BELL TECHNOLOGY GROUP LTD, SB-2/A, 1997-11-06

BELL TECHNOLOGY GROUP LTD
SB-2/A, 1997-11-06
COMPUTER INTEGRATED SYSTEMS DESIGN

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1997

REGISTRATION NO. 333-23259
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 4 TO

FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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BELL TECHNOLOGY GROUP LTD.
(Exact name of small business issuer in its charter)

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<S> <C> <C>
DELAWARE 7373 13-3781263
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification No.)
of incorporation) Classification Code No.)

MARC H. BELL
BELL TECHNOLOGY GROUP LTD.
295 LAFAYETTE 295 LAFAYETTE STREET 295 LAFAYETTE STREET
STREET NEW YORK, NEW YORK 10012 NEW YORK, NY 10012
NEW YORK, NY 10012 (212) 334-8510 (212) 334-8510
(212) 334-8510
(Address and (Address and telephone (Address and telephone
telephone number of agent for service number of business or
number of principal of process) intended place of business)
executive offices)
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COPIES TO:

ARNOLD N. BRESSLER, ESQ.
MILBERG WEISS BERSHAD HYNES & LERACH LLP
ONE PENNSYLVANIA PLAZA
NEW YORK, NEW YORK 10119

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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:

As soon as practicable after the Registration Statement becomes effective.

If any of these securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration number of the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE

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PROPOSED MAXIMUM
TITLE OF EACH CLASS PROPOSED MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED PER UNIT (1) PRICE (1) FEE
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Common Stock, $.01 par value of Selling Stockholders..... 400,000 $6.8125(2) $2,725,000 $825.76
Stock Purchase Warrant................................... 1 $10 $10 1
Common Stock underlying Stock Purchase Warrant........... 34,783 $6.60(2) $229,568 $69.57
Total Registration Fee*.................................. $895.33
</TABLE>

* A fee of $2,935.72 has previously been paid in connection with this
Registration Statement.
(1) Estimated solely for the purpose of calculating the registration fee.

(2) Based on the average of the high and low prices of the Common Stock on
the National Association of Securities Dealers Automated Quotation
Systems Inc. on October 30, 1997.

Pursuant to Rule 429 of the Securities Act of 1933, as amended, this form
incorporates by reference and updates all of the information contained in the
Registration Statement on Form SB-2; File No. 33-98978.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

<PAGE>
BELL TECHNOLOGY GROUP LTD.

CROSS-REFERENCE SHEET

SHOWING LOCATION IN PROSPECTUS OF PART I ITEMS OF FORM SB-2

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ITEM NUMBER AND HEADING IN
FORM SB-2 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
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1. Front of Registration Statement and Outside Front of Registration Statement; Outside of Front Cover
Front Cover of Prospectus....................... Page

2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front and Outside Back Cover Pages

3. Summary Information and Risk Factors............ Prospectus Summary; The Company; Risk Factors

4. Use of Proceeds................................. Prospectus Summary; Use of Proceeds

5. Determination of Offering Price................. Outside Front Cover Page; Risk Factors; Underwriting

6. Dilution........................................ Not Applicable

7. Selling Security Holders........................ Selling Stockholders and Plan of Distribution

8. Plan of Distribution............................ Outside Front Cover Page; Plan of Distribution

9. Legal Proceedings............................... Business

10. Directors, Executive Officers, Promoters and
Control Persons................................. Principal Stockholders; Management

11. Security Ownership of Certain Beneficial Owners
and Management.................................. Principal Stockholders

12. Description of Securities....................... Description of Securities

13. Interest of Named Experts and Counsel........... Legal Matters; Experts

14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... Management -- Limited Liability and Indemnification Matters

15. Organization Within Last Five Years............. Prospectus Summary; Certain Transactions

16. Description of Business......................... Prospectus Summary; Risk Factors; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business

17. Management's Discussion and Analysis or Plan of
Operation....................................... Management's Discussion and Analysis of Financial Condition
and Results of Operations

18. Description of Property......................... Business -- Properties

19. Certain Relationships and Related
Transactions.................................... Certain Transactions; Principal Stockholders

20. Market for Common Equity and Related Stockholder
Matters......................................... Outside Front Cover Page; Risk Factors; Dividend Policy;
Description of Capital Stock; Shares Eligible for Future
Sale; Market for Company's Common Stock

21. Executive Compensation.......................... Management

22. Financial Statements............................ Financial Statements

23. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure............. Not Applicable
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<PAGE>

[Bell Logo] 400,000 SHARES OF COMMON STOCK

This Prospectus relates to the offer and sale of an aggregate of 400,000
shares (the "Shares") of common stock, $.01 par value (the "Common Stock"), of
Bell Technology Group Ltd. (the "Company") by certain stockholders of the
Company (the "Selling Stockholders"). The Company will not receive any portion
of the proceeds from the sale of Common Stock offered hereby.

The Company's Common Stock is traded on the Nasdaq SmallCap Market
("NASDAQ") under the trading symbol "BELT" and on the Boston Stock Exchange
under the trading symbol "BTG."

The 400,000 Shares offered hereby may be sold from time to time by the
Selling Stockholders, or by transferrors, commencing from the date of this
Prospectus. No underwriting arrangements have been entered into by the Selling
Stockholders. The distribution of the Selling Stockholders' Shares by the
Selling Stockholders may be effected by one or more transactions that may take
place on the over-the-counter market, including ordinary broker's transactions,
privately negotiated transactions or through the sale to one or more dealers for
resale of such shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Stockholders in connection with the sales of the Selling
Stockholders' Shares. See "Selling Stockholders and Plan of Distribution."

The Company will pay all of the expenses incident to the registration
offering and sale of the Shares to the public hereunder (other than commissions,
fees and discounts of underwriters, brokers, dealers and agents).

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

FOR A DESCRIPTION OF CERTAIN RISKS REGARDING AN INVESTMENT IN
THE COMPANY SEE "RISK FACTORS" (PAGE 8).

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is __________, 1997.

<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Atlanta Regional Office of the Commission at
3475 Lenox Road, N.E., Suite 1000, Atlanta, Georgia 30326-7232. Copies of such
materials may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a World Wide Web site (C://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file such information electronically. The Common
Stock is quoted on Nasdaq and the BSE. Reports, proxy statements and other
information concerning the Company may be inspected at the offices of Nasdaq,
1735 K Street N.W., Washington, D.C. 20006, and at the offices of the BSE at One
Boston Place, Boston, Massachusetts 02108.

The Company has filed with the Commission a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Shares offered hereby. This Prospectus, which is a part of the registration
statement, does not contain all the information set forth in, or annexed as
exhibits to, such registration statement, certain portions of which have been
omitted pursuant to rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is made
to such registration statement, including the exhibits thereto, copies of which
may be inspected and copied at the aforementioned facilities of the Commission.
Copies of such registration statement, including the exhibits, may be obtained
from the Public Reference Section of the Commission at the aforementioned
address upon payment of the fee prescribed by the Commission.

The Company intends to furnish its shareholders with annual reports
containing financial statements audited and reported upon by its independent
public accountants after the end of each fiscal year, commencing with its fiscal
year ending September 30, 1997. It will make available such other periodic
reports as the Company may deem appropriate or as may be required by law.

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS.

CERTAIN TERMS USED IN THIS PROSPECTUS ARE DEFINED IN THE GLOSSARY ON PAGE
8.

THE COMPANY

Bell Technology Group Ltd., together with its wholly-owned subsidiaries
(the "Company"), is a diversified computer products and service company which is
focused on providing sophisticated Internet and computer solutions to large
corporate clients. The Company advises clients on computer solutions available,
provides, installs and services such solutions, and assists the client in
properly utilizing the benefits to be gained from using the Internet. The
Company has pursued a growth strategy of becoming a "start-to-finish" provider
of Internet solutions, which provides corporate customers with everything
necessary for their Internet needs. Using the Company's knowledge of hardware
and software as a means of entry into a new client, the Company then proceeds to
deal with all of its computer clients needs. The services offered include (i)
the sale and service of hardware and software, (ii) training in the use of
Internet and related programs, (iii) interactive development, and (iv) Internet
co-location, access and hosting services. The number of corporate Internet
customers has grown from approximately 29 in early 1996 to over 220 as of June
30, 1997, or an increase of 659%. For the nine months ended June 30, 1997, the
Company reported $13 million in revenues versus $7.9 million for 1996, or an
increase of 75%.

The Company is authorized to sell and service high end equipment from
hardware manufacturers such as Silicon Graphics, Inc., Sun Microsystems, Inc.
and Cisco Systems, Inc. and software manufacturers such as Microsoft
Corporation, Netscape Corporation, Alias/Wavefront Inc. and Checkpoint Software
Corp. The Company prepares equipment sold to customers, installs LANs, provides
warranty support for major hardware manufacturers, and provides ongoing service
support for its customers in the form of hardware repairs and software
consulting.

A large number of the Company's clients are "Fortune 1000" companies. Major
customers include American Express, Amro Bank, Gannett, General Media
(Penthouse), The Hearst Corporation, Lucent Technologies, MSNBC Desktop Video,
Ogilvy & Mather, Prudential, Ralph Lauren, Scholastic and Time Warner. Major
corporations that have web hosting and/or co-location services with the Company
are invited to work closely with the Company at its facility in setting up and
managing sites.

During the past fiscal year, the Company has spent over $2 million building
a state-of-the-art network operations center ("NOC") at its new location. The
2,000 square foot NOC offers customers direct, high-speed Internet connections
and World Wide Web hosting and co-location facilities. The Company assists its
clients on a personalized level with web development and hosts their web sites
by providing the appropriate hardware, network and maintenance services. The
Company firmly believes that facilities-based Internet services are the future
of the industry.

The Company maintains several classrooms at its headquarters facility,
where it conducts training for its clients. In addition, the Company provides
training at its client's facilities on a national basis. The Company uses a
variety of modern hardware and software and typically charges a fixed price
depending upon the size of the class, the complexity of the group and the
equipment required. The Company is a training center in the New York City
Metropolitan area for Alias/Wavefront and Macromedia Authorware/Director.

The Company's digital media division is involved in producing interactive
CD-ROM presentations and high-impact World Wide Web sites. The Company's main
areas of digital design development include animation, interactive and web
production. The Company's graphic arts capabilities include creating and
assembling World Wide Web sites and interactive applications such as computer
based training and promotional sales material. The Company works with content
providers such as marketing firms and provides the technical and design aspects
of a project for large-scale multimedia projects including sites to be used on
the Internet. The Company provides consulting and project management services
for companies making the transition from print to electronic to Internet
presentations or catalogs and is currently completing a nine month project for
the Thomas Register, put out by Thomas Publishing, the largest and oldest
industrial directory of products and services in the world. The
3

<PAGE>

Company is presently working with numerous customers to implement secure
commerce and audio/video streaming applications.

Other services offered by the Company to its customers include Internet
access, ISDN, leased lines, web hosting, programming, firewall, network security
and system design services. Due to the existence of its sales and service
operation, the Company is able to offer customers support and services on all
major operating systems including UNIX, IRIX, Windows NT and Mac OS. The Company
also provides consulting services in the areas of inter-networking, programming,
firewall services, computer and network security, network design and network
operation.

Among the solutions offered by the Company are Internet based commerce
solutions, which include secure credit card transaction processing, a shopping
cart for browsing and purchasing merchandise on-line, and audio/video streaming
technologies that allow for, among other things, pay-per-view programming. The
Company is able to create multi-media web sites and provide high-speed access to
the Internet for the client/user. This technology enables users to make use of
the Internet to complete "on-line" transactions. For example, the Company is
bringing a substantial catalog sales company on-line, to enable it to increase
sales and market share by completing transactions over the Internet.

In January 1996, the Company completed an initial public offering of
1,279,642 shares of its Common Stock and 661,250 redeemable Common Stock
purchase warrants (the "Warrants") to purchase an additional 661,250 shares of
Common Stock, which raised net proceeds of approximately $7,000,000. The initial
public offering was effected through Rickel & Associates, Inc. (the
"Underwriter").

In September 1997, the Company entered into an agreement with Value
Management & Research GMBH ("VMR") to sell to VMR for itself or on behalf of
other investors an aggregate of 382,609 shares of its Common Stock (the "Private
Placement"). The Company agreed to pay VMR a fee of $100,000 and to issue 17,391
shares of the Common Stock and a stock purchase warrant to purchase 34,783
shares of the Common Stock at an exercise price of $6.60 per share (the "VMR
Warrant").

The Company was originally incorporated in the state of New York in 1989 by
Marc H. Bell as NAFT International Ltd. ("NAFT"). In July 1994, PFM Technologies
Corporation acquired the assets and liabilities of NAFT and its affiliated
corporations in a tax-free exchange of common stock. In September 1995, the
Company was reincorporated by merger into Bell Technology Group Ltd., a Delaware
corporation. The Company's executive offices are located at 295 Lafayette
Street, 3rd Floor, New York, New York 10012, and its telephone number is (212)
334-8510. The Company's address on the World Wide Web is www.belltech.com.

<PAGE>

THE OFFERING

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Securities Offered.................................... 400,000 shares of Common Stock
Common Stock Outstanding(1)(2)........................ 3,448,450 shares of Common Stock
Use of Proceeds....................................... The Company will not receive any of the proceeds from the
sales of the Shares by the Selling Stockholders.
Risk Factors.......................................... The securities offered hereby involve a high degree of
risk and substantial immediate dilution to new investors.
See "Risk Factors" and "Dilution."
Proposed NASDAQ SmallCap
Market Symbol....................................... BELT
Proposed Boston Stock
Exchange Symbol..................................... BTG
</TABLE>

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(1) Excludes (i) minimum of 661,150 shares of Common Stock issuable upon
exercise of the Company's outstanding Warrants, (ii) 172,500 shares of
Common Stock issuable upon exercise of the Rickel Underwriter's Warrants
(including Warrants underlying the Underwriter's Warrants), (iii) 34,783
shares of Common Stock issuable upon exercise of the VMR Warrant and (iv) an
aggregate of 360,000 shares of Common Stock reserved for issuance pursuant
to options available for grant under the Company's 1995 Stock Option Plan,
309,562 of which have been granted to date. See "Management -- Stock Option
Plan."

(2) Includes 400,000 shares of Common Stock included in the Offering.

<PAGE>

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The summary consolidated financial data for the nine month period ended
September 30, 1995 and fiscal year ended September 30, 1996, and for the nine
month periods ended June 30, 1996 and June 30, 1997 have been derived from the
Company's financial statements included elsewhere in this Prospectus. The nine
month period ended September 30, 1995 and year ended September 30, 1996 have
been audited by Arthur Andersen LLP, independent public accountants, whose
report thereon is also included elsewhere in this Prospectus. The summary
consolidated financial data for the nine month period ended June 30, 1997 are
unaudited and in the opinion of management include all adjustments, consisting
of only normal recurring adjustments necessary for a fair presentation of such
data. In 1995, the Company changed its fiscal year end from December 31 to
September 30. The summary consolidated financial data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and Notes thereto included elsewhere in this Prospectus.

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SEPTEMBER 30, JUNE 30, 1997
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1995 1996 ACTUAL AS ADJUSTED (1)
----------- ----------- ------------ ---------------
BALANCE SHEET DATA:
Cash and cash equivalents....... $ 222,367 $ 2,342,011 $ 1,338,747 $ 3,438,747
Working capital................. 179,739 3,423,313 1,435,565 3,535,565
Other assets.................... 459,670 2,666,387 3,956,083 3,956,083
Total assets.................... 2,961,550 7,809,782 10,291,424 12,391,424
Current liabilities............. 2,322,141 1,720,082 4,899,776 4,899,776
Long-term liabilities........... 340,612 0 896,940 896,940
Stockholders' equity............ 298,797 6,089,700 4,494,708 6,594,708
</TABLE>

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(1) As Adjusted financial information gives effect to the issuance and sale by
the Company of the 400,000 shares of the Common Stock pursuant to the
private placement on September 24, 1997.

<PAGE>

GLOSSARY

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Backbone A centralized high-speed network that interconnects smaller, independent networks.

Bandwidth The number of bits of information which can move through a communications medium in
a given amount of time.

CSU/DSU A high-speed modem used with dedicated network connections, capable of handling
connection speeds of up to 45 Mbps or more.

Firewall A system placed between networks that filters data passing through it and removes
unauthorized traffic, thereby enhancing the security of the network.

HTML Hyper-Text Markup Language. Used in writing pages for the World Wide Web, it permits
the text to include code that defines font, layout, embedded graphics and hypertext
links.

Internet A global collection of interconnected computer networks which uses TCP/IP, a common
communications protocol.

Intranet The use of the hypertext transfer protocol ("http") within a private network for the
purpose of disseminating html content. An Intranet is usually confined to a local
area network ("LAN") or private wide area network ("WAN").

ISDN Integrated Services Digital Network. A communications protocol used by telephone
companies to permit copper telephone wires to carry voice, data and other source
materials at high speeds.

LAN Local Area Network. A data communications network designed to interconnect personal
computers, workstations, minicomputers, file servers and other communications and
computing devices within a localized environment.

Mbps Megabits per second. A transmission rate. One megabit equals 1,024 kilobits.

Render Farm The process of creating an image on a computer from a collection of mathematical
formulas is called rendering, a microprocessor intensive activity. A render farm is
a collection of multiple computers (and therefrom micro-processors) linked together
to act as a single unit.

Router A system placed between networks that relays data to those networks based upon a
destination address contained in the data packets being routed.

TCP/IP Transmission Control Protocol/Internet Protocol. A suite of network protocols that
allow computers with different architectures and operating system software to
communicate with other computers on the Internet.

WAN Wide Area Network. A data communications network designed to connect personal
computers, workstations, minicomputers, file servers and other communications and
computing devices over a geographically dispersed area.

World Wide Web Or Web A collection of computer systems supporting a communications protocol that permits
multi-media presentation presentation of information over the Internet.
</TABLE>

<PAGE>

RISK FACTORS

THE SECURITIES OFFERED HEREBY INVOLVE CERTAIN RISKS. EACH PROSPECTIVE
INVESTOR SHOULD CAREFULLY CONSIDER, ALONG WITH OTHER MATTERS REFERRED TO HEREIN,
THE FOLLOWING FACTORS IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY:

1. LIMITED OPERATING HISTORY. The Company's consulting services business has
been in operation for approximately six years, and the Company's Value Added
Reseller ("VAR") business has been in operation for approximately four years.
However, the Company's Internet business has been in operation only since early
1995 and the Company's interactive development operations have been in operation
for approximately one year. There can be no assurance that the Company will be
able to successfully commercialize these operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

2. PRIOR LOSSES; ACCUMULATED DEFICIT. The Company incurred a net loss for the
fiscal year ended September 30, 1996 in the amount of $1,893,480, and a net loss
in the first nine months of the current fiscal year in the amount of $1,540,397
($680,806 for the three month period ended December 31, 1996, $402,076 for the
three month period ended March 31, 1997 and $457,515 for the three months ended
June 30, 1997). As of June 30, 1997, the Company had an accumulated deficit of
$3,514,663. There can be no assurance that the Company will be profitable in
future operating periods or that it will have sufficient cash available to meet
continuing losses and necessary capital expenditures. The Company believes that
as a result of the expansion to be undertaken it may incur further losses during
the 1998 fiscal year due to the fact that certain expenses (e.g. marketing) are
incurred and recognized prior to the earning and recognition of the revenue to
which such expenses would relate. However, there can be no assurance that after
incurring such expenses, there will be an increase in revenues or earnings
resulting therefrom. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

3. PRESSURE ON PROFIT MARGINS OF VALUE-ADDED RESELLERS. As a reseller of
computer and peripheral equipment to corporations and other organizations, the
Company faces intense competition and the use of mass marketing channels in
which price-cutting is the dominant form of competition. Over the past decade,
technological improvements in computer and peripheral products, and increased
competition, have been accompanied by a consistent decline in their prices. This
decline in prices has resulted in decreasing profit margins for computer
resellers, including the Company. The industry trend is for users to hire
on-staff MIS personnel or independent MIS consultants which enables the user to
purchase equipment from catalogs rather than engage the services of a reseller
such as the Company to design and/or install a computer system. See
"Business -- Product Sales and Service."

