The Compensation Committee is
composed of two independent non-employee directors who have no interlocking
relationships as defined by the Securities and Exchange Commission.

         COMPENSATION POLICY AND PROGRAMS. The Compensation Committee's
responsibility is to ensure that a strong and direct link exists among
shareholder values, Company performance, and executive compensation through its
oversight of the design and implementation of a sound compensation program that
will attract and retain highly qualified personnel. Compensation programs are
intended to complement the Company's short- and long-term business objectives
and to focus executive efforts on the fulfillment of these objectives.

         The Compensation Committee has conducted a full review of the Company's
executive compensation program and will repeat this review annually. It is the
Compensation Committee's practice to establish target levels of compensation for
senior officers consistent with that of companies comparable in size and
complexity to the Company, as well as companies that are direct business
competitors of the Company. Actual compensation of the Company's executive
officers is subject to increase or decrease by the Compensation Committee from
targeted levels according to the Company's overall performance and the
individual's efforts and contributions. A significant portion of executive
compensation is directly related to the Company's financial performance and is
therefore at risk. Total compensation for the Company's senior management is
composed of base salary, near-term incentive compensation in the form of
bonuses, and long-term incentive compensation in the form of stock options. The
Compensation Committee retains the discretion to adjust the formula for certain
items of compensation so long as total compensation reflects overall corporate
performance and individual achievement.

         BASE SALARY. In establishing base salary levels for senior officer
positions, the Compensation Committee and Mr. J.L. Tandon consider levels of
compensation at other similarly situated companies and at direct competitors,
levels of responsibility, and internal issues of consistency and fairness. In
determining the base salary of a particular executive, the Compensation
Committee and Mr. J.L. Tandon consider individual performance, including the
accomplishment of short- and long-term objectives, and various subjective
criteria including initiative, contribution to overall corporate performance,
and leadership ability.

         In the fiscal year ended March 31, 1999, the annual base salary of Mr.
J.L. Tandon was unchanged at $198,000, a level determined to be appropriate by
the Compensation Committee based on comparable chief executive salaries of a
peer group of companies and of direct competitors referred to above, the

                                       28
<PAGE>

Company's overall performance in the prior fiscal year, and Mr. J.L. Tandon's
efforts and contributions to the Company.

         BONUSES.  The Company's executive officers are eligible for annual
bonuses based upon recommendations made by Mr. J.L. Tandon (as to the other
executive officers) and the Compensation Committee (as to Mr. J.L. Tandon) as to
individual performance and the Company's achievement of certain operating
results.

         Amounts of individual awards are based principally upon the results of
the Company's financial performance during the prior fiscal year. The amount of
awards for senior officers are within guidelines established by the Compensation
Committee and Mr. J.L. Tandon as a result of their review of total compensation
for senior management of peer companies and competitors. The actual amount
awarded, within these guidelines, will be determined principally by the
Compensation Committee's and Mr. J.L. Tandon's assessment of the individual's
contribution to the Company's overall financial performance. Consideration is
also given to factors such as the individual's successful completion of a
special project, any significant increase or decrease in the level of the
participant's executive responsibility and the Compensation Committee's and Mr.
J.L. Tandon's evaluation of the individual's overall efforts and ability to
discharge the responsibilities of his position. In fiscal 1999, in light of the
Company's financial results, no bonuses were paid to any of the executive
officers named in the Summary Compensation Table.

         Mr. J.L. Tandon received no bonus with respect to the March 31, 1999
fiscal year. In determining bonuses in future years, the Compensation Committee
will give particular consideration to the following factors: (1) the Company's
progress toward break-even financial results and sustainable positive cash flow;
(2) the narrowing of losses and the trend toward positive earnings growth of the
Company during the fiscal year; (3) the efforts and contributions made by Mr.
J.L. Tandon in discharging his responsibilities as Chief Executive Officer; and
(4) the efforts and contributions by the other executives of the Company.

         STOCK OPTIONS. During fiscal 1994, the Compensation Committee adopted
the Company's 1994 Stock Option Plan. The purpose of the 1994 Plan is to provide
incentives and reward the contributions of key employees and officers for the
achievement of long-term Company performance, as measured by earnings per share
and the market value of the Common Stock. The Compensation Committee, working
with the Option Committee (which, prior to being disbanded in fiscal 1996,
consisted of Mr. J.L. Tandon and Mr. M.L. Tandon), set guidelines for the number
and terms of stock option awards based on factors similar to those considered
with respect to the other components of the Company's compensation program,
including comparison with the practices of peer group companies and direct
competitors. In the event of unsatisfactory corporate performance, the
Compensation Committee may decide not to award stock options or restricted stock
in any given fiscal year although exceptions to this policy may be made for
individuals who have assumed substantially greater responsibilities and other
similar factors. The awards under the 1994 Plan are designed to align the
interests of executives with those of the shareholders. Generally, stock options
become exercisable in cumulative installments over a period of five years, but
the individual forfeits any installment that has not vested during the period of
his employment.

         In light of the Company's financial performance during fiscal 1998 and
1999, the Compensation Committee has tabled its review of any necessary
revisions to the Company's executive compensation policy or plans due to the
provisions of the Omnibus Budget Reconciliation Act of 1993. This legislation
amended Section 162 of the Internal Revenue Code by limiting to $1,000,000 the
deductibility of compensation paid to certain executives. The Company's 1994
Plan was amended by the Board of Directors to conform with new rules on Section
162 compliance and those amendments were approved at the Company's 1995 Annual
Meeting of Shareholders. It is the current policy of the Compensation Committee
to maximize, to the extent reasonably possible, the Company's ability to obtain
a corporate tax deduction for compensation paid to executive officers of the
Company to the extent consistent with the best interests of the Company and its
stockholders.

                                            THE COMPENSATION COMMITTEE
                                            R. D. Middlebrook, Ph.D.
                                            Robert Sherburne

                                       29

<PAGE>

                               COMPANY PERFORMANCE

         The following graph shows a comparison of cumulative total returns for
the Company, the NASDAQ Stock Market-U.S. Index, and a peer group index
comprised of the NASDAQ Computer Index (as described below) for the period
during which the Company's Common Stock has been registered under Section 12 of
the Exchange Act. The NASDAQ Computer Index includes approximately 170
companies, all of which are manufacturers of computer hardware or software. The
Company believes that the companies included in the NASDAQ Computer Index are
reasonably representative of companies in the Company's industry.


                  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
                           AMONG GOLDEN SYSTEMS, INC.,
                      THE NASDAQ STOCK MARKET (U.S.) INDEX
                   AND THE NASDAQ COMPUTER MANUFACTURER INDEX

                                     [GRAPH]

<TABLE>
<CAPTION>

                          Cumulative Total Return
----------------------------------------------------------------------------
         3/95        3/96         3/97        3/98        3/99         3/00
<S>                <C>          <C>         <C>         <C>          <C>


       100.00       53.85        23.08        4.92       13.54         9.85
       100.00      135.80       150.95      228.88      309.19       574.04
       100.00      153.72       167.92      297.18      589.61      1392.13
</TABLE>
<TABLE>
<CAPTION>
                                                                                             Begin:     3/31/1999
                                                                                        Period End:     3/31/2000
GOLDEN SYS INC                                                                                 End:     3/31/2000

                                       BEGINNING
              TRANSACTION   CLOSING      NO. OF     DIVIDEND    DIVIDEND      SHARES      ENDING     CUM. TOT.
    DATE*        TYPE       PRICE**    SHARES***    PER SHARE     PAID      REINVESTED    SHARES      RETURN
    -----     -----------   -------    ---------    ---------   --------    ----------    ------     ---------

<S>           <C>           <C>         <C>         <C>         <C>         <C>           <C>          <C>
    31-Mar-95    Begin      0.813       123.08                                            123.077      100.00

    31-Mar-96  Year End     0.438       123.08                                            123.077       53.85

    31-Mar-97  Year End     0.188       123.08                                            123.077       23.08

    31-Mar-98  Year End     0.040       123.08                                            123.077        4.92

    31-Mar-99  Year End     0.110       123.08                                            123.077       13.54

    31-Mar-00     End       0.080       123.08                                            123.077        9.85
</TABLE>

*   Specified ending dates or ex-dividends dates.
**  All Closing Prices and Dividends are adjusted for stock splits and stock
    dividends.
***'Begin Shares' based on $100 investment.


                                       30
<PAGE>


ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding the
beneficial ownership of the Company's capital stock as of January 31, 2000 by
(i) each person who is known by the Company to be the beneficial owner of more
than 5% of any class of the Company's capital stock, (ii) each Director, and
certain executive officers of the Company, individually, and (iii) all Directors
and executive officers as a group:
<TABLE>
<CAPTION>
                                                                    AMOUNT                PERCENT
                                                                 BENEFICIALLY                OF
              NAME OF BENEFICIAL OWNER (1)                          OWNED                   CLASS
              ----------------------------                          -----                   -----
<S>                                                              <C>                      <C>
              J.L. Tandon (2).................................       2,276,666  (3)          43.0  (3)
              Clady International Corporation ("Clady") (4)...       2,125,000               40.1
              D.L. Tandon (5).................................         141,666                2.7
              M.L. Tandon (6).................................               0                0.0
              S.L. Tandon (6).................................         141,666                2.7
              Naren Bansal (7)................................           7,500                  *
              Harvey A. Marsh.................................               0                  0
              R.D. Middlebrook, Ph.D. (8).....................          30,000                  *
              Robert Sherburne (8)............................          24,000                  *
              All executive  officers and directors as a group
              (five persons) (9)..............................       2,621,498               49.5
</TABLE>

----------------------------------
*Less than one percent
(1)  Except as otherwise indicated below, the persons named have sole voting
     power and investment power with respect to all shares of capital stock
     shown as beneficially owned by them, subject to community property laws
     where applicable.

(2)  The address for J. L. Tandon is 2125-C Madera Road, Simi Valley,
     California 93065.

(3)  Includes 2,125,000 shares owned by Clady, a Panamanian corporation of
     which J. L. Tandon is the President.

(4)  The address for Clady is c/o J. L. Tandon, 2125-C Madera Road, Simi Valley,
     California 93065.

(5)  D. L. Tandon is an officer and director of Clady. He expressly disclaims
     beneficial ownership of any shares owned by Clady for the purposes of
     Sections 13(d) and 13(g) of the Exchange Act.

