UNICOMP INC, 10-Q, 2000-01-18

UNICOMP INC
10-Q, 2000-01-18
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>
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SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q

(MARK ONE)

<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1999

<TABLE>
<C> <S>
/ / TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 0-15671

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

UNICOMP, INC.

(Exact name of Registrant as Specified in its Charter)

<TABLE>
<S> <C>
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)
</TABLE>

Registrant's Telephone Number, Including Area Code: (770) 424-3684

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

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

7,434,243 Common shares, $0.01 par value, as of November 30, 1999.

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<PAGE>
UNICOMP, INC.

INDEX

<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
PART I. FINANACIAL INFORMATION

Item 1. Financial Statements........................................ 3 - 7

Consolidated Balance Sheets as of February 28, 1999 and
November 30, 1999......................................... 3, 4

Consolidated Statements of Operations for the three months
ended November 30, 1998 and 1999.......................... 5

Consolidated Statements of Operations for the nine months
ended November 30, 1998 and 1999.......................... 6

Consolidated Statements of Cash Flows for the nine months
ended November 30, 1998 and 1999.......................... 7

Notes to the Consolidated Financial Statements.............. 8 - 12

Item 2. Management's Discussion and Analysis of Results of
Operations, Financial Conditions, and Liquidity and
Capital Resources......................................... 13 - 25

Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 26

PART II. OTHER INFORMATION

Item 1. Legal Proceedings........................................... 27
Item 2. Changes in Securities and Use of Proceeds................... 27
Item 6. Exhibits and Reports on Form 8-K............................ 28

Signatures..................................................................... 29

Exhibits....................................................................... 34
</TABLE>

2
<PAGE>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNICOMP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
(AUDITED) (UNAUDITED)
FEBRUARY 28, NOVEMBER 30,
1999 1999
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,400 $ 134
Accounts and other receivables:
Trade, net of allowance of $824 and $689 at
February 28, 1999 and November 30, 1999,
respectively.......................................... 7,192 8,119
Other receivables....................................... 531 572
Inventory................................................. 3,261 3,557
Prepaid expenses and Other................................ 1,255 2,428
------- -------
Total current assets................................ 13,639 14,810
------- -------
Property and equipment, net................................. 2,240 4,109
------- -------
Other assets:
Acquired and developed software, net of accumulated
amortization of $6,631 and $8,389 at February 28, 1999
and November 30, 1999, respectively..................... 5,680 5,275
Goodwill, net of accumulated amortization of $489 and $870
at February 28, 1999 and November 30, 1999,
respectively............................................ 2,454 4,016
Deferred income taxes..................................... 626 626
Prepaid pension........................................... 602 602
Receivables from related parties.......................... 525 525
Other..................................................... 1,159 585
Net assets of discontinued operations..................... 2,848 3,538
------- -------
Total other assets.................................. 13,894 15,167
------- -------
Total assets........................................ $29,773 $34,086
======= =======
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

3
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
(AUDITED) (UNAUDITED)
FEBRUARY 28, NOVEMBER 30,
1999 1999
------------- -------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Current liabilities:
Accounts payable.......................................... $ 2,564 $ 3,982
Accrued expenses.......................................... 1,923 1,742
Deferred revenue.......................................... 1,210 868
Taxes payable............................................. 801 747
Lines of credit........................................... 3,611 4,502
Current portion of notes payable.......................... 1,069 1,701
------- -------
Total current liabilities........................... 11,178 13,542
------- -------
Long-term liabilities:
Notes payable............................................. 1,473 2,423
Deferred income taxes..................................... 1,151 1,031
Other long-term liabilities............................... 163 285
------- -------
Total long-term liabilities......................... 2,787 3,739
------- -------
Total liabilities................................... 13,965 17,281
------- -------
Stockholders' equity:
Preferred stock: $1 par value, authorized 5,000, of which
3 were issued and outstanding at February 28, 1999 and
November 30, 1999, respectively......................... 2,800 2,800
Common stock: $.01 par value, 25,000 authorized 7,965 and
8,085 issued at February 28, 1999 and November 30, 1999,
respectively............................................ 80 81
Additional contributed capital............................ 15,810 16,387
Retained earnings (deficit)............................... (697) 586
------- -------
17,993 19,854
Less treasury stock....................................... (2,052) (2,785)
Cumulative translation adjustment......................... (133) (264)
------- -------
Total stockholders' equity.......................... 15,808 16,805
------- -------
Total liabilities and stockholders' equity.......... $29,773 $34,086
======= =======
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

4
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
NOVEMBER 30, NOVEMBER 30,
1998 1999
------------ ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Revenue:
Equipment................................................. $1,946 $2,978
Services.................................................. 2,685 1,962
Software.................................................. 1,358 2,524
------ ------
Total revenue........................................... 5,989 7,464
------ ------
Cost of sales:
Equipment................................................. 1,283 2,038
Services.................................................. 1,363 309
Software.................................................. 216 706
------ ------
Total cost of sales..................................... 2,862 3,053
------ ------
Gross profit................................................ 3,127 4,411

Selling, general and administrative expenses................ 2,895 4,057
------ ------
Operating income............................................ 232 354
------ ------
Other income (expense):
Other, net................................................ (13) 1
Interest, net............................................. (63) (126)
------ ------
Total other income (expense)............................ (76) (125)
------ ------
Income from continuing operations before provision for
income taxes.............................................. 156 229

Provision (Benefit) for income taxes........................ (20) (200)
------ ------
Net income from continuing operations....................... $ 176 $ 429
Income from discontinued operations......................... (158) 173
------ ------
Net income.................................................. $ 18 $ 602
====== ======
Preferred stock dividends................................... $ -- $ 37
------ ------
Income available to common shareholders..................... $ 18 $ 565
====== ======
Basic earnings per common share:
Income(loss) from continuing operations..................... $ 0.02 $ 0.06
Income(loss) from discontinued operations................... (0.02) 0.02
------ ------
Net income(loss)............................................ $(0.00) $ 0.08
====== ======
Diluted earnings per common share:
Income(loss) from continuing operations..................... $ 0.02 $ 0.04
Income(loss) from discontinued operations................... (0.02) 0.02
------ ------
Net income(loss)............................................ $(0.00) $ 0.06
====== ======
Weighted average shares..................................... 7,837 7,456
====== ======
Weighted average shares assuming dilution................... 8,373 8,837
====== ======
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

5
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
NOVEMBER 30, NOVEMBER 30,
1998 1999
------------ ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Revenue:
Equipment................................................. $ 6,207 $ 8,768
Services.................................................. 5,974 5,227
Software.................................................. 3,356 6,865
------- -------
Total revenue........................................... 15,537 20,860
------- -------
Cost of sales:
Equipment................................................. 4,385 5,627
Services.................................................. 1,791 855
Software.................................................. 1,186 1,964
------- -------
Total cost of sales..................................... 7,362 8,446
------- -------
Gross profit................................................ 8,175 12,414
Selling, general and administrative expenses................ 8,551 11,725
------- -------
Operating income............................................ (376) 689
------- -------
Other income (expense):
Other, net................................................ (17) 24
Interest, net............................................. (313) (366)
------- -------
Total other income (expense)............................ (330) (342)
------- -------
Income (loss) from continuing operations before provision
for income taxes.......................................... (706) 347
Provision (benefit) for income taxes........................ (191) (440)
------- -------
Net income (loss) from continuing operations................ $ (515) $ 787
Income from discontinued operations......................... 273 601
------- -------
Net income (loss)........................................... $ (242) $ 1,388
======= =======
Preferred stock dividends................................... $ -- $ 105
------- -------
Income(loss) available to common shareholders............... $ (242) $ 1,283
======= =======
Basic earnings per common share:
Income(loss) from continuing operations..................... $ (0.07) $ 0.09
Income(loss) from discontinued operations................... 0.04 0.08
------- -------
Net income(loss)............................................ $ (0.03) $ 0.17
======= =======
Diluted earnings per common share:
Income(loss) from continuing operations..................... $ (0.06) $ 0.08
Income(loss) from discontinued operations................... 0.03 0.06
------- -------
Net income(loss)............................................ $ (0.03) $ 0.14
======= =======
Weighted average shares..................................... 7,892 7,485
======= =======
Weighted average shares assuming dilution................... 8,428 8,940
======= =======
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

