<PAGE>

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

                                   FORM 10-QSB

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

                    FOR THE QUARTER ENDED: SEPTEMBER 30, 2001

          [ ] 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:

                      ADVANCED SYSTEMS INTERNATIONAL, INC.
                  (NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)

                       NEVADA                          13-3953047
           (STATE OR OTHER JURISDICTION OF      (I.R.S. EMPLOYER I.D. NO.)
            INCORPORATION OR ORGANIZATION)

                         25300 TELEGRAPH ROAD, SUITE 455
                           SOUTHFIELD, MICHIGAN 48034
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                  248-263-0000
                           (ISSUER'S TELEPHONE NUMBER)

    SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT: NONE

      SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
                         COMMON STOCK, $0.001 PAR VALUE

           CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO
         BE FILED BY SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE
            PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
               REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND
     (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
                                 YES [X] NO[ ]

                                       ---

              CHECK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
            ITEM 405 OF REGULATION S-B IS NOT CONTAINED HEREIN AND NO
                        DISCLOSURE WILL 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-QSB OR ANY
                       AMENDMENT TO THIS FORM 10-QSB. [X]

              AS OF SEPTEMBER 30, 2001, 14,886,541 SHARES OF COMMON
               STOCK OF THE REGISTRANT WERE OUTSTANDING, AT A PAR
                            VALUE OF $.001 PER SHARE.





<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

                      ADVANCED SYSTEMS INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                       Three Months Ended                          Nine Months Ended
                                            September 30,                              September 30,
                                        2001        2000(as restated,           2001      2000(as restated,
                                                       see Note F)                           see Note F)
                                 -------------------------------------       -----------------------------
<S>                               <C>                  <C>                  <C>              <C>
Revenues                          $  1,829,256         $1,701,018           $ 3,365,893      $ 4,489,114

Cost of Revenues                       457,539            491,163             1,145,264        1,300,273
                                 -------------------------------------      ------------------------------

Gross Profit                         1,371,717          1,209,855             2,220,629        3,188,841

Operating Expenses

  Sales & Marketing                    262,113            617,385               843,498        2,141,312
  Research & Development               173,354            257,480               532,090          665,253
  General & Administrative             770,662          1,031,221             2,435,198        3,665,103
                                 -------------------------------------      -------------------------------
                                     1,206,129          1,906,086             3,810,786        6,471,668
                                 -------------------------------------      -------------------------------

Income (Loss) From Operations          165,588           (696,231)           (1,590,157)      (3,282,827)

Other Expense

  Interest Expense - Net               111,533             48,939               332,716          193,718


                                 ------------------------------------      --------------------------------
Net Income (Loss)                 $     54,055         $ (745,170)          $(1,922,873)     $(3,476,545)
                                 ====================================      ================================

Income (Loss) Per Share -
 basic & diluted                  $       0.00         $    (0.05)          $    (0.13)      $     (0.26)
                                 ====================================      ================================

Weighted Number of Outstanding
  Shares                            14,886,541         14,728,430            14,886,541       13,757,710
                                 ====================================      ================================
</TABLE>

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


                                        2


<PAGE>


                      ADVANCED SYSTEMS INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                      September 30,      December 31,
                                                          2001               2000
                                                      -------------------------------
<S>                                                    <C>               <C>
ASSETS

CURRENT ASSETS
Cash                                                   $   347,168       $    277,166
Accounts Receivable
Trade
     Billed (net of allowance of $25,426 at
       September 30, 2001 and December 31, 2000)           592,514          2,171,515
     Unbilled                                              191,497            212,838
Inventory                                                   15,982              8,849
Prepaid Expenses                                            14,164             32,349
                                                       ------------------------------
     TOTAL CURRENT ASSETS                                1,161,325          2,702,717
                                                       ------------------------------

PROPERTY & EQUIPMENT - AT COST
Computer Equipment                                         332,648            305,723
Office Equipment                                           130,349             92,856
Leasehold Improvements                                      83,770             83,770
                                                       ------------------------------
                                                           546,767            482,349
     Less Accumulated Depreciation and Amortization       (340,920)          (278,108)
                                                       ------------------------------
     NET PROPERTY & EQUIPMENT                              205,847            204,241

OTHER ASSETS
Deposits                                                    53,069             28,069
Software Development Costs(less $296,430 and
     $207,501 accumulated amortization at September
     30, 2001 and December 31, 2000, respectively)          59,289            148,218
Other                                                           --                746
                                                       ------------------------------
TOTAL ASSETS                                           $ 1,479,530       $  3,083,991
                                                       ==============================

LIABILITIES & STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Notes Payable and Other Obligations - Bank             $   907,186       $  2,073,877
Current Maturities of Long-Term Debt                        77,322              3,374
Current Maturities of Long-Term Debt To Related
     Parties                                             1,067,801            585,000
Deferred Revenue                                         2,749,580          1,997,185
Accounts Payable                                         1,252,536            924,494
Accrued Liabilities                                        246,490            540,934
                                                       ------------------------------
     TOTAL CURRENT LIABILITIES                           6,300,915          6,124,864
                                                       ------------------------------
COMMITMENT AND CONTINGENCIES (See Note D)                       --                 --