(6)  M. L. Tandon and S. L. Tandon expressly disclaim beneficial ownership of
     any shares owned by Clady for the purposes of Section 13(d) and 13(g) under
     the Exchange Act.

(7)  Includes 7,500 shares issuable upon exercise of stock options excercisable.

(8)  Includes 24,000 shares issuable upon exercise of stock options exercisable
     within sixty days of January 31, 2000.

(9)  For purposes of this calculation, all shares beneficially owned by any
     member of the Tandon family are included in the amount beneficially owned.

                                       31
<PAGE>

ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Tandon family has been involved in the manufacture of a wide range
of personal computer components and of personal computers for many years. Since
its formation, the Company and its subsidiaries have been operated in
conjunction with other privately held operations of the Tandon family.

         In order to support the continuing operations of the Company, Tandon
Associates loaned the Company $1,525,000, net of repayments, during fiscal 1998.
The March 31, 1998 loan balance, including interest at 1% per month on the
average daily balance, was $1,607,000. The total due Tandon Associates,
including accrued interest, at March 31, 1999 was $1,334,000.
Payments on the loan balance during fiscal 1999 were $432,000.

         In fiscal 1997 the Company entered into a renewed lease agreement with
SDJ Partners, a general partnership, whose partners are certain members of the
Tandon family. The lease was for the Company's headquarters facility, which
includes office and warehouse space. The facility lease was at the cost of
comparable space at the time the lease was negotiated and utilities are charged
at $250 per month, which approximates estimated usage and cost. During fiscal
1998, SDJ Partners agreed to amend the lease agreement, which allowed the
Company to reduce the amount of leased space because of the contraction of its
business. On December 31, 1999, the lease expired and the Company is currently
renting space on a month-to-month basis. For fiscal 1999, total facilities cost
was $57,000.

Eastern Peripherals Ltd., a Tandon family-affiliated company that had shared
common facilities with and had purchased power supplies from Ultra Tek, owed
Ultra Tek $96,000 at March 31, 1998. Eastern Peripherals Ltd. ceased operations
in 1995, and since then has been liquidating its assets to pay its obligations
to Ultra Tek and other creditors. During fiscal 1999, it was determined that all
the assets of Eastern Peripherals Ltd. had been liquidated and that no further
payments would be forthcoming. Consequently, the balance due of $84,000 was
written off as being uncollectible.

During fiscal 1999, J.T. Holdings Pvt. Ltd. loaned $806,000 to the Company for
needed working capital. The loan is unsecured, payable on demand at an interest
rate of 15% per annum commencing April 1, 2000.

                                       32
<PAGE>

PART IV

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

         The following documents are filed as part of this report:

(a)      1.   Financial Statements:

              Reports of Independent Public Accountants

              Consolidated Balance Sheets as of March 31, 1998 and 1999:
                  Assets
                  Liabilities and Shareholders' Deficit

              Consolidated Statements of Operations for each of the three
                  years in the period ended March 31, 1999

              Consolidated Statements of Shareholders' Equity for each of the
                  three years in the period ended March 31, 1999

              Consolidated Statements of Cash Flows for each of the three years
                  in the period ended March 31, 1999

              Notes to Consolidated Financial Statements

         2.   Financial Statement Schedules:

              Reports of Independent Public Accountants on Supplemental Schedule
              Schedule II - Valuation and Qualifying Accounts for the three
              fiscal years ended March 31, 1999


              All other schedules are omitted because they are not applicable,
              not required, or the required information is shown in the
              Financial Statements or notes thereto.

         3.   Exhibits:

                  See Item 14(c) below.

 (b)     Reports on Form 8-K

         No reports on Form 8-K were filed during the last quarter of the fiscal
year ended March 31, 1999.

 (c)     Exhibits

         The exhibits listed on the accompanying index immediately following the
signature page are filed as part of this report.

(d)      Financial Statement Schedules

         See Item 14(a) above

                                       33
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on May 9, 2000.


                                                   GOLDEN SYSTEMS, INC.


                                            /s/ JAWAHAR L. TANDON
                                            -----------------------------------
                                                    Jawahar L. Tandon
                                            Chairman of the Board of Directors
                                               and Chief Executive Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates so indicated.
<TABLE>
<CAPTION>

               SIGNATURE                                    TITLE                           DATE
               ---------                                    -----                           ----
<S>                                       <C>                                             <C>
         /s/ JAWAHAR L. TANDON              Chairman of the Board of Directors and        May 9, 2000
         ----------------------                     Chief Executive Officer
           Jawahar L. Tandon                     (Principal Executive Officer)

          /s/ HARVEY A. MARSH              Vice President, Chief Financial Officer        May 9, 2000
         ----------------------           (Principal Financial Officer) and Director
            Harvey A. Marsh

         /s/ R. D. MIDDLEBROOK                             Director                       May 9, 2000
        -----------------------
           R.D. Middlebrook

         /s/ ROBERT SHERBURNE                              Director                       May 9, 2000
        -----------------------
           Robert Sherburne

</TABLE>

                                       34
<PAGE>

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

    EXHIBIT                                                                                  SEQUENTIAL
    NUMBER                             DESCRIPTION                                           PAGE NUMBER
    -------                            -----------                                           -----------
<S>               <C>                                                                        <C>
      3.1(1)      Restated Articles of Incorporation of the Company.......................
      3.2(1)      Bylaws of the Company, as amended to date...............................
     10.1(1)      Stock Exchange Agreement dated July 1, 1993 by and between the Company
                  and Lunenburg S.A. .....................................................
     10.2(1)      Stock Purchase and Sale Agreement dated July 1, 1993 by and between
                  Lunenburg S.A. and Clady International Corporation......................
     10.3(1)      Letter Agreement dated July 1, 1993 by and between Clady International
                  Corporation and the Company.............................................
     10.4(1)      Form of Lease by and between the President of India as landlord and
                  Ultra Tek Devices Ltd. as tenant........................................
     10.5(1)      Letter Agreement Sublease dated April 1, 1993 between Ultra Tek
                  Devices Ltd. and Eastern Peripherals Ltd. ..............................
     10.6(1)      Declaration  dated  September 7, 1993 by Advance Power Devices
                  Pvt. Ltd. ..............................................................
     10.7(1)      Letter of Credit in the  principal  amount of $320,000  dated August 20,
                  1993  issued by  American  Pacific  State Bank for the account of Golden
                  Systems, Inc. ..........................................................
     10.8(1)      Memorandum of Agreement  dated February 5, 1993 by and between Ultra Tek
                  Devices Ltd. as borrower and the Bank of India as lender................
     10.9(1)      Hypothecation  Agreement of Goods and Book Debts dated October 19, 1992,
                  by and  between  Ultra Tek Devices  Ltd. as borrower  and Canara Bank as
                  lender..................................................................
     10.10(1)     Hypothecation  Agreement of Goods and Book Debts dated October 19, 1993,
                  by and  between  Ultra Tek Devices  Ltd. as borrower  and Canara Bank as
                  lender..................................................................
     10.11(1)     Purchase  Agreement  dated May 25, 1993 by and between  Compaq Asia Pte.
                  Limited and the Company.................................................
     10.12(1)     Employment  Agreement dated as of July 23, 1993, between the Company and
                  Raymond V. Thomas.......................................................
     10.13(2)     Form of  Warrant  Agreement  dated  November  17,  1993  between  Golden
                  Systems,      Inc.      and     the      Representatives      of     the
                  Underwriters............................................................
     10.14(2)     License   Agreement,   dated  May  27,  1993,  between  Compaq  Computer
                  Corporation and the Company.............................................
     10.15(2)     Loan and Security  Agreement,  dated  October 7, 1993,  between  Silicon
                  Valley Bank and the Company.............................................
     10.16(3)     Agreement dated March 4, 1994, by and between the Board of Investment of
                  Sri Lanka and Golden Systems Lanka (Private) Limited....................
     10.17(4)     Stock  Purchase  Agreement,  dated  as of  March  31,  1997,  among  the
                  Company,  J. L. Tandon,  Clady and certain  members of management  (with
                  exhibits, including Subscription Agreement and Bridge Note).............
     21.1(1)      List of Subsidiaries....................................................
     27           Financial Data Schedule.................................................
</TABLE>

1  Incorporated by reference to the Company's Registration Statement on Form S-1
   dated September 9, 1993.
2  Incorporated by reference to Amendment No. 1 to the Company's Registration
   Statement on Form S-1 dated October 20, 1993.
3  Incorporated by reference to the Company's Form 10K for the Fiscal Year Ended
   March 31, 1994.
4  Incorporated by reference to the Company's Preliminary Proxy Materials, filed
   April 1, 1997.
-------------------------


                                       35
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
  ON SUPPLEMENTAL SCHEDULE


We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Golden Systems, Inc. and its subsidiaries
as of March 31, 1999 and for each of the two years then ended, and have issued
our qualified report thereon, qualified with respect to the Company's ability to
continue as a going concern, dated September 17, 1999. Our audit was made for
the purpose of forming an opinion on the statements taken as a whole. The
supplemental schedule is presented for purposes of complying with the Securities
and Exchange Commission's Rules and Regulations and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements, and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.


                                             /s/ FARBER & HASS LLP
                                             ----------------------------------
                                                  Farber & Hass LLP

Oxnard, California
September 17, 1999

                                       36
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                            ON SUPPLEMENTAL SCHEDULE



We have audited in accordance with generally accepted auditing standards, the
consolidated statement of operations, shareholders equity and cash flows of
Golden Systems, Inc. and subsidiaries for the year ended March 31, 1997, and
have issued our qualified report thereon, qualified with respect to the
Company's ability to continue as a going concern, dated June 2, 1998. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. Supplemental Schedule II is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements referred to
above, and, in our opinion, fairly states in all material respects the financial
data required to be set forth therein for the year ended March 31, 1997 in
relation to the basic financial statements taken as a whole.