4. NEED FOR ADDITIONAL CAPITAL RESOURCES; ADDITIONAL INDEBTEDNESS. The Company
believes that it will require additional financing in the future to fund future
acquisitions and growth. Therefore, in such event, it would seek to raise
additional capital through further public or private offerings or the call of
the Warrants. However, there can be no assurance that the Company will be able
to raise additional capital when and as needed. The Company will not be
restricted in the amount of indebtedness it may incur in the future. The
Company's amount of leverage will affect its cost of funds, which may limit the
financing available to the Company for its operations, make it more vulnerable
to economic downturns and limit its ability to withstand adverse changes or to
capitalize on business opportunities. If the Company is at any time unable to
generate sufficient cash flow from operations to service its debt, refinancing
of all or a portion of that debt or obtaining additional financing may be
required to avoid defaults (including cross-defaults) on some or all of its
indebtedness. A substantial portion of the Company's accounts receivable,
inventory and furniture, fixtures and equipment have been pledged to current
lenders, thereby making it unlikely that additional institutional debt financing
will be available (other than the refinancing of existing debt). There can be no
assurance that any such refinancing would be possible or that any additional
financing could be obtained, or obtained on terms that are favorable or
acceptable to the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

5. DEPENDENCE UPON SUPPLIERS; SOLE AND LIMITED SOURCES OF SUPPLY. The Company
relies on other companies to supply certain components of its computer
inventory, service and diagnostic equipment, as well as its network
infrastructure (including telecommunications services and networking equipment)
which, in the quantities and

<PAGE>

quality required by the Company, is available only from sole or limited sources.
At the present time, Silicon Graphics and Sun Microsystems are the Company's
largest suppliers of products for both its sales and Internet operations.
Revenues from the sales from each of such suppliers presently account for
approximately 18% of the Company's total revenues. The Company has in the past,
and may from time to time, experience delays in receiving telecommunications
services and shipments of merchandise purchased for resale. There can be no
assurance that the Company will be able to obtain such telecommunication
services and shipments of merchandise on the scale and at the times required by
the Company at an affordable cost. There can be no assurance that the Company's
suppliers, will not enter into exclusive arrangements with the Company's
competitors or stop selling their products or components to the Company at
commercially reasonable prices, or at all. See "Business -- Dependence Upon
Suppliers."

6. COMPETITION WITH SUPPLIERS. The Company is dependent upon continued service
from an Internet access provider ("IAP") that may, for competitive reasons,
discontinue service to the Company at any time. Although there are other IAPs
from whom the Company could obtain a comparable level of service, a change in
access providers would likely involve significant costs and result in delays in
the Company's service to its customers. In addition, these other access
providers are, by definition, competitors of the Company, and may also
discontinue service to the Company.

In order to provide Internet access and other on-line services to its
customers, the Company leases long distance fiber optic telecommunications lines
from more than one national telecommunications services provider does. The
Company is dependent upon these providers of data communications facilities.

Certain of the Company's suppliers, including the regional Bell operating
companies ("RBOCs") and local exchange carriers ("LECs") currently are subject
to various price constraints, including tariff controls, which in the future may
change. In addition, regulatory proposals are pending that may affect the prices
charged by the RBOCs and LECs to the Company. Such regulatory changes could
result in increased prices of products and services, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.

7. INTERNET RELATED RISK FACTORS.

DIFFICULTY IN ESTABLISHING INTERNET ACCESS BUSINESS. The Company's success in
the Internet access business will depend upon its ability to develop a
reputation for reliability over the long term and the security of its current
and future Internet connections. The Company must continue to expand and adapt
its network infrastructure as the number of users and the amount of information
they wish to transfer increases, and as the requirements of its customers
change. The expansion of the Company's Internet network infrastructure will
require substantial capital expenditures to purchase network-related hardware
and telecommunications lines. The Company may experience insufficient revenue
growth to achieve and maintain profitability if it is unable to obtain and
expand an ongoing client base. If the Internet access market fails to grow,
grows more slowly than anticipated, or becomes saturated with competitors, the
Company's business, financial condition and results of operations would be
materially adversely affected. See "Business -- Competition."

PHYSICAL RISKS ASSOCIATED WITH INTERNET ACCESS BUSINESS. The Company's Internet
operations are dependent upon the protection of its network infrastructure
against damage from acts of nature, power failures, telecommunications failures
and similar events. Physical protection of the Company's network infrastructure
will be the primary responsibility of the Company. However, because it leases
its lines from long-distance telecommunications companies, RBOCs and LECs, the
Company is dependent upon these companies for physical repair and maintenance of
the leased lines. Despite precautions taken by the Company, the occurrence of a
natural disaster or other unanticipated problems at the Company's headquarters
and network operations center in New York City, may cause interruptions in the
services provided by the Company. In addition, failure of the Company's
telecommunications providers to provide the data communications capacity
required by the Company as a result of a natural disaster, operational
disruption or for any other reason could cause interruptions in the services
provided by the Company.

SECURITY RISKS ASSOCIATED WITH INTERNET ACCESS BUSINESS. Despite the
implementation of security measures, the core of the Company's network
infrastructure is vulnerable to computer viruses and disruptive problems. The
Company and other IAPs may in the future experience interruptions in service as
a result of the accidental or

<PAGE>

intentional actions of Internet users, current and former employees or others.
Unauthorized use could also potentially jeopardize the security of confidential
information stored in the computer systems of the Company and its customers,
which may result in liability of the Company to its customers and deter
potential subscribers. Although the Company intends to continue to implement
industry-standard security measures, such measures have been circumvented in the
past, and there can be no assurance that measures implemented by the Company
will not be circumvented in the future. Eliminating computer viruses and
alleviating other security problems may cause interruptions, delays or cessation
of service to the Company's customers. The Company does not carry any insurance
against these risks due to the unavailability of such insurance at a reasonable
cost. See "Use of Proceeds" and "Business."

8. COMPETITION. The Company engages in an array of technology and
computer-related businesses, each of which carries its own particular commercial
and financial risks. There are no substantial barriers to entry into any of the
Company's lines of business, and the Company encounters significant competition
in each of them. The Company's competitors include (i) value-added resellers of
computer, network and peripheral equipment, (ii) computer repair services and
training providers, (iii) network consultants, (iv) IAPs, and (v) graphic design
and consulting firms. Many of the Company's current and potential competitors
have substantially greater financial, technical, marketing and other resources
and larger installed customer bases than the Company. The Company expects that
competition will intensify in each of its lines of business, particularly in the
area of Internet services, as more competitors enter the marketplace. There can
be no assurance that the Company will have the financial resources, technical
expertise or marketing and support capabilities to successfully meet its
competition. See "Business -- Competition."

9. RISKS OF TECHNOLOGICAL CHANGE; DEFECTS. The markets for the Company's
products and services are generally characterized by rapidly changing
technology, evolving industry standards, emerging competition and frequent new
product and service introductions. There can be no assurance that the Company
can successfully identify new product opportunities and develop and bring new
products and services to market in a timely manner. The Company's pursuit of
necessary technological advances will require substantial time and expense, and
there can be no assurance that the Company will succeed in adapting its computer
distribution and Internet services businesses to changing technology standards
and customer requirements.

10. TECHNICAL OBSOLESCENCE. The introduction of new products and services could
render the Company's existing products and services obsolete and unmarketable.
This risk is present in each of the Company's product lines, but particularly in
its Internet services business, which relies on the continued widespread
commercial use of Transmission Control Protocol/Internetwork Protocol
("TCP/IP"). Alternative open protocol and proprietary protocol standards have
been or are being developed. If any of these alternative protocols become widely
adopted, there may be a reduction in the use of TCP/IP. There can be no
assurance that the announcement or introduction of new products or services by
the Company or its competitors or any change in industry standards will not
cause customers to defer or cancel purchases of existing products or services,
which could have a material adverse effect on the Company's business, financial
condition and results of operations.

Products and services as complex as those offered by the Company may
contain undetected errors or defects when first introduced or as new versions
are released. There can be no assurance that, despite testing by the Company or
its customers, errors will not be found in new products after commencement of
commercial deployment, resulting in product redevelopment costs and loss of, or
delay in, market acceptance, delays in collecting accounts receivable and
additional service costs.

11. DEPENDENCE UPON CHIEF EXECUTIVE OFFICER; NEED TO MANAGE GROWTH AND
EXPANSION. The Company's success will depend upon the continued service of its
President and CEO, Marc H. Bell. Mr. Bell has entered into an employment
agreement with the Company pursuant to which Mr. Bell will be employed by the
Company through September 30, 2000. In addition, the Company has obtained a key
person life insurance policy on Mr. Bell in the amount of $1,000,000. The
Company is the beneficiary of such policy.

The Company's success also depends upon its ability to attract and retain
additional highly qualified management, technical and sales and marketing
personnel. Competition for qualified employees is intense and salaries are
escalating very quickly. In addition, the process of locating such personnel
with the combination of skills and attributes required to carry-out the
Company's strategy is often lengthy.

<PAGE>

As of September 30, 1997, the Company had approximately 75 full-time
employees and 10 part-time employees. The Company has hired additional full-time
sales staff, engineers and technicians the cost of which, at least initially, is
greater than the revenue, which they will generate. To manage its growth, the
Company must hire and train additional qualified personnel; and must continue to
expand and upgrade its sales capacity and build its network infrastructure.
Failure to manage its growth effectively could have a material adverse effect on
the Company's business, financial condition and results of operations.

12. GEOGRAPHIC CONCENTRATION; INDUSTRY CONCENTRATION. Almost all of the
Company's current revenues are generated within the New York City metropolitan
area. In addition, approximately 50% of the Company's sales are currently made
to organizations engaged in the advertising, publishing and entertainment
industries. As a result, the Company is susceptible to fluctuations in its
business caused by economic conditions in the New York City metropolitan area
and/or in those industries.

13. GOVERNMENT REGULATION. The Internet access operations of the Company are
not currently subject to direct regulation by the Federal Communications
Commission or any other government agency, other than regulations applicable to
businesses generally. Changes in the regulatory environment relating to the
Internet access industry, including regulatory changes which directly or
indirectly affect telecommunication costs or increase the likelihood or scope of
competition from regional telephone companies or others, could have an adverse
effect on the Company's business. The Company cannot predict the impact, if any,
that future regulation or regulatory changes may have on its business.

14. SUBSTANTIAL CONTROL BY PRINCIPAL STOCKHOLDERS. Marc H. Bell and Harpoon
Holdings, Ltd. (together, the "Principal Stockholders") beneficially own or
control approximately 56.9% of the outstanding shares of Common Stock. Harpoon
has entered into an Irrevocable Proxy Agreement with Marc H. Bell (the
"Irrevocable Proxy") which expires on October 1, 2005, pursuant to which Marc H.
Bell has the power to vote all shares owned by Harpoon (the "Harpoon Shares") in
the election of the Company's directors. The Irrevocable Proxy is intended to
enable Mr. Bell to maintain control over the Company. Thus, as a practical
matter, Marc H. Bell will be able to control election of the Company's Board of
Directors. The Irrevocable Proxy could have the effect of depressing the market
price of the Company's securities since it adversely affects the ability of
other stockholders to effect changes in management of the Company. See
"Principal Stockholders."

15. POSSIBLE ADVERSE EFFECT OF ISSUANCE OF PREFERRED STOCK. The Company's
Certificate of Incorporation authorizes the issuance of 500,000 shares of "blank
check" Preferred Stock, with designations, rights and preferences that may be
determined from time to time by the Board of Directors. At this time, none of
the shares of Preferred Stock are issued or outstanding. However, the Board of
Directors is empowered, without further stockholder approval, to issue Preferred
Stock with dividend, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of the Common
Stock. In addition, such charter provisions could limit the price that certain
investors might be willing to pay in the future for shares of the Company's
Common Stock and may have the effect of delaying or preventing a change in
control of the Company. The issuance of Preferred Stock also could decrease the
amount of earnings and assets available for distribution to the holders of
Common Stock. There can be no assurance that the Company will not issue
Preferred Stock at some time in the future. See "Description of
Securities -- Preferred Stock."

16. SHARES AVAILABLE FOR FUTURE SALE. Future sales of shares of Common Stock by
the Principal Stockholders under Rule 144 of the Securities Act or the issuance
ofshares of Common Stock upon the exercise of options or warrants could
materially and adversely affect the market price of the Common Stock and could
materially impair the Company's future ability to raise capital through an
offering of equity securities. A substantial number of shares of Common Stock
will become available for sale in the public market at various times. No
predictions can be made as to the effect, if any, that market sales of such
shares or the availability of such shares for future sale will have on the
market price of the Securities prevailing from time to time. See "Principal
Stockholders."

17. ABSENCE OF DIVIDENDS. The Company has not paid any cash dividends on the
Common Stock since July 1994, when NAFT and an affiliated company, both
Subchapter S corporations under the Internal Revenue Code, were acquired by
PFMT, the Company's immediate corporate predecessor. As Subchapter S
corporations, NAFT and its affiliated company made several distributions to
their sole shareholder, Marc H. Bell. The Company does not anticipate paying any
cash dividends on the Common Stock in the foreseeable future. See "Dividend
Policy."

<PAGE>

18. POSSIBLE DELISTING AND RISK OF LOW-PRICED SECURITIES; "PENNY STOCK"
REGULATIONS. The Company's Common Stock is listed on Nasdaq and on the BSE.
There can be no assurance that the Company will continue to be able to satisfy
certain specified financial tests and market related criteria required for
continued listing on Nasdaq and the BSE. If the Company is unable to satisfy
such maintenance criteria in the future, the Common Stock may be delisted from
trading on Nasdaq or the BSE, as the case may be. If the Common Stock were to be
delisted from trading on each of Nasdaq or the BSE, trading, if any, would
thereafter be conducted in the over-the-counter market so-called "pink sheets"
or the "Electronic Bulletin Board" of the National Association of Securities
Dealers, Inc., and consequently an investor could find it more difficult to
dispose of, or to obtain accurate quotations as to the price of, the Company's
Common Stock. This could adversely impact on the market value of the Debentures.

The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. Commission regulations generally
define a penny stock to be an equity security that has a market price listed of
less than $5.00 per share, subject to certain exceptions. Such exceptions
include any equity security listed on Nasdaq or a national securities exchange
(such as the BSE) and any equity security issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in continuous
operation for three years, (ii) net tangible assets of at least $5,000,000, if
such issuer has been in continuous operation for less than three years, or (iii)
average annual revenue of at least $6,000,000, if such issuer has been in
continuous operation for less than three years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.

In addition, if the Company's securities are not quoted on Nasdaq or the
BSE, or the Company does not meet the other exceptions to the penny stock
regulations cited above, trading in the Company's securities would be covered by
Rule 15g-9 promulgated under the Exchange Act for non-Nasdaq and non-exchange
listed securities. Under such rule, broker/dealers who recommend such Securities
to persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities, in
general, also are exempt from this rule if the market price is at least $5.00
per share.

If the Company's securities become subject to the regulations applicable to
penny stocks, the market liquidity for the Company's securities could be
adversely affected. In such an event, the regulations on penny stocks could
limit the ability of broker/dealers to sell the Company's securities and thus
the ability of purchasers of the Company's securities to sell their securities
in the secondary market.

19. LIMITED LIABILITY AND INDEMNIFICATION MATTERS. As permitted by the Delaware
Law, the Company has included in its Certificate of Incorporation a provision to
eliminate the personal liability of its directors for monetary damages for
breach or alleged breach of their fiduciary duties as directors, subject to
certain exceptions. In addition, the By-laws of the Company provide that the
Company is required to indemnify its officers and directors under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and the Company is required to advance expenses to
its officers and directors as incurred in connection with proceedings against
them for which they may be indemnified. At present, the Company is not aware of
any pending or threatened litigation or proceeding involving a director,
officer, employee or agent of the Company in which indemnification would be
required or permitted.

<PAGE>

MARKET FOR COMPANY'S COMMON STOCK

The Company's Common Stock is traded on Nasdaq and the BSE. The following
table indicates high and low sales quotations for the periods indicated based
upon information supplied by Nasdaq, since the Company's initial public offering
in January 1996. Such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
LOW HIGH
------ -------
<S> <C> <C>
Fiscal year ended September 30, 1997
First Quarter.......................................................... $8.875 $ 9.875
Second Quarter......................................................... 9.625 13.750
Third Quarter.......................................................... 9.875 13.875
Fourth Quarter......................................................... 5.563 11.375

Fiscal year ended September 30, 1996
Second Quarter......................................................... $7.750 $10.500
Third Quarter.......................................................... 8.625 10.000
Fourth Quarter......................................................... 7.500 9.500
</TABLE>

The number of holders of record of the Company's Common Stock on October
30, 1997 was approximately 32, which does not include individual participants in
security position listings. The closing price for the Common Stock on October
30, 1997 was $6.75 per share.

<PAGE>

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of the Common Stock
by the Selling Stockholders. The net proceeds to the Company from the sale of
the 400,000 shares of Common Stock in the Private Placement was $2,100,000 after
deduction of VMR's fee. The Company anticipates that the net proceeds from the
Private Placement will be used as follows:

<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE OF
APPROXIMATE NET
AMOUNT PROCEEDS
----------- -------------
<S> <C> <C>
Upgrade of Facilities and Equipment (1).............................................. $1,000,000 47.7%
Sales and Marketing (2).............................................................. 400,000 19.0
Upgrade of Management Information Systems (3)........................................ 400,000 19.0
Working Capital and General Corporate Purposes (4)................................... 300,000 14.3
----------- -------------
Total......................................................................... $2,100,000 100.0%
</TABLE>

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

(1) In order to upgrade the network operation center, the Company will need to
(i) purchase additional equipment and line capacity, (ii) maintain a
sufficient inventory of network capacity to satisfy customer requirements on
a timely basis, and (iii) make additional physical improvements to the
existing facilities such as an increase in electrical power and air
conditioning. Expenditures may include the purchase of additional network
servers, routers, CSU/DSUs and network computers, as well as high-speed
telecommunications lines (T-1s and T-3s). These costs are estimated to be
approximately $1,000,000 and are necessitated by the rapid growth of the
Company's Internet related operations.

(2) Represents funds required to implement the Company's sales and marketing
program, including participation in trade shows, the hiring of additional
sales personnel, the placing of advertising in various media, and the
marketing of the Company's Internet services and promotion of the Company's
other products and services.

(3) In order to integrate more efficiently the Company's various databases and
systems, the Company intends to upgrade its management information system.
In connection with this project the Company will need to purchase additional
equipment and programming service.

(4) The Company intends to use the balance of the net proceeds of the Offering
for working capital and other general corporate purposes.

The foregoing uses of proceeds are estimates only and there could be
significant variations in the anticipated use of the proceeds due to changes in
business or economic circumstances. Accordingly, the Company reserves the right
to reallocate the foregoing uses of proceeds depending upon any such change of
circumstances.