STOCKHOLDERS' DEFICIT
Preferred Stock - $.001 par value; authorized,
     10,000,000 shares; none issued and outstanding             --                 --
Common Stock - $.001 par value; authorized,
     30,000,000 shares; 14,886,541 shares issued
     and outstanding at both September 30, 2001 and
     December 31, 2000                                      14,887             14,887
Additional Paid-in Capital                              10,264,152         10,121,791
Accumulated Deficit                                    (15,100,424)       (13,177,551)
                                                       ------------------------------
     TOTAL STOCKHOLDERS' DEFICIT                        (4,821,385)        (3,040,873)
                                                       ------------------------------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT              $ 1,479,530       $  3,083,991
                                                       ==============================

</TABLE>


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

                                        3


<PAGE>


                      ADVANCED SYSTEMS INTERNATIONAL, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                   (Unaudited)

<Table>
<Caption>
                                                                             Additional
                                                           Common              Paid-In             Accumulated
                                                            Stock              Capital               Deficit              Total
                                                          ------------------------------------------------------------------------

<S>                                                       <C>               <C>                  <C>                  <C>
Balance at December 31, 2000                              $ 14,887          $ 10,121,791         $ (13,177,551)       $ (3,040,873)
Issuance of 783,646 warrants                                                     142,361                                   142,361
Net Loss                                                                                            (1,922,873)         (1,922,873)
                                                          ------------------------------------------------------------------------
Balance at September 30, 2001 (Unaudited)                 $ 14,887          $ 10,264,152         $ (15,100,424)       $ (4,821,385)
                                                          ========================================================================
</TABLE>



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



                                       4


<PAGE>


                      ADVANCED SYSTEMS INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (Unaudited)

<Table>
<Caption>
                                                                                         Nine Months Ended
                                                                                            September 30,
                                                                                    2001          2000(as restated,
                                                                                                    see Note F)
                                                                                -----------------------------------
<S>                                                                             <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss                                                                        $(1,922,873)        $(3,476,545)
  Adjustments to reconcile net loss to net cash provided (used):
    Depreciation and Amortization                                                   152,487             163,312
    Accretion of discount on indebtedness                                           105,162
    Loss on disposal of equipment                                                                         2,830
    Change in Assets & Liabilities
      Decrease (Increase) in Accounts Receivable                                  1,600,342          (1,674,213)
      Decrease in Other Receivables                                                       -              48,566
      Increase in Inventory                                                          (7,133)             (1,350)
      Decrease (Increase) in Deposits                                               (25,000)              4,767
      Decrease (Increase) in Prepaid Expenses                                        18,185             (21,619)
      Increase in Accounts Payable                                                  328,042              60,651
      (Decrease) in Accrued Liabilities                                            (294,444)           (179,203)
      Increase in Deferred Revenue                                                  752,395             417,586
                                                                                -------------------------------
        Net Cash Provided (Used) by Operating Activities                            707,163          (4,655,222)
                                                                                -------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of Property and Equipment                                              (64,418)            (30,164)
                                                                                -------------------------------
        Net Cash Used in Investing Activities                                       (64,418)            (30,164)
                                                                                -------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
    Repayment of Notes Payable - Bank                                            (1,166,691)
    Proceeds from Notes Payable and Other Obligations - Bank                              -           1,743,781
    Repayment of Debt                                                                (1,052)
    Payment of Lease Obligations                                                                         (5,232)
    Proceeds from Issuance of Debt and Warrants to Related Parties
      and others                                                                    660,000
    Proceeds from Issuance of Common Stock                                                -           3,778,629
    Repayments of Related Party Obligations                                         (65,000)           (569,814)
                                                                                -------------------------------
        Net Cash Provided (Used) by Financing Activities                           (572,743)          4,947,364
                                                                                -------------------------------

NET INCREASE IN CASH                                                                 70,002             261,978

CASH AT JANUARY 1                                                                   277,166             445,548
                                                                                -------------------------------

CASH AT SEPTEMBER 30                                                            $   347,168         $   707,526
                                                                                ===============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash Paid During the Period For Interest                                    $   166,258         $   145,614
                                                                                ===============================

</TABLE>


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



                                       5
<PAGE>



                      ADVANCED SYSTEMS INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of
the accompanying financial statements follows.

BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-QSB and Article 10
of Regulation S-X. Accordingly, they do not contain all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
solely of normal recurring adjustments) considered necessary for a fair
presentation have been included. For further information, please refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB, for the year ended December 31, 2000.
The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the full year.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.

