JAVELIN SYSTEMS INC, SB-2/A, 1999-02-10

JAVELIN SYSTEMS INC
SB-2/A, 1999-02-10
COMPUTER INTEGRATED SYSTEMS DESIGN

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1999

REGISTRATION NO. 333-70865

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 1
TO
FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
--------------------------

JAVELIN SYSTEMS, INC.

(Name of Small Business Issuer in Its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 3571 52-1945748
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification
Organization) No.)
</TABLE>

17891 CARTWRIGHT ROAD
IRVINE, CA 92614
(949) 440-8000

(Address and Telephone Number of Principal Executive Offices)
--------------------------

RICHARD P. STACK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
JAVELIN SYSTEMS, INC.
17891 CARTWRIGHT ROAD
IRVINE, CA 92614
(949) 440-8000
(Name, Address, Telephone Number of Agent for Service)
--------------------------

COPIES TO:

JEREMY D. GLASER, ESQ. CAMERON JAY RAINS, ESQ.
MICHAEL A. NEWMAN, ESQ. SCOTT M. STANTON, ESQ.
ADAM C. LENAIN, ESQ. CHRISTIAN WAAGE, ESQ.
COOLEY GODWARD LLP GRAY CARY WARE & FREIDENRICH LLP
4365 EXECUTIVE DRIVE, SUITE 1100 4365 EXECUTIVE DRIVE, SUITE 1600
SAN DIEGO, CA 92121 SAN DIEGO, CA 92121
(619) 550-6000 (619) 677-1400

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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------

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

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value......... 2,875,000 $15.125 $43,484,375 $12,089
</TABLE>

(1) Includes 375,000 shares that the Underwriters have the option to purchase
solely to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act of
1933.
--------------------------

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

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SUBJECT TO COMPLETION, DATED FEBRUARY 10, 1999

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
2,500,000 SHARES

[LOGO]

COMMON STOCK

Of the shares of Common Stock offered, 2,000,000 shares are being sold by
Javelin and 500,000 shares are being sold by the Selling Stockholders named
under "Principal and Selling Stockholders." Javelin will not receive any of the
proceeds from the shares of Common Stock sold by the Selling Stockholders.

Javelin's Common Stock is traded on The Nasdaq National Market under the
symbol "JVLN". On February 9, 1999, the last reported sale price for the Common
Stock on The Nasdaq National Market was $11.88 per share.

INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON
PAGE 6.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS JAVELIN STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share................................................. $ $ $ $
Total(1).................................................. $ $ $ $
</TABLE>

(1) Javelin has granted the Underwriters an option, exercisable for 45 days from
the date of this prospectus, to purchase a maximum of 375,000 additional
shares to cover over-allotments of shares.

Delivery of the shares of Common Stock will be made on or about February ,
1999, against payment in immediately available funds.

FIRST SECURITY. VAN KASPER

TUCKER ANTHONY
Incorporated

MERIDIAN CAPITAL GROUP, INC.

FEBRUARY , 1999
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[LOGO]

[PHOTOGRAPHS OF PRODUCTS IN USE IN RETAIL AND RESTAURANT SETTINGS.]

Javelin Systems designs, manufactures and markets open systems touchscreen
point-of-sale ("POS") computers and provides system integration services
primarily for the food service and retail industries.

Javelin's POS computers assist restaurants, arenas and pubs to better serve
their customers and capture and analyze information to manage their businesses.

Javelin, Javelin-Wedge 5, Javelin-Wedge P, Javelin-LC, Javelin-LCP,
Javelin-LP, Javelin-HHT 40, CCI and Posnet are trademarks of the Company. All
other trademarks or service marks used in this Prospectus are the property of
their respective holders.
<PAGE>
PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK BEING SOLD IN THIS
OFFERING AND OUR FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS.

JAVELIN SYSTEMS, INC.

OUR COMPANY

We develop and sell open system point-of-sale ("POS") touchscreen computers
and provide related systems integration services primarily to the food service
and retail industries. Customers that use POS systems incorporating our products
can gather data from the point of sale and use it at the in-store "back office"
and the enterprise's headquarters. Our products enable our customers to process
transactions to better manage inventory and costs, analyze sales data and
customize their products and services. We believe that our success is based on
the application of open system PC technology to POS systems which allows our
customers to choose the software application that best meets their individual
needs. Our network-ready computers have substantially all of the functionality
of desktop personal computers and can be integrated with hardware from other
vendors. In addition, our computers are competitively priced, durable and have a
small footprint.

We sell our POS systems integration services primarily to corporate
customers with multi-site operations. Our knowledge of advanced information
technologies, POS systems and numerous software applications enables us to help
our customers identify the optimal POS system for their particular business. Our
experience in the food service and retail industries enables us to effectively
manage the full deployment and ongoing support of these customers' POS
solutions. Because we offer both systems integration services and hardware, we
can capture a greater percentage of a customer's total expenditures on POS
systems. We believe that the customer relationships we develop build recurring
help desk, maintenance and field service revenues and position us to recommend
changes and upgrades to systems.

OUR MARKETS AND CUSTOMERS

We estimate there are more than 450,000 restaurants and more than 1.6
million retail stores in the United States alone. These restaurants and retail
stores are increasingly part of multi-location chains that need robust,
integrated POS systems and services that can reliably manage large numbers of
individual transactions. We serve international markets through sales and
service offices in England, Australia and Singapore and through our recently
acquired European systems integration companies. We believe that Western Europe
presents an attractive untapped market for our products and services.

We distribute our products through resellers and through direct sales.
Because our resellers have direct knowledge of new business opportunities and
changing customer requirements, our relationships with the resellers can play a
critical role in getting our products to market. Our customers include, among
others, the following:

<TABLE>
<CAPTION>
PRODUCTS SERVICES
- ----------------------------- --------------------------
<S> <C>
McDonald's Corporation ARAMARK Corp.
Blimpies International Popeye's Inc.
Greyhound Lines Inc. Church's Fried Chicken
Madison Square Garden Seattle's Best Coffee
Universal Studios Baskin-Robbins USA Co.
Chevron Corporation Dunkin' Donuts Inc.
</TABLE>

OUR STRATEGY

Our objective is to become a leading developer of POS hardware systems and
to be the premier POS systems integrator for multi-site chain operators in the
food service and retail industries. Principal elements of our strategy include
the following:

- Pursue large customers directly and through our reseller relationships;

- Focus on international business opportunities;

- Minimize production costs;

- Grow the base of recurring service revenues; and

- Introduce new products on a timely basis.

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ACQUISITIONS

We initially focused on manufacturing open system touchscreen POS computers.
We have expanded our focus to include worldwide POS systems integration and
support services. To achieve our objective, we have acquired the following POS
systems service providers:

<TABLE>
<CAPTION>
ACQUIRED COMPANIES DATE LOCATION SERVICES OFFERED
- ---------------------------------- ------------------ ------------------- -----------------------------------------
<S> <C> <C> <C>
CCI Group, Inc. December 1997 United States POS systems integration
POSNET Computers, Inc. December 1997 United States POS systems integration
Aspact IT Services June 1998 Singapore Consulting; POS systems integration
RGB/Trinet Limited November 1998 United Kingdom Networking systems integration
Jade Communications Limited November 1998 United Kingdom POS systems integration
</TABLE>

Through these acquisitions, we now have the ability to provide POS systems
hardware, systems integration and support services throughout the United States,
Western Europe, Australia and Singapore.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company............................. 2,000,000 shares
Common Stock offered by the Selling Stockholders................ 500,000 shares
Common Stock to be outstanding after the Offering............... 7,835,333 shares(1)
Use of proceeds................................................. Working capital and other general
corporate purposes, including
potential acquisitions and product
development.
Nasdaq National Market symbol................................... JVLN
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

<TABLE>
<CAPTION>
INCEPTION TO FISCAL YEAR ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, DECEMBER 31,
------------ ----------------------------- --------------------------
1996 1997 1998 1997 1998
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Product sales................................. $ 1,463,600 $ 7,014,600 $27,132,400 $ 7,402,300 $25,585,500
Service....................................... -- -- 2,513,700 -- 5,214,200
------------ ------------ ------------ ------------ -----------
Total revenues.............................. 1,463,600 7,014,600 29,646,100 7,402,300 30,799,700
Gross profit.................................... 359,400 1,515,100 7,910,100 1,706,000 8,427,100
Research and development expenses............... 46,700 396,400 874,000 306,700 583,200
Selling and marketing expenses.................. 83,500 390,800 1,179,900 408,800 1,405,400
General and administrative expenses............. 244,700 859,900 4,195,500 822,900 4,217,600
Income (loss) from operations................... (15,500) (132,000) 1,660,700 167,600 2,220,900
Net income (loss)............................... $ (54,300) $ (826,900)(3) $ 1,014,100 $ 113,700 $ 1,046,600
Net income (loss) per share(2):
Basic......................................... $ (0.03) $ (0.30)(3) $ 0.28 $ 0.04 $ 0.22
Diluted....................................... $ (0.03) $ (0.30)(3) $ 0.27 $ 0.03 $ 0.22
Shares used in computing earnings (loss) per
share(2):
Basic......................................... 2,086,260 2,782,535 3,622,604 3,182,328 4,691,368
Diluted....................................... 2,086,260 2,782,535 3,750,611 3,304,206 4,831,333
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1998
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ACTUAL AS ADJUSTED(4)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents......................................................... $ -- $ 28,340,000
Working capital................................................................... 11,061,200 39,401,200
Total assets...................................................................... 42,943,800 71,283,800
Short-term debt................................................................... 3,016,500 3,016,500
Long-term debt, net of current portion............................................ 1,359,600 1,359,600
Total stockholders' equity........................................................ $ 22,662,400 $ 51,002,400
</TABLE>

4
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(1) Excludes: (i) 1,269,450 shares of Common Stock reserved for issuance upon
exercise of options outstanding at a weighted average exercise price of
$6.40 per share as of December 31, 1998; (ii) 151,332 shares of Common Stock
issuable upon exercise of warrants outstanding at a weighted average
exercise price of $9.33 per share as of December 31, 1998; and (iii) an
aggregate of 89,650 shares of Common Stock reserved for future issuance
under the Company's 1997 Equity Incentive Plan (the "1997 Plan"). See
"Management--Stock Option Plans," and "Description of Capital Stock."

(2) See Note 2 of Notes to Javelin Systems, Inc. Consolidated Financial
Statements (the "Javelin Consolidated Financial Statements") for a
description of the computation of the net income (loss) per share and the
number of shares used in the per share calculations.

(3) Net loss for the year ended June 30, 1997 includes interest expense of
approximately $636,100 related to warrants issued in connection with certain
promissory notes. This non-recurring interest expense is attributable to the
imputation of interest based upon the fair value of the warrants and did not
represent a cash expense to the Company.

(4) As adjusted to give effect to the sale of 2,000,000 shares of Common Stock
sold in the Offering by the Company hereby at an assumed public offering
price of $15.25 per share after deducting estimated underwriting discounts
and commissions and estimated offering expenses. See "Use of Proceeds" and
"Capitalization."

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

The following table presents certain operating and other data for each of
the four quarters in the fiscal year ended June 30, 1998 and for each of the
first two quarters in the fiscal year ending June 30, 1999. The information for
each of the quarterly periods is unaudited but includes all adjustments,
consisting only of normal recurring adjustments, that management considers
necessary to fairly present such information. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Quarterly Results of
Operations."

Units shipped (1)............. 1,638 2,351 2,535 4,083 5,437 5,454
</TABLE>

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(1) Includes only the Javelin product line.

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

Javelin was incorporated in the State of Delaware on September 19, 1995. Our
executive offices are located at 17891 Cartwright Road, Irvine, California,
92614, and our telephone number is (949) 440-8000. Javelin's World Wide Web
address is http://www.jvln.com. Information contained in our World Wide Web site
should not be considered to be part of this Prospectus.

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

UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND NO EXERCISE OF ANY
OUTSTANDING WARRANTS OR STOCK OPTIONS AS OF THE DATE OF THIS PROSPECTUS.

5
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RISK FACTORS

INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER THE FOLLOWING DISCUSSION OF RISKS AS WELL AS OTHER INFORMATION IN THIS
PROSPECTUS BEFORE PURCHASING ANY OF OUR COMMON STOCK.

EXCEPT FOR HISTORICAL INFORMATION, THE INFORMATION CONTAINED IN THIS
PROSPECTUS AND IN OUR SEC REPORTS ARE "FORWARD LOOKING" STATEMENTS ABOUT OUR
EXPECTED FUTURE BUSINESS AND PERFORMANCE. OUR ACTUAL OPERATING RESULTS AND
FINANCIAL PERFORMANCE MAY PROVE TO BE VERY DIFFERENT FROM WHAT WE MIGHT HAVE
PREDICTED AS OF THE DATE OF THIS PROSPECTUS. THE RISKS DESCRIBED BELOW ADDRESS
SOME OF THE FACTORS THAT MAY AFFECT OUR FUTURE OPERATING RESULTS AND FINANCIAL
PERFORMANCE.

WE HAVE A SHORT OPERATING HISTORY

We were incorporated in September 1995 and have a limited operating history
from which to evaluate our business or prospects. Our operating results in the
future will be subject to all of the risks and uncertainties inherent in the
development and maturation of a business. We anticipate that we will make
significant investments in our operations, particularly to support increased
sales activities and new product development. Our recent profitability does not
necessarily mean that we will be able to sustain profitability in the future.

WE CANNOT MAINTAIN OUR HISTORICAL RATE OF GROWTH

We are currently experiencing rapid growth and expansion. This rapid growth
and expansion is primarily due to acquisitions and increased sales of hardware,
both domestically and internationally.

We do not believe that our domestic hardware sales will continue to grow at
the rate at which they have grown in the past. Further, we cannot guarantee you
that we will be able to increase our domestic service sales or our foreign
hardware and service sales in the future at or near the rates that we have in
past.

WE MAY NOT BE ABLE TO MANAGE OUR GROWTH

Because we are currently experiencing rapid growth and expansion, we have
also experienced, and will continue to experience, a strain on our
administrative, engineering and operating resources. Our growth has also
increased the demands on our information systems and controls. We anticipate
that continued growth will require us to recruit and hire a number of additional
management personnel, particularly in operational management. We cannot
guarantee that we will be successful at hiring or retaining these personnel or
that we will be able to successfully expand and improve our operational,
management and financial systems and controls.

In addition, we plan to increase our operating expenses to:

- Expand our product line;

- Increase our sales and marketing operations;

- Increase the volume of products manufactured;

- Develop new distribution channels;

- Broaden our customer support capabilities;

- Grow our international sales force; and

- Develop and fully integrate our international operations.

We cannot guarantee that our expansion can be successfully implemented or
that the cost of our expansion will not exceed any revenues generated by it. In
addition, we may spend money on our expansion well before the expansion results
in greater sales or revenues. This may negatively impact our earnings in the
short term. Further, if the expansion does not result in increased revenues, our
financial performance may suffer and this could result in lower prices for our
common stock.

6
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OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY

Our operating results may fluctuate significantly in the future. Many
factors may cause these fluctuations, including:

- The size and timing of individual orders, particularly with respect to our
larger end users;

- General health of the food service industry, particularly the quick
service restaurant segment;

- Lengthy sales and implementation cycles;

- Competition and pricing in the POS systems industry;

- Our ability to expand our international and domestic sales;

- Changes in the mix of products and services sold;

- Employee hiring and retention, particularly with respect to sales and
consulting personnel; and

- The mix of distribution channels through which our products are sold.

We usually ship our products shortly after they are ordered and,
consequently, order backlog at the beginning of any quarter usually represents
only a small portion of that quarter's expected revenues. As a result, our
product revenues in any quarter are substantially dependent on orders booked and
shipped in that quarter, and this makes it difficult for us to predict revenues.

Our sales and implementation cycles vary substantially from customer to
customer. We have experienced, and expect to continue to experience, quarters or
periods where individual product or service orders are significantly larger than
our typical product or service orders. This will add to the unpredictability of
our revenues. Nevertheless, our expense levels are based in large part on
expectations of future revenues and are relatively fixed in the near term.
Because of this, our net income may be lower than expected if we experience an
unanticipated decline in revenue for a particular quarter. We also expect
expense levels to increase in the near term as we attempt to expand our
operations. Moreover, the POS systems industry is generally dependent on system
roll-outs with fixed time horizons. Our operating results, particularly with
respect to our systems integration business, may vary significantly if we fail
to obtain major projects, if major projects are cancelled or delayed or if we
fail to replace projects that have been completed or are nearing completion. In
addition, we may also experience relatively weaker demand for our products in
August, particularly in international markets, and December as a result of
reduced sales activities during those months.

As a result of the above factors, revenues and earnings for any quarter may
vary significantly and we do not believe that period-to-period comparisons of
our financial performance are necessarily meaningful. You should not rely on
them as an indication of our future performance. Fluctuations in our operating
results may also result in volatility in the price of our common stock. It is
likely that in some future quarter our total revenues or operating results will
be below the expectations of public market analysts or investors. If that
happens, the price of our common stock may decline.

THERE ARE MANY RISKS ASSOCIATED WITH OUR RECENT AND POTENTIAL FUTURE
ACQUISITIONS

We recently acquired CCI Group, Inc., POSNET Computers, Inc., Aspact IT
Services Ltd., RGB/Trinet Limited and Jade Communications Limited. Acquisitions
involve numerous risks. For example:

- It is often difficult to assimilate the operations and personnel of an
acquired business into our own business;

- Management information and accounting systems of an acquired business must
be integrated into our current systems;

- Our management must devote its attention to assimilating the acquired
business which diverts their attention from our other business concerns;

- We might enter markets in which we have limited prior experience; and

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- We might lose key employees of an acquired business.

In particular, the companies we acquired have self-contained management
information and accounting systems, and we have not yet created an information
management and accounting system that integrates them into our overall
enterprise. Further, the companies we acquired are POS systems integrators and
service providers and operate in a market where we have no direct prior
experience. We have devoted substantial time and resources to integrate these
recently acquired businesses, and we will be required to devote substantial time
and resources to integrate any other business we may acquire in the future.

We intend to continue to evaluate potential acquisitions of companies which
we believe will complement or enhance our existing business. If we acquire other
companies in the future, it may result in the issuance of equity securities that
could dilute your stock ownership. We may also incur additional debt and
amortize expenses related to goodwill and other tangible assets if we acquire
another company, and this could negatively impact our results of operations. We
currently do not have any arrangements or understandings to acquire any company
or business, and we cannot guarantee that we will be able to identify or
complete any acquisition in the future.

THERE ARE MANY RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

We derived approximately 10% of our total revenues from sales outside North
America, principally in Europe, in the year ended June 30, 1998. We anticipate
that the percentage of our revenues attributable to sales in international
markets will increase in the future since we have acquired RGB/Trinet and Jade,
which are both located in England. In fact, in the quarter ended December 31,
1998, we derived approximately 36% of our total revenues from sales outside
North America. Part of our growth strategy depends on increasing international
sales. If we cannot increase our international sales, we may not be able to
achieve our business objectives. We currently have sales or support staff
located in Singapore, Australia and England. We have already devoted significant
resources to, and expect to continue to devote resources to, our expansion into
foreign countries, particularly to expand our sales force. We also plan to
transfer a significant portion of our manufacturing operations to a third-party
manufacturer in Singapore. To increase international sales in the future, we
must establish additional foreign operations, hire additional personnel and
recruit additional international resellers. There are many risks inherent in our
international business activities. For example:

- We are subject to many foreign regulatory requirements that may change
without notice;

- Our expenses related to sales and marketing and research and development
may increase;

- We are subject to various export restrictions, and export licenses may not
always be available;

- We are subject to foreign tariffs and other trade barriers;

- Some of the foreign countries that we deal with suffer from political and
economic instability;

- Some of the foreign currencies that we deal with fluctuate significantly;

- Asian markets have recently suffered considerable turmoil;

- It can be more difficult to staff and manage our foreign operations; and

- We may have difficulty collecting accounts receivable.

Any of these factors could negatively affect our financial performance and
results of operations. In addition, some of our customer purchase agreements are
governed by foreign laws, which may differ significantly from U.S. laws.
Therefore, we may be limited in our ability to enforce our rights under such
agreements and to collect amounts owed to us should any foreign customer refuse
to pay us. We are also subject to the Foreign Corrupt Practices Act (the "FCPA")

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which may place us at a competitive disadvantage to foreign companies that are
not subject to the FCPA.

In addition, we cannot guarantee that we will be able to maintain or
increase international market demand for our products or services. Almost all of
our international sales are denominated in local currency. When accounts
receivable and accounts payable arising from international sales and services
are converted to U.S. dollars, the resulting gain or loss could contribute to
fluctuations in our operating results. We do not currently utilize foreign
currency hedging instruments, and we cannot assure you that fluctuations in
foreign currency rates will not impact our financial performance in the future.

A SIGNIFICANT PORTION OF OUR REVENUES ARE DERIVED FROM LARGE CUSTOMERS

We have derived, and believe that we may continue to derive, a significant
portion of our revenues from a limited number of large customers. For the six
months ended December 31, 1998, Wang (Global) accounted for 12.8% of our
revenues. For the fiscal year ended June 30, 1998, AFC Enterprises, Inc.
accounted for 11% of our revenues. For the fiscal year ended June 30, 1997,
ScanSource, Inc. and CompUSA Inc. accounted for 32% of our revenues. Our
customers may buy less of our products or services depending on their own
technological developments and internal budget cycles. A major customer in one
year may not purchase any of our products or services in another year, which may
negatively affect our financial performance. Further, as a result of our focus
in specific markets, such as the quick service restaurant market, we may be
affected by economic and other conditions that affect these markets.

WE ARE DEPENDENT ON KEY PERSONNEL

Our success is dependent, in part, upon certain key executive officers
remaining employed with us, including Richard P. Stack, our President and Chief
Executive Officer, Robert D. Nichols, our Executive Vice President and President
of CCI Group, Inc., C. Norman Campbell, our Vice President, Engineering, Moray
Boyd, Managing Director of Javelin Systems (Europe) Limited, and Horace M.
Hertz, our Chief Financial Officer. We also believe that our future success
depends to a significant degree upon the continued contributions of our sales,
marketing, research and development and manufacturing personnel. We have entered
into employment agreements with Messrs. Stack, Nichols and Campbell, and we
carry key-man life insurance on Messrs. Stack and Campbell. We also believe our
future success will depend largely upon our ability to attract and retain
highly-skilled hardware engineers, managerial, and sales and marketing
personnel. We compete against numerous companies, including larger, more
established companies, for our personnel. We do not know if we will be
successful in attracting or retaining skilled personnel. Further, the loss of
certain key employees or our inability to attract and retain other qualified
employees could negatively affect our financial performance.

OUR MARKETS ARE HIGHLY COMPETITIVE

The market for our products and services is highly competitive. It is also
subject to rapid change and sensitive to new product introductions or
enhancements and marketing efforts by industry participants. We expect to
continue to experience significant and increasing levels of competition in the
future. The principal elements of competition related to our products include:

- Price;

- Product features and performance;

- Compatibility with open systems;

- Quality and reliability;

- Brand awareness;

- Level of customer service; and

- Quality of display.

The POS systems integration industry is also highly competitive and
undergoing continual change. The principal elements of competition related to
our systems integration services include:

- Reputation;

- Scope of services provided;

9
<PAGE>
- Availability of resources; and

- Price.

In many of our markets, traditional computer hardware manufacturing,
communications and consulting companies provide the most significant
competition. We must also compete with smaller service providers that have been
able to develop strong local or regional customer bases. Most of our competitors
and potential competitors are more established, benefit from greater name
recognition and have significantly greater resources than we do. We also believe
the use of open systems architecture in our targeted industries is an important
competitive element. Several of our competitors currently offer open systems,
and we believe that the number of competitors offering open systems solutions
will grow over the next several years.

In order to effectively compete, we need to continue to grow our business
and generate greater revenue so that we have the resources to timely develop new
products and services in response to evolving technology and customer demands
and to sell products and services through a broad distribution channel. We
cannot assure you that we will be able to grow sufficiently to compete
effectively in this marketplace.

Our competitors include a substantial number of large well-established
companies including International Business Machines (IBM), MICROS Systems, Inc.,
Par Technology Corporation, Radiant Systems, Inc., NCR Corp., Panasonic
Communications and Systems Co., Fujitsu, Ltd. and ICL Retail Systems. These
companies all offer open systems architecture products and related services. We
cannot assure you that we will be able to compete effectively with these
competitors or that our existing competitors, or new competitors, will not
develop competitive products and services at lower prices than we offer.

Moreover, we have little or no proprietary barriers to entry that could keep
our competitors from developing products or services and technology similar to
ours or from selling competing products or services in our markets. We could be
forced to reduce prices and suffer reduced margins and market share due to
increased competition from manufacturers or distributors of products similar to,
or competitive with, our products, or from service providers that provide
services similar to our services. Competition could also render our technology
obsolete.

OUR GROWTH IS DEPENDENT ON DEVELOPING OUR DIRECT SALES AND MAINTAINING OUR
INDIRECT DISTRIBUTION CHANNELS

We presently market our products primarily through resellers of our products
and direct sales to end-users. We intend to continue to utilize these
distribution channels in the future. Moreover, as part of our strategy to
increase international sales, we will need to more fully develop similar
distribution channels in international markets. We also anticipate that our
services business will increase in the future, resulting in a greater emphasis
on marketing and distributing directly to end users.

As we increasingly rely on direct sales to end users, we anticipate
competing to a certain extent with certain resellers of our products. This
competition may harm our relationship with some of our resellers and may cause
some of them to terminate their relationship with us. If we cannot expand our
distribution channels, develop our international distribution channels or manage
any potential channel conflicts, our growth may be adversely affected. If we are
unable to recruit, manage or retain important resellers, or if they cannot
penetrate their respective market segments, our financial performance could
suffer. We cannot guarantee you that we will be able to attract resellers that
will be able to market our products effectively and who will be qualified to
provide timely and cost-effective customer support and service. We also cannot
assure you that we will be able to manage conflicts among our resellers. In
addition, our agreements with resellers typically do not restrict them from
distributing competing products, and in most cases these agreements can be
terminated by either party without cause.

Our future success depends in part upon our ability to attract, integrate,
train, motivate and retain sales and technical support personnel.

10
<PAGE>
We intend to rely more heavily in the future on direct sales to end users;
however, we cannot guarantee you that we will be able to expand our direct sales
force or that the revenue generated by the expansion will exceed the cost of
expanding our sales force. In addition, we expect to experience a significant
time lag between the date sales personnel are hired and the date sales personnel
become fully productive. Competition for sales and support personnel is intense,
and we compete in a market for sales personnel against numerous companies,
including larger, more established companies with significantly greater
financial resources than we have.

THERE ARE RISKS RELATED TO PRODUCT DEFECTS

Computer products and systems often contain undetected errors. Despite
product testing prior to sale, our products have in the past contained errors
that were discovered after they were sold. Errors or performance problems may
also be discovered in the future. If a customer detects a defect after shipment
in the future, it could result in loss of sales, delays in or elimination of
market acceptance, damage to our brand or to our reputation, or product returns
and warranty costs. This is particularly true in the quick service restaurant
market which does not tolerate product defects that cause a restaurant's POS
systems and cash registers to be inoperable. In addition, third-party products,
upon which our products are dependent, may contain defects which could reduce or
undermine entirely the performance of our products.

In addition, although our sales agreements with our customers typically
contain provisions designed to limit our exposure to potential product liability
claims, we do not know if these limitations of liability are enforceable or
would otherwise protect us from liability for damages to a customer resulting
from a defect in one of our products. Although we maintain product liability
insurance covering certain damages arising from implementation and use of our
products, we do not know if this insurance would cover any claims brought
against us. Any product liability or other claims brought against us, if
successful and of sufficient magnitude, could negatively impact our financial
performance.

WE ARE DEPENDENT ON THIRD-PARTY MANUFACTURERS AND SUPPLIERS

Although we have the capacity to manufacture limited volumes of our
products, we currently rely on, and intend in the future to rely more heavily
on, third-party manufacturers to manufacture and assemble our products. In
particular, we intend to transfer a significant portion of our manufacturing
operations to a third-party manufacturer in Singapore. Any termination of, or
significant disruption in, our relationship with our third-party manufacturers
may prevent us from filling customer orders in a timely manner since we
generally do not maintain large inventories of our products or components.

We have occasionally experienced, and may in the future experience, delays
in delivery of products and delivery of products of inferior quality from some
of our third-party manufacturers. Although alternate manufacturers are available
to produce our products, the number of manufacturers of some of our products is
limited, and qualifying a replacement manufacturer could take several months. In
addition, our use of third-party manufacturers reduces our direct control over
product quality, manufacturing timing, yields and costs. Disruption of the
manufacture of our products or a third-party manufacturers' failure to remain
competitive in functionality or price could delay or interrupt our ability to
manufacture or deliver our products to customers on a timely basis. Moreover,
although arrangements with our third-party manufacturers may contain provisions
for warranty obligations on the part of the third-party manufacturers, we remain
primarily responsible to our customers for warranty obligations.

We also depend upon third-party suppliers to deliver components that are
free from defects, competitive in functionality and cost and in compliance with
our specifications and delivery schedules. We cannot be certain that the
components we need to build our products will be available in the future. For
example, we are aware of a decrease in the availability of liquid crystal
display panels that we use in some of our products. If a third-party supplier
fails to comply with any of our procurement needs, our ability to manufacture or
deliver our products to our

11
<PAGE>
customers on a timely basis could be delayed or interrupted.

OUR GROWTH DEPENDS ON OUR ABILITY TO EXPAND INTO CERTAIN MARKET SECTORS

Although we have historically sold most of our products and services to the
food service industry, we are increasingly focusing on selling our products and
services to retailers and the industrial market. To date, we have only
recognized a limited amount of revenue in these markets. We cannot guarantee
that our products and services will gain acceptance in or meet these sectors'
expectations and needs.

WE MUST KEEP PACE WITH TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE

The POS computer industry is characterized by evolving technology and
industry standards. We must cost effectively develop and introduce new products
that keep pace with technological developments to compete. If we do not gain
market acceptance for our existing or new products or if we fail to introduce
progressive new products in a timely or cost-effective, our financial
performance will be negatively affected. We cannot guarantee you that our new
products, even if successfully developed, will ever achieve market acceptance.
Moreover, if our competitors introduce new technology or new industry standards
emerge, our existing products could be rendered obsolete and unmarketable.

Moreover, if we are going to develop and manufacture new competitive
products and enhance our existing products, we must continue to make significant
investments in engineering and product development. The success of product
enhancements and new products depends on a variety of factors, including product
selection and specification, timely and efficient completion of product design,
cost-effective implementation of the manufacturing and assembly processes and
effective sales and marketing efforts. We cannot guarantee you that we will be
able to successfully manage all of the diverse aspects of successful product
development.

WE HAVE FEW PROPRIETARY RIGHTS

We hold no patents and believe that our competitive position is not
dependent upon patent protection. We believe that most of the technology used in
the design and manufacture of our products is generally known and available to
others. Consequently, others can develop, market and sell products substantially
equivalent to our products, or utilize technologies similar to those used by us.
We are aware of at least one competitor who has attempted to copy our products
in the past, and similar attempts may be made in the future. Although we believe
that our products do not infringe on any third party's patents, we cannot be
certain that we will not become involved in litigation involving patents or
proprietary rights. Patent and proprietary rights litigation entails substantial
legal and other costs, and we do not know if we will have the necessary
financial resources to defend or prosecute our rights in connection with any
litigation. Responding to, defending or bringing claims related to our
intellectual property rights may require our management to redirect our human
and monetary resources to address these claims.

WE MAY REQUIRE ADDITIONAL CAPITAL IN THE FUTURE

We have expended, and will continue to expend, substantial funds on
expansion of our sales and marketing efforts, expansion of our services
business, potential acquisitions and product development. We expect that the net
proceeds of this Offering, together with current sources of financing available
to us, will be sufficient to fund our operations for the next eighteen months.
After that, we may require additional funds to finance our operations. We do not
know at this time when we may need additional funds, and we cannot be certain
that if we do need additional funds in the future that we will be able to obtain
them on terms satisfactory to us, if at all. If we do raise additional funds
through the issuance of equity or convertible debt securities, your stock
ownership will be diluted. Further, these new securities may have rights,
preferences or privileges senior to yours. Additionally, any debt financing that
may be available to us may include restrictive covenants. If we are unable to
raise additional funds when

12
<PAGE>
necessary, we may have to reduce planned capital expenditures, scale back our
manufacturing, sales or other operations or enter into financing arrangements on
terms which we would not otherwise accept.

