TECH ELECTRO INDUSTRIES INC/TX, ARS, 2000-05-10

TECH ELECTRO INDUSTRIES INC/TX
ARS, 2000-05-10
ELECTRONIC PARTS & EQUIPMENT, NEC

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TECH ELECTRO INDUSTRIES, INC.
1999 Annual Report to Shareholders

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DIRECTORY

Tech Electro Industries, Inc.
477 Madison Avenue 24th Flr
New York, NY 10022
212-583-0900
212-583-0741 Facsimile

DIRECTORS
William Kim Wah Tan
Ian C. Edmonds
Sadasuke Gomi

Computer Components Corporation
4300 Wiley Post Road
Addison, TX 75001
800-749-0222
972-661-3746 Facsimile

DIRECTORS
William Kim Wah Tan
Ian C. Edmonds
Randy T. Hardin

AlphaNet Hospitality Systems, Inc.
275 N. Franklin Turnpike, Ste 230
Ramsey, NJ 07446
201-327-4700
201-327-8219 Facsimile

And

55 St Clair Ave W 4th Flr
Toronto, ON M4V 2Y7 Canada
416-413-4400
416-413-4470 Facsimile

DIRECTORS
William Kim Wah Tan
Ian C. Edmonds
Mark Holzberg

Auditors: King Griffin & Adamson P.C.
14160 Dallas Parkway 9th Flr
Dallas, TX 75240

Corporate Counsel: Carl Generes
4315 West Lovers Lane
Dallas, TX 75209

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MESSAGE FROM THE PRESIDENT

1999 has been a year of growth and development at Tech Electro Industries,
Inc. particularly in the technology arena. On October 22, 1999, the Company
consummated the acquisition of Alphanet Hospitality Systems Inc. ("AlphaNet").
AlphaNet is a leading supplier of business and connectivity solutions to the
hospitality industry. AlphaNet's core product, InnFax(R), can be found in
approximately 70,000 hotel rooms in renowned hotels worldwide, including many
leading luxury hotels such as The Waldorf Astoria, Plaza Hotel, The New York
Palace and The Mansion on Turtle Creek. AlphaNet's The Offic(TM), a 24-hour
"self-serve" business center, is positioned for further growth in 2000. We are
also pleased to announce that AlphaNet has entered into an agreement with a
high-speed Internet provider, to market and sell its private label,
InnConnect(TM), a high speed internet service chiefly utilizing Digital
Subscriber Line (DSL) technology to hotel and meeting rooms throughout the
United States and Canada. In addition, AlphaNet recently launched a new private
label, InnPhone(R), an advanced cordless phone using Digital Spread Spectrum
(DSS) technology.

In 1999, we implemented our plan to turnaround Computer Components
Corporation ("CCC") by restructuring the management and shifting the focus of
its business from components to battery and battery related products. I am proud
to share with you that subsequently, CCC has achieved strong growth and
profitability. In fact, CCC recorded a 64% increase in revenues compared to the
same period for year ended December 31, 1998 and reversed the loss situation to
a profit of $276,027. CCC is anticipating the momentum to continue for this
year.

Our strategy is to build a strong foundation from which we can grow. In
2000, we shall continue to position ourselves for expansion and growth by
seeking new products and markets that augment our existing product lines and
sales channels.

Together, with our dedicated team, we strive for a year of growth,
financial stability, and prosperity for the shareholders. We look forward to
continued growth, profitability and a bright future for Tech Electro Industries.

Sincerely,

William Tan
President and CEO

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Computer Components Corporation

Computer Components Corporation (CCC) has long been recognized as a
successful distributor of electronic components. The company now known as CCC
began in 1963 under the name of Dunbar Associates, Inc. and has since evolved
into one of the industry's leading distributors of industrial batteries.

Tech Electro Industries Inc. was incorporated in 1992 for the purpose of
acquiring 100 percent of the capital stock of CCC and in 1996, the company
formed Universal Battery Corporation (UBC), another Texas corporation, to expand
into new markets for batteries and battery products. In June 1999 UBC was merged
into CCC due to their similarity of business.

CCC's operations are basically divided into three areas: (i) Sale of
battery and battery assembly systems and contract manufacturing or kitting
systems; (ii) Sale of passive electronic components; (iii) Sale of other
products, such as AC transformers, ceramic sound sources, battery chargers, etc.

CCC sells and distributes, under agreements with Panasonic and Varta, a
broad line of industrial (as opposed to consumer-retail) batteries. The
batteries sold and distributed by CCC include sealed lead-acid, nickel-cadmium,
lithium, carbon-zinc, nickel metal hydride and alkaline batteries. In addition
to the sales of individual batteries, CCC assembles and sells battery "packs"
consisting of assembled groups of batteries combined physically and electrically
into a single unit. CCC is a Panasonic authorized MOD center ("Modification
Center") and, in that capacity, creates custom-designed battery packs meeting
specifications of individual customers. In addition to providing the services
necessary to produce battery packs, such as welding and assembly, CCC supplies
materials such as wiring, connectors, buss bars and casings. Completed battery
packs are assembled to order in nearly all instances and CCC maintains little or
no inventory of completed packs, although components for assembly of packs are
maintained. CCC also offers customers battery packs assembled in China to the
customers' specifications. CCC maintains a broad inventory of various sizes of
batteries and components utilized in battery package production to serve
customer needs for immediate pack design and assembly.

Commencing in February 1997, CCC was appointed as a distributor of
Panasonic brand retail consumer batteries and currently distributes to a wide
range of merchants and retail outlets. Encouraged by the successes of its
battery venture, CCC management will continue to position and expand the Company
to gain global market recognition for its high technology products and services.

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AlphaNet Hospitality Systems, Inc.

Founded in 1992, AlphaNet Hospitality Systems Inc. ("AlphaNet") is a
leading supplier of business and connectivity solutions to the hospitality
industry. Among AlphaNet's products are: InnFax, the private in-room facsimile
and business service; InnConnect(TM), the company's new high-speed Internet
access product for hotel guest and meeting rooms; InnPhone(R), an advanced
two-line cordless telephone developed exclusively for hotels; and The
Office(TM), a 24-hour unattended "self-serve" hotel business center. AlphaNet's
products can be found in hundreds of hotels around the world serving tens of
thousands of guestrooms.

Products

InnFax(R): AlphaNet's core product, InnFax, provides business travelers
staying at leading hotels with a private, in-room fax machine. Users may send
and receive faxes with complete confidentiality and at their convenience, on a
unique, private fax number which is disabled on check-out so that the next guest
has a different and unique number. In addition, the guest has access to a range
of information services and in-room printing of the hotel bill. The latest
InnFax machine, the IBC-5000, provides the benefits of the InnFax service with
the additional features of plain paper PC printing and copying.

InnFax service is based on AlphaNet's patent-protected technologies,
combining the facilities of the public switched telephone network with
conventional radio frequency paging into a unique communications capability.
This technology provides hotels with the capability of offering private in-room
fax service, even in single-line rooms, without the significant capital
expenditures otherwise required to rewire the hotel and upgrade telecom systems
to make in-room fax possible.

The Office(TM): The Office is an unattended "self-service" hotel business
center. Credit card activated, The Office provides hotel guests with 24- hour
convenient access to various office services. Hotel guests can utilize a
personal computer loaded with popular business software, have access to the
Internet and Email, as well as document printing, faxing and photocopying, all
without ever having to leave the hotel. For hotels, particularly those within
the fast growing mid-market/ limited service sector, The Office allows them to
meet the needs of business travelers without the expense of added staff.

InnConnect(TM): In July of 1999, AlphaNet entered into a sales and
marketing agreement with a high-speed internet provider engaged in the
installation and operation of high-speed Internet access systems, chiefly
utilizing Digital Subscriber Line (DSL) technology. The agreement provides for
AlphaNet to sell and market high-speed Internet access for hotel guest and
meeting rooms, across the US and Canada. InnConnect is AlphaNet's private label
for the services sold under the agreement with a high-speed internet provider.

InnConnect provides hotel guests with the same fast and reliable Internet
connection that they are accustomed to having in their offices and which cannot
be achieved via a dial-up connection using a standard hotel dataport. Moreover,
InnConnect takes the unprecedented stress off hotels' PBX systems that dial-up
connections create, and that leads to both guest dissatisfaction and higher
hotel operating costs.

InnPhone(R): AlphaNet has continued to evolve as a single-source provider
of business and connectivity solutions to the hospitality industry with its
introduction of InnPhone, an advanced two-line cordless phone designed
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exclusively for hotels. InnPhone utilizes 900 MHz digital spread spectrum
technology as well as "smart channel hopping" to ensure maximum security
without crosstalk, even when hundred of units are installed in the same hotel.
InnPhone features guest service buttons, a dataport, hands-free speakerphone and
guest message indicator. With InnPhone, hotel guests can roam around their room
or suite while on the phone without being tied to fixed telephone.

AlphaNet sells its product line at both chain/management company and
individual property levels. Among its 370 hotel clients are properties
represented by more than 20 brands, such as Hyatt, Marriott, Loews, Fairmont,
and Sheraton, to name a few. AlphaNet's InnFax service can be found in every
"Business Class" room of the Hyatt chain and in many leading luxury properties
such as The Waldorf-Astoria, The Plaza Hotel, The New York Palace Hotel and The
Mansion on Turtle Creek.

AlphaNet will continue to develop and provide innovative products and
services to the hospitality industry, and to expand its range of business
solutions and its client base.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)

For the Fiscal Year Ended December 31, 1999

[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)

Commission File No. 0-27210

Tech Electro Industries, Inc.
----------------------------
(Name of Small Business Issuer in its Charter)

Texas 75-2408297
----------------------------- ------------------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.

477 Madison Avenue, 24th Floor, New York, New York 10022
-------------------------------------------------- ----------
Address of principal executive office Zip Code

Issuer's telephone number: (212) 583 0900

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT

Common Stock, $0.01 Par Value
-----------------------------
(Title of Class)

Class A Preferred Stock, $1.00 Par Value
----------------------------------------
(Title of Class)

Units, consisting of one (1) share of Common
Stock and one (1) share of Class A Preferred Stock
--------------------------------------------------
(Title of Class)

Redeemable Class A Warrants
---------------------------
(Title of Class)

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Check whether the issuer has (i) filed all reports required by Section 13 or
15(d) of the Exchange ACT during the past 12 months, and (ii) been subject to
such filing requirements for the past ninety (90) days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB. [X]

The Company's revenue for Fiscal Year ended December 31, 1999 was $18,650,674.

As of February 28, 2000, 8,089,874 shares of Common Stock were outstanding and
the aggregate market value of the Common Stock (based on the latest price of
known transactions on the OTC Bulletin Board) held by non-affiliates
(3,500,178 shares) was approximately $3,281,417.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

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THIS DOCUMENT IS PREPARED AND FILED UNDER THE REQUIREMENTS OF REGULATION S-B OF
THE SECURITIES AND EXCHANGE COMMISSION, EFFECTIVE JULY 31, 1992.

Part I

Item 1. Description of Business

General Business History

Tech Electro Industries, Inc. ("TEI" or the "Company") was incorporated
under the laws of the State of Texas on January 10, 1992, for the purpose of
acquiring 100% of the capital stock of Computer Components Corporation ("CCC"),
its direct, wholly-owned subsidiary. CCC has, since its inception, operated as a
distributor of electronic components and, in 1980, expanded into the battery
assembly business.

On October 29, 1996 TEI incorporated Universal Battery Corporation ("UBC"),
a Texas corporation, for the purpose of expanding into new markets for batteries
and battery products. In February, 1997 TEI, in an internal reorganization,
transferred to CCC the capital stock of UBC. The purpose of the internal
reorganization was to move all operations to subsidiaries and enabled TEI to
operate more expediently as a parent/holding company.

On June 21, 1999, the State of Texas approved the merger of Universal
Battery (UBC) into Computer Components Corporation due to similarity of business
operations.

In March, 1998, the Company completed the acquisition of a controlling
interest in US Computer Group, "USCG" a company that provided a broad range of
information technology services and products. On February 25, 1999, Telstar
Entertainment ("Telstar"), the second largest shareholder of USCG, contributed
additional capital to USCG through the purchase of additional shares.
Accordingly making Telstar the largest shareholder of USCG, effective February
25, 1999 TEI ceased reporting USCG's financial results in its consolidated
financial statements, and uses the equity method to account for its minority
interest in that company. In March 2000, a USCG bank creditor foreclosed on all
of USCG's assets, effectively terminating all of USCG's operations. TEI has
guaranteed a portion of the USCG bank indebtedness. In this regard, the said
bank creditor has demanded that TEI pay $361,740 to the bank pursuant to the
guarantee. TEI is investigating its options in response to these events.

On October 26, 1999, TEI completed the acquisition of AlphaNet Hospitality
Systems, Inc. ("AlphaNet"). TEI paid a combination of cash, promissory note and
assumption of indebtedness for a total consideration value of $3,500,000. TEI
paid $1,400,000 cash that was raised in a private placement through the sale of
TEI's Common Stock and Warrants. TEI issued a $2,100,000 non-interest bearing
four-month promissory note to the seller as part of the purchase price.

On March 8, 2000, TEI paid in full the $2,100,000 note by paying to the
seller $500,000 in cash and 1,100,000 shares of TEI common stock. The $500,000
cash was borrowed from an entity affiliated with TEI's president. See discussion
under Item 12 below.

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Business of TEI and its Subsidiaries

Computer Components Corporation

CCC's operations have historically consisted of: (i) Sale of battery and
battery assembly systems and contract manufacturing or kitting systems; (ii)
Sale of passive electronic components; (iii) Sale of other products, such as AC
transformers, ceramic sound sources, battery chargers, etc.

The products are sold to original equipment manufacturers (OEMs) and
distributors for use in the manufacture and sale of high-technology products,
such as computers, oil field equipment, medical instrumentation, uninterruptable
power supply ("UPS") systems, and security equipment among others. CCC is an
authorized distributor, on a non-exclusive basis, for two product groupings of
Panasonic, USA ("Panasonic"), Varta, USA ("Varta") and Duracell, USA. Varta,
based in Germany, is a manufacturer of battery products. Panasonic is a
subsidiary of Matsushita Electric Corp. of Japan. CCC also operates under
noncontractual, long-term relationships (many exceeding 10 years) with other
vendors located in Taiwan, Hong Kong, China, Korea and Japan from whom it
imports non-proprietary electronic components and batteries marketed under its
registered trademark, "NIKKO","UBC", "Tech Electro Industries" and,
occasionally, under the name of the Asian vendor. CCC has also added, within the
last two years, vendors of electro magnetic devices, battery charging and
electro mechanical devices from The People's Republic of China. Whereas CCC has
developed new sources of supply for some of the products it sells in order to
improve costs and open up new market opportunities, the arrangements with these
suppliers do not include classical "distributorship" contracts.

Batteries

CCC sells and distributes, under agreements with Panasonic and Varta, a
broad line of industrial (as opposed to consumer-retail) batteries. The
batteries sold and distributed by CCC include sealed lead-acid, nickel-cadmium,
lithium, carbon-zinc, nickel metal hydride and alkaline batteries. In addition
to the sales of individual batteries, CCC assembles and sells battery packs"
consisting of assembled groups of batteries combined physically and electrically
into a single unit. CCC is a Panasonic authorized MOD center ("Modification
Center") and, in that capacity, creates custom-designed battery packs meeting
specifications of individual customers. In addition to providing the services
necessary to produce battery packs, such as welding and assembly, CCC supplies
materials such as wiring, connectors, buss bars and casings. Completed battery
packs are assembled to order in nearly all instances and CCC maintains little or
no inventory of completed packs, although components for assembly of packs are
maintained. CCC also offers customers battery packs assembled in China to the
customers' specifications. CCC maintains a broad inventory of various sizes of
batteries and components utilized in battery package production to serve
customer needs for immediate pack design and assembly.