The Company has, as of September 30, 2001, deficits in stockholders' equity of
$4,821,385 and working capital of $5,139,590. In addition the Company has
recurring losses from operations. These factors, among others, raise substantial
doubt about the Company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

In the first quarter 2001, the Company raised additional capital of $635,000
through the issuance of subordinated notes with related parties and others. Also
in the first quarter 2001, the Company instituted a "down-sizing" initiative.
The Company continues to pursue cost-cutting measures currently, and will act
accordingly in the future as results and business conditions warrant. The
Company continues to pursue additional sources of capital through numerous
contacts with investment representatives. The Company also is identifying
opportunities to negotiate strategic partnerships and joint ventures. Future
operations will be dependent upon the Company's ability to raise the additional
funds that are currently being pursued, and achieve sustainable profitable
operations as a result of its down-sizing initiative during 2001.


NATURE OF BUSINESS

Advanced Systems International, Inc. (formerly Automatic Time Systems Corp.)
("the Company") was incorporated on February 1, 1996. The Company is a developer
and supplier of labor management, data integration and business to business
extension software application services. The Company also offers ongoing support
necessary for the deployment of enterprise-wide data management and markets its
products through direct sales and in conjunction with strategic partners. The
Company addresses three critical business to business issues:

         -    Providing real-time labor and product costing information in order
              to intelligently compete in the global economy;
         -    Allowing real-time access to tracking and fulfillment data of
              supply chain orders and process manufacturing;
         -    Permitting integration of Front Office and Back Office Business to
              Business applications.

                                        6

<PAGE>


The Company has developed its principal application software programs to
effectively facilitate labor management, inventory tracking, fulfillment and
complete integration of enterprise applications. Essentially, the Company
provides the tool set for companies to extend controls over labor productivity
and product costing so they can better compete.

In order to provide a complete solution, the Company bundles implementation
services, on-going support for its products, and third party hardware together
with its software products. Key markets include airline, automotive, automotive
supply, food processing, pulp and paper and other manufacturing industries. The
Company markets its products through direct sales and in conjunction with its
network of resellers.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, Automatic Time Systems Corp. and Automated
Systems International, Ltd. All significant intercompany balances and
transactions have been eliminated.

REVENUE RECOGNITION

The Company develops, markets, licenses, and supports computer software products
and provides related services. The Company conveys the right to use the software
products to customers under perpetual license agreements and coveys the right to
product support and enhancements in annual maintenance agreements.

The Company recognizes revenue in accordance with AICPA Statement of Position
97-2, "Software Revenue Recognition" (SOP 97-2), as amended. Revenues from the
sale of systems are recognized using the percentage of completion method as the
work is performed, measured primarily by the ratio of labor hours incurred to
total estimated labor hours for each specific contract. When the total estimated
cost of a contract is expected to exceed the contract price, the total estimated
loss is charged to expense in the period when the information becomes known. The
Company defers and recognizes maintenance and support services revenue over the
term of the contract period, which varies between one and five years. The
Company recognizes training and consulting services revenue as the services are
provided. The Company generally expenses sales commissions as the related
revenue is recognized and pays sales commissions upon receipt of payment from
the customer.

In addition to its direct sales effort, the Company licenses its products
through a network of resellers. When fees are received in a transaction in which
the Company is licensing software and also performing significant development,
customization or consulting services, the fees are recognized using the
percentage of completion method and, therefore, product license and product
support and other services revenue are recognized as work progresses. The
Company does not record revenue until the reseller has delivered the licenses to
end-user customers and the end-user customer has deployed and registered the
software with the Company. The Company also records revenue when the software is
deployed directly to the end-user customer on behalf of the reseller.

When the fees for software upgrades and enhancements, maintenance, consulting
and training are bundled with the license fee, they are unbundled using the
Company's objective evidence of the fair value of the multiple elements
represented by the Company's customary pricing for each element in separate
transactions. If such evidence of fair value for each element of the arrangement
does not exist, all revenue from the arrangement is deferred until such time
that evidence of fair value exists for undelivered elements or until all
elements of the arrangement are delivered, subject to certain exceptions set
forth in SOP 97-2.

NET INCOME (LOSS) PER SHARE

Basic income (loss) per share excludes dilution and is computed by dividing the
income (loss) available to common shareholders by the weighted-average common
shares outstanding for the period. Diluted income (loss) per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock or resulted in the
issuance of common stock that then shared in the income (loss) of the entity.
Potential dilutive securities of 6,672,663 and 5,628,163 as of September 30,
2001 and 2000, respectively, have been excluded from the calculation of loss per
share for the nine months ended September 30, 2001 due their antidilutive
effect. Such dilutive securities did not have an effect on the calculation of
net income per share for the three months ended September 30, 2001.



                                        7

<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS

Management believes the fair value of the Company's financial instruments
approximates their carrying value. The fair value of long-term obligations
approximate their carrying values based on current rates for instruments with
similar characteristics.

