As filed with the Securities and Exchange Commission on May 11, 2001

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

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

                                    FORM 10-Q

             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended March 31, 2001

                                       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 No.: 0-22693

                        SYSCOMM INTERNATIONAL CORPORATION
             (Exact name of registrant as specified in Its charter)

                   Delaware                                    11-2889809
       (State or Other Jurisdiction of                      (I.R.S. Employer
        Incorporation or Organization)                    Identification No.)

                   20 Precision Drive, Shirley, New York 11967
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's Telephone Number, Including Area Code: (631) 205-9000

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

     The number of shares  outstanding  of each class of our common equity as of
May 10, 2001 is as follows:

Class of Common Equity                                  Number of Shares
----------------------                                  ----------------
Common Stock, par value $.01                               4,895,998


                                       1
<PAGE>
                        SYSCOMM INTERNATIONAL CORPORATION

                                TABLE OF CONTENTS

Item                               Description                              Page

                    PART I - FINANCIAL INFORMATION

 1.    Financial Statements
       Consolidated Balance Sheets -
       March 31, 2001 (unaudited) and September 30, 2000                       3
       Consolidated Statements of Operations -
       Three and Six Months ended March 31, 2001 and 2000 (unaudited)          4
       Consolidated Statement of Stockholders' Equity
       Six Months ended March 31, 2001 (unaudited)                             5
       Consolidated Statements of Cash Flows -
       Six Months ended March 31, 2001 and 2000 (unaudited)                    6
       Notes to Consolidated Financial Statements (unaudited)                  7
 2.    Management's Discussion and Analysis of Financial Condition
       and Results of Operations                                              11
 3.    Quantitative and Qualitative Disclosures About Market Risk             20

                      PART II - OTHER INFORMATION

 1.    Legal Proceedings                                                      21
 2.    Changes In Securities                                                  21
 3.    Defaults Upon Senior Securities                                        21
 4.    Submission of Matters to a Vote of Security Holders                    22
 5.    Other Information                                                      22
 6.    Exhibits and Reports on Form 8-K                                       22

 SIGNATURE                                                                    23
 EXHIBITS                                                                     24


<PAGE>



PART I   FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>


               SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARIES
----------------------------------------------------------------------------------------------------------
                           CONSOLIDATED BALANCE SHEETS
                         (In thousands except par value)

                                   Assets
                                   ------
                                                                     March 31, 2001       September 30,
                                                                        (Unaudited)            2000
                                                                     -----------------   -----------------
Current Assets
<S>                                                                      <C>                <C>
   Cash and cash equivalents                                             $ 2,428            $ 1,039
   Accounts receivable (net of allowance for doubtful accounts of
     $687 at March 31, 2001 and $133 at September 30, 2000)                6,674              9,802
   Inventories                                                               123                404
   Notes receivable                                                          118                 --
   Due from affiliate                                                        750                 --
   Other current assets                                                      609                241
----------------------------------------------------------------------------------------------------------
      Total Current Assets                                                10,702             11,486
Property And Equipment, net                                                3,356              3,298
Goodwill, net                                                              2,271
Other Assets                                                                 806                846
----------------------------------------------------------------------------------------------------------
Total Assets                                                             $17,135            $15,630
==========================================================================================================

                    Liabilities and Stockholders' Equity
                    ------------------------------------
Current Liabilities
   Current maturities of long-term debt                                  $   981            $   279
   Accounts payable and accrued expenses                                   4,550              5,144
----------------------------------------------------------------------------------------------------------
      Total Current Liabilities                                            5,531              5,423
Long-Term Debt                                                             2,726                999
----------------------------------------------------------------------------------------------------------
      Total Liabilities                                                    8,257              6,422
----------------------------------------------------------------------------------------------------------
Commitments And Contingencies
                                                                            -                   -
Stockholders' Equity
   Preferred shares:
    Authorized 5,000 shares at March 31, 2001 and 1,000 shares at
    September 30, 2000; none issued                                         -                   -
   Common shares:
    Authorized 80,000 shares at March 31, 2001 and 40,000 shares at
    September 30, 2000, of $.01 par value; 5,757 shares issued at
    March 31, 2001 and 5,555 shares issued at September 30, 2000              58                 56
    Additional paid-in capital                                             6,627              6,502
    Retained earnings                                                      3,111              3,562
    Treasury stock (carried at cost)                                       (918)               (912)
----------------------------------------------------------------------------------------------------------
      Total Stockholders' Equity                                           8,878              9,208
----------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                               $17,135            $15,630
==========================================================================================================

</TABLE>

--------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.               3

<PAGE>


               SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                      For The Three Months            For The Six Months
                                                        Ended March 31,                Ended March 31,
                                                -------------------------------- -----------------------------
                                                       2001           2000            2001           2000
                                                       ----           ----            ----           ----
<S>                                                   <C>            <C>            <C>            <C>
Product revenue                                       $8,380         $9,338         $15,263        $21,063
Service revenue                                          860              -           1,406              -
--------------------------------------------------------------------------------------------------------------
Total revenue                                          9,240          9,338          16,669         21,063
--------------------------------------------------------------------------------------------------------------
Product cost of goods sold                             7,145          8,025          12,793         18,468
Service costs of goods sold                              429              -             549              -
--------------------------------------------------------------------------------------------------------------
Cost of product and services sold                      7,574          8,025          13,342         18,468
--------------------------------------------------------------------------------------------------------------
Gross profit                                           1,666          1,313           3,327          2,595
Selling, general and administrative expenses           1,555          1,773           3,507          3,932
Depreciation and amortization                            152             75             247            150
Other income                                             (19)           (73)            (46)           (73)
Interest expense                                          88             34             123             80
--------------------------------------------------------------------------------------------------------------
Loss before benefit for income taxes                    (110)          (496)           (504)        (1,494)
Benefit for income taxes                                 (10)           (26)            (53)          (276)
--------------------------------------------------------------------------------------------------------------
Net loss available to common stockholders             $ (100)        $ (470)        $  (451)       $ (1,218)
==============================================================================================================
Net loss per common share - basic                     $(0.02)        $(0.10)        $ (0.09)       $ (0.26)
==============================================================================================================
Net loss per common share - diluted                   $(0.02)        $(0.10)        $ (0.09)       $ (0.26)
==============================================================================================================
Weighted average number of common
  shares outstanding - basic                           4,696          4,683           4,784          4,712
==============================================================================================================
Weighted average number of common
  shares outstanding - diluted                         4,696          4,683           4,784          4,712
==============================================================================================================