Pending specific application of the proceeds of the Private Placement, the
net proceeds will be invested in interest-bearing savings accounts, certificates
of deposit, money market accounts, United States government obligations or other
short-term interest-bearing obligations.

DIVIDEND POLICY

The Company has not paid any cash dividends on the Common Stock since
terminating its status as a Subchapter S corporation under the Internal Revenue
Code in 1994. The Company currently intends to retain its future earnings, if
any, to fund the development and growth of its business and, therefore does not
anticipate paying any cash dividends on the Common Stock in the foreseeable
future.

<PAGE>

CAPITALIZATION

The following table sets forth the Company's actual capitalization as of
June 30, 1997, without giving effect to or assuming the exercise of the
Warrants.

<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(1)
----------- --------------
Notes Payable.............................................. $ 1,225,501 $ 1,225,501
Preferred Stock, $.01 par value, 500,000
shares authorized, no shares issued and
outstanding; no shares issued and
outstanding pro forma; no shares issued
and outstanding as adjusted.............................. -- --
Common Stock, $.01 par value, 10,000,000
shares authorized, 3,048,450 shares issued
and outstanding at June 30, 1997 (1)..................... 30,485 34,485
Additional paid-in capital................................. 7,978,886 10,074,886
Accumulated deficit........................................ (3,514,663) (3,514,663)
----------- --------------
Total capitalization....................................... $ 5,720,209 $ 7,820,209
----------- --------------
----------- --------------
</TABLE>

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

(1) As Adjusted financial information gives effect to the issuance and
sale by the Company of the 400,000 shares of Common Stock pursuant
to the private placement on September 24, 1997.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The selected consolidated financial data for the nine months ended
September 30, 1995 and year ended September 30, 1996 have been derived from the
Company's financial statements included elsewhere in this Prospectus which have
been audited by Arthur Andersen LLP, independent public accountants, whose
report thereon is also included elsewhere in this Prospectus. The selected
consolidated financial data for the nine months ended June 30, 1997 are
unaudited and, in the opinion of management, include all adjustments, consisting
of only normal recurring adjustments, necessary for a fair presentation of such
data. The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE NINE FOR THE FOR THE NINE MONTHS ENDED
MONTHS ENDED YEAR ENDED ------------------------------
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 JUNE 30, 1996 JUNE 30, 1997
------------------ ------------------ ------------- -------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................... $8,738,410 $ 10,373,664 $ 7,935,579 $ 13,868,965
Costs and expenses.........................
Cost of goods sold......................... 7,292,232 8,599,241 6,341,812 10,802,824
Selling, general and administrative........ 1,212,829 3,186,718 2,025,573 4,256,888
Depreciation and amortization.............. 68,510 219,176 171,180 312,320
Research and development................... 34,000 57,250 -0- -0-
------------------ ------------------ ------------- -------------
Income (loss) from operations.............. $ 130,839 $ (1,688,721) $ (602,986) $ (1,503,067)
Interest income............................ -0- 121,256 28,119 69,366
Interest expense........................... (72,881) (98,520) (56,541) (32,036)
Income (loss) before taxes................. 57,958 (1,923,376) (830,915) (1,540,397)
Provision (benefit) for taxes.............. 19,099 (29,896) -0- -0-
------------------ ------------------ ------------- -------------
Net income (loss).......................... $ 38,859 $ (1,893,480) $ (830,915) $ (1,540,397)
------------------ ------------------ ------------- -------------
------------------ ------------------ ------------- -------------
Net income (loss) per common and common
equivalent share......................... $ 0.02 $ (0.72) $ (0.34) $ (0.51)
Number of shares used in computing net
income (loss) per common and common
equivalent share......................... 1,725,000 2,633,400 2,464,185 3,044,799

OTHER DATA:
Deficiency of earnings to cover fixed
charges (1).............................. (75,865) (1,705,795) (875,924) (1,753,535)
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
<S> <C> <C> <C>
1995 1996 JUNE 30, 1997
----------- ----------- -------------
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 222,367 $ 2,342,011 $ 1,338,747
Working capital.......................... 179,739 3,423,313 1,435,565
Other assets............................. 459,670 2,666,387 3,956,083
Total assets............................. 2,961,550 7,809,782 10,291,424
Current liabilities...................... 2,322,141 1,720,082 4,899,776
Long-term liabilities.................... 340,612 -0- 896,940
Stockholders' equity..................... 298,797 6,089,700 4,494,708
</TABLE>

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

(1) Deficiency of earnings available to cover fixed charges consist of earnings
(losses) before income taxes. Fixed charges consist of interest on debt and
the interest component of rent expense (deemed to be one-third of the
total).

<PAGE>

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

GENERAL

The Company has divided its operations for "Segment Reporting" purposes
into two segments: (a) Sale, preparation, installation and servicing of computer
hardware and software products (the "Products Segment"); and (b) Internet
programming, web hosting, design of Internet systems such as shopping malls,
on-line gaming systems, payment systems and video streaming, training in the use
of computer software, animation services, and interactive and CD ROM design
services (the "Services Segment"). The Company first reported operations based
upon segments for the fiscal year ended September 30, 1996. These segment
results were influenced by the fact that during the fiscal year ended September
30, 1996, the Company's Internet activities were essentially in a developmental
stage. During the current fiscal year, the operating revenues from the Services
Segment will be considerably higher than in the prior fiscal year, both in terms
of dollar amount and percentage of sales, as will the identifiable assets used
in the Services Segment. However, the Company makes no prediction as to the
operating results of the two segments. For a further discussion of operations,
see "Business."

For the fiscal year ended September 30, 1996, operating results on a
segment basis were:

<TABLE>
<CAPTION>
PRODUCTS SERVICES
SEGMENT SEGMENT CONSOLIDATED
---------- ---------- -----------
<S> <C> <C> <C>
Sales to unaffiliated customers................... $9,732,322 $ 641,342 $10,373,664
Operating loss.................................... 267,482 359,751 1,688,721*
Identifiable assets............................... 3,442,760 1,132,253 7,809,782**
</TABLE>

* Includes $1,061,488 of unallocated corporate overhead including
executive salaries of $389,000 and overhead including rent, payroll
charges for administrative staff including accounting, human resources,
MIS and other support personnel and professional fees.

** Including corporate assets not allocable to a particular segment of
$3,234,769.

RESULTS OF OPERATIONS

NINE MONTHS ENDED JUNE 30, 1997 COMPARED WITH NINE MONTHS ENDED JUNE 30, 1996

REVENUES. Consolidated revenues for the nine months ended June 30, 1997,
compared to the same period in 1996, increased approximately 75% from
approximately $7.9 million to approximately $13.9 million. This increase was
spread across all aspects of the Company's business. The Company intends to
focus its future operations primarily in the areas of Internet related
activities, sales of high-end computer products and systems, training,
interactive development and web site development.

COST OF REVENUES. Cost of revenues for the nine months ended June 30, 1997 were
approximately $10.8 million, or approximately 78% of revenues, as compared to
approximately $6.3 million or approximately 80% of revenues for the comparable
period in fiscal 1996. The increase in gross profit margin was due to the fact
that an increased percentage of sales came from sales of services (which
generated higher profit margins) rather than sales of products. In addition,
product sales of more sophisticated computer systems, which required greater
pre-sales, and after market customer assistance, and therefore generated higher
profit margins, increased.

SELLING, GENERAL AND ADMINISTRATIVE. For the nine months ended June 30, 1997,
selling, general and administrative expenses increased from approximately
$2,026,000 (or 26% of Revenues) to approximately $4,257,000 (or 31% of
Revenues). This increase was due primarily to an increase in payroll for
corporate administrative personnel and sales personnel, technicians and
engineers in all areas of operations. In addition, general overhead increased as
a result of the relocation and expansion of the Company's facilities. Starting
in January 1997, the Company commenced an internal cost cutting program.
Specifically, it has consolidated all of its operations at 295 Lafayette Street,
New York, New York and surrendered its premises at 611 Broadway, New York, New
York. This was made possible by the exercise by the Company of an option to
lease additional space at its corporate headquarters at a price of $4.00 per
square foot.

NET LOSS. For the nine month period ended June 30, 1997, the Company incurred a
net loss of approximately $1,540,000 as compared to a net loss of approximately
$831,000 for the corresponding nine month period ended June 30, 1996. The
Company expects that as a result of the expansion to be undertaken

<PAGE>

it may incur further operating losses during fiscal 1998 due to the fact that it
will incur and recognize certain expenses (such as marketing costs) in advance
of the receipt and recognition of revenues expected to be generated by such
increased expenditures.

TWELVE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1995

The financial statements contain results of operations for the twelve-month
period ended September 30, 1996 and the nine-month period ended September 30,
1995. The Company received the proceeds of its public offering on February 1,
1996. These facts should be considered in reading the following discussion.

REVENUES. Revenues increased from $8,738,410 in fiscal 1995 to $10,363,664 in
fiscal 1996 because of the longer fiscal year. In the fiscal year ended
September 30, 1995, revenues from Internet operations were small, and no other
segment of the Company's business accounted for 10% of gross revenues, operating
income/loss and identifiable assets of the Company. While the Company's actual
revenues are not steady on a month by month basis, for comparison purposes only,
average monthly revenues in fiscal 1996 were approximately $864,000 as
contrasted with average monthly revenues in fiscal 1995 of approximately
$971,000. This decline is due to a substantial reduction in the sales of Apple
computer products, which produced large sales numbers because of the price of
the products, being sold. The Company is replacing these sales in part with
sales of other products and with Internet related sales, training and service.
The Company anticipates that, in the future, a greater percentage of revenues
will result from Internet related sales which have higher gross profit margins.

COST OF REVENUES. Cost of revenues remained constant from fiscal 1995 to fiscal
1996 at approximately 82%. However, gross profit margins for the three and nine
month periods ended June 30, 1996 were 23% and 20%, respectively. The gross
profit margin for the three month period ended September 30, 1996 was 7%. The
fourth quarter results of operations were negatively impacted by a number of
events and adjustments, all of which adversely impacted gross margins. In
particular, (a) the Company reflected a reclassification of approximately
$100,000 from selling, general and administration to cost of revenue to more
accurately reflect direct expenses of the Internet operations; (b) established a
reserve of $90,000 for returned merchandise allowances primarily with Apple
Computer, Inc., because of the Company's de-emphasis of its business with Apple
and the Company's assessment of Apple's financial situation; and (c) various
year-end adjustments of approximately $100,000. In addition, the Company
relocated its operations in the fourth quarter of fiscal 1996, which adversely
impacted revenues and gross profit margins.

NET INCOME (LOSS). Approximately $220,000 of the Company's loss before taxes in
1996 was due to depreciation and $257,000 was due to the write-off of debt
issuance costs related to a debt incurred prior to the initial public offering.
The balance of the loss (in the amount of $1,416,480) can be traced directly to
selling, general and administrative costs. Within this category, a substantial
portion of such costs was related to payroll. The monthly payroll of the Company
increased from $162,233 for the month of October 1995 to $308,115 for the month
of October 1996. This increase in payroll was primarily for corporate
administrative personnel and sales personnel, technicians and engineers in all
areas of operations. A portion of the Internet engineering payroll ($130,000)
was capitalized. In the initial phases of operation, such increased payroll
resulted in no significant revenue. This negative trend continued in the fourth
quarter so that selling, general and administrative costs as a percentage of
revenues increased from approximately 22% in the quarter ended December 31, 1995
to approximately 48% in the quarter ended September 30, 1996. The Products
Segment in the year ended September 30, 1996 had an operating loss of
approximately $267,000. For the nine months ended September 30, 1995, the
Products Segment had an operating profit of approximately $71,000. The cost of
revenues for the Products Segment for both fiscal years was approximately 85%.
The reason for the loss in 1996 can be traced to (a) an increase in payroll of
approximately $650,000 for the hiring of additional sales staff and computer
technicians offset by (b) a decrease in other selling, general and
administrative expenses of approximately $150,000, and (c) an increase in gross
profits of $200,000 based on increased revenues of approximately $1,300,000. As
noted above, the Company's focus is shifting toward its Internet operations. The
Company believes that the increase in sales staff and technicians in the
Products Segment will lead to future business for its complimentary Services
Segment.

Expenditures for research and development increased by $23,250 to $57,250.
This increase was for Internet programming work done by the Company in setting
up its Internet network.

As a result of the above, the Company reported a net loss for 1996 of
$1,893,480 or $0.72 per share as opposed to the reported net income in 1995 of
$38,859 or $0.02 per share.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company (through its NAFT subsidiary) has a Revolving Credit Agreement
with NationsCredit ("Nations") which may be used to finance its accounts
receivable and inventory up to a maximum of $3 million. The availability of
credit is based upon the balance of collateral available which is 80% of its
current accounts receivable and 100% of its inventory. As of June 30, 1997, the
Company had an outstanding balance of approximately $2.2 million, which was the
maximum available under the formula. Such obligation is secured by a continuing
security interest in the accounts receivable and inventory of NAFT, and
guaranties and cross guaranties of the Company and its other subsidiaries. The
borrowings bear interest at the prime rate plus 1.75%. Pursuant to the terms of
these agreements, NAFT is required to maintain certain liquidity ratios which
the Company is currently maintaining; (a) tangible net worth plus indebtedness
subordinated to amounts owed to Nations, less prepaid expenses, officer/employee
receivables and other intangible assets of not less than $1.4 million at the end
of each fiscal quarter, and (b) a ratio of total liabilities to tangible net
worth of no greater than 2.5 to 1 at the end of each fiscal quarter. As of June
30, 1997, NAFT had a tangible net worth of approximately $1.45 million and a
ratio of total liabilities to tangible net worth of 2.4 to 1, therefore keeping
the Company in complaince with all requirements. As of March 31, 1997, NAFT had
a tangible net worth as defined in the Credit Agreement of approximately $1.2
million and a ratio of total liabilities to tangible net worth of 2.9 to 1. The
shortfall in tangible net worth arose because of certain intercompany
transactions. Nations formally waived the default in May 1997. Since the
Company's NAFT subsidiary is currently operating with a small profit, the
Company believes that it will be able to maintain compliance with all required
liquidity ratios. While the Credit Agreement gives Nations the right to demand
repayment ifi it deems itself "insecure." Nations has given the Company no
indication that it is considering utilizing this provision. Furthermore,
incurring losses as the Company builds its new businesses was anticipated in
setting its covenants with Nations in October 1996. The Company deems its
relationship with Nations to be normal.

The Company had a negative cash flow of approximately $1 million for the
nine months ended June 30, 1997. This resulted in part from a cash loss in
operations of approximately $2.7 million which represents a net loss of
approximately $1.5 million, and an increase in accounts receivable of
approximately $2.2 million (offset in part, by the increase in accounts payable
of approximately $600,000). In addition, the Company purchased property and
equipment in the amount of approximately $1.6 million and increased long-term
borrowings by approximately $1.2 million.

Due to the Company's negative cash flow from operations and past and future
expenditures under its aggressive program of capital expenditures, the Company
has increased its borrowings under its Credit Agreement, and obtained a chattel
mortgage on its furniture and certain computer equipment in April 1997 in the
amount of $874,000 from FINOVA Capital Corporation. Such loan is for a term of
three years bears interest at 12.19% per annum and is self-liquidating over its
term.

To continue its pattern of growth, the Company must raise additional
capital and there can be no assurance that such capital will be available when
and as needed by the Company, or at a reasonable cost.

FORWARD LOOKING STATEMENTS

The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain forward-looking statements. Due to
the fact that the Company faces intense competition in a business characterized
by rapidly changing technology, actual results and outcomes may differ
materially from any such forward looking statements. Future results of
operations are, in general, difficult to forecast due to the fast moving pace of
the industry.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per share
("EPS"), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of operations. Under this new standard, Basic EPS is
computed based on weighted average number of shares actually outstanding during
the year and excludes any potential dilution; diluted EPS includes the

<PAGE>

effect of potential dilution from the exercise of dilutive stock options and
warrants into common stock using the treasury stock method. SFAS 128 is
effective for financial statements issued for periods ending after December 31,
1997, including interim periods, and earlier application is not permitted. When
adopted, the Company will be required to restate its EPS data for all prior
periods presented. The Company does not expect the impact of the adoption of
this statement to be material to previously reported EPS amounts.

<PAGE>

BUSINESS

Bell Technology Group Ltd. (the "Company"), is a diversified computer
products and service company which focuses its operation on providing
sophisticated computer/Internet business solutions to larger companies which are
engaged primarily in the graphics arts, advertising, publishing, entertainment
and financial industries. The Company has the ability to advise clients on the
various computer solutions available, provide, install and service such
solutions and then assist the client in properly utilizing the benefits to be
gained from using the World Wide Web (the "Internet"). The Company has
authorizations to sell and service equipment from hardware manufacturers such as
Silicon Graphics, Inc., Sun Microsystems, Inc. and Cisco Systems, Inc. and
software manufactures such as Microsoft Corporation, Netscape Corporation,
Alias/Wavefront Inc. and Checkpoint Software Corp. As a result of its growing
experience in the use of the Internet in commercial applications, the Company
has done substantial work in the areas of video streaming, security in credit
card transactions, and the creation of "shopping carts" for catalog sales
companies.

INTERNET SERVICES

The Internet services industry is comprised of many large, mid-sized, and
small companies engaged in a number of Internet-related activities including
Internet access, World Wide Web site design, Internet software development and
related consulting services. The Internet is a worldwide network of public and
private computer networks that link individuals, commercial organizations,
government agencies and educational institutions by means of a common
communication standard. Recent technological advances, including improvement in
network topologies and the development of easy-to-use graphical user interfaces,
combined with cultural and business changes, have led to the Internet being
integrated into the activities of individuals and the operations and strategies
of commercial organizations. However, direct access to the Internet is, in
general, prohibitively expensive for many organizations and individuals, without
the assistance of an Internet Access Provider, such as the Company, which has
the technological and other resources necessary to provide the connection. In
addition, while there has been significant media interest in use of the Internet
by consumers, business and professional organizations currently represent a more
significant percentage of Internet use. In June 1995, the Company, in order to
take advantage of the rapid growth in Internet usage by commercial organizations
began providing Internet-related services to such organizations.

During the past fiscal year, the Company has spent over $2 million building
a state-of-the-art network operations center at its new location. The 2,000
square foot network operations center offers customers the ultimate in network
connectivity. Connected to three Tier I Internet carriers via redundant fiber
optics, and providing connectivity to leased line clients via an OC-12 on the
NYNEX SONET ring, the Company is poised to service the most demanding companies
in New York City. Additionally, the network operations center offers secure
on-premises co-location services for those clients focused on Internet
publishing on the World Wide Web.

With its staff of Internet engineers and systems administrators, the
Company offers multiple platforms for World Wide Web hosting and development,
and is continually working on new and unique approaches to the use of the
Internet for business solutions. The Company's state-of-the-art network
operations center (located at its corporate headquarters) provides sophisticated
Internet connectivity available for direct, high-speed Internet connections and
World Wide Web hosting and co-location facilities. The Company assists its
clients with web development and hosts their web sites by providing the
appropriate hardware, network and maintenance services. The Company operates
this aspect of its business on a highly personalized level as opposed to using a
mass market approach, paying particular attention to the particular needs of its
clients. The Company firmly believes that facilities-based Internet services are
the future of the industry. Major corporations, which have web hosting and/or
co-location services, such as MSNBC Desktop Video and General Media
International, are invited to work closely with the Company at its facility in
setting up and managing sites.

