UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X]	ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

OR

[ ]	TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  	to

Commission file number 0-21456

ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
-------------------------------------------------
(Exact name of registrant as specified in its charter)

	Delaware					           06-1361276
--------------------------------	          ------------------	-
(State or other jurisdiction of			(I.R.S. Employer
 incorporation or organization)			 Identification No.)

	488 Main Avenue
	Norwalk, Connecticut					 06851
-------------------------------			-------------------
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: 203-849-2500

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

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

Common Stock, $.01 par value
(Title of class)

	Indicate by a 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 as 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 (Section 229.405 of
this chapter) is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [    ]

	State the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant. The
aggregate market value shall be computed by reference to the price
at which the common equity was sold, or the average bid and asked
prices of such common equity, as of a specified date within 60
days prior to the date of filing.

Aggregate market value as of
 March 12, 2001   						$4,784,980

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

Common Stock, $.01 par value,
 	 	 as of March 12, 2001			21,345,383 shares

DOCUMENTS INCORPORATED BY REFERENCE

	List hereunder the documents, all or portions of which are
incorporated by reference herein, and the part of the Form 10-K
into which the document is incorporated:  Proxy Statement to be
filed with respect to the 2001 Annual Meeting of Stockholders-Part
III.



PART I
ITEM 1.  BUSINESS

General

	Electronic Retailing Systems International, Inc. (the
"Company" or "ERS") develops and provides electronic shelf label
("ESL") systems designed to allow supermarket chains and other
retailers to increase productivity, reduce labor costs and improve
management information systems. The ERS ShelfNet(R) system (the
"ERS ShelfNet System") has been designed as a productivity
enhancing center store automation system, which replaces paper
price tags on retail shelves with electronic liquid crystal
display units and provides a suite of applications to enhance a
retailer's pricing, inventory, shelf management, merchandising and
promotional activities. The ERS ShelfNet System is comprised of
proprietary hardware and software that electronically link a
store's shelves to its point-of-sale ("POS") systems and central
computer.

The market for ESL systems, such as the ERS ShelfNet System,
is in the development stage, and market acceptance of, and demand
for, these systems are subject to a high level of uncertainty. The
Company's success will be dependent upon, among other things, the
extent to which retailers choose to install ESL systems. The
demand for such systems may be affected by numerous factors, many
of which are beyond the Company's control, including the actual
savings and benefits experienced by the individual stores using
the ESL systems, and there can be no assurance that supermarket
chains or other retailers will choose to install ESL systems in a
significant number of their stores. See "Customers" below.

	In February 2000, the Company acquired an interest in
NewCheck Corporation ("NewCheck"), of Jacksonville, Florida, which
also does business under the name of Productivity Solutions, Inc.
NewCheck is engaged in the development and commercialization of
retailing productivity solutions, for use in supermarkets and
other retail environments similar to those addressed by the
Company's system. NewCheck's ACM(R) Self Checkout (the "ACM Self
Checkout"), an automated self-checkout machine, is designed to
enable shoppers to scan their items at a self-checkout lane and
then either pay at the lane or at a centrally-located pay station.
The securities acquired at closing by the Company represent
approximately 18% of NewCheck's outstanding voting securities. The
Company has the right to acquire additional securities of NewCheck
and, under a management agreement extended to NewCheck, to manage
NewCheck's operations. The Company believes that the benefits to
it from its interest in and continued support to NewCheck extend
to the ability to utilize marketing efforts relative to the
NewCheck product to familiarize the same customers with the
Company's products and the ability subsequently to allocate
significant portions of the Company's general, administrative and
other costs to NewCheck through the management contract, as well
as participation in the gains from developing the NewCheck
product. See "Agreements with NewCheck Corporation" below. At
December 31, 2000, the Company recorded certain impairment charges
against its interest in NewCheck, as more fully described under
"Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation-Liquidity and Capital
Resources."

	In addition, as more fully described under "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources," in the
third quarter of 2000 the Company completed the exchange of $76.4
million principal amount at maturity of its 13-1/4% senior
discount notes due 2004 (the "Senior Discount Notes") for an
aggregate of $13.8 million in cash, approximately $5 million
principal amount of its 10% Guaranteed Secured Notes due August
1, 2001  (the "10% Notes"),  approximately $5 million principal
amount of its 8% Guaranteed Secured Notes due August 1, 2004 (the
"8% Notes") and 39,985 shares of its newly-created Series A-1
Convertible Preferred Stock, $1.00 par value ("Series A-1
Preferred Stock"). The notes submitted for exchange represented
all of the remaining outstanding Senior Discount Notes, and
followed the acquisition in open market transactions during the
first quarter of 2000 of $24.5 million principal amount at
maturity of Senior Discount Notes for an aggregate purchase price
of $4.7 million, and the acquisition in open market transactions
and as a result of a tender offer during the fourth quarter of
1999 of $46.3 million principal amount at maturity of Senior
Discount Notes for an aggregate purchase price of $7.2 million.

	Management believes that the Company's current resources
will enable the Company to fund operations, including the
Company's interim financing commitments to NewCheck, into the
second quarter of 2001. In the event the Company is unable to
raise additional financing, the Company's operations would need
to be scaled back or discontinued. These factors raise
substantial doubt about the Company's ability to continue its
operations as a going concern. Management is proactively seeking
sources of additional financing in order to support operations
and meet the Company's debt obligations, is investigating
opportunities for creation of various forms of alliances with
unaffiliated parties in order to sustain its ESL operations and
is engaged in discussions with the holders of its debt
obligations with respect to arrangements that would avoid
default in payment obligations that become due in the third
quarter of 2001, but there can be no assurance that any such
additional financing or other such transaction would be
available on terms reasonable to the Company or would be
consummated. As a result of these conditions, the report of
independent accountants to the Company's Consolidated Financial
Statements included in response to "Item 14. Exhibits, Financial
Statements, Schedules and Reports on Form 8-K" has been modified
to emphasize the substantial doubt regarding the Company's
ability to continue as a going concern.

	This Annual Report on Form 10-K contains various forward-
looking statements and information that are based on information
currently available to management and management's beliefs and
assumptions. When used in this document, the words "anticipate",
"designed to", "estimate", "believes", "plans", and similar
expressions are intended to identify forward-looking statements,
but are not the exclusive means of identifying such statements.
Such statements are subject to risks and uncertainties, and the
Company's actual results may vary materially from those
anticipated, estimated or projected due to a number of factors,
including, without limitation, the timely availability and
acceptance of new products, the rate of development of the
emerging market for ESL systems, the impact of competitive
products and pricing, the ability to obtain system components from
suppliers, the management of growth, and other factors set forth
in reports and other documents filed by the Company with the
Securities and Exchange Commission from time to time.

Business Strategy

	The Company's principal objective has been to achieve
increasing revenue through greater market penetration of the ERS
ShelfNet System.  To achieve this objective, the Company has
pursued a strategy that includes the following key elements:

		Initial Focus on Supermarket Sector.  The Company has
initially focused its marketing efforts on the
supermarket sector because of the Company's established
relationships with supermarket chains and because of the
Company's belief that supermarket operators generally are
more receptive than other retailers to utilizing
technology to reduce operating costs and improve
productivity. The Company estimates that, as of December
31, 2000, of the approximately 31,500 supermarkets in the
United States, approximately 225 stores were operating
ESL systems.

		Reduce Manufacturing Costs.  The Company has continued
its efforts to reduce the cost of manufacturing its
wireless ESLs through the application of established chip
manufacturing techniques to the ESL's integrated circuit,
the integration of various components in the ESL and the
achievement of significant economies of scale expected as
a result of the higher manufacturing volumes the Company
believes will arise from the implementation of its
marketing plans.

		Value-Added Applications.  In order to increase the
appeal of the Company's system to prospective customers
(by increasing the level of potential cost savings) and
to encourage existing customers to install additional
systems, the Company intends to develop additional
productivity enhancing applications for the ERS ShelfNet
System.

The Company believes that the benefits to it from its interest
in and continued support to NewCheck extend to the ability to
allocate significant portions of the Company's general,
administrative and other costs to NewCheck through its
management contract with Newcheck and the ability to utilize
marketing efforts relative to the NewCheck product to
familiarize the same customers with the Company's products, as
well as participation in the gains from developing the NewCheck
product.

Retail Industry Overview

	The Company's target market for the ERS ShelfNet System
consists of retailers that stock a large number of stockkeeping
units ("SKUs"), operate in highly competitive environments, have
relatively low margins and change prices frequently. Such
retailers include supermarkets, discount mass merchandisers, chain
drug stores and convenience stores. The approximate number of
supermarkets, discount mass merchandisers, chain drug stores and
convenience stores in the United States is set forth in the table
below. The table does not include the European market, where the
aggregate number of comparable stores is greater than in the
United States.

			Type of Store			Number of Stores
			--------------		     -----------------

		Supermarkets				31,500
		Discount mass merchandisers		10,600
		Chain drug stores				17,600
		Convenience stores				57,500
				         -------
		Total				117,200
				         =======
Source:  Progressive Grocer Annual Report, April 2000; Chain Store
Guide 2000.

The Company believes there is a widespread need among
retailers for a cost-effective and efficient communications system
to improve pricing accuracy and efficiency, to reduce labor costs
associated with price change activity and to provide the basis for
strategic pricing programs to enable sophisticated merchandising
so as to support margin improvement programs. The Company believes
that such retailers generally seek automated solutions to reduce
labor costs and improve efficiencies and obtain other benefits in
operations.

Supermarket Sector

	The supermarket sector is mature, intensely competitive and
tends to have margins that are among the lowest in the retailing
industry. The Company estimates that an average supermarket stocks
approximately 19,500 SKUs, most of which are available at
competitive stores, and runs frequent promotions with respect to
many of these items. As a result, a supermarket's success depends
in large part on the efficiency of its operations, which in turn
affects its ability to offer competitive prices and maintain
acceptable operating margins. Supermarkets are under constant
pressure to reduce costs, manage inventory more effectively and
offer competitive prices.

	Historically, supermarkets have been among the first
retailers to adopt technologies designed to reduce labor and other
costs, improve operations and enhance customer service. For
example, POS scanners were first introduced in the supermarket
sector and have achieved the greatest level of market penetration
there. While fewer than 15 supermarkets in the United States had
POS scanners in 1974, by 1995 approximately 95% of all chain
supermarket stores and approximately 80% of independent
supermarket stores had installed POS scanners. POS systems have
enabled retailers to reduce labor costs, improve pricing integrity
and increase efficiency while also providing additional
applications such as electronic funds transfer and computerized
inventory management. The Company believes that supermarkets and
other retailers will more quickly adopt other technological
innovations as a result of their experience with POS scanners. As
a result, and because of the Company's established relationships
with supermarket chains and its installed base of ERS ShelfNet
Systems in supermarkets, the Company intends to continue to focus
its marketing efforts in the supermarket sector.

Challenges Facing Retailers That Affect the Company

	The Company has designed the ERS ShelfNet System to address
retailer productivity, labor costs, merchandising and competitive
market share issues, as summarized below:

	Manual Price Changes

	Although POS systems have enabled supermarkets to achieve
efficiencies at the "front end" of the store, the center of the
typical store has not been automated and remains labor intensive.
The Company estimates that an average supermarket carries
approximately 19,500 SKUs and changes approximately 2,500 prices
per week at the shelf with newly printed paper labels. These price
changes require numerous manual steps resulting in (i) significant
labor costs and (ii) delays in implementing price changes
following special promotions or increases in wholesale costs, both
of which adversely affect supermarket profitability.

Pricing Integrity

	In addition to being labor intensive and time-consuming,
manual implementation of price changes is also more susceptible to
pricing inaccuracy. Stores with inaccurate prices risk customer
dissatisfaction as well as fines and penalties levied by
governmental agencies. As a result, supermarket operators incur
significant expense in auditing pricing integrity and correcting
pricing inaccuracies.

Merchandising Management

	Supermarkets actively promote products at the shelf with a
variety of merchandising materials such as "hangers" or "bibs",
which are affixed to the shelf or a product's price label and
alert consumers to pricing or promotional activities. Supermarkets
install and remove bibs manually, with employees generally
spending time in the aisle hanging and removing bibs from sale
items. Store managers walk the aisle auditing promotional items
against a printed list. The Company believes that current in-aisle
promotional maintenance and promotional compliance procedures are
an unnecessarily time-consuming, inaccurate and costly process.

	Replenishment/Inventory Management

	Supermarkets can lose sales (and their corresponding margins)
when products are inadvertently missing from designated shelves
arranged according to shelf set schematics (called "planograms"),
often due to lost or damaged paper labels. In addition, damaged
and handwritten paper labels result in increased order entry
errors, which increases both out-of-stocks (resulting in lost
sales) and labor costs associated with the product ordering
process.



Shelfset Management

	Typically, supermarkets carefully develop planograms for the
management of products and product categories in the stores, on
the belief that products perform best in the aggregate when
arranged on shelves in the quantities and with the facings
prescribed by the planogram. When paper labels are lost, damaged
or moved, deviations from the planogram occur, possibly resulting
in a higher incidence of out-of-stock items, loss of sales of
potentially high margin items, continued stocking of discontinued
or unauthorized products, and increased time and labor associated
with new cut-ins to a shelfset that differ from the planogram.

ERS ShelfNet Applications

	The ERS ShelfNet System has been designed (i) to replace
paper price tags on retail shelves with electronic liquid crystal
display units, and (ii) to provide a suite of applications to
address the challenges to retailers of manual price changes,
pricing integrity, merchandising management, replenishment/
inventory management and shelfset management. The ERS ShelfNet
System's applications are designed to include the following
features to address the needs of retailers:

Retail Challenge						ERS Solution

Manual Price
 Changes	The ERS ShelfNet System allows retailers
to implement price changes almost
instantaneously from the store's central
computer or directly from corporate or
regional headquarters, which the Company
believes facilitates significant labor
savings from manual implementation of
price changes. In addition, electronic
price changes are significantly faster
to implement, which the Company believes
leads to increased margins as prices may
be increased promptly following special
promotions or increases in wholesale
prices.

Pricing Integrity 	The ERS ShelfNet System electronically
links a store's POS systems and its
ESLs, virtually eliminating
discrepancies between prices displayed
on the store shelves and prices charged
at checkout. This assurance of pricing
integrity permits retailers to reduce or
eliminate manual pricing audits and
fines paid to governmental entities for
pricing inaccuracies. In addition, such
pricing accuracy can result in fewer
price checks and errors at checkout, can
result in faster checkout times,
improved cashier productivity and
increased customer satisfaction.

Merchandising
 Management	The ERS ShelfNet System is designed to
increase the speed and accuracy of
placing product displays and promotional
material by displaying a signal on the
ESLs of products that require the
addition or removal of merchandising
bibs or hangers. This is intended to
eliminate the time-consuming and
potentially inaccurate manual process of
checking promotional items against a
printed list. The ERS system is designed
to enable conduct of audits of
promotional programs quickly and
accurately in the store aisle.

Replenishment/
 Inventory
 Management	The ERS ShelfNet System is designed to
allow authorized store personnel to
change ESLs from a price display to an
out-of-stock message. This procedure
replaces the current system of noting
out-of-stocks manually, with the use of
a label scanner, which requires follow-
up by the store employee. The ERS
ShelfNet System facilitates simple
notation of out-of-stocks during normal
stocking procedures, with the system
automatically generating an out-of-stock
report that can be resolved quickly by
store management. In addition, the
display of an out-of-stock message,
rather than removal of a paper label,
holds the shelf placement for the
missing product, increasing planogram
integrity.

Shelfset Management	The ERS ShelfNet System is designed to
maintain shelfsets more easily, because
the ESLs stay locked in place and cannot
be moved back and forth as can paper
tags. In addition, the ESL is designed
to display product facing information
and section, shelf, and bay locations
for simple, more accurate and less
paper-intensive planogram
implementations or changes. These
features are intended to reduce labor
associated with shelfset management and
stocking and increase planogram
compliance and monitoring.

The ERS ShelfNet System

	The Company's ESL system replaces paper price tags on retail
shelves with liquid crystal display labels and transmits pricing
and other information to and from the shelf edge. The Company's
new generation ERS ShelfNet System provides spread spectrum
microwave transmission of data directly to wireless ESLs. The
enhanced ERS ShelfNet System is designed to provide additional
flexibility and convenience to customers  by expanding potential
coverage by the Company's ESLs to the entire store and allowing
the retailer to change store placement of the ESLs more easily.
The Company believes that the cost to the customer of installing
and maintaining the Company's wireless ESLs will be lower than
that of its prior ESL system, which required the wiring of store
aisles.

