<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10QSB


[X]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
       OF 1934 For the quarterly period ended June 30, 1999.


Commission file number: 33-89384-LA


                        PROLOGIC MANAGEMENT SYSTEMS, INC.
                 (Name of small business issuer in its charter)

<TABLE>
<S>                                                                             <C>
                            Arizona                                                         86-0498857
(State or other jurisdiction of incorporation or organization)                  (I.R.S. Employer Identification No.)

            2030 East Speedway Blvd., Tucson, Arizona                                          85719
                 (Address of principal executive offices)                                   (Zip Code)
</TABLE>

                    Issuer's telephone number (520) 320-1000.


Securities registered under Section 12(g) of the Exchange Act:

               Common Stock and Warrants to Purchase Common Stock


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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 / /


Number of shares of common stock outstanding on June 30, 1999 was 4,741,349.


Transitional Small Business Disclosure Format:
                                Yes / / ; No /X/.
<PAGE>   2
                        Prologic Management Systems, Inc.
                                      Index


<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
<S>                                                                                            <C>
Part I.                    FINANCIAL INFORMATION                                                 3

Item 1.                    Condensed Consolidated Financial Statements

                           Condensed Consolidated Balance Sheets at June 30, 1999
                           and March 31, 1999                                                    3

                           Condensed Consolidated Statements of Operations
                           for the Three Months Ended June 30, 1999 and June 30, 1998            4

                           Condensed Consolidated Statements of Cash Flows
                           for the Three Months Ended June 30, 1999 and June 30, 1998            5

                           Notes to Condensed Consolidated Financial Statements                  6

Item 2.                    Management's Discussion and Analysis of
                           Results of Operations and Financial Condition                         7


Part II.                   OTHER INFORMATION                                                     11

Item 1.                    Legal Proceedings                                                     11

Item 2.                    Changes in Securities                                                 12

Item 3.                    Defaults upon Senior Securities                                       12

Item 4.                    Submission of Matters to a Vote by Security Holders                   12

Item 5.                    Other Information                                                     12

Item 6.                    Exhibits and Reports on Form 8-K                                      12
                           Exhibit 11.1
                           Exhibit 27
                           Exhibit 10.17
SIGNATURES
</TABLE>


                                                                               2
<PAGE>   3
PART I.  FINANCIAL INFORMATION

ITEM  1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

               PROLOGIC MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
                    CONDENSED AND CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             JUNE 30, 1999       MARCH 31, 1999
                                                                             -------------       --------------
Assets                                                                        (unaudited)
Current assets:
<S>                                                                          <C>                 <C>
      Cash                                                                    $    304,112        $    128,162
      Restricted cash                                                              300,000             300,000
      Accounts receivable,less allowance for doubtful accounts of
        $245,688 at March 31, 1999 and June 30, 1999                             5,895,081           2,628,176
      Inventory                                                                     98,335             516,937
      Prepaid expense                                                              119,125               4,265
                                                                              ------------        ------------
Total current assets                                                             6,716,653           3,577,540

Property and equipment, net                                                        495,554             492,001
Goodwill, net                                                                      967,037           1,028,162
Other assets                                                                        33,024              83,420
                                                                              ------------        ------------
Total assets                                                                  $  8,212,269        $  5,181,123
                                                                              ============        ============

Liabilities and Stockholders' Deficit

Current liabilities
      Short term debt and notes payable                                       $    389,868        $    349,136
      Notes payable - related parties                                              100,400             100,400
      Accounts payable                                                           5,639,383           3,572,170
      Accrued expenses                                                             891,276             733,950
      Deferred revenue                                                             128,566             120,891
                                                                              ------------        ------------
Total current liabilities                                                        7,149,494           4,876,547

Long term debt and notes payable                                                   459,784             533,217
Line of credit                                                                   2,172,045           1,234,256

