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

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FORM 10-Q

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

OR

| | [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934For the transition period from ____________ to ________________ | 
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | 

Commission File No.: 0-22693

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

|Delaware(State or other jurisdiction ofincorporation or organization) | 11-2889809(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------- | ---------------------------------------------

7 Kingsbridge Road, Fairfield, New Jersey 07004
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code:  (973) 227-8772

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 February 8,
2002 is as follows:

|Class of Common EquityCommon Stock, par value $.01 | Number of Shares4,895,998
|-------------------------------------------------- | -------------------------

SYSCOMM INTERNATIONAL CORPORATIONTABLE OF CONTENTS

|Item      | Description                                                                           | Page | 
|--------- | ------------------------------------------------------------------------------------- | ---- | 
|          | PART I  FINANCIAL INFORMATION                                                        |      | 
|1.        | Financial Statements                                                                  |      | 
|          | Consolidated Balance Sheets                                                          |      | 
|          | December 31, 2001 (unaudited) and September 30, 2001
(unaudited)                      | 3    | 
|          | Consolidated Statements of Operations                                                |      | 
|          | Three Months ended December 31, 2001 and 2000 (unaudited)                             | 4    | 
|          | Consolidated Statement of Stockholders Equity                                        |      | 
|          | Three Months ended December 31, 2001(unaudited)                                       | 5    | 
|          | Consolidated Statements of Cash Flows                                                |      | 
|          | Three Months ended December, 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 | 10   | 
|3.        | Quantitative and Qualitative Disclosures About Market
Risk                            | 14   | 
|          | PART II  OTHER INFORMATION                                                           |      | 
|6.        | Exhibits and Reports on Form 8-K                                                      | 15   | 
|SIGNATURE | 16                                                                                    |     
|EXHIBITS  | 17                                                                                    |     

2

PART I FINANCIAL INFORMATION
     ITEM 1. FINANCIAL STATEMENTS

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

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|                                                                                                                                                                                                                               |                   |        |                    |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------- | ------ | ------------------ | - | ------
|Assets                                                                                                                                                                                                                         |                   |        |                    |   |       
|                                                                                                                                                                                                                               | December 31, 2001 |        | September 30, 2001 |  
|Current Assets                                                                                                                                                                                                                 |                   |        |                    |   |       
|Cash and cash equivalents                                                                                                                                                                                                      | $                 | 1,880  |                    | $ | 1,811 
|Accounts receivable (net of allowance for doubtful accounts of $ 418 at December 31, 2001 and $414 at September 30, 2001)                                                                                                      |                   | 5,420  |                    |   | 9,409 
|Inventories                                                                                                                                                                                                                    |                   | 211    |                    |   | 495   
|Notes receivable                                                                                                                                                                                                               |                   | 70     |                    |   | 87    
|Deferred tax asset                                                                                                                                                                                                             |                   | 171    |                    |   | 171   
|Other current assets                                                                                                                                                                                                           |                   | 420    |                    |   | 502   
|                                                                                                                                                                                                                               |                   |        |                    |   |       
|Total Current Assets                                                                                                                                                                                                           |                   | 8,172  |                    |   | 12,475
|Property And Equipment, net                                                                                                                                                                                                    |                   | 3,134  |                    |   | 3,177 
|Goodwill, net                                                                                                                                                                                                                  |                   | 2,154  |                    |   | 2,154 
|Deferred tax asset                                                                                                                                                                                                             |                   | 1,092  |                    |   | 905   
|Other Assets                                                                                                                                                                                                                   |                   | 360    |                    |   | 360   
|                                                                                                                                                                                                                               |                   |        |                    |   |       
|Total Assets                                                                                                                                                                                                                   | $                 | 14,912 |                    | $ | 19,071
|                                                                                                                                                                                                                               |                   |        |                    |   |       
|Liabilities and Stockholders' Equity                                                                                                                                                                                           |                   |        |                    |   |       
|Current Liabilities                                                                                                                                                                                                            |                   |        |                    |   |       
|Current maturities of long-term debt                                                                                                                                                                                           | $                 | 889    |                    | $ | 1,007 
|Current amounts due to Parent Company                                                                                                                                                                                          |                   | 2,793  |                    |   | 947   
|Accounts payable                                                                                                                                                                                                               |                   | 986    |                    |   | 4,850 
|Accrued expenses                                                                                                                                                                                                               |                   | 1,765  |                    |   | 1,177 
|                                                                                                                                                                                                                               |                   |        |                    |   |       
|Total Current Liabilities                                                                                                                                                                                                      |                   | 6,433  |                    |   | 7,981 
|Note Payable - Parent Company                                                                                                                                                                                                  |                   | -      |                    |   | 2,398 
|Long-Term Debt                                                                                                                                                                                                                 |                   | 110    |                    |   | 42    
|                                                                                                                                                                                                                               |                   |        |                    |   |       
|Total Liabilities                                                                                                                                                                                                              |                   | 6,543  |                    |   | 10,421
|                                                                                                                                                                                                                               |                   |        |                    |   |       
|Commitments And Contingencies                                                                                                                                                                                                  |                   | -      |                    |   | -     
|Stockholders Equity                                                                                                                                                                                                           |                   |        |                    |   |       
|Preferred shares:                                                                                                                                                                                                              |                   |        |                    |   |       
|Authorized 5,000 shares at December 31, 2001
and 5,000 shares at September 30, 2001, no par value; none issued                                                                                                                 |                   | -      |                    |   | -     
|Common shares:                                                                                                                                                                                                                 |                   |        |                    |   |       
|Authorized 80,000 shares at December 31, 2001 and September 30, 2001, of
$.01 par value; 5,757 shares issued at      December 31, 2001 and September 30, 2001; 4,896 shares outstanding at December 31, and September 30, 2001 |                   | 58     |                    |   | 58    
|Additional paid-in capital                                                                                                                                                                                                     |                   | 6,653  |                    |   | 6,653 
|Retained earnings                                                                                                                                                                                                              |                   | 2,576  |                    |   | 2,857 
|Treasury stock (carried at cost, 861 shares at December 31, 2001 and
September 30, 2001)                                                                                                                                       |                   | (918)  |                    |   | (918) 
|                                                                                                                                                                                                                               |                   |        |                    |   |       
|Total Stockholders Equity                                                                                                                                                                                                     |                   | 8,369  |                    |   | 8,650 
|                                                                                                                                                                                                                               |                   |        |                    |   |       
|Total Liabilities and Stockholders'
Equity                                                                                                                                                                                     | $                 | 14,912 |                    | $ | 19,071
|                                                                                                                                                                                                                               |                   |        |                    |   |       