Commencing in February 1997, CCC was appointed as a distributor of
Panasonic brand retail consumer batteries. CCC distributes retail batteries to a
variety of retail merchants and outlets.

On December 8, 1999, CCC launched an e-commerce site, www.ubcbattery.com,
enabling consumers to purchase an extensive selection of battery and battery
related products. The e-commerce site will augment current sales and marketing
channels, affording CCC the opportunity to reach out to a segment of the battery
market not currently being served by its direct sales force.

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Contract Manufacturing and Kitting Operations

For the past several years CCC has sold various types of electronic
components to United States-based customers. The components are delivered to the
customer's facility in Mexico, where Mexican sub-contractors insert these
components into parted circuit ("PC") boards to customer specifications. After
such assembly, the PC boards are shipped back to the United States for assembly
into the customer's final product.

CCC is currently pursuing a number of projects and believes that kitting
operations represent an opportunity for it to reach new customers.

Electronic Components

CCC imports and sells to OEMs and distributors the following electronic
components for use in the manufacture, repair and modification of electronic
equipment:

RESISTORS. Carbon film, metal film and metal oxide resistors in both
leaded and chip (surface mount) configurations.

CAPACITORS. Polyester, polypropylene and polycarbonate metalized
film, film and foil (inductive and non-inductive),
aluminum electrolytic and ceramic capacitors (leaded and
chip).

RELAYS. AC and direct current("DC") relays, usually for operations
at less than 20 amperes contact rating and 50 volts DC
coil operation.

OTHER PRODUCT SALES

CCC sells to OEMs and distributors or retail suppliers the following other
products:

SOUND SOURCES. Piezo and inductive drive "sounders" for the production
of alarm signals in security systems.

TRANSFORMERS. 120-volt AC household and business wall plug
transformers for reduction of power line voltage to low
voltage (12 to 24 volts AC) applications as utilized by
household and business electrical devices.

BATTERY CHARGERS. Various battery chargers used in consumers and
business applications.

CCC relies primarily on sales personnel and representatives, and has
undertaken only minimal advertising in trade publications. At December 31, 1999,
CCC employed a direct sales force of four outside salesmen and five inside
"customer service" representatives.

Property and Equipment

CCC owns the majority of the equipment utilized in its design,
manufacturing and assembly operations. This includes specialized equipment such
as small electric welders, sonic welder, computer aided design ("CAD") computer
programs, computer driven battery analyzers, battery chargers, heat-shrink

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ovens, strip-chart recorders, timers, multimeters and hand tools utilized in
operations. Additional manufacturing equipment capable of automated epoxy
dispensing and automated "connector to wire" attachment, is also owned. An
insignificant amount of small equipment is leased. CCC owns the computer
hardware and software required for its accounting, sales, inventory and
management. Office furniture and equipment as necessary to operate the business,
are also listed among CCC assets.

CCC's equipment consist of readily available items and could be replaced
without significant cost or disruption to business activities.

Customers

CCC's customer base is relatively broad. CCC maintains a computer database
of over one thousand active and inactive customers, all of whom are believed to
be potential customers for CCC's products. CCC believes, however, that the loss
of a major customer or group of related customers may have a materially adverse
effect on its operations.

Employees

As of December 31, 1999, the CCC workforce consisted of 21 full time employees.

Technology

CCC's electronic products are all relatively low technology. CCC believes
these products are not subject to sudden obsolescence since they represent basic
elements common to a wide variety of existing electronic circuit designs. At the
same time, there can be no assurance that advances and changes in technology,
manufacturing processes and other factors will not affect the market for CCC's
products.

Competition

CCC competes in the sale of its batteries and battery packs with many
companies located in the United States, Mexico and Asia. In sales of its
electronic components, CCC faces competition from many large electronic
distributors as well as from factory direct sale outlets throughout the United
States as well as other importers and exporters in Asia. Many competitors of CCC
are substantially larger and have greater resources than CCC.

Environmental Matters

CCC believes it is in material compliance with all relevant federal, state,
and local environmental regulations and does not expect to incur any significant
costs to maintain compliance with such regulations in the foreseeable future.

Patents and Trademarks

Although CCC is the owner in Texas of the trademark "NIKKO" for batteries
and electronic components, that trademark is not regarded as essential or
necessary for the marketing of CCC's products. CCC does depend, in part, on the
patents and trademarks of its vendors and suppliers, over which it has little
control. It is possible that the loss of these marks, or the deregulation of
their value, could have an adverse effect on CCC's business.

Sources and Availability of Materials

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With the exception of battery products and certain electronic components
described below, CCC purchases its raw materials, such as wire, metals and
packaging materials, from a number of local sources and is not dependent on any
single source for raw materials. Except as noted below, CCC believes that the
loss of any single supplier would not adversely affect CCC's business. All raw
materials utilized by CCC are readily available from many sources.

CCC enjoys a close and beneficial non-exclusive relationship with a single
supplier of a substantial portion of its battery products, the Panasonic Battery
Sales Group of Matsushita Electric Corp. of America ("Panasonic"). CCC is a
certified Panasonic Modification Center for the production of battery packs. CCC
has also established relationships with other battery manufacturers from which
CCC purchases substantial numbers of batteries. The loss of any of these
relationships could have a materially adverse effect on CCC.

Research and Development

During each of the last two fiscal years CCC did not expend in excess of
ten thousand dollars on research and development of products.

Governmental Matters

Except for usual and customary business and tax licenses and permits, and
the licenses and permits described elsewhere herein, no governmental approval is
required for the principal products/services of CCC, nor does CCC know of any
existing or probable governmental regulations affecting CCC's activities.

AlphaNet Hospitality Systems, Inc.

Founded in 1992, AlphaNet Hospitality Systems Inc. ("AlphaNet") is a
leading supplier of business and connectivity solutions to the hospitality
industry. Among AlphaNet's products are: InnFax(R), the private in-room
facsimile and business service; InnConnect(TM), the company's new high-speed
Internet access product for hotel guest and meeting rooms; InnPhone(R), an
advanced two-line cordless telephone developed exclusively for hotels; and The
Office(R), a 24-hour unattended "self-serve" hotel business center. AlphaNet's
products can be found in hundreds of hotels around the world serving tens of
thousands of guestrooms.

Products

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InnPhone(R): AlphaNet has continued to evolve as a single-source provider
of business and connectivity solutions to the hospitality industry with its
introduction of InnPhone, an advanced two-line cordless phone. With InnPhone,
hotel guests will be able to roam around their room or suite while on the phone
without being tied to fixed telephone.

Equipment

AlphaNet purchases fax machines and office equipment from a leading brand
name manufacturer in Japan. The manufacturer modifies facsimile machines to
AlphaNet specifications. This allows the facsimile machines to operate as a part
of a communications network so that business travelers or other individuals
residing in hotel rooms can send and receive fax transmissions.

AlphaNet also leases fax machines to hotels using third party lease
arrangements. Hotels sign multi-year lease agreements with third party lease
companies for fax machines, as alternative to having AlphaNet owned equipment on
site. The leased equipment connects to AlphaNet communications and billing
system. Approximately 10% of the installed fax machines are leased.

The equipment necessary for The Office product line is obtained from brand
name manufacturers and software suppliers and deployed in hotels under contract.
The Office products contain modifications to allow for activity tracking,
therefore individual usage is summarized for billing purposes that is provided
to AlphaNet and the hotel.

AlphaNet acts as a sales agent for both its InnConnect and InnPhone products.

Client Base

"Business Class" room of the Hyatt chain and in many leading luxury properties
such as The Waldorf-Astoria, Plaza Hotel, New York Palace Hotel and The Mansion
on Turtle Creek.

Employees

AlphaNet is headquartered in Ramsey, New Jersey, a suburb of New York City,
and maintains a significant office in Toronto, Canada and a small depot repair
facility in Colorado Springs. AlphaNet's CEO and the sales and marketing
management and support staff are located in New Jersey. Operations, Customer
Service, R&D and Finance reside in the Toronto facility. The three sales
managers and the inside sales representative work from their homes, as do three
installation managers located in New York, Chicago and the Washington, DC area.
AlphaNet employs a total of 37 people.

Sales and Marketing

AlphaNet sells its products and services through a direct sales force
comprised of three regional sales managers and an inside sales representative,
led by the Vice President of Marketing. The regional sales managers, working
from their homes in New York, Chicago and San Jose, California, each are
respectively responsible for the Eastern, Central and Western United States and
Canada. In addition, senior management of AlphaNet takes an active roll in sales
and sales management.

The sales force is supported by trade advertising and extensive use of
highly targeted direct mail. AlphaNet also typically exhibits at two major
industry trade shows each year.

Technology

AlphaNet holds a number of patents allowing individual fax machines to work
in concert with communications networks. AlphaNet purchases fax machines and
office equipment obtained from brand name manufacturers. Manufacturers may make
modifications to their equipment as per AlphaNet specifications for
communications network accessibility.

Patents and Trade Marks

AlphaNet holds a number patents allowing individual fax machines to work in
concert with communications networks.

InnFax and InnPhone are copyrighted by AlphaNet. The Office and InnConnect
are AlphaNet registered trademarks.

Competition

In part due to its first to market advantage and proven technology and
support capabilities, AlphaNet does not have significant competition to its
InnFax business. The market for high-speed Internet access is very competitive,
with some 30 providers. There are two established competitors to AlphaNet's The
Office product and many distributors of hotel telephones.

Sources and Availability of Services

AlphaNet relies upon the facilities and services of various telephone and
communications common carriers. Those relationships are defined under contract
by multiyear agreements that have, and continue to, satisfy AlphaNet's needs.
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AlphaNet relies on one manufacturer to provide it with fax machines.

Government Matters

Except for the usual and customary business and tax licenses and permits,
no government approval is required for the principal products / services of
AlphaNet nor does AlphaNet know of any existing or probable government
regulations affecting AlphaNet activities.

Item 2. Description of Property

AlphaNet occupies leased office space in Toronto (7,300 square feet), New
Jersey (2600 square feet) and Colorado (400 square feet). The "per month" lease
cost are as follows:

Toronto $11,420
New Jersey 4,200
Colorado 550

The Toronto property is on a month to month lease as the new lease is under
negotiation. The New Jersey lease expires on July 31, 2000. The Colorado Lease
expires on March 1, 2001.

CCC occupies an industrial office building complex and parking facility
owned by La Taste Enterprises, a partnership of Craig D. La Taste, former
director and former President of CCC. CCC utilizes the entire property, which
includes approximately 23,000 square feet of office and warehouse building and
7,000 square feet of open fenced and paved parking and storage areas. CCC has
entered into a lease effective March 1, 2000 for five years at a rate of $8,400
per month. The building space includes approximately 4,000 square feet of office
space, 4,000 square feet of assembly space used in the CCC's battery pack
business, with the balance of the space dedicated to warehousing, storage,
shipping and receiving operations.

On August 1, 1998, the TEI leased a 1,500 square feet office in New York
City. This office serves as TEI's Corporate Headquarters and is being leased for
$5,000 monthly. The lease expired July 31, 1999, and is now on a month to month
basis.

Item 3. Legal Proceedings

Martin Frank, a former employee of CCC, has filed an arbitration claim with
the American Arbitration Association against CCC and TEI for breach of his
employment agreement. CCC and TEI are unable at this time to determine the
amount of their liability, if Frank prevails in the proceeding. Mr. Frank claims
damages in excess of $2,500,000. A decision of the arbitration panel is expected
by the end of April 2000.

AlphaNet has been the defendant in a lawsuit filed by a competitor claiming
that AlphaNet's The Office product infringes on a patent assigned to the said
competitor. In order to end this litigation and the resultant legal fees,
AlphaNet has been negotiating a settlement with the competitor. AlphaNet
believes that the litigation will not have a material impact on AlphaNet
regardless of whether the case proceeds or is settled.

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

None
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Part II

Item 5. Market for Company's Common Equity and Related Stock Matters

The Common Stock, Units, Class A Preferred Stock and Warrants of the
Company are traded on the OTC Market under the symbols TELE, TELEU, TELEP and
TELEW, respectively. On December 31, 1999, the last sales price of the Company's
Common Stock, Units and Warrants was $1, $2 3/4, and $1/16, respectively. The
Class A Preferred Stock has been traded with the Units and has not been
separately quoted. During 1999, the Company sold 2,214,014 shares of Common
Stock through private placement for gross proceeds of $1,448,750. The sale was
made to accredited and related investors.

No dividends have been declared or paid on the Common Stock.

The Company has paid all dividends, which have accrued on the Class A
Preferred Stock. Dividends accrue at an annual rate of $36.75 and are payable in
quarterly arrears on the last day of March, June, October, and December of each
year. At the option of the Company, dividends are payable either in cash or
shares of Common Stock.

As of February 28, 2000, there were approximately 8,089,874 shares of
Common Stock issued and outstanding held by 588 shareholders of record of the
Common Stock of the Company.

On April 7, 1999, the Company was informed by NASDAQ that its securities
were delisted effective April 7, 1999, for failure to file a timely annual
report on Form 10-KSB. The Company failed in its appeal to have the decision
reversed and is currently trading on OTC Bulletin Board. The Company is still
considering its options to be listed on NASDAQ again.

The following table sets forth the high and low prices of the Company's
Common Stock on a quarterly basis for the calendar years 1996, 1997, 1998 and
1999.
Common Stock Price

Calendar Period High Low
1996:
First Quarter.......$4.00 $2.125
Second Quarter......$1.875 $0.625
Third Quarter.......$1.50 $0.75
Fourth Quarter......$2.25 $1.375
1997:
First Quarter.......$3.25 $1.625
Second Quarter......$2.75 $1.50
Third Quarter.......$4.375 $1.625
1998:
First Quarter.......$3.938 $2.375
Second Quarter......$3.50 $2.375
Third Quarter.......$2.813 $1.375
Fourth Quarter......$4.25 $0.875
1999:
First Quarter.......$2.688 $1.00
Second Quarter......$1.188 $0.25
Third Quarter.......$1.312 $0.688
Fourth Quarter......$1.063 $0.625

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Item 6. Management's Discussion and Analysis of Financial Condition and Results
Operations

The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and notes thereto included
elsewhere in this Form 10-KSB. Except for the historical information contained
herein, the discussion in this Form 10-KSB contains certain forward looking
statements that involve risks and uncertainties, such as statements of the
Company's plans, objectives, expectations and intentions. The cautionary
statements made in this Form 10-KSB should be read as being applicable to all
related forward-looking statements wherever they appear in this Form 10-KSB.
These statements include, without limitation, statements concerning the
potential operations and results of the Company and information relating to Year
2000 matters, described below. The Company's actual results could differ
materially from those discussed here. Factors that could cause or contribute to
such differences include, without limitation, those factors discussed.

Results of Operations

FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998. The Company's results of
operations for the year ended December 31, 1999 versus the year ended December
31, 1998 were significantly impacted by the acquisition of AlphaNet Hospitality
Systems, Inc. completed on October 22, 1999, the de-consolidation of US Computer
Group, Inc. on February 25, 1999, and a significant increase in sales at
Computer Components Corporation.

