UNICOMP INC, 10-K405, 1998-05-29

UNICOMP INC
10-K405, 1998-05-29
COMPUTER INTEGRATED SYSTEMS DESIGN

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO ______

Commission file number 0-15671

UNICOMP, INC.
(Exact name of registrant as specified in its charter)

Colorado 84-1023666
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

1850 Parkway Place, Suite 925
Marietta, GA 30067
(Address of principal executive offices) (zip code)

Registrant's telephone number, including area code: (770) 424-3684

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share
---------------------------------------
(title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K. [ X ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $27,300,000 on May 26, 1998.

The number of shares outstanding of the registrant's Common Stock as of May 26,
1998 was 7,965,423.

DOCUMENTS INCORPORATED BY REFERENCE:

Specified sections of the registrant's 1998 Proxy Statement in
connection with its 1998 Annual Meeting of Stockholders are incorporated by
reference in Part III herein.

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PART I

ITEM 1. BUSINESS

Overview

UniComp, Inc. (the Company), founded in 1985, provides computer equipment
and other information technology products and services to businesses located
primarily in the United Kingdom, as well as, year 2000 conversion tools and
services, vertical market application software, platform-migration software and
transaction-processing systems to users worldwide. The Company's strategy is to
emphasize its software products, acquire synergistic technologies and
businesses, and to expand its services business within its existing geographic
markets.

The Company has experienced significant growth over the past four years,
primarily through acquisitions, with total revenue growing to $52.1 million in
fiscal year 1998 from $12.7 million in fiscal year 1994. In fiscal year 1998,
approximately 82% of the Company's revenue was derived from providing computer
equipment, support and various other information technology services, with 75%
of revenue attributable to international operations, primarily in the United
Kingdom.

Computer Equipment

The Company provides computer equipment to the transaction-processing
market in North America, and to the educational and corporate sectors primarily
in Northern Ireland. The Company began providing computer equipment for the
transaction-processing industry with the acquisition of Novatek Corporation
(Novatek) in fiscal year 1998. In connection with the acquisition of CEM
Computers Limited (CEM) in 1997, the Company became a reseller of computer
equipment to the educational marketplace in Northern Ireland. The Company also
provides computer equipment to the corporate market, which is generally supplied
as an adjunct to its software and services.

Professional Services and Vertical Market Applications

The worldwide information technology industry is characterized by rapid
technological change, which often leads to increased costs required to maintain
internal information technology resources capable of responding to such change.
The Company believes that, as businesses strive to compete and utilize complex
new technologies, more businesses will move toward outsourcing their information
technology requirements. The Company believes that this movement will enhance
its information technology services business.

The Company provides a wide variety of vertical market applications and
professional services, including proprietary and third party software products,
support services, installation and integration of software and hardware systems
and outsourcing of information technology services. The Company's vertical
application software products consist of accounting software, process management
products for the manufacturing industry, a human resource time and attendance
product, as well as other third party software products. Support services
consist of system upkeep including hardware and software support and
maintenance, technical support and training. Installation and integration
services include system consulting and design, custom software development,
system installation and testing, as well as a broad range of systems
configuration and integration services for computer networks. The Company also
provides information technology services to businesses on an outsourced basis,
thereby offering its customers an opportunity to reduce information technology
overhead while continuing to respond to technological

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change. Outsourcing services include disaster recovery, facilities management
and related information technology support services.

Year 2000 Conversion Tools and Services

The year 2000 problem arises from the inability of software applications to
effectively process programs that use two-digit data field format to represent a
year. Unless these applications are modified, significant problems could occur
due to the inability to properly interpret data fields (e.g., such applications
may interpret "00" as the year "1900" rather than "2000"). In response to the
increased awareness and demand for year 2000 solutions, the Company has expanded
its business to address this market, with a focus on the IBM midrange systems
market. The Company believes that it has a unique opportunity to market its
solutions to its installed base of users of its other products and services. The
Company also anticipates that customer contacts developed in providing year 2000
solutions will provide opportunities for the Company to provide additional
on-going products and services to such customers.

Platform-Migration Software

During the past several years, the computer industry has been moving from
proprietary systems toward open and portable systems. The Company believes that
decreasing prices, increasing functionality of hardware and software systems and
the inherent constraints of proprietary platforms have contributed to increased
market acceptance of open systems and customer demand for products based on such
systems. Changing computing platforms from proprietary to open or portable
systems, however, often results in significant disruption of business operations
as users are retrained and software errors are discovered and corrected. Also
critical is the potential loss of data contained in existing databases that may
result from a change to new software applications.

In response to the demand for software applications capable of running on
multiple computing platforms, the Company has developed platform-migration
software that rehosts code written for certain proprietary platforms to open
computing platforms. The Company believes that its rehosting solution allows
businesses and independent software vendors (ISVs) to migrate their software
applications to open systems in a more cost-effective manner than competing
methodologies. Rehosting enables businesses to retain their investment in
existing software and databases. Rehosting also allows ISVs to expand their
market opportunities without replacing or rewriting applications, retraining or
replacing software developers or incurring the cost and disruption of
re-engineering their products.

Transaction-processing Systems

Electronic transaction-processing refers to the sequence of activities that
occur among a customer, a merchant and a transaction processor when goods or
services are sold via debit or credit cards, checks, or other transactions which
are not settled in cash. Electronic transaction-processing for commercial
businesses has grown rapidly in recent years as a result of an increased usage
of credit and debit cards and wider acceptance of such cards among merchants.
Advances in transaction-processing and telecommunication technologies have also
been key factors contributing to such growth. The Company believes that the
transition from paper-based to electronic-based transaction-processing provides
greater convenience to merchants and consumers, reduces fees charged to
merchants and facilitates faster, more accurate settlement of payments.

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Transaction-processing systems include the software and hardware
combinations that allow electronic settlement of payment transactions. The
Company designs, develops and markets transaction-processing systems, which may
include both software and hardware, that provide merchants a high degree of
hardware independence by supporting a variety of hardware platforms, including
personal computers, point-of-sale terminals and other peripheral devices. The
Company's transaction-processing systems also provide merchants a high degree of
independence by supporting most major payment processors.

Acquisition History

Through 1992, the Company's primary business was as a reseller of third
party software products. The Company has grown since 1992, primarily through
acquisition. Following is a brief overview of the Company's acquisition history.

In May 1993, the Company acquired ICS Computing Group Limited (ICGL), for
$4.1 million, a United Kingdom holding company consisting of three subsidiary
companies, one of which, Unibol, Ltd., is the developer of the UNIBOL36 and
UNIBOL400 platform-migration software. The acquisition of ICGL also included two
other subsidiaries specializing in the delivery of information technology
products and services: ICS Computing Limited (ICS), specializing in
vertical-market applications software and professional services, and Computer
Maintenance Ireland Limited (CMI), providing independent hardware and software
support, systems integration services, and training primarily in Northern
Ireland.

In September 1994, in exchange for assuming the net liabilities and
forgiving a $200,000 working capital loan made by the Company to the seller, the
Company acquired CI Computer Software Limited (CICS), a United Kingdom company
that provides software consultancy and custom software applications for the IBM
AS/400 marketplace in Northern Ireland.

In August 1995, the Company acquired for $420,000 certain assets and
liabilities of Advec Limited (Advec), a United Kingdom company specializing in
hardware support and systems integration services. Subsequent to the acquisition
Advec was merged into CMI.

In April 1996, the Company acquired, for 500,000 shares of the Company's
Common Stock, Smoky Mountain Technologies, Inc. (Smoky Mountain), a North
Carolina corporation specializing in the development of transaction-processing
systems.

In February, 1997, the Company acquired CEM for $3.7 million, a United
Kingdom company that provides computer equipment, independent hardware and
software support, systems integration services and training primarily in
Northern Ireland. Subsequent to the CEM acquisition, CEM and CMI were merged and
renamed Aurora UniComp Limited (Aurora).

In November 1997, the Company acquired for 788,708 shares of the Company's
Common Stock, Novatek Corporation and Sun and Sky Development Corporation
(together Novatek). Novatek is a Florida corporation that provides new and
refurbished transaction-processing equipment primarily in North America.
Subsequent to the Novatek acquisition, Novatek was merged with Smoky Mountain.

In January 1998, the Company acquired for 107,453 shares of the Company's
Common Stock, Industrial Computing Machines Limited (ICM), an Irish company that
provides software products for the manufacturing industry primarily in Ireland
and the United Kingdom.

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Markets

Computer Equipment

The Company provides computer equipment to the transaction-processing
market, to the educational sector, and as an adjunct to their software and
services customers. The Company began providing computer equipment for the
transaction-processing industry with the acquisition of Novatek in fiscal year
1998. In connection with the acquisition of CEM in fiscal year 1997, the Company
became a reseller of computer equipment to the educational marketplace in
Northern Ireland. The Company also provides computer equipment to the corporate
market, which is generally supplied as an adjunct to its software and services.
The primary market for the Company's transaction-processing equipment is the
United States. The Company's primary market for educational and corporate
equipment is the United Kingdom, and more specifically, Northern Ireland. While
the Company does sell equipment outside of these markets from time to time,
there are no current plans to substantially expand the market for the Company's
educational and corporate equipment.

Professional Services and Vertical Market Applications

The worldwide information technology industry is characterized by rapid
technological change, which often leads to increased costs required to maintain
internal information technology resources capable of responding to such change.
The Company believes that the information technology markets in the United
Kingdom, where the majority of the Company's information technology service
customers are based, are regionally focused and highly fragmented. The Company
believes that as companies strive to compete and utilize complex new
technologies, more companies will move toward outsourcing their information
technology requirements.

The Company provides a wide variety of vertical market applications and
professional services including proprietary and third party software products,
support services, installation and integration of software and hardware systems
and outsourcing of information technology services. The Company's vertical
application software products consist of accounting software, process management
products for the manufacturing industry, a human resource time and attendance
product, as well as other third party software products. Support services
consist of system upkeep including hardware and software support and
maintenance, technical support and training. Installation and integration
services include system consulting and design, custom software development,
system installation and testing, as well as a broad range of systems
configuration and integration services for computer networks. The Company also
provides information technology services to businesses on an outsourced basis,
thereby offering its customers an opportunity to reduce information technology
overhead while continuing to respond to technological change. Outsourcing
services include disaster recovery, facilities management and related
information technology support services.

Year 2000 Conversion Tools and Services

In the mid-1990s, several conferences and market pronouncements increased
worldwide awareness of the impending year 2000 problem, also known as the
"millennium bug." This problem arises from the inability of software
applications to effectively process programs that use a two-digit data field
format to represent a year. The two-digit year format assumes that all dates are
in the twentieth century. When twenty-first century dates are added to the
equation, disastrous problems could occur due to the inability to properly
interpret date fields (e.g., such applications may interpret "00" as the year
"1900" rather than "2000"). Potential problems include inability to properly
calculate interest, disappearance of long term orders, premature expiration of
life insurance and annuity policies, premature

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expiration of credit cards and ATM cards, birth dates overtaking retirement
dates, and many other disruptive date-sensitive functions. Resolving a year 2000
problem is a highly time- and labor-intensive project often requiring software
professionals to analyze millions of lines of code. The Gartner Group has
estimated that it will cost the public and private sectors between $300 and $600
billion worldwide to initiate appropriate year 2000 conversions.

Many organizations lack the internal resources to adequately address the
year 2000 problem. A number of solution providers, including the Company, have
developed special programs to meet the needs of year 2000 compliance. The
Company believes that over the next few years, more and more organizations will
be in need of cost-effective solutions for the year 2000 problem. As a result,
the Company anticipates that demand for solution tools for the year 2000 problem
will grow significantly. The Company also believes that, due to lack of internal
resources, many businesses will seek to outsource the year 2000 conversion
process to outside service providers. The year 2000 problem presents a
significant marketing opportunity for the Company. The Company provides year
2000 conversion services for IBM midrange systems that combines the Company's
software tools with well defined procedures. The Company also provides a range
of year 2000 software tools which help organizations that have adequate internal
resources to address their year 2000 issues by utilizing automated corrections
and testing.

Platform-Migration Software

IBM's midrange computing platforms, the System/36 and AS/400, have served
as popular computing solutions for business applications since IBM's
introduction of these two systems in 1983 and 1988, respectively. While IBM
discontinued producing the System/36 in 1988, industry publications estimate
approximately 90,000 System/36 systems remained in use worldwide at the end of
1997. Industry publications also estimate that over 450,000 AS/400 systems were
in use worldwide at the end of 1997. The installed base of AS/400 systems is
estimated to increase by 30,000 to 50,000 systems per year for at least the next
few years, while the installed base of System/36 users is declining.

In adopting IBM's midrange computing platforms, businesses, and the
software vendors that support them, have invested substantial resources
developing software applications that provide a wide variety of manufacturing,
accounting and other information-management functions. According to industry
sources, over 25,000 software applications have been developed for use on the
AS/400 system. Development of software applications intended for use on IBM's
midrange computing platforms continues, assisted by more than 8,000 ISVs that
IBM estimates develop and market software applications for the AS/400 platform.

IBM midrange system computing platform users and developers have
historically been constrained by the nonportable and proprietary nature of IBM's
operating systems. Software applications written for the System/36 and AS/400
platforms would not run on other computing platforms, including those using open
operating systems such as UNIX, or other portable operating systems such as
Windows NT. These other computing platforms often offer users significant
advantages, including access to a wider range of software and hardware vendors,
as well as increased system capacity, interoperability and scalability.

Since the late 1980s, vendors of hardware and, to a lesser extent, software
have experienced recognizable price reductions of their products due to
increased competition and the availability of alternative operating systems. The
Company believes that decreasing prices and increasing functionality in
information technology products have also led to increased market acceptance of
open systems and customer demand for software applications based on such
systems.

Changing computing platforms from proprietary to open or portable systems
often results in

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significant disruption of business operations as users are retrained and errors
in the new software are discovered and corrected. Even more critical to many
businesses is the potential loss of data contained in existing databases that
may result from a change to new software applications. ISVs must adapt to
customer demands associated with increased popularity of new computing
platforms. ISVs that have developed successful AS/400 software applications are
faced with the challenge of migrating their products to new platforms to meet
customer demands while maintaining their existing customer base for software
applications running on the AS/400 platform. Additionally, the users that have
legacy systems which are highly customized may not be able to acquire a new
packaged product that meets their business needs. For those reasons both ISVs
and users need the ability to migrate those legacy applications to newer
computing platforms.

Approaches to migrating System/36 and AS/400 systems may be summarized
as follows:

Refacing Refacing involves replacing the "green-screen"
interface with a graphical user interface. Because
refacing affects only the end-user interface, the
source code must still be operating on the original
computing platform, thereby defeating the goal of
many users to upgrade system performance,
interoperability and scalability.

Re-engineering Re-engineering requires rewriting existing software
applications to enable such software to operate on a
new computing platform. Since this entails completely
rewriting software applications to meet customer
requirements, this process often results in increased
cost, risk of failure, disruption and delay.

Packaged Solutions Migrating to a new computing platform can
sometimes be accomplished by installing a software
package that has been independently developed to
run on open or portable platforms. While a
substantial number of packaged software
applications are available, businesses
implementing this approach will often have to
abandon their investment in existing databases and
software and may incur substantial retraining
costs. Additionally, substantial modifications to
packaged software may be necessary to meet
specialized customer needs. These modifications
often result in increased cost, disruption and
delay.

Rehosting Rehosting involves migration of software applications
to a new computing platform with minimal change to
the source code or user interface. Rehosting is
achieved by rebuilding software applications to run
efficiently on the new computing platform. This
solution often enables businesses to enjoy the
continued use of their existing programs and
databases, reduce retraining costs and obtain the
advantages of a new computing platform. The Company
offers a rehosting solution through its UNIBOL
product line.

Transaction-processing System

The market for transaction-processing systems has grown noticeably over the
last several years as electronic-based transaction settlement has begun to
replace paper-based settlement. The market for check verification services has
also demonstrated increased growth over that period.

The transaction-processing market is dominated by a few large
transaction-processing and check verification organizations, the five largest of
which, according to industry publications, accounted for almost 50% of the total
United States market for electronic transaction-processing.

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The Company designs, develops and markets software and hardware systems to
facilitate the processing of electronic payment transactions. Functions
supported by the Company's transaction-processing systems include credit, debit
and purchase-card processing, check authorization and guarantee, signature
capture, communication and retrieval and address verification. To address the
lack of interoperability that now exists among many vendors' hardware and
software products, the Company's transaction-processing systems are designed to
provide transaction processors and merchants with a high degree of hardware
independence by supporting a variety of hardware platforms, including personal
computers, certain point-of-sale terminals and other peripheral devices, while
also providing a high degree of processor independence by supporting most major
transaction and check processing organizations.

Products and Services

Computer Equipment

The Company began providing computer equipment for the
transaction-processing industry with the acquisition of Novatek. Novatek
provides a wide range of new and remanufactured equipment to its customers as
well as providing additional value added services. In connection with the
acquisition of CEM, the Company became a reseller of computer equipment to the
educational marketplace in Northern Ireland. The Company also provides computer
equipment to the corporate market, which is generally supplied as an adjunct to
its software and services. Sales of computer equipment can vary from quarter to
quarter based on customer needs, seasonality, and political influences impacting
the purchases of educational computer equipment.

Novatek is a distributor of point-of-sale equipment in the United States.
In addition, Novatek repairs and remanufactures point-of-sale equipment for
resale. The Company provides a wide variety of computer equipment to the
educational and corporate marketplace, consisting primarily of personal
computers. However, the Company also supplies other computer equipment such as
servers and peripheral devices.

Professional Services and Vertical Market Applications

The Company provides a wide variety of vertical market applications and
professional services including proprietary and third party software products,
support services, installation and integration of software and hardware systems
and outsourcing of information technology services. The Company's vertical
application software products consist of accounting software, process management
products for the manufacturing industry, a human resource time and attendance
product, as well as other third party software products. Support services
consist of system upkeep including hardware and software support and
maintenance, technical support and training. Installation and integration
services include system consulting and design, custom software development,
system installation and testing, as well as a broad range of systems
configuration and integration services for computer networks. The Company also
provides information technology services to businesses on an outsource basis,
thereby offering its customers an opportunity to reduce information technology
overhead while continuing to respond to technological change. Outsourcing
services include disaster recovery, facilities management and related
information technology support services.