	Each ERS ShelfNet System generally consists of up to 30,000
ESLs and the necessary communication and support infrastructure to
link the ESLs with the store's central computer and POS systems.
The Company's new generation system consists of the following
components:

	Electronic Shelf Label

	Each ESL is a mini data transceiver contained in a plastic
case, which displays price and other information by means of a
wide-angle view liquid crystal display window. The ESL is also
able to display pricing and other promotional information for the
consumer and inventory and reorder information for store
employees, and is equipped with two buttons designed to allow
store staff to interact with the store computers from the ESL on
the shelf. The Company offers five different sizes and types of
ESLs for use in different applications, such as SKUs for coolers
and freezers. The Company's prior generation ESLs are powered
through the rails to which they are connected, whereas the
wireless ESLs are powered by long-life batteries.



	Spread Spectrum Wireless Network

	Communication to the ESLs is managed by a high frequency,
real-time communication system that uses spread spectrum
technology. Active cell antennae in the store ceiling send and
receive signals to and from wireless ESLs in their respective
coverage areas. The cells form a radio frequency infrastructure in
which multiple, non-overlapping cells may be active
simultaneously, while overlapping cells synchronize their
transmissions, permitting spectrum re-use. The redundancy of
transmission provided by ERS' spread spectrum network helps to
eliminate interference problems and to ensure that complete
information is clearly communicated.

	Communication Hub

	The local area network's communication hub, located in the
store's back office area, has two functions: (i) the hub
distributes signals to the ESLs through computerized information
processors which relay information to active cell antennae in the
store ceiling and from the antennae to the individual product ESLs
located on the shelf and (ii) the hub receives information from
the information processors which has been relayed by the antennae
in the ceiling after receipt from the ESLs located on the shelf.

	System Controller

	The system controller is a personal computer or the existing
in-store processor, also located in the store's back office area,
which is linked directly to the store's electronic POS system. The
system software resides in the system controller, and allows the
same pricing data that is incorporated into the POS system to be
used with the ERS ShelfNet System simultaneously. The system
controller communicates the pricing or other data directly to and
from the communication hub. The system controller is designed to
receive information from the store's corporate or regional
headquarters (such as product price or promotional information)
and to communicate data to such headquarters (such as product
order information).

	Software System

	The Company's ESL system is designed to be compatible with
electronic POS scanning systems and is compatible with systems
provided by the three major worldwide suppliers of POS systems,
IBM, NCR, and Fujitsu-ICL. The Company's system may also be
interfaced with major store operating systems, such as OS/2,
Windows NT and Unix. Because the "intelligence" of the ERS
ShelfNet System is located in the system controller and not the
individual ESLs, the Company is able to incorporate new functions
into its system by upgrading software without replacing any
hardware.

	The Company's system can be linked to an in-store laser
printer capable of printing paper overlays for ESLs, paper labels
for non-electronic shelves and other promotional items. The
Company furnishes its customers with specific procedures and
guidelines for each application that show store managers how to
utilize the ERS system and software tools, and a data collection
and analysis format to document productivity increases and to
monitor ongoing improvements in store operations.

Marketing and Sales

	The Company will continue to focus its marketing efforts with
respect to the ERS ShelfNet System on major national and regional
supermarket chains. The Company believes that each supermarket
chain will typically choose a single supplier of ESL systems to
maximize chainwide efficiency. Therefore, the Company's marketing
strategy is to make installations in a small number of stores in
each of the largest supermarket chains in North America and then
to build upon such installations by installing systems through the
rest of the chain's stores. In response to retailing trends, the
Company has also increased its marketing efforts to mass
merchandisers.

	The Company's marketing efforts are premised on the adoption
of the ERS ShelfNet System in four successive phases, as follows:

?	Detailed review of store procedures and systems and
documentation of expected cost savings and benefits;

?	Agreement for multi-store adoption of the ERS
ShelfNet System subject to design, installation and
implementation of a single store evaluation system
and concurrent design of integration plans, operating
procedures and training programs for broader use by
the retailer;

?	Installation of the first group of stores within a
chain, defined by a geographic or merchandising
region, to establish final chain-wide operating
procedures; and

?	Chain-wide commercial rollout.

	The Company currently markets its products to major retail
chains through a direct marketing and sales force. The Company's
marketing and sales personnel have significant retail experience,
including experience in the POS system and local area network
industries. The Company's marketing staff works with existing and
potential customers to define their needs for ESL systems and to
coordinate their implementation of the ERS ShelfNet System. The
Company exhibits its system at major trade shows and produces and
distributes promotional materials to increase market awareness of
the Company's system.

	In addition, the Company will continue to investigate the
feasibility of marketing its system through indirect channels such
as value added resellers and distributors. In 1997, the Company
entered into a five-year agreement with Symbol Technologies, Inc.
("Symbol"), granting Symbol the right, subject to specified
exceptions and exclusion of certain markets in the United States,
to resell the Company's products worldwide and, subject to
achievement of specified market penetration objectives, the
exclusive right to resell the Company's products in Europe.
Pursuant to such arrangements and subject to meeting certain
minimum sales criteria, Symbol would also have the right to
manufacture the Company's ESL system. The Company has not
generated any revenues under its arrangements with Symbol.

	The Company has also marketed the ERS ShelfNet System under
its arrangements called Save-As-You-Go (the "SayGo Plan"). Under
the SayGo Plan, the Company owns the system and, with no upfront
cash cost to the retailer, furnishes the system to retailers who
pay monthly fees to the Company based largely on their actual
usage of the system. Under the SayGo Plan, the Company furnishes
the system to qualified customers, identified by the Company as
those retailers who meet minimum requirements with respect to
price change potential per store and number of ESLs ordered. The
Company's contract with such customers typically provides for
charges to be billed to the customer monthly based on usage of the
system. The Company currently has one system installed under the
SayGo Plan.

	System sales revenue from the Company's hardware and software
products is recognized at the time of shipment to customers, or
upon completion of an installation of a trial system, while
revenue from providing installation services to customers is
recognized upon the completion of an installation. Under the SayGo
Plan, the Company recognizes revenues as monthly usage and other
fees are billed to customers, and depreciates the cost of hardware
components of its systems over the shorter of their estimated
useful lives or five years. Maintenance revenue for services
provided under maintenance contracts is recognized over the
service contract period, and other revenue for parts and services
is recognized when provided. In connection with implementing the
SayGo Plan, the Company incurs substantial cash requirements for
manufacturing and carrying costs which are not initially covered
by revenues.

	The Company has collaborated with supermarket retailers and
suppliers of in-store wireless networks, printing services,
merchandise planning systems and other retail systems providers in
order to develop a better understanding of customer needs and to
offer comprehensive customer solutions. The Company will continue
to pursue such efforts and will seek additional strategic partners
to assist the Company in the broad market adoption and roll-out of
the Company's new generation system.

Customers

As of December 31, 2000, the Company's ESL systems were
installed in 82 U.S. retail stores, including those owned by such
leading supermarket chains as Stop & Shop Supermarket Company
("Stop & Shop"), Big Y Foods, Inc., Shaw's Supermarkets, Inc.
("Shaw's"), The J.H. Harvey Company ("Harvey's"), K Mart
Corporation, Winco Foods, Inc. ("Winco"), Safeway, Inc.
("Safeway") and Schnuck Markets, Inc. ("Schnucks"). Installations
at December 31, 2000 reflect the determination of Rite-Aid
Corporation not to renew its arrangements under which the Company
furnished the system in ten stores in exchange for charges based
on usage, and the removal of the systems from these stores.

	As of December 31, 2000, the Company had installed its new
generation system in 14 Shaw's stores, 36 Stop & Shop stores,
one Harvey's store, two Schnucks stores, one Winco store and one
Safeway store. As of December 31, 2000, the Company had received
purchase orders covering four new generation systems from Stop &
Shop, four from Shaw's and, subject to satisfaction with the
performance of the system, one from Publix Supermarkets, Inc.,
all of which the Company plans to install in 2001.

	During the year ended December 31, 2000, Stop & Shop and
Shaw's accounted for 76% and 10%, respectively, of the Company's
consolidated revenues; during the year ended December 31, 1999,
Stop & Shop and Shaw's accounted for 80% and 10%, respectively, of
the Company's consolidated revenues; and during the year ended
December 31, 1998, Stop & Shop and Shaw's, accounted for 59% and
29%, respectively, of the Company's consolidated revenues. The
failure of such customers to continue to utilize systems from the
Company could have a material adverse effect on the business of
the Company. Additionally, customers who account for significant
portions of the Company's revenues may have the ability to
negotiate prices for the Company's products and services that are
more favorable to such customers and that result in lower profit
margins for the Company.

	The Company is actively engaged in pursuing its efforts to
procure additional orders for its systems, and may also in the
ordinary course of its business enter into letters of intent
contemplating the installation of its system. Such letters of
intent are not binding obligations, will be subject to conditions
such as the negotiation and execution of definitive contract
terms, and there can be no assurance that any such arrangements
will be consummated.

Installation and Customer Service

	The ERS ShelfNet System is designed to be installed in a
store without disrupting normal store operations. The Company uses
a team comprised of one Company employee and two sub-contracted
installers to install communications infrastructure and software
and, if rail strips are also ordered by the customer, up to an
additional five sub-contracted installers to install such
hardware. The ESLs generally are programmed by the customer or at
the Company's facilities and shipped to the site where they are
installed by the customer.

	The Company's customer service group is staffed with
employees experienced in POS and other retail systems. The Company
also has an agreement with Data Cabling & Engineering, Inc., under
which the Company obtains support in installation and project
management services. The Company offers standard maintenance
contracts to its customers which, under the SayGo Plan, do not
entail additional charges other than for specified extended
services.

Manufacturing

	The Company utilizes third parties to manufacture and
assemble the components comprising the ERS ShelfNet System. The
Company's ESLs currently incorporate a microprocessor which is
supplied solely by Sanyo Semiconductor Corporation. While the
Company, on the basis of its familiarity with the design of such
microprocessor and the capabilities of other sources, believes
that other suppliers could produce equivalent microprocessors
within approximately four months of notification by the Company,
any inability to obtain microprocessors from its current supplier
in sufficient quantities could result in a temporary interruption
of the Company's production of ESLs and any such replacement
supplier could charge more for such production or produce a lower-
quality unit, thus diminishing the Company's revenues and income
from operations.  The Company's policy is to maintain an inventory
of microprocessors sufficient to meet substantially all of its
requirements during any such period. The Company intends to
evaluate, from time to time, establishing relationships with other
manufacturers of microprocessors to provide a second source of
supply for its ESLs.

	The Company intends to maintain its practice of utilizing
manufacturing subcontractors, and has a supply arrangement with
Surface Mount Technology Ltd., of Hong Kong, for the assembly of
ESLs. Although the Company has not experienced interruptions or
delays in the manufacture or assembly of its systems, and believes
that alternative sources of system components are readily
available, the termination of the Company's relationship with one
or more of its contract manufacturers or legal or regulatory
changes in any country in which such manufacturer resides may
result in a temporary interruption in the manufacture and assembly
of the Company's system and, thus, in the delay or loss of
placements of the ERS ShelfNet System, with a corresponding loss
of revenues.

Engineering and Development

	The Company's principal engineering and development efforts
have been conducted through software and hardware development
groups located at its facilities in Connecticut and Massachusetts.
These groups focus on improvements to current technology and also
on new applications of existing technology. The Company's
engineering staff also generates the functional specifications and
development schedules for each of the Company's customers. The
Company has also from time to time engaged third parties to design
hardware components based upon requirements or specifications
developed by the Company, and entered into arrangements with
hardware and software developers to augment the Company's internal
activities in the area of long-term product development. The
Company's arrangements with such developers are typically subject
to termination by the Company without penalty, and continuation of
such arrangements will in each case depend upon the satisfactory
achievement by such developers of specified milestones or other
satisfactory performance by them.

	During the years ended December 31, 2000, 1999 and 1998, the
Company incurred expenses for research and development activities
of $4,049,000, $5,460,000, and $3,928,000, respectively. In the
year ended December 31, 1998, the Company capitalized an aggregate
of $373,000 in costs of internal labor and outside services
associated with product development. No such costs were
capitalized during 1999 and 2000.

Intellectual Property

	The Company has aggressively pursued an intellectual property
rights strategy to protect its product developments. The Company's
policy is to file patent applications to protect its technology,
inventions and improvements that are important to the development
of its business, and to seek copyright protection with respect to
its software. The Company also relies upon trade secrets, know-
how, continuing technological innovation and licensing
opportunities to develop and maintain its competitive position.

	The Company holds 20 United States patents and seven foreign
patents, and has five additional United States patent
applications, one United States provisional patent application and
four foreign patent applications pending. The Company also has
other applications under preparation and intends to continue to
file patent applications on its novel products and systems.
Certain of these patents and patent applications are directed to
salient features of the Company's ESL system, in particular
relating to the ESL and associated hardware, and the
communications network linking the components of the system.

	The Company's wholly-owned subsidiary, Amacrine
International, Inc. ("Amacrine"), is entitled to use, and to grant
sublicenses with respect to, certain patents directed to an
alphanumeric display module and radio frequency communications
system, which Amacrine designed and developed for Telepanel
Systems Inc. ("Telepanel") under a technical services agreement
which existed between such companies. The Company is aware of
certain statements made by Telepanel, which the Company believes
are without merit, regarding whether Telepanel is entitled to a
sublicense fee in respect of such patents or will otherwise
protect its rights.

	The Company attempts to protect certain computer software and
service applications through the use of copyright and trade secret
law. The Company relies on non-disclosure agreements with its
employees, customers, consultants, and strategic partners.

	Although the Company believes that patents and other
intellectual property rights are important to its business, there
can be no assurance that patents will issue from any applications
therefor, or if patents issue, that the claims allowed will be of
adequate scope to protect the Company's technology or that issued
patents or other technology rights will not be challenged or
invalidated. The Company's business could be adversely affected by
increased competition in the event that any patent granted to it
is adjudicated to be invalid or is inadequate in scope to protect
the Company's operations, or if any of the Company's other
arrangements related to technology are breached or violated.

	Although the Company believes that its products and
technology do not infringe intellectual property rights of others,
there can be no assurance that third parties will not assert
infringement claims in the future or that such claims will not be
successful. Furthermore, the Company could incur substantial costs
in defending itself in patent infringement suits brought by others
and in prosecuting suits against patent infringers.

Competition

	The Company believes that the only ESL system suppliers
offering a product currently competing with the Company's system
in the United States are Telepanel, Pricer Inc., an affiliate of
Pricer A.B. ("Pricer") and, recently, NCR and Display Edge
Technology, Ltd. ("DET"). Telepanel has publicly reported the
existence of an arrangement with IBM whereby IBM may market the
Telepanel system. NCR and DET also have developed and have
introduced ESL systems in the United States. Outside of the United
States, in addition to Pricer, the Company expects to compete with
a number of companies with ESL systems under development.

	The emerging ESL system market is characterized by rapid
technological advances and evolving industry standards, and the
Company may be subject to a high degree of potential competition
with additional companies which may attempt to develop or market
competing ESL systems. These companies may be larger than the
Company and have greater financial and other resources than the
Company. In the future, the Company may face competition from
vendors of POS systems, or scanner manufacturers which offer
products related to POS systems, who may elect to enter the market
for ESL systems. The ERS ShelfNet System is also subject to
competition from vendors selling traditional paper labeling
methods, as well as providers of hand-held portable data
terminals.

	The principal competitive factors in the Company's business
are product functionality, price/performance and reliability. The
Company believes that it competes favorably on each of these
factors.

Government Regulation

	Accuracy in pricing on the part of supermarkets has been an
objective of state and local regulation. At least 17 states
currently have laws or regulations requiring some form of "unit
pricing" (which require prices and price per measure to be
displayed either on the package or the shelf), and at least five
states (and other local jurisdictions) have laws requiring "item
pricing" (which require the marking of prices on individual
consumer packages for some or all products in the retail store).
The existence of item pricing laws applicable to any of the
Company's intended customers increases such customers' costs of
providing price information to consumers and may decrease or
eliminate some of the potential benefits of implementation of the
ERS ShelfNet System. In the State of Minnesota, item pricing is
not required if the price is clearly presented on the shelf and
consumers are offered the means by which to mark individual items.
In the State of Connecticut, the item pricing law allows the
State's Commissioner of Consumer Protection to exempt from item
pricing requirements stores employing an approved ESL system. The
Commonwealth of Massachusetts has conducted trials of ESL systems
in support of its consideration of regulation which may encourage
the installation of such systems.

	The United States Federal Communications Commission has
established standards for radio frequency emissions from computer
products, and certain components utilized in the Company's ESL
system must comply with such criteria. All components currently
incorporated into the ERS ShelfNet System comply with such
standards, and the Company does not anticipate any material delays
in securing any required certification for components under
development by the Company. Certain foreign countries also
regulate radio frequency emissions.