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See the accompanying notes to consolidated financial statements.

3

SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands except per share data)(Unaudited)

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|                                                               |      |                                        |      |   |       
|-------------------------------------------------------------- | ---- | -------------------------------------- | ---- | - | ------
|                                                               |      | For The Three MonthsEnded December 31,
|                                                               | 2001 |                                        | 2000
|Product revenue                                                | $    | 4,596                                  |      | $ | 7,294 
|Service revenue                                                |      | 745                                    |      |   | 134   
|                                                               |      |                                        |      |   |       
|Total revenue                                                  |      | 5,341                                  |      |   | 7,428 
|                                                               |      |                                        |      |   |       
|Cost of product sold                                           |      | 4,061                                  |      |   | 5,580 
|Cost of service sold                                           |      | 370                                    |      |   | 107   
|                                                               |      |                                        |      |   |       
|Cost of product and services sold                              |      | 4,431                                  |      |   | 5,687 
|                                                               |      |                                        |      |   |       
|Gross profit                                                   |      | 910                                    |      |   | 1,741 
|Selling, general and administrative expenses                   |      | 1,227                                  |      |   | 2,033 
|Depreciation and amortization                                  |      | 63                                     |      |   | 95    
|Other income                                                   |      | -                                      |      |   | (27)  
|Interest expense                                               |      | 88                                     |      |   | 35    
|                                                               |      |                                        |      |   |       
|Loss before benefit for income taxes                           |      | (468)                                  |      |   | (395) 
|Benefit for income taxes                                       |      | (187)                                  |      |   | (42)  
|                                                               |      |                                        |      |   |       
|Net loss available to common stockholders                      | $    | (281)                                  |      | $ | (353) 
|                                                               |      |                                        |      |   |       
|Net loss per common share  basic                              | $    | (0.06)                                 |      | $ | (0.08)
|                                                               |      |                                        |      |   |       
|Net loss per common share  diluted                            | $    | (0.06)                                 |      | $ | (0.08)
|                                                               |      |                                        |      |   |       
|Weighted average number of common shares outstanding  basic   |      | 4,896                                  |      |   | 4,694 
|                                                               |      |                                        |      |   |       
|Weighted average number of common shares outstanding 
diluted |      | 4,896                                  |      |   | 4,694 
|                                                               |      |                                        |      |   |       

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See the accompanying notes to consolidated financial statements.