Revenues

For the year ended December 31, 1999, the Company had sales of $18,650,674,
a decrease of $6,262,357 (25.137%), compared to sales of $24,913,031 during the
same period in 1998. The significant decrease in revenues was due to the
de-consolidation of USCG. USCG had sales contributing to the Company's revenues
in 1999 first quarter of $3,187,661 and AlphaNet contributed sales of $2,312,191
in the fourth quarter of 1999.

CCC recorded revenues for the year ended December 31, 1999 of $13,150,822,
compared to $8,006,535 for the same period in 1998, an increase of $5,144,287
(64.25%). This increase in revenues was primarily due to management's decision
to shift their focus from components to the battery industry and the jumpstart
program which they started in 1999.

AlphaNet recorded revenues for the fourth quarter 1999 of $2,312,191, with
no contribution in the comparable period in 1998.

The Company recognized a loss from operations of $3,008,196 for the year
ended December 31, 1999, compared to a loss of $4,438,491 during the same period
in the prior year, a decrease in net losses of $1,430,295 (32.25%). The
decreased loss as compared to 1998 was due primarily to the de-consolidation of
USCG in 1999. USCG's cost of goods sold and direct servicing cost in 1998 was
$17,588,858 compared to 1999 $2,496,303 and their general and administrative
expenses were $10,564,336 in 1998 to $2,064,840 in 1999.

The 1999 loss from operations was mainly attributable to the losses
incurred by AlphaNet for the last quarter of 1999, by USCG during the first
quarter of 1999 and by overhead expenses incurred by the parent company. The
majority of these overhead expenses were salaries, legal and professional fees.
Because of CCC's increased revenues for 1999, this entity reflected a profit
from operations of approximately $276,000 for the year. Both CCC and TEI
12
<PAGE>

incurred expenses relating to the write off of loans made to USCG that were
deemed uncollectible at year end. The amount of these notes that were written
off during 1999 was $472,344.

Cost of Goods Sold and Direct Servicing Costs

The Company's cost of goods sold and direct servicing costs, decreased to
$13,528,488 in the year ended December 31, 1999 from $17,588,858 during the same
period during 1998, a decrease of $4,060,370 (23.08%). The decrease in cost of
goods sold and direct servicing costs is attributable to the de-consolidation of
USCG, which contributed cost of goods sold and direct servicing costs of
$2,496,030 during the first quarter with no contribution during the remaining
period in 1999.

CCC's costs of goods sold increased by $4,455,525, to $10,577,578 for the
year ended December 31, 1999, compared to $6,122,053 for the same period in
1998. Overall, cost of goods as a percentage of sales increased to 72.5% in the
year ended December 31, 1999, from 70.6% during the same period in 1998. These
increased costs are largely attributable to CCC increasing revenues for 1999.
The Company has expanded its sales base to include a large volume customer with
a lower profit margin than many of the other customers. Also, as part of the
overall plan for increasing revenues by concentrating more on batteries and
battery related products, the gross margin has declined because these products
have a lower margin than electronic components. Management believes it has
compensated for that loss of margin, and will continue to do so, with the
increases in volume.

AlphaNet's cost of goods sold in the fourth quarter of 1999 was $562,831.

Selling, General and Administrative Expenses

The Company's selling, general and administrative expenses (or "S,G &A"),
decreased to $6,796,921 for the year ended December 31, 1999, compared to
$9,395,513 for the year ended December 31, 1998, a decrease of $2,598,592
(27.66%). The decrease in selling, general and administrative expenses was due
to de-consolidation operations of USCG, which contributed general and
administrative expenses of $2,064,840 in the first period of 1999, with no
contribution during the remaining period of 1999.

CCC's selling, general and administrative expenses increased by $167,072
(7.451%), to $2,409,483 for the year ended December 31, 1999, compared to
$2,242,411 during the same period ended December 31, 1998. At December 31, 1999,
CCC incurred a bad debt expense of $272,864 on a loan that was made to USCG. Had
it not been for this bad debt, the Company S,G & A expenses would have been
lower than during 1998.

AlphaNet's selling, general and administrative expenses in the fourth
quarter 1999 was $2,604,454 of which $956,647 was depreciation of revenue
producing assets. The last quarter of 1999 was abnormally high due to
accounting, legal and loan refinancing costs incurred by AlphaNet in connection
with its acquisition by the Company.

Inventory

CCC monitors potential inventory adjustments on an ongoing basis and
increased its inventory allowance periodically throughout Fiscal 1999. During
1999, the Company recorded an additional provision of $107,951 for obsolete

13
<PAGE>

inventory compared to a provision of $1,250,798 in 1998, a substantial portion
of which was for USCG.

Depreciation and Amortization Expense

The Company incurred $1,225,510 in depreciation and amortization for the
year ending December 31, 1999, compared to $1,116,353 in 1998 an increase of
$109,157 (9.7%). The majority of the depreciation expense is contributed to
AlphaNet which incurred $967,153. USCG incurred depreciation and amortization
cost of $181,803 in 1999 compared to $1,060,737 in 1998.

Amortization of Excess of Net Assets of Company Acquired over Cost

The Company also has an excess of net assets of Company acquired over cost
which is associated with the purchase of AlphaNet which is being amortized of
which the Company incurred $130,101 in 1999.

Interest Expense

The Company incurred $552,536 in interest expense for the year ended
December 31, 1999, compared to $684,120 during the same period in 1998, a
decrease of $131,584 (19.23%). The majority of the interest expense is
attributable to USCG, which incurred $122,525 in interest the first quarter and
AlphaNet which incurred $370,530 in the fourth quarter of 1999. AlphaNet
interest expense was larger than expected due to an interest penalty for early
retirement of an AlphaNet financing arrangement with a third party.

Income Tax Expense

The expected income tax benefit for 1999 and 1998 resulting from the net
loss has a 100% valuation allowance recorded against it for both periods due to
the uncertainty of generating future taxable revenue.

Liquidity

As of December 31, 1999, the Company had cash and cash equivalents of
$894,261. By comparison on December 31, 1998, the Company had approximately
$1,399,060 in cash and cash equivalents.

Cash Flow From Operations

Cash provided by operations for 1999 was $290,669 compared to cash used in
operators of $1,833,921 in 1998. The major components of cash flows from
operations in 1999 included a decrease of $702,657 in inventory due to
management watching inventory turnover, an increase of $387,316 in prepaid
expenses due advance payments to oversea vendors. Capitalization of loan costs
increased to $228,768 due to refinancing of several Company loans. Accrued
liabilities increased $867,803 due to property tax liability, accrued vacation,
bonuses, salary, and accrued note interest.

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<PAGE>

Cash Flow From Investing Activities

Cash used by investing activities in 1999 was $2,154,980 compared to
$195,653 in 1998. The Company used $994,235 to an acquire AlphaNet compared to
acquisition cost of $188,613 in 1998. In 1999, the Company purchased $260,294 in
short term investments, advanced USCG $472,344 in loans which the Company had to
write off and the cash decreased from the de-consolidation of USCG was $316,262.

Cash Flow From Financing Activities

Cash provided by financing activities was $1,359,512 and $1,510,030 in 1999
and 1998 respectively. The Company received proceeds on sale of common and
preferred shares of $1,448,750 and proceeds from additional long-term debt in
the amount of $2,375,000. The Company used cash of $1,060,557 on their current
bank lines of credit and $1,428,681 on some long-term debt in 1999.

The Company expects to fund future cash needs through operations, its lines
of credit and raising additional capital as necessary.

Inflation

The Company has not been materially effected by inflation. While the
Company does not anticipate inflation affecting the Company's operations,
increases in labor and supplies could impact the Company's ability to compete.

Forward-Looking Statements

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company wishes to caution readers that the
following important factors could cause the Company's actual results to differ
materially from those projected in forward-looking statements made by, or on
behalf of, the Company:

Factors related to increased competition from existing and new competitors,
including price reductions and increased spending on marketing and product
development; and limitations on the Company's opportunities to enter into and/or
renew agreements with vendors and customers.

The Company's inability to manage its growth and to adapt its
administrative, operational and financial control systems to the needs of the
expanded entity; and the failure of management to anticipate, respond to and
manage changing business conditions.

The failure of the Company or its partners to successfully utilize
international markets; and risks inherent in doing business on an international
level, such as laws governing content that differ greatly from those in the
U.S., unexpected changes in regulatory requirements, political risks, export
restrictions, export controls relating to technology, tariffs and other trade
barriers, fluctuations in currency exchange rates, issues regarding intellectual
property and potentially adverse tax consequences.

The amount and rate of growth in the Company's marketing and general and
administrative expenses; the implementation of additional pricing programs; and
the impact of unusual items resulting from the Company's ongoing evaluation of
its business strategies, asset valuations and organizational structures.
Difficulties or delays in the development, production, testing and marketing of

15
<PAGE>

products, including, but not limited to, a failure to ship new products and
technologies when anticipated.

The acquisition of businesses, fixed assets and other assets and
acquisition related risks, including successful integration and management of
acquired technology, operations and personnel, the loss of key employees of the
acquired companies, and diversion of management attention from other ongoing
business concerns; the making or incurring of any expenditures and expenses; and
any revaluation of assets or related expenses.

The ability of the Company to diversify its sources of revenue through the
introduction of new products and services and through the development of new
revenue sources.

Item 7. Financial Statements

Information required by this item appears in the Consolidated Financial
Statements and Report of Independent Certified Accountants of Tech Electro
Industries, Inc. and Subsidiaries contained herein.

Item 8. Change in and Disagreement with Accountants on Accounting and Financial
Disclosure

As reported on Form 8-K, on February 13, 1998, the Company retained King
Griffin & Adamson P.C.as its independent public accountants. The engagement of
King Griffin & Adamson P.C. was approved by the Company's Board of Directors.
The Company had announced on Form 8-K filed on June 27, 1997, that it had
engaged Deloitte & Touche LLP in anticipation of their accepting the Company as
a new client; however, Deloitte & Touche LLP had not completed its new client
acceptance procedures and did not reach an agreement with the Company regarding
fee arrangements and timing of audit services. As of February 13, 1998, Deloitte
& Touche LLP had not audited any financial statements nor reviewed any interim
financial information of the Company or any subsidiary of the Company, nor had
the Company consulted with Deloitte & Touche LLP as to any accounting principles
or practices, financial statements or disclosures, or auditing scope or
procedure, except for a brief consultation ($3,400) in coordination with King
Griffin & Adamson P.C. regarding financial statement disclosure. Deloitte &
Touche LLP's services were limited to reading a draft of the Company's Form
10-KSB for the year ended December 31, 1996 and discussing the format of such
report with the Company's auditors and attorneys. Deloitte & Touche LLP did not
provide a written summary in connection with the consultation. King Griffin &
Adamson P.C.was consulted concerning the format of the report, and expressed no
views on such consultation. The Company had no disagreements with Deloitte &
Touche LLP during the period from June 27, 1997 through February 13, 1998 on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons

(a) At March 31, 2000, the following persons served as
directors and executive officers of TEI:

Name and Age Position with Company Since

William Tan Kim Wah (57) Chairman of the Board, 1997
President, Chief Executive
Officer and Director
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<PAGE>

Sadasuke Gomi (29) Director (1) 1997

Ian Colin Edmonds (28) Director 1997
Vice President 1999

Julie Sansom-Reese (37) Interim Chief Financial Officer 1999

Mee Mee Tan (26) Corporate Secretary 1998

(1) Mr. Gomi served as a Vice President and Corporate Secretary of TEI until
his resignation in February 1998.

All directors of the Company are elected at the annual shareholder meeting
and serve as such directors until the next annual meeting of shareholders.
Directors may be re-elected at such succeeding annual meeting so as to succeed
themselves. All employees of the Company who are also directors do not receive
compensation for serving as such directors. Outside (non-employee) directors
receive Five Hundred Dollars ($500.00) compensation for attendance at director
meetings.
(b) Executive Officers of the Company:

William Tan Kim Wah was elected Chairman of the Board, President, Chief
Executive Officer and Director of the Company on February 11, 1997.

Sadasuke Gomi was elected Director and Secretary of the Company in May
1997. Mr. Gomi resigned as Vice-President and Secretary of the Company on
February 16, 1998. Mr. Gomi was appointed to the Independent Audit Committee on
March, 1999. Ian Edmonds was elected a director of the Company in July 1997 and
was appointed to the Independent Audit Committee on February 18, 1998. Mr.
Edmonds resigned from the Committee in February 1999 and was concurrently
appointed Vice-President of the Company.

Julie Sansom-Reese was appointed Interim Chief Financial Officer November
3, 1999.

MeeMee Tan was appointed Corporate Secretary of the Company on February 16,1998.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file various reports with the Securities and
Exchange Commission and the National Association of Securities Dealers
concerning their holdings of, and transactions in, securities of the Company.
Copies of these filings must be furnished to the Company.

Based on a review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and directors, the
Company believes that during the 1999 fiscal year its officers, directors and
greater than 10% stockholders complied with all applicable Section 16(a) filing
requirements.

David Arnold (64) President of CCC as of January 14, 1999

Randy Hardin (40) Chief Executive Officer of CCC as of January 14,
1999
17
<PAGE>

Julie A. Sansom-Reese (37) Chief Financial Officer of CCC
and Interim Chief Financial Officer of TEI

Mark Holzberg (39) President since 1995 an appointed
Chief Executive Officer and Director of AlphaNet in October
1996.

Didler (DJ) Vallauri (35) Vice President, Marketing and Business
Development, joined AlphaNet in November 1996.

Ian Kindred ( 52) Vice President, Worldwide Operations, joined
AlphaNet in 1992.

(d) Business Experience:

WILLIAM TAN KIM WAH, Chairman of the Board, Chief Executive Officer,
President and Director. Mr. Tan was elected to these offices on February 11,
1997. For the past twenty years, Mr. William Tan Kim Wah has been active as an
entrepreneur in the fields of finance, general insurance, property development
and management. Mr. William Tan Kim Wah has held senior management positions in
a number of financing, insurance, textile, property development and related
businesses.

SADASUKE GOMI, Director. He has served as director since February 11, 1997.
Mr. Gomi is a graduate of Mejii University in Japan, where he received a
bachelor's degree in commerce. Mr. Gomi served as Vice President and Corporate
Secretary of the Company from February 11, 1997 until February 1998. Mr. Gomi
was appointed to the Independent Audit Committee on March 1999.

IAN COLIN EDMONDS, Vice President and director of the Company. Mr. Edmonds
is a graduate of the University of Denver, where he received a bachelors degree
in Marketing and minor in Statistics in June 1996. Following graduation and
through December 1997, he was Assistant Product Manager at Information Handling
Services, a private information-technology firm, in Denver, Colorado. Mr.
Edmonds has served as a director of the Company since July 1997. Mr. Edmonds was
appointed as Vice President in February 1999.

JULIE SANSOM-REESE, Interim Chief Financial Officer. Ms. Sansom-Reese
earned a BA degree from Texas Tech University, Lubbock, Texas. Since August
1986, she has served as the Chief Financial Officer of Computer Components
Corporation, the Company's subsidiary. She has served has the CFO for the
Company in the period 1992 thru June 1996, when she resigned, and was
re-appointed as Interim CFO November 1999.

MEEMEE TAN, Corporate Secretary. Ms.Tan holds a BS in Marketing and a minor
in Statistics from University of Denver, Colorado. Prior to joining TEI, Ms. Tan
was an intern at Prudential Securities in Denver, Colorado. She is the daughter
of Mr. William Tan Kim Wah.