</TABLE>



--------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.               4
<PAGE>


               SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                     For the Six Months Ended March 31, 2001
                                 (In Thousands)
                                   (Unaudited)



<TABLE>
<CAPTION>

                                  Preferred Stock   Common Stock    Additional                                   Total
                                  ---------------  ---------------    Paid-In   Retained    Treasury Stock    Stockholders'
                                  Number   Amount  Number   Amount    Capital   Earnings   Number     Amount    Equity
                                  ---------------  ---------------  ----------  --------  ------------------  ------------
<S>                                 <C>    <C>     <C>      <C>       <C>        <C>       <C>     <C>            <C>
Balance, September 30, 2000          -     $  -    5,555    $  56     $ 6,502    $ 3,562   (852)   $  (912)       $  9,208
  Net loss                                                                          (451)                            (451)
  Sale of common stock                               202        2         125                                         127
  Purchase of treasury shares                                                                (9)        (6)            (6)
--------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2001              -     $  -    5,757    $  58     $ 6,627    $ 3,111   (861)   $  (918)       $  8,878
==========================================================================================================================

</TABLE>




--------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.               5
<PAGE>

               SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                            For The Six Months
                                                                                             Ended March 31,
                                                                                     -------------------------------
                                                                                             2001         2000
                                                                                             ----         ----
<S>                                                                                         <C>         <C>
Cash flows from operating activities
    Net loss                                                                                $ (451)     $(1,218)
    Adjustments to reconcile net loss to cash provided by operating activities
       Depreciation and amortization                                                           247          150
       Deferred tax benefit                                                                   (125)            -
       Change in assets and liabilities:
           Decrease in accounts receivable                                                   7,227        4,054
           Decrease in inventories                                                             703          403
           (Increase) decrease in other current assets                                         (34)         491
           (Increase) decrease in other assets                                                  22         (134)
           Decrease in accounts payable and accrued expenses                                (2,547)      (3,070)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                    5,042          676
--------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
    Payments for costs of business acquisitions                                             (1,966)           -
    Payments for property and equipment                                                        (71)        (225)
--------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                       (2,037)        (225)
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
    Net amounts paid on notes payable                                                       (1,514)           -
    Payments on long-term debt                                                                (223)         (50)
    Sale of common stock                                                                       127           23
    Purchase of treasury stock                                                                  (6)         (57)
--------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities                                                       (1,616)         (84)
--------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents                                                    1,389          367
Cash and cash equivalents - beginning of period                                              1,039        2,263
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period                                                  $ 2,428      $ 2,630
====================================================================================================================
Supplemental Disclosures of Cash Flow Information
    Cash paid (received) during period for:
    Interest                                                                               $    61      $    80
    Income taxes                                                                                19            6

Supplemental Schedules of Noncash Financing Activities
    Acquisition of business:
       Notes payable issued for acquisition                                                $ 2,652            -
</TABLE>



--------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.               6
<PAGE>


               SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      (In thousands, except per share data)
                                   (Unaudited)
--------------------------------------------------------------------------------

1.   Basis of Presentation

     The accompanying  unaudited  consolidated  financial  statements of SysComm
International Corporation (the "Company") as of March 31, 2001 and September 30,
2000 and for the three and six months  ended  March 31,  2001 and 2000 have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation S-X under the Securities Exchange Act of 1934.  Accordingly,  they do
not include all of the information and footnotes  required by generally accepted
accounting principles for complete financial  statements.  In the opinion of the
Company's  management,  all  adjustments  (consisting  of only normal  recurring
adjustments)  considered necessary to present fairly the consolidated  financial
statements have been made.

     The consolidated statement of operations for the six months ended March 31,
2001 is not  necessarily  indicative of the results that may be expected for the
entire  year.  These   statements   should  be  read  in  conjunction  with  the
consolidated  financial  statements  and related notes  thereto  included in our
Annual Report on Form 10-K for the year ended September 30, 2000.

2.   Principles of Consolidation

     The financial statements include the accounts of the Company and its wholly
owned subsidiaries.  All significant intercompany accounts and transactions have
been eliminated in consolidation.

3.   Inventory

     Inventory at March 31, 2001 and September 30, 2000 consists of:

                                                    March 31,    September 30,
                                                      2001            2000
                                                   ----------    -------------
     Finished goods                                  $  305         $  654
     Allowance for excess and obsolescence             (182)          (250)
                                                   ----------    -------------
                                                     $  123         $  404
                                                   ==========    =============

                                       7
<PAGE>


4.   Loss Per Share

     The following is a reconciliation of the numerator and denominator of basic
and diluted loss per share:

<TABLE>
<CAPTION>
                                                      Three Months Ended           Six Months Ended
                                                           March 31,                   March 31,
                                                   ----------------------------------------------------
                                                       2001         2000          2001          2000
                                                       ----         ----          ----          ----
<S>                                                 <C>          <C>           <C>          <C>
Numerator:
Net loss available to common stockholders           $   (100)    $  (470)      $   (451)    $  (1,218)
                                                   ====================================================
Denominator:
Denominator for basic loss per share -
Weighted-average shares                                4,696       4,683          4,784         4,712
                                                   ====================================================
Denominator for diluted loss per share(1)              4,696       4,683          4,784         4,712
                                                   ====================================================
Basic loss per share                                $  (0.02)    $ (0.10)      $  (0.09)    $   (0.26)
                                                   ====================================================
Diluted loss per share                              $  (0.02)    $ (0.10)      $  (0.09)    $   (0.26)
                                                   ====================================================
-------------
<FN>

(1)  The  weighted  average  shares of the  employee  stock  options,  63 and 55
     respectively for the three months and six months ended March 31, 2001, were
     not included in the  computation of diluted loss per share because to do so
     would have been anti-dilutive for the periods presented.
</FN>
</TABLE>

5.   Mergers and Acquisitions

     The  following  represents  acquisitions  which  occurred  in the first six
months of fiscal 2001:
<TABLE>
<CAPTION>

                                       Date of      Percent   Acquisition        Cash                             Business
                                     Acquisition    Acquired     Price      Consideration    Notes Issued       Description
------------------------------------------------------------------------------------------------------------------------------

First Quarter 2001 Acquisitions
-------------------------------

<S>                                   <C>             <C>        <C>            <C>             <C>            <C>
Information Products                  12/01/2000      100%       $4,550         $1,899          $2,652            Systems
Center, Inc.,                                                                                                  integrator and
Fairfield, NJ                                                                                                    networking
                                                                                                                 solutions
                                                                                                                  provider
</TABLE>