OUR PRODUCTS MUST BE COMPATIBLE WITH THIRD PARTY SOFTWARE

Although we produce PC-based open system hardware for the food service and
retail industries, we do not develop software. Consequently, we are dependent
upon third party software providers to develop the POS application software that
operates on our hardware platform. As in other sectors of the computer industry,
hardware sales can often be driven by advances in software technology.
Accordingly, if software providers do not, or are unable to, continue to provide
state-of-the-art POS application software that runs on our hardware, our
financial performance may suffer.

We cannot guarantee that all available software will be compatible with our
hardware. In the past, certain software installed in our products did not
function properly and software fixes were required. Further, we cannot assure
you that we will have the technical personnel necessary to evaluate and fix any
software compatibility problems that may exist in the future. If we do not have
technical personnel available to address and fix similar software compatibility
problems, our sales could decline.

YEAR 2000 ISSUE RISKS MAY RESULT IN A MATERIAL ADVERSE EFFECT ON OUR BUSINESS

We are aware of the issues associated with the programming code in existing
computer systems as the year 2000 approaches. The year 2000 problem is pervasive
and complex. Virtually every computer operation will be affected in some way by
the rollover of the two digit year value to "00". The issue is whether computer
systems will properly recognize date-sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. We are reviewing both our information
technology and our non-information technology systems to determine whether they
are year 2000 compliant, and to date we have not identified any material systems
which are not year 2000 compliant. We have not made any material expenditures to
address the year 2000 problem and do not anticipate that we will be required to
make any such material expenditure in the future.

We have contacted all of our significant suppliers and service providers to
determine the extent to which we are vulnerable to their failure to address the
year 2000 problem. Although we have received verbal assurances from some of
these third parties that their systems are year 2000 compliant, we have not yet
received written assurances from any of them. Although we do not believe our
operations will be significantly disrupted even if third parties with whom we
have relationships are not year 2000 compliant, we cannot guarantee you that any
year 2000 compliance problems of our suppliers or resellers of our products will
not negatively affect our financial performance. If our suppliers are unable to
provide us sufficient quantities of materials or goods as a result of their
failure to be year 2000 compliant, we believe that we can obtain adequate
supplies of materials and goods at comparable prices from other sources. If
resellers of our products are adversely affected by any failure to become year
2000 compliant and are therefore unable to purchase anticipated quantities of
our products on a timely basis, we may seek to replace these resellers. Because
uncertainty exists concerning the potential costs and effects associated with
any year 2000 compliance, we intend to continue to make efforts to ensure that
third parties with whom we have relationships are year 2000 compliant.

The year 2000 problem could also have an effect on our revenues. Demand for
some of our products and services may decline after January 1, 2000 because
most, if not all, of a customer's year 2000 driven POS retrofit will have been
completed by that time. Similarly, many companies may spend substantial
resources to prevent or minimize problems associated with the year 2000 problem
and therefore may choose not to, or not have the budget capacity to, upgrade
their current POS systems for some period of time.

13
<PAGE>
MANAGEMENT HAS BROAD DISCRETION TO USE THE NET PROCEEDS OF THIS OFFERING

We intend to use the proceeds of this offering principally for working
capital and general corporate purposes, including potential acquisitions and
product development. Our management and Board of Directors have broad discretion
with respect to the application of the proceeds, and the amounts we actually
spend on operations may vary significantly depending on a number of factors,
including the amount of cash, if any, generated by our operations.

OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE

The market price of our common stock has been, and is likely to continue to
be, volatile. When we or our competitors announce new customer orders or
services, change pricing policies, experience quarterly fluctuations in
operating results, announce strategic relationships or acquisitions, change
earnings estimates, experience government regulatory actions or suffer from
generally adverse economic conditions, our stock price is often affected.
Recently, companies similar to ours have experienced extreme price fluctuations,
often for reasons unrelated to their performance.

WE MAY ISSUE PREFERRED STOCK IN THE FUTURE; DELAWARE LAW AND SOME PROVISIONS OF
OUR CHARTER MAY AFFECT THE PRICE OF YOUR STOCK

We are authorized to issue up to 1,000,000 shares of preferred stock. We may
issue the preferred stock in one or more series. Our Board of Directors may
determine the terms of the preferred stock without further action by our
stockholders. These terms may include voting rights, preferences as to dividends
and liquidation, conversion and redemption rights, and sinking fund provisions.
Although we have no present plans to issue shares of preferred stock, if we do
issue preferred stock, it could affect your rights or even reduce the value of
your common stock. In particular, specific rights granted to future holders of
preferred stock could be used to restrict our ability to merge with or sell our
assets to a third party. Further, special meetings of our stockholders may be
called only by the Chairman of the Board of Directors, the Chief Executive
Officer of the Company, by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors or by the
holders of 10% of the outstanding voting stock of the Company. Our corporate
charter documents also provide for staggered terms for the members of the Board
of Directors. These and other provisions of our charter documents, as well as
certain provisions of Delaware law, could delay or make more difficult certain
types of transactions involving a change in control of the Company or our
management. As a result, the price of our common stock may be adversely
affected.

THERE ARE SUBSTANTIAL SHARES ELIGIBLE FOR FUTURE SALE; THE SALE OF SUCH SHARES
MAY DEPRESS OUR STOCK PRICE

If our stockholders sell substantial amounts of our common stock (including
shares issued upon the exercise of outstanding options and warrants) in the
public market following this offering, the market price of our common stock
could fall. These sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and at a price that we deem
appropriate. Upon completion of this offering, we will have outstanding
7,835,333 shares of common stock (based upon shares outstanding as of January
15, 1999), assuming no exercise of the Underwriters' over-allotment option and
no exercise of outstanding options or warrants after January 15, 1999. Of these
shares, the 2,500,000 shares sold in this offering, together with the 850,000
shares sold in our initial public offering in October 1996 and the 1,552,500
shares sold in our public offering in October 1998 are freely tradable. Of the
remaining 2,932,833 shares, the following 2,835,775 shares are eligible for sale
in the public market as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ------------------------- ------------------------
<S> <C>
940,467 Prospectus date
90,000 April 26, 1999
1,805,308 180 days after
the prospectus date
</TABLE>

The above table excludes options to purchase 1,269,450 shares of common
stock and warrants to purchase 151,332 shares of common stock that were
outstanding on January 15, 1999.

14
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby at an assumed public offering price
of $15.25 per share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company, are
estimated to be approximately $28.3 million ($33.7 million if the Underwriters
over-allotment option is exercised in full). The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders.

The Company intends to use the net proceeds from this Offering primarily for
working capital needs and general corporate purposes, including selected
acquisitions or investments in complementary businesses or products and product
and market development. While from time to time the Company evaluates potential
acquisitions of businesses and products and anticipates continuing to make these
evaluations, there are no present understandings, commitments or agreements with
respect to any acquisition of businesses or products. Pending such uses, the net
proceeds of this Offering will be invested in short-term, interest-bearing
securities, including money market funds.

PRICE RANGE OF COMMON STOCK

The Company effected its initial public offering on October 25, 1996, at a
price to the public of $5.00 per share. From that date until October 27, 1998,
the Common Stock traded on the Nasdaq SmallCap Market under the symbol "JVLN."
Since October 27, 1998, the Common Stock has traded on the Nasdaq National
Market under the symbol "JVLN." The following table sets forth the high and low
sales prices for the Common Stock for the quarters indicated as reported on
Nasdaq. Prices reflect inter-dealer prices without retail mark-up, mark-down or
commissions, and may not necessarily reflect actual transactions.

<TABLE>
<CAPTION>
HIGH LOW
------------ -----------
<S> <C> <C>
YEAR ENDED JUNE 30, 1997
Second Quarter (from October 25, 1996)..................................... 51/2 41/2
Third Quarter.............................................................. 51/2 41/2
Fourth Quarter............................................................. 63/8 45/8
YEAR ENDED JUNE 30, 1998
First Quarter.............................................................. 111/4 41/2
Second Quarter............................................................. 1013/16 81/2
Third Quarter.............................................................. 103/4 71/2
Fourth Quarter............................................................. 15 93/8
YEAR ENDED JUNE 30, 1999
First Quarter.............................................................. 131/8 7
Second Quarter............................................................. 131/8 61/2
Third Quarter (to February 9, 1999)........................................ 171/2 115/16
</TABLE>

On February 9, 1999, the last reported sale price of the Common Stock on the
Nasdaq National Market was $11.88 per share. As of December 31, 1998, there were
77 holders of record of the Company's Common Stock. This number does not reflect
the number of beneficial holders of the Company's Common Stock, which the
Company believes to be in excess of 600 holders.

DIVIDEND POLICY

To date, the Company has not declared nor paid any cash dividends on its
Common Stock. The Company currently intends to retain any future earnings to
finance the growth and development of its business and therefore does not
anticipate paying any cash dividends in the foreseeable future. In addition, a
loan agreement of the Company prohibits the payment of cash dividends on the
Company's capital stock without the consent of the lender.

15
<PAGE>
CAPITALIZATION

The following table sets forth as of December 31, 1998 (i) the actual
capitalization of the Company and (ii) the capitalization of the Company as
adjusted to give effect to the sale of 2,000,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $15.25 per share
(after deducting estimated underwriting discounts and commissions and estimated
offering expenses). This table should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------
ACTUAL AS ADJUSTED
------------- -------------
<S> <C> <C>
Short-term debt, including current portion of long-term debt... $ 3,016,500 $ 3,016,500
------------- -------------
------------- -------------
Long-term debt, net of current portion......................... $ 1,359,600 $ 1,359,600
------------- -------------
Stockholders' equity:
Preferred Stock, $0.01 par value: 1,000,000 shares authorized
and no shares issued and outstanding, actual and as
adjusted................................................... -- --
Common Stock, $0.01 par value: 20,000,000 shares authorized,
actual and as adjusted; 5,835,333 shares issued and
outstanding, actual; 7,835,333 shares issued and
outstanding, as adjusted(1)................................ 58,400 78,400
Additional paid-in capital..................................... 21,472,400 49,792,400
Deferred compensation.......................................... (22,200) (22,200)
Retained earnings.............................................. 1,179,500 1,179,500
Cumulative translation adjustment.............................. (25,700) (25,700)
------------- -------------
Total stockholders' equity................................... 22,662,400 51,002,400
------------- -------------
Total capitalization....................................... $ 24,022,000 $ 52,362,000
------------- -------------
------------- -------------
</TABLE>

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

(1) Excludes: (i) 1,269,450 shares of Common Stock reserved for issuance upon
exercise of options outstanding at a weighted average exercise price of
$6.40 per share as of December 31, 1998; (ii) 151,332 shares of Common Stock
issuable upon exercise of warrants outstanding at a weighted average
exercise price of $9.33 per share as of December 31, 1998; and (iii) an
aggregate of 89,650 shares of Common Stock reserved for future issuance
under the 1997 Plan. See "Management-- Stock Option Plans," and "Description
of Capital Stock."

16
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

On December 19, 1997, the Company acquired all of the outstanding capital
stock of POSNET Computers, Inc. ("Posnet") pursuant to the terms of a Stock
Purchase Agreement by and among the Company, Posnet and the selling shareholders
of Posnet. Posnet sold, installed and maintained POS systems and turnkey retail
automation systems. The purchase price for the Posnet stock consisted of 300,000
shares of the Common Stock of the Company. See Notes 3 and 9 to Javelin
Consolidated Financial Statements. The acquisition has been accounted for using
the purchase method, and accordingly, the results of operations of Posnet have
been included with those of the Company beginning at the date of acquisition.
The purchase price of $1,957,400 (including acquisition costs of $75,500) was
based on the quoted market price of the Company's Common Stock at the date of
acquisition and the date which shares of the Company's Common Stock were issued
for the cancellation of certain earnout shares. Shares issued to Posnet were
discounted by 25% due to restrictions and liquidity. The purchase price resulted
in an excess of the cost of acquisition over the net assets acquired of
$2,399,200. Such excess is being amortized on a straight-line basis over 25
years. The final allocation of the purchase price may vary as additional
information is obtained, and accordingly, the ultimate allocation may differ
from that used in the Unaudited Pro Forma Condensed Financial Information. See
Note 9 to Javelin Consolidated Financial Statements.

On December 22, 1997, the Company acquired all of the outstanding capital
stock of CCI Group, Inc. ("CCI") pursuant to the terms of a Plan of
Reorganization and Stock Purchase Agreement by and among the Company, CCI and
the selling shareholders of CCI. CCI sold, installed and maintained POS systems
and turnkey retail automation systems. The purchase price for the CCI stock
consisted of 670,000 shares of the Common Stock of the Company. The acquisition
has been accounted for using the purchase method, and accordingly, the results
of operations of CCI have been included with those of the Company beginning at
the date of acquisition. The purchase price of $4,476,800 (including acquisition
costs of $111,300) was based on the quoted market price of the Company's Common
Stock at the date of acquisition discounted by 25% due to restrictions and
liquidity. The purchase price resulted in an excess of the cost of acquisition
over the net assets acquired of $4,097,500. Such excess is being amortized on a
straight-line basis over 25 years. The final allocation of the purchase price
may vary as additional information is obtained, and accordingly, the ultimate
allocation may differ from that used in the Unaudited Pro Forma Condensed
Financial Information.

The Unaudited Pro Forma Condensed Financial Information for the year ended
June 30, 1998 presents the combined results of operations of Javelin for the
year ended June 30, 1998 and the historical results of operations of CCI and
Posnet from July 1, 1997 through the date of acquisition as if the acquisitions
had occurred on July 1, 1997, after giving effect to certain adjustments
described in the attached Notes to Unaudited Pro Forma Condensed Financial
Information.

The combined company expects to achieve merger benefits in the form of
operating cost savings. The unaudited pro forma earnings, which do not reflect
any direct costs or potential savings, are not indicative of the results of
future operations. No assurances can be given with respect to the ultimate level
of expense savings.

Unaudited pro forma results of operations for RGB/Trinet Ltd., Jade
Communications Ltd., and Aspact IT Services (Singapore) Pte Ltd. have not been
included as their results of operations were not significant.

17
<PAGE>
JAVELIN SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
FOR THE YEAR ENDED JUNE 30, 1998

<TABLE>
<CAPTION>
JAVELIN CCI POSNET TOTAL ADJUSTMENTS PRO FORMA
----------- ---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales......................... $27,132,400 $3,718,300 $1,949,800 $32,800,500 $(869,200)(1) $31,931,300
Service............................... 2,513,700 925,100 711,700 4,150,500 -- 4,150,500
----------- ---------- ---------- ----------- ---------- -----------
Total revenues...................... 29,646,100 4,643,400 2,661,500 36,951,000 (869,200) 36,081,800
----------- ---------- ---------- ----------- ---------- -----------
Cost of revenues:
Cost of product sales................. 19,831,300 3,049,000 1,179,600 24,059,900 (869,200)(1) 23,190,700
Cost of service....................... 1,904,700 652,500 370,300 2,927,500 -- 2,927,500
----------- ---------- ---------- ----------- ---------- -----------
Total cost of revenues.............. 21,736,000 3,701,500 1,549,900 26,987,400 (869,200) 26,118,200
----------- ---------- ---------- ----------- ---------- -----------
Gross profit............................ 7,910,100 941,900 1,111,600 9,963,600 -- 9,963,600
----------- ---------- ---------- ----------- ---------- -----------
Operating expenses:
Research and development.............. 874,000 -- -- 874,000 -- 874,000
Selling, general and administrative... 5,375,400 862,500 1,058,400 7,296,300 137,200(2) 7,433,500
----------- ---------- ---------- ----------- ---------- -----------
Total............................... 6,249,400 862,500 1,058,400 8,170,300 137,200 8,307,500
----------- ---------- ---------- ----------- ---------- -----------
Income (loss) from operations........... 1,660,700 79,400 53,200 1,793,300 (137,200) 1,656,100
Other income (expense).................. (61,700) (6,200) 3,000 (64,900) -- (64,900)
----------- ---------- ---------- ----------- ---------- -----------
Income before income taxes.............. 1,599,000 73,200 56,200 1,728,400 (137,200) 1,591,200
Provision for income taxes.............. (584,900) (29,700) (800) (615,400) -- (615,400)
----------- ---------- ---------- ----------- ---------- -----------
Net income (loss)....................... $ 1,014,100 $ 43,500 $ 55,400 $ 1,113,000 $(137,200) $ 975,800
----------- ---------- ---------- ----------- ---------- -----------
----------- ---------- ---------- ----------- ---------- -----------
Weighted average shares outstanding:
Basic................................. 4,517,600
-----------
-----------
Diluted............................... 4,645,600
-----------
-----------
Earnings per share:
Basic................................. $ 0.22
-----------
-----------
Diluted............................... $ 0.21
-----------
-----------
</TABLE>

NOTE 1

The Unaudited Pro Forma Condensed Financial Information should be read in
conjunction with the financial statements and the notes thereto included
elsewhere in this Prospectus.

NOTE 2

The Unaudited Pro Forma Condensed Financial Information reflects the
acquisition of Posnet and CCI using the purchase method of accounting.

Purchase accounting adjustments related to the foregoing acquisitions
reflected in the Unaudited Pro Forma Condensed Financial Information for the
year ended June 30, 1998 are summarized as follows:

<TABLE>
<S> <C> <C>
(1) Elimination of intercompany sales and cost of sales.......... $ 869,200
No adjustments were necessary to eliminate intercompany
profits from inventory as such amount was not significant.

(2) Amortization of goodwill..................................... $ 137,200
No adjustments to the provision for income taxes were
required since the amortization of goodwill is not deductible
for income tax purposes.
</TABLE>

18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Javelin Consolidated Financial Statements and
the Notes thereto included elsewhere in this Prospectus. The Consolidated
Statements of Operations Data for the period from inception to June 30, 1996 and
for the years ended June 30, 1997 and 1998 and the Consolidated Balance Sheet
Data as of June 30, 1996, 1997 and 1998 are derived from the Javelin
Consolidated Financial Statements, which financial statements have been audited
by Ernst & Young LLP, independent auditors for the period from inception to June
30, 1996 and the year ended June 30, 1997 and by PricewaterhouseCoopers LLP,
independent accountants, for the year ended June 30, 1998. The consolidated
statements of operations data for the six month periods ended December 31, 1997
and 1998 and the consolidated balance sheet data at December 31, 1998 are
derived from unaudited consolidated financial statements included elsewhere in
this Prospectus. The data at and for the six months ended December 31, 1997 and
December 31, 1998 include, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the Company's financial position at those dates and results of
operations for those periods. The results of operations for the six months ended
December 31, 1998 are not necessarily indicative of the results to be expected
for the full year or future periods.
<TABLE>
<CAPTION>
SIX MONTHS
INCEPTION TO FISCAL YEAR ENDED ENDED
JUNE 30, JUNE 30, DECEMBER 31,
------------ --------------------------------- ------------
1996 1997 1998 1997
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Product sales.......................................... $1,463,600 $ 7,014,600 $ 27,132,400 $ 7,402,300
Service................................................ -- -- 2,513,700 --
------------ -------------- ------------ ------------
Total revenues....................................... 1,463,600 7,014,600 29,646,100 7,402,300
------------ -------------- ------------ ------------
Cost of revenues:
Cost of product sales.................................. 1,104,200 5,499,500 19,831,300 5,696,300
Cost of service........................................ -- -- 1,904,700 --
------------ -------------- ------------ ------------
Total cost of revenues............................... 1,104,200 5,499,500 21,736,000 5,696,300
------------ -------------- ------------ ------------
Gross profit............................................. 359,400 1,515,100 7,910,100 1,706,000
------------ -------------- ------------ ------------
Operating expenses:
Research and development............................... 46,700 396,400 874,000 306,700
Selling and marketing.................................. 83,500 390,800 1,179,900 408,800
General and administrative............................. 244,700 859,900 4,195,500 822,900
------------ -------------- ------------ ------------
Total operating expenses............................. 374,900 1,647,100 6,249,400 1,538,400
------------ -------------- ------------ ------------
Income (loss) from operations............................ (15,500) (132,000) 1,660,700 167,600
Interest expense......................................... (38,800) (709,500) (115,000) (8,800)
Other income............................................. -- -- 41,100 6,100
Interest income.......................................... -- 14,600 12,200 8,000
------------ -------------- ------------ ------------
Income before income taxes............................... (54,300) (826,900) 1,599,000 172,900
Provision for income taxes............................... -- -- (584,900) (59,200)
------------ -------------- ------------ ------------
Net income (loss)........................................ $ (54,300) $ (826,900)(2) $ 1,014,100 $ 113,700
------------ -------------- ------------ ------------
------------ -------------- ------------ ------------
Earnings per common share:
Basic.................................................. $ (0.03) $ (0.30)(2) $ 0.28 $ 0.04
Diluted................................................ $ (0.03) $ (0.30)(2) $ 0.27 $ 0.03
Shares used in computing earnings (loss) per share:
Basic.................................................. 2,086,260 2,782,535 3,622,604 3,182,328
Diluted................................................ 2,086,260 2,782,535 3,750,611 3,304,206

1998
------------
<S> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Product sales.......................................... $ 25,585,500
Service................................................ 5,214,200
------------
Total revenues....................................... 30,799,700
------------
Cost of revenues:
Cost of product sales.................................. 18,321,700
Cost of service........................................ 4,050,900
------------
Total cost of revenues............................... 22,372,600
------------
Gross profit............................................. 8,427,100
------------
Operating expenses:
Research and development............................... 583,200
Selling and marketing.................................. 1,405,400
General and administrative............................. 4,217,600
------------
Total operating expenses............................. 6,206,200
------------
Income (loss) from operations............................ 2,220,900
Interest expense......................................... (469,200)
Other income............................................. 17,700
Interest income.......................................... 8,200
------------
Income before income taxes............................... 1,777,600
Provision for income taxes............................... (731,000)
------------
Net income (loss)........................................ $ 1,046,600
------------
------------
Earnings per common share:
Basic.................................................. $ 0.22
Diluted................................................ $ 0.22
Shares used in computing earnings (loss) per share:
Basic.................................................. 4,691,368
Diluted................................................ 4,831,333
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, 1998
---------------------------------- --------------------------
1996 1997 1998 ACTUAL AS ADJUSTED(3)
---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................................... $ 6,400 $ 686,200 $ -- $ -- $ 28,340,000
Working capital................................................ 232,200 3,028,900 4,080,700 11,061,200 39,401,200
Total assets................................................... 951,300 5,203,000 22,531,300 42,943,800 71,283,800
Short-term debt................................................ 291,600 200,000 1,643,000 3,016,500 3,016,500
Long-term debt, net of current portion......................... 75,000 -- 1,200,000 1,359,600 1,359,600
Total stockholders' equity..................................... 195,000 3,354,500 11,398,900 21,662,400 51,002,400
</TABLE>

- ------------------------------
(1) See Note 2 of Notes to Javelin Consolidated Financial Statements for a
description of the computation of the net income (loss) per share and the
number of shares used in the per share calculation.

(2) Net loss for the year ended June 30, 1997 includes interest expense of
approximately $636,100 related to warrants issued in connection with certain
promissory notes. This non-recurring interest expense is attributable to the
imputation of interest based upon the fair value of the warrants and did not
represent a cash expense to the Company.

(3) As adjusted to give effect to the sale of 2,000,000 shares of Common Stock
sold in the Offering by the Company hereby at an assumed public offering
price of $15.25 per share after deducting estimated underwriting discounts
and commissions and estimated offering expenses. See "Use of Proceeds" and
"Capitalization."

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE JAVELIN
CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO AND THE OTHER
FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF ANY NUMBER OF FACTORS, INCLUDING THOSE
SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

The Company was incorporated in September 1995 and commenced shipping its
initial products in December 1995. From its inception through the quarter ended
March 31, 1997, the Company experienced operating losses primarily as a result
of costs incurred in connection with product development and the establishment
of distribution channels, partially offset by revenues from product sales.
Javelin sells its hardware products through its direct sales force and
indirectly through OEMs and VARs.

RECENT ACQUISITIONS

In December 1997, the Company acquired all of the outstanding capital stock
of CCI Group, Inc. ("CCI") and POSNET Computers, Inc. ("Posnet"). CCI and Posnet
have been combined and now operate as CCI. CCI sells the Javelin product line as
well as hardware from other manufacturers and provides POS systems integration
and support services directly to end-users. These acquisitions were consummated
to enable the Company, among other things, to sell products and services
directly to large end-users and to capture a greater proportion of each
customer's POS system expenditures, including system design, installation,
maintenance and help desk. These acquisitions and increased product sales have
resulted in substantial growth in revenues, operating profits and net income.

Through March 31, 1998, substantially all of the Company's sales had been
made to domestic customers. To implement its marketing strategy internationally,
the Company established foreign subsidiaries in March and April 1998 in England,
Singapore and Australia and in November 1998 acquired all of the outstanding
capital stock of two companies based in England, RGB/Trinet Limited
("RGB/Trinet") and Jade Communications Limited ("Jade"). In addition to the
ongoing service revenues that Jade's existing operations may generate, the
Company anticipates that these acquisitions will increase international sales of
Javelin's product line through indirect distribution channels. Although the
Company is not presently contemplating the acquisition of any other companies,
the Company may pursue opportunities, if they arise, for strategic acquisitions
both domestically and internationally.

The acquisitions of CCI and Posnet were accounted for using the purchase
method, and accordingly, the results of operations of these subsidiaries have
been consolidated with those of the Company commencing on the respective dates
of acquisition. The acquisitions of RGB/Trinet and Jade were accounted for using
the purchase method, and accordingly, their results of operations were included
with those of the Company from the date of acquisition. The Company amortizes
goodwill resulting from its acquisitions over 25 years.

COMPOSITION OF REVENUES

The replacement cycle for hardware in the POS food service industry is
generally long, and consequently, revenues for hardware products to a specific
end-user tend to be non-recurring. Certain services, such as system design and
installation, also tend to be non-recurring. Other services, such as maintenance
and help desk, are of an ongoing nature, and the related revenues tend to be
recurring. Through December 31, 1997, the Company's revenues consisted solely of
product sales. Due to the acquisition of CCI, service revenues represented 11.3%
of total revenues in the six months ended June 30, 1998 and 8.5%

20
<PAGE>
in fiscal 1998. The Company anticipates that service revenues in the future will
increase as a percentage of total revenues.

If the Company's strategy to increase sales to large end-users who have
volume purchasing power is successful, the Company believes its gross margins
may decline over time. Notwithstanding such potential decline in gross margins,
the Company believes that increased sales to large end-users may improve
operating margins because (1) related sales and marketing costs as a percentage
of revenues may be lower than the costs incurred to generate sales to indirect
distribution channels, and (2) increased related general and administrative
costs necessary to support the additional revenues should not be significant. In
addition, sales to large end-users may result in significant variations in
revenues or profits from period to period due to, among other things, the timing
and size of large orders, delays in system installations or the Company's
inability to generate new sales on a timely basis to large end-users.

Revenues from product sales are generated from the sale of hardware
manufactured by Javelin and other independent manufacturers and are recorded as
the products are shipped. Service revenues are generated by the installation of
products and the provision of consulting and other services. Service revenues
are recognized upon the completion of installation or ratably over the term of
related contracts.

COST OF REVENUES

Cost of revenues from product sales consists of the acquisition costs of
non-Javelin product line hardware that is resold by the Company and the costs of
components and payroll and related costs for assembly, manufacturing,
purchasing, quality control and repairs of Javelin products. Sales of
non-Javelin hardware through CCI generally carry a lower gross margin than do
other product sales. The cost of the components incorporated in the Javelin
product line represents in excess of 85% of the total cost of such products. The
cost of five components represents in excess of 75% of the cost of all
components included in the Javelin product line. While the Company has in the
past experienced reductions in the cost of components due to increased volume of
purchases, it believes that these costs have now stabilized and that further
material reductions may be difficult to achieve. The Company is in the process
of qualifying two independent outside contract manufacturers to assist the
Company in the manufacturing of new products and with increased capacity needs
for existing products. The Company anticipates that the cost of manufacturing
its products will not be materially affected by the shifting of production to
outside contract manufacturers.

Cost of service revenues consists primarily of payroll and related costs for
the technical and support staff providing the services. In anticipation of
gaining new customers, the Company has invested and will continue to invest in
the service business by incurring costs necessary to meet the needs of a higher
level of service revenues. These costs are of a relatively fixed nature in the
short term whereas the level of annual service revenues per multi-year contract
is relatively modest in the periods immediately following execution of the
contract. Service revenues per contract increase as new installations under the
contract are completed. Consequently, until the Company has a larger volume of
matured service contracts, gross margins on service revenues will be lower than
the Company believes can be realized by its service operations. Additionally,
because the Company's service business should generate higher revenues and
higher margins in periods in which the Company handles significant system
deployments, and because contracts for such deployments are non-recurring in
nature, the Company anticipates that revenues and gross margins from its service
business will fluctuate from period to period.

21
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth certain statements of operations data as a
percentage of total revenues for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------- --------------------
1996 1997 1998 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:

Product sales.................................. 100.0% 100.0% 91.5% 100.0% 83.1%
Service........................................ -- -- 8.5 -- 16.9
--------- --------- --------- --------- ---------
Total revenues................................... 100.0 100.0 100.0 100.0 100.0
--------- --------- --------- --------- ---------
Cost of revenues:
Cost of product sales(1)....................... 75.4 78.4 73.1 77.0 71.6
Cost of services(1)............................ -- -- 75.8 -- 77.7
--------- --------- --------- --------- ---------
Total cost of revenues........................... 75.4 78.4 73.3 77.0 72.6
--------- --------- --------- --------- ---------
Gross profit..................................... 24.6 21.6 26.7 23.0 27.4
--------- --------- --------- --------- ---------
Operating expenses:
Research and development....................... 3.2 5.7 2.9 4.1 1.9
Selling and marketing.......................... 5.7 5.6 4.0 5.5 4.6
General and administrative..................... 16.7 12.2 14.2 11.1 13.7
--------- --------- --------- --------- ---------
Total operating expenses......................... 25.6 23.5 21.1 20.7 20.2
--------- --------- --------- --------- ---------
Income (loss) from operations.................... (1.0) (1.9) 5.6 2.3 7.2
Interest expense................................. (2.7) (10.1) (0.4) (0.1) (1.5)
Other income..................................... -- -- 0.2 -- 0.1
Interest income.................................. -- 0.2 -- 0.1 --
Provision for income taxes....................... -- -- (2.0) (0.8) (2.4)
--------- --------- --------- --------- ---------
Net income (loss)................................ (3.7)% (11.8)% 3.4% 1.5% 3.4%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

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

(1) Expressed as a percentage of related revenues, not of total revenues.

SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1997

REVENUES. Revenues increased by 316.1% to $30.8 million for the first six
months of fiscal 1999 compared to revenues of $7.4 million for the first six
months of fiscal 1998. The change is due to an increase in revenues relating to
Javelin hardware sales of $5.7 million (77.2%), hardware revenues from CCI and
RGB/Trinet and Jade of $7.3 million and $1.0 million, respectively, service
revenues from CCI and RGB/Trinet and Jade of $2.2 million and $2.6 million,
respectively, and revenues primarily from hardware from the newly established
foreign subsidiaries of $4.6 million. The increases relating to Javelin are
attributable primarily to increases in the number of units sold (approximately
10,900 units in 1998 compared to 4,000 in 1997).

GROSS PROFIT. Gross profit increased by 394.0% to $8.4 million for the
first six months of fiscal 1999 compared to a gross profit of $1.7 million for
the first six months of fiscal 1998. The change is due to an increase in gross
profit relating to Javelin of $2.5 million (147.2%), gross profit relating to
hardware sales by CCI and RGB/Trinet and Jade of $1.5 million and $449,000,
respectively, gross profit relating to services provided by CCI and RGB/Trinet
and Jade of $101,000 and $760,000, respectively, and gross profit from the newly
established foreign subsidiaries of $1.4 million. The increases relating to
Javelin are attributable to the increase in revenues and a reduction in the cost
of its products due to reductions in prices from the Company's suppliers
resulting from increased volume of purchases by the Company and the realization
of manufacturing efficiencies.

22
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased by 90.2% to $583,000 for the first six months of fiscal 1999 compared
to research and development expenses of $307,000 for the first six months of
fiscal 1998. All research and development activities are conducted by Javelin.
The increase is primarily attributable to increased payroll costs due to the
hiring of additional engineers.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses increased by
243.8% to $1.4 million for the first six months of fiscal 1999 compared to
selling and marketing expenses of $409,000 for the first six months of fiscal
1998. The change is due to an increase in expenses of Javelin of $340,000
(83.2%), increases in expenses of RGB/Trinet and Jade of $447,000 and in
expenses of the newly established foreign subsidiaries of $209,000. Such
expenses consisted primarily of payroll, tradeshow fees, and travel costs. The
increase at Javelin is primarily attributable to additional personnel and
advertising costs associated with the growth of the business.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by 412.5% to $4.2 million for the first six months of fiscal 1999
compared to general and administrative expenses of $823,000 for the first six
months of fiscal 1998. The change is due to an increase in general and
administrative expenses relating to Javelin of $284,000 (34.5%), general and
administrative expenses from CCI of $1.9 million, general and administrative
expenses from the newly established foreign subsidiaries of $947,000 and general
and administrative expenses of RGB/Trinet and Jade of $250,000. The increase at
Javelin consisted primarily of increased payroll costs due primarily to an
increase in the number of employees and increased facility costs due to
expansion.

