SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

|X| ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: July 31, 2000

| | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from:

Commission File No. 2-96510-NY

DG LIQUIDATION, INC.
(Name of registrant as specified in its charter)

New Jersey 11-2269958
(State of other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)

c/o Med-Care, Building #3, 3535 Route 66, Neptune, NJ 07753
(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code: (732) 918-7555

Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
------------------- ----------------

None None

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

Title of each class

Common Stock, par value $1.00 per share

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). | |

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter.

There is no trading market and therefore no market value for the
registrant's voting common equity securities.

Indicate the number of shares outstanding of each of the registrant's class of
common stock, as of the latest practicable date:

As of July 14, 2004 there were 9,274,863 shares of common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

PART I

ITEM 1. BUSINESS.

General

DG Liquidation, Inc. (formerly known as "Drug Guild Distributors, Inc.",
and sometimes referred to as the "Company" or the "Registrant"), was previously
engaged in wholesale distribution of a wide variety of products almost
exclusively to drugstores and health and beauty product stores primarily in the
State of New Jersey and the Greater New York City metropolitan area.

Since the sale of assets to Neuman Health Services, Inc. and Neuman
Distributors, Inc. in July 1997, the Company has been operating under a
liquidation plan and its financial reporting is now made in accordance with the
liquidation basis of accounting. Therefore, all discussions in this annual
report relate to the Company in liquidation.

Asset Sale.

The purchase price was composed of $4,000,000 in cash paid on closing, an
unsecured $1,000,000 non-interest bearing promissory note due in August 2001,
and an adjustable value promissory note recorded at $10,646,000 payable in
quarterly installments over four years and collateralized by a standby letter of
credit. Neuman also agreed to assume and to pay, perform or discharge certain
specified liabilities of the Company, including leases, trade accounts payable,
accrued expenses as reflected on the closing balance sheet, the collective
bargaining agreement with the union local representing former employees,
expenses incurred in the ordinary course of business, bank debt and long term
notes. However, Neuman did not assume severance or termination payments, worker
compensation claims, liability for any federal, state or local taxes,
environmental claims, undisclosed or contingent liabilities, penalties, Drug
Enforcement Administration fines or liabilities with respect to the preferred
stock of the Company.

The adjustable value note provided for interest at a rate determined
quarterly equal to the higher of 1% plus the 180-day London Interbank Offered
Rate or the rate specified for U.S. Treasury Notes with maturity equal to the
remaining term of the note, but no lower than the Federal rate as disseminated
by the Internal Revenue Service from time to time. During the fiscal year ended
July 31, 2000, pursuant to the terms of the note, interest was paid quarterly
based on the principal payments received by the Company. Subsequent thereto,
interest was payable quarterly based on the unpaid principal balance of the
note. During the year ended July 31, 2000, the Company received three quarterly
principal payments on the note aggregating $2,400,000, plus interest of
$173,000. In addition the Company received $7,084,000, from a standby letter of
credit as result of Neuman's default in May 2000.

In connection with the sale, the Company received an option in favor of
the Company's stockholders to purchase, under certain conditions, an aggregate
of 10% of Neuman shares to be made available in a public offering in the event
Neuman filed a registration statement with the Securities and Exchange
Commission prior to July 3, 2001, at a price equal to 85% of the per share
public offering price. Since no registration statement was been filed by Neuman
prior to July 3, 2001, the option lapsed.

The asset purchase agreement provided that the purchase price was subject
to adjustment based upon a final valuation of the assets and liabilities sold.
The terms of sale also provided that Neuman had one year from the date of
purchase to return to the Company any accounts receivable balances which had not
then been collected and reduce the amount of the adjustable note by such
uncollected balances.

On or about July 1, 1998, Neuman proposed to reassign to the Company
uncollected accounts receivable of four customers which accounted for
approximately $1,486,000. The Company rejected Neuman's proposal and claimed
that, pursuant to the provisions of the asset purchase agreement, it was
entitled to receive the full amount of the pre-acquisition balance due of
$1,486,000 out of a pending payment by a major pharmaceutical retail chain to
Neuman of approximately $2,500,000. This disagreement between Neuman and the
Company was ended by Neuman's bankruptcy in 2000 (see below) and the uncollected
accounts receivable of $1,486,000 were not reassigned to the Company.

On April 6, 2000, Neuman filed a petition for reorganization under Chapter
11 of the Bankruptcy Code. As a result, the Company wrote off the then $880,000
carrying value of Neuman's unsecured promissory note as uncollectible. Neuman's
bankruptcy petition constituted an "event of default" under the terms of the
secured adjustable value promissory note. By reason of Neuman's default, and on
May 22, 2000, the Company made a drawing on the standby letter of credit which
collateralized the note. On May 25, 2000, the Company received $7,084,000, of
which $2,794,000 represented the carrying value of the adjustable rate note,
$102,000 represented accrued interest thereon through such date and $4,188,000
represented additional proceeds.

Within the ninety-day period prior to the filing of the Neuman bankruptcy
petition, the Company had received $885,000 of quarterly payments from Neuman in
connection with the adjustable value note. Subsequent to the filing of the
Neuman bankruptcy petition, the Chapter 11 Trustee filed a complaint against the
Company in the Bankruptcy Court seeking to recover the $885,000 as a preference
payment. The Company filed an answer including defenses against the Trustee's
claims and filed a motion for summary judgment. October 20, 2000, the Company
also filed a general unsecured claim against the Neuman bankruptcy estate which
reflected $7,657,000 due from Neuman on the adjustable value note at March 31,
2000, including $576,000 of additional accrued interest through such date based
on the increased amount of the note, prior to the receipt of the $7,084,000
letter of credit proceeds, leaving a balance of $573,000 due the Company. In
addition, the Company filed a claim for $1,000,000 in connection with the
unsecured note.