Agreements with NewCheck Corporation

	In February 2000, in exchange for payments aggregating $6.5
million, the Company acquired 262,802 shares of the newly-created
Series C Convertible Preferred Stock, $.0001 par value (the
"Senior Preferred Stock"), of NewCheck, together with NewCheck's
8% Convertible Promissory Note (the "Convertible Note") in the
aggregate principal amount of $4.6 million, convertible into an
additional 613,205 shares of Senior Preferred Stock. The shares of
Senior Preferred Stock acquired at closing by the Company
represent approximately 18% of NewCheck's outstanding voting
securities. In December 2000, the Company committed to its
portion, in an amount up to $2.5 million, of interim financing for
the benefit of NewCheck, as part of arrangements entered into by
NewCheck's principal stockholders and which will be convertible
into additional equity of NewCheck in certain circumstances. For
additional information concerning the terms of the securities
acquired by the Company and such additional financing, and
impairment charges recorded by the Company against such assets at
December 31, 2000, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources," which information is
incorporated by reference herein.

	NewCheck Business

	ACM Self Checkout.  NewCheck is engaged in the development
and commercialization of retailing technology productivity
solutions for use in supermarkets and other retail environments
similar to those addressed by the Company's system. NewCheck's ACM
Self Checkout is designed to enable shoppers to scan their items
at a self-checkout lane and then either pay at the lane or at a
centrally- located pay station. The Company believes that the ACM
Self Checkout enables retailers to reduce labor requirements at
the front-end of the store, as a result of lesser staffing and
training needs and the ability to handle traffic variations
without the deployment of additional personnel, thereby raising
such retailers' gross margins and lowering their operating costs
in the highly-competitive U.S. retailing market.

	The ACM Self Checkout is intended to achieve labor
efficiencies for retailers as a result of such features as:

System
 Familiarity	The ACM Self Checkout closely resembles
a conventional checkout lane. With color
touch screens and conveyor-based lanes,
the system is intended to look and
operate like checkout lanes familiar to
retailer customers.

User-Friendly	Systems that are easier to use are
typically used more often and, as a
result of innovations in self-checkout
technology, the ACM Self Checkout is
targeted for ease of use by the retail
customer. User interface features such
as simplified color touch screens,
multi-media instruction which includes
voice synthesized assistance, online
look-up screens, scale weight displays
and electronic receipts are designed to
guide the customer more rapidly through
checkout. Because the system is
integrated with the store's POS systems,
it allows real-time price and
description verification as the customer
scans.

Flexibility	Because self-checkout systems operate on
a 24-hour basis, staffing requirements
for cashiers may decrease significantly.
At the same time, the ability of the ACM
Self Checkout to process both full size
and express size orders, at any time of
day, enhances the retailer's use of the
system as a substitute for a
conventional lane. The configuration of
the ACM Self Checkout is designed to
permit its use at any location to the
front end of the store, and to be
converted to a conventional lane in
special circumstances.

Rapid
 Throughput	Customer preferences for better, faster
self-service, which have been
implemented through automated teller
machines in banking transactions and
pay-at-the pump credit/debit card
machines for fuel service stations, are
among the principal rationales for self-
checkout. The Company believes that many
customers will choose familiar, user-
friendly systems over the conventional
alternatives, thereby enhancing
throughput generally in the store.
Multiple payment options available at
the lane further contribute to rapid
transaction throughput, as well as the
ACM Self Checkout's ability to process
different size orders at any time. In
addition, through the introduction self-
checkout lanes, wait time may be lowered
at all lanes, including conventional
lanes.

	The ACM Self Checkout is designed to substitute for the
conventional lane and enable customers to process purchases
through the following sequential steps:

?	the customer scans each item, guided by audio and video
instructions throughout the checkout process;

?	each item is then placed on the center of the conveyor
belt, and then checked for weight and dimensional
security;

?	for produce and non-bar coded items, the customer selects
a photograph of the item purchased from among the icons
displayed on the touch-screen;

?	when finished, the customer touches the "finish and pay"
icon;

?	the customer may then pay at the lane with cash, credit or
debit  payment, or at a pay station with any form of
payment; and

?	bagging of the order is accomplished in a distinct area,
so as to permit more than one order to be processed at the
same time (with store baggers during peak hours to
increase throughput, at the option of the retailer).

	NewCheck Strategy

	NewCheck's primary target market consists of supermarkets and
mass merchandising retailers in the United States. NewCheck's ACM
Mini is designed to extend the advantages of the system to
additional markets, such as drug stores and convenience stores.
See "Retail Industry Overview" above for a description of the
retail environment in which NewCheck operates.  As a result of its
focus on major national and regional chains, the NewCheck ACM Self
Checkout is installed in stores owned by Great Atlantic & Pacific
Tea Co., Food Lion LLC, Giant Eagle, Inc., Hannaford Brothers,
Inc., The Stop & Shop Supermarket Company, Wal-Mart Stores, Inc.,
Weis Markets Inc., Winn-Dixie Stores, Inc. and Big V Supermarkets
Inc.

	Management Arrangements

	The Company and NewCheck have entered into a management
agreement dated February 11, 2000 (the "Management Agreement"),
under which, for an initial term of five years, the Company will
manage NewCheck's operations. Under the Management Agreement, the
Company is obligated to develop an annual business plan for
NewCheck, subject to review and approval by the Board of Directors
of NewCheck, and subsequently, within the parameters of the
business plan, to supervise and manage NewCheck's business. The
initial term of the Management Agreement may be extended by an
additional period of five years, at the option of the Company upon
notice to NewCheck, as long as the Company is not in default under
the agreement and, together with its affiliates, continues to own
or has the right to acquire at least seven percent of the
outstanding equity of NewCheck.

	In exchange for the Management Agreement, the Company is
entitled to reimbursement of the costs of performance, including
an allocated portion of the Company's general and administrative
expense. In addition, in exchange for the Management Agreement,
the Company holds 850,000 ten-year warrants (net of 260,000
warrants assigned by the Company to one of its executive
officers), with an exercise price of $.001 per share, exercisable
after the first year to acquire shares of NewCheck's common stock,
$.0001 par value (the "NewCheck Common Stock"), equal to
approximately 12% of NewCheck's outstanding voting securities
(giving effect to such warrants and to the conversion of the
Convertible Note).   The Company received additional ten-year
warrants (certain of which were assigned by the Company to an
aggregate of four of its executive officers), exercisable at the
same price per share with respect to specified percentages of the
outstanding NewCheck Common Stock, that vest in the event the
equity value of NewCheck exceeds specified levels during the three
years after closing.   Under the Management Agreement, the Company
will administer a stock option plan authorized by NewCheck's Board
of Directors with respect to shares of NewCheck Common Stock,
equal to up to 15% of the securities of NewCheck outstanding at
closing (on a fully-diluted basis), which may be granted to
officers, employees and consultants of NewCheck (including
officers and employees of the Company).

	The Management Agreement provides for NewCheck to indemnify
the Company for activities by the Company under the Management
Agreement, except insofar as may be attributable to any gross
negligence or willful misconduct of the Company, and, except as
may be attributable to such matters, provides for any liability of
the Company under the Management Agreement to be limited to
amounts received by the Company and the fair market value of the
warrants, and warrant stock, issued under the Management
Agreement.

	Other Arrangements

	Under the agreements pursuant to which the Company, and other
subscribers to NewCheck's Senior Preferred Stock,
contemporaneously acquired their securities, NewCheck is obligated
to observe covenants addressing such matters as the ability to
incur debt, effect acquisitions, dispose of assets and undertake
other actions, unless waived by the requisite consent of holders
of the Senior Preferred Stock, Convertible Note and NewCheck's
prior issued Series B Convertible Preferred Stock. NewCheck's
arrangements with the Company and such other subscribers extend,
among other matters, to demand and incidental registration rights
covering the NewCheck Common Stock issuable upon conversion of the
Senior Preferred Stock (and the warrants issued to the Company)
and rights of first offer regarding new issues of securities by
NewCheck. The Company is also entitled to name one of the three
directors allocated to the Senior Preferred Stock on NewCheck's
seven member Board of Directors.

Employees

	As of December 31, 2000, the Company had 69 employees,
consisting of 34 engaged in engineering, development and
manufacturing support, eleven in marketing and sales activities,
thirteen in customer services and eleven in general administrative
and executive functions. The Company does not have a collective
bargaining agreement with any of its employees and considers its
relationship with its employees to be good.

Executive Officers

	The executive officers of the Company, and their respective
ages and positions with the Company, are as follows:

	Name				Age			Position
	--------			------		-----------

Norton Garfinkle		70		Chairman of the Board
Bruce F. Failing, Jr.	52		Vice Chairman of the Board
							 and Chief Executive Officer
Michael Persky			37		President
Jerry McAuliffe			37		Vice President, Chief
 Financial Officer
Frank Romano			38		Vice President, Engineering
Paul Lavoie			40		Vice President, Sales
Norman Tsang			36		Vice President, Marketing

	Mr. Garfinkle, the Company's Chairman of the Board, is a
founder of the Company. Since 1970, Mr. Garfinkle has also been
the Chairman of Cambridge Management Corporation, which
manufactures and markets the DAP series of massively parallel
processing computers, and has also served during this period as
Chairman of its affiliates, including Oxford Management
Corporation, which specialize in the research and development of
new technologies. From 1985 to 1988, Mr. Garfinkle was Chairman of
Oral Research Laboratories, Inc., a manufacturer of dental hygiene
products founded by Mr. Garfinkle. Mr. Garfinkle also served as a
director of Actmedia, Inc. from 1975 to 1978 and from 1983 to
1988. Mr. Garfinkle is a director of eSynch Corporation.

	Mr. Failing, the Company's Vice Chairman of the Board and
Chief Executive Officer, is a founder of the Company, and served
as President through February 1997. In 1973, Mr. Failing co-
founded Actmedia, Inc., a provider of in-store advertising for the
supermarket industry, and was President and Chief Executive
Officer of Actmedia, Inc. until its sale in 1989.

	Mr. Persky has been President and Chief Operating Officer of
the Company since 1998, having joined the Company and become Vice
President-Marketing in 1997. Prior to joining the Company, Mr.
Persky was Vice President-Marketing for Executone, Inc., a
manufacturer of telephone systems, since 1996. Prior to 1996, Mr.
Persky held various marketing positions with Octel Communications
(formerly VMX, Inc.), a voice mail supplier, the last of which was
as Marketing Director, Europe, Middle East and Africa.

Mr. McAuliffe has been Vice President, Chief Financial
Officer of the Company since January 1999. From 1997 until joining
the Company, Mr. McAuliffe was Chief Financial Officer of Ubiq
Communications, Inc., a specialty wireless messaging and
information company, and from prior to 1996 to 1997 served as
Chief Financial Officer of Ovid Technologies, Inc.,  a software
and internet based information technology company.

Mr. Romano has been Vice President, Engineering of the
Company since March 2000, having joined the Company as Director,
Hardware Engineering in May 1999.  Prior to joining the Company,
Mr. Romano served as Director, Manufacturing and Corporate Quality
of Comtec Information Systems Inc., a developer of  wireless
portable printers and hand held terminals, since 1997. Prior to
1996, Mr. Romano held various positions in product development
with GTECH Corporation, which provides online gaming systems, the
last of which was as Manager, Product Engineering.

Mr. Lavoie has been Vice President, Sales of the Company
since January 1999, having joined the Company as Vice President,
Marketing in 1998. From prior to 1996 to 1998, Mr. Lavoie held
various marketing positions with News America Marketing, Inc.
(formerly, Actmedia, Inc.), the last of which was as Senior Vice
President, Retail Marketing.

Mr. Tsang has been Vice President, Marketing of the Company
since January 1999.  Prior to joining the Company, Mr. Tsang was
Vice President, Marketing of Star Markets Company, a regional
supermarket and natural foods chain from prior to 1996 to December
1998, prior to which he was a consultant with McKinsey & Company,
a strategic consulting company.

ITEM 2. PROPERTIES

	The Company's executive offices are located at 488 Main
Avenue, Norwalk, Connecticut. The Company currently leases
approximately 9,000 square feet of space at such location, devoted
to administrative, sales and product support uses, under a lease
requiring payment of annual rent (in addition to utility charges
and increases in operating expenses and real estate taxes) in an
amount, currently, at approximately $160,000 increasing to
approximately $209,000 in the  final year of the lease (which
expires August 2007),  subject to the Company's right to terminate
the lease in July 2002 or July 2004 upon payment of specified
sums.

	The Company has entered into a lease arrangement in
Boxborough, Massachusetts, with respect to approximately 22,500
square feet, which expires in September 2002 and requires annual
rent (in addition to increases in operating expenses and real
estate taxes) in an amount currently of approximately $285,000,
increasing to approximately $290,000 in the final year of the
lease. The space is used for engineering and development
activities. The Company leases additional space at other smaller
locations where required to support operations. The foregoing
facilities are regarded by management as adequate in all material
respects for the current requirements of the Company's business.

ITEM 3. LEGAL PROCEEDINGS

	The Company is involved in certain litigation incidental to
the conduct of its business and affairs. Management does not
believe that the outcome of any such litigation will have a
material adverse effect on the financial condition or results of
operations of the Company.

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

(a)	On October 13, 2000, the Company convened its Annual
Meeting of Stockholders (the "Annual Meeting").

(b)	Not applicable because (i) proxies for the Annual
Meeting were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934 together with the Company's Proxy
Statement dated September 15, 2000; (ii) there was no
solicitation in opposition to management's nominees as listed in
such Proxy Statement; and (iii) all of such nominees were
elected.

(c)	At the Annual Meeting, the Company's stockholders
voted in favor of the election of management's nominees for
election as directors of the Company. The holders of 15,496,315
shares voted in favor of, and the holders of 30,712 shares
withheld their vote for, the election of David Diamond; the
holders of 15,496,315 shares voted in favor of, and the holders
of 30,712 shares withheld their vote for, the election of Bruce
F. Failing, Jr.; the holders of 15,496,315 shares voted in favor
of, and the holders of 30,712 shares withheld their vote for, the
election of Norton Garfinkle; the holders of 15,496,315 shares
voted in favor of, and the holders of 30,712 shares withheld
their vote for, the election of Michael Persky; and the holders
of 15,496,315 shares voted in favor of, and the holders of 30,712
shares withheld their vote for, the election of Donald E. Zilkha.

At the Annual Meeting, the stockholders voted in favor of a
proposal to approve an amendment to the Company's 1993 Employee
Stock Option Plan in order to increase the number of shares
issuable pursuant to the exercise of options under such plan from
3,500,000 to 4,500,000 shares of Common Stock of the company. The
holders of 15,334,970 shares voted in favor of, the holders of
167,807 shares voted against, the holders of 24,250 shares
abstained and there were no broker non-votes with respect to
approval of such proposal.

(d) 	Not applicable

PART II

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

	(a) The Company's Common Stock is currently quoted on the OTC
Bulletin Board under the symbol "ERSI." From November 6, 1998 to
September 2, 1999, the Company's Common Stock was quoted on the
Nasdaq SmallCap Market, and prior to November 6, 1998 was quoted
on the Nasdaq National Market. The following table sets forth, for
the calendar periods indicated, the range of quarterly high and
low sales prices for the Common Stock, as reported on the Nasdaq
National Market prior to November 6, 1998 and on the Nasdaq
SmallCap Market from and after such date until September 2, 1999,
and the range of high and low bid prices for the Common Stock as
reported on the OTC Bulletin Board from and after September 2,
1999. Quotations represent prices between dealers, do not include
retail mark-ups, mark-downs or commissions, and may not represent
actual transactions.

			1999				 High				 Low
					  		-------			------

		First Quarter    		$3.13	  	   		$1.06
		Second Quarter    		 2.25	  	    		 1.13
		Third Quarter     		 2.00         		 0.63
		Fourth Quarter    		 2.06	   	    		 0.75

		2000  			 High				 Low
				  		-------			------
		First Quarter			$1.03				$0.81
		Second Quarter 			 0.94				 0.47
		Third Quarter1			 1.13			 0.56
		Fourth Quarter          	 0.94				 0.27

	Since July 11, 1996, the Common Stock has also been admitted
to trading on the Alternative Investment Market of the London
Stock Exchange.

	As of March 12, 2001, the number of record holders of the
Company's Common Stock was 501.

	The Company has never paid or declared any cash dividends on
its Common Stock and does not intend to pay cash dividends on its
Common Stock in the foreseeable future. The Company intends to
retain its earnings, if any, for the future operation and
expansion of its business. The payment of dividends in the future
will depend upon the restrictions imposed by the 10% Notes and the
8% Notes, the Company's available earnings, the capital
requirements of the Company, its general financial condition and
other factors deemed pertinent by the Board of Directors. See Note
4 of the Notes to the Company's Consolidated Financial Statements
included in response to "Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity", which information is incorporated herein by
reference.

	(b)	Not applicable.

ITEM 6. SELECTED FINANCIAL DATA

	The following tables reflect summary historical consolidated
financial data with respect to the Company for the periods
indicated and should be read in conjunction with the Company's
Consolidated Financial Statements included in response to "Item
14. Exhibits, Financial Statement Schedules and Reports on Form 8-
K" and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations".