Stockholders' Deficit
      Series A cumulative convertible preferred stock, no par value,
        750,000 shares authorized, 16,667 shares issued and outstanding            100,000             100,000
      Series B cumulative convertible preferred stock, no par value,
         100,000 shares authorized, 72,000 shares issued and
         outstanding                                                               519,883             519,883
      Common stock, no par value, 10,000,000 shares authorized,
         4,741,349 shares issued and outstanding                                 8,700,137           8,692,637
      Warrants                                                                     694,230             694,230
      Accumulated deficit                                                      (11,583,303)        (11,469,647)
                                                                              ------------        ------------
Total stockholders' deficit                                                     (1,569,053)         (1,462,897)
                                                                              ------------        ------------
Total liabilities and stockholders' deficit                                   $  8,212,269        $  5,181,123
                                                                              ============        ============
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                                                               3
<PAGE>   4
               PROLOGIC MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
               CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED JUNE 30,
                                                     1999               1998
                                                  -----------        -----------
                                                  (unaudited)        (unaudited)
<S>                                               <C>                <C>
                   Net Sales
Hardware                                          $ 6,313,701        $ 3,332,919
Licenses                                            1,207,803            453,449
Services                                              673,003          1,584,075
                                                  -----------        -----------
                                                    8,194,508          5,370,443


Cost of Sales                                       6,646,080          3,958,387

                   Gross Profit                     1,548,427          1,412,055
Operating Expenses
       Selling and marketing                          327,736            338,617
       General and administrative                   1,219,750          1,200,968
       Research and development                             0             51,750
                                                  -----------        -----------
                   Total Operating Expenses         1,592,485          1,591,336

                   Operating Loss                     (44,058)          (179,280)

Interest Expense                                      (69,847)           (80,845)
Other income (expense)                                    250            (14,482)
                                                  -----------        -----------

Net loss                                             (113,655)          (274,608)

Cumulative Preferred Stock Dividend                   (20,222)           (47,934)
                                                  -----------        -----------
Net loss available to common stockholders         $  (133,877)       $  (322,542)
                                                  ===========        ===========

Loss per common share
       Basic and Diluted                                (0.03)             (0.07)

Weighted average shares of common stock
       Basic and Diluted                            4,721,349          4,492,024
</TABLE>


See accompanying notes to condensed consolidated financial statements.


                                                                               4
<PAGE>   5
               PROLOGIC MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
               CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED JUNE 30,
                                                                        1999               1998
                                                                     -----------        -----------
                                                                     (unaudited)        (unaudited)
<S>                                                                  <C>                <C>
Cash flows from operating activities:

       Net loss                                                      $  (113,655)       $  (322,542)
       Adjustments to reconcile net loss to net cash used in
       operating activities:
               Depreciation and amortization                             105,670            111,594
               Issuance of warrants                                                          56,477
               Changes in:
                      Trade accounts receivable                       (3,266,905)          (709,440)
                      Accounts payable and accrued expenses            2,224,539          1,531,210
                      Other assets and liabilities                      (361,813)          (264,855)
                                                                     -----------        -----------
                             Total adjustments                          (574,883)           724,986
                                                                     -----------        -----------
                             Net cash from (used in) operating
                             activities                                 (688,537)           402,444
                                                                     -----------        -----------

Cash flows from investing activities

       Purchase of equipment                                             (48,081)           (67,087)
                                                                     -----------        -----------

                      Net cash used in investing activities              (48,081)           (67,087)

Cash flows from financing activities:
       Issuance of Debt - Line of Credit                                 937,789
       Issuance of common stock                                            7,500             17,500
       Repayment of debt                                                 (32,720)          (507,083)
                                                                     -----------        -----------

                      Net cash provided by (used in) financing
                      activities                                         912,569           (489,583)
Net cash increase (decrease) in cash and cash equivalents                175,950           (154,226)

Cash and cash equivalents, beginning of period                           128,162            175,110
                                                                     -----------        -----------

Cash and cash equivalents, end of period                             $   304,112        $    20,884
                                                                     ===========        ===========
</TABLE>


See accompanying notes to condensed consolidated financial statements.


                                                                               5
<PAGE>   6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.       Interim Periods

         The accompanying condensed consolidated financial statements include
         the accounts of Prologic Management Systems, Inc. (the "Company") and
         its wholly-owned subsidiaries, Great River Systems, Inc. ("GRSI"), and
         BASIS, Inc ("BASIS"). All significant inter-company balances and
         transactions have been eliminated in consolidation.