On September 24, 2002, a settlement agreement was entered into pursuant to
which the Company and the Trustee released each other from all pre-petition or
post-petition claims, except that the Company was entitled to receive
distribution from the bankruptcy estate with respect to its unsecured claims,
referred to above, which were allowed in full. The settlement agreement was
approved by the Bankruptcy Court on October 9, 2002.

As of the date of this report, no additional distribution has been made to
the Company from the Neuman bankruptcy estate and there is no assurance that any
additional distributions will be made in the future.

Employees

The Company has oral consulting agreements with its President, Harold
Blumenkrantz, and a director, Michael Katz, and a written consulting agreement
with Jay Reba, its former Vice President-Finance, for the purpose of
implementing the Liquidation Plan. The terms of the consulting agreement with
Mr. Blumenkrantz provided for his part-time employment on a month-to-month basis
for a consulting fee of $5,000 per month, plus reasonable and customary
expenses. Mr. Blumenkrantz ceased collecting his consulting fee after July 31,
2001. Michael Katz received a consulting fee of $1,000 per month for assistance
in liquidation activities until the end of April 2002. The written consulting
agreement with Mr. Reba is dated June 4, 1998, and provided for his consulting
services for a minimum of three months, and on a month-to-month basis
thereafter, for a consulting fee of $11,400 per month (beginning in January
1999), plus reasonable and customary expenses and a severance payment of
$34,200. Mr. Reba's consulting agreement terminated August 31, 1999. He was
thereafter engaged by the Company on a month-to-month basis to render limited
consulting services for a fee of $2,750 per month from September 1, 1999 until
April 30, 2002. His current engagement by the Company provides for payment to
him of $125 per hour, plus expense reimbursement, for work he is asked to
perform.

Competition.

Competition is no longer a material factor for the Company, since it is
engaged only in implementing its Liquidation Plan and is not actively engaged in
business as a going concern.

ITEM 2. PROPERTIES.

The Company occupies office space, on a month-to-month basis, in the
offices of its President, Harold Blumenkrantz, in Neptune, New Jersey and in
Boca Raton, Florida, at an annual cost, including telephone service, photocopies
and postage, of $1,200.

ITEM 3. LEGAL PROCEEDINGS.

DG Liquidation, Inc. v. Anchin, Block & Anchin, LLP.

On March 3, 1998, the Company filed a complaint in New York County Supreme
Court against its former auditors, Anchin, Block & Anchin, LLP (the "Anchin
Firm"), seeking to recover damages for professional malpractice, breach of
fiduciary duty and breach of contract exceeding $16,000,000 in connection with
inventory defalcations during the period of October 1992 through May 1996. The
Anchin Firm had previously acted in the capacities of financial advisors,
auditors and accountants for the Company for a continuous period beginning in
1977 and ending on July 2, 1996.

On April 30, 1998, the Anchin Firm filed an answer denying the material
allegations, and commenced a third-party lawsuit against members of the
Company's Executive Committee during the period of January 1990 through May 31,
1996, and the Company's corporate attorneys, alleging that if the Company was
successful in its claims against the Anchin Firm, then these third-party
defendants should be held liable for the losses to the Company by reason of an
alleged failure to reasonably perform their respective fiduciary duties. On
October 27, 1998, the court dismissed all of the third-party claims against the
Company's corporate attorneys and the Anchin Firm withdrew its claims against
the former members of the Executive Committee.

Claim of Daniel Kantor

Mr. Kantor is a former director of the Company who owns or controls
approximately 134,000 shares of the Company's common stock. In October 1996, the
Company received a letter from an attorney for Mr. Kantor alleging mismanagement
of the Company and requesting additional information. In June 1997, the
attorney, acting on behalf of Mr. Kantor and other stockholders who appear to be
related to Mr. Kantor, asked for copies of the Company's financial statements
over the past three years, which the Company supplied. As of the date of this
report, no other action has taken place with regard to this matter.

Michael's Pharmacy and Michael Scicutella v. Drug Guild Distributors, Inc., et
al.

The plaintiff, a customer of Drug Guild, initiated this lawsuit in
February 1997 in the United States District Court for the District of New
Jersey, alleging that the Company has conspired with co-defendant wholesalers,
McKesson Corp., Cardinal Health Company, W. Daly, Inc. and Remo Drug Corp. to
deny credit to the plaintiff that was allegedly due to it, amounting to an
alleged "group boycott" in violation of the federal Sherman Anti-trust Act and
New Jersey's Anti-trust Act, as well as an alleged breach of an implied covenant
of good faith and fair dealing, and tortious interference with the plaintiff's
contracts.

The plaintiff asked for preliminary and permanent injunctions as well as a
money judgment against each defendant for what were described as actual,
compensatory, punitive and trebled damages, attorney's fees and costs, and such
other relief as the court found appropriate. The court denied the plaintiff's
requests for a preliminary injunction. The Company filed an answer denying all
of the material allegations of the complaint, setting forth various affirmative
defenses, alleging a counterclaim against the plaintiff for approximately
$48,000 owed to the Company, and asked for a dismissal of the complaint.

The defendants, including the Company, made motions for summary judgment
seeking dismissal of all of the plaintiff's claims. The Company also asked for
summary judgment on its counterclaim. On August 12, 2002, all of the claims were
formally dismissed by the court.

The Company has been a party to several other pending legal actions,
principally motor vehicle accidents involving vehicles owned or operated by the
Company, and other claims, including products liability, for which the Company
is covered by insurance. The results of these various lawsuits and claims will
not materially affect the financial position of the Company.

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

There were no matters submitted to a vote of the Company's security
holders during the fiscal year ended July 31, 2000 through the solicitation of
proxies or otherwise.

PART II

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

There is no existing public market for any of the Company's securities.

As of July 14, 2004, there were approximately 366 holders of record of the
Company's common stock, and all of the Company's preferred stock has been
redeemed.