INTEREST EXPENSE. Interest expense increased by $460,000 to $469,000 for
the first six months of fiscal 1999 compared to interest expense of $9,000 for
the first six months of fiscal 1998. The increase is due to borrowings under the
credit facility in the first six months of fiscal 1998. Such borrowings were
necessary to sustain the growth of business.

INCOME TAXES. Provision for federal, state and foreign income taxes
increased from 34.2% of income before income taxes for the first six months of
fiscal 1998 to 41.1% of income before income taxes for the first six months of
fiscal 1999. The increase is attributable to the utilization of available tax
benefits in fiscal 1997. All of such benefits were utilized during fiscal 1998.

FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997

REVENUES. Revenues increased by 322.6% to $29.6 million in fiscal 1998
compared to revenues of $7.0 million in fiscal 1997. The change is due to a
154.6% increase in revenues relating to Javelin product sales of $10.8 million,
product sales from CCI of $8.4 million, service revenues from CCI of $2.5
million and revenues derived primarily from the sale of products by the
Company's newly established foreign subsidiaries of $900,000. The increase
relating to Javelin is attributable primarily to increases in the number of
units sold as the average sales price of Javelin products remained relatively
constant in fiscal 1997 and 1998.

GROSS PROFIT. Gross profit increased by 422.1% to $7.9 million in fiscal
1998 compared to a gross profit of $1.5 million in fiscal 1997. The change is
due to a 224.0% increase in gross profit relating to Javelin of $3.4 million,
gross profit relating to hardware sales by CCI of $2.2 million, gross profit
relating to services provided by CCI of $500,000 and gross profit from the newly
established foreign subsidiaries of $300,000. Gross margins on revenues from
product sales increased to 26.9% in fiscal 1998 from 21.6% in fiscal 1997
primarily due to a reduction in the cost of its products and the realization of
manufacturing efficiencies. The reduction in the cost of the Company's products
was attributable to decreases in prices from the Company's suppliers resulting
from increased volume of purchases by the Company. The increased gross margins
on revenues from product sales were partially offset by lower gross margins on

23
<PAGE>
sales of non-Javelin products by CCI. Gross margin on service revenues were
24.2% in fiscal 1998. The Company anticipates that annual gross margins will not
increase in fiscal 1999.

RESEARCH AND DEVELOPMENT EXPENSES. All research and development is
performed by Javelin at its corporate headquarters. Research and development
expenses consist primarily of payroll and related costs and the cost of tooling
and prototypes. The Company expenses research and development costs as incurred.
Research and development expenses increased by 120.5% to $900,000 in fiscal 1998
compared to research and development expenses of $400,000 in fiscal 1997. The
increase is primarily attributable to increased payroll costs due to the hiring
of additional engineers. The Company anticipates a continued increase in
research and development expenses primarily due to the anticipated introduction
of several new products and enhancements to existing products.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist
primarily of payroll and related costs, including commissions, of salespersons
and of the customer service department, and of travel, entertainment and
advertising costs. Selling and marketing expenses increased by 201.9% to $1.2
million in fiscal 1998 compared to selling and marketing expenses of $400,000 in
fiscal 1997. The increase is primarily attributable to additional personnel and
advertising costs associated with the growth of the business. The Company
anticipates that selling and marketing costs will increase as the Company
increases its sales force, both domestically and internationally, and attempts
to enhance the recognition of its brand name; however, to the extent that
revenues increase in future periods, the Company anticipates that such costs may
decrease as a percentage of revenues.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of payroll and related costs, facility costs, depreciation and
amortization and costs associated with being a public company. General and
administrative expenses increased by 387.9% to $4.2 million in fiscal 1998
compared to general and administrative of $900,000 in fiscal 1997. The change is
due to an increase in general and administrative expenses relating to Javelin of
$1.2 million (138.9%), general and administrative expenses from the acquired
domestic subsidiaries of $1.9 million and general and administrative expenses
from the newly established foreign subsidiaries of $300,000. As a percentage of
revenues, general and administrative expenses increased from 12.2% to 14.2%. The
increase at Javelin consisted primarily of increased payroll costs due primarily
to an increase in the number of employees, increased facility costs due to
relocations and costs associated with being a public company. The Company
believes that general and administrative expenses will continue to increase as
the Company invests additional resources to improve its operating systems, to
expand its international presence and to sustain its anticipated continued
growth; however, to the extent that revenues increase in future periods, the
Company anticipates that general and administrative expenses may remain
relatively constant as a percentage of revenues.

INTEREST EXPENSE. Interest expense decreased by $600,000 to $100,000 in
fiscal 1998 compared to interest expense of $700,000 in fiscal 1997. The
decrease is due to the inclusion of $600,000 in interest expense in fiscal 1997
related to warrants issued in connection with certain promissory notes. This
non-recurring interest expense incurred in fiscal 1997 is attributable to the
imputation of interest based upon the fair value of the warrants and did not
represent a cash expense to the Company.

INCOME TAXES. A provision for federal, state and foreign income taxes of
$600,000 was required in fiscal 1998 since the Company generated taxable income
while no provision was required for fiscal 1997 as the Company incurred a net
taxable loss for that period. The tax benefits of the Company's historical
operating losses were realized during the year ended June 30, 1998 resulting in
an effective tax rate lower than the U.S. statutory tax rate. The Company
anticipates that in the future its tax rate on U.S. income will increase due to
the lack of additional tax benefits and the non-deductibility of certain
expenses, including the amortization of goodwill. This anticipated increase may
be mitigated to the extent that increases from revenues result from the
Company's foreign subsidiaries operating in jurisdictions with lower income tax
rates than those in the United States.

24
<PAGE>
FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996

REVENUES. Revenues increased by 379.3% to $7.0 million in fiscal 1997
compared to revenues of $1.5 million in fiscal 1996. The increase was
attributable primarily to increases in the number of units sold.

GROSS PROFIT. Gross profit increased by 321.5% to $1.5 million in fiscal
1997 compared to a gross profit of $359,000 in fiscal 1996. Gross margins
decreased to 21.6% in fiscal 1997 from 24.6% in fiscal 1996 primarily due to
component cost increases.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased by 747.5% to $396,000 in fiscal 1997 compared to research and
development expenses of $47,000 in fiscal 1996, primarily due to increased
payroll costs and the introduction of two new products.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses increased by
368.1% to $391,000 in fiscal 1997 compared to selling and marketing expenses of
$83,000 in fiscal 1996, primarily due to additional personnel necessary to
manage the activities of an increased number of VAR and OEM customers and the
introduction of new products.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by 251.3% to $860,000 in fiscal 1997 compared to general and
administrative expenses of $245,000 in fiscal 1996, primarily due to an
increased in payroll costs and consulting fees.

INTEREST EXPENSE. Interest expense increased by $671,000 to $709,000 in
fiscal 1997 compared to interest expense of $38,000 in fiscal 1996. The increase
is due to the inclusion of $636,000 in interest expense in fiscal 1997 related
to warrants issued in connection with certain promissory notes. This non-
recurring interest expense in fiscal 1997 is attributable to the imputation of
interest based upon the fair market value of the warrants and did not represent
a cash expense to the Company.

INCOME TAXES. A provision for income taxes was not required for fiscal 1997
as the Company incurred a net taxable loss for that period.

25
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

The following tables present quarterly operating results for fiscal 1998 and
for the first two quarters of fiscal 1999. This information has been derived
from unaudited consolidated financial statements and has been prepared on the
same basis as the Javelin Consolidated Financial Statements which appear
elsewhere in this Prospectus. In the opinion of the Company's management, this
information reflects all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such information in accordance
with generally accepted accounting principles. The operating results for any
quarter are not necessarily indicative of the results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1998 1998 1998 1998
------------- ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales.................. $ 2,950,100 $4,452,200 $ 9,357,400 $ 10,372,700 $11,588,000 $13,997,500
Service........................ -- -- 1,286,000 1,227,700 1,344,200 3,870,000
------------- ------------ ------------ ------------ ------------- ------------
Total revenues............... 2,950,100 4,452,200 10,643,400 11,600,400 12,932,200 17,867,500
------------- ------------ ------------ ------------ ------------- ------------
Cost of revenues:
Cost of product sales.......... 2,268,800 3,427,500 6,864,100 7,270,900 8,156,300 10,165,400
Cost of service................ -- -- 891,700 1,013,000 1,110,500 2,940,400
------------- ------------ ------------ ------------ ------------- ------------
Total cost of revenues....... 2,268,800 3,427,500 7,755,800 8,283,900 9,266,800 13,105,800
------------- ------------ ------------ ------------ ------------- ------------
Gross profit..................... 681,300 1,024,700 2,887,600 3,316,500 3,665,400 4,761,700
------------- ------------ ------------ ------------ ------------- ------------
Operating expenses:
Research and development....... 137,200 169,500 250,100 317,200 298,000 285,200
Selling and marketing.......... 147,500 261,300 438,100 333,000 366,700 1,038,700
General and administrative..... 374,700 448,200 1,581,700 1,791,000 1,975,700 2,241,900
------------- ------------ ------------ ------------ ------------- ------------
Total operating expenses..... 659,400 879,000 2,269,900 2,441,200 2,640,400 3,565,800
------------- ------------ ------------ ------------ ------------- ------------
Income from operations........... 21,900 145,700 617,700 875,300 1,025,000 1,195,900
Interest expense................. (1,900) (6,900) (26,800) (79,400) (234,500) (234,700)
Other income (expense)........... (2,800) 8,900 23,200 11,900 24,400 (6,700)
Interest income.................. 3,900 4,100 2,200 2,000 3,700 4,500
------------- ------------ ------------ ------------ ------------- ------------
Income before income taxes....... 21,100 151,800 616,300 809,800 818,600 959,000
Provision for income taxes....... -- (59,200) (262,900) (262,800) (346,000) (385,000)
------------- ------------ ------------ ------------ ------------- ------------
Net income....................... $ 21,100 $ 92,600 $ 353,400 $ 547,000 $ 472,600 $ 574,000
------------- ------------ ------------ ------------ ------------- ------------
------------- ------------ ------------ ------------ ------------- ------------

Units shipped (1)................ 1,638 2,351 2,535 4,083 5,437 5,454
</TABLE>

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

(1) Includes only the Javelin product line.

26
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1997 1998 1998 1998
--------------- --------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales........................ 100.0% 100.0% 87.9% 89.4% 89.6%
Service.............................. -- -- 12.1 10.6 10.4
----- ----- ----- ----- -----
Total revenues..................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues:
Cost of product sales(1)............. 76.9 77.0 73.4 70.1 70.4
Cost of service(1)................... -- -- 69.3 82.5 82.6
----- ----- ----- ----- -----
Total cost of revenues............. 76.9 77.0 72.9 71.4 71.7
----- ----- ----- ----- -----
Gross profit........................... 23.1 23.0 27.1 28.6 28.3
----- ----- ----- ----- -----
Operating expenses:
Research and development............. 4.7 3.8 2.3 2.7 2.3
Selling and marketing................ 5.0 5.9 4.1 2.9 2.8
General and administrative........... 12.7 10.0 14.9 15.4 15.3
----- ----- ----- ----- -----
Total operating expenses........... 22.4 19.7 21.3 21.0 20.4
----- ----- ----- ----- -----
Income from operations................. 0.7 3.3 5.8 7.6 7.9
Interest expense....................... -- (0.2) (0.2) (0.7) (1.8)
Other income (expense)................. (0.1) 0.2 0.2 0.1 0.2
Interest income........................ 0.1 0.1 -- -- --
----- ----- ----- ----- -----
Income before income taxes............. 0.7 3.4 5.8 7.0 6.3
Provision for income taxes............. -- (1.3) (2.5) (2.3) (2.6)
Net income............................. 0.7% 2.1% 3.3% 4.7% 3.7%

DECEMBER 31,
1998
---------------
<S> <C>
Revenues:
Product sales........................ 78.3%
Service.............................. 21.7
-----
Total revenues..................... 100.0
-----
Cost of revenues:
Cost of product sales(1)............. 72.6
Cost of service(1)................... 76.0
-----
Total cost of revenues............. 73.3
-----
Gross profit........................... 26.7
-----
Operating expenses:
Research and development............. 1.6
Selling and marketing................ 5.8
General and administrative........... 12.6
-----
Total operating expenses........... 20.0
-----
Income from operations................. 6.7
Interest expense....................... (1.3)
Other income (expense)................. --
Interest income........................ --
-----
Income before income taxes............. 5.4
Provision for income taxes............. (2.2)
Net income............................. 3.2%
</TABLE>

- ------------------------
(1) Expressed as a percentage of related revenues, not of total revenues.

Gross margins on revenues from product sales increased from 23.1% in the
first quarter of 1998 to 27.4% in the second quarter of 1999 primarily due to
decreases in prices from the Company's suppliers resulting from increased volume
of purchases by the Company. The increase in the number of Javelin products sold
has enabled the Company to obtain volume discounts from its suppliers and to
procure certain products directly from the manufacturers rather than from
distributors. Gross margins on revenues from product sales decreased from 29.6%
in the first quarter of 1999 to 27.4% in the second quarter of 1999. The
decrease is primarily attributable to an increase in revenues from large
customers which received certain large volume discounts in the second quarter of
1999 as compared to the first quarter.

Cost of service consists primarily of payroll and related costs for
technical and support staff providing the services and are of a relatively fixed
nature in the short term. Gross margins on service revenues decreased from 30.7%
in the third quarter of 1998 to 17.5% in the fourth quarter of 1998 due
primarily to the completion in the third quarter of a significant retrofit by
CCI of 66 stores of one customer and increased costs in the fourth quarter
incurred to support anticipated future projects. Gross margins on service
revenues increased from 17.4% in the first quarter of 1999 to 24.0% in the
second quarter as a result of service revenues of $2.6 million generated by Jade
at a gross margin of 29.2%.

General and administrative expenses increased from $448,000 in the second
quarter of 1998 to $2.2 million in the second quarter of 1999 primarily due to
the acquisitions of CCI and Posnet in the third quarter of fiscal 1998, the
establishment of three foreign subsidiaries in the fourth quarter of fiscal 1998
and the acquisitions of RGB/Trinet and Jade in the second quarter of fiscal
1999.

The matters that we discussed in the section entitled "Risk Factors" could
cause our results of operations to fluctuate significantly from period to
period, including on a quarterly basis.

LIQUIDITY AND CAPITAL RESOURCES

In October and November 1998, the Company received proceeds of $8.1 million
from the sale of 1,395,000 shares of its common stock in a public offering. On
June 8, 1998, the Company and its U.S.

27
<PAGE>
subsidiaries obtained a credit facility of $7.5 million from a financial
institution. The credit facility expires on June 8, 2001 and consists of a line
of credit of up to $6.0 million and a term loan of $1.5 million. Under the line
of credit, the Company may borrow up to 80% of eligible receivables (as defined)
and 50% of eligible inventory (as defined) with monthly interest based upon the
prime rate of a national financial institution plus 1.75% (9.5% as of December
31, 1998). As of December 31, 1998 borrowing outstanding under the line amounted
to $2.4 million with approximately $3.5 million available for future borrowings.
Borrowings under the term loan are collateralized by substantially all of the
assets of the Company and bear interest at 13.65% per annum. The Company is
required to repay $25,000 per month under the term loan with all unpaid
principal and interest due on June 8, 2001. As of December 31, 1998, the Company
had working capital of $11.1 million.

Cash used in operating activities in fiscal 1998 totaled $1.8 million and
consisted primarily of increases in trade receivables and inventories. Cash used
in operating activities in the six months ended December 31, 1998 totaled $5.0
million and reflects an increase in inventories to meet anticipated needs. Cash
used in net investing activities in fiscal 1998 totaled $400,000 and resulted
primarily from the acquisition of capital equipment offset by cash received from
acquired businesses. Cash used in net investing activities in the six months
ended December 31, 1998 totaled $2.6 million and included $1.9 million used in
conjunction with the acquisitions of RGB/Trinet and Jade. The Company
anticipates that expenditures for capital equipment will decrease in fiscal
1999. Cash provided by financing activities in fiscal 1998 totaled $1.6 million
and consisted primarily of net borrowings under the line of credit and a term
loan obtained in June 1998. Cash provided by financing activities in the six
months ended December 31, 1998 totaled $7.7 million and consisted primarily of
proceeds from the Company's public offering of its common stock.

The Company anticipates that its working capital needs will increase with
the growth of the Company. The Company believes that the net proceeds from this
offering, together with the availability of its line of credit, will be
sufficient to meet its capital requirements for the next eighteen months.
Depending on the rate of growth and profitability, the Company may require
additional equity or debt financing to meet its future working capital and
capital expenditures needs. There can be no assurance that such additional
financing will be available or, if available, that such financing can be
obtained on terms satisfactory to the Company.

YEAR 2000

The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The year 2000 problem is
pervasive and complex as virtually every computer operation will be affected in
some way by the rollover of the two digit year value to "00". The issue is
whether computer systems will properly recognize date-sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail. The Company
is reviewing both its information technology and its non-information technology
systems to determine whether they are year 2000 compliant, and to date the
Company has not identified any material systems which are not year 2000
compliant. The Company has not made any material expenditure to address the year
2000 problem and at present does not anticipate that it will be required to make
any such material expenditures in the future.

The Company has initiated formal communications with all significant
suppliers and service providers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate the year 2000 problem.
Although the Company has received verbal assurances of year 2000 compliance from
certain of such third parties, the Company has not yet received written
assurances of year 2000 compliance from the third parties with whom it has
relationships. The Company believes its operations will not be significantly
disrupted even if third parties with whom the Company has relationships are not
year 2000 compliant.

In the event that the Company's suppliers are unable to provide sufficient
quantities of materials or goods to the Company as a result of their failure to
be year 2000 compliant, the Company believes that it

28
<PAGE>
can obtain adequate supplies of materials and goods at comparable prices from
other sources. In the event that the Company's OEMs and VARs are adversely
affected by any failure to become year 2000 compliant and are therefore unable
to purchase anticipated quantities of the Company's products on a timely basis,
the Company may seek to replace such OEMs and VARs. Nevertheless, the Company
believes that any year 2000 compliance problems of its suppliers, OEMs or VARs
could cause the Company's results of operations to fluctuate on a period to
period basis.

Uncertainty exists concerning the potential costs and effects associated
with any year 2000 compliance, and the Company intends to continue to make
efforts to ensure that third parties with whom it has relationships are year
2000 compliant. Any year 2000 compliance problem of either the Company or third
parties with whom the Company has relationships could materially adversely
affect the Company's business, financial condition or results of operations.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENT

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131") which supersedes Statement of Financial Accounting Standards No.
14. This statement changes the way that publicly-held companies report
information about operating segments as well as disclosures about products and
services, geographic areas and major customers. Operating segments are defined
as revenue-producing components of the enterprise, which are generally used
internally for evaluating segment performance. SFAS 131 will be effective for
the Company's year ending June 30, 1999 and will not affect the Company's
financial position or results of operations.

29
<PAGE>
BUSINESS

GENERAL

Javelin Systems, Inc. ("Javelin" or the "Company") designs, manufactures and
markets open system touch screen point-of-sale ("POS") computers and provides
POS systems integration services primarily for the food service and retail
industries. POS systems incorporating the Company's products enable restaurants
and retailers to capture, analyze, disseminate and use information throughout an
enterprise on a real-time basis, from the point of sale to the in-store "back
office" to the enterprise's headquarters. These POS systems provide transaction
processing, in-store operating controls, and timely information used to manage
inventory and costs, analyze sales data and customize products and services. The
Company's product family of network-ready computers integrates substantially all
of the functionality of standard desktop personal computers into durable, small
footprint touchscreen workstations that run on industry standard open operating
systems. The Company's products utilize off-the-shelf, industry-specific
application software developed by third parties. The Company's products are
currently being marketed by value added resellers ("VARs"), original equipment
manufacturers ("OEMs") and directly to end users through the Company's sales
force. The Company's systems integration services are generally sold directly to
multi-site operators.

INDUSTRY OVERVIEW

The Company estimates that there are more than 450,000 restaurants and more
than 1.6 million retail stores in the United States. These restaurants and
retail stores are increasingly part of multi-location chains that have the need
to capture, analyze and disseminate information throughout the entire enterprise
in order to better manage inventory and costs, make pricing decisions, analyze
sales data and provide customized products and services. Moreover, businesses
that encounter local demographic changes or seek to expand globally face
additional challenges, such as multilingual customer and employee bases,
multiple currency transactions and local regulatory requirements. Consequently,
food service providers and retailers now require robust, integrated POS systems
and services that are able to reliably and efficiently capture and manage large
numbers of individual transactions generated by diversified points of sale.

The critical front and back office roles of integrated POS systems are now
being recognized by distinct market segments within the food service and retail
industries. Quick service restaurants ("QSRs") and full service restaurants, the
largest market segments within the food service industry, both are investing in
advanced POS systems, with QSRs generally being the first to adopt the latest
POS technology and full service restaurants being more price sensitive and
therefore more likely to adopt POS technology later in the product life cycle. A
typical QSR requires four to seven POS workstations to operate efficiently,
while a full service restaurant generally requires at least seven POS
workstations. The food service industry also encompasses hotel restaurants and
restaurants located in other hospitality locations, such as stadiums and arenas,
casinos, theme parks and cruise lines. Retail establishments, such as
convenience stores, gas stations, record stores and clothing stores, are
increasingly utilizing POS systems to expedite in-store transactions and more
effectively monitor inventory on a current basis.

Initial POS systems targeted for the food service and retail industries were
generally designed to satisfy the individual operating requirements of a
particular large chain of restaurants or stores. These initial POS systems were
custom designed to meet the individual enterprise's needs and, as such, were
generally proprietary with all hardware, software and service developed or
provided by a single vendor. Because this focus on single company solutions
resulted in no generic POS standard operating system or computer architecture,
many large food service providers and retailers became captive to the relatively
small companies that had designed their proprietary POS systems. In addition,
the POS companies found it difficult to achieve significant economies of scale
due to the highly customized nature of their products. Instead, early POS
companies were forced to focus on establishing and maintaining long product life
cycles in order to recoup their high costs from developing custom products for a
limited customer base. There was little opportunity for these POS companies to
leverage their niche success into market-wide success.

The POS industry has begun evolving from proprietary, customized single
platform systems to open-architecture systems in which a variety of hardware and
software products from different manufacturers

30
<PAGE>
can be combined to obtain the mix of features desired by the customer. With the
advent of hardware and software systems that use industry standard
open-architecture, food service providers and retailers are no longer captive to
single solution vendors that had initially created their POS systems. As in
other markets for computer products and systems where open systems are replacing
proprietary platforms, new entrants have been drawn to the growing POS market,
increasing competition for POS software and hardware and enhancing competitive
pressure through faster design cycles.

In addition to relying on single solution vendors, large multi-unit food
service and retail chains frequently implemented and maintained their
proprietary POS systems utilizing internal resources. However, as a result of
the competitive environment in which these businesses operate and the growing
complexity and multiplicity of available POS systems, food service providers and
retailers have found it increasingly difficult to design, implement and manage
these systems on their own. For example, a typical multi-chain enterprise
requires a POS system that is capable of supporting multiple applications and
processing high volumes of data across geographically remote locations. In
addition, the increasing variety of hardware and software applications utilized
in the food service and retail industries has resulted in connectivity and
compatibility problems for many POS systems. Multi-unit chains now generally
require a total systems integration solution including design, consulting,
system creation, acquisition of software applications and required hardware,
system installation and configuration, product support services and ongoing
system service and maintenance. The high demand for qualified network engineers
and other technical personnel has also made it increasingly difficult for these
types of businesses to recruit and train qualified POS technology professionals.
Consequently, many food service providers and retailers now rely upon third
parties for the technological expertise and personnel to meet their POS systems
needs. Javelin believes that the increasing complexity and rapid evolution of
POS system technologies have created a significant opportunity for companies
specializing in providing POS system solutions to the food service and retail
industries.

THE JAVELIN SOLUTION

Javelin designs, manufactures and markets open system touch screen POS
computers and provides POS systems integration services primarily for the food
service and retail industries. The Company's product family of network-ready
computers integrates substantially all of the functionality of standard desktop
personal computers into durable, small footprint touchscreen workstations that
run on industry standard open operating systems. The Company's products utilize
off-the-shelf, industry specific application software developed by third
parties. POS systems incorporating the Company's products enable restaurants and
retailers to capture, analyze, disseminate and use information throughout an
enterprise on a real-time basis, from the point of sale to the in-store "back
office" to the enterprise's headquarters. These POS systems provide transaction
processing, in-store operating controls, and timely information used to manage
inventory and costs, analyze sales data and customize products and services.

Javelin also has a global POS systems integration business that assists
large multi-site corporate customers in identifying the best multi-vendor open
systems solution for the customer's particular business, and then manages the
full deployment and ongoing support of the POS solution. The Company has
extensive experience resolving the integration, implementation and management
issues faced by food service providers and retailers and substantial knowledge
of advanced information technologies, POS systems and the numerous software
applications developed by information system and software vendors for these
markets. The Company serves as a single point of contact to objectively assess
its customers' POS technology requirements, taking into account the products and
applications of various hardware and software vendors. The Company then selects
the optimal mix of applications and products of various hardware and software
vendors to create tailored advanced POS systems. By acting as the project
manager during the installation and implementation of the POS system, the
Company frees its customers from much of the time and difficulties associated
with large-scale systems installations, including managing the variety of other
vendors involved in the systems' installation. The Company believes that its
cumulative experience, food service and retail focus and technology expertise
enable it to understand its customers'

31
<PAGE>
core business dynamics and deliver customized advanced POS systems and services
to satisfy its customers' specialized needs.

BUSINESS STRATEGY

The Company's objective is to become a leading developer of POS hardware
systems and to be the premier POS systems integrator for multi-site chain
operators in the food service and retail industries. The Company plans to
achieve these objectives through internal growth and development and, to the
extent suitable acquisition candidates are identified, through the acquisition
of complementary businesses. Key elements of Javelin's strategy include the
following:

- PURSUE LARGE CUSTOMERS. The Company intends to increase its sales of
products to large chains with over 100 stores through direct sales efforts
and by utilizing the Company's relationships with its OEMs. The evolution
to open systems has also created an opportunity for full service systems
integrators which have an in-depth knowledge of the industry standard POS
software and hardware packages and the ability to integrate them into a
successful POS solution for clients. The Company's acquisitions of CCI
Group, Inc. ("CCI") and POSNET Computers, Inc. ("Posnet") have given
Javelin an immediate entrance and client base in the POS systems
integration business on a domestic basis.

- FOCUS ON INTERNATIONAL BUSINESS OPPORTUNITIES. The Company has
established sales and support branches in England, Australia and Singapore
to capture identified sales opportunities. The Company also continues to
pursue its acquisition strategy internationally, including its recent
acquisitions of Aspact IT Services ("Aspact"), RGB/Trinet Limited
("RGB/Trinet") and Jade Communications Limited ("Jade"), which provide the
Company with additional systems integration services and complementary
networking products and services. The Company believes that the
international markets continue to be fundamentally under-served with
respect to technologically advanced POS systems, and, in particular, the
Company believes that Western Europe presents a particularly attractive
market for its products and services.

- MINIMIZE PRODUCTION COSTS. The Company plans to continue to outsource the
manufacturing and assembly of its products in order to maintain low
overhead and production costs. The Company also controls its costs by
utilizing components that are generally available in the PC industry and
anticipates streamlining its product line in order to further develop
economies of scale. The Company believes that it will be able to maintain
its cost advantage in the future through economies of scale and because
the Company utilizes in-house design capabilities and integrates the
design and manufacturing engineering of its products, which reduces
engineering costs and costly design changes. In addition, the Company
intends to utilize contract manufacturers based in Singapore commencing
later in fiscal 1999, which the Company believes will provide many
benefits, including high quality manufacturing, components' cost
reduction, and lower corporate income tax.

- GROW RECURRING SERVICE REVENUE. The Company currently receives recurring
revenue from its help desk, depot repair, managed network services and
field services. The Company intends to expand certain of these services in
the future because the Company believes that an increase in these revenues
can lessen the Company's reliance on product sales, which tend to
fluctuate over time, and provide the Company with stable, recurring
billings and cash flow. The Company also plans to leverage CCI's name
recognition in the field of systems integration to expand the service
component of the Company's business.

- INTRODUCE TIMELY NEW PRODUCTS. The Company intends to continue to develop
new POS hardware systems incorporating advanced PC technology utilizing
its engineering team composed of PC industry veterans. As part of its
sales strategy, the Company consults with its OEMs and VARs in order to
identify new product platforms and product refinements. The Company also
obtains direct customer feedback through its systems integration business.
Because a significant portion of the Company's management is experienced
in the PC industry, the Company has been able to quickly launch new
products in the POS system industry and respond quickly to its customers'
specific needs. This experience has enabled Javelin to rapidly establish
itself in the POS market by

32
<PAGE>
developing and introducing new products with advanced features in an
average of six months compared to the industry standard of twelve to
eighteen months. The Company intends to leverage its history of timely new
product introductions and successful customer engagements and expand its
marketing programs to enhance its market presence and visibility with the
goal of making Javelin a recognized leader in providing POS solutions.

PRODUCTS AND SERVICES

THE JAVELIN PRODUCT LINE

Javelin's product line offers customers a fully functioning PC inside a
small footprint touchscreen POS workstation. All of Javelin's systems are
network ready and support industry standard operating systems, enabling the easy
installation and setup of leading industry standard POS software programs. The
Javelin system also virtually eliminates configuration conflicts due to the
Javelin system's proprietary embedded firmware. In addition, its single
motherboard design reduces costly trouble shooting and service calls, and
Javelin's systems are sealed to protect against liquid and other foreign matter
entering the interior electronic chamber. Javelin believes that its POS computer
systems offer its clients more features and better reliability than its
competitors' products at lower price points. The retail price of the Company's
products to end users generally ranges from $2,500 to $3,700. The Javelin
product line is currently comprised of the Javelin-Wedge 5, Javelin-Wedge P,
Javelin-LC and Javelin-LCP series.

JAVELIN-WEDGE 5. The Javelin-Wedge 5 is a small footprint, high performance
color LCD touchscreen computer which is approximately 12.75"(W), 10.25"(D) and
6.0"(H). The Javelin-Wedge 5 features a 133mHz processor, system memory from 4
MB of RAM up to 64 MB of RAM, 1 MB of video memory, a 10.4 or 12.1 inch TFT
active matrix screen, 4 serial ports, 1 enhanced parallel port, 2 electronic
cash drawer ports, a 10 Base-T Ethernet port and an integrated customer display.
As a result of the product's inherent flexibility and rugged design, it is being
marketed and sold as a POS workstation and as an industrial operator interface.

JAVELIN-WEDGE P. The Javelin-Wedge P is a product line extension of the
Javelin-Wedge 5 series and is believed by the Company to be the first fully
integrated, Pentium-based touch screen computer designed specifically for the
POS marketplace. The Wedge P features a 200 mHz Intel Pentium processor with
additional features such as a 512K Pipeline Burst cache and up to 128 MB of RAM.
The Wedge P approximately doubles the speed and performance of the Wedge 5 which
provides end users the ability to dramatically increase speed and performance
when using graphically intensive POS applications that operate in Windows 95 and
Windows NT environments.

JAVELIN-LC. The Javelin-LC product line offers customers what the Company
believes is the smallest footprint of any POS computer in the industry with a
footprint of less than eight inches square and has been designed to be more
compact and elegant in appearance, making it suitable for both the food service
market and the retail market. In addition, the system's reduced size and flat
panel display allow it to be mounted in a variety of ways, including
wall-mounted, fixed to an adjustable base or attached to an articulated arm. The
Javelin-LC features a 133mHz processor, system memory from 4 MB of RAM up to 64
MB of RAM, 1 MB of video memory, a 10.4 or 12.1 inch TFT active matrix screen, 2
serial ports, 1 enhanced parallel port and a 10 Base-T Ethernet port.

JAVELIN-LCP. The Javelin LCP is a product line extension of the Javelin-LC.
This is a Pentium based LC product which, like the LC, is believed by the
Company to have the smallest footprint of any POS computer in the industry. The
speed of the Pentium-based CPU offers clients the ability to dramatically
increase speed and performance when using graphically intensive POS
applications. The LCP features a 200 mHz Intel Pentium processor with additional
features such as an integrated sound card and full screen video, 3 serial ports
and up to 128 MB of RAM. The food service industry, especially the QSR segment,
is demanding the latest generation hardware to be based around the Pentium
processor. The Javelin LCP is specifically designed to meet the industry's
unique hardware requirements for speed, space, flexibility and multimedia
features.