                                             /s/ ARTHUR ANDERSEN LLP
                                             ----------------------------------
                                                  ARTHUR ANDERSEN LLP

Los Angeles, California
June 2, 1998

                                       37
<PAGE>

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                FOR THE YEARS ENDED MARCH 31, 1997, 1998 AND 1999
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                       ADDITIONS
                               BALANCE AT              CHARGED TO                                    BALANCE AT
      DESCRIPTION           BEGINNING OF YEAR            INCOME               DEDUCTIONS             END OF YEAR
      -----------           -----------------          ----------             ----------             -----------
<S>                         <C>                        <C>                    <C>                    <C>
   Inventory reserves

          1999                   $5,671                    5                      733                  $4,943

          1998                   $6,869                    60                    1,258                 $5,671

          1997                   $5,808                  4,325                   3,264                 $6,869

</TABLE>

                                       38


<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

<S>                                                                                                <C>
                                                                                                        Page

Reports of Independent Public Accountants                                                              F-2 - F-4

Consolidated Balance Sheets as of March 31, 1998 and 1999:
  Assets                                                                                               F-5
  Liabilities and Shareholders' Deficit                                                                F-6

Consolidated Statements of Operations for each of
  the three years in the period ended March 31, 1999                                                   F-7

Consolidated Statements of Shareholders' Equity (Deficit) for
  each of the three years in the period ended March 31, 1999                                           F-8

Consolidated Statements of Cash Flows for each of the
  three years in the period ended March 31, 1999                                                       F-9 and F-10

Notes to Consolidated Financial Statements                                                             F-11 - F-24


</TABLE>

                                      F-1


<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholders
  of Golden Systems, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Golden Systems,
Inc. and its subsidiaries (the "Company") as of March 31, 1998 and 1999 and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of the Company at March
31, 1998 and 1999 and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is currently facing significant financial and
operational issues which raise substantial doubt that the Company has the
ability to continue as a going concern. These issues are summarized in the
paragraphs that follow. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

At March 31, 1999, the Company had outstanding amounts due to four separate
Indian lenders in the amount of $9,579,000, all of which are currently in
default. Of that amount, three of the banks have issued notices to the Company
demanding immediate repayment of $8,617,000. The Company has insufficient funds
available to repay the banks. Because the Indian debt is secured by the assets
of the Company's subsidiary, Ultra Tek, alternatives available to the banks
include closing its operations and forcing it into liquidation (see Note 4). In
the event of such action by the lenders, liquidation of assets may result in
amounts less than amounts shown in the attached financial statements.

In fiscal 1995 and 1997, Ultra Tek came under investigation by the Indian custom
authorities and the Indian Department of Revenue Intelligence regarding alleged
improprieties in their inventories and in the import and export of certain
components. The government's allegations and investigations could lead to
additional duty and penalties being assessed against Ultra Tek in the amount of
$2,450,000 at September 17, 1999. In addition, penal action which could be taken
under Indian law could result in possible fines up to approximately $16,923,000
at September 17, 1999. The Company is contesting these allegations, but
currently, the matters are unresolved and the outcomes uncertain (see Note 11).

The Company has incurred significant losses from operations over the past four
years and has lost its two largest customers, which has significantly impacted
its revenues. At March 31, 1999, the Company had a shareholders' deficit of
$16,737,000. During fiscal 2000, the Company has continued to incur significant
losses and management has not successfully executed its efforts to achieve
profitable operations and positive cash flows. Outside of related party
financing, the Company has identified no viable source of financing.



                                                     /s/FARBER & HASS LLP
                                                     ----------------------
                                                       Farber & Hass LLP
Oxnard, California
September 17, 1999

                                      F-2
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To the Shareholders of
  Golden Systems, Inc.:


We have audited the consolidated statement of operations, shareholders' equity
(deficit) and cash flows of GOLDEN SYSTEMS, INC. (a California corporation) and
subsidiaries for the year ended March 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of their operations and their cash flows for
the year ended March 31, 1997, in conformity with accounting principles
generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is currently facing significant financial and
operational issues which raise substantial doubt that the Company has the
ability to continue as a going concern. These issues are summarized in the
paragraphs that follow. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

At March 31, 1997, the Company had outstanding amounts due to four separate
Indian lenders in the amount of $8,306,000, all of which are currently in
default. Of that amount, three of the banks have issued notices to the Company
demanding immediate repayment of $7,392,000. The Company has insufficient funds
available to repay the banks. Because the Indian debt is secured by the assets
of Ultra Tek, alternatives available to the banks include closing the operations
of Ultra Tek and forcing Ultra Tek into liquidation (see Notes 4 and 5). In the
event of such action by the lenders, liquidation of assets may result in amounts
less than amounts shown in the attached financial statements and related
inability to pay liabilities.

In fiscal 1995, Ultra Tek's importing of computer components into India came
under investigation by the Indian customs authorities. In September 1997, the
Indian customs authorities issued a separate "show cause" notice alleging that
Ultra Tek has not provided valid explanations for shortages of imported raw
material in its inventories. In fiscal 1997, Ultra Tek came under the
investigation of the Indian Department of Revenue Intelligence concerning the
import and export of certain components used in the manufacture of power
supplies. The above governmental allegations and investigations could lead to
additional duty and penalties being assessed against Ultra Tek in the amount of
$2.4 million and penal action being initiated against Ultra Tek estimated at
$16.9 million. Penalties relating to the Indian Department of Revenue
Intelligence investigation, if any, have not yet been finalized. The Company is
contesting these allegations, but currently, the matters are unresolved and the
outcomes uncertain (see Note 11).

                                      F-3

<PAGE>



The Company has incurred significant losses from operations and has lost major
customers, which has significantly impacted its revenues. Management has not
successfully executed on its efforts to achieve profitable operations and
positive cash flows.



                                                  /s/ ARTHUR ANDERSEN LLP
                                                  ---------------------------
                                                     ARTHUR ANDERSEN LLP



Los Angeles, California
June 2, 1998


                                      F-4
<PAGE>

                      GOLDEN SYSTEMS, INC. AND SUBSIDIARIES

            CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1998 AND 1999
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                     ASSETS

                                                                                           1999                    1998
                                                                                         --------               --------
<S>                                                                                     <C>                   <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                               $    79                $   117
  Restricted cash balances                                                                     12                     12
  Accounts receivable, net of allowance of
    $352 and $129 at March 31, 1998 and
    1999, respectively                                                                        871                    548
  Inventories                                                                                 790                    612
  Prepaid expenses and other current assets                                                   110                    131
                                                                                         --------               --------

          Total current assets                                                              1,862                  1,420
                                                                                         --------               --------


PROPERTY, PLANT AND EQUIPMENT, at estimated realizable value, net
  of accumulated depreciation and amortization                                                665                    628
                                                                                         --------               --------
                                                                                         $  2,527               $  2,048
                                                                                         ========               ========
</TABLE>

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


                                      F-5

<PAGE>


                      GOLDEN SYSTEMS, INC. AND SUBSIDIARIES

            CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1998 AND 1999
                                 (IN THOUSANDS)


                      LIABILITIES AND SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>


                                                                                            1998                  1999
                                                                                        -----------           ----------
<S>                                                                                   <C>                    <C>
CURRENT LIABILITIES:
  Short-term borrowings                                                                   $ 7,904              $  8,617
  Note payable under Recapitalization Plan                                                  2,023                 2,173
  Notes payable                                                                               834                   962
  Accounts payable                                                                          3,638                   885
  Accrued liabilities                                                                       1,012                 1,044
  Net amounts due to related parties                                                        1,834                 2,505
                                                                                        ---------              --------

         Total current liabilities                                                         17,245                16,186
                                                                                        ---------              --------

COMMITMENTS AND CONTINGENCIES (Note 11)

MINORITY INTEREST                                                                           2,599                 2,599

SHAREHOLDERS' DEFICIT:
  Common stock, no par value:
    Authorized--6,000 shares
    Issued and outstanding--5,300
      shares in 1998 and 1999                                                              16,405                16,405
  Retained deficit                                                                        (34,070)              (33,957)
  Cumulative translation adjustments                                                          348                   815
                                                                                        ---------              --------
                                                                                          (17,317)              (16,737)
                                                                                        ---------              --------
                                                                                        $   2,527              $  2,048
                                                                                        =========              ========
</TABLE>

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

                                      F-6
<PAGE>



                      GOLDEN SYSTEMS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE YEARS ENDED MARCH 31, 1997, 1998 AND 1999
                    (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                          1997             1998                 1999
                                                                      ----------        ----------           ----------
<S>                                                                 <C>               <C>                 <C>
NET SALES                                                                $ 2,568           $ 4,581              $ 3,935

COST OF GOODS SOLD
  Material, labor, overhead and direct cost                                2,780             4,272                2,634
  Inventory provisions                                                     4,325                60                    -
                                                                      ----------        ----------           ----------

                                                                           7,105             4,332                2,634
                                                                      ----------        ----------           ----------

         Gross profit (loss)                                              (4,537)              249                1,301
                                                                      -----------       ----------           ----------

OPERATING (INCOME) EXPENSES:
  Selling, general and administrative                                      3,348             2,246                1,525
  Research and development                                                   865               976                  341
  Property, plant and equipment impairment loss                            2,495                 -                    -
  Extinguishment of accounts payable                                           -                 -               (2,174)
                                                                      ----------        ----------           -----------

                                                                           6,708             3,222                 (308)
                                                                      ----------        ----------           -----------

         Income (loss) from operations                                   (11,245)           (2,973)               1,609
                                                                      -----------       -----------          ----------

OTHER INCOME (EXPENSE):
  Interest expense                                                        (1,585)           (1,998)              (1,828)
  Litigation settlement                                                      429                 -                    -
  Foreign currency transaction gains (losses)                               (452)              235                  169
  Gain on sales of subsidiary companies                                        -               752                    -
  Other income                                                               224               285                  164
                                                                      ----------        ----------           ----------

                                                                          (1,384)             (726)              (1,495)
                                                                      -----------       -----------          -----------

         Income (loss) before provision
           for income taxes                                              (12,629)           (3,699)                 114

PROVISION (BENEFIT) FOR INCOME TAXES                                          (2)                1                    1
                                                                      -----------       ----------           ----------

NET INCOME (LOSS)                                                       $(12,627)          $(3,700)             $   113
                                                                      ===========       ===========          ==========

BASIC INCOME (LOSS) PER COMMON SHARE                                     $(2.84)           $  (.70)              $  .02
                                                                      ===========       ===========          ==========

WEIGHTED AVERAGE NUMBER OF
  OUTSTANDING SHARES                                                       4,452             5,300                5,300
                                                                      ===========       ===========          ==========

</TABLE>


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

                                      F-7
<PAGE>
<TABLE>
<CAPTION>

                                                 GOLDEN SYSTEMS, INC. AND SUBSIDIARIES

                                       CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY/(DEFICIT)
                                            FOR THE YEARS ENDED MARCH 31, 1997, 1998 AND 1999
                                                             (IN THOUSANDS)