The Company has never paid a cash dividend and does not expect to pay cash
dividends in the future. As of the date of this report, liquidation payments
have been made to preferred stockholders ($2,262,000) and common stockholders
($15,785,000, with a reserve of $39,000 for certain stockholders who could not
be located), and additional liquidation payments will be made to the Company's
common shareholders in accordance with the provisions of the Liquidation Plan.

ITEM 6. SELECTED FINANCIAL DATA

This table has been omitted because the Company's financial reporting is
now being made on the liquidation basis of accounting. See Item 8 - Financial
Statements and Supplementary Data.

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

Since July 1, 1997, the Company has been operating under the Liquidation
Plan and its financial reporting is being made in accordance with the
liquidation basis of accounting. Therefore, the following discussion relates to
the financial statements presented on a liquidation basis, since statements
previously presented on a going concern basis are no longer material to
stockholder value.

Statement of Net Assets in Liquidation

Pursuant to the Liquidation Plan, the Company sold substantially all of
its operating assets on July 3, 1997, subject to substantially all of the
Company's liabilities, for an aggregate price of $4,000,000 in cash paid at the
closing, an unsecured, non interest bearing promissory note for $1,000,000 due
June 30, 2001 and an adjustable value promissory note recorded for $10,646,000
payable over four years with interest at 1% above the 180-day Libor rate and
collateralized by an irrevocable standby letter of credit. The $1,000,000
promissory note was recorded at its then present value of approximately
$766,000. The purchase price was subject to additional adjustment based on the
final valuation of the assets and liabilities sold. In addition, the buyer had
the right to return any receivables not paid after one year from the sale.
During the fiscal year ended July 31, 2000, the Company collected $9,657,000 of
payments made on the adjustable rate promissory note, of which $5,194,000 was
applied to notes receivable and the remaining $275,000 to interest. The
remaining balance of $4,188,000 represented additional proceeds. Any adjustment
for the final valuation of the assets and liabilities sold will be recognized in
the period in which the adjustment is determined.

The Company set aside as accrued and estimated liquidation expenses an
amount believed to be adequate for payment of all expenses and other known
liabilities as well as likely and quantifiable contingent obligations, including
potential tax obligations. In the event this accrued and estimated liquidation
expense is not adequate for payment of the Company's expenses and liabilities,
each stockholder could be held liable for pro rata payments to creditors in an
amount not to exceed the stockholder's prior distributions from the Company. The
Company has therefore adopted a conservative policy of retaining sufficient
assets to insure against any unforeseen and non-quantifiable contingencies.

Statement of Changes in Net Assets in Liquidation

As of July 31, 2000, the Company had net assets in liquidation of
$4,990,000. This represented a decrease in estimated liquidation value of assets
over liabilities of $4,285,000 from the net assets at July 31, 1999. This change
was mainly attributed to the distribution to stockholders of $4,174,000, and by
the decrease in net assets for the year. The decrease in net assets was due to
the write-off of the unsecured note receivable from Neuman of $880,000. This
write-off was offset by interest income of $486,000 and collection of $323,000
of accounts receivable previously written off. The tax benefit for the year was
$22,000 due to the decrease in net assets. The decrease was also reduced by the
acceptance by the Company of common stock as payment for previously written off
receivables in the amount of $34,000. This amount is included in the $323,000
listed above.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See the index constituting a part of Item 15.

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

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

As required by Rule 13a-15 under the Act, within the 90 days prior to the
filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision of the
Company's management, the President and Chief Executive Officer and Secretary,
Treasurer, Principal Financial and Accounting Officer. Based upon that
evaluation, the Company's President, Chief Executive Officer and Principal
Financial and Accounting Officer have concluded that the Company's disclosure
controls and procedures are currently effective in timely alerting them to
material information relating to the Company required to be included in the
Company's periodic SEC filings.

Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in
Company reports filed under the Act is accumulated and communicated to
management, which consists only of the Company's President and Chief Executive
Officer and Secretary, Treasurer, Principal Financial and Accounting Officer, to
allow timely decisions regarding required disclosures.

Changes in Internal Controls.

There have been no changes in internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

In connection with adoption of the Liquidation Plan in June 1997, the
Company's shareholders approved elimination of staggered terms for members of
the Board of Directors and reduced the number of members from 34 to 7.

The following individuals served as directors and executive officers of
the Company during the fiscal year ended July 31, 2000:

Name Age Position

Harold Blumenkrantz 67 President, Chief Executive Officer and Director
Alfred Hertel 76 Chairman of the Board and Director
Michael Katz 66 Vice President and Director
Howard Sternheim 71 Vice President and Director (deceased April 2002)
Gerald Koblin 68 Secretary,Treasurer, Chief Accounting
and Financial Officer and Director
Paul Emanuel 79 Director
Ernest Wyre 81 Director

The Company's officers hold office until the next annual meeting of the
Company's Board of Directors and until their respective successors are elected.

Harold Blumenkrantz has been a member of the Executive Committee of the
Company's Board of Directors for more than the past five years and was appointed
President in June 1997. He has been a principal of West End Family Pharmacy,
Inc., Long Branch, New Jersey, since 1962.

Alfred Hertel has been an officer and director of the Company and an
officer and a principal shareholder of Oakland Drug Inc., located in Oakland,
New Jersey, for more than the past five years.

Michael Katz was principal of Katz Drug, Brooklyn, New York and is now
retired. Mr. Katz has been a director of the Company since 1976 and a vice
president of the Company since June 1997.

Howard Sternheim (deceased April 22, 2002) was president and principal
shareholder of Vanderveer Pharmacy, Inc. in Brooklyn, New York, as well as other
drugstores and one variety story in the New York City metropolitan area, for
more than the past five years. He had been a director of the Company since 1976
and a vice president since June 1997.

