<PAGE>   1
[DELOITTE &                     
TOUCHE LLP LOGO]                -----------------------------------------------
                                CINTECH                                        
                                TELE-MANAGEMENT                                
                                SYSTEMS, INC.                                  
                                                                               
                                Financial Statements for the Years Ended       
                                June 30, 1998 and 1997 and Independent         
                                Auditors' Report                               
                                
       
       
       




---------------
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
---------------






<PAGE>   2


[DELOITTE &                     
TOUCHE LLP LOGO]                             


                                                                    [LETTERHEAD]




INDEPENDENT AUDITORS' REPORT


To the Stockholders of
  Cintech Tele-Management Systems, Inc.

We have audited the accompanying balance sheets of Cintech Tele-Management
Systems, Inc. (the "Company") as of June 30, 1998 and 1997 and the related
statements of operations, stockholders' equity and cash flows for the years then
ended (all expressed in U.S. dollars). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 1998 and 1997 and
the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

/s/ DELOITTE & TOUCHE LLP

August 26, 1998








---------------
DELOITTE TOUCHE
TOHMATSU
---------------


<PAGE>   3



CINTECH TELE-MANAGEMENT SYSTEMS, INC. 

BALANCE SHEETS 
JUNE 30, 1998 AND 1997
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                  LIABILITIES AND STOCKHOLDERS'
ASSETS                                       1998         1997    EQUITY                                        1998         1997

<S>                                      <C>         <C>          <C>                                       <C>            <C>
CURRENT ASSETS:                                                   CURRENT LIABILITIES:
  Cash and Cash Equivalents (Note 2)       $  913,699  $  440,500   Accounts payable                      $    201,292  $   533,103
  Marketable securities (Notes 3, 5)          909,147     363,095   Accrued liabilities:
  Accounts receivable, trade - (net of                              Accrued salaries                           222,562      104,159 
  allowance of $28,397 and $37,604                                  Accrued payroll taxes                       13,660        3,677
  in 1998 and 1997, respectively) (Note 2)  1,530,743     973,948   Accrued vacation                            86,782       82,699
  Inventory (Note 2)                           87,472     101,415   Other                                      300,302      179,344
  Prepaid expenses                             28,450      19,783   Notes payable (Note 5)                          -        30,000
                                           ----------  ----------
      Total current assets                  3,469,511   1,898,741   Deferred maintenance revenue (Note 2)      442,611      176,325
                                           ----------  ----------                                         ------------  -----------
                                                                              Total current liabilities      1,267,209    1,109,307
FIXED ASSETS (Notes 2,4):                                                                                 ------------  -----------
  Equipment                                   668,065     632,489   STOCKHOLDERS' EQUITY (Notes 1,6,7):
  Furniture and fixtures                      146,592     120,269   Common stock                             8,982,842    8,982,842
                                           ----------  ----------   Contributed capital                        675,757      675,757
      Total                                   814,657     752,758   Treasury stock                              (2,290)      (2,290)
  Less accumulated depreciation              (703,804)   (608,423)  Accumulated deficit                    (7,118,037)   (8,364,210)
                                           ----------  ----------                                         -----------   -----------
      Total fixed assets - net                110,853     144,335             Total stockholders' equity    2,538,272     1,292,099
                                           ----------  ----------                                                                 
                                                                                                                                   
OTHER ASSETS:

  Software development costs - net
  (Note 2)                                   225,117     358,330
                                          ----------  ----------
      Total other assets                     225,117     358,330
                                          ----------  ----------                                             ----------  ----------
TOTAL                                     $3,805,481  $2,401,406   TOTAL                                     $3,805,481  $2,401,406
                                          ==========  ==========                                             ==========  ==========
See notes to the financial statements.
</TABLE>



                                      - 2 -



<PAGE>   4


CINTECH TELE-MANAGEMENT SYSTEMS, INC.