33
<PAGE>
NEW PRODUCTS

JAVELIN-LP. The Company intends to release the Javelin LP in fiscal 1999.
The Javelin LP is designed to be a compact, low profile PC for the high-traffic,
POS environment. The LP is planned to be network-ready with an integrated
100/10BaseT Ethernet controller. With 4 serial ports, two of which can supply
+5Volt power, the LP should accommodate a variety of peripheral equipment such
as cash drawers, card readers, scanners and printers. The Javelin LP's rugged,
aluminum die-cast, convection cooled case should provide the Javelin LP with a
significant advantage over other POS systems. The LP is designed to be spill-
resistant with a solid cover, and, because it has no fans, is expected to be
noiseless and have no vents into which airborne debris can enter and collect
inside the system. The LP's low profile design should require minimal counter
space, and I/O connectors planned to be located at the bottom of the unit should
allow easy routing of cables through a small opening in a counter or desk top.
The Javelin LP is expected to come with an integrated touchscreen controller
supporting both Elographics and Microtouch Bus Monitors, eliminating the need
for an external controller.

JAVELIN-HHT 40. The Javelin HHT-40 is being developed for the Company by a
third party, and the Company anticipates that the HHT-40 will become available
in fiscal 1999. The HHT-40 is designed to be a compact, lightweight, wireless
handheld system that provides service people the ability to enter orders quickly
and efficiently and offers the benefit of sending information remotely to the
kitchen, bar, etc. With its built-in customer display and paging system, the
HHT-40 would expedite customer transactions, reduce operator errors, and most
significantly, increase table turns. The HHT-40 is planned to be based on a main
module where a battery, magnetic card reader or end-piece can be connected to
any side of the main module.

SYSTEMS INTEGRATION

NETWORK DESIGN/PROJECT MANAGEMENT. The Company provides network services
ranging from network design to large-scale network implementation, which would
include a review and audit of a customer's existing POS technology
infrastructure, an assessment of the functional requirements of the customer's
POS system, the preparation of network specifications and technical design
documentation and diagrams. The Company's network implementation services
involve the purchase, delivery, testing and installation of enterprise-wide POS
systems. The Company acts as the single project manager for all parties involved
in a multi-unit installation, to effectively converge and integrate all of the
client's business processes. The Company believes that the delivery of a
combination of design, implementation and management services through a project
manager enables the Company's personnel to fully understand the customer's
computing and operating environments, install POS systems that meet the
customer's specialized requirements and train the customer's users and internal
POS system staff prior to the full migration to a new POS system. The Company's
personnel have extensive experience resolving the integration, implementation
and management issues faced by its customers, and the personnel involved in any
particular project are carefully selected for their technical expertise to meet
the requirements of the specific project. The Company assesses its customers'
POS system requirements and selects the optimal mix of applications and products
of various hardware and software vendors, and does not exclusively use Javelin
products. The Company's expertise extends through each area of POS system
networking to create a tailor-made infrastructure for the client, including
structured cabling, power, local area network (LAN), wide area network (WAN) and
internet technologies.

BUSINESS PROCESS INTEGRATION. The Company offers total software integration
solutions for POS clients who already have existing software platforms (e.g.
accounting, inventory, payroll, and food costing) in place. Programs are
provided and written in Visual Basic, C++ and Crystal Reports. The Company
believes that the future of software systems integration is to develop and
implement Intranet and Internet connections within multi-unit chains resulting
in the localization of all critical operational data.

SUPPORT SERVICES

MANAGED NETWORK SERVICES. As POS systems become more complex, food service
providers and retailers are experiencing difficulties in hiring, training and
retaining technology professionals who can

34
<PAGE>
maintain the performance and functionality of their POS systems. Accordingly,
these companies are increasingly outsourcing certain maintenance and management
functions for their POS systems in order to minimize the potentially high costs
associated with POS system outages. The Company provides a range of enterprise
network support and management services that are designed to maintain the
effective performance of a customer's POS system. The Company uses its technical
expertise and staffing experience to package, price and deliver combinations of
these services, and the customer benefits from the Company's experience in
providing network management services in a broad range of operating
environments. The Company's network management services include combinations of
the following services, which are selected by the customer to meet its specific
needs: network health checks, baseline documentation and management maintenance,
break/fix remote network management and diagnostics help desk services network
outsourcing.

HELP DESK. The Company's emergency software hotline is available for
questions customers may have with respect to specific application software and
operating systems. The Help Desk is designed to provide service and support for
issues that can be resolved without an on-site visit. If at any time during the
Help Desk call it is determined that hardware service is required, the support
personnel will expedite the call to the hardware service department.

HARDWARE SERVICE/HARDWARE MAINTENANCE/PREVENTATIVE MAINTENANCE. A variety
of hardware maintenance options are currently provided on a 24 hour, seven day a
week basis. Calls placed to a central service center are greeted with assistance
to determine the nature of the call. Once the failure is determined, the
responding field technician will answer the call in accordance with services
needed and contracted coverage. Depot service supplies configured equipment
directly to the location for uninterrupted operations while defective equipment
is returned from the site to the service center for repair via courier. Full
service maintenance offers on site technical maintenance from the Company's
field service technician for both front and back of house equipment.

TRAINING/INSTALLATION. Site-specific training is available through customer
support personnel beginning with pre-install configuration and database building
through installation and "live" date. Hardware preparation such as software
load, equipment burn-in, cabling and performance testing of "pre-live" system is
an essential component prior to staging and installation.

PRODUCT DEVELOPMENT

For the fiscal years ended June 30, 1998 and June 30, 1997, the Company
spent approximately $874,000 and $396,000, respectively, on research and
development. The Company maintains an engineering staff of nine people, with
expertise in electronics, mechanical and software design, who are responsible
for prototyping, tooling and testing the Company's products. The Company's
engineering and manufacturing staff then coordinate with systems engineers and
quality control personnel to progress from the final design stage to mass
production. The Company intends to hire additional engineers and project
managers to better coordinate the product development process as the Company
expands its product development efforts.

PRODUCT DISTRIBUTION

The Company's products are primarily distributed through strategic
relationships with OEMs and VARs that have a strong reputation in the food
service and retail POS markets. By distributing its products through OEMs and
VARs, the Company has been able to take advantage of the existing name
recognition and market position of its OEMs and VARs and quickly establish a
market for its products, while minimizing expenditures for direct sales,
marketing, technical support and service. The Company intends to continue to
expand these relationships to further penetrate its existing domestic and
international markets, as well as to gain access to new market segments and
international markets.

To date, the Company's sales have been predominantly to small-to-mid size
restaurant chains. Javelin believes a major opportunity exists for it to further
penetrate large accounts (100 site or more chain organizations) with its
existing systems and ability to provide a total solution to the client. Large
accounts often require a "total solution" including initial consulting, hardware
and software installation, ongoing

35
<PAGE>
support and maintenance, product support services and a super-regional or
national presence. Consequently, in order to meet this need, the Company
recently purchased three established and well-regarded systems integrators: CCI,
Posnet and Aspact. CCI and Posnet, both based in the US, have been consolidated
and operate as CCI Group, Inc. Aspact's activities have been primarily focused
on the Singapore and Hong Kong markets. The Company believes that by targeting
different markets through its different distribution channels, it can more
effectively penetrate multiple markets while minimizing costs associated with
channel conflicts.

VARS. The Company sells its products to VARs who integrate
industry-specific software with the Company's hardware product for resale into
various vertical markets comprised of relatively small customers (less than 50
stores). The Company works closely with these VARs as well as the various
software developers to stay abreast of the diversified needs of the Company's
targeted markets. The Company's VAR network currently totals approximately 250
VARS. The Company believes that VAR distribution channels are advantageous to
the Company as they generally have existing geographically diverse customers,
focus their businesses on providing customized solutions to their customers and
maintain their own sales and technical support staff.

OEMS. The Company also sells its products to OEMs with significant market
presence in the food service and specialty retail industries. The OEMs market
the Company's products under their own names and sell either through dealers or
directly to mid-sized customers (50 to 100 stores). Because of the high
likelihood of the Company's product being offered by more than one OEM into an
end user account, the Company offers the OEM an opportunity to choose its own
customized design. The OEM is charged for mechanical design, prototyping and
tooling. One of the Company's principal strategies is to expand the OEM
distribution channel both domestically and internationally.

DIRECT SALES ORGANIZATION (CCI). The Company's acquisitions of CCI and
Posnet allow it to sell directly to corporate accounts. Since the acquisitions,
the Company has focused its efforts principally on large customers (100+ stores)
because these customer opportunities are beyond the scope that can be
effectively managed by the Company's regional VAR marketing partners. In this
manner, the Company believes it can minimize any potential distribution channel
conflict with its VARs. The Company typically provides a multi-vendor POS
solution for its corporate accounts, and the hardware utilized in any particular
account may not be Javelin hardware. The standardized nature of franchised
operations enables the Company to design and rapidly deploy customized solutions
for these large-scale customers. The Company intends to focus on growing its
direct sales business in the near future to take advantage of a scarcity of POS
service providers currently in the marketplace.

CUSTOMERS

Certain end users of the Company's products are:

<TABLE>
<CAPTION>
BOTH JAVELIN
JAVELIN HARDWARE SERVICES HARDWARE AND SERVICES
- -------------------------------- -------------------------------- --------------------------

<S> <C> <C>
Blimpies International ARAMARK Corp. Universal Studios
Red Robin International
Madison Square Garden -Stadiums and Arenas Inc.
Greyhound Lines Inc. -National Parks Direct Express
Club Corporation of America AFC Enterprises, Inc. Chevron Corporation
Greenall's Pubs and Restaurants -Popeye's Inc. Claim Jumper Restaurants
Ogden Entertainment Services
Inc. -Church's Fried Chicken Inc. Quizno's Corporation
Mitsubishi Silicon America -Seattle's Best Coffee
McDonald's Corporation Sonic Corp.
Allied Domecq PLC
-Baskin-Robbins USA Co.
-Dunkin' Donuts Incorporated
Jamba Juice Co.
</TABLE>

36
<PAGE>
CASE STUDIES

VAR. Farris Point of Sale ("Farris") is an example of a well-established
VAR focused on the food service and retail markets that was searching for an
open systems solution to integrate with the software it was selling. Farris now
integrates restaurant software with Javelin's touchscreen hardware, then deploys
the open system POS solution in small chain operations throughout Texas. Farris'
customers generally are chains with less than ten stores. Historically, Farris
has purchased 30-40 Javelin systems per month and provides 24-hour technical
support for its customers.

OEM. Wang (Global) is a leading global network and desktop and integration
services company that plans, deploys, manages and maintains worldwide network
and desktop computing environments. Wang is also one of the long-term suppliers
for McDonald's Corporation. To date, Wang is one of several suppliers that have
installed POS systems in a large number of locations for McDonald's. Recently,
McDonald's delineated a new hardware specification for its POS systems requiring
a Pentium-based solution. Since Wang did not have a product that satisfied this
new specification, Wang sought Javelin's assistance to provide an integrated
solution for McDonald's. In this collaboration, Javelin has provided the
hardware design and manufacturing, while Wang distributes and supports the
product. The companies together refined Javelin's Wedge-P to match McDonald's
requirements, and Wang guided it through McDonald's extensive approvals process.

DIRECT SALES/CCI. ARAMARK Corp. ("ARAMARK") is an industry leader offering
a variety of managed services to private and public sector clients, and
generates $7 billion in revenues each year. ARAMARK is the largest provider of
food services to major and minor league sports venues, including many high
profile locations such as Camden Yards in Baltimore, Turner Field in Atlanta,
Coors Field in Denver, CoreStates Center in Philadelphia and Fenway Park in
Boston. ARAMARK also serves state and national park locations, including Denali
in Alaska, Pikes Peak, Lake Powell, Hearst Castle as well as many major
convention centers throughout the United States. CCI has worked closely with
ARAMARK's sports and entertainment division for the past four years and offers a
number of products and services to ARAMARK's clients. For example, CCI has
provided systems integration services to Camden Yards and CoreStates Center to
interconnect multiple providers of point of sale solutions, to Turner Field and
Coors Field to implement wireless handheld order devices, and at several
national park locations to interconnect several manufacturers' cash registers
with PC-based inventory systems.

CCI provides turn-key deployments of POS solutions for ARAMARK properties
starting with the development of a complete network and equipment design and
associated budget for the property. Once the design and budget is approved, CCI
develops a detailed project plan in conjunction with ARAMARK and the property
owners. CCI then procures all equipment and materials, builds all necessary
computer and POS systems, performs the required network wiring and installation
and deploys all systems at the property. Prior to releasing the property for
use, CCI will conduct various tests and dry run activities to ensure correct
functionality of all equipment and systems. On larger properties, such as
stadiums, CCI also provides on-going on-site support as part of the deployment
plan. All properties also receive hardware and software support via CCI's St.
Louis-based help desk and repair center. All ARAMARK properties can receive
seven-day support from CCI's help desk and repair center, including overnight
and same day counter-to-counter equipment replacement. Larger facilities also
have an on-site equipment spares pool maintained by CCI in support of major
sporting events. Throughout the process, CCI provides weekly status and
financial reports to ARAMARK for project control.

SALES AND MARKETING

The Company's sales and marketing efforts are dedicated to developing the
Company's direct and indirect distribution channels on a worldwide basis. The
Company's sales efforts in its indirect distribution channels are divided into
four regional groups, United States, Europe, Australia and Asia, with
international sales efforts directed from the Company's international
subsidiaries. In its indirect distribution channel, the Company has a sales
force of ten salespersons spread throughout the regions, all of whom are
dedicated to developing the Company's OEM and VAR distribution channels. Three
of these salespersons

37
<PAGE>
have also recently been dedicated to specific domestic channels linked to the
application software that is integrated with the Javelin POS system with the
intent of increasing sales from these channels. The Company's technically
sophisticated OEMs and VARs are responsible for all end user interaction,
including sales and warranty support, thereby reducing the need for the Company
to maintain large in-house sales or technical support staff while increasing the
Company's presence in the food service and retail markets. The Company also
consults with its OEMs and VARs in order to identify new product opportunities
and product refinements.

The Company's direct sales and marketing efforts are staffed by 32
salespersons located in regional offices in the Unites States, England,
Australia and Singapore. The Company's direct sales business has grown
significantly through acquisitions of its POS systems integrators: CCI and
Posnet in the United States and Aspact in Singapore. The Company expects its
systems integration business to operate under labels other than "Javelin" in
order to reinforce the independent role of the systems integrator in a multi-
vendor marketplace. The Company eventually expects to adopt a single brand
identity for all of its regional system integration subsidiaries. In the United
States, for example, the Posnet sales force has been merged into CCI's sales
force.

The Company's primary direct selling efforts for its system integration
services are through CCI. CCI is an expert in touchscreen POS technology focused
in the food service and retail markets. This expertise combined with a vendor
independent, open systems commitment have positioned CCI as a client partner as
opposed to a vendor.

MANUFACTURING

The Company designs all of the hardware and certain of the firmware
components for all Javelin products. The Company's manufacturing operations
consist of the procurement of components and the assembly, testing and quality
assurance of finished goods for shipment to its customers. The fabrication of
major sub-assemblies, such as circuit boards and sheet metal chassis, and the
supply of other finished components, such as touchscreens, are provided by
third-party manufacturers. Javelin monitors the quality of its purchased and
manufactured components through source and incoming inspection. The Company
evaluates and monitors suppliers based on quality, reputation, responsiveness
and price. To date, the Company has undertaken substantially all of the final
assembly for its products at its facility in Irvine, California.

The principal components that make up the Company's products are standard
electronics available from a wide variety of suppliers. A single supplier
currently provides certain components utilized in the Company's products. The
Company believes that, with respect to these components, there are a number of
alternative suppliers that could supply components that could be easily
integrated into the Company's products without any significant interruption in
the Company's operations. The Company has no written long-term contracts with
the manufacturers of its products or with any suppliers of the components used
in the Company's products. The Company historically has placed orders for
products and components based on its projected sales over the next approximately
90 days, and the Company currently maintains a 60-day supply of product
components in inventory.

The Company recently has begun to outsource some final assembly of its
products to a U.S.-based contract manufacturer. The Company believes that
outsourcing will reduce the likelihood of capacity constraints as production
volumes for its products increase. In addition, the Company has contracted with
a manufacturer based in Singapore to manufacture one of Javelin's proposed new
products, the Javelin LP, on a turnkey basis. Under the turnkey program, the
Singapore manufacturer will ship finished products to Javelin, with the
manufacturer managing the day-to-day purchasing, manufacturing and quality
control requirements. The Company initially plans to have all finished products
inspected at its Irvine, California facility prior to shipment to customers. The
Company ultimately plans to have the manufacturer ship products directly to the
Company's subsidiaries and distributors for final integration of the products
and shipment to customers. The Company expects to have all of its new products
similarly manufactured and shipped by third parties in the future.

38
<PAGE>
PRODUCT WARRANTY

The Company's computer products have a warranty that covers defective
material and workmanship during the twelve-month warranty period commencing on
the date of delivery of the products. During the warranty period, the Company
will, at its sole option, repair or replace parts found to be defective or
refund the purchase price of products or parts. Certain of the Company's major
distributors also provide warranty service for the Company's products.

COMPETITION

The Company believes that the open system architecture of its products and
systems integration services makes it well positioned to take advantage of the
current POS marketplace. The migration to open systems architecture in the POS
industry has been disruptive to many POS companies that built their businesses
on the proprietary operating model. Companies promoting proprietary systems have
faced significant pressure on their operating margins due to high product costs
and substantial overheads. Many of these proprietary vendors have now left the
POS marketplace through acquisitions or financial failure, and the remaining
proprietary vendors generally have undergone reorganizations that have resulted
in rapid exits from significant market segments and/or distribution channels.
With the largest multinational open systems computer companies not yet fully
appreciating the potential of the open systems POS market, the Company is
focused on providing food service providers and retailers with cost-effective
POS solutions that satisfy their POS needs, including system design, hardware
and software installation and implementation and ongoing support and
maintenance.

The market for the Company's products and services is highly competitive,
subject to rapid change and sensitive to new product introductions or
enhancements and marketing efforts by industry participants. The Company expects
to continue to experience significant and increasing levels of competition in
the future, in part as open systems architecture in its targeted industries
becomes more common. The principal elements of competition related to the
Company's products include price, product features and performance,
compatibility with open systems, quality and reliability, brand awareness, level
of customer service and quality of display. The POS systems integration industry
is also highly competitive and undergoing continual change. The principal
elements of competition related to the Company's systems integration services
include reputation, scope of services provided, availability of resources and
price. In many of the Company's markets, traditional computer hardware
manufacturing, communications and consulting companies provide the most
significant competition. The Company must also compete with smaller service
providers that have been able to develop strong local or regional customer
bases. Most of the Company's competitors for its products and services, as well
as certain potential competitors, are more established, benefit from greater
name recognition, have significantly greater financial, technological,
production and marketing resources, and have more extensive distribution
networks than the Company.

The Company believes the use of open systems architecture in its targeted
industries is an important competitive element. Several of the Company's
competitors currently also offer open systems and the Company believes that the
number of competitors offering open systems solutions will grow over the next
several years. The Company anticipates that a significant source of future
competition may be from existing competitors in the POS products and services
market that the Company believes are currently attempting to develop POS systems
and support services utilizing open systems architecture. Due to the greater
sales, marketing, product development and financial resources of the Company's
competitors, the Company anticipates that competition from these competitors
will intensify in the future. In order to effectively compete against these
competitors, the Company will need to continue its growth trend and attain
sufficient revenues to have the resources to timely develop new products and
services in response to evolving technology and customer demands and to sell
products and services through a broad distribution channel in competition with
these other existing and potential competitors. No assurance can be given that
the Company will be able to grow sufficiently to enable it to compete
effectively in this marketplace.

The Company's competitors include a substantial number of large
well-established companies including International Business Machines (IBM),
MICROS Systems, Inc., Par Technology Corporation, Radiant Systems, Inc., NCR
Corp., Panasonic Communications and Systems Co., Fujitsu, Ltd. and ICL Retail

39
<PAGE>
Systems, each of which also offers open systems architecture products and
services related thereto. There can be no assurance that the Company will be
able to compete effectively or that these existing substantial competitors, or
new competitors, will not develop competitive products and services with
favorable pricing. Moreover, the Company has little or no proprietary barriers
to entry that could keep its competitors from developing similar products or
services and technology or selling competing products or services in the
Company's markets.

Increased competition from manufacturers or distributors of products similar
to or competitive with the Company's products, or from service providers that
provide services similar to the Company's services, could result in price
reductions, reduced margins and loss of market share or could render the
Company's technology obsolete, all of which could have a material adverse effect
on the Company's results of operations and financial condition. There can be no
assurance that the Company will be able to successfully compete in this
marketplace or develop sufficient new products and services to remain
competitive, and any failure to do so could have a material adverse effect on
its results of operations and financial condition.

EMPLOYEES

As of December 31, 1998 the Company had approximately 259 full-time
employees, including 32 employed in sales and marketing, 173 employed in
research and development, engineering, technical support and production, and 44
employed as administrative and support staff. None of the Company's employees
are represented by unions, and the Company considers its employee relations to
be good.

FACILITIES

The Company's executive offices, research and product development,
warehousing and distribution facilities are currently housed in a single leased
industrial unit comprised of approximately 41,400 square feet located in Irvine,
California. Under the terms of the lease, the Company presently pays rent of
approximately $32,800 per month with predetermined monthly rent increases at
annual intervals. The lease expires in July 2003. CCI leases a warehousing and
distribution facility of approximately 33,000 square feet in Earth City,
Missouri under a lease that expires on October 31, 2003 and provides for monthly
rental of approximately $18,200.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

40
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company and their ages are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Richard P. Stack................. 33 President, Chief Executive Officer and Director

Robert D. Nichols................ 45 Vice President, Sales and Marketing, President, CCI Group, Inc.
and Director

C. Norman Campbell............... 44 Vice President, Engineering

Horace M. Hertz.................. 49 Chief Financial Officer and Secretary

Andrew F. Puzder(2).............. 48 Director

Steven J. Goodman(1)............. 58 Director

Jay L. Kear(1)(2)................ 61 Director
</TABLE>

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

(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

RICHARD P. STACK has been President, Chief Executive Officer and a director
of the Company since the Company's inception in September 1995. Prior to that
time, from 1991 through September 1995, Mr. Stack was Managing Director of
Hi-Technology Supply, a manufacturer and distributor of personal computers and
components located in South Africa. From 1988 through 1991, Mr. Stack was
employed by Pan-American Airlines in technical management positions. Mr. Stack
holds a B.A. degree from the University of California at Berkeley.

ROBERT D. NICHOLS has been Vice President, Sales and Marketing, and a
director of the Company since August 1998, and has been President of CCI Group,
Inc. since its inception in 1992. Prior to that time, from 1991 to 1992, Mr.
Nichols served as Director of Sales and Marketing for DP-Tek, Inc., an
electronic components manufacturer and systems integrator. From 1985 through
1991, Mr. Nichols served in various sales and marketing positions, most recently
as Sales Manager, Quick Service Restaurants, for Unisys Corporation, a
publicly-traded computer and information systems provider. Mr. Nichols holds an
Associates Degree from the State University of New York and B.S. and M.B.A.
degrees from the University of Missouri.

C. NORMAN CAMPBELL has been Vice President, Engineering, of the Company
since its inception in September 1995. Mr. Campbell also served as a director of
the Company from its inception through May 1998. Prior to that time, from 1991
through September 1995, Mr. Campbell served in various engineering management
positions, including Director of Research and Development, Singapore, for
Advanced Logic Research, a publicly-traded high-end file server manufacturing
company. From 1984 to 1991, Mr. Campbell also acted as a consultant to the
computer industry with such companies as Intel, ITT, Orange Micro Inc. and IBC
(UK).

HORACE M. HERTZ has been Chief Financial Officer of the Company since
November 1997. Prior to that time, from 1996 to 1997, Mr. Hertz acted as a
financial consultant for various companies. From October 1995 to December 1995,
Mr. Hertz was the Chief Financial Officer of Access Healthnet, Inc., an entity
that declared bankruptcy in December 1995. From 1991 to 1995, Mr. Hertz was a
partner of Corbin & Wertz, a CPA firm specializing in publicly-held companies.
From 1974 to 1991, Mr. Hertz was a partner of Deloitte & Touche LLP. Mr. Hertz
holds a masters degree in mathematics from the University of California at
Irvine.

41
<PAGE>
ANDREW F. PUZDER was elected as a director of the Company in November 1996.
Mr. Puzder is currently Executive Vice President of Irvine-based Fidelity
National Financial, Inc., Executive Vice President and General Counsel of CKE
Restaurants, Inc., Chief Executive Officer and a director of Green Burrito Foods
Corporation, and a director of Rally's Hamburgers, Inc. He is also a partner on
leave at the law firm of Stradling, Yocca, Carlson & Rauth. Mr. Puzder received
his J. D. from the Washington University School of Law.

STEVEN J. GOODMAN was elected as a director of the Company in January 1996.
Mr. Goodman is currently a consultant for Tessa Financial Group, Inc., a
regional investment banking firm. From November 1991 through March 1995, Mr.
Goodman was West Coast Managing Director of Creative Business Strategies, Inc.,
a financial corporate consulting firm.

JAY L. KEAR was elected as a director of the Company in August 1996. Since
1988, Mr. Kear has represented Kear Enterprises in working with and investing in
high technology companies. From 1988 through 1993, Mr. Kear also engaged in
similar work for the Noorda Family Trust. Prior to 1988, Mr. Kear held various
sales, marketing, engineering, and general management positions with private and
public companies in the high technology sector. Mr. Kear received a B.S. degree
from the University of Southern California.

BOARD COMPOSITION

The Board of Directors is divided into three classes, with each class
holding office for staggered three-year terms. The terms of Richard P. Stack and
Robert Nichols expire in 1999, the term of Steven J. Goodman expires in 2000 and
the terms of Jay L. Kear and Andrew F. Puzder expire in 2001.

COMMITTEES OF THE BOARD OF DIRECTORS

The Audit Committee consists of Messrs. Puzder and Kear. The Audit Committee
makes recommendations to the Board of Directors regarding the selection of
independent auditors, reviews the results and scope of the audit and other
services provided by the Company's independent auditors and reviews and
evaluates the Company's audit and control functions.

The Compensation Committee consists of Messrs. Goodman and Kear. The
Compensation Committee makes recommendations regarding the Company's stock
option plans as well as decisions concerning salaries and incentive compensation
for employees and consultants of the Company.

DIRECTOR COMPENSATION

The members of the Board do not receive any cash compensation for their
service as directors, but are eligible for reimbursement of their expenses
incurred in connection with attendance at Board meetings in accordance with
Company policy. Each non-employee director of the Company is also automatically
granted options to purchase 30,000 shares of the Company's Common Stock pursuant
to the terms of the Company's stock option plan for services rendered as a
director of the Company. During the last fiscal year, the Company granted
options covering an aggregate of 30,000 shares to Mr. Goodman at an exercise
price of $9.00 per share, representing the fair market value of the Company's
Common Stock on the date of grant.

EXECUTIVE COMPENSATION

The following table sets forth the compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer and the other executive officer
of the Company who earned in excess of $100,000

42
<PAGE>
in salary and bonus (collectively, the "Named Executive Officers") for services
rendered to the Company during the year ended June 30, 1998:

SUMMARY COMPENSATION TABLE (1)

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- --------------------------------- ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
Richard P. Stack................. 1998 $ 105,508 -- 50,000
President, Chief Executive 1997 $ 87,958 -- --
Officer and Director 1996 $ 15,000 -- --

C. Norman Campbell............... 1998 $ 107,593 -- 30,000
Vice President, Engineering
</TABLE>

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

(1) In accordance with the rules of the Securities and Exchange Commission (the
"SEC"), the compensation described in this table does not include medical,
group life insurance or other benefits received by the Named Executive
Officers which are available generally to all salaried employees of the
Company and certain perquisites and other personal benefits received by the
Named Executive Officers which do not exceed the lesser of $50,000 or 10% of
any such officer's salary and bonus disclosed in this table.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth each grant of stock options made during the
fiscal year ended June 30, 1998 to each of the Named Executive Officers:

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------- REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE OR MARKET PRICE FOR OPTION TERM(3)
OPTIONS FISCAL BASE PRICE ON DATE OF EXPIRATION ------------------
NAME GRANTED(1) YEAR(2) ($/SH) GRANT DATE 5% 10%
- ----------------------- ----------- ------------ ----------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>

Richard Stack.......... 50,000 8.0% $ 8.625 $ 8.625 12/11/07 $271,200 $687,300

C. Norman Campbell..... 30,000 4.8% $ 8.625 $ 8.625 12/11/07 $162,700 $412,400
</TABLE>

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

(1) The options referenced above become exercisable over a 5-year period with
20% vesting one year from the date of grant and 20% of the remaining shares
vesting yearly thereafter. The term of the options is ten years.

(2) Based on options to purchase 623,000 shares granted to employees in fiscal
1998, including the Named Executive Officers.

(3) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the stock
price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock
price. These amounts represent certain assumed rates of appreciation only,
in accordance with the rules of the SEC, and do not reflect the Company's
estimate or projection of future stock price performance. Actual gains, if
any, are dependent on the actual future performance of the Company's Common
Stock and no gain to the

43
<PAGE>
optionee is possible unless the stock price increases over the option term,
which will benefit all stockholders.

AGGREGATED FISCAL YEAR-END OPTION VALUES

The following table sets forth for each of the Named Executive Officers the
number and value of securities underlying unexercised options held by the Named
Executive Officers at June 30, 1998.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT JUNE 30, 1998(1) AT JUNE 30, 1998(2)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard Stack.............. -- 50,000 -- $150,000

C. Norman Campbell......... -- 30,000 -- $ 90,000
</TABLE>

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

(1) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with exercise prices below the market price of the
Company's Common Stock.

(2) Based on the fair market value of the Common Stock as of June 30, 1998.
Amounts reflected are based on the fair market value minus the exercise
price and do not indicate that the optionee sold such stock.

STOCK OPTION PLANS

1996 INCENTIVE STOCK AWARD PLAN

In August 1996, the Company adopted, and the stockholders subsequently
approved, the Company's 1996 Stock Incentive Award Plan (the "1996 Plan"). Under
the 1996 Plan, 300,000 shares of the Company's Common Stock are reserved for
issuance pursuant to the exercise of stock awards granted to employees,
directors and consultants. As of December 31, 1998, options to purchase a total
of 246,200 shares were outstanding under the 1996 Plan, 40,900 shares of Common
Stock had been issued upon the exercise of options granted under the 1996 Plan,
and 12,900 shares remained available for grant thereunder. The 1996 Plan will
terminate in August 2006, unless sooner terminated by the Company's Board of
Directors.

The 1996 Plan provides for the grant of both incentive and nonstatutory
stock options, restricted stock, stock appreciation rights, dividend
equivalents, stock payments and/or performance awards. Incentive stock options
granted under the 1996 Plan are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Nonstatutory stock options granted under the 1996 Plan are
intended not to qualify as incentive stock options under the Code. Options
granted under the 1996 Plan generally have a term of ten years and vest over
three years, with 40% vesting after one year and 30% vesting yearly thereafter.

No incentive stock option may be granted under the 1996 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. For
incentive stock option grants, the aggregate fair market value, determined at
the time of grant, of the shares of Common Stock with respect to which such
options are exercisable for the first time by an optionee during any calendar
year (under all such plans of the Company and its affiliates) may not exceed
$100,000.

The Company did not grant any options to its executive officers under the
1996 Plan during the fiscal year ended June 30, 1998.

44
<PAGE>
1997 EQUITY INCENTIVE PLAN

In September 1997, the Company adopted, and the stockholders subsequently
approved, the Company's 1997 Equity Incentive Plan (the "1997 Plan"). Under the
1997 Plan, 1,100,000 shares of the Company's Common Stock are reserved for
issuance pursuant to the exercise of stock awards granted to employees,
directors and consultants. As of December 31, 1998, options to purchase a total
of 1,023,250 shares were outstanding under the 1997 Plan and options to purchase
76,750 shares remained available for grant thereunder. The 1997 Plan will
terminate in September 2007, unless sooner terminated by the Company's Board of
Directors.

The 1997 Plan provides for the grant of both incentive and nonstatutory
stock options and stock appreciation rights. Incentive stock options granted
under the 1997 Plan are intended to qualify as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Nonstatutory stock options granted under the 1997 Plan are intended not
to qualify as incentive stock options under the Code. Options granted under the
1997 Plan generally have a term of ten years and vest over a period of four to
five years, with 25% to 20% vesting after one year and 25% to 20% vesting yearly
thereafter.

