10-Q 1 a2035207z10-q.txt FORM 10-Q -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended NOVEMBER 30, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transaction period from ____ to ____ Commission file number 0-15671 UNICOMP, INC. (Exact Name of Registrant as Specified in its Charter) COLORADO 84-1023666 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 1850 PARKWAY PLACE, SUITE 925 MARIETTA, GA 30067 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (770) 424-3684 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 X No --- --- There were 8,154,970 Common Shares outstanding as of November 30, 2000. -------------------------------------------------------------------------------- UNICOMP, INC. Index

PAGE PART I. ~~FINANACIAL~~FINANCIAL INFORMATION ~~PAGE~~ Item 1. Financial Statements Consolidated Balance Sheets as of February 29, 2000 and ~~August~~November 3130, 2000 3 Consolidated Statements of Operations for the three months ended ~~August~~November 3130, 1999 and 2000 5 Consolidated Statements of Operations for the ~~six~~nine months ended ~~August~~November 3130, 1999 and 2000 7 Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~August~~November 3130, 1999 and 2000 9 Notes to the Consolidated Financial Statements 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1617 Item 3. Quantitative and Qualitative Disclosures About Market Risks 33 PART II. OTHER INFORMATION Item 1. Legal Proceedings 34 Item 2. Changes in Securities and Use of Proceeds 34 Item 6. Exhibits and Reports on Form 8-K 36 Signatures 3736 Exhibits 3837

2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ----------------------------------- UNICOMP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS) ASSETS

(AUDITED) (UNAUDITED) FEBRUARY 29, ~~AUGUST~~NOVEMBER ~~31,~~30 2000 2000 --------------- --------------- (In Thousands) Current assets: Cash and cash equivalents ........................................................... $ 3,288 $ ~~392~~823 Accounts and other receivables: Trade, net of allowance of $~~322~~190 and ~~392~~$199 .....................................~~...~~ 52,~~185~~866 41,~~432~~999 Other receivables ................................................................ 333 ~~231~~192 Inventory ........................................................................... 3,~~429~~405 3,~~736~~556 Prepaid expenses and Other .......................................................... ~~880~~669 ~~655~~322 --------------- --------------- Total current assets ........................................................... 1310,~~115~~561 96,~~446~~892 --------------- --------------- Property and equipment, net ............................................................ 43,~~147~~808 3,~~805~~842 --------------- --------------- Other assets: Acquired and developed software, net of accumulated amortization of $81,~~974~~621 and $~~9,521~~ 667.......................................................................... 62,~~895~~173 61,~~486~~434 Goodwill and other intangibles, net of accumulated amortization of $~~1,138~~846 and $1,~~584~~ 185....................................................................... ~~3,892 3,446 Prepaid pension~~ .....~~...............................................................~~ ~~695~~3,392 ~~695~~2,957 Note receivable from officer/director .............................................. 525 ~~398~~462 Other ............................................................................... 629 ~~595~~632 Net assets of discontinued operations ............................................... ~~104~~7,426 0 --------------- --------------- Total other assets ............................................................. 1214,~~740~~145 115,~~620~~485 --------------- --------------- Total assets ................................................................... $30 28,~~002~~514 $24 16,~~871~~219 =============== ===============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 3 UNICOMP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS) LIABILITIES AND STOCKHOLDERS' EQUITY

(AUDITED) (UNAUDITED) FEBRUARY 29, ~~AUGUST~~NOVEMBER ~~31,~~30 2000 2000 --------------- --------------- Current liabilities: ~~Bank~~Accounts ~~Overdraft~~ payable............................................................. ~~$ 0 $ 0 Accounts payable~~ .~~..........................................................~~ 21,~~155~~990 32,~~624~~827 Accrued expenses .............................................................. ~~884~~756 1,~~834~~356 Deferred revenue .............................................................. ~~816~~358 ~~1,208~~644 Taxes payable ................................................................. ~~588~~235 ~~485~~112 Lines of credit ............................................................... 3,~~931~~547 43,~~173~~964 Other ......................................................................... 235 ~~610~~480 Current portion of notes payable .............................................. 561 ~~341~~343 --------------- --------------- Total current liabilities ................................................ 97,~~170~~682 129,~~275~~726 --------------- --------------- Long-term liabilities: Notes payable ................................................................. 2,664 2,~~481~~786 Deferred income taxes ......................................................... 525 525 Other long-term liabilities ................................................... 325 ~~838~~690 Net liabilities of discontinued operations .................................... 0 ~~723~~688 --------------- --------------- Total long-term liabilities .............................................. 3,514 4,~~567~~689 --------------- --------------- Total liabilities ........................................................ 1211,~~684~~196 1614,~~842~~415 --------------- --------------- Stockholders' equity: Preferred stock: $1 par value, authorized 5,000, 1 issued and outstanding at February 29, 2000 ......................................................... 1,045 0 Common stock: $.01 par value, 100,000 authorized 8,918 and 9,014 issued, respectively ............................................................... 89 90 Common stock issuable ......................................................... 210 405 Additional contributed capital ................................................ 17,920 16,765 Retained earnings (deficit) ................................................... 1,624 (411,~~985~~236) --------------- --------------- 20,888 126,~~275~~024 Less treasury stock ........................................................... (3,115) (3,~~413~~462) Cumulative translation adjustment ............................................. (455) (~~833~~758) --------------- --------------- Total stockholders' equity ............................................... 17,318 81,~~029~~804 --------------- --------------- Total liabilities and stockholders' equity ............................... $ 3028,~~002~~514 $ 2416,~~871~~219 =============== ===============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4 UNICOMP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED) THREE MONTHS ENDED ------------------------------------- ~~AUGUST~~NOVEMBER 3130, ~~AUGUST~~NOVEMBER 3130, 1999 2000 ------------------ ----------------- Revenue: Equipment ...................................................... $ 2,~~786~~979 $ 2,~~696~~179 Services ....................................................... 1,~~567~~035 ~~623~~486 Software ....................................................... 21,~~456~~752 ~~891~~638 ------------------ ----------------- Total revenue ............................................... 65,~~809~~766 43,~~210~~303 ------------------ ----------------- Cost of sales: Equipment ...................................................... 12,~~705~~038 1,~~893~~293 Services ....................................................... ~~196~~253 ~~131~~103 Software ....................................................... ~~556~~229 ~~327~~178 ------------------ ----------------- Total cost of sales ......................................... 2,~~457~~520 21,~~351~~574 ------------------ ----------------- Gross profit ...................................................... 43,~~352~~246 1,~~859~~729 ------------------ ----------------- ~~Reorganization~~Selling, ~~cost~~general and ~~asset~~administrative ~~impairment~~expenses before reorganization cost .......................................................... 3,037 1,876 ------------------ ~~2,406~~----------------- ~~Selling,~~Operating ~~general~~income ~~and~~(loss) ~~administrative~~before ~~expenses~~reorganization cost................ ~~4,015~~209 ~~4,302~~(147) ------------------ ----------------- ~~Operating~~Reorganization ~~loss~~cost .............................................. ~~337~~- 54 ------------------ ----------------- Operating income (~~4,849~~loss)........................................... 209 (201) ------------------ ----------------- Other income (expense): Other, net ..................................................... 224 305 Interest, net .................................................. (~~136~~121) (~~132~~97) ------------------ ----------------- Total other income (expense) ................................ (~~114~~117) (~~102~~92) ------------------ ----------------- Income (loss) from continuing operations before provision for Income taxes .................................................. ~~223~~92 (~~4,951~~293) ------------------ ----------------- Provision (benefit) for income taxes ..............................~~....~~ (~~136~~200) 0 ------------------ ----------------- Net income (loss) from continuing operations ...................... $ ~~359~~292 $ (~~4,951~~293) Discontinued operations: Income (loss)from discontinued operations................... 310 (4,160) Loss on disposal............................................ ~~197~~- (1,798) -- ---------------- ----------------- Net income (loss) ................................................ $ ~~556~~602 $ (46,~~951~~251) ================== =================

5 UNICOMP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) Net income (loss) ................................................ $ 602 $ (6,251) =============== ================= Preferred stock dividends and accretion........................... $ 37 $ 0 =============== ================= Income(loss) available to common shareholders..................... $ 565 $ (6,251) =============== ================= Basic earnings per common share: Income(loss) from continuing operations........................... $ .04 $ (.03) Discontinued operations: Income(loss) from operations............................... $ .04 (.51) Loss on disposal........................................... - (.22) --------------- ----------------- Net income (loss) ................................................ .08 (.76) =============== ================= Diluted earnings per common share: Income(loss) from continuing operations........................... $ .03 $ (.03) Discontinued operations: Income (loss) from operations............................... .03 (.51) Loss on disposal............................................. - (.22) --------------- ----------------- Net income(loss) ................................................. $ .06 $ (.76) =============== ================= Weighted average shares........................................... 7,456 8,186 =============== ================= Weighted average shares assuming dilution......................... 8,837 8,186 =============== =================

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 6 UNICOMP, INC. AND UNICOMP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED) ~~SIX~~NINE MONTHS ENDED ------------------------------------- ~~AUGUST~~NOVEMBER 3130, ~~AUGUST~~NOVEMBER 3130, 1999 2000 ------------------ ----------------- Revenue: Equipment ...................................................... $ 58,~~789~~768 $ 68,~~056~~235 Services ....................................................... 32,~~265~~686 1,~~546~~446 Software ....................................................... 4,~~341~~408 21,~~013~~730 ------------------ ----------------- Total revenue ............................................... 1315,~~395~~862 911,~~615~~411 ------------------ ----------------- Cost of sales: Equipment ...................................................... 35,~~589~~627 45,~~219~~512 Services ....................................................... ~~546~~647 ~~198~~290 Software ....................................................... ~~1,256~~582 ~~809~~438 ------------------ ----------------- Total cost of sales ......................................... 56,~~391~~856 56,~~226~~240 ------------------ ----------------- Gross profit ...................................................... 89,~~004~~006 45,~~389~~171 ------------------ ----------------- ~~Reorganization~~Selling, general and administrative expenses before reorganization cost and asset impairment ...................................... 8,475 8,065 ------------------ ~~2,406~~----------------- ~~Selling,~~Operating ~~general~~income ~~and~~(loss) ~~administrative~~before ~~expenses~~reorganization cost and asset impairment..................................................... 7531 (2,~~673~~894) 8------------------ ----------------- Reorganization Cost............................................... - 1,~~340~~388 Asset Impairment.................................................. - 945 ------------------ ----------------- Operating ~~profit~~income (loss) .......................................... ~~331~~531 (65,~~357~~227) ------------------ ----------------- Other income (expense): Other, net ..................................................... 2339 1419 Interest, net .................................................. (~~240~~355) (~~266~~356) ------------------ ----------------- Total other income (expense) ................................ (~~217~~316) (~~252~~337) ------------------ ----------------- Income (loss) from continuing operations before provision for Income taxes .................................................. ~~114~~215 (65,~~609~~564) ------------------ ----------------- Provision for income taxes ........................................ (~~240~~440) 0 ------------------ ----------------- Net income (loss) from continuing operations ...................... $ ~~354~~655 $ (65,~~609~~564) Discontinued operations: Income (loss) from ~~discontinued~~ operations................................ 733 (5,498) Loss on disposal............................................. ~~430~~- (1,798) -- ---------------- ----------------- Net income (loss) ................................................ $ ~~784~~1,388 $ (612,~~609~~860) ================== =================

7 UNICOMP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) Net income (loss) ................................................ $ 1,388 $ (12,860) =============== ================= Preferred stock dividends and accretion........................... $ 105 $ 0 =============== ================= Income(loss) available to common shareholders..................... $ 1,283 $ (12,860) =============== ================= Basic earnings per common share: Income(loss) from continuing operations...................... $ .07 $ (.68) Discontinued operations: Income (loss) from operations................................ .10 (.67) Loss on disposal............................................. - (.22) --------------- ----------------- Net income (loss) ................................................ $ .17 $ (1.57) =============== ================= Diluted earnings per common share: Income (loss) from continuing operations..................... $ .06 $ (.68) Discontinued operations: Income (loss) from operations .............................. .08 (.67) Loss on disposal............................................ - (.22) =============== ================= Net income (loss) ................................................ $ .14 $ (1.57) =============== ================= Weighted average shares........................................... 7,485 8,209 =============== ================= Weighted average shares assuming dilution......................... 8,940 8,209 =============== =================