                                                                                    CUMULATIVE
                                       SHARES           COMMON       RETAINED       TRANSLATION
                                     OUTSTANDING         STOCK        DEFICIT       ADJUSTMENTS        TOTAL
                                     -----------        -------      --------       -----------        -----
<S>                                  <C>                <C>          <C>            <C>               <C>
BALANCE, March 31, 1996                    4,450        $16,278      $(17,743)            $(545)      $(2,010)
  Translation adjustments                    ---            ---           ---               342           342
  Issuance of Common Stock
    under Recapitalization Plan              850            127           ---               ---           127
  Net Loss                                   ---            ---       (12,627)              ---       (12,627)
                                        --------        -------       --------        ---------     ----------

BALANCE, March 31, 1997                    5,300         16,405       (30,370)             (203)      (14,168)
  Translation adjustments                    ---            ---           ---               551           551
  Net Loss                                   ---            ---        (3,700)              ---        (3,700)
                                        --------        -------       --------        ---------     ----------

BALANCE, March 31, 1998                    5,300         16,405       (34,070)              348       (17,317)
  Translation adjustments                    ---            ---           ---               467           467
  Net Income                                 ---            ---           113               ---           113
                                        --------        -------       -------         ---------     ---------

BALANCE, March 31, 1999                    5,300         $16,405      $(33,957)            $815      $(16,737)
                                        ========        ========     ==========       =========     =========
</TABLE>

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

                                      F-8
<PAGE>
<TABLE>
<CAPTION>

                                                 GOLDEN SYSTEMS, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           FOR THE YEARS ENDED MARCH 31, 1997, 1998 AND 1999
                                                             (IN THOUSANDS)

                                                                              1997                1998                1999
                                                                          ----------           ----------          -----------
<S>                                                                       <C>                  <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                        $(12,627)             $(3,700)           $   113
  Adjustments to reconcile net income (loss)
    to net cash used in
    operating activities:
      Depreciation                                                              452                  100                 79
      Property, plant & equipment impairment loss                             2,495                    -                  -
      Provision for losses on accounts
        receivable                                                              278                  148                123
      Provision for losses on inventories                                     4,325                   60                  5
      Gain on disposition of property
        and equipment                                                             -                 (232)                 -
     Gain on disposition of subsidiaries                                          -                 (752)                 -
     Extinguishment of accounts payable                                           -                    -             (2,174)
Changes in operating assets and liabilities, excluding effects of dispositions:
  Decrease (increase) in:
    Accounts receivable                                                         838                 (786)               200
    Inventories                                                               1,046                  306                 74
    Prepaid expenses and other current assets                                   459                  205                (21)
    Income taxes receivable                                                      46                    -                  -
  Increase (decrease) in:
    Accounts payable                                                           (189)                 628               (398)
    Accrued liabilities                                                         416                 (171)                52
                                                                           --------              --------            ------

         Net cash used in operating activities                               (2,461)              (4,194)            (1,947)
                                                                           --------              --------            ------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                                    (62)                 (51)               (78)
  Proceeds from the sale of property and
    equipment                                                                     -                  354                  -
  Restricted cash                                                               857                   16                  -
                                                                           --------             --------             ------

         Net cash provided by (used in)
           investing activities                                                 795                  319                (78)
                                                                           --------             --------             -------
</TABLE>

                                      F-9

<PAGE>
<TABLE>
<CAPTION>

                                                 GOLDEN SYSTEMS, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           FOR THE YEARS ENDED MARCH 31, 1997, 1998 AND 1999
                                                             (IN THOUSANDS)

                                                                              1997                1998                1999
                                                                          ----------           ----------          -----------
<S>                                                                       <C>                  <C>                 <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term borrowings, net of repayments                                     (342)               1,398              1,284
  Borrowings (repayments) under notes payable                                   (20)                (118)               168
  Change in related party balances                                              365                1,738                698
  Note payable under Recapitalization Plan                                    1,873                  150                150
  Issuance of Common Stock under Recapitalization Plan                          127                    -                  -
                                                                            -------              -------             ------

         Net cash provided by financing activities                            2,003                3,168              2,300
                                                                            -------              -------             ------

EFFECT OF EXCHANGE RATE CHANGES ON CASH
  AND CASH EQUIVALENTS                                                          342                 (577)              (237)
                                                                            -------              --------            -------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                                              679               (1,284)                38

CASH AND CASH EQUIVALENTS, beginning of year                                    684                1,363                 79
                                                                            -------              -------             ------

CASH AND CASH EQUIVALENTS, end of year                                       $1,363              $    79             $  117
                                                                            =======              =======             ======
</TABLE>

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

                                      F-10


<PAGE>

                      GOLDEN SYSTEMS, INC. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 1999



1.       BASIS OF PRESENTATION, BACKGROUND, AND PRINCIPLES OF CONSOLIDATION

         BASIS OF PRESENTATION

The accompanying financial statements include the accounts of Golden Systems,
Inc. (GSI) and Fairplay Group, Inc. (Fairplay), collectively hereafter referred
to as "the Company".

The accompanying financial statements at March 31, 1999 have been prepared
assuming that the Company will continue as a going concern. However, the Company
is currently facing significant issues which raise substantial doubt that the
Company has the ability to continue as a going concern. These issues are
summarized as follows:

-    At March 31, 1999, the Company had outstanding amounts due to four separate
     Indian lenders in the amount of $9,579,000, all of which are currently in
     default. Of that amount, three banks have issued notices to the Company
     demanding immediate repayment of $8,617,000. The Company has insufficient
     funds available to repay the lenders. Because the Indian debt is secured by
     the assets of Ultra Tek, alternatives available to the lenders include
     closing the operations of Ultra Tek and forcing Ultra Tek into liquidation
     (see Note 4).

-    In fiscal 1995, Ultra Tek's importing of computer components into India
     came under investigation by the Indian customs authorities. In September
     1997, the Indian customs authorities issued a separate "show cause" notice
     alleging that Ultra Tek has not provided valid explanations for shortages
     of imported raw material in its inventories. In fiscal 1997, Ultra Tek came
     under the investigation of the Indian Department of Revenue Intelligence
     concerning the import and export of certain components used in the
     manufacture of power supplies and returned customer product. Subsequently,
     a separate "show cause" notice was issued requesting explanation of why
     duties should not be assessed. The above governmental allegations and
     investigations could lead to additional duty and penalties being assessed
     against Ultra Tek in the amount of $2,450,000 using the Indian rupee
     translation rate at September 17, 1999, and penal action being initiated
     against Ultra Tek. In addition, penal action under Indian law, which the
     Company believes is very unlikely, could result in possible monetary fines
     of up to a maximum of $16,923,000 using the Indian rupee translation rate
     at September 17, 1999. The Company is contesting these allegations, but
     currently, the matters are unresolved and the outcomes uncertain (see Note
     11).

-    The Company has incurred significant losses from operations over the past
     four years; has lost its two main customers, which has significantly
     impacted its revenues; and at March 31, 1999, had a shareholders' deficit
     of $16,737,000. During fiscal 2000, the Company has continued to incur
     significant losses, and management has not successfully executed on its
     efforts to achieve profitable operations and positive cash flows. Outside
     of related party financing, the Company has identified no viable source of
     financing.

Due to the significance of these factors in the accompanying financial
statements at March 31, 1999, all assets have been stated at their estimated
realizable values. Costs of resolving the contingencies noted above or settling
amounts due to Indian banks or Company creditors have not been reflected in the
accompanying financial statements as management is currently unable to estimate
these amounts. Accounts receivable and inventories were valued at their
subsequently realized amounts (inventories at cost), and property, plant and
equipment were valued based on estimates by management and in accordance with
the guidelines of Statement of Financial Accounting Standards No. 121
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" (SFAS 121). The estimated realizable values and settlement amounts
may be different from the proceeds ultimately received or payments made.

         BACKGROUND

Fairplay, a Panamanian corporation, is solely a holding company and conducts its
business through Ultra Tek Devices Limited (Ultra Tek), an Indian corporation
and wholly owned subsidiary of Fairplay.

The Company is principally in the business of the manufacture and export of
switching mode power supplies and adapters, primarily for incorporation by
original equipment manufacturers (OEMs) of personal computers and computer
peripheral

                                      F-11
<PAGE>

devices into their products. The Company's power supplies convert alternating
current electrical power from a primary source, such as a wall outlet, into the
direct current, stable voltages required to power the OEMs' various products.

The manufacturing facilities of Ultra Tek are primarily located in Bombay,
India, in the Santa Cruz Electronics Export Processing Zone (SEEPZ). Under the
regulations of the SEEPZ, Ultra Tek is required to export a substantial part of
its production. Ultra Tek imports substantially all of its raw materials from
East Asia, Europe and the United States of America. Ultra Tek exports
substantially all of its production to GSI and its customers in the United
States of America, Asia and Europe.

GSI was incorporated in October 1985, but began its operations in February 1991.
GSI, a California corporation, designs and markets the power supplies
manufactured by Ultra Tek. The power supplies are primarily drop shipped by
Ultra Tek directly to GSI's customers.

The Company began using the fictitious name "Cortech Systems" during the second
quarter of fiscal 1997.

         PRINCIPLES OF CONSOLIDATION

The accompanying financial statements include the accounts of the Company
presented on a consolidated basis. All significant intercompany balances and
transactions have been eliminated.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         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 amounts 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 reporting period. Actual
results could differ from those estimates.

         FOREIGN CURRENCY TRANSLATION

The financial statements of Ultra Tek and the Company's subsidiaries in Sri
Lanka and England have been prepared in their local currencies and have been
translated into U.S. dollars in accordance with the Statement of Financial
Accounting Standards No. 52. The functional currency is the local currency.
Assets and liabilities are translated from the local currencies into U.S.
dollars at the exchange rate at the balance sheet date. Revenues, expenses and
cash flows are translated at weighted average exchange rates for the period to
approximate translation at the exchange rates prevailing at the dates those
elements are recognized in the financial statements. Translation adjustments
resulting from the process of translating the local currency financial
statements into U.S. dollars are not included in determining net income or loss
but are accumulated and reported as a separate component of shareholders'
deficit in the accompanying balance sheets.