6
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
NOVEMBER 30, NOVEMBER 30,
1998 1999
------------ ------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Net cash provided (used) by operating activities:
Net income (loss)......................................... $ (515) $ 787
Adjustments to reconcile net income to net cash provided
(used) by operations:
Depreciation and amortization........................... 2,238 2,915
Allowance for doubtful accounts......................... 129 8
Deferred income taxes................................... 99 (120)
Gain on disposition of joint venture.................... 0 (40)
Changes in assets and liabilities:
Accounts and other receivables........................ (448) (664)
Inventory............................................. (938) 440
Prepaid expenses...................................... (374) (1,016)
Accounts payable...................................... (561) 266
Accrued expenses...................................... (545) 17
Deferred revenue...................................... (96) (342)
Income taxes payable.................................. (369) (272)
Other................................................. (745) (163)
------- -------
Net cash provided (used) by operating activities.... (2,125) 1,816
------- -------
Cash flow from investing activities:
Capital expenditures...................................... (727) (410)
Purchase of acquired company.............................. 0 (259)
Payment received on note for sale of joint venture........ 0 95
Proceeds from disposition of joint venture................ 0 10
Acquired and developed software........................... (1,388) (1,392)
------- -------
Net cash used by investing activities............... (2,115) (1,956)
------- -------
Cash flow from financing activities:
Bank Overdraft............................................ 0 0
Payments on borrowings.................................... (2,794) (2,182)
Proceeds from borrowing................................... 227 1,365
Issuance of Series A Preferred Stock, net................. 2,800 0
Payment of preferred stock dividends...................... 0 (105)
Receivables from related parties.......................... 120 0
Purchase of Treasury Stock................................ (279) (736)
------- -------
Net cash provided (used) by financing activities.... 74 (1,658)
------- -------
Net increase (decrease) in cash............................. (4,166) (1,798)
Effect of exchange rate changes on cash..................... (200) (51)
Cash from discontinued activities........................... 1,465 583
Cash and cash equivalents at beginning of period............ 3,904 1,400
------- -------
Cash and cash equivalents at end of period.................. $ 1,003 $ 134
======= =======
Cash paid for interest...................................... $ 252 $ 375
======= =======
Cash paid for taxes......................................... $ 86 $ 299
======= =======
Common stock issued and to be issued for acquired company... $ 0 $ 578
======= =======
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

7
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of UniComp, Inc.
and its subsidiaries (the "Company"). All material intercompany balances and
transactions have been eliminated in consolidation. The preparation of financial
statements requires management to make estimates and assumptions underlying the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Changes in the
status of certain matters, facts or circumstances underlying these estimates
could result in material changes and actual results could differ from these
estimates. It is suggested that these quarterly consolidated financial
statements and notes be read in conjunction with the financial statements and
notes included in the Annual Report on Form 10-K for the fiscal year ended
February 28, 1999.

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

2. BASIC AND DILUTED EARNINGS PER SHARE

The calculation and presentation of earnings per share are in accordance
with SFAS No. 128 "Earnings Per Share." Basic earnings per share are based on
the weighted average number of shares outstanding. Diluted earnings per share
are based on the weighted average number of shares outstanding and the dilutive
effect of the stock options and warrants outstanding (using the treasury stock
method) and the conversion of preferred stock (using the if-converted method).
For the Company, the numerator is the same for both basic and diluted EPS
calculations. The following is a reconciliation of the denominator used in the
calculation (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 30 NOVEMBER 30
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average shares......................... 7,837 7,456 7,892 7,485
Dilutive effect of common stock options,
warrants and preferred shares................. 536 1,381 536 1,455
----- ----- ----- -----
Weighted average shares assuming dilution....... 8,373 8,837 8,428 8,940
===== ===== ===== =====
</TABLE>

Options and warrants to purchase 502,127 shares of common stock at a
weighted average price of $6.57 per share for the nine months ended
November 30, 1999 were outstanding but were not included in the computation of
diluted EPS because the options' exercise prices were greater than the average
market price for the Company's common stock for the period.

3. BUSINESS COMBINATIONS

ACQUISITION OF CONTINUUM TECHNOLOGY CORPORATION

In January 1999, the Company acquired a $.6 million note receivable from
Continuum Technology Corporation ("Continuum"). Consideration consisted of
$.2 million in cash and accounts receivable of $.4 million. In March 1999, the
Company purchased 97.5% of Continuum's outstanding common stock. Consideration
consisted of $259,361 in cash, 8% notes payable aggregating $572,128, and
200,000 restricted shares of the Company's common stock.

8
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DISPOSITION OF AURORA UNICOMP LIMITED

On December 17, 1998, the Company completed the sale of substantially all of
the assets of the Company's Northern Ireland subsidiary, Aurora UniComp Limited
("Aurora"), to Aurora SX3 Limited. Aurora maintained computer hardware and was a
reseller of computer equipment to the educational marketplace. Consideration
consisted of approximately $6.3 million in cash and assumption of debt totaling
approximately $5.5 million. The assets disposed of included, but were not
limited to, the plant machinery and motor vehicles, computer and office
equipment, furniture, premises, tradename, investments and intellectual property
rights. Aurora was a combination of the CEM acquisition, in 1997, ADVEC in 1995
and CMI, one of the ICS Computing Group subsidiaries acquired in 1993.

DISPOSITION OF SHOP WHILE YOU WAIT, INC.

In June 1998, the Company contributed accounts receivable of $.5 million for
a 67% ownership in a newly formed entity engaged in retail electronic commerce.
In April 1999, the Company sold its ownership percentage to the minority
shareholder for a $.7 million note receivable bearing interest at 8.5%. The note
is receivable in monthly installments of $5,000-$10,000 per month with a final
payment of $240,000 due in August 2003. The note is secured by the assets of the
venture and the personal guarantee and pledged assets of the purchaser. The gain
of $.2 million on the sale will be recognized as cash is received.

DISPOSITION OF ICS UNICOMP LIMITED

On December 1, 1999, UniComp, Inc. (the "Company") completed the sales of
certain assets (the "Assets") of the Company's Northern Ireland subsidiary, ICS
UniComp Limited, to ZEC Limited (the "Sale"). ICS UniComp Limited is an
information technology service provider. The Assets disposed of include, but are
not limited to, the following: plant machinery and motor vehicles, computer and
office equipment, furniture, premises, tradename, and intellectual property
rights. Accounts receivable, accounts payable, and all other liabilities as of
December 1, 1999 were retained by ICS UniComp Limited. The Sale was consummated
in accordance with the terms of that certain Agreement for the Sales and
Purchase of the Goodwill Business and Assets of ICS UniComp Limited between ICS
UniComp Limited, UniComp Holdings (UK) Limited, ICS Computing Group Limited,
UniComp, Inc., and ZEC Limited dated December 1, 1999 (the "Sale Agreement").

The Consideration paid to the Company in connection with the Sale was as
follows: (i) approximately 4.9 million pounds sterling, (approximately
$7.8 million U.S.) of which 0.2 million pounds sterling (approximately
$.3 million U.S.) is being withheld pending final calculation of certain
completion accounts set forth in detail in the Sale Agreement. In addition, the
Company retained certain net assets worth $1.3 million.

The total consideration paid in the Sale was determined through arm's length
negotiation between the parties. Neither the Company nor ICS UniComp Limited,
nor any of their affiliates had, or to the knowledge of the Company or ICS
UniComp Limited, did any director or officer or any associate of any such
director or officer of the Company nor ICS UniComp Limited, have any material
relationship with ZEC Limited prior to the Sale.

9
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SUMMARY OF DISCONTINUED OPERATIONS--ICS UNICOMP LIMITED

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
------------------- -------------------
11/30/98 11/30/99 11/30/98 11/30/99
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue.................................... $2,575 $2,722 $7,030 $7,979
Expenses................................... 1,419 1,888 3,948 5,040
Earnings................................... 243 253 720 921
Tax........................................ 61 80 191 320
------ ------ ------ ------
Net income................................. $ 182 $ 173 $ 529 $ 601
====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
FEBRUARY 28, 1999 NOVEMBER 30, 1999
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Current assets............................... $ 183 $ 471
Property and equipment net................... 1,371 1,506
Other assets................................. 1,736 2,036
Current liabilities.......................... (442) (475)
------ ------
Net assets disposed of....................... $2,848 $3,538
====== ======
</TABLE>

Company results have been restated to exclude the above from continuing
operations. Company results for the period ending November 30, 1998 had
previously been restated to exclude the results of Aurora UniComp Limited.