         The accompanying unaudited condensed consolidated financial statements
         have been prepared by the Company in accordance with generally accepted
         accounting principles, pursuant to the rules and regulations of the
         Securities and Exchange Commission. In the opinion of management, the
         accompanying condensed consolidated financial statements include all
         adjustments (of a normal recurring nature) which are necessary for a
         fair presentation of the results for the interim periods presented.
         Certain information and footnote disclosures normally included in
         financial statements have been condensed or omitted pursuant to such
         rules and regulations. Although the Company believes that the
         disclosures are adequate to make the information presented not
         misleading, these financial statements should be read in conjunction
         with the consolidated financial statements and the notes thereto
         included in the Company's Report on Form 10-KSB for the fiscal year
         ended March 31, 1999. The results of operations for the three months
         ended June 30, 1999 are not necessarily indicative of the results to be
         expected for the full year.

2.       Lines of Credit

         In March 1998, BASIS and GRSI obtained a line of credit in an amount
         that is the lower of $5,000,000 or the sum of 85% of eligible accounts
         receivable, restricted cash (see Note 2) and equipment loans in the
         first year (maximum equipment loan is $250,000). This line of credit is
         secured by substantially all of BASIS and GRSI's assets. As of June 30,
         1999, borrowings under this line of credit were $2,172,045.

         The line of credit bears monthly interest at the highest prime rate in
         effect during each month (7.75% during March 1999) plus 1.75% per annum
         for the portion of the loan related to accounts receivable and prime
         plus 2.25% per annum for the portion related to equipment purchases
         subject to a minimum charge in any month of not less than 9% per annum.
         Interest is based on a minimum daily loan balance of $1,000,000. The
         line matures on March 31, 2001.

         The Company is required to pay a monthly minimum fee of $1,500. Also,
         the Company paid an initial loan fee of $50,000 in March 1998 with an
         additional loan fee based on .25% of the maximum dollar amount
         ($5,000,000) due annually thereafter. In years four and beyond, the
         Company must pay a renewal fee of .5% of the maximum dollar amount.

         If the Company terminates this agreement prior to the maturity date, it
         must pay a penalty equal to the greater of all interest due during the
         prior six months or the minimum monthly interest multiplied by the
         number of partial or full months from the effective termination to the
         maturity date.

         The line of credit agreement requires that BASIS and GRSI maintain a
         combined minimum net worth of $750,000. At June 30, 1999, BASIS and &
         GRSI were in compliance with this covenant.

3.       Goodwill

         Cost in excess of net assets acquired (goodwill) is being amortized on
         a straight-line basis over seven years. Amortization expense for the
         quarter ended June 30, 1999 totaled $61,125. Accumulated amortization
         totaled $751,595 at June 30, 1999.

         In September 1995, the Company completed the acquisition of GRSI, a
         systems integration company based in St. Paul, Minnesota. All of the
         outstanding common stock of GRSI was acquired for 100,000 shares of
         common stock of the Company valued at $40,000, the issuance of a
         promissory note in the amount of $150,000 and $100,000 of cash. The
         acquisition was accounted for as a purchase and


                                                                               6
<PAGE>   7
         accordingly, the aggregate purchase of $290,000 was allocated to the
         assets acquired and liabilities assumed based on their estimated fair
         values at the date of acquisition. Cost in excess of net assets
         acquired of $259,746 was recorded as goodwill in connection with the
         acquisition.

         In August 1996, the Company completed the acquisition of BASIS, a
         systems integration company located in the San Francisco Bay Area. All
         of the outstanding stock of BASIS was acquired for 337,325 shares of
         common stock of the Company valued at $1,400,000 and $500,000 in cash.
         The acquisition was accounted for as a purchase and accordingly the
         aggregate purchase price of $2,231,533 was allocated to the assets
         acquired and the liabilities assumed based on their estimated fair
         values at the date of the acquisition. Cost in excess of net assets
         acquired of $1,459,661 was recorded as goodwill in connection with the
         acquisition.