         STOCK-BASED COMPENSATION PLAN

The Company accounts for its stock-based compensation plan (see Note 6) under
the provisions of APB Opinion No. 25. The Company has elected to follow the
disclosure provisions of Statement of Financial Accounting Standards No. 123
(SFAS 123), "Accounting for Stock-Based Compensation", beginning April 1, 1995
for employee awards. See Note 7 for disclosure of pro forma loss and loss per
common share amounts for the years ended March 31, 1997, 1998 and 1999, as
required by SFAS 123. The Company has adopted SFAS 123 for all non-employee
awards beginning April 1, 1996.

         REVENUE RECOGNITION

Revenues on product sales are recognized at the time of shipment from India.

The Company accounts for potential product returns by reserving for the
potential loss of sales and accounts receivable in the period in which the
original sale occurred based on historical results. Historically, product
returns have been relatively insignificant, except for in fiscal 1995 when the
Company's most significant customer returned approximately $4.2 million of
product to the Company. These significant returns only occurred in fiscal 1995
and, through fiscal 1999, the Company has incurred relatively insignificant
product returns in every other year of its operations since its inception. The
Company's management believes that the fiscal 1995 level of returns was of a
non-recurring nature, and as such, only reserves relating to an estimated
recurring level of returns were recorded as of March 31, 1998 and 1999 and are
included in the accounts receivable allowance.

                                      F-12
<PAGE>

Sales to countries other than the United States approximated 20, 18 and 36
percent of the Company's revenues in fiscal years 1997, 1998 and 1999,
respectively.

         RESEARCH AND DEVELOPMENT

Costs associated with developing and testing new concepts and designs are
expensed as incurred. All research and development costs have been expensed
through March 31, 1999.

         WARRANTIES

The Company generally provides its customers with a one to three-year warranty
on its power supplies. A provision for estimated future costs relating to
warranty expense is recorded when products are shipped.

         SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK

In fiscal 1997, sales to two customers accounted for approximately 19 and 36
percent, respectively, of the Company's net sales. As of March 31, 1997, these
customers accounted for approximately 85 percent of the Company's accounts
receivable balance. In fiscal 1998, sales to these customers were not material
because they were replaced with two new customers which accounted for
approximately 15% and 65%, respectively, of the Company's net sales. At March
31, 1998, the accounts receivable balance to these newly acquired customers was
approximately 93 percent of the total accounts receivable balance. In fiscal
1999, the customer obtained in 1998, which accounted for the smaller percentage
of sales, was replaced. Sales to the new customer and the existing customer
accounted for approximately 12 and 64 percent, respectively, of the Company's
net sales. As of March 31, 1999, these customers accounted for approximately 76
percent of the Company's accounts receivable balance.

The Company's strategy of selling to OEMs anticipates that the Company will be
relying on high sales volumes to a relatively small number of customers.
Although there can be no assurance that the major customers will continue to
utilize the Company's products at current levels, if at all, the Company expects
to continue to depend upon such customers for a significant percentage of its
net sales. The Company has no long-term contracts with major customers. A
decline in demand for computer peripheral equipment and other electronic
products, or other factors affecting the electronics industry in general, or
major customers in particular, could have a material adverse effect on the
Company's results of operations (see Note 1).

         INVENTORIES

Inventories are valued at the lower of cost (first in, first out) or market.
Cost includes cost of material, freight and manufacturing overhead. Inventories
consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                            March 31,            March 31,
                                                                              1998                  1999
                                                                            ---------            ---------
      <S>                                                                 <C>                  <C>
         Raw materials                                                        $   584             $    359
         Work-in-progress                                                          78                  156
         Finished goods                                                           128                   97
                                                                            ---------            ---------

                                                                               $  790               $  612
                                                                            =========            =========
</TABLE>

The Company reviews its inventories on a periodic basis (generally quarterly)
for slow-moving, excess and obsolete items. A reserve is recorded against the
cost of items identified as such. The amounts shown at March 31, 1998 and 1999
are presented net of a reserve of $5,671,000 and $4,943,000, respectively, which
records the inventories at their estimated net realizable values.

         PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at acquisition cost, net of accumulated
depreciation and amortization, which is computed using straight-line and
accelerated methods over three to fifteen years. The amounts presented below are
shown net of accumulated depreciation and amortization as the amounts are
presented at their fair value (as determined by applying SFAS 121).

                                      F-13
<PAGE>


Property, plant and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>

                                                     March 31,                          March 31,
                                                       1998                                1999
                                                     ---------                          ---------
<S>                                                <C>                                 <C>
Machinery and equipment                                 $2,369                             $2,253
Motor vehicles                                              37                                 34
Furniture and fixtures                                     607                                612
Computer software                                           55                                 54
Leasehold improvements                                     256                                253
                                                     ---------                          ---------
                                                         3,324                              3,207
Accumulated
  depreciation and amortization                         (1,392)                            (1,330)
Reserve for impairment loss                             (1,267)                            (1,249)
                                                     ---------                          ----------

                                                         $ 665                             $  628
                                                     =========                          =========
</TABLE>

Costs of normal maintenance and repairs are charged to expense as incurred.
Major replacements or betterments of property and equipment are capitalized.
When items are sold or otherwise disposed of, the cost and related accumulated
depreciation and reserve for impairment loss are removed from the accounts and
any resulting gain or loss is included in operations.

         CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of
90 days or less to be cash equivalents.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

Based on borrowing rates currently available to the Company for bank loans with
similar terms and maturities, the fair value of the Company's long-term debt
approximates the carrying value. Furthermore, the carrying value of all other
financial instruments potentially subject to valuation risk (principally
consisting of cash equivalents, accounts receivable and accounts payable) also
aproximates fair value.

         SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for income taxes was $800 in 1997, 1998 and 1999. Cash paid for
interest was approximately $308,000, $302,000 and $223,000 in 1997, 1998 and
1999, respectively.

         BASIC INCOME (LOSS) PER SHARE

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," that established standards for the
computation, presentation and disclosure of earnings per share ("EPS"),
replacing the presentation of Primary EPS with a presentation of Basic EPS. It
also requires dual presentation of Basic EPS and Diluted EPS on the face of the
income statement for entities with complex capital structures. Basic EPS is
based on the weighted average number of common shares outstanding during the
period, which totaled 5,300,000, 5,300,000 and 4,452,000 for 1999, 1998 and
1997, respectively. The Company did not present Diluted EPS since the result was
anti-dilutive in 1997 and 1998 and immaterial in 1999.

         NEW ACCOUNTING PRONOUNCEMENTS

The Company adopted the provisions of Statement of Financial Account Standards
("SFAS") No. 130, "Reporting Comprehensive Income", in fiscal year 1999. The
impact of SFAS No. 130, which establishes standards for reporting and displaying
comprehensive income and its components in the consolidated financial
statements, was not significant.

         RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year
presentation.

3.       RECAPITALIZATION PLAN

In February 1997, the Company's Board of Directors approved a proposal (the
"Recapitalization Plan" or the "Plan") from the Company's President on behalf of
the Tandon family, the Company's principal shareholders, pursuant to which the

                                      F-14
<PAGE>

Tandon family would contribute $2,000,000 in cash in exchange for 13,333,333
shares of the Company's common stock. In February 1997, the Company received a
fairness opinion from an investment bank which stated the Plan was fair to the
Company's shareholders from a financial point of view. In March 1997, the
Company issued 850,000 of its common shares, which represented all of the shares
available to be issued by the Company under its current capital structure, to
the Tandon family. The Company's authorized shares will be increased, if
approved by the Company's shareholders, at which time the remaining 12,483,333
shares will be issued to the Tandon family. In connection with the Plan (due to
not all of the shares being issued), the Company entered into an agreement with
the Tandon family under which $1,873,000 of the $2,000,000 contributed would be
set up as a note payable with the remaining $127,000 recorded as an increase to
equity in fiscal 1997. Borrowings under the note payable agreement bear interest
at 8 percent, are convertible into 12,483,333 shares of common stock upon
approval by the Company's shareholders and are secured by essentially all assets
of GSI.

4.       SHORT-TERM BORROWINGS

         GSI FACTORING AGREEMENT

The Company has a factoring agreement with a United States bank. Under the
agreement, the Company may sell its accounts receivable to the bank, at the
bank's option, at the value of 60 percent in fiscal 1998 and 80% as of September
14, 1998, of the face amount of each receivable the bank desires to purchase.
The total amount of "unpaid advances" by the bank cannot exceed $1,333,333. The
Company must pay a monthly finance charge (1.75 percent) on the outstanding
unpaid advances in addition to a one-time administration fee (.75 percent) on
each purchased receivable. The unpaid advances are secured by essentially all of
the assets of the Company. The term of the factoring agreement is on a
year-to-year basis unless terminated in writing by Buyer or Seller. Through
March 31, 1997, the Company had not sold any of its accounts receivable under
the agreement. During November and December 1997, the Company factored a total
of $713,000 of its accounts receivable to provide working capital. Subsequently,
the borrowings were repaid and there was no outstanding balance at March 31,
1998. During fiscal 1999, the Company factored a total of $264,608 of its
accounts receivable to provide working capital. Subsequently, the borrowings
were repaid and there was no outstanding balance at March 31, 1999.

During fiscal 1995, the Company issued the bank a warrant to purchase 24,000
shares of its common stock at the price of $.50 per share. The warrants may be
exercised beginning in December 1994 and expire in December 1999.

         ULTRA TEK FINANCING AGREEMENTS

The Company has entered into borrowing agreements with three banks in India,
which are denominated in Indian Rupees. The agreements provide for borrowings
based upon qualifying intercompany accounts receivable which relate to export
sales. At March 31, 1998 and 1999, $7,437,000 and $8,191,000 of principal and
accrued interest (295,461,000 and 349,102,000 in Indian rupees), respectively,
were outstanding under these agreements and no amounts were available to borrow.
Borrowings bear interest at varying rates prescribed by the Reserve Bank of
India for such borrowings. At March 31, 1998 and 1999, the normal rate of
interest was 13 percent per annum, with interest on overdue amounts increasing
to a maximum of 25 percent. These agreements are secured by accounts receivable,
property, plant and equipment, and inventories.

The Company has also entered into additional credit agreements with the same
three banks, which are denominated in Indian rupees. These agreements provide
for borrowings based upon qualifying inventories which relate to export sales.
At March 31, 1998 and 1999, $467,000 and $425,595 (18,495,000 and 18,139,000 in
Indian rupees), respectively, were outstanding under these agreements and no
amounts were available to borrow. Borrowings bear interest at varying rates
prescribed by the Reserve Bank of India for such borrowings. At March 31, 1998
and 1999, the normal rate of interest was 13 percent per annum, with interest on
overdue amounts increasing to a maximum of 25 percent. These credit agreements
are secured by inventories and accounts receivable.