	The following selected consolidated statement of operations
and balance sheet data, insofar as it relates to each of the five
years in the period ended December 31, 2000, has been derived from
audited consolidated financial statements, including the
consolidated balance sheet as of December 31, 2000 and 1999 and
the related consolidated statement of operations for each of the
three years in the period ended December 31, 2000 and the notes
thereto.


						 	                 Year Ended December
31,
									 -------------------------
-------------------------
                             2000     1999       1998       1997      1996
									  ----     ----       ----
----      ----
                              (Amounts in thousands, except per share data)

Consolidated Statement
 of Operations Data:

Revenues....................  $4,582  $ 4,631    $ 3,764  $  1,972  $  5,002
Cost of goods sold..........   4,965    7,035      8,095     3,699     6,204
									   ------- -------    ----
---  --------  ---------
  Gross income (loss).......    (383)  (2,404)    (4,331)   (1,727)   (1,202)
									   ------- -------    ----
---  --------- ---------
Operating expenses:
 Selling, general and
  administrative............   7,119   11,476     12,671    12,394     6,310
 Research and development...   4,049    5,460      3,928     3,409     1,614
Depreciation and amorti-
  zation....................     881      402        375       301       162
Stock option compensation...      --       --         --        --        44
									   ------- --------   ----
----  --------   -------
  Total operating expenses..  12,049   17,338     16,974    16,104     8,130
									   ------- --------   ----
----  --------   -------
  Loss from operations...... (12,432) (19,742)   (21,305)  (17,831)   (9,332)
									   ------- --------   ----
----  --------   -------
Other income (expenses):
 Interest income............   1,101    2,680      3,982     4,982       302
 Interest expense...........  (5,629) (18,844)   (16,886)  (14,024)     (382)
Loss on disposals ..........    (247)    (787)      (104)       --        --
Loss on investments and
  and other assets..........  (6,414)      --         --        --        --
									   -------  -------   ----
----   -------   -------
Total other expense, net.... (11,189) (16,951)   (13,008)    9,042)      (80)
									   -------  -------   ----
----   -------   -------
Net loss before
  extraordinary item.......  (23,621) (36,693)   (34,313)  (26,873)   (9,412)

Extraordinary item:
   Gain on extinguishment
   of debt                    64,828    34,582      --   	     --   	   --
									  -------  --------   ----
----   --------   --------
Net income (loss)            $41,207  $(2,111)   $(34,313)  $(26,873)  $(9,412)
									  =======  ========
========   ========   ========
Earnings (Loss) per share:
 Weighted average number
  of common shares out-
  standing.................   21,291   21,264      21,233    21,096     16,169
									  =======  ========
=========  ========   ========
Basic gain/(loss) per common
  share
	Loss per share before
     extraordinary items     $ (1.11)  $(1.73)   $ (1.62)   $ (1.27)   $ (0.60)
   Extraordinary item           3.04     1.63         --        --       --
									  --------  -------   ----
-----  ---------  ---------
Net income (loss)         $  1.94   $(0.10)   $ (1.62)   $ (1.27)   $ (0.60)
								  ========  =======   =========
=========  =========

                                               December 31,
									   -----------------------
---------------------------
                              2000        1999     1998      1997      1996
									   -----       -----    --
---     -----     -----
                                           (Dollars in thousands)
Consolidated Balance
 Sheet Data:

Net working capital.......  $ (1,029)	$ 41,165  $ 65,697  $  88,372  $ 8,764
Total assets..............     7,430	  49,516    81,626    100,208   12,260
Long-term debt............     6,882	  98,208   124,057    113,102    4,989
Redeemable Preferred
  Stock...................	    3,999	     --	 --	       --	    --
Common stock purchase
 warrants.................     5,100	   5,100     5,100      5,100     --
Stockholders' (deficit)
 equity...................   (67,232)	 (56,854)  (54,742)   (20,476)   5,723



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

Overview

Since its inception in 1990, the Company has been engaged
primarily in the development, design, market testing and sale of
the ERS ShelfNet System. The Company subcontracts to third parties
the manufacture and assembly of the components comprising the ERS
ShelfNet System. In addition, the Company engages unaffiliated
parties to augment its internal development resources and to
assist it in the continued development of the ERS ShelfNet System.
The Company has never been profitable and has incurred significant
net operating losses and negative cash flow from operations to
date. Since inception and through December 31, 2000, the Company
has generated cumulative revenues of $26.6 million, and has
incurred a cumulative net operating loss of approximately $134.3
million (prior to recording an extraordinary gain in 1999 and 2000
of an aggregate of $99.4 million in connection with the Company's
acquisition of Senior Discount Notes). The Company expects losses
and negative cash flow from operations to continue through the
current fiscal year, and the accumulated deficit to increase.

	The market for the Company's ESL systems is in the
development stage, and the Company estimates that, as of December
31, 2000, approximately 225 stores in the United States were
operating such systems, out of a potential market in excess of
100,000 supermarkets and other stores. As a result, market
acceptance of and demand for these systems are subject to a high
level of uncertainty. The Company's success will depend upon the
rate at and extent to which retailers choose to install ESL
systems throughout their stores. The initial acceptance and rate
of installation by retailers may be affected by numerous factors
beyond the Company's control, including the customer's assessment
of the benefits of and the need for ESL systems and the customer's
available capital resources, and  there can be no assurance that
supermarket chains or other retailers will choose to install ESL
systems in a significant number of their stores.

	In February 2000, the Company acquired an interest in
NewCheck, which is engaged in the development and
commercialization of retailing productivity solutions for use in
supermarkets and other retail environments similar to those
addressed by the Company's system. Under a management agreement
extended to NewCheck, the Company manages NewCheck's operations
within the parameters of a business plan authorized by NewCheck's
board of directors. The Company believes that the benefits to it
from its interest in and continued support to NewCheck extend to
the ability to utilize marketing efforts relative to the NewCheck
product to familiarize the same customers with the Company's
products and the ability subsequently to allocate significant
portions of the Company's general, administrative and other costs
to NewCheck through the management contract, as well as
participation in the gains  from developing the NewCheck product.
See "Liquidity and Capital Resources" below for information
concerning impairment charges recorded by the Company at December
31, 2000 against the Company's interest in NewCheck.

	In order to pursue its business strategy, the Company has
historically incurred substantial indebtedness. During the third
quarter of 2000, an aggregate of $76.4 million, constituting all
of the remaining outstanding Senior Discount Notes were acquired
by the Company in exchange for $13.8 million in cash, $10 million
principal amount of new indebtedness (recorded with interest
through maturity) and $4 million liquidation preference of newly-
created preferred stock. Such exchange followed the acquisition
by the Company during fourth quarter 1999 and first quarter 2000
of an aggregate of $70.9 million principal amount at maturity of
Senior Discount Notes.

	Management believes that the Company's current resources
will enable the Company to fund operations, including the
Company's interim financing commitments to NewCheck, into the
second quarter of 2001, after which, in the event the Company is
unable to raise additional financing, its operations would need
to be scaled back or discontinued. These factors raise
substantial doubt about the Company's ability to continue its
operations as a going concern.  Management is proactively
seeking sources of additional financing in order to support
operations and meet the Company's debt obligations, including
those that become due in the third quarter of 2001, but there
can be no assurance any such financing will be available on
terms reasonable to the Company or that the Company will be able
to consummate any other transaction (as more fully described
below under "Liquidity and Capital Resources") to address its
liquidity requirements.  As a result of these conditions, the
report of independent accountants to the Company's Consolidated
Financial Statements included in response to "Item 14. Exhibits,
Financial Statements, Schedules and Reports on Form 8-K" has
been modified to emphasize the substantial doubt regarding the
Company's ability to continue as a going concern.

Results of Operations

	Year ended December 31, 2000 compared to
	 Year ended December 31, 1999

	Revenues.  The Company's revenues were $4,582,000 in 2000,
compared to $4,631,000 in 1999. In 2000, revenues were
concentrated among two significant customers within the
supermarket industry, comprising approximately 86% of total
revenues, with one customer accounting for approximately 76%.
Approximately 90% of total revenues in 1999 were attributable to
two customers, with one customer accounting for 80%. For the year
ended December 31, 2000, maintenance revenues increased to
$968,000 from $788,000 in the prior year, due primarily to
increased maintenance and billable service activity from a larger
customer base of installations offsetting a reduction in
maintenance revenue per installation for the Company's wireless
system compared with the previous generation system.

	Cost of Goods Sold.  Cost of goods sold consists of the cost
of hardware components of the ERS ShelfNet System, system
installation costs, depreciation of tools and dies owned by the
Company and utilized in the manufacturing of hardware components,
amortization of capitalized product development costs, warranty
and maintenance costs, freight and inventory obsolescence.
Under the SayGo Plan, the Company depreciates the cost of
hardware components of its system over the shorter of their
estimated useful lives or five years.

	Cost of goods sold decreased to $4,965,000 in 2000 from
$7,035,000 in 1999, resulting in a gross loss (cost of good sold
in excess of revenues) in 2000 of 8% of total revenues compared to
a gross loss  of 52% in 1999. The margin improvement reflects a
decrease in the amortization of capitalized software costs as a
share of cost of goods sold and a decrease in maintenance labor.
During the years 2000 and 1999, the Company recorded charges of
$724,000 and  $1,700,000, respectively, representing increases in
its reserves for inventory.

	Warranty and maintenance expenses included in cost of goods
sold decreased to  $393,000  in 2000 from $677,000 in 1999,
attributable to reductions in the cost to maintain the Company's
wireless product. The Company anticipates that future warranty and
maintenance expenses per installation will decrease, as a greater
percentage of the installed base consists of wireless
installations, and that the cost of goods sold as a percentage of
revenues will decrease as a result of higher manufacturing volumes
of its components, a decrease in the costs of the components and
as the installation process is improved.

	Selling, General and Administrative.  Selling, general and
administrative costs consist of costs associated with selling and
administrative staff, overhead, market research and development,
and customer service personnel. Selling, general and
administrative costs decreased $4,357,000, to $7,119,000 in 2000,
compared to $11,476,000 in 1999. The 2000 results reflect the
impact of the Company's cost reduction efforts during the year,
including employee costs associated with a 45% headcount
decrease.  In addition, selling general and administrative costs
in 2000 reflect a charge of $913,000 against amounts owed to the
Company by NewCheck under the Management Agreement (see
"Liquidity and Capital Resources" below).

	Research and Development.  Research and development expenses
decreased to $4,049,000 in 2000 from $5,460,000 in 1999.    The
decrease reflects a reduction in overall hardware and software
engineering activities resulting from a focus on core product
enhancement and new product development.

	Depreciation and Amortization. The increase in 2000 to
$881,000 from $402,000 in 1999 is due to a $584,000 charge for
amortization of intangibles associated with the acquisition of
the Company's investment in PSI during 2000.

	Interest Income.  Interest income decreased to $1,101,000 in
2000 compared to $2,680,000 in 1999, due to decreased cash and
cash equivalents available for investment.

	Interest Expense.  Interest expense decreased  to $5,629,000
in 2000 compared to $18,844,000 in 1999. Interest expense in 1999
included interest on amounts borrowed from the Connecticut
Development Authority ("CDA"), which matured in August 1999, and,
in both 1999 and the current year, non-cash interest on the
Senior Discount Notes, all of which were acquired during the
period from the fourth quarter of 1999 through the third quarter
of 2000 as described below. With the consummation in January 1997
of the private sale (the "Private Placement") of 147,312 units
(the "Units") each consisting of Senior Discount Notes with a
principal amount at maturity of $1,000 and one warrant
(collectively the "1997 Warrants") to purchase 17.23 shares of
common stock, $.01 par value ("Common Stock"), the Company
commenced recording interest on an amount equal to the gross
proceeds from the Private Placement plus prior recorded and
unpaid interest at the annual rate of 13.25%. Additional expense
has been recorded as a result of the amortization of the discount
recorded on the Senior Discount Notes (for value attributed to
the 1997 Warrants) and the amortization of costs of issuance.
See "Liquidity and Capital Resources" below for information
concerning the retirement of all outstanding Senior Discount
Notes.

	Loss on Investment and Other Assets and Impairment Loss on
Investment.  During 2000, the Company recorded a loss of
$6,414,000 related to its investment in NewCheck, consisting of
$3,273,000 in losses recorded under the equity method and an
impairment charge of $3,141,000 (see "Liquidity and Capital
Resources" below).  The Company accounts for its investment in
NewCheck under the equity method. NewCheck has experienced
recurring losses. See Note 9 of the Notes to the Company's
Consolidated Financial Statements included in response to "Item
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K" with respect to the Company's reduction of its investment in
NewCheck by an amount corresponding to its share of NewCheck's
losses, as reflected in the statement of operations, and by
additional impairment charges.

	Income Taxes.  The Company has incurred net losses since
inception which have generated net operating loss carryforwards
for federal income tax purposes of approximately $34.2 million,
which are available to offset future taxable income and expire
through the year 2013 for federal income tax purposes. In
consideration of the Company's accumulated losses and the
uncertainty of its ability to utilize any future tax benefits
resulting from these losses, the impact of this potential tax
benefit has been eliminated in the Company's consolidated
financial statements as of December 31, 2000 and 1999 (see Note 8
of the Notes to the Company's Consolidated Financial Statements
included under "Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K". During the years ended December 31,
2000 and 1999, the Company's net operating loss carryforwards
were reduced as a consequence of the Company's recognition of
extraordinary gain as hereinafter described, and after utilizing
the Company's operating losses to offset such gain for tax
purposes.

	Extraordinary Gain. In 2000 and 1999, the Company recognized
extraordinary gains of $64,828,000 and $34,582,000, respectively.
The 1999 gain is the result of the acquisition of $46,345,000
principal amount at maturity of Senior Discount Notes for a net
cost of $7,183,000. Such gain is net of transaction fees of
$818,000 and the write-off of $1,232,000 of debt issuance costs.

In the first quarter of 2000, the Company recognized an
extraordinary gain of $18,959,000 as the result of the acquisition
of $24,549,000 principal amount at maturity of Senior Discount
Notes for a cost of $4,652,000, net of fees. Such gain is net of
transaction fees, the write off of debt issuance costs and accrued
interest.  In the third quarter of 2000, the Company completed the
exchange of $76,420,000 principal amount at maturity of Senior
Discount Notes for an aggregate of $13,760,000, in cash,
approximately $5,000,000 principal amount of the Company's 10%
Notes, approximately $5,000,000 principal amount of the Company's
8% Notes, and 39,985 shares of the Company's Series A-1
Convertible Preferred Stock, plus cash in lieu of fractional
shares. The 10% Notes and 8% Notes have been recorded with
interest through maturity. The notes submitted for exchange
represented 100% of the remaining outstanding Senior Discount
Notes.  The Company recognized an extraordinary gain of
$45,869,000, net of transaction fees and the write off of debt
issuance costs.

	Year ended December 31, 1999 compared to
	    year ended December 31, 1998

	Revenues.  The Company's revenues were $4,631,000 in 1999,
compared to $3,764,000 in 1998, reflecting the increased demand
for ERS' new generation product. In 1999, revenues were
concentrated among two significant customers within the
supermarket industry comprising 90% of total revenues, with one
customer accounting for 80%. Approximately 59% of revenues in
1998 was attributable to a single customer, with two customers
accounting for 88% of total revenues. In 1998, the Company
recognized non-recurring revenue of $122,000 for software license
fees, while no such revenue was recognized in 1999. For the year
ended December 31, 1999, maintenance revenues decreased to
$788,000 from $864,000 in the prior year, due primarily to a
reduction in maintenance revenue per installation for the
Company's wireless system compared with the previous generation
system.

	Cost of Goods Sold. Cost of goods sold decreased to $7,035,000
in 1999 from $8,095,000 in 1998, resulting in a gross loss (cost
of goods sold in excess of revenues) in 1999 of 52% of total
revenues compared to 115% in 1998. The decrease in gross loss as a
percent of revenues is primarily the effect of a decrease in
inventory reserves and material costs as a percent of sales, and a
decrease in the amortization of product development costs as a
share of cost of goods sold, resulting from increased installation
volumes. During the years 1999 and 1998, the Company recorded
charges of  $1,700,000 and $3,099,000, respectively, representing
increases in its reserves for inventory.

	Warranty and maintenance expenses included in cost of goods
sold increased to $677,000 in 1999 from $654,000 in 1998,
attributable to an increased installation base offset by
reductions in the cost to maintain the Company's wireless product.
The Company anticipates that future warranty and maintenance
expenses per installation will decrease, as a greater percentage
of the installed base consists of wireless installations, and that
the cost of goods sold as a percentage of revenues will decrease
as a result of higher manufacturing volumes of its components, a
decrease in the costs of the components and as the installation
process is improved.