USE OF ESTIMATES

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

STOCK BASED COMPENSATION

The Company accounts for stock-based compensation under Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
As permitted by SFAS No. 123, the Company has elected to continue following the
provision of Accounting Principles Board ("APB") No. 25, "Accounting for Stock
Issued to Employees" for options issued to employees and to adopt only the
disclosure provisions of SFAS No. 123.


NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued two new Statements
of Financial Accounting Standards ("SFAS"). SFAS No. 141, "Business
Combinations," requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001, establishes specific
criteria for the recognition of intangible assets separately from goodwill and
requires unallocated negative goodwill to be written off. SFAS No. 141 is
effective for all business combinations effective after June 30, 2001. SFAS No.
142, "Goodwill and Other Intangible Assets," addresses the accounting for
goodwill and intangible assets subsequent to their acquisition. SFAS No. 142 is
effective for fiscal years beginning after December 31, 2001. The Company does
not believe that the adoption of these pronouncements will have a material
impact on the Company's financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This supercedes SFAS 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of." This statement retains the
impairment loss recognition and measurement requirements of SFAS 121. In
addition, it requires that one accounting model be used for long-lived assets to
be disposed of by sale, and broadens the presentation of discontinued operations
to include more disposal transactions. The Company is required to adopt this
statement for the year ending December 31, 2002, and has not determined the
impact, if any, that this statement will have on its financial position or
results of operations.


                                        8


<PAGE>


                          NOTE B - NOTES PAYABLE - BANK



A $2 million revolving credit line with a commercial bank was established in
July, 2000 with an initial term of 24 months. The Company has been in default
due to non-compliance with covenant provisions since the third quarter of 2000.
Interest on the revolving credit line is based on the bank's default rate (prime
rate + 7%), which was 13% at September 30, 2001. The outstanding balance at
September 30, 2001 and December 31, 2000 was $667,805 and $1,827,551,
respectively, and is collateralized by all assets of the Company.


                             NOTE C - LONG TERM DEBT

<TABLE>
<CAPTION>
                                                                                            September 30, 2001
                                                                                            ------------------
<S>                                                                                         <C>
Bank term loan for an original amount of $250,000 to be repaid $6,944 monthly.
Such payments have been suspended. Interest is based on the bank's default rate
(prime rate + 3%), which was 10% at September 30, 2001. The loan is
collateralized by all assets of the Company.                                                   $    208,333


Subordinated debentures to related parties ($1,105,000) and others ($75,000),
with interest accruing at 12%, and maturity date in December 2001. Interest is
payable semi-annually and warrants with an exercise price of $.125 per warrant
were issued in connection with the efforts in raising the additional funding.
The debentures are stated at the face value less the unamortized discount
attributable to the fair value of the warrants at the date of issuance of
$37,199 as of September 30, 2001.                                                                 1,142,801

Equipment lease line with a commercial bank leasing company beginning in
October, 2000.  Payments have been suspended. Interest is based on the default rate
(prime rate + 3%) of 10% at September 30, 2001. The amount outstanding is due on demand.             31,048

Other                                                                                                 2,322
                                                                                               ------------
Total                                                                                             1,384,504
Less Current Maturities                                                                           1,384,504
                                                                                               ------------
                                                                                               $        -0-
                                                                                               ------------
</TABLE>


                     NOTE D - COMMITMENTS AND CONTINGENCIES

The Company leases office space and equipment under operating leases.
Approximate future minimum rental payments under these agreements as of
September 30, 2001 is approximately $602,000. Rent expense for the nine months
ended September 30, 2001 was approximately $306,000.

The Company is party to legal proceedings incident to its business. Management
believes the outcome of such proceedings will not have a material impact on the
Company's financial position or results of operations.



                                        9


<PAGE>


                      ADVANCED SYSTEMS INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


================================================================================


                           NOTE E - INDUSTRY SEGMENTS



The Company's operations by business segment for the three months ended
September 30, 2001 is as follows:

<TABLE>
<CAPTION>
                                                                                     Segment
                                             ATServer             ATLink              Totals
                                           -----------         -----------         -----------
<S>                                        <C>                 <C>                 <C>
Revenues                                   $ 1,420,406         $   408,850         $ 1,829,256
Interest Income                                     --                  --                  --
Interest Expense                               111,533                  --             111,533
Depreciation and Amortization                       --              29,643              29,643

Net Income (Loss)                              104,218            ( 27,248)             76,970
Assets                                       1,020,004              59,289           1,079,293
Expenditures for Assets                             --                  --                  --

</TABLE>

RECONCILIATION TO CONSOLIDATED AMOUNTS

<TABLE>
<S>                                                                     <C>
              NET INCOME
                      Net Income for Reportable Segments                $    76,970
                      Unallocated Corporate Expenses                     (   22,915)
                                                                        -----------
                                                                        $    54,055
                                                                        ===========
                ASSETS
                      Total Assets for Reportable Segments              $ 1,079,293
                      Corporate Assets                                      400,237
                                                                        -----------
                                                                        $ 1,479,530
                                                                        ===========
</TABLE>