4. COMPREHENSIVE INCOME

The components of comprehensive income are as follows (in thousands) for the
three month and nine month periods ended November 30, 1998 and 1999.

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 30 NOVEMBER 30
---------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income (Loss)............................. $18 $602 ($242) $1,388
Change in Cumulative Translation
Adjustments................................. 68 (79) 169 (131)
--- ---- ----- ------
Comprehensive Income (loss)................... $86 $523 ($ 73) $1,257
=== ==== ===== ======
</TABLE>

5. SEGMENT INFORMATION

The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," in its financial statements for the year
ended February 28, 1999. The Company's business units have been aggregated into
three reportable segments: Platform Migration, Transaction Processing, and
Other, since the long-term financial performance within each of these segments
is affected by similar economic conditions. Each of these segments has its own
management team. The Platform Migration segment provides software that rehosts
code written for certain proprietary platforms to open computing platforms. The
Company markets its platform migration software through direct and indirect
sales channels. The Transaction Processing segment provides computer software
and hardware that allow merchants to settle non cash transactions. The Company
markets its transaction processing systems through a direct sales force. The
Company also provides certain other technology products and solutions,

10
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

including Year 2000 conversion tools and services and human resources management
software, which are marketed through direct and indirect sales channels..

The accounting policies of the reportable segments are the same as those
described in Note 1 to the financial statements.

The Company evaluates the performance of each operating division based on
income from operations. Summarized financial information concerning the
Company's reportable segments is shown in the following table. The "Other"
column includes corporate-related activities as well as results of smaller
operations of the Company.

<TABLE>
<CAPTION>
PLATFORM TRANSACTION
SEGMENT REPORTING MIGRATION PROCESSING OTHER TOTAL
- ----------------- --------- ----------- -------- --------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED NOVEMBER 30, 1999:
(IN THOUSANDS)
Revenues.............................................. $3,387 $2,052 $2,025 $7,464
Cost of sales......................................... 637 1,486 930 3,053
------ ------ ------ ------
Gross profit.......................................... 2,750 566 1,095 4,411
Operating expenses.................................... 1,678 745 1,634 4,057
------ ------ ------ ------
Operating income (loss)............................... 1,072 (179) (539) 354
====== ====== ====== ======
THREE MONTHS ENDED NOVEMBER 30, 1998:
(IN THOUSANDS)
Revenues.............................................. $2,365 $2,261 $1,363 $5,989
Cost of sales......................................... 563 1,253 1,046 2,862
------ ------ ------ ------
Gross profit.......................................... 1,802 1,008 317 3,127
Operating expenses.................................... 1,428 551 916 2,895
------ ------ ------ ------
Operating income (loss)............................... 374 457 (599) 232
====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
PLATFORM TRANSACTION
SEGMENT REPORTING MIGRATION PROCESSING OTHER TOTAL
- ----------------- --------- ----------- -------- --------
<S> <C> <C> <C> <C>
NINE MONTHS ENDED NOVEMBER 30, 1999:
(IN THOUSANDS)
Revenues............................................. $9,159 $5,908 $5,793 $20,860
Cost of sales........................................ 1,599 4,023 2,824 8,446
------ ------ ------ -------
Gross profit......................................... 7,560 1,885 2,969 12,414
Operating expenses................................... 4,780 2,084 4,861 11,725
------ ------ ------ -------
Operating income (loss).............................. 2,780 (199) (1,892) 689
====== ====== ====== =======
NINE MONTHS ENDED NOVEMBER 30, 1998:
(IN THOUSANDS)
Revenues............................................. $6,273 $6,856 $2,408 $15,537
Cost of sales........................................ 1,729 4,726 907 7,362
------ ------ ------ -------
Gross profit......................................... 4,544 2,130 1,501 8,175
Operating expenses................................... 3,826 1,969 2,756 8,551
------ ------ ------ -------
Operating income (loss).............................. 718 161 (1,255) (376)
====== ====== ====== =======
</TABLE>

11
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
UNITED UNITED
STATES KINGDOM TOTAL
-------- -------- --------
<S> <C> <C> <C>
THREE MONTHS ENDED NOVEMBER 30, 1999:
(IN THOUSANDS)
Revenues.................................................. $4,741 $2,723 $7,464
Cost of sales............................................. 2,240 813 3,053
------ ------ ------
Gross profit.............................................. 2,501 1,910 4,411
Operating expenses........................................ 1,579 2,478 4,057
------ ------ ------
Operating income (loss)................................... 922 (568) 354
====== ====== ======
THREE MONTHS ENDED NOVEMBER 30, 1998:
(IN THOUSANDS)
Revenues.................................................. $2,799 $3,190 $5,989
Cost of sales............................................. 1,424 1,438 2,862
------ ------ ------
Gross profit.............................................. 1,375 1,752 3,127
Operating expenses........................................ 1,262 1,633 2,895
------ ------ ------
Operating income (loss)................................... 113 119 232
====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
UNITED UNITED
STATES KINGDOM TOTAL
-------- -------- --------
<S> <C> <C> <C>
NINE MONTHS ENDED NOVEMBER 30, 1999:
(IN THOUSANDS)
Revenues.................................................. $13,213 $7,647 $20,860
Cost of sales............................................. 6,260 2,186 8,446
------- ------ -------
Gross profit.............................................. 6,953 5,461 12,414
Operating expenses........................................ 4,742 6,983 11,725
------- ------ -------
Operating income (loss)................................... 2,211 (1,522) 689
======= ====== =======
NINE MONTHS ENDED NOVEMBER 30, 1998:
(IN THOUSANDS)
Revenues.................................................. $ 8,356 $7,181 $15,537
Cost of sales............................................. 5,206 2,156 7,362
------- ------ -------
Gross profit.............................................. 3,150 5,025 8,175
Operating expenses........................................ 4,183 4,368 8,551
------- ------ -------
Operating income (loss)................................... (1,033) 657 (376)
======= ====== =======
</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 the
three and nine months periods ended November 30, 1998 and 1999.

6. USE OF ESTIMATES

The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statement and the reported amounts or revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
consolidated financial statements include all adjustments that, in the opinion
of management, are necessary for a fair presentation of the results for the
periods indicated. All such adjustments are of a normal recurring nature.

12
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS,
FINANCIAL CONDITIONS, AND LIQUIDITY AND CAPITAL RESOURCES:

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND WITH THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1999. EXCEPT
FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THIS DISCUSSION CONTAINS
FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES,
INCLUDING ECONOMIC, COMPETITIVE AND TECHNOLOGICAL FACTORS AFFECTING THE
COMPANY'S OPERATIONS, MARKETS, PRODUCTS, SERVICES AND PRICES AS WELL AS OTHER
FACTORS DISCUSSED IN THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND THE
COMPANY'S ANNUAL REPORT ON FORM 10-K. THESE AND OTHER FACTORS MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED.

OVERVIEW

UniComp, Inc. (the "Company" or "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. For the nine months ended November 30, 1999, the
Company generated $20.9 million in total revenue, of which $8.8 million was
derived from sales of computer equipment and $5.2 million was derived from
information technology services. The remaining $6.9 million in revenue was
derived from license and maintenance fees for the Company's platform-migration
software, transaction-processing systems and other vertical market software
products.

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

Selling, general and administrative expenses include salaries and related
costs for all employees, travel, costs associated with internal equipment, sales
commissions, premises and marketing costs, as well as general office and
administrative costs, and the amortization of goodwill. 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.

On December 1, 1999, the Company completed the sale of certain assets of the
Company's Northern Ireland subsidiary, ICS UniComp, Limited, to ZEC Limited. ICS
UniComp was an information technology service provider. Consideration consisted
of approximately $7.8 million in cash. The assets disposed of included, but were
not limited to, the following: plant, machinery and motor vehicles, computer and
office equipment, furniture, premises, tradename, and intellectual property
rights. ICS was one of the ICS' Computing Group subsidiaries acquired in 1993.

Consideration consisted of $259,361 in cash, 8% notes payable aggregating
$572,128, and 200,000 restricted shares of the Company's common stock.

In December 1998, the Company acquired for approximately $403,000 a United
Kingdom company, Carlton Software Productions Limited, which develops, sells and
supports IBM AS/400 Systems management software tools.