	Selling, General and Administrative. Selling, general and
administrative costs decreased $1,195,000, to $11,476,000 in
1999, compared to $12,671,000 in 1998. The 1999 results reflect a
decrease in compensation related expense from 1998 resulting from
an overall decrease in employee headcount and the absence of
costs associated with the proposed acquisition of Telepanel.  In
October 1997, the Company and Telepanel executed an agreement to
combine, as a result of which the Company would have become the
sole beneficial owner of the outstanding Telepanel common shares.
In April 1998, such arrangements were terminated. Results for the
year ended December 31, 1998 include direct transaction costs
associated with the proposed combination of $381,000, while no
such expense was recorded in 1999 or 2000.

	Research and Development.  Research and development expenses
increased $1,532,000 to $5,460,000 in 1999 from $3,928,000 in
1998. Such increases reflect expanded hardware and software
engineering activities, primarily to enhance the functionality of
the Company's new system, creation of improved POS data
integration tools and the development of training programs.
During the year ended December 31, 1998, the Company also
capitalized product development costs of $373,000, while no such
costs were capitalized in 1999.

	Interest Income.  Interest income decreased to $2,680,000 in
1999 compared to $3,982,000 in 1998, due to decreased cash and
cash equivalents available for investment.

	Interest Expense.  Interest expense increased to $18,844,000
in 1999 compared to $16,886,000 in 1998. Interest expense
represents interest on amounts borrowed from the Connecticut
Development Authority (the "CDA"), which matured in August 1999,
and, non-cash interest on the Senior Discount Notes.

	Income Taxes. In consideration of the Company's accumulated
losses and the uncertainty of its ability to utilize any future
tax benefits resulting from these losses, a full valuation
allowance has been provided against the impact of this potential
tax benefit in the Company's consolidated financial statements as
of December 31, 1999 and 1998. During the year ended December 31,
1999, the Company's net operating loss carryforwards were reduced
as a consequence of the Company's recognition of extraordinary
gain as hereinafter described, and after utilizing the Company's
1999 operating loss to offset such gain for tax purposes.

	Extraordinary Gain. In 1999, the Company recognized an
extraordinary gain of $34,582,000 as the result of the
acquisition of $46,345,000 principal amount at maturity of Senior
Discount Notes for a cost of $7,183,000 net of fees. The
extraordinary gain is net of transaction fees of $818,000 and the
write-off of $1,232,000 of debt issuance costs.

      Liquidity and Capital Resources

	As of December 31, 2000, the Company had a net working
capital deficiency of $1,029,000 reflecting cash and cash
equivalents of $2,887,000, compared to net working capital of
$41,165,000, reflecting cash and cash equivalents of $37,386,000
at December 31, 1999. The decrease in net working capital and in
cash and cash equivalents resulted primarily from funding the
Company's operations and the acquisition by the Company of its
remaining outstanding Senior Discount Notes, and the Company's
purchase of securities of and interim financing to NewCheck.

	Net cash used in operations was $8,851,000 in 2000, compared
to net cash of $12,820,000 used for operating activities in 1999,
resulting primarily from the net losses (prior to accounting for
the extraordinary gains of $64,828,000 and $34,582,000,
respectively) of $23,621,000 and $36,693,000, respectively, for
such periods. In 2000, the net loss included $418,000 of non-cash
interest expense, compared to $17,151,000 of such expense in the
prior year. See Note 9 of the Notes to the Company's Consolidated
Financial Statements included under "Item 14. Exhibits, Financial
Statement Schedules and Reports on form 8-K" with respect to
write-downs of the securities of NewCheck held by the Company and
amortization of the difference between the Company's investment
and the initial underlying value of its share of the net assets
of NewCheck. During the year ended December 31, 2000, the Company
recorded net income of $41,207,000, after including gain
recognized upon acquisition by the Company of Senior Discount
Notes, compared to a net loss of $2,111,000 in 1999, after
including gain recognized upon acquisition of such notes.

	Net cash used in operations during 2000 reflected an
increase in trade accounts receivable (net of allowance for
doubtful accounts) of $139,000 and a decrease in inventory (net
of reserves) of $2,127,000, compared to an increase in accounts
receivable (net of allowance for doubtful accounts) of $1,045,000
and a decrease of inventory (net of reserves) of $1,056,000
during the prior year. During 2000, current liabilities,
excluding the current portion of long-term debt, decreased by
$1,849,000 (including a decrease of $3,789,000 relating to the
acquisition of the Company's Senior Discount Notes), reflecting
decreases in outstanding trade payables and other accrued
expenses, compared to an increase of $848,000  in the prior year.

	Cash used in investing activities totaled $7,244,000 in 2000
compared to $1,076,000 in 1999.  The increase in investing
activities was primarily due to the investment of $4,550,000 in
NewCheck convertible debt, $1,950,000 in NewCheck equity and
$497,000 in interim financing extended to NewCheck. Investing
activities also included capital expenditures of $291,000 and
$1,076,000 in 2000 and 1999, respectively.

	In February 2000, in exchange for payments aggregating
$6,500,000, the Company acquired shares of NewCheck's newly-
created Senior Preferred Stock, representing approximately 18% of
NewCheck's outstanding voting securities, together with
NewCheck's Convertible Note in the aggregate principal amount of
$4,550,000, convertible into additional shares of NewCheck Senior
Preferred Stock. The NewCheck Senior Preferred Stock is entitled,
pursuant to its terms, to receive preferential dividends, payable
semi-annually in additional shares of NewCheck Senior Preferred
Stock, at the rate of 8% per annum on the liquidation preference
per share, which cumulate if not paid, is subject to certain
redemption rights exercisable by the holders and participates on
an "as converted" basis with NewCheck's common stock, $.0001 par
value ("NewCheck Common Stock"), and other participating series,
in the proceeds of certain events. Each share of NewCheck Senior
Preferred Stock is convertible into three shares of NewCheck
Common Stock at the election of the holder, is automatically
converted in specified circumstances, carries a number of votes
equal to the number of shares of NewCheck Common Stock issuable
upon conversion, and votes together with the NewCheck Common
Stock and other voting securities of NewCheck.

	The NewCheck Convertible Note accrues interest, payable at
maturity, at the per annum rate of 8%, matures on the fifth
anniversary of issue, and is repayable (together with interest)
in shares of NewCheck Senior Preferred Stock at the election of
NewCheck. The NewCheck Convertible Note is convertible after two
years (and earlier in specified circumstances) into shares of
NewCheck Senior Preferred Stock. Under the Management Agreement
extended by the Company to NewCheck, the Company will manage
NewCheck's operations and, in addition to warrants issued to the
Company with respect to NewCheck Common Stock, the Company will
be reimbursed for the costs of its performance. See "Item 1.
Business-Agreements with NewCheck Corporation," which information
is incorporated by reference in response to this item.

In December 2000, the Company committed to its portion, in
an amount up to $2,500,000, of interim financing for the benefit
of NewCheck, as part of arrangements entered into by NewCheck's
principal stockholders.  At December 31, 2000, the Company had
advanced $497,000 under such arrangements, advanced an additional
$1,372,000 during the first quarter of 2001 and anticipates
funding the remainder of its commitment prior to the final
drawdown date allowed NewCheck through the end of May 2001.  Such
amounts accrue interest at the rate of 9% per annum and are
repayable at specified times through August 2001, unless
converted to additional equity of NewCheck at the election of
NewCheck and with the consent of the requisite NewCheck
stockholders.

In accordance with the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," and based upon uncertainties resulting from
NewCheck's history of operating losses and uncertainties
regarding ERS' ability to provide future financing to NewCheck,
management has reduced the carrying value of amounts due from
NewCheck to zero at December 31, 2000. The consequent impairment
charges aggregate $3,141,000 and consist of a write-down in the
amount of $2,644,000 of the remaining carrying value of the
NewCheck Convertible Note and a write-down in the amount of
$497,000 of amounts advanced by the Company under the interim
arrangements with NewCheck. The Company has also recorded a loss
provision of $913,000 against amounts owed to the Company under
the Management Agreement.

	To date, the Company has not generated positive cash flow
from operations, and has historically funded its operations
primarily through loans from its stockholders, the sale of
interests in an affiliated partnership, its initial public
offering of Common Stock consummated in 1993, its arrangements
with the CDA, the sale of Series A Preferred Stock, $1.00 par
value, to the Company's principal stockholders and members of the
Company's Board of Directors and their affiliates, an offshore
public offering and contemporaneous private placement of Common
Stock in 1996 and the Private Placement.

	Cash used in financing activities was $18,404,000 in 2000
primarily to acquire all of the outstanding principal amount at
maturity of the Senior Discount Notes.  In 1999,  $4,997,000 was
used for the repayment of indebtedness to the CDA and $7,598,000
for the acquisition of $46,345,000 principal amount at maturity
of Senior Discount Notes.

	In January 1997, the Company completed the private sale of
147,312 Units, consisting of $147,312,000 principal amount at
maturity of its Senior Discount Notes and the 1997 Warrants,
which were sold to investors at a price aggregating $100 million
($95 million net proceeds to the Company). The 1997 Warrants are
exercisable through February 1, 2004 with respect to an aggregate
of 2,538,258 shares of Common Stock, at a per share price of
$5.23. During the first quarter of 2000, the Company repurchased
$24,549,000 aggregate principal amount at maturity of Senior
Discount Notes in open market transactions from holders who were
not affiliated with the Company for an aggregate purchase price
of $4,650,000. In July 2000, the Company completed the exchange
of $76,418,000 principal amount at maturity of its Senior
Discount Notes for an aggregate of $13,755,240, in cash,
approximately $5,000,000 principal amount of the Company's 10%
Notes (due August 1, 2001), approximately $5,000,000 principal
amount of the Company's 8% Notes (due August 1, 2004), and 39,985
shares of Series A-1 Preferred Stock, plus cash in lieu of
fractional shares. The 10% Notes and 8% Notes are recorded with
interest through maturity. The notes submitted for exchange
represented 100% of the outstanding Senior Discount Notes.

The Company's 10% Notes accrue interest payable at the rate
of 10% per annum, semi-annually, through issuance of additional
10% Notes. Upon consummation by the Company of specified equity
transactions (the "Equity Investment") aggregating at least $20
million over any twelve-month period (including any cash
distributions on the Company's investment in NewCheck), the 10%
Notes will be subject to mandatory prepayment. The Company's 8%
Notes accrue interest payable at the rate of 8% per annum, semi-
annually, through issuance of additional 8% Notes. Upon
consummation by the Company of specified equity transactions
aggregating at least $40 million on a cumulative basis from
Closing, the 8% Notes will be subject to mandatory prepayment.

The 10% Notes and 8% Notes (the "Notes") are subject to
prepayment at the election of the Company, in the case of the 10%
Notes without premium and in the case of the 8% Notes at premiums
ranging up to eight percent of the principal prepaid. Upon
specified change-in-control events, the Notes will be subject to
mandatory prepayment at specified premiums. The Notes are
guaranteed by the Company's subsidiaries and are collateralized
by the assets of the Company and its subsidiaries. The Notes
contain covenants that, among other matters, restrict
distributions on the Common Stock, and limit the ability of the
Company and its subsidiaries to incur indebtedness for borrowed
money and create liens on their assets.

	The Series A-1 Preferred Stock does not entitle the holders
to dividends or, except in limited circumstances, voting rights.
The Series A-1 Preferred Stock entitles the holders to a
liquidation preference per share of $100 and, subject to
specified exceptions, is subject to automatic conversion upon
consummation of the Equity Investment, into the same securities
offered in such transaction and at the same price, payable by
application of the liquidation preference of the Series A-1
Preferred Stock. Under certain limited circumstances, up to five
percent of the preferred shares may be subject to mandatory
redemption, at the option of the holder, following consummation
of the Equity Investment.

	The Company expects net losses and negative cash flows from
operations to continue through the current fiscal year. The
Company believes that current resources will enable the Company
to fund operations, including the Company's interim financing
commitments to NewCheck, into the second quarter of 2001. In the
event the Company is unable to raise additional financing, the
Company's operations would need to be scaled back or discontinued.
These factors raise substantial doubt about the Company's ability
to continue its operations a going concern. Management is
proactively seeking sources of additional financing in order to
support operations and meet the Company's debt obligations, is
investigating opportunities for creation of various forms of
alliances with unaffiliated parties in order to sustain its ESL
operations and is engaged in discussions with the holders of its
debt obligations with respect to arrangements that would avoid
default in payment obligations that become due in the third
quarter of 2001, but there can be no assurance that any such
additional financing or other such transaction would be available
on terms reasonable to the Company or would be consummated.  As a
result of these conditions, the report of independent
accountants to the Company's Consolidated Financial Statements
included in response to "Item 14. Exhibits, Financial
Statements, Schedules and Reports on Form 8-K" has been modified
to emphasize the substantial doubt regarding the Company's
ability to continue as a going concern. The Company's
Consolidated Financial Statements included herein do not reflect
any adjustments that might arise from the outcome of such
uncertainty.

Market Risk

	The Company is subject to market risks related to changes in
interest rates and, accordingly, the Company's objective is to
minimize any impact on its financial position from these risks.
The Company's cash and cash equivalents predominantly consist of
short-term, highly-liquid U.S. treasury bills and certificates of
deposit, in order to minimize interest rate risk. The Company does
not enter into transactions involving derivative financial
instruments for speculative trading purposes.

	The Company utilizes sensitivity analysis, along with other
techniques, as a basis for measuring the impacts that market risk
exposure may have on the fair value of the Company's debt and
financial instruments. If market interest rates were to increase
immediately and uniformly by ten percent from levels at December
31, 2000, the decline in fair value of the portfolio would not be
material. The Company's long-term term debt bears interest at a
fixed rate and, therefore, relative to its long-term debt, an
immediate ten percent change in the market interest rates would
not materially impact the Company's financial statements.

	These effects of hypothetical changes in interest rates,
however, ignore other effects the same movement may have arising
from other variables, and actual results could differ from the
sensitivity calculations of the Company.  The Company regularly
assesses additional relevant variables, establishes policies and
business practices to protect against the adverse effects of using
any given financial instruments and does not anticipate any
material losses generated by these risks.

Recently Issued Accounting Pronouncements

	In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS 137, which the Company is required
to adopt effective beginning January 1, 2001. The Company adopted
the standard on January 1, 2001, with no significant impact on the
Company's financial statements.

	In December of 1999, the staff of the Securities and Exchange
Commission issued its Staff Accounting Bulletin ("SAB") No. 101
"Revenue Recognition". SAB No. 101, as amended, provides guidance
on the measurement and timing of revenue recognition in financial
statements of public companies. Changes in accounting policies to
apply the guidance of SAB No. 101 must be adopted by recording the
cumulative effect of the change.  The Company has evaluated the
impact of and concluded that its accounting policies are in
compliance with SAB 101.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

	For information concerning this item, see "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations-Market Risk," which information is
incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	For information concerning this item, see "Item 14. Exhibits,
Financial Statement Schedules, and Reports on Form 8-K", which
information is incorporated herein by reference.

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

		Not applicable.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

	For information concerning this item, see "Item 1. Business-
Executive Officers" and the Proxy Statement to be filed with
respect to the 2000 Annual Meeting of Stockholders (the "Proxy
Statement"), which information is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

	For information concerning this item, see the Proxy
Statement, which information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

	For information concerning this item, see the Proxy
Statement, which information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

	For information concerning this item, see the Proxy Statement
which information is incorporated herein by reference.

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

		(a) 	1. Financial Statements:

			The consolidated financial statements filed in this
Annual Report on Form 10-K are listed in the attached Index to
Consolidated Financial Statements and Schedules.

			2. Financial Statement Schedules:

			No consolidated financial statement schedules are
filed in this Annual Report on Form 10-K because they are not
required or are inapplicable or the required information is
otherwise shown in the consolidated financial statements or notes
thereto.

			3. Exhibits:

			The exhibits required to be filed as part of this
Annual Report on Form 10-K are listed in the attached Index to
Exhibits.

		(b) 	Current Reports on Form 8-K:


	During the quarter ended December 31, 2000, the Company did
not file any Current Reports on Form 8-K. The Company filed a
Current Report on Form 8-K dated February 16, 2001 reporting,
under "Item 5. Other Events" thereunder, certain financing
arrangements extended to NewCheck.


POWER OF ATTORNEY

	The issuer and each person whose signature appears below
hereby appoint Norton Garfinkle, Bruce F. Failing, Jr. and Jerry
McAuliffe as attorneys-in-fact with full power of substitution,
severally, to execute in the name and on behalf of the registrant
and each such person, individually and in each capacity stated
below, one or more amendments to the annual report which
amendments may make such changes in the report as the attorney-in-
fact acting deems appropriate and to file any such amendment to
the report with the Securities and Exchange Commission.

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.

Dated:	March 30, 2001			ELECTRONIC RETAILING SYSTEMS
							 INTERNATIONAL, INC.