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Year 2000 Conversion Tools and Services

The Company offers year 2000 solutions through a variety of tools. These
tools include the TALC 2000, INTO 2000, and KDP Year 2000 tool sets. The Company
has obtained distribution rights to the TALC 2000 millenium validation and
testing product for the IBM AS/400, mainframe and open systems products.
Marketing rights also have been obtained for the KDP 36/2000 tool set.
Additionally, the Company has gained distribution and marketing rights for the
INTO 2000 millenium solution into most of Europe.

Many organizations lack the internal resources to adequately address the
year 2000 problem. The Company believes that, due to lack of internal resources,
many businesses will seek to outsource the year 2000 conversion process to
outside service providers. Therefore, the Company provides year 2000 conversion
services for IBM midrange systems that combines the Company's software tools
with well-defined procedures and manpower. The Company's year 2000 conversion
services involves six phases (i) Inventory and Estimate (ii) Impact Analysis
(iii) Build and Unit Test (iv) Application Test (v) Implementation; and (vi)
Post Implementation Support.

The Company's year 2000 conversion services can be distinguished from the
so-called "mass change" approach which involves the automatic expansion of all
two-digit date fields in all applications to four-digit date fields. The
Company's conversion services, on the other hand, involve analysis of the impact
of the year 2000 on each application and a determination of the most appropriate
solution for each application. Under this methodology, the Company's tools are
utilized to help determine the technical feasibility of implementing program
logic changes to particular applications that enable the applications to become
year 2000 compliant without expanding date fields. The Company's tools are then
utilized to assist in implementing date field expansion where appropriate and
program logic changes where appropriate. The Company's conversion approach
typically involves more time and effort in the planning phase of the process,
while the mass change approach typically involves considerably more time and
effort in the correction and testing phases. Since the source correction and
testing phases tend to be much larger and more labor intensive than the planning
phase, the mass change approach can result in significantly higher costs to the
customer.

Platform-Migration Software

The Company designs, develops and markets platform-migration software under
its UNIBOL brand.

UNIBOL36. The UNIBOL36 system rehosts software applications written in RPG
or COBOL, and related data, from IBM's System/36 to UNIX or Windows NT systems.

UNIBOL400. The UNIBOL400 system rehosts software applications written in
RPG or COBOL, and related data, from IBM's AS/400 to UNIX systems. The Company
is currently developing an AS/400-to-Windows NT migration solution.

Advantages of the UNIBOL rehosting solution include:

Versatility The UNIBOL36 system enables the migration to open
systems of applications software written in either
RPG or COBOL languages. The Company currently offers
the UNIBOL36 system on most major UNIX or Windows NT
platforms, including IBM RS/6000, HP9000, Siemens
Nixdorf RM Series, DEC Alpha, Sun SPARCstation, Data
General Aviion and Intel/SCO UNIX.

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The UNIBOL400 system currently supports applications
software written in RPG or COBOL. The UNIBOL400
system is currently available on the IBM RS/6000,
HP9000, Siemens Nixdorf RM Series, Sun Ultra Sparc
and the Data General Aviion UNIX hardware platforms.
The Company expects to release a version of UNIBOL400
that supports Windows NT late in fiscal year 1998 or
early fiscal year 1999.

User Interface The UNIBOL systems preserve the "look and feel" of
the legacy system's user interface, thereby saving
businesses that are migrating to a new computing
platform substantial retraining, documentation and
technical support costs. By enabling the use of a
single set of end-user documentation, this feature
allows for efficient technical support of software
applications running on multiple computing
platforms.

Developer Interface The UNIBOL systems offer software developers many
System/36- and AS/400-style development tools, as
well as access to native UNIX development
facilities. This feature facilitates the
transition from a System/36 or AS/400 development
environment to a UNIBOL environment on new
computing platforms and allows further development
of migrated applications software.

Native Environment The UNIBOL36 and UNIBOL400 systems are native
System/36 and AS/400 application development and
execution environments for open systems,
essentially replacing the functionality of the
proprietary operating system under which the
applications software was written. The Company
believes that, as a native open-systems
environment, the UNIBOL environment generally
enables software applications to operate at least
as efficiently as under the original proprietary
operating system.

Transaction-processing Systems

The Company believes its Universal Payment Software to be the most critical
component of its transaction-processing systems. The Universal Payment Software
facilitates transaction-processing at merchant locations and operates on a
variety of hardware platforms, including personal computers, the Company's
Universal Payment Adapter Master Controller and certain electronic cash
registers (ECRs). The Universal Payment Software facilitates a variety of
functions, including credit, debit and purchase-card processing, check
authorization and guarantee, signature capture, communication and retrieval and
address verification.

The Company also designs, develops and markets a variety of ancillary
hardware, software and related systems that comprise certain of its
transaction-processing systems. The Company's Universal

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Terminal Software acts as the application environment for a variety of
point-of-sale peripherals, while the Universal Payment Host resides on a
personal computer located at the payment transaction processor and collects data
for authorization and settlement processing on the host computer as well as
performs signature capture and retrieval functions. The Company's Universal
Payment Adapter Master Controller and Universal LAN Adapter products provide the
hardware platforms on which the Universal Payment Software operates and support
connectivity with up to 63 peripheral devices, including several types of
point-of-sale terminals, ECRs, printers and other devices, as well as entire
local area networks. The Company's Universal BackRoom Software for Windows
allows the gathering of sales and inventory data, generated from various
point-of -sale registers at multiple stores, at a single location. This
information can be used to generate a variety of reports that can be transmitted
to a central location, such as a corporate office. The Company's Universal
Register Software is a touch screen point-of-sale system, initially targeted at
fast food outlets. This system can also support credit and debit cards, as well
as frequent shopper programs.

The Company is developing enhancements and add-ons to its
transaction-processing systems to provide data collection for time and
attendance reporting, inventory ordering, coupon processing, electronic benefits
processing and remote bill paying.

Product Development and Enhancement

The computer industry is characterized by rapid technological change in
computer hardware, operating systems and software. To keep pace with this change
the Company dedicates considerable resources in the development of new product
development and product enhancement. The majority of the Company's research and
development for platform migration software and year 2000 conversion tools is
performed in the United Kingdom while research and development for its
transaction-processing systems is performed in the United States.

The Company intends to continue to recruit and hire experienced software
developers and to consider the acquisition of complementary software businesses
and technologies. In addition, the Company will continue to actively collaborate
with and support ISV's who offer products that enhance and complement the
software products the Company offers.

From time to time, the Company has delayed or briefly suspended product
shipments to make programming corrections. These corrections, which are not
unusual in the software industry, have generally been made to fix errors or
"bugs" in the software. Additionally, there can be no assurance that the
Company's development efforts will result in the timely introduction of new
products or that such new products will be commercially successful. Failure to
successfully develop new products, delays in the introduction of these products,
or lower-than-anticipated demand for these products could have a material and
adverse effect on the Company's business.

See Note 1 to the Consolidated Financial Statements for further discussion
on research and development costs and capitalized software development costs.

Marketing and Distribution

Professional Services, Vertical Market Applications, and Computer Equipment

As of February 28, 1998, the Company marketed and sold computer equipment,
vertical market application and professional services through 32 direct sales
and marketing personnel. Specific marketing programs vary by target customer.
The Company believes that its direct sales approach, including having Company
project managers serve as client-relationship managers, lead to better account
penetration and

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management, better communications and long-term relationships with its clients
and greater opportunities for follow-on sales of products and services to its
existing client base. To date, the Company has focused its sales and marketing
efforts for computer equipment and professional services primarily on businesses
in Northern Ireland and vertical market applications and the related services to
businesses in the United Kingdom and the rest of Europe.

Year 2000 Conversion Services

As of February 28, 1998, the Company marketed and sold its year 2000
conversion tools and services, through 10 direct sales and marketing personnel.
The Company markets its year 2000 solutions through telemarketing, direct mail,
public relations, advertising programs, seminars, audio conferences, trade
shows, newsletters and the internet. The Company plans to initially market its
conversion solutions to its existing installed base of over 3,500 UNIBOL36
customers and to the estimated 90,000 remaining users of the System/36 and
450,000 users of the AS/400. There are further opportunities for the Company
marketing to businesses that have previously migrated to the AS/36 or to UNIX
through means other than the Company's UNIBOL36 product. Additionally, the
Company has entered into joint marketing relationships with major UNIX hardware
system vendors. The Company believes that its multi-channel distribution
strategy enables it to effectively market its year 2000 solutions to a wide
range of potential customers.

Through a telemarketing campaign, the Company will be marketing its testing
solutions associated with the Company's distribution rights for the TALC2000
millenium validation and testing product and the KDP 36/2000 tool set beginning
in fiscal year 1999.

Platform-Migration Software

As of February 28, 1998, the Company marketed and sold its
platform-migration software through 14 direct sales and marketing personnel.
UNIBOL's direct sales and marketing force operates from the Company's offices in
Belfast, Northern Ireland, Atlanta, Georgia and Dallas, Texas. The Company
markets its UNIBOL products and services through telemarketing, direct mail,
public relations, advertising programs, seminars, audio conferences, trade
shows, newsletters and its internet homepage. In addition, the Company markets
its platform-migration software through ISVs and independent distributors in
over 30 countries. The Company has entered into strategic relationships with
major UNIX hardware system vendors, including Hewlett-Packard, Siemens Nixdorf
and Data General, as well as certain database providers such as Oracle. The
Company believes that its multi-channel distribution strategy enables it to
effectively market its platform-migration software to a wide range of potential
customers.

According to industry sources, there are more than 8,000 ISVs currently
supporting applications software for the AS/400 platform. The Company believes
that, by using the UNIBOL400 system, ISVs will be able to offer their software
applications on open systems and other portable platforms. The Company believes
it can accelerate market acceptance of its UNIBOL400 product by leveraging its
reputation in the System/36 market and focusing on the ISV distribution channel.
The Company also believes that, by using the ISV distribution channel, it will
derive licensing revenue from both the initial sale to an ISV of the UNIBOL400
developer kit and from subsequent license fees payable when an ISV licenses its
migrated applications to end users.

Transaction-processing Systems

As of February 28, 1998, the Company marketed and sold its
transaction-processing systems through 7 direct sales and marketing personnel.
Because the target market for the Company's transaction-

12
<PAGE>

processing systems consists of a small number of large transaction processors
and point-of-sale hardware and software vendors, the Company's direct sales
staff markets its transaction-processing systems largely through system
demonstrations, trade shows and collateral sales materials.

Significant Customers

No one of the Company's customers accounted for more than 10% of the
Company's total revenues in any of its three most recent fiscal years.

Competition

Computer Equipment

The Company is a provider of computer equipment to the educational sector
in Northern Ireland. However, due to decreasing prices and widespread
availability of the products, the Company faces increasing competition from
other hardware providers, some of which have greater financial resources and
buying capabilities than that of the Company. Due to this increase in
competition, the Company has incurred decreasing margins on computer hardware,
and must continue to price competitively to maintain its position in the
educational market. The Company believes that, due to its experience in the
educational market in Northern Ireland and its ability to price competitively,
it compares favorably to its competitors in providing computer equipment within
this sector.

The Company faces similar competition in the corporate market for computer
equipment as it does within the educational marketplace. The Company generally
provides hardware to the corporate market as an adjunct to software and
services. The Company faces direct competition from outside computer equipment
providers, since the software or service customer is under no obligation to
purchase the equipment from the Company. However, due to the convenience of
negotiating with one vendor, the Company's competitive pricing with other
hardware providers and the quality software and services the Company provides,
the Company believes it compares favorably with its competitors.

The Company faces direct competition from transaction-processing equipment
manufacturers that sell their equipment through direct channels, as well as
other resellers of transaction-processing equipment in the US market. While some
of the equipment manufacturers may have an advantage in competitive pricing on
new equipment, the Company is able to offer refurbished equipment with similar
functionality and warranties at a discounted price. The Company believes that
because of the ability to provide refurbished equipment at a lower price than
new equipment, as well as providing new equipment, the Company compares
favorably with its competitors.

Professional Services and Vertical Market Applications

The market for the Company's professional services and vertical market
applications is intensely competitive due primarily to low barriers to entry.
The Company believes that the primary competitive factors in this market include
familiarity with local customs and practices, price, technical expertise and
reputation.

The Company believes that it has many direct and indirect competitors, none
of which is dominant in the Company's marketplace. The Company faces indirect
competition from hardware manufacturers that service their own equipment such as
Digital Equipment Company and IBM. The Company also faces direct competition
from various independent information technology service providers in Northern
Ireland. Some of the Company's current and potential competitors have longer
operating histories and financial, sales,

13
<PAGE>

marketing, technical and other competitive resources that are substantially
greater than those of the Company. As a result, the Company's competitors may be
able to adapt more quickly to changes in customer needs or to devote greater
resources to this market than the Company. Such competitors could also attempt
to increase their presence in the Company's markets by forming strategic
alliances with other competitors of the Company, offering new or improved
products and services to the Company's customers or increasing their efforts to
gain and retain market share through competitive pricing. As the markets in
which the Company competes have matured, price competition has intensified and
is likely to continue to intensify. Such price competition could adversely
affect the Company's results of operations. There can be no assurance that the
Company will be able to continue to compete successfully with existing or new
competitors.

The Company believes that it competes by providing quality services at
competitive prices and distinguishing itself from its competition on the basis
of its technical expertise, vendor alliances, direct sales strategy and
customer-service orientation. Based on the level of the Company's recurring
business with many of its customers, the Company believes that it compares
favorably to many of its competitors with respect to the principal competitive
factors set forth above.

Year 2000 Conversion Tools and Services

The market for the Company's year 2000 conversion services is highly
competitive. The Company faces direct competition from other companies that
provide year 2000 conversion services and indirect competition from businesses
who will attempt to resolve their year 2000 problems in-house. There are a
number of larger companies, including computer manufacturers and software
companies, that have greater financial resources than the Company and the
technological ability to develop a year 2000 methodology and application tools
similar to those offered by the Company. These companies present a significant
competitive challenge to the Company. Because the Company is focusing its year
2000 conversion tools and services on customers utilizing software written for
the System/36 and AS/400, many of the Company's competitors do not have the
expertise in the programming languages for these systems or the breadth of
solutions that the Company offers. The Company believes that it has advantages
over these competitors due to the level of knowledge it has obtained over the
past 15 years developing migration solutions targeted for applications
originally written for these systems. The Company competes on the basis of its
service, price, and technological advances and believes that it competes
favorably in all of these categories.

Platform-Migration Software

The market for the Company's platform-migration software is highly
competitive. The Company faces direct competition from other developers of
rehosting solutions and companies that provide other migration solutions such as
refacing, re-engineering and packaged software applications. There are a number
of larger companies, including computer manufacturers and software companies,
that have greater financial resources than the Company and the technological
ability to develop software products similar to those offered by the Company.
These companies present a significant competitive challenge to the Company's
platform migration business. Many of the Company's competitors do not offer the
breadth of solutions that the Company offers. Additionally, many of the
competitors can only migrate object code (instead of migrating source code as in
the UNIBOL solution) which will not allow the end users to modify the code once
it has been migrated to the new platform. The Company believes that its UNIBOL
solutions provide end users with a wider variety of migration options while
maintaining the source code and thereby conserving the ability of end users to
update, enhance and modify the software application. The Company competes on the
basis of its service, price, system functionality and performance and
technological advances and believes that it competes favorably in all of these
categories.

14
<PAGE>

Transaction-processing Systems

The market for the Company's transaction-processing systems is highly
competitive. The Company believes that the principal competitive factors in the
business include the ability to provide comprehensive, integrated
transaction-processing systems, product performance, time to market for new
product introductions, adherence to industry standards, price, marketing and
distribution resources. The Company believes that it competes favorably in all
of these categories. There are a number of larger companies, including
point-of-sale terminal manufacturers and software companies, that have greater
financial resources than the Company and the technological ability to develop
software products similar to those offered by the Company. These companies
present a significant competitive challenge to the Company's
transaction-processing business.

Segment Information

The Company operates in one business segment, the providing of computer
hardware and software systems and services. The vast majority of the Company's
revenue is generated from products and services provided in the United Kingdom
and the United States, although the Company does have customers in over 30
countries. The following table illustrates the relative percentages of total
revenue represented by the Company's products and services in the United Kingdom
and the United States.

<TABLE>
<CAPTION>
Percent of Revenue, Fiscal Year Ended
February 29, 1996 February 28, 1997 February 28, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
United Kingdom 68.7% 66.1% 74.9%
United States 31.3% 33.9% 25.1%
----- ----- -----
100.0% 100.0% 100.0%

</TABLE>

Environmental Standards

The Company believes its facilities and operations are within standards
fully acceptable to the Environmental Protection Agency and that all facilities
and procedures are in accordance with environmental rules and regulations, and
international, federal, state and local laws.

Seasonality

The Company believes there is no inherent seasonal pattern to its business,
with the exception of transaction-processing equipment, which is attributable to
retail establishments purchasing new systems during the summer months (the
Company's first and second quarters) in order to implement those systems before
the holiday buying season begins. Sales volume fluctuates quarter-to-quarter due
to relatively large and nonrecurring individual sales and customer-established
shipping dates. The Company has worked diligently to smooth quarter-to-quarter
revenues, however, there can be no assurance that the Company will be successful
in achieving this goal.

Backlog

Due to the nature of the Company's business, the Company maintains minimal
backlog. The Company has annual support contracts with a backlog of $2.1 and
$3.6 million as of February 28, 1997 and 1998, respectively. As of February 28,
1998, the Company also has a backlog of service contracts, primarily related to
year 2000 projects for its customers of approximately $1.6 million. It is
anticipated that most of the fiscal year 1998 backlog will be realized as
revenue in fiscal year 1999.