Among the services and products offered to its clients is video
streaming -- a process whereby a user can view video transmissions while
downloading the video file. This allows companies like MSNBC Desktop Video to
distribute live video feeds to its customers. The Company is also working with a
major international magazine publisher to stream multiple channels of video,
each carrying its own content, to the Internet using public. In effect, this
enables the magazine publisher to produce its own "cable-like TV experience"
without regard to geographic boundaries.

<PAGE>

Among the marketing approaches developed by the Company are Internet based
commerce solutions, which include secure credit card transaction processing, a
shopping cart for browsing and purchasing merchandise on-line, and audio/video
streaming technologies that allow for, among other things, pay-per-view
programming. The Company is able to create multi-media web sites and provide
high-speed access to the Internet for the client/user. This technology enables
users to make use of the Internet to complete "on-line" transactions. For
example, the Company is bringing a substantial catalog sales company on-line, to
enable it to increase sales and market share by completing transactions over the
Internet.

BASIC INTERNET ACCESS: The Company provides dedicated Internet access to
corporations and other commercial entities. The Company offers four commercial
connection bandwidths: 56 Kbps, 128 Kbps, T-1, and T-3, and the hardware
necessary for basic Internet access, including routers and CSU/DSUs. The
bandwidth, or capacity of a physical network to carry traffic, of a dedicated
digital line is far greater than that possible through use of a conventional
modem. Greater bandwidth allows faster connection and downloading capabilities
for subscribers. Businesses with medium to large LANs and WANs often require the
bandwidth offered by dedicated digital lines.

A direct link between a commercial subscriber's LAN or WAN and the Internet
through the Company gives a subscriber the ability to use all the tools
available on the Internet. A direct link involves a leased line, provided by a
local telephone service provider, between the subscriber's location and the
Company's multi-path (or "redundant") backbone connection to the Internet. The
Company derives Basic Internet Access revenues from initial connection charges
and monthly service fees, both of which vary directly with the bandwidth chosen.
Each commercial subscriber receives a numerical Internet address, a descriptive
domain name, and 24-hour access to the Internet.

The Company also offers three levels of protection against unauthorized
access to private communications, depending on subscriber needs: (i) router
configuration, (ii) host configuration, and (iii) firewall design and
configuration. Router configuration involves the filtering of information
requests. Host configuration involves the determination of who is authorized to
access information. Firewall design, which is the most secure form of protection
against unauthorized access available, involves the interposition of certain
physical devices and barriers between a LAN and the Internet.

The Company assists subscribers in achieving full integration of their
existing LAN or WAN into the Internet once the basic Internet connection is
established. Where commercial subscribers utilize standard internal e-mail
applications, such as QuickMail or cc:Mail, the Company is able to assist them
with the setup of a mail gateway for proactive mail delivery to the desktop. In
addition, the Company provides a configuration service for LAN-based computers
by installing and configuring Internet-related software needed for applications
such as (i) File Transfer Protocol ("FTP"), an application which allows an
Internet user to retrieve entire files and documents from remote databases and
networks, and (ii) telnet, a utility which allows users to log-on to remote
systems easily.

Other services offered by the Company to it's customers include Internet
access, ISDN, leased lines, web hosting, programming, firewall, network security
and system design services. Due to the existence of its sales and service
operation the Company is able to offer customers support and services on all
major operating systems including UNIX, IRIX, Windows NT and Mac OS. However,
the Company does not intend to go into the consumer "dial-up" market. The
Company also provides consulting services in the areas of inter-networking,
computer and network security, network design and network operations.

PRODUCT SALES AND SERVICE

The Company has been shifting its emphasis from the sale of low margin
products with intense price competition such as Apple to higher-end, higher
margin hardware products such as Silicon Graphics, Integraph, Sun Microsystems,
Cisco, Digital Equipment, and software products such as SoftImage,
Alias/Wavefront and Avid. These products are generally not purchased through
mail order (as are Compaq and Apple products, for example) and require a higher
level of sales effort and after-market support such as training.

The Company services the products, which it sells by providing, warranty
repair services as well as contract support of system software and hardware.
Hardware contracts are issued for a fixed price and for a fixed term.

<PAGE>

Contracts for software support and maintenance are issued on the basis of
prepaid hours where a customer prepays for a block of hours, which may be used
at any time. Payments for service contracts are accounted for ratably over the
period of the contract. Payments for prepaid hours are accounted for as the
hours are used.

When requested by the client, the Company will prepare all equipment sold
by it by loading customer programs, connecting equipment to a network, and
servicing the client's hardware and software. The Company is authorized to carry
out warranty and other repairs on many of the products, which it sells. However,
the Company does not consider its repair and service activity to be a mainstream
activity but rather a service, which is maintained for the convenience of its
clients.

TRAINING

The Company maintains several classrooms at its headquarters facility,
which it rents out to corporations for the training of their professional staff.
The Company also provides training at the client's site on a national basis. The
Company provides a variety of modern operating equipment and current programs,
together with instructors to teach how to use such equipment and programs. Some
instructors are on staff and others are hired on a freelance basis, as needs
dictate. The Company typically charges a fixed price depending upon the size of
the class, the complexity of the group and the equipment required.

In September 1996, the Company began an aggressive program to market its
in-house training facilities. The Company provides training services for the
more sophisticated computer software program which it sells. Training is
marketed to large advertising and publishing firms, banks, large financial
institutions, clothing manufacturers, and the like, which send their personnel
to the Company's facility to attend one to five day programs. The Company's
modern classrooms at its corporate headquarters can accommodate groups of up to
150. Training rooms are equipped with modern hardware, computer desks and other
appropriate classroom equipment and various programs are loaded into equipment
as required by the users. In addition, T-1 access is provided in each classroom
for use in teaching Internet usage and programs. Course materials and training
methodology are custom developed to fit each client's specific needs. The
Company markets it training on a value-added basis, rather than as a
price-focused commodity product. The Company intends to expand this operation
into a significant source of revenue. The Company also provides training
sessions at its customers' sites. In such events, it provides trainers,
materials and any software or special hardware required.

The Company is a training center for Alias/Wavefront for the New York City
Metropolitan area. Alias programs are used for high-end (e.g. broadcast and
film) animation, 3-D modeling, and rendering. The Company is also an authorized
training provider for Macromedia Authorware/Director. Training is provided on a
wide range of platforms, including PC, IRIX and Mac OS.

INTERACTIVE DEVELOPMENT

The Company's graphic arts capabilities include creating and assembling
World Wide Web sites, interactive applications such as computer based training
and promotional sales material. The Company works with content providers such as
marketing firms to provide the technical and design aspects of a project for
large-scale multimedia projects including sites to be used on the Internet.

The Company designs internal communications products used by businesses for
computer based in-house training and Intranet development. In addition, the
Company provides front-end interfaces and graphics for database driven web
sites.

The Company's main areas of digital design development include animation,
interactive and web production. The animation capability extends to working in
Alias and SoftImage (the two animation packages with the greatest market share)
and to render work on a state-of the-art render farm from Silicon Graphics. The
Silicon Graphics render farm is made available to major national broadcast
companies which rent time on the farm when the Company is not using it. The
Company's Authorware division is responsible for creating computer-based
training and computer-based sales tools for major corporations. Most recently,
the Company has leveraged its Internet knowledge and instructional design
expertise to develop interactive training applications with rich multi-media
content for delivery over corporate Intranets. The Company recently completed an
intranet based interactive training program utilizing Macromedia Shockwave
technology for an international pharmaceutical company.

<PAGE>

The Company provides consulting and project management services for
companies making the transition from print to electronic to Internet
presentations and is currently doing such project for the largest and oldest
industrial directory of products and services in the world.

COMPETITION

The Company engages in an array of technology and computer related
businesses, each of which carries its own particular commercial and financial
risks. All of the businesses in which the Company engages faces competition from
significantly larger and better capitalized companies.

The market for Internet access services is extremely competitive. There are
no substantial barriers to entry in this industry, and the Company expects that
competition will intensify in the future. The Company believes that its ability
to compete successfully depends upon a number of factors including the pricing
policies of its competitors and suppliers; the timing of introductions of new
products and services by the Company and its competitors; and the Company's
ability to maintain or exceed industry service standards. The Company expects
that, because of the specialized nature of the Internet services business, it
may initially enjoy a competitive advantage because of its existing knowledge of
the advertising and publishing industries.

The Company's current and prospective competitors in the Internet services
industry generally may be divided into the following two groups: (1) other IAPs,
such as UUNET, and its strategic partner Microsoft, PSI, NETCOM, BBN, and other
national and regional providers; and (2) telecommunications companies, such as
AT&T, MCI, Sprint, MFS, WilTel, the RBOCs and various cable companies. All of
these competitors have greater market presence, engineering and marketing
capabilities, and financial, technological and personal resources than those
available to the Company.

Although most of the established telecommunications companies currently
offer only limited Internet access, many have announced plans to offer expanded
Internet access capabilities. The Company expects that all of the major
telecommunications companies will compete fully in the Internet access market.
The Company believes that new competitors, including large hardware, software,
media and other technology and telecommunications companies will enter the
Internet access market, resulting in even greater competition for the Company.
Certain companies, including America On-Line, GTE and PSI, have obtained or
expanded their Internet access products, services and customer bases as a result
of acquisitions. Such acquisitions may permit the Company's competitors to
devote greater resources to the development and marketing of new and existing
competitive products and services. In addition, the ability of some of the
Company's competitors to market other products and services with Internet access
services could place the Company at a competitive disadvantage. For example,
certain of the Company's competitors which are telecommunications companies may
be able to provide customers with reduced communications costs in connection
with their Internet access services, reducing the overall cost of their Internet
access solution and significantly increasing price pressure on the Company.

As a result of increased competition, the Company expects to encounter
significant pricing pressure in each of its business areas, which in turn could
result in significant reductions in the prices that the Company can charge for
its services. There can be no assurance that the Company will be able to offset
the effects of any such price reductions with an increase in the number of its
customers, higher revenues from enhanced services, cost reductions or otherwise.
In addition, the Company believes that the Internet access and on-line services
businesses are likely to encounter consolidation in the near future, which could
result in increased price and other competition in the industry. There can be no
assurance that the Company will have the financial resources, technical
expertise or marketing and support capabilities to successfully meet its
competition. See "Risk Factors -- Dependence upon Chief Executive Officer; Need
to Manage Growth and Expansion."

As a reseller of computer and peripheral equipment to business
organizations, the Company faces intense competition from mass marketing
channels in which price-cutting is the dominant form of competition. Over the
past decade, technological improvements have been accompanied by a consistent
decline in prices. This decline in prices has resulted in decreasing profits
margins. Consequently, in order to achieve and maintain profitability, the
Company must attain increased sales in this area of the business, or achieve
greater sales in other areas of the business, which have higher profit margins.
Furthermore, as companies hire their own internal computer specialists, the
companies are in a better position to fulfill their computer needs through mail
order purchases at lower prices than the Company can provide.

<PAGE>

The market for new commercial computer equipment is characterized by rapid
technological advancements, intense competition and the use of mass marketing
channels in which price-cutting is the dominant form of competition. The Company
can be distinguished from other computer equipment providers on the basis of
added services, such as consultation and advisory services, and its ability to
work with clients in the more sophisticated areas of computer usage such as 3D
animation, training and Internet access, which the Company's sales and technical
staff is trained to provide.

The market for the servicing of computers and peripheral equipment is a
local market. As a result, the Company's main competitors are local New York
City computer resellers. The Company has scaled back its computer service and
repair operation and offers it primarily as a convenience to its clients.

The Company relies on other companies to supply certain components of its
computer inventory, service and diagnostic equipment, as well as its network
infrastructure (including telecommunications services and networking equipment)
which, in the quantities and quality required by the Company, are available only
from sole or limited sources. The Company has in the past, and may from time to
time, experience delays in receiving telecommunication services and shipments of
merchandise. There can be no assurance that the Company will be able to obtain
such telecommunication services and merchandise on the scale and at the times
required by the Company at an affordable cost.

EMPLOYEES

As of October 30, 1997, the Company employed approximately 75 full time and
10 part time employees. Of the full time employees, approximately 10 are in
management positions, 10 are in administrative and support positions, 20 are in
sales positions, and 35 are in technical, engineering, design and service
positions. None of the Company's employees are covered by a collective
bargaining agreement. The Company believes that its employee relations are
satisfactory.

PROPERTIES

The Company leases approximately 32,000 square feet of space in New York,
New York, which it uses as its principal executive offices, sales, service and
training center, shipping and receiving depot, for a term expiring the year
2007. The initial rent under the lease is $309,250, and escalates over the term
of the lease to $563,547 in the year 2007. The Company intends to use a portion
of the proceeds of the private placement to expand its facilities.

The Company considers that, in general, its physical properties are well
maintained, in good operating condition and adequate for its purposes.

LEGAL PROCEEDINGS

In January 1997, a company, which allegedly provides website services,
commenced an action in the Supreme Court of the State of New York, County of New
York against General Media International Ltd., the Company and two individuals.
The complaint alleges that the Company tortiously interfered with the
plaintiff's contractual and business relations with General Media International,
Inc. The Company believes that the action against it is without merit and
intends to vigorously defend itself. No papers have been filed in the action
since the original summons and complaint filed by the plaintiff and the answer
by the Company.

<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS

The following sets forth information with respect to the executive officers
and directors of the Company as of the date of the Prospectus.

NAME AGE POSITION
- --------------------- --- -----------------------------------
Marc H. Bell 30 Chairman, Chief Executive Officer
and Director
Robert B. Bell 58 Executive Vice President, Chief
Financial Officer and Director
William T. Jahnke 43 Vice President
Marc Jaffe 30 Vice President
Alan Levy 35 Treasurer (Chief Accounting
Officer)
Scott Safran 41 Vice President -- Training &
Interactive Development
Tsuyoshi Shiraishi 52 Director
Martin Fox 62 Director
Dr. Richard Videbeck 73 Director
Lord St. John of 40 Director
Bletso

MARC H. BELL has been the President and Chief Executive Officer since he
founded the Company in 1989. He has had more than eight years of experience in
the computer industry. Mr. Bell has a B.S. degree in accounting from Babson
College and an M.S. degree in Real Estate Development and Investment from New
York University.

ROBERT BELL has served as Executive Vice President and Chief Financial
Officer of the Company and its corporate predecessor since 1994. Prior to
joining the Company, Mr. Bell was a practicing attorney in New York City for
more than five years. Prior to 1994, Mr. Bell was for many years also an Adjunct
Professor at New York University. He is primarily responsible for the Company's
financial policies. Robert Bell is the father of Marc H. Bell.

WILLIAM T. JAHNKE has been a Vice President of the Company since March 1997
and the Director of Corporate Sales of the Company since August 1995. Prior to
joining the Company, Mr. Jahnke was president and chief operating officer of
Vernon Computer Rentals and Leasing from February 1989 to December 1994, where
he pioneered and implemented a nationwide asset management program for Apple
which is used by several thousand U.S. sales representatives. Mr. Jahnke
received a B.S. Degree in Computer Science from Seneca College in 1975.

MARC JAFFE a Vice President of the Company since March 1997 and Director of
On-Line Services, joined the Company in early 1995 to run the Company's Internet
services business. Prior to joining the Company, Mr. Jaffe had extensive
experience in the use of computers and telecommunications in the advertising and
marketing industry. Mr. Jaffe recently developed an Internet-focused marketing
strategy that won the prestigious CreaTech Award, presented by ADVERTISING AGE
magazine, and has spoken at numerous Internet conferences sponsored by Apple
Computer. Prior to joining the Company, Mr. Jaffe was a department manager at
Sid Patterson Advertising Inc. in New York City since 1989. Mr. Jaffe graduated
from Colgate University in 1989, where he received a Bachelor of Arts Degree.

ALAN LEVY joined the Company as Treasurer and Chief Accounting Officer in
February 1997. From March 1994, to February 1997, Mr. Levy was the Assistant to
the Vice President of Finance of Del Laboratories, Inc., a manufacturer and
wholesaler of cosmetics and over-the-counter pharmaceuticals. Prior to that, Mr.
Levy was a Technical Manager with the American Institute of Certified Public
Accountants from August 1990 to March 1994. He is a Certified Public Accountant
and received his Bachelor's degree in Public Accounting from Long Island
University, C.W. Post Campus.

SCOTT SAFRAN has been Vice President-Training and Interactive Development
since June 1997 and the Director of Corporate Training since joining the Company
in March 1996. Prior to joining the Company he was a

<PAGE>

Senior Account Executive at IBM Skill Dynamics Corporation from December 1994 to
October 1995. From December 1989 to December 1994 Mr. Safran was in various
sales positions with AT&T Networking Systems. Mr. Safran has a Bachelor of Arts
in English Literature and Master of Business Administration degrees from St.
John's University.

TSUYOSHI SHIRAISHI has been a director of the Company since July 1, 1994.
Mr. Shiraishi has been the Chairman of Century World PTE Ltd., an investment
consulting firm and the Managing Director of Harpoon since 1992. Prior to that,
Mr. Shiraishi was the Director of Marketing & Investment for Kajima Overseas
Asia PTE Ltd., a subsidiary of Kajima Corporation, an international construction
company, since 1990. In addition, since 1990, Mr. Shiraishi has been Vice
Chairman of Century International Hotels, which operates and manages 17 hotels
in the Pacific Rim. He is the sole shareholder of Harpoon. Mr. Shiraishi is a
Japanese citizen and a resident of Singapore.

MARTIN FOX has been a director of the Company since October 1995. Mr. Fox
has been, for more than five years, the President and a director of Initio,
Inc., a publicly owned mail order retailer of consumer products.

RICHARD VIDEBECK has been a director of the Company since October 1995.
Since 1983, Dr. Videbeck has been an independent consultant in consumer risk
analysis, particularly for retailers and banks. From 1974 until 1986, Dr.
Videbeck was a professor of sociology at the University of Illinois at Chicago.
From 1974 until 1977, Dr. Videbeck was the Dean of the Doctor of Arts Program of
the Graduate College of the University of Illinois at Chicago.

ANTHONY ST. JOHN, LORD ST. JOHN OF BLETSO has been a director of the
Company since October 1997. Lord St. John is a member of the House of Lords of
Parliament of the United Kingdom. He serves on the European Union Select
Committee A on Trade, Finance and Foreign Affairs. He also serves as a
consultant to Merrill Lynch and is a registered representative of the London
Stock Exchange. Lord St. John has a Bachelor of Science in Psychology, a
Bachelor of Arts in Law from Cape Town University and a Masters in Law from
London University. Lord St. John of Bletso is a citizen and resident of the
United Kingdom.

The directors serve until the next annual meeting of the Company's
stockholders and until their respective successors are duly elected and
qualified or until their earlier resignation, death or removal. Officers are
appointed by, and serve at the discretion of, the Board. Marc H. Bell has
entered into an employment agreement with the Company. See " -- Employment
Arrangements."

OTHER KEY EMPLOYEES

MARC MANDEL, 30, currently serves as the Director of Publishing Sales and
is an Internet Sales Account Executive for the Company. Mr. Mandel has been with
the Company since August 1993. Prior to joining the Company, Mr. Mandel was
President of Desktop Designs Ltd., a VAR of Apple and Silicon Graphics systems,
which he founded in 1986. Mr. Mandel has degrees in Marketing and Management
from Western New England College.

JERROLD HOFFMAN, 52, the Company's Director of Purchasing since January
1994, has extensive experience in purchasing, production, sales and budgeting.
Prior to joining the Company, Mr. Hoffman served for eight years as production
manager at A. Kamhi, Inc., an apparel manufacturer. He received his Bachelor's
degree in economics from Hunter College.