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997

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

                                                       1998           1997

NET SALES (Note 2)                                  $9,798,630     $7,044,857

COST OF PRODUCTS SOLD (Notes 2,10)                   1,359,684        944,851

PROVISION FOR OBSOLETE INVENTORY (Note 2)               13,877        861,793

AMORTIZATION AND WRITE-OFF OF DEFERRED SOFTWARE
  DEVELOPMENT COSTS (Note 2)                           323,599        135,540

LICENSING FEES (Note 2)                              1,918,402      1,145,063
                                                    ----------    ----------- 

GROSS PROFIT                                         6,183,068      3,957,610

RESEARCH AND DEVELOPMENT                               531,650        443,776

SELLING, GENERAL AND ADMINISTRATIVE (Notes 2,4)      4,444,225      4,808,181
                                                    ----------    ----------- 

INCOME (LOSS) FROM OPERATIONS                        1,207,193     (1,294,347)

OTHER INCOME                                            38,980         30,440
                                                    ----------    ----------- 

NET INCOME (LOSS)                                   $1,246,173    $(1,263,907)
                                                    ==========    =========== 

BASIC AND DILUTED EARNINGS
(LOSS) PER COMMON SHARE (Notes 6,10)                $     0.10    $     (0.10)
                                                    ==========    =========== 

See notes to financial statements.




                                       -3-


<PAGE>   5
CINTECH TELE-MANAGEMENT SYSTEMS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                     COMMON                                                                TOTAL
                                      STOCK          CONTRIBUTED     TREASURY      ACCUMULATED          STOCKHOLDERS'
                                   NO PAR VALUE        CAPITAL        STOCK          DEFICIT               EQUITY

<S>                                <C>                <C>            <C>          <C>                   <C>  
BALANCE AT JUNE 30, 1996           $8,982,580         $675,757       $(2,290)      $(7,100,303)         $ 2,555,744

SALE OF COMMON STOCK                      262                                                                   262

NET LOSS                                                                            (1,263,907)          (1,263,907) 
                                   ----------         --------       -------       -----------          ----------- 
BALANCE AT JUNE 30, 1997            8,982,842          675,757        (2,290)       (8,364,210)           1,292,099

NET INCOME                                                                           1,246,173            1,246,173
                                   ----------         --------       -------       -----------          ----------- 

BALANCE AT JUNE 30, 1998           $8,982,842         $675,757       $(2,290)      $(7,118,037)          $ 2,538,272
                                   ==========         ========       =======       ===========          ============
</TABLE>

See notes to financial statements.



                                      -4-
<PAGE>   6
CINTECH TELE-MANAGEMENT SYSTEMS, INC.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                  1998            1997             
                                                                                                                   
<S>                                                                             <C>            <C>                 
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                              
 Net income (loss)                                                                $1,246,173     $(1,263,907)        
                                                                                  ----------     -----------         
 Adjustments to reconcile net income (loss) to net cash provided by                                                 
  operating activities:                                                                                              
  Depreciation                                                                        96,681         216,218         
  Amortization and write-off of software development costs                           323,599         135,540         
  Provision for obsolete inventory                                                    13,877         861,793         
  Provision for doubtful accounts                                                     (9,207)        (16,122)        
  Loss on disposal of fixed assets                                                                     3,124                       
  Changes in assets and liabilities:                                                                                 
   (Increase) decrease in accounts receivable                                       (547,588)        193,645         
   Decrease in inventory                                                                  66          46,752         
   Increase in prepaid expenses                                                       (8,667)         (1,559)        
   Decrease in accounts payable                                                     (331,811)       (116,168)        
   Increase in accrued expenses                                                      253,427          84,596         
   Increase in deferred maintenance revenue                                          266,286          35,658         
                                                                                  ----------     -----------         
     Total adjustments                                                                56,663       1,443,477         
                                                                                  ----------     -----------         
     Net cash provided by operating activities                                     1,302,836         179,570         
                                                                                  ----------     -----------         
                                                                                                                   