15
<PAGE>

Employees

As of February 28, 1998, the Company employed approximately 450 full time
equivalents in the United Kingdom and the United States. The Company believes
that its relationship with its employees is good.

ITEM 2. PROPERTIES

The Company leases office space in Marietta, Georgia, which totals
approximately 10,745 square feet at an aggregate annual cost of approximately
$225,000. The lease expires in September 2000 and contains a renewal option for
one additional three-year term. The Company also owns office and warehouse space
in Murphy, North Carolina and Coral Springs, Florida. The North Carolina
facility is under a 8.83% fixed rate mortgage loan with an outstanding balance
as of February 28, 1998 of $286,000. Annual payments on this loan are
approximately $36,000. The Florida facility is under a 8.86% fixed rate mortgage
loan with an outstanding balance as of February 28, 1998 of $300,000. Annual
payments on this loan are approximately $36,000.

The Company leases three facilities in Belfast Northern Ireland totaling
approximately 48,500 square feet of office and warehouse space at an annual cost
of approximately $460,000 under separate leases expiring from 1999 through 2003.
The Company also owns a facility in Belfast, Northern Ireland under a 10-year
8.25% variable rate mortgage loan with an outstanding principal balance as of
February 28, 1998 of approximately $556,000. Annual payments on this loan are
approximately $70,000.

The Company believes that its current facilities are either adequate to
meet its needs for the foreseeable future or that adequate space is readily
available in all geographical areas in which the Company does business.

ITEM 3. LEGAL PROCEEDINGS

In connection with its acquisition in 1993 of ICGL, the Company incurred a
claim by the seller related to pension overfunding. Based upon the advise of its
United Kingdom solicitor, the Company believes that it has adequate defenses to
this claim such that the expected outcome would not be material to the Company's
financial condition or results of operations. Due to uncertainties of the legal
process, however, no assurance can be made that the outcome of this case will be
in accordance with the Company's expectations.

The Company is not presently a party to any other material litigation and,
to management's knowledge, no material litigation is threatened against the
Company.

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

No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year ended February 28, 1998.

16
<PAGE>

PART II

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

The Company's Common Stock trades on the Nasdaq National Market under the
symbol UCMP. The following table sets forth, for the periods indicated, the high
and low sale prices of the Common Stock as reported by the Nasdaq National
Market. Such quotations do not include retail mark-ups, mark-downs, or other
fees or commissions.

<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Fiscal Year 1998
Fourth Quarter ended February 28, 1998......................................................... $9.88 $6.13
Third Quarter ended November 30, 1997.......................................................... 11.50 7.63
Second Quarter ended August 31, 1997........................................................... 9.63 6.63
First Quarter ended May 31, 1997............................................................... 8.56 5.38

Fiscal Year 1997
Fourth Quarter ended February 28, 1997......................................................... $10.25 $3.50
Third Quarter ended November 30, 1996.......................................................... 6.31 4.25
Second Quarter ended August 31, 1996........................................................... 7.63 5.00
First Quarter ended May 31, 1996............................................................... 8.63 6.25

</TABLE>

On May 26, 1998, the closing sale price of the Common Stock on the Nasdaq
National Market was $4.875 per share. As of May 26, 1998, there were
approximately 550 owners of record of the Common Stock. Because many of such
shares may be held by brokers and other institutions on behalf of stockholders,
the Company is unable to estimate the total number of beneficial owners
represented by these record holders.

Dividend Policy

The Company has never paid cash dividends on the Common Stock, and
presently intends to retain any future earnings to finance its operations and
expand its business. It therefore does not anticipate paying cash dividends for
the foreseeable future.

17
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below with respect
to the Company's statement of operations data for the fiscal years ended
February 29, 1996, February 28, 1997 and February 28, 1998 and with respect to
the Company's balance sheet data at February 29, 1997 and February 28, 1998 are
derived from the audited consolidated financial statements of the Company
included elsewhere herein and are qualified by reference to such consolidated
financial statements and notes thereto. The selected consolidated financial data
with respect to the statement of operations data for February 28, 1994 and 1995
and the balance sheet data at February 28, 1994, 1995 and 1996 are derived from
unaudited consolidated financial statements not included herein. The selected
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes thereto included elsewhere
herein.

Fiscal Year Ended
----------------------------------------------------------------------------------
Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28,
1994 1995 1996 1997 1998
Statement of Operations Data: (in thousands except per share data)

<S> <C> <C> <C> <C> <C>
Total revenue.................. $ 12,718 $ 21,684 $ 27,161 $ 31,709 $ 52,106
Gross profit................... 7,020 12,484 15,474 16,095 24,598
Operating income............... 1,598 2,234 2,543 2,060 270
Income (loss) before taxes..... 1,460 2,140 2,269 1,824 (341)
Net income (loss).............. $ 1,205 $ 1,642 $ 2,065 $ 1,511 (783)
Basic earnings per share....... $ 0.23 $ 0.30 $ 0.36 $ 0.23 $ (0.10)
Diluted earnings per share..... $ 0.23 $ 0.29 $ 0.34 $ 0.22 $ (0.10)
Weighted average shares........ 5,132 5,499 5,672 6,465 7,727
Weighted average shares assuming
dilution....................... 5,250 5,690 6,064 6,865 7,727

Balance Sheet Data:
Total assets................... $ 7,537 $ 10,419 $ 17,200 $ 31,506 $ 42,505
Working capital (deficit)...... 693 (481) 1,217 1,725 663
Debt, including current portion 1,971 1,663 4,635 9,066 13,428
Total shareholders' equity..... 1,893 3,449 6,220 14,465 16,293

</TABLE>

The statement of operations data and balance sheet data presented above
have been restated to give retroactive effect to the merger with Smoky Mountain
Technologies on April 16, 1996, and the merger with Novatek on November 29,
1997, both of which have been accounted for as a pooling-of-interests
transactions.

During fiscal years 1994 and 1995, the Company experienced lower than
normal effective tax rates of 17.5% and 23.3%, respectively, as a result of
reductions in the valuation allowance on deferred tax assets. In fiscal year
1996, the Company recognized a credit to tax expense of $0.3 million related to
the recognition of the remaining deferred tax asset in the United States when
the Company determined that it was more likely than not that the deferred tax
asset would be realized in future periods, resulting in a lower than normal tax
rate of 9.0% for that year. During fiscal year 1997, the Company recognized an
income tax credit of $0.3 million related to recognition of previously
unrecognized deferred tax assets in the United Kingdom when it was determined
that it was more likely than not that the deferred tax assets would be realized
in future tax periods, resulting in a lower than normal tax rate of 17.0% for
that year. During fiscal year 1998, the Company recorded a valuation allowance
of $0.5 million for the deferred tax asset in the US, resulting in recording a
tax expense of $0.4 million for the fiscal year, despite having a loss before
provision for income taxes.

During fiscal year 1998, the Company recorded non-recurring expenses of
$1.1 million. $0.7 million of this amount related to compensation expense
recorded for the value of certain compensatory stock options at Novatek for
which the applicable compensation expense could only be determined upon the sale
of Novatek. Therefore, the Company recorded a one-time non-cash compensation
expense upon consummation of the merger with Novatek. Additionally, the Company
recorded $0.3 million in expenses relating to the pooling-of-interests
transaction with Novatek. The Company also recorded $0.1 million of expenses
related to other potential acquisitions that the Company is no longer pursuing.

18
<PAGE>

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

The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. Except for the historical
information contained herein, Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that are
subject to risks and uncertainties, including economic, competitive and
technological factors affecting the Company's operations, markets, products,
services and prices, as well as other factors. These and other factors may cause
actual results to differ materially from those anticipated.

Overview

UniComp provides computer equipment primarily to businesses in the United
Kingdom and North America, vertical market applications and professional
services to businesses located primarily in the United Kingdom and
platform-migration software and transaction-processing systems to users
worldwide. In fiscal year 1998, the Company generated $52.1 million in total
revenue, of which $25.8 million was derived from sales of computer equipment and
$17.0 million was derived from information technology services. The remaining
$9.3 million in revenue was derived from license and maintenance fees for the
Company's platform-migration software, transaction-processing systems and other
vertical market software products. The Company expects revenue from software
licensing to increase as a percentage of total revenue in the future as these
relatively new software products penetrate their target markets and gain market
acceptance.

Approximately 69%, 66%, and 75% of the Company's revenue was derived from
its international operations in fiscal years 1996, 1997, and 1998, respectively.
Denomination of the Company's revenue and expenses are generally in
corresponding currencies. As a result, to date, the Company has not hedged
against foreign currency exchange rate risks.

Cost of sales for computer equipment consists of the actual costs of the
products sold. Cost of sales for information technology services includes
supplies, parts, subcontractors and other direct costs of delivering the
services, except for salary costs, which are included in selling, general and
administrative costs. Cost of sales for software licensing includes amortization
of capitalized software development costs, as well as any royalties payable on
embedded technologies and any other direct costs of providing its software
products and support. The Company amortizes capitalized software development
costs over the estimated life of the product, generally three to four years.

Selling, general and administrative expenses include salaries and related
costs for all employees, travel, costs associated with internal equipment, sales
commissions, premises and marketing costs, general office and administrative
costs, and the amortization of goodwill. Development grants received from the
government of Northern Ireland have been recorded as a reduction in selling,
general and administrative expenses, or a reduction in capitalized development
costs, and are anticipated to remain relatively constant for the foreseeable
future. Although the Company expects the dollar amount of selling, general and
administrative expenses to increase as the Company grows, it anticipates that
these expenses will remain constant or decrease as a percentage of total
revenue.

In February 1997, the Company completed its acquisition of CEM Computers
Limited ("CEM") a provider of hardware and software support and systems
integration primarily in Northern Ireland and is a reseller of computer systems
to the education and corporate marketplace. The acquisition has been accounted
for by the purchase method. As such, CEM's results of operations have been
included since the date of acquisition.

19
<PAGE>

On November 30, 1997, the Company completed its acquisition of Novatek
Corporation ("Novatek"). Novatek distributes, maintains, repairs, remanufactures
and modifies a wide variety of point-of-sale and transaction-processing
equipment and supplies. The Company issued 788,708 shares of its common stock
for all outstanding common stock of Novatek. This transaction has been accounted
for as a pooling-of-interest; therefore, the Company's historical financial
statements have been restated to reflect this merger.

Prior to the merger, Novatek prepared its financial statements based on a
December 31 year end. As a result, the restated historical financial statements
include the Company's historical results of operations for the years ended
February 29, 1996 and February 28, 1997 combined with Novatek's historical
results of operations for the years ended December 31, 1995 and 1996,
respectively.

Results of Operations

The following table summarizes the Company's results of operations in
dollars and as a percentage of total revenue for the fiscal years ended February
29, 1996, February 28, 1997 and February 28, 1998.

Fiscal Years Ended
----------------------------------------------------------------
2/29/96 2/29/97 2/28/98
------------------ ------------------- -----------------
(in thousands, except per share and percentage data)
<S> <C> <C> <C> <C> <C> <C>
Total Revenue.................... $ 27,161 100.0% $ 31,709 100.0% $ 52,106 100.0%
Cost of sales.................... 11,687 43.0 15,614 49.2 27,508 52.8
------- ------- ------ ------- ------- -------

Gross profit..................... 15,474 57.0 16,095 50.8 24,598 47.2
Operating expenses............... 12,931 47.6 14,035 44.3 24,328 46.7
------- ------- ------ ------- ------- -------

Operating income................. 2,543 9.4 2,060 6.5 270 0.5

Other expenses (income).......... 274 1.0 236 0.7 611 1.2
------- ------- ------ ------- ------- -------
Income before taxes.............. 2,269 8.4 1,824 5.8 (341) (0.7)

Provision for taxes.............. 204 0.8 313 1.0 442 0.8
------- ------- ------ ------- ------- -------
Net income....................... $ 2,065 7.6% $ 1,511 4.8% $ (783) (1.5)%
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------

</TABLE>

Fiscal Year Ended February 28, 1998 Compared to Fiscal Year Ended February
28, 1997

Revenue. Revenue for fiscal year 1998 increased to $52.1 million compared
to $31.7 million for fiscal year 1997, an increase of $20.4 million, or 64.4%.
The vast majority of these increases have been from acquisitions which have
occurred over the past year as explained in more detail under the captions
below.

Equipment Revenue

The following table summarizes the revenue generated from sales of computer
equipment for the year ended February 28, 1998 and the comparable periods from
the prior fiscal year.
<TABLE>
<CAPTION>

12 Months Ended Increase/(Decrease)
---------------------- --------------------
2/28/97 2/28/98 $ %
------- ------- ------- -------
(in thousands, except percentage data)

<S> <C> <C> <C> <C>
Transaction-processing Equipment. $ 6,315 $ 9,325 $ 3,010 47.7%
Educational Equipment............ 1,200 8,135 6,935 577.9
Other Equipment.................. 5,023 8,310 3,287 65.4
------ ------ -------
Total Equipment Revenue.......... $ 12,538 $ 25,770 $ 13,232 105.5%
------ ------ ------
------ ------ ------
</TABLE>

20
<PAGE>

Revenue from the sale of transaction-processing equipment, which is
generated by the recently acquired Novatek, increased by 47.7% for the fiscal
year 1998 as compared to the prior fiscal year. Revenue increases are due to a
trend of transaction-processing equipment manufacturers selling more through
resellers and less direct sales. Novatek has been able to capitalize on this
trend by providing a wide range of new and refurbished equipment to its
customers and providing additional value added services. While the Company
believes that this trend will continue for the forseeable future, there can be
no assurance of such.

In connection with the acquisition of CEM, the Company became a reseller
of computer equipment to the educational marketplace in Northern Ireland which
accounts for all of the revenue generated from the sale of educational
computer equipment. The increase in educational equipment is attributable to
only one month of revenues being included for the year ended February 28, 1997
due to the timing of the acquisition.

The increase in other equipment, which is generally supplied as an
adjunct to software and services customers, is principally due to the
acquisition of CEM near the end of fiscal year 1997, with only one month of
revenues being included during the prior fiscal year.

Services Revenue

Revenue from information technology services increased to $17.1 million for
the fiscal year 1998 from $11.3 million for fiscal year 1997. This increase of
$5.8 million was in part due to $3.6 million of service revenue generated by CEM
for fiscal year 1998, as compared to $0.3 million for the one month included in
the prior fiscal year. Additionally, during fiscal year 1998, the Company
generated $2.8 million of revenue from year 2000 conversion services. The
majority of the revenue generated from year 2000 conversion services is
attributable to a long-term contract with DHL Worldwide Express which is
expected to generate a total of $4.0 million in revenue. As a result of a large
percentage of the year 2000 conversion services revenue being generated by one
customer, there can be no assurance that the Company will be able to maintain
the current level of revenue in the future once this contract is completed
unless new contracts are obtained to replace this revenue stream.

Software Revenue

The following table summarizes the revenue from software licensing and
support for the year ended February 28, 1998 and the comparable period from the
prior fiscal year.

Twelve months ended Increase/(Decrease)
-------------------- -------------------
2/28/97 2/28/98 $ %
------- ------- ------- -----
(in thousands, except percentage data)
<S> <C> <C> <C> <C>
Initial License Fees:
Platform Migration......... $ 2,019 $ 1,872 $ (147) (7.3)%
Transaction-processing..... 2,078 2,077 (1) (0.0)
Other...................... 776 897 121 15.6
-------- ------- -------
Total Initial License Fees....... $ 4,873 $ 4,846 $ (27) (0.6)%
-------- ------- -------

Software Support Fees:
Platform Migration......... $ 1,316 $ 1,336 $ 20 1.5%
Transaction-processing..... - 74 74 100.0
Other...................... 1,699 3,029 1,330 78.3
-------- ------- -------
Total Software Support Fees...... $ 3,015 $ 4,439 $ 1,424 47.2%
------- ------- -------

Total Software Revenue........... $ 7,888 $ 9,285 $ 1,397 17.7%
------- ------- ------
</TABLE>

21
<PAGE>

Revenue generated from platform migration systems was $3.2 million for
fiscal year 1998 as compared to $3.3 million for the prior year. Platform
migration revenue by major product class is as follows.

Twelve months ended Increase/(Decrease)
-------------------- -------------------
2/28/97 2/28/98 $ %
------- ------- ------- -----
(in thousands, except percentage data)

<S> <C> <C> <C> <C>
UNIBOL36......................... $ 2,119 $ 2,370 $ 251 11.8%
UNIBOL400........................ 1,216 838 (378) (31.1)%
------- ------- ------

Total Platform Migration Revenue. $ 3,335 $ 3,208 $ (127) (3.8)%
------- ------- ------
------- ------- ------
</TABLE>

The UNIBOL36 product is in a declining market as users of the IBM System 36
update their computer systems to more modern technology. The Company has been
able to slow the decline in UNIBOL36 product sales through marketing the product
along with its year 2000 conversion tools and services and with the release of a
version of UNIBOL36 which supports Microsoft NT. Although there is a decline in
this market, revenue for this product is expected to continue for the next few
years, however, there may be fairly volatile revenue fluctuations from quarter
to quarter during this period.

Sales of the UNIBOL400 product began to slow in the second half of the
current fiscal year as end-users are waiting for additional functionality and
enhancements to the product. The Company anticipates completing these
enhancements during the first or second quarters of fiscal year 1999 and does
not anticipate substantial UNIBOL400 revenue to be generated until after that
time.

Revenue generated from transaction-processing systems remained relatively
consistent for the fiscal year ending February 28, 1998 as compared to the prior
fiscal year. Revenue generated from other software sales consist primarily of
vertical market software products such as the Company's Distributex product, as
well as other third party software products. Revenues for these products vary
depending on customer demands and product mix. The large increase in software
support fees is principally as a result of the Company's pricing structure for
many of the vertical market applications having a lower initial license fee
replaced with longer-term annual support fees, coupled with the number of new
customers using these systems.