Gerald Koblin has been a principal of Koblin Pharmaceuticals, Inc., Nyack,
New York for more than the past five years. Mr. Koblin has been a director of
the Company since 1995, the Secretary and Treasurer since July 1997, and the
Chief Accounting and Financial Officer of the Company since August 1997.

Paul Emmanuel had been the owner of Town and Country Pharmacy, Inc.,
Ridgewood, New Jersey, for more than the past five years, and sold the store in
2000. Mr. Emmanuel has been a director of the Company since 1985.

Ernest Wyre was a principal of Lenox Terrace Drugstore, Inc. and Fairview
Chemists, Brooklyn, New York for more than five years prior to 1987, and since
that time has been a private investor. Mr. Wyre has been a director of the
Company since 1976.

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table

The following table sets forth, for the fiscal years ended July 31, 2000,
1999 and 1998, the cash compensation paid by the Company, as well as certain
other compensation paid with respect to those years, to the chief executive
officer and each of the four other most highly compensated executive officers of
the Company in all capacities in which they served.

ANNUAL COMPENSATION

Other
Name Annual All Other
and Principal Compen- Compen-
Position Year Salary Bonus sation sation___
- -------- ---- ------ ----- ------ ---------

Harold Blumenkrantz 2000 $60,000 -- -- --
President and 1999 60,000
CEO(1) 1998 65,000

All 2000 Executive Officers
as a Group (2 persons) $60,000 -- -- --

(1) Mr. Blumenkrantz is paid pursuant to a consulting agreement on a
month-to-month basis at the rate of $5,000 per month.

None of the directors or members of the Executive Committee received any
direct remuneration from the Company or reimbursement for expenses, except that
Michael Katz received a consulting fee of $1,000 per month for assistance in
liquidation activities until the end of April 2002 and the Company reimburses
minor amounts of expenses on an infrequent basis.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding shares of
common stock beneficially owned as of July 14, 2004, by (i) each person, known
to the Company, who beneficially owns more than 5% of the common stock, (ii)
each of the Company's directors and (iii) all officers and directors as a group:

Name and Address of Shares Beneficially Percentage of Stock
Beneficial Owner Owned (1) Outstanding (1)
- ------------------- ------------------- -------------------
Sharon Sternheim, 492,784 5.31%
Executrix of The Estate
of Howard Sternheim
1020 Park Avenue
New York, NY 10028

Paul Emanuel 24,480 .26%
468 Churchill Road
Teaneck, NJ 07666

Harold Blumenkrantz 36,685 .40%
7411 Orangewood Lane
Boca Raton, FL 33433

Alfred Hertel 113,358 1.22%
84 Shoreline Drive
Hilton Head Island, SC 29928

Michael Katz 101,196 1.09%
3400 Galt Ocean Drive
Apt. 1507S Fort Lauderdale, FL 33308

Gerald Koblin 43,997 .47%
214 Jewett Road
Upper Nyack, NY 10960

Ernest Wyre 149,699 1.61%
6613 Pullen Ct
Tampa, FL 33625
All Officers and 469,415 5.06%
Directors as a Group (6
persons)
- ----------
(1) All of these shares are owned of record.

Common Stock

The Company is authorized to issue up to 25,000,000 shares of common
stock, $1.00 par value each, of which 9,274,863 shares are currently issued and
outstanding. The holders of common stock are entitled to one vote for each share
held of record on all matters to be voted on by shareholders, and are entitled
to receive dividends when and if declared by the Board of Directors out of funds
legally available therefore. The common stock has no conversion, preemptive or
other subscription rights, and there are no redemption provisions applicable to
the common stock (except for the Company's right of first refusal, discussed
below). There is no cumulative voting with respect to the election of directors,
with the result that the holders of more than 50% of the shares of common stock
can elect all of the directors.

Holders of the common stock who are customers of the Company are required
to pledge their shares to the Company as security for their purchase of
products. All holders who intend to sell their shares are required to first
offer them to the Company (the "right of first refusal") at a purchase price
equal to the lesser of (a) the book value of the shares or (b) the greater of
cost or par value. If the Company elects to exercise its right of first refusal,
it must pay for the shares in three equal annual installments, without interest,
commencing 60 days after the offer is made.

In the event of liquidation, dissolution or winding up of the Company,
such as that being implemented the Liquidation Plan, the owners of common stock
are entitled to share all assets remaining available for distribution after the
payment of liabilities and after provision has been made for each class stock,
if any, having a preference over the common stock as such.

Preferred Stock

The Company is authorized to issue up to 250,000 shares of preferred
stock, $100 par value each. Preferred stockholders are entitled to an 8%
cumulative dividend based on par value, payable in preferred stock. Upon
liquidation of the Company, holders of the preferred stock are entitled to a
payment of $100 per share before any amounts are paid to holders of common
stock. The preferred stock is not entitled to vote and does not have any
preemptive or conversion rights.

Holders of preferred stock have the right to require the Company to
repurchase their shares at par value ($100.00) commencing five years after full
payment for the stock has been made.

The Company may call preferred stock at any time. The call price is 105%
of par value if shares are called within the first year of issue, 110% of par
value within the second year, 115% within the third year, 120% within the fourth
year and 125% after four years.

A holder of shares of preferred stock desiring to sell his shares to a
third party must first offer them to the Company at the repurchase price. If the
Company elects to accept such offer, it is obligated to pay for such shares in
three equal annual installments, without interest, the first such installment to
be made 60 days after such offer.

As of July 31, 2000, there were no shares issued and outstanding.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company occupies office space, on a month-to-month basis, in the
offices of its President, Harold Blumenkrantz, in Neptune, New Jersey, and Boca
Raton, Florida, at an annual cost, including telephone service, photocopies and
postage, of $1,200.