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 8 UNICOMP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) ~~SIX~~NINE MONTHS ENDED ----------------------------------------- ~~AUGUST~~NOVEMBER 3130, ~~AUGUST~~NOVEMBER 3130, 1999 2000 ------------------ ------------------ (In Thousands) Net cash provided (used) by operating activities: Net income (loss) from continuing operations ................. $ ~~354~~655 $ (65,~~609~~564) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization ............................. 21,~~091~~357 1,~~335~~108 Write down of acquired and developed software ............. 0 ~~944~~945 Allowance for doubtful accounts ........................... 448 ~~327~~122 Gain on disposition of joint venture ...................... (3640) (8) Deferred income taxes.................................... (120) 0 Changes in assets and liabilities: Accounts and other receivables .......................... (601,983) ~~250~~784 Inventory ............................................... ~~920~~369 (~~334~~184) Prepaid expenses ........................................ (~~835~~903) ~~183~~294 Accounts payable ........................................ ~~(1,086)~~445 ~~1,502~~862 Accrued expenses ........................................ 74(118) ~~1,386~~668 Deferred revenue ........................................ (~~259~~224) ~~446~~308 Taxes payable ........................................... (~~169~~174) (58102) Other ................................................... (~~115~~145) ~~662~~605 ------------------ ------------------ Cash ~~provided (~~used) by continuing operations ................... ~~883 26 Income from discontinued operations~~ .~~......................~~ ~~430~~(833) --(162) Cash provided ~~(used)~~ by discontinued operations .............. 231,482 ~~827~~13 ------------------ ------------------ Net cash provided (used) by operating activities ................................... ~~1,336~~649 ~~853~~(149) Cash flow from investing activities: ~~Capital~~Cash ~~expenditures~~received from sale of discontinued operations........ - 1,000 Capital expenditures........................................ (~~283~~302) (96576) Purchase of acquired company ................................. (259) (75) Payment received on note for sale of joint venture ........... 8595 18 Proceeds from disposition of joint venture ................... 10 0 Acquired and developed software .............................. (~~1,077~~50) (~~1,227~~478) ------------------ ------------------ Net cash used by investing activities ............... (~~1,524~~506) (~~1,380~~111) ------------------ ------------------ Cash flow from financing activities: Common stock issued and to be issued, net .................~~...~~ 0 348 Redemption of preferred stock .............................~~...~~ 0 (2,353) ~~Bank overdraft ............................................... 0 0~~ Payments on borrowings ....................................... (~~647~~1,848) (~~959~~1,160) Proceeds from borrowing ...................................... ~~703~~1,365 ~~825~~1,441 Payment of preferred stock dividends ......................... (68105) 0 Receivables from related parties ............................. 0 ~~127~~63 (343) Purchase of Treasury Stock ................................... (~~536~~736) ~~(298)~~ ------------------ ------------------ Net cash ~~provided (~~used) by financing activities ............... (~~548~~1,324) (2,~~310~~004) ------------------ ------------------ Net ~~increase (~~decrease) in cash ........................................... (~~736~~1,181) (2,~~837~~264) Effect of exchange rate changes on cash ......................... (5285) (59201) ~~-------- --------~~ Cash and cash equivalents at beginning of period ................ 1,400 3,288 ------------------ ------------------ Cash and cash equivalents at end of period ...................... $ ~~612~~134 $ ~~392~~823 ================== ================== Cash paid for interest .......................................... $ ~~246~~375 94 ================== ================== Cash paid for taxes ............................................. $ 56299 58 ================== ==================

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 9 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of UniComp, Inc. and its subsidiaries (the "Company"). All material intercompany balances and transactions have been eliminated in consolidation. The preparation of financial statements requires management to make estimates and assumptions underlying the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Changes in the status of certain matters, facts or circumstances underlying these estimates could result in material changes and actual results could differ from these estimates. It is suggested that these quarterly consolidated financial statements and notes be read in conjunction with the financial statements and notes included in the Annual Report on Form 10-K for the fiscal year ended February 29, 2000. Certain amounts previously presented in the consolidated financial statements have been reclassified to conform to current presentation. 2. BASIC AND DILUTED EARNINGS PER SHARE The calculation and presentation of earnings per share are in accordance with SFAS No. 128 "Earnings Per Share." Basic earnings per share are based on the weighted average number of shares outstanding. Diluted earnings per share are based on the weighted average number of shares outstanding and the dilutive effect of the stock options and warrants outstanding (using the treasury stock method) and the conversion of preferred stock (using the if-converted method). For the Company, the numerator is the same for both basic and diluted EPS calculations. The following is a reconciliation of the denominator used in the calculation (in thousands):

THREE MONTHS ~~SIX~~NINE MONTHS ENDED ~~AUGUST~~NOVEMBER 3130 ENDED ~~AUGUST~~NOVEMBER 3130 -------------------- ------------------ 2000 1999 2000 1999 ----- ----- ----- ----- Weighted average shares 8,~~202~~186 7,~~495~~456 8,~~220~~209 7,~~503~~485 Dilutive effect of common stock options and Warrants 0 1,~~255~~381 0 1,~~180~~455 ----- ----- ----- ----- Weighted average shares assuming dilution 8,~~202~~186 8,~~750~~837 8,~~220~~209 8,~~683~~940 ===== ===== ===== =====

Options and warrants to purchase 502,127 shares of common stock at a weighted average price of $6.57 per share for the nine months ended November 30, 1999 were outstanding but were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price for the Company's common stock for the period. All of the options and warrants outstanding for the three and nine months ended November 30, 2000 were excluded from the calculation of diluted earnings per share due to the net loss for the nine month period. 3. BUSINESS COMBINATIONS ACQUISITION OF CONTINUUM TECHNOLOGY CORPORATION In January 1999, the Company acquired a $.6 million note receivable from Continuum Technology Corporation ("Continuum"). Consideration consisted of $.3 million in cash and accounts receivable of $.4 million. In March 1999, the Company purchased 97.5% of Continuum's outstanding common stock. Consideration consisted of $259,361 in cash, 8% notes payable aggregating $572,128 and 10 200,000 shares of the Company's common stock. The remaining 2.5% of Continuum's outstanding common stock was purchased in February, 2000 for $17,800 in cash and 18,953 shares of the Company's common stock. Continuum, headquartered in Fletcher, North Carolina, is involved in the design, manufacturing, marketing, and servicing of a complete line of hardware and software for customer activated terminals used in a retail setting. The acquisition has been accounted for as a purchase, and accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The results of operations have been included from March 1, 1999, the effective date of the acquisition. The excess consideration above the fair value of net assets acquired of approximately $2.0 million has been recorded in goodwill. DISPOSITION OF SHOP WHILE YOU WAIT, INC. In June 1998, the Company contributed accounts receivable of $.5 million for a 67% ownership in a newly formed entity engaged in retail electronic commerce. In April 1999, the Company sold its ownership percentage to the minority shareholder for a $.7 million note receivable bearing interest at 8.5%. The note is receivable in monthly installments of $5,000-$10,000 per month with a final payment of $240,000 due in August 2003. The note is secured by the assets of the venture and the personal guarantee and pledged assets of the purchaser. The gain of $.3 million on the sale will be recognized as cash is received. DISPOSITION OF UNIBOL LTD Effective as of November 8, 2000 (the "Closing Date"), UniComp, Inc. (the "Company"), through its wholly-owned subsidiary, UniComp Computing Group Limited, sold all the issued and outstanding shares of capital stock (the "Shares") of the Company's Northern Ireland subsidiary, Unibol Ltd ("Unibol UK"), to California Software Corporation (the "Sale"). Unibol UK develops, markets, and sells IBM Midrange migration software. The Sale was consummated in accordance with the terms of that certain Stock Purchase Agreement between Unibol Ltd, ICS Computing Group Limited, UniComp, Inc. and California Software corporation ("CSC"), dated effective as of November 8, 2000, as amended on November 10, 2000 (the "Sale Agreement"). In consideration of the Sale, CSC ( i ) paid $1,000,000 at closing in cash to UniComp, Inc. ( ii ) an additional $500,000, in cash is payable to UniComp, Inc. in equal monthly installments over four months with each installment payment due on or before the first of each month beginning with the second month after that in which the Closing Date falls (e.g., if the Closing Date is November 8, 2000, then the first installment is due on or before December 1, 2000), and ( iii ) $1,500,000 is payable to UniComp, Inc. in CSC common stock on the six month anniversary of the Closing Date. In accounting for the disposition, the Company accrued reserves for the $500,000 cash and $1,500,000 stock receivable as well as an additional $2.3 million owed to the Company and its subsidiaries by Unibol, Ltd. The Company is presently party to two lawsuits with CSC relating to the sale of Unibol Ltd. CSC claims to have purchased Unibol, Inc. in its purchase of Unibol Ltd and announced plans to operate under that assumption. The Company disputes these claims and has filed a lawsuit against CSC in connection with this dispute. CSC has filed a lawsuit claiming fraudulent misrepresentation and other causes against several parties including the Company and its CEO. The Company vigorously denies these charges. Although there can be no assurances, management strongly believes the Company will be successful in both of these lawsuits. Management also believes the receivables from CSC for the sale are fully enforceable. One of the provisions of the November 10, 2000 addendum includes the following: "California Software Corporation shall cause Stephen A. Hafer to continue to serve on the Board of the Company, and to serve as its Chairman and Chief Executive Officer for a period of not less than six (6) months after the Closing Date. Mr. Hafer is hereby granted the sole and exclusive right to vote the outstanding shares of Unibol, Ltd for such period of time." The Company had not received the first of the four cash installment payments in the amount of $125,000 from CSC as of January 16, 2001. 11 Revenues of Unibol UK were $0.4 million and $1.7 million for the three months and $1.9 million and $5.0 million for the nine month periods ended November 30, 2000 and 1999, respectively. The results of operations of Unibol UK and all other discontinued operations have been excluded from the Company's continuing operations in all periods presented. Because the stock of Unibol Ltd was sold on November 8, 2000, none of its assets or liabilities are reflected in the balance sheet as of November 30, 2000. A summary of the net assets of Unibol UK, which have been reflected separately in the consolidated balance sheet as of February 29, 2000, is as follows (in thousands):

~~August~~FEBRUARY, 2000 ~~February, 2000~~ ------------ --~~------------~~ Current assets ~~$ 181 $ 1~~2,~~384~~554 Property and equipment, net --339 0 Other assets ~~695~~5,917 ~~631~~ Current liabilities (1,~~599~~488) ~~(1,911) Long-term debt -- (0) ------------ -------------- $(723) $104~~ =======~~=====~~ 7,322 =======~~=======~~

DISPOSITION OF ICS UNICOMP LIMITED On December 1, 1999, the Company completed the sale of certain assets of the Company's Northern Ireland subsidiary, ICS UniComp Limited ("ICS UniComp") to ZEC Limited. ICS UniComp was an information technology service provider. Consideration consisted of $8.4 million in cash, $.9 million of which was received after year-end following final calculation of the purchase price. The assets disposed of included, but were not limited to, plant and machinery and motor vehicles, computer and office equipment furniture, premises, tradename, and intellectual property rights. Accounts receivable, accounts payable, and all other liabilities as of December 1, 1999 were retained by ICS UniComp. ICS UniComp was one of the ICS Computing Group subsidiaries acquired in 1993. Revenues of ICS UniComp were $2.7 million for the three months and $8.0 million for the nine months ended November 30, 1999. The results of operations of ICS UniComp and all other discontinued operations have been excluded from the Company's continuing operations in all periods presented. A summary of the net assets of ICS UniComp, which have been reflected separately in the consolidated balance sheets as of November 30, 2000 and February 29, 2000, is as follows (in thousands):

~~(THREE~~NOVEMBER, ~~MONTHS~~2000 ~~ENDED)~~FEBRUARY, ~~(SIX~~2000 ~~MONTHS ENDED)~~ --------------~~------~~ --------------~~----~~ ~~8/31/00~~Current ~~8/31/99~~assets ~~8/31/00~~$177 ~~8/31/99~~$1,384 ~~-------~~Other ~~-------~~assets ~~-------~~695 ~~-------~~631 ~~Net~~Current ~~Income~~liabilities (~~loss) (4~~1,~~951~~560) ~~556~~ (61,~~609~~911) ~~784 Change in Cumulative Translation Adjustment (330) 38 (378) (52)~~ ------ ------- ------ ------- ~~Comprehensive Income~~ $(~~loss~~688) ~~(5,281)~~$104 ~~594 (6,987) 732~~ ====== ======= ====== =======

12 4. COMPREHENSIVE INCOME The components of comprehensive income are as follows (in thousands) for the three and nine months periods ended November, 2000 and 1999.