International Revenue. Revenue from international operations, principally
in Northern Ireland, increased to $39.0 million for the fiscal year ended
February 28, 1998 from $20.9 million for the prior fiscal year, an increase of
$18.1 million, or 87%. This increase is primarily due to the acquisition of CEM
which accounted for approximately $16.0 million in revenue for the fiscal year
ended February 28, 1998 as compared to $1.6 million for the one month included
in the prior fiscal year. The remainder of the increase is primarily due to year
2000 conversion services in the United Kingdom which accounted for $2.6 million
of revenue during the fiscal year ended February 28, 1998. Revenue from domestic
operations increased to $13.1 million for the fiscal year ended February 28,
1998 as compared to $10.8 million for the prior fiscal year, an increase of $2.3
million, or 21.3% primarily due to an increase in transaction-processing
equipment revenue of $3.0 million as described above under "Equipment Revenue,"
offset by a decline in platform migration software sales.

Gross Profit. The following tables summarizes the Company's gross profit
information in dollars and as a percentage of the associated revenues for the
fiscal year ended February 28, 1998 and the comparable period for the prior
fiscal year.

22
<PAGE>

Twelve Months Ended
-----------------------------------------
2/28/97 2/28/98
--------------------- ------------------
(In Thousands, Except Percentage Data)
Gross Profit Gross Profit
--------------------- ------------------
$ % $ %
----------- ----- ---------- -----
<S> <C> <C> <C> <C>
Equipment:
Transaction-processing Equipment $ 1,195 18.9 $ 2,313 24.8
Educational Equipment......... 92 11.5 888 10.9
Other Equipment............... 896 16.5 1,403 16.9
------- -------
Total Equipment.................... $ 2,183 17.4 $ 4,604 17.9
------- -------

Information Technology Services.... $ 9,035 80.1 14,232 83.5
------- ------

Software:
Platform Migration............ $ 1,940 58.2 $ 1,553 48.4
Transaction-processing........ 1,552 74.7 1,443 67.1
Other......................... 1,385 55.9 2,766 70.5
------- ------
Total Software..................... $ 4,877 61.8 $ 5,762 62.1
------- ------

Total Gross Profit................. $16,095 50.8 $ 24,598 47.2
------- ------
------- ------
</TABLE>

Gross profit margins for equipment and services vary depending on customer
demands and product mix. The types of equipment the Company sells are generally
commodity products. As a result, overall profit margins for equipment are
declining. Information technology services gross profit margin, which does not
include salary costs, increased slightly for fiscal year 1998 due primarily to
year 2000 services revenue generated during those periods.

Platform migration profit margins decreased for fiscal year 1998 compared
to the prior fiscal year. These declines are due principally to relatively fixed
amortization expense related to capitalized software development costs for the
UNIBOL400 product, for which revenues have declined since the prior year, as
described earlier. These margins are expected to improve in future periods as
the enhanced versions of the UNIBOL400 product are released, the product begins
to gain market acceptance and licensing revenues increase.

Transaction-processing software gross profit margins declined slightly for
fiscal year 1998 compared to the prior fiscal year. These declines are due
principally to an increase in amortization expense for the current fiscal year
related to capitalized software development costs for newly released
transaction-processing software, for which revenues have remained constant since
the prior year, as described earlier. Gross margins for other software products
increased to 70.5% for fiscal year 1998 compared to 55.9% in the prior fiscal
year. Other software primarily consist of vertical market software products such
as the Company's Distributex product as well as other third party software
products. Gross margins for these products have increased due to the increase in
related annual support fees as more customers are added.

Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses as a percentage of total revenue remained relatively
constant at 44.6% for fiscal year 1998 as compared to 44.3% in the prior fiscal
year. During the fourth quarter of fiscal year 1998, the Company adjusted the
accounts receivable allowance and accrued special charges regarding certain
contingencies totaling $1.6 million, which is included in selling, general, and
administrative expenses. Of the $1.6 million, $1.3 related to an adjustment to
the accounts receivable allowance for the transaction-processing business unit.
This increase in the allowance was related to slow collections on certain
accounts experienced by that business during fiscal year 1998. The remaining
$0.3 million relates to increases in accounts receivable allowances and the
accrual of changes for certain other contingencies related to platform migration
and other business units of the Company.

23
<PAGE>

Acquisition Related Expenses. During fiscal year 1998, the Company recorded
non-recurring acquisition related expenses of $1.1 million. $0.7 million of this
amount related to one-time non-cash compensation expense recorded for the value
of certain compensatory stock options for which the applicable compensation
expense could only be determined upon the sale of Novatek. Additionally, the
Company recorded $0.3 million in expenses relating to the pooling of interests
transaction with Novatek. The Company also recorded $0.1 million of expenses
related to other potential acquisitions which the Company is no longer pursuing.

Other Expenses. Interest, the primary component of other expenses,
increased to $0.6 million for fiscal year 1998 from $0.3 million for fiscal year
1997, an increase of $0.3, million or 100%. The increase in interest expense was
due primarily to borrowings related to the acquisition of CEM and additional
borrowings on the Company's lines of credit to fund operations.

Taxes. During fiscal year 1998, the Company recorded a valuation allowance
of $0.5 million related to certain deferred tax assets that are not anticipated
to be utilized through normal operating results. The effective income tax rate
(income taxes expressed as a percentage of pretax income), excluding the
valuation allowance, was 17.0% for fiscal year 1998, compared to 17.0% for
fiscal year 1997. During the fourth quarter of fiscal 1997, the Company
recognized an income tax credit of $0.3 million related to reduction of the
cumulative deferred tax liability in the United Kingdom. The effective income
tax rate for 1997 excluding this tax credit would have been approximately 35%.

Fiscal Year Ended February 29, 1997 Compared to Fiscal Year Ended February
29, 1996

Revenue. Revenue for fiscal year 1997 increased to $31.7 million compared
to $27.2 million for fiscal year 1996, an increase of $4.5 million, or 16.5%.

Equipment Revenue

The following table summarizes the revenue generated from sales of computer
equipment for the year ended February 28, 1997 and the comparable periods from
the prior fiscal year.

<TABLE>
<CAPTION>
12 Months Ended Increase/(Decrease)
---------------------- -------------------
2/29/96 2/28/97 $ %
------- ------- -------- ------
(in thousands, except percentage data)

<S> <C> <C> <C> <C>
Transaction-processing Equipment. $ 4,870 $ 6,315 $ 1,445 29.7
Educational Equipment............ - 1,200 1,200 100.0
Other Equipment.................. 5,517 5,023 (494) (9.0)
-------- -------- --------

Total Equipment Revenue.......... $ 10,387 $ 12,538 $ 2,151 20.7
-------- -------- --------
-------- -------- --------
</TABLE>

Revenue from the sale of transaction-processing equipment, which is
generated by the recently acquired Novatek, increased by 29.7% for the fiscal
year 1997 as compared to the prior fiscal year. Revenue increases are due to a
trend of transaction-processing equipment manufacturers selling more through
resellers and less direct sales. Novatek has been able to capitalize on this
trend by providing a wide range of new and refurbished equipment to its
customers and providing additional value added services. While the Company
believes that this trend will continue for the forseeable future, there can be
no assurance of such.

24
<PAGE>

sale of educational computer equipment. Revenue from other equipment, which is
generally supplied as an adjunct to software and services customers, decreased
slightly for the comparable periods.

Services Revenue

Revenue from information technology services increased to $11.3 million for
the fiscal year 1997 from $9.6 million for fiscal year 1996, an increase of $1.7
million. This increase was partially attributable to $0.6 million of services
revenue associated with the acquisitions of CEM and Novatek. The remaining
increase was related to improved revenues from the Company's existing
subsidiaries which provide professional services as the Company signs new and
renews existing contracts.

Software Revenue

The following table summarizes the revenue from software, which includes
both initial license fees and software support fees, for the year ended February
28, 1997 and the comparable period from the prior fiscal year.

<TABLE>
<CAPTION>
Twelve months ended Increase/(Decrease)
---------------------- -------------------
2/29/96 2/28/97 $ %
------- ------- ------- ------
(in thousands, except percentage data)

<S> <C> <C> <C> <C>
Platform Migration............... $ 4,880 $ 3,335 $ (1,545) (31.7)
Transaction-processing........... 799 2,078 1,279 160.1
Other............................ 1,517 2,475 958 63.1
------- ------- -------

Total Software................... $ 7,196 $ 7,888 $ 692 9.6
------- ------- -------
------- ------- -------

</TABLE>

Revenue generated from platform migration systems was $3.3 million for
fiscal year 1997 as compared to $4.9 million for the prior year. Platform
migration revenue by major product class is as follows.

Year ended Increase/(Decrease)
-------------------- -------------------
2/29/96 2/28/97 $ %
------- ------- ----- ------
(in thousands, except percentage data)

<S> <C> <C> <C> <C>
UNIBOL36......................... $ 3,280 $ 2,119 $ (1,161) (35.4)
UNIBOL400........................ 1,600 1,216 (384) (24.0)
------- ------- --------

Total Platform Migration Revenue. $ 4,880 $ 3,335 $ (1,545) (31.7)
------- ------- --------
------- ------- --------
</TABLE>

UNIBOL36 revenue declined by $1.2 million during fiscal year 1997 as
compared to fiscal year 1996. This decrease is due to a declining market as
users of the IBM System 36 update their computer systems to more modern
technology. The Company hopes to slow the decline in UNIBOL36 product sales
through marketing the product along with its year 2000 conversion tools and
services and with the release during fiscal year 1997 of a version of UNIBOL36
which supports Microsoft NT.

Revenues for UNIBOL400 decreased to $1.2 million during fiscal year 1997
from $1.6 million in fiscal year 1996. This decrease was due to the recognition
of $1.6 million in revenue during fiscal year 1996 associated with a large sale
of platform migration software to Siemens Nixdorf.

Revenue generated from transaction-processing systems increased to $2.1
million for fiscal year

25
<PAGE>

1997 compared to $0.8 million for fiscal year 1996, an increase of $1.3 million,
or 162.5%. Revenue generated from transaction-processing systems has grown
substantially as these products expand market penetration for existing products
and gain market acceptance for new products. Revenue generated from other
software sales primarily consist of vertical market software products such as
the Company's Distributex product as well as other third party software
products. Revenues for these products vary depending on customer demands and
product mix.

International Revenue. Revenue from international operations, principally
in Northern Ireland, increased to $20.9 million for the fiscal year ended
February 28, 1997 from $18.7 million for the prior fiscal year, an increase of
$2.2 million, or 11.8%. Revenue from domestic operations increased to $10.8
million for the fiscal year ended February 28, 1997 as compared to $8.5 million
for the prior fiscal year, an increase of $2.3 million, or 27.1% primarily due
to an increase in transaction-processing equipment revenue of $1.4 million as
described above under "Equipment Revenue".

Gross Profit. The following tables summarizes the Company's gross profit
information in dollars and as a percentage of the associated revenues for the
year ended February 28, 1997 and the comparable periods for the prior fiscal
year.

Year Ended
---------------------------------------
2/29/96 2/28/97
-------------------- ---------------
(in thousands, except percentage data)
Gross Profit Gross Profit
------------------- -----------------
$ % $ %
<S> <C> <C> <C> <C>
Equipment:
Transaction-processing Equipment $ 1,161 23.8 $ 1,195 18.9
Educational Equipment......... 0 0.0 92 11.5
Other Equipment............... 1,224 22.2 896 16.5
------- -------
Total Equipment.................... $ 2,385 23.0 $ 2,183 17.4
------- -------

Information Technology Services.... $ 7,823 81.7 $ 9,035 80.1
------- --------

Software:
Platform Migration............ $ 3,764 77.1 $ 1,940 58.2
Transaction-processing........ 565 70.7 1,552 74.7
Other......................... 937 61.8 1,385 55.9
------- -------
Total Software..................... $ 5,266 73.2 $ 4,877 61.8
------- -------

Total Gross Profit................. $ 15,474 57.0 $ 16,095 50.8
------- -------
------- -------

</TABLE>

Gross profit margins for equipment and services vary depending on customer
demands and product mix. The types of equipment the Company sells are generally
commodity products. As a result, overall profit margins for equipment are
declining. Information technology services gross profit margin, which does not
include salary costs, remained relatively consistent for fiscal year 1997 as
compared to the prior fiscal year.

Platform migration profit margins decreased for fiscal year 1997 compared
to the prior fiscal year. These declines are due principally to relatively fixed
amortization expense related to capitalized software development costs for the
UNIBOL36 and UNIBOL400 products, for which the $1.6 million in revenue
recognized associated with the large sale of UNIBOL400 software to Siemens
Nixdorf caused increased margins during fiscal year 1996. These margins are
expected to improve in future periods as the enhanced versions of the UNIBOL400
product are released, the product begins to gain market acceptance and licensing
revenues increase.

26
<PAGE>

Transaction-processing gross profit margins remained relatively consistent
for fiscal year 1997 compared to the prior fiscal year. Gross margins for other
software products decreased to 55.9% for fiscal year 1997 compared to 61.8% in
the prior fiscal year. Other software primarily consist of vertical market
software products such as the Company's Distributex product as well as other
third party software products. Gross margins for these products vary depending
on customer demands and product mix.

Operating Expenses. Operating expenses as a percentage of total revenue are
44.3% for fiscal year 1997 compared to 47.6% in the prior fiscal year. The
Company incurred operating expenses of $0.3 million during fiscal year 1997
relating to the acquisition of CEM in February 1997.

Other Expenses. Interest, the primary component of other expenses,
increased to $0.3 million for fiscal year 1997 from $0.2 million for fiscal year
1996, an increase of $0.1 million or 50%. The increase in interest expense was
due to the issuance of $2.0 million principal amount of 7% convertible notes in
fiscal year 1996 and additional borrowings related to the acquisition of CEM.
All of the notes were converted into shares of the Company's common stock during
fiscal year 1997.

Taxes. The effective income tax rate (income taxes expressed as a
percentage of pretax income) was 17.0% for fiscal year 1997, compared to 9.0%
for fiscal year 1996. During the fourth quarter of fiscal 1997, the Company
recognized an income tax credit of $0.3 million related to reduction of the
cumulative deferred tax liability in the United Kingdom. The effective income
tax rate for fiscal year 1997 excluding this tax credit would have been
approximately 35%. During fiscal year 1996 the Company recognized a credit to
tax expense of $0.3 million related to the recognition of the remaining deferred
tax asset in the United States. The effective income tax rate for fiscal year
1996 excluding this tax credit would have been approximately 22%.

Year 2000

Software applications that use only two digits to identify a year may fail
or create errors in the year 2000 (the "Year 2000 issue"). The Company began
evaluating the Year 2000 issue in 1996 and is currently continuing such efforts.
The Company has implemented upgrades to a substantial portion of its products to
address the Year 2000 issue. In addition, the Company is working with each
business partner vendor of software included in the Company's product offering
in an effort to ensure their products address the Year 2000 issue. The Company
is currently evaluating the status of each of its products which is not, at
present, Year 2000 compliant and anticipates that the costs to insure compliance
will not be material to the Company's financial position and results of
operations. Although to date the expense of upgrading product applications to
make them Year 2000 compliant has not been material, there can be no assurance
that the Company will not incur material costs with respect to such issues in
the future. In addition, the Company has plans in place to make all critical
internal systems Year 2000 compliant by the middle of 1999 and will incur
non-material costs to do so.

Liquidity and Capital Resources

The Company has experienced growth during the past two fiscal years with
total revenue growing to $52.1 million for fiscal year 1998, from $27.2 million
for fiscal year 1996. During this period, the Company has satisfied its
liquidity requirements primarily through operations, placements of debt and
equity securities, bank financing and grants from the government of Northern
Ireland.

At February 28, 1998, the Company had approximately $3.9 million in cash
and equivalents as compared to $3.8 million at February 28, 1997, $3.0 million
of which was restricted at February 28, 1997 and 1998. See Notes 1 and 8 to the
financial statements.

27
<PAGE>

The Company has generated negative operating cash flows of $1.6 million for
fiscal year 1998, primarily as a result of an increase in accounts receivable of
$6.5 million. The Company has experienced a significant slow-down in the
collection of receivables related to its transaction-processing and platform
migration business units, which has resulted in the Company recording an
increase in the allowance for doubtful accounts of $1.4 million. The Company has
changed its revenue recognition and collection procedures in light of this
issue. The Company also experienced an increase in inventory of $2.1 million as
a result of corresponding increases in the transaction-processing equipment
inventory. As a result of significant increases in the sale of
transaction-processing equipment over the past few years, the Company has seen
the need to increase its inventory levels to provide a wider array of equipment
to its customers. Additionally, the Company is growing these inventory levels
for the peak sales months of April through September. Transaction-processing
equipment sales are somewhat seasonal due to retail establishments purchasing
new systems during the summer months (the Company's first and second quarters)
in order to implement those systems before the holiday buying season begins.

During fiscal year 1998, in order to offset the declining operating cash
flows, the Company obtained $1.0 million of short-term financing through a
subordinated note payable. This note carries an interest rate of 12% and is due
in full in February 1999. The note is collateralized by a subordinated position
in substantially all of the Company's assets.

The Company maintains revolving credit facilities which are its primary
sources of liquidity. The facilities allow the Company to borrow based on
current levels of accounts receivable and inventory and contain financial
covenants including, but not limited to, requirements with respect to minimum
net worth and debt to net worth ratios. The Company has minimum covenant
requirements that must be met by February 28, 1999. While there can be no
assurance, the Company expects to be able to meet these covenants, as well as
be able to renew or replace these facilities in the ordinary course of
business.

Although the Company anticipates spending comparable amounts in the future
on capital expenditures, the Company does not have any significant commitments
to purchase capital equipment as of February 28, 1998.

On November 18, 1996, the Company completed a secondary offering of an
additional 1,500,000 shares of common stock at $5.00 per share. The proceeds,
net of underwriters discounts, commissions and expenses were $5.7 million.