4.       Property and Equipment

         Property and equipment as of June 30, 1999, consists of the following:
<TABLE>
<CAPTION>
                                          June 30, 1999      March 31, 1999
<S>                                       <C>                <C>
Furniture and leasehold improvements       $   303,883        $   350,027
Equipment and software                       1,281,459          1,187,634
                                           -----------        -----------
                                             1,585,342          1,537,661
Less accumulated depreciation               (1,089,788)        (1,045,660)
                                           -----------        -----------
Net property and equipment                 $   495,554        $   492,001
                                           ===========        ===========
</TABLE>


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

         The following discussion should be read in conjunction with the audited
Consolidated Financial Statements as filed in the Company's annual report Form
10-KSB. Except for the historical information contained herein, the matters
discussed in this 10-QSB are forward-looking statements that involve a number of
risks and uncertainties. There are certain important factors and risks,
including the rapid change in hardware and software technology, market
conditions, the anticipation of growth of certain market segments and the
positioning of the Company's products and services in those segments,
seasonality in the buying cycles of certain of the Company's customers, the
timing of product announcements by the Company and by companies whose products
are sold by the Company under reseller agreements, the release of new or
enhanced products, the introduction of competitive products and services by
existing or new competitors and the significant risks associated with the
acquisition of new products, product rights, technologies, businesses, the
management of growth, the Company's ability to attract and retain highly skilled
technical, managerial and sales and marketing personnel, and the other risks
detailed from time to time in the Company's SEC reports, including reports on
Form 10-KSB and Form 10-QSB, that could cause results to differ materially from
those anticipated by the statements made herein. Therefore, historical results
and percentage relationships will not necessarily be indicative of the operating
results of any future period.

INTRODUCTION

         The Company provides systems integration services, networking services,
software development and applications software for the commercial market. The
Company's professional services include consulting, systems integration,
software development, maintenance, training and the installation of hardware on
which to implement the Company's as well as third-party software products. The
Company's proprietary applications software is primarily licensed for use to
manufacturers and for use in the wholesale distribution industry. For additional
information on the combined operating results of the Company and its
subsidiaries, see the Consolidated Financial Statements of the Company and Notes
thereto. The discussion should be read in conjunction with and is qualified in
its entirety by the Consolidated Financial Statements of the Company and Notes
thereto.


                                                                               7
<PAGE>   8
RESULTS OF OPERATIONS

         Net Sales. Net sales for the first quarter of fiscal 2000 were
$8,194,508 compared to the net sales of $5,370,443 for the first quarter of
fiscal 1999, an increase of $2,824,065 or 52.6%. The sales increase was the
result of a significant increase in sales of third party hardware and software
licenses offset somewhat by a decrease in the sale of integration services.
Sales of third party hardware for the period were $6,313,701 an increase of
approximately 89.4% over sales for the same period one year ago of $3,332,919.
Sales of software licenses, which included third party licenses as well as
proprietary software, were $1,207,803 for the period reflecting an increase of
$754,354 over sales of $453,449 for the first quarter of the previous fiscal
year. Service sales decreased by 57.5% , dropping from $1,584,075 to $673,003.
The increased hardware sales were the result of the restaffing and
reorganization of the sales staff at Basis, which began during the fourth
quarter of the previous fiscal year and continued into the first quarter of the
current fiscal year. The new sales staff initially concentrated on sales of
hardware and software, which historically leads to service requirements over
time.

         Cost of Sales. Cost of sales was approximately $6,646,080, or 81.1% of
total net sales, for the period ended June 30, 1999 versus approximately
$3,958,387, or 73.7% of net sales, for the same period of the previous year. The
increased total cost was due to the increased total sales as well as the change
in sales mix as third party products, which carry a high cost, increased as a
percentage of total net sales. Higher cost third party hardware sales increased
as a percentage of total net sales, increasing from 62.1% of net sales for the
first quarter of last year to 77.0% for the current fiscal year, while service
sales, which historically carry a much lower cost of sales, decreased from 29.5%
of total net sales to 8.2%. The Company expects to continue to see the margins
of sales of third party products to decrease, the result of continued
competition and pricing pressure in the computer market. The Company plans to
offset the increased cost by increasing the sales of higher margin services
related to the sale of third party hardware and software.

         Selling and Marketing. Selling and marketing expenses were $372,736 or
4.5% of net sales, for the three month period ended June 30, 1999, compared to
$338,617, or 6.3% of net sales, for the same period of the previous fiscal year.
The increase in selling and marketing expenses is due to the restaffing and
reorganization of the sales staff at the Basis subsidiary. The Company expects
selling and marketing expenses to continue to increase as sales continue to
grow.