4

SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITYFor the Three Month Period Ended December 31, 2001(In thousands)(Unaudited)

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|                            | Preferred Stock |              | Common Stock |        | AdditionalPaid-InCapital |        | RetainedEarnings |  | Treasury Stock |       | TotalStockholders'Equity |       
|--------------------------- | --------------- | ------------ | ------------ | ------ | ------------------------ | ------ | ---------------- |  | -------------- | ----- | ------------------------ | ------
|                            | Number          | Amount       |              | Number |                          | Amount |                  |  |                |       |                          | Number
|Balance, September 30, 2001 | -               | $          - |              | 5,757  |                          | $      | 58               |  | $              | 6,653 |                          | $     
|Net loss                    | -               | -            |              | -      |                          |        | -                |  |                | -     |                          |       
|                            |                 |              |              |        |                          |        |                  |  |                |       |                          |       
|Balance, December 31, 2001  | -               | $          - |              | 5,757  |                          | $      | 58               |  | $              | 6,653 |                          | $     

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See the accompanying notes to consolidated financial statements.

5

SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)

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|                                                                           |   |                                        |       |      |        
|-------------------------------------------------------------------------- | - | -------------------------------------- | ----- | ---- | -------
|                                                                           |   | For The Three MonthsEnded December 31, |      
|                                                                           |   | 2001                                   |       | 2000 |        
|Cash flows from operating activities                                       |   |                                        |       |      |        
|Net loss                                                                   | $ | (281)                                  |       | $    | (353)  
|Adjustments to reconcile net loss to cash provided
by operating activities |   |                                        |       |      |        
|Depreciation and amortization                                              |   | 63                                     |       |      | 95     
|Deferred tax benefit                                                       |   | (187)                                  |       |      | (43)   
|Change in assets and liabilities:                                          |   |                                        |       |      |        
|Decrease in accounts receivable                                            |   | 3,989                                  |       |      | 5,084  
|Decrease in inventories                                                    |   | 284                                    |       |      | 405    
|Decrease in other current assets                                           |   | 82                                     |       |      | 63     
|Increase in other assets                                                   |   | -                                      |       |      | (46)   
|Decrease in current amounts due to Parent
Company                          |   | (68)                                   |       |      | -      
|Decrease in accounts payable and accrued
expenses                          |   | (3,276)                                |       |      | (2,917)
|                                                                           |   |                                        |       |      |        
|Net cash provided by operating activities                                  |   |                                        | 606   |      |        
|                                                                           |   |                                        |       |      |        
|Cash flows from investing activities                                       |   |                                        |       |      |        
|Payments for costs of business
acquisitions                                |   |                                        | -     |      |        
|Payments for property and equipment                                        |   |                                        | (20)  |      |        
|Payments received on notes receivable                                      |   |                                        | 17    |      |        
|                                                                           |   |                                        |       |      |        
|Net cash used in investing activities                                      |   |                                        | (3)   |      |        
|                                                                           |   |                                        |       |      |        
|Cash flows from financing activities                                       |   |                                        |       |      |        
|Payments on long-term debt                                                 |   |                                        | (51)  |      |        
|Net payments on Parent Company line of
credit                              |   |                                        | (483) |      |        
|Purchase of treasury stock                                                 |   |                                        | -     |      |        
|                                                                           |   |                                        |       |      |        
|Net cash used in financing activities                                      |   |                                        | (534) |      |        
|                                                                           |   |                                        |       |      |        
|Net increase (decrease) in cash and cash
equivalents                       |   |                                        | 69    |      |        
|Cash and cash equivalents - beginning of period                            |   |                                        | 1,811 |      |        
|                                                                           |   |                                        |       |      |        
|Cash and cash equivalents - end of period                                  |   | $                                      | 1,880 |      | $      
|                                                                           |   |                                        |       |      |        
|                                                                           |   |                                        |       |      |        
|Supplemental Schedules of Noncash Financing
Activities                     |   |                                        |       |      |        
|Acquisition of business:                                                   |   |                                        |       |      |        
|Notes payable issued for acquisition                                       |   | $                                      | -     |      | $      

---

See accompanying notes to consolidated financial statements.