The Company issued $2.0 million principal amount of 7.0% convertible notes
in fiscal year 1996. The proceeds from the convertible notes were used to
acquire the rights to use and modify the source code of the database embedded in
the UNIBOL400 product and for general working capital purposes. During fiscal
year 1997, all the principal and related accrued interest thereon was converted
into shares of common stock.

The Company received grants to fund research and development from the
government of Northern Ireland of approximately $0.4 million for each of the
fiscal years ended 1996, 1997 and 1998, respectively. These grants are subject
to the legislative rules and regulations of Northern Ireland and the United
Kingdom. Management does not anticipate that the receipt of grants will diminish
significantly in the foreseeable future; however, there can be no assurance that
the Company will be able to continue to receive such grants.

The Company believes available credit will be sufficient to meet its
working capital needs both on a

28
<PAGE>

short and a long-term basis. However, the Company's capital needs will depend on
many factors, including the Company's ability to achieve profitable operations,
the need to develop and improve products, and various other factors. Depending
on its working capital requirements, the Company may seek additional financing
through debt or equity offerings in the private or public markets at any time.
The Company's ability to obtain additional financing will depend on its results
of operations, financial condition and business prospects, as well as conditions
then prevailing in the relevant capital markets. There can be no assurance that
financing will be available or, if available, will be on terms acceptable to the
Company.

Factors That May Affect Future Results

The Company's operating results and financial condition can be impacted by
a number of factors, including but not limited to, any of the following which
could cause actual results to vary materially from current and historical
results or the Company's anticipated future results.

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. In addition, these estimates and assumptions affect the reported
amounts of revenues and expenses during the reporting period as well. Amounts
affected by these estimates include, but are not limited to, the estimated
useful lives, related amortization expense and carrying value of the Company's
intangible assets and capitalized software development costs, accrued reserves
for contingencies and estimates to complete fixed price contracts. Changes in
the status of certain matters or facts or circumstances underlying these
estimates could result in material changes to these estimates, and actual
results could differ from these estimates.

The business of the Company is subject to national and worldwide economic
and political influences such as recession, political instability, the economic
strength of governments, and rapid change in technology. The Company's operating
results are dependent on its ability to rapidly develop, manufacture, and market
innovative products that meet customers demands. Inherent in this process are a
number of risks that the Company must manage in order to achieve favorable
operating results. The process of developing new high technology products is
complex and uncertain, requiring innovative designs and features that anticipate
customer needs and technological trends. The products, once developed, must be
manufactured and distributed in sufficient volumes at acceptable costs to meet
demand. The development of such products involve risks and uncertainties,
including but not limited to risk of product demand, market acceptance, economic
conditions, competitive products and pricing, difficulties in product
development, commercialization, technology, and other risks. The Company's
success will depend on the level of market acceptance and enhancements to the
market on a timely and cost effective basis, and its ability to maintain a labor
force sufficiently skilled to compete in the current environment. Additionally,
there is increasing competition in the Company's products and services
businesses, and there can be no assurance that the Company's current products or
services will remain competitive or that the Company's development efforts will
produce products with the cost and performance characteristics necessary to
remain competitive.

The timing and amount of the Company's revenues are subject to a number of
factors, including, but not limited to, the timing of customers' decisions to
enter into license agreements with the Company, which makes estimation of
operating results prior to the end of the quarter or year extremely uncertain.
While management believes that the Company's financing needs for the foreseeable
future will be satisfied from cash flows from operations, the Company's existing
credit facilities, and the ability to raise additional capital through the
equity markets, unforeseen events and adverse economic or business trends may
significantly increase cash demands beyond those currently anticipated that
affect the Company's

29
<PAGE>

ability to generate or raise cash to satisfy financing needs.

The Company derives its revenue primarily from operations in Northern
Ireland. It is reasonably possible that this concentration of revenue makes the
Company vulnerable to the risk of a near-term severe impact due to unforeseen
political and economic forces, as well as exchange rate fluctuations.
Additionally, concentrations of credit risks with respect to trade accounts
receivable is generally diversified due to the large number of entities
comprising the Company's worldwide customer base. The Company performs ongoing
credit evaluations on certain of its customers' financial conditions, but
generally does not require collateral to support customer receivables. The
Company establishes an allowance for uncollectible accounts based on factors
surrounding the credit risk of specific customers, historical trends and other
information. There can be no assurance, however, that the Company's procedures
will identify all potential uncollectible accounts in a timely manner and
significant adjustments to the Company's allowance for uncollectible accounts
may be necessary from time to time.

As a result of the above and other factors, the Company's operations and
financial position can vary significantly from quarter-to-quarter and
year-to-year. These variations may contribute to volatility in the market for
the Company's common stock.

While management believes that the Company's financing needs for the
foreseeable future will be satisfied from cash flows from operations and the
Company's existing credit facilities, unforeseen events and adverse economic or
business trends may significantly increase cash demands beyond those currently
anticipated that affect the Company's ability to generate/raise cash to satisfy
financing needs.

Forward Looking Statements

This annual report contains both historical facts and forward-looking
statements which represent the Company's expectations or beliefs concerning
future events, including sufficiency of funds from operations and available
borrowings to meet the Company's working capital and capital expenditure needs
for 1998, among others. Any forward-looking statements involve risks and
uncertainties, including but not limited to risk of product demand, market
acceptance, economic conditions, competitive products and pricing, difficulties
in product development, commercialization, technology, and other risks detailed
in this filing. Although the Company believes it has the product offerings and
resources for continued success, future revenue and margin trends cannot be
reliably predicted. Factors external to the Company can result in volatility of
the Company's common stock price. Because of the forgoing factors, recent trends
are not necessarily reliable indicators of future stock prices or financial
performance.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See pages F-1 through F-27 attached hereto and incorporated herein.

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

Effective February 23, 1998, the Company replaced its independent auditors,
Coopers & Lybrand L.L.P. ("Coopers & Lybrand") with Arthur Andersen LLP ("Arthur
Andersen"). Coopers & Lybrand's report on UniComp's financial statements during
the two most recent fiscal years preceding the date hereof contained no adverse
opinion or a disclaimer of opinions, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was approved by the Company's Audit Committee.

30
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company's directors and executive officers are as follows:

Name Age Position

<S> <C> <C>
Stephen A. Hafer..................... 49 Chairman of the Board, President and Chief
Executive Officer

J. Patrick Henry..................... 44 President of Unibol, Inc. and Director

B Michael Wilson..................... 42 President of Smoky Mountain Technologies, Inc. and
Director

L. Allen Plunk....................... 27 Chief Financial Officer

Nelson J. Millar..................... 60 Director

Thomas Zimmerer...................... 56 Director

</TABLE>

Stephen A. Hafer. Mr. Hafer currently serves as the Company's Chairman of
the Board, President and Chief Executive Officer, positions he has held since
January 1993. From July 1990 to January 1993, Mr. Hafer was the Company's Chief
Financial Officer. Mr. Hafer has been Chairman of the Board of Linder Financial
Corporation, an asset-based lending company, since November 1994 and President
since September 1995. He has served as Treasurer of Foutz & Associates, a public
relations company, since 1981 and as President and Chairman of Arccom
Technologies, Inc., an investment holding company, since 1990. Mr. Hafer holds a
B.S. in Accounting from Florida State University.

J. Patrick Henry. Mr. Henry has been President of Unibol, Inc., which
controls the Company's North and South American UNIBOL operations, since January
1992 and a Director of the Company since 1992. Mr. Henry first joined the
Company in March 1991 as Vice President of Sales with seven years of data
processing experience as a Marketing Manager at Burroughs Corporation. Mr. Henry
holds a B.S. in Industrial Management from Georgia Institute of Technology and
an M.B.A. in Finance from Georgia State University.

B. Michael Wilson. Mr. Wilson has been President of Smoky Mountain since
October 1993, and a Director of the Company since January 1997. Mr. Wilson
previously founded Lighthouse Technologies, Inc. in March 1992, which he merged
into Smoky Mountain in October 1993. Mr. Wilson was manager of Research and
Development for SK Technologies Corporation from 1989 to 1992.

L. Allen Plunk. Mr. Plunk was appointed as the Company's Chief Financial
Officer in August 1996. From June 1992 until joining the Company, Mr. Plunk was
with Coopers & Lybrand L.L.P., where he was most recently a manager and
specialized in accounting and Securities and Exchange Commission reporting
related to the software industry. Mr. Plunk is a Certified Public Accountant and
holds a B.B.A. in Accounting from Harding University.

31
<PAGE>

Nelson J. Millar. Mr. Millar has been a Director of the Company since
November 1994. Mr. Millar has been the President and owner of Trafalgar
Management Consultants in Belfast, Northern Ireland since 1993. From September
1992 to May 1993, Mr. Millar acted as the Managing Director of the ICS Computing
Group Limited, the group of companies that the Company acquired in May 1993.
From 1976 to 1993, Mr. Millar was the Managing Director of CMI Limited, the
systems integration subsidiary of ICS Computing Group Limited. Mr. Millar holds
a Higher National Diploma in Business Studies from Queens University in Belfast,
Northern Ireland, and is a member of the British Computer Society and Fellow of
the Institute of Directors.

Thomas Zimmerer. Dr. Zimmerer has been a Director of the Company since May
1994. Dr. Zimmerer holds the Allen and Ruth Harris Chair of Excellence in
Business, and has served as Professor of Management, at East Tennessee State
University since 1993. Dr. Zimmerer co-founded Clemson University's Emerging
Technology and Marketing Center and has co-authored eight books and over 90
articles and professional papers. In addition, he has served as a consultant to
over 75 United States and foreign corporations. Dr. Zimmerer holds a B.S.B.A. in
Management and Economics from the American University in Washington, D.C., an
M.S. in Economics from Louisiana State University and a Ph.D. in Management from
the University of Arkansas.

Information other than the listing of Directors and Executive Officers of
the Company, which is set forth above, required under this Item is incorporated
by reference to the Company's Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required under this Item is incorporated by reference to
the Company's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required under this Item is incorporated by reference to
the Company's Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required under this Item is incorporated by reference to
the Company's Proxy Statement.

32
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) Documents filed as part of the Form 10-K

(1) Financial Statements
Reports of Independent Public Accountants
Consolidated Balance Sheets as of February 28, 1998 and
February 29, 1997
Consolidated Statements of Operations for the years ended
February 28, 1998, February 28, 1997, and February 29, 1996
Consolidated Statements of Stockholders' Equity for the years
ended February 28, 1998, February 28, 1997, and
February 29, 1996
Consolidated Statements of Cash Flow for the years ended
February 28, 1998, February 28, 1997, and February 29, 1996
Notes to Consolidated Financial Statements

(2) Financial Statement Schedule

Schedule II - Valuation and qualifying accounts

All other schedules have been omitted as the required information is not
applicable, the amounts are not significant or the information is set forth in
the consolidated financial statements or the notes thereto.

(b) Reports on Form 8-K

During the fourth quarter, the Company filed a report on Form 8-K (as
amended) relating to the acquisition of Novatek Corporation on November 29,
1997.

Exhibits:

Exhibits Description
------------ -------------------------------------------------------------
<S> <C>

2.1 Stock Purchase Agreement between the Registrant and Eurodis
Electron Plc, dated February 20, 1997 (previously filed with Form
8-K on March 6, 1997 and incorporated herein by reference)
3.1 Articles of Incorporation of the Registrant (previously filed
with Form S-18, filed April 15, 1986 (Reg. No. 33-04906-D) and
incorporated herein by reference)
3.2 Amendment to Articles of Incorporation changing the Registrant's
name from Liberty Ventures, Ltd. To UniComp, Inc. (previously
filed with Form S-18, filed April 15, 1986 (Reg. No. 33-04906-D)
and incorporated herein by reference)
3.3 Amended and Restated Bylaws of the Registrant (previously filed
with Form S-1, dated September 18, 1996, as amended, (Reg. No.
333-12209) and incorporated herein by reference)
10.1 End-User Purchase Agreement between the Registrant and
Hewlett-Packard

</TABLE>

33
<PAGE>

<TABLE>

<S> <C>

dated October 25, 1994 (previously filed with
Form 10-K/A amendment no. 2 for the fiscal year ended February
28, 1994 and incorporated herein by reference)
10.2 Business Partner Agreement between the Registrant and IBM dated
March 1, 1994 (previously filed with Form 10-K/A amendment no. 2
for the fiscal year ended February 28, 1994 and incorporated
herein by reference)
10.3 Agreement between the Registrant and Siemens Nixdorf dated
January 3, 1995 (previously filed with Form 10-K for the fiscal
year ended February 28, 1995 and incorporated herein by
reference)
10.4 Agreement for Sale of a Business between the Registrant and Euro
Software Limited dated September 25, 1995 for the acquisition of
the assets of Advec Limited (previously filed with Form 10-K for
the fiscal year ended February 29, 1996 and incorporated herein
by reference)
10.5 Offshore Warrant Agreement between the Registrant and First
Bermuda Securities, Ltd. Dated December 20, 1995 (previously
filed with Form 10-K for the fiscal year ended February 29, 1996
and incorporated herein by reference)
10.6 Form of 7% Convertible Promissory Notes dated December 20, 1995
issued by the Registrant to certain offshore investors
(previously filed with Form 10-K for the fiscal year ended
February 29, 1996 and incorporated herein by reference)
10.7 Stock Purchase Agreement between the Registrant and Smoky
Mountain Technologies, Inc., dated April 16, 1996 (previously
filed with Form 8-K dated May 1, 1996, as amended, and
incorporated herein by reference)
10.8 Employment Agreements, dated April 16, 1996 between the
Registrant and each of B. Michael Wilson and George Gruber,
(previously filed with Form 8-K dated May 1, 1996, as amended,
and incorporated herein by reference)
10.9 Form of Indemnification Agreement used between the Registrant and
members of the Board of Directors and executive officers of the
Registrant (previously filed with Form S-1, dated September 18,
1996, as amended, (Reg. No. 333-12209) and incorporated herein by
reference)
10.10 Agreement between Smoky Mountain Technologies, Inc. and the
Atalla Division of Tandem, Inc. dated October 30, 1996
(previously filed with Form S-1, dated September 18, 1996, as
amended, (Reg. No. 333-12209) and incorporated herein by
reference)
10.12 Agreement and Plan of Reorganization By and Among UniComp, Inc.,
Smoky Mountain Technologies, Inc., Novatek Corporation, its
Shareholders, Sun and Sky Development Corp. and its Shareholders
(previously filed with Form 8-K dated November 29, 1997 and
incorporated herein by reference)
16.1 Letter of Coopers & Lybrand re: Change in Certified Public
Accountants
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule (for SEC use only)

</TABLE>

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Marietta, State of Georgia, on the 29th day of May, 1998.

UNICOMP, INC.

By: /s/ L. Allen Plunk
----------------------------------------
L. Allen Plunk
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities indicated below on the 29th day of May, 1998.

Signature Title
--------- -----
/s/ Stephen A. Hafer Chairman of the Board, President and Chief Executive
- ---------------------- Officer (Principal Executive Officer)
Stephen A. Hafer

/s/ L. Allen Plunk Chief Financial Officer (Principal Financial and
- ---------------------- Accounting Officer)
L. Allen Plunk

/s/ J. Patrick Henry Director
- ---------------------
J. Patrick Henry

/s/ B. Michael Wilson Director
- ---------------------
B. Michael Wilson

/s/ Nelson J. Millar Director
- ---------------------
Nelson J. Millar

/s/ Thomas Zimmerer Director
- ---------------------
Thomas Zimmerer

35
<PAGE>

UNICOMP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----
<S> <C>
Reports of Independent Public Accountants F-1

Consolidated Financial Statements:
Consolidated Balance Sheets as of February 28, 1997 and
February 28, 1998 F-3
Consolidated Statements of Operations for the years ended
February 29, 1996, February 28, 1997 and February 28, 1998 F-5
Consolidated Statement of Changes in Stockholders' Equity for the
years ended February 29, 1996, February 28, 1997 and F-6
February 28, 1998
Consolidated Statements of Cash Flows for the years ended
February 29, 1996, February 28, 1997 and February 28, 1998 F-7

Notes to Consolidated Financial Statements F-8
</TABLE>

<PAGE>

Report of Independent Public Accountants

To the Stockholders and Board of Directors
of UniComp, Inc. and Subsidiaries:

We have audited the accompanying balance sheet of UniComp, Inc. (a Colorado
corporation) and subsidiaries as of February 28, 1998, 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.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commissions rules and is not a part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
May 26, 1998

F-1

<PAGE>

Report of Independent Public Accountants

To the Stockholders and Board of Directors
of UniComp, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheet and the
financial statement schedule of UniComp, Inc. and subsidiaries as of February
28, 1997, and the related statements of operations, stockholders equity, and
cash flows for the two years ended February 28, 1997 that appear in this Form
10-K. These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
UniComp, Inc. and subsidiaries as of February 28, 1997, and the consolidated
results of their operations and their cash flows for each of the two years in
period ended February 28, 1997 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.

COOPERS & LYBRAND L.L.P.