The above agreements and facilities were due for renewal at various dates and
amounts prior to March 31, 1998, and as such, effective June 1996, the
consortium of banks "froze" all credit facilities available to the Company. In
July 1997, the banks' legal counsel issued notices to Ultra Tek and the Company
calling upon them to pay the outstanding amounts due. The banks have not
initiated any legal action against the Company for non-payment of the amounts
due, since Ultra Tek has been declared a sick company by the Board of Industrial
and Financial Reconstruction (BIFR) of the Government of India.

The BIFR appointed an Operating Agency ("OA") to examine the Company's viability
and prepare a viability study report. Accordingly, the Company prepared a draft
rehabilitation proposal, which was submitted to the OA. The OA reviewed the
proposal and forwarded the same to the BIFR along with the minutes of a joint
meeting between the banks and the Company convened by the OA in March 1999.
Based on the minutes of the joint meeting, the BIFR prepared its Draft
Rehabilitation Scheme and advised all concerned inviting suggestions/objections
to the scheme. The Draft Scheme is subject to ongoing discussion and envisages
restructuring of existing debts (unpaid principal amount of $5,129,047 to banks
and financial institutions as of September 30, 1999), conversion of simple
interest into a Funded Interest Term Loan amounting to

                                      F-15
<PAGE>

$2,132,801 as of September 30, 1999, infusion of funds by way of contribution by
the Tandon family amounting to $938,527 which has already occurred, and
additional working capital facilities from the Indian banks of $1,642,421, which
would enable the Company to generate enough resources to continue its operations
and repay the restructured debts over a period of time. The BIFR held a hearing
on August 16, 1999 and after hearing all interested parties, has advised the
Company and the banks to discuss further and modify the Draft Scheme to take
into account the various points made at the hearing. The BIFR also instructed
the OA to conduct joint meetings with the banks and the Company and to forward a
modified scheme. The Company is in the process of discussing with the banks ways
to modify the Draft Scheme to take into account a potential conversion of
compound interest and liquidated damages into redeemable preference stock.

Essentially all of the above agreements and facilities are covered by corporate
guarantees from GSI, Fairplay and Tandon Associates, a related party. They are
also covered by the personal guarantee of the Chairman of Ultra Tek for the
amount of approximately $10,030,000.

5.       NOTES PAYABLE

In fiscal 1995, the Company entered into borrowing agreements with an Indian
lending institution (which are denominated in U. S. dollars) to finance the
purchase of certain property and equipment. At March 31, 1998 and 1999, $834,000
and $962,000, respectively, was owed under these agreements. The borrowings are
repayable in five equal installments beginning on April 1, 1997 and ending on
April 1, 1998. Interest on outstanding amounts are payable annually at a rate
equal to the London Inter Bank Offer Rate (LIBOR) plus 2.75 percent. For overdue
amounts, the rate of interest was 20.4 percent per annum. At March 31, 1998, the
rate was 8.7 percent. The borrowings are secured by the property and equipment.
The Company currently has defaulted on all payments due subsequent to April 1,
1997. Currently, there has been no legal action taken by the lender nor has the
lender called for repayment of outstanding amounts due.

6.       EQUITY TRANSACTIONS

         STOCK OPTION PLAN

During fiscal 1994, the Company adopted a stock option plan (the "1994 Plan")
that provides for the granting of options to purchase up to 455,000 shares of
common stock, consisting of both incentive stock options and non-qualified
options. Incentive stock options are issuable only to employees, while
non-qualified stock options may be issued to non-employee directors, consultants
and others, as well as to employees. All stock options must be granted at prices
equal to the fair market value of the common stock on the grant date. All
options granted expire ten years from the date of grant and vest in 20 percent
increments over five years.

The Company accounts for the 1994 Plan under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for this plan been
determined consistent with SFAS 123, the Company's net income (loss) and income
(loss) per common share amounts would have been adjusted to the following pro
forma amounts for the years ended March 31, 1997, 1998 and 1999 (net income/loss
amounts are in thousands):

<TABLE>
<CAPTION>

                                                                            1997             1998          1999
                                                                            ----             ----          ----
<S>                                                                     <C>              <C>            <C>
         Net Income (Loss):
              As Reported.................................................$(12,627)        $(3,700)       $  113
              Pro Forma................................................... (12,646)         (3,700)          113
         Income (Loss) Per Common Share:
              As Reported.................................................$  (2.84)        $  (.70)       $  .02
              Pro Forma...................................................   (2.84)           (.70)       $  .02

</TABLE>

Because the SFAS 123 method of accounting has not been applied to options
granted prior to April 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.

                                      F-16
<PAGE>

A summary of the status of the Company's outstanding stock options at March 31,
1997, 1998 and 1999 and changes during the years then ended is presented in the
table and narrative below (shares are in thousands):
<TABLE>
<CAPTION>

                                                                1997                 1998                1999
                                                         ------------------   ------------------   ------------------
                                                                      Wtd.                 Wtd.                 Wtd.
                                                                      Avg.                 Avg.                 Avg.
                                                           SHARES  EX. PRICE   SHARES   EX. PRICE     SHARES  EX. PRICE
                                                           ------  ---------   ------   ---------     ------  ---------
<S>                                                        <C>     <C>         <C>      <C>           <C>     <C>
Outstanding at beginning of year.........................   246     $3.10        124       $4.58         90     $4.75
Granted..................................................   ---       ---        ---        ---         ---      ---
Exercised................................................   ---       ---        ---        ---         ---      ---
Forfeited................................................  (122)     1.61        (34)       4.14         (9)     5.25
                                                           ------  ---------   ------   ---------     ------  ---------
Outstanding at end of year...............................   124    $ 4.58         90      $ 4.75         81     $4.69
                                                           ------  ---------   ------   ---------     ------  ---------
Exercisable at end of year...............................    51    $ 5.46         59      $ 5.82         65     $5.82
                                                           ------  ---------   ------   ---------     ------  ---------
Weighted average fair value of options granted...........             N/A                  N/A                  N/A
                                                                   ---------            ---------             ---------
</TABLE>

The fair value of each option grant is estimated on the date of grant using an
option pricing model with the following weighted-average assumptions used for
grants in 1997; a risk-free interest rate of seven percent; no expected dividend
yield; expected lives of 5 years; expected volatility of 50% to 60%.

         COMMON STOCK PURCHASE WARRANTS

A summary of warrant activity is as follows:
<TABLE>
<CAPTION>

                                                                  NUMBER OF
                                                                   SHARES                     OPTION PRICES
                                                                  ---------                   -------------
<S>                                                               <C>                        <C>
                  Balance, March 31, 1996                          149,000                   $  .50 to 8.40

                         Issued                                          -                                -
                         Exercised                                       -                                -
                         Redeemed                                        -                                -
                                                                  --------                   --------------

                  Balance, March 31, 1997, 1998 and 1999           149,000                      $ .50 to 8.40
                                                                   =======                  =================
</TABLE>

No warrants were issued, exercised or redeemed in fiscal years 1997, 1998 and
1999.

         STOCK PURCHASE PLAN

The Company has established an Employee Stock Purchase Plan (the Purchase Plan),
which allows eligible employees to purchase shares of the Company at the price
of 85 percent of the fair market value of the shares on the first or last day of
an option period. The maximum number of shares which may be issued under the
Purchase Plan is 300,000. The Purchase Plan became effective on September 1,
1994. No shares have been issued under this Plan.

7.       LITIGATION SETTLEMENT

During the third quarter of fiscal year 1995, the Company experienced a product
rejection by its then-largest customer, which cost the Company $4.2 million of
lost accounts receivables directly related to the sales of the rejected units
and $2.2 million related to other direct costs stemming from the rejections. The
Company engaged the services of an outside contractor to address the customer
complaint and rework the rejected product. After rework, the product was again
rejected by the customer as a result, in the Company's view, of poor workmanship
in the rework process.

In fiscal year 1996, the Company filed a complaint against the contractor
alleging, among other things, that the contractor improperly performed rework
services and thereby breached the contract with the Company. The Company sought
damages in excess of $3 million. Also, in fiscal year 1996, the contractor filed
a cross-complaint against the Company alleging breach of contract by the Company
for failure to pay for rework services rendered. The contractor sought $108,000
and unspecified damages.

In April 1996, the Company settled the lawsuits with the contractor. Under the
agreement terms, the Company received a cash settlement of $592,000, of which
$163,000 related to the reimbursement of legal expenses incurred in fiscal year
1996.

                                      F-17

<PAGE>

Accordingly, $163,000 was recorded as a reduction of legal expenses in
fiscal year 1996 and the balance of the settlement has been recorded in fiscal
year 1997.

8.       EXTINGUISHMENT OF ACCOUNTS PAYABLE

In 1994, the Company attempted to develop a product line, which failed to
materialize. Inventory related to this product line was previously reserved for,
however certain accounts payable amounts aggregating $1,775,000 payable since
1994 had been retained in the financial statements pending any possible demand
for payment. Since demand for payment has not been made and any future demand
will be barred under the Indian Limitation Act, the Company has credited
operating income for the balance due. Similarly, there are other accounts
payable amounts aggregating $399,000 that have not been paid for which no demand
has been made against the Company and which are currently barred under the
Indian Limitation Act. These amounts have also been credited to operating
income.

9.       INCOME TAXES

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109).

Under SFAS 109, deferred income tax assets or liabilities are computed based on
the temporary difference between the financial statement and income tax bases of
assets and liabilities using the enacted marginal income tax rate in effect for
the year in which the differences are expected to reverse. Deferred income tax
expenses or credits are based on the changes in the deferred income tax assets
or liabilities from period to period. The valuation allowance decreased $624,000
in 1999.