DAVID ARNOLD, President and Director of CCC. Since January 1987, Mr. Arnold
has served as Vice President of Dunbar Associates, Inc., now merged into
Computer Components Corporation. On January 12, 1999, Mr. Arnold was appointed
Vice President of CCC. In addition to serving in his new position, Mr. Arnold
will continue to oversee the battery assembly operation, as well as, purchasing
and inventory control functions. Mr. Arnold was born in Portsmouth, Ohio, and
received a public school education there. Mr. Arnold earned a BA degree from
Ohio Wesleyan University, Delaware, Ohio, and a BSEE degree from Case Institute
of Technology, Cleveland, Ohio.
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<PAGE>

RANDY HARDIN, President and Director of CCC. On January 12, 1999, Mr.
Hardin was appointed CEO of CCC and UBC. Mr. Hardin is in charge of the day to
day operations, all marketing and sales activities of the newly consolidated
company. He graduated from Texas A&M in 1982 with a BA degree in Marketing. From
1982 to 1992 he was employed by Interstate Batteries as National Sales Manager
of specialty products. From 1992 to 1996 he served in the same position with MK
Battery company, presently a division of East Penn Battery Company. In October
1996 he joined UBC.

MARK HOLZBERG, President and CEO, Mark H. Holzberg was named President of
AlphaNet in November 1995, and was given the added title of CEO in October 1996.
Mr. Holzberg is responsible for the Company's business worldwide. Before joining
AlphaNet in October 1992, Mr. Holzberg held a number of senior executive and
consulting positions. As a consultant with Graycon Group, a national management
consulting firm with a practice in the travel and financial industries, he was
responsible for a number of business development and management consulting
assignments for clients that included AT&T. Mr. Holzberg is a Phi Beta Kappa
graduate of George Washington University and Georgetown University's Army ROTC
program.

DIDLER (DJ) VALLAURI, Vice President, Marketing and Business Development
joined AlphaNet in November 1996. His responsibilities include managing the
InnFax and The Office brands and developing new business opportunities for the
company. Prior to joining AlphaNet, Mr. Vallauri served as Director of Marketing
and Business Development for Avis' Wizcom International. He has also held sales
and marketing positions with Meridien Hotels, Utell International, and AMR's
TeleService Resources.

IAN KINDRED, Vice President, Worldwide Operations, joined AlphaNet in 1992
to create and manage InnFax operations, engineering and customer service in
North America, as well as providing operations support to AlphaNet's InnFax
licensees around the world. Mr. Kindred has 18 years' experience in the
high-tech sector, and has held management positions at Panacom Automation,
Hewlett-Packard and Varity Corporation.

No family relationship exist among any of the executive officers or
directors of the Company or chosen to become directors or executive officers,
except that MeeMee Tan is the daughter of Mr. William Tan Kim Wah .

Item 10. Executive Compensation

The following table sets forth the aggregate cash compensation paid by the
Company during its year ended December 31, 1999, 1998 and 1997 to the CEO of the
Company and each of the Company's executive officers whose total cash
compensation from the Company exceeded $100,000, and to all executive officers
as a group.

SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
------------------------ ---------------------------------
Awards Payouts
- ---------- --------- ------ ----- ----------- ---------- ------------ --------
Name and Fiscal Salary Bonus Other Restricted Securities LTIP
Principal Year ($) ($) Annual stock Underlying Payouts
Position Ended Compensation award(s) Options/ ($)
Dec. 31 ($) (1) ($) SARs (#)
- ---------- --------- ------ ----- ----------- ---------- ------------ --------
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<PAGE>

William 1999 0 0 0 400,000 0
Tan Kim
Wah, 1998 0 0 0 $244,620 100,000 0
Chairman (2a) (2b)
of the 1997 0 0 0 $393,750 0 0
Board, (2b)
President
and CEO
of TEI
- ---------- -------- ------- ----- ----------- ---------- ------------ --------
Randy T. 1999 $103,231 $90,000 0 0 200,000 0
Hardin,
Chief
Executive
of CCC
- ---------- -------- ------- ----- ----------- ---------- ------------ --------
Craig D. 1998 $ 77,423 0 $1,391(1) 0 0 0
La Taste
President 1997 $ 75,000 $50,000 $1,391(1) 0 0 $99,651
of CCC*
- ---------- -------- ------- ----- ----------- ---------- ------------ --------
Mark 1999 $ 49,808 $62,233 $3,328(1) 0 50,000 0
Holzberg,
Chief
Executive
Officer &
President
of AlphaNet
- ---------- -------- ------- ----- ----------- ---------- ------------ --------
Alan 1998 $ 29,167 0 0 0 0 0
Andrus
Chief
Executive 1997 N/A N/A N/A N/A N/A N/A
Officer of
USCG
- ---------- -------- ------- ----- ----------- ---------- ------------ --------
Stephen 1998 $237,523 0 0 0 0 0
Davies (5)
President
& CEO of 1997 0 0 0 0 0
USCG $202,190
until Jan, (5)
1999
- ---------- -------- ------- ----- ----------- ---------- ------------ --------
Steven 1999 $ 30,000 0 $146,126 0 37,500 0
Scott,
Executive 1998 $190,000 0 0 $ 15,900 50,000 (3) 0
Vice (4)
President
of TEI 1997 $ 75,000 0 0 $112,500 0 0
- ---------- -------- ------- ----- ----------- ---------- ------------ --------
*Mr. La Taste served as Chairman of the Board, President and Chief
Executive Officer of TEI until February 11, 1997 when he was replaced by Mr.
William Tan Kim Wah. Mr. La Taste resigned as President and CEO of CCC, and on
January 12, 1999, was subsequently replaced by David Arnold and Randy Hardin, as
President and CEO respectively.
20
<PAGE>

(1) Represents non-cash compensation in the form of use of a car and related
expenses and life insurance.

(2a) On November 18, 1998, the Company agreed on an annual compensation of
$360,000 including expenses, effective February 1998, for Mr. Tan's services. On
December 15, 1998, the Company issued to Mr. Tan 400,000 shares of Common Stock
in lieu of payment of Mr. Tan's 1998 accrued salary in consideration for
services provided by Mr. Tan. On December 22, 1999, the Company and Mr. Tan
rescinded this of 400,000 shares to him. Mr. Tan returned the shares to the
Company and has waived all compensation due him for his services to the Company.

(2b) In February 1998, the Company agreed to pay Mr. Tan $10,000 per month
for services rendered in 1997 as the Company's Chairman of the Board, President
and Chief Executive Officer. On February 20, 1998, the Company issued to Mr. Tan
100,000 shares of Common Stock, valued at $2.25 per share, in lieu of payment of
Mr. Tan's 1997 accrued salary, and an additional 75,000 shares of Common
Stock in repayment of expenses and advances incurred by Mr. Tan on behalf of the
Company. Concurrently with the issuance of the foregoing shares, the Company
granted to Mr. Tan options to acquire 100,000 shares of Common Stock, which
options are exercisable over a period of two years from the date of issuance, at
an exercise price of $5.00 per share.

(3) On February 20, 1998, the Company issued to Mr. Steven Scott, Executive Vice
President of the Company, 50,000 shares of Common Stock, valued at $2.25 per
share, as consideration for services rendered to the Company in 1997.
Concurrently with the issuance of the foregoing shares, the Company granted to
Mr. Scott options to acquire an additional 50,000 shares of Common Stock,
exercisable over a period of two years from the date of issuance, at an exercise
price of $0.75.

(4) Mr. Steven Scott accepted 19,500 shares of Common Stock in lieu of his
November, 1998 $20,000 salary. Mr. Scott was issued the shares on December
15, 1998.

(5) Salary includes taxable fringe benefits.

On January 12, 1999, Craig D. La Taste resigned as President and CEO of
Computer Components Corporation and was replaced by David Arnold and Randy
Hardin as President and CEO, respectively.

On January 19, 1999, USCG announced that its founder and Chief Executive
Officer, Stephen Davies left the company to pursue other interests. The Board of
Directors of USCG appointed Mr. Alan R. Andrus to succeed Mr. Davies as CEO.

Incentive Stock Option Plans

1995 Incentive Stock Option Plan. On August 16, 1995, shareholders of the
Company adopted the 1995 Incentive Stock Option Plan (the "Plan") covering
125,000 shares of Common Stock of the Company. Under the Plan, the Board of
Directors may grant to officers and key employees of the Company "incentive
Stock Options" (intended to qualify as such under the provisions of Section 422
of the Internal Revenue Code of 1986, as amended) to purchase the number of
shares of Common Stock covered by such options through December 31, 1996. During
Fiscal 1996, 119,000 options were granted under the Plan. No options were
granted under the Plan in Fiscal 1997.

1997 Incentive Stock Option Plan. On July 12, 1996 the Company's Board of
Directors approved and adopted the 1997 Incentive Stock Option Plan (the "1997
21
<PAGE>

Plan") for an aggregate of 250,000 shares of Common Stock. The 1997 Plan was
adopted by the Shareholders of the Company at its annual meeting on July 18,
1997. No options have been granted under the 1997 Plan. The 1997 Plan is
substantially identical to the 1995 Plan except as to the number of options
(250,000) and the expiration date of granting of options under the 1997 Plan is
December 31, 1999. The 1997 Plan was ratified at the Company's annual meeting of
shareholders in July 1997.

1999 Incentive Stock Option Plan. In August 1999, the Company's Board of
Directors approved and adopted the 1999 Incentive Stock Option Plan (the "1999
Plan") for an aggregate of 1,300,000 shares of Common Stock. The 1999 Plan is
substantially identical to the 1995 and 1997 Plans.

The Board of Directors will administer the Plans and have the power to
determine eligibility to receive options, the terms of any options including the
exercise price, the number of shares subject to the options, the vesting
schedule and the term of any such options. The exercise price of all options
granted under the Plan must be at least equal to the fair market value of the
shares of Common Stock on the date of grant. For those holders of Common Stock
possessing more than 10% of the voting power of the Company's outstanding Common
Stock, the exercise price of any option granted must equal at least 110% of the
fair market value on the grant date and the maximum term of the option must not
exceed five years. The terms of all other options granted under the Plan may not
exceed 10 years.

The Company has not adopted any other deferred compensation or retirement
program for its employees. It may in the future adopt a pension plan, profit
sharing plan, employee stock ownership plan, stock bonus or some other deferred
compensation and/or retirement program.

Option Grants in 1997. The Company did not grant any options under either
the 1997 Plan or the 1995 Plan in fiscal 1997.

Option Exercises in 1997 and 1998. No options were exercised by the Named
Executives during 1997 and 1998.

Option Grants in 1998. The Company did not grant any options under the 1997
Plan or the 1995 Plan in fiscal 1998.

Option Grants in 1999. The Board granted options for 1,246,500 shares of
Common Stock of the Company under the 1999 Plan. The options were granted to
personnel of CCC, AlphaNet and TEI for their performance, contribution to the
Company and the closing of the AlphaNet transaction.

Option Exercise in 1999. No options were exercised during fiscal year 1999.

The following table provides certain information concerning unexercised
options held as of December 31, 1999, by the Named Executives who held options
at the end of 1999:

22
<PAGE>

- -------- --------- ------- ----------------------- ----------------------
(d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
December 31, 1999 December 31,
1999($)(1)

(a) (b) (c) Exercisable Exercisable

Shares Value
Name Acquired Realized($)
Upon
Exercise

William
Kim Wah -0- -0- 500,000 375,000

Ian - 0- -0- 200,000 150,000
Edmonds

Sadasuke
Gomi - 0- -0- 100,000 75,000
- -------- --------- ------- ----------------------- ----------------------
(1)The value of the "in-the-money" options represents the difference between
the exercise price of such options, and $1.00, the closing sale price of the
Common Stock on December 31, 1999.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of February 28, 2000, the only persons
known to the Company to be the beneficial owners of more than 5% and owned by
each director and executive officer by all directors and executive officers as a
group of the Company's Common Stock and Series A Preferred Stock:

- ------------------ ------------ --------- ------------ --------- --------
Common Series A
Stock Stock
------ --------
Amount Amount
and and
Nature of Nature of % of
Beneficial % of Beneficial % of Voting
Name and Address Ownership(1) Class(2) Ownership(1) Class(2) Power(3)
- ------------------ ------------ --------- ------------ --------- --------
William Tan 3,467,546 42.86% 5,000 4.18% 13.48%
Kim Wah, President Direct (through
and CEO and Indirect ownership of
No. 18 Jalan Sri (4) 5,000 units)
Semantan 1
Damansara Heights
50490
Kuala Lumpur
Malaysia
23
<PAGE>

- ------------------ ------------ --------- ------------ --------- --------
Gin Securities, Ltd. 1,163,636(9) 14.38% 0 0 7.19%
11 Jalan Medang
Bukit Bandaraya
59100 Kuala Lumpur
Malaysia
- ------------------ ------------ --------- ------------ --------- --------
Pricewaterhouse 1,100,000 13.60% 0 0 13.60%
Coopers, Inc.
145 King Street W
Toronto Ontario
Canada
M5H 1V8
- ------------------ ------------ --------- ------------ --------- --------
Jenny Jechart 1,094,696(10) 12.59% 0 0 6.29%
10724 Wilshire Blvd.
Los Angeles, CA 90024
- ------------------ ------------ --------- ------------ --------- --------
Jason Tan Highway 668,000(7) 8.26% 0 0 4.13%
Wisma Cosway #12-02, Direct
Jln.
Raja Chulan
50200 Kuala Lumpur, Maylysia
- ------------------ ------------ --------- ------------ --------- --------
Wooi Hou Tan 666,000(8) 8.23% 0 0 4.12%
First Floor Flat Direct
53 Gloucester Road
London, England SW74QN
United Kingdom
- ------------------ ------------ --------- ------------ --------- --------
Mutsuko Gomi 666,000(8) 8.23% 0 0 4.12%
1367-31 Kawana
Ito-Shi,
Japan 414
- ------------------ ------------ --------- ------------ --------- --------
Craig D. La Taste 542,979 6.71% 0 0 6.30%
4300 Wiley Post Rd. Direct(5)
Dallas, TX 75244
USA
- ------------------ ------------ --------- ------------ --------- --------
Mee Mee Tan, 535,000(11) 8.21% 0 0 4.37%
Secretary Indirect
477 Madison Ave,
24th Floor
New York, NY 10022
- ------------------ ------------ --------- ------------ --------- --------
Sadasuke Gomi, 387,150 4.79% 0 0 2.25%
Director Direct and
477 Madison Ave, Indirect(12)
24th Floor
New York, NY 10022
- ------------------ ------------ --------- ------------ --------- --------
Synergy System 385,000 4.76% 0 0 2.53%
Limited Direct(6)
3A Lauderdale Road
Maida Vale
London W9 1LT
United Kingdom
24
<PAGE>

- ------------------ ------------ --------- ------------ --------- --------
385,000 4.76% 0 0 2.53%
Block 126 #19-372 Indirect(6)
Bukit Merah View
Singapore 151126
- ------------------ ------------ --------- ------------ --------- --------
Fleet Security 385,000 4.76% 0 0 2.53%
Investment Ltd. Indirect(6)
P.O. Box 901
Road Town
British Virgin Islands
- ------------------ ------------ --------- ------------ --------- --------
Asean Broker Limited 385,000 4.76% 0 0 2.53%
Flat 1, 51 Queens Indirect(6)
Gate Terrace
London, SW7 5PL
United Kingdom
- ------------------ ------------ --------- ------------ --------- --------
Eurasia Securities, 385,000 4.76% 0 0 2.53%
Ltd. Indirect(6)
No. 11 Jalan Medang
Bukit Bandaraya
59100 Kuala Lumpur
Malaysia
- ------------------ ------------ --------- ------------ --------- --------
Ian Colin Edmonds, 200,000(13) 2.47% 0 0 0
Vice President
477 Madison Ave,
24th Floor
New York, NY 10022
- ------------------ ------------ --------- ------------ --------- --------
All Directors 4,589,696 56.73% 5,000 2.70% 2.70%
and Executive
Officers as a Group
(6 persons)
- ------------------ ------------ --------- ------------ --------- --------
(1) Except as otherwise indicated and subject to applicable community
property and similar laws, the Company assumes that each named person
has the sole voting and investment power with respect to his or her
shares (other than shares subject to options).