~~LEGACY~~(THREE ~~EXTENSION~~MONTHS ~~AND~~ENDED) ~~VERTICAL~~(NINE ~~TRANSACTION~~MONTHS ~~APPLICATION~~ENDED) ~~E-BUSINESS~~11/30/00 ~~SEGMENT~~11/30/99 ~~REPORTING~~11/30/00 ~~SOFTWARE~~11/30/99 ~~SOLUTIONS TOTAL~~ --------------------~~--------------------------~~ ------------ -------~~-------~~ ~~--------~~Net ~~Three~~Income ~~months~~(loss) ~~ended August 31~~(6,251) ~~2000:~~602 ~~Revenues $ 1~~(12,~~439~~860) ~~$ 2,771 $ 4,210 Cost of sales 433~~ 1,~~918~~388 ~~2,351~~Change ~~Gross~~in ~~profit~~Cumulative ~~1,006~~Translation ~~853~~Adjustment ~~1,859~~(225) ~~Operating expenses 4,593 2,115 6,708 Operating loss~~ (~~3,587~~79) (~~1,262~~603) (~~4,849~~131) Total assets 15,208 9,663 24,871 Three months ended August 31, 1999: Revenues $ 3,950 $ 2,859 $ 6,809 Cost of sales 861 1,596 2,457 Gross profit 3,089 1,263 4,352 Operating expenses 2,889 1,126 4,015 Operating income 200 137 337 Total assets 20,392 10,136 30,528 LEGACY EXTENSION AND VERTICAL TRANSACTION APPLICATION E-~~BUSINESS SEGMENT REPORTING SOFTWARE SOLUTIONS TOTAL~~ ------~~----------------------------------------~~ -------~~-----~~ --------~~------~~ -------- ~~Six~~Comprehensive ~~months~~Income ~~ended August 31, 2000: Revenues $ 3,454 $ 6,161 $ 9,615 Cost of sales 892 4,334 5,226 Gross profit 2,562 1,827 4,389 Operating expenses 7,605 3,141 10,746 Operating loss~~ (~~5,043~~loss) (~~1,314) (~~6,~~357~~476) ~~Total~~523 ~~assets 15,208 9,663 24,871 Six months ended August 31, 1999: Revenues $ 7,469 $ 5,926 $~~ (13,~~395~~463) ~~Cost of sales~~ 1,~~777~~257 ~~3,614~~======= ~~5,391~~======= ~~Gross~~======== ~~profit 5,692 2,312 8,004 Operating expenses 5,623 2,050 7,673 Operating income (loss) 69 262 331 Total assets 20,392 10,136 30,528~~======

5. SEGMENT INFORMATION The Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," in fiscal 1999. During fiscal 2000, management changed the way it viewed its business. In prior years, the Company's segments were Platform Migration, Transaction Processing, and Other, which included corporate level activities. Management now views the business as retail e-Business solutions and Legacy Extension and Vertical Application Software, since the long-term financial performance within each of these segments is affected by similar economic conditions, and each of these segments has its own management team. Consequently, the prior year segment information has been restated. Discontinued operations have been excluded from the following disclosures. The Retail e-Business solutions segment includes: - A full suite of e-commerce products and services including secure Internet and/or traditional bricks and mortar transaction processing, web development, and web hosting; - A family of customer-activated wireless devices to enhance the retail shopping experience and reduce vendors' overhead costs. The Legacy Extension and Vertical Application Software and services include: - A comprehensive suite of systems management software for IBM AS/400 users and two legacy extension products for transitioning IBM/36 and AS/400 applications to open-system platforms such as Windows NT, Unix, and Linux; - A process control, business automation, and financial management system for the compound feed milling industry.* * These products are currently not material to the Company's consolidated operations. The accounting policies of the reportable segments are the same as those described in Note 1 to the financial statements. The Company evaluates the performance of each operating division based on income from operations. Summarized financial information concerning the Company's reportable segments is shown in the following table. 13

~~UNITED~~LEGACY ~~STATES~~EXTENSION ~~FOREIGN~~AND VERTICAL TRANSACTION APPLICATION E-BUSINESS SEGMENT REPORTING SOFTWARE SOLUTIONS TOTAL ------------- ------------- ------- Three months ended August 31, 2000: Revenues $3,155 $1,055 $4,210 Cost of sales 2,009 342 2,351 Gross profit 1,146 713 1,859 Operating expenses 3,124 3,584 6,708 Operating loss (1,978) (2,871) (4,849) Long-term assets 8,388 7,037 15,425 Total assets 14,527 10,344 24,871 Three months ended August 31, 1999: Revenues 4,872 1,937 6,809 Cost of sales 1,915 542 2,457 Gross profit 2,957 1,395 4,352 Operating expenses 1,696 2,319 4,015 Operating income 1,261 (924) 337 Long-~~term assets 8,481 10,451 18,932 Total assets 14,826 15,702 30,528 UNITED STATES FOREIGN TOTAL~~ ---------~~----~~ ------------- --------- ~~Six~~Three months ended ~~August~~November 3130, 2000: Revenues $71,~~021~~089 $2,~~594~~214 $93,~~615~~303 Cost of sales 4274 1,~~444~~300 ~~782 5~~1,~~226~~574 Gross profit ~~2,577~~815 914 1,~~812~~729 ~~4,389~~ Operating expenses ~~5,045~~991 ~~5,701~~939 101,~~746~~930 Operating loss (~~2,468~~176) (~~3,889~~25) (~~6,357~~201) ~~Long-term assets 8,388 7,037 15,425~~ Total assets 146,~~527~~124 10,~~344~~095 2416,~~871~~219 ~~Six~~Three months ended ~~August~~November 3130, 1999: Revenues 8$2,~~472~~693 4$3,~~923~~073 13$5,~~395~~766 Cost of sales ~~4,020~~132 12,~~371~~388 52,~~391~~520 Gross profit 42,~~452~~561 685 3,~~552~~246 ~~8,004~~ Operating expenses 32,~~163~~254 ~~4,510~~783 73,~~673~~037 Operating income ~~1,289~~307 (~~958~~98) ~~331~~209 ~~Long-term~~Total assets 812,~~481~~114 10,~~451~~691 1822,~~932 Total assets 14,826 15,702 30,528~~805

~~Quarter~~LEGACY ~~Ended~~EXTENSION ~~Cost~~AND ~~related~~VERTICAL toTRANSACTION ~~8/31/00~~APPLICATION ~~11/30/00~~E-BUSINESS SEGMENT REPORTING SOFTWARE SOLUTIONS TOTAL --------------------------------- ----------- ------------ ~~Write~~-~~off~~-------- ofNine ~~capitalized~~months ~~software~~ended ~~development~~November ~~costs................................................~~30, 2000 Revenues $3,036 ~~945~~$8,375 $11,411 ~~Inactive~~Cost ~~operation~~of ~~closure.............................~~sales ~~400~~606 ~~Compensation~~5,634 ~~costs~~6,240 ~~for~~Gross ~~severance~~profit ~~and~~2,430 ~~other~~2,741 ~~termination~~5,171 ~~benefits................................~~Operating 24expenses ~~281~~6,318 ~~Other~~4,080 ~~asset~~10,398 ~~write-downs~~Operating ~~and~~loss ~~costs......................~~(3,888) (1,~~037~~339) ~~205~~(5,227) ~~--------~~Total ~~--------~~assets 6,124 10,095 16,219 Nine months ended November 30, 1999: Revenues $6,863 2$8,~~406~~999 $15,862 ~~486~~Cost of sales 854 6,002 6,856 Gross profit 6,009 2,997 9,006 Operating expenses 5,642 2,833 8,475 Operating income (loss) 367 164 531 Total assets 12,114 10,691 22,805

The vast majority of the Company's revenue is generated from products and services provided in the United States and the United Kingdom, although the Company does have customers in over 30 countries. The following table illustrates a summary of the operations by geographic area. 14

~~THREE~~UNITED ~~MONTHS~~STATES ~~ENDED~~FOREIGN ~~SIX~~TOTAL ~~MONTHS ENDED~~ ---------~~---------------------------------~~ ---------~~-------------------------------------~~ ~~8/31/99 8/31/00 8/31/99 8/31/00~~ ------- ~~-------~~Three ~~-------~~months ~~-------~~ended ~~(in~~November ~~thousands~~30, ~~except~~2000: ~~percentage~~Revenues ~~data) (in thousands, except percentage data) Total revenue ................~~ $ 62,~~809~~782 ~~100.0%~~ $ ~~4,210~~521 ~~100.0%~~ $ 133,~~395~~303 ~~100.0% $ 9,615 100.0%~~ Cost of sales ~~................ 2,457 36.~~1 2,~~351~~322 ~~55.8~~252 51,~~391~~574 ~~40.2 5,226 54.4 -------- ------ -------- ------ -------- ------ -------- -------~~ Gross profit ~~................. 4~~1,~~352~~460 ~~63.9~~269 1,~~859~~729 ~~44.2~~Operating ~~8,004 59.8 4,389 45.6 Selling, general and administrative~~ expenses ~~...... 4~~1,~~015~~095 ~~59.0~~835 61,~~708~~930 ~~159.3 7,673 57.3 10,746 111.7 -------- ------ -------- ------ -------- ------ -------- -------~~ Operating income (loss) ~~......~~365 ~~337 4.9~~ (~~4,849~~566) (~~115.1~~201) ~~331~~Long-term ~~2.5~~assets (68,~~357)~~330 ~~(66.1)~~997 ~~Other~~9,327 ~~expense~~Total ~~................~~assets ~~114~~13,976 ~~1.7 102~~ 2.4,243 ~~217~~16,219 ~~1.6~~Three ~~252~~months ~~2.6~~ended ~~--------~~November ~~------~~30, ~~--------~~1999: ~~------~~Revenues ~~--------~~4,741 ~~------~~1,025 ~~--------~~5,766 ~~-------~~Cost ~~Income~~of ~~(loss)~~sales ~~before~~2,240 ~~taxes~~280 ~~... 223 3.~~2 (4,~~951)~~520 ~~(117.5)~~Gross ~~114~~profit ~~0.9 (6~~2,~~609)~~501 ~~(68.7)~~745 ~~Provision~~3,246 ~~for~~Operating ~~taxes~~expenses ~~..........~~1,579 ~~(136)~~1,458 ~~(2.0)~~3,037 0Operating ~~0.0~~income (~~240~~loss) 922 (~~1.8~~713) 0209 ~~0.0~~ Long-~~-------~~term ~~------~~assets ~~--------~~8,320 ~~------ -------- ------ -------- ------- Net income (loss) ............ $ 359 5.~~2,027 ~~$ (4~~10,~~951)~~347 ~~(117.5)~~Total $assets ~~354~~15,100 2.7 ~~$ (6~~,~~609)~~705 ~~(68.7) ======== ====== ======== ====== ======== ====== ======== ======~~22,805