13
<PAGE>
On December 17, 1998, the Company completed the sale of substantially all of
the assets of the Company's Northern Ireland subsidiary, Aurora UniComp Limited
("Aurora"), to Aurora SX3 Limited. Aurora maintained computer hardware and was a
reseller of computer equipment to the educational marketplace. Consideration
consisted of approximately $6.3 million in cash and assumption of debt totaling
approximately $5.5 million. The assets disposed of included, but were not
limited to, the plant machinery and motor vehicles, computer and office
equipment, furniture, premises, tradename, investments and intellectual property
rights. Aurora was a combination of the CEM acquisition, in 1997, ADVEC in 1995
and CMI, one of the ICS Computing Group subsidiaries acquired in 1993.

In June 1998, the Company contributed accounts receivable of $.5 million for
a 67% ownership in a newly formed entity engaged in retail electronic commerce.
In April 1999, the Company sold its ownership percentage to the minority
shareholder for a $.7 million note receivable bearing interest at 8.5%. The note
is receivable in monthly installments of $5,000 - $10,000 per month with a final
payment of $240,000 due August 2003. The note is secured by the assets of the
venture and the personal guarantee and pledged assets of the purchaser. The gain
of $.2 million on the sale will be recognized as cash is received.

On October 7, 1998, the Company issued 3,000 shares of Series A Convertible
Preferred Stock, par value $1.00 per share, and warrants for 102,127 shares of
the Company's Common Stock for an aggregate consideration of $3 million. Each
share of Series A Convertible Preferred Stock may be converted into a number of
shares of the Company's Common Stock pursuant to the terms of the Series A
Convertible Preferred Stock Purchase Agreement; provided that, absent
shareholder approval, the maximum number of shares of Common Stock that may be
issued upon conversion of the Series A Convertible Preferred Stock is 1,576,000.
The warrants entitle the holders thereof to purchase an aggregate of 102,127
shares of the Company's Common Stock at an exercise price of $4.4063 per share.
The holders of the Series A Convertible Preferred Stock have certain
registration rights.

In connection with the issuance of the Series A Convertible Preferred Stock,
the Company has certain mandatory redemption obligations if certain events
occur, such as upon conversion of the Series A convertible Preferred Stock if
the shares of Common Stock of the Company to be issued would exceed 1,576,000
shares of Common Stock.

Holders of the Series A Convertible Preferred Stock are not entitled to vote
on any matter.

In May, 1999, the Company and the holder of the Series A Convertible
Preferred Stock entered into a letter agreement whereby the Company would
repurchase 2,000 of the 3,000 shares of Series A Convertible Preferred Stock for
approximately $4 million and the remaining 1,000 shares of the Company Series A
Convertible Preferred Stock would be exchanged for an equal number of shares of
a newly created Series B Convertible Preferred Stock having substantially
similar terms as the Series A Convertible Preferred Stock, except the Series B
Convertible Preferred Stock would be convertible into a maximum of 286,000
shares of the Company's common stock (the "Repurchase"). The Repurchase is
subject to the negotiation and agreement of the definitive Repurchase documents
between the Company and the holder of the Series A Convertible Preferred Stock.
See "Liquidity and Capital Resources."

14
<PAGE>
RESULTS OF OPERATIONS

THREE AND NINE MONTHS ENDED NOVEMBER 30, 1999 COMPARED TO THREE AND NINE
MONTHS ENDED NOVEMBER 30, 1998

The following table summarizes the Company's results of operations in
dollars and as a percentage of total revenue for the three and nine-month
periods ended November, 1999 and 1998.

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------------- --------------------------------------------
11/30/98 11/30/99 11/30/98 11/30/99
------------------- ------------------- ------------------- -------------------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA) (IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue........... $5,989 100.0 % $7,464 100.0 % $15,537 100.0 % 20,860 100.0 %
Cost of sales........... 2,862 47.8 % 3,053 40.9 % 7,362 47.4 % 8,446 40.5 %
------ ----- ------ ----- ------- ----- ------ -----
Gross profit............ 3,127 52.2 % 4,411 59.1 % 8,175 52.6 % 12,414 59.5 %
Selling, general and
administrative
expenses.............. 2,895 48.3 % 4,057 54.3 % 8,551 55.0 % 11,725 56.2 %
------ ----- ------ ----- ------- ----- ------ -----
Operating income........ 232 3.9 % 354 4.8 % (376) (2.4)% 689 3.3 %
Other expense........... 76 1.3 % 125 1.7 % 330 2.1 % 342 1.6 %
------ ----- ------ ----- ------- ----- ------ -----
Income before taxes..... 156 2.6 % 229 3.1 % (706) (4.5)% 347 1.7 %
Provision for taxes..... (20) (0.3)% (200) (2.7)% (191) (1.2)% (440) (2.1)%
------ ----- ------ ----- ------- ----- ------ -----
Net income.............. $ 176 2.9 % $ 429 5.8 % $ (515) (3.3)% $ 787 3.8 %
====== ===== ====== ===== ======= ===== ====== =====
</TABLE>

REVENUE. Revenue for the three months ended November 30, 1999 increased to
$7.5 million compared to $6.0 million for the three months ended November 30,
1998, an increase of $1.5 million, or 25%. $1.0 million of that increase is from
Continuum, the March 1999 acquisition, and the remaining increase is primarily
attributable to higher platform migration license fees. Revenue for the nine
months ended November 30, 1999 increased to $20.9 million compared to
$15.5 million for the nine months ended November 30, 1998, an increase of
$5.4 million, or 34.8%. $3.1 million of the increase is from Continuum and the
balance primarily from increased platform migration license fees.

EQUIPMENT REVENUE. The following table summarizes the revenue generated
from sales of computer equipment for the three and nine months ended
November 30, 1999 and the comparable periods from the prior fiscal year.

<TABLE>
<CAPTION>
THREE MONTHS INCREASE/
ENDED (DECREASE)
------------------- -------------------
11/30/98 11/30/99 $ %
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Transaction Processing Equipment................... $1,898 $1,708 $ (190) (10.0)%
Other Equipment.................................... 48 1,270 1,222 2,545.8 %
------ ------ ------ -------
Total Equipment Revenue............................ $1,946 $2,978 $1,032 53.0 %
====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS INCREASE/
ENDED (DECREASE)
------------------- -------------------
11/30/98 11/30/99 $ %
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Transaction Processing Equipment................... $6,087 $5,130 $ (957) (15.7)%
Other Equipment.................................... 120 3,638 3,518 2,931.7 %
------ ------ ------ -------
Total Equipment Revenue............................ $6,207 $8,768 $2,561 41.3 %
====== ====== ======
</TABLE>

15
<PAGE>
The increase in other equipment sales was primarily attributed to revenues from
Continuum which provided $1.0 million and $3.1 million for the three and nine
month periods ended November 30, 1999 respectively. Sales of transaction
processing equipment are typically made up of large orders and can vary
significantly depending on timing of those orders.

SERVICES REVENUE. Revenues from information technology services decreased
to $5.2 million for the nine months ended November 30, 1999 from $6.0 million
for the comparable period in the prior fiscal year, an decrease of $0.8 million
(13.3%). Revenues for the three-month periods ended November 30, 1999 decreased
to $2.0 million from $2.7 million for the comparable period in 1998 a decrease
of $0.7 million or 25.9%. This decrease was largely due to effect of a large
individual contract in the prior year.

SOFTWARE REVENUE. The following table summarizes the revenue from software
licensing and support.