Atlanta, Georgia
May 22, 1997, except for the third paragraph of Note 4 as to which the date
is November 29, 1997

F-2
<PAGE>

UniComp, Inc. and Subsidiaries
Consolidated Balance Sheets

ASSETS

February 28, February 28,
1997 1998
------------ ------------
(In Thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents ($3 million restricted).................................... $ 3,810 $ 3,904
Accounts and other receivables:
Trade, net of allowance of $230 and $1,655 in 1997 and 1998, respectively......... 10,049 14,735
Other receivables................................................................. 151 480
Inventories.......................................................................... 2,227 4,556
Prepaid expenses..................................................................... 802 531
Deferred income taxes................................................................ 61 -
Other................................................................................ 64 338
--------------- ----------------

Total current assets............................................................ 17,164 24,544
--------------- ----------------

Property and equipment, net............................................................. 4,131 4,746
--------------- ----------------

Other assets:
Acquired and developed software, net of accumulated amortization of $2,853 and $4,945
in 1997 and 1998, respectively.................................................... 5,847 6,403
Goodwill and other intangibles, net of accumulated amortization of $126 and $542 in
1997 and 1998, respectively....................................................... 3,161 4,510
Deferred income taxes................................................................ 99 446
Prepaid pension...................................................................... 442 754
Investments in joint ventures........................................................ 184 673
Receivables from related party....................................................... 354 390
Other................................................................................ 124 39
--------------- ----------------

Total other assets.............................................................. 10,211 13,215
--------------- ----------------

Total assets.................................................................... $ 31,506 $ 42,505
--------------- ----------------
--------------- ----------------
</TABLE>

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

F-3

<PAGE>

UniComp, Inc. and Subsidiaries
Consolidated Balance Sheets (Continued)

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
February 28, February 28,
1997 1998
------------ ------------
(In Thousands, Except Per Share Data)

<S> <C> <C>
Current liabilities:
Accounts payable..................................................................... $ 3,477 $ 4,955
Accrued expenses..................................................................... 1,194 2,080
Deferred revenues.................................................................... 2,093 3,634
Taxes payable........................................................................ 778 1,064
Other................................................................................ - 200
Lines of credit...................................................................... 7,379 10,590
Current portion of notes payable..................................................... 518 1,358
---------------- ----------------

Total current liabilities....................................................... 15,439 23,881
---------------- ----------------

Long-term liabilities:
Notes payable........................................................................ 1,169 1,480
Deferred income taxes................................................................ 433 741
Other................................................................................ - 110
---------------- ----------------

Total long-term liabilities..................................................... 1,602 2,331
---------------- ----------------

Total liabilities............................................................... 17,041 26,212
---------------- ----------------

Stockholders' equity:
Preferred stock: $1 par value, 5,000 authorized , none issued and outstanding at
February 28, 1997 and February 28, 1998........................................... - -
Common stock: $.01 par value, 25,000 authorized, 7,677 and 7,965 issued and
outstanding at February 28, 1997 and February 28, 1998, respectively............... 77 80
Additional contributed capital....................................................... 13,117 15,331
Retained earnings.................................................................... 2,042 1,192
----------------- ----------------
15,236 16,603
Less treasury stock.................................................................. (609) (206)
Cumulative translation adjustment.................................................... (162) (104)
----------------- ----------------

Total stockholders' equity...................................................... 14,465 16,293
----------------- ----------------

Total liabilities and stockholders' equity...................................... $ 31,506 $ 42,505
----------------- ----------------
----------------- ----------------

</TABLE>

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

F-4
<PAGE>

UniComp, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>

Year Ended
--------------------------------------------------------
February 29, February 28, February 28,
1996 1997 1998
----------------- ----------------- ----------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Revenue:
Equipment........................................................ $ 10,387 $ 12,538 $ 25,770
Services......................................................... 9,578 11,283 17,051
Software......................................................... 7,196 7,888 9,285
----------------- ----------------- -----------------
Total revenue................................................. 27,161 31,709 52,106
----------------- ----------------- -----------------

Cost of sales:
Equipment........................................................ 8,002 10,355 21,166

Services......................................................... 1,755 2,248 2,819

Software......................................................... 1,930 3,011 3,523
----------------- ----------------- ----------------
Total cost of sales........................................... 11,687 15,614 27,508
----------------- ----------------- ----------------

Gross profit........................................................ 15,474 16,095 24,598
----------------- ----------------- ----------------

Selling, general and administrative................................. 12,931 14,035 23,243
Acquisition related charges......................................... - - 1,085
----------------- ----------------- ----------------
Total operating expenses...................................... 12,931 14,035 24,328
----------------- ----------------- ----------------
Operating income.................................................... 2,543 2,060 270
----------------- ----------------- ----------------

Other income (expense):
Other, net....................................................... (33) 46 (6)
Interest, net.................................................... (241) (282) (605)
----------------- ----------------- ----------------
Other income (expense), net................................... (274) (236) (611)
----------------- ----------------- ----------------

Income (loss) before provision for income taxes..................... 2,269 1,824 (341)
----------------- ----------------- ----------------

Provision for income taxes.......................................... 204 313 442
----------------- ----------------- ----------------

Net income (loss)................................................... $ 2,065 $ 1,511 $ (783)
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Basic earnings per share............................................ $ 0.36 $ 0.23 $ (0.10)
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Diluted earnings per share.......................................... $ 0.34 $ 0.22 $ (0.10)
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Weighted average shares ............................................ 5,672 6,465 7,727
Weighted average shares assuming dilution........................... 6,064 6,865 7,727

</TABLE>

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

F-5

<PAGE>

UniComp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity

Common Stock
------------------
Number of Additional Retained Cumul. Total
Shares Contributed Earnings Treasury Trans. Stockholders'
Issued Amount Capital (Deficit) Stock Adjust. Equity
------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance February 28, 1995......... 5,790 $ 58 $ 5,568 $ (1,534) $ (494) $ (148) $ 3,450

Stock issued................... 162 2 603 605
Change in treasury stock....... 33 33
Effect of shares issued by
Smoky Mountain.............. 99 99
Net income..................... 2,065 2,065
Change in cumulative
translation adjustment...... (32) (32)
------------------------------------------------------------------------------------

Balance February 29, 1996......... 5,952 60 6,270 531 (461) (180) 6,220

Stock issued................... 1,506 15 5,737 5,752
Conversion of debt............. 427 4 1,948 1,952
Treasury stock purchased....... (1,042) (1,042)
Retirement of treasury stock... (208) (2) (892) 894 0
Warrants issued................ 54 54
Net income..................... 1,511 1,511
Change in cumulative
translation adjustment...... 18 18
------------------------------------------------------------------------------------

Balance February 28, 1997......... 7,677 77 13,117 2,042 (609) (162) 14,465

Net loss from Novatek's two
months ended February 28,
1997 (See Note 4)........... (67) (67)
Options and warrants exercised. 181 2 1,459 403 1,864
Stock issued for acquisition
of ICM...................... 107 1 755 756
Net income..................... (783) (783)
Change in cumulative
translation adjustment...... 58 58
------------------------------------------------------------------------------------

Balance February 28, 1998......... 7,965 $ 80 $ 15,331 $ 1,192 $ (206) $ (104) $ 16,293
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------

</TABLE>

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

F-6

<PAGE>

UniComp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

Year Ended
-------------------------------------------------------------
February 29, February 28, February 28,
1996 1997 1998
----------------- ------------------ -------------------
(In Thousands)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)........................................... $ 2,065 $ 1,511 $ (783)
Adjustments to reconcile net income to net cash provided
(used) by operations:
Depreciation and amortization............................ 1,465 2,300 3,840
Issuance of warrants..................................... - 54 -
Allowance for doubtful accounts.......................... 11 62 1,426
Deferred income taxes.................................... 54 102 22
Changes in assets and liabilities:
Accounts and other receivables......................... (1,199) (716) (6,544)
Inventory.............................................. (288) (231) (2,134)
Prepaid expenses....................................... (470) (145) 62
Accounts payable....................................... 763 (753) 1,153
Accrued expenses....................................... 178 (302) 736
Other accrued taxes.................................... 382 (101) 62
Deferred revenue....................................... (636) (398) 1,133
Income taxes payable................................... (50) (42) 160
Other.................................................. (654) (262) (706)
------------------ ------------------ -----------------

Net cash provided (used) by operating activities.... 1,621 1,079 (1,573)
------------------ ------------------ -----------------

Cash flow from investing activities:
Capital expenditures........................................ (1,505) (1,450) (1,816)
Acquired and developed software............................. (2,695) (2,525) (2,625)
------------------ ------------------ -----------------

Net cash used by investing activities............... (4,200) (3,975) (4,441)
------------------ ------------------ -----------------

Cash flow from financing activities:
Proceeds from issuance of convertible notes, net............ 1,900 - -
Payments on debt............................................ (228) (241) (1,349)
Proceeds from borrowing..................................... 1,433 873 5,567
Issuance of common stock, net............................... 737 5,752 1,868
Receivables from related party.............................. (127) (338) (37)
Purchase of treasury stock.................................. - (618) -
------------------ ------------------ -----------------

Net cash provided by financing activities........... 3,715 5,428 6,049
------------------ ------------------ -----------------

Net increase in cash........................................... 1,136 2,532 36
Effect of exchange rate changes on cash........................ (32) 18 58
Cash and cash equivalents at beginning of year................. 156 1,260 3,810
------------------ ------------------ -----------------

Cash and cash equivalents at end of year....................... $ 1,260 $ 3,810 $ 3,904
------------------ ------------------ -----------------
------------------ ------------------ -----------------
Cash paid for interest......................................... $ 249 $ 324 $ 766
------------------ ------------------ -----------------
Cash paid for taxes............................................ $ 263 $ 165 $ 358
------------------ ------------------ -----------------
------------------ ------------------ -----------------
</TABLE>

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

F-7
<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies:

Basis of Presentation

The consolidated financial statements include the accounts of UniComp, Inc.
and its subsidiaries (the Company). All material intercompany balances and
transactions have been eliminated in consolidation. The preparation of financial
statements requires management to make estimates and assumptions underlying the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Changes in the
status of certain matters, facts or circumstances underlying these estimates
could result in material changes and actual results could differ from these
estimates.

The consolidated financial statements have been prepared to give
retroactive effect of the acquisitions of Smoky Mountain Technologies, Inc.
(Smoky Mountain) and Novatek Corporation and Sun and Sky Development Corporation
(together Novatek) as described in Note 4. These acquisitions have been
accounted for as pooling-of-interests. Generally accepted accounting principles
require giving retroactive effect to business combinations accounted for as
pooling-of-interests. As such, the historical consolidated financial statements
have been restated to reflect the resulting combined entities.

Certain amounts previously presented in the consolidated financial
statements have been reclassified to conform to current presentation.

Revenue Recognition

The Company's revenue is generated primarily from licensing software
products, providing various professional services, and the sale of computer
equipment.

Revenue from the sale of the Company's software products, the resale of
third-party software products, and the sale of computer equipment is recognized
upon delivery, customer acceptance, fulfillment of significant vendor
obligations, if any, and determination that collectibility is probable. Revenue
related to sales which impose significant vendor obligations on the Company are
deferred until those obligations are satisfied. Revenue from post-contract
customer support is recognized ratably over the life of the contract.

The Company provides professional services, including systems
implementation and integration, hardware and software support and maintenance,
custom software development, consulting, educational and other services. These
services are generally provided under time and materials or annual support
contracts for which revenue is recognized as the services are performed or
ratably over the life of the contract. In some circumstances, the Company
performs professional services under fixed price contracts, for which revenue is
recognized on the basis of the estimated percentage of completion. From time to
time, adjustments are made to the estimates used to calculate the percentage of
completion for a contract. Changes in estimates to complete and losses, if any,
are recognized in the period in which they are determined.

F-8

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued):

Foreign Currency Translation and Transactions

All assets and liabilities in the balance sheet of a foreign subsidiary
whose functional currency is other than the United States dollar are translated
at the year-end currency exchange rate. Income statement items are translated at
the average currency exchange rate for the period. Translation gains and losses
are accumulated as a separate component of stockholders' equity and are not
included in determining net income. Transaction gains and losses are included in
the results of operations in the period which they occur.

Cash and Cash Equivalents

Cash and cash equivalents includes all cash balances and highly liquid
investments with an original maturity of three months or less. At times, cash in
bank deposits may exceed the federally insured limits. The Company has not
experienced and does not anticipate any losses from such accounts. $3 million of
cash and cash equivalents is restricted and held as collateral on certain
indebtedness of the Company as described in Note 8. During the fiscal year
ending February 28, 1999, the Company anticipates refinancing the debt for which
the $3 million in cash and cash equivalents is held as collateral and thus
anticipates that the collateral will be released within the next year.

Inventory

Inventory consists primarily of computer equipment and
transaction-processing equipment available for resale. Inventory is stated at
the lower of cost or market, cost being determined on a first-in first-out
basis. Components of inventory as of February 28, 1997 and 1998 are as follows:

<TABLE>
<CAPTION>
1997 1998
--------------- -----------------
(In Thousands)
<S> <C> <C>
Computer equipment.......................... $ 1,911 $ 1,992
Transaction-processing equipment............ 316 2,564
--------------- -----------------

$ 2,227 $ 4,556
--------------- -----------------
--------------- -----------------
</TABLE>

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation.
Depreciation is provided based on the straight-line method over the estimated
useful lives of the related assets, except for leasehold improvements, which are
depreciated over the life of the related lease. Gains and losses on dispositions
of property and equipment are determined based on the difference between the
cash plus the fair value of any assets received (in the case of a non-monetary
transaction) less the net book value of the asset disposed of at the date of
disposition.

F-9
<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued):

Acquired and Developed Software

In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased or
Otherwise Marketed," certain costs incurred in the internal development of
computer software which is to be licensed to customers, and costs of
purchased computer software, are capitalized and amortized over their
estimated useful lives, generally three to five years, at the greater of the
amount computed using (i) the ratio that current gross revenues for a product
bear to the total of current and anticipated future gross revenues of that
product or (ii) the straight-line method.

Costs which are capitalized as part of internally developed software
primarily include direct and indirect costs associated with payroll, benefits,
computer usage, an allocation of depreciation, facilities, and other direct
allocable costs, among others. All research and development costs incurred prior
to the establishment of technological feasibility and subsequent to the product
becoming generally available have been expensed in the period in which they were
incurred. Product enhancements are improvements to an existing product that are
intended to extend the life or significantly improve the marketability of the
original product. Costs incurred for product enhancements are charged to expense
as research and development until technological feasibility of the enhancement
has been established. Total research and development costs which were expensed
as they were incurred totaled $0.3, $0.6 and $0.9 million for fiscal years 1996,
1997 and 1998, respectively.

The Company capitalized software development costs of $2.7, $2.5, and $2.6
million during fiscal years 1996, 1997, and 1998, respectively, with
amortization expense of $0.7, $1.5 and $2.1 million during the same periods.
Capitalized software costs are net of amounts reimbursed by Northern Ireland
government grants of $0.4 million in each of fiscal years 1996, 1997 and 1998.

The amount by which unamortized software costs exceeds the net realizable
value, if any, is recognized as expense in the period it is determined.

Goodwill and Other Intangible Assets

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Assets to be Disposed Of" (FAS 121),
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the expected future
cash flows of those assets are less than the assets' carrying amount. FAS 121
also addresses the accounting for long-lived assets that are expected to be sold
or discarded. The Company adopted FAS 121 on March 1, 1996.

Identifiable intangible assets and goodwill are recorded and amortized over
their estimated economic lives or periods of future benefit. The lives
established for these assets are a composite of many factors which are subject
to change because of the nature of the Company's operations. This is
particularly true for goodwill which reflects value attributable to the
going-concern nature of acquired businesses, the stability of their operations,
market presence and reputation. Accordingly, the Company evaluates the continued
appropriateness of these lives and recoverability of the carrying value of such
assets based upon the latest available economic factors and circumstances.

F-10

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued):

Goodwill and Other Intangible Assets (Continued)

The Company evaluates the recoverability of all long-lived assets,
including specific intangible assets and goodwill, based upon a comparison of
estimated future cash flows from the related operations with the then
corresponding carrying values of those assets. Impairment of value, if any, is
recognized in the period in which it is determined. A rate considered to be
commensurate with the risk involved is used to discount the cash flows for any
recognized impairment.

The Company amortizes goodwill on a straight-line basis over an estimated
life of up to 10 years for goodwill related to computer hardware and service
company acquisitions and 5 to 7 years for goodwill related to software company
acquisitions. The Company believes these lives appropriately reflect the current
economic circumstances for such businesses and the related period of future
benefit. Other identifiable intangible assets are amortized on a straight-line
basis over their estimated period of benefit ranging from 3 to 10 years.
Amortization charged to expense was $0.1, $0.1, and $0.4 million for fiscal
years 1996, 1997, and 1998, respectively.

Fair Value of Financial Instruments

The carrying value of the Company's financial assets and liabilities,
including cash and cash equivalents, accounts receivable, short-term notes
receivable, accounts payable, and lines of credit at February 28, 1997 and 1998
approximate fair value because of the short maturity of these instruments. The
carrying value of the Company's long-term debt and notes receivable approximates
fair value at February 28, 1997, and 1998 based on market rates for similar
issues.

Income Taxes

The provision for income taxes and the corresponding balance sheet accounts
are determined in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (FAS 109). Under FAS 109, the deferred
tax liabilities and assets are determined based on temporary differences between
the bases of certain assets and liabilities for income tax and financial
reporting purposes. These differences are primarily attributable to differences
in the recognition of depreciation and amortization of property and equipment,
intangible assets, and capitalized software development costs. No deferred tax
liability has been recognized relating to taxable temporary differences
attributable to the excess of the amount for financial reporting over the tax
basis of investments in foreign subsidiaries due to the fact that such taxable
temporary differences are not expected to reverse in the foreseeable future. The
determination of the amount of such liability is not practical.

Advertising

The Company generally expenses advertising and marketing costs as incurred.
Advertising and marketing costs were $0.5, $0.6 and $0.8 million during fiscal
years 1996, 1997, and 1998, respectively.

F-11
<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued):

Basic and Diluted Earnings Per Share

In 1997, Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," was issued effective for fiscal years ending after December 15, 1997.
The Company has adopted the new guidelines for the calculation and presentation
of earnings per share, and all prior periods have been restated. Basic earnings
per share are based on the weighted average number of shares outstanding.
Diluted earnings per share are based on the weighted average number of shares
outstanding and the dilutive effect of the stock options and warrants
outstanding (using the treasury stock method). For the Company, the numerator is
the same for both basic and diluted EPS calculations. The following is a
reconciliation of the denominator used in the calculation:

<TABLE>
<CAPTION>
Fiscal year ended
------------------------------------------------
1996 1997 1998
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Weighted average shares........................... 5,672 6,465 7,727
Dilutive effect of common stock options and warrants
392 400 -
------- ------ ------
Weighted average shares assuming dilution 6,064 6,865 7,727
------- ------ ------
------- ------ ------

</TABLE>

Options and warrants to purchase 25,000 and 282,500 shares of common stock
at a weighted average price of $6.90 and $7.62 per share for fiscal years 1996
and 1997, respectively, were outstanding but were not included in the
computation of diluted EPS because the options' exercise prices were greater
than the average market price for the Company's common stock for the period. All
of the options outstanding for fiscal year 1998 were excluded from the
calculation of diluted earnings per share due to the net loss for that period.