No other officer or director received any direct remuneration from the
Company or reimbursement for expenses, except that the Company reimburses minor
amounts of expenses on an infrequent basis.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

AUDIT FEES

The aggregate fees billed by Eisner LLP for the annual audit and review of
interim financial statements were approximately $54,000 and $54,000 for the
fiscal years ended July 31, 2000 and 1999, respectively.

AUDIT RELATED FEES

Eisner LLP did not render any professional services to DG Liquidation,
Inc. involving "Audit Related Fees" other than as set forth in the preceding
paragraph.

TAX FEES

Eisner LLP did not render any professional services to DG Liquidation,
Inc. during fiscal years ended July 31, 2000 and 1999 for tax compliance, tax
advice or tax planning services.

ALL OTHER FEES

The aggregate fees billed by Eisner LLP for all other services rendered to
DG Liquidation, Inc. during the fiscal years ended July 31, 2000 and July 31,
1999, other than audit services, was approximately $5,000 each year for tax
return preparation.

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT

Schedules and Reports on Form 8-K

(a)(1) Financial Statements.

The following are filed with this report:

(i) Independent Auditors' Report.
(ii) Statement of Net Assets (liquidation basis) at July 31, 2000 and
1999.
(iii) Statement of Changes in Net Assets (liquidation basis)
for the years ended July 31, 2000, 1999 and 1998.
(iv) Notes to the Financial Statements.
(a)(2) Financial Statement Schedules:

None
(a)(3) Exhibits.

The following exhibits are filed as part of this report:

Exhibit Number Exhibit

31 Rule 13(a)-15(e)/15(d)-15(e)Certifications.

32 Section 1350 Certifications

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the last quarter of fiscal 2000.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this amended Section 13 or 15(d) report to be executed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Neptune,
State of New Jersey, on July 14, 2004

DG LIQUIDATION, INC.

By: /s/ Harold Blumenkrantz
------------------------------
Harold Blumenkrantz, President
and Chief Executive Officer

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

/s/ Harold Blumenkrantz President, Chief Executive July 14, 2004
- -----------------------
Harold Blumenkrantz Officer and Director

/s/ Gerald Koblin Secretary, Treasurer, July 14, 2004
- -----------------------
Gerald Koblin Principal Financial and
Accounting Officer and Director

/s/ Alfred Hertel Chairman of the Board July 14, 2004
- -----------------------
Alfred Hertel and Director

/s/ Michael Katz Vice President and Director July 14, 2004
- -----------------------
Michael Katz

/s/ Paul Emanuel Director July 14, 2004
- -----------------------
Paul Emanuel

/s/ Ernest Wyre Director July 14, 2004
- -----------------------
Ernest Wyre

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
DG Liquidation, Inc.

We have audited the accompanying statements of net assets (liquidation basis) of
DG Liquidation, Inc. as of July 31, 2000 and 1999 and the related statements of
changes in net assets (liquidation basis) for each of the three years in the
period ended July 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

As described in Note A to the financial statements, the stockholders of the
Company approved a plan of liquidation on June 27, 1997 and on July 3, 1997, the
Company sold substantially all its net assets and commenced liquidation
proceedings. As a result, the Company has changed its basis of accounting for
periods subsequent to June 30, 1997 from the going concern basis to a
liquidation basis.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets in liquidation of DG Liquidation, Inc. as
of July 31, 2000 and 1999 and the changes in its net assets in liquidation for
each of the three years in the period ended July 31, 2000, in conformity with
accounting principles generally accepted in the United States of America applied
on the liquidation basis as described in the preceding paragraph.

Eisner LLP

New York, New York
November 29, 2000 except for Notes D, E[3], A[2] and E[1] as to which the dates
are December 14, 2001, August 12, 2002, October 9, 2002 and May 16, 2003,
respectively.

F-1

DG LIQUIDATION, INC.
(formerly known as Drug Guild Distributors, Inc.)

STATEMENTS OF NET ASSETS
(liquidation basis)
(in thousands, except share and per share amounts)

JULY 31,
--------
2000 1999
------- -------
ASSETS

Cash $ 9,753 $ 4,329
Notes receivable, including accrued interest of $32 6,105
Deferred tax asset 1,974 361
Other assets 60 134
------- -------
11,787 10,929

LIABILITIES
Estimated liquidation expenses 746 1,263
Income taxes payable 1,457
Accrued expenses 129 71
Liquidating distributions payable 277 320
Deferred gain related to proceeds from letter of credit 4,188
------- -------
6,797 1,654
------- -------
Commitments and contingencies (Note E)

NET ASSETS IN LIQUIDATION $ 4,990 $ 9,275
======= =======

NET ASSETS IN LIQUIDATION PER COMMON SHARE (BASED ON 9,275,000
AND 9,309,000 COMMON SHARES OUTSTANDING IN 2000 AND
1999, RESPECTIVELY) $ 0.54 $ 1.00

See notes to financial statements

F-2

DG LIQUIDATION, INC.
(formerly known as Drug Guild Distributors, Inc.)

STATEMENTS OF CHANGES IN NET ASSETS
(liquidation basis)
(in thousands except per share amounts)

YEAR ENDED JULY 31,
--------------------------------
2000 1999 1998
-------- -------- --------

Net assets in liquidation - beginning of year $ 9,275 $ 13,258 $ 12,659
-------- -------- --------

Interest and other income 486 663 1,319

Decrease (increase) in estimated costs to be
incurred during period of liquidation 26 (11) (293)

Loss on write-off of note receivable (880)

Recovery of receivables previously written off 323 966

Other adjustments to net assets (54) (133) (32)
-------- -------- --------

(Decrease) increase in net assets before income taxes
and items shown below (99) 1,485 994

Provision for income taxes related to change
in net assets, including a deferred tax (provision)
benefit of $1,613 in 2000,$(148) in 1999 and
$382 in 1998 22 (476) (395)
-------- -------- --------

(Decrease) increase in net assets before items shown below (77) 1,009 599

Common stock acquired in settlement of receivables (34) (338)

Liquidating distributions to common stockholders ($0.45 per
share in 2000, $0.50 per share in 1999) (4,174) (4,654)
-------- -------- --------

(Decrease) increase in net assets (4,285) (3,983) 599
-------- -------- --------

NET ASSETS IN LIQUIDATION - END OF YEAR $ 4,990 $ 9,275 $ 13,258
======== ======== ========

See notes to financial statements

F-3

DG LIQUIDATION, INC.
(formerly known as Drug Guild Distributors, Inc.)