6

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

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1.    Basis of Presentation

The accompanying unaudited consolidated financial statements of SysComm International Corporation
(the Company) as of December 31, 2001 and September 30, 2001 and for the three
months ended December 31, 2001 and 2000 have been prepared in accordance with accounting principles generally
accepted in the United States of America 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 three
months ended December 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, 2001.

Accounting Changes

Effective October 1, 2001, the
Company adopted Statement of Financial Accounting Standard No. 142 Goodwill and Other Intangible Assets (FAS 142). FAS 142 requires that goodwill and certain intangibles no
longer be amortized, but instead tested for impairment at least annually.  There was no impairment of goodwill
upon adoption of FAS 142.

Net loss and loss per share for the three months ended
December 31, 2000 adjusted to exclude amortization expense is as follows:

|                                                   | For The ThreeMonths EndedDecember 31, 2000 |       
|-------------------------------------------------- | ------------------------------------------ | ------
|                                                   |                                            |       
|Net loss:                                          |                                            |       
|Net loss as reported                               | $                                          | (353) 
|Goodwill amortization                              |                                            | 10    
|                                                   |                                            |       
|Adjusted net loss                                  | $                                          | (343) 
|                                                   |                                            |       
|Basic and diluted loss per share:                  |                                            |       
|Net loss per share, basic and diluted, as
reported | $                                          | (0.08)
|Goodwill amortization                              |                                            | 0.01  
|                                                   |                                            |       
|Adjusted net loss per share, basic and diluted     | $                                          | (0.07)
|                                                   |                                            |       

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.

7

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

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3.    Inventory

Inventory at December 31, 2001 and September 30, 2001 consists of:

|                                      | December 31,2000 |       | September 30,2001 |  
|------------------------------------- | ---------------- | ----- | ----------------- | -
|                                      |                  |       |                   |  
|Finished goods                        | $                | 326   |                   | $
|Allowance for excess and obsolescence |                  | (115) |                   |  
|                                      | $                | 211   |                   | $

4.    Loss Per Share

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

|                                          | Three Months EndedDecember 31, |        | 
|----------------------------------------- | ------------------------------ | ------ | 
|                                          |                                | 2001   | 
|                                          |                                |        | 
|Numerator:                                |                                |        | 
|Net loss available to common stockholders | $                              | (281)  | 
|Denominator:                              |                                |        | 
|Denominator for basic loss per share -    |                                |        | 
|Weighted-average shares                   |                                | 4,896  | 
|Denominator for diluted loss per share(1) |                                | 4,896  | 
|Basic loss per share                      | $                              | (0.06) | 
|Diluted loss per share                    | $                              | (0.06) | 

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|(1) | The weighted average shares of employee stock options of 0 and 2
for the three months ended December 31, 2001 and 2000, respectively, were not included in the computation of
diluted loss per share because to do so would have been anti-dilutive for the periods
presented.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.    Mergers and Acquisitions

The following represents acquisitions which occurred in the
first three months of fiscal 2001:

|                                | Date ofAcquisition | PercentAcquired | AcquisitionPrice | CashConsideration | Notes Issued | BusinessDescription                                 
|------------------------------- | ------------------ | --------------- | ---------------- | ----------------- | ------------ | ----------------------------------------------------
|First Quarter 2001 Acquisitions |                    |                 |                  |                   |              |                                                     
|InfoTech USA, Fairfield NJ      | 12/01/2000         | 100%            | $4,550           | $1,899            | $2,652       | Systems integrator and networking solutions provider

On December 14, 2000, we acquired fifty-one percent (51%)
of the outstanding shares of common stock of InfoTech USA (formerly Information Products Center, Inc.), a New
Jersey corporation (InfoTech), from Applied Digital Solutions, Inc. (ADSX). The purchase
price for the shares of InfoTech 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 InfoTech
for approximately $2,400, payable by promissory note. The purchase price of InfoTech 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 resulting in goodwill of
approximately $2,339 in value, which was being amortized on a straight-line basis over 10 years through September
30, 2001. On October 1, 2001, the Company adopted FAS 142, which resulted in no impairment of goodwill. See Note
1 for further description of the effects of adoption of FAS 142.