(2) Percent of class is based on the number of shares outstanding as of
February 28, 2000. In addition, shares which a person had the right to
acquire within 60 days are also deemed outstanding in calculating the
percentage ownership of the person but not deemed outstanding as to
any other person. Does not include shares issuable upon exercise of
any warrants, options or other convertible rights issued by the
Company which are not exercisable within 60 days from the date hereof.

(3) In order to reflect the voting rights of the Common Stock and Series A
Stock as of February 28, 2000 based on shares which a holder has the
right to acquire within 60 days, if such right has not been exercised
as of February 28, 2000. However, all shares which a holder has the
right to acquire within 60 days, are accounted for in the percentage
of class calculations for each of the individual type of securities
accounted for in this table. See footnote 2 above.

25
<PAGE>

(4) Includes (i) 75,000 shares directly held by Mr. Tan, (ii) options to
acquire 500,000 shares of common stock exercisable within 60 days of
February 28, 2000. (iii) 288,000 shares of common stock, 100,000
options to purchase common stock and 1,050,000 warrants to purchase
stock held by Placement & Acceptance, Inc., (both exercisable within
60 days of February 28, 2000), a company of which Mr Tan is a director
and officer. (iv) 727,273 shares of common stock and 727,273 warrants
to purchase shares of common stock held by Ventures International,
Ltd., a company of which Mr. Tan is a director and officer. (v) 5,000
Units, with each Unit convertible within 60 days of February 28, 2000
into one share of common stock and one share of Preferred Stock, of
which one share of Preferred Stock is convertible into two shares of
common stock.

(5) Mr. La Taste has direct ownership of 433,732 shares of Common Stock,
and as of February 28, 2000 as a partner of La Taste Enterprise (with
his two children), he is owner of 16,667 shares of Common Stock which
shares have been included in the percent of shares shown herein. In
addition, Mr. La Taste has been issued 35,000 options, each to acquire
one share of Common Stock. 26,250 of such options are exercisable
within 60 days of February 28, 2000, and are included in the percent
of shares shown herein. Mr. La Taste's wife, Jacqueline Green La
Taste, is the owner of 24,213 shares of Common Stock which she
received in 1994 as an inheritance. Mr. La Taste disclaims any
beneficial interest in these shares. Mr. La Taste's children are
beneficiaries of the La Taste Children's Trust, which owns 46,317
shares of Common Stock of the Company. Mr. La Taste also disclaims any
beneficial interest in these shares.

(6) Includes, in each case, options to acquire 180,000 shares of Common
Stock, which are currently exercisable.

(7) Includes options to acquire 334,000 shares of common stock exercisable
within 60 days of February 28, 2000.

(8) Includes options to acquire 333,000 shares of common stock exercisable
within 60 days of February 28, 2000.

(9) Includes (i) 581,818 shares of Common Stock, (ii) 581,818 warrants
exercisable within 60 days of February 28, 2000.

(10) Includes (i) 509,091 shares of Common Stock, (ii) 509,091 warrants
exercisable within 60 days of February 28, 2000 and (iii) 76,514
warrants exercisable within 60 days of February 28, 2000 owned by
AlphaNet Funding, LLC which Ms. Jechart is the principal.

(11) Includes (i) 205,000 shares held by Ms. Tan and the options to acquire
180,000 shares of common stock exercisable within 60 days of February
28, 2000 attributed to her through Equator Holdings, Inc. a company of
which Ms. Tan is a director and officer. (ii) 150,000 options held
directly by Ms. Tan to acquire shares of common stock within 60 days
of February 28, 2000.

(12) Includes (i) 385,000 shares held by Mr. Gomi are attributed to him
through Fleet Security Investments, Inc., of which Mr. Gomi is a
director. This sum also includes options to acquire 180,000 shars of
common stock exercisable within 60 days of February 28, 2000. (ii)
2,150 shares are directly held by Mr. Gomi.
26
<PAGE>

(13) Includes 200,000 options exercisable by Mr. Edmonds within 60 days of
February 28, 2000.

Item 12. Certain Relationships and Related Transactions

The Company leases its office and warehouse premises from La Taste
Enterprises, a partnership comprised of Mr. La Taste and members of his family.
The current lease is for a term ending December 31, 2001 and provides for an
annual base rent of $67,200.

On October 26, 1999, the Company completed the acquisition of AlphaNet. As
part of this transaction, the Company arranged for a $2,525,000 credit facility
for AlphaNet to refinance its existing indebtedness. $1,525,000 of the said
indebtedness was refinanced through Appel Investments Inc. ("Appel"). William
Tan Kim Wah's brother, Kim Yeow Tan is an officer of Appel. In conjunction with
Appel's $1,525,000 loan to refinance AlphaNet indebtedness, AlphaNet paid a loan
origination fee of $150,737. The remaining balance of the indebtedness is an
interest only loan at 20.5% per annum. The principal of the indebtedness is due
in full on October 26, 2001. As additional consideration for the refinancing,
Appel Investments Inc. received 116,703 Warrants to purchase the Common Stock of
the Company exercisable at $0.75 per share. The Warrants expire on October 20,
2004.

The Company engaged Placement & Acceptance, Inc. ("PAI"), a British Virgin
Islands corporation, to effect a private placement of securities, which was
consummated in December 1997. Mr. Tan is a director and shareholder of PAI. PAI
received fees of $112,000, inclusive of expenses, for acting as sales agent in
the placement. The Company also engaged PAI in October, 1999 to effect a private
placement of securities for the Company's acquisition of AlphaNet. PAI received
a placement fee of 500,000 warrants in consideration for services rendered. In
addition, the Company retained PAI to refinance the outstanding AlphaNet
indebtedness required to complete the acquisition. PAI received a placement fee
of 550,000 warrants in consideration for services rendered. The warrants are
exercisable at $0.75 per share and expire on October 20, 2004.

On February 25, 2000, the Company renegotiated and settled in full its $2.1
Million promissory note with PricewaterhouseCoopers, Inc. (Trustee of the Estate
of AlphaNet Telecom Inc.) that composed part of the purchase price of the
acquisition of AlphaNet. The promissory note was paid in full by the payment of
$500,000 cash and the issuance of 1,100,000 shares of Common Stock. The $500,000
cash was raised by a loan from Caspic International, Inc. Mr. Tan is also a
director and shareholder of Caspic International, Inc. The loan is due on May
25, 2000, bears an interest rate of 12% per annum payable monthly and is secured
by a pledge of the shares of capital stock of AlphaNet. As additional
consideration for the loan, the Company also issued warrants to purchase 250,000
shares of Common Stock at $0.73 per share (which was the market price on the day
the transaction was negotiated), exercisable immediately, with an expiration
date of February 25, 2005.

Item 13. Exhibits and Reports on Form 8-K

(a) Exhibits

The following exhibits pursuant to Rule 601 of Regulation SB are
incorporated by reference to Company's Registration Statement on Form SB-2,
Commission File No. 33-98662, filed on October 30, 1995, and amended on January
5, 1996 and January 23, 1996.
27
<PAGE>
3.1 Articles of Incorporation, as amended (incorporated by
reference to the Company's Registration Statement on Form SB-2, Commission File
No. 33-98662, filed on October 30, 1995 and amended on January 5, 1996 and
January 23, 1996).

3.2 Certificate of Designation (incorporated by reference to the
Company's Registration Statement on Form SB-2, Commission File No. 33-98662,
filed on October 30, 1995 and amended on January 5, 1996 and January 23, 1996).

3.2A Amended Certificate of Designation (incorporated by
reference to the Company's Registration Statement on Form SB-2, Commission File
No. 33-98662, filed on October 30, 1995 and amended on January 5, 1996 and
January 23, 1996).

3.3 Bylaws (incorporated by reference to the Company's
Registration Statement on Form SB-2, Commission File No. 33-98662, filed on
October 30, 1995 and amended on January 5, 1996 and January 23, 1996).

4.4 Warrant Agreement (incorporated by reference to the
Company's Registration Statement on Form SB-2, Commission File No. 33-98662,
filed on October 30, 1995 and amended on January 5, 1996 and January 23, 1996).

10.1 Sales Agent Agreement between the Company and Placement &
Acceptance, Inc., dated February 10, 1997 (incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996).

10.2 Subscription Agreement between the Company and Placement &
Acceptance, Inc., dated February 10, 1997 (incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996).

10.3 Subscription Agreement between the Company and Synergy
System Limited, dated February 10, 1997, with option to purchase shares of
Company common stock (incorporated by reference to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996).

10.4 Subscription Agreement between the Company and Equator
Holdings Inc., dated February 10, 1997, with option to purchase shares of
Company common stock (incorporated by reference to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996).

10.5 Subscription Agreement between the Company and Fleet
Security Investment Ltd., dated February 10, 1997, with option to purchase
shares of Company common stock (incorporated by reference to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1996).

10.6 Subscription Agreement between the Company and Asian Brokers
Limited, dated February 10, 1997, with option to purchase shares of Company
common stock (incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996).

10.7 Subscription Agreement between the Company and Eurasia
Securities Ltd., dated February 10, 1997, with option to purchase shares of
Company common stock (incorporated by reference to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996).

10.8 Employment Agreement between Computer Components Corporation
and Craig D. La Taste, entered into February 11, 1997 (incorporated by reference
to the Company's Annual Report on Form 10-KSB for the year ended December 31,
1996).
28
<PAGE>

10.9 Sales Agent Agreement between the Company and Placement &
Acceptance, Inc., dated October 16, 1997 (incorporated by reference to the
Company's Current Report on Form 8-K, dated January 5, 1998).

10.10 Amended and Restated Stock Purchase Agreement among Tech
Electro Industries, Inc., US Computer Group, Inc. and Telstar Holding Limited
(incorporated by reference to the Company's Current Report on Form 8-K, dated
March 19, 1998).

21 Subsidiaries of Issuer

27.1 Financial Data Schedule

(b) Reports on Form 8-K

On November 15, 1999, the Company filed a report on Form 8-K reporting that
it had acquired all of the issued and outstanding shares of capital stock of
AlphaNet Hospitality Systems, Inc., a Delaware corporation and certain
intellectual property, copyrights and trademarks utilized in AlphaNet's business
from PricewaterhouseCoopers, Inc., in its capacity as Trustee of the Estate of
AlphaNet Telecom Inc. a bankrupt.

On January 5, 2000, the Company amended Form 8-K/A by submitting the
financial statements, pro forma financial statements and exhibits of AlphaNet
Hospitality Systems, Inc. for the year ended December 31, 1998 and the
nine-months ended September 30, 1999.

29
<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES

DECEMBER 31, 1999 AND 1998

F-1

30
<PAGE>

INDEX TO FINANCIAL STATEMENTS
FILED ON FORM 10-KSB

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES

YEARS ENDED DECEMBER 31, 1999 AND 1998

Page

Report of Independent Certified Public Accountants.........................F-3

Financial Statements

Consolidated Balance Sheets as of December 31, 1999 and 1998..........F-4

Consolidated Statements of Operations
for the years ended December 31, 1999 and 1998.....................F-6

Consolidated Statement of Changes in Stockholders' Equity
for the years ended December 31, 1999 and 1998.....................F-7

Consolidated Statements of Cash Flows
for the years ended December 31, 1999 and 1998.....................F-9

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

F-2

<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Stockholders and Board of Directors
Tech Electro Industries, Inc. and Subsidiaries

We have audited the consolidated balance sheets of Tech Electro Industries,
Inc. and Subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tech Electro
Industries, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

KING GRIFFIN & ADAMSON P.C.

February 11, 2000, except for Note R for which the date is March 22, 2000
Dallas, Texas

F-3
<PAGE>

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998

ASSETS

1999 1998
---------- ------------
CURRENT ASSETS
Cash and cash equivalents.....................$ 894,261 $ 1,399,060
Certificate of deposit........................ 260,294 -
Accounts and notes receivable
Trade, net of allowance for doubtful
accounts of $282,498 and $305,077 in
1999 and 1998, respectively................. 3,352,887 2,879,528
Notes....................................... 180,146 305,659
Other....................................... 67,901 13,489
Inventories, net ........................... 1,611,358 3,356,539
Prepaid expenses and other.................. 601,257 331,893
---------- ----------

Total current assets..................... 6,968,104 8,286,168
---------- ----------
PROPERTY AND EQUIPMENT
Facsimile and business center equipment....... 8,175,530 -
Other equipment............................... 959,814 1,305,001
Furniture and fixtures........................ 214,271 458,897
Vehicles...................................... 14,262 216,201
Leasehold improvements........................ 51,378 327,810
---------- ----------
9,415,255 2,307,909
Less accumulated depreciation and
amortization................................ (1,426,888) (1,410,085)
---------- ----------
Net property and equipment................ 7,988,367 897,824
---------- ----------

OTHER ASSETS
Notes receivable, net of current portion...... 7,031 7,031
Contract rights, net.......................... - 4,608,349
Deferred financing costs, net................. 688,875 199,193
Other ........................................ 26,461 182,029
---------- ----------
Total other assets........................ 722,367 4,996,602
---------- ----------
TOTAL ASSETS.....................................$15,678,838 $14,180,594
=========== ===========

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

- Continued -

F-4
<PAGE>

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
December 31, 1999 and 1998

LIABILITIES AND STOCKHOLDERS' EQUITY

1999 1998
----------- ------------
CURRENT LIABILITIES
Lines of credit.......................... $ 389,532 $ 8,198,654
Current portion of long-term debt........ 2,316,796 215,300
Trade accounts payable................... 1,846,642 3,349,682
Accrued liabilities...................... 948,687 1,354,335
Deferred service liability............... - 1,646,949
Other liabilities........................ 44,119 333,975
----------- ------------
Total current liabilities......... 5,545,776 15,098,895
----------- ------------

LONG-TERM DEBT, less current portion.......... 2,556,174 53,204
EXCESS OF NET ASSETS OF COMPANIES ACQUIRED
OVER COST................................ 4,033,132 -
----------- ------------
Total liabilities................. 12,135,082 15,152,099

MINORITY INTEREST IN SUBSIDIARY............... - 2,054,633

COMMITMENTS AND CONTINGENCIES (Note Q)

STOCKHOLDERS' EQUITY
Preferred stock - $1.00 par value; 1,000,000
shares authorized; 119,588 and 177,488
Class A issued and outstanding in 1999 and
1998, respectively; liquidation preference
of $627,837 and $931,812 in 1999 and 1998,
respectively............................. 119,588 177,488
Common stock - $0.01 par value; 10,000,000
shares authorized; 7,034,684 and 4,799,177
shares issued and outstanding during 1999
and 1998, respectively.................... 70,347 47,992
Additional paid-in capital................... 13,225,368 3,165,843
Receivable from shareholder.................. - (25,000)
Accumulated deficit.......................... (9,871,547) (6,392,461)
----------- ------------
Total stockholders' equity............. 3,543,756 (3,026,138)
----------- ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...... $ 15,678,838 $ 14,180,594
============ =============