<TABLE>
<CAPTION>
THREE MONTHS INCREASE/
ENDED (DECREASE)
------------------- -------------------
11/30/98 11/30/99 $ %
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Initial License Fees:
Platform Migration................................ $ 735 $1,951 $1,376 165.4 %
Transaction Processing............................ (10) 70 80 (800.0)%
Other............................................. 81 82 (159) 1.2 %
------ ------ ------
Total Initial License Fees.......................... $ 806 $2,103 $1,297 160.9 %
------ ------ ------
Software Support Fees:
Platform Migration................................ $ 228 $ 241 $ 13 5.7 %
Transaction Processing............................ 31 14 (17) (54.8)%
Other............................................. 293 166 (127) (43.3)%
------ ------ ------
Total Software Support Fees......................... $ 552 $ 421 $ (131) (23.7)%
------ ------ ------

Total Software Revenue.............................. $1,358 $2,524 $1,166 85.9 %
====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS INCREASE/
ENDED (DECREASE)
------------------- -------------------
11/30/98 11/30/99 $ %
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Initial License Fees:
Platform Migration................................. $1,536 $5,113 $3,577 232.9 %
Transaction-processing............................. 73 130 57 78.1 %
Other.............................................. 241 308 67 27.8 %
------ ------ ------ -----
Total Initial License Fees........................... $1,850 $5,551 $3,701 200.1 %
------ ------ ------
Software Support Fees:
Platform Migration................................. $ 697 $ 752 $ 55 7.9 %
Transaction-processing............................. 63 58 (5) (7.9)%
Other.............................................. 746 504 (242) (32.4)%
------ ------ ------
Total Software Support Fees.......................... $1,506 $1,314 $ (192) (12.7)%
------ ------ ------

Total Software Revenue............................... $3,356 $6,865 $3,509 104.6 %
====== ====== ======
</TABLE>

16
<PAGE>
Platform migration revenue by major product class is as follows:

<TABLE>
<CAPTION>
THREE MONTHS INCREASE/
ENDED (DECREASE)
------------------- -------------------
11/30/98 11/30/99 $ %
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
UNIBOL36............................................. $722 $ 679 $ (43) (6.0)%
---- ------ ------
UNIBOL400............................................ 241 1,513 1,272 527.8 %
---- ------ ------

Total Platform Migration Revenue..................... $963 $2,192 $1,229 127.6 %
==== ====== ======
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS INCREASE/
ENDED (DECREASE)
------------------- -------------------
11/30/98 11/30/99 $ %
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
UNIBOL36............................................. $1,781 $2,246 $ 465 26.1%
UNIBOL400............................................ 452 3,619 3,167 700.7%
------ ------ ------

Total Platform Migration Revenue..................... $2,233 $5,865 $3,632 162.7%
====== ====== ======
</TABLE>

The Company has been able to improve 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. Revenue
from this product is expected to continue for the next few years; however, there
may be fairly volatile revenue fluctuations from quarter to quarter.

Revenue generated by the UNIBOL400 product increased to $1.5 million and
$3.6 million for the three and nine months ended November 30, 1999, respectively
from $0.2million and $0.5 million for the comparable periods in the prior fiscal
year, respectively. Unibo1400 sales were slow for the period ending
November 30, 1998, because end-users were waiting for additional functionality
and enhancements. These enhancements have been made available during fiscal year
2000. The revenues related to the UNIBOL400 product are expected to continue to
improve in future periods as the enhanced versions of the product gain market
acceptance.

Revenue generated from initial license fees of transaction-processing
systems increased by $80 thousand and $57 thousand for the three and nine months
ended November 30, 1999, respectively to $70 thousand and $130 thousand.
Transaction-processing support fees remained relatively constant.

Revenue generated from other software sales primarily consist of vertical
market software products such as the Company's Human Resources Management
product as well as other third party software products. Revenues for these
products vary depending on customer demands and product mix. Revenue from
initial license fees of other software products increased to $82 thousand and to
$308 thousand for the three and nine months ended November 30, 1999,
respectively, from $81 thousand and $241 thousand for the comparable periods in
the prior fiscal year, respectively. Revenue generated from software support
fees for other software products decreased to $0.2 million and $0.5 million for
the three and nine months ended November 30, 1999, respectively from
$0.3 million and $0.7 million for the comparable periods in the prior fiscal
year, respectively.

INTERNATIONAL REVENUE. Revenue from international operations increased to
$7.6 million for the nine months ended November 30, 1999 from $7.2 million for
the comparable period in the prior fiscal year, an increase of $0.4 million or
5.6%. This increase came primarily from increased growth of information
technology services and software. Revenue from domestic operations increased to
$13.2 million for the nine months ended November 30, 1999 as compared to
$8.4 million for the comparable period in the prior fiscal year, an increase of
$4.8 million or 57.1%. This increase was due to $3.1 million of revenues added
by Continuum and increased revenues from platform migration software.

17
<PAGE>
For the quarters ended November 30, 1999 and 1998, revenue from
international operations dropped from $3.1 million to $2.7 million mainly due to
the effect of a large individual contract in the prior year. Revenue from
domestic operations grew to $4.7 million from $2.8 million due to revenues
generated by Continuum and platform migration license fee growth.

GROSS PROFIT. The following tables summarize the Company's gross profit
information in dollars and as a percentage of the associated revenues for the
three and nine months ended November 30, 1999 and the comparable periods for the
prior fiscal year.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
11/30/98 11/30/99
------------------- -------------------
GROSS PROFIT GROSS PROFIT
------------------- -------------------
$ % $ %
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Information Technology Services............ $1,322 49.2% $1,653 84.3%
------ ------

Equipment:
Transaction-processing................... 661 34.8% 542 31.7%
Other.................................... 2 4.2% 398 31.3%
------ ------
Total Equipment............................ 663 34.1% 940 31.6%
------ ------

Software:
Platform Migration....................... 831 86.3% 1,717 78.3%
Transaction-processing................... (40) -190.5% (28) -33.3%
Other.................................... 351 83.9% 129 52.0%
------ ------
Total Software............................. 1,142 84.1% 1,818 72.0%
------ ------

Total Gross Profit......................... $3,127 52.2% $4,411 59.1%
====== ======
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
11/30/98 11/30/99
------------------- -------------------
GROSS PROFIT GROSS PROFIT
------------------- -------------------
$ % $ %
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
Information Technology Services............ $4,183 70.0% $ 4,372 83.6%
------ -------

Equipment:
Transaction-processing................... 1,798 29.5% 1,866 36.4%
Other.................................... 24 20.0% 1,275 35.0%
------ -------
Total Equipment............................ 1,822 29.4% 3,141 35.8%
------ -------

Software:
Platform Migration....................... 1,351 60.5% 4,622 78.8%
Transaction-processing................... (46) -33.8% (171) -91.0%
Other.................................... 865 87.6% 450 55.4%
------ -------
Total Software............................. 2,170 64.7% 4,901 71.4%
------ -------

Total Gross Profit......................... $8,175 52.2% $12,414 59.5%
====== =======
</TABLE>

18
<PAGE>
Gross profit margins for services and equipment vary from quarter to quarter
depending on customer demands and product mix. Information technology services
gross profit margin, which does not include salary costs, increased for the
three and ninth month periods compared to the prior year, due to a greater
proportion of the services being software related which yield a higher margin
than hardware related services. Equipment margins rose in the nine month period
largely due to healthy margins realized from sales at Continuum. Total equipment
margins shrank for the three month period due to slightly lower margins in the
transaction processing segment.

Platform-migration software profit margins decreased to 78.3% from 86.3% for
the three months ending November 30, 1999, as compared to the three months
ending November 30, 1998, and increased to 78.8% from 60.5% for the nine months
ending November 30, 1999 compared to the nine months ended November 30, 1998.
These differences in margin are due to the primary element of cost of sales
being the amortization of capitalized software development costs. This
amortization is normally constant over a time period for each product, but
overall may fluctuate from quarter to quarter as product versions become
marketable and the development costs commence amortization or as development
costs of particular products become fully amortized. License fee revenues vary
with orders taken and licenses shipped or granted.

Gross margins for other software products changed to 52.0% and 55.4% for the
three and nine months ended November 30, 1999, respectively, compared to 93.9%
and 97.6% for the comparable periods in the prior fiscal year. The decrease is
due to continued and increasing amortization of software development costs and
constant or slightly shrinking revenues for the periods. Other software
primarily consist of vertical market software products such as the Company's
Human Resources product as well as other third party software products.

SELLING, GENERAL, & ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses increased to $4.0 million and $11.7 million for the
three and nine months ended November 30, 1999, respectively from $2.9 million
and $8.6 million for the comparable periods in the prior fiscal year,
respectively. Those are increases of $1.1 million or 38.6% and $3.1 million or
36.6% respectively. Selling, general and administrative expenses as a percentage
of total revenue for the nine month period is unchanged from year to year.

OTHER EXPENSES. Net interest expense is slightly higher year to year for
both the three and nine month periods due to increased borrowing to fund
operations.

LIQUIDITY AND CAPITAL RESOURCES

At November 30, 1999, the Company had approximately $0.1 million in cash and
equivalents as compared to $1.4 million at February 28, 1999.