8

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

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Unaudited pro forma results of operations for the three
months ended December 31, 2000 are included below. Such pro forma information assumes that the above transaction
occurred as of October 1, 2000.

|                                |                    |       
|------------------------------- | ------------------ | ------
|                                | Three Months Ended |       
|                                | December 31,       |       
|                                |                    |       
|                                | 2000               |       
|                                |                    |       
|Revenues                        | $                  | 12,866
|Net loss                        | $                  | (312) 
|Loss per common share  basic   | $                  | (0.07)
|Loss per common share  diluted | $                  | (0.07)

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. ADSX acquired the shares for $4,500 by
issuing approximately 1.7 million shares of its common stock, valued at approximately $2,750, to the selling
shareholders and upon payment of an aggregate amount of cash equal to approximately $1,750 to the selling
shareholders.

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.

9

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, 2001. 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 Forward-Looking Statements and Associated Risk section later in this Item.

RECENT DEVELOPMENTS

On January 28, 2002, we sold our 40,000 square foot
facility including approximately 7.4 acres located at 20 Precision Drive, Shirley, New York, for a purchase price
of $2,500,000. The sale generated cash of approximately $1,300,000. We have centralized all back office and
warehousing operations in our Fairfield, New Jersey location, which has become our new corporate
headquarters.

BUSINESS DESCRIPTION(in $000 unless otherwise noted)

We are a Delaware corporation incorporated in
1997.  Through our two wholly-owned subsidiaries, Information Technology Services, Inc., and InfoTech USA, Inc. (formerly Information
Products Center, Inc.), which was acquired in December 2000, we provide professional services in the area of
systems integration, information technology (IT) procurement and logistics, and technology strategy. Doing
business as InfoTech, we provide integrated eBusiness strategy and technology implementation services
on a regional basis to enterprise and small to medium businesses who want to fully leverage eBusiness
technologies as part of their overall business strategy. Our service offering includes technology strategy and
due diligence consulting, systems architecture and design, application and technology infrastructure deployment,
enterprise security, IT product procurement and logistics, and provisioning. Our services are designed to improve
a client's competitive and financial position and increase efficiency through the development of pragmatic and
innovative business strategies enabled by the integration of emerging and existing technologies.

As described above under Note 6,
Change in Control, on December 14, 2000, Applied Digital
Solutions, Inc. acquired approximately 55% of our issued and outstanding common shares, resulting in a change in
control. Simultaneously, we acquired from Applied Digital Solutions fifty-one percent (51%) of the outstanding
shares of common stock of InfoTech USA. The purchase price for the shares of InfoTech USA 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 InfoTech USA. The purchase price for the shares of InfoTech
USA was approximately $2,400, payable by promissory note.

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.

10

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

|                                             | Relationship to Revenue | 
|-------------------------------------------- | ----------------------- | 
|                                             | Three Months Ended      | 
|                                             | December 31,            | 
|                                             |                         | 
|                                             | 2001                    | 
|                                             |                         | 
|                                             | %                       | 
|                                             |                         | 
|Product revenue                              | 86.1                    | 
|Service revenue                              | 13.9                    | 
|                                             |                         | 
|Total revenue                                | 100.0                   | 
|                                             |                         | 
|Cost of product sold                         | 76.0                    | 
|Cost of service sold                         | 7.0                     | 
|                                             |                         | 
|Cost of product and service sold             | 83.0                    | 
|                                             |                         | 
|Gross profit                                 | 17.0                    | 
|Selling, general and administrative expenses | 23.0                    | 
|Depreciation and amortization                | 1.2                     | 
|Other income                                 | -                       | 
|Interest expense                             | 1.6                     | 
|                                             |                         | 
|Loss before benefit for income taxes         | (8.8)                   | 
|Benefit for income taxes                     | (3.5)                   | 
|                                             |                         | 
|Net loss available to common stockholders    | (5.3)                   | 
|                                             |                         | 

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

Revenue for the first quarter of 2002 decreased $2,087,
or 28.1%, to $5,341 from $7,428 for the first quarter of 2001. The decrease in revenue was a result of a very
soft market especially in product sales, which declined by $2,698 or 37.0%. This was somewhat offset by an
increase in service revenue of $611. The increase in service revenue was a result of InfoTech USA, acquired in
December 2000, contributing a full quarter of service revenue in the quarter ended December 31, 2001 versus only
one month in the same quarter last year.  Additionally, the increase was a result of our continued effort to
increase service revenues.