No incentive stock option may be granted under the 1997 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. For
incentive stock option grants, the aggregate fair market value, determined at
the time of grant, of the shares of Common Stock with respect to which such
options are exercisable for the first time by an optionee during any calendar
year (under all such plans of the Company and its affiliates) may not exceed
$100,000.

EMPLOYMENT AGREEMENTS

The Company and Richard P. Stack entered into an Employment Agreement dated
August 19, 1996 (the "Stack Employment Agreement"). The Stack Employment
Agreement expires on August 19, 1999 (subject to annual renewals thereafter) and
provides for payment to Mr. Stack of an annual salary of $95,000 from January 1,
1997 through December 31, 1997 and $105,000 from and after January 1, 1998. As
of April 1, 1998, Mr. Stack's annual salary was increased to $150,000. In
addition to his salary, Mr. Stack is reimbursed for all reasonable and necessary
travel and other business expenses incurred in connection with the performance
of his duties. The Company is also obligated to pay the premium for a life
insurance policy insuring Mr. Stack's life providing for death benefits of up to
$750,000 to the named beneficiary of the policy. If Mr. Stack's employment with
the Company is terminated for cause (as defined in the Stack Employment
Agreement), Mr. Stack will be entitled to receive his base salary through the
date of termination. If Mr. Stack's employment with the Company is terminated
without cause, he will be entitled to receive payment of his base salary for the
greater of (i) the remaining term of the Stack Employment Agreement, or (ii) one
(1) year from the date of termination.

The Company and C. Norman Campbell entered into an Employment Agreement
dated August 19, 1996 (the "Campbell Employment Agreement"). The Campbell
Employment Agreement expires on August 19, 1999 (subject to annual renewals
thereafter) and provides for payment to Mr. Campbell of an annual salary of
$95,000 from January 1, 1997 through December 31, 1997 and $105,000 from and
after January 1, 1998. As of April 1, 1998, Mr. Campbell's annual salary was
increased to $130,000. In addition to his salary, Mr. Campbell is reimbursed for
all reasonable and necessary travel and other business expenses incurred in
connection with the performance of his duties. The Company is also obligated to
pay the premium for a life insurance policy insuring Mr. Campbell's life
providing for death benefits of up to $750,000 to the named beneficiary of the
policy. If Mr. Campbell's employment with the Company is terminated for cause
(as defined in the Campbell Employment Agreement), Mr. Campbell will be entitled

45
<PAGE>
to receive his base salary through the date of termination. If Mr. Campbell's
employment with the Company is terminated without cause, he will be entitled to
receive payment of his base salary for the greater of (i) the remaining term of
the Campbell Employment Agreement, or (ii) one year from the date of
termination.

CCI and Robert Nichols entered into an Employment Agreement dated January 1,
1998 (the "Nichols Employment Agreement"). The Nichols Employment Agreement
expires on December 31, 2002 and provides for payment to Mr. Nichols of an
annual base salary of $100,000. Mr. Nichols is also entitled to a quarterly
bonus of $6,250 and a year-end bonus of approximately $31,750, subject to
adjustment based on CCI's profitability for the applicable fiscal year. In
addition to his base salary and bonuses, Mr. Nichols is also reimbursed for all
reasonable and necessary travel and other business expenses incurred in
connection with the performance of his duties. If Mr. Nichols' employment with
CCI is terminated for cause (as defined in the Nichols Employment Agreement),
Mr. Nichols will be entitled to his base salary through the date of termination.
If Mr. Nichols is terminated without cause (as defined in the Nichols Employment
Agreement), then Mr. Nichols will be entitled to a lump sum equal to Mr.
Nichol's annual base salary.

46
<PAGE>
CERTAIN TRANSACTIONS

On December 22, 1997, the Company issued 557,500 shares of the Company's
Common Stock to Robert Nichols, Executive Vice President, Sales and Marketing,
and a Director of the Company, for his entire interest in CCI in connection with
the purchase by the Company of all the outstanding capital stock of CCI. In
connection with the acquisition of CCI, the Company also assumed a note payable
to Mr. Nichols with a balance of approximately $185,000 (the "Nichols Note"). In
February 1998, the Company repaid to Mr. Nichols the principal amount and all
accrued interest outstanding under the Nichols Note.

The Company has entered into employment agreements with Richard P. Stack and
C. Norman Campbell. In addition, CCI entered into an employment agreement with
Robert Nichols. See "Management--Employment Agreements."

47
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of December 31, 1998, and
as adjusted to reflect the sale of shares in this Offering, by (i) each person
who is known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) each Named Executive Officer, (iii) each of the
Company's directors, (iv) each of the Company's current stockholders who is
expected to sell shares in the offering and (v) all current directors and
executive officers as a group. Except as indicated in the footnotes to this
table, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING NUMBER OF AFTER OFFERING
------------------------- SHARES BEING -----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) NUMBER PERCENT OFFERED NUMBER PERCENT
- ----------------------------------------------------- ------------ ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Richard P. Stack(3).................................. 811,508 13.9% 123,467 688,041 8.8%
Robert D. Nichols(4)................................. 508,750 8.7 123,467 385,283 4.9
C. Norman Campbell(5)................................ 441,050 7.5 123,466 317,584 4.0
Steven J. Goodman(6)................................. 295,200 5.1 45,000 250,200 3.2
Patricia E. Green(7)................................. 196,667 3.4 60,000 136,667 1.7
Horace Hertz(8)...................................... 38,167 * 20,000 18,167 *
Roger Scarlett....................................... 33,333 * 2,024 30,976 *
Jay L. Kear(9)....................................... 27,000 * -- 27,000 *
Andrew F. Puzder(10)................................. 15,000 * -- 15,000 *
Anthony Sampson...................................... 1,426 * 1,426 -- *
Jacqueline Sampson................................... 1,150 * 1,150 -- *
All Executive Officers and Directors as a group
(7 persons)(11)..................................... 2,136,675 36.0% 435,400 1,704,575 21.5%
</TABLE>

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

* Less than one percent

(1) All persons listed above have an address c/o the Company's principal
executive offices at 17891 Cartwright Road, Irvine, CA 92614.

(2) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. Percentage of beneficial ownership is
based on 5,835,333 shares of Common Stock outstanding as of December 31,
1998 and assuming 7,835,333 shares of Common Stock outstanding after
completion of this offering.

(3) Includes 9,700 shares owned by Mr. Stack's children and 62,000 shares owned
by Mr. Stack's mother. Also includes 12,500 shares subject to options
exercisable within 60 days of December 31, 1998.

(4) Includes 5,850 shares owned by Mr. Nichols' children. Also includes 1,250
shares subject to options exercisable within 60 days of December 31, 1998.

(5) Includes 9,450 shares subject to options exercisable within 60 days of
December 31, 1998, held by Mr. Campbell's spouse and 7,500 shares subject
to options exercisable within 60 days of December 31, 1998.

48
<PAGE>
(6) Includes 203,200 shares owned by The Steven J. Goodman Revocable Living
Trust of which Steven J. Goodman, a director of the Company, is the sole
trustee and the sole beneficiary, and with respect to which Mr. Goodman has
sole voting and investment power. Also includes 20,000 shares subject to
options exercisable within 60 days of December 31, 1998.

(7) Includes 136,667 shares held by Mrs. Green's spouse.

(8) Includes 16,667 shares subject to options exercisable within 60 days of
December 31, 1998. Also includes 21,500 shares held by GAK Limited, a
partnership of which Mr. Hertz is a general partner.

(9) Includes 5,000 shares held by the Jay Louis Kear Family Trust of which Mr.
Kear is the trustee and 7,000 shares owned by an individual retirement
account of which Mr. Kear is the trustee. Also includes 15,000 shares
subject to options exercisable within 60 days of December 31, 1998.

(10) Includes 15,000 shares subject to options exercisable within 60 days of
December 31, 1998.

(11) Includes 97,367 shares subject to options exercisable within 60 days of
December 31, 1998.

49
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, $0.01 par value, and 1,000,000 shares of Preferred Stock, $0.01
par value. The following description of the Company's capital stock is qualified
in all respects by reference to the Company's Amended and Restated Certificate
of Incorporation ("Certificate of Incorporation"), which has been filed as an
exhibit to the Registration Statement incorporating this Prospectus.

COMMON STOCK

At December 31, 1998, there were 5,835,333 shares of Common Stock
outstanding, which were held of record by 77 stockholders. The holders of
outstanding shares of Common Stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the Board
of Directors may, from time to time, determine, subject to any preferences which
may be granted to the holders of Preferred Stock. Holders of Common Stock are
entitled to one vote per share on all matters on which the holders of Common
Stock are entitled to vote. The Common Stock is not entitled to preemptive
rights and is not subject to redemption or conversion. Upon liquidation,
dissolution or winding-up of the Company, the assets (if any) legally available
for distribution to stockholders are distributable ratably among the holders of
the Common Stock after payment of all debt and liabilities of the Company and
the liquidation preference of any outstanding class or series of Preferred
Stock. All outstanding shares of Common Stock are, and the shares of Common
Stock to be issued pursuant to this Offering will be, when issued and delivered,
validly issued, fully paid and nonassessable. The rights, preferences and
privileges of holders of Common Stock are subject to any series of Preferred
Stock that the Company may issue in the future. Certain holders of Common Stock
or securities convertible into Common Stock are entitled to the registration
rights discussed below.

PREFERRED STOCK

Preferred Stock may be issued from time to time in one or more series, and
the Board of Directors, without action by the holders of the Common Stock, may
fix or alter the voting rights, redemption provisions (including sinking fund
provisions), dividend rights, dividend rates, liquidation preferences,
conversion rights and any other rights, preferences, privileges and restrictions
of any wholly unissued series of Preferred Stock. The Board of Directors,
without stockholder approval, can issue shares of Preferred Stock with rights
that could adversely affect the rights of holders of Common Stock. No shares of
Preferred Stock presently are outstanding, and the Company has no present plans
to issue any such shares. The issuance of shares of Preferred Stock could
adversely affect the voting power of holders of Common Stock and could have the
effect of delaying, deferring or preventing a change in control of the Company
or other corporate action.

WARRANTS

The Company issued warrants to Meridian Capital Group, Inc. ("Meridian"),
one of the Underwriters in this Offering, and certain of Meridian's officers in
connection with the Company's initial public offering in October 1996 (the
"Meridian Warrants"). To date, warrants to purchase 82,102 shares of Common
Stock have been exercised pursuant to the net-exercise provisions of the
Meridian Warrants, and warrants to purchase 2,898 shares of Common Stock remain
outstanding under the Meridian Warrants at an exercise price of $6.25 per share.

In addition, the Company issued warrants to purchase 35,000 shares of Common
Stock to an investment banking firm and certain of the investment banking firm's
officers in connection with financial services provided to the Company at a
weighted average exercise price per share of $11.61, and a warrant to purchase
100,000 shares of Common Stock in connection with the Company's line of credit
at an

50
<PAGE>
exercise price per share of $9.00 (the "Other Warrants," and together with the
Meridian Warrants, the "Warrants").

REGISTRATION RIGHTS

The holders of the Warrants have certain rights of registration with respect
to the 137,898 shares of Common Stock now issuable upon exercise thereof. The
holders of the shares issuable upon exercise of the Meridian Warrants may
require the Company to file one registration statement under the Securities Act
with respect to such shares. In addition, if the Company registers any of its
Common Stock either for its own account or for the account of other security
holders, the holders of the shares issuable upon exercise of the Warrants are
entitled to include their shares of Common Stock in the registration, subject to
certain limitations.

The Company is required to bear substantially all costs incurred in
connection with any such registrations, other than underwriting discounts and
commissions. The foregoing registration rights could result in substantial
future expense to the Company and adversely affect any future equity or debt
offerings of the Company. The demand and piggy-back registration rights related
to the Meridian Warrants expire November 1, 2001 and November 1, 2003,
respectively. The registration rights related to the Other Warrants terminate on
June 8, 2003 and June 9, 2003, respectively.

CERTAIN PROVISIONS OF DELAWARE LAW AND CHARTER DOCUMENTS

The Company is a Delaware corporation and subject to Section 203 of the
Delaware General Corporation law (the "Delaware GCL"), an anti-takeover law. In
general, Section 203 of the Delaware GCL prevents an "interested stockholder"
(defined generally as a person owning 15% or more of a corporation's outstanding
voting stock) from engaging in a "business combination" (as defined) with a
Delaware corporation for three years following the date such person became an
interested stockholder, subject to certain exceptions such as the approval of
the board of directors and of the holders of at least two-thirds of the
outstanding shares of voting stock not owned by the interested stockholder. The
existence of this provision would be expected to have an anti-takeover effect,
including attempts that might result in a premium over the market price of the
shares of Common Stock held by stockholders.

As permitted by the Delaware GCL, the Company has included in its
Certificate of Incorporation a provision to eliminate the personal liability of
its directors for monetary damages for breach or alleged breach of their
fiduciary duties as directors to the extent permitted by the Delaware GCL. In
addition, the Amended and Restated Bylaws ("Bylaws") of the Company provide that
the Company is required to indemnify its officers and directors under certain
circumstances, including the circumstances in which indemnification would
otherwise be discretionary, and the Company is required to advance expenses to
its officers and directors as incurred in connection with proceedings against
them for which they may be indemnified. The Company has entered into
indemnification agreements with its officers and directors containing provisions
that are in some respects broader than the specific indemnification provisions
contained in the Delaware GCL. The indemnification agreements require the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers to the fullest extent permitted by Delaware law and to
advance their expenses incurred as a result of any proceedings against them as
to which they could be indemnified. The Company also carries directors' and
officers' liability insurance. The foregoing provisions of the Company's Bylaws
and indemnification agreements would be available for indemnification of, and
advancing of expenses to, officers and directors of the Company in connection
with liabilities under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the Company's Bylaws
and/or indemnification agreement, or otherwise, the Company has been advised
that in the opinion of the SEC,

51
<PAGE>
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. At present, the Company is not aware of any
pending or threatened litigation or proceeding involving a director, officer,
employee or agent of the Company in which indemnification would be required or
permitted. The Company believes that its charter provisions and indemnification
agreement are necessary to attract and retain qualified persons as directors and
officers.

The Company's Certificate of Incorporation and Bylaws provide for the Board
of Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. The provisions of the Certificate of Incorporation
and Bylaws of the Company with respect to the foregoing may be amended, modified
or rescinded by the holders of at least 66 2/3% of the Company's outstanding
voting stock. These provisions could have the effect of delaying, deferring or
preventing a change in control or other corporation action.

TRANSFER AGENT AND REGISTRAR

The stock transfer agent and registrar for the Common Stock is U.S. Stock
Transfer Corporation, Glendale, California.

52
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of Common Stock in the public market
could adversely affect market prices prevailing from time to time. Furthermore,
since only a limited number of shares will be available for sale shortly after
this Offering because of certain contractual and legal restrictions on resale
described below, sales of substantial amounts of Common Stock of the Company in
the public market after the restrictions lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.

Upon completion of this Offering, the Company will have outstanding
7,835,333 shares of Common Stock, assuming no exercise of the Underwriters'
over-allotment option. Of these shares, the 2,500,000 shares sold in this
Offering, together with the 850,000 shares sold in the Company's initial public
offering in October 1996 and the 1,552,500 shares sold in the Company's public
offering in October 1998 will generally be freely tradable without restriction
or further registration under the Securities Act. Of the remaining 2,932,833
shares, the following 2,835,775 shares of Common Stock may be sold in the public
market as follows: (1) 940,467 shares will be eligible for immediate sale on the
date of this Prospectus; (2) upon expiration of a lock-up agreement on April 26,
1999, an additional 90,000 shares will be eligible for sale subject to the
volume and other restrictions of Rule 144 and (3) upon expiration of lock-up
agreements 180 days after the date this Prospectus is declared effective (the
"Effective Date"), approximately 1,805,308 additional shares will be eligible
for sale subject to the volume and other restrictions of Rule 144. In addition,
holders of vested options to purchase 151,091 shares of Common Stock as of the
date of this Prospectus will be able to sell without restriction pursuant to a
Form S-8 registration statement filed with respect to such shares. Holders of
additional vested options to purchase an aggregate of 94,167 shares of Common
Stock as of the date of this Prospectus will be entitled to sell all of such
shares upon expiration of lock-up agreements 180 days after the Effective Date.
Future sales of shares by existing stockholders could have an adverse effect on
the market price of the Common Stock or otherwise impair the Company's ability
to raise additional capital. See "Description of Capital Stock."

In general, under Rule 144 as currently in effect, an affiliate of the
Company, or person (or persons whose shares are aggregated) who has beneficially
owned restricted shares for at least one year will be entitled to sell in any
three-month period a number of shares that does not exceed the greater of (i)
one percent of the then outstanding shares of the Company's Common Stock or (ii)
the average weekly trading volume of the Company's Common Stock in the Nasdaq
National Market during the four calendar weeks immediately preceding the date on
which notice of the sale is filed with the SEC. Sales pursuant to Rule 144 are
subject to certain requirements relating to manner of sale, notice, and the
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed to have been an affiliate
of the Company at any time during the 90 days immediately preceding the sale and
who has beneficially owned restricted shares for at least two years is entitled
to sell such shares under Rule 144(k) without regard to the limitations
described above.

The Company has filed registration statements under the Securities Act
covering shares of Common Stock reserved for issuance under the Company's stock
option plans. Such registration statements cover approximately 1,400,000 shares.
Shares registered under such registration statements will, subject to Rule 144
volume limitations applicable to affiliates, be available for sale in the open
market, unless such shares are subject to the lock up agreements described
above. See "Management."

53
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), through their representatives,
Van Kasper & Company, Tucker Anthony Incorporated and Meridian Capital Group,
Inc. (the "Representatives"), have severally agreed to purchase from the Company
the number of shares of Common Stock set forth opposite their names below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Van Kasper & Company.............................................................
Tucker Anthony Incorporated......................................................
Meridian Capital Group, Inc......................................................

----------
Total........................................................................ 2,500,000
----------
----------
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the shares of Common Stock offered hereby (other than those
subject to the Underwriters' Over-Allotment Option described below) if any are
purchased.

The Underwriters propose to offer the shares of Common Stock directly to the
public at the price to public set forth on the cover page of this Prospectus and
to certain dealers at this price less a concession not in excess of $ per
share. The Underwriters may allot and these dealers may reallot a concession not
in excess of $ per share to certain other dealers. After the initial
offering, the offering price and other selling terms may be changed by the
Representatives.

The following table summarizes the compensation to be paid to the
Underwriters by the Company and the Selling Stockholders, and the expenses
payable by the Company and the Selling Stockholders:

<TABLE>
<CAPTION>
TOTAL
------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
----------- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts and Commissions paid by the Company............ $ $ $
Expenses payable by the Company....................................... $ $ $
Underwriting Discounts and Commissions paid by the Selling
Stockholders........................................................ $ $ $
Expenses payable by the Selling Stockholders.......................... $ $ $
</TABLE>

The Company has granted to the Underwriters an option (the "Over-Allotment
Option"), exercisable no later than 45 days after the date of this Prospectus,
to purchase up to 375,000 additional shares of Common Stock at the per share
public offering price less the Underwriting Discounts and Commissions set forth
on the cover page of this Prospectus, solely to cover over-allotments. To the
extent that the Representatives act to exercise the Over-Allotment Option, each
of the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof as the number of shares of Common Stock to be purchased
by it shown in the above table bears to the total offering, and the Company will
be obligated, pursuant to the option, to sell such shares of Common Stock to the
Underwriters.

54
<PAGE>
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. The Representatives have informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they exercise
discretionary authority.

In connection with the Offering, the Representatives may engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Offering, the Representatives may reduce that short position
by purchasing Common Stock in the open market. The Representatives may also
elect to reduce any short position by exercising all or part of the
Over-Allotment Option. In general, purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price of the
security to be higher than it might be in the absence of such purchases.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transaction or that such transactions, once
commenced, will not be discontinued without notice.

The Company, the Selling Stockholders, all of the Company's executive
officers and directors, and certain beneficial owners of the Company's Common
Stock have agreed not to, directly or indirectly, offer to sell, contract to
sell, sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exercisable for shares of Common Stock or any rights to
purchase or acquire Common Stock for the 180-day period from the date of this
Prospectus without the prior written consent of Van Kasper & Company. Van Kasper
& Company may, in its sole discretion and at any time without notice, release
all or any portion of the securities subject to these lock-up agreements. See
"Shares Eligible for Future Sale."

As discussed above, Van Kasper & Company may, under certain circumstances,
decide to release the Company, the Selling Stockholders and the Company's
officers, directors, employees and certain other stockholders from the 180-day
lock-up period on sales of Common Stock as set forth in the lock-up agreements.
In making such a determination, Van Kasper & Company would consider prevailing
market factors and conditions at the time of receipt of a request for release
from the 180-day restriction period. The granting of any such release would be
conditioned, in the judgment of the Van Kasper & Company on such sale not
materially adversely impacting the prevailing trading market for the Common
Stock on the Nasdaq National Market. Specifically, factors such as average
trading volume, recent price trends, and the need for additional public float in
the market for the Common Stock would be considered in evaluating such a
request.

In October 1996, the Company issued to Meridian Capital Group, Inc.
("Meridian") and certain of Meridian's officers warrants to purchase 85,000
shares of the Company's Common Stock at $6.25 per share in connection with the
Company's initial public offering (the "Meridian Warrants"). To date, warrants
to purchase 82,102 shares of the Company's Common Stock have been exercised for
a total of 45,689 shares of Common Stock pursuant to the net exercise provisions
contained in the Meridian Warrants, and warrants to purchase 2,898 shares of
Common Stock at an exercise price of $6.25 per share remain outstanding under
the Meridian Warrants.

55
<PAGE>
LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by its counsel, Cooley Godward LLP, San Diego, California.
Certain legal matters in connection with the Offering will be passed upon for
the Underwriters by Gray Cary Ware & Freidenrich LLP, San Diego, California.

EXPERTS

The Consolidated Financial Statements of Javelin Systems, Inc. at June 30,
1997, and for the period from inception to June 30, 1996 and the year ended June
30, 1997, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

The Consolidated Financial Statements of Javelin Systems, Inc. as of June
30, 1998 and for the year then ended included in this Prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.

The Financial Statements of POSNET Computers, Inc. as of October 31, 1997
and for the year then ended included in this Prospectus and Registration
Statement have been so included in reliance on the report of Corbin & Wertz,
independent auditors, given on the authority of said firm as experts in
accounting and auditing.

The Consolidated Financial Statements of CCI Group, Inc. as of December 31,
1997 and for the year then ended included in this Prospectus and Registration
Statement have been so included in reliance on the report of Rubin, Brown,
Gornstein & Co. LLP, independent auditors, given on the authority of said firm
as experts in accounting and auditing.

CHANGE IN ACCOUNTANTS

On May 28, 1998, the Company elected to replace Ernst & Young LLP ("Ernst &
Young") as its independent accountants. The reports of Ernst & Young on the
Company's financial statements as of June 30, 1996 and 1997 and for the period
from inception to June 30, 1996 and for the year ended June 30, 1997 contained
no adverse opinion or disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles. The Company's audit
committee approved the Company's dismissal of Ernst & Young and the engagement
of PricewaterhouseCoopers LLP as the Company's independent accountants.

During the Company's two most recent fiscal years and through May 28, 1998,
there were no disagreements with Ernst & Young on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of Ernst &
Young would have caused them to make reference thereto in their report. During
the two most recent fiscal years and through May 28, 1998, there have been no
reportable events (as defined in Regulation S-K Item 304(a)(1) (v)). Ernst &
Young has furnished the Company with a letter addressed to the SEC stating that
it agrees with the above statements.

The Company engaged PricewaterhouseCoopers LLP as its new independent
accountants as of May 28, 1998. During the two most recent fiscal years and
through May 28, 1998, the Company has not consulted with PricewaterhouseCoopers
LLP on items which (i) are described in Regulation S-K Item 304(a)(2)(i) or (ii)
concerned the subject matter of a disagreement or reportable event with the
former accountants (as described in Regulation S-K Item 304(a)(2)(ii)).

56
<PAGE>
ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement on Form SB-2 under the Act, with
respect to the Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and such
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules filed as part thereof. Statements contained in this Prospectus as
to the contents of any contract or document filed as an exhibit to the
Registration Statement are qualified by reference to such exhibit as filed.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the SEC. A copy of the Registration Statement, and the
exhibits and schedules thereto, as well as reports and other information filed
by the Company with the SEC may be inspected without charge at the public
reference facilities maintained by the SEC in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048, and copies of all or any part of the Registration Statement may be
obtained from such offices upon the payment of the fees prescribed by the SEC.
The SEC maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of the SEC's World Wide Web site is
http://www.sec.gov.

57
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
JAVELIN SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants:
PricewaterhouseCoopers LLP............................................................................. F-2
Ernst & Young LLP...................................................................................... F-3
Consolidated Balance Sheets as of June 30, 1997 and 1998 and December 31, 1998 (unaudited)............... F-4
Consolidated Statements of Operations for the Years Ended June 30, 1997 and 1998 and the Six Months Ended
December 31, 1997 (unaudited) and 1998 (unaudited)..................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 1997 and 1998 and the Six Months Ended
December 31, 1997 (unaudited) and 1998 (unaudited)..................................................... F-6
Consolidated Statement of Stockholders' Equity for the Years Ended June 30, 1997 and 1998 and the Six
Months Ended December 31, 1998 (unaudited)............................................................. F-7
Notes to Consolidated Financial Statements............................................................... F-8

POSNET COMPUTERS, INC. FINANCIAL STATEMENTS
Independent Auditors' Report............................................................................. F-21
Balance Sheet as of October 31, 1997..................................................................... F-22
Statement of Operations for the Twelve-Month Period Ended October 31, 1997............................... F-23
Statement of Stockholders' Deficit for the Twelve-Month Period Ended October 31, 1997.................... F-24
Statement of Cash Flows for the Twelve-Month Period Ended October 31, 1997............................... F-25
Notes to Financial Statements............................................................................ F-26

CCI GROUP, INC. CONSOLIDATED FINANCIAL STATEMENTS
Auditors' Report......................................................................................... F-32
Consolidated Balance Sheets as of December 31, 1997 and 1996............................................. F-33
Consolidated Statements of Income for the Years Ended December 31, 1997 and 1996......................... F-34
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1997 and
1996................................................................................................... F-35
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997 and 1996..................... F-36
Notes to Consolidated Financial Statements............................................................... F-37
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Javelin Systems, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Javelin
Systems, Inc. and its subsidiaries at June 30, 1998, and the results of their
operations and their cash flows for the year in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

Costa Mesa, California
August 25, 1998

F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Javelin Systems, Inc.

We have audited the accompanying balance sheet of Javelin Systems, Inc. as of
June 30, 1997, and the related statements of operations, stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Javelin Systems, Inc. at June
30, 1997, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Orange County, California
August 1, 1997

F-3
<PAGE>
JAVELIN SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1997 1998
------------ ------------- DECEMBER 31,
1998
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 686,200 $ $
Accounts receivable--net of allowance for doubtful accounts of
$41,000 as of June 30, 1997, $248,800 as of June 30, 1998, and
of $399,000 as of December 31, 1998............................ 2,470,600 7,449,700 14,703,700
Inventories...................................................... 1,674,100 5,925,300 14,472,400
Deferred income taxes............................................ 204,900 204,900
Other current assets............................................. 46,500 426,900 593,300
------------ ------------- -------------
Total current assets........................................... 4,877,400 14,006,800 29,974,300
Property and equipment, net...................................... 295,600 1,036,400 1,797,500
Excess of cost over net assets of purchased businesses........... 6,457,500 10,230,600
Deferred financing costs......................................... 889,000 768,200
Other assets, net................................................ 30,000 141,600 173,200
------------ ------------- -------------
Total assets................................................... $ 5,203,000 $ 22,531,300 $ 42,943,800
------------ ------------- -------------
------------ ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit................................................... $ 200,000 $ 1,343,000 $ 2,716,500
Accounts payable................................................. 1,503,800 5,636,900 11,651,600
Accrued expenses................................................. 144,700 625,000 2,189,800
Current maturities of long-term debt............................. 300,000 300,000
Customer deposits................................................ 1,197,200 648,800
Deferred maintenance revenues.................................... 385,300 368,000
Income taxes payable............................................. 438,700 1,038,400
------------ ------------- -------------
Total current liabilities...................................... 1,848,500 9,926,100 18,913,100
------------ ------------- -------------
Long-term debt, net of current portion............................. 1,200,000 1,359,600
Deferred rent expense.............................................. 6,300 8,700
Commitments and contingencies (Note 6)

Stockholders' equity:
Preferred stock, $0.01 par value: authorized shares-- 1,000,000;
issued and outstanding shares--none
Common stock, $.01 par value: authorized shares-- 20,000,000;
issued and outstanding shares--3,119,250 as of June 30, 1997
4,111,962 as of June 30, 1998 and 5,835,333 as of December 31,
1998........................................................... 31,200 41,100 58,400
Additional paid in capital....................................... 4,295,300 11,270,900 21,472,400
Deferred compensation............................................ (90,800) (39,200) (22,200)
Retained earnings (accumulated deficit).......................... (881,200) 132,900 1,179,500
Cumulative translation adjustment................................ (6,800) (25,700)
------------ ------------- -------------
Total stockholders' equity..................................... 3,354,500 11,398,900 22,662,400
------------ ------------- -------------
Total liabilities and stockholders' equity..................... $ 5,203,000 $ 22,531,300 $ 42,943,800
------------ ------------- -------------
------------ ------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-4
<PAGE>
JAVELIN SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

SEE ACCOMPANYING NOTES.

F-5
<PAGE>
JAVELIN SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
JUNE 30, 1997 JUNE 30, 1998
------------------ ------------------ SIX MONTHS ENDED
DECEMBER 31,
------------------------
1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................... $ (826,900) $ 1,014,100 $ 113,700 $1,046,600
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization................. 37,800 354,900 52,400 530,600
Amortization of deferred charge related to
warrants.................................... 636,100
Amortization of deferred compensation......... 108,200 51,600 31,500 17,000
Loss on disposal of assets.................... 55,100 2,800
Deferred income taxes......................... (204,900)
Deferred rent expense......................... 6,300 3,200 2,400
Income tax benefit from exercise of stock
options..................................... 59,200 59,200
Non-cash allowances:
Inventories................................. 312,800 5,000
Accounts receivable......................... 243,800 58,000 150,200
Other....................................... 130,000 62,100 42,000
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable......................... (1,776,900) (3,403,500) (1,224,300) (4,536,000)
Inventories................................. (1,464,800) (2,985,800) (167,200) (7,577,000)
Other current assets........................ (42,500) (313,900) (293,500) 58,200
Accounts payable............................ 1,147,100 2,838,100 487,100 4,687,600
Accrued expenses............................ 111,800 35,100 (35,000) 689,300
Deferred maintenance revenues............... 129,200 (129,100)
Customer deposits........................... (408,500) (548,400)
Income taxes payable........................ 239,000 567,500
------------------ ------------------ ----------- -----------
Net cash provided by (used in) operating
activities.................................. (2,070,100) (1,847,400) (845,000) (4,999,100)
------------------ ------------------ ----------- -----------
INVESTING ACTIVITIES
Purchase of equipment......................... (305,300) (724,600) (180,100) (685,700)
Cash received from (paid for) purchased
businesses.................................. 392,400 665,100 (1,889,800)
Other assets.................................. (20,300) (75,200) (7,300) (61,700)
------------------ ------------------ ----------- -----------
Net cash provided by (used in) investing
activities.................................. (325,600) (407,400) 477,700 (2,637,200)
------------------ ------------------ ----------- -----------
FINANCING ACTIVITIES
Net borrowings (repayments) under line of
credit...................................... (6,600) 774,200 800,000 (341,000)
Proceeds from issuance of long-term debt...... 1,500,000
Payments of notes payable to related
parties..................................... (90,000) (515,500) 5,800
Repayment of notes payable.................... (70,000) (180,500)
Deferred financing costs...................... (278,900) (29,400)
Net proceeds from public offering............. 3,238,700 8,146,400
Exercise of stock options and warrants........ 3,400 95,600 71,400 70,400
------------------ ------------------ ----------- -----------
Net cash provided by (used in) financing
activities................................ 3,075,500 1,575,400 871,400 7,671,700
------------------ ------------------ ----------- -----------
CUMULATIVE TRANSLATION ADJUSTMENT............... (6,800) (35,400)
------------------ ------------------ ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... 679,800 (686,200) 504,100 --
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD........................................ 6,400 686,200 686,200
------------------ ------------------ ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...... $ 686,200 $ -- $1,190,300 $ --
------------------ ------------------ ----------- -----------
------------------ ------------------ ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income tax paid............................... $ 800 $ 298,000 $ -- $ 161,300
------------------ ------------------ ----------- -----------
------------------ ------------------ ----------- -----------
Interest paid................................. $ 71,400 $ 113,200 $ 6,900 $ 319,100
------------------ ------------------ ----------- -----------
------------------ ------------------ ----------- -----------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING AND INVESTING ACTIVITIES:
See Note 3 for the acquisition of businesses
in exchange for 910,300 shares of the
Company's common stock.
See Note 5 for the warrants issued in
connection with credit facility.
See Note 9 for issuance of the Company's
Common Stock for the cancellation of
earnout shares and issuance of shares in
connection with subsequent acquisitions.
</TABLE>

SEE ACCOMPANYING NOTES.