~~THREE~~UNITED ~~MONTHS~~STATES ~~ENDED~~FOREIGN ~~INCREASE/(DECREASE)~~TOTAL --------- --------- ------~~-------------~~ ~~(in~~Nine ~~thousands,~~months ~~except~~ended ~~percentage~~November ~~data)~~30, ~~8/31/99~~2000: ~~8/31/00~~Revenues $9,803 ~~% ------- ------- ------ ----- Transaction-processing Equipment .......~~ $ 1,~~575~~608 $ 111,~~252~~411 ~~(323)~~Cost ~~(20.5)~~of ~~Retail~~sales ~~Wireless~~5,766 ~~Devices~~474 ~~and~~6,240 ~~Other~~Gross ~~Equipment~~profit ~~..............................~~4,037 1,~~211~~134 15,~~444~~171 ~~233~~Operating ~~19.2~~expenses ~~-------~~6,140 ~~-------~~4,258 ~~------ ----- Total Equipment Revenue ................ $ 2~~10,~~786~~398 $Operating ~~2,696~~loss (902,103) (3.2,124) ~~======= ======= ====== ===== SIX MONTHS ENDED INCREASE/~~(~~DECREASE~~5,227) Long-~~-----------------~~term ~~-------------------~~assets ~~(in thousands~~8,330 ~~except~~997 ~~percentage~~9,327 ~~data)~~Total ~~8/31/99~~assets ~~8/31/00~~13,976 $2,243 %16,219 ~~-------~~Nine ~~-------~~months ~~------~~ended ~~-----~~November 2330, ~~Transaction-processing~~1999: ~~Equipment~~Revenues ~~....... $ 3~~13,~~422~~213 $ 2,~~981~~649 ~~(441)~~15,862 ~~(12.9)~~Cost ~~Retail~~of ~~Wireless~~sales ~~Devices~~6,260 ~~and~~596 ~~Other~~6,856 ~~Equipment~~Gross ~~..............................~~profit 26,~~367~~953 32,~~075~~053 ~~708 29.~~9,006 ~~-------~~Operating ~~-------~~expenses ~~------~~4,742 ~~-----~~3,733 ~~Total~~8,475 ~~Equipment~~Operating ~~Revenue~~income ~~................~~(loss) $2,211 5(1,~~789~~680) $531 6Long-term assets 8,~~056~~320 ~~267~~2,027 ~~4.6~~10,347 ~~=======~~Total ~~=======~~assets ~~======~~15,100 ~~=====~~7,705 22,805

The Company sells its products and services to a variety of customers. Symbol Technologies represented 23.8% of company revenue for the three months and 20.4% of company revenue for the nine months ended November 30, 2000. Symbol Technologies represented 6.3% of company revenue for the three months and 11.1% of company revenue for the nine months ended November 30, 1999. 6. SERIES A CONVERTIBLE PREFERRED STOCK On October 7, 1998, the Company issued 3,000 shares of Series A convertible preferred stock, par value $1 per share, and warrants for 102,127 shares of the Company's common stock at an exercise price of $4.41, for aggregate consideration of $3 million. Transaction costs of $.2 million were paid in connection with the offering. Dividends are payable quarterly in cash or additional preferred 15 stock at a rate of 5% per annum. The preferred shares, together with any accrued and unpaid dividends, are convertible into shares of the Company's common stock at the lower of 90% of the Company's stock price for 30 days preceding the conversion or $5 per share. The beneficial conversion feature and the warrants have been allocated $300,000 and $110,000, respectively, of the proceeds. The discount of $300,000 resulting from the allocation to the beneficial conversion feature was recognized as an additional return to the preferred shareholders through the earliest conversion date. In the event the Company does not register the underlying common stock, the holder of the preferred shares receives an additional discount of 2% per month on the conversions with a maximum additional discount of 15%. At February 29, 2000, the conversion percentage was 75%. Holders of the Series A preferred stock are not entitled to vote on any shareholder matter. The preferred stock agreement provides that, absent shareholder approval, the maximum number of shares of common stock that may be issued upon conversion of the Series A convertible preferred stock is 1,576,000. If the number of underlying shares of common stock exceeds 1,576,000, the Company is mandatorily obligated to redeem the excess. As of February 29, 2000, 1,880 shares of the preferred had been converted into 759,000 shares of the Company's common stock. In March 2000, the remaining 1,120 preferred shares and accrued dividends were redeemed by the Company for cash in the amount of $2.4 million. 7. USE OF ESTIMATES The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts or revenues and expenses during the reporting period. Actual results could differ from those estimates. The consolidated financial statements include all adjustments that, in the opinion of management, are necessary for a fair presentation of the results for the periods indicated. All such adjustments are of a normal recurring nature. 8. IMPAIRMENT OF ASSETS AND REORGANIZATION COSTS During the second quarter and as of September 1, 2000, the Company reorganized through plans to consolidate and refocus existing business units. These plans will allow the Company to more effectively manage its existing businesses in the current, rapidly changing market conditions. In connection therewith, management also reevaluated the Company's investment in capitalized software in light of current market conditions and the reorganization plans. Management determined that, based on current market conditions, evolving sales strategies, and an analysis of projected undiscounted future cash flows calculated in accordance with the provisions of SFAS No. 121, the carrying amount of certain long-lived assets, notably software of its transaction processing subsidiary, may not be recoverable. The resultant impairment of long-lived assets, due principally to the impact of current market conditions and a shift in sales strategy in the direction of transaction processing revenues, necessitated a write-down of approximately $.9 million. In connection with effecting the reorganization, the Company has also recorded costs and accrued liabilities to close inactive operations. The reorganization, which was substantially completed in the third quarter of fiscal 2001, also included the termination of certain redundant staff positions. Details of this element of the reorganization were finalized and communicated in the second and third quarters of fiscal 2001. Compensation costs, including severance and other termination benefits, and 16 other future costs related to the reorganization, were recognized in the second and third quarters of the current fiscal year as noted below. Asset impairment and reorganization costs for the quarters ended August 31, 2000 and November 30, 2000 are as follows (in thousands):

~~THREE~~QUARTER ~~MONTHS~~ ENDED ~~INCREASE/(DECREASE)~~COST ~~------------------~~RELATED ~~-------------------~~TO ~~(in thousands, except percentage data)~~ 8/31/9900 811/3130/00 ~~$ %~~ ------- ------- -~~-----~~ ----- ~~Initial License Fees: Legacy Extension .................... $ 1,871 $ 227 (1,644) (87.9) E~~-~~commerce .......................... 16 7 (9) (56.3) Other ............................... 124 190 66 53.2~~ -~~------~~ ------- -~~-----~~ Write-~~----~~off ~~Total~~of ~~Initial~~capitalized ~~License~~software ~~Fees~~development costs............. ~~2,011 424 (1,587) (78~~.~~9) ------- ------- ------ ----- Software Support Fees: Legacy Extension~~ .................... ~~287 364 77 26~~.~~8 E-commerce~~ .............~~.............~~ 8 8 0 0 Other ............................... 150 95 (55) (36.7) ------- ------- ------ ----- Total Software Support Fees ............ 445 467 22 4.9 ------- ------- ------ ----- Total Software Revenue ................. $ ~~2,456~~945 $ 891 $(1,565) (63.7) ======= ======= ====== ===== SIX MONTHS ENDED INCREASE/(DECREASE) ------------------ ------------------- (in thousands, except percentage data) 8/31/99 8/31/00 $ % ------- ------- ------ ----- Initial License Fees: 24 Legacy Extension .................... $ 3,162 $ 853 (2,309) (73.0) ~~E-commerce~~Inactive ~~..........................~~operation ~~60 29 (31) (51~~closure.~~7) Other~~ ............................~~...~~ ~~226~~400 ~~248~~Compensation 22costs ~~9.7~~for ~~-------~~severance ~~-------~~and ~~-------~~other ~~-----~~termination ~~Total Initial License Fees~~ benefits............. ~~3,448 1,130 (2,318) (67~~.~~2) ------- ------- ------- ----- Software Support Fees: Legacy Extension~~ .................... ~~511~~24 ~~658~~54 ~~147~~Other ~~28.8~~asset Ewrite-~~commerce~~downs ~~..........................~~and ~~44 32 (12) (27~~costs.~~3) Other~~ .....................~~..........~~ ~~338~~910 ~~193~~0 ~~(145) (42.9)~~ ------- ------- ~~------- ----- Total Software Support Fees ............ 893 883 (10) (1.1) ------- ------- ------- ----- Total Software Revenue .................~~ $ ~~4,341 $~~ 2,~~013~~279 $~~(2,328)~~ ~~(53.6) ======= ======= ======= =====~~54