The components of the net deferred income tax asset at March 31, 1999 are as
follows (in thousands):
<TABLE>
<CAPTION>
                                                                                                1999
                                                                                              -------
<S>                                                                                           <C>
         Allowance for bad debts                                                                   52
         Vacation accrual                                                                           8
         Net operating loss carryforwards                                                       3,958
         Inventory reserve                                                                         92
         Warranty reserve                                                                          80
         Book over tax depreciation                                                                97
         Other accrual                                                                             22
                                                                                              -------
                                                                                                4,309

         Less:  Valuation allowance                                                            (4,309)
                                                                                              -------
                                                                                              $     -
                                                                                              =======
</TABLE>

The provision for income taxes for the years ended March 31, 1997, 1998 and 1999
are as follows (in thousands):
<TABLE>
<CAPTION>

                                                              1997                 1998              1999
                                                              ----                 ----              ----
<S>                                                           <C>                  <C>               <C>
         Current  - Federal                                   $  -                 $  -              $  -
                  - State                                        1                    1                 1
                  - Foreign                                     (3)                   -                 -
                                                              -----                ----              ----

                                                              $ (2)                $  1              $  1
                                                              =====                ====              ====
</TABLE>

                                      F-18

<PAGE>

Differences between the provision for income taxes and income taxes at the
statutory federal income tax rate for the years ended March 31, 1997, 1998 and
1999 are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                1997             1998              1999
                                                              ---------         -------          --------
<S>                                                            <C>              <C>                <C>
   Income tax benefit
     at statutory federal rate                                 $(4,653)         $(1,258)               39
   State and local income taxes,
     net of federal income tax effect                                1                1                 6
   Tax benefits not recognized                                   4,653            1,258               (44)
   Other items, net                                                 (3)               -
                                                              ---------         -------          --------

                                                                $   (2)         $     1            $    1
                                                              =========         =======          ========
</TABLE>

In 1997, the pre-tax losses relating to U.S. and foreign operations were
$1,551,100 and $12,147,000, respectively. In 1998, the pre-tax losses relating
to U.S. and foreign operations were $1,561,000 and $2,138,000, respectively. In
1999, the pre-tax loss relating to U.S. operations was $816,000 and the pre-tax
profit relating to foreign operations was $929,000.

Ultra Tek's manufacturing facilities are located in an export processing zone.
Under the Indian Income-tax Act of 1961, the entire profits of a company
situated in a free trade zone are exempt from income tax for a period of five
consecutive years within the first eight years of operations at the option of
the Company. Ultra Tek elected to claim the exemption for the five years ended
March 31, 1992. Consequently, Ultra Tek did not have any income tax liability up
to March 31, 1992. Under another provision of the Indian Income-tax Act of 1961,
Ultra Tek will continue to be exempt from income tax to the extent of profits
attributable to its export sales. For the years ended March 31, 1997, 1998 and
1999, no provision for income taxes was recorded as Ultra Tek incurred losses
for tax purposes.

The Company does not provide for U. S. federal income taxes on the undistributed
earnings of its foreign operations. The Company's policy is to leave the income
permanently invested in the country of origin. Such amounts will only be
distributed to the United States to the extent any federal income tax can be
fully offset by foreign tax credits. Currently, this policy is still in effect
due to the limited foreign funds available for repatriation to the U.S.

Net operating loss carryforwards as of March 31, 1999 for federal and state tax
purposes are approximately $11.6 million and $6.1 million, respectively, and
begin expiring in fiscal years 2010 and 2000, respectively.

10.      MINORITY INTEREST

On September 7, 1993, the holders of notes payable due from Ultra Tek in the
amount of approximately $2.6 million contributed such amounts to Ultra Tek in
exchange for Ultra Tek redeemable preference shares. The preference shares
exchanged for the debt are non-voting shares, with an aggregate annual dividend
amount of $25 ($0.00003 per share) per year, are mandatorily redeemable in 20
years and have a liquidation preference of approximately $2.6 million. Due to an
agreement with the preference shareholders, these shares are redeemable at the
option of the Company but do not have to be redeemed for 20 years. Early
redemption of the shares prior to maturity can be accomplished only with the
approval of a majority of the Company's outside directors. The full redemption
amount is shown in the accompanying balance sheets as of March 31, 1998 and 1999
as minority interest.

11.      COMMITMENTS AND CONTINGENCIES

         A)       LEASES

         GSI leases its corporate headquarters from a related party under a
         three year operating lease which expired in December 1999. Ultra Tek
         leases certain factory premises from the Indian Government under
         operating leases which expire at various dates through December 2000.
         Future minimum payments under these and other various operating leases
         are as follows (in thousands):

                                      F-19

<PAGE>
<TABLE>
<CAPTION>

                  YEAR ENDING MARCH 31:
<S>                                                                           <C>
                         2000                                                         84
                         2001                                                         25
                         2002                                                          -
                         2003                                                          -
                         2004                                                          -
                                                                                  --------
                                                                                    $109
                                                                                  ========
</TABLE>

         Gross rental expense for the years ended March 31, 1997, 1998 and 1999
         was approximately $214,000, $222,000 and $98,000, respectively.

         b)       LITIGATION

         The Company is subject to lawsuits in the normal course of business. In
         the opinion of management and legal counsel to the Company, pending
         litigation will not result in a material loss to the Company.

         c)       CONTINGENCIES

         During fiscal year 1995, the Company's imports of computer components
         for final assembly and sale into the domestic tariff area (DTA) of
         India (outside the SEEPZ) came under investigation by the Indian
         customs authorities. As a result, Company inventories of $1,090,000
         (47,447,000 in Indian rupees) were seized by the authorities. On May
         30, 1995, the authorities issued a notice to the Company alleging
         misdeclaration of purported imports of complete computer systems as
         imports of computer system components. The notice calls upon the
         Company to explain why the authorities should not (a) confiscate all
         the goods so imported, (b) levy additional duty of $1,123,000
         (48,885,000 in Indian rupees) on the goods already sold into the DTA,
         and (c) take penal action against the Company under the law. The
         Company paid an advance of $700,000 (20,000,000 in Indian rupees)
         against customs duty that may ultimately be levied by the authorities
         and recorded this amount in "cost of goods sold" in the accompanying
         statement of operations for the year ended March 31, 1995. During
         fiscal 1996, the authorities released the seized goods. However,
         because of difficulties encountered in re-exporting the goods and
         technological obsolescence, the entire amount of the seized goods was
         included in the inventory reserve amounts discussed in Note 2 at March
         31, 1997 (Inventories). No other penalties or expenses related to this
         government action have been incurred by the Company.

         In September 1997, the Indian customs authorities issued a "show cause"
         notice alleging that Ultra Tek has not provided valid explanations for
         shortages of raw material in its inventories. The notice called upon
         the Company to explain why the authorities should not (a) impose duty
         of $591,000 (25,725,000 in Indian rupees) leviable on imported
         components which were alleged not accounted for in the terms of bond
         executed, (b) why penal action should not be initiated against the
         Company, and (c) why a penalty equal to the duty held to be leviable,
         $591,000 (25,725,000 in Indian rupees), in respect of unaccounted goods
         should not be imposed.

         In fiscal 1997, the Company came under investigation by the Indian
         Department of Revenue Intelligence (DRI) in connection with the import
         and export of certain components and goods used in the manufacture of
         power supplies and customer returns. The investigation focused on the
         alleged discrepancy noted between the physical stock records and books,
         in respect of the work-in-process inventory at March 31, 1996 and 1997
         and customer returned product at March 31, 1992 through March 31, 1997.
         In May 1998, the DRI issued a "show cause" notice requesting that the
         Company explain why the DRI should not impose duties of approximately
         $591,000 (25,720,000 in Indian rupees). Penalties relating to the
         investigation, if any, have not yet been determined.

         The aggregate of threatened duties and penalties to the Company is
         approximately $2,450,000 (106,474,000 in Indian rupees), using the
         Indian rupee translation rate at September 17, 1999. Although the
         Company is contesting the allegations of the authorities, the outcomes
         of these matters are uncertain at this time. Accordingly, no additional
         provisions for any losses that may ultimately result have been made in
         these financial statements. In addition, penal action under Indian law,
         which the Company believes is very unlikely, could result in possible
         monetary fines of up to $16,923,000 at September 17, 1999.

                                      F-20

<PAGE>


12.      RELATED PARTY TRANSACTIONS

The Company has substantial dealings with the following entities which are owned
by or affiliated with Company shareholders. The amount of loans, sales,
purchases, transfers and sharing of expenses during the years ended March 31,
1997, 1998 and 1999 with each party are as follows (in thousands):

<TABLE>
<CAPTION>

                                                                           1997              1998             1999
<S>                                                                  <C>                <C>                 <C>
ADVANCE TECHNOLOGY DEVICES
     BEGINNING BALANCE                                                 $     (39)            (113)              (36)
         Product sales                                                         1               21
         Sale (purchase) of raw materials                                     (4)              17                 2
         Credits for sharing common expenses                                   3                7                 4
         Sale of assets                                                        -               47                 -
         Translation adjustments to/(from) the Company                         3                6                 2
         Cash transfers (to)/from the Company                                (77)             (21)               (5)
                                                                       ---------------------------------------------
     ENDING BALANCE                                                         (113)             (36)              (33)
                                                                       ---------------------------------------------

EASTERN PERIPHERALS LTD.
     BEGINNING BALANCE                                                       423              171                96
         Purchase of raw materials                                            (1)               -                 -
         Charges for sharing common expenses                                 (16)              (6)               (6)
         Sale/(purchase) of assets                                            (7)               -                 -
         Translation adjustments to/(from) the Company                        (3)             (11)               (6)
         Reserve for doubtful collection                                       -                -               (84)
         Cash transfers (to)/from the Company                               (225)             (58)                -
                                                                       --------------------------------------------
     ENDING BALANCE                                                          171               96                 -
                                                                       --------------------------------------------

GOLDEN COMPUTER LTD.
     BEGINNING BALANCE                                                         1                -               (13)
         Product sales                                                        (1)               1                 -
         Translation adjustments to/(from) the Company                         -                -                 1
         Cash transfers (to)/from the Company                                  -              (14)               12
                                                                       --------------------------------------------
     ENDING BALANCE                                                            -              (13)                -
                                                                       --------------------------------------------

MAAZDA TRAVEL
     BEGINNING BALANCE                                                       (10)              (1)               (1)
         Charges for travel agent services                                   (36)             (23)              (43)
         Cash transfers (to)/from the Company                                 45               23                46
                                                                       --------------------------------------------
     ENDING BALANCE                                                           (1)              (1)                2
                                                                       --------------------------------------------

MODULAR ELECTRONICS PVT. LTD.
     BEGINNING BALANCE                                                       (29)             (73)              (66)
         Purchase of raw materials                                             -                7                 -
         Charges for sharing common expenses                                   -                -                 -
         Credits for sharing common expenses                                   -                -                 -
         Translation adjustments to/(from) the Company                         -                -                 4
         Cash transfers (to)/from the Company                                (44)               -                 -
                                                                       --------------------------------------------
     ENDING BALANCE                                                          (73)             (66)              (62)
                                                                       ---------------------------------------------