F-6
<PAGE>
JAVELIN SYSTEMS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
DEFERRED CHARGE
RELATED TO RETAINED
COMMON STOCK ADDITIONAL WARRANTS ISSUED EARNINGS CUMULATIVE
------------------ PAID-IN DEFERRED IN CONNECTION (ACCUMULATED TRANSLATION
SHARES AMOUNT CAPITAL COMPENSATION WITH DEBT DEFICIT) ADJUSTMENT TOTAL
--------- ------- ----------- ------------ --------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of July 1,
1996.................. 2,104,250 $21,100 $ 348,100 $ -- $(119,800) $ (54,300) $ -- $ 195,100
Value assigned to
warrants issued in
connection with
debt.................. 516,300 (516,300) --
Amortization of deferred
charge................ 636,100 636,100
Exercise of warrants.... 165,000 1,600 1,700 3,300
Proceeds from initial
public offering,
net................... 850,000 8,500 3,230,200 3,238,700
Deferred stock
compensation.......... 199,000 (199,000) --
Amortization of deferred
stock compensation.... 108,200 108,200
Net loss................ (826,900) (826,900)
--------- ------- ----------- ------------ --------------- ------------ ---------- -----------

Balance, June 30,
1997.................. 3,119,250 31,200 4,295,300 (90,800) -- (881,200) -- 3,354,500
Value assigned to
warrants issued in
connection with credit
facility.............. 621,900 621,900
Issuances of shares for
acquisitions.......... 929,050 9,300 6,199,500 6,208,800
Amortization of deferred
stock compensation.... 51,600 51,600
Exercise of stock
options and exchange
of warrants for common
stock................. 63,662 600 95,000 95,600
Income tax benefit from
exercise of stock
options............... 59,200 59,200
Cumulative translation
adjustment............ (6,800) (6,800)
Net income.............. 1,014,100 1,014,100
--------- ------- ----------- ------------ --------------- ------------ ---------- -----------
Balance, June 30,
1998.................. 4,111,962 41,100 11,270,900 (39,200) -- 132,900 (6,800) 11,398,900
Exercise of stock
options and warrants
(unaudited)........... 15,063 100 70,300 70,400
Issuance of common stock
in connection with the
elimination of earnout
shares (unaudited).... 56,250 600 362,600 363,200
Shares issued in
connection with public
offering, net of
offering costs
(unaudited)........... 1,395,000 14,000 8,132,400 8,146,400
Shares issued in
connection with
acquisition of RGB and
Jade (unaudited)...... 257,058 2,600 1,636,200 1,638,800
Amortization of deferred
compensation
(unaudited)........... 17,000 17,000
Net income
(unaudited)........... 1,046,600 1,046,600
Cumulative translation
adjustment
(unaudited)........... (18,900) (18,900)
--------- ------- ----------- ------------ --------------- ------------ ---------- -----------
Balance as of December
31, 1998
(unaudited)........... 5,835,333 $58,400 $21,472,400 $ (22,200) $ -- $1,179,500 $(25,700) $22,662,400
--------- ------- ----------- ------------ --------------- ------------ ---------- -----------
--------- ------- ----------- ------------ --------------- ------------ ---------- -----------
</TABLE>

SEE ACCOMPANYING NOTES.

F-7
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

Javelin Systems, Inc. ("Javelin") was incorporated in the State of Delaware
on September 19, 1995 under the name of Sunwood Research, Inc. Javelin designs,
develops, markets and sells open systems touch screen point-of-sale ("POS")
computers.

On November 1, 1996, Javelin completed an initial public offering (the
"IPO") of 850,000 shares of its common stock at $5.00 per share, netting
proceeds of approximately $3.2 million. Proceeds were used to repay debt with an
outstanding balance of approximately $745,000 and for working capital.

In December 1997, Javelin acquired all of the outstanding common stock of
POSNET Computers, Inc.("Posnet") and CCI Group, Inc. ("CCI") as described in
Note 3. Posnet and CCI provide full turn-key systems integration services,
including system consulting, staging, training, deployment, product support and
maintenance.

In March and April 1998, Javelin established three international
subsidiaries to expand its sales and distribution channels in the international
marketplace. The international subsidiaries are: Javelin Systems (Europe)
Limited ("Javelin Europe") headquartered in England; Javelin Systems
International Pte Ltd ("Javelin Asia") headquartered in Singapore; and Javelin
Systems Australia Pty Limited ("Javelin Australia") headquartered in Australia.

In May 1998, Javelin Asia acquired all of the outstanding common stock of
Aspact IT Services (Singapore) Pte Ltd ("Aspact") as described in Note 3. Aspact
is headquartered in Singapore and provides consulting and system integration
services.

In July 1998, Javelin entered into a letter of intent to acquire all of the
outstanding capital stock of RGB/Trinet Ltd. ("RGB/Trinet") and Jade
Communications Ltd ("Jade"). RGB/Trinet and Jade are headquartered in England
and provided complementary Wide Area Networking (WAN) products and services
primarily to large retail, hospitality, and telecommunications companies. See
Note 9 for description of these subsequent acquisitions.

Hereinafter, Javelin and its subsidiaries are referred to as the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Javelin and of
its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reported period. Actual results could materially differ from these estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair market value of the financial instruments could be different than
that recorded on a historical basis in the accompanying consolidated financial
statements. The financial instruments consist of cash and

F-8
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

cash equivalents, accounts receivable, accounts payable, accrued expenses and
debt. The carrying amounts of the Company's financial instruments as of June 30,
1997 and 1998 approximate their respective fair values.

CONCENTRATION OF BUSINESS AND CREDIT RISK

Javelin operates within an industry that is subject to rapid technological
advancement, intense competition and uncertain market acceptance. The
introduction of new technologies, competitors' alternative products and ultimate
market acceptance of the products sold by Javelin, could have a substantial
impact on the future operations of the Company.

Financial instruments which potentially subject the Company to a
concentration of credit risk consist primarily of trade receivables. In the
normal course of business, the Company provides credit terms to its customers
and collateral is generally not required. Accordingly, the Company performs
ongoing credit evaluations of its customers and maintains allowances for
potential losses which, when realized, have been within the range of
management's expectations.

During the year ended June 30, 1997 two customers aggregated approximately
16% each of net sales. During the year ended June 30, 1998 one customer
aggregated approximately 11% of net sales. Sales were not to the same major
customers in 1997 and 1998. Export sales, principally to Europe, during the year
ended June 30, 1998 aggregated approximately 10% of net sales. Export sales
during the year ended June 30, 1997 were not significant.

CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.

INVENTORIES

Inventories consist primarily of computer hardware and components and are
stated at the lower of cost (first-in, first-out) or market as follows:

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1997 1998
------------ ------------ DECEMBER 31,
1998
-------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials..................................... $ 1,525,700 $ 3,572,500 $ 12,569,400
Work in process................................... -- -- 1,217,800
Finished goods.................................... 148,400 2,352,800 685,200
------------ ------------ -------------
$ 1,674,100 $ 5,925,300 $ 14,472,400
------------ ------------ -------------
------------ ------------ -------------
</TABLE>

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Maintenance and repairs are
charged to expense as incurred, and the costs of additions and betterments are
capitalized. Depreciation is provided in amounts, which amortize costs over the
useful lives of the related assets, generally three to five years, utilizing the
straight-line method. Leasehold improvements are amortized over the terms of the
respective leases or useful lives of the improvements, whichever is shorter.

Management of the Company assesses the recoverability of property and
equipment when certain events are known to management which may affect the
carrying value of such assets in relation to fair

F-9
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

value. Management assesses fair value by determining whether the carrying value
of such assets over their remaining lives can be recovered through projected
undiscounted cash flows. The amount of impairment, if any, is measured based on
projected undiscounted cash flows and is charged to operations in the period in
which such impairment is determined by management. To date, management has not
identified any impairment of property and equipment.

Property and equipment consists of the following:

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1997 1998
---------- ------------
<S> <C> <C>
Machinery and equipment............................................. $ 112,800 $ 603,000
Furniture and fixtures.............................................. 150,800 638,000
Leasehold improvements.............................................. 72,700 35,200
---------- ------------
336,300 1,276,200

Less accumulated depreciation and amortization...................... (40,700) (239,800)
---------- ------------
Property and equipment, net......................................... $ 295,600 $ 1,036,400
---------- ------------
---------- ------------
</TABLE>

EXCESS OF COST OVER NET ASSETS OF PURCHASED BUSINESSES

Excess of cost over net assets of purchased businesses (goodwill) represents
the excess of purchase price over the fair value of the net assets of acquired
businesses. Goodwill is stated at cost and is amortized on a straight-line basis
over 25 years. The Company assesses the recoverability of this intangible asset
by determining whether the amortization of the goodwill balance over its
remaining life can be recovered through projected undiscounted cash flows. The
amount of goodwill impairment, if any, is measured based on projected
undiscounted cash flows and is charged to operations in the period in which
goodwill impairment is determined by management. To date, management has not
identified any impairment of goodwill.

DEFERRED FINANCING COSTS

Deferred financing costs represent incremental costs to unrelated parties
incurred in connection with the credit facility described in Note 5 and are
deferred and amortized over the term of the related debt.

CUSTOMER DEPOSITS

Customer deposits as of June 30, 1998 consists principally of amounts
received for contracts to be started in fiscal 1999.

FOREIGN CURRENCY TRANSLATION

The consolidated financial statements of the Company's non-U.S. operations
are translated into U.S. dollars for financial reporting purposes. The assets
and liabilities of non-U.S. operations whose functional currencies are other
than the U.S. dollar are translated at rates of exchange at fiscal year-end, and
revenues and expenses are translated at average exchange rates for the fiscal
year. The cumulative translation effects are reflected in stockholders' equity.
Foreign currency gains and losses on transactions denominated in other than the
functional currency of an operation are reflected in other income (expense).

F-10
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

REVENUE RECOGNITION

Revenues from sales of products are recognized upon shipment of the
products. The Company does not have any significant remaining obligations upon
shipment of the products. Product returns and sales allowances, which
historically have not been significant, are provided for at the date of sale.

Revenues from the installation of products are recognized upon the
completion of the installation of the product as acknowledged by the customer.

Service contract revenues are recognized ratably over the term of the
related contract.

WARRANTIES

The Company's products are under warranty for defects in material and
workmanship for one year. Certain components included in the Company's products
are covered by manufacturers' warranties. The Company establishes an accrual for
estimated warranty costs at the time of sale.

ADVERTISING COSTS

The Company expenses the costs of advertising as incurred.

RESEARCH AND DEVELOPMENT

The Company expenses the cost of research and development, principally
comprised of payroll and related costs and the cost of prototypes.

STOCK-BASED COMPENSATION

During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which defines a fair value based method of accounting for
stock-based compensation. However, SFAS 123 allows an entity to continue to
measure compensation cost related to stock and stock options issued to employees
using the intrinsic method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."
Entities electing to use APB 25 for accounting for stock-based compensation to
employees must make pro forma disclosures of net income or loss, as if the fair
value method of accounting defined in SFAS 123 had been applied. The Company has
elected to account for its stock-based compensation to employees under APB 25.

INCOME TAXES

The Company accounts for its income taxes using the asset and liability
method whereby deferred tax assets and liabilities are determined based on
temporary differences between bases used for financial reporting and income tax
reporting purposes. Income taxes are provided based on the enacted tax rates in
effect at the time such temporary differences are expected to reverse. A
valuation allowance is provided for certain deferred tax assets if it is more
likely than not that the Company will not realize those tax assets through
future operations.

EARNINGS (LOSS) PER COMMON SHARE

The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which
specifies the computation, presentation and disclosure requirements for earnings
per share ("EPS"). It replaces the presentation of primary and fully

F-11
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

diluted EPS with basic and diluted EPS. Basic EPS excludes all dilution and it
is based upon the weighted average number of common shares outstanding during
the period. Diluted EPS reflects the potential dilution that would occur if
securities or other contracts to issue common stock which are dilutive were
exercised or converted into common stock. The Company has adopted SFAS 128 in
the quarter ended December 31, 1997 and has restated all previously reported per
share amounts to conform to the new presentation.

Diluted loss per common share is computed using the weighted average number
of common shares outstanding during the period. Common share equivalents were
not included in the 1997 computation of diluted loss per common share since
their effect would have been anti-dilutive.

A reconciliation of basic and diluted EPS for the years ended June 30, 1997
and 1998 is as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997 YEAR ENDED JUNE 30, 1998
-------------------------- --------------------------
BASIC DILUTED BASIC DILUTED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss).................... $ (826,900) $ (826,900) $ 1,014,100 $ 1,014,100
Weighted average common shares
outstanding........................ 2,782,535 2,782,535 3,622,604 3,622,604
Additional shares due to potential
exercise of stock options.......... 128,007
Diluted weighted average common
shares outstanding................. 2,782,535 2,782,535 3,622,604 3,750,611
Earnings (loss) per share............ $ (0.30) $ (0.30) $ 0.28 0.27
</TABLE>

COMPREHENSIVE INCOME (UNAUDITED)

Effective in the first quarter of fiscal 1999, the Company adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting and displaying of
comprehensive income and its components in the Company's consolidated financial
statements. Comprehensive income is defined in SFAS 130 as the change in equity
(net assets) of a business enterprise during the period from transactions and
other events and circumstances from nonowner sources. Total comprehensive income
was $1,035,400 and $113,700 for the quarters ended December 31, 1998 and 1997,
respectively. The primary difference from net income as reported is the tax
effected change in the cumulative translation adjustment.

RECENTLY ISSUED ACCOUNTING STANDARD

F-12
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

UNAUDITED INTERIM INFORMATION

The information presented as of December 31, 1998, and for the six month
periods ended December 31, 1997 and 1998, has not been audited. In the opinion
of management, the unaudited interim financial statements included all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position as of December 31, 1998, and the
results of its operations and its cash flows for the six months ended December
31, 1997 and 1998, and the stockholders' equity for the six months ended
December 31, 1998.

3. ACQUISITIONS

Cash received in connection with the Company's purchase acquisitions is as
follows:

<TABLE>
<S> <C>
Fair value of assets acquired, including goodwill.............. $10,422,000
Less liabilities assumed....................................... 4,561,200
Less stock and cash issued to sellers.......................... 6,253,200
----------
Cash received.................................................. $ 392,400
----------
----------
</TABLE>

In December 1997, the Company acquired all of the outstanding capital stock
of Posnet. Posnet sells, installs and maintains POS systems and turnkey retail
automation systems. The original purchase price for the Posnet capital stock
consisted of 225,000 shares of the Company's common stock. The Company may be
required to issue an additional 75,000 shares (the "Contingency Shares") of its
common stock in 1998 and shares of its common stock with a market value of
$500,000 in each of 1999 and 2000 (the "Additional Contingency Shares") based
upon the cumulative net profits of Posnet during the three years ending December
31, 2000. The Contingency Shares and Additional Contingency Shares are
collectively known as the "Earnout Shares." The acquisition has been accounted
for by the purchase method, and accordingly, the results of operations of Posnet
have been included with those of the Company commencing on the date of
acquisition. The original purchase price of $1,594,200 (including acquisition
costs of approximately $75,500) was determined by discounting the value of the
common stock issued by 25% from the quoted price principally due to restrictions
and liquidity factors and resulted in excess of acquisition costs over net
assets of approximately $2,036,000. Such excess (which will increase for any
contingent payments) is being amortized on a straight-line basis over 25 years.
The final allocation of the purchase price may vary as additional information is
obtained, and accordingly, the ultimate allocation may differ from that used in
accompanying consolidated financial statements. During the year ended June 30,
1998, the Company issued 18,750 Contingency Shares as additional consideration.
See Note 9 for amendment to the additional contingent consideration.

In December 1997, the Company acquired all of the outstanding capital stock
of CCI. CCI sells, installs and maintains POS systems and turnkey retail
automation systems. The purchase price for the CCI capital stock consisted of
670,000 shares of the Company's common stock. The acquisition has been accounted
for by the purchase method, and accordingly, the results of operations of CCI
have been included with those of the Company commencing on the date of
acquisition. The purchase price of $4,476,800 (including costs of acquisition of
approximately $111,300) was determined by discounting the value of the common
stock issued by 25% from the quoted price principally due to restrictions and
liquidity factors and resulted in excess of acquisition costs over net assets of
approximately $4,097,500. Such excess is being amortized on a straight-line
basis over 25 years. The final allocation of the purchase price may vary as
additional information is obtained, and accordingly, the ultimate allocation may
differ from that used in accompanying consolidated financial statements.

F-13
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Unaudited pro forma consolidated results of operations as if the
acquisitions of Posnet and CCI had occurred as of July 1, 1996 and July 1, 1997,
respectively, are as follows:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Revenues....................................................... $ 19,462,200 $ 36,081,800
Cost of revenues............................................... 14,750,000 26,118,200
------------- -------------
Gross profit................................................... 4,712,200 9,963,600

Operating expenses............................................. 5,081,100 8,307,500
------------- -------------
Income (loss) from operations.................................. (368,900) 1,656,100
Other income (expense)......................................... (733,600) (64,900)
------------- -------------
Income (loss) before income taxes.............................. (1,102,500) 1,591,200
Provision for income taxes..................................... (8,500) (615,400)
------------- -------------
Net income (loss).............................................. $ (1,111,000) $ 975,800
------------- -------------
------------- -------------
Income (loss) per share:
Basic........................................................ $ (0.30) $ 0.22
------------- -------------
------------- -------------
Fully diluted................................................ $ (0.30) $ 0.21
------------- -------------
------------- -------------
</TABLE>

The above unaudited pro forma amounts are not necessarily indicative of what
the actual results might have been if the acquisitions had occurred as of the
dates indicated.

On May 14, 1998, Javelin Asia acquired all of the outstanding common stock
of Aspact for $170,000 in cash and 15,300 shares of the Company's common stock.
The acquisition of Aspact has been accounted for as a purchase. Accordingly, the
purchase price of $567,400 has been allocated to assets and liabilities based on
their estimated fair value at the date of acquisition. Results of operations of
Aspact have been included in the consolidated financial statements from the date
of acquisition. The purchase price resulted in excess of acquisition costs over
net assets of approximately $320,000. Such excess is being amortized on a
straight-line basis over 25 years. The results of operations of Aspact prior to
May 14, 1998 were not material.

See Note 9 regarding subsequent acquisitions.

F-14
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INCOME TAXES

No provision for federal or state income taxes was required for the year
ended June 30, 1997 since the Company incurred losses from inception to June 30,
1997. The components of income tax expense for the year ended June 30, 1998 are
as follows:

<TABLE>
<S> <C>
Current:
Federal........................................................ $ 686,300
State.......................................................... 70,700
Foreign........................................................ 32,800
---------
789,800
---------

Deferred:
Federal........................................................ (157,400)
State.......................................................... (47,500)
Foreign........................................................ --
---------
(204,900)
---------
Total............................................................ $ 584,900
---------
---------
</TABLE>

The Company's effective tax rate differs from the U.S. federal statutory tax
rate, as follows:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Income tax provision at statutory tax rates.................................... 34.0% 34.0%
State taxes, net of federal tax effect......................................... 2.5
Goodwill....................................................................... 2.7
Non-deductible items........................................................... 4.1
Net operating loss benefit..................................................... (34.0) (8.7)
Other.......................................................................... -- 2.0
--------- ---
Total.......................................................................... 0% 36.6%
--------- ---
--------- ---
</TABLE>

Components of the deferred income tax balance are as follows:

<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................................... $ 38,400 $ --
Accrued expenses.................................................... 15,700 195,000
Other................................................................. 35,600 9,900
---------- ----------
Deferred tax assets................................................... $ 89,700 $ 204,900
---------- ----------
---------- ----------
Valuation allowance................................................... $ 89,700 $ 0
---------- ----------
---------- ----------
Net deferred tax asset................................................ $ 0 $ 204,900
---------- ----------
---------- ----------
</TABLE>

Management believes it is more likely than not that the Company will realize
its deferred tax asset based upon current year and expected results.

F-15
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LINE OF CREDIT AND LONG-TERM DEBT

On June 8, 1998, the Company and its U.S. subsidiaries obtained a credit
facility of $7,500,000 from an unrelated financial institution. The credit
facility expires on June 8, 2001 and consists of a line of credit of up to
$6,000,000 and a term loan of $1,500,000. The Company issued warrants to
purchase 135,000 shares of common stock in connection with the credit facility.
See Note 7 regarding warrants.

Under the terms of the line of credit, the Company may borrow up to 80% of
eligible accounts receivable (as defined) and 50% of eligible inventory (as
defined) with monthly interest payments based upon the prime rate of a national
financial institution plus 1.75% (10.25% as of June 30, 1998). Borrowings under
the line of credit are collateralized by substantially all the assets of the
Company. As of June 30, 1998, borrowings outstanding under the line amounted to
$1,343,000 with approximately $2,800,000 available for future borrowings.

Borrowings under the term loan are collateralized by substantially all of
the assets of the Company, bear interest at 13.65% per annum and are repayable
at $25,000 per month with all unpaid principal and interest due on June 8, 2001.

6. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases its facilities and certain equipment under noncancelable
operating leases subject to scheduled rent increases. The leases expire at
various dates through August 2003.

Future minimum annual lease payments as of June 30, 1998 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30,
- --------------------------------------------------------------------------------
<S> <C>
1999............................................................................ $ 605,100
2000............................................................................ 670,900
2001............................................................................ 638,700
2002............................................................................ 572,200
2003............................................................................ 473,600
Thereafter...................................................................... 1,700
------------
Total........................................................................... $ 2,962,200
------------
------------
</TABLE>

Rent expense under operating lease agreements aggregated approximately
$34,300 and $230,100 for the year ended June 30, 1997 and 1998, respectively,
and is included in general and administrative expenses in the accompanying
consolidated statement of operations.

EMPLOYMENT AGREEMENTS

The Company has employment agreements with eleven employees of the Company,
which expire at various dates through December 2002. Some of the agreements
provide for incentive bonuses which are payable if specified management goals
are attained.

F-16
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Future annual minimum payments under the employment agreements as of June
30, 1998 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
- --------------------------------------------------------------------------------
<S> <C>
1999............................................................................ $ 1,040,000
2000............................................................................ 320,000
2001............................................................................ 320,000
2002............................................................................ 320,000
2003............................................................................ 160,000
------------
Total........................................................................... $ 2,160,000
------------
------------
</TABLE>

7. STOCKHOLDERS' EQUITY

COMMON STOCK

On August 23, 1996, the Company effected a 4,300-for-1 stock split. All
references in the accompanying consolidated financial statements and notes to
shares outstanding and per share amounts have been adjusted to reflect the
impact of the stock split.

In November 1996, the Company completed its initial public offering by
issuing 850,000 shares of common stock at an offering price of $5.00 per share.

During the year ended June 30, 1998, the Company issued 929,050 shares of
its common stock in connection with the acquisitions described in Note 3, 27,300
shares of common stock upon the exercise of stock options with a weighted
average exercise price of $3.50 per share and 36,362 shares of its common stock
upon the exercise of warrants issued to the underwriter in connection with the
initial public offering.

STOCK OPTION PLANS

The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options. Under APB 25, the Company recognizes
as compensation expense the difference between the exercise price and the fair
market value of the common stock on the date of grant. Stock based compensation
expense is deferred and recognized over the vesting period of the stock option.
During the years ended June 30, 1997 and 1998, the Company recognized $108,200
and $51,600, respectively, in stock based compensation expense.

In August 1996, the Company adopted a stock incentive award plan (the
"Plan") under which the Board of Directors (the "Board"), or a committee
appointed for such purpose, may from time to time grant options, restricted
stock or other stock-based compensation to the directors, officers, eligible
employees or consultants of the Company to acquire up to an aggregate of 300,000
shares of common stock, in such numbers, under such terms and at such exercise
prices as are determined by the Board or such committee. Options vest over a
3-year period based on the following schedule: 40% after year one, 30% after
year two, and 30% at the end of year three. All options expire ten years from
the date of grant. It is the Company's intention to grant options under the Plan
principally to employees.

In December 1997, the stockholders approved the Company's 1997 Equity
Incentive Plan (the "1997 Plan") under which the Board, or a committee appointed
for such purpose, may from time to time grant options, restricted stock or other
stock-based compensation to the directors, officers, eligible employees or
consultants of the Company to acquire up to an aggregate of 1,100,000 shares of
common stock, in such numbers, under such terms and at such exercise prices as
are determined by the Board or such committee.

F-17
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Options generally vest 20% per year over a 5-year period. All options expire ten
years from the date of grant. It is the Company's intention to grant options
under the Plan principally to employees.

The following option activity occurred in the years ended June 30, 1997 and
1998:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- -----------------
<S> <C> <C>
FOR OPTIONS GRANTED AT LESS THAN FAIR
MARKET VALUE ON THE DATE OF GRANT:
Outstanding as of July 1, 1996...................................
Granted.......................................................... 191,000 $ 3.71
Exercised........................................................
Canceled......................................................... 13,500 $ 3.50
---------

Balance, June 30, 1997........................................... 177,500 $ 3.73
Granted..........................................................
Exercised........................................................ 27,300 $ 3.50
Canceled.........................................................
---------

Balance, June 30, 1998........................................... 150,200 $ 3.77
---------
---------
Exercisable at June 30, 1998..................................... 112,536 $ 3.80
--------- -----
--------- -----
FOR OPTIONS GRANTED AT FAIR
MARKET VALUE ON THE DATE OF GRANT:

Outstanding as of July 1, 1996...................................
Granted.......................................................... 68,000 $ 4.90
Exercised........................................................
Canceled......................................................... --
---------

Balance, June 30, 1997........................................... 68,000 $ 4.90
Granted.......................................................... 623,000 $ 9.42
Exercised........................................................
Canceled......................................................... 7,500 $ 9.50
---------

Balance, June 30, 1998........................................... 683,500 $ 8.96
---------
Exercisable at June 30, 1998..................................... 58,943 $ 5.47
--------- -----
--------- -----
</TABLE>

The weighted average remaining contractual life of options outstanding as of
June 30, 1998 was 9.3 years.

The range of exercise prices for options outstanding as of June 30, 1998 was
$2.50 to $12.50. The weighted-average fair value of options granted at less than
fair market value in 1997 was $1.65. The weighted-average fair value of options
granted at fair market value in 1997 and 1998 was $1.68 and $3.62, respectively.
Income tax benefits from the exercise of the stock options during the fiscal
year ended June 30, 1998 of approximately $59,000 has been credited to
additional paid-in capital in the accompanying consolidated balance sheet.

Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if the Company accounted for its employee stock options granted subsequent to
June 30, 1996 under the fair value method of the statement. The fair value

F-18
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Risk free interest rate......................................... 6.0% 6.0%
Dividend yield.................................................. None None
Volatility factor of the expected market price of the Company's
common stock.................................................. 0.41 0.57
Weighted-average expected life of each option................... 3 years 3 years
</TABLE>

The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of fair value of its employee stock options. For purpose of pro forma
disclosures, the estimated fair value of the options is amortized to expenses
over the options vesting period. The Company's pro forma information for the
years ended June 30, 1997 and 1998 follows:

<TABLE>
<CAPTION>
1997 1998
----------- ------------
<S> <C> <C>
Net income (loss) as reported...................................... $ (826,900) $ 1,014,100
Net income (loss)--SFAS 123 adjusted............................... $ (886,000) $ 743,300
Earnings (loss) per share as reported:
Basic............................................................ $ (0.30) $ 0.28
Diluted.......................................................... $ (0.30) $ 0.27
Earnings (loss) per share-SFAS 123 adjusted:
Basic............................................................ $ (0.32) $ 0.21
Diluted.......................................................... $ (0.32) $ 0.20
</TABLE>

WARRANTS

In connection with the issuance of $725,000 of the Company's 10% promissory
notes at various dates through August 1996 and the initial public offering, the
Company granted warrants to purchase shares of the Company's common stock. The
warrants entitled the holders to purchase a total of 165,000 shares of the
Company's common stock at an aggregate price of approximately $3,300. The
outstanding warrants became exercisable following the effectiveness of the
public offering of the Company's common stock and had no expiration date. As of
June 30, 1997, all warrants had been exercised. The Company assigned a value of
approximately $646,300 to the warrants, which has been accounted for as
additional paid in capital in the accompanying consolidated financial
statements. The deferred charge related to the warrants was fully amortized
after the exercise of all the warrants.

In connection with its initial public offering, the Company sold the
representatives of the underwriters a warrant to purchase 85,000 shares of the
Company's common stock at $6.25 per share. During the year ended June 30, 1998,
warrants to purchase 65,670 shares of the Company's common stock were exchanged
into 36,362 shares of common stock. The fair value of the common stock issued
approximated the fair value of the warrants received.

F-19
<PAGE>
JAVELIN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In connection with the credit facility described in Note 5, the Company
issued warrants to purchase 100,000 shares of its common stock at $9.00 per
share to the financial institution and warrants to purchase 35,000 shares of its
common stock at prices ranging from $9.36 to $12.65 to its independent financial
advisors. The fair value of these warrants was estimated at $621,900 at the date
of grant using a Black-Scholes pricing model with the assumptions described
above. The fair value of the warrants has been reflected as deferred financing
costs and additional paid in capital in the accompanying consolidated balance
sheet.

8. RELATED PARTY TRANSACTIONS

During the year ended June 30, 1997, the Company purchased electronic
components from a company owned by a stockholder and founder of the Company
totaling $1,234,328. Purchases from the related company during the year ended
June 30, 1998 were not significant. Included in accounts payable at June 30,
1997 is $116,360 due to that company.

In connection with the acquisitions of Posnet and CCI described in Note 3,
the Company assumed certain debt payable to former shareholders of the acquired
entities and current shareholders of the Company. All of such debt was repaid
prior to June 30, 1998.

9. SUBSEQUENT EVENTS

In August 1998, the Company agreed to issue 56,250 shares of its common
stock, valued at $363,200, to the former shareholders of Posnet in consideration
for the elimination of any future Earnout Shares (see Note 3). The value of
these shares will be recorded as additional goodwill.

In November 1998, the Company acquired all of the outstanding capital stock
of RGB/Trinet Ltd. ("RGB") and 52.5% of the outstanding common stock of Jade
Communications Ltd. ("Jade"). The remaining 47.5% of the outstanding common
stock of Jade is owned by RGB. RGB and Jade are headquartered in England and
provide complementary Wide Area Networking (WAN) products and services primarily
to large retail and hospitality chains as well as the telecommunications
industry.

UNAUDITED

The aggregate purchase price for the RGB and Jade capital stock consisted of
$1,889,800 in cash (including acquisition costs of $148,700) and 257,058 shares
of the Company's common stock. The Company may be required to issue additional
shares of its common stock with a market value of $3,290,000 in each of 1999 and
2000 based upon the cumulative net profits of RGB and Jade during the
twenty-four month period ending September 30, 2000. The acquisition has been
accounted for by the purchase method, and accordingly, the results of operations
of RGB and Jade will be included with those of the Company commencing on the
date of acquisition. The purchase price of $3,528,500 resulted in excess of
acquisition costs over the fair value of net assets acquired by approximately
$2,865,200. Such excess (which will increase for any contingent payments) is
being amortized on a straight-line basis over 25 years.

In December 1998, the Company increased the number of authorized shares of
common stock from 10,000,000 to 20,000,000.

F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors

Posnet Computers, Inc.

We have audited the accompanying balance sheet of Posnet Computers, Inc.
(the "Company") as of October 31, 1997, and the related statements of
operations, stockholders' deficit and cash flows for the twelve-month period
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Posnet Computers, Inc. as of
October 31, 1997, and the results of its operations and its cash flows for the
twelve-month period then ended in conformity with generally accepted accounting
principles.

CORBIN & WERTZ

Irvine, California
January 21, 1998

F-21
<PAGE>
POSNET COMPUTERS, INC.