         General and Administrative. General and administrative expenses
increased from $1,200,968, or 22.4% of net sales, for the first quarter of the
previous fiscal year to $1,219,750, or 14.9% of net sales, for the first quarter
of the current fiscal year. The increase was in part the result of continued
consolidation efforts by the Company in the accounting and administrative areas.
The Company expects to reduce administrative expense as the planned
consolidations continue.

         Research and Development. During the period ended June 30, 1999 the
Company did not incur any research and development expense. Total research and
development expense was $51,750, or 1.0% of net sales, in the quarter ended June
30, 1998. Research and development is primarily concerned with upgrading current
proprietary software modules, including the efforts to meet Year 2000
compliance. The Company does not expect to incur any research and development
expense during the remainder of the fiscal year.

         Operating Loss. The operating loss for the period was $44,058 compared
to an operating loss of $179,280 for the prior year's first quarter. The
operating loss improvement was the result of the increased sales offset by the
increased cost of sales , a result in the change in sales mix to higher costing
sales of third party products and the decrease in the sale of higher margin
services.

         Interest and Other Income. Interest expense for the quarter was $69,847
which was paid on the current lines of credit, short term and long term
borrowings. The Company incurred approximately $80,845 in interest expenses
during the first quarter of the previous fiscal year.


                                                                               8
<PAGE>   9
         Net Loss. The net loss for the quarter ended June 30, 1999 was
approximately $113,655, or $.024 per share, versus a loss for the same period of
the prior fiscal year of approximately $274,606, or $.07 per share. The
improvement in net operating loss was the result of increased sales.

         Income Taxes. The Company had no income tax expense for the first
quarter of fiscal 2000 and 1999. As of March 31, 1999, the Company had Federal
net operating loss carryforwards of approximately $11,200,000. The utilization
of net operating loss carryforwards will be limited as determined pursuant to
applicable provisions of the Internal Revenue Code and Treasury regulations
thereunder.

LIQUIDITY AND CAPITAL RESOURCES

         Liquidity and Capital Resources. At June 30, 1999 the Company had a
working capital deficit of approximately $432,840 versus a deficit of
approximately $1,299,000 at March 31, 1999. The cash balance at June 30, 1999
was approximately $604,000, $300,000 of which was restricted as security for the
Company's line of credit.

         Cash used by operations during the period ended June 30, 1999 was
approximately $688,537. Cash generated by operations during the same three month
period of the previous fiscal year totaled approximately $402,444. Cash used in
investing activities was approximately $48,081 at June 30, 1999 and
approximately $67,087 at June 30, 1998. Cash provided by financing activities
for the quarter ended June 30, 1999 totaled approximately $912,569 the result of
additional advances from the Companies line of credit. Cash used by financing
activities totaled approximately $489,583 for the three months ended June 30,
1998.

         The Company has not integrated the sale of its proprietary software
into its subsidiaries and has not generated the increase in professional service
revenue it had anticipated and has therefore not generated the higher margins
that it had expected. The result is that historically the Company has been
unable to generate sufficient internal cash flows to support operations, and has
been dependent upon capital reserves and outside capital sources to supplement
cash flow. New equity investments, lines of credit and other borrowings, and
credit granted by its suppliers have enabled the Company to sustain operations
over the past several years. In August 1998, the Company had failed to meet the
"continued listing criteria" established by NASDAQ and the Company's Securities
were delisted from the NASDAQ Small Cap Market. The subsequent lack of liquidity
in the Company's securities has materially affected the Company's ability to
attract equity capital. Additionally, the lack of capital resources has
precluded the Company from effectively executing its strategic business plan.
The ability to raise capital and maintain credit sources is critical to the
continued viability of the Company.

         During July 1999, the Company entered into a Stock Purchase and Merger
Agreement ("SPMA") with Sunburst Acquisitions IV, Inc., a Colorado corporation
("Sunburst"). The terms of the SPMA require that Sunburst purchase up to
5,280,763 shares of common stock of the Company for $3,000,000 pursuant to a
Regulation D Exemption under the United States Securities Act of 1933, as
amended. The investment by Sunburst is to be staged in two parts. The first
stage ("Tranche 1") purchases 3,459,972 shares at $0.2890 per share, for a total
of $1,000,000. The Company received the initial $1 million during August 1999.
The second stage ("Tranche 2") purchases up to 1,820,791 shares at $1.0984 per
share, for a total of $2,000,000. The Company shall use the proceeds from
Tranche 1 primarily as working capital. The proceeds from Tranche 2 are intended
to be used by the Company to facilitate the acquisition of another
(unaffiliated) company (the "Tranche 2 Acquisition"), and funded essentially
simultaneously with the closing of the Tranche 2 Acquisition.