OTHER SIGNIFICANT ITEMS

<TABLE>
<CAPTION>
                                                                           Segment         Corporate       Consolidated
                                                                            Totals          Amounts           Totals
                                                                        --------------    -----------      ------------

<S>                                                                     <C>               <C>              <C>
                      Interest Income                                            --               --               --
                      Depreciation and Amortization                          29,643           22,915           52,558
                      Expenditures for Assets                                    --           43,923           43,923

</TABLE>

GEOGRAPHIC INFORMATION

<TABLE>
<CAPTION>
                                                             Long-Lived
                                            Revenues           Assets
                                          -------------    -------------
<S>                                       <C>              <C>
                     United States        $   1,765,652    $     318,205
                     Canada                      63,604               --
                                          -------------    -------------
                                          $   1,829,256    $     318,205
                                          =============    =============
</TABLE>


                                       10


<PAGE>

                      ADVANCED SYSTEMS INTERNATIONAL, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

================================================================================


                     NOTE E - INDUSTRY SEGMENTS (CONTINUED)
The Company's operations by business segment for the nine months ended September
30, 2001 is as follows:

<TABLE>
<CAPTION>
                                                                                      Segment
                                              ATServer             ATLink              Totals
                                            -----------         -----------        -----------
<S>                                        <C>                  <C>                <C>
Revenues                                   $  2,743,755         $   622,138        $ 3,365,893
Interest Income                                     --                  --                  --
Interest Expense                                332,716                 --             332,716
Depreciation and Amortization                       --               88,929             88,929

Net Loss                                     (1,356,564)           (502,751)        (1,859,315)
Assets                                        1,020,004              59,289          1,079,293
Expenditures for Assets                             --                  --                  --
</TABLE>

RECONCILIATION TO CONSOLIDATED AMOUNTS

<TABLE>
<S>                                                                     <C>
              NET LOSS
                      Net Loss for Reportable Segments                  $(1,859,315)
                      Unallocated Corporate Expenses                     (   63,558)
                                                                        -----------
                                                                        $(1,922,873)
                                                                        ===========
                ASSETS
                      Total Assets for Reportable Segments              $ 1,079,293
                      Corporate Assets                                      400,237
                                                                        -----------
                                                                        $ 1,479,530
                                                                        ===========
</TABLE>

OTHER SIGNIFICANT ITEMS

<TABLE>
<CAPTION>
                                                                           Segment         Corporate       Consolidated
                                                                            Totals          Amounts           Totals
                                                                        --------------    -----------      ------------
<S>                                                                     <C>               <C>              <C>
                      Interest Income                                            --               --               --
                      Depreciation and Amortization                          88,929           63,558          152,487
                      Expenditures for Assets                                    --           64,418           64,418

</TABLE>

GEOGRAPHIC INFORMATION

<TABLE>
<CAPTION>
                                                             Long-Lived
                                            Revenues           Assets
                                          -------------    -------------
<S>                                       <C>              <C>
                     United States        $   3,133,012    $     318,205
                     Canada                     232,881               --
                                          -------------    -------------
                                          $   3,365,893    $     318,205
                                          =============    =============
</TABLE>


                                       11


<PAGE>

                     NOTE E - INDUSTRY SEGMENTS (CONTINUED)



The Company's operations by business segment for the three months ended
September 30, 2000 is as follows:

<Table>
<Caption>
                                                                                                    Segment
                                                            ATServer              ATLink            Totals
                                                          -----------           ---------         -----------
<S>                                                       <C>                  <C>                <C>
Revenues                                                  $  1,637,282         $   63,736         $ 1,701,018
Interest income                                                    --                  --                  --
Interest expense                                                41,779              7,724              49,503
Depreciation and amortization                                      --              29,643              29,643
Net loss                                                      (303,949)          (416,026)           (719,975)
Assets                                                       2,551,977            177,861           2,719,838
Expenditures for assets                                            --                  --                  --
</TABLE>

RECONCILIATION TO CONSOLIDATED AMOUNTS

<TABLE>
<S>                                                       <C>                  <C>                <C>
    NET LOSS
       Net loss for reportable segments                                                           $(  719,975)
       Unallocated corporate expenses                                                              (   25,195)
                                                                                                  -----------
                                                                                                  $(  745,170)
                                                                                                  ===========
    ASSETS
       Total assets for reportable segments                                                       $ 2,719,838
       Corporate assets                                                                               738,207
                                                                                                  -----------
                                                                                                  $ 3,458,045
                                                                                                  ===========

</TABLE>

OTHER SIGNIFICANT ITEMS

<TABLE>
<CAPTION>
                                            SEGMENT           CORPORATE        CONSOLIDATED
                                             TOTALS             AMOUNT            TOTALS
                                           ----------        -----------       ------------
<S>                                        <C>               <C>               <C>
Interest income                            $       --        $      564        $      564
Depreciation and amortization                  29,643            25,759            55,402
Expenditures for assets                            --             8,784             8,784
</TABLE>