BALANCE SHEET

AS OF OCTOBER 31, 1997
ASSETS (NOTE 4)

<TABLE>
<S> <C>
Current assets:
Cash.......................................................................... $ --
Accounts receivable, net of allowance for doubtful accounts of $30,000........ 729,537
Inventories................................................................... 126,905
Prepaid expenses.............................................................. 7,951
---------
Total current assets........................................................ 864,393
Property and equipment, net (Note 2)............................................ 62,644
Other assets (Note 3)........................................................... 49,000
---------
$ 976,037
---------
---------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Bank overdraft................................................................ $ 120,751
Accounts payable and accrued expenses......................................... 716,355
Customer deposits............................................................. 60,618
Bank line-of-credit and equipment line-of-credit (Note 4)..................... 95,134
Notes payable--stockholders (Note 6).......................................... 49,200
---------
Total current liabilities................................................... 1,042,058
---------
Commitments and contingencies (Note 7)
Stockholders' deficit (Note 8):
Common stock, no par value; 100,000 shares authorized; 4,000 shares issued and
outstanding................................................................. 121,622
Accumulated deficit........................................................... (187,643)
---------
Total stockholders' deficit................................................. (66,021)
---------
$ 976,037
---------
---------
</TABLE>

See accompanying notes to financial statements

F-22
<PAGE>
POSNET COMPUTERS, INC.

STATEMENT OF OPERATIONS

FOR THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 1997

<TABLE>
<S> <C>
Net sales....................................................................... $4,813,501
Cost of sales................................................................... 2,804,806
---------
Gross profit.................................................................... 2,008,695
Salaries and related expenses................................................... 1,371,752
Selling, general and administrative expenses.................................... 648,503
---------
Loss from operations............................................................ (11,560)
Interest expense................................................................ 15,602
---------
Loss before provision for income taxes.......................................... (27,162)
Provision for income taxes (Note 5)............................................. 800
---------
Net loss........................................................................ $ (27,962)
---------
---------
</TABLE>

See accompanying notes to financial statements

F-23
<PAGE>
POSNET COMPUTERS, INC.

STATEMENT OF STOCKHOLDERS' DEFICIT

FOR THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 1997

<TABLE>
<CAPTION>
COMMON STOCK
----------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Balances, November 1, 1996......................................... 4,000 $ 121,622 $ (159,681) $ (38,059)
Net loss........................................................... -- -- (27,962) (27,962)
----- ---------- ------------ ----------
Balances, October 31, 1997......................................... 4,000 $ 121,622 $ (187,643) $ (66,021)
----- ---------- ------------ ----------
----- ---------- ------------ ----------
</TABLE>

See accompanying notes to financial statements

F-24
<PAGE>
POSNET COMPUTERS, INC.

STATEMENT OF CASH FLOWS

FOR THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 1997

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................................ $ (27,962)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense.............................................................. 50,000
Depreciation and amortization................................................. 26,425
Impairment loss on other asset................................................ 10,000
Changes in operating assets and liabilities:
Accounts receivable......................................................... (208,133)
Inventories................................................................. (65,035)
Prepaid expenses............................................................ 7,864
Accounts payable and accrued expenses....................................... 243,827
Customer deposits........................................................... (78,860)
---------
Net cash used in operating activities..................................... (41,874)
---------
Cash flows from investing activities:
Purchase of property and equipment.............................................. (11,007)
Advances to stockholders........................................................ (18,213)
---------
Net cash used in investing activities....................................... (29,220)
---------
Cash flows from financing activities:
Net payments on bank line-of-credit and equipment line-of-credit................ (56,878)
Increases in notes payable--stockholders........................................ 25,000
Bank overdraft.................................................................. 102,972
---------
Net cash provided by financing activities................................... 71,094
Net change in cash................................................................ --
Cash at beginning of year......................................................... --
---------
Cash at end of year............................................................... $ --
---------
---------
Supplemental disclosure of cash flow information--Cash paid during year for:
Interest........................................................................ $ 15,602
---------
---------
Income taxes.................................................................... $ 4,807
---------
---------
</TABLE>

Supplemental disclosure of non-cash investing and financing activities--See
notes to the financial statements for certain non-cash transactions entered into
during the twelve-month period ended October 31, 1997.

See accompanying notes to financial statements

F-25
<PAGE>
POSNET COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 1997

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

ORGANIZATION AND NATURE OF OPERATIONS

Posnet Computers, Inc. (the "Company") was incorporated in the state of
California in July 1992. The Company sells new and refurbished point-of-sales
systems within the hospitality industry, primarily to restaurants. The Company
recently expanded to include value-added services, including system integration
and specialized reporting capabilities, for its customers located in the United
States.

These financial statements are presented as of October 31, 1997 and for the
twelve-month period ended October 31, 1997 (the "Period").

RISKS, UNCERTAINTIES AND CONCENTRATIONS

CASH

Cash balances are maintained at one bank. Accounts at this institution are
insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000.
During fiscal 1997, the Company had cash balances in this bank which exceeded
the FDIC limit.

CUSTOMERS

The majority of the Company's sales are to customers throughout the Western
United States. Credit is extended based on an evaluation of each customer's
financial condition and collateral is not required. The Company establishes an
allowance for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends and other information.

During the Period, the Company received a significant portion of its
business from one customer. During the Period, sales to this customer totaled
22%. As of October 31, 1997, amounts due from this customer totaled 22% of net
accounts receivable. As of October 31, 1997, another customer accounted for 13%
of net accounts receivable. If the relationship between the Company and these
customers was altered, the future results of operations and financial condition
could be affected.

SUPPLIERS

During the Period, the Company purchased a significant portion of its goods
from three suppliers. During the Period, purchases from these suppliers totaled
24%, 21% and 11% of total purchases, respectively. As of October 31, 1997,
amounts due to these suppliers totaled 42%, 18% and 12% of accounts payable. If
the relationship between the Company and these suppliers was altered, the future
results of operations and financial condition could be affected.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The accompanying balance sheet includes financial instruments whereby the
fair market value of the financial instruments could be different than that
recorded on a historical basis. The Company's financial instruments consist of
its cash, accounts receivable, accounts payable, lines-of-credit and notes
payable--stockholders. The carrying amounts of the Company's financial
instruments generally approximate their fair values at October 31, 1997. The
fair value of the notes payable--stockholders was not readily determinable as
market comparables were not available for such an instruments.

F-26
<PAGE>
POSNET COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 1997

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Significant estimates made by management are, among others,
provisions for losses on accounts receivable and provisions for slow moving and
obsolete inventories. Actual results could materially differ from those
estimates.

INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Cost is
determined on the first-in, first-out ("FIFO") method. Costs include only
materials; there are no direct labor or overhead components. The Company
operates in an industry in which its products are subject to design changes and
are manufactured based on customer specifications. Accordingly, should either
design requirements change significantly or orders cancel or decline, the
ultimate realizability of its inventories could be less than their carrying
values. As of October 31, 1997, management believes that inventories are carried
at their net realizable value.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the related assets,
ranging from three to seven years. Maintenance and repairs are charged to
expense as incurred. Significant renewals and betterments are capitalized. At
the time of retirement or other disposition of property and equipment, the cost
and accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in operations.

The Company assesses the recoverability of property and equipment by
determining whether the depreciation and amortization of property and equipment
over its remaining life can be recovered through projected undiscounted future
cash flows. The amount of property and equipment impairment, if any, is measured
based on fair value and is charged to operations in the period in which property
and equipment impairment is determined by management. As of October 31, 1997,
management believes that there is no impairment of property and equipment.

WARRANTY ACCRUAL

The Company grants warranties on certain computer products for periods
ranging from ninety days to one year, commencing from the time of sale. For most
computer products sold, the Company receives a manufacturers warranty. As such,
the repair costs or rework costs are ultimately borne by the manufacturer.
Accordingly, no provision for warranties have been included in the accompanying
financial statements.

REVENUE RECOGNITION AND DEFERRED REVENUES

Revenues are recognized upon shipment of products and as services are
rendered to customers. Nonrefundable deposits received pursuant to certain
contracts are deferred as unearned revenues until the products are shipped or
until such time that the services are rendered to customers.

F-27
<PAGE>
POSNET COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 1997

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
ADVERTISING

The Company reports the costs of all advertising as expense in the period in
which those costs are incurred.

INCOME TAXES

The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", ("SFAS 109"). Under
SFAS 109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance is
provided for significant deferred tax assets when it is more likely than not
that such assets will not be recovered.

NEW DISCLOSURE STANDARD

In June 1997, SFAS No. 130, "Comprehensive Income," ("SFAS 130") was issued
which becomes effective in fiscal 1998 and requires reclassification of earlier
financial statements for comparative purposes. SFAS 130 requires that changes in
the amounts of certain items, including foreign currency translation adjustments
and gains and losses on certain securities, be shown in the financial
statements. SFAS 130 does not require a specific format for the financial
statement in which comprehensive income is reported, but does require that an
amount representing total comprehensive income be reported in that statement.
The Company does not expect that the implementation of SFAS 130 will have a
material effect upon the Company's financial statements.

NOTE 2--PROPERTY AND EQUIPMENT

Property and equipment (see Note 4) consists of the following as of October
31, 1997:

<TABLE>
<S> <C>
Office and computer equipment..................................... $ 65,823
Trucks and automobiles............................................ 45,076
Furniture and fixtures............................................ 15,884
Tools and test equipment.......................................... 22,777
---------
149,560
Less accumulated depreciation and amortization.................... (86,916)
---------
$ 62,644
---------
---------
</TABLE>

During the Period, depreciation and amortization expense totaled $26,425 and
has been reflected in selling, general and administrative expense in the
accompanying statement of operations.

F-28
<PAGE>
POSNET COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 1997

NOTE 3--OTHER ASSETS

Other assets consist of the following as of October 31, 1997:

<TABLE>
<S> <C>
Investment in restaurant........................................... $ 10,000
Shareholder advances............................................... 39,000
---------
$ 49,000
---------
---------
</TABLE>

As of October 31, 1997, the Company has a $10,000 (or a 0.75% ownership
interest) investment in a restaurant located in Southern California. The
investment in the restaurant is carried at cost. During the Period, the Company
recorded an impairment loss on this asset totaling $10,000.

Stockholder advances are due on demand and are non-interest bearing.

NOTE 4--BANK LINE-OF-CREDIT AND EQUIPMENT LINE-OF-CREDIT

BANK LINE-OF-CREDIT

The Company has a $200,000 revolving line-of-credit (the "Line") with Wells
Fargo Bank which expires on February 10, 1998. Borrowings pursuant to the Line
($90,079 as of October 31, 1997) accrue interest at Wells Fargo Bank's prime
rate, as defined, plus 3.00% (11.50% as of October 31, 1997), and are personally
guaranteed by all of the Company's stockholders. The Line is secured by
substantially all of the assets of the Company.

The Line provides for various warranties, covenants and restrictions
requiring compliance on a continuing basis. Default on any warranty, covenant or
restriction could effect the bank's commitment to lend, and if not waived or
corrected, could accelerate the maturity of any borrowings outstanding under the
Line. Subsequent to October 31, 1997, the Company was acquired (see Note 8). The
Line has a provision which requires repayment upon such an event. The Line is
currently due and has not yet been repaid.

EQUIPMENT LINE-OF-CREDIT

The Company has a $100,000 equipment line-of-credit (the "Equipment Line")
with Wells Fargo Bank which expires on March 5, 1998. Equipment purchase
advances, pursuant to the Equipment Line ($5,055 as of October 31, 1997), accrue
interest at either of the following two options: (1) fixed on the date of a
particular disbursement at 4.25% above the Treasury Rate, as defined, in effect
at the close of business on the Thursday of the week preceding such
disbursement; or, (2) prime rate, as defined, plus 2.00%. The principal of each
equipment advance shall be amortized over a period of not less than 24 months
nor more than 96 months (depending on the type of equipment purchased), as
agreed by the Company and Wells Fargo Bank at the time of such equipment
advance.

In August 1996, the Company borrowed $10,200, pursuant to the Equipment
Line. The Company elected option #1 (see above). The equipment purchase advance
is due in equal monthly installments of $482 over a 24 month period. The
equipment purchase advance bears interest at a fixed rate of 12.35% per annum
The equipment purchase advance is secured by the related equipment purchased
(see Note 2).

F-29
<PAGE>
POSNET COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 1997

NOTE 5--INCOME TAXES

The provision for taxes consists of the following for the Period:

<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
----------- --------- ---------
<S> <C> <C> <C>
Current.............................................................. $ -- $ 800 $ 800
Deferred............................................................. -- -- --
----- --------- ---------
$ -- $ 800 $ 800
----- --------- ---------
----- --------- ---------
</TABLE>

During the Period, the provision for taxes totaled $800, and differs from
the amount computed by applying the U.S. Federal income tax rate of 34% to
income attributable to continuing operations as a result of the following
significant reconciling items: meals and entertainment, keyman life insurance
and an increase in the valuation account.

As of October 31, 1997, the significant components of the Company's net
deferred tax assets are as follows:

<TABLE>
<S> <C>
Deferred tax assets:
Net operating losses............................................ $ 45,000
Allowance for bad debts......................................... 12,000
Other........................................................... 4,000
---------
61,000
Valuation allowance............................................... (61,000)
---------
Deferred tax assets............................................... $ --
---------
---------
</TABLE>

During the Period, the valuation allowance increased $5,000.

As of October 31, 1997, the Company has net operating loss carryforwards
("NOLs") for Federal and state reporting purposes of approximately $112,000 and
$111,000, respectively, which expire in various years through 2012. The Federal
and state tax codes provide for restrictive limitations on the annual
utilization of NOLs to offset taxable income when the stock ownership of a
company significantly changes, as defined. In light of the Company's sale (see
Note 8), certain NOLs may currently, or in the foreseeable future, be subject to
such annual limitations. As such, an uncertainty exists as to the ultimate NOLs
that the Company will have to offset future taxable income. The Company's
management has recorded a valuation allowance to reflect for this uncertainty.

NOTE 6--RELATED PARTY TRANSACTIONS

NOTES PAYABLE--STOCKHOLDERS

As of October 31, 1997, the Company had notes with two stockholders totaling
$49,200. The notes are due on demand and bear interest at a rate of 10% per
annum. Subsequent to year end all principal and accrued interest pursuant to
these notes was repaid.

OTHER MATTERS

See discussion in Note 3 for other related party transactions.

F-30
<PAGE>
POSNET COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 1997

NOTE 7--COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases its facilities (located in Huntington Beach and the San
Francisco Bay Area) under two operating leases. The operating leases are
month-to-month. During the Period and pursuant to these operating leases, the
Company incurred rent expense totaling $49,000.

ROYALTY AGREEMENT

In October 1994, the Company entered into a license agreement (the "License
Agreement") with an individual (the "Licensor") whereby the Licensor performs
repairs, maintenance and testing of RMS equipment on certain customers'
equipment (on behalf of the Company). As consideration, the Company is required
to pay the Licensor 7.5% of the total invoices billed to customers for theses
services. During the Period, the Company incurred royalty expense totaling
$9,900 pursuant to the License Agreement.

NOTE 8--SUBSEQUENT EVENTS

In December 19, 1997, all of the Company's shareholders (the "Selling
Shareholders") entered into a stock purchase agreement (the "SPA") with Javelin
Systems, Inc. (the "Purchaser"). Pursuant to the SPA and in exchange for 100% of
the Company's outstanding common stock, the Selling Shareholders received
225,000 shares of the Purchaser's common stock (the "Initial Consideration"). In
addition to the Initial Consideration and upon certain events, as defined, the
Selling Shareholders may earn additional shares of the Purchaser's common stock.
The Purchaser is a public company traded on the NASDAQ SmallCap market
(NASDAQ:JVLN).

OTHER MATTERS

See discussion of other subsequent events in Notes 4 and 6.

F-31
<PAGE>
INDEPENDENT AUDITORS' REPORT

Stockholders and Board of Directors
CCI Group, Inc.

We have audited the accompanying consolidated balance sheets of CCI Group,
Inc. and subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CCI Group, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the consolidated results
of operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

Rubin, Brown, Gornstein & Co. LLP

February 6, 1998
St. Louis, Missouri

F-32
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS

CURRENT ASSETS
Cash................................................................................ $ 793,509 $ 134,806
Accounts receivable................................................................. 1,197,299 563,899
Inventory........................................................................... 1,196,848 373,403
Prepaid expenses.................................................................... 14,179 15,526
Other assets........................................................................ 22,575 15,006
------------ ------------
TOTAL CURRENT ASSETS.............................................................. 3,224,410 1,102,640
------------ ------------
PROPERTY AND EQUIPMENT
Property and equipment.............................................................. 330,080 90,886
Accumulated depreciation............................................................ (96,733) (27,951)
------------ ------------
TOTAL PROPERTY AND EQUIPMENT...................................................... 233,347 62,935
------------ ------------
TOTAL ASSETS.......................................................................... $ 3,457,757 $ 1,165,575
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable.................................................................... $ 651,296 $ 210,898
Billings in excess of costs and estimated earnings on uncompleted contracts......... 1,479,413 537,372
Line of credit...................................................................... 365,000 --
Note payable--officer............................................................... 185,478 99,990
Accrued expenses.................................................................... 189,220 275,505
Accrued income taxes................................................................ 199,666 1,822
------------ ------------
TOTAL CURRENT LIABILITIES......................................................... 3,070,073 1,125,587
------------ ------------
LONG-TERM LIABILITIES
Deferred income taxes............................................................... 8,379 5,795
Minority interest in subsidiaries................................................... -- 35,452
------------ ------------
TOTAL LONG-TERM LIABILITIES....................................................... 8,379 41,247
------------ ------------
STOCKHOLDERS' EQUITY
Common stock:
$1 par value, 30,000 shares authorized, 1,000 shares issued and outstanding......... 1,000 1,000
Retained earnings................................................................... 378,305 126,008
Treasury stock...................................................................... -- (128,267)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY........................................................ 379,305 (1,259)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................................ $ 3,457,757 $ 1,165,575
------------ ------------
------------ ------------
</TABLE>

See the accompanying notes to consolidated financial statements.

F-33
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Product sales....................................................................... $ 7,575,558 $ 4,602,186
Sales of services................................................................... 1,939,380 367,926
------------ ------------
TOTAL REVENUES........................................................................ 9,514,938 4,970,112
------------ ------------
COST OF SALES
Cost of products.................................................................... 6,335,727 3,773,499
Cost of services.................................................................... 1,487,700 64,116
------------ ------------
TOTAL COST OF SALES................................................................... 7,823,427 3,837,615
------------ ------------
GROSS PROFIT.......................................................................... 1,691,511 1,132,497
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......................................... 1,177,209 1,055,116
------------ ------------
INCOME FROM OPERATIONS................................................................ 514,302 77,381
------------ ------------
OTHER INCOME (EXPENSE)
Other income........................................................................ 6,500 1,890
Interest expense.................................................................... (22,554) --
Loss on sale of assets.............................................................. (2,156) --
Interest income..................................................................... 1,387 13,052
------------ ------------
TOTAL OTHER INCOME (EXPENSE).......................................................... (16,823) 14,942
------------ ------------
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES AND MINORITY
INTEREST............................................................................ 497,479 92,323
PROVISION FOR INCOME TAXES............................................................ 201,973 23,326
------------ ------------
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST............................ 295,506 68,997
MINORITY INTEREST..................................................................... -- 6,894
------------ ------------
INCOME FROM CONTINUING OPERATIONS..................................................... 295,506 62,103
LOSS FROM DISCONTINUED AUTOMOTIVE OPERATIONS, NET OF APPLICABLE INCOME TAX CREDIT OF
$4,211 AND $2,709................................................................... (6,160) (8,012)
GAIN FROM DISPOSAL OF AUTOMOTIVE SEGMENT, NET OF APPLICABLE INCOME TAXES OF $29,643... 43,370 --
------------ ------------
NET INCOME............................................................................ $ 332,716 $ 54,091
------------ ------------
------------ ------------
INCOME PER SHARE OF COMMON STOCK:
Income from continuing operations................................................... 322 70
Discontinued operations............................................................. 41 (9)
------------ ------------
NET INCOME............................................................................ $ 363 $ 61
------------ ------------
------------ ------------
</TABLE>

See the accompanying notes to consolidated financial statements.

F-34
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK RETAINED TREASURY STOCK STOCKHOLDERS'
---------------------- EARNINGS ----------------------- EQUITY
SHARES AMOUNT (DEFICIT) SHARES AMOUNT (DEFICIT)
----------- --------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE--DECEMBER 31, 1995..................... 1,000 $ 1,000 $ 71,917 -- $ -- $ 72,917

PURCHASE OF TREASURY STOCK..................... -- -- -- 450 128,267 (128,267)

NET INCOME..................................... -- -- 54,091 -- -- 54,091
----- --------- ---------- ----- ---------- ------------

BALANCE--DECEMBER 31, 1996..................... 1,000 1,000 126,008 450 128,267 (1,259)

TREASURY STOCK REISSUED TO EMPLOYEES........... -- -- (36,465) (168) (47,861) 11,396

TREASURY STOCK REISSUED TO STOCKHOLDER......... -- -- (43,954) (282) (80,406) 36,452

NET INCOME..................................... -- -- 332,716 -- -- 332,716
----- --------- ---------- ----- ---------- ------------

BALANCE--DECEMBER 31, 1997..................... 1,000 $ 1,000 $ 378,305 -- $ -- $ 379,305
----- --------- ---------- ----- ---------- ------------
----- --------- ---------- ----- ---------- ------------
</TABLE>

See the accompanying notes to consolidated financial statements.

F-35
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers........................................................ $ 10,004,350 $ 6,075,501
Cash paid to suppliers and employees................................................ (9,582,820) (5,906,488)
Interest paid....................................................................... (16,839) --
Interest received................................................................... 1,417 --
Income taxes paid................................................................... (25,600) (16,500)
Other receipts...................................................................... 6,500 4,167
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES............................................. 387,008 156,680
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of treasury stock.......................................................... -- (128,267)
Capital expenditures................................................................ (241,659) (62,126)
Proceeds from sale of segment....................................................... 62,866 --
Proceeds from sale of assets........................................................ -- 74,927
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES................................................. (178,793) (115,466)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (payments to) officer................................................. 85,488 (48,593)
Proceeds from line of credit........................................................ 365,000 --
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES................................... 450,488 (48,593)
------------ ------------
NET INCREASE (DECREASE) IN CASH....................................................... 658,703 (7,379)
CASH--BEGINNING OF YEAR............................................................... 134,806 142,185
------------ ------------
CASH--END OF YEAR..................................................................... $ 793,509 $ 134,806
------------ ------------
------------ ------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net income.......................................................................... $ 332,716 $ 54,091
------------ ------------
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation...................................................................... 70,091 18,056
Minority interest in subsidiaries................................................. -- 6,894
Wages paid by company stock....................................................... 11,396 --
Loss (gain) on sale of property................................................... 2,156 (66,096)
Gain on sale of segment........................................................... (73,013) --
Increase in accounts receivable................................................... (633,400) (388,816)
Increase in interest receivable................................................... -- (5,387)
Increase in inventory............................................................. (863,298) (248,003)
Decrease (increase) in prepaid expenses........................................... 1,347 (12,409)
Increase in other assets.......................................................... (7,569) (2,439)
Increase in accounts payable...................................................... 490,398 165,622
Increase in billing in excess of costs and estimated earnings on uncompleted
contracts....................................................................... 942,041 418,292
Increase (decrease) in income tax payable......................................... 197,844 (1,678)
Increase in deferred taxes........................................................ 2,584 5,795
(Increase) decrease in accrued expenses........................................... (86,285) 212,758
------------ ------------
TOTAL ADJUSTMENTS............................................................... 54,292 102,589
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES............................................. $ 387,008 $ 156,680
------------ ------------
------------ ------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Proceeds from sale of segment through reduction in accounts payable................. $ 50,000 $ --
------------ ------------
------------ ------------
</TABLE>

See the accompanying notes to consolidated financial statements.

F-36
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

BUSINESS DESCRIPTION

CCI GROUP, INC. (the Company) is the parent company of CCI Technology, Inc.,
CCI Payment Systems, Inc., Sourcelink, Inc., and Custom Configurations, Inc. The
parent company is a holding company.

CCI Technology, Inc. is a general contractor for the design, configuration
and deployment of retail point of sale, information management and data
collection systems, primarily for the food service industry. CCI Technology's
services include installation, training, support, and documentation. CCI Payment
Systems, Inc. is the distributor of payment processing systems assembled and
configured by CCI Technology. Custom Configurations, Inc. was the manufacturer
of certain automotive parts. Sourcelink, Inc. was the distributor of those
automotive parts. All CCI Group companies market throughout the United States.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and all subsidiaries, which are all more than 50% owned. Intercompany accounts
and transactions have been eliminated in the consolidated financial statements.

REVENUE RECOGNITION

The Company recognizes contract revenue principally on the percentage of
completion method. The percent complete is measured independently for each
contract based on the terms of that contract. The majority of contracts' percent
complete is based on the completion of specific phases indicated within the
contract. Other revenues are recognized on the basis of shipment of products or
performance of services.

Contract costs include all direct labor and benefits, materials unique to or
installed in the project, subcontractor cost and indirect cost allocations,
including employee benefits.

As long-term contracts extend over one or more years, revisions in cost and
earnings estimates during the course of the work are reflected in the accounting
period in which the facts which require the revision become known. At the time a
loss on a contract becomes known, the entire amount of the estimated ultimate
loss is recognized in the financial statements.

The Company generally does not have any significant remaining obligations
upon shipment of its products. Product returns and sales allowances, which have
not been significant historically, are provided for at the date of sale.

Amounts billed to customers in excess of revenue earned is included as a
current liability, "billings in excess of costs and estimated earnings on
uncompleted contracts" on the balance sheet. At December 31, 1997 and 1996, this
account balance consists principally of amounts billed on contracts to be
started in 1998 and 1997, respectively.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly-liquid debt instruments to be cash equivalents.

F-37
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE--ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company uses the allowance method to account for uncollectible accounts
receivable. The allowance for doubtful accounts is based on prior years'
experience and management analysis of possible bad debts. As of December 31,
1997 and 1996, management has determined no allowance is required.

INVENTORY

The Company uses the weighted average cost method of valuing inventory. At
December 31, 1997 and 1996, inventory consists principally of purchased computer
hardware and components.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation and amortization is
computed using both straight line and accelerated methods. Asset lives range
from 3 to 5 years.

Repairs and maintenance are charged to expense when incurred. Expenditures
for major renewals and betterments that extend the useful life of the assets are
capitalized.

DEFERRED INCOME ON SERVICE SALES

The Company includes product service with some system contracts. Revenues
billed specifically for the service portion of the contract are deferred and
amortized on a straight-line basis over the life of the service contract.
Service contract costs are charged to operations as incurred.

INCOME TAXES

The Company's operations are included in consolidated tax returns, which
includes the operation of the four subsidiary companies, through the sale date
of the Company, December 22, 1997. The consolidated tax return excluded CCI
Payment Systems, Inc. which was an S Corporation from its inception May 5, 1997
through December 15, 1997.

The Company accounts for income taxes using the asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than enactments of changes in the tax law or rates.

CCI Payment Systems, Inc. elected S corporate status effective on its date
of incorporation. Therefore, the income and losses through December 22, 1997 are
included in the income tax returns of the shareholders. No provision or
liability for income taxes is recorded for this subsidiary for that period.

EARNINGS PER COMMON SHARE

Earnings per common share are computed by dividing net income applicable to
common shareholders by the weighted average number of shares outstanding during
each year. The weighted average number of common shares outstanding used to
compute income (loss) per common share for 1997 and 1996 was 918 and 888,
respectively.

F-38
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1996

USE OF ESTIMATES

The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

WARRANTIES

The Company's products are under warranty for defects in material and
workmanship for up to one year. Certain components included in the Company's
products are covered by manufacturer's warranties. Costs related to after-sale
service and repair have been considered insignificant.

2. PROPERTY AND EQUIPMENT

Property and equipment at December 31 consist of:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Computer hardware..................................................... $ 119,306 $ 39,508
Computer software..................................................... 38,454 22,057
Computer hardware held for operating lease............................ 78,030 --
Office equipment...................................................... 60,167 19,469
Shop equipment........................................................ 23,009 7,102
Vehicles.............................................................. 11,114 2,750
---------- ----------
330,080 90,886
Less: Accumulated depreciation........................................ (96,733) (27,951)
---------- ----------
$ 233,347 $ 62,935
---------- ----------
---------- ----------
</TABLE>

Depreciation and amortization expense charged against income amounted to
$70,091 in 1997 and $18,056 in 1996.

3. LINE OF CREDIT AGREEMENT

In 1997, the Company had a $1,000,000 line of credit from Magna Bank which
matures August 5, 1998. Interest is payable monthly at a rate of one percent
over the prime rate. The Company's inventory, accounts receivable, property,
furniture and equipment are collateral for the line of credit.

4. INCOME TAXES

Deferred income taxes are provided for the temporary differences between the
tax and financial reporting basis of the Company's assets and liabilities at
December 31, 1997 and 1996, utilizing the tax rates expected to be in effect
when the temporary differences reverse. The principal temporary difference
results from the use of accelerated tax depreciation methods for income tax
reporting purposes.

F-39
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1996

4. INCOME TAXES (CONTINUED)
The income tax provision charged to continuing operations during the years
ended December 31 was as follows:

<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Current Tax Expense:
Federal.............................................................. $ 172,258 $ 13,744
State................................................................ 27,131 3,787
---------- ---------
Total Current Tax Expense............................................ 199,389 17,531
Deferred Tax Expense................................................... 2,584 5,795
---------- ---------
PROVISION FOR INCOME TAX............................................... $ 201,973 $ 23,326
---------- ---------
---------- ---------
</TABLE>

Deferred tax liabilities at December 31 were comprised of the following:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred Tax Liabilities:
Tax over book depreciation............................................... $ 8,379 $ 5,795
--------- ---------
--------- ---------
</TABLE>

5. LEASE AGREEMENTS

The Company leases its office and warehouse facility under a noncancellable
agreement. The lease calls for monthly rental payments of $7,569 and expires
October 31, 1998. Rent expense for the years ended December 31, 1997 and 1996
totaled $89,412 and $63,273, respectively.

In 1997, CCI Technology, Inc. leased equipment to two customers under
month-to-month operating lease agreements. The leases call for monthly lease
payments of $33 to $50 per month per unit leased. Lease income for the year
ended December 31, 1997 totaled $69,831. At December 31, 1997, the assets are
carried on the books at $78,030 less $19,191 accumulated depreciation.

6. CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentrations of credit risk are cash investments and trade receivables.

The Company places its cash investments with high-credit-quality financial
institutions. Deposits in excess of the FDIC insurance limit amounted to
$693,384 and $34,807 at December 31, 1997 and 1996, respectively.

In the normal course of business, the Company provides credit terms to its
customers and collateral is generally not required. Accordingly, the Company
performs ongoing credit evaluations of its customers and maintains allowances
for potential losses, if necessary.

F-40
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1996

6. CONCENTRATIONS OF CREDIT RISK (CONTINUED)

The Company has a significant concentration of credit risk with respect to a
receivable from a development stage customer engaged in payment processing
services (a niche market of the point of sale industry). Repayment is dependent
upon the customer's ability to continue to raise capital for operations and
expansion.

This receivable represents 57% of total accounts receivable at December 31,
1997.

7. LINES OF BUSINESS

The Company operates in two major lines of business: point of sale systems
and automotive parts. Information concerning operations in these segments at
December 31, 1997 and 1996, and for the years then ended, is presented below:

<TABLE>
<CAPTION>
AUTOMOTIVE
POINT OF PARTS
SALE (DISCONTINUED
SYSTEMS OPERATIONS) CONSOLIDATED
----------- ------------- ------------
<S> <C> <C> <C>
1997
Net operating revenues (excluding intersegment transfers).............. $ 9,514,938 $ 170,624 $9,685,562
Operating income....................................................... 514,302 2,727 517,029
Identifiable operating assets.......................................... 3,450,593 7,164 3,457,757
Capital expenditures................................................... 241,659 -- 241,659
Depreciation and amortization.......................................... 70,091 -- 70,091
1996
Net operating revenues (excluding intersegment transfers).............. $ 4,970,112 $ 1,075,913 $6,046,025
Operating income (loss)................................................ 77,381 (53,914) 23,467
Identifiable operating assets.......................................... 932,392 233,183 1,165,575
Capital expenditures................................................... 62,126 -- 62,126
Depreciation and amortization.......................................... 16,991 1,065 18,056
</TABLE>

8. MAJOR CUSTOMERS

During the year ended December 31, 1997, three customers, each accounted for
over 10% of the Company's revenues. Sales to these customers represented 20%,
39% and 11% of total Company sales. At December 31, 1997, accounts receivable
from these customers were 11%, 13% and 57% of total accounts receivable,
respectively.

During the year ended December 31, 1996, three customers, each accounted for
over 10% of the Company's revenues. Sales to these customers represented 26%,
21% and 11% of total Company sales. At December 31, 1996, accounts receivable
from these customers were 18%, 22% and 25% of total accounts receivable,
respectively.