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

F-5
<PAGE>

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1999 and 1998

1999 1998
------------ ------------
REVENUES
Sales .............................. $ 13,150,822 $ 11,541,122
Service Revenue...................... 5,499,852 13,371,909
-------------- -----------------
18,650,674 24,913,031
COST OF REVENUES
Cost of goods sold................... 10,469,627 11,327,817
Direct servicing costs............... 3,058,861 6,261,041
-------------- -----------------
13,528,488 17,588,858

GROSS PROFIT........................... 5,122,186 7,324,173

OPERATING EXPENSES
Selling, general and administrative.. 6,796,921 9,395,513
Inventory obsolescence provision..... 107,951 1,250,798
Depreciation and amortization........ 1,225,510 1,116,353
-------------- ----------------
8,130,382 11,762,664

LOSS FROM OPERATIONS................... (3,008,196) (4,438,491)

OTHER INCOME (EXPENSES)
Interest income...................... 37,794 98,529
Interest expense..................... (552,536) (684,120)
Realized gain on sale of marketable
securities................. - 71,439
Amortization of excess of net assets
of companies acquired over cost... 130,101 -
Amortization of deferred financing costs (154,716) (52,470)
Other .............................. 118,919 -
-------------- ---------------
(420,438) (566,622)

MINORITY INTEREST SHARE OF LOSS OF SUBSIDIARY - 29,202
-------------- ---------------
LOSS BEFORE PROVISION FOR INCOME TAXES. (3,428,634) (4,975,911)

PROVISION FOR INCOME TAXES............. - -
-------------- ---------------
NET LOSS............................... $ (3,428,634) $ (4,975,911)
-------------- ---------------
Net loss attributable to common stockholders$ (3,479,086) $ (5,058,245)
============== ===============
Basic and diluted net loss per share
attributable to common shareholders $ (.63) $ (1.26)
============== ===============
Number of weighted-average shares of common
stock outstanding (basic and diluted).. 5,509,527 4,012,377
============== ===============
The accompanying footnotes are an integral part of these
consolidated financial statements.
F-6
<PAGE>

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Accumulated
Preferred Stock Common Stock Additional Deficit)
Number of Number of paid-in Shareholder Retained Marketable
Shares Amount Shares Amount Capital Receivable Earnings Securities Total
--------- -------- --------- -------- ---------- ------------ ------------ ---------- -----------
Balances at
January 1, 1998 319,934 $319,934 3,498,407 $34,985 $5,713,866 $ - $(1,334,216) $24,624 $4,759,193

Issuance of common
stock for cash and
receivable - - 331,250 3,312 659,188 - - - 662,500

Conversions of
preferred stock
into common stock (142,446) (142,446) 284,892 2,849 139,597 - - - -

Repayment of
shareholder loan - - 100,000 1,000 99,000 (25,000) - - 75,000

Common stock issued
for compensation - - 551,650 5,516 765,257 - - - 770,773

Dividends paid by
issuance of common
stock - - 32,978 330 82,004 - (82,334) - -

Minority shareholder
portion of share-
holders deficit
in connection with
acquisition of U.S.
Computer Group - - - - (4,293,069) - - - (4,293,069)

Comprehensive income:

Net loss for 1998 - - - - - - (4,975,911) -

Net unrealized loss
on marketable
securities - - - - - - - (24,624)

Total comprehensive
income - - - - - - - - (5,000,535)

--------- -------- --------- ------ ---------- ---------- ---------- --------- -----------
Balances at
December 31, 1998 177,488 177,488 4,799,177 47,992 3,165,843 (25,000) (6,392,461) - (3,026,138)

Issuance of common
stock for cash - - 2,214,014 22,141 1,426,609 - - - 1,448,750
</TABLE>
The accompanying footnotes are an integral part of this
consolidated financial statement.
F-7
<PAGE>

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - Continued
Years ended December 31, 1999 and 1998

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Accumulated
Preferred Stock Common Stock Additional Deficit)
Number of Number of paid-in Shareholder Retained Marketable
Shares Amount Shares Amount Capital Receivable Earnings Securities Total
--------- -------- --------- -------- ---------- ------------ ------------ ---------- -----------
Conversions of
preferred stock
into common stock (57,900) (57,900) 115,800 1,158 56,742 - - - -

Common stock issued
as repayment on loan
from shareholder - - 108,000 1,080 113,669 - - - 114,749

Cash received on
shareholder receivable - - - - - 25,000 - - 25,000

Common stock issued
for compensation - - 135,446 1,354 138,547 - - - 139,901

Dividends paid by
issuance of common - - 47,247 472 49,980 - (50,452) - -
stock

Common stock issued
for services - - 15,000 150 13,209 - - - 13,359

Common stock contributed
by President and CEO
of TEI - - (400,000) (4,000) 4,000 - - - -

De-consolidation of
USCG - - - - 7,597,929 - - - 7,597,929

Stock options issued
to employees below
fair market value
recorded as
compensation - - - - 77,652 - - - 77,652

Warrants issued
with debt - - - - 581,188 - - - 581,188

Net loss for 1999 - - - - - - (3,428,634) - (3,428,634)

--------- -------- --------- ------- ---------- --------- ----------- --------- -----------
Balances at
December 31,1999 119,588 $119,588 7,034,684 $70,347$13,225,368 $ - $(9,871,547) $ - $3,543,756
========= ======== ========= ====== ========== ========= =========== ========= ===========
</TABLE>
The accompanying footnotes are an integral part of these
consolidated financial statements.
F-8
<PAGE>

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998

1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES ------------ ------------
Net loss ....................................... $ (3,428,634) $(4,975,911)
Adjustments to reconcile net loss to net cash
provided by (used by) operating activities:
Stock issued for compensation........... 139,901 308,523
Stock issued for services............... 13,359 -
Stock options issued to employees recorded
as compensation..................... 77,652 -
Depreciation and amortization of property
and equipment....................... 1,056,545 256,406
Provision for bad debts................. 98,163 289,077
Provision for obsolete inventory........ 107,951 1,250,798
Loss on sale of fixed assets............ 2,170 -
Minority interest share of
loss of subsidiary.................. - (29,202)
Amortization of contract rights......... 168,965 859,947
Amortization of deferred financing costs 154,716 52,470
Amortization of excess of net assets
of companies acquired over cost...... (130,101) -
Change in operating assets and liabilities
(net of effects of acquisitions and
de-consolidation)
(Increase)decrease -
Accounts receivable - trade...... (425,634) (373,562)
Accounts receivable - other...... (54,412) 21,453
Inventories...................... 702,657 (1,045,849)
Prepaid expenses and other....... (387,316) 118,364
Deferred financing costs......... (249,565) -
Other assets..................... 5,551 52,711
Increase(decrease) in -
Trade accounts payable........... 1,822,942 1,061,772
Accrued liabilities.............. 867,803 84,595
Deferred service liability....... - 262,919
Other liabilities................ (252,044) -
Dividends payable................ - (28,432)
----------- -------------
Net cash provided by (used by) operating activities 290,669 (1,833,921)
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment......... (173,799) (177,939)
Proceeds on sale of property and equipment.. 21,512 -
Cash paid for acquired subsidiary,
net of cash in subsidiary................ (994,235) (188,613)
Payments received on notes receivable....... 40,442 99,460
Sale (purchase) of short term investments... (260,294) 71,439
Advances on notes receivable................ (472,344) -
Cash in de-consolidation of subsidiary...... (316,262) -
------------ ------------
Net cash used by investing activities............ (2,154,980) (195,653)
------------ ------------

The accompanying footnotes are an integral part of these
consolidated financial statements.
F-9

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
Years ended December 31, 1999 and 1998

1999 1998
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net activity on bank lines of credit........ (1,060,557) 752,591
Repayment of long-term debt................. (1,428,681) -
Proceeds of long-term debt.................. 2,375,000 -
Payments on loans from other banks.......... - (178,072)
Advances on loans from affiliates........... - 411,000
Proceeds from stockholder loans............. - 75,000
Cash received on shareholder receivable..... 25,000 -
Payments on redeemed preferred stock of USCG - (212,989)
Net proceeds on sale of common and
preferred shares......................... 1,448,750 662,500
------------- -----------
Net cash provided by financing activities..... 1,359,512 1,510,030
------------- -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS..... (504,799) (519,544)

Cash and cash equivalents at beginning
of year ................................. 1,399,060 1,918,604
------------- -----------

Cash and cash equivalents at end of year...... $ 894,261 $ 1,399,060
============= ===========

SUPPLEMENTAL DISCLOSURES OF INTEREST PAID..... $ 553,000 $ 680,000
============= ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES

Preferred stock conversions
into common stock........................ $ 57,900 $ 142,446
============= ===========
Issuance of common stock for
settlement of note payable............... $ 114,749 $ 100,000
============= ===========
Dividends paid through issuance
of common stock......................... $ 50,452 $ 82,334
============= ===========
Receivable from shareholder................ $ - $ 25,000
============= ===========
Write off of notes receivable from USCG.... $ 472,344 $ -
============= ===========
Warrants issued and capitalized as
deferred financing costs................ $ 581,188 $ -
============= ===========

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

F-10
<PAGE>

TECH ELECTRO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION

Tech Electro Industries, Inc. ("TEI") was formed on January 10, 1992 as a
Texas corporation. On March 19, 1998, TEI acquired 51% of the common stock of
U.S. Computer Group ("USCG"). The acquisition was accounted for as a purchase
and accordingly, the consolidated statements of operations include the
operations of USCG from the acquisition date through February 24, 1999. On
February 25, 1999, Telstar Entertainment ("Telstar") contributed additional
capital to USCG through the purchase of additional shares resulting in Telstar
becoming the largest shareholder of USCG. Effective February 25, 1999, USCG has
been accounted for under the equity method in the consolidated financial
statements of TEI. As TEI's proportionate share of USCG losses has exceeded it's
original investment in USCG prior to the de-consolidation, there has been no
equity income/loss effect recorded by TEI during the period that USCG has been
accounted for under the equity method. On October 22, 1999, TEI acquired 100% of
the outstanding common stock of AlphaNet Hospitality Systems, Inc. ("AHS"). The
acquisition was accounted for as a purchase and the operations of AHS are
included in the results of operations of the Company from the acquisition date.

Its subsidiary, Computer Components Corporation ("CCC"), stocks and sells
electronic components. A significant portion of CCC's business is involved in
the stocking and sale of batteries. Within the battery sales activity there is
significant value added to the batteries in the assembly of batteries into
"packs". CCC's electronic components sales are generated by in-house sales staff
and sales representatives as well as over the internet to customers throughout
the United States. USCG provides maintenance services for midrange equipment
manufactured by Digital Equipment Corporation, IBM, Sun Microsystems, Inc. and
many leading brand personal computers, the sale of new and used computer
equipment, network integration and design services, disaster recovery, business
relocation services and internet-based training services. USCG's computer
maintenance and sales customers are located primarily in New York, New Jersey
and Pennsylvania. AHS provides in-room facsimile and business center services to
the hotel industry for their business travelers through licensing agreements.
AHS generated services revenue from its InnFax product line, a patented in-room
send and receive facsimile service and TheOffice, full service business centers,
for business travelers staying at hotels.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
TEI, CCC, AHS and USCG, (for the period that USCG was accounted for as a
subsidiary). All significant intercompany transactions and balances have been
eliminated in consolidation. The consolidated group is referred to as the
"Company".

Cash and Cash Equivalents

The Company considers all unrestricted cash on hand and in banks,
certificates of deposit and other highly-liquid investments with maturities of
three months or less, when purchased, to be cash and cash equivalents for
purposes of the Statements of Cash Flows.
F-11
<PAGE>

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Certificate of Deposit

At December 31, 1999, the Company's subsidiary CCC has pledged a $150,000
standby letter of credit with one of their major vendors. The Company has a 120
day certificate of deposit which secures the standby letter of credit.

Inventories

Inventories consist primarily of electronic components, materials used in
the assembly of batteries into "packs" and computer systems and hardware which
support the Company's computer maintenance service contracts. All items are
stated at the lower of cost or market. Cost related to electronic components and
battery packing inventory is determined by the average cost method by specific
part. Cost related to inventory used in computer maintenance is determined using
the first-in, first-out method. Reserves are established for slow moving items.

Property and Equipment

Property and equipment are carried at cost. Depreciation and amortization
of equipment is provided using the straight line method over the estimated
useful lives of the assets ranging from three to ten years. Assets held under
capital leases and leasehold improvements are amortized on a straight-line basis
over the shorter of the lease term or the estimated useful life of the related
asset. Depreciation and amortization expense of property and equipment
recognized during 1999 and 1998 including depreciation on facsimile and business
equipment, amounted to $1,056,545 and $256,406, respectively.

Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred.

Contract Rights

Contract rights represent the value assigned to maintenance and servicing
contracts acquired in connection with the acquisition of USCG. The contract
rights of $5,468,296 are amortized on a straight-line basis over their estimated
average life of 5 years. Amortization expense of contract rights for the years
ended December 31, 1999 and 1998 was $168,965 and $859,947, respectively. During
1999 these contract rights were removed from the financial statements as part of
the USCG de-consolidation.

Deferred Financing Costs

Deferred financing costs are amortized on a straight-line basis over the
original term of the financing agreement ranging from one to five years.
Amortization was $154,716 and $52,470 for the years ended December 31, 1999 and
1998, respectively. During 1999, a portion of the deferred financing costs were
removed from the financial statements as part of the USCG de-consolidation.

Income Taxes

The Company utilizes the asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually for differences between the financial
F-12
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

statements and tax basis of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense or
benefit is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.

Long-Lived Assets

The Company accounts for the impairment and disposition of long-lived
assets in accordance with Statement of Financial Accounting Standards (SFAS) No.
121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
Be Disposed Of. In accordance with SFAS No. 121, long-lived assets are reviewed
for events or changes in circumstances which indicate that their carrying value
may not be recoverable. There was no impairment of the value of such assets for
the years ended December 31, 1999 and 1998.

Excess of Net Assets of Companies Acquired Over Cost

The deferred credit results from the excess of the estimated fair value of
the net assets acquired over the purchase price paid for AHS. After application
to all non current assets acquired, this amount totaling $4,163,233 is being
amortized using the straight-line method over 8 years. Amortization for the
period ended December 31, 1999 was $130,101.

Revenue Recognition

Service revenues generated under service maintenance contracts are
recognized on a straight-line basis over the contract period, which is in
proportion to the costs expected to be incurred in performing services under the
contract. Estimated losses on contracts, if any, are charged against earnings in
the period in which such losses are identified. Service revenues that are not
under contract are recognized as the service is performed. Revenue from product
sales including computer equipment and electronic components is recognized upon
shipment.

Stock-Based Compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB
Opinion No. 25, compensation expense for employees is based on the excess, if
any, on the date of grant, between the fair value of TEI's stock over the
exercise price.

The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the

F-13

<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date
of the fair value of the equity instrument issued is the earlier of the date on
which the counterparty's performance is complete or the date on which it is
probable that performance will occur.

Reclassifications

Certain 1998 amounts have been reclassified to conform with the 1999
presentation.

Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding for the period. Diluted net loss per
share is computed by dividing net loss by the weighted average number of common
shares and common stock equivalents outstanding for the period. The Company's
common stock equivalents are not included in the diluted loss per share for 1999
and 1998 as they are antidilutive. Therefore, diluted and basic loss per share
is identical. Net loss per share has been increased for dividends on preferred
stock totaling $50,452 and $82,334 for 1999 and 1998, respectively.