As of November 30, 2000, approximately 60 employee terminations and resignations were related to reorganization actions. Substantially all costs related to reorganization actions had been incurred by November 30, 2000. As a result of these reorganization efforts and additional cost containment measures the Company has reduced its annual selling, general, and administrative costs, primarily through payroll and related cost reduction, by approximately $4,000,000 annually. See discussion in the MD&A where the Company breaks total selling, general, and administrative costs for the three and nine month periods ended November 30, 2000, into recurring, non-recurring, and one time, reorganization and asset impairment costs. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND WITH THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2000. EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES, INCLUDING ECONOMIC, COMPETITIVE AND TECHNOLOGICAL FACTORS AFFECTING THE COMPANY'S OPERATIONS, MARKETS, PRODUCTS, SERVICES AND PRICES AS WELL AS OTHER FACTORS DISCUSSED IN THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE COMPANY'S ANNUAL REPORT ON FORM 10-K. THESE AND OTHER FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED. OVERVIEW UniComp, Inc. (the Company), founded in 1985, is a provider of retail e-business solutions and legacy extension and innovative vertical application software for small and large companies, resellers and system integrators worldwide. The Company licenses its technology to a cross section of industries including manufacturing, distribution, transportation, public-sector, point of sale and transaction 17 processors. Additionally, the Company provides installation, training, and systems integration, serving a worldwide network of end user customers, dealers and distributors. The Company's strategy is to emphasize its software products, acquire synergistic technologies and businesses, and to expand its services business within its existing geographic markets. In the first three quarters of fiscal year ending February 28, 2001, the Company generated $11.4 million in total revenue, of which $8.2 million was derived from sales of computer equipment, primarily transaction processing equipment and retail wireless devices, and $1.5 million was derived from information technology services. The remaining $1.7 million in revenue was derived from license and maintenance fees for the Company's platform-migration software, transaction-processing systems and other vertical market software products. Cost of sales for computer equipment consists of the actual costs of the products sold. Cost of sales for information technology services includes supplies, parts, subcontractors and other direct costs of delivering the services, except for salary costs, which are included in selling, general and administrative costs. Cost of sales for software includes amortization of capitalized software development costs, as well as royalties payable on embedded technologies and any other direct costs of providing its software products and support. The Company amortizes capitalized software development costs over the estimated life of the product, generally three to four years. Selling, general and administrative expenses include salaries and related costs for all employees, travel, costs associated with internal equipment, sales commissions, premises and marketing costs, as well as general office and administrative costs, and the amortization of goodwill. REPORTABLE SEGMENTS The Company's business units have been aggregated into two reportable segments: (1) Retail e-Business Solutions and (2) Legacy Transition and Vertical Application Software. The Retail e-Business Solutions include: - A full suite of e-commerce products and services including secure Internet and/or traditional bricks and mortar transaction processing, web development, and web hosting; - A family of customer-activated wireless devices to enhance the retail shopping experience and reduce vendors' overhead costs. The Legacy Transition and Vertical Application Software and services include: - A comprehensive suite of systems management software for IBM AS/400 users and two legacy extension products for transitioning IBM/36 and AS/400 applications to open-system platforms such as Windows NT, Unix, and Linux; - A process control, business automation, and financial management system for the compound feed milling industry. Financial information by reportable segment for the three and nine month periods ended November 30, 2000 and 1999 is included in Note 6 of the Notes to Consolidated Financial Statements. PRODUCTS AND SERVICES RETAIL E-BUSINESS SOLUTIONS 18 E-commerce products and services UniComp has been developing e-commerce products since the early 1990's. Those development efforts have yielded a web-enabled suite of products that deliver a completely integrated solution for Internet merchants as well as those who have yet to transition to e-commerce and continue to operate in the traditional world. The primary piece of software involved, Universal Payment Software ("UPS"), facilitates both e-commerce and traditional commerce by providing a secure method for processing credit and debit card transactions while supporting check verification, authorization, and guarantee services. UniComp will not only realize revenue from the sale of the software itself, but also will participate in the recurring transaction processing revenue stream. The system also supports other payment types including electronic benefits transfer and frequent shopper programs, and allows for gift certificate issuance and validation. It can be integrated with Point Of Sale ("POS") software, and batch processing following each business day can provide immediate sales data. Another key software offering is the recently completed Internet Payment Processing System ("IPPS"). IPPS is a complete Shopping Cart system, ECML-compliant Order Form, and a browser-based Merchant Account Control Panel for secure on-line ordering, processing credit card sales, issuing refunds and voids, viewing pending orders, and generating revenue, refund, and state sales tax reports. This software will allow merchants to do business on-line through their web-site. UniComp complements these software offerings by supplying new and refurbished transaction-processing equipment, thereby offering complete transaction-processing systems to merchants worldwide. The final offerings that complete the set are the web design and web hosting services, which are targeted primarily at small and medium-sized businesses. UniComp offers a full complement of web design capabilities, including site design and layout, custom logos, buttons and background design, a custom site map for navigation, and banner creation for increasing site and product exposure. UniComp will also host and register a web site with four major Internet search engines. Retail Wireless Devices By virtue of a recent strategic acquisition, UniComp is now a significant supplier of high performance POS transaction processing terminals, and is involved in the design, manufacturing, marketing, and servicing of a complete line of hardware and software for remote transaction processing applications. The initial set of products to be marketed and distributed worldwide consists of two that are currently available and being sold in the United States and two in the final stages of development that will be launched early in calendar year 2001. The Retail Display Adapter ("RDA") is a small, box shaped device that enables a retailer to connect a full color graphics display device to any IBM 46xx terminal. The RDA allows for fully configurable fields, increasing the amount of information available on the POS display, including running subtotals, multiple-item listing, coupon totals, frequent shopper rewards, and a Virtual Receipt. The RDA provides three main benefits to retailers: 1) by configuring the POS display to meet the specific needs of a retailer's operation through use of the PC based RDA Configurator software, the RDA enhances checkout efficiency and customer satisfaction through improved communication, 2) the RDA can be utilized as a data collection device, which data can then be used to improve the retailer's own marketing efforts, and 3) the RDA allows retailers to realize substantial savings in capital investment by either extending the life and providing increased functionality to legacy systems, thus postponing costly system upgrades, or by allowing for installations of refurbished equipment that would have increased usability, efficiency, and a longer effective lifetime through the RDA. 19 The Price Checker Terminal ("PCT") is a small, customer activated device retailers mount throughout their stores to enable the checking of product prices and frequent-shopper information prior to arriving at the checkout counter by scanning a bar code. This reduces store personnel requirements and improves customer satisfaction. Additionally, as with the RDA, the PCT allows for data collection for use in future customer marketing. The PCT ties directly into any existing in-store network using a number of communications options including radio frequency links, hard-wired network, or TCP/IP Ethernet. The most recent wireless version of the PCT leverages the wireless open standard architecture of IEEE 802.11 to simplify its integration into a wireless open-network environment. Fast and accurate price verification is made possible through use of a Symbol Technologies omni-directional scanner, which provides maximized read rates with minimum delays. Other store-specific applications, such as in-store promotions, printers, and location assistance, can be supported by the PCT. The Micro Kiosk ("MK"), one of the products currently nearing completion, is a family of upright, free standing, in-store customer kiosks that utilize a VGA color display to interact with customers. As with the PCT, the MK ties directly into the existing in-store network through a variety of communications options. Through that link, the MK will provide price checking, in-store advertising, frequent shopper status information, and a store locator. The MK will also allow customers to enter orders for items that store personnel have to retrieve from back rooms. As with the two existing products, another significant feature of the MK is its data collection capability. The features found in the four versions of the MK include operating systems from UniComp's proven, proprietary CTX O/S to embedded Windows NT or Linux, processors as powerful as Intel's Pentium, Symbol Technology scanners, color VGA flat panel screens, spectrum 24 WLAN, printer and touch screen options, and the availability of popular web browsers such as Internet Explorer and Netscape. The MK is being integrated with a 802.11, 2.4 GHz radio to make it compatible with Symbol, Lucent, and Telxon wireless networks, which is a critical step towards ensuring that those products will be inter-operable with customers' communications infrastructure worldwide and will conform with the differing international radio frequency restrictions. LEGACY TRANSITION AND VERTICAL APPLICATION SOFTWARE IBM AS/400 Systems Management and Legacy Transition Products The Company has retained the ability to market and distribute legacy extension software formerly developed at Unibol Ltd through its U.S. subsidiary, Unibol, Inc. Prior to the Company's acquisition of Unibol Ltd, Unibol, Inc., then doing business under the name Arccom Management Systems, Inc., signed a distribution agreement with Unibol Ltd. That agreement gave Unibol, Inc. the exclusive and perpetual right to market and distribute products under the UNIBOL brand in the United States. While there can be no assurances that this distribution agreement will survive the current litigation surrounding the Unibol Ltd disposition, the Company believes it will be successful in retaining ownership of Unibol, Inc. and in continuing to sell legacy extension software in the United States. UNIBOL36. The UNIBOL36 system rehosts software applications written in RPG or COBOL, and related data, from IBM's System/36 to UNIX or Windows NT systems. UNIBOL400. The UNIBOL400 system rehosts software applications written in RPG or COBOL, and related data, from IBM's AS/400 to UNIX or Windows NTsystems. Advantages of the UNIBOL rehosting solution include: VERSATILITY The UNIBOL36 system enables the migration to open systems of applications software written in either RPG or COBOL languages. The Company currently offers the UNIBOL36 system on most major UNIX or Windows NT platforms, 20 including IBM RS/6000, HP9000, Siemens Nixdorf RM Series, DEC Alpha, Sun SPARCstation, Data General Aviion and Intel/SCO UNIX. The UNIBOL400 system currently supports applications software written in RPG or COBOL. The UNIBOL400 system is currently available on the IBM RS/6000, HP9000, Siemens Nixdorf RM Series, Sun Ultra Sparc and the Data General Aviion UNIX hardware platforms. The Company released a version of UNIBOL400 that supports Windows NT in fiscal year 2000. USER INTERFACE The UNIBOL systems preserve the "look and feel" of the legacy system's user interface, thereby saving businesses that are migrating to a new computing platform substantial retraining, documentation and technical support costs. By enabling the use of a single set of end-user documentation, this feature allows for efficient technical support of software applications running on multiple computing platforms. DEVELOPER INTERFACE The UNIBOL systems offer software developers many System/36-style and AS/400-style development tools, as well as access to native UNIX development facilities. This feature facilitates the transition from a System/36 or AS/400 development environment to a UNIBOL environment on new computing platforms and allows further development of migrated applications software. NATIVE ENVIRONMENT The UNIBOL36 and UNIBOL400 systems are native System/36 and AS/400 application development and execution environments for open systems, essentially replacing the functionality of the proprietary operating system under which the applications software was written. The Company believes that, as a native open-systems environment, the UNIBOL environment generally enables software applications to operate at least as efficiently as under the original proprietary operating system. UniComp's AS/400 systems management product, mAStermind, includes disk management, job scheduling, spool file management, back up/recovery, object auditing, source code management, SMS messaging, and software implementation features, providing a complete systems management tool for AS/400 professionals. PROCESS CONTROL, BUSINESS AUTOMATION, AND FINANCIAL MANAGEMENT SYSTEM UniComp offers two products, InFeed 600 and the Mill Wheel System, for companies that manufacture animal and aquaculture feeds, primarily in Europe. InFeed 600 is a Windows NT client server based 21 system that provide complete production management, including process supervision, control, and automation. The Mill Wheel System is an Informix based system operating within a Unix environment that provides a complete, turn key solution for all aspects of the compound feed milling business, from production management through financial reporting. MARKETS RETAIL E-BUSINESS SOLUTIONS E-COMMERCE PRODUCTS AND SERVICES The market for UniComp's Retail e-Business Solutions consist of merchants engaged in e-commerce, traditional commerce, or, as is becoming more and more prevalent, both. Continued, rapid growth of the Internet is fueling huge gains in Internet-generated revenues. Forrester Research predicts that the global Internet economy will reach $6.9 trillion in 2004. UniComp's two primary markets lead the way with North America making up $3.5 trillion and Europe $1.5 trillion of the worldwide total. This expansion of e-commerce will directly impact the markets for UniComp's products. According to Forrester Research, as companies develop their online businesses, packaged e-commerce software spending in the United States alone is anticipated to grow from $3.1 billion in 1999 to $14.5 billion in 2003. UniComp's UPS and IPPS products should participate in that growth. The e-payment, or transaction processing, market will show similarly impressive growth. The Nilson Report expects that the volume of payment card transactions should increase in the United States from 16 billion in 1997 to over 39 billion in 2005. As the volume of transactions grows, the need for complete transaction processing systems such as those offered by UniComp increases in step, and the available recurring transaction processing revenue streams expand as well. The e-commerce explosion also bodes well for the Web site development and Web hosting markets. Web hosting is one of the fastest-growing markets in the information technology industry, according to International Data Corp., with the U.S. market expected to increase 10-fold from the $1.8 billion market in 1999 to almost $19 billion in 2003. ActivMedia Research has determined that Web site development has already become a $10 billion industry, with particularly high growth rates for mid-range and smaller online operations. While the growth in each of the markets above is impressive and promising for each of UniComp's e-commerce products individually, it is UniComp's ability to offer a complete solution, including software, hardware, transaction processing, and web site development and hosting, that will allow UniComp to participate fully in the transition towards an Internet economy. Retail Wireless Devices The current shift towards e-commerce has generated a sense of urgency among traditional retailers to respond to the threat and keep the customers who come through their doors satisfied with the bricks-and-mortar shopping experience. Increasingly, those traditional merchants are learning from their on-line 22 competitors and looking toward technology to deliver some of the same benefits as online shopping. UniComp's Retail Wireless Devices, particularly the Micro Kiosk product line, are some of the solutions those merchants are turning to. The following is from a study of consumers' acceptance of retail technology conducted by the Indiana University Center for Education and Research in Retailing and KPMG's Retail Industry practice. The primary goal of the study was to provide information that would help retailers decide what technologies to implement in their stores. The demographics of the group participating in the summary closely matched those of the population of the United States. "Consumers were very positive about both the product information/ordering and frequent shopper kiosks. On average, 76 percent rated the kiosks as an advantage, 60 percent were more likely to shop at a store with these technologies, and 80 percent expected to use the technologies at least some of the time they shopped. Consumers felt that the product information/ordering kiosk would make shopping faster and easier by helping them find what they wanted and provide detailed/current product information. Shoppers liked the frequent shopper kiosk because it would highlight items that were on special and eliminate the need to clip and carry coupons, thus saving them money. Consumers disliked the prospect of waiting in line to use the machines and recommended that several kiosks be installed in each store to accommodate demand." Retailers worldwide are getting the message that their customers are demanding a better shopping experience, and they are beginning to understand that technology can help them provide such an experience. UniComp's line of Retail Wireless Devices will be one of the solutions those merchants can turn to. ACQUISITIONS AND DISPOSITIONS In December 1998, the Company acquired for approximately $403,000 a United Kingdom company, Carlton Software Productions Limited, which develops, sells and supports IBM AS/400 Systems management software tools. In January 1999, the Company acquired a $.6 million note receivable from Continuum Technology Corporation ("Continuum"). Consideration consisted of $.2 million in cash and accounts receivable of $.4 million. In March 1999, the Company purchased 97.5% of Continuum's outstanding common stock. Consideration consisted of $259,361 in cash, 8% notes payable aggregating $572,128, and 200,000 shares of the Company's common stock. The remaining 2.5% of Continuum's outstanding common stock was purchased in February, 2000 for $17,800 in cash and 18,953 shares of the Company's common stock. In April, 2000, the Company acquired 51% of the outstanding shares of Commitment Software Ltd. a United Kingdom software development company. Consideration consisted of approximately $75,000 in cash and approximately 7,000 shares of the Company's common stock. On November 8, 2000, the Company completed the sale of all of the issued and outstanding shares of capital stock of the Company's Northern Ireland subsidiary, Unibol Ltd to California Software Corporation. Unibol Ltd designed, developed, and marketed legacy extension software under the UNIBOL brand. Consideration consisted of $1.0 million in cash, cash receivable of $0.5 million, and $1.5 million in California Software Corporation common stock. In conjunction with the disposition, the Company booked reserves for the cash and stock receivable and for an additional $2.3 million owed to the Company and its subsidiaries by Unibol Ltd. Unibol Ltd was one of the ICS Computing Group subsidiaries acquired in 1993. 23 On December 1, 1999, the Company completed the sale of certain assets of the Company's Northern Ireland subsidiary, ICS UniComp Limited, to ZEC Limited. ICS UniComp was an information technology service provider. Consideration consisted of $8.4 million in cash, $0.9 of which was received after year-end following final calculation of certain completion accounts. The assets disposed of included, but were not limited to, plant and machinery and motor vehicles, computer and office equipment, furniture, premises, tradename, and intellectual property rights. Accounts receivable, accounts payable, and all other liabilities as of December 1, 1999 were retained by ICS UniComp Limited. ICS UniComp was one of the ICS Computing Group subsidiaries acquired in 1993. In June 1998, the Company contributed accounts receivable of $.5 million for a 67% ownership in a newly formed entity engaged in retail electronic commerce. In April 1999, the Company sold its ownership percentage to the minority shareholder for a $.7 million note receivable bearing interest at 8.5%. The note is receivable in monthly installments of $5,000-$10,000 per month with a final payment of $240,000 due August 2003. The note is secured by the assets of the venture and the personal guarantee and pledged assets of the purchaser. The gain of $.2 million on the sale will be recognized as cash is received. RESULTS OF CONTINUING OPERATIONS The following table summarizes the Company's results of continuing operations in dollars and as a percentage of total revenue for the three and nine months ending November 30, 1999 and 2000.