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                              
  Proceeds from sale (purchase) of marketable securities                            (546,052)        407,296         
  Purchase of fixed assets                                                           (63,199)        (59,404)        
  Expenditures for software development costs                                       (190,386)       (190,665)        
                                                                                  ----------     -----------         
     Net cash provided by (used in) investing activities                            (799,637)        157,227         
                                                                                  ----------     -----------         
                                                                                                                   
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                              
  Proceeds from sale of common stock                                                                     262         
  Payment on notes payable                                                           (30,000)       (100,000)        
                                                                                  ----------     -----------         
     Net cash used in financing activities                                           (30,000)        (99,738)        
                                                                                  ----------     -----------         
                                                                                                                   
NET INCREASE IN CASH AND CASH EQUIVALENTS                                            473,199         237,059         
                                                                                                                   
CASH AND CASH EQUIVALENTS:                                                                                         
  Beginning of year                                                                  440,500         203,441         
                                                                                  ----------     -----------         
                                                                                                                   
  End of year                                                                     $  913,699     $   440,500         
                                                                                  ==========     ===========         
</TABLE>                                                                        



See notes to financial statements.




                                      -5-



<PAGE>   7





CINTECH TELE-MANAGEMENT SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
-------------------------------------------------------------------------------

1.    INITIAL PUBLIC OFFERING

      In January 1994, Cintech Tele-Management Systems, Inc. (the "Company")
      completed its initial public offering of 2,181,820 shares of common stock.
      The Company's shares are traded on the Toronto Stock Exchange (TSE) under
      the symbol "CTM".

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      NATURE OF BUSINESS - The Company develops and markets computer software in
      the emerging Computer-to-Telephone Integration (CTI) industry which
      integrates the voice functions of the telephone with the data functions of
      the computer to provide various business applications. This provides the
      means for small to mid-sized offices to take advantage of the rapid
      advances and emerging capabilities of CTI. Cintech has key strategic
      product partnerships with Nortel and NEC America, and extensive
      distribution capabilities with product sold through Nortel and NEC's
      direct sales organizations as well as their authorized distributors
      throughout North America.

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

      FINANCIAL STATEMENT PRESENTATION - These financial statements have been
      prepared in accordance with accounting principles generally accepted in
      the United States of America and are expressed in United States dollars.
      The differences in accounting principles generally accepted in the United
      States of America and Canada are described in Note 9.

      REVENUE - Generally, the Company records revenue from product sales when
      the product is shipped. Contracts with certain distributors may have terms
      which cause the Company to record revenue when the product is sold to
      third parties. Also, the Company records an estimate of potential future
      returns of product sold at the time of sale.

      DEFERRED MAINTENANCE REVENUE - The Company sells product maintenance
      agreements which provide for repair of hardware and no-cost upgrade of
      software. These agreements normally cover a one-year period with revenue
      being recognized on a straight-line basis over the maintenance period.

      WARRANTY RESERVE - At the time of sale, the Company accrues for warranty
      costs relating to hardware replacement or on site support to be provided
      during the first 12 months following the sale. Costs associated with
      supporting product under warranty are charged to the reserve instead of
      current period cost. The reserve, included in other accrued liabilities in
      the financial statements, is adjusted periodically based upon actual
      experience.



                                      -6-


<PAGE>   8




      DEPRECIATION - Fixed assets are carried at cost. Depreciation is based on
      the estimated useful lives of the assets and is computed using an
      accelerated method. Prior to April 1997 depreciation was computed using
      the following useful lives:


               Equipment                          5 years
               Furniture and Fixtures             7 years


      Effective April 1, 1997, the Company adopted a three-year amortization
      period for all computer equipment. The change in service life was applied
      on a prospective basis resulting in a fourth quarter adjustment (see Note
      10).