NOTES TO FINANCIAL STATEMENTS

NOTE A - PLAN OF LIQUIDATION, SALE OF ASSETS AND BASIS OF PRESENTATION

[1] PLAN OF LIQUIDATION:

DG Liquidation, Inc. (the "Company"), formerly known as Drug Guild
Distributors, Inc., was a wholesale distributor of a wide variety of
products to drug stores and health and beauty aid stores located primarily
in the State of New Jersey, the greater New York City metropolitan area
and Connecticut.

A Plan of Complete Liquidation (the "Plan") was approved by the holders of
a majority of the Company's outstanding shares of common stock on June 27,
1997. The Plan provided for: (1) the sale of the Company's operating
assets, (2) the payment of or provision for all of the Company's remaining
liabilities and obligations, (3) payment of $100 per share to the holders
of preferred stock prior to any amounts distributed to the common
stockholders and (4) the dissolution of the Company.

[2] SALE OF ASSETS:

On July 3, 1997, the Company sold substantially all of its operating
assets, subject to substantially all of the Company's liabilities, to
Neuman Health Services, Inc. and Neuman Distributors, Inc. (collectively
"Neuman"), wholesale distributors of pharmaceuticals and health and beauty
products, for $4,000,000 in cash paid on closing, an unsecured $1,000,000
noninterest bearing promissory note due in August 2001 and the remainder
in an adjustable value promissory note, recorded at $10,646,000, payable
in quarterly installments over four years and collateralized by a standby
letter of credit. The $1,000,000 promissory note was recorded at its
present value ($880,000 at July 31, 1999) using an imputed interest rate
of 6.69%. The adjustable value note provided for interest at a rate (6.97%
at July 31, 1999) determined quarterly equal to the higher of 1% plus the
180-day London Interbank Offered Rate or the rate specified for U.S.
Treasury Notes with maturity equal to the remaining term of the note, but
no lower than the Federal rate as disseminated by the Internal Revenue
Service from time to time. During the year ended July 31, 1998, pursuant
to the terms of the note, interest was paid quarterly based on the
principal payments received by the Company. Subsequent thereto, interest
was payable quarterly based on the unpaid principal balance of the note.
During the period August 1, 1999 to May 22, 2000 and the years ended July
31, 1999 and 1998, the Company received from Neuman quarterly principal
payments on the note aggregating $2,400,000, $3,452,000 and $2,000,000,
respectively, plus interest payments of $173,000, $1,060,000 and $82,000,
respectively.

In connection with the sale, the Company also received an option in favor
of the Company's stockholders to purchase under certain conditions, at 85%
of the per share offering price, an aggregate of 10% of Neuman shares to
be made available in a public offering in the event Neuman filed a
registration statement with the Securities and Exchange Commission prior
to July 3, 2001 in connection with an initial public offering. No value
had been ascribed to the option due to its contingent nature. Such option
expired unexercised.

The asset purchase agreement provided that the purchase price would be
subject to adjustment based upon a final valuation of the assets and
liabilities sold. In addition, the terms of sale provided that Neuman had
one year from the date of purchase to return to the Company any accounts
receivable balances which had not then been collected and reduce the
amount of the adjustable note by such uncollected balances (see Note
E[2]). The gain recognized on the sale was $3,683,000.

F-4

DG LIQUIDATION, INC.
(formerly known as Drug Guild Distributors, Inc.)

NOTES TO FINANCIAL STATEMENTS

NOTE A - PLAN OF LIQUIDATION, SALE OF ASSETS AND BASIS OF PRESENTATION
(CONTINUED)

[2] SALE OF ASSETS: (CONTINUED)

On April 6, 2000, Neuman filed a petition for reorganization under Chapter
11 of the Bankruptcy Code. As a result thereof during the year ended July
31, 2000, the Company wrote off the $880,000 carrying value of the
unsecured promissory note due from Neuman. In addition, on May 22, 2000
the Company made a drawing on the standby letter of credit and on May 25,
2000 received $7,084,000 of which $2,794,000 represented the carrying
value of the adjustable value note, $102,000 represented accrued interest
thereon through such date and $4,188,000 represented additional proceeds.

Within the ninety-day period prior to the filing of the petition, the
Company received $885,000 from Neuman in connection with the adjustable
value note. Subsequent to the filing, the Chapter 11 Trustee filed a
complaint against the Company in the Bankruptcy Court to recover such
alleged preference payment. The Company maintained that it had defenses
against the Trustee's claims and filed a motion for summary judgment. In
addition, on October 20, 2000, the Company filed a general unsecured claim
against the bankruptcy estate which reflected that $7,657,000 was due from
Neuman on the adjustable value note at March 31, 2000, including $576,000
of additional accrued interest through such date based on the increased
amount of the note, prior to the receipt of the $7,084,000 letter of
credit proceeds, leaving a balance of $573,000 due the Company. In
addition, the Company filed a claim for $1,000,000 in connection with the
unsecured note.

On September 24, 2002, a settlement agreement, which was approved by the
Bankruptcy Court on October 9, 2002, was entered into pursuant to which
the Company and the Trustee released each other from all pre-petition or
post-petition claims, except that the Company is entitled to receive
distribution from the bankruptcy estate as to its unsecured claims
referred to above which were allowed in full.