M. L. TANDON
     BEGINNING BALANCE                                                         -                -
     Unsecured loan                                                            -             (120)             (111)
     Translation adjustments to/(from) the Company                             -                9                 7
                                                                       --------------------------------------------
     ENDING BALANCE                                                            -             (111)             (104)
                                                                       ---------------------------------------------
</TABLE>

                                      F-21
<PAGE>

<TABLE>
<CAPTION>

                                                                           1997              1998             1999
<S>                                                                     <C>             <C>                  <C>
RELIABLE CONSULTANCY SERVICES PVT. LTD.
     BEGINNING BALANCE                                                         -               (2)               (3)
         Charges for sharing common expenses                                  (6)               -                (1)
         Credits for sharing common expenses                                   4                -                 -
         Translation adjustments (to)/from the Company                         -               (1)                -
         Cash transfers (to) from the Company                                  -                -                 4
                                                                       --------------------------------------------
     ENDING BALANCE                                                           (2)              (3)                -
                                                                       --------------------------------------------

SACHAM ELECTRONICS SERVICES PVT. LTD.
     BEGINNING BALANCE                                                        10               10                 9
         Translation adjustments to/(from) the Company                         -               (1)               (1)
         Cash Transfers (to) from the Company                                  -                -                (2)
                                                                       ---------------------------------------------
     ENDING BALANCE                                                           10                9                 6
                                                                       --------------------------------------------

SDJ PARTNERS
     BEGINNING BALANCE                                                         -                -                 -
         Rent & utilities                                                   (113)             (53)              (57)
         Cash transfers (to)/from the Company                                113               53                 -
                                                                       --------------------------------------------
     ENDING BALANCE                                                            -                -               (57)
                                                                       ---------------------------------------------

ST HOLDING PVT. LTD.
     BEGINNING BALANCE                                                         -               (4)               (4)
         Charges for sharing common expenses                                  (4)               -                 -
                                                                       --------------------------------------------
     ENDING BALANCE                                                           (4)              (4)               (4)
                                                                       --------------------------------------------

TANCOM ELECTRONICS
     BEGINNING BALANCE                                                       (49)             (96)              (94)
         Sale of raw materials                                                 8               67                 6
         Sale/(purchase) of assets                                             6              (35)               (2)
         Purchase of materials                                                 -                -               (23)
         Credits for sharing common expenses                                  89               40                 1
         Charges for sharing common expenses                                   -                -                (3)
         Translation adjustments to/(from) the Company                         2                9                 7
         Cash transfers (to)/from the Company                               (152)             (79)                6
                                                                       --------------------------------------------
     ENDING BALANCE                                                          (96)             (94)             (102)
                                                                       ---------------------------------------------

TANDON ASSOCIATES, INC. - NOTE RECEIVABLE
     BEGINNING BALANCE                                                         -                -            (1,607)
         Secured loans                                                         -           (1,989)                -
         Accrued interest on loan                                              -              (82)             (159)
         Cash transfers (to)/from the Company                                  -              464               432
                                                                       --------------------------------------------
     ENDING BALANCE                                                            -           (1,607)           (1,334)
                                                                       ---------------------------------------------

TANDON ASSOCIATES, INC.
     BEGINNING BALANCE                                                        (8)              22                 -
         Credits for outside services and expenditures                       317                -                 -
         Credits for sharing common expenses                                  59               19                17
         Charges for sharing common expenses                                   -                -               (39)
         Credits for research and development                                 27                -                 -
         Sale of assets                                                        -               40                 -
         Cash transfers (to)/from the Company                               (373)             (81)                -
                                                                       --------------------------------------------
     ENDING BALANCE                                                           22                -               (22)
                                                                       ---------------------------------------------

TANDON DATA SYSTEMS SERVICES LTD.
     BEGINNING BALANCE                                                       (23)               -                 -
         Cash transfers (to)/from the Company                                 23                -                 -
                                                                       --------------------------------------------
     ENDING BALANCE                                                            -                -                 -
                                                                       --------------------------------------------

</TABLE>

                                      F-22
<PAGE>

<TABLE>
<CAPTION>

                                                                           1997              1998             1999
<S>                                                                    <C>              <C>                 <C>
TANDON MAGNETICS (I) PVT. LTD.
     BEGINNING BALANCE                                                        (3)              (5)               (4)
         Charges (credits) for sharing common expenses                        (2)               1                 -
                                                                       --------------------------------------------
     ENDING BALANCE                                                           (5)              (4)               (4)
                                                                       ---------------------------------------------

TANTEC MAGNETICS
     BEGINNING BALANCE                                                         -               (1)                -
         Product sales                                                        26               47                 -
         Purchase of computers                                               (18)              (5)                -
         Sale of raw of materials                                              -                5                 9
         Charges for sharing common expenses                                  (1)               -                (4)
         Credits for sharing common expenses                                   -                -                 -
         Credits for outside services                                         37                -                 -
         Sale of assets                                                        -               18                 -
         Cash transfers (to)/from the Company                                (45)             (64)                -
                                                                       --------------------------------------------
     ENDING BALANCE                                                           (1)               -                 5
                                                                       --------------------------------------------

J.T. HOLDINGS PVT. LTD.
     BEGINNING BALANCE                                                         -                -                 -
         Unsecured loan                                                        -                -              (806)
         Translation adjustments (to)/from the Company                         -                -                10
                                                                       --------------------------------------------
     ENDING BALANCE                                                            -                -              (796)
                                                                       ---------------------------------------------

TOTAL NET DUE TO RELATED PARTIES                                       $     (92)       $  (1,834)           (2,505)
                                                                       =============================================

TANDON FAMILY
     BEGINNING BALANCE                                                 $         -      $  (1,873)        $  (2,023)
         Note under Recapitalization Plan                                 (1,873)               -
         Interest on note                                                      -             (150)             (150)
                                                                       ---------------------------------------------
     Total note payable under Recapitalization Plan                      $(1,873)       $  (2,023)        $  (2,173)
                                                                       =============================================
</TABLE>


During fiscal 1999, it was determined that the balance of $84,000 due from
Eastern Peripherals Ltd. was not collectible. Eastern Peripherals ceased
operations in 1995 and has liquidated all of its assets to pay down its
outstanding obligations.

During fiscal 1999, J. T. Holdings Pvt. Ltd. loaned $806,000 to the Company for
needed working capital. The loan is unsecured, payable on demand at an interest
rate of 15% per annum commencing April 1, 2000.

During fiscal 1998, Tandon Associates loaned the Company $1,525,000, net of
repayments, to support continuing operations. The loan, which is secured by a
factoring agreement, is at a monthly interest rate of 1% on the average daily
outstanding balance.

The Company believes that related party transactions are at amounts and terms
which approximate market. The headquarters facility lease is at the cost of
comparable office and warehouse space at the time the lease was negotiated and
utilities are at estimated usage and cost. Charges and credits for common
expenses and administrative services are at approximate cost and the transfer of
assets is at net book value which approximates market value. The purchase of
travel services is at competitive prices and the purchase of computer supplies
is at cost plus a five percent mark-up to cover administrative costs. The sale
of Company product is at estimated market price.

In addition, during fiscal 1998, the Company sold its manufacturing subsidiary
located in Sri Lanka to Cortex, Limited, a Tandon family affiliate, which
transaction resulted in a gain to the Company of approximately $590,000. In
connection with the sale, Cortex, Limited, agreed to assume all of the bank debt
in Sri Lanka, the facility lease, and all the obligations to employees. The
Company also entered into an agreement with an affiliated part of Tandon
Associates to sell its Singapore operation. The Company recorded a gain of
approximately $38,000 on this transaction.

13.      FOREIGN OPERATIONS

The Company operates principally in three geographic areas: the United States,
Europe, and Asia. The following is a summary of information by areas as of and
for the years ended March 31, 1997, 1998 and 1999 (in thousands):

                                      F-23
<PAGE>


<TABLE>
<CAPTION>

1997
----
                                                                    United
                                                                    States      Europe       Asia        Total
                                                                   --------    --------    -------    ----------
<S>                                                              <C>         <C>          <C>        <C>
Sales originating from.................................            $ 2,329           -        239      $   2,568
Loss from operations..................................             $ 1,944         830      8,471      $  11,245
Identifiable assets......................................          $ 1,699          42      2,414      $   4,155

1998
----
                                                                    United
                                                                    States      Europe       Asia        Total
                                                                   --------    --------    -------    ----------
Sales originating from..................................            $4,305           -        276      $   4,581
Loss from operations..................................              $1,587           -      1,386      $   2,973
Identifiable assets......................................           $1,068           -      1,458      $   2,527

1999
----
                                                                    United
                                                                    States      Europe       Asia        Total
                                                                   --------    --------    -------    ----------
Sales originating from.................................             $3,889           -         46         3,935
Loss (income) from operations......................                 $  560           -     (2,169)       (1,609)
Identifiable assets......................................           $  829           -      1,244         2,073


</TABLE>


The Company exported approximately 11 percent, 13 percent, and 35 percent, of
its total sales in the years ended 1997, 1998 and 1999, respectively. These
exports are primarily to foreign subsidiaries of U. S. companies.

DOMESTIC VERSUS EXPORT SALES

<TABLE>
<CAPTION>

                                                                                      Export
                                                                         ---------------------------------
                                                                          European               All Other
                                                            Domestic     Community     Asia        Areas        Total
                                                            --------     ---------   -------     ----------   --------
<S>                                                       <C>           <C>         <C>         <C>          <C>
1997 Sales to unaffiliated customers......................  $  2,047         192         81            9      $ 2,329
1998 Sales to unaffiliated customers......................  $  3,751         468         86            -      $ 4,305
1999 Sales to unaffiliated customers......................  $  2,506       1,117        266            -      $ 3,889

</TABLE>

14.      401K PLAN

The Company maintains a 401K plan for the benefit of its domestic employees. The
Plan covers substantially all of these employees, subject to certain
participation requirements. Participants may contribute from 1% to 15% of their
eligible earnings, subject to certain restrictions. The Plan provides that the
Company may make additional contributions to the Plan but it is not required to
contribute on behalf of the participants. The Company did not incur expenses
related to this Plan during fiscal years 1997, 1998 and 1999.

                                      F-24