The Company generated positive operating cash flows of $1.8 million for the
nine months ended November 30, 1999. 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, 2000. 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.

During the nine months ended November 30, 1999, the Company expended
$0.4 million for capital improvements. 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
November 30, 1999.

19
<PAGE>
During the nine months ended November 30, 1999, the Company expended
$0.7 million to buy shares of its own common stock on the open market.

The Company received grants to fund research and development from the
government of Northern Ireland of approximately $44,000 for the three months and
$177,000 for the nine months ended November 30, 1999. 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.

On October 7, 1998, the Company issued 3,000 shares of Series A convertible
Preferred Stock, par value $1.00 per share, and warrants for 102,127 shares of
the Company's Common Stock for an aggregate consideration of $3 million. Each
share of Series A Convertible Preferred Stock may be converted into a number of
shares of the Company's Common Stock pursuant to the terms of the Series A
convertible Preferred Stock Purchase Agreement; provided that, absent
shareholder approval, the maximum number of shares of Common Stock that may be
issued upon conversion of the Series A Convertible Preferred Stock is 1,576,000.
The warrants entitle the holders thereof to purchase an aggregate of 102,127
shares of the Company's Common Stock at an exercise price of $4.4063 per share.
The holders of the Series A Convertible Preferred Stock have certain
registration rights.

The Company believes available credit will be sufficient to meet its working
capital needs both on a short and a long-term basis. However, the Company's
capital needs will depend on many factors, including the Company's ability to
maintain 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.

YEAR 2000 COMPLIANCE

THE PROBLEM REVISITED. The scope of the Year 2000 problem applied to any
device, software or firmware that makes references to dates. Specifically it
applied to the Real Time Clock (RTC) which stores the year portion of the date
in two digit formats (e.g. 98 instead of 1998). Estimates indicated that many
computers built prior to 1996 would not switch over correctly from 1999 to 2000.
The impact of this would greatly affect any date-sensitive projects such as
budgets and financial projections in the forthcoming year.

CURRENT STATUS AND OVERALL IMPACT OF THE YEAR 2000. UniComp experienced
minimal problems to their business through the millennium changeover. All
network systems and company data remained intact and

20
<PAGE>
unaffected. The Company will continue to monitor their systems and continue to
review all information through out the fiscal year. The following table
identifies each of the seven phases that were addressed during this project.
UniComp completed all phases by the projected date.

<S> <C> <C> <C>
PROJECT PHASE PROJECT % COMPLETION COMMENTS
COMPLETED
Awareness 100% Completed
Identification 100% Completed
Impact Analysis 100% Completed
Risk Evaluation 100% Completed All significant suppliers have been
evaluated.
Remediation 100% Completed All critical systems are completed..
Testing 100% Completed Secondary tests for critical systems
completed.
Contingency Plan 100% Completed Implemented.
Overall Completion Estimate 100% Completed Implemented and completed on
schedule.
</TABLE>

CONTINGENCY PLAN. UniComp continues to have a disaster recovery program
implemented company wide. Routinely information is backed up to diskette and
tape. This regiment incorporates daily, weekly and monthly backups. These
backups are divided into on-site (primary) and off-site (secondary) data copies.
The secondary copies are archived up to three months and kept in a secure
location to help maintain an ongoing disaster recovery program. This methodology
of damage control was integrated into UniComp's Year 2000 contingency plan to
safeguard all mission critical data. This routine was created to allow
information to be transported to various machines should the need arise.

COST. The overall cost incurred for activities relating to the Year 2000
issue was not material in amount over the two-year period from 1998 to 1999.
Most of the expense would have been considered a part of the ongoing routine of
maintenance and upkeep of internal systems. The current infrastructure has a
system in place to allocate personnel to perform such tasks. UniComp used
internal resources to oversee the most intensive phases of the Year 2000
project. Expense in this area was limited to man hours and personnel expense. In
addition, a consultant was hired to help the larger sites in the United Kingdom
to transition their systems to millennium compliance. The cost of this course of
action was nominal. The cost to replace fully depreciated systems was considered
to be a part of normal business operations and not directly related to the Year
2000 issue.

FACTORS THAT MAY AFFECT FUTURE RESULTS

FORWARD LOOKING STATEMENTS

The foregoing contains forward-looking statements that involve risks and
uncertainties, including but not limited to quarterly fluctuations in results,
the timely availability and customer acceptance of new products, the impact of
competitive products and pricing, general market trends and conditions, and
other risks detailed below in "Factors That May Affect Future Results." Actual
results may vary materially from projected results.

UniComp's domestic and international businesses operate in highly
competitive markets that involve a number of risks, some of which are beyond the
Company's control. While UniComp is optimistic about its long-term prospects,
the following discussion highlights some risks and uncertainties that should be
considered in evaluating its future growth prospects.

21
<PAGE>
SUCCESS DEPENDENT ON ABILITY TO COMPETE IN HIGHLY COMPETITIVE INFORMATION
TECHNOLOGY INDUSTRY

Our success depends on our ability to compete in an industry that is
intensely competitive and subject to rapid change. In competing in the
information technology industry, we believe the principal competitive factors we
face are reputation and quality of service, relative price and performance,
technical expertise and product availability. Our competitors in the information
technology service market include installation and service organizations within
many established companies, computer manufacturers, custom software developers,
regional systems integrators, software and hardware distributors, and systems
consultants. The market for our platform-migration software is highly
competitive as well. We believe that the principal competitive factors in this
area include product performance, time to market for new product introductions,
adherence to industry standards, price, marketing and distribution resources.
The market for our transaction-processing systems is also highly competitive. We
believe that the principal competitive factors in this area include the ability
to provide a comprehensive, integrated transaction-processing system, product
performance, time to market for new product introductions, adherence to industry
standards, price, marketing and distribution resources. Some of our current and
potential competitors have longer operating histories and substantially greater
competitive resources than ours. As a result, our competitors may be able to
adapt more quickly to changes in customer needs or to devote greater resources
to sales, marketing and product development. As the markets in which we compete
have matured, product price competition has intensified and such intensity will
likely continue. Such price competition could adversely affect our results of
operations. There can be no assurance that we will be able to continue to
compete successfully with existing or new competitors.

DEPENDENCE ON FOREIGN SALES

Any reduction of our international business could significantly affect our
revenues. Our revenues from international operations represented slightly more
than half of our total revenues for fiscal years 1997 through 1999. We expect
that our international operations will continue to account for a significant
percentage of our total revenues. Certain risks are inherent in international
operations, including (1) unexpected changes in regulatory requirements,
(2) currency exchange rate fluctuations, (3) changes in trade policy or tariff
regulations, (4) customs matters, (5) longer payment cycles, (6) higher tax
rates, (7) additional tax withholding requirements, (8) difficulty in enforcing
agreements, (9) intellectual property protection difficulties, (10) foreign
collection problems, and (11) military, political and transportation obstacles.
In addition, foreign operations involve uncertainties arising from local
business practices, cultural considerations and international political and
trade tensions. Our revenues and expenses are generally denominated in
corresponding currencies. As a result, to date we have not hedged against
foreign currency exchange rate risks. In the future; however, we may implement
hedging techniques with respect to foreign currency transactions. Nevertheless,
such hedging activities cannot assure that we could successfully protect
ourselves against foreign currency exchange losses or against other
international sales risks such as exchange limitations, price controls or other
foreign currency restrictions.

SUCCESS DEPENDENT ON ABILITY TO ADJUST TO RAPID TECHNOLOGICAL CHANGE AND
INTRODUCTION OF NEW PRODUCTS AND SERVICES

The information technology industry is characterized by rapid technological
advances, numerous changes in customer requirements and frequent new product
introductions and enhancements, which could disrupt our services business and
render our products obsolete. Our future success will depend in large part on
our ability to anticipate and respond to such advances, changes and new product
introductions. Our failure to respond could have a material adverse effect on
our competitive position and results of operations. In addition, we are subject
to the risks generally associated with new product introductions and
applications, including lack of market acceptance, delays in development or
failure of products to perform as expected. Many of our software products,
including certain transaction-processing products and UNIBOL400, have yet to
achieve a substantial installed user base. We cannot be certain that these

22
<PAGE>
products will ever achieve a substantial market acceptance or user base. Our
growth strategy includes using our current business relationships and our
current knowledge of our customers' computer systems to generate additional
revenue by providing other products and services to these clients. There can be
no assurance, however, that we will be successful in generating additional
business from our current customers.