Use of Estimates and Assumptions

Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could vary from the estimates that were
used.

Recent Accounting Pronouncements

The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131") during the fiscal year ended December 31, 1998. SFAS 131 establishes
standards for reporting information regarding operating segments in annual
financial statements and requires selected information for those segments to be
presented in interim financial reports. SFAS 131 also establishes standards for
related disclosures about products and services and geographic areas. Operating
segments are identified as components of an enterprise about which separate
discrete financial information is available for evaluation by the chief
operating decision maker, or decision making group, in making decisions about
how to allocate resources and assess performance.

In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133", which establishes accounting and reporting standards for
derivative instruments. SFAS No. 137 is effective for all fiscal quarters for
all fiscal years beginning after June 15, 2000. The adoption of SFAS 137 is not
expected to have a significant impact on the Company's results of operations.

F-14
<PAGE>

NOTE C - ACQUISITIONS

On March 19, 1998, the Company completed the acquisition of 51% of the
issued and outstanding common stock of USCG (being new stock issued by USCG).
The purchase consideration for this transaction was $1,000,000 paid in cash. The
acquisition has been accounted for as a purchase. Negative equity related to the
minority interest shareholders at the date of purchase of $4,293,068 was
recorded as a contra to additional paid-in capital.

The summary of the fair value of assets acquired and liabilities assumed is
as follows:

Current assets......................................$ 4,131,186
Fixed assets........................................ 667,408
Contract rights..................................... 5,468,296
Other assets........................................ 486,113
Current liabilities................................. (5,000,983)
Long-term liabilities............................... (6,777,466)
Minority interest in preferred stock................ (2,267,622)
Purchased deficit................................... 4,293,068
------------
$ 1,000,000
============

Acquisition costs net of cash acquired in USCG amounted to $188,613.

The following unaudited pro forma consolidated information for the year
ended December 31, 1998 assumes the USCG acquisition occurred as of January 1,
1998:
Year Ended
December 31, 1998
(unaudited)
------------
Revenues..............................................$ 30,005,656
Net loss..............................................$ (5,731,981)
Loss per share (basic and diluted)....................$ (1.43)

On October 26, 1999, the Company completed the acquisition of 100% of the
issued and outstanding common stock of AHS. The purchase consideration totaled
$3,500,000 through a combination of cash of $1,400,000, promissory note of
$2,100,000, in addition to assuming debt of $2,375,000. The acquisition has been
accounted for as a purchase. The excess of net assets of companies acquired over
cost of $4,163,233 was recorded, as the purchase price was less than the
estimated fair value of net assets acquired. The fair value of fixed assets was
recorded based on an appraised value.

A summary of the fair value of assets acquired and liabilities assumed is
as follows:

Current assets........................................$ 2,526,927
Fixed assets.......................................... 8,543,822
Current liabilities................................... (1,834,495)
Long-term liabilities................................. (1,573,021)
Excess of net assets of companies acquired over cost.. (4,163,233)
------------
$ 3,500,000
============
F-15
<PAGE>

NOTE C - ACQUISITIONS (Continued)

The following unaudited pro forma consolidated results of operations for
the years ended December 31, 1999 and 1998 assumes the AHS acquisition occurred
as of January 1, 1998.

1999 1998
(Unaudited) (Unaudited)
------------ ------------
Revenues............................$ 25,534,064 $ 33,480,355
Net loss............................$ (4,881,516) $ (7,322,573)
Loss per share (basic and diluted)..$ (.89) $ (1.82)

NOTE D - INVENTORIES

Inventories at December 31, 1999 and 1998, consist of the following:

1999 1998
------------ -----------
Computer components for
maintenance contracts................$ - $ 2,527,808
Electronic components.................. 2,212,181 2,550,129
Inventory obsolescence reserve......... (600,823) (1,721,398)
------------- ----------------
$ 1,611,358 $ 3,356,539
============ ================
NOTE E - NOTES RECEIVABLE

Notes receivable consist of the following at December 31, 1999 and 1998:

1999 1998
------------ ------------
Notes receivable from a minority
shareholder; interest at 6%, unpaid
interest accrues monthly and adds to
principal. These notes were removed
from the financial statements as part
of the USCG de-consolidation...............$ - $ 81,909

Note receivable from a preferred stock
shareholder, due March 31, 1999 and
extended month-to-month thereafter,
bearing interest at 10.5%, interest
payments due quarterly, secured by
common stock of the Company................ 180,146 220,000

Notes receivable, jointly and severally
from two minority shareholders with
interest at 6%, payable monthly at $312.50
plus interest, matures November 2001,
unsecured.................................. 7,031 10,781
---------- -----------
187,177 312,690
Less current maturities................. (180,146) (305,659)
----------- -----------
Long-term portion.......................$ 7,031 $ 7,031
============ ===========
F-16
<PAGE>

NOTE F - LINES OF CREDIT

Lines of credit at December 31, 1999 and 1998 consist of the following:

1999 1998
----------- -----------
$10,000,000 line of credit with bank,
bearing interest at prime plus 2%,
maturing September 30, 2001 and
secured by accounts receivable,
inventory and equipment. This note
was removed as part of the USCG
de-consolidation........................... $ - $ 7,362,654

$1,000,000 line of credit with bank
payable on demand with interest at
prime plus 1/2%, maturing June 30,
1999 and secured by accounts
receivable, inventory and equipment......... - 836,000

$3,000,000 line of credit with bank
payable on demand, with interest
payable monthly at prime plus 2%
(10.50% at December 31, 1999),
maturing August, 2002 and secured by
accounts receivable, inventories,
equipment and intangibles of CCC.
Pursuant to borrowing base formulas,
as of December 31, 1999 additional
borrowings of $1,018,168 are available
under the line of credit.................... 389,532 -
---------- ----------
$ 389,532 $ 8,198,654
=========== ===========

NOTE G - LONG TERM DEBT

Long-term debt at December 31, 1999 and 1998 consists of the following:

1999 1998
------------ -----------
Note payable to a former employee
bears interest at 8 percent per year,
payable in twenty-four equal monthly
installments including principal and
interest and matures on September 15,
1999..................................... $ - $ 49,225

Various capital lease obligations
payable in monthly installments through
July 2000. The monthly lease payments,
including interest, range from $4,427 to
$8,017. The capital lease obligations
are secured by the related underlying
equipment and furniture................... - 167,865

F-17
<PAGE>

NOTE G - LONG-TERM DEBT (Continued)
Capital lease obligation payable in
monthly installments through December
2000. The capital lease is secured by
certain facsimile equipment............. 19,491 -

Various automobile loans with annual
interest rates ranging from 9.9% to
11.5% payable in monthly installments
through February 2001. The monthly
loan payments, including interest,
range from $324 to $522. The
automobile loans are secured by the
related automobiles...................... - 51,414

Non-interest bearing note payable to
former Trustee of AHS, lump sum
payment due at maturity on February,
2000, secured by stock of AHS
(see additional discussion in Note R).... 2,100,000 -

Non-interest bearing, unsecured note
payable to an investment company,
lump sum payment due at maturity on
June, 2000............................... 107,000 -

Note payable to financing company,
with interest payable monthly at 24%,
and principal due at maturity
(October 2001), guaranteed by TEI,
with first lien on all AHS assets
and second lien on AHS common stock
(see additional discussion in Note H).... 940,600 -

Installment notes payable to leasing
company, due in monthly installments
ranging from $3,695 to $3,004,
including interest at rates from
14.50% to 14.52%, maturing at
various dates though October 2002,
collateralized by facsimile and
business center equipment of AHS......... 271,479 -
---------- -----------
4,872,970 268,504
---------- -----------
Less current maturities.................. (2,316,796) (215,300)
---------- -----------
$ 2,556,174 $ 53,204
=========== ===========
F-18
<PAGE>

NOTE G - LONG-TERM DEBT (Continued)

Maturities on long-term debt are as follows:

Year ended
December 31,
------------
2000.................................$ 2,316,796
2001................................. 2,479,317
2002................................. 76,857
------------
$ 4,872,970
============
NOTE H - RELATED PARTY TRANSACTIONS

Lease Agreements

The Company leases its Texas office and warehouse space, approximately
16,000 square feet, from a partnership consisting of members of the family of a
shareholder. Rent paid to the partnership for the building lease was $67,200 for
the years ended December 31, 1999 and 1998. In addition, commencing March 1,
2000, the Company will lease warehouse space, approximately 7,800 square feet,
adjacent to their building from the same partnership for five years.

At December 31, 1999, future minimum rental commitments for facilities
under the non-cancelable operating lease agreement (including the additional
commitment in effect March 1, 2000) were as follows:

2000...............................................$ 131,200
2001............................................... 101,900
2002............................................... 100,800
2003............................................... 100,800
2004............................................... 100,800
------------
Total..............................................$ 535,500
============

During January 1999, the Company loaned USCG $222,344 for working capital
requirements. The loan bears interest at 8% and matures March 12,2000, with
annual options to extend for one year periods through March 12, 2004. On August
26, 1999, the Company loaned USCG an additional $250,000 for working capital
requirements. The loan bears interest at the prime rate plus 1%. During December
1999, the Company determined that these loans were uncollectible and therefore,
these receivables were written off. Such amounts have been included with
selling, general and administrative expenses in the accompanying consolidated
statements of operations.

During July 1999, the Company issued 108,000 shares of common stock with a
fair market value $114,749 to a stockholder of TEI in settlement of a $56,000
note payable. The excess of the fair market value of the stock over the note has
been recorded as compensation expense during the year ended December 31, 1999.
In addition, this stockholder contributed 400,000 shares of TEI common stock to
the Company. Such stock was immediately cancelled.

F-19
<PAGE>

NOTE H - RELATED PARTY TRANSACTIONS (Continued)

During 1999, the Company borrowed $1,525,000 from a finance company that
has an officer who is a relative of TEI's president. The Company paid a loan
origination fee of $150,737. The loan requires interest payments monthly at
20.5% per annum. The principal is due in full on October 21, 2001. As
additional consideration the finance company received warrants to purchase
116,703 shares of TEI common stock exercisable at $0.75 per share. The warrants
vest immediately and expire on October 20, 2004.

During 1999, the Company borrowed $1,000,000 from a finance company that
has a principal who is also a shareholder of TEI. The Company paid an
origination fee of $98,828. The loan requires interest payments monthly at 20.5%
per annum. The principal is due in full on October 21, 2001. As additional
consideration the finance company received warrants to purchase 76,514 shares of
TEI common stock exercisable at $0.75 per share. The warrants vest immediately
and expire on October 20, 2004.

Also during 1999, the Company engaged an investment company, of which the
Company's president is a director and shareholder to act as sales agent in a
private placement. The investment company received a placement fee of 500,000
warrants in consideration for these services rendered. In addition, the Company
retained the investment company to refinance certain outstanding indebtedness.
The investment company received a fee of 550,000 warrants in consideration for
these services rendered. All of the aforementioned 1,050,000 warrants are
exercisable at $0.75 per share and expire on October 20, 2004.

NOTE I - DECONSOLIDATION OF USCG

Through February 25, 1999, the consolidation losses of USCG exceeded the
Company's investment in USCG by approximately $3,340,000 million. Therefore, in
conformity with the equity method of accounting for its investment in USCG, no
additional losses have been charged to operations after February 25, 1999. In
addition, the de-consolidation of USCG resulted in a net credit to additional
paid-in capital of $7,597,929.

Following is an unaudited summary of financial position and results of
operations of USCG:

December 31, December 31,
1999 1998
(unaudited) (unaudited)
------------ ------------
Current assets..............................$ 3,671,255 $ 3,840,774
Property, plant and equipment, net.......... 384,290 558,268
Other assets, net........................... 673,243 779,661
------------ ------------
Total assets.........................$ 4,728,788 $ 5,178,703

Current liabilities.........................$ 7,017,569 $ 6,336,940
Long-term debt.............................. 6,719,136 7,119,882
------------ ------------
Total liabilities.................... 13,736,705 13,456,822
------------ ------------
Stockholders' deficit.......................$ (9,007,917) $ (8,278,119)
============= =================
F-20
<PAGE>

NOTE I - DECONSOLIDATION OF USCG (Continued)
Year Ended
December 31, December 31,
1999 1998
(unaudited) (unaudited)
-------------- ---------------
Revenue............................... $ 15,446,564 $ 18,075,264
Gross profit.......................... 11,866,508 11,572,130
-------------- ----------------
Net loss................................ $ (1,818,664) $ (2,362,635)
============== ================

NOTE J - MINORITY INTEREST

Minority interest of $2,054,633 at December 31, 1998, represents the
minority interest in USCG's series D and series E redeemable preferred stock
which remains outstanding at December 31, 1998. The Series E preferred stock was
issued as a requirement of a shareholder to convert a loan due from USCG to
preferred stock prior to the acquisition of 51% of the common stock of USCG by
the Company (See additional discussion in Note A).

NOTE K - STOCKHOLDERS' EQUITY

The preferred stock bears cumulative dividends of 36 3/4 cents per share
payable annually and has a liquidation preference of $5.25 per share. Through
December 31, 1999 the Company has paid all dividends which have accrued on the
preferred stock. The voting rights are equal to common shares, other than with
respect to certain matters; generally amending the rights or powers of the
preferred stock. The preferred stock is convertible at the option of the holder
into two shares of common stock subject to adjustment (the "Conversion Rate")
(as more fully described in the Certificate of Designation) at any time after
one year from the date of issue. The Company may compel conversion at the
Conversion Rate at any time after one year from the date of issue if the closing
market price of the common stock is $5.25 or higher for 30 consecutive trading
days. During 1999, 57,900 shares of preferred stock were converted into common
stock.

NOTE L - INCOME TAXES

Deferred tax assets and liabilities at December 31, 1999 and 1998 consist
of the following:
1999 1998
------------ -----------

Current deferred tax asset.............$ 517,436 $ 749,188
Current deferred tax liability......... (80,069) -
Valuation allowance.................... (437,367) (749,188)
------------- -----------
Net current deferred tax asset.........$ - $ -
============== ===========

Non-current deferred tax asset.........$ 3,251,779 $ 1,979,549
Non-current deferred tax liability..... (19,570) (1,741,498)
Valuation allowance.................... (3,232,209) (238,051)
------------- -----------
Net non-current deferred tax asset.....$ - $ -
============= ===========
F-21
<PAGE>

NOTE L - INCOME TAXES (Continued)

The current deferred tax asset results primarily from the provision for
inventory obsolescence and doubtful accounts and certain accrued liabilities
which are not currently deductible for federal income tax purposes. The current
deferred tax liability results from capitalized loan costs that are expensed
immediately for tax purposes. The non-current deferred tax liability arises from
the accelerated methods of depreciation of assets for federal income tax
purposes. The non-current deferred tax asset results primarily from the net
operating loss carry forward. The net operating loss available at December 31,
1999 amounts to approximately $9,400,000 and begins to expire in 2011. A portion
of the net operating losses are limited subject to section 382 of the Internal
Revenue Code. The current and net non-current deferred tax assets have a 100%
valuation allowance due to the uncertainty of generating future taxable income.

The Company's income tax benefit for the years ended December 31, 1999 and 1998
differed from the statutory federal rate of 34 percent as follows:

1999 1998
---------------- -----------
Statutory rate applied to loss
before income taxes..................... $ (1,165,736) $(1,691,810)
Increase (decrease) in income taxes
resulting from:
Amounts not deductible for federal
income tax purposes, and other...... 55,405 6,877
State income taxes, net of federal
income tax effect................... (97,386) (146,509)
Increase in valuation allowance....... 2,682,337 364,363
Net assets purchased.................. 339,737 1,467,079
Net liability removed through
de-consolidation of USCG.......... (1,814,357) -
-------------- ----------
Income tax expense...................... $ - $ -
============== ==========

NOTE M - CREDIT CONCENTRATIONS AND SIGNIFICANT CUSTOMERS

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, a certificate of
deposit, and accounts and notes receivable.