GEOGRAPHIC INFORMATION

<TABLE>
<CAPTION>
                                                                               LONG-LIVED
                                                              REVENUES            ASSETS
                                                             ----------        ----------
<S>                                                         <C>                <C>
United States                                               $ 1,577,267        $  392,409
Canada                                                          123,751                --
                                                             ----------        ----------
                                                            $ 1,701,018        $  392,409
                                                             ==========        ==========
</TABLE>



                                       12
<PAGE>

                     NOTE E - INDUSTRY SEGMENTS (CONTINUED)

The Company's operations by business segment for the nine months ended September
30, 2000 is as follows:

<TABLE>
<CAPTION>
                                                                                                     Segment
                                                            ATServer             ATLink              Totals
                                                          -----------         -----------         -----------
<S>                                                       <C>                 <C>                 <C>
Revenues                                                  $ 4,104,054         $   385,060         $ 4,489,114
Interest income                                                    --                  --                  --
Interest expense                                              137,475              58,322             195,797
Depreciation and amortization                                      --              88,929              88,929
Net loss                                                   (2,149,514)         (1,254,727)         (3,404,240)
Assets                                                      2,551,977             177,861           2,729,838
Expenditures for assets                                            --                  --                  --
</TABLE>

RECONCILIATION TO CONSOLIDATED AMOUNTS

<TABLE>
<S>                                                       <C>                 <C>                 <C>
    NET LOSS
       Net loss for reportable segments                                                           $(3,404,241)
       Unallocated corporate expenses                                                              (   72,304)
                                                                                                  -----------
                                                                                                  $(3,476,545)
                                                                                                  ===========
    ASSETS
       Total assets for reportable segments                                                       $ 2,729,838
       Corporate assets                                                                               738,207
                                                                                                  -----------
                                                                                                  $ 3,468,045
                                                                                                  ===========
</TABLE>

OTHER SIGNIFICANT ITEMS

<TABLE>
<CAPTION>
                                            SEGMENT           CORPORATE        CONSOLIDATED
                                             TOTALS             AMOUNT            TOTALS
                                           ----------        -----------       ------------
<S>                                        <C>               <C>               <C>
Interest income                            $       --        $    2,079        $    2,079
Depreciation and amortization                  88,929            74,383           163,312
Expenditures for assets                            --            30,164            30,164

</TABLE>

GEOGRAPHIC INFORMATION

<TABLE>
<CAPTION>
                                                                               LONG-LIVED
                                                              REVENUES            ASSETS
                                                             ----------        ----------

<S>                                                          <C>               <C>
United States                                                $4,015,688        $  392,409
Canada                                                          473,426                --
                                                             ----------        ----------
                                                             $4,489,114        $  392,409
                                                             ==========        ==========
</TABLE>


                                       13

<PAGE>

                              NOTE F - RESTATEMENT

Subsequent to the issuance of the Company's 1999 financial statements, the
Company's management determined that certain transactions had not been recorded
in conformity with SOP 97-2, promulgated by the American Institute of Certified
Public Accountants. In particular, revenue for certain software arrangements
should have been accounted for under the percentage of completion method and
recognized, as work progresses, over the entire contract period. Additionally,
management determined that revenue had been inappropriately recognized in 1999
where the contract had not been fully executed in that reporting period.

As a result, the Company has restated its 1999 financial statements to comply
with the requirements of SOP 97-2. Accordingly, the Company's interim financial
statements for the quarterly periods in the year ended December 31, 2000 have
been restated from the amounts previously reported to appropriately recognize
revenue upon receipt of a properly executed contract and over the contract terms
for large, complex contracts that combine both products and services.

A summary of the significant effects of the restatement for the three and nine
months ended September 30, 2000 is as follows:

<TABLE>
<CAPTION>
                                       As previously reported                 As restated

                                    Three months      Nine months     Three months   Nine months
                                     ended September 30, 2000          ended September 30, 2000
                                   -------------      -----------     ------------   -----------
<S>                                <C>                <C>             <C>            <C>
Revenue                            $ 1,443,388        $ 5,269,850     $ 1,701,018    $ 4,489,114

Gross profit                       $ 1,376,726        $ 5,123,490     $ 1,209,855    $ 3,188,842

Net (loss)                         $(1,002,800)       $(1,833,741)    $(  745,170)   $(3,476,545)

Loss per share-basic and diluted   $    (0.07)        $   (0.20)      $   (0.05)     $   (0.26)

</TABLE>


                                       14


<PAGE>


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations


FORWARD LOOKING STATEMENTS

         The information in this section should be read together with the
consolidated, unaudited, interim financial statements that are included
elsewhere in this Form 10-QSB. Those interim financial statements include all
adjustments, which we have deemed necessary in order to make them not
misleading.