     On  December  14,  2000,  we  acquired   fifty-one  percent  (51%)  of  the
outstanding shares of common stock of Information  Products Center,  Inc., a New
Jersey  corporation  ("Information  Products"),  from Applied Digital Solutions,
Inc.  ("ADSX").  The purchase price for the shares of  Information  Products was
$2,075,  payable  $1,821 in cash and $254 by  promissory  note.  On December 15,
2000, we acquired the  remaining  forty-nine  percent  (49%) of the  outstanding
shares of common stock of Information Products for approximately $2,400, payable
by promissory  note. The purchase price of Information  Products was assigned to
the assets  acquired and the  liabilities  assumed based on their estimated fair
values at the acquisition date, which approximated their book values,  using the
purchase  method of  accounting.  Based  upon such  allocations,  the  aggregate
purchase  price  exceeded the  estimated  fair value of the net assets  acquired


                                       8
<PAGE>

resulting in goodwill of approximately  $2,339 in value which is being amortized
on a straight-line basis over 10 years.

     Unaudited pro forma  results of  operations  for the six months ended March
31, 2001 and 2000 are included below.  Such pro forma  information  assumes that
the above transaction occurred as of October 1, 2000 and 1999, respectively.

                                                    ----------------------------
                                                          Six Months Ended
                                                             March 31,
                                                    ----------------------------
                                                        2001            2000
                                                        ----            ----
Revenues                                             $22,403         $30,298
Net loss                                             $  (397)        $  (962)
Loss per common share - basic                        $ (0.08)        $ (0.20)
Loss per common share - diluted                      $ (0.08)        $ (0.20)

6.   Change in Control

     On December 14, 2000,  ADSX  acquired  approximately  55% of our issued and
outstanding  common  shares,  resulting  in a change in control of the  Company.
Shares of our common stock were sold to ADSX by the following persons and in the
following amounts:

Selling Shareholders                Number of Shares Held    Percent Ownership
--------------------------------- ------------------------- -------------------
John H. Spielberger                        1,920,000                41%
Catherine Spielberger                         50,000                 1%
Bearpen Limited Partnership                  600,000                13%
--------------------------------- ------------------------- -------------------
       Total                               2,570,000                55%
================================= ========================= ===================

     ADSX  acquired  the  shares  listed  above  for  $4.5  million  by  issuing
approximately  1.7 million shares of its common stock,  valued at  approximately
$2.75 million,  to the selling  shareholders listed above and upon payment of an
aggregate  amount of cash equal to  approximately  $1.75  million to the selling
shareholders listed above.

     As a condition to the closing of the transaction, John H. Spielberger, John
C.  Spielberger,  Lee Adams and  Cornelia  Eldridge  resigned  as  officers  and
directors  of the  Company.  Garrett  A.  Sullivan,  David A.  Loppert  and Anat
Ebenstein were appointed to fill the vacancies on the board of directors created
by such  resignations,  and the  following  persons  become the  officers of the
Company:

David A. Loppert           Chief Executive Officer, Assistant Secretary and
                                Assistant Treasurer
Anat Ebenstein             President, Chief Operating Officer
Michael Krawitz            Vice President, Secretary
J. Robert Patterson        Vice President, Chief Financial Officer and Treasurer
John C. Spielberger        Vice President, Sales and Marketing



                                       9
<PAGE>


7.   De-Listing From Nasdaq Small Cap Market

     On September 5, 2000, we received a notice that NASDAQ  intended to de-list
our stock from trading on the NASDAQ  SmallCap  Market,  where it had previously
been listed,  because we had not maintained a minimum bid price for our stock of
$1.00 over the prior 30  consecutive  trading days. The matter was considered by
the NASDAQ Listing  Qualifications  Panel at a hearing on December 14, 2000. The
Panel was  unwilling to grant us an extension of time to satisfy the minimum bid
requirement,  and the delisting  became effective on January 9, 2001. Our Common
Stock is now traded on the OTC Bulletin Board.



                                       10
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     This  discussion  should  be  read in  conjunction  with  the  accompanying
consolidated  financial statements and related notes in Item 1 of this report as
well as our Annual  Report on Form 10-K for the year ended  September  30, 2000.
Certain statements made in this report may contain  forward-looking  statements.
For a description of risks and  uncertainties  relating to such  forward-looking
statements, see the Risk Factors sections later in this Item.

BUSINESS DESCRIPTION

     We are a  Delaware  corporation  incorporated  in  1987.  In the  past,  we
conducted  business through our wholly owned subsidiary  Information  Technology
Services,  Inc. ("InfoTech").  On December 14, 2000, Applied Digital Solutions ,
Inc. ("ADSX") acquired a majority interest in us and simultaneously we purchased
Information Products Center, Inc. ("Information  Products") from ADSX. The union
of these two  organizations  created  the  "new"  InfoTech,  a  leading  network
consulting company specializing in the design,  implementation,  and maintenance
of complex network solutions.  Through our newly defined "GO2 Service Strategy",
we transform our customers'  strategic business objectives into sound technology
solutions.  As a market driven Information Technology ("IT") solutions provider,
we deliver best of breed service and customer care in our marketplace.

     We   strive  to   partner   with  our   customers   to   consistently   and
cost-effectively  plan, execute and deliver  high-quality  services and results.
Our  consultants  are  seasoned  professionals  who  build  long-term,   trusted
relationships and bring a high level of energy, integrity,  experience and value
to the customers whom they serve.  Our established  partnerships/alliances  with
other  leading  technology  providers  enables  us to  remain  objective  in our
selection of the most appropriate  hardware,  software and services  required to
meet the business technology needs of our customers.

     The services we offer are characterized by standardized offerings that have
clearly  defined  deliverables  and pricing  models.  All of these  services are
implemented using a standard methodology, and are delivered with the utmost care
through our GO2 Service  Strategy.  With  flexibility as a driving  force,  this
model allows us to provide our customers  with services  specific to their needs
and budget.

     Our services include:

     o   Network Infrastructure Engineering
     o   Communications
     o   Information Security
     o   Systems Computing
     o   Storage Area Networks (SANDS Solutions)
     o   Messaging
     o   Wireless
     o   Procurement Services

     We are continually  developing  strategic  alliances and partnerships  with
leading technology companies such as Cisco, Microsoft, IBM, Compaq, EMC, McData,
CheckPoint,   Citrix  and  Hewlett  Packard.   These  partnerships   insure  the
appropriate solutions and responsive support needed by our customers.