THREE MONTHS ENDED ~~INCREASE/(DECREASE)~~NINE MONTHS ENDED ------------------------------------------ -------------------------------------------- 811/3130/99 811/3130/00 $11/30/99 %11/30/00 -------- -------- -------- -------- (in thousands, except percentage data) ~~UNIBOL36~~(in thousands, except percentage data) Total revenue ...... $5,766 100.0% $3,303 100.0% $15,862 100.0% $11,411 100.0% Cost of sales............ 2,520 43.~~........~~7 1,~~024~~574 ~~238~~47.7 ~~(786)~~6,856 ~~(76~~43.8)2 ~~UNIBOL400~~6,240 54.7 ------- ------ ------- ----- ------- ------ ------- ------ Gross profit............. 3,246 56.3 1,729 52.3 9,006 56.8 5,171 45.3 Selling, general and administrative expenses.. 3,037 52.~~.........~~7 1,~~134~~930 ~~353~~58.4 ~~(781)~~8,475 ~~(68~~53.9)4 10,398 91.1 ------- ------ ------- ----- ------- ------ ~~Total~~------- ~~Platform~~------ ~~Migration~~Operating ~~Revenue~~income (loss).. 209 3.~~....~~6 $(201) ~~2,158~~(6.1) $531 ~~591~~3.4 (15,~~567~~227) (7245.68) ~~=======~~Other ~~=======~~expense............ ~~=======~~117 ~~=====~~2.0 ~~SIX~~92 ~~MONTHS~~2.8 ~~ENDED~~316 ~~INCREASE/(DECREASE)~~2.0 337 3.0 ------- ------~~-----~~ ------- ----- ------- ~~8/31/99 8/31/00 $ %~~ ------- ------- ------ ~~-----~~Income (~~in thousands, except percentage data~~loss) ~~UNIBOL36~~before taxes....................~~..........~~ 92 1~~,567~~.6 ~~817~~ (~~750~~293) (478.9) ~~UNIBOL400~~215 1.4 (5,564) (48.8) Provision for taxes...... (200) (3.~~....................~~5) ~~2,106~~0 ~~694~~0.0 (~~1,412~~440) (672.08) 0 0.0 ------- ------ ------- ----- ------- ------ ~~Total~~------- ~~Platform~~------ ~~Migration~~Net ~~Revenue~~income (loss) ....... $ ~~3,673~~292 5.1 $ ~~1,511~~(293) (8.9) $655 4.2 $ (5,~~162~~564) (5848.98) ======= ====== ======= ===== ======= ====== ======== ======

THREE AND NINE MONTHS ENDED NOVEMBER 30, 1999 COMPARED TO THREE AND NINE MONTHS ENDED NOVEMBER 30, 2000. REVENUE Revenue for the three months ended November 30, 2000 decreased to $3.3 million compared to $5.8 million for the three months ended November 30, 1999, a decrease of $2.5 million, or 43.1%. Revenue for the nine months ended November 30, 2000 fell to $11.4 million from $15.9 million for the nine months ended November 30, 1999, a decrease of $4.5 million, or 28.3%. These decreases are detailed below. EQUIPMENT REVENUE The following table summarizes the revenue generated from sales of computer equipment for the three and nine months ended November 30, 2000 and the comparable period from the prior fiscal year. 24

THREE MONTHS ENDED INCREASE/(DECREASE) ------------------ ------------------~~------~~ 25 (in thousands, except percentage data) 811/3130/99 811/3130/00 ~~-------~~$ ~~-------~~% ~~GROSS PROFIT GROSS PROFIT~~ --------~~----~~ --------~~----~~ ~~$ % $ %~~ ------ --~~----~~ ----- --~~-----~~ ~~Information Technology Services .............. 1,371 87.5 492 79.0 ------ ----- Equipment:~~ Transaction-processing Equipment ...~~......~~ ~~630~~$ ~~40.0~~1,708 ~~630~~$ 50824 (884) (51.38) Retail Wireless Devices and Other Equipment ..........................~~......~~ ~~451~~1,271 ~~37.2~~1,355 ~~173~~84 126.06 ------ --~~---~~ ~~Total Equipment .............................. 1,081 38.8 803 29.8~~ ------- ----- ~~Software: Legacy Extension ......................... 1,802 83.5 371 62.8 E~~-~~commerce~~ ~~............................... (90) (375.0) (16) (106.7) Other .................................... 188 68.6 209 73.3~~ ------ ~~-----~~ Total ~~Software~~Equipment Revenue............~~...................~~ 1$ 2,~~900~~979 ~~77.4~~$ ~~564 63.~~2,179 ~~------~~(800) ~~----- Total Gross Profit~~ (26.~~.......................... 4,352 63.~~9) ~~1,859~~======== ~~44.2~~======= ====== ====== ~~SIX~~NINE MONTHS ENDED INCREASE/(DECREASE) ----------------- ------------------~~-------~~ (in thousands, except percentage data) 811/3130/99 811/3130/00 ~~-------~~$ ~~-------~~% ~~GROSS PROFIT GROSS PROFIT~~ --------~~----~~ --------~~----~~ ~~$ % $ %~~ ------ --~~----~~ ----- --~~-----~~ ~~Information Technology Services .............. 2,719 83.3 1,348 87.2 ------ ----- Equipment:~~ Transaction-processing Equipment ...~~......~~ 1$ 5,~~324~~130 ~~38.7~~$ 3,805 (1,~~083~~325) 36(25.28) Retail Wireless Devices and Other Equipment ..........................~~......~~ ~~876~~3,638 ~~37.0~~4,430 ~~754~~792 1421.98 ------ --~~---~~ ~~Total Equipment .............................. 2,200 38.0 1,837 30.3~~ ------- ----- ~~Software: Legacy Extension ......................... 2,905 79.1 939 62.1 E~~-~~commerce~~ ~~............................... (143) (137.5) (91) (313.8) Other .................................... 323 57.3 356 80.7~~ ------ ~~-----~~ Total ~~Software~~Equipment Revenue............~~...................~~ ~~3,085~~$ ~~71.1 1~~8,~~204~~768 ~~59.8~~$ ~~------ ----- Total Gross Profit ...........................~~ 8,~~004~~235 59(533) (6.81) ~~4,389~~======== ~~45.6~~======= ====== ======

The increase in revenue from retail wireless devices and other equipment for both the three and nine month periods is due to the continuing strong performance of the Continuum business unit. The decrease in revenue from transaction processing equipment for both the three and nine month periods is largely due to the Company's tight cash position. SERVICES REVENUE Revenue from information technology services decreased to $.5 and $1.4 million for the three and nine months ended November 30, 2000 from $1.0 and $2.7 million for the comparable periods in the prior fiscal year, a decrease of $0.5 and $1.3 million or 50.0% and 48.1%. These decreases are primarily due to poor performances by the United Kingdom business units and the closing of the Australian office of one of those business units. SOFTWARE REVENUE The following table summarizes the revenue from software licensing and support.

THREE MONTHS ~~SIX~~ENDED ~~MONTHS~~INCREASE/(DECREASE) ~~ENDED~~------------------ ~~ENDED~~------------------ 8(in thousands, except percentage data) 11/3130/0099 811/3130/00 $ % -------- -------- -------- ------- ~~Reorganization~~Initial ~~related~~License ~~costs~~Fees: Legacy Extension............. $ 21,~~406~~330 $ ~~2,406~~395 ~~Non~~(935) (70.3) E-~~recurring~~commerce................... ~~selling~~70 19 (51) (72.9) Other........................ 82 47 (35) (42.7) ------- ------ ------- Total Initial License Fees......... 1,482 ~~general~~461 (1,021) &(68.9) ~~administrative~~------- ------ ------- Software Support Fees: Legacy Extension............. 90 87 (3) (3.3) E-commerce................... 14 4 (10) (71.4) Other........................ 166 86 (80) (48.2) ------- ------ ------- Total Software Support Fees........ 270 177 (93) (34.4) ------- ------ ------- Total Software Revenue............. $ 1,~~250~~752 2$ 638 $ (1,~~500~~114) ~~Recurring~~(63.6) ~~selling~~------- ------ ------- NINE MONTHS ENDED INCREASE/(DECREASE) ------------------ ------------------ (in thousands, ~~general~~except percentage data) 11/30/99 11/30/00 $ % -------- -------- -------- ------- Initial License Fees: Legacy Extension............. $ 3,126 &$ ~~administrative~~800 (2,326) (74.4) E-commerce................... 130 48 (82) (63.1) Other........................ 308 295 (13) (4.2) ------- ------ ------- Total Initial License Fees......... 3,~~052~~564 51,~~840~~143 (2,421) (67.9) ------- ------ ------- 25 Software Support Fees: Legacy Extension............. 282 272 (10) (3.5) E-commerce................... 58 36 (22) (37.9) Other........................ 504 279 (225) (44.6) ------- ------ ------- Total ~~selling,~~Software ~~general,~~Support &Fees........ ~~administrative~~844 6587 (257) (30.5) ------- ------ ------- Total Software Revenue............. $ 4,~~708~~408 10$ 1,~~746~~730 $ (2,678) (60.8) ======= ====== =======~~===~~

Legacy extension software revenue by major product class is as follows.