POTENTIAL FOR DELAYS IN PRODUCT INTRODUCTION

Our delay in any potential product development and introduction may have an
adverse effect on the product's success and on our reputation and results of
operations. Additionally, competitors may introduce products and gain market
share during any such delays. Our failure to introduce new products and product
enhancements that are responsive to market conditions and customer requirements
may have an adverse effect on our business, results of operations and financial
condition. Furthermore, our complex software products may contain undetected
errors when first introduced or when new versions are released. We cannot be
certain that current or future releases of our products will not contain errors
or that any such errors will not result in loss or delay of market acceptance of
such products. We have previously experienced delays in developing and
introducing new products, and there can be no assurance that we will not
experience delays in the future.

DISTRIBUTION OF MANAGEMENT OF OVERSEAS OPERATIONS

Any significant disruption in the management of our international operations
could have a material adverse effect on our business, results of operations and
financial condition. Our headquarters and administrative offices are located in
Atlanta, Georgia; however, as of December 31, 1999, approximately 120 of our 300
employees work in our United Kingdom facilities. This geographical distance, as
well as the time-zone difference, can isolate management from operational
issues, delay communications and require devotion of a significant amount of
time, effort and expense to international travel. In the future, we may face
significant management demands associated with our international operations.

CHANGES IN OPERATIONS IN NORTHERN IRELAND

A significant proportion of our personnel and operations are located in
Northern Ireland. Northern Ireland has historically experienced periods of
religious, civil and political unrest. Northern Ireland may experience further
unrest which could disrupt our ability to provide information technology
services and product development programs and have a material adverse effect on
our results of operations and financial condition. For each of the past three
fiscal years, the Northern Ireland government has granted to us approximately
$0.3 million to fund our research and development programs. Our use of these
funds is subject to various rules and regulations, including the requirement
that we repay such funds in the event we remove certain operations from Northern
Ireland. We cannot be sure that we will continue to be eligible for or will
receive similar grants in the future or, if such grants are received, whether
additional restrictions will apply to our use of such funds.

RISK OF ACQUISITION PROGRAM

To date, our acquisition program has substantially contributed to our
growth. We have no assurance that we will complete any future acquisitions or
that we will benefit from any completed acquisition in the future. We obtain
most of our acquisitions by taking advantage of opportunities that are presented
to us. We require significant administrative, operational and financial
resources to successfully integrate and manage our diverse businesses. There are
numerous operational and financial risks involved in managing acquired
businesses, including (1) difficulties in assimilating acquired operations,
(2) diversion of management's attention, (3) amortization of acquired intangible
assets, (4) increases in administrative costs, (5) additional costs associated
with debt or equity financing, and (6) potential loss of key employees or
customers of acquired operations. We may not be successful in integrating our
current acquisitions or

23
<PAGE>
retaining and motivating key personnel of our acquired companies. Our failure to
integrate businesses, to expand our acquired customer and technology base and to
retain key employees of our acquired companies could have an adverse effect on
our business, results of operations and financial condition. Although we
currently do not have any understandings, commitments or agreements with respect
to any acquisition, we anticipate future potential acquisition opportunities.

SUCCESS DEPENDENT ON ABILITY TO HIRE AND RETAIN TECHNICAL PERSONNEL AND KEY
EMPLOYEES

Our success depends in part on our ability to attract, hire, train and
retain qualified managerial, technical and sales and marketing personnel.
Competition for such personnel is intense. We cannot be certain that we will be
successful in attracting and retaining the technical personnel we require to
conduct and expand our operations successfully. Our results of operations could
be materially adversely affected if we are unable to attract, hire, train and
retain qualified personnel. Our success also depends to a significant extent on
the continued service of our management team. The loss of any member of the
management team could have a material adverse effect on our business, results of
operations and financial condition. We do not have any employment or noncompete
agreements with any of our executive officers.

UNCERTAINTY OF FUTURE RESULTS

We are unable to accurately forecast revenues from our software products and
services because of (1) the evolving product lifecycle of the UNIBOL36 product,
(2) the recent introductions of the UNIBOL400 product and (3) the recent
acquisitions of our transaction-processing businesses. In addition, although our
service revenues are more predictable than our product revenues, unexpected
variations in job pricing and complexity could have an adverse effect on the
profitability of customer service projects. We base our expense levels, which
are relatively fixed in the short term, in significant part on our expectations
of future product revenues and service demands. If demand for our products and
services is below expectations, our results of operations could be adversely
affected.

DEPENDENCE ON PROPRIETARY TECHNOLOGY

Much of our future success depends on our ability to protect our proprietary
technology. We rely principally on trade secret and copyright law, as well as
nondisclosure agreements and other contractual arrangements, to protect such
proprietary technology. We are not certain that such measures will be adequate
to protect our technologies from infringement by others or that we will be
effective in preventing misappropriation of our proprietary rights. In addition,
the laws of some foreign countries do not protect our proprietary rights to the
same extent as do the laws of the United States.

INABILITY TO COLLECT ACCOUNTS RECEIVABLE

We have no assurance that we will be able to collect all of our accounts
receivable. Our worldwide customer base of trade accounts receivable is
generally diversified with respect to credit risks due to the large number of
such accounts. We perform ongoing credit evaluations on certain of our
customers' financial conditions, but we generally do not require collateral to
support customer receivables. We establish an allowance for uncollectible
accounts based on factors surrounding the credit risk of specific customers,
historical trends and other information. We cannot be sure that our procedures
will identify all potential uncollectible accounts in a timely manner,
therefore, we may have to make additional significant adjustments to our
allowance for uncollectible accounts from time to time.

OPERATING RESULTS DEPENDENT ON PRODUCT DEVELOPMENT

Our continued success depends on our ability to develop, produce and
transition technologically complex and innovative products that meet customer
needs. Inherent in this process are various risks that we must manage to achieve
favorable operating results. The process of developing new high technology

24
<PAGE>
products is complex and uncertain, requiring innovative designs and features
that anticipate customer needs and technological trends. The products, once
developed, must be manufactured and distributed in sufficient volumes at
acceptable costs to meet demand. The development of such products involves risks
and uncertainties, including but not limited to risk of product demand, market
acceptance, economic conditions, competitive products and pricing,
commercialization, technology, and other risks. Our business is also subject to
national and worldwide economic and political influences such as recession,
political instability, economic strength of governments, and rapid change in
technology. Additionally, we are experiencing increasing competition in our
products and services businesses, and there can be no assurance that our current
products or services will remain competitive or that our development efforts
will produce products with the cost and performance characteristics necessary to
remain competitive.

ESTIMATES CONTAINED IN FINANCIAL STATEMENTS

Our preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements. Our
estimates and assumptions affect the reported amounts of revenues and expenses
during the reporting period as well. For example, our estimates affect estimated
useful lives, amortization expense, carrying values, accrued reserves, and
estimates to complete fixed price contracts. Changes in the status of certain
matters or facts or circumstances underlying these estimates could result in
material changes to these estimates, and actual results could differ from these
estimates.

VOLATILITY OF STOCK PRICE

Our stock price is subject to significant volatility and will likely be
adversely affected if revenues or earnings in any quarter fail to meet the
investment community's expectations. Additionally, the market price of our
common stock could be subject to significant fluctuations in response to
(1) announcements of new products or services offered by us or our competitors,
(2) loss of key customer, distributor or vendor relationships, (3) general
conditions in the computer software industry, or (4) other events or factors.
Furthermore, in recent years, the stock market in general, and the market for
shares of stock in technology companies in particular, has experienced extreme
price fluctuations. Such fluctuations could materially and adversely affect the
market price of our common stock in the future.

ANTITAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

Our Board of Directors has the authority to issue up to five million shares
of preferred stock and to determine the price, rights, preferences, privileges
and restrictions, including voting rights, of those shares without any further
vote or action by our shareholders. Currently the Company has designated 3,600
of such preferred stock as Series A Convertible Preferred Stock. The rights of
the holders of common stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock. The issuance of preferred
stock may have the effect of delaying, deterring or preventing a change in
control of UniComp without further action by the shareholders and may adversely
affect the voting and other rights of the holders of common stock. Furthermore,
certain provisions of our charter documents may have the effect of delaying or
preventing changes in control or management of UniComp, which could have an
adverse effect on the market price of the common stock.