         Subject to shareholder approval, on the earlier of the closing of the
Tranche 2 Acquisition or September 30, 1999, it is intended that the Company
initiate the process to be merged with and into Sunburst or a subsidiary of
Sunburst organized for that purpose. As a condition to closing of the merger,
Sunburst is obligated to have a binding commitment from other investors,
satisfactory to the Company in form and substance, to purchase from Sunburst or
the surviving entity 890,287 shares of common stock at $2.246 per share, for a
total of $2,000,000


                                                                               9
<PAGE>   10
("Tranche 3"). The proceeds from this financing are also intended to facilitate
an additional acquisition(s). After the merger, the shareholders of the Company
as of March 31, 1999, without dilution for existing warrants, options or other
such derivatives, would hold no less than 47.15% of the common stock of Sunburst
or the surviving entity. All outstanding warrants and options to acquire Company
stock that are not exercised prior to the merger will be automatically converted
into an option or right to purchase a like number of shares from Sunburst or the
surviving entity. Upon completion of the merger, the carrying value of the
Company's assets may be revised to reflect purchase accounting.

         The three investment stages in the SPMA could potentially provide the
Company with the equivalent of a $5,000,000 capital infusion. Upon the merger,
Prologic shareholders, including those holding exercisable derivatives, would
retain approximately 50% of the merged entities. The potential acquisitions,
which are conditions to closing the future financing, will be consistent with
the Company's strategic business plan. With the capital resources available to
properly manage them, the acquisition of two or more profitable companies should
significantly expand the Company's revenues and enhance earnings. The resulting
increase in internally generated cash flows should greatly reduce the Company's
dependence upon outside capital sources. Additionally, the Company would expect
to be the beneficiary of, through the acquisitions, qualified executive
management, technical, and sales personnel, as well as new product and service
offerings. The Company believes that the SPMA can be the catalyst that will
provide its shareholders and investors the opportunity to participate in liquid
securities, trading in an orderly market.

         In the future, the Company may require additional equity, working
capital and/or debt financing to maintain current operations as well as achieve
future plans for expansion. No assurance can be given of the Company's ability
to obtain such financing on favorable terms, if at all. If the Company is unable
to obtain additional financing, its ability to meet current and future plans for
expansion could be materially adversely affected.

         During fiscal 1998, the Company signed a financing agreement with Coast
Business Credit for a line of credit in an amount of the lower of $5,000,000 or
the sum of 85% of eligible accounts receivable, restricted cash (see Note 5 of
the Consolidated Financial Statements) and equipment loans (maximum of
$250,000). This new facility is designed to provide working capital to support
the Company's sales growth for both subsidiaries. Among other things the
agreement required that the Company maintain a combined net worth at its BASIS
and GRSI subsidiaries of at least $1,000,000. The Company received a waiver for
non-compliance with this requirement at March 31, 1998 and modified the
agreement in July 1998 to a combined net worth requirement of $750,000 for both
subsidiaries. The Company was in compliance at June 30, 1999. The total amount
of the line of credit outstanding at June 30, 1999 was approximately $2,172,045.

         During fiscal 1997, the Company borrowed approximately $100,000 at a
rate of 8%, which was scheduled to become due on June 30, 1997. During July
1997, the note holder agreed to extend maturity on a month-to-month basis. As a
result of the extension, the Company issues 10,000 restricted common shares per
month to the note holder in consideration for the term of the extension. As of
June 30, 1999 the note was still outstanding.