RICHARD TOPOLEWSKI, JR., 35, has been the Company's Director of Internet
Sales since May 1997. Mr. Topolewski has thirteen years experience in the
telecommunications industry. Prior to joining the Company, Mr. Topolewski was
the Director of Northeast Agent Sales for MFS Communications from February 1993
through May 1997. Prior to that, he was with Metromedia Communications as
National Sales Manager from November 1990 through February 1993. He received a
Bachelors of Science from Johnson and Wales University in Business Management.

BOARD COMPENSATION

Each director of the Company who is not employed by the Company, and who
does not beneficially own more than 5% of the outstanding Common Stock of the
Company, receives (i) the sum of $1,000 per meeting

<PAGE>

attended by such outside director and (ii) an annual grant of options to
purchase a total of 3,000 shares of Common Stock. Such options are immediately
exercisable, have a ten-year term, subject to certain restrictions, and are
exercisable at the fair market value of the Common Stock at the date of the
grant. Of the current board members, only Mr. Fox, Dr. Videbeck and Lord St.
John of Bletso are entitled to receive such compensation. The stock options
granted to them expire in October 2005, October 2006 and are exercisable at
$6.125, respectively. In addition, at the discretion of the Board of Directors,
directors may be reimbursed for reasonable travel expenses in attending Board
and committee meetings.

EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table sets forth information concerning the compensation
received for services rendered to the Company during the past three fiscal years
by Marc H. Bell, the Chief Executive Officer. No other executive officer
received compensation in excess of $100,000 during any of the past three fiscal
years.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION

<TABLE>
<CAPTION>
NAME AND
PRINCIPAL POSITION YEAR SALARY
- ------------------------------------------------------------------- ---- ---------
<S> <C> <C>
Marc H. Bell....................................................... 1996 $165,000
President and Chief 1995 45,000
Executive Officer 1994(1) 149,000
</TABLE>

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

(1) Prior to July 1, 1994, the Company was a Subchapter S
corporation for purposes of the Internal Revenue Code. The
amount shown is for a twelve-month period and includes
dividend distributions made by the Company.

STOCK OPTION PLAN

The Company has adopted the 1995 Stock Option Plan (the "Stock Option
Plan"), pursuant to which options to acquire an aggregate of 360,000 shares of
Common Stock have been reserved for issuance to employees, officers or directors
of, or consultants to, the Company. The Board has discretionary authority to
determine the types of stock options to be granted, the persons eligible to
receive stock options, those to whom options may be granted, the number of
shares to be subject to such options, the exercise price of such options and the
terms of the stock option agreements. The exercise price may be paid in cash,
certified or bank check, or in stock of the Company valued at its then fair
market value. Options are non-transferable (including pursuant to a final
divorce decree or property division settlement or agreement) except by will or
by the laws of descent and distribution. The Company has filed a registration
statement on Form S-8 with respect to the shares of Common Stock to be issued
upon the exercise of the options granted under the 1995 Stock Option Plan.

As of September 30, 1997, the Company had granted options to purchase
309,562 shares of Common Stock under the Stock Option Plan of which 301,564
options are unexercised. The unexercised number includes options to purchase
90,000 shares granted to Robert Bell, the Company's Executive Vice President;
options to purchase 6,000 shares granted to Martin Fox, a director; and options
to purchase 6,000 shares granted to Dr. Richard Videbeck, a director. The
exercise price of all such options is $6.125 per share and the term of the
options is ten years from the date of grant.

<PAGE>

SHARE DEPOSIT AGREEMENT

Pursuant to a Share Deposit Agreement between the Principal Stockholders,
the Company and the Underwriter entered into in January 1996, the Principal
Stockholders have deposited with the Company an aggregate of 420,000 of the
shares of Common Stock owned by them. The Share Deposit Agreement was negotiated
between the Principal Stockholders and the Underwriter as a means for the
Principal Stockholders to demonstrate their confidence in the Company's future
and their commitment to the Company. The Principal Stockholders retain the right
to vote such shares during the term of the agreement. The shares so deposited by
them will not be released until January 24, 2004 unless the Company reports
"pre-tax net income" (as defined in the Share Deposit Agreement) in excess of
$3,500,000 during the eight quarters ending March 31, 1998, in which event all
of such shares will be released.

EMPLOYMENT ARRANGEMENTS

In October 1995, the Company entered into an employment agreement with Marc
H. Bell, which extends for a period of five years, terminating on September 30,
2000. Pursuant to the terms of the agreement, Mr. Bell receives a base salary of
$200,000 per year effective January 1, 1996. Mr. Bell's base salary will
increase 5% per year for each year that the Company reports net income. Pursuant
to his existing employment agreement, in the third quarter of fiscal 1997, the
Company made loans to Mr. Bell bearing interest at 8.75% per annum in the amount
of $145,408. Such loan matures in April, 2002 to the extent of $114,000 and in
June 2002 for the balance. The agreement also provides for a severance payment
to Mr. Bell in the event of a "change of control" of the Company equal to 2.99
times his average annual compensation, including bonus, during the term of the
agreement.

The Company has also entered into employment agreements with all of its
executive and key personnel listed above. See "Management -- Executive Officers,
Key Employees and Directors." Many of these agreements contain non-competition
provisions in the event of termination for cause by the Company, or termination
without cause by the employee.

In addition to base compensation, the Company intends to reserve at the end
of each fiscal year, a sum equal to ten (10%) percent of the consolidated net
income of the Company (computed before provision for federal and state income
taxes) (the "Bonus Pool"), for allocation among the officers of the Company and
certain key employees (including Marc H. Bell). Marc H. Bell will receive an
amount equal to 5% of the pre-tax income over $1 million (50% of the Bonus Pool
to the extent, if any, that the Bonus Pool exceeds $100,000). The Board of
Directors of the Company will determine the allocation of the Bonus Pool to
other employees to the extent the Bonus Pool is in excess of Mr. Bell's
allocable share as set forth above.

The Company has obtained a key person life insurance policy on Mr. Bell in
the amount of $1,000,000. The Company is the beneficiary of such policy.

LIMITED LIABILITY AND INDEMNIFICATION MATTERS

As permitted by the Delaware Law, the Company has included in its
Certificate of Incorporation a provision to eliminate the personal liability of
its directors for monetary damages for breach or alleged breach of their
fiduciary duties as directors, subject to certain exceptions. In addition, the
By-laws of the Company provide that the Company is required to indemnify its
officers and directors under certain circumstances, including those
circumstances in which indemnification would otherwise be discretionary, and the
Company is required to advance expenses to its officers and directors as
incurred in connection with proceedings against them for which they may be
indemnified. At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted. The Company
believes that the provisions discussed above are necessary to attract and retain
qualified persons as directors and officers.

The Company has been advised that it is the position of the Commission that
insofar as the foregoing provision may be invoked to disclaim liability for
damages arising under the Securities Act, such provision is against public
policy as expressed in the Securities Act and is therefore unenforceable.

<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1997 by each
beneficial owner of more than 5% of the outstanding shares thereof known to the
Company, and by each director and executive officer named in the Summary
Compensation Table and all executive officers and directors of the Company as a
group, both before and after giving effect to this Offering.

SHARES OF PERCENTAGE OF OUTSTANDING
NAME AND ADDRESS OF COMMON STOCK COMMON STOCK
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) BENEFICIALLY OWNED(3)
- ------------------------------------------------------------ --------------------- -------------------------

<S> <C> <C>
Marc H. Bell(4)............................................. 1,802,142 50.5%

Tsuyoshi Shiraishi (4)(5)
Harpoon Holdings, Ltd.
2 Handy Road, #11-09 Cathay
Building, Singapore 229233.................................. 862,500 25.0%

Robert B. Bell (6).......................................... 90,000 2.5%

Martin Fox (6)
2001 Tonnelle Avenue
North Bergen, NJ 07047...................................... 6,000 *

Richard Videbeck (6)
3249 East Angler's Stream
Avon Park, FL 33825......................................... 6,000 *

All executive officers and directors
as a group (9 persons) (7).................................. 1,822,142 50.8%
</TABLE>

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

* Less than 1%

(1) The address for Messrs. Marc and Robert Bell is c/o Bell Technology Group
Ltd., 295 Lafayette Street, New York, NY 10012.

(2) Under the rules of the Securities and Exchange Commission, a person is
deemed to be the beneficial owner of a security if such person has or shares
the power to vote or direct the voting of such security or the power to
dispose or direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities if that person has the right to
acquire beneficial ownership within 60 days. Accordingly, more than one
person may be deemed to be a beneficial owner of the same securities. Unless
otherwise indicated by footnote, the named entities or individuals have sole
voting and investment power with respect to the shares of Common Stock
beneficially owned.

(3) Represents the number of shares of Common Stock beneficially owned as of
September 30, 1997 by each named person or group, expressed as a percentage
of all of the shares of such class outstanding as of such date.

(4) Includes the 862,500 Harpoon Shares which are subject to the October 1995
Irrevocable Proxy Agreement entered into between Harpoon and Marc H. Bell,
pursuant to which Harpoon has granted Mr. Bell the sole right to vote the
Harpoon Shares with respect to the election of the Company's directors. The
Irrevocable Proxy Agreement terminates in October 2005. Also includes
420,000 Shares subject to the Share Deposit Agreement. See
"Management -- Share Deposit Agreement." Also includes 90,000 shares with
respect to which Robert Bell, the Company's Executive Vice President, and
30,000 with respect to which Leslie Bell, the Company's Assistant Secretary,
have currently exercisable options to purchase. Robert Bell and his daughter
Leslie Bell, have entered into an agreement pursuant to which Marc H. Bell,
or in the alternative, the Company has the right to acquire any shares
purchased pursuant to the exercise of such options for the fair market value
of such shares on the date of exercise.

(5) Mr. Shiraishi, a director of the Company, is the sole shareholder of
Harpoon. See "Management -- Executive Officers and Directors."

<PAGE>

(6) The named individual has the right to acquire the number of shares shown
above pursuant to a currently exercisable stock option.

(7) Includes currently exercisable stock options to purchase 140,000 shares.

CERTAIN TRANSACTIONS

During the past two years, there have been no transactions between the
Company and any of its officers, directors and/or principal stockholders other
than the creation of five year, 8.75% term loans to Marc Bell in the amount of
$145,408. Such loans, which mature in the third quarter of fiscal 2002, were
made pursuant to Mr. Bell's Employment Agreement. See "Management -- Employment
Arrangements."

<PAGE>

DESCRIPTION OF SECURITIES

GENERAL

The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock, par value $.01 per share, and 500,000 shares of Preferred
Stock, par value $.01 per share. The Preferred Stock may be issued with such
rights, designations and privileges (including redemption and voting rights) as
the Board may, from time to time, determine.

COMMON STOCK

There are currently 3,448,450 shares of Common Stock outstanding. holders
of Common Stock are entitled to one vote per share on all matters to be voted
upon by the stockholders of the Company. The holders of the Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to the prior liquidation rights
of any outstanding Preferred Stock. The Common Stock has no preemptive,
redemption, conversion or other subscription rights. The outstanding shares of
Common Stock are fully paid and non-assessable. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock, which the Company may designate and issue in the future.

WARRANTS

The Company has outstanding 661,150 Warrants to purchase shares of its
Common Stock. The holders of the Warrants are entitled to purchase one share of
Common Stock at a price of $7.70 per share at any time until January 23, 2001.
Unless exercised, the Warrants will automatically expire on January 23, 2001.
The Warrants are subject to redemption by the Company at a redemption price of
$.10 per Warrant upon 30 days prior written notice to the holders of the
Warrants. The redemption is conditioned upon the average closing bid quotation
of the Common Stock as reported on Nasdaq, if traded thereon, (or if not traded
thereon, the average closing price if listed on a national securities exchange
or other reporting system that provides last sale price), having been at least
150% of the then current exercise price of the Warrants (initially $11.55 per
share) for a period of 20 consecutive trading days ending on the third day prior
to the date on which the Company gives notice of redemption. The Warrants are
exercisable until the close of business on the day immediately preceding the
date fixed for redemption. The Company has agreed with the Underwriter not to
redeem the Warrants during the twelve month period commencing on the date hereof
without the Underwriter's prior written consent. The Warrant Agreement may be
amended, subject to certain exceptions, by the Company and the warrant agent
with the consent in writing of the holders of at least a majority of the
Warrants.

PREFERRED STOCK

The Board of Directors is authorized, without further stockholder approval,
to issue up to 500,000 shares of "blank check" Preferred Stock in one or more
series. The Board has the right to fix the rights, preferences, privileges and
restrictions granted or imposed upon any unissued shares of Preferred Stock, fix
the number of shares constituting any series and the designations of such
series.

The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. As of the closing of the Offering, no shares of
Preferred Stock will be outstanding, and the Company currently has no plans to
issue any shares of Preferred Stock.

DELAWARE LAW AND CERTAIN CHARTER PROVISIONS

The Company is a Delaware corporation and subject to Section 203 of the
Delaware General Corporation Law (the "Delaware Law"), an anti-takeover law. In
general, Section 203 of the Delaware Law prevents an

<PAGE>

"interested stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the date such person became an interested stockholder, subject to certain
exceptions such as the approval of the Board of Directors and the holders of at
least 66 2/3% of the outstanding shares of voting stock not owned by the
interested stockholder. The existence of this provision would be expected to
have the effect of discouraging takeover attempts, including attempts that might
result in a premium over the market price for the shares of Common Stock held by
stockholders.

The Company's Certificate of Incorporation provides that any action
required or permitted to be taken by the stockholders of the Company may be
taken only at a duly called annual or special meeting of the stockholders. The
Certificate of Incorporation and Bylaws leave to the directors the sole right to
change the size of the Board of Directors and to fill vacancies on the Board of
Directors. The Bylaws also establish procedures, including advance notice
procedures, with regard to the nomination, other than by or at the direction of
the Board of Directors, of candidates for elections as directors or for
stockholder proposals to be submitted at stockholder meetings.

These and other provisions could have the effect of making it more
difficult for a third party to effect a change in control of the Board of
Directors and therefore may discourage another person or entity from making a
tender offer for the Company's Common Stock, including offers at a premium over
the market price of the Common Stock, and might result in a delay in changes in
control of management. In addition, these provisions could have the effect of
making it more difficult for proposals favored by the stockholders to be
presented for stockholder consideration.

The Company's Certificate of Incorporation also includes provisions to
eliminate the personal liability of its directors for monetary damages resulting
from breaches of their fiduciary duty to the extent permitted by the Delaware
Law and to indemnify its directors and officers to the fullest extent permitted
by the Delaware Law.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock and
Warrants is Continental Stock Transfer & Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Except as discussed below, all the Company's Securities will be freely
tradable without restriction under the Securities Act, unless purchased by
"affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act.

The Company currently has 3,448,450 shares of Common Stock outstanding. Of
these, 1,682,142 and 400,000, respectively, shares of Common Stock were issued
by the Company in private transactions in reliance upon the "private placement"
exemption under Section 4(2) of the act in three separate transactions in July
1994 and October 1995 (1,682,142), and under Regulation S in September 1997
(400,000). The July 1994 and October 1995 shares are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933 ("Restricted
Shares").

In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned for at
least one year shares of Common Stock which are treated as "restricted
securities," including persons who may be deemed affiliates of the Company,
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of: (i) one percent of the number of shares of
Common Stock then outstanding (approximately 34,485 shares); or (ii) the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding the filing of a form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about the
Company. Under Rule 144(k), a person who is not deemed to have been an affiliate
of the Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

<PAGE>

SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION

The following table sets forth certain information with respect to persons
for whom the Company is registering the Shares for resale to the public. The
Company will not receive any of the proceeds from the sale of the Shares by the
Selling Stockholders. Beneficial ownership of the Shares by such Selling
Stockholders after this offering will depend on the number of Shares sold by
each Selling Stockholder. Assuming all of the Shares being offered hereby are
sold, none of the Selling Stockholders will beneficially own any Common Stock in
the Company.

<TABLE>
<CAPTION>
SHARES
SHARES BENEFICIALLY
BENEFICIALLY OWNED OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING
NAME AND ADDRESS OF ------------------ SHARES -----------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- -------------------------------------------------------------- ------- ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Hans Knettenbrecht
Erbenheimer Weg
65205 Wiesbaden
Ausland AG.................................................. 34,783 1.0% 34,783 0 0
Mathias von Marcard
Kromberger StraBe 48
60323 Frankfurt a. M........................................ 26,087 * 26,087 0 0
Andreas Dulger
Ludolph-Krell Str 55
D-69120 Heidelberg Germany.................................. 34,783 1.0% 34,783 0 0
Siegfried Piel
Am Liehberg 1
65779 Kelkheim.............................................. 34,783 1.0% 34,783 0 0
Value Management and Research
Flughafenstrada 21
D-63263 New Isenburg Germany................................ 113,043 3.3% 113,043 0 0
VMR High Octane Fund
P.O. Box 71 Road Town
Tortola, British Virgin Islands............................. 121,739 3.5% 121,739 0 0
Risk Reward Fund
P.O. Box 3460 Road Town
Tortola, British Virgin Islands............................. 34,782 1.0% 34,782 0 0
</TABLE>

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

* Less than one percent of the Company's Common Stock.

The Selling Stockholders received an aggregate of 400,000 shares of the
Company's Common Stock in connection with the Company's Private Placement in
September, 1997 of shares in the aggregate principal amount of $2,200,000.
Pursuant to the terms of the Private Placement, the Company has agreed to
register these shares for immediate resale.

The Selling Shareholders have advised the Company that sales of the Shares
may be effected from time to time in transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the Common Stock or a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Common Stock directly
to purchasers or through broker-dealers that may act as agents or principals.
Such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of shares of Common Stock for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Milberg Weiss Bershad Hynes & Lerach LLP, One Pennsylvania Plaza, New
York, New York 10119.

<PAGE>

EXPERTS

The audited consolidated financial statements included in this Prospectus
and elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto. Such report is included herein in reliance upon the authority of said
firm as experts in giving said reports.