NO DIVIDENDS ON COMMON STOCK

We have not paid any cash dividends on the common stock since our inception
and we do not anticipate paying cash dividends for the foreseeable future.

25
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal market risks to which the Company is exposed are changes in
foreign currency exchange rates and changes in interest rates. The Company's
international sales, accounted for 36% of the Company's total sales in the
quarter and nine months ending November 30, 1999. The Company manages its
exposure to changes in foreign currency exchange rates by entering into revenue
and expense transactions in corresponding currencies. As a result, today the
Company has not hedged against foreign currency exchange risk.

The Company reduces its exposure to changes in interest rates by maintaining
a proportion of its debt in fixed-rate instruments. As of November 30, 1999,
17.7% of the Company's total debt was in fixed-rate instruments. The Company
has a revolving line of credit that provides for borrowings by the Company of up
to $4.7 million. The borrowings bear interest at a variable rate of the UK
bank's base lending rate plus 1.75% or the U.S.30 day commercial paper rate plus
3.0%. If the Company were to borrow all of the $3 million of the revolving line
of credit and the $1.7 million of foreign lines of credit, 17.3% of the
Company's total debt would be in fixed-rate instruments. In addition, the
Company maintains an average maturity of its short-term investment portfolio
under twelve months to avoid large changes in its market value. As of
November 30, 1999, the average maturity of the Company's short-term investments
was less than one month.

26
<PAGE>
PART II. OTHER INFORMATION

ITEMS 3, 4 AND 5 ARE NOT APPLICABLE.

ITEM 1. LEGAL PROCEEDINGS

The Company does not believe that there are any pending or threatened legal
proceedings other than non-material legal proceedings incidental to the
Company's business, that if adversely determined, could have a material adverse
effect on the Company.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) On October 6, 1998, the Company filed Articles of Amendment to the
Articles of Incorporation ("Articles of Amendment") of the Company
designating 3,600 shares of Preferred Stock as Series A Convertible
Preferred Stock, $1.00 par value, of which 600 shares may be issued only as
dividends on the outstanding shares of Series A Convertible Preferred Stock
issued on October 7, 1998. The Series A Convertible Preferred Stock ranks
(i) senior to the Common Stock, now or hereafter issued, as to payment of
dividends and distribution of assets upon liquidation, dissolution, or
winding upon the Company; (ii) senior to any additional series of the class
of Preferred Stock which series the Company's Board of Directors may from
time to time authorize, both as to payment of dividends and as to
distributions of assets upon liquidation, dissolution, or winding up the
Company; and (iii) senior to any additional class of preferred stock (or
series of preferred stock of such class) which the Board of Directors or the
stockholders may from time to time authorize in accordance with the Articles
of Amendment.

Holders of the Series A Convertible Preferred Stock are entitled to receive,
when, as, and if declared by the Board of Directors out of funds legally
available for such purpose, dividends at the rate of $50.00 per annum per share,
which are fully cumulative, shall accrue without interest (except for dividends
in arrears) from the date of original issuance of each share and are payable
quarterly on March 15, June 15, September 15, and December 15 of each year
commencing December 15, 1998. Dividends on the Series A Convertible Preferred
Stock may be paid in cash, or subject to certain limitations, dividends of
additional shares of Series A Convertible Preferred Stock.

In connection with the issuance of the Series A Convertible Preferred Stock,
the Company has certain mandatory redemption obligations if certain events
occur, such as upon conversion of the Series A Convertible Preferred Stock if
the shares of Common Stock of the Company to be issued would exceed 1,576,000
shares of Common Stock. The Company also has certain optional redemption rights.

Holders of the Series A Convertible Preferred Stock may at any time on or
after January 5, 1999 convert all or from time to time any part of such holder's
shares of Series A Convertible Preferred Stock into fully paid and nonassessable
shares of Common Stock of the Company and such other securities and property
pursuant to the conversion formula set forth in the Articles of Amendment.
However, absent shareholder approval, the maximum number of shares of Common
Stock that may be issued upon conversion of the Series A Convertible Preferred
Stock is 1,576,000.

Holders of the Series A Convertible Preferred Stock are not entitled to vote
on any matter.

(b) None.

(c) On September 30, 1998, the Company issued warrants for 25,000 shares
of the Company's Common Stock to an "accredited investor" as defined by
Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"). The
warrants entitled the holders thereof to, upon exercise, purchase an
aggregate of 25,000 shares of the Company's Common Stock at an exercise
price of $3.00 per share. This transaction was exempt from the registration
provisions of the Act, pursuant to section 4(2) of the Act for transactions
not involving a public offering, based on the fact that the securities were
offered and sold to one investor

27
<PAGE>
who had access to financial and other relevant data concerning the Company,
its financial condition, business, and assets.

On October 7, 1998, the Company issued 3,000 shares of Series A Convertible
Preferred Stock, par value $1.00 per share, and warrants for 102,127 shares of
the Company's Common Stock to an "accredited investor" as defined by Rule 501 of
Regulation D promulgated by the Securities and Exchange Commission under the Act
for an aggregate consideration of $3 million. This transaction was exempt from
the registration provision of the Act pursuant to Rule 506 of Regulation D as
promulgated by the Securities and Exchange Commission under the Act. Each share
of Series A Convertible Preferred Stock may be converted into a number of shares
of the Company's Common Stock pursuant to the terms of the Series A Convertible
Preferred Stock Purchase Agreement; provided that, the maximum number of shares
of Common Stock that may be issued upon conversion of the Series A Convertible
Preferred Stock is 1,576,000. Absent the Company's certain redemption rights,
the holders of the Series A Convertible Preferred Stock may at any time on or
after January 5, 1999 convert all or from time to time any part of their shares
of Series A Convertible Preferred Stock into fully paid and nonassessable shares
of Common Stock and such other securities and property as provided in the
Articles of Amendment. Each Series A Convertible Preferred Stock shall be
converted pursuant to the conversion terms of the Articles of Amendment;
provided that absent shareholder approval, the maximum number of shares of
Common Stock that may be issued upon conversion of the Series A Convertible
Preferred Stock is 1,576,000. See "Liquidity and Capital Resources" and
"Subsequent Events." The holders of the Series A Convertible Preferred Stock
have certain registration rights.

In January 1999, the Company acquired a $.6 million note receivable from
Continuum Technology Corporation ("Continuum"). Consideration consisted of
$.2 million in cash and accounts receivable of $.4 million. The note receivable
is classified as other assets in the accompanying balance sheet at February 28,
1999. In March 1999, the Company purchased 97.5% of Continuum's outstanding
common stock. Consideration consisted of $259,361 in cash, 8% notes payable
aggregating $572,128, and 200,000 restricted shares of the Company's common
stock.

(d) Not required.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The Company filed Form 8-K on December 15, 1999 relating to the
disposition of ICS UniComp Limited on December 1, 1999.

(b) Exhibits:

2.1 Agreement for the Sale and Purchase of the Goowill Business and
Assets of ICS UniComp Limited, dated December 1, 1999 (previously filed
with Form 8-K on December 15, 1999 and incorporated herein by reference).

27.1 Financial Data Schedule (for SEC use only)

28
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

UNICOMP, INC.

<TABLE>
<S> <C>
/s/ Hugh Moore January 18, 1999
Hugh Moore Date
Vice President of Finance
Principal Accounting Officer
</TABLE>

<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITIED FINANCIAL STATEMENTS AS OF NOVEMBER 30, 1999 AND 1998.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 134
<SECURITIES> 0
<RECEIVABLES> 8,808
<ALLOWANCES> 689
<INVENTORY> 3,557
<CURRENT-ASSETS> 14,810
<PP&E> 7,021
<DEPRECIATION> 2,913
<TOTAL-ASSETS> 34,086
<CURRENT-LIABILITIES> 13,542
<BONDS> 2,423
0
2,800
<COMMON> 81
<OTHER-SE> 13,924
<TOTAL-LIABILITY-AND-EQUITY> 34,086
<SALES> 15,633
<TOTAL-REVENUES> 20,860
<CGS> 7,591
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<OTHER-EXPENSES> 11,725
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<INTEREST-EXPENSE> 366
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<INCOME-TAX> (440)
<INCOME-CONTINUING> 787
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,388
<EPS-BASIC> .17
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</TABLE>