Cash and certificates of deposit are at risk to the extent that they exceed
Federal Deposit Insurance Corporation insured amounts. To minimize this risk,
the Company places its cash and cash equivalents and other short-term
investments with high quality financial institutions.

The Company recognizes revenue upon shipment of goods or delivery of
services and does not maintain any set policy regarding the customer's right of
return. Customer requests to return products for refund or credit are handled on
an individual basis at the discretion of management. The refunds or credits in
1999 and 1998 were not significant to the results of operations of the Company.
In the normal course of business, the Company extends unsecured credit to
virtually all of its customers. The Company has a broad base of customers
located throughout the United States, which reduces its credit risk. Because of
the credit risk involved, management has provided an allowance for doubtful
accounts which reflects its opinion of amounts
F-22
<PAGE>

NOTE M - CREDIT CONCENTRATIONS AND SIGNIFICANT CUSTOMERS (Continued)

which will eventually become uncollectible. In the event of complete
non-performance by the Company's customers, the maximum exposure to the Company
is the outstanding accounts receivable balance at the date of non-performance.
At December 31, 1999, one accounts receivable account comprised approximately
28% of the total trade accounts receivable balance. Through the date of this
report, substantially all of this amount had been collected. During the year
ended December 31, 1999, one customer accounted for 20% of total revenues while
in 1998 no single customer accounted for in excess of 10% of revenues. CCC has
certain significant suppliers of its battery products and electronic components.
The loss of any of these relationships could have a material adverse effect on
the Company. AHS relies on one manufacturer to provide it with all fax machines.
The loss of this relationship could have a material adverse effect on the
Company.

NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107 "Disclosure About Fair
Value of Financial Instruments", requires disclosure about the fair value of all
financial assets and liabilities for which it is practicable to estimate. At
December 31, 1999 and 1998 the carrying value all of the Company's accounts
receivable, accounts payable and accrued liabilities approximate fair value
because of their short term nature.

Lines of credit and long term debt carrying values approximate fair values
based on the borrowing rates currently available to the Company for loans with
similar terms.

NOTE O - STOCK OPTIONS AND WARRANTS

On July 12, 1996, the Company implemented an Incentive Stock Option Plan
("1997 Plan") in terms of which 250,000 shares of common stock may be issued
through December 31, 1999. During 1997, the 1997 Plan was approved by the
shareholders of the Company. At December 31, 1997, there were no options
outstanding under the 1997 Plan. During 1998, 150,000 options were granted under
the 1997 Plan of which 90,000 options are outstanding at December 31, 1999.

On November 18, 1998, the Board of Directors approved the 1998 Incentive
Stock Plan ("1998 Plan") in terms of which 250,000 shares of common stock may be
issued through May 31, 1999. No options were issued pursuant to the 1998 Plan.

On August 13, 1999, the Board of Directors approved the issuance, to
certain employees, of 341,250 options to purchase TEI common stock. The options
were granted with an exercise price of $1.00 per share, vest immediately and are
exercisable over two years.

On October 11, 1999, the Board of Directors approved the issuance, to
certain employees, of 100,000 options to purchase TEI common stock. The options
were granted with an exercise price of $0.75 per share, vest immediately and are
exercisable over two years for motivation to certain personnel.

On November 3, 1999, the Board of Directors approved the issuance of 87,500
options to purchase TEI common stock. The options were granted to an employee
for prior services, with an exercise price of $0.75 per share, vest immediately
and expire from two to five years.

F-23
<PAGE>

NOTE O - STOCK OPTION PLANS (Continued)

On November 15, 1999, the Board of Directors approved the issuance, to
certain employees, of 1,030,000 options to purchase shares of TEI common stock.
The options were granted with an exercise price of $0.75 per share, expire from
two to five years and the majority vest immediately.

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," in accounting for all options granted to employees. Had compensation
cost for the Company's stock based compensation Plans been determined consistent
with FASB statement No. 123, "Accounting for Stock Based Compensation," the
Company's net loss and loss per share would have been increased to the pro forma
amounts indicated below:

Years ended December 31,
1999 1998
------------ --------------
Net loss attributable to
common shareholders
As reported..$ (3,479,086) $ (5,058,245)
Pro forma....$ (4,631,874) $ (5,184,628)

Basic and diluted loss per
share attributable to
common shareholders
As reported...$ (.63) $ (1.26)
Pro forma.....$ (.84) $ (1.29)

During 1998, USCG issued 375,000 options to purchase shares of USCS stock
to Company employees. In accordance with their Plan, 250,000 of these options
issued expire in 7 years and vest 20% immediately and 20% per year over the next
4 years. The remaining 125,000 options expire in 7 years and vest 33 1/3% over
the next 2 years. The fair value of these options has been included in pro-forma
expense amounts disclosed above.

The fair value of each option grant for USCG stock is estimated on the date
of grant using the Black-Scholes option pricing model with the following
assumptions used for grants in 1998: dividend yield of 0 percent; risk free
interest of 6%; and an expected life of 3 years. Because USCG is not a publicly
traded company, it is permitted to use the "minimum value" method, which
excludes the volatility factor from the option-pricing model.

The fair value of each option grant for TEI stock is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
assumptions used for grants in 1998: dividend yield of 0 percent; expected
volatility of 112%; risk free interest rate of 6%; and an expected life of 2
years.

The fair value of each option and warrant grant for TEI stock is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following assumptions used for grants in 1999: dividend yield of 0 percent;
expected volatility of 134%; risk free interest rate of 6%; and an expected life
of 2 to 5 years.

F-24
<PAGE>

NOTE O - STOCK OPTION PLANS (Continued)

A summary of the status of the Company's compensatory stock option plans as
of December 31, 1999 and 1998 and changes during the years ended December 31,
1999 and 1998 are as follows:

Weighted
Average
Exercise Range of
Shares Price Exercise Price
--------- ----- --------------
Outstanding at January 1, 1998... 117,750 1.18 1.00 - 1.75

Granted.......................... 150,000 .75 .75 - .75
---------
Outstanding at December 31, 1998. 267,750 .94 .75 - 1.75

Granted.......................... 1,558,750 .80 .75 - 1.00
Forfeitures...................... (6,500) 1.00 1.00 - 1.00
Cancelled........................ (171,250) 1.00 1.00 - 1.00
---------
Outstanding at December 31, 1999. 1,648,750 .82 .75 - 1.19
=========

The following summarizes information about compensatory options outstanding at
December 31, 1999.

At December 31, 1999 the weighted-average remaining contractual life of the
compensatory options outstanding is 3.1 years. The number of exercisable
compensatory options are 1,570,000 and 111,250 with a weighted-average exercise
price of $0.82 and $1.18 at December 31, 1999 and 1998, respectively. The
weighted-average grant date fair value of options issued during 1999 and 1998
totaled $0.79 and $0.84, respectively.

Effective December 12, 1997, the Company adjusted the terms of certain
previously issued warrants. The exercise price was reduced from $3.50 to $3.30
per warrant. Each warrant was also adjusted to entitle the holder the purchase
of 1.06 shares of the Company's common stock. Total warrants outstanding,
relating to this issuance, at December 31, 1999 were 1,953,500. The warrants
expire January 26, 2000 and may be redeemed at $0.10 per warrant on 30 days
written notice if the average price of the common stock exceeds $5.25 per share
for 30 consecutive trading days prior to the notice.

Effective February 12, 1997, the Company sold 1,100,000 shares of common
stock and warrants to acquire 1,000,000 shares of common stock for $1,870,000,
(a combined price of $1.70 net to the Company). The warrants had an exercise
price per share of $2.15. Each warrant originally expired thirteen months from
the date of issuance. On March 1, 1998, the Company and the warrant holders
agreed to amend the original warrant agreement. The amendment adjusted the
exercise price to $2.50 per share, and extended the exercise period to March 10,
1999. On February 11, 1999, the Company agreed to extend the exercise period to
March 10, 2000 at the same exercise price of $2.50 per share.

F-25
<PAGE>

NOTE O - STOCK OPTION PLANS (Continued)
Effective December 12, 1997, the Company sold 1,000,000 shares of common
stock and warrants to acquire 1,000,000 shares of common stock for net proceeds
of $1,470,500, (a combined price of $1.47 net to the Company). The warrants had
an exercise price of $1.75 and expired twelve months from the date of issuance.
On November 12, 1998, the Company agreed to extend the exercise period to
December 12, 1999 at the same exercise price of $1.75 per share. On November 30,
1999, the Company agreed to extend the exercise period to December 12, 2001 at
the same exercise price of $1.75 per share.

As part of the 1999 private placement, each common stock share purchased
included a warrant to purchase an additional share of common stock at $0.75 per
share. A total of 2,036,354 warrants were issued as part of the private
placement. The warrants vested immediately and expire October 20, 2004.

During 1999, the Company issued warrants to purchase 193,217 shares of TEI
common stock associated with loans from two related parties (see additional
discussion in note H). During 1999, the Company also issued warrants to purchase
1,050,000 shares of TEI common stock to a related party for fund raising and the
arrangement of certain debt (see additional discussion in note H).

NOTE P - SEGMENTS
The Company's service maintenance segment represents operations of the
Company's New York subsidiary, USCG (for the period it was consolidated) which
provides computer system maintenance services to customers in New York, New
Jersey and Pennsylvania. The electronics sales segment represents the operations
of the Company's Texas subsidiary, CCC which includes the stocking and sales of
electronic components and batteries. The hospitality service operations of the
Company is the New Jersey subsidiary, AHS which provides private in-room
facsimile and office business center for business travelers. These segments were
identified based on the different nature of the services, location, and, in
general, the type of customers for those services.

A summary of the segment financial information reported to the chief
operating decision maker is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1999
---------------------------------------------------------------------------
Service Facsimile & Electronic
Maintenance(1) Business Center Sales Adjustment Consolidated
------------ --------------- ------------ ---------- ------------
Revenue $3,187,661 $ 2,312,191 $13,150,822 $ - $18,650,674
Depreciation and
amortization 168,965 979,991 73,448 3,106 1,225,510
Segment profit (loss) (1,493,412) (1,095,523) 276,027 (1,115,726) (3,428,634)
Segment Assets - 10,262,390 5,174,189 242,259 15,678,838
Capital expenditures
by segment 8,774 149,307 9,791 5,927 173,799

</TABLE>

F-26
<PAGE>

NOTE P - SEGMENTS (Continued)
<TABLE>
<S> <C> <C> <C> <C>
Year Ended December 31, 1998
----------------------------------------------------------------
Service Electronics
Maintenance(2) Sales Adjustment Consolidated
----------- ----------- ----------- ------------
Revenue $16,906,496 $8,006,535 $ - $ 24,913,031
Depreciation and Amortization 1,052,523 62,908 922 1,116,353
Segment loss (2,845,082) (568,609) (1,562,220) (4,975,911)
Segment Assets 9,363,185 4,668,788 148,621 14,180,594
Capital expenditures by segment 80,338 86,069 11,532 177,939
</TABLE>
(1)Includes the operations for the period from January 1, 1999 through February
25, 1999.
(2)Includes operations for the period from March 19, 1998 through December 31,
1998.

The adjustments represent depreciation and amortization related to
corporate assets, corporate losses, and corporate capital expenditures to
reconcile segment balances to consolidated balances. None of the other
adjustments are significant.

NOTE Q - COMMITMENTS AND CONTINGENCIES

Litigation

A former employee of CCC has filed suit against the Company for breach of
his employment agreement. The case has been presented in an arbitration hearing
and is currently pending. The Company is unable at this time to determine the
amount of any liability if the former employee prevails in the proceeding.
Should this be settled in an adverse manner the amount could be material to the
operations and financial condition of the Company.

The Company has been defendant in a lawsuit filed by a competitor claiming
that AHS's The Office product infringes on a patent assigned to the said
competitor. In order to end this litigation and the resultant legal fees, the
Company has been negotiating a settlement with the competitor. The Company
believes that the litigation will not have a material impact on the Company's
operations or financial condition regardless of whether the case proceeds to
trial or is settled.

Additionally, in the normal course of its business, the Company is subject
to various other litigation. Management of the Company, based on discussions
with its outside legal counsel, does not believe these claims, individually or
in the aggregate, will have a material adverse impact on the Company's financial
position, results of operations or cash flows.

Operating Leases

The Company is obligated under various non-cancelable operating leases
relating to certain office facilities. Minimum future payments on leases having
remaining terms in excess of one year as of December 31, 1999 are as follows:

F-24
<PAGE>

NOTE Q - COMMITMENTS AND CONTINGENCES (Continued)

Years ending
December 31,

2000....................................$ 67,200
2001.................................... 67,200
------------
$ 134,400
============

Rent expense for the years ended December 31, 1999 and 1998 amounted to
approximately $182,000 and $737,000.

Guarantees

On October 20, 1999 the Company guaranteed a payment made by Telstar to
USCG totaling $100,000 for working capital. The Company has also guaranteed
certain USCG debt with it's primary lender totaling $361,740 (see additional
discussion in Note R).

Commitment

The Company has entered into an agreement with a leasing company which
requires the Company to pay $5 per machine each month for two years, which
represents the estimated residual value at the end of a four-year leasing
contract. The future minimum payments under this agreement at December 31, 1999
are as follows:

Year ended
December 31,

2000...............................................$ 232,936
2001............................................... 106,798
2002............................................... 21,744
------------
$ 361,478
============

NOTE R - SUBSEQUENT EVENTS

On March 8, 2000, the Company renegotiated and settled in full its
$2,100,000 promissory note that composed part of the purchase price of its
acquisition of AHS. The promissory note was retired with $500,000 cash and the
issuance of 1,100,000 shares of TEI common stock.

The Company was advised on March 22, 2000 that Coast Business Credit
Industries, Inc. ("Coast"), has declared that USCG has defaulted on certain
loans from Coast and has demanded full payment. The Company was advised verbally
by Coast's attorney that it had foreclosed and sold all of USCG's assets that
were pledged to secure loans from Coast. Coast has demanded that the Company pay
Coast $361,740 on its guarantees. The Company is investigating the propriety of
Coasts said foreclosure sale of USCG's assets and the validity of its said
demand under the Company guarantees. TEI owns approximately 43% of USCG's
outstanding capital stock.

F-28
<PAGE>

Signatures

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

Date: April 13, 2000

TECH ELECTRO INDUSTRIES, INC.

By: _________________________
William Tan Kim Wah
President and CEO

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

Signature Capacity Date

________________________ Director, Chairman of the Board, April 13, 2000
William Tan Kim Wah President and Chief Executive
Officer (principal executive officer)

________________________ Vice President and Director April 13, 2000
Ian Edmonds

________________________ Director April 13, 2000
Sadasuke Gomi

________________________ Interim Chief Financial Officer April 13, 2000
Julie Sansom-Reese

Exhibit
Subsidiaries of Issuer

Computer Components Corporation, wholly-owned by Tech Electro Industries, Inc.

AlhpaNet Hospitality Systems, Inc., wholly-owned by Tech Electro Industries,
Inc.

USCG, 51% owned by Tech Electro Industries, Inc. until February 25, 1999
when Telstar became the largest shareholder after purchasing additional shares
in USCG. TEI now owns approximately 42% of USCG.