                                       11
<PAGE>

GO2 Service Strategy:

     Our GO2 Service  Strategy is simple:  we are the one customers "go to" when
they need complete, integrated solutions and high-end services. We have made the
affirmative decision to strive to be the GO2 partner of our entire customer base
and alliance-partners.

     The GO2 Service Strategy is broken down into four component parts:  Design,
Deployment,  Maintenance and  Supplemental  Services.  Through these services we
deliver a total solution for our customers.

Change in Control

     As described above under Note 6 - Change in Control,  on December 14, 2000,
ADSX acquired  approximately  55% of our issued and  outstanding  common shares,
resulting in a change in control of the Company.

Acquisition of Assets

     On December 14, 2000, we acquired from ADSX fifty-one  percent (51%) of the
outstanding shares of common stock of Information  Products.  The purchase price
for the shares of  Information  Products was $2,075,  payable $1,821 in cash and
$254 million by promissory note.

     On December 15, 2000, we acquired the remaining forty-nine percent (49%) of
the  outstanding  shares of common stock of Information  Products.  The purchase
price for the shares of Information Products was approximately  $2,400,  payable
by promissory note.

De-Listing From Nasdaq Small Cap Market

     On September 5, 2000, we received a notice that NASDAQ  intended to de-list
our stock from trading on the NASDAQ  SmallCap  Market,  where it had previously
been listed,  because we had not maintained a minimum bid price for our stock of
$1.00 over the prior 30  consecutive  trading days. The matter was considered by
the NASDAQ Listing  Qualifications  Panel at a hearing on December 14, 2000. The
Panel was  unwilling to grant us an extension of time to satisfy the minimum bid
requirement,  and the delisting  became effective on January 9, 2001. Our Common
Stock is now traded on the OTC Bulletin Board.

RESULTS OF OPERATIONS

     We operate in a highly competitive industry,  which in turn places constant
pressures on maintaining gross profit margins. Many of our sales are high volume
equipment sales, which produce lower than average gross profit margins,  but are
often  accompanied  by a service  arrangement  which yields  higher than average
gross profit margins.


                                       12
<PAGE>


     The following table sets forth, for the periods  indicated,  the percentage
relationship to total revenue of certain items in our consolidated statements of
operations.

<TABLE>
<CAPTION>

                                                                           Relationship to Revenue
                                                          ----------------------------------------------------------
                                                               Three Months Ended            Six Months Ended
                                                                   March 31,                    March 31,
                                                          ----------------------------------------------------------
                                                                2001          2000          2001           2000
                                                                ----          ----          ----           ----
                                                                  %             %             %              %
                                                                ----          ----          ----           ----
                                                                   -             -             -              -
<S>                                                             <C>          <C>            <C>           <C>
Product revenue                                                 91.0         100.0          91.7          100.0
Service revenue                                                  9.0             -           8.3              -
                                                          ----------------------------------------------------------
   Total revenue                                               100.0         100.0         100.0          100.0
                                                          ----------------------------------------------------------
Product cost of goods sold                                      85.3          85.9          83.8           87.7
Service costs                                                   49.9             -          39.0              -
                                                          ----------------------------------------------------------
   Total cost of goods sold                                     82.0          85.9          80.0           87.7
                                                          ----------------------------------------------------------
Gross profit                                                    18.0          14.1          20.0           12.3
Selling, general and administrative expenses                    16.8          19.0          21.1           18.6
Depreciation and amortization                                    1.6           0.8           1.5            0.7
Other income                                                    (0.2)         (0.8)         (0.3)          (0.3)
Interest expense                                                 1.0           0.4           0.7            0.4
                                                          ----------------------------------------------------------
Loss before benefit for income taxes                            (1.2)         (5.3)         (3.0)          (7.1)
Benefit for income taxes                                        (0.1)         (0.3)         (0.3)          (1.3)
                                                          ----------------------------------------------------------
Net loss available to common stockholders                       (1.1)         (5.0)         (2.7)          (5.8)
                                                          ==========================================================
</TABLE>

Three Months  Ended March 31, 2001  Compared to the Three Months Ended March 31,
2000 (in $'000 unless otherwise noted)

     Revenue for the second quarter of 2001 decreased  approximately $98 or 1.0%
to $9,340 from  $9,338 for the second  quarter of 2000.  The slight  decrease in
revenue was a result of lower product sales which declined by $958, or 10.3%, to
$8,380 from $9,338, offset by increased service revenue of $860 from Information
Products, acquired in December 2000.

     Gross profit was $1,666 for the quarter  ended March 31, 2001,  an increase
of $353,  or 26.9%,  compared to $1,313 in the second  quarter of 2000.  Product
gross profit  percentage  was 14.7% in 2001  compared to 14.1% in 2000.  Service
gross profit  percentage was 50.1% in the second  quarter of 2001.  There was no
service revenue in the second quarter of 2000. Total gross profit percentage was
18.0% in the second  quarter of 2001 compared to 14.1% in the second  quarter of
2000. The increase in the gross profit and the gross profit percentage,  despite
relatively flat revenue, was primarily attributable to the higher margin service
revenue contributed by Information  Products.  Information Products services and
hardware   business   historically   produces  a  higher  margin  than  we  have
historically experienced.

     Selling,  general and  administrative  expenses were $1,555 for the quarter
ended March 31, 2001, down $218, or 12.3%, from the $1,773 reported for the same
period last year.  The  reduction  in expense was  primarily  due to layoffs and
other cost control  programs,  reduced  commissions  on lower  sales,  and staff
reductions  associated with redirecting marketing efforts implemented in the 4th
quarter of 2000.  This was offset by additional SG&A from  Information  Products
included in the current quarter's SG&A.

     Depreciation and amortization  expense for the current quarter was $152, an
increase of $77 or 102.7% over the $75 for the quarter ended March 31, 2000. The
increase was primarily due to the  amortization of goodwill  associated with the


                                       13
<PAGE>

acquisition of Information  Products in December 2000, as well as the additional
depreciation expense from Information Products.

     Other income for the second quarter was $19 in 2001, down $54, or 74%, from
the $73 in the second  quarter of 2000.  The decrease was  primarily a result of
$50 in miscellaneous  credits that were booked in 2000. Interest expense was $88
in 2001 compared to $34 in 2000, an increase of $54, or 158.8%.  The increase in
interest  expense was primarily due to the debt  associated with the acquisition
of Information Products.