         In addition, during fiscal 1997 the Company borrowed $820,000 in a
private offering of 10% Subordinated Convertible Notes due December 31, 1999.
Prior to September 30, 1997, with the exception of one $100,000 note holder, the
Company renegotiated the conversion terms with the note holders of the remaining
$720,000. The revised terms assign a fixed conversion price of $3.75 per share.
In addition, the note holders have been granted warrants to purchase a total of
252,000 shares of the Company's common stock at a price of $2.00 per share. The
warrants will expire on December 31, 2001. During December 1997, one $100,000
note holder exchanged the debt for unregistered common stock of the Company. The
common stock was exchanged at a price of $.625 per share for a total of 160,000
shares. In fiscal 1999, the remainder of the note holders representing $720,000
converted to 72,000 shares of unregistered convertible preferred stock at a
conversion rate of $3.75 per share and received warrants to purchase an
additional 72,000 shares of unregistered common stock at a price of $1.00 per
share. These warrants expire March 31, 2001.


                                                                              10
<PAGE>   11
         The Company borrowed $240,000 in short term notes collateralized by its
computer equipment and office furnishings during fiscal 1997. Interest on these
notes is paid monthly at a rate of 2%. During fiscal 1998, an additional
$125,000 was borrowed against this equipment. Of the $365,000, holders of notes
totaling $205,000 agreed to extend through December 31, 1997; the remaining
$160,000 exchanged their debt for unregistered common stock of the Company at a
price of $0.625 per share, for a total of 256,000 shares.

         During fiscal 1999, holders of $45,000 of the above notes were paid
off; holders of notes totaling $130,000 extended through July 31, 1998; a
$20,000 note holder agreed to extend on a month-to-month basis with 30 days
notice of payment on demand; and a $10,000 note holder exchanged the debt for
common stock at a rate of $0.625 per share. As of June 30, 1999, $150,000 of
principal remained outstanding on these notes extended on a month to month
basis.

         During the first quarter of fiscal 2000, the Company purchased
approximately $48,081 in capital equipment and software.

         Year 2000 Issue. The Company's proprietary manufacturing software
product line was Year 2000 compliant in July 1998 and was released during the
quarter ending September 30, 1998. The Company's internal development tools are
Year 2000 compliant. The proprietary wholesale distribution software product
line was Year 2000 compliant as of April 1999 and was released in May 1999.
Internally, the Company uses its distribution software accounting package and
does not foresee any problems in converting to the Year 2000 compliant version
of its software. The Company does not foresee any problems in working with
third-party companies or clients because of the Year 2000 issue. Furthermore,
the Company does not believe that clients utilizing its updated software
products will have any problems with their vendors because of the Year 2000
issue due to the use of the Company's software products. Costs relating to the
development of the Year 2000 issue have been included in the research and
development expenses over the fiscal year ended March 31, 1999.


"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

This form 10-QSB may contain forward-looking statements that involve risks and
uncertainties, including, but not limited to, the impact of competitive products
and pricing, product demand and market acceptance risks, the presence of
competitors with greater financial resources, product development and
commercialization risks, costs associated with the integration and
administration of acquired operations, capacity and supply constraints or
difficulties, the results of financing efforts and other risks detailed from
time to time in the Company's Securities and Exchange Commission filings,
including the Company's 1999 Form 10-KSB.

PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         As of the date of this filing, neither the Company nor its subsidiaries
are a party to any legal proceedings, the outcome of which, in management's
opinion, would have a material adverse effect on the Company's operations or
financial position.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.


                                                                              11
<PAGE>   12
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 10QSB

A.    Exhibits:
<TABLE>
<CAPTION>
        Exhibit Number              Document                                            Page
        --------------              --------                                            ----
<S>                                 <C>                                                 <C>
        11.1                        Schedule of Computation of Net Loss Per Share
        27                          Financial Data Schedule
        10.17                       Heim Employment Agreement
</TABLE>

B.     Reports:
No reports on Form 8-K were filed during the quarter ended June 30, 1998.


                                                                              12
<PAGE>   13
In Accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                     PROLOGIC MANAGEMENT SYSTEMS, INC.



    DATED: August 13, 1999           By:  /s/  James M. Heim
                                        ----------------------------------------
                                        James M. Heim
                                        President and Chief Executive Officer



                                     By:  /s/  William E. Wallin
                                        ----------------------------------------
                                        William E. Wallin,
                                        Vice President, Chief Financial Officer,
                                        Secretary and Treasurer (Principal
                                        Financial and Accounting Officer)


                                                                              13

<PAGE>   14


                                EXHIBIT INDEX
                                -------------

Exhibit
  No.       Description
-------     -----------
  11        Schedule of Computation of Net Loss Per Share
  27        Financial Data Schedule