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Public Accountants................................................................ F-2
Financial Statements of Bell Technology Group Ltd. and Subsidiaries.....................................
Consolidated Balance Sheets -- September 30, 1996 and September 30, 1995................................ F-3
Consolidated Statements of Operations -- For the Year Ended September 30, 1996 and Nine Months Ended
September 30, 1995.................................................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity -- For the Year Ended September 30, 1996 and
Nine Months Ended September 30, 1995.................................................................. F-5
Consolidated Statements of Cash Flows -- For the Year Ended September 30, 1996 and Nine Months Ended
September 30, 1995.................................................................................... F-6
Notes to Consolidated Financial Statements -- For the Year Ended September 30, 1996..................... F-7
Consolidated Balance Sheets as of June 30, 1997 and September 30, 1996.................................. F-15
Consolidated Statements of Operations for the Nine Months Ended June 30, 1997 and 1996.................. F-16
Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 1997 and 1996.................. F-17
Notes to Consolidated Financial Statements for the Nine Months Ended June 30, 1997...................... F-18
</TABLE>

F-1

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO: BELL TECHNOLOGY GROUP LTD.:

We have audited the accompanying consolidated balance sheets of Bell
Technology Group Ltd. (a Delaware corporation) and Subsidiaries as of September
30, 1996 and September 30, 1995, and the related consolidated statements of
operations, and cash flows for the year and nine months then ended,
respectively. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Bell Technology Group
Ltd. and Subsidiaries as of September 30, 1996 and September 30, 1995, the
results of its operations and its cash flows for the year and nine months then
ended, respectively, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

December 23, 1996
New York, New York

F-2

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................ $ 2,342,011 $ 222,367
Accounts receivable, net of allowance for doubtful accounts of $64,842 and
$11,212 as of September 30, 1996 and September 30, 1995, respectively......... 1,847,918 1,423,548
Inventories...................................................................... 758,353 843,904
Prepaid expenses and other current assets........................................ 195,113 12,061
------------- -------------
TOTAL CURRENT ASSETS.......................................................... 5,143,395 2,501,880
Property and equipment, net........................................................ 2,151,294 413,306
Deferred stock offering costs...................................................... -- 25,000
Long-term investment............................................................... 400,000 --
Other assets....................................................................... 115,093 21,364
------------- -------------
TOTAL ASSETS.................................................................. $ 7,809,782 $ 2,961,550
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings............................................................ $ -- $ 711,952
Current portion of notes payable................................................. 39,152 75,865
Accounts payable................................................................. 1,274,197 1,319,532
Accrued expenses................................................................. 240,116 118,414
Deferred revenues................................................................ 166,617 75,562
Deferred income taxes............................................................ -- 20,816
------------- -------------
TOTAL CURRENT LIABILITIES..................................................... 1,720,082 2,322,141
Long term note payable, net of current portion................................... -- 47,050
Note payable -- Stockholder...................................................... -- 287,000
Deferred income taxes............................................................ -- 6,562
------------- -------------
TOTAL LIABILITIES............................................................. 1,720,082 2,662,753
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value; 500,000 shares authorized; no shares issued and
outstanding................................................................... -- --
Common Stock, $.01 par value; 10,000,000 shares authorized; 3,083,210 and
1,725,000 shares issued and outstanding....................................... 30,832 17,250
Additional paid-in capital....................................................... 8,033,134 362,333
Accumulated deficit.............................................................. (1,974,266) (80,786)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY.................................................... 6,089,700 298,797
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................... $ 7,809,782 $ 2,961,550
------------- -------------
------------- -------------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-3

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------ ------------------
<S> <C> <C>
REVENUES.................................................................. $ 10,373,664 $8,738,410
COSTS AND EXPENSES:
Cost of revenues........................................................ 8,599,241 7,292,232
Selling, general and administrative..................................... 3,186,718 1,212,829
Depreciation and amortization........................................... 219,176 68,510
Research and development................................................ 57,250 34,000
------------------ ------------------
Total costs and expenses............................................. 12,062,385 8,607,571
Net Income (loss) from operations......................................... (1,688,721) 130,839
Interest income......................................................... 121,256 --
Interest expense........................................................ (98,520) (72,881)
Write-off of Debt Issuance Costs........................................ (257,391) --
------------------ ------------------
Income (loss) before taxes................................................ (1,923,376) 57,958
(Benefit from) provision for taxes........................................ (29,896) 19,099
------------------ ------------------
Net income (loss)......................................................... $ (1,893,480) $ 38,859
------------------ ------------------
------------------ ------------------

Net earnings (loss) per share............................................. $ (0.72) $ 0.02

Weighted average shares outstanding....................................... 2,633,400 1,725,000
</TABLE>

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

F-4

<PAGE>
BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN ACCUMULATED STOCKHOLDERS
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994.................... 1,725,000 $10,625 $ 368,958 $ (119,645) $ 259,938
Adjustment related to the Merger of PFMT and
the Company................................. -- 6,625 (6,625) -- --
Net income.................................... -- -- -- 38,859 38,859
--------- ------- ---------- ----------- ------------
BALANCE, SEPTEMBER 30, 1995................... 1,725,000 17,250 362,333 (80,786) 298,797
Stock issuance in connection with bridge
financing................................... 35,710 357 249,643 -- 250,000
Proceeds from Initial Public Offering, net of
expenses of $1,602,175...................... 1,322,500 13,225 7,421,158 -- 7,434,383
Net Loss...................................... -- -- -- (1,893,480) (1,893,480)
--------- ------- ---------- ----------- ------------
BALANCE, SEPTEMBER 30, 1996................... 3,083,210 $30,832 $8,033,134 $(1,974,266) $ 6,089,700
--------- ------- ---------- ----------- ------------
--------- ------- ---------- ----------- ------------
</TABLE>

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

F-5

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income....................................................... $ (1,893,480) $ 38,859
Adjustments to reconcile net (loss) income to net cash used in operating
activities
Depreciation and amortization........................................ 219,176 68,510
Write-off and amortization of debt issuance.......................... 250,000 0
(Benefit) for deferred taxes......................................... (29,896) (838)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) in accounts receivable.................................. (424,370) (111,434)
Decrease (increase) in inventories................................. 85,551 (422,991)
(Increase) decrease in prepaid expenses and other current assets... (183,052) 4,354
(Increase) in other assets......................................... (68,729) (31,890)
(Decrease) increase in accounts payable............................ (45,337) 99,211
Increase in accrued expenses....................................... 121,702 6,347
(Decrease) in payable due to officers.............................. -- (5,250)
Increase in deferred revenues...................................... 91,057 48,762
------------------ ------------------

Net cash used in operations............................................... (1,877,378) (306,360)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net of landlord reimbursement...... (1,954,646) (149,917)
Purchase of long-term investment........................................ (400,000) --
------------------ ------------------
Net cash used in investing activities..................................... (2,354,646) (149,917)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments of) proceeds from short term borrowings................. (711,952) 417,739
Repayments of stockholder loan.......................................... (287,000) (13,000)
Repayments of notes payable............................................. (83,763) (48,990)
Proceeds from initial public offering, net of offering costs of
$1,602,175........................................................... 7,434,383 --
------------------ ------------------

Net cash provided by financing activities................................. 6,351,668 355,749
------------------ ------------------

Net increase (decrease) in cash and cash equivalents...................... 2,119,644 (100,528)
Cash and cash equivalents,
beginning of period.................................................. 222,367 322,895
------------------ ------------------
Cash and cash equivalents,
ending of period..................................................... $ 2,342,011 $ 222,367
------------------ ------------------
------------------ ------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................................. 53,887 60,157
Cash paid for income taxes.............................................. 12,736 --
Noncash investing and financing activities:
Issuance of common stock in connection with bridge financing......... 250,000 --
Equipment acquired under capital lease obligations................... -- 121,422
</TABLE>

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

F-6

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Bell Technology Group Ltd. and Subsidiaries (the "Company") was
incorporated in the State of Delaware in September 1995. Shortly thereafter, the
Company succeeded by merger to all the assets and liabilities of PFM
Technologies Corporation ("PFMT"), a New York corporation (See Note 3). In July
1994, the sole stockholder of NAFT International Ltd. ("NAFT") and Stellar
Graphics Corp. ("Stellar Graphics") exchanged 100% of the common stock of both
companies for 100 shares (100%) of PFMT, then a newly formed corporation, in a
tax free exchange. Subsequent to this transaction, an additional 100 shares of
PFMT were issued to Harpoon Holdings, Ltd. ("Harpoon") in consideration for
$200,000, of which $198,000 represented additional paid-in capital. The Company
also owns 100% of the equity of NAFT Computer Service Corp. ("NCS") a New York
corporation formed in September 1994, PFM Communications Inc. ("PFMC"), a New
York corporation formed in March 1995 and GameNet Corp. ("GameNet"), a New York
corporation formed in March 1995. Prior to the merger of PFMT into the Company,
these entities were wholly owned subsidiaries of PFMT. During 1996, the Company
changed the name of Stellar Graphics Corp. to Bluestreak Digital Inc.
("Bluestreak").

The consolidated financial statements herein include the accounts of the
Company, NAFT, PFMC, NCS, GameNet and Bluestreak. All material intercompany
accounts and transactions have been eliminated. The activities of NAFT and
Bluestreak from January 1, 1994 until the formation of PFMT are included in
these consolidated financial statements at their carryover basis as they were
under common control prior to the tax free exchange discussed above. In
September 1995, the Company changed its fiscal year end from December 31 to
September 30. Accordingly, the period ended September 30, 1995 is for a nine
month period.

OPERATIONS

The Company's activities presently fall into two main segments. One segment
consists of computer products sales, service, network installation and
maintenance. The second segment consists of all Internet related activities
including Web hosting and interactive CD ROM design and preparation.

SEGMENT INFORMATION

The following is a summary of segment information for the year ended
September 30, 1996. The Company started its Internet operations during the
second half of the fiscal period ended September 30, 1995. For the fiscal year
ended September 30, 1995 no operating segment of the Company had sufficient
Gross Revenues, Operating Income/Loss or Identifiable Assets to require the
reporting of results for that period on a Segment basis.

<TABLE>
<CAPTION>
COMPUTER
PRODUCT & INTERNET
SERVICE SALES OPERATIONS CONSOLIDATED
--------------- ----------- ------------
<S> <C> <C> <C>
Sales to unaffiliated Customers..................................... $ 9,732,322 $ 641,342 $ 10,373,664
Operating Loss...................................................... 267,482 359,751 1,688,721*
Identifiable assets at September 30, 1996........................... 3,442,760 1,132,253 7,809,782**
</TABLE>

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

* Includes $1,061,488 of unallocated corporate overhead including executive
salaries of $389,000 and overhead including rent, payroll charges for
administrative staff including accounting, human resources, MIS and other
support personnel and professional fees.

** Including corporate assets not allocable to a particular segment of
$3,234,769.

NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share is based on the weighted average number
of shares outstanding during the periods presented. The impact of outstanding
and stock options has not been included in the calculation as the effect would
be anti-dilutive.

F-7

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES -- Continued
CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash and cash equivalents.

CONCENTRATIONS OF CASH AND ACCOUNTS RECEIVABLE

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
accounts receivable. As of September 30, 1996, the Company had concentrations of
cash in a bank in the form of demand deposits and money market accounts,
totaling approximately $2,103,416. The Company believes that concentrations of
credit risk with respect to trade accounts receivable are limited due to the
large number of entities comprising the Company's customer base. The Company
primarily operates in the New York City metropolitan area.

INVENTORIES

Inventory consists of computer hardware and software, parts and related
items. Inventories are carried at the lower of cost or market determined by the
first-in, first-out method.

PROPERTY AND EQUIPMENT

Furniture, equipment and internally developed software are recorded at cost
and are depreciated on a straight-line basis over their estimated useful lives,
generally five years. Leasehold improvements are recorded at cost and amortized
over the term of the lease or life of the asset, whichever is shorter. Property
and equipment consist of the following.

<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1996
------------- -------------
<S> <C> <C>
Leasehold improvements............................................................. $ 510,057 $ 43,935
Computer and network equipment..................................................... 1,862,416 520,805
Furniture and delivery equipment................................................... 193,054 40,312
Less Accumulated depreciation...................................................... (414,233) (191,746)
------------- -------------
Property and equipment, net........................................................ $ 2,151,294 $ 413,306
------------- -------------
------------- -------------
</TABLE>

Included in computer and network equipment is $155,507 of assets held under
capital lease obligations at September 30, 1996 and 1995. Also included in
computer and network equipment at September 30, 1996 and September 30, 1995 is
$184,086 and $28,333, respectively, related to internally developed software
costs.

REVENUE RECOGNITION

Revenues consist primarily of computer hardware sales, maintenance
contracts, Internet access fees, network installation charges and repair fees.
Generally, maintenance contracts are for an agreed upon number of hours and are
prepaid by customers. Repair fees and maintenance charges are recognized as the
service is provided. Payments received in advance of providing services are
deferred until the period such services are provided. Equipment sales and
installation charges are recognized when installation is completed.

Monthly subscription service revenue related to Internet access is
recognized over the period services are provided. Subscription service and
equipment installation revenues, which require the use of Company-provided
installation of equipment at a subscriber's location, are recognized at
completion of installation and upon commencement of service. Revenues related to
the Web and to 2-D and 3-D animation are recognized at the completion of each
project. Projects are generally completed within a three month period.

F-8

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES -- Continued
COST OF REVENUES

Cost of revenues in the Company's Internet businesses, PFMC and GameNet,
consist primarily of local access costs, leased network backbone circuit costs,
the cost of equipment and applications sold to customers and depreciation of
network-related equipment. NAFT's primary cost of revenues is the cost of the
computer products it sells. NCS's cost of revenues consist of parts, internal
and third-party labor costs, and training and certification costs. Bluestreak's
cost of revenues consist primarily of labor, printing expenses and camera work.

RESEARCH & DEVELOPMENT

Research and development costs are expensed as incurred.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results.

RECENT PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"),
which is effective for financial statements for fiscal years beginning after
December 15, 1995. SFAS 121 requires that long-lived assets and certain
identifiable intangible assets held and used by a company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amounts of the assets may not be recoverable. The Company believes
that, as of September 30, 1996, no assets covered by SFAS 121 have been
impaired.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"). SFAS 123 allows companies to account for stock-based
compensation to employees under either (i) the new provisions of SFAS 123 or
(ii) the provisions of APB 25 with pro forma disclosure in the footnotes to the
financial statements as if the measurement provisions of SFAS 123 had been
adopted. The Company intends to continue accounting for its stock-based
compensation to employees in accordance with the provisions of APB 25. As the
Company did not issue options to non-employees, the implementation of SFAS 123
had no impact on the financial position, results of operations and cash flows of
the Company.

NOTE 2 -- RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 1996

Revenues increased from $8,738,410 in fiscal 1995 to $10,363,664 in fiscal
1996 because of the longer fiscal year. In the fiscal year ended September 30,
1995, revenues from Internet operations were small, and no other segment of the
Company's business accounted for 10% of Gross Revenues, Operating Income/Loss
and Identifiable Assets of the Company. While the Company's actual revenues are
not steady on a month by month basis, for comparison purposes only, average
monthly revenues in fiscal 1996 were approximately $864,000 as contrasted with
average monthly revenues in fiscal 1995 of approximately $971,000. This decline
is due to a substantial reduction in the sales of Apple computer products which
produced large sales numbers because of the price of the products being sold.
The Company is replacing these sales in part with sales of other products and
with Internet related sales, training and service. The Company anticipates that,
in the future, a greater percentage of revenues will result from Internet
related sales which have higher gross profit margins.

Cost of Revenues remained constant from fiscal 1995 to fiscal 1996 at
approximately 82%. However, gross profit margins for the 3 and 9 month periods
ended June 30, 1996 were 23% and 20%, respectively. The gross profit margin for
the 3 month period ended September 30, 1996 was 7%. The fourth quarter results
of operations

F-9

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 2 -- RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 1996 -- Continued

were negatively impacted by a number of events and adjustments, all of which
adversely impacted gross margins. In particular, (a) the Company reflected a
reclassification of approximately $100,000 from selling, general and
administration to cost of revenue to more accurately reflect direct expenses of
the Internet operations; (b) established a reserve of $90,000 for returned
merchandise allowances primarily with Apple Computer Company, because of the
Company's de-emphasis of its business with Apple and the Company's assessment of
Apple's financial situation; and (c) various year-end adjustments of
approximately $100,000. In addition, the Company relocated its operations in the
fourth quarter of fiscal 1996, which adversely impacted revenues and gross
profit margins.

Approximately $220,000 of the Company's loss before taxes in 1996 was due
to depreciation and $257,000 was due to the write-off of Debt Issuance Costs
related to a debt incurred prior to the initial public offering. The balance of
the loss (in the amount of $1,416,480) can be traced directly to Selling,
General and Administrative costs. Within this category, a substantial portion of
such costs were related to payroll. The monthly payroll of the Company increased
from $162,233 for the month of October 1995 to $308,115 for the month of October
1996. In the Company's Form 10-KSB filed January 13, 1997 the Company attributed
the increase in payroll to the hiring of additional sales staff, engineering
staff and technicians working in the Internet sales and engineering departments
of the Company. More particularly stated: This increase in payroll was primarily
for corporate administrative personnel and sales personnel, technicians and
engineers in all areas of operations. A portion of the Internet engineering
payroll ($130,000) was capitalized. In the initial phases of operation, such
increased payroll resulted in no significant revenue. This negative trend
continued in the fourth quarter so that selling, general and administrative
costs as a percentage of revenues increased from approximately 22% in the
quarter ended December 31, 1995 to approximately 48% in the quarter ended
September 30, 1996. The Computer Product and Service Sales segment in the year
ended September 30, 1996 had an operating loss of approximately $267,000. For
the nine months ended September 30, 1995, the segment had an operating profit of
approximately $71,000. The cost of revenues for Computer Product and Service
Sales for both fiscal years was approximately 85%. The reason for the loss in
1996 can be traced to (a) an increase in payroll of approximately $650,000 for
the hiring of additional sales staff and computer technicians offset by (b) a
decrease in other selling, general and administrative expenses of approximately
$150,000 and (c) an increase in gross profits of $200,000 based on increased
revenues of approximately $1,300,000. As noted above, the Company's focus is
shifting toward its Internet operations. The Company believes that the increase
in sales staff and technicians in Computer Sales and Service will lead to future
business for its complimentary Internet segment.

Expenditures for Research and Development increased by $23,250. This
increase was for Internet programming work done by the Company in setting up its
Internet network.

As a result of the above, the Company reported a net loss for 1996 of
$1,893,480 or $0.72 per share as opposed to the reported net income in 1995 of
$38,859 or $0.02 per share. Losses will continue in the first half of the
current fiscal year.

NOTE 3 -- DEBT

The Company (through its NAFT subsidiary) has available a total of
$1,400,000 pursuant to a Business Financing Agreement and an Agreement for
Wholesale Financing with Deutsche Financial Services ("DFSO") to finance its
accounts receivable and inventory. On certain inventory purchased from Apple and
financed through DFS, Apple pays the finance charges for a thirty day period. As
of September 30, 1995 and 1996, the Company had outstanding a total of $377,261
and $1,386,170, respectively, under these agreements, of which $377,261 and
$674,218, respectively, represent the portion of the line used for the Wholesale
Financing Agreement and are included in accounts payable in the accompanying
balance sheet. At September 30, 1996, the Company had not drawn upon the
Business Financing Agreement.

F-10

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 3 -- DEBT -- Continued
The borrowings under these agreements bear interest at the prime rate plus
1.5% (9.75% as of September 30, 1996) and are secured by a continuing security
interest in substantially all of the assets of NAFT and the guarantee of the
Company. Interest expense related to such agreements was $45,000 for 1996 and
$55,000 for 1995. Pursuant to the terms of these agreements, NAFT is required to
obtain prior written consent from DFS before it engages in certain transactions
outside of NAFT's ordinary course of business. These agreements also require
that NAFT comply with certain financial covenants and prohibit dividends. NAFT
presently has an accumulated deficit. Future retained earnings will be
restricted as to the payment of dividends.

The Company borrowed $300,000 from Harpoon, a stockholder of the Company,
in 1994. The debt incurred by this borrowing was repaid in full during fiscal
year 1996.

NOTE 4 -- STOCKHOLDERS' EQUITY AND STOCK OPTIONS

INITIAL PUBLIC OFFERING

In January, 1996. the Company sold, in an initial public offering,
1,150,000 shares of Common Stock at an initial offering price of $7.00 per
share, and 575,000 Redeemable Common Stock Purchase Warrants for $.10 per
warrant. Each warrant entitles the holder to purchase one share of the Company's
common stock for $7.70 per share. The are redeemable by the Company at $.10 per
warrant at any time after January 24, 1997 if certain conditions are met. The
net proceeds, which the Company received, from the public offering amounted to
approximately $6,600,000.

In March 1996, the underwriter of the initial public offering exercised its
over-allotment option to purchase 129,642 common shares from the Company for
$7.00 per share. The net proceeds amounted to approximately $800,000.