     Loss before income taxes for the quarter decreased $386 or 77.8% to $110 in
2001 compared to $496 in 2000.  The reduction in the loss before income taxes is
attributable  to a  higher  gross  profit  coupled  with the  reduction  in SG&A
expense.  Our  effective  tax rate was a negative 9.1% in fiscal year 2001 and a
negative 5.2% in fiscal year 2000.

     Our net loss for the quarter  ended March 31, 2001  decreased  to $100 from
$470 for the same period last year,  due to higher gross profit coupled with the
reduction in SG&A expense.


Six Months Ended March 31, 2001  Compared to the Six Months Ended March 31, 2000
(in $'000 unless otherwise noted)

     Sales for the six  months  ended  March 31,  2001  decreased  approximately
$4,394,  or 20.9%,  to $16,669 from  $21,063 for the same period last year.  The
decrease  in revenue  was a result of lower  product  sales  which  declined  by
$5,800,  or 27.5%, to $15,263 from $21,063,  offset by increased service revenue
of $1,406 from  Information  Products,  acquired in December 2000.  There was no
service  revenue in the six months ended March 31, 2000. The decrease in product
sales was a result of the pending  change in control of the Company in the first
quarter  and the  reduction  in sales staff  resulting  in  substantially  lower
revenue  during the first  quarter of 2001.  This was  somewhat  offset by the 4
months of incremental sales contributed by Information Products.

     Gross  profit  was  $3,327  for the six months  ended  March 31,  2001,  an
increase  of $732,  or 28.2%,  compared to $2,595 for the same period last year.
Product  gross profit  percentage  was 16.2% in 2001  compared to 12.3% in 2000.
Service  gross  profit  percentage  was 61.0% in the six months  ended March 31,
2001. There was no service revenue in the six month period ended March 31, 2000.
Total gross profit  percentage was 20.0% in the six month period ended March 31,
2001 compared to 12.3% in the same period in 2000. The  substantial  increase in
the gross profit and the gross profit  percentage,  despite lower  revenue,  was
primarily  attributable to the  acquisition of Information  Products in December
2000.   Information   Products   product  and  services   business   produced  a
significantly  higher margin during the period than the Company has historically
experienced.

     Selling, general and administrative expenses for the six months ended March
31, 2001 were $3,507,  down $425 or 10.8% from the $3,932  reported for the same
period last year.  The reduction in expense is primarily due to layoff and other
cost control programs,  reduced  commissions on lower sales and staff reductions
associated with redirecting  marketing efforts implemented in the 4th quarter of
2000.  This was  somewhat  offset by the 4 months of  additional  SG&A  costs of
Information  Products  Center,  acquired in December 2000, that were included in
the period.

     Depreciation and amortization  expense was $247 for the period, an increase
if $97 or 64.7%  over the $150 for the six  months  ended  March 31,  2000.  The
increase was primarily due to the  amortization of goodwill  associated with the
acquisition  of  Information  Products  in  December  2000,  and the  additional
depreciation expense from Information Products.

                                       14
<PAGE>

     Other income was $46 for the six months ended March 31, 2001,  down $27, or
40.0%,  from $73 the same period last year.  The decrease was primarily a result
of $50 in  miscellaneous  credits that were booked in the six months ended 2000.
Interest expense was $123 in 2001 compared to $80 in 2000, an increase of $43 or
53.8%. The increase in interest expense was primarily due to the debt associated
with the acquisition of Information Products.

     Loss before income taxes for the six months ended March 31, 2001  decreased
$990, or 66.3%,  to $504  compared to $1,494 in 2000.  The reduction in the loss
before income taxes is attributable  to a substantially  higher gross profit and
slightly  reduced  SG&A.  This was somewhat  offset by higher  depreciation  and
amortization  expense, and higher interest expense. Our effective tax rate was a
negative 10.5% in fiscal year 2001 and a negative 18.5% in fiscal year 2000.

     Our net loss for the six months ended March 31, 2001 decreased to $451 from
$1,218 in the same period last year due to  substantially  higher  gross  profit
coupled with the reduction in SG&A expense.

Liquidity and Capital Resources

     Our current  ratios at March 31, 2001 and  September  30, 2000 were 1.9 and
2.1,  respectively.  Working capital at March 31, 2001 was $5,171, a decrease of
$892 from the $6,063 at September 30, 2000.

     Cash  provided by operating  activities in the first six months of 2001 was
$5,042  compared to $676 of cash  provided by operating  activities in the first
six months of 2000.  The cash provided by operating  activities  during 2001 and
2000 was as a result of significant reductions in accounts receivable, inventory
and  recoverable  taxes,  offset by a reduction in accounts  payable and the net
loss.

     Cash used in  investing  activities  was  $2,037 and $225 in 2001 and 2000,
respectively,  and was used  primarily  to acquire our  interest in  Information
Products in the first  quarter of 2001 and to finance  capital  expenditures  in
both 2001 and 2000.

     Net cash used in financing  activities was $1,616 and $84 in 2001 and 2000,
respectively.  The net  cash  used  in 2001  was  primarily  due to  Information
Products  paying  down its line of  credit  with  ADSX.  Other  net cash used in
financing in 2001 and 2000 were for payments on notes payable and long-term debt
and the re-purchase of our common stock.

     Under  our  financing  arrangement  with  IBM  Credit  Corporation,  as  of
September  30, 2000,  we were able to borrow up to 85% of our eligible  accounts
receivable and 100% of our eligible  inventory,  up to a maximum of $22,500,000.
As of September 30, 2000, we had no borrowings  outstanding under the IBM Credit
Corporation facility. As a result of ADSX having acquired a majority interest in
us,  we  cancelled  our  credit  agreement  with  IBM  Credit   Corporation  and
established a line of credit with ADSX,  which has its own credit  facility with
IBM  Credit  Corporation.  Borrowings  from  ADSX  will  be on  such  terms  and
conditions as it may reasonably make available to us from time to time.

     Advances  under our  Agreement  for  Wholesale  Financing  from IBM  Credit
Corporation totaling $1,410 and $4,411 are included in accounts payable at March
31, 2001 and  September  30,  2000,  respectively,  and were offset  against the
maximum credit available at that time from IBM Credit Corporation.

     We believe that our present  financing  provided by ADSX and our  projected
earnings  capacity  will  be  sufficient  to fund  our  operations  and  capital
expenditures for at least the next 12 months.