New Accounting Standards

In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (FAS 130), was issued. FAS 130 establishes
standards for reporting and display of comprehensive income and its components,
and is effective for fiscal years beginning after December 15, 1997. The
adoption of FAS 130 is not expected to have a material effect on the Company's
disclosures.

In June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (FAS 131),
was issued. FAS 131 is designed to improve the information provided in financial
statements about the different types of business activities in which the
enterprise engages and economic environments in which the enterprise operates,
and is effective for fiscal years beginning after December 15, 1997. The Company
is currently assessing how it views its operations for internal decision making
and planning purposes, and has not made a determination of the impact of FAS 131
on its segment disclosures.

In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-2, "Software Revenue Recognition" (SOP 97-2).
SOP 97-2 provides guidance on applying generally accepted accounting principles
in recognizing revenue on software transactions, and is effective for
transactions entered into in fiscal years beginning after December 31, 1997. The
adoption of SOP 97-2 is not expected to have a significant impact on the
Company's annual financial position or results of operations, however, the
adoption may create fluctuations in the Company's quarterly results of
operations.

F-12
<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued):

New Accounting Standards (Continued)

In early 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides
guidance on accounting for the costs of computer software developed or obtained
for internal use, and is effective for fiscal years beginning after December 31,
1998. The adoption of SOP 98-1 is not expected to have a material effect on the
Company's financial statements.

2. Property and Equipment:

The components of property and equipment as of February 28, 1997 and 1998
are as follows:

<TABLE>
<CAPTION>
Estimated
Useful Life
(years) 1997 1998
---------------- ----------------- ------------------
(In Thousands)
<S> <C> <C> <C>
Buildings................................ 30-50 $ 1,418 $ 1,911
Land..................................... N/A 45 70
Leasehold improvements................... 5-10 865 868
Computer equipment....................... 3-5 4,040 5,420
Computer software........................ 3 137 296
Furniture and fixtures................... 5 1,097 1,303
Vehicles................................. 2-4 417 304
----------------- ------------------

8,019 10,172
Less accumulated depreciation............ (3,888) (5,426)
----------------- ------------------

$ 4,131 $ 4,746
----------------- ------------------
----------------- ------------------

</TABLE>

Depreciation charged to expense was $0.7, $0.7, and $1.3 million for
fiscal years 1996, 1997, and 1998, respectively

3. Investments in Joint Ventures

The equity method of accounting is used when the Company does not have
effective control and has a 20% to 50% interest in other companies. Under the
equity method, original investments are recorded at cost and adjusted by the
Company's share of undistributed earnings or losses of these companies. As of
February 28, 1997 and 1998 the Company had a $0.2 million investment relating to
a 50% ownership in a joint venture in the United Kingdom. The joint venture
company provides the production of web sites, internet access and internet
integration solutions for businesses in Northern Ireland. Subsequent to February
28, 1998, the Company contributed accounts receivable of $0.5 million for a 67%
ownership in a United States joint venture which is pursuing retail electronic
commerce. This investment was included in the February 28, 1998 balance sheet as
an investment in joint venture.

F-13
<PAGE>

Unicomp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4. Business Combinations:

Acquisition of ICM Computing Machines Limited

On January 8, 1998, the Company completed its acquisition of ICM Computing
Machines Limited (ICM) for 107,453 shares of the Company's common stock, or
approximately $0.8 million. ICM, headquartered in Ireland, principally provides
process management software and related services to the farming industry. The
acquisition has been accounted for as a purchase and accordingly, the purchase
price has been allocated to the assets acquired and the liabilities assumed
based on their estimated fair values at the date of acquisition. The results of
operations have been included from January 1, 1998, the effective date of the
acquisition. The excess consideration above the fair value of net assets
acquired of approximately $1.2 million has been recorded as goodwill. Under the
terms of the purchase agreement, the Company has guaranteed approximately $0.8
million in proceeds from the sale of the Company stock issued to consummate the
transaction. Upon the sale of these securities, the Company will pay any
shortfall to the previous owners in cash or will receive cash from the previous
owners if the sale results in an overage.

Supplemental pro-forma information is not presented since this acquisition
was not material to the Company's consolidated results of operations in the year
of acquisition.

Acquisition of Novatek

On November 29, 1997, the Company completed its acquisition of Novatek, a
provider of new and refurbished point-of-sale and transaction-processing
equipment and related services. The Company issued 788,708 shares of its common
stock for all of the outstanding common stock of Novatek. This transaction has
been accounted for as a pooling-of-interests; therefore, the historical
financial statements have been restated to reflect this merger. Novatek
historically prepared its financial statements on a December 31 year end.
Subsequent to the acquisition, Novatek was merged with one of the Company's
subsidiaries and thus their fiscal year end has been changed to conform with the
Company's year end. The historical financial data for Novatek is included in the
consolidated financial statements for all periods presented as of their year end
except for the year ended February 28, 1998, where Novatek's results of
operations have been presented as of the Company's year end. As a result of the
change in Novatek's fiscal year end to conform to the Company's subsequent to
acquisition, the results of operations for Novatek for the two month period
ended February 28, 1997, is not reflected in any of the periods presented and
has been charged directly to equity. The results of Novatek's operations for the
two months ended February 28, 1997 are summarized as follows:

Two months ended February 28, 1997
-------------------------------------
(In Thousands)
<S> <C>
Revenue $ 713
Net Loss $ 67
</TABLE>

The stockholders' equity accounts have been adjusted to reflect the
conversion of all of Novatek's common stock into 788,708 shares of the Company's
common stock. No other adjustments were required to reflect the consolidation
since the accounting policies of this companies prior to the transaction were
substantially the same, and prior to the date of the acquisition there were no
significant transactions between the companies.

F-14
<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4. Business Combinations (Continued):

Novatek's revenue and net income included in the Company's consolidated
statements of operations for the years ended February 29, 1996 and February 28,
1997 are summarized as follows:

<TABLE>
<CAPTION>
Fiscal year ended February 29, 1996
---------------------------------------------------
UniComp Novatek
Feb. 29, 1996 Dec. 31, 1995 Total
----------------- --------------- ---------
(In Thousands)
<S> <C> <C> <C>
Revenue........................................... $ 22,291 $ 4,870 $ 27,161
Net income........................................ $ 2,060 $ 5 $ 2,065
</TABLE>

<TABLE>
<CAPTION>
Fiscal year ended February 28, 1997
---------------------------------------------------
UniComp Novatek
Feb. 28, 1997 Dec. 31, 1996 Total
----------------- -------------- -------
(In Thousands)
<S> <C> <C> <C>
Revenue........................................... $ 25,151 $ 6,558 $ 31,709
Net income (loss)................................. $ 1,526 $ (15) $ 1,511

</TABLE>

In connection with this acquisition, the Company incurred charges totaling
$1.0 million. $0.7 million of this amount related to compensation expense
recorded for the value of certain compensatory stock options at Novatek for
which the applicable compensation expense could only be determined upon the sale
of Novatek. Therefore, the Company recorded a one-time non-cash compensation
expense upon consummation of the merger with Novatek. Additionally, the Company
recorded $0.3 million in expenses relating to the pooling of interests
transaction with Novatek.

Acquisition of CEM Computers Limited

On February 20, 1997, the Company completed its acquisition of CEM
Computers Limited (CEM) for approximately $3.7 million. CEM, headquartered in
Northern Ireland, principally provides computer equipment, hardware and software
support and systems integration services. The acquisition has been accounted for
as a purchase and accordingly, the purchase price has been allocated to the
assets acquired and the liabilities assumed based on their estimated fair values
at the date of acquisition. The results of operations have been included from
February 1, 1997, the effective date of the acquisition. The excess
consideration above the fair value of net assets acquired of approximately $2.9
million has been recorded as goodwill.

Assuming this acquisition had occurred as of the beginning of the Company's
fiscal year in which the acquisition occurred (March 1, 1996), the unaudited pro
forma results of operations for fiscal year ended February 28, 1997 would have
been as follows:
<TABLE>
<CAPTION>

Fiscal Year Ended
February 28, 1997
-------------------
(In Thousands, Except Per Share Data)
<S> <C>
Revenue........................................... $ 50,337
Net income........................................ $ 1,520
Basic earnings per share.......................... $ 0.24
Diluted earnings per share........................ $ 0.22
</TABLE>

F-15

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4. Business Combinations (Continued):

Acquisition of Smoky Mountain

On April 16, 1996, the Company completed its acquisition of Smoky Mountain,
a software and hardware developer for the transaction-processing industry. The
Company issued 500,000 shares of its common stock for all of the outstanding
common stock of Smoky Mountain. This transaction has been accounted for as a
pooling-of-interests; therefore, the historical financial statements have been
restated to reflect this merger. Smoky Mountain historically prepared its
financial statements on a December 31 year end. Smoky Mountain's fiscal year end
has been changed to conform with the Company's year end and its historical
financial data is included in the consolidated financial statements for all
periods presented as of the Company's year end.

5. Income Taxes:

The significant components of income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>
Fiscal Year
---------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Current provision: (In Thousands)
Federal....................................................... $ 14 $ (7) -
State......................................................... 43 5 7
Foreign....................................................... 80 130 376
Deferred provision:
Federal....................................................... (307) 191 (191)
State......................................................... - 32 (100)
Foreign....................................................... 373 (39) 350
--- ---- ---

$203 $312 $442
---- ---- ----
---- ---- ----
</TABLE>

A reconciliation of the provision for income taxes to the amount computed
by applying the statutory federal income tax rate to income before income taxes
is as follows:

<TABLE>
<CAPTION>
Fiscal Year
----------------------------------
1996 1997 1998
---- ---- ----
(In Thousands)

<S> <C> <C> <C>
Income tax at statutory rate.................................... $ 770 $ 625 $ (116)
Increase (decrease) in provision from:
State income taxes (net of federal tax deduction)............. 29 28 (113)
Differences in foreign and US tax rates....................... (52) (13) (18)
Goodwill...................................................... - - 139
Utilization of federal net operating losses................... (238) - -
Deferred tax asset valuation allowance........................ (302) - 500
Reduction of UK cumulative deferred liability................. - (320) -
Other......................................................... (4) (8) 50
--- --- ---

Tax provision............................................. $ 203 $ 312 $ 442
----- ----- -----
----- ----- -----
</TABLE>

F-16
<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

5. Income Taxes (Continued):

An analysis of the net deferred income tax assets and liabilities is as
follows:

<TABLE>
<CAPTION>
February 28,
---------------------------
1997 1998
---- ----
Current deferred assets: (In Thousands)

<S> <C> <C>
Net operating loss carryforward................................. $ 32 -
Other........................................................... 29 -
----- -----
Current deferred assets $ 61 $ -

Long-term deferred assets:
Net operating loss carryforward................................. $ 99 $ 430
Allowance for doubtful accounts and other....................... - 516
Deferred tax asset valuation allowance.......................... - (500)
------ ------
Total net deferred assets $ 160 $ 446
------ ------
------ ------
Long-term deferred liabilities (assets):
Capitalized software development costs from foreign operations..
$ 839 $1,190
Depreciation from foreign operations............................ (406) (449)
------ ------

Total net deferred liabilities $ 433 $ 741
------ ------
------ ------
</TABLE>

As of February 28, 1998, the Company has net operating loss carryforwards,
subject to certain limitations under the provisions of Internal Revenue Code
Section 382, that expire at various times from 2003 through 2013 totaling $1.1
million for federal purposes and $0.4 million for state purposes. The Company
recorded a valuation allowance of $0.5 million as of February 28, 1998 related
to certain deferred tax assets that are not anticipated to be utilized through
normal operating results. Realization of the remainder of the deferred tax asset
is dependent upon generating sufficient taxable income in future periods.
Although realization is not assured, management believes that it is more likely
than not that the remaining deferred tax asset will be realized.

6. Related Party Transactions:

During fiscal year 1997, the Company's Board of Directors approved the
exchange of 68,626 shares of the Company's common stock for of $0.4 million of
indebtedness owed to the Company by certain officers and affiliated companies.
These shares were recorded as treasury stock and subsequently retired.

Receivables from related parties at February 28, 1997 and 1998 are
comprised of $0.4 million due from certain officers which have borrowed funds
from the Company principally in the form of unsecured 10% notes which mature
February 28, 2002.

F-17

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

7. Leases:

The Company leases office space, automobiles, and certain other items under
non-cancelable operating leases. Rental expense for fiscal years 1996, 1997 and
1998 was $1.0, $1.1 and $1.7 million, respectively.

Future minimum lease payments for operating leases at February 28, 1998 are
as follows (In Thousands):

<TABLE>

<S> <C>
1999...................................... $ 924
2000...................................... 539
2001...................................... 193
2002...................................... 126
2003...................................... 50
Thereafter................................ -
-----------------

$ 1,832
-----------------
-----------------
</TABLE>

8. Lines of Credit:

The Company maintains a series of working capital lines of credit with
maximum borrowing available of $6.0 million in the United Kingdom which are
secured by certain accounts receivables, inventories, and other assets of the
Company. The lines of credit are utilized for short-term borrowing for general
corporate use. From time to time, the bank in the United Kingdom allows the
borrowing under such lines to be in excess of the maximum to accommodate the
Company's peaks in spending. The total outstanding balance on the lines of
credit was $6.3 million and interest is charged based on the average outstanding
balance at a variable rate based on the lending bank's base lending rate plus
1.75%, or 9.0% as of February 28, 1998.

The Company maintains an additional line of credit in the United Kingdom
which is secured principally by $3 million of cash and equivalents which is
restricted as to use. This line of credit was used to fund the purchase of CEM
(See Note 4). The outstanding balance on the line of credit was $2.8 million and
interest is charged based on the average outstanding balance at a variable rate
based on LIBOR plus 0.375%, or 8.0% as of February 28, 1998.

The Company maintained a separate line of credit with maximum borrowing of
$1.5 million in the United States which is secured by certain accounts
receivables, inventories, and other assets of the Company. This line of credit
is used for short-term borrowing for general corporate use. Interest is charged
based on the average outstanding balance at a variable rate based on LIBOR plus
2.25%, or 9.875% as of February 28, 1998. The outstanding balance on the line of
credit was $1.4 million as of February 28, 1998. Subsequent to year end, this
line of credit was refinanced with a new line of credit of up to $3 million on
substantially the same terms and conditions. The Company did not meet certain
covenants related to this line of credit, however, the lender has agreed to
modify the agreement such that the Company will be in compliance.

All of the Company's lines of credit are subject to customary covenants,
terms and conditions including debt and equity ratios, minimum tangible net
worth, among others.

F-18

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

9. Long-Term Debt:

Notes Payable

Notes payable as of February 28, 1997 and February 28, 1998 are as
follows:

<TABLE>
<CAPTION>
1997 1998
---- ----
(In Thousands)
<S> <C> <C>
Mortgage payable in UK pounds, interest at a variable rate of LIBOR plus 1.75%,
or 9.5% as of February 28, 1998, collateralized by a building in Northern
Ireland, payable in quarterly installments of approximately $18 through
July 2005................................................ $622 $556
Mortgage payable, interest at a fixed rate of 8.83%,
collateralized by a building in North Carolina, payable in
monthly installments of approximately $3 through February
2004..................................................... 300 286
Mortgage payable, interest at a fixed rate of 8.86%,
collateralized by a building in Florida, payable in
monthly installments of approximately $3 through February
2005..................................................... - 300
Note payable in UK pounds, interest at a variable rate of
LIBOR plus 1.75%, or 9.31% as of February 28, 1998, collateralized by certain
accounts receivable and other assets of the Company, payable in quarterly
installments of approximately $40 through February 2000...............
488 329
Subordinated note payable, interest at a rate of 12% and paid monthly,
collateralized by a subordinated position in substantially all of the
Company's assets, due in full in
February 1999............................................ - 1,000
Other....................................................... 277 367
------------------ ---------------------

Total notes payable......................................... 1,687 2,838
Less: current portion....................................... 518 1,358
------------------ ---------------------

$1,169 $1,480
------------------ ---------------------
------------------ ---------------------

</TABLE>

Maturities of long-term debt are as follows (In Thousands):
<TABLE>

<S> <C>
1999.................................................... $ 1,358
2000.................................................... 396
2001.................................................... 233
2002.................................................... 102
2003.................................................... 104
Thereafter.............................................. 645
---------------------

2,838
---------------------
---------------------
</TABLE>

F-19

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

10. Stockholders' Equity:

On November 18, 1996 the Company completed a secondary offering of an
additional 1.5 million shares of common stock at $5.00 per share. The proceeds,
net of underwriters discounts, commissions, and expenses were $5.8 million. In
accordance with this offering, the Company granted warrants to purchase 150,000
shares of the Company's common stock at $8.25 per share to the underwriters of
the transaction. These warrants expire on November 13, 2001. As of February 28,
1998, these warrants had not been exercised.

During fiscal year 1997, the Company granted warrants to purchase 175,000
shares of common stock at a weighted average exercise price of $6.50 to its
financial advisors (the Advisor Warrants) and warrants to purchase 95,000 shares
of common stock at a weighted average price of $5.32 to its investor relations
advisors (the Investor Relations Warrants). The Company recorded $0.1 million of
consulting expense during fiscal year 1997 in association with the granting of
these warrants based on the fair value of the services received in exchange for
the warrants. During fiscal year 1998, all of the Investor Relations Warrants
were exercised. The Advisor Warrants expire on July 15, 2001 and none have been
exercised as of February 28, 1998.