In connection with the settlement, in fiscal 2003, the Company will record
an additional gain on sale of $2,513,000 net of income taxes of $1,675,000
($0.27 per common share).

[3] BASIS OF PRESENTATION:

Subsequent to June 30, 1997, the Company adopted the liquidation basis of
accounting. Accordingly, the net assets of the Company at July 31, 2000
and 1999 are stated at liquidation value whereby assets are stated at
their estimated net realizable values and liabilities, which include
estimated liquidation expenses to be incurred through the date of final
dissolution of the Company, are stated at their anticipated settlement
amounts.

The valuation of assets and liabilities necessarily requires estimates and
assumptions. Net assets and future liquidating distributions will be
subject to uncertainties including the ultimate amount of liquidation
expense and the amount, if any, ultimately collected on unsecured claims
against the bankruptcy estate.

F-5

DG LIQUIDATION, INC.
(formerly known as Drug Guild Distributors, Inc.)

NOTES TO FINANCIAL STATEMENTS

NOTE B - ESTIMATED LIQUIDATION EXPENSES

Estimated liquidation expenses, consisting of legal and other professional fees,
consulting fees and insurance expense, to be incurred through the date of final
dissolution of the Company have been accrued in the accompanying financial
statements. Analysis of transactions reflected in the liability for estimated
liquidation expenses during fiscal 1998, 1999 and 2000 follows:

Balance at July 31, 1997 $1,924
Liquidation expenses paid during the year ended July (411)
31, 1998
Increase in estimated liquidation expenses to be 293
incurred ------

Balance at July 31, 1998 1,806
Liquidation expenses paid during the year ended July (554)
31, 1999
Increase in estimated liquidation expenses to be 11
incurred ------

Balance at July 31, 1999 1,263
Liquidation expenses paid during the year ended (491)
July 31, 2000
Decrease in estimated liquidation expenses to be (26)
incurred ------

Balance at July 31, 2000 $ 746
======

NOTE C - INCOME TAXES

The Company accounts for income taxes utilizing the asset and liability approach
requiring the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the basis of
assets and liabilities for financial reporting purposes and tax purposes.

The tax gain of $624,000 on sale of the net assets to Neuman was recognized on
the installment basis for tax purposes; accordingly, the tax basis of the
adjustable value note was reduced by the unrecognized gain and a deferred tax
liability had been recorded at July 31, 1999 for the difference between the
carrying amount of the note and its tax basis.

The net deferred tax asset at July 31, 2000 and 1999 relates to the following:

2000 1999
---------- ----------
Estimated liquidation expenses $ 299,000 $ 429,000
Deferred gain related to proceeds from letter
of credit 1,675,000

Difference between financial
reporting and tax basis of note receivable (68,000)
---------- ----------
$1,974,000 $ 361,000
========== ==========

NOTE D - OFFICER'S LIFE INSURANCE

At July 31, 2000 the Company was the owner and beneficiary of insurance policies
of $1,600,000, on the life of its former president. At July 31, 2000 and 1999,
the cash surrender value of these policies was $194,000 and $201,000,
respectively. At such dates, the Company had outstanding loans aggregating
$152,000 against the cash surrender value at an annual interest rate of 7.57%.
The cash surrender value, net of borrowings, is included in other assets. In
October 2001, the Company's former president died and on December 14, 2001, the
Company received approximately $1,599,000, net of outstanding loans of $157,000
from the insurance company in settlement of the policies resulting in a gain of
$1,511,000 in fiscal 2002.

F-6

DG LIQUIDATION, INC.
(formerly known as Drug Guild Distributors, Inc.)

NOTES TO FINANCIAL STATEMENTS

NOTE E - COMMITMENT AND CONTINGENCIES

[1] On March 3, 1998, the Company filed a complaint in Supreme Court of the
State of New York, in New York County, against its former auditors,
Anchin, Block & Anchin, LLP (the "Anchin Firm") seeking to recover damages
for professional malpractice, breach of fiduciary duty and breach of
contract exceeding $16,000,000 in connection with an inventory
defalcation. The Anchin Firm had previously acted in the capacities of
financial advisors, auditors and accountants for the Company for a
continuous period beginning in 1977 and ending on July 2, 1996.

The damages sought from the Anchin Firm relate to the loss of inventory by
reason of the defalcations taking place during the period from October
1992 through May 1996, a reduction in the consideration received in the
asset sale transaction with Neuman and restitution of approximately
$900,000 of fees paid to the Anchin Firm and various other fees and
expenses.

On April 30, 1998, the Anchin Firm filed an answer denying the material
allegations, and commenced a third-party lawsuit against members of the
Company's Executive Committee during the period of January 1990 through
May 31, 1996, and the Company's corporate attorneys, alleging that if the
Company is successful in its claims against the Anchin Firm, then these
third-party defendants, by reason of their alleged failure to reasonably
perform their respective fiduciary duties, should be held liable for the
losses to the Company for which the Anchin Firm is sought to be held
responsible. On October 27, 1998, the court dismissed the third-party
claims against the Company's corporate attorneys and the Anchin Firm
withdrew its claims against the former members of the Executive Committee,
thereby discontinuing the third-party lawsuit.

The Company's claims against the Anchin Firm were tried before a jury in
Supreme Court, New York County in October and November 2002, which
resulted in a verdict in favor of the Company. Judgment in favor of the
Company and against the Anchin Firm was entered in Supreme Court, New York
County on February 4, 2003 in the aggregate sum of approximately $290,000.
The judgment was paid in full on May 16, 2003 in the total sum of
$297,000, including interest of $7,000. Net assets will be increased by
the amount of the judgment reduced by related legal and other professional
fees during the year ended July 31, 2003.