                                       15
<PAGE>

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK

     Certain statements in this Report, constitute "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933,  Section 21E of
the Securities Exchange Act of 1934 and the Private Securities Litigation Reform
Act of 1995.  We intend that such  forward-looking  statements be subject to the
safe harbors created thereby. Such forward-looking  statements involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause our  actual
results,  performance or achievements to be materially different from any future
results,   performance   or   achievements   expressed   or   implied   by  such
forward-looking  statements.  Such factors include, among others, the following:
our continued  ability to sustain our growth  through  product  development  and
future  business  acquisitions;  the successful  completion  and  integration of
future acquisitions; the ability to hire and retain key personnel; the continued
development of our  technical,  manufacturing,  sales,  marketing and management
capabilities;  relationships  with  and  dependence  on  third-party  suppliers;
anticipated competition;  uncertainties relating to economic conditions where we
operate;   uncertainties   relating  to  government  and  regulatory   policies;
uncertainties  relating to customer plans and commitments;  rapid  technological
developments and obsolescence in the industries in which we operate and compete;
potential  performance issues with suppliers and customers;  governmental export
and import policies;  global trade policies;  worldwide  political stability and
economic  growth;  the  highly  competitive  environment  in which  we  operate;
potential  entry of new,  well-capitalized  competitors  into our  markets;  and
changes in our  capital  structure  and cost of  capital.  The words  "believe",
"expect",  "anticipate",  "intend" and "plan" and similar  expressions  identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements,  which speak only as of the date the statement
was made.

RISK FACTORS

     In  addition  to the other  information  contained  herein,  the  following
factors should be considered in evaluating  our Company and our business.  These
risks and uncertainties  include,  but are not limited to those set forth herein
and the risk factors  described in our Prospectus  dated June 17, 1997, and from
time to time in our other filings with the Securities and Exchange Commission.

Uncertainty of Future Financial Results

     We have incurred  operating losses for each of the last three fiscal years,
and our future financial  results are uncertain.  There can be no assurance that
we will return to  profitability,  and we may  continue to operate at a loss for
the foreseeable future.  Profitability depends upon many factors,  including the
success of our various  marketing  programs,  the  maintenance  or  reduction of
expense  levels and our ability to  successfully  coordinate  the efforts of the
different divisions of our business.

Significant Fluctuations in Quarterly Results

     Our  quarterly  operating  results  have  fluctuated  in the  past  and may
continue to do so in the future.  Quarterly operating results may fluctuate as a
result of a  variety  of  factors,  including  the  timing  of our  delivery  of
significant  orders,  the  ability  of  manufacturers  to  deliver,  in a timely
fashion,  products for which we have  received  orders,  the length of the sales
cycle,  receipt of volume  discounts,  the demand for  products  and services we
offer, the introduction or announcements by IBM and other manufacturers relating
to new  products,  the hiring and training of additional  personnel,  as well as
general business conditions.

     Historically,  the size and timing of our sales  transactions  have  varied
substantially from quarter to quarter, and we expect such variations to continue
in future  periods,  including the  possibility  of losses in one or more fiscal
quarters.  The fluctuations may be caused by delays in shipping certain computer

                                       16
<PAGE>

systems orders that we expect to deliver during that quarter.  In addition,  our
collection  periods have fluctuated due to periodic  unavailability  of product,
which  resulted in delayed  payment  from certain  customers  until their entire
orders were shipped. Accordingly, it is likely that in one or more future fiscal
quarters,  our operating  results may be below the expectations of public market
analysts and investors.  As a result, the market price of our Common Stock could
be materially adversely affected.

Principal Markets and Customers

     Since 1994, we have sold and delivered computer systems,  network products,
software,  maintenance  and system  support  services to more than 800 customers
throughout the United States and in more than 20 countries worldwide.  In fiscal
years 1998, 1999 and 2000, our top customer  accounted for  approximately  6.8%,
8.6% and 25.0%,  respectively,  of our total revenues.  In fiscal year 1999, our
top five  customers (3 of which were new) accounted for  approximately  24.7% of
total revenues. In fiscal year 2000, our top five customers (1 of which was new)
accounted for approximately 48.0% of total revenues.

     In the fiscal year ended  September  30, 2000,  approximately  10.9% of our
sales of computer  systems  were to  customers  in the  banking,  financial  and
securities  industry based in the  Northeastern  United States.  Although we are
striving to broaden our market focus to include sales to other markets,  such as
educational   institutions,   government  agencies,   healthcare  and  insurance
companies,  in the immediate  future we expect that we will continue to derive a
substantial  percentage  of our sales of  computer  systems  from such  banking,
financial  and  securities   businesses.   Accordingly,   unfavorable   economic
conditions  or factors that relate to these  industries,  particularly  any such
conditions that might result in reductions in capital expenditures or changes in
such  companies'  information  processing  system  requirements,  could  have  a
material adverse affect on our results of operations.

     For the last three  fiscal  years,  1998,  1999,  and 2000,  a  significant
portion (21%, 25% and 48%, respectively) of our revenues were derived from sales
to five principal  customers,  which customers  varied  annually,  and encompass
markets where the demands of any one customer may vary greatly. In addition,  we
do not have any  exclusive  long-term  arrangements  with our  customers for the
continued  sales of computer  systems.  The number of customers who purchased at
least  $250,000 of computer  systems from us decreased  from 67 in 1999 to 29 in
2000. Our failure to acquire a significant or principal  customer or to maintain
its relationship could have a material adverse effect on our operations.

Goodwill write-off's will reduce our earnings

     As a result of the December 2000  acquisition of Information  Products,  we
have approximately $2,400 of goodwill,  which will be amortized over 10 years at
the rate of  approximately  $240 per year,  which reduces our net income and our
earnings  per share.  In addition,  future  acquisitions  may also  increase our
existing  goodwill and the amount of annual  amortization,  further reducing net
income and earnings per share. As required by Statement of Financial  Accounting
Standards No. 121, we will periodically review our goodwill for impairment based
on expected future cash flows. If we determine that there is such impairment, we
would be required to write down the amount of goodwill accordingly,  which would
also reduce our earnings.

Need for Additional Capital

     We may  require  additional  capital  to fund  the  growth  of our  current
business as well as to make future acquisitions.  However, we may not be able to
obtain  capital from  outside  sources.  Even if we obtain  capital from outside
sources,  it may not be on terms favorable to us. Our current credit arrangement
with ADSX may hinder our  ability to raise  additional  debt or  capital.  If we

                                       17
<PAGE>

raise additional capital by issuing equity securities, these securities may have
rights, preferences or privileges senior to those of our common stockholders.