The Company held 130,000 and 43,837 shares of common stock in treasury at
February 28, 1997 and 1998, respectively. Treasury stock is held at cost and
presented as a reduction of stockholders' equity. These treasury shares are
intended to be issued as options are exercised under the Company's Long Term
Incentive Plan and Director Incentive Plan.

11. Commitments and Contingencies:

In connection with an acquisition in 1993, the Company incurred a claim by
the seller related to pension overfunding. The Company believes that it has
adequate defenses to this claim such that the expected outcome would not be
material to the Company's results of operations or financial condition. The
Company is not presently a party to any material litigation, nor to the
knowledge of management is any material litigation threatened against the
Company. There are no other significant pending legal proceedings, other than
routine litigation incidental to the Company's business.

12. Supplemental Cash Flow Information:

On January 8, 1998, the Company acquired ICM for $0.8 million. The entire
purchase price was paid with the Company's common stock, and therefore has been
accounted for in the Statement of Cash Flows as a non-cash transaction.

On February 20, 1997, the Company acquired CEM Computers Limited for $3.7
million. The entire purchase price was financed with debt and therefore has been
accounted for in the Statement of Cash Flows as a non-cash transaction.

During fiscal years 1996 and 1997, convertible notes with principal amounts
of $2.0 million were converted into shares of common stock which has been
accounted for in the Statement of Cash Flows as non-cash transactions.

F-20
<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

12. Supplemental Cash Flow Information (Continued):

During fiscal year 1997, 68,626 shares of the Company's common stock were
exchanged for $0.4 million of indebtedness owed to the Company by certain
officers and affiliated companies which has been accounted for in the Statement
of Cash Flows as a non-cash transaction.

13. Segment Information:

The Company operates in one business segment, the providing of computer
hardware and software systems and services. The vast majority of the Company's
revenue is generated from products and services provided in the United States
and United Kingdom, although the Company does have customers in over 30
countries. The following table illustrates a summary of the operations by
geographic area.

<TABLE>
<CAPTION>
United States United Kingdom
------------- --------------
(In Thousands)

<S> <C> <C>
Fiscal Year 1996
Revenues................................................. $ 8,503 $ 18,658
Cost of sales............................................ 4,754 6,933
Gross profit............................................. 3,749 11,725
Operating expenses....................................... 3,320 9,611
Operating income......................................... 429 2,114
Total assets............................................. $ 4,027 $ 13,173

Fiscal Year 1997
Revenue.................................................. $ 10,762 $ 20,947
Cost of sales............................................ 6,269 9,345
Gross profit............................................. 4,493 11,602
Operating expenses....................................... 3,539 10,496
Operating income......................................... 954 1,106
Total assets............................................. $ 10,411 $ 21,095

Fiscal Year 1998
Revenues................................................. $ 13,100 $ 39,006
Cost of sales............................................ 8,124 19,384
Gross profit............................................. 4,976 19,622
Operating expenses....................................... 6,719 17,609
Operating income (loss).................................. (1,743) 2,013
Total assets............................................. $ 12,622 $ 29,883

</TABLE>

The Company sells its products and services to a variety of customers. No
individual customer accounted for more than 10% of Company revenue during fiscal
years 1996, 1997 or 1998.

F-21
<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

14. Employee Benefit Plans:

United Kingdom Defined Benefit and Contribution Pension Plans

The Company maintains a defined benefit pension plan in the United Kingdom
which is designed to provide death and retirement benefits for eligible
employees. On April 1, 1997, the Company also began to operate a defined
contribution pension plan in the United Kingdom. After April 1, 1997, any new
employees eligible to participate in the Company's pension plan may only join
the defined contribution pension plan. The Company contributed minimal amounts
to the defined contribution plan during fiscal year 1998, the plan's first year
in existence. Additionally, employees enrolled in the defined benefit pension
plan may transfer to the defined contribution plan if they elect to do so. The
pension costs associated with the defined benefit pension plan are assessed in
accordance with Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions". Actuarial assumptions used for defined benefit plan
valuations as of February 28, 1998 included a 9% long-term rate of return on
assets, a 8.5% discount rate and a salary increase of 5% as well as the
following:

o Benefit formula: annual pension to be 1/60 of final pensionable
salary for each year of pensionable service, subject to a maximum
fraction of 2/3.

o Funding policy: the employer contributes to the fund at rates
determined by the actuary. Employees contribute in accordance
with the plan.

o Assets held are fixed interest securities and deferred annuities
insurance policies.

Cost components for fiscal years 1997 and 1998 (In Thousands):

<TABLE>
<CAPTION>
1997 1998
--------------- --------------
<S> <C> <C>
Service cost............................................. $ 122 $ 71
Interest cost............................................ 333 360
Return on assets......................................... (376) (467)
Amortization and deferral of period service costs........ 11 11
--------------- --------------
Net periodic pension cost (income).................... $ 90 $ (25)
--------------- --------------
--------------- --------------
</TABLE>

Reconciliation of funded status as of February 28, 1997 and 1998 (In
Thousands):

<TABLE>
<CAPTION>
1997 1998
--------------- --------------

<S> <C> <C>
Accrued benefits obligation.............................. $ 3,976 $ 4,043
--------------- --------------
--------------- --------------
Project benefit obligation............................... $ 4,155 $ 5,128
Assets at market value................................... 4,998 6,646
---------------- --------------

Funded status......................................... 843 1,518
Unrecognized transitions asset........................... (59) (54)
Unrecognized gain........................................ (342) (710)
---------------- --------------

Prepaid pension expense............................... $ 442 $ 754
--------------- --------------
--------------- --------------
</TABLE>

F-22

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

14. Employee Benefit Plans (Continued):

401(k) Retirement Savings Plan

The Company maintains a defined contribution 401(k) profit-sharing plan and
trust (the 401(k) Plan) in the United States. To be eligible to participate in
the 401(k) Plan (the Plan Eligibility Requirements), an employee must be 21
years of age, work at least 30 hours per week and be employed for 1 month. After
satisfying the Plan Eligibility Requirements, employees of the Company may
enroll in the 401(k) Plan on the first of any month. A participating employee,
by electing to defer a portion of his or her compensation, may make pretax
contributions to the 401(k) Plan, subject to limitations under the Code, of a
percentage (not to exceed 15%) of his or her total compensation. The Company
contributes 50% of every dollar the participant contributes up to a total of 2%
of the participant's gross compensation. Participant contributions and earnings
are 100% vested at all times, while Company-matching contributions vest in 20%
increments over a five-year period beginning one year after the employees
eligibility date. Participants may alter their contribution amounts at any time.
Employees are responsible for directing the investments of all assets in their
individual account. Contributions may be withdrawn, with possible penalties for
certain early withdrawals, only after (i) the employee reaches age 59 1/2, (ii)
the employee's retirement with the Company, (iii) the employee's death or
disability, (iv) the termination of the employee's employment with the Company,
or (v) the termination of the 401(k) Plan. The Company pays all expenses
associated with the 401(k) Plan, and contributed minimal amounts to the plan
during fiscal year 1996, 1997, and 1998.

Stock Option Plan

The Company maintains a Long Term Incentive Plan (the LTI Plan) under which
options to purchase shares of the Company's common stock have been granted to
eligible employees. During fiscal year 1998, the Company increased the total
number of shares available for award under the LTI Plan to 1.7 million from 1.2
million. The LTI Plan is administered by the Compensation Committee of the Board
of Directors. Option activity and related weighted average prices under the LTI
Plan are summarized as follows:

<TABLE>
<CAPTION>
February 29, 1996 February 28, 1997 February 28, 1998
----------------- ----------------- -----------------
Weighted Weighted Weighted
Average Average Average
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------

<S> <C> <C> <C> <C> <C> <C>
Shares under option at beginning of year....... 993 $ 3.31 573 $ 3.31 1,012 $ 4.09
Granted..................................... - 3.31 445 5.08 125 6.51
Exercised................................... (162) 3.31 (6) 3.31 (198) 4.19
Forfeited................................... (258) 3.31 - - (45) 6.18
----------- ----------- ------------

Shares under option at end of year............. 573 $ 3.31 1,012 $ 4.09 894 $ 4.30
----------- ----------- ------------
----------- ----------- ------------
Shares under option exercisable at end of
year........................................... 70 $ 3.31 291 $ 3.31 366 $ 3.63
----------- ----------- ------------
----------- ----------- ------------

Shares available for future grant.............. 465 20 440
----------- ----------- ------------
----------- ----------- ------------
</TABLE>

F-23

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

14. Employee Benefit Plans (Continued):

The following table summarizes information about fixed options outstanding
at February 28, 1998:

Options Outstanding Options Exercisable
------------------------------------------------ ---------------------------
Weighted Weighted Weighted
Average Average Average
Range of Exercise Prices Shares Remaining Life Exercise Price Shares Exercise Price
------------------------ ------ -------------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
$3 to $5.................. 610 1.7 years $ 3.42 329 $ 3.35
$5 to $7.................. 284 2.3 years 6.19 37 6.16
--- ---
894 366
</TABLE>

All options granted have exercise prices of 100% of the market value at the
date of grant and are generally exercisable at the rate of 25% per year
beginning two years from date of grant. Options expire 10 years from the date of
grant unless otherwise specified in the option agreement.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting of Stock Based
Compensation" (FAS 123). FAS 123 requires companies with stock-based
compensation plans either recognize compensation expense based on new fair value
accounting methods or continue to apply the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and
disclose pro forma net income and earnings per share assuming the fair value
method had been applied. The Company has elected to follow APB 25 in accounting
for its employee stock options and has not recorded any expense related to the
granting of options to employees.

Pro forma information regarding net income and earnings per share is
required by FAS 123 and has been determined as if the Company had accounted for
its employee stock options under the fair value method. The fair value for these
options was estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
Fiscal Year
---------------------------------------
1997 1998

<S> <C> <C>
Risk free interest rate................... 5.9% 6.0%
Expected dividend yield................... 0.0% 0.0%
Expected lives (years).................... 2.0 2.25
Expected volatility....................... 52.0% 65.0%
Weighted average fair value of options
granted during the year................ $ 1.80 $ 2.69

</TABLE>

F-24

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

14. Employee Benefit Plans (Continued):

The total value of the options granted, as calculated using the Black
Sholes method, are amortized over the vesting periods of the options. The
Company's pro forma information required under FAS 123 is as follows:

<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------------------
1996 1997 1998
---- ---- ----
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Net income (loss) as reported....................... $ 2,065 $ 1,511 $ (783)
Pro forma net income (loss)......................... $ 2,054 $ 1,433 $ (981)

Basic earnings per share as reported................ $ 0.36 $ 0.23 $ (0.10)
Basic pro-forma earnings per share.................. $ 0.36 $ 0.22 $ (0.13)

Diluted earnings per share as reported.............. $ 0.34 $ 0.22 $ (0.10)
Diluted pro-forma earnings per share................ $ 0.34 $ 0.21 $ (0.13)

</TABLE>

15. Significant Risks and Uncertainties:

As discussed in Note 1, the preparation of the 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. In addition, these estimates and assumptions affect
the reported amounts of revenues and expenses during the reporting period as
well. Amounts affected by these estimates include, but are not limited to, the
estimated useful lives, related amortization expense and carrying value of the
Company's intangible assets and capitalized software development costs, accrued
reserves for contingencies and estimates to complete fixed price contracts.
Changes in the status of certain matters or facts or circumstances underlying
these estimates could result in material changes to these estimates, and actual
results could differ from these estimates.

F-25

<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

15. Significant Risks and Uncertainties (Continued):

market on a timely and cost effective basis, and its ability to maintain a labor
force sufficiently skilled to compete in the current environment. Additionally,
there is increasing competition in the Company's products and services
businesses, and there can be no assurance that the Company's current products or
services will remain competitive or that the Company's development efforts will
produce products with the cost and performance characteristics necessary to
remain competitive.

F-26
<PAGE>

UniComp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

16. Quarterly Consolidated Results of Operations (Unaudited):

<TABLE>
<CAPTION>
Fiscal Year Ended February 28, 1997
------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
------------------- --------------- -------------- --------------
(In Thousands, Except Per Share Data)

<S> <C> <C> <C> <C>
Revenue....................... $ 7,525 $ 7,377 $ 8,355 $ 8,452
Gross profit.................. 3,921 3,911 4,532 3,731
Net income.................... 460 282 573 196
Basic earnings per share...... $ 0.08 $ 0.05 $ 0.09 $ 0.03
Diluted earnings per share.... $ 0.07 $ 0.04 $ 0.09 $ 0.03

</TABLE>

Fiscal Year Ended February 28, 1998
------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
------------------- --------------- -------------- --------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
Revenue....................... $ 12,656 $ 13,938 $ 13,543 $ 11,969
Gross profit.................. 5,585 6,891 6,865 5,257
Net income (loss)............. 522 717 330 (2,352)
Basic earnings per share...... $ 0.07 $ 0.09 $ 0.04 $ (0.30)
Diluted earnings per share.... $ 0.07 $ 0.09 $ 0.04 $ (0.30)

</TABLE>

17. Fourth Quarter Adjustments:

During the fourth quarter of fiscal year 1998, the Company recorded a
provision for doubtful accounts and returns of $1.3 million. The increase in the
provision is due principally to increases in the Company's general and specific
reserves. Also during the fourth quarter of fiscal year 1998, the Company
recorded a deferred tax asset valuation allowance of $0.5 million.

During the fourth quarter of fiscal year 1997, the Company recognized an
income tax credit of $0.3 million related to a reduction of the cumulative
deferred tax liability in the United Kingdom. Also during the fourth quarter of
fiscal year 1997, the Company recorded an additional prepaid pension asset of
$0.2 million related to the defined benefit pension plan in the United Kingdom
based on the computation of its actuarial determination of net periodic pension
cost. Additionally, during the fourth quarter of 1997, the Company recorded a
provision for returns for a specific customer of $0.4 million.

During the fourth quarter of fiscal year 1996, the Company recognized an
income tax credit of $0.3 million to recognize the United States deferred tax
asset related to net operating loss carryforwards. Also during the fourth
quarter of fiscal year 1996, the Company recorded a prepaid pension asset of
$0.2 million related to the defined benefit pension plan in the United Kingdom
based on the computation of its actuarial determination of net periodic pension
cost.

F-27

<PAGE>

UniComp, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
For the years ended February 29, 1996 and February 28, 1997 and 1998

Balance at the Charged to Charged to
Beginning of Costs and Other Balance at
the Period Expenses Accounts Deductions End of Period
---------- -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Year ended February 29, 1996
Accounts receivable allowance.......... $ 127 $ 110 $ (99) $ 138
Deferred tax asset valuation
allowance............................ $ 540 $ (540) (1) $ 0

Year ended February 28, 1997
Accounts receivable allowance.......... $ 138 $ 92 $ 230
Deferred tax asset valuation
allowance............................ $ 0 $ 0

Year ended February 28, 1997
Accounts receivable allowance.......... $ 230 $ 1,433 $ (8) $ 1,655
Deferred tax asset valuation
allowance............................ $ 0 $ 500 $ 500

</TABLE>

(1) To adjust the valuation allowance to reflect the utilization of net
operating losses during the year and realization of remaining deferred tax
asset.

<PAGE>

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT JURISDICTION OF INCORPORATION

UniComp U.K. Holdings, Limited United Kingdom

ICS Computing Group Limited United Kingdom

CI Computer Software Limited United Kingdom

Unibol Limited United Kingdom

Computer Maintenance Ireland Limited United Kingdom

CEM Computers Limited United Kingdom

Aurora UniComp Limited United Kingdom

ICS Computing Limited United Kingdom

UniComp IOM Limited Isle of Man

Industrial Computing Machines Limited Ireland

Smoky Mountain Technologies, Inc. North Carolina

Novatek Corporation Florida

Sun and Sky Development Corporation Florida

Arccom Management Systems, Inc. Georgia
(d/b/a Unibol, Inc.)

UniComp Systems, Inc. Texas

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the incorporation by reference in the registration statements
of UniComp, Inc. on Forms S-3 (File Numbers 33-64312, 333-11605 and 333-27857)
and S-8 (File Numbers 33-98564 and 333-21313) of our report dated May 22.
1997 except for the third paragraph of Note 4 as to which the date is
November 29, 1997, on our audits of the consolidated financial statements and
financial statement schedule of UniComp, Inc. as of February 28, 1997, and
for each of the two years in the period ended February 28, 1997, which report
is included in the Annual Report on Form 10-K.

COOPERS & LYBRAND L.L.P.

Atlanta, Georgia
May 28, 1998

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of
our report dated May 26, 1998, with respect to the consolidated financial
statements of UniComp, Inc. as of February 28, 1998 and for the year then
ended, included in this Form 10-K, into the following previously filed
Registration Statements of UniComp, Inc.:

0 Form S-3 (File Numbers 33-64312, 333-11605 and 333-27857)
0 Form S-8 (File Numbers 33-98564 and 333-21313)

ARTHUR ANDERSEN LLP

Atlanta, Georgia
May 26, 1998

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S ANNUAL FINANCIAL STATEMENTS AS CONTAINED IN THE COMPANY'S FEBRUARY 28,
1998 FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 3,904
<SECURITIES> 0
<RECEIVABLES> 16,390
<ALLOWANCES> 1,655
<INVENTORY> 4,556
<CURRENT-ASSETS> 24,544
<PP&E> 10,172
<DEPRECIATION> 5,426
<TOTAL-ASSETS> 42,505
<CURRENT-LIABILITIES> 23,881
<BONDS> 1,480
0
0
<COMMON> 80
<OTHER-SE> 16,213
<TOTAL-LIABILITY-AND-EQUITY> 42,505
<SALES> 25,770
<TOTAL-REVENUES> 52,106
<CGS> 21,166
<TOTAL-COSTS> 27,508
<OTHER-EXPENSES> 24,334
<LOSS-PROVISION> 1,433
<INTEREST-EXPENSE> 605
<INCOME-PRETAX> (341)
<INCOME-TAX> 442
<INCOME-CONTINUING> (783)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (783)
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10

</TABLE>