[2] On or about July 1, 1998, the buyer of the Company's assets (Neuman)
proposed to reassign to the Company uncollected accounts receivable of
four customers which accounted for approximately $1,486,000 of accounts
receivable purchased from the Company in July 1997 (see Note A[2]). The
Company had assigned those accounts receivable to Neuman together with
related security agreements. After the closing of the asset purchase
Neuman made additional sales to those four customers and extended
additional credit to them. Neuman also incurred legal fees and interest in
seeking to collect both the pre-closing and post-closing accounts
receivable with the result that Neuman asserted that it has made a
post-closing extension of credit to the four customers totaling
approximately $2,336,000. Neuman has told the Company that it should
accept reassignment of the accounts receivable of the four customers in an
aggregate total of $1,486,000 without reassignment of the security
agreements, with a corresponding reduction in the adjustable value note
receivable.

F-7

DG LIQUIDATION, INC.
(formerly known as Drug Guild Distributors, Inc.)

NOTES TO FINANCIAL STATEMENTS

NOTE E - COMMITMENT AND CONTINGENCIES (CONTINUED)

[2] (CONTINUED)

The Company has taken the position that the security agreements must
follow the accounts receivable which they secure and that it is therefore
not obligated to accept reassignment of the accounts receivable, and
therefore a reduction in the face amount of the note, unless it also
receives the security agreements applicable to those accounts receivable.
The Company has told Neuman that pursuant to the asset purchase agreement,
the oldest accounts receivable must be paid in full before the newer
accounts receivable are paid and that it is therefore entitled, under the
security agreements which must be reassigned together with the accounts
receivable, to receive the full amount of the pre-acquisition balance due
of $1,486,000 out of a pending payment by a major pharmaceutical retail
chain to Neuman of approximately $2,500,000.

As described in Note A[2], a settlement agreement was approved by the
Bankruptcy Court on October 9, 2002, pursuant to which the Trustee in
Neuman's bankruptcy and the Company released each other from all
pre-petition or post-petition claims and, accordingly, none of the
accounts receivable were reassigned to the Company.

[3] A customer of the Company initiated a lawsuit in February 1997 in the
United States District Court for the District of New Jersey, alleging that
the Company has conspired with co-defendant wholesalers to deny credit to
the plaintiff that is allegedly due to it, amounting to an alleged "group
boycott" in violation of the federal Sherman Anti-trust Act and New
Jersey's Anti-trust Act, as well as a breach of an implied covenant of
good faith and fair dealing and tortuous interference with the plaintiff's
contracts.

The plaintiff asked for preliminary and permanent injunctions as well as a
money judgment against each defendant for what are described as actual,
compensatory, punitive and trebled damages, attorney's fees and costs and
such other relief as the court may deem appropriate. The court did not
enter any preliminary injunction against any defendant. The Company filed
an answer denying all of the material allegations of the complaint,
setting forth various affirmative defenses, alleging a counterclaim
against the plaintiff for the money it owes the Company, approximately
$48,000, and asking for a dismissal of the complaint.

The defendants, including the Company, have made motions for summary
judgment seeking dismissal of all of the plaintiff's claims, which are
pending before the court. The Company has also asked for summary judgment
on its counterclaim. On August 12, 2002, these claims were dismissed by
the court.

[4] The Company entered into consulting agreements with its President, a
Director and its former Vice President - Finance for the purpose of
implementing the plan of liquidation. The agreement with the Company's
President provides for his part-time employment on a month-to-month basis
for a fee of $5,000 per month plus expenses. The consulting fee for the
Director was $1,000 per month and ended in April 2002. The agreement with
the former Vice President - Finance commenced on June 4, 1998 and provides
for a monthly consulting fee of $11,400 (beginning in January 1999) plus
expenses, and a severance payment of $34,000. This agreement terminated in
August 1999 and he was engaged thereafter on a month-to-month basis for a
fee of $2,750 through April 2002.

[5] In connection with the sale of the Company's assets on July 3, 1997, the
purchaser assumed the Company's obligation under existing leases and the
landlord released the Company from liability for future lease payments.
The Company, subsequent to the sale, occupies office space on a
month-to-month basis in the offices of its President, at an annual cost
including telephone service, photocopies and postage of $1,200.

[6] The Company has been a party to several other pending legal actions,
principally motor vehicle accidents involving vehicles owned or operated
by the Company, and other claims including one for product liability for
which the Company is covered by its insurance. The Company believes the
results of these various lawsuits and claims will not materially affect
the financial position of the Company.

F-8

DG LIQUIDATION, INC.
(formerly known as Drug Guild Distributors, Inc.)

NOTES TO FINANCIAL STATEMENTS

NOTE F - REDEEMABLE PREFERRED STOCK

Preferred stockholders were entitled to an 8% cumulative dividend based on par
value, payable in preferred stock. Upon liquidation of the Company, holders of
the preferred stock were entitled to a payment of $100 per share before any
amounts are paid to holders of common stock. The preferred stock was not
entitled to vote and did not have any preemptive or conversion rights. During
the year ended July 31, 1998, 20,690 shares of preferred stock were redeemed for
$2,069,000 and subsequent thereto through December 28, 1998, the remaining 1,930
outstanding shares of preferred stock were redeemed for $193,000.

NOTE G - RECOVERY OF RECEIVABLES

The stockholders constituted a substantial portion of the Company's customers
and all stockholders had assigned their shares to the Company as additional
collateral for their respective accounts receivable balances. The transfer of
shares is restricted by agreement, and any stockholder who wishes to sell his
shares must first offer them to the Company at cost (as defined) or par value
with respect to shares issued as a stock dividend. During the years ended July
31, 2000 and 1999, respectively, stockholders returned 34,000 and 243,000 shares
of common stock to the Company in settlement of previously written off
receivable balances. The common stock was valued at approximately $34,000 in
2000 and $338,000 in 1999 based on the per share value of net assets in
liquidation.