THREE MONTHS ENDED INCREASE/(DECREASE) ------------------ ------------------~~---------------------------------------------------------------------------~~ ~~PROJECT~~11/30/99 ~~PHASE~~11/30/00 ~~PROJECT~~$ % ~~COMPLETED COMPLETION COMMENTS~~ --------~~-----~~ --------~~-----------~~ ---------- -------- ~~---------------------------------------------------------------------------------------------------------------~~(in ~~Awareness~~thousands, ~~100%~~except ~~Completed~~percentage ~~---------------------------------------------------------------------------------------------------------------~~data) ~~Identification~~UNIBOL36........................... ~~100%~~323 ~~Completed~~167 ~~---------------------------------------------------------------------------------------------------------------~~(156) ~~Impact~~(48.3) ~~Analysis~~UNIBOL400.......................... ~~100%~~1,097 ~~Completed~~315 (782) (71.3) ------- ------ -------~~-------------------------------------------------------------------------------------------~~ ~~Risk~~Total ~~Evaluation~~Legacy ~~100%~~Extension ~~Completed~~Revenue..... ~~All~~$ ~~significant~~1,420 ~~suppliers~~$ ~~have~~482 ~~been~~(938) ~~evaluated~~(66.1) ~~---------------------------------------------------------------------------------------------------------------~~======= ~~Remediation~~====== ~~100%~~======= ~~Completed~~NINE ~~All~~MONTHS ~~critical~~ENDED ~~systems~~INCREASE/(DECREASE) ~~are completed.~~ ------------------ ------------------ 11/30/99 11/30/00 $ % -------- -------- -------- -------~~--------------------------------------------~~ ~~Testing~~(in ~~100%~~thousands, ~~Completed~~except ~~Secondary~~percentage ~~tests~~data) ~~for~~UNIBOL36........................... ~~critical~~1,001 ~~systems~~596 ~~completed~~(405) (40.5) ~~---------------------------------------------------------------------------------------------------------------~~UNIBOL400.......................... ~~Contingency~~2,407 ~~Plan~~476 ~~100%~~(1,931) ~~Completed Implemented~~(80.2) ------- ------ -------~~-------------------------------------------------------------------------------------------~~ ~~Overall~~Total ~~Completion~~Legacy ~~100%~~Extension ~~Completed~~Revenue..... ~~Implemented~~$ ~~and~~3,408 ~~completed~~$ on1,072 ~~Estimate~~(2,336) ~~schedule~~(68.5) ~~---------------------------------------------------------------------------------------------------------------~~======= ====== =======

During both the three and nine month periods ended November 30, 1999, the Company recorded significant revenue from a single legacy extension contract. That contract did not extend into the current fiscal year. INTERNATIONAL REVENUE. Revenue from international operations, principally in Northern Ireland and the Republic of Ireland, decreased to $.5 and $1.6 million for the three and nine months ended November 30, 2000 from $1.0 and $2.6 million for the comparable periods in the prior fiscal year, decreases of $0.5 and $1.0 million or 50% and 38.5%. These decreases are due to shortfalls in all significant foreign business units, including the closure of the Australian operation. Revenue from domestic operations decreased to $2.8 and $9.8 million for the three and nine months ended November 30, 2000 from $4.7 and $13.2 million for the comparable period in the prior fiscal year, decreases of $1.9 and $3.4 million, or 40.4% and 25.8%. The decreases are due to shortfalls in transaction processing equipment and legacy extension software sales. GROSS PROFIT. The following table summarizes the Company's gross profit information in dollars and as a percentage of the associated revenues for the three and nine months ended November 30, 2000 and the comparable periods for the prior fiscal year.

Gross profit margins for equipment and services vary from quarter to quarter depending on customer demands and product mix. SELLING, GENERAL, & ADMINISTRATIVE EXPENSES. During the second and third quarters of fiscal 2001, the Company reorganized several of its business units in an effort to reduce selling, general, and administrative expenses to more reasonable levels in future quarters. Approximately 60 people who were on the Company's payrolls at the beginning of the second quarter of fiscal 2001 are no longer employed by the Company as of November 30, 2000. The Company incurred certain costs related to the reduction of head count, including $.1 million related to the reduction of head count in the third fiscal quarter. Additionally, the Company wrote down the assets of its Australian operation pending disposal, wrote down the net assets of two inactive operations and wrote off capitalized software development costs at its transaction processing operation as that company's revenue stream is shifting away from software sales toward transaction processing revenues. The breakout of recurring and non-recurring is estimated using currently available information. The following table summarizes selling, general, and administrative expenses for the three and nine months periods ended November 30, 2000. 27