By s/Bruce F. Failing, Jr.
    -----------------------------
        Bruce F. Failing, Jr.
        Vice Chairman of the Board
         and Principal Executive
         Officer

	Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated:

Signature		Title		Date
------------		------		-------

		  Vice Chairman of the Board  		March 30, 2001
s/Bruce F. Failing, Jr.	 and Principal Executive Officer
------------------------
Bruce F. Failing, Jr.

				  Vice President and Principal 	March 30, 2001
s/Jerry McAuliffe	 Financial and Accounting
------------------------	 Officer
Jerry McAuliffe


s/Michael Persky	Director		March 30, 2001
------------------------
Michael Persky


s/David Diamond	  Director	March 30, 2001
------------------------
David Diamond


s/Norton Garfinkle 	  Director					March  30, 2001
------------------------
Norton Garfinkle


s/Donald E. Zilkha 	 Director					March  30, 2001
------------------------
Donald E. Zilkha



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES


Financial Statements:

Report of Independent Accountants						F-2

Consolidated Balance Sheet, December 31,
  2000 and 1999										F-3

Consolidated Statement of Operations for
  the years ended December 31, 2000, 1999
  and 1998											F-4

Consolidated Statement of Cash Flows
  for the years ended December 31, 2000, 1999
  and 1998											F-5

Consolidated Statement of Changes in
  Stockholders' (Deficit) Equity for the years
  ended December 31, 2000, 1999 and 1998					F-6

Notes to Consolidated Financial Statements				F-7



Financial Statement Schedules:

No Financial Statement Schedules are included herein because they
are not required, are inapplicable, or the information is
otherwise shown in the consolidated financial statements or the
notes thereto.

















Report of Independent Accountants

To the Board of Directors and Stockholders
of Electronic Retailing Systems International, Inc.


In our opinion, the consolidated financial statements listed in
the index on page F-1 present fairly, in all material respects,
the financial position of Electronic Retailing Systems
International, Inc. and its subsidiaries at December 31, 2000 and
1999, and the results of their operations and their cash flows
for each of the three years in the period ended December 31,
2000, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are
the responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America, which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial
statements, the Company has suffered recurring losses from
operations, has limited capital resources and has a net capital
deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to
these matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


s/PricewaterhouseCoopers LLP
  Stamford, Connecticut
  March 23, 2001

Electronic Retailing Systems International, Inc.
Consolidated Balance Sheet
(in thousands, except per share and share amounts)

                                                      December 31,
                                                    ---------------
                                                    2000       1999
                                                    ----       ----
Assets
Current assets
 Cash and cash equivalents (Note 2)              $  2,887   $ 37,386
 Accounts receivable - net of allowance
   for doubtful accounts of $1,074 in 2000
   and $206 in 1999                                 1,575      2,304
Inventories - net of reserves of $5,334 in
   2000 and $5,583 in 1999 (Note 2)                 1,403      4,006
 Prepayments and other current assets                 198        531
                                                ---------   --------
   Total current assets                             6,063     44,227

Furniture and equipment, net (Note 2)               1,361      2,515

Other non-current assets                                6      2,774
			--------   --------
Total assets                                    $   7,430   $ 49,516
                                                =========   ========
Liabilities, Redeemable Securities
   and Stockholders' Deficit
Current liabilities
  Current portion of long-term debt              $  5,552   $    --
  Accounts payable and accrued expenses             1,430      2,557
  Deferred revenue                                    110        505
                                                 --------    -------
    Total current liabilities                       7,092      3,062
                                                 --------    -------
Long-term debt (Note 4)                             6,882     98,207
                                                 --------    -------
Redeemable preferred stock, Series A-1
  (par value $1.00 per share; 40,000 shares
  authorized, 39,985 issued and outstanding;
  liquidation preference $100 per share)            3,999        --
Common stock purchase warrants (Note 4)             5,100      5,100
                                                 --------    -------
    Total redeemable securities                     9,099      5,100
                                                 --------    -------
Commitments and contingencies (Note 6)                --         --

Stockholders' deficit
 Preferred stock, undesignated (par value
  $1.00 per share; 2,000,000 shares
     authorized, none issued and outstanding)		     --	    --
 Common stock (par value $0.01 per share;
  35,000,000 authorized; 21,295,383 and
  21,282,637 shares issued and outstanding
  in 2000 and 1999, respectively)                     213        212
 Additional paid-in capital                        51,376     51,374
 Accumulated deficit                              (67,232)  (108,439)
                                                   -------    -------
   Total stockholders' deficit                    (15,643)   (56,853)
                                                 ---------   --------
Total liabilities and stockholders' deficit	 $ 7,430    $49,516
                                                 =========   ========
See accompanying notes to consolidated financial statements




                      Electronic Retailing Systems International, Inc.
                         Consolidated Statement of Operations
                       (in thousands, except per share amounts)

                                               Year Ended December 31,
                                             ----------------------------
                                             2000        1999        1998
                                             ----        ----        ----
Revenues
 Product sales	  $  3,614     $ 3,843     $  2,900
 Maintenance	       968         788          864
		  --------    --------    ---------
 Total revenues	     4,582       4,631        3,764
		  --------    --------    ---------
Cost of goods sold
 Product sales	     4,572       6,358        7,441
 Maintenance	       393         677          654
		  --------    --------    ---------
  Total cost of goods sold	     4,965       7,035        8,095
		  --------    --------    ---------
 Gross loss	      (383)     (2,404)      (4,331)
                                            --------    --------    ---------
Operating expenses
 Selling, general and administrative
  (including amounts to related parties
   of $90 in 2000, $45 in 1999 and $192
   in 1998)(Note 3)	     7,119      11,476       12,671
 Research and development 	     4,049       5,460        3,928
 Depreciation and amortization	       881         402          375
 		  --------    --------     --------
  Total operating expenses	    12,049      17,338       16,974
		  --------    --------     --------
 Loss from operations	   (12,432)    (19,742)     (21,305)
 		  --------    --------     --------
Other income (expenses)
 Interest income	     1,101       2,680        3,982
 Interest expense	    (5,629)    (18,844)     (16,886)
 Loss on disposals	      (247)       (787)        (104)
 Loss on investment and other assets	    (3,273)        --           --
 Impairment loss on investment	    (3,141)        --           --
			--------    --------    ---------
  Total other expense, net	   (11,189)    (16,951)     (13,008)
                                            --------    --------    ---------
  Loss before extraordinary gain
      on extinguishment of debt	   (23,621)    (36,693)     (34,313)

Extraordinary item
  Gain on extinguishment of debt	    64,828      34,582
                                            --------    --------     --------
  Net income (loss) 	  $ 41,207    $( 2,111)    $(34,313)
		  ========    ========     ========
Income (loss) per share
 Weighted average common shares
  Outstanding	    21,291      21,264       21,233
                                            ========    ========     ========
Basic and diluted income (loss) per
 common share (Note 2)
Loss per share before extraordinary item	  $  (1.11)   $  (1.73)    $  (1.62)
Extraordinary item	      3.04        1.63           --
                                            --------    --------     --------
Net income (loss)	 $    1.94    $  (0.10)    $  (1.62)
		 ---------    --------     --------
See accompanying notes to consolidated financial statements



                   Electronic Retailing Systems International, Inc.
                          Consolidated Statement of Cash Flows
                                     (in thousands)

                                                    Year Ended December 31,
                                                 ---------------------------
                                                 2000        1999       1998
                                                 ----        ----       ----

Net Cash Flows from Operating Activities:
Net Income (loss)	  	 $ 41,207    $( 2,111)    $(34,313)
Adjustments to reconcile net income (loss)
 to net cash used in operating activities:
  Depreciation and amortization		    2,177       2,397        2,994
  Extraordinary gain on early debt retirement  (64,828)    (34,582)        --
  Loss on disposal of fixed assets	   		247         787          104
	Loss on equity investment                      3,273         --
  Impairment loss on investment                  3,141         --          --
	Provision for inventory obsolescence             724       1,700
3,099
  Provision for doubtful accounts                  868           -          165
  Accrued and other interest                       418      17,151       15,441
  Accounts receivable                             (139)     (1,045)      (1,222)
  Inventories                                    2,127       1,056       (2,634)
  Other current and non-current assets              85         979           28
  Current liabilities                            1,849         848         (268)
                                               ---------   ---------   ---------
-
    Net cash used in operating activities       (8,851)    (12,820)     (16,606)
                                               ---------   ---------   ---------
-
Cash Flows from Investing Activities:
 Capital expenditures                             (291)     (1,076)      (1,730)
 Loans to NewCheck                              (5,047)         --           --
 Equity investment in NewCheck                  (1,950)         --           --
 Other, net                                         44          --         (234)
                                               ---------   ---------   ---------
    Net cash used in investing
      activities                                (7,244)     (1,076)      (1,964)
                                               ---------  ---------    ---------
Cash Flows from Financing Activities:
 Repayment of Debt net of discount                  --      (4,997)         --
 Cash used for early debt retirement            (18,407)    (7,598)
 Net proceeds from the issuance of common stock       3        --            47

                                                --------   --------   ---------
   Cash (used in) provided by financing
      activities                                (18,404)    (12,595)         47
                                                --------   --------   ---------
Net (decrease) increase in cash and cash
 equivalents                                    (34,499)    (26,491)    (18,523)
                                                --------   --------   ---------
Cash and cash equivalents at beginning of
  period                                         37,386      63,877      82,400
                                                --------   --------   ---------
Cash and cash equivalents at end of period      $ 2,887     $37,386   $  63,877
                                                ========   ========   =========
There were no cash payments for income taxes in the years 2000, 1999 and
1998. Cash payments for interest expense were $0, $216, and $401 in 2000,
1999 and 1998, respectively.

See accompanying notes to consolidated financial statements

                     Electronic Retailing Systems International, Inc.
               Consolidated Statement of Changes in Stockholders'
(Deficit) Equity
                          (in thousands, except share amounts)

                                              Additional
                                    Common     Paid-in    Accumulated
                                       Stock      Capital    Deficit
Total
                                     --------   ---------   -----------   ------
---

Balances at December 31, 1997       $    211   $ 51,328   $ (72,015)
$(20,476)

 Issuance of 52,412 common
   shares with exercise of stock
    options                                1         46                       47
 Net loss for year                                          (34,313)
(34,313)
                                    ---------  ---------  ----------    --------
-
 Balances at December 31, 1998           212     51,374    (106,328)
(54,742)

 Issuance of 33,190 common
   shares with exercise of stock
    options
 Net loss for year                                           (2,111)
(2,111)
                                    ---------  ---------  ----------    --------
-
 Balances at December 31, 1999           212     51,374    (108,439)
(56,853)

Issuance of 12,746 common
   shares with exercise of stock
    options                                1          2
	3
 Net income for year                                          41,207
41,207
                                    ---------  ---------  ----------    --------
-
 Balances at December 31, 2000      $    213   $ 51,376   $  (67,232)
$(15,643)
                                =========  =========  ==========    =========
















See accompanying notes to consolidated financial statements




ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -Organization:

	Electronic Retailing Systems International, Inc. ("ERS" or
the "Company"), was incorporated in 1993 under the laws of
the State of Delaware as a holding company for the business
and assets of Electronic Retailing Systems International,
Inc., incorporated in 1990 under the laws of Connecticut,
and an affiliated partnership. The Company develops and
supplies electronic shelf labeling ("ESL") systems.
Electronic shelf labeling systems replace paper price tags
on retail shelves with liquid crystal display labels and
transmit pricing and other information to and from the
aisle. The Company's system is designed to address
retailers' needs for improved pricing accuracy and labor
efficiencies by electronically linking a store's shelves to
its POS scanners and central computer. The Company currently
operates primarily in North America.

	The Company has sustained net losses and negative cash flows
from operations since its inception and management expects
these conditions to continue into the year ending December
31, 2001. Management believes that existing resources will
enable the Company to fund operations into the second
quarter of 2001. In the event that the Company is unable to
raise any required additional financing, the Company's
operations would need to be scaled back or discontinued.
These factors raise substantial doubt about the Company's
ability to continue its operations as a going concern.
Management is proactively seeking sources of additional
financing in order to support operations and meet the
Company's debt obligations, is investigating opportunities
for creation of various forms of alliances with unaffiliated
parties in order to sustain its ESL operations and is
engaged in discussions with the holders of its debt
obligations with respect to arrangements that would avoid
default in payment obligations that become due in the third
quarter of 2001, but there can be no assurance that any such
additional financing or other transaction would be available
on terms reasonable to the Company or would be consummated.
As a result of these conditions, the report of independent
accountants to these financial statements has been modified
to emphasize the substantial doubt regarding the Company's
ability to continue as a going concern.  These financial
statements do not reflect any adjustments that might arise
as a result of the outcome of these uncertainties.

ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 -Summary of Significant Accounting Policies:

	Basis of Consolidation

	The consolidated financial statements include the accounts
of the Company and all of its subsidiaries. All significant
intercompany balances and transactions have been eliminated.
	Investments in affiliated companies owned more than 20%, but
not in excess of 50%, are recorded under the equity method.
Certain prior year amounts have been reclassified to conform
to the current year's presentation.

Use of Estimates

	The preparation of financial statements in conformity with
accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions covering a broad spectrum of the Company's
financial activities, and while the Company believes these
estimates to be prudent, there exists a possibility that
unexpected events might affect these estimates. Actual
results could differ from those estimates and the difference
could be material. The Company's future results and
inventory valuation could be adversely affected by a number
of factors, including (a) the timely availability and
acceptance of ESL systems, (b) the impact of competitive
products and pricing, (c) the Company's ability to obtain
system components from suppliers and (d) the Company's
ability to continue as a going concern, thereby realizing
assets and liquidating liabilities in the ordinary course of
business.

	Cash Equivalents

	Cash equivalents consist of short-term, highly-liquid U.S.
Treasury Bills and certificates of deposit with original
maturities of less than three months and are stated at cost,
which approximates market. Interest income is accrued as
earned.



ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Financial Instruments

	Financial instruments include cash, cash equivalents, notes
payable, long-term debt, redeemable preferred stock and
common stock purchase warrants. Financial instruments are
carried at cost or accrued carrying value which approximates
fair market value.

	Inventories

	Inventories are stated at the lower of cost (determined on a
first in, first out basis) or market value. Inventories at
December 31, 2000 consist of approximately $458,000 of
materials, supplies and work in process and $945,000 of
finished goods. Inventories at December 31, 1999 consisted
of approximately $2,234,000 of materials, supplies and work
in process and $1,772,000 of finished goods.

	Charges for excess, slow moving and obsolete inventory for
the years 2000, 1999 and 1998 were $724,000, $1,700,000, and
$3,099,000, respectively.

	Furniture and Equipment

	Furniture and equipment is stated at cost. Depreciation is
provided on the straight-line method over the estimated
useful lives of the respective assets as follows: office and
manufacturing equipment, 3 to 5 years; software, 2 years;
furniture and fixtures, 5 to 10 years; leasehold
improvements, over the lease term or useful life if shorter
then the lease term.

In 1999, the Company adopted Statement of Position 98-1
("SOP 98-1"), "Accounting for the costs of Computer Software
Developed or Obtained for Internal Use."  This statement
requires capitalization of certain costs incurred in the
development of internal use software.  The Company has
applied the guidance outlined in SOP 98-1 and the impact of
the adoption has not been significant.

Furniture and equipment as of December 31, 2000 and 1999,
was comprised of the following (in 000s):



ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

							  2000	  1999
							 -------	 -------
	Office and manufacturing
	 equipment					$ 1,614	$2,861
	Capitalized software			    244	   591
	Furniture and fixtures		    701	   701
	Leasehold improvements		    403	   649
							-------	-------
							  2,962	 4,802
	Accumulated depreciation		 (1,601)	(2,287)
							-------	-------
	Furniture and equipment, net	$ 1,361	$2,515
							=======	=======

	Fully depreciated furniture and equipment no longer in use
of $1,572,000 was written-off during 2000. In addition,
during 2000 the Company disposed of equipment with a cost of
$539,000 resulting in a loss of $247,000.

	Product Development Costs

	The Company capitalizes product development costs,
principally wages and contractor fees, after establishing
commercial and technical viability. Product development
costs are stated at the lower of cost or net realizable
value. These costs are amortized using the straight-line
method over the shorter of the estimated useful life of the
product or three years. The Company's policy is to make
regular evaluations of the remaining product development
costs for potential impairments of value through analysis of
operating results and related cash flows, trends and
prospects as well as competitive and economic factors.
Amortization commences when the product is available for
general release to customers. As of December 31, 2000, there
is no remaining unamortized capitalized product development
costs  in the accompanying consolidated balance sheet.
Amortization expense totaled $186,000, $373,000 and $783,000
for 2000, 1999 and 1998, respectively.

	Long-Lived Assets

	Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", requires that long-
lived assets and certain intangible assets be reviewed for


ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

impairment whenever events or change in circumstances
indicate that the carrying amount may not be recoverable.
If undiscounted expected  future cash  flows are  less than
the carrying  value of the assets, an impairment loss is to
be recognized based on the fair value of the assets.  No
impairment losses have been recognized to date.