9. EMPLOYEE RETIREMENT PLAN

The Company has a defined contribution profit sharing plan which covered
substantially all full-time employees. This Plan was amended and restated in
1997 to qualify as a salary reduction defined contribution profit sharing plan
under Section 401(k) of the Internal Revenue code. The Company's contributions
to the plan are made at the discretion of the Board of Directors. The Company's
contribution for 1996 of $50,000 was accrued at December 31, 1996 and paid in
1997. No contribution is accrued at December 31, 1997.

F-41
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1996

10. TREASURY STOCK TRANSACTIONS

In 1996, the Company and Custom Configurations purchased 450 shares and 320
shares, respectively, of treasury stock from an officer of the companies. The
treasury stock was recorded at cost.

In January 1997, 168 shares of treasury stock of the Company were reissued
to employees. Compensation expense of $11,396 was recorded based on the
estimated fair value of the Company's stock, with the difference between the
fair value and cost recorded as an adjustment to retained earnings.

In 1997, prior to the sale of the Company, the Company acquired 320 shares
of CCI Technology stock, 200 shares of Sourcelink stock, and 1,000 shares of CCI
Payment Systems stock in exchange for 282 shares of stock from its treasury
stock. The difference between the estimated fair value of stock traded and the
treasury stock cost was recorded as an adjustment to retained earnings. With
these transactions, the Company owns one hundred percent of all of its
subsidiaries.

11. SALE OF AUTOMOTIVE SEGMENT

In 1996, Custom Configurations, Inc. sold its operating assets. The sale
resulted in a gain on sale of assets of $66,096.

In 1997, Sourcelink, Inc. sold its operating assets for a price not to
exceed $200,000. $50,000 was paid immediately by a reduction in the accounts
payable to the purchaser. The remaining purchase price is being paid on a per
unit basis as units are sold and delivered by the purchaser. In 1997, Sourcelink
has recognized $73,013 of gain from the sale. The remainder of the gain will be
recognized when realized.

Custom Configurations and Sourcelink made up the Company's automotive
segment of its business. As such, the operations of these companies through the
sale of Sourcelink have been recorded as discontinued operations in the
accompanying statements. The gain on sale of Sourcelink has been recorded as
income from disposal of a segment, net of income taxes.

12. SALE OF COMPANY

On December 22, 1997, the Company's shareholders exchanged the Company's
1,000 shares of issued and outstanding stock for 380,000 shares of Javelin
Systems, Inc. common stock. 290,000 shares have been put in escrow until certain
sale provisions are met. Subsequent to this sale, the Company is owned one
hundred percent by Javelin Systems, Inc.

13. RELATED PARTY TRANSACTIONS

The Company has notes payable to a former corporate officer for $185,478 and
$99,990 at December 31, 1997 and 1996, respectively. The notes are due on demand
and carry interest at a rate of 10%. Interest expense on the notes payable for
the years ended December 31, 1997 and 1996 was $22,168 and $23,279,
respectively. Interest payable to the officer for the years ended December 31,
1997 and 1996 was $34,739 and $19,356, respectively. Subsequent to December 31,
1997, the Company paid its notes payable and interest due the officer in full.

CCI Technology purchased $166,584 of equipment and repairs from Javelin
Systems, Inc., prior to its acquisition. CCI Technology owed Javelin $15,394 at
December 31, 1997.

F-42
<PAGE>
[LOGO]

[PHOTOGRAPHS OF PRODUCT]

The Javelin LP, expected to be released during fiscal 1999, is designed to
be a compact, low profile PC for the high-traffic, POS environment. The LP is
planned to be network ready with an integrated Ethernet controller. The LP
should accommodate a variety of peripheral equipment such as cash drawers, card
readers, scanners and printers. The LP is designed to be spill resistant with a
solid cover, and, because it has no fans, is expected to be noiseless.

INNOVATIVE

The Javelin HHT-40 is being developed for the Company by a third party, and
the Company anticipates that the HHT-40 will become available in fiscal 1999.
The HHT-40 is designed to be a compact, lightweight, wireless handheld system
that provides service people the ability to enter orders quickly and efficiently
and offers the benefit of sending information remotely to the kitchen, bar, etc.
The HHT-40 targets table service restaurants as well as the arena and stadium
food service market.

VARIETY

The rugged, small-footprint Javelin Wedge, Javelin's first integrated
touchscreen computer, was introduced in January 1996. The Javelin Wedge is now
available with a Pentium processor to handle graphically-intense software
applications.

FLEXIBILITY

The Javelin LC, introduced in June 1997, presents a profile and a footprint
of less than eight inches square and has been designed to be more compact and
elegant in appearance making it suitable for both the food service market and
the retail market. In addition, the system's reduced size and flat panel display
allows it to be mounted in a variety of ways, including wall-mounted, fixed to
an adjustable base or attached to an articulated arm.

PERFORMANCE
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 15
Price Range of Common Stock............................................... 15
Dividend Policy........................................................... 15
Capitalization............................................................ 16
Unaudited Pro Forma Condensed Financial Information....................... 17
Selected Consolidated Financial Information............................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 20
Business.................................................................. 30
Management................................................................ 41
Certain Transactions...................................................... 47
Principal and Selling Stockholders........................................ 48
Description of Capital Stock.............................................. 50
Shares Eligible for Future Sale........................................... 53
Underwriting.............................................................. 54
Legal Matters............................................................. 56
Experts................................................................... 56
Change in Accountants..................................................... 56
Additional Information.................................................... 57
Index to Financial Statements............................................. F-1
</TABLE>

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

2,500,000 Shares

[LOGO]

Common Stock

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

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

FIRST SECURITY. VAN KASPER

TUCKER ANTHONY
Incorporated

MERIDIAN CAPITAL GROUP, INC.

FEBRUARY , 1999

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Bylaws require that directors and officers be indemnified to
the maximum extent permitted by Delaware law.

The Delaware GCL provides that a director or officer of a corporation (i)
shall be indemnified by the corporation for all expenses of litigation or other
legal proceedings when he is successful on the merits, (ii) may be indemnified
by the corporation for the expenses, judgments, fines and amounts paid in
settlement of such litigation (other than a derivative suit) even if he is not
successful on the merits if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation (and,
in the case of a criminal proceeding, had no reason to believe his conduct was
unlawful), and (iii) may be indemnified by the corporation for expenses of a
derivative suit (a suit by a stockholder alleging a breach by a director or
officer of a duty owed to the corporation), even if he is not successful on the
merits, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation, provided that no
such indemnification may be made in accordance with this clause (iii) if the
director or officer is adjudged liable to the corporation, unless a court
determines that, despite such adjudication but in view of all of the
circumstances, he is entitled to indemnification of such expenses. The
indemnification described in clauses (ii) and (iii) above shall be made upon
order by a court or a determination by (i) a majority of disinterested
directors, (ii) if there are no such directors or if such directors so direct,
by independent legal counsel in a written opinion or (iii) the stockholders that
indemnification is proper because the applicable standard of conduct is met.
Expenses incurred by a director or officer in defending an action may be
advanced by the corporation prior to the final disposition of such action upon
receipt of an undertaking by such director or officer to repay such expenses if
it is ultimately determined that he is not entitled to be indemnified in
connection with the proceeding to which the expenss relate. The Company's
Certificate of Incorporation includes a provision eliminating, to the fullest
extent permitted by Delaware law, director liability for monetary damages for
breaches of fiduciary duty.

The Company has entered into indemnity agreements (the "Indemnity
Agreements") with each director or officer designated by the Board of Directors.
The Indemnity Agreements require that the Company indemnify directors and
officers who are parties thereto in all cases to the fullest extent permitted by
Delaware law. Under the Delaware GCL, except in the case of litigation in which
a director or officer is successful on the merits, indemnification of a director
or officer is discretionary rather than mandatory. Consistent with the Company's
Bylaw provision on the subject, the Indemnity Agreements require the Company to
make prompt payment of litigation expenses at the request of the director or
officer in advance of indemnification provided that he undertakes to repay the
amounts if it is ultimately determined that he is not entitled to
indemnification for such expenses. The advance of litigation expenses is
mandatory; under the Delaware GCL such advance would be discretionary. Under the
Indemnity Agreements, the director or officer is permitted to bring suit to seek
recovery of amounts due under the Indemnity Agreements and is entitled to
recover the expenses of seeking such recovery unless a court determines that the
action was not made in good faith or was frivolous. Without the Indemnity
Agreements, the Company would not be required to pay the director or officer for
his expenses in seeking indemnification recovery against the Company. Under the
Indemnity Agreements, directors and officers are not entitled to indemnity or
advancing of expenses (i) if such director or officer has recovered payment
under an insurance policy for the subject claim, or has otherwise been
indemnified against the subject claim, (ii) for actions initiated or brought by
the director or officer and not by way of defense (except for actions seeking
indemnity or expenses from the Company), (iii) if the director or officer
violated section 16(b) of the Exchange Act or similar provisions of law or (iv)
if a court of competent jurisdiction determines that the director or officer
failed to act in good faith and in a manner reasonably believed to be

II-1
<PAGE>
in or not opposed to the best interests of the Company or, with respect to any
proceeding which is of a criminal nature, had reasonable cause to believe his
conduct was unlawful. Absent the Indemnity Agreements, indemnification that
might be made available to directors and officers could be changed by amendments
to the Company's Certificate of Incorporation or Bylaws.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Common Stock being registered. All the amounts
shown are estimates except for the SEC registration fee and the NASD filing fee.

<TABLE>
<S> <C>
Registration fee................................ $12,089.00
NASD filing fee................................. $ 4,800.00
Nasdaq Stock Market Listing Application fee..... $17,500.00
Printing and engraving expenses................. $100,000.00
Legal fees and expenses......................... $100,000.00
Accounting fees and expenses.................... $70,000.00
Transfer agent and registrar fees............... $ 5,000.00
Miscellaneous................................... $20,611.00
----------
Total......................................... $330,000.00
----------
----------
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

The Company has sold and issued within the past three years the following
securities which were not registered under the Securities Act of 1933, as
amended (the "Act"):

1. On September 26, 1995, the Company issued 430,000 shares of Common Stock
to Richard P. Stack, 288,100 shares of Common Stock to C. Norman Campbell and
77,400 shares of Common Stock to John R. Amos at a per share price of
approximately $.006. The issuance of the Common Stock was deemed to be exempt
from registration under the Act by virtue of Section4(2) of the Act and Rule 504
of Regulation D promulgated thereunder.

2. On October 1, 1995, the Company issued a Promissory Note in the amount
of $15,000 to Richard P. Stack. The issuance of the Promissory Note was deemed
to be exempt from registration under the Act by virtue of Section 4(2) of the
Act and Rule 504 of Regulation D promulgated thereunder because the issuance did
not involve a public offering.

3. On November 1, 1995, the Company issued 288,100 shares of Common Stock
to C. Norman Campbell and 107,500 shares of Common stock to Alex Nelson at a per
shares price of approximately $.006. The issuance of the Common Stock was deemed
to be exempt from registration under the Act by virtue of Section 4(2) the Act
and Rule 504 of Regulation D promulgated thereunder.

4. On January 9, 1996, the Company issued 180,600 shares of Common stock
the The Steven J. Goodman Revocable Living Trust ("Goodman") and 25,800 shares
of Common Stock to GAK Limited, a Delaware limited partnership ("GAK"), of which
Horace and Madeleine Hertz are the general partners, at a per shares price of
approximately $.02. The issuance of the Common Stock was deemed to be exempt
from registration under the Act by virtue of Section 4(2) of the act and Rule
504 of Regulation D promulgated thereunder.

5. In February 1996, the Company issued two Promissory Notes, each in the
original principal amount of $20,000, to each of Peter Aiello and Jim Cox. The
Promissory Note issued to Mr. Cox is convertible at his option into shares of
Common Stock at a per share price of $2.50 per share. Effective as of June 30,
1997, Mr. Cox converted his Promissory Note into 8,000 shares of Common Stock.
The issuance of the Promissory Notes and the Common Stock issued upon conversion
of Mr. Cox's Promissory

II-2
<PAGE>
Note was deemed to be exempt from registration under the Act by virtue of
Section 4(2) of the Act and Rule 504 of Regulation D promulgated thereunder.

6. On April 1, 1996, the Company issued 430,000 shares of Common stock to
Richard P. Stack at a price per share of approximately $.19 upon conversion of a
convertible promissory note originally issued in October 1995. The issuance of
the convertible promissory note and the Common Stock was deemed to be exempt
from registration under the Act by virtue of section 4(2) of the Act and Rule of
Regulation D promulgated thereunder.

7. On April 3, 1996, the Company issued 116,100 shares of Common Stock to
Goodman at a per share price of approximately $.22. The issuance of the Common
Stock was deemed to be exempt from registration under the Act by virtue of
Section 4(2) of the Act and Rule 504 of Regulation D promulgated thereunder.

8. On May 1, 1996, the Company issued 86,000 shares of Common Stock to
Teresa M. McRae at a per share price of approximately $.47 upon conversion of a
convertible promissory note originally issued in October 1995. The issuance of
the convertible promissory note and the Common Stock was deemed to be exempt
from registration under the Act by virtue of Section 4(2) of the Act and Rule
504 of Regulation D promulgated thereunder.

9. On May 23, 1996, the Company issued 38,780 shares of Common Stock to GAK
at a per share price of approximately $.65. The issuance of the Common Stock was
deemed to be exempt from registration under the Act by virtue of Section 4(2) of
the Act and Rule 504 of Regulation D promulgated thereunder.

10. On May 31, 1996, the Company issued 17,200 shares of Common Stock to
Richard A. Stack at a per share price of approximately $.70 upon conversion of a
convertible promissory note originally issued in October 1995. The issuance of
the convertible promissory note and the Common Stock was deemed to be exempt
from registration under the Act by virtue of Section 4(2) of the Act and Rule
504 of Regulation D promulgated thereunder.

11. On June 3, 1996, the Company issued 10,750 shares of Common Stock to
Herbert R. and Janice N. Donica, as joint tenants by the entireties, at a per
share price of approximately $2.33. The issuance of the Common Stock was deemed
to be exempt from registration under the Act by virtue of Section 4(2) of the
Act and Rule 504 of Regulation D promulgated thereunder.

12. At various times commencing May 1996 through August 1996, the Company
issued Promissory Notes to the following accredited investors in the following
original principal amounts: (1) The Steven J. Goodman Charitable Remainder Trust
(the "Goodman CRT"), $50,000; (2) John R. Amos, $25,000; (3) Kanayo Partabrai
Gangwani, $25,000; (4) Jack S. Kompan, two Promissory Notes aggregating $50,000;
(5) Universal Partners, L.P., a partnership that specializes in providing bridge
financing of which Windy City Bridges, Inc. is a general partner, $25,000; (6)
Scott Robinson, $25,000; (7) Rebecca L. Gregarek, $12,500; (8) David M. Munch,
$25,000; (9) David J. Gregarek, $25,000; (10) Jay Louis Kear Family Trust,
$25,000; (11) Mildred J. Geiss, $37,500; (12) Westerling Family Trust, $100,000;
(13) Yu Family Revocable Trust, $25,000; (14) Kenneth and Linda Bloom, $25,000;
(15) Christopher Neil, $25,000; (16) Izzy Rabinowitz, $50,000; (17) Don R.
Thorne, $50,000; (18) Mark Ratto, $12,500; (19) B.C. Investments, $12,500; (20)
Chris Brown, $50,000; (21) Victor A. Ince and Terry A. Ince, joint tenants,
$25,000; (22) Caribou Bridge Fund, LLC, $25,000. Concurrent with the issuance of
each of the foregoing Promissory Notes, the Company issued warrants to purchase
shares of Common Stock (the "Warrants") in an amount equal to the number of
shares that results from dividing $5.00 into the original principal amount of
the Promissory Note, with the exception of the Promissory Notes issued to Mr.
Amos, Mr. Gangwani and Mr. Kompan which provided for $2.50 being divided into
the original principal amount of their respective Promissory Notes. The total
purchase price for all of the shares of Common Stock issuable upon the exercise
of such Warrants is an aggregate of $1.00 per Warrant, or $23.00 in the
aggregate. The Warrants

II-3
<PAGE>
became exercisable October 25, 1996 and were all exercised between October and
December 1996. In connection with the sales of certain of the Promissory Notes
and Warrants, the Company paid a total of $15,000 in commissions to Spencer
Edwards in its capacity as a selling agent and $27,500 to Meridian in its
capacity as a selling agent. The issuance of the Promissory Notes and the
Warrants was deemed to be exempt from registration under the Act by virtue of
Section 4(2) of the Act and Rule 504 of Regulation D promulgated thereunder.

The foregoing information has been adjusted to reflect a 4,300 for 1 stock
split of the Common Stock effected in August 1996.

13. On December 19, 1997, the company issued an aggregate of 225,000 shares
of the Company's Common Stock to Mark LeMay, Paul Amestoy, Greg Kosin and Ralph
E. Rudzik, Jr. in consideration for all of the outstanding capital stock of
POSNET Computers, Inc., a California corporation ("Posnet"). The issuance of the
Common Stock was deemed to be exempt from registration under the Act by virtue
of Section 4(2) of the Act and Rule 506 promulgated thereunder.

14. On December 22, 1997, the Company issued a warrant to purchase up to
10,000 shares of the Company's Common Stock to L.H. Friend, Weinress, Frankson &
Presson, Inc. at an exercise price of $9.36 per share. The issuance of the
warrant and the Common Stock underlying the warrant are deemed to be exempt from
registration under the Act by virtue of Section 4(2) of the Act.

15. On December 22, 1997, the Company issued an aggregate of 670,000 shares
of the Company's Common Stock to Robert Nichols, Robert Hess, Melissa Sobo and
Renee Voirol in consideration for all of the outstanding capital stock of CCI
Group, Inc., a Missouri corporation. The issuance of the Common Stock was deemed
to be exempt from registration under the Act by virtue of Section 4(2) of the
Act and Rule 506 promulgated thereunder.

16. On March 31, 1998, the Company issued an aggregate of 18,752 shares of
the Company's Common Stock to Mark LeMay, Paul Amestoy, Greg Kosin and Ralph E.
Rudzik, Jr. as further consideration for all of the outstanding capital stock of
Posnet pursuant to the earnout provisions of the Stock Purchase Agreement dated
December 19, 1997, among the Company, Posnet, Mark LeMay, Paul Amestoy, Greg
Kosin and Ralph E. Rudzik, Jr. The issuance of the Common Stock was deemed to be
exempt from registration under the Act pursuant to Section 4(2) of the Act and
Rule 506 promulgated thereunder.

17. On April 23, 1998, the Company issued an aggregate of 36,362 shares of
the Company's Common Stock to Meridian Capital Group, Inc. ("Meridian") and
certain officers of Meridian upon exercise of warrants held by such entity and
individuals pursuant to the net-exercise provision contained in such warrants.
The issuance of the Common Stock was deemed to be exempt from registration under
the Act by virtue of Section 4(2) under the Act.

18. On May 10, 1998, the Company issued 15,300 shares of the Company's
Common Stock to Aspact Enterprise, Ltd. in consideration for all of the
outstanding capital stock of Aspact IT Services Pty Ltd., a corporation
organized under the laws of Singapore. The issuance of the Common Stock was
deemed to be exempt from registration under the Act by virtue of Section 4(2) of
the Act.

19. On June 9, 1998, the Company issued warrants to purchase an aggregate of
25,000 shares of the Company's Common Stock to L.H. Friend, Weinress, Frankson &
Presson, Inc. ("L.H. Friend") and certain of L.H. Friend's officers at an
exercise price of $12.65 per share. The issuance of such warrants and the Common
stock underlying such warrants was deemed to be exempt from registration under
the Act by virtue of Section 4(2) of the Act.

20. On June 12, 1998, the Company issued a warrant to purchase 100,000
shares of the Company's Common Stock to FINOVA Capital Corporation at an
exercise price per share of $9.00. The issuance of

II-4
<PAGE>
the warrant and the Common Stock underlying the warrant was deemed to be exempt
from registration under the Act by virtue of Section 4(2) of the Act.

21. On November 6, 1998, the Company issued 243,125 shares of the Company's
Common Stock to the shareholders of RGB/Trinet Limited ("RGB/Trinet") and Jade
Communications Limited ("Jade") in exchange for all of the outstanding equity
interests of each of RGB/Trinet and Jade. The issuance of the Common Stock was
deemed to be exempt from registration under the Act pursuant to Regulation S
under the Act.

22. On January 14, 1999, the Company issued an aggregate of 9,136 shares of
the Company's Common Stock to Meridian and certain officers of Meridian upon
exercise of warrants held by such entity and individuals pursuant to the
net-exercise provision contained in such warrants. The issuance of the Common
Stock was deemed to be exempt from registration under the Act by virtue of
Section 4(2) of the Act.

The recipients of the above-described securities represented their intention
to acquire the securities for investment only and not with a view to
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. All recipients had adequate access, through
employment or other relationships, to information about the Registrant.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

3.1(7) -- Registrant's Amended and Restated Certificate of Incorporation.

3.2(1) -- Registrant's Amended and Restated Bylaws.

4.1(1) -- Form of Common Stock Certificate of Registrant.

5.1* -- Opinion of Cooley Godward LLP.

10.1(1) -- Form of Indemnity Agreement entered into between the Company and its directors and executive
officers.

10.2(1) -- 1996 Stock Incentive Award Plan (the "1996 Plan").

10.3(1) -- Form of Director Non-Qualified Stock Option Agreement under the 1996 Plan.

10.4(1) -- Form of Employee Non-Qualified Stock Option Agreement under the 1996 Plan.

10.5(6) -- 1997 Equity Incentive Plan, as amended.

10.6(6) -- Form of Incentive Stock Option Agreement under the 1997 Plan.

10.7(6) -- Form of Nonstatutory Stock Option Agreement under the 1997 Plan.

10.8(1) -- Employment Agreement dated August 19, 1996 by and between the Company and Richard P. Stack.

10.9(1) -- Employment Agreement dated August 19, 1996 by and between the Company and C. Norman Campbell.

10.10(6) -- Employment Agreement dated January 1, 1998 by and between CCI Group, Inc and Robert Nichols.

10.11(6) -- Standard Industrial/Commercial Multi-Tenant Lease-Modified Net dated January 27, 1998 by and
between the Company and BRS-Campo Investment Company LP.

10.12(1) -- Standard Industrial/Commercial Single-Tenant Lease-Gross dated October 19, 1995 by and between
the Company and Robert P. Peebles Trust, dated April 11, 1979.
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -------------------------------------------------------------------------------------------------
10.13(2) -- Standard Sublease dated September 9, 1997 by and between the Company, D. Howard Lewis and William
R. Miller.
<S> <C> <C>

10.14(6) -- The Business Center Office/Warehouse Lease dated April 4, 1997 by and between CCI Group, Inc and
Nooney Krombech Company.

10.15(2) -- Distributor Agreement dated March 14, 1997 by and between the Company and ScanSource, Inc.

10.16(3) -- Stock Purchase Agreement dated December 19, 1997 by and among the Company, POSNET Computers,
Inc., Paul R. Amestoy, Greg Kolin, Mark LeMay and Ralph E. Rudzik, Jr.

10.17(4) -- Amendment to Stock Purchase Agreement dated January 23, 1998 by and between the Company and Mark
LeMay as agent for Paul R. Amestoy, Mark LeMay, Greg Kosin and Ralph E. Rudzik, Jr.

10.18(5) -- Plan of Reorganization and Stock Purchase Agreement dated December 22, 1997 by and among the
Company and CCI Group, Inc., Robert Nichols, Robert Hess, Melissa Sobo and Renee Voirol.

10.19(6) -- Loan and Security Agreement dated June 8, 1998 by and among the Company, CCI Group, Inc., POSNET
Computers, Inc. and FINOVA Capital Corporation and related Secured Promissory Note, Pledge
Agreement and Secured Continuing Corporate Guaranty.

10.20(6) -- Form of Warrant issued by the Company in favor of FINOVA Capital Corporation.

10.21(7) -- Second and Third Amendments to Loan and Security Agreement dated December 15, 1998 and January
10, 1999, respectively, by and among the Company, CCI Group, Inc., POSNET Computers, Inc. and
FINOVA Capital Corporation.

16.1(6) -- Letter on change in Certifying Accountant dated May 29, 1998 from Ernst & Young LLP to the SEC.

21.1* -- Subsidiaries of the Registrant.

23.1 -- Consent of PricewaterhouseCoopers LLP, independent accountants.

23.2 -- Consent of Ernst & Young LLP, independent auditors.

23.3 -- Consent of Corbin & Wertz, independent auditors.

23.4 -- Consent of Rubin, Brown, Gornstein & Co. LLP, independent auditors.

23.5 -- Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.

24.1 -- Power of Attorney. Reference is made to page II-8.
</TABLE>

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

* Previously filed.

(1) Filed as an exhibit to the Company's Registration Statement on Form SB-2, as
amended (No. 333-11217), and incorporated herein by reference.

(2) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1997 and incorporated herein by reference.

(3) Filed as an exhibit to the Company's Current Report on Form 8-K dated
December 30, 1997 and incorporated herein by reference.

(4) Filed as an exhibit to the Company's Current Report on Form 8-K/A dated
March 4, 1998 and incorporated herein by reference.

II-6
<PAGE>
(5) Filed as an exhibit to the Company's Current Report on Form 8-K dated
January 5, 1998 and incorporated herein by reference.

(6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1998 and incorporated herein by reference.

(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for the
quarter ended December 31, 1998, and incorporated herein by reference.

(b) Schedules

All schedules are omitted because they are not required, are not applicable
or the information is included in the consolidated financial statements or notes
thereto.

ITEM 28. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 24 or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes:

(1) That, for purposes of determining any liability under the Act, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(2) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.

(3) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-7
<PAGE>
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Irvine, County of Orange, State of California, on the 10th day of
February, 1999.

By: /s/ RICHARD P. STACK
-----------------------------------
Richard P. Stack
President and Chief Executive
Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard P. Stack and Horace Hertz, and each of
them, as his true and lawful attorney-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments, exhibits thereto and other documents in connection therewith) to
this Registration Statement and any subsequent registration statement filed by
the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as
amended, which relates to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, to their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- --------------------------------------------- --------------------
<C> <S> <C>
/s/ RICHARD P. STACK
----------------------------------- President, Chief Executive Officer and February 10, 1999
Richard P. Stack Director (PRINCIPAL EXECUTIVE OFFICER)

*
----------------------------------- Chief Financial Officer and Secretary February 10, 1999
Horace Hertz (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)

*
----------------------------------- Director February 10, 1999
Steven J. Goodman

*
----------------------------------- Director February 10, 1999
Robert Nichols

*
----------------------------------- Director February 10, 1999
Jay L. Kear

----------------------------------- Director February , 1999
Andrew F. Puzder
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ RICHARD P. STACK
-------------------------
Richard P. Stack
ATTORNEY-IN-FACT
</TABLE>

II-8
<PAGE>
EXHIBIT INDEX

3.1(7) -- Registrant's Amended and Restated Certificate of Incorporation.

3.2(1) -- Registrant's Amended and Restated Bylaws.

4.1(1) -- Form of Common Stock Certificate of Registrant.

5.1* -- Opinion of Cooley Godward LLP.

10.1(1) -- Form of Indemnity Agreement entered into between the Company and its directors and executive
officers.

10.2(1) -- 1996 Stock Incentive Award Plan (the "1996 Plan").

10.3(1) -- Form of Director Non-Qualified Stock Option Agreement under the 1996 Plan.

10.4(1) -- Form of Employee Non-Qualified Stock Option Agreement under the 1996 Plan.

10.5(6) -- 1997 Equity Incentive Plan, as amended.

10.6(6) -- Form of Incentive Stock Option Agreement under the 1997 Plan.

10.7(6) -- Form of Nonstatutory Stock Option Agreement under the 1997 Plan.

10.8(1) -- Employment Agreement dated August 19, 1996 by and between the Company and Richard P. Stack.

10.9(1) -- Employment Agreement dated August 19, 1996 by and between the Company and C. Norman Campbell.

10.10(6) -- Employment Agreement dated January 1, 1998 by and between CCI Group, Inc and Robert Nichols.

10.11(6) -- Standard Industrial/Commercial Multi-Tenant Lease-Modified Net dated January 27, 1998 by and
between the Company and BRS-Campo Investment Company LP.

10.12(1) -- Standard Industrial/Commercial Single-Tenant Lease-Gross dated October 19, 1995 by and between
the Company and Robert P. Peebles Trust, dated April 11, 1979.

10.13(2) -- Standard Sublease dated September 9, 1997 by and between the Company, D. Howard Lewis and William
R. Miller.

10.14(6) -- The Business Center Office/Warehouse Lease dated April 4, 1997 by and between CCI Group, Inc and
Nooney Krombech Company.

10.15(2) -- Distributor Agreement dated March 14, 1997 by and between the Company and ScanSource, Inc.

10.16(3) -- Stock Purchase Agreement dated December 19, 1997 by and among the Company, POSNET Computers,
Inc., Paul R. Amestoy, Greg Kolin, Mark LeMay and Ralph E. Rudzik, Jr.

10.17(4) -- Amendment to Stock Purchase Agreement dated January 23, 1998 by and between the Company and Mark
LeMay as agent for Paul R. Amestoy, Mark LeMay, Greg Kosin and Ralph E. Rudzik, Jr.

10.18(5) -- Plan of Reorganization and Stock Purchase Agreement dated December 22, 1997 by and among the
Company and CCI Group, Inc., Robert Nichols, Robert Hess, Melissa Sobo and Renee Voirol.

10.20(6) -- Form of Warrant issued by the Company in favor of FINOVA Capital Corporation.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -------------------------------------------------------------------------------------------------
10.21(7) -- Second and Third Amendments to Loan and Security Agreement dated December 15, 1998 and January
10, 1999, respectively, by and among the Company, CCI Group, Inc., POSNET Computers, Inc. and
FINOVA Capital Corporation.
<S> <C> <C>

16.1(6) -- Letter on change in Certifying Accountant dated May 29, 1998 from Ernst & Young LLP to the SEC.

21.1* -- Subsidiaries of the Registrant.

23.1 -- Consent of PricewaterhouseCoopers LLP, independent accountants.

23.2 -- Consent of Ernst & Young LLP, independent auditors.

23.3 -- Consent of Corbin & Wertz, independent auditors.

23.4 -- Consent of Rubin, Brown, Gornstein & Co. LLP, independent auditors.

23.5 -- Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.

24.1 -- Power of Attorney. Reference is made to page II-8.
</TABLE>

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

* Previously filed.

(1) Filed as an exhibit to the Company's Registration Statement on Form SB-2, as
amended (No. 333-11217), and incorporated herein by reference.

(2) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1997 and incorporated herein by reference.

(3) Filed as an exhibit to the Company's Current Report on Form 8-K dated
December 30, 1997 and incorporated herein by reference.

(4) Filed as an exhibit to the Company's Current Report on Form 8-K/A dated
March 4, 1998 and incorporated herein by reference.

(5) Filed as an exhibit to the Company's Current Report on Form 8-K dated
January 5, 1998 and incorporated herein by reference.

(6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1998 and incorporated herein by reference.

(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for the
quarter ended December 31, 1998, and incorporated herein by reference.

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated August 25, 1998,
relating to the consolidated financial statements of Javelin Systems, Inc.,
which appears in such Prospectus. We also consent to the references to us
under the headings "Experts" and "Selected Consolidated Financial
Information" in such Prospectus. However, it should be noted that
PricewaterhouseCoopers LLP has not prepared or certified such "Selected
Consolidated Financial Information."

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Costa Mesa, California
February 9, 1999

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the references to our firm under the caption "Experts"
and "Selected Consolidated Financial Information" and to the use of our
report dated August 1, 1997, in Amendment No. 1 to the Registration Statement
(Form SB-2 No. 333-70865) and related Prospectus of Javelin Systems, Inc. for
the registration of 2,875,000 shares of its common stock.

Ernst & Young LLP

Orange County, California
February 9, 1999

<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in Javelin Systems, Inc.'s Registration
Statement on Form SB-2 of our report dated January 21, 1998 relating to the
financial statements on Posnet Computers, Inc. as of and for the twelve month
period ended October 31, 1997, which appear in such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.

/s/ CORBIN & WERTZ
CORBIN & WERTZ

Irvine, California
February 9, 1999

<PAGE>

EXHIBIT 23.4

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Javelin Systems, Inc.

We hereby consent to the use of our report dated February 6, 1998 on the
consolidated financial statements of CCI Group, Inc. and subsidiaries
included in the Javelin Systems, Inc. Registration Statement on Form SB-2 as
filed with the Securities & Exchange Commission on January 20, 1999 and
amended on February 10, 1999 and to the reference to our Firm under the
caption "Experts" in the related prospectus.

/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP
RUBIN, BROWN, GORNSTEIN & CO. LLP

St. Louis, Missouri
February 10, 1999