         As stated in Note F to the consolidated financial statements, the
Company's financial have been restated. The accompanying management's discussion
and analysis give effect to that restatement. The information in this section
should be read together with the consolidated financial statements that are
included elsewhere in the 10-QSB.

           This discussion includes certain forward-looking statements about the
Company's business and its expectations, including statements relating to the
demand for products and services, revenue growth rates, and the availability of
cash, investments, and operating cash flow. Any such statements are subject to
risk that could cause the actual results to vary materially from expectations.

SUMMARY

         Advanced Systems International, Inc. (AdSys) and the industry have
experienced a slowdown in software project initiatives. The broad economic
downturn and the uncertainties associated with it, coupled with the Company's
experience that "Fortune 1000" IT Managers continue to focus efforts towards
assessing their e-business initiatives as well as new security measures in light
of the recent terrorism acts, have caused a continued delay in software project
purchasing decisions. AdSys believes that its new product offerings that track
production activities, materials, fulfillment and ever-critical labor and
biometric data address this focus and will therefore be included in customers'
e-business and security initiatives. Currently, AdSys is identifying
opportunities for growth, including the negotiation of strategic partnerships
and joint ventures that will enable it to broaden competitive opportunities,
shorten sales cycles and improve deliverables. The Company is expecting further
penetration into industries such as airlines, automotive supply, food
processing, entertainment, furniture manufacturing, paper and forestry products,
and other manufacturing sectors.

         AdSys has identified a significant opportunity to provide comprehensive
labor and inventory data within the high growth business to business (B2B)
market. Building on its proven labor management technology, AdSys has expanded
its product offering to include a web-based tool set that tracks critical
production inventory, fulfillment and labor data in real-time to support the
cost efficient, streamlined supply chain and enterprise-wide e-business
initiatives of its customers. Through the enhancement and integration of the
Company's two main product suites Laborview (web-based ATServer product) and
ATLink, combined with strong partnerships, customers now have a one stop shop
for software and services to track labor costs, manage security, integrate
disparate devices and ERP systems and tie that information together within a
unified interface enabling companies to track and calculate all costs associated
with running their businesses. ATServer is a registered trademark of AdSys; the
Company also claims common-law and pending trademark rights in ATLink.

RESULTS OF OPERATIONS - RESULTS OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001
AND SEPTEMBER 30, 2000

REVENUES

The Company experienced a decrease in revenues to $3,365,893 for the nine months
ended September 30, 2001, from $4,489,114 for the nine months ended September
30, 2000, a decrease of $1,123,221 or 25%. The Company attributes this decrease
to factors that continue to delay its customers' IT purchases. The widespread
economic downturn has deterred companies from technology spending, the widely
held belief that many IT Managers continue to attempt to prioritize e-business
initiatives, therefore delaying purchasing decisions. The Company continues to
focus on Fortune 1000 clientele, which requires an extended sales cycle.
However, the Company has experienced a certain level of penetration into its
target markets. The Company had a net loss of $1,922,873 for the nine months
ended September 30, 2001 as compared with a net loss of $3,476,545 for the nine
months ended September 30, 2000, a difference of $1,553,672. This difference is
largely attributable to the reduction in the costs required to support the lower
level of sales for the nine month period and in the Company's aggressive cost-
cutting
                                            15


<PAGE>


initiatives, which commenced in January 2001.

ATServer (R) is a workforce management, client/server and web-based software
package. ATServer collects, processes, and distributes key employee labor data
throughout user organizations. ATServer-related revenue amounted to $2,743,755
and $4,104,054 for the nine months ended September 30, 2001 and 2000,
respectively, a decrease of $1,360,299 or 33%.  The decrease is primarily due
to the economic slowdown and the corresponding delay in the implementation of
software project initiatives.


The ATLink (TM) product is an integration enabling product that facilitates data
flows between legacy and/or application software within an enterprise and
extends to enterprise applications of both customers and vendors. ATLink-related
revenue increased to $622,138 from $385,060, an increase of $237,078 or 62% in
the nine months ended September 30, 2001 and 2000,respectively. This increase is
primarily due to the initial implementation of new contracts.


GROSS PROFIT

The Company had gross profit of $2,220,629 (66% of total revenues) and
$3,188,842 (71% of total revenues) for the nine months ended September 30, 2001
and 2000, respectively. This represents a decrease in gross profit of $968,573
or 30%. This decrease is due primarily to lower revenues, primarily in the
delivery of professional services, which have higher gross margins, in 2001 from
2000.

ATServer-related gross profit was $1,902,791 (69% of ATServer revenue) and
$3,034,647 (74% of ATServer revenue) for the nine months ended September 30,
2001 and 2000, respectively, a decrease of $1,131,856 or 37%. This decrease is
due primarily to decreased ATServer revenue, primarily direct professional
services sold.

ATLink-related gross profit was $317,838 (51% of ATLink revenue) and $154,195
(40% of ATLink revenue) for the nine months ended September 30, 2001 and 2000,
respectively, an increase of $163,643 or 106%. This increase is due primarily to
the increase in ATLink revenue.


OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses decreased to $843,498 for the
nine months ended September 30, 2001, from $2,141,312 for the nine months ended
September 30, 2000, a decrease of $1,297,814. The decrease was attributable to
the restructuring of the Company's sales department. This cost-cutting
initiative resulted in a decrease in compensation and related benefits of
$810,857 for the nine months ended September 30, 2001. Costs of traveling also
decreased to $101,023 for the nine months ended September 30, 2001 from $292,246
for the nine months ended September 30, 2000, a decrease of $191,223.
Advertising and public relations expenses decreased by $170,292 for the nine
months ended September 30, 2001 as compared to the nine months ended September
30, 2000.

Research and Development. Research and development expenses decreased to
$532,090 for the nine months ended September 30,2001, from $665,253 for the nine
months ended September 30, 2000, a decrease of $133,163. The decrease reflects
the reduction in research and development personnel.

General and Administrative. General and administrative expenses decreased to
$2,435,198 for the nine months ended September 30, 2001, from $3,665,103 for the
nine months ended September 30, 2000, a decrease of $1,229,905. This decrease is
due primarily to a decrease in compensation and related benefits of $1,164,811,
and a decrease in computer related costs of $64,634.


                                       16


<PAGE>

LIQUIDITY AND CAPITAL RESOURCES


The Company entered into a $2,000,000 credit facility with a commercial bank on
July 28, 2000 for borrowing against its eligible accounts receivable to address
liquidity needs pending customer payments. As of September 30, 2001, the
outstanding balance was approximately $907,000 under this facility. Due to the
Company's inability to comply with the credit facility's covenants, this
facility is "due upon demand" as the Company works with the commercial bank to
pay down the existing debt and attract and retain another lender at terms more
favorable to the Company. As of October 31, 2001, the Company's indebtedness,
including interest to the commercial bank is $798,515, $559,134 of which bears
interest at the bank's prime rate plus 7 percent, (11.5% at October 31, 2001)
and $239,381 of which bears interest at 8.5 percent as of October 31, 2001.

As part of an overall $1.2 million debt financing with related parties at the
end of 2000 and the first quarter of 2001, the Company refinanced a $560,000
subordinated short-term note payable with interest accruing at 12% annually. The
maturity date of this refinancing is December 2001 with 12% annual interest rate
payable monthly and 560,000 two-year warrants with an exercise price of
$.125/share. The Company received an additional $660,000 in 2001 from this
financing in the form of debt with terms identical to the refinancing described
above. Certain fees were paid in connection with the refinancing and a total of
an additional 783,646 two-year warrants were issued.

In May 2001 the Company secured a $2 million commitment in advance funding for
work to be performed for one of its premier clients. The initial amount of
$500,000 was funded immediately and the remainder was received as the Company
met certain project related milestones through the third quarter of 2001.

The Company maintains an equipment leasing relationship with Primex, a private
lending Company. As of September 30, 2001, the Company had approximately
$231,000 of assets under equipment lease arrangements with this company.

In January 2001, the Company instituted a "down-sizing" initiative. The Company
continues to pursue cost-cutting measures currently, and will act accordingly in
the future as results and business conditions warrant.

The Company has, as of September 30, 2001, deficits in stockholders' equity of
$4,821,385 and working capital of $5,139,590. These factors, among others, raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments relating to
the recoverability and classifications of assets carrying amounts or the amount
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company is currently pursuing
additional sources of capital. Future operations will be dependent upon the
Company's ability to raise additional funds.


         Although the Company believes that improved operations, together with
the financing described above, will yield sufficient liquidity, no assurance can
be given that additional sources of capital will not be required. The Company
believes sustainable profitable operations can be achieved through the
down-sizing initiative that is being carried out during 2001 as well as customer
acceptance of the enhanced product offerings that have been developed. The
Company is considering raising additional capital as market conditions warrant
in order to form a stronger capital base, and for increased investment in
product development, acquisitions of and/or strategic alliances with companies
with synergistic value, and resource procurement based on a definable
implementation schedule or backlog. The extent to which such additional
financing is available will affect the level to which the Company pursues
these discretionary growth actions.



                                       17


<PAGE>



                           PART II - OTHER INFORMATION


Item 1. LEGAL PROCEEDINGS

     None.


Item 2. CHANGES IN SECURITIES

     None.


Item 3. DEFAULTS UPON SENIOR SECURITIES

     None.


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

     None.


Item  5.  OTHER INFORMATION

     None.


Item 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibits

              None.

        (b) Reports on Form 8-K

              None.

        SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                     Advanced Systems International, Inc.
                                     (the "Registrant")

Date: November 16, 2001                /s/ Gerald A. Pesut
                                     ----------------------

                                     Gerald A. Pesut
                                     President, CEO, Chairman of the Board



                                       18