	Debt Issuance Costs

	The Company has capitalized costs incurred in connection with
the issuance of debt in 1997. Such costs are principally
investment banking, legal, accounting, financial printing,
and other related fees and costs. These costs are amortized
using the effective interest method over the lives of the
respective debt arrangements. As a result of the acquisition
of  the Company's outstanding Senior Discount Notes (see Note
4), $2,459,000 and $1,232,000 of debt issuance costs were
written off during 2000 and 1999, respectively. As of
December 31, 2000 and 1999, unamortized debt issuance costs
of -0- and $2,599,000, respectively, are included as other
non-current assets in the accompanying consolidated balance
sheet. Amortization expense totaled $140,000, $644,000 and
$563,000 for 2000, 1999 and 1998, respectively.

	Revenue Recognition

	Revenue is recognized when the product is shipped or upon
completion of installation of a trial electronic shelf label
system, provided that no significant obligations remain and
collection of the resulting receivable is deemed probable.
Revenue from providing installation services to customers is
recognized upon the completion of an installation. Under the
SayGo Plan, the Company recognizes revenues as monthly
usage, and other fees are billed to customers, and
depreciates the cost of hardware components of its systems
over the shorter of their estimated useful lives or five
years. Maintenance revenue for services provided under
maintenance contracts is recognized over the service
contract period. Other revenue for parts and services is
recognized when provided.

	Income Taxes

	The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109,


ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

"Accounting for Income Taxes", which requires an asset and
liability approach to the recognition of deferred tax assets
and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial
statements or tax returns. Deferred income taxes relate to
timing differences between the carrying amounts for
financial statement reporting purposes and the income tax
basis for such assets and liabilities primarily for stock
option compensation, product development costs, depreciation
and other items.

	Stock Based Compensation

	The Company accounts for incentive plans and stock options
using the provisions of Accounting Principle Board Opinion
No. 25, "Accounting for Stock Issued to Employees."

	Pro forma information required by Financial Accounting
Standards No. 123, "Accounting for Stock Based
Compensation," is included in Note 7.

	Earnings Per Share

	Basic earnings per share ("EPS") is calculated by dividing
the net loss available to common stockholders by the
weighted average number of common shares outstanding for the
period, without consideration for common stock equivalents.
Diluted EPS is computed by dividing net loss for the period
by the weighted average number of common shares outstanding
and dilutive common stock equivalents.

	Due to the Company's loss position, the Company has reported
only "basic" EPS. The presentation of "dilutive" EPS is not
required as common stock equivalents are anti-dilutive. The
number of securities at December 31, 2000, 1999 and 1998
that could potentially dilute basic EPS in the future are
3,738,000, 5,319,150 and 5,745,496, respectively. Such
securities, which have been excluded from the calculation of
basic EPS as they are anti-dilutive, include employee and
director stock options, convertible debt, and common stock
purchase warrants.




ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Segment Information

	The Company is in one business segment, the electronic shelf
labeling business, and follows the requirements of FAS 131,
"Disclosures about Segments of an Enterprise and Related
Information;" however, the requirements have not had a
material impact on the financial statements for the periods
presented.

	Comprehensive Income

	The Company has adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income".  The
adoption of this standard had no material impact on the
Company's financial statements.

	Recently Issued Accounting Pronouncements

	In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS 137, which the
Company is required to adopt effective beginning January 1,
2001. The Company adopted the standard on January 1, 2001,
with no significant impact anticipated on the Company's
financial statements.

In December of 1999, the staff of the Securities and
Exchange Commission issued Staff Accounting Bulletin ("SAB")
No. 101 "Revenue Recognition in Financial Statements". SAB
No. 101, as amended, provides guidance on the measurement
and timing of revenue recognition in financial statements of
public companies.  Changes in accounting policies to apply
the guidance of SAB No. 101 must be adopted by recording the
cumulative effect of the change. The Company has evaluated
the impact of and concluded that its accounting policies are
in compliance with SAB 101.



ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 -Related Party Transactions:

	The Company has received consulting services and paid a
current and a former member of its Board of Directors,
through an affiliate of the Company, fees of $90,000,
$45,000 and $192,000 in 2000, 1999 and 1998, respectively.

Note 4 - Debt and Common Stock Purchase Warrants

	In August 1999, the Company repaid to the Connecticut
Development Authority (the "CDA"), in accordance with its
terms, an aggregate of $5,000,000 principal amount of
indebtedness.  In August 1999, warrants to purchase 699,724
shares (as adjusted) of common stock, $.01 par value
("Common Stock"), held by the CDA expired without exercise.
If the Company relocates outside of Connecticut before 2004,
the Company remains obligated to pay a penalty to the CDA of
$250,000.

	In January 1997, the Company completed the sale, in a
private offering (the "Private Placement"), of 147,312 Units
("Units") consisting of $147,312,000 principal amount at
maturity of 13.25% Senior Discount Notes due February 1,
2004 (the "Senior Discount Notes") together with warrants to
purchase an aggregate of 2,538,258 shares of Common Stock,
at an exercise price of $5.23 per share, exercisable from
the period commencing on the first anniversary of closing
through February 1, 2004.

	The Units were sold to investors at a price aggregating $100
million, representing a yield to maturity on the Senior
Discount Notes of 13.25%. No cash interest accrued on the
Senior Discount Notes prior to February 1, 2000. The Senior
Discount Notes provided for interest to be payable
thereafter on February 1 and August 1 of each year
commencing August 1, 2000. The Senior Discount Notes were to
be non-callable prior to February 1, 2001. Upon specified
change in control events, each holder had the right to
require the Company to purchase its Senior Discount Note at
a specified price. The net proceeds to the Company from the
Private Placement approximated $95 million.



ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The indenture under which the Senior Discount Notes were
issued placed limitations on operations and sales of assets
by the Company or its subsidiaries, required maintenance of
certain financial ratios in order for the Company to incur
additional indebtedness (subject to specified exceptions),
required the delivery by the Company's subsidiaries of
guaranties if specified debt was subsequently incurred by
such subsidiaries, and limited the Company's ability to pay
cash dividends or make other distributions to the holders of
its capital stock or to redeem such stock.

With the consummation of the Private Placement in January
1997, the Company commenced recording interest on the
outstanding Senior Discount Notes on an amount equal to the
gross proceeds from the Private Placement plus prior
recorded and unpaid interest at the annual rate of 13.25%.
Additional interest expense has been recorded as a result of
the amortization of the discount recorded on the Senior
Discount Notes (for value attributed to the warrants) and
the amortization of the costs of issuance.

		During the fourth quarter of 1999, the Company repurchased:
(i) $45.25 million aggregate principal amount at maturity of
Senior Discount Notes in open market transactions from
holders not affiliated with the Company for an aggregate
purchase price of $7.01 million; and (ii) $1.095 million
aggregate principal amount at maturity of Senior Discount
Notes as the result of a tender offer by the Company for an
aggregate purchase price of $.170 million. The Company
incurred $818,000 in transaction fees related to these
purchases. During the first quarter of 2000, the Company
repurchased $24.549 million aggregate principal amount at
maturity of Senior Discount Notes in open market
transactions from holders who were not affiliated with the
Company for an aggregate purchase price of $4.65 million,
and recognized an extraordinary gain of $18.959 million
($0.89 per share).

	During the third quarter of 2000, the Company completed the
exchange of $76.418 million principal amount at maturity of
Senior Discount Notes for an aggregate of $13.76 million, in
cash, approximately $5 million principal amount of the
Company's 10% Guaranteed Secured Notes due August 1, 2001
(the "10% Notes"), approximately $5 million principal amount
of the Company's 8% Guaranteed Secured Notes due August 1,


ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2004 (the "8% Notes"), and 39,985 shares of the Company's
newly-created Series A-1 Convertible Preferred Stock, $1.00
par value ("Series A-1 Preferred Stock"), subject to
automatic conversion as described below, plus cash in lieu
of fractional shares. The 10% Notes and 8% Notes are
recorded together with interest through maturity. The notes
submitted for exchange represented all of the remaining
outstanding Senior Discount Notes. The exchange was
accounted for in accordance with the provisions of FASB 15,
"Accounting by Debtors and Creditors for Troubled Debt
Restructurings."  The Company recognized an extraordinary
gain of $45.869 million ($2.15 per share) as a result of the
exchange of the Senior Discount Notes.

The 10% Notes and 8% Notes (the "Notes") are guaranteed by
the Company's subsidiaries and are collateralized by the
assets of the Company and its subsidiaries.  The Notes
contain covenants that, among other matters, restrict
distributions on the Company's Common Stock and limit the
ability of the Company and its subsidiaries to incur
indebtedness for borrowed money and create liens on their
assets.

The Company's Series A-1 Preferred Stock does not entitle
the holders to dividends or, except in limited
circumstances, voting rights.  The Series A-1 Preferred
Stock entitles the holders to a liquidation preference per
share of $100 and, subject to specified exceptions, is
subject to automatic conversion upon consummation of
specified equity transactions aggregating at least $20
million over any twelve-month period (including any cash
distributions on the Company's investment in NewCheck
Corporation) into the same securities offered in such
transaction and at the same price, payable by application of
the liquidation preference of the Series A-1 Preferred
Stock. Under certain limited circumstances, up to five
percent of the preferred shares may be subject to mandatory
redemption, at the option of the holder, following
consummation of such equity transactions.

	At December 31, 2000, the 10% Notes, plus interest, are
classified as current liabilities.

	Long-term debt as of December 31, 2000 was comprised of the
8% Notes totaling $5 million, plus interest, and, as of


ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 was comprised of 13.25% Senior Discount
Notes totaling $98.2 million.

Note 5 - Customer Information:

	All of the Company's sales are to customers in the retail
food market industry. Significant customer sales for the
years ended December 31, 2000, 1999 and 1998 were as
follows:

	Customer					2000		1999		1998
	-----------                  -----	-----	    -----
	The Stop & Shop Supermarket
	 Company             		76%	 	80%	 	59%

	Shaw's Supermarkets, Inc.		10%	 	10%	 	29%

	Accounts receivable at December 31, 2000 and 1999 are
unsecured and concentrated among major supermarket chains in
the United States. If the customers within this
concentration failed to pay according to the terms of their
agreements these receivables would be reduced to nominal
value.

Note 6 - Commitments and Contingencies:

	The Company leases its facilities under non-cancelable
operating lease agreements. During 2000, 1999 and 1998
rental expense amounted to approximately $635,000, $786,000
and $946,000, respectively.

	Future minimum lease payments on a calendar year basis under
these leases, as of December 31, 2000, are as follows:

							  Total
							Commitments
							-----------
		2001					$  448,000
		2002					   389,000
		2003					   183,000
		2004					   190,000
		2005	and thereafter		   525,000
							-----------
							$1,735,000



ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is involved in certain litigation incidental to
the conduct of its business and affairs. Management does not
believe that the outcome of any such litigation will have a
material adverse effect on the financial condition or
results of operations of the Company.

	See Note 9 for a description of commitments made by the
Company to NewCheck Corporation in December 2000 which may
aggregate up to $2.5 million

Note 7 - Stock Option and Defined Contribution Plan:

	The Company has an employee stock option plan whereby
options to purchase shares of Common Stock may be granted to
key employees of the Company. The stockholders have approved
successive increases in the number of shares of Common Stock
available for issuance under the plan, which currently
authorizes the grant of options covering 4,500,000 shares.
As of December 31, 2000 there were 552,193 shares available
for future grants. Options granted under the plan typically
become exercisable over a period of four years and have a
term of 10 years.

A summary of all option activity pursuant to the employee
stock option plan is as follows:


						  	    Price Range	Options
							    -----------	-------

	Options outstanding December 31, 1997    $ .01-$6.19   1,735,128
	                                                       ---------
	   Options granted                       $2.25-$4.00   1,118,099
	   Options exercised                     $ .01-$2.25     (52,412)
	   Options canceled                      $ .01-$6.13  (1,181,853)
	                                                      ----------
	Options outstanding December 31, 1998    $ .01-$6.19   1,618,962
	                                                       =========
	   Options granted                       $ .97-3.00    1,385,000
	   Options exercised                     $ .01           (33,190)
	   Options canceled                      $ .01-$5.00    (539,880)
	                                                       ----------
	Options outstanding December 31, 1999    $ .01-$6.19   2,430,892
	                                                       ==========
	 Options granted                         $ .61-$ .94   1,803,300
	   Options exercised                     $ .01           (12,746)
	   Options canceled                      $ .01-$6.13    (853,708)
	                                                       ----------
	Options outstanding December 31, 2000    $ .01-$6.13   3,367,738
	                                                       ==========


ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Options exercisable at:

		December 31, 2000			741,254
		December 31, 1999			604,807
		December 31, 1998			280,165

	The following table summarizes information about employee
stock options outstanding and exercisable at December 31, 2000:

		Weighted	Weighted		Weighted
Range of		 Average	 Average		 Average
Exercise	  Number	Remaining	 Exercise 	  Number	 Exercise
 Prices    	Outstanding	   Life  	   Price 	Exercisable	   Price
--------      ----------     ----------    ---------   -----------    --------
-
$ .01           148,426       1 years       $ .01       148,426         $ .01
$0.61-$0.97   1,815,500       9               .84        26,250           .97
$1.09-$2.25     783,700       8              1.69       231,700          1.78
$2.91-$6.13     620,112       7              3.37       334,878          3.51
              ---------                                 -------
              3,367,738                                 741,254
              =========                                 =======


Additionally, the Company has a director stock option plan
under which options covering 750,000 shares of Common Stock
may be granted to directors of the Company. During 1998,
47,500 options were granted to directors of the Company to
purchase an equal number of common shares pursuant to this
plan at option prices of $2.75 and $4.00, and during 2000
options were granted to directors of the Company to purchase
60,000 shares at a price of $0.88. As of December 31, 2000
options covering an aggregate of 120,000 shares of Common
Stock were outstanding under the plan. As of December 31,
2000, 620,000 shares of Common Stock were available for
future option grants.

In June 1998, the Company's Board of Directors approved a
plan to issue new options with a lower exercise price and a
different vesting period upon surrender by the employee of
existing options. Employee options with exercise prices
ranging from $4.875 to $6.1875 to purchase 508,863 shares of
common stock were exchanged for 508,863 shares at the price
of $3.50, which was the fair market value at the time of
exchange. The tables above have been adjusted to reflect
these reduced exercise prices, and the extension of the
option's life.

ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company applies APB Opinion 25 and related
interpretations in accounting for its employee and director
stock option plans. Had compensation expense for the
Company's employee stock option plan been determined based
on the fair value at the grant dates of  awards under the
plan, consistent with FAS 123, the Company's net income
(loss) and basic income (loss) per common share would have
been the pro forma amounts indicated below:

	 		2000	1999	1998
			----         ----           -----

		Net income (loss):
		   As reported          	$41,207,000	  ($2,111,000)
	($34,313,000)
		   Pro forma	$41,078,000  	  ($2,306,000) 	($34,781,000)

		Basic income (loss) per common share:
	  	   As reported	         $1.94	($0.10)	($1.62)
	   Pro forma	         $1.93	($0.15)	($1.64)



	The fair value of each stock option grant was estimated on
the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions used
in 2000, 1999 and 1998:

						2000		1999		1998
						----		----		----
	Dividend yield			  0%		  0%		  0%
	Expected volatility		137%		122%		112%
	Risk-free interest rate	  6%		  6%		  5%
	Expected life			6 years	6 years	6 years

	The weighted average fair value of stock options granted
during the years ended December 31, 2000, 1999 and 1998  was
$0.76, $1.42 and $2.89, respectively.

	The Company has a defined contribution profit sharing and
savings plan which qualifies under Section 401(k) of the
Internal Revenue Code for employees meeting certain service
requirements. Participants may contribute up to 15% of their
gross wages, not to exceed in any given year a limitation set
by Internal Revenue Service regulations (such limitation was
$10,500 and $10,000 in 2000 and 1999, respectively). The plan
provides for discretionary matching contributions, as
determined by the Board of Directors, to be made by the


ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company. There were no discretionary amounts contributed to
the plan for the year ended December 31, 2000.  There was
$38,000 and $34,000 contributed to the plan, by the Company,
for the years ended December 31, 1999 and 1998, respectively.

Note 8 - Income Taxes:

	The Company has incurred operating net losses since inception
which have generated  loss carryforwards of $34.2 million for
federal income tax purposes. The reduction in loss
carryforwards available is a result of the forgiveness of
debt pursuant to the debt restructuring (Note 4). Loss
carryforwards are available to offset future taxable income
and begin to expire in the year 2011. These loss
carryforwards are subject to limitation on future years
utilization should certain ownership changes occur.