Gross profit was $910 for the quarter ended December 31,
2001, a decrease of $831, or 47.7%, compared to $1,741 in the first quarter of 2001. Product gross profit
percentage was 11.6% in the first quarter of 2002 compared to 23.5% in 2001. The decrease in product gross profit
percentage in the first quarter of 2002 from the same period last year was due to soft market conditions forcing
margins down in addition to reduced manufacturers rebates in 2002 versus 2001. Service gross profit
percentage was 50.3% in the first quarter of 2002 compared to 20.1% in the first quarter of 2001. The increase in
service gross profit margin in the first quarter of 2002 from the same period last year was due to an increase in
the utilization rate of our service employees. Total gross profit percentage was 17.0% in the first quarter of
2002 compared to 23.4% in the first quarter of 2001.

Selling, general and administrative expenses were $1,227
for the quarter ended December 31, 2001, down $806 or 39.6%, from the $2,033 reported for the same period last
year. The reduction in expense was primarily due to layoffs and other cost control programs, as well as reduced
commissions on lower sales. This was offset somewhat by additional selling, general and administrative expense
from InfoTech USA resulting from a full quarter of selling, general and administrative expense included in the
quarter ended December 31, 2001 versus only one month in the same quarter last year.

11

Depreciation and amortization expense for the current
quarter was $63, a decrease of $32 or 33.7% over the $95 for the quarter ended December 31, 2001. The decrease
was primarily due to the adoption of FAS 142, which took effect October 1, 2001.  The adoption of FAS 142
requires the testing of goodwill for impairment at least annually eliminating the need for monthly amortization
of goodwill.  Accordingly, the goodwill amortization associated with the acquisition of InfoTech USA was not
recorded during the first quarter of 2002. Additionally, depreciation on the land, building and equipment of our
Shirley facility ceased September 30, 2001 as a result of managements decision to cease use of that
facility and offer it for sale.The assets were impaired in the fourth quarter
of 2001 when the Company determined that the net book value of the land, building, and equipment to be offered
for sale exceeded its fair value, less costs to sell. The carrying value of these assets, prior to impairment,
was approximately $2.5 million.  The expected sales proceeds were estimated at $2.4 million. This resulted in an
asset impairment of $95 being charged to operations in the fourth quarter of fiscal year 2001.

Interest expense was $88 in 2002 compared to $35 in 2001,
an increase of $53, or 151.4%. The increase in interest expense was primarily due to the debt associated with the
acquisition of InfoTech USA.

Loss before income taxes for the quarter increased $73,
or 18.5%, to $468 in 2002 compared to a loss of $395 in 2001. The increase in the loss before income taxes in was
due to the combination of reduced sales and lower gross profit margin stemming form a very soft market. This was
largely offset by the efforts made to reduce selling, general and administrative expenses.

Benefit for income taxes increased by $145 to $187 from
$42 reported in the same quarter last year.  This increase was due to and increase in effective tax rate used for
the calculation of taxes based upon the projected profits for the year.

Our net loss for the quarter ended December 31, 2001
decreased to $281 from $353 for the same period last year.

Liquidity and Capital Resources

Our current ratios at December 31, 2001 and September 30,
2001 were 1.3 and 1.6, respectively. Working capital at December 31, 2001 was $1,739, a decrease of $2,755 from
the $4,494 at September 30, 2001.  The decrease was primarily a result of the $2,398 loan due to ADS on December
15, 2002, moving from long term to current.

Cash provided by operating activities in the first three
months of 2002 was $606 compared to $2,288 of cash provided by operating activities in the first three months of
2001. The cash provided by operating activities during 2002 and 2001 was a result of large reductions in accounts
receivable and reductions in inventory.  The large reduction in accounts receivable was a result of lower sales
at the end of the current quarter compared to the end of the period ending September 30, 2001, combined with the
collection of large accounts receivable balances that resulted from the high sales volume in September 2001. This
was offset by the large reductions in accounts payable that stemmed from the payments made to our suppliers, and
the net losses incurred during the three months ended December 31, 2002 and 2001.

Cash used in investing activities was $3 and $1,975 in
2002 and 2001, respectively.  The use of cash in investing activities for 2002 consisted of the purchase of fixed
assets, which was largely offset by payments received on notes receivable. The use of cash in investing
activities in 2001 was primarily to acquire our interest in InfoTech USA in the first quarter of 2001.