OTHER EXPENSES. Interest, the primary component of other expenses, was relatively unchanged for both the three and nine month periods ended November 30, 2000 compared with the same periods in the prior fiscal years. LIQUIDITY AND CAPITAL RESOURCES At February 29, 2000, the Company had approximately $3.3 million in cash and equivalents. As of November 30, 2000, the Company's cash balance had been reduced to $823,000, and the lines of credit had increased to $4.0 million from the $3.5 million outstanding at February 29, 2000. This use of cash during the nine months ended November 30, 2000 was largely attributable to the $2.4 million expended to redeem the preferred stock outstanding as of February 29, 2000. Additionally, the Company's U. S. line of credit is fully utilized and has not been formally extended since October 30, 2000. Management is currently in discussions with the lender and believes these discussions will be successful in maintaining the current line through February 28, 2001. Additionally, the Company is currently exploring several financing alternatives to maintain liquidity and support continuing growth. Those alternatives include combined debt and equity financing, short-term bridge loans from lenders with which the Company has prior experience, increases in the current lines of credit, and equipment financing as an alternative to capital expenditures. While there can be no assurance that any of these alternatives will be successful, Management is confident that it will secure the funding necessary to achieve its growth objectives. If Management is unsuccessful in its efforts to obtain necessary financing, the Company's operations could be severely and negatively impacted. The Company maintains revolving credit facilities which are its primary sources of liquidity. The facilities allow the Company to borrow based on current levels of accounts receivable and inventory and contain financial covenants including, but not limited to, requirements with respect to minimum net worth and debt to net worth ratios. At February 29, 2000 and November 30, 2000 the Company was in default of a covenant under its $3 million United States line of credit. Management is currently in discussions with the lender regarding extending the maturity of the facility. The Company does not have any significant commitments to purchase capital equipment as of November 30, 2000. The Company believes available credit will be sufficient to meet its working capital needs both on a short and a long-term basis. However, the Company's capital needs will depend on many factors, including the Company's ability to achieve profitable operations, the need to develop and improve products, and various other factors. Depending on its working capital requirements, the Company may seek additional financing through debt or equity offerings in the private or public markets at any time. The Company's ability to obtain additional financing will depend on its results of operations, financial condition and business prospects, as well as conditions then prevailing in the relevant capital markets. There can be no assurance that financing will be available or, if available, will be on terms acceptable to the Company. 28 FACTORS THAT MAY AFFECT FUTURE RESULTS FORWARD LOOKING STATEMENTS The foregoing contains forward-looking statements that involve risks and uncertainties, including but not limited to quarterly fluctuations in results, the timely availability and customer acceptance of new products, the impact of competitive products and pricing, general market trends and conditions, and other risks detailed below in "Factors That May Affect Future Results." Actual results may vary materially from projected results. UniComp's domestic and international businesses operate in highly competitive markets that involve a number of risks, some of which are beyond the Company's control. While UniComp is optimistic about its long-term prospects, the following discussion highlights some risks and uncertainties that should be 29 considered in evaluating its future growth prospects. See "Forward-Looking Statements and Associated Risks" in Part I of this annual report. SUCCESS DEPENDENT ON ABILITY TO COMPETE IN HIGHLY COMPETITIVE INFORMATION TECHNOLOGY INDUSTRY Our success depends on our ability to compete in an industry that is intensely competitive and subject to rapid change. In competing in the information technology industry, we believe the principal competitive factors we face are reputation and quality of service, relative price and performance, technical expertise and product availability. Our competitors in the information technology service market include installation and service organizations within many established companies, computer manufacturers, custom software developers, regional systems integrators, software and hardware distributors, and systems consultants. The market for our platform-migration software is highly competitive as well. We believe that the principal competitive factors in this area include product performance, time to market for new product introductions, adherence to industry standards, price, marketing and distribution resources. The market for our transaction-processing systems is also highly competitive. We believe that the principal competitive factors in this area include the ability to provide a comprehensive, integrated transaction-processing system, product performance, time to market for new product introductions, adherence to industry standards, price, marketing and distribution resources. Some of our current and potential competitors have longer operating histories and substantially greater competitive resources than ours. As a result, our competitors may be able to adapt more quickly to changes in customer needs or to devote greater resources to sales, marketing and product development. As the markets in which we compete have matured, product price competition has intensified and such intensity will likely continue. Such price competition could adversely affect our results of operations. There can be no assurance that we will be able to continue to compete successfully with existing or new competitors. DEPENDENCE ON FOREIGN SALES Any reduction of our international business could affect our revenues. Our revenues from international operations represented one-sixth of our total revenues for fiscal years 1998 through 2000. We expect that our international operations will continue to account for a similar or smaller percentage of our total revenues. Certain risks are inherent in international operations, including (1) unexpected changes in regulatory requirements, (2) currency exchange rate fluctuations, (3) changes in trade policy or tariff regulations, (4) customs matters, (5) longer payment cycles, (6) higher tax rates, (7) additional tax withholding requirements, (8) difficulty in enforcing agreements, (9) intellectual property protection difficulties, (10) foreign collection problems, and (11) military, political and transportation obstacles. In addition, foreign operations involve uncertainties arising from local business practices, cultural considerations and international political and trade tensions. Our revenues and expenses are generally denominated in corresponding currencies. As a result, to date we have not hedged against foreign currency exchange rate risks. In the future; however, we may implement hedging techniques with respect to foreign currency transactions. Nevertheless, such hedging activities cannot assure that we could successfully protect ourselves against foreign currency exchange losses or against other international sales risks such as exchange limitations, price controls or other foreign currency restrictions. SUCCESS DEPENDENT ON ABILITY TO ADJUST TO RAPID TECHNOLOGICAL CHANGE AND INTRODUCTION OF NEW PRODUCTS AND SERVICES The information technology industry is characterized by rapid technological advances, numerous changes in customer requirements and frequent new product introductions and enhancements, which could disrupt our services business and render our products obsolete. Our future success will depend in large part on our ability to anticipate and respond to such advances, changes and new product introductions. Our failure to respond could have a material adverse effect on our competitive position and results of 30 operations. In addition, we are subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in development or failure of products to perform as expected. Many of our software products, including certain e- commerce products and UNIBOL400, have yet to achieve a substantial installed user base. We cannot be certain that these products will ever achieve a substantial market acceptance or user base. Our growth strategy includes using our current business relationships to generate additional revenue by providing other products and services to these clients. POTENTIAL FOR DELAYS IN PRODUCT INTRODUCTION Our delay in any potential product development and introduction may have an adverse effect on the product's success and on our reputation and results of operations. Additionally, competitors may introduce products and gain market share during any such delays. Our failure to introduce new products and product enhancements that are responsive to market conditions and customer requirements may have an adverse effect on our business, results of operations and financial condition. Furthermore, our complex software products may contain undetected errors when first introduced or when new versions are released. We cannot be certain that current or future releases of our products will not contain errors or that any such errors will not result in loss or delay of market acceptance of such products. We have previously experienced delays in developing and introducing new products, and there can be no assurance that we will not experience delays in the future. RISK OF ACQUISITION PROGRAM To date, our acquisition program has substantially contributed to our growth. We have no assurance that we will complete any future acquisitions or that we will benefit from any completed acquisition in the future. We obtain most of our acquisitions by taking advantage of opportunities that are presented to us. We require significant administrative, operational and financial resources to successfully integrate and manage our diverse businesses. There are numerous operational and financial risks involved in managing acquired businesses, including (1) difficulties in assimilating acquired operations, (2) diversion of management's attention, (3) amortization of acquired intangible assets, (4) increases in administrative costs, (5) additional costs associated with debt or equity financing, and (6) potential loss of key employees or customers of acquired operations. We may not be successful in integrating our current acquisitions or retaining and motivating key personnel of our acquired companies. Our failure to integrate businesses, to expand our acquired customer and technology base and to retain key employees of our acquired companies could have an adverse effect on our business, results of operations and financial condition. Although we currently do not have any understandings, commitments or agreements with respect to any acquisition, we anticipate future potential acquisition opportunities. SUCCESS DEPENDENT ON ABILITY TO HIRE AND RETAIN TECHNICAL PERSONNEL AND KEY EMPLOYEES Our success depends in part on our ability to attract, hire, train and retain qualified managerial, technical and sales and marketing personnel. Competition for such personnel is intense. We cannot be certain that we will be successful in attracting and retaining the technical personnel we require to conduct and expand our operations successfully. Our results of operations could be materially adversely affected if we are unable to attract, hire, train and retain qualified personnel. Our success also depends to a significant extent on the continued service of our management team. The loss of any member of the management team could have a material adverse effect on our business, results of operations and financial condition. We do not have any employment or noncompete agreements with any of our executive officers. 31 UNCERTAINTY OF FUTURE RESULTS It is difficult to accurately forecast revenues from our software products and services because of (1) the evolving product lifecycle of the UNIBOL36 product, (2) the recent introductions of the UNIBOL400 product and (3) the recent acquisitions of our retail e-business companies. In addition, although our service revenues are more predictable than our product revenues, unexpected variations in job pricing and complexity could have an adverse effect on the profitability of customer service projects. We base our expense levels, which are relatively fixed in the short term, in significant part on our expectations of future product revenues and service demands. If demand for our products and services is below expectations, our results of operations could be adversely affected. DEPENDENCE ON PROPRIETARY TECHNOLOGY Much of our future success depends on our ability to protect our proprietary technology. We rely principally on trade secret and copyright law, as well as nondisclosure agreements and other contractual arrangements, to protect such proprietary technology. We are not certain that such measures will be adequate to protect our technologies from infringement by others or that we will be effective in preventing misappropriation of our proprietary rights. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States. CONTROL BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS Our executive officers and directors and their affiliates beneficially hold an aggregate of approximately 18 % of our outstanding shares of common stock. As a result, these shareholders, acting together, may be able to exert significant influence on many matters requiring shareholder approval, including the election of directors. INABILITY TO COLLECT ACCOUNTS RECEIVABLE We have no assurance that we will be able to collect all of our accounts receivable. Our worldwide customer base of trade accounts receivable is generally diversified with respect to credit risks due to the large number of such accounts. We perform ongoing credit evaluations on certain of our customers' financial conditions, but we generally do not require collateral to support customer receivables. We establish an allowance for uncollectible accounts based on factors surrounding the credit risk of specific customers, historical trends and other information. We cannot be sure that our procedures will identify all potential uncollectible accounts in a timely manner, therefore, we may have to make additional significant adjustments to our allowance for uncollectible accounts from time to time. OPERATING RESULTS DEPENDENT ON PRODUCT DEVELOPMENT Our continued success depends on our ability to develop, produce and transition technologically complex and innovative products that meet customer needs. Inherent in this process are various risks that we must manage to achieve favorable operating results. The process of developing new high technology products is complex and uncertain, requiring innovative designs and features that anticipate customer needs and technological trends. The products, once developed, must be manufactured and distributed in sufficient volumes at acceptable costs to meet demand. The development of such products involves risks and uncertainties, including but not limited to risk of product demand, market acceptance, economic conditions, competitive products and pricing, commercialization, technology, and other risks. Our business is also subject to national and worldwide economic and political influences such as recession, political instability, economic strength of governments, and rapid change in technology. Additionally, 32 we are experiencing increasing competition in our products and services businesses, and there can be no assurance that our current products or services will remain competitive or that our development efforts will produce products with the cost and performance characteristics necessary to remain competitive. ESTIMATES CONTAINED IN FINANCIAL STATEMENTS Our preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. Our estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period as well. For example, our estimates affect estimated useful lives, amortization expense, carrying values, accrued reserves, and estimates to complete fixed price contracts. Changes in the status of certain matters or facts or circumstances underlying these estimates could result in material changes to these estimates, and actual results could differ from these estimates. VOLATILITY OF STOCK PRICE Our stock price is subject to significant volatility and will likely be adversely affected if revenues or earnings in any quarter fail to meet the investment community's expectations. Additionally, the market price of our common stock could be subject to significant fluctuations in response to (1) announcements of new products or services offered by us or our competitors, (2) loss of key customer, distributor or vendor relationships, (3) general conditions in the computer software industry, or (4) other events or factors. Furthermore, in recent years, the stock market in general, and the market for shares of stock in technology companies in particular, has experienced extreme price fluctuations. Such fluctuations could materially and adversely affect the market price of our common stock in the future. ANTITAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS Our Board of Directors has the authority to issue up to five million shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by our shareholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock. The issuance of preferred stock may have the effect of delaying, deterring or preventing a change in control of UniComp without further action by the shareholders and may adversely affect the voting and other rights of the holders of common stock. Furthermore, certain provisions of our charter documents may have the effect of delaying or preventing changes in control or management of UniComp, which could have an adverse effect on the market price of the common stock. NO DIVIDENDS ON COMMON STOCK We have not paid any cash dividends on the common stock since our inception and we do not anticipate paying cash dividends for the foreseeable future. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The principal market risks to which the Company is exposed are changes in foreign currency exchange rates and changes in interest rates. The Company's international revenues, which accounted for approximately 17% of the Company's total revenues in 2000 are concentrated in the United Kingdom and the Republic of Ireland. The Company manages its exposure to changes in foreign currency exchange rates by entering into revenue and expense transactions in corresponding currencies. As a result, today the Company has not hedged against foreign currency exchange risk. 33 The Company reduces its exposure to changes in interest rates by maintaining a high proportion of its debt in fixed-rate instruments. As of November 30, 2000, 26.8% of the Company's total debt was in fixed-rate instruments. The Company has a revolving line of credit that provides for borrowings by the Company of up to $3.0 million, which is fully utilized as of November 30, 2000. The Company also has a UK revolving line of credit that is currently being re-negotiated with the UK lender. There is no current availability on that facility as of November 30, 2000. The borrowings bear interest at a variable rate of the UK bank's base lending rate plus 1.75% or the 30 day commercial paper rate plus 3.0%. In addition, the Company maintains an average maturity of its short-term investment portfolio under twelve months to avoid large changes in its market value. As of November 30, 2000, the average maturity of the Company's short-term investments was less than one month. PART II. OTHER INFORMATION ITEMS 4 AND 5 ARE NOT APPLICABLE. ITEM 1. LEGAL PROCEEDINGS UniComp, Inc., Unibol, Inc. and Unibol, Ltd. filed a complaint in the Superior Court of Cobb County, Georgia on December 1, 2000 against California Software Corp. On or about November 10, 2000, UniComp, Inc., its wholly-owned subsidiary UniComp Computing Group, Limited (formerly known as ICS Computing Group, Limited) and California Software Corp. entered into a stock purchase agreement and addendum for the purchase by California Software Corp. of Unibol, Ltd., a wholly-owned subsidiary of UniComp Computing Group, Limited. The parties simultaneously entered into an addendum containing additional terms related to the sale of Unibol, Ltd. We are seeking a declaratory judgment that the agreement is enforceable against California Software Corp. and that only UniComp, Ltd. was purchased by California Software Corp., and that Unibol, Inc. is not affected by that agreement. California Software Corp. filed a complaint in the Superior Court of California, Orange County, on December 5, 2000 against UniComp, Inc., ICS Computing Group Ltd., Unibol, Inc., Unibol, Ltd., Stephen A. Hafer and Shelly Singhal. The complaint alleges that California Software also purchased Unibol, Inc. in connection with its purchase of Unibol, Ltd. California Software Corp.'s claim is based on discussions and negotiations regarding the purchase by California Software Corp. of Unibol, Inc., a wholly-owned subsidiary of UniComp, Inc., that took place prior to the execution of the stock purchase agreement and addendum. California Software Corp. is seeking a declaratory judgment that UniComp, Inc. is obligated to sell Unibol, Inc., an injunction restraining UniComp, Inc. from exercising ownership and control over Unibol, Ltd. or Unibol, Inc., possession of Unibol, Ltd. and Unibol, Inc., the reformation of the stock purchase agreement and addendum to reflect the alleged intention of the parties, and unspecified damages. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (a) On October 6, 1998, the Company filed Articles of Amendment to the Articles of Incorporation ("Articles of Amendment") of the Company designating 3,600 shares of Preferred Stock as Series A Convertible Preferred Stock, $1.00 par value, of which 600 shares may be issued only as dividends on the outstanding shares of Series A Convertible Preferred Stock issued on October 7, 1998. The Series A Convertible Preferred Stock ranks (i) senior to the Common Stock, now or hereafter issued, as to payment of dividends and distribution of assets upon liquidation, dissolution, or winding upon the Company; (ii) senior to any additional series of the class of Preferred Stock which series the Company's Board of Directors may from time to time authorize, both as to payment of dividends and as to distributions of assets upon liquidation, dissolution, or winding up the Company; and (iii) senior to any additional class of preferred stock (or series of preferred stock of such class) which the Board of Directors or the stockholders may from time to time authorize in accordance with the Articles of Amendment. Holders of the Series A Convertible Preferred Stock are entitled to receive, when, as, and if declared by the Board of Directors out of funds legally available for such purpose, dividends at the rate of $50.00 per annum per share, which are fully cumulative, shall accrue without interest (except for dividends in arrears) from the date of original issuance of each share and are payable quarterly on March 15, June 15, September 15, and December 15 of each year commencing December 15, 1998. Dividends on the Series A Convertible Preferred Stock may be paid in cash, or subject to certain limitations, dividends of additional shares of Series A Convertible Preferred Stock. In connection with the issuance of the Series A Convertible Preferred Stock, the Company has certain mandatory redemption obligations if certain events occur, such as upon conversion of the Series A Convertible Preferred Stock if the shares of Common Stock of the Company to be issue would exceed 1,576,000 shares of Common Stock. The Company also has certain optional redemption rights. 34 Holders of the Series A Convertible Preferred Stock may at any time on or after January 5, 1999 convert all or from time to time any part of such holder's shares of Series A Convertible Preferred Stock into fully paid and nonassessable shares of Common Stock of the Company and such other securities and property pursuant to the conversion formula set forth in the Articles of Amendment. However, absent shareholder approval, the maximum number of shares of Common Stock that may be issued upon conversion of the Series A Convertible Preferred Stock is 1,576,000. Holders of the Series A Convertible Preferred Stock are not entitled to vote on any matter. (b) None. (c) On September 30, 1998, the Company issued warrants for 25,000 shares of the Company's Common Stock to an "accredited investor" as defined by Rule 501 of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"). The warrants entitled the holders thereof to, upon exercise, purchase an aggregate of 25,000 shares of the Company's Common Stock at an exercise price of $3.00 per share. This transaction was exempt from the registration provisions of the Act, pursuant to section 4(2) of the Act for transactions not involving a public offering, based on the fact that the securities were offered and sold to one investor who had access to financial and other relevant data concerning the Company, its financial condition, business, and assets. On October 7, 1998, the Company issued 3,000 shares of Series A Convertible Preferred Stock, par value $1.00 per share, and warrants for 102,127 shares of the Company's Common Stock to an "accredited investor" as defined by Rule 501 of Regulation D promulgated by the Securities and Exchange Commission under the Act for an aggregate consideration of $3 million. This transaction was exempt from the registration provision of the Act pursuant to Rule 506 of Regulation D as promulgated by the Securities and Exchange Commission under the Act. Each share of Series A Convertible Preferred Stock may be converted into a number of shares of the Company's Common Stock pursuant to the terms of the Series A Convertible Preferred Stock Purchase Agreement; provided that, the maximum number of shares of Common Stock that may be issued upon conversion of the Series A Convertible Preferred Stock is 1,576,000. Absent the Company's certain redemption rights, the holders of the Series A Convertible Preferred Stock may at any time on or after January 5, 1999 convert all or from time to time any part of their shares of Series A Convertible Preferred Stock into fully paid and nonassessable shares of Common Stock and such other securities and property as provided in the Articles of Amendment. Each Series A Convertible Preferred Stock shall be converted pursuant to the conversion terms of the Articles of Amendment; provided that absent shareholder approval, the maximum number of shares of Common Stock that may be issued upon conversion of the Series A Convertible Preferred Stock is 1,576,000. See "Liquidity and Capital Resources" and "Subsequent Events." The holders of the Series A Convertible Preferred Stock have certain registration rights. As of May 31, 2000, all 3,000 shares of the Series A Convertible Preferred Stock had been redeemed for a combination of cash and shares of the Company's common stock. (d) Not required. 35 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 21.1 Subsidiaries of the Registrant (b) Reports on Form 8-K. The Company filed a report on Form 8-K on March 29, 2000 relating to the change in the Company's certifying accountants. On December 12, 2000, the Company filed on Form 8-K relating to the disposition of Unibol, Ltd on November 8, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNICOMP, INC. /s/ STEPHEN A. HAFER January 22, 2001 -------------------------------- -------------------------------- Stephen A. Hafer Date Chairman of the Board, President, Chief Executive Officer, and acting Chief Financial Officer Principal Executive Officer

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