The Company has loss carryforwards and temporary
differences between the carrying amounts of assets and
liabilities for financial reporting and income tax
purposes resulting in a deferred tax benefit at December
31, 2000 and 1999 of $19.5 million and $47.1 million,
respectively. Based on the Company's history of losses it
has been determined that the utilization of these
deferred tax benefits is not considered more likely than
not and as a result a valuation allowance is being
recorded to fully offset the net deferred tax asset.

	Significant components of the deferred tax asset at December
31, 2000 and 1999 are as follows:

		2000	1999
	                                    -----	      ----

	Net operating loss carryforwards	$14,227,000	$28,604,000
	Deferred interest expense	    -0-	 13,831,000
	Stock option compensation	  2,628,000	  2,648,000
	Other 	  2,690,000  	  1,982,000
	                                 ------------        ------------
	Total deferred tax benefit	19,545,000	  47,065,000
	Valuation allowance	19,545,000 	 (47,065,000)
		-----------	------------
	Net deferred tax asset	$     --    	$     --
		===========	============




 	ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2000, 1999 and 1998 a statutory Federal income tax rate
of 35% and a state income tax rate of 7.6%, net of the
Federal tax benefit, were applicable to the Company. Due
to the Company's taxable losses the effective tax rate was
nil in each year.

	The income tax provision calculated for financial reporting
purposes differs from income taxes determined by applying
the statutory Federal income tax rate to the financial
statement net loss for the years ended December 31, 2000,
1999 and 1998 as a result of the following:

			  2000	  1999	 1998
			-----	-----        -----

  		Tax benefit at Federal statutory
		rate   	$ 8,259,000  $ 13,246,000  $11,156,000
  		State income tax benefit, net of
   	Federal tax charge                 -0-            1,870,000    2,494,000
  		Net loss not providing current
   	year tax benefits                 (6,278,000)  (14,110,000) (12,641,000)
  		Non-deductible interest           (1,970,000)     (985,000)
(987,000)
		Other                                (11,000)      (21,000)
(22,000)
		                                      ------------  -----------  ---
--------
    	Provision for income taxes         $    -        $    -       $   -
			===========	===========	==========

Note 9 - Agreements with NewCheck Corporation

On February 11, 2000, in exchange for payments aggregating
$6.5 million, the Company acquired 262,802 shares of the
newly-created Series C Convertible Preferred Stock, $.0001
par value (the "NewCheck Senior Preferred Stock"), of
NewCheck Corporation ("NewCheck"), together with NewCheck's
8% Convertible Promissory Note (the "NewCheck Convertible
Note") in the aggregate principal amount of approximately
$4,550,000, convertible into an additional 613,205 shares of
NewCheck Senior Preferred Stock. NewCheck is engaged in the
development and commercialization of retailing productivity
solutions for use in supermarkets and other retail
environments similar to those addressed by the Company's
system. The shares of NewCheck Senior Preferred Stock
acquired at closing by the Company represent approximately
18% of NewCheck's outstanding voting securities.



ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The NewCheck Convertible Note accrues interest, payable at
maturity, at the per annum rate of 8%, matures on the fifth
anniversary of issue, is repayable (together with interest)
in shares of NewCheck Senior Preferred Stock at the election
of NewCheck. The NewCheck Convertible Note is convertible
after two years (and earlier in specified circumstances)
into shares of NewCheck Senior Preferred Stock.

The Company applies the equity method of accounting to its
investment in NewCheck.  NewCheck has experienced recurring
losses.  In applying the equity method, the Company has
reduced its investment in NewCheck by an amount
corresponding to its share of NewCheck losses, first by
reducing its initial equity investment to zero and then by
applying any remainder to its note receivable from NewCheck.
During 2000, the Company recorded losses under the equity
method of $3,273,000 and, as more fully described below,
recorded an impairment charge of $2.6 million against the
NewCheck Convertible Note.  In addition, amortization of the
difference between the Company's investment and the initial
underlying value of its share of net assets has been
included in depreciation and amortization in the amount of
$584,000 million.

The Company and NewCheck have also entered into a management
agreement under which, for an initial term of five years,
the Company will manage NewCheck's operations. In exchange
for the agreement, and in addition to continuing
reimbursements to the Company of the costs of performance,
at closing the Company was issued 850,000 ten-year warrants
(net of 260,000 warrants assigned by the Company to one of
its executive officers, the value of which are de minimis
and no compensation charge has been recorded in these
financial statements), with an exercise price of $.001 per
share, exercisable to acquire shares of NewCheck Common
Stock equal to approximately 12% of NewCheck's outstanding
voting securities (giving effect to such warrants and to the
conversion of the NewCheck Convertible Note). At closing,
the Company received additional ten-year warrants (certain
of which were assigned by the Company to an aggregate of
four of its executive officers, the value of which are de
minimis and no compensation charge has been recorded in
these


ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

financial statements) that vest with respect to specified
percentages of the outstanding NewCheck Common Stock in the
event the equity value of NewCheck exceeds specified levels
during the three years after closing.

In December 2000, the Company committed to its portion, in
an amount up to $2.5 million, of interim financing for the
benefit of NewCheck, as part of arrangements entered into
by NewCheck's principal stockholders. At December 31, 2000,
the Company had advanced  $0.5 million under such
arrangements (the carrying value of which has been reduced
to zero, as more fully described below), advanced an
additional  $1.372  million during the first quarter of 2001
and anticipates funding the remainder of its commitment
prior to the final drawdown date allowed NewCheck through
the end of May 2001. Such amounts accrue interest at the
rate of 9% per annum and are repayable at specified times
through August 2001 unless converted to additional equity of
NewCheck at the election of NewCheck and with the consent
of the requisite NewCheck stockholders.

In accordance with the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," and based upon uncertainties resulting from
NewCheck's history of operating losses and uncertainties
regarding ERS' ability to provide future financing to
NewCheck, management has reduced the carrying value of
amounts due from NewCheck to zero at December 31, 2000. The
consequent impairment charges aggregate $3,141,000 and
consist of a write-down in the amount of $2,644,000 of the
remaining carrying value of the NewCheck Convertible Note
and a write-down in the amount of $497,000 of amounts
advanced by the Company under the interim arrangements with
NewCheck. The Company has also recorded a loss provision of
$913,000 against amounts owed to the Company under the
NewCheck management agreement.

Note 10    -	Selected Unaudited Quarterly Financial Data

	The following table presents selected quarterly unaudited
financial data for the years ended December 31, 1999 and
2000.



ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
				NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

							  Q1 1999	  Q2 1999	  Q3 1999
Q4 1999

Revenues		 		   $798	   $910	  $1,238	 $1,685
Gross Loss		 		  (661)	  (405)	      97	 (1,435)
Loss before Extra-
 ordinary Gain			  (8,772)	 (8,534)	  (8,269)	(11,118)
Extraordinary Gain		    --	   --		   --		 34,582
Net Income (Loss)		  (8,772)	 (8,534)    (8,269)	 23,464
Per Share:
  Loss before Extra-
  ordinary Gain	  		  (0.41)	  (0.40)	   (0.39)	  (0.52)
  Extraordinary Gain-	    --	    --	    --       1.62
  Net Income (Loss)		  (0.41)	  (0.40)     (0.39)    1.10

							Q1 2000	Q2 2000	Q3 2000	Q4
2000

Revenues				$1,024	$1,563	 $979		 $1,015
Gross Loss				    57	   201	 (163)	   (478)
Loss before Extra-
 ordinary Gain	 	     (5,883)	(5,388)  (4,423)	 (7,931)
Extraordinary Gain		 18,959	  --		45,869 	    --
Net Income (Loss)		 13,076	(5,388)	41,446	 (7,931)
Per Share:
Loss before Extra-
 ordinary Gain	  	      (0.28)	 (0.25)	 (0.21)	  (0.37)
  Extraordinary Gain		  0.89	  --		  2.15	    --
  Net Income (Loss)		  0.61	 (0.25)	  1.95      (0.37)





INDEX TO EXHIBITS

Exhibit Number 			Document Description
---------------			----------------------

3.1			-	Certificate of Incorporation of the Company
(Incorporated by reference to Exhibit
3(a) to the Quarterly Report on Form 10-
Q for the period ended June 30, 2000).

3.2			-	By-laws of the Company (Incorporated by
reference to Exhibit 3.2 to the Annual
Report on Form 10-K for the year ended
December 31, 1997).

10.1			-	Restated Stockholders' Agreement dated March
12, 1993 among Norton Garfinkle, The G/N
Garfinkle Trust, Bruce F. Failing, Jr.,
The Failing Trust and Elizabeth Z.
Failing (Incorporated by reference to
Exhibit 10.3 to the Registration
Statement on Form S-1 No. 33-59486),
together with Amendment No. 1 to
Restated Stockholders Agreement dated
October 29, 1997 (Incorporated by
reference to Exhibit 10.4 to the Annual
Report on Form 10-K for the year ended
December 31, 1997) and Amendment No. 2
to Restated Stockholders Agreement dated
April 25, 1998 (Incorporated by
reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the
period ended March 31, 1998).

10.2			-	Registration Rights Agreement dated March 12,
1993 among the Company, Norton
Garfinkle, The G/N Garfinkle Trust,
Bruce F. Failing, Jr., The Failing
Trust, Elizabeth Z. Failing, Robert D.
Power and John Stevens (Incorporated by
reference to Exhibit 10.2 to the
Registration Statement on Form S-1 No.
33-59486).

10.3			-	Registration Rights Agreement dated March 12,
1993 among the Company and the limited
partners of the ERS Associates, L.P.
(Incorporated by reference to Exhibit
10.5 to the Registration Statement on
Form S-1 No. 33-59486).

10.4			-	Registration Rights Agreement dated as of
July 24, 1995 among the Company, Donald
E. Zilkha, Bruce F. Failing, Jr.,
Hanseatic Corporation and Garfinkle
Limited Partnership II (Incorporated by
reference to Exhibit 5(d) of the Current
Report on Form 8-K dated July 24, 1995).

10.5			-	Technical Services Agreement dated October 1,
1985 between Telepanel, Inc. and
Amacrine International, Inc.
(Incorporated by reference to Exhibit
10.10 to the Registration Statement on
Form S-1 No. 33-59486).

10.6			-	Placing Agreement dated July 5, 1996 between
the Company and Henderson  Crosthwaite
Institutional Brokers Limited
(Incorporated by reference to Exhibit
5(c) to the Current Report on Form 8-K
dated July 11, 1996), together with
Agreement with respect to U.S.
Securities Laws dated July 2, 1996
between the Company and Henderson
Crosthwaite Institutional Brokers
Limited (Incorporated by reference to
Exhibit 5(d) to the Company's Current
Report on Form 8-K dated July 11, 1996).

10.7			-	Registration Rights Agreement dated July 11,
1996 between the Company and the
subscribers parties thereto
(Incorporated by reference to Exhibit
5(g) to the Current Report on Form 8-K
dated July 11, 1996).

10.8			-	Warrant Agreement dated as of January 24,
1997 between the Company and American
Stock Transfer & Trust Company
(Incorporated by reference to Exhibit
10.20 to the  Registration Statement on
Form S-4 No. 333-21893).

10.9			-	Indenture dated as of January 24, 1997
between the Company and United States
Trust Company of New York (Incorporated
by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 No.
333-21893).

10.10			-	Lease Agreement dated May 30, 1997 between
488 Main Avenue Associates, LLC and the
Company, together with Amendment No. 1
thereto (Incorporated by reference to
Exhibit 10.17 to the Annual Report on
Form 10-K for the year ended December
31, 1997) and Partial Lease Termination
dated January 27, 2000 between 488 Main
Avenue Associates, LLC and the Company
(Incorporated by reference to Exhibit
10.11 to the Annual Report on Form 10-K
for the year ended December 31, 1999).

10.11			-	Partial Lease Termination Agreement dated
August 21, 2000 between 488 Main Avenue
Associates, LLC and the Company.

10.12			-	Lease Agreement dated October 1, 1997 between
Kurian Limited Partnership and the
Company (Incorporated by reference to
Exhibit 10.18 to the Annual Report on
Form 10-K for the year ended December
31, 1997).

10.13			-	Stock and Convertible Note Purchase Agreement
dated as of February 11, 2000 entered
into by, inter alia, the Company and
NewCheck Corporation (Incorporated by
reference to Exhibit 2(a) to the Current
Report on Form 8-K dated February 11,
2000).

10.14			-	8% Convertible Note dated February 11, 2000
issued by NewCheck Corporation to the
Company (Incorporated by reference to
Exhibit 2(b) to the Current Report on
Form 8-K dated February 11, 2000).



10.15			-	Management Agreement dated as of February 11,
2000 between the Company and NewCheck
Corporation (Incorporated by reference
to Exhibit 2(c) to the Current Report on
Form 8-K dated February 11, 2000).

10.16			-	Warrant Certificate dated February 11, 2000
issued by NewCheck Corporation to the
Company (Incorporated by reference to
Exhibit 2(d) to the Current Report on
Form 8-K dated February 11, 2000).

10.17			-	Warrant Certificate dated February 11, 2000
issued by NewCheck Corporation to the
Company (Incorporated by reference to
Exhibit 2(e) to the Current Report on
Form 8-K dated February 11, 2000).

10.18			-	Amended and Restated Registration Rights
Agreement dated as of February 11, 2000
entered into, inter alia, by the Company
and NewCheck Corporation (Incorporated
by reference to Exhibit 2(f) to the
Current Report on Form 8-K dated
February 11, 2000).

10.19			-	Amended and Restated Securityholders
Agreement dated as of February 11, 2000
entered into, inter alia, by the Company
and NewCheck Corporation (Incorporated
by reference to Exhibit 2(g) to the
Current Report on Form 8-K dated
February 11, 2000).

10.20			-	Form of Letter of Transmittal executed to the
Company by holders of 13-1/4% Senior
Discount Notes due February 1, 2004
(Incorporated by reference to Exhibit
2(b) to the Current Report on Form 8-K
dated July 6, 2000).

10.21			-	Form of the Company's 10% Guaranteed Secured
Note due August 1, 2001 (Incorporated by
reference to Exhibit 2(c) to the Current
Report on Form 8-K dated July 6, 2000).



10.22			-	Form of the Company's 8% Guaranteed Secured
Note due August 1, 2001 (Incorporated by
reference to Exhibit 2(d) to the Current
Report on Form 8-K dated July 6, 2000).

10.23			-	Guaranty Agreement dated July 6, 2000 entered
into by Electronic Retailing Systems
International, Inc., a Connecticut
corporation ("ERS-Connecticut")
(Incorporated by reference to Exhibit
2(e) to the Current Report on Form 8-K
dated July 6, 2000).

10.24			-	Conditional Assignment and Security Agreement
dated July 6, 2000 among the Registrant,
ERS-Connecticut, and United States Trust
Company of New York as Collateral Agent
(Incorporated by reference to Exhibit
2(f) to the Current Report on Form 8-K
dated July 6, 2000).

10.25			-	Commitment Letter dated as of December 1,
2000 executed by the Company to NewCheck
Corporation, together with promissory
notes dated, respectively, as of
December 15, 2000, January 15, 2000 and
March 1, 2001 executed by NewCheck
Corporation to the Company.

10.26			-	Severance Agreement dated June 23, 2000
between the Company and Michael Persky.
F1

10.27			-	Severance Agreement dated June 23, 2000
between the Company and Jerry McAuliffe.
F1

10.28			-	Severance Agreement dated June 23, 2000
between the Company and Norman Tsang. F1

10.29			-	Severance Agreement dated June 23, 2000
between the Company and Paul Lavoie. F1

F1 Management contract or compensatory plan or arrangement.

10.30			-	Warrant Assignment Agreement dated July 19,
2000 between the Company and Bruce F.
Failing, Jr. F1

10.31			-	Warrant Assignment Agreement dated August 1 ,
2000 between the Company and Michael
Persky. F1

10.32			-	Warrant Assignment Agreement dated August 1,
2000 between the Company and Jerry
McAuliffe. F1

10.33			-	Warrant Assignment Agreement dated August 1,
2000 between the Company and Norman
Tsang. F1

10.34			-	Warrant Assignment Agreement dated August 1,
2000 between the Company and Paul
Lavoie. F1

10.35			-	Electronic Retailing Systems International,
Inc. 1993 Employee Stock Option Plan
(Incorporated by reference to Exhibit
10(a) of the Quarterly Report on Form
10-K for the period ended September 30,
2000). F1

10.36			-	Electronic Retailing Systems International,
Inc. 1993 Director Stock Option Plan
(Incorporated by reference to Exhibit
10.22 of the Annual Report on Form 10-K
for the year ended December 31, 1997).
F1

11.1			-	Statement of Computation of Per Share
Earnings.

12.1			-	Statement of Computation of Ratio of Earnings
to Fixed Charges.

21			-	Subsidiaries of the Company.

23			-	Consent of PricewaterhouseCoopers LLP.


F1 Management contract or compensatory plan or arrangement.


24			-	Power of Attorney (See "Power of Attorney" in
this Annual Report on Form 10-K).

















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