Dependence on Key Individuals

     Our future  success is highly  dependent  upon our  ability to attract  and
retain qualified key employees.  We are organized with a small senior management
team, with each of our separate operations under the day-to-day control of local
managers.  If we  were  to lose  the  services  of any  members  of our  central
management  team, our overall  operations could be adversely  affected,  and the
operations of any of our individual  facilities  could be adversely  affected if
the services of the local managers should be unavailable.

Control by Principal Stockholder

     Applied Digital  Solutions  acquired  approximately  55% of our outstanding
common stock in December 2000 and now has effective  control of us and the power
to control the outcome of matters submitted to a vote of the stockholders,  such
as the  election of at least a majority of the members of our Board of Directors
and to direct our future  operations.  Such concentration may have the effect of
discouraging, delaying or preventing a future change in control of the Company.

Anti-Takeover Provisions

     Certain   provisions   of  our  Amended   and   Restated   Certificate   of
Incorporation,  Amended and  Restated  By-laws and Delaware law may be deemed to
have an anti-takeover effect. Our certificate of incorporation provides that our
Board of Directors may issue additional  shares of Common Stock or establish one
or more classes or series of Preferred  Stock with such  designations,  relative
voting rights,  dividend rates,  liquidation  and other rights,  preferences and
limitations  that the Board of Directors  fixes  without  stockholder  approval.
Moreover, our certificate of incorporation and by-laws provide that our Board of
Directors  is divided into three  classes  serving  staggered  three year terms,
resulting in  approximately  one-third of the directors  being elected each year
and also contain certain other provisions  relating to voting and the removal of
the officers and  directors.  In addition,  we are subject to the  anti-takeover
provisions of Section 203 of the Delaware  General  Corporation Law. In general,
the statute  prohibits a publicly held Delaware  corporation  from engaging in a
"business  combination"  with an "interested  stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
Each  of the  foregoing  provisions  may  have  the  effect  of  rendering  more
difficult,  delaying,  discouraging,  preventing  or  rendering  more  costly an
acquisition of the Company or a change in control of the Company.

Risks that the value of our inventory may decline

     We  sometimes  purchase and  warehouse  inventory.  As a result,  we assume
inventory  risks and price  erosion  risks for these  products.  These risks are
especially  significant because computer equipment generally is characterized by
rapid technological change and obsolescence. These changes affect the market for
excess  inventory  equipment.  Our success,  when we warehouse  inventory,  will
depend on our ability to purchase such inventory at attractive  prices  relative
to its resale value and our ability to turn our inventory rapidly through sales.
If we pay too much or hold  inventory  too  long,  we may be  forced to sell our
inventory  at a discount or at a loss or write down its value,  and our business
could be materially adversely affected.


                                       18
<PAGE>


Lack of Dividends on Common Stock; Issuance of Preferred Stock

     We do not have a history of paying dividends on our common stock, and there
can be no assurance that such dividends will be paid in the foreseeable  future.
Pursuant to certain  restrictions  under  ADSX's  financing  agreement  with IBM
Credit  Corporation,  there are  restrictions  on our ability to declare and pay
dividends.  We intend to use any earnings  which may be generated to finance the
growth of our businesses.  Our Board of Directors has the right to authorize the
issuance of preferred stock, without further shareholder  approval,  the holders
of which may have preferences over the holders of the common stock as to payment
of dividends.

Possible Volatility of Stock Price

     Our common stock is quoted on the Over the Counter Bulletin Board(R), which
has experienced,  and is likely to experience in the future,  significant  price
and volume  fluctuations  which could  adversely  affect the market price of our
common stock  without  regard to our  operating  performance.  In  addition,  we
believe that factors such as the significant  changes to our business  resulting
from  continued  acquisitions  and  expansions,  quarterly  fluctuations  in our
financial  results  or  cash  flows,  shortfalls  in  earnings  or  sales  below
expectations,  changes in the  performance of other companies in our same market
sectors and the  performance  of the overall  economy and the financial  markets
could cause the price of our common stock to fluctuate substantially. During the
12 month period  prior to May 10, 2001,  the price per share of our common stock
has ranged from a high of $1.56 to a low of $0.41.

Year 2000 Compliance

     We have not experienced any significant Year 2000 related problems.  During
1998 and 1999, we  implemented a company wide program to ensure that we would be
compliant  prior to the Year 2000 failure  dates.  We experienced no problems on
either  January  1, 2000 or  February  29,  2000.  However  we  cannot  make any
assurances that unforeseen problems may not arise in the future.

     We do not believe  that the Year 2000  problem has had or will  continue to
have a material  adverse  effect on our business,  results of operations or cash
flows. Our estimate of the potential impact on our financial  position,  overall
results of  operations  or cash flows for the Year 2000 problem  could change in
the  future.  Our  ability  to  achieve  Year 2000  compliance  and the level of
incremental  costs  associated  therewith could be adversely  impacted by, among
other things,  the availability  and cost of programming and testing  resources,
vendors' ability to modify  proprietary  software,  and  unanticipated  problems
identified in the ongoing compliance review.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1998, the Financial  Accounting Standards Board ("FASB") issued FAS
133,  Accounting  for  Derivative  Instruments  and  Hedging  Activities,  which
provides  a  comprehensive  and  consistent  standard  for the  recognition  and
measurement of derivatives  and hedging  activities.  The statement is effective
for fiscal years  commencing  after June 15, 2000. In June 2000, the FASB issued
FAS 138,  Accounting  for Certain  Derivative  Instruments  and Certain  Hedging
Activities - an Amendment of FAS statement 133, which  addresses  implementation
issues  experienced by those companies that adopted FAS 133 early. We will adopt
FAS 133, as well as its amendments and interpretations,  in fiscal year 2001. We
do not  believe  that FAS 133 will  have a  material  impact on our  results  of
operations, cash flows and financial condition.

     In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
Revenue Recognition in Financial Statements. This Staff Accounting Bulletin

                                       19
<PAGE>

summarizes   certain  of  the  staff's  views  on  applying  Generally  Accepted
Accounting  Principles to revenue recognition in financial  statements.  On June
26, 2000,  the SEC staff issued SAB No.  101B,  which delays the  implementation
date of SAB 101 until no later than the fourth  fiscal  quarter of fiscal  years
beginning  after  December 15, 1999.  We adopted SAB 101 in October 2000 and its
adoption did not have a material impact on our results of operations, cash flows
and financial condition.