Net cash used in financing activities was $534 and $958
in 2002 and 2001, respectively. The net cash used in 2002 and 2001 was primarily due to InfoTech USA paying down
its line of credit with Applied Digital Solutions. Other net cash used in financing in 2002 and 2001 was for
payments on notes payable and long-term debt.  Also, in the first quarter of 2001 the company used cash for the re-purchase of our common
stock.

Under our financing arrangement with IBM Credit
Corporation, as of December 31, 2001, we were able to borrow up to 85% of our eligible accounts receivable and
100% of our eligible inventory, up to a maximum of $3,350. As of December 31, 2001, interest on the outstanding
borrowings for IBM Credit Corporation were payable monthly at the prime rate, or prime rate plus 6.5% should we fail to meet certain
collateral requirements. As of December 31, 2001, there were no borrowings outstanding under the IBM Credit
Corporation facility. Additionally, advances under our Agreement for Wholesale Financing from IBM Credit
Corporation totaling $944 and $3,179 were included in accounts payable at December 31, 2001 and September 30,
2001, respectively, and were offset against the maximum credit available at that time from IBM Credit
Corporation.

12

In May 1999, Applied Digital Solutions entered into a
Term and Revolving Credit Agreement with IBM Credit Corporation. The IBM Agreement, as amended and restated on
March 31, 2001, provides for interest at the 30-day London Interbank Offered Rate plus 2.75%. The IBM Agreement
contains standard covenants relating to Applied Digital Solutionss financial position and performance, as
well as restrictions on Applied Digital Solutionss declaration and payment of dividends. In addition,
Applied Digital Solutionss shares of our common stock are pledged as collateral for the IBM Agreement. IBM
Credit Corporation has a security interest in our receivables and inventory, up to the amount advanced from
Applied Digital Solutions under the line of credit.  The loan bears interest at the same rate as paid by Applied
Digital Solutions. The loan, including interest, is repayable as funds are available.

Applied Digital Solutions failed to make interest and
principal payments due to IBM Credit Corporation during 2001 and violated debt covenants. Effective November 15,
2001, IBM Credit Corporation extended the due dates of all interest and principal payments currently due under
the credit agreement until January 4, 2002. The due dates have subsequently been extended to March 1, 2002 by IBM
Credit Corporation. Applied Digital Solutions has not received and does not anticipate receiving waivers
concerning its covenant defaults. Applied Digital Solutions is currently seeking to restructure the IBM
Agreement, which matures on May 25, 2002. Applied Digital Solutions believes that it will be successful in its
efforts to restructure the IBM Agreement.  There can be no assurance, however, that its ongoing discussions with
IBM Credit Corporation will be successful. Applied Digital Solutionss non-compliance with certain covenants
constitutes an event of default under the IBM Agreement, and IBM Credit Corporation is entitled to accelerate
maturity of all amounts due. Due to these circumstances, future borrowings may not be available from Applied
Digital Solutions.

We are actively seeking a new credit facility, which will
adequately serve our financing needs. We are in the process of negotiating a proposal with a major finance
company for a credit facility totaling $10,000. However, any change in financing arrangements may require the
consent of Applied Digital Solutions and IBM Credit Corporation. There can be no assurances that these consents
will be given, or that we will be successful in our negotiations for a new credit facility. Our inability to have
continuous access to such financing at reasonable costs would materially and adversely impact our financial
condition, results of operations and cash flows.

We believe that our present Agreement for Wholesale
Financing with IBM Credit Corporation, current cash position, projected positive cash flow and financing provided
by Applied Digital Solutions or other credit parties will be sufficient to fund our operations and capital
expenditures for at least twelve months.

On December 15, 2002, a payment of $2,398 is due to
Applied Digital Solutions on a promissory note related to the acquisition of InfoTech USA. We may be unable to
pay this note without additional sources of financing. If we are unable to pay the note on its due date, we will
seek to renegotiate its terms with Applied Digital Solutions.

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, 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; our ability to maintain available sources of financing; 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.

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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.  For
Information Technology Services, Inc., borrowings under the financing agreement with IBM Credit Corporation are
at zero percent interest for the first 30 days, thereafter the interest rate is the prime rate plus 6.5%. For
InfoTech USA, borrowings under the financing agreement with IBM Credit Corporation are at zero percent interest
for the first 10 days, thereafter the interest rate is the prime rate plus 6.5%. 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.