BRIDGE FINANCING

In October 1995, the Company borrowed $250,000 in a Bridge Financing. The
Bridge Notes issued in connection with the Bridge Financing carried interest at
9% per annum. Such loans were repaid at the closing of the initial public
offering. In connection with the Bridge Financing, the Company issued 35,710
shares of Common Stock to the Bridge Lenders at no cost, which were registered
as part of the initial public offering. Debt issuance costs of $257,391 and
interest expense of $37,149 were incurred by the Company as a result of the
bridge loan transaction.

STOCK OPTIONS

The Company has an Employee Stock Option Plan (the "Stock Option Plan").
Under the Option Plan, options are exercisable for a period up to 10 years from
the date of the grant. The number of shares of Common Stock reserved for
issuance under the Option Plan is 360,000. The purchase price of the stock will
be equal to or greater than 100% of the fair market value at the date of issue.

As of September 30, 1996, options to purchase approximately 202,730 shares,
at exercise prices between $7.00 and $8.75 have been issued under the plan. In
the opinion of management, options were issued at the fair market value of the
Company's Common Stock as of the date of the grant.

MERGER

Pursuant to the terms of the merger of PFMT and the Company, in September
1995, each of the 200 shares of outstanding common stock of PFMT was
exchangeable for 8,625 shares of common stock of the Company. As a result, as of
September 30, 1996 there were a total of 1,725,000 shares of common stock of the
Company issued and outstanding. All per share amounts have been adjusted
retroactively to reflect this merger.

F-11

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 4 -- STOCKHOLDERS' EQUITY AND STOCK OPTIONS -- Continued
DEPOSIT SHARES

In connection with the Company's initial public offering, Marc Bell and
Harpoon have each deposited 210,000 shares of the Common Stock owned by them
(the "Deposit Shares") with the Company. The Company will hold such shares
pursuant to a Share Deposit Agreement. The Deposit Shares will be returned to
their respective owners no later than at the end of eight years from the date of
the Prospectus for the initial public offering. However, the Deposit Shares may
be returned prior to such time, if certain levels of profitability are met.

NOTE 5 -- COMMITMENTS AND CONTINGENCIES

CAPITAL AND OPERATING LEASES

The Company leases office equipment and office space under various
non-cancelable operating leases. Rent expense for the year ended September 30,
1996 and the nine months ended September 30, 1995 was approximately $253,402 and
$81,280, respectively. The Company has entered into capital leases for computer
equipment. These capital lease obligations have been recorded at interest rates
ranging from 8% to 8.75%.

In February 1996 the Company entered into a lease for its corporate
headquarters effective July 1996. The lease is for eleven years and six months
starting with an initial annual base rental of $309,250 escalating to $563,547
in the final year. Under the lease, the landlord is to reimburse the Company
$500,000 for leasehold improvements. The Company was required by the terms of
the lease to maintain a letter of credit in the amount of $400,000 for the
duration of the lease. In order to meet such requirement, the Company maintains
a restricted certificate of deposit in the amount of $400,000, which is
classified as a long-term investment as of September 30, 1996.

Future minimum lease payments under these lease agreements are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30, OPERATING CAPITAL
- ---------------------------------------------------------------------------------------- ----------- --------
<S> <C> <C>
1997.................................................................................... $ 421,160 $ 54,071
1998.................................................................................... 392,548 --
1999.................................................................................... 423,319 --
2000.................................................................................... 447,362 --
2001.................................................................................... 456,309 --
Thereafter.............................................................................. 3,240,388 --
Less: Amount representing interest.................................................... -- (14,919)
Present value of net minimum lease payments........................................... $ 5,381,086 $ 39,152
</TABLE>

NOTE 6 -- INCOME TAXES

Income taxes are accounted for under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under this method, deferred
tax assets and liabilities are determined based on differences between the
financial reporting and income tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The provision for income taxes on
historical net income for the year ended September 30, 1996 and the nine months
ended September 30, 1995 differs from the amount computed by applying the
federal statutory rate due to the effects of state and local taxes, net of
federal tax benefit and for the year ended September 30, 1996, the difference is
also the result of the Company recording a valuation allowance.

The Company is in an accumulated loss position for both financial reporting
and income tax purposes. No current federal tax benefit has been recorded due to
the uncertainty of the Company's ability to realize benefits by generating
taxable income in the future. The Company has a tax loss carry-forward of
approximately $1.5 million at September 30, 1996. This carry-forward expires in
2011. The benefit from the provision for taxes of $29,896 represents the
reversal of deferred taxes provided in prior years.

F-12

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 6 -- INCOME TAXES -- Continued
Income tax (benefit) expense consists of the following:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
CURRENT:
Federal.......................................................................... $ -- $ 8,410
State and local.................................................................. -- 11,527
------------- -------------
Total......................................................................... -- 19,937
------------- -------------
DEFERRED:
Federal.......................................................................... $ (19,759) (398)
State and local.................................................................. (10,137) (440)
------------- -------------
Total......................................................................... (29,896) (838)
------------- -------------
Total......................................................................... $ (29,896) $19,099
------------- -------------
------------- -------------
</TABLE>

The provision for income taxes on historical net income for the year ended
September 30, 1996 and the nine months ended September 30, 1995 differs from the
amount computed by applying the federal statutory rate due to the following:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
Statutory federal income tax rate.................................................. (34)% 34%
Effect of federal graduating tax rate.............................................. -- (18)%
State and local taxes, net of federal benefit...................................... (11)% 14%
Other: (1)% 3%
Valuation allowance................................................................ (44)% --
Effective income tax rate.......................................................... (2)% 33%
------------- -------------
Total......................................................................... (29,896) (838)
------------- -------------
Total......................................................................... (29,896) 19,099
------------- -------------
------------- -------------
</TABLE>

Significant components of the Company's deferred tax assets and liabilities
are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
Deferred tax assets (liabilities):
Tax depreciation and amortization in excess of book depreciation and
amortization..................................................................... $ (12,920) $ (6,708)
Income not recognized due to the change from the cash to the accrual method of
accounting for income tax purposes............................................ -- (25,828)
Net operating loss carry forward................................................. 733,393 --
Allowance for doubtful accounts.................................................. 29,176 5,158
Valuation allowance.............................................................. (749,649) --
------------- -------------
Total net deferred tax liabilities............................................ $ -- $ (27,378)
------------- -------------
------------- -------------
</TABLE>

NOTE 7 -- EMPLOYMENT AGREEMENT

F-13

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 7 -- EMPLOYMENT AGREEMENT -- Continued

receives a base salary of $200,000 per year and a bonus equal to 5% of the
annual pre-tax net income of the Company in excess of $1 million.

The Company also entered into employment agreements on October 1, 1995 with
two officers of the Company, which extend for a period of two years. Pursuant to
the terms of these agreements, annual base salaries totaled $125,000 and $64,000
per annum. In addition to base compensation, the Company intends to reserve at
the end of each fiscal year, a sum equal to ten (10%) percent of the
consolidated net income of the Company (computed before provision for federal
and state income taxes) (the "Bonus Pool"), for allocation among the officers of
the Company and certain key employees (including Marc H. Bell) as the Board of
Directors of the Company may determine. Marc Bell will receive an amount equal
to 5% of the pre-tax income over $1 million (50% of the Bonus Pool) to the
extent, if any, that the Bonus Pool exceeds $100,000.

Because the increases in the officer's base salaries did not become
effective until January 1, 1996, the salary expense recognized in the 1996
financial statements for all officers was approximately $330,000, of which
$165,000 related to Marc H. Bell.

NOTE 8 -- SUBSEQUENT EVENT

NEW CREDIT AGREEMENT

In October 1996, the Company entered into a new credit agreement with
NationsCredit, to replace the DFS facility discussed in Note 2. This agreement
provides for a revolving credit line of up to $3,000,000 based upon 100% of
eligible inventory and 80% of eligible trade receivables. On inventory items,
NAFT will finance the purchase invoice through the line of credit and pay no
interest for the first 30 days. After the expiration of such 30 day period,
interest will accrue at the prime rate plus 1.75%. Any borrowings under this
agreement are secured by substantially all of the assets of NAFT and a cross
guaranty of the Company.

F-14

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, SEPT. 30,
1997 1996
----------- -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................ $ 1,338,747 $ 2,342,011
Accounts receivable, net of allowance for doubtful accounts of $151,676 and
$64,843 as of June 30, 1997 and September 30, 1996, respectively.............. 3,925,384 1,847,918
Inventories...................................................................... 962,187 758,353
Prepaid expenses and other current assets........................................ 109,023 195,113
----------- -------------
TOTAL CURRENT ASSETS.......................................................... 6,335,341 5,143,395
Property and equipment, net........................................................ 3,313,800 2,151,294
Long-term investment............................................................... 400,000 400,000
Loan to stockholder................................................................ 145,408 --
Other assets....................................................................... 96,875 115,093
----------- -------------
TOTAL ASSETS.................................................................. $10,291,424 $ 7,809,782
----------- -------------
----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings............................................................ $ 2,246,549 $ --
Current portion of notes payable................................................. 328,561 39,152
Accounts payable................................................................. 1,993,740 1,274,197
Accrued expenses................................................................. 197,622 240,116
Deferred revenues................................................................ 133,304 166,617
----------- -------------
TOTAL CURRENT LIABILITIES..................................................... 4,899,776 1,720,082
----------- -------------
Notes payable, less current portion.............................................. 896,940 --
----------- -------------
TOTAL LIABILITIES............................................................. 5,796,716 1,720,082
----------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value; 500,000 shares authorized; no shares issued and
outstanding................................................................... -- --
Common Stock, $.01 par value; 10,000,000 shares authorized; 3,048,450 and
3,040,352 shares issued and outstanding....................................... 30,485 30,404
Additional paid-in capital....................................................... 7,978,886 8,033,562
Accumulated deficit.............................................................. (3,514,663) (1,974,266)
----------- -------------
TOTAL STOCKHOLDERS' EQUITY.................................................... 4,494,708 6,089,700
----------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................... $10,291,424 $ 7,809,782
----------- -------------
----------- -------------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-15

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-------------------------
1997 1996
----------- ----------
<S> <C> <C>
REVENUES............................................................................. $13,868,965 $7,935,579
COSTS AND EXPENSES:
Cost of revenues................................................................... 10,802,824 6,341,812
Selling, general and administrative................................................ 4,256,888 2,025,573
Depreciation and amortization (net of $145,300 included in cost of revenues
for the nine months ended June 30, 1997)........................................... 312,320 171,180
----------- ----------
Total costs and expenses........................................................ 15,372,032 8,538,565
----------- ----------
Loss from operations................................................................. (1,503,067) (602,986)
Interest income (expense), net..................................................... (37,330) 28,422
Write-off of debt issuance costs................................................... -- (256,351)
----------- ----------
Loss before taxes.................................................................... (1,540,397) (830,915)
Provision for taxes.................................................................. -- --
----------- ----------
NET LOSS............................................................................. $(1,540,397) $ (830,915)
----------- ----------
----------- ----------
NET LOSS PER SHARE................................................................... $ (0.51) $ (0.34)
Weighted average shares outstanding.................................................. 3,044,799 2,464,185
</TABLE>

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

F-16

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................................................... $(1,540,397) $ (830,915)
Adjustments to reconcile net (loss) to net cash used in operating activities
Depreciation and amortization.................................................. 457,620 134,051
Provision for bad debts........................................................ 86,833 --
Write off of amortization of debt issuance costs............................... -- 293,500
Provision for deferred taxes................................................... -- 2,570
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) in accounts receivable................................................. (2,164,299) (430,495)
(Increase) decrease in inventories................................................ (203,834) 259,340
Decrease (increase) in prepaid expenses and other current assets.................. 86,090 (157,972)
Decrease (increase) in other assets............................................... 18,218 (77,137)
Increase (decrease) in accounts payable........................................... 636,955 (460,906)
(Decrease) in accrued expenses.................................................... (42,494) (51,555)
(Decrease) increase in deferred revenues.......................................... (33,313) 85,378
----------- -----------
Net cash used in operations.................................................... (2,698,621) (1,234,141)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net of landlord reimbursement................ (1,620,126) (653,157)
----------- -----------
Purchase of long-term investment.................................................. -- (400,000)
Net cash used in investing activities.......................................... (1,620,126) 1,053,157)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from short term borrowings........................................... 2,246,549 (711,952)
Net proceeds of notes payable..................................................... 1,186,349 (350,195)
Loan to stockholder............................................................... (145,408) --
Proceeds initial public offering, net of offering costs of $1,602,175............. -- 7,412,819
Proceeds from exercise of stock options........................................... 27,993 --
----------- -----------
Net cash provided by financing activities...................................... 3,315,483 6,350,672
----------- -----------
NET (DECREASE) INCREASE in cash and cash equivalents................................ (1,003,264) 4,063,374
CASH AND CASH EQUIVALENTS, beginning of period...................................... 2,342,011 222,367
----------- -----------
CASH AND CASH EQUIVALENTS, end of period............................................ $ 1,338,747 $ 4,285,741
----------- -----------
----------- -----------
</TABLE>

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

F-17

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

The consolidated balance sheets as of June 30, 1997, statements of
operations for the three and nine months ended June 30, 1997 and 1996 and the
statements of cash flows for the nine months ended June 30, 1997 and 1996 have
been prepared by Bell Technology Group Ltd. (the "Company") without audit. All
material inter-company accounts and transactions have been eliminated. The
consolidated results should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Form 10-KSB/A on file
with the Securities and Exchange Commission. Results of operations for the
three-month and nine-month periods are not necessarily indicative of the
operating results for the full year. Interim statements are prepared on a basis
consistent with year-end statements.

In the opinion of management, the unaudited interim financial statements
furnished herein include all adjustments necessary for a fair presentation of
the results of operations of the Company. All such adjustments are of a normal
recurring nature.

NOTE 2 -- REVOLVING CREDIT AGREEMENT

The Company (through its NAFT subsidiary) has a Revolving Credit Agreement
with NationsCredit ("Nations") which may be used to finance its accounts
receivable and inventory up to a maximum of $3 million. The availability of
credit is based upon the balance of collateral available which is 80% of its
current accounts receivable and 100% of its inventory. As of June 30, 1997, the
Company had an outstanding balance of approximately $2.2 million, which was the
maximum available under the formula. Such obligation is secured by a continuing
security interest in the accounts receivable and inventory of NAFT, and
guaranties and cross guaranties of the Company and its other subsidiaries. The
borrowings bear interest at the prime rate plus 1.75%. Pursuant to the terms of
these agreements, NAFT is required to maintain certain liquidity ratios which it
is currently maintaining: (a) tangible net worth plus indebtedness subordinated
to amounts owed to Nations, less prepaid expenses, officer/employee receivables
and other intangible assets of not less than $1.4 million at the end of each
fiscal quarter, and (b) a ratio of total liabilities to tangible net worth of no
greater than 2.5 to 1 at the end of each fiscal quarter. As of June 30, 1997,
NAFT had a tangible net worth of approximately $1.45 million and a ratio of
total liabilities to tangible net worth of 2.4 to 1, therefore keeping the
Company in compliance with all requirements. As of March 31, 1997, NAFT had a
tangible net worth as defined in the Credit Agreement of approximately $1.2
million and a ratio of total liabilities to tangible net worth of 2.9 to 1. The
shortfall in tangible net worth arose because of certain intercompany
transactions. Nations formally waived the default in May 1997. While the Credit
Agreement gives Nations the right to demand repayment if it deems itself
"insecure," Nations has given the Company no indication that it is considering
utilizing this provision. Furthermore, incurring losses as the Company builds
its new businesses was anticipated in setting its covenants with Nations in
October 1996. The Company deems its relationship with Nations to be normal.

NOTE 3 -- LOAN TO STOCKHOLDER

During the third quarter of fiscal 1997, the Company made loans to Marc H.
Bell, the President and Chief Executive Officer, bearing interest at 8.75% per
annum in the total amount of $145,408. These loans are pursuant to his existing
employment agreement. The loans mature in June 2002.

NOTE 4 -- NOTES AND MORTGAGES PAYABLE

The Company has entered into leases for various items of its office
furniture and equipment as well as for its telephone system. The terms on the
leases call for monthly payments of approximately $8,300 per month for 60
months. The office furniture and equipment lease commenced in January 1997. The
telephone equipment lease will commence in July 1997. There is no residual
payment under such leases and the Company will own the equipment after the
expiration of the lease terms.

F-18

<PAGE>

BELL TECHNOLOGY GROUP LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 4 -- NOTES AND MORTGAGES PAYABLE -- Continued
The Company obtained a first chattel mortgage on certain of its furniture
and computer equipment in April 1997 in the amount of approximately $874,000
from FINOVA Capital Corporation. Such loan is for a term of three years, bears
interest at 12.19% per annum and is self-liquidating over its term.

NOTE 5 -- COMMITMENTS AND CONTINGENCIES

In February 1996, the Company entered into a lease for its corporate
headquarters. Rent commenced in July 1996. The lease is for eleven years and six
months starting with an initial annual base rental of $309,250 escalating to
$563,547 in the final year. Under the lease, the landlord is to reimburse the
Company $500,000 for leasehold improvements. $450,000 has been received to date.
The final $50,000 payment was received in July 1997 and is recorded as an other
asset as of June 30, 1997. The Company was required by the terms of the lease to
maintain a letter of credit as a security deposit under the lease. To secure its
obligation to meet such requirement, the Company has pledged a certificate of
deposit in the amount of $400,000. This amount is included in "Long-term
investments" on the Company's consolidated balance sheet at June 30, 1997 and
September 30, 1996. Under the terms of such lease, if the Company is not in
default, $75,000 of the letter of credit and accompanying certificate of deposit
will be released in July 1998, and an additional $75,000 will be released in
July 1999 and $150,000 of the letter of credit will be released in July 2000.

NOTE 6 -- SUBSEQUENT EVENT

In February 1997, the Company filed Form SB-2 for a warrant exchange. The
Company then revised such offering and filed amendments to Form SB-2 on July
31, 1997, August 26, 1997 and September 10, 1997 for the public offering of
$5,500,000 Senior Subordinated 10% Convertible Debentures. The Company has now
voluntarily revised such offering and is filing this amendment on behalf of the
Selling Stockholders.

NOTE 7 -- RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per share
(EPS), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of operations. Under this new standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently required fully diluted EPS. SFAS
128 is effective for financial statements issued for periods ending after
December 31, 1997, including interim periods, and earlier application is not
permitted. When adopted, the Company will be required to restate its EPS data
for all prior periods presented. The Company does not expect the impact of the
adoption of this statement to be material to previously reported EPS amounts.

F-19

<PAGE>

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES IN ANY CIRCUMSTANCES WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

PAGE
----
Prospectus Summary................................... 3
Glossary............................................. 7
Risk Factors......................................... 8
Market for Company's Common Stock.................... 13
Use of Proceeds...................................... 14
Dividend Policy...................................... 14
Capitalization....................................... 15
Selected Consolidated Financial Information.......... 16
Management's Discussion and Analysis of
Financial Condition and Results
of Operations...................................... 17
Business............................................. 21
Management........................................... 26
Principal Stockholders............................... 30
Description of Securities............................ 32
Shares Eligible for Future Sale...................... 33
Selling Stockholders and Plan of Distribution........ 34
Legal Matters........................................ 34
Experts.............................................. 35
Index to Consolidated Financial Statements........... F-1

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

BELL TECHNOLOGY GROUP LTD.