     In  September  2000,  the  Emerging  Issues Task Force  ("EITF")  reached a
consensus in EITF Issues 00-10,  "Accounting  for Shipping and Handling Fees and
Costs,"  agreeing that shipping and handling fees must be classified as revenues
and  comparable  prior  periods  should be restated.  Further,  EITF agreed that
shipping  and  handling  costs can be  classified  anywhere in the  statement of
earnings,  except they cannot be netted against sales.  If shipping and handling
costs are not included in costs of goods sold, the amount and  classification of
these  expenses must be disclosed in the footnotes to the financial  statements.
This  consensus must be adopted no later than the fourth quarter of fiscal years
beginning  after  December 15, 1999. We adopted EITF Issue 00-10 in October 2000
and its  adoption did not have a material  impact on our results of  operations,
cash flows and financial condition.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We presently do not use any derivative  financial  instruments to hedge our
exposure to adverse  fluctuations  in interest  rates,  foreign  exchange rates,
fluctuations  in  commodity  prices or other market  risks,  nor do we invest in
speculative financial instruments.  Borrowings from ADSX are at ADSX's borrowing
rate from IBM Credit, which is the 30-day LIBOR rate plus 3.25%. the prime rate.
Our  interest  income is  sensitive  to  changes in the  general  level of U. S.
interest  rates,  particularly  since the  majority  of our  investments  are in
short-term investments.

     Due to the nature of our borrowings and our short-term investments, we have
concluded  that there is no material  market risk  exposure and,  therefore,  no
quantitative tabular disclosures are required.


                                       20
<PAGE>

PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     None.

ITEM 2. CHANGES IN SECURITIES

Recent Sales of Unregistered Securities

     The  following  table  lists all  unregistered  securities  sold by us from
January 1, 2001  through  March 31,  2001.  These  shares  were  issued  without
registration  in reliance  upon the  exemption  provided by Section  4(2) of the
Securities Act of 1933, as amended, or Regulation D promulgated thereunder.

                                                                       Number of
                                         Number of       Issued          Common
Name/Entity/Nature               Note     Persons          For           Shares
------------------               ----     -------          ---           ------

Private Placement of Shares       1          1        Sale of Shares     200,000

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

1.   Represents  shares issued to the purchasing  shareholder in connection with
     an  offering  of  shares  for sale by the  Company  pursuant  to a  Private
     Placement  Memorandum  dated February 1, 2001 and exempt from  registration
     pursuant to Rule 506 of Regulation D promulgated under the Act. The Private
     Placement  Memorandum  included  an  acknowledgement  that the sale was not
     registered,  that the  shareholder  was acquiring the shares for investment
     and not for resale, and that the shareholder acknowledged that he must hold
     the shares until and unless  registered  or unless  transferred  in another
     transaction  exempt  from  registration.   In  addition,   the  certificate
     representing the shares were legended to indicate that they were subject to
     restrictions on transfer.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable


                                       21
<PAGE>


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

     An annual meeting of shareholders of the Company was held on March 29, 2001
to:

     (a)  Elect seven directors.

     (b)  Approve the increase in the number of authorized shares of stock.

     (c)  Ratify the appointment of Albrecht,  Viggiano,  Zureck & Company, P.C.
          as independent  auditors of the Company for the year ending  September
          30, 2001; and

     (d)  Approve the 2001 Flexible Stock Plan.

     The results of the votes were as follows:

                                             For         Against        Abstain
                                         ---------------------------------------
Election of directors:
         Garrett A. Sullivan              4,753,859         15,188            --
         David A. Loppert                 4,753,859         15,188            --
         Anat Ebenstein                   4,753,859         15,188            --
         Charles L. Doherty               4,753,859         15,188            --
         Ashok Rametra                    2,026,359      2,742,688            --
         Scott Silverman                  4,753,859         15,188            --
         Donald H. Swift                  4,753,859         15,188            --

Increase in  authorized shares            3,124,454         98,692         1,438

Appointment of auditors                   4,708,957         58,817         1,273

2001 Flexible Stock Plan                  3,126,761         96,450         1,373

ITEM 5. OTHER INFORMATION

     None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

     See List of  Exhibits  filed as part of this  annual  report on Form  10-Q.
Reports on Form 8-K

     None.

                                       22
<PAGE>


                                    SIGNATURE

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

                                         SYSCOMM INTERNATIONAL CORPORATION
                                         (Registrant)

Dated:   May 11, 2001                    By:        /S/ J. ROBERT PATTERSON
                                             -----------------------------------
                                                      J. Robert Paterson
                                              Chief Financial Officer (Principal
                                                      Accounting Officer)



                                       23
<PAGE>


LIST OF EXHIBITS

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

  3.1     Amended and Restated Certificate of Incorporation (incorporated herein
          by reference to Exhibit 3.1 to the Company's Registration Statement on
          Form S-1 (File No.  333-25593)  filed with the Commission on April 22,
          1997)

  3.2     Amended and  Restated  By-Laws  (incorporated  herein by  reference to
          Exhibit 3.2 to the Company's  Registration Statement on Form S-1 (File
          No. 333-25593) filed with the Commission on April 22, 1997)

  10.1    Inventory and Working Capital Financing Agreement, dated September 24,
          1996  between  the  Company's   subsidiary,   Information   Technology
          Services,  Inc., and IBM Credit  Corporation  (incorporated  herein by
          reference to Exhibit 10.2. to the Company's  Registration Statement on
          Form S-1/A (File No.  333-25593) filed with the Commission on June 12,
          1997)

  10.2    Agreement for Wholesale Financing (Security Agreement), dated November
          27, 2000  between the  Company's  subsidiary,  Information  Technology
          Services,  Inc., and IBM Credit  Corporation  (incorporated  herein by
          reference to Exhibit 10.2 to the  Company's  Annual Report on 10-K for
          the fiscal year ended  September 30, 2000 filed with the Commission on
          December 29, 2000)

  10.3*   1998 Incentive Stock Option Plan, as Amended  (incorporated  herein by
          reference to Exhibit 99 to the Company's  definitive  Proxy  Statement
          filed with the Commission on December 27, 1999)

  10.4*   1999 Employee  Stock Purchase Plan  (incorporated  herein by reference
          to Exhibit A to the Company's  definitive  Proxy  Statement filed with
          the Commission on December 28, 1998)

  10.5*   2001 Flexible Stock Plan (incorporated  herein by reference to Exhibit
          A  to  the  Company's   definitive  Proxy  Statement  filed  with  the
          Commission on February 28, 2001)

-----------------------------
     *    Management contract or compensatory plan.

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