14

PART II.  OTHER INFORMATIONITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

|(a) | Exhibits (listed by numbers corresponding to the
Exhibit Table of Item 601 in Regulation S-K).                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | We filed a Report on Form 8-K dated January 11, 2002,
announcing the retirement and resignation of Garrett A. Sullivan, our Chairman of the Board of Directors.
|(c) | We filed a Report on Form 8-K dated February 12, 2002,
announcing the sale of our property located at 20 Precision Drive, Shirley, New York.                   

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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
|------------------------- | ---------------------------------
|Dated:  February 14, 2002 | By:                              
|                          |                                  

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EXHIBITS

|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1           |  | Stock Purchase Agreement by and between Applied Digital Solutions, Inc. and John H.
Spielberger,  Catherine  Spielberger  and Bearpen Limited  Partnership,  dated November 13, 2000
(incorporated  herein by reference to Exhibit 2.1 to the  Company's  Current  Report on Form 8-K
filed with the  Commission on December 22, 2000, as amended by the Company's  Current  Report on
Form 8-K/A filed with the Commission on February 9, 2001).                
|2.2           |  | Amendment No. 1 to Stock Purchase Agreement by and between Applied Digital  Solutions,  Inc. and
John H. Spielberger,  Catherine Spielberger and Bearpen Limited Partnership,  dated December 14,
2000  (incorporated  herein by reference to Exhibit 2.2 to the Company's  Current Report on Form
8-K filed with the  Commission on December 22, 2000, as amended by the Company's  Current Report
on Form 8-K/A filed with the Commission on February 9, 2001).
|2.3           |  | Stock Purchase Agreement by and between the Company and Applied Digital  Solutions,  Inc., dated
November 13, 2000  (incorporated  herein by reference  to Exhibit 2.3 to the  Company's  Current
Report on Form 8-K filed with the  Commission  on December 22, 2000, as amended by the Company's
Current Report on Form 8-K/A filed with the Commission on February 9, 2001).                                                                                  
|2.4           |  | Addendum to Stock Purchase Agreement by and between the Company  Corporation and Applied Digital
Solutions,  Inc.,  dated December 14, 2000  (incorporated  herein by reference to Exhibit 2.4 to
the  Company's  Current  Report on Form 8-K filed with the  Commission  on December 22, 2000, as
amended by the Company's  Current  Report on Form 8-K/A filed with the Commission on February 9,
2001).                                                       
|2.5           |  | Stock Purchase Agreement by and between the Company and Applied Digital  Solutions,  Inc., dated
December 15, 2000  (incorporated  herein by reference  to Exhibit 2.5 to the  Company's  Current
Report on Form 8-K filed with the  Commission  on December 22, 2000, as amended by the Company's
Current Report on Form 8-K/A filed with the Commission on February 9, 2001).                                                                                  
|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          |  | Agreement for Wholesale  Financing  (Security  Agreement),  dated November 27, 2000, between the
Company's  subsidiary,  Information  Technology  Services,  Inc.,  and  IBM  Credit  Corporation
(incorporated  by reference to Exhibit 10.2 to the Company's  Annual Report on Form 10-K for the
fiscal year ended September 30, 2000 filed with the Commission on December 29, 2000)                                                                          
|10.2          |  | Agreement for  Wholesale  Financing  (Security  Agreement),  dated January 5, 2001,  between the
Company's  subsidiary,  Information  Technology  Services,  Inc.,  and  IBM  Credit  Corporation
(incorporated by reference to the Company's  Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 filed with the Commission on August 13, 2001)                                                                                                   
|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)                                                                                                                                                                                                                                                                                      

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|10.6 |  | Collateralized  Guaranty dated May 23, 2001 between the Company,  its subsidiaries,  Information
Technology  Services,  Inc. and Information  Products Center,  Inc., and IBM Credit  Corporation
(incorporated by reference to the Company's  Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 filed with the Commission on August 13, 2001)
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.7 |  | Contract  of Sale - Office,  Commercial  and  Multi-Family  Residential  Premises by and between
SysComm  International  Corporation  and Parr  Research and  Marketing,  Inc.  (incorporated  by
reference  to the  Company's  Current  Report on Form 8-K dated  January 28, 2002 filed with the
Commission on February 12, 2002)                           

---

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

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