[Bell Logo]

400,000 SHARES OF
COMMON STOCK

----------------
PROSPECTUS
----------------

, 1997

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

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. The Company's Certificate of Incorporation limits the liability of
Directors to the maximum extent permitted by Delaware General Corporation Law.
Delaware law provides that the directors of a corporation will not be personally
liable to such corporation or its stockholders for monetary damages for breach
of their fiduciary duties as directors, except for liability (i) for any breach
of their duty of loyalty to the corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law; or (iv) for any transaction from which the director
derives an improper personal benefit. The Company's By-laws provide that the
Company shall indemnify its directors and officers under certain circumstances,
including those circumstances in which indemnification would otherwise be
discretionary, and the Company is required to advance expenses to its officers
and directors as incurred in connection with proceedings against them for which
they may be indemnified.

The directors and officers of the Company are insured (subject to certain
exemptions and deductions) against liabilities that they may incur in their
capacity as such, including liabilities under the Act, other than liabilities
thereunder arising in connection with this Offering, under a liability insurance
policy carried by the Company. Such policy provides coverage in an aggregate
amount of $1,000,000 (subject to retentions ranging from $75,000 to $150,000).

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses payable by the Company in connection with this
offering, are as follows:

<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
SEC Registration Fee................................................................................ $ 895
Nasdaq Filing Fee................................................................................... 4,000
Boston Stock Exchange Filing Fee.................................................................... 7,500
Legal Fees and Expenses............................................................................. 3,000*
Accounting Fees and Expenses........................................................................ 2,000*
Fees of Registrar and Transfer Agent................................................................ 500
Miscellaneous.......................................................................................
-------
Total............................................................................................... $17,895
-------
-------
</TABLE>

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

* Indicates expenses that have been estimated for purposes of this filing.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

In the past three years, the Company has made the following sales of
unregistered securities, which were exempt from the registration requirements of
the Act pursuant to Section 4(2) and Regulation S thereof:

In October 1995, the Company issued 9% promissory notes in the aggregate
principal amount of $250,000 to eight individual lenders to evidence loans for
such amount, and also issued to the eight lenders, for $.01 per share, an
aggregate of 35,710 shares of the Company's fully paid and non assessable Common
Stock as a fee for making the loan. The loan was repaid out of the proceeds of
the Company's initial public offering in January 1996.

In September 1997, the Company sold, pursuant to Regulation S, to Value
Management & Research GmbH of Frankfurt, Germany ("VMR") and others an aggregate
of 382,609 shares of the Company's Common Stock and agreed to pay a fee to VMR
of 17,391 shares of the Common Stock and a stock purchase warrant to purchase
34,783 shares of the Common Stock at an exercise price of $6.60 per share,
exercisable for a period of five years from September 24, 1997.

II-1

<PAGE>

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------ ---------------------------------------------------------------------------------------- ----

<C> <S> <C>
3(a) Certificate of Incorporation of the Company, dated September 29, 1995. (1)

3(b) By-laws of the Company. (1)

5 Opinion of Milberg Weiss Bershad Hynes & Lerach LLP.*

10(a) Sublease for Penthouse Suite 907D between Rhodes Associates, Rose Associates, Electric
Curtain Inc. and Stellar Graphics Corp., dated as of July 1, 1997.*

10(b) Bell Technology Group Ltd. 1995 Stock Option Plan, adopted September 29, 1995. (1)(+)

10(c) Irrevocable Proxy Agreement between Harpoon Holdings Ltd. and Marc H. Bell, dated as of
October 1, 1995. (1)

10(d) Employment Agreement between Marc H. Bell and the Company dated as of October 1, 1995.
(1)(+)

10(e) Employment Agreement between Robert Bell and the Company dated as of October 1, 1995.
(1)(+)

10(f) Share Deposit Agreement between Marc H. Bell, Harpoon Holdings Ltd., the Company, and
Rickel & Associates. (3)

10(g) Form of Consulting Agreement between the Company and Rickel. (1)

10(h) Amendment to Employment Agreement between Marc H. Bell and the Company dated as of
January 1, 1996. (4)(+)

10(i) Amendment to Employment Agreement between Robert Bell and the Company dated as of
January 1, 1996. (4)(+)

10(j) Agreement of Lease between Bell Technology Group Ltd. and Puck Associates dated as of
July 23, 1996. (4)

10(k) Security Agreement with NationsCredit Commercial Corporation of America
("NationsCredit") and NAFT International Ltd. ("NAFT")dated October 1996. (4)

10(l) Agreement for Wholesale Financing between NAFT and NationsCredit dated as of October
1996. (4)

10(m) Lock Box Service Agreement between NAFT, European American Bank and NationsCredit dated
as of October 1996. (4)

10(n) Loan and Security Agreement between FINOVA Capital Corporation ("FINOVA") and the
Company, dated as of May 1, 1997. (6)

10(o) Guaranty by NAFT in favor FINOVA, dated as of May 1, 1997. (6)

10(p) Guaranty by NAFT Computer Service Corp. in favor of FINOVA, dated as of May 1, 1997. (6)

10(q) Guaranty by Bluestreak Digital, Inc. in favor of FINOVA, dated as of May 1, 1997. (6)

10(r) Guaranty by PFM Communications, Inc. in favor FINOVA, dated as of May 1, 1997. (6)

10(s) Promissory Notes to Bell Technology Group Ltd. from Marc H. Bell dated April 2, 1997 and
June 30, 1997.*

10(t) Agreement by and between Bell Technology Group Ltd. and Value Management & Research GMBH
for the sale of an aggregate of 382,609 shares of Common Stock dated as of September
24, 1997. (7)

21 List of Subsidiaries. (5)
</TABLE>

II-2

<PAGE>

<TABLE>
<C> <S> <C>
23(a) Consent of Arthur Andersen LLP.*

23(b) Consent of Milberg Weiss Bershad Hynes & Lerach LLP (included in its opinion filed as
Exhibit 5 to this Registration Statement)
</TABLE>

(+) Denotes a management contract or compensatory plan, contract or
agreement.

(*) Filed herewith.

<TABLE>
<C> <S> <C>
(1) Incorporated by reference to Registration Statement on Form SB-2 (File No. 33- 98978)
(the "Registration Statement") filed November 3, 1995.

(2) Incorporated by reference to Amendment No. 1 to the Registration Statement, filed
December 20, 1995.

(3) Incorporated by reference to Amendment No. 2 to the Registration Statement filed January
23, 1996, declared effective January 24, 1996.

(4) Incorporated by reference to the Company's Annual Report on Form 10-KSB/A for the year
ended September 30, 1996.

(5) Incorporated by reference to the Company's Registration Statement on Form SB-2 filed
March 13, 1997 (File No. 333-23259).

(6) Incorporated by reference to the Company's Report on Form 8-K/A filed July 18, 1997.

(7) Incorporated by reference to the Company's report on Form 8-K filed October 8, 1997.
</TABLE>

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

ITEM 28. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes that it will:

(1) File, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to
include any additional or changed material information on the
plan of distribution.

(2) For determining liability under the Securities Act of 1933,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the
offering.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.

II-3

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable ground to believe that it meets all
the requirements for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated: November 5, 1997

BELL TECHNOLOGY GROUP LTD.

By: /s/____________________________
MARC H. BELL
CHIEF EXECUTIVE OFFICER

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

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------------------ ------------------------------- -------------------

<S> <C> <C>
/s/ Chief Executive Officer November 5, 1997
- ------------------------------------------------------ and Director
MARC H. BELL

/s/ Executive Vice President, November 5, 1997
- ------------------------------------------------------ Chief Financial Officer
ROBERT B. BELL and Director

Director November 5, 1997
- ------------------------------------------------------
MARTIN FOX

Director November 5, 1997
- ------------------------------------------------------
TSUYOSHI SHIRAISHI

/s/ Director November 5, 1997
- ------------------------------------------------------
RICHARD VIDEBECK

Director November 5, 1997
- ------------------------------------------------------
LORD ST. JOHN BLETSO

/s/ Treasurer and November 5, 1997
- ------------------------------------------------------ Chief Accounting Officer
ALAN LEVY
</TABLE>

II-4

<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- -------------------------------------------------------------------------------------- ----------
<C> <S> <C>
3 (a) Certificate of Incorporation of the Company, dated September 29, 1995. (1)
3 (b) By-laws of the Company. (1)
5 Opinion of Milberg Weiss Bershad Hynes & Lerach LLP.*
10 (a) Sublease for Penthouse Suite 907D between Rhodes Associates, Rose Associates, Electric
Curtain Inc. and Stellar Graphics Corp., dated as of July 1, 1997.*
10 (b) Bell Technology Group Ltd. 1995 Stock Option Plan, adopted September 29, 1995. (1)(+)
10 (c) Irrevocable Proxy Agreement between Harpoon Holdings Ltd. and Marc H. Bell, dated as
of October 1, 1995. (1)
10 (d) Employment Agreement between Marc H. Bell and the Company dated as of October 1, 1995.
(1)(+)
10 (e) Employment Agreement between Robert Bell and the Company dated as of October 1, 1995.
(1)(+)
10 (f) Share Deposit Agreement between Marc H. Bell, Harpoon Holdings Ltd., the Company, and
Rickel & Associates. (3)
10 (g) Form of Consulting Agreement between the Company and Rickel. (1)
10 (h) Amendment to Employment Agreement between Marc H. Bell and the Company dated as of
January 1, 1996. (4)(+)
10 (i) Amendment to Employment Agreement between Robert Bell and the Company dated as of
January 1, 1996. (4)(+)
10 (j) Agreement of Lease between Bell Technology Group Ltd. and Puck Associates dated as of
July 23, 1996. (4)
10 (k) Security Agreement with NationsCredit Commercial Corporation of America
("NationsCredit") and NAFT International Ltd. ("NAFT")dated October 1996. (4)
10 (l) Agreement for Wholesale Financing between NAFT and NationsCredit dated as of October
1996. (4)
10 (m) Lock Box Service Agreement between NAFT, European American Bank and NationsCredit
dated as of October 1996. (4)
10 (n) Loan and Security Agreement between FINOVA Capital Corporation ("FINOVA") and the
Company, dated as of May 1, 1997. (6)
10 (o) Guaranty by NAFT in favor FINOVA, dated as of May 1, 1997. (6)
10 (p) Guaranty by NAFT Computer Service Corp. in favor of FINOVA, dated as of May 1, 1997.
(6)
10 (q) Guaranty by Bluestreak Digital, Inc. in favor of FINOVA, dated as of May 1, 1997. (6)
10 (r) Guaranty by PFM Communications, Inc. in favor FINOVA, dated as of May 1, 1997. (6)
10 (s) Promissory Notes to Bell Technology Group Ltd. from Marc H. Bell dated April 2, 1997
and June 30, 1997.*
10 (t) Agreement by and between Bell Technology Group Ltd. and Value Management & Research
GMBH for the sale of an aggregate of 382,609 shares of common stock dated September
24, 1997. (7)
21 List of Subsidiaries. (5)
23 (a) Consent of Arthur Andersen LLP.*
23 (b) Consent of Milberg Weiss Bershad Hynes & Lerach LLP (included in its opinion filed as
Exhibit 5 to this Registration Statement)
</TABLE>

<PAGE>

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

(+) Denotes a management contract or compensatory plan, contract or agreement.

(*) Filed herewith.

<TABLE>
<C> <S> <C>
(1) Incorporated by reference to Registration Statement on Form SB-2 (File No. 33- 98978)
(the "Registration Statement") filed November 3, 1995.
(2) Incorporated by reference to Amendment No. 1 to the Registration Statement, filed
December 20, 1995.
(3) Incorporated by reference to Amendment No. 2 to the Registration Statement filed January
23, 1996, declared effective January 24, 1996.
(4) Incorporated by reference to the Company's Annual Report on Form 10-KSB/A for the year
ended September 30, 1996.
(5) Incorporated by reference to the Company's Registration Statement on Form SB-2 filed
March 13, 1997 (File No. 333-23259).
(6) Incorporated by reference to the Company's Report on Form 8-K/A filed July 18, 1997.
(7) Incorporated by reference to the Company's report on Form 8-K filed October 8, 1997.
</TABLE>

MILBERG WEISS BERSHAD HYNES & LERACH LLP

November 5, 1997

Bell Technology Group Ltd.
295 Lafayette Street, 3rd Floor
New York, New York 10012

Re: Bell Technology Group Ltd.
Registration Statement on Form SB-2
-----------------------------------

Ladies and Gentlemen:

We have acted as counsel for Bell Technology Group Ltd., a Delaware
corporation (the "Company"), in connection with the preparation and filing by
the Company of a registration statement (the "Registration Statement") on Form
SB-2, File No. 333-23259, under the Securities Act of 1933, relating to the
registration of 400,000 shares of the Company's Common Stock, par value, $.01
per share (the "Shares") which Shares were acquired by the Selling Security
Holders in connection with the Company's private placement of $2,200,000 of
Common Stock pursuant to Regulation S of the Securities Act of 1933, as amended,
in September, 1997.

We have examined the Certificate of Incorporation and the By-Laws of the
Company, the minutes of the various meetings and consents of the Board of
Directors of the Company, originals or copies of such records of the Company,
agreements, certificates of public officials, certificates of officers and
representatives of the Company and others, and such other documents,
certificates, records, authorizations, proceedings, statutes and judicial
decisions as we have deemed necessary to form the basis of the opinion expressed
below. In such examination, we have assumed the genuiness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
originals of all documents submitted to us as

<PAGE>

Bell Technology Group Ltd.
November 5, 1997
Page 2

copies thereof. We have also assumed that the certificates evidencing the Shares
were issued and delivered or will be delivered.

As to various questions of fact material to this opinion, we have relied
upon statements and certificates of officers and representatives of the Company
and others.

Based on the foregoing, we are of the opinion that the Shares are
validly issued, fully paid and nonassessable.

We hereby consent to be named in the Registration Statement and the
Prospectus as attorneys who have passed upon legal matters in connection with
the offering of the securities offered thereby under the caption "Legal
Matters."

We further consent to your filing a copy of this opinion as an Exhibit
to the Registration Statement.

Very truly yours,

MILBERG WEISS BERSHAD HYNES
& LERACH LLP

By: /s/
------------------------
Arnold N. Bressler

Exhibit 10(a)

SUBLEASE FOR PENTHOUSE

Agreement made and entered into as of this 1st day of July, 1997, between
and among Rhodes Associates, having an office at 58-47 Francis Lewis Blvd.
Bayside, New York 11364; Rose Associates, having an office at 611 Broadway, New
York, New York 10012 (both such entities being hereinafter collectively referred
to as "Rose"); Electric Curtain Incorporated ("Subtenant"), having an office at
611 Broadway, Suite 907D, New York, NY 10012, and Stellar Graphics Corp.
("Stellar") having an office at 295 Lafayette Street, 3rd Floor, New York, NY
10012.

1. There currently exists a lease for Penthouse Suite 907D dated September
1, 1994 between Rose and Stellar (herein known as the "Lease"). Stellar does
hereby sublet the premises presently occupied by it and known as Penthouse Suite
907D (the "Premises") to Subtenant on the following terms and conditions:

(a) the sublease shall commence on July 1, 1997 and shall terminate on
February 28, 1998.

(b) the rent, two thousand two hundred dollars and no cents
($2,200.00) per month shall be payable at the beginning of each month.

(c) Subtenant shall make no changes to the Premises except as
permitted in writing by Rose and Stellar. The consent of Stellar shall not be
unreasonably withheld or delayed provided Subtenant, prior to the making of any
such change agrees in writing that prior to the expiration of the term of this
Sublease, Subtenant shall restore the Premises to its condition prior to the
making of the change.

(d) Subtenant shall keep and perform all of the terms and conditions
of the Lease during the term of its tenancy.

2. Rose does hereby agree to the sublease of the Premises for use as an
office and the placement of computer terminals and equiment used by Subtenant
in connection with its business and in accordance with the provisions of this
Agreement.

3. Rose, Subtenant and Stellar all agree that all payments made pursuant to
the Sublease shall be paid directly by Subtenant to Stellar. Notwithstanding the
fact that Stellar will make payments directly to Rose, the acceptance of such
payments shall not confer the

<PAGE>

status of Tenant upon Subtenant and further Stellar shall remain primarily
liable for all provisions and covenants of the Lease.

4. Rose agrees to give Stellar a copy of any notice of default or other
notice, which it may deliver immediately to Subtenant pursuant to the Lease or
by reason of Subtenant's use and/or occupation of the Premises. In the case of
such default Subtenant shall have 21 days to vacate.

5. Subtenant shall have the Premises covered under its insurance policy
with Stellar named as additional insured.

6. Upon the execution and delivery of this Sublease by the parties hereto,
Subtenant shall pay to Stellar the sum of four thousand four hundred dollars and
no cents ($4,400.00) as security for the full and faithful performance of all of
the provisions of the Lease.

7. Rose represents and warrants to Subtenant that the sublease between Rose
and its landlord is in full force and effect. Stellar represents and warrants to
Subtenant that the Lease is in full force and effect and that there is no
material default under any provision of the Lease.

The foregoing has been executed by the parties hereto as of this 1st day of
July, 1997.

Rhodes Associates Stellar Graphics Corp.

by: by: /s/ Paul Asher
______________________ ______________________

Rose Associates Electric Curtain Incorporated

by:______________________ By: /s/ John Joseph Heartfield
-------------------------

EXHIBIT 10(s)

PROMISSORY NOTE

$31,408 As of June 30, 1997
New York, New York

FOR VALUE RECEIVED, I promise to pay, on or before June 30, 2002, to the
order of BELL TECHNOLOGY GROUP LTD., at 295 Lafayette Street, New York, New York
10012, or such other location as the payee shall specify, THIRTY-ONE THOUSAND
FOUR HUNDRED EIGHT DOLLARS ($31,408), together with interest at the rate of
8.75% per annum, from the date hereof until maturity. Interest to be paid
quarter annually on the 30th day of September, December, March and June of each
year until final payment. Interest shall be calculated on the basis that one day
represents 1/360th of a year.

The undersigned shall have the right to make prepayments on account of the
principal of this Note, in whole or in part, from time to time without premium
or penalty.

The undersigned hereby waives diligence, protest, presentment and all
notices.

The undersigned waives trial by jury in any litigation to enforce or with
respect to this Note and the right to interpose any setoff, counterclaim or
cross-claim, irrespective of the nature thereof in any such litigation.

/s/
________________________
Marc H. Bell

<PAGE>

PROMISSORY NOTE

$114,000 As of April 2, 1997
New York, New York

FOR VALUE RECEIVED, I promise to pay, on or before April 2, 2002, to the
order of BELL TECHNOLOGY GROUP LTD., at 295 Lafayette Street, New York, New York
10012, or such other location as the payee shall specify, ONE HUNDRED FOURTEEN
THOUSAND DOLLARS ($114,000), together with interest at the rate of 8.75% per
annum, from the date hereof until maturity. Interest to be paid quarter annually
on the second day of July, October, January and April of each year until final
payment. Interest shall be calculated on the basis that one day represents
1/360th of a year.

The undersigned shall have the right to make prepayments on account of the
principal of this Note, in whole or in part, from time to time without premium
or penalty.

The undersigned hereby waives diligence, protest, presentment and all
notices.

/s/
________________________
Marc H. Bell

Exhibit 23(a)

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report dated December 23, 1996 (and to all references to our Firm) included in
or made a part of this registration statement on Form SB-2 and related
Prospectus registering 400,000 shares of Common Stock.

ARTHUR ANDERSEN LLP

New York, New York
November 6, 1997