      INVENTORY - Inventories are valued at the lower of cost or market, with
      cost being computed using the first-in, first-out method. In fiscal 1997,
      due to slower than expected sales, the Company decided to record a reserve
      for OCTUS PCTA inventory. This reserve represents essentially the entire
      cost of the OCTUS PCTA-related retail product inventory. Inventories
      consist of:

                                                         1998          1997   
                                                                              
               Literature and other documentation     $  27,107     $  39,176 
               Computer hardware                        933,500       958,173 
               Allowance for obsolete inventory        (873,135)     (895,934)
                                                       --------      -------- 
                                                                              
               Total inventory                        $  87,472     $ 101,415 
                                                      =========     ========= 
               
      SIGNIFICANT CUSTOMERS - Most of the Company's sales are to distributors in
      the telephony industry. The Company had sales to a major distributor, as
      follows:


                                         SALES FOR THE YEARS ENDED JUNE 30, 
                                             1998                1997 
                                         ----------------    ----------------
                                         AMOUNT         %    AMOUNT         %

                    Distributor A       $5,969,862     61%  $3,908,169     56%
                                        ==========     ==   ==========     == 


      The Company had gross accounts receivable from major distributors, each of
      which was in excess of 10% of the Company's total accounts receivable, as
      follows:


                                                                 PERCENT OF
                                                                   GROSS
                                                                 ACCOUNTS
                                                 DISTRIBUTORS    RECEIVABLE
                    June 30, 1998                    1               86%
                    June 30, 1997                    2               74%



                                      -7-

<PAGE>   9




      INTERNATIONAL SALES - The Company had international sales as follows:


                                        SALES FOR THE YEARS ENDED JUNE 30,

                                             1998                1997
                                       ---------------      ----------------
                                        AMOUNT      %         AMOUNT     %  

               Canada                  $ 69,844     1%      $161,952     2%
               Other                     40,368    --         34,913     1%
                                       --------   ---       --------   --- 

               Total                   $110,212     1%      $196,865     3%
                                       ========   ===       ========   === 


      SOFTWARE DEVELOPMENT COSTS - Costs incurred internally for creation of the
      computer software product are charged to research and development expense
      when incurred until technological feasibility has been established for the
      product. Thereafter, until general release, all software production costs
      are capitalized and subsequently reported at the lower of amortized cost
      or net realizable value. The capitalized costs are amortized on a
      straight-line basis over the estimated economic life of the product.

      Costs capitalized were $190,386 and $190,665 and related amortization was
      $323,599 and $135,540 for 1998 and 1997, respectively. The Company
      periodically evaluates the capitalized cost relative to potential sales
      and accelerates the write-off when appropriate. This accelerated write-off
      resulted in amortization of $181,042 and $26,585, included within total
      amortization expense, in fiscal 1998 and 1997, respectively.

      LICENSING FEE - The Company has agreements with distributors which require
      the payment of a license fee on certain software sales made by the
      distributors. This license fee is for the distribution of the Company's
      products.

      FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of certain of the
      Company's financial instruments, such as cash, trade accounts receivable
      and trade accounts payable, approximate their fair values.

      ACCOUNTING CHANGES - In 1997, the Financial Accounting Standards Board
      (FASB) issued Statement No. 130, "Reporting Comprehensive Income," and
      Statement No. 131, "Disclosures about Segments of an Enterprise and
      Related Information." These statements, which are effective for periods
      beginning after December 15, 1997, expand or modify disclosures and,
      accordingly, will have no impact on the Company's reported financial
      position, result of operations or cash flows. In 1998, the FASB issued
      Statement No. 133, "Accounting for Derivative Instruments and Hedging
      Activities." This statement, which is effective for all periods beginning
      after June 15, 1999, will have no impact on the Company's reported
      financial position, results of operations or cash flows.

      Additionally, in 1997, FASB issued Statement No. 128, "Earnings Per Share"
      which revises the manner in which earnings per share is calculated. This
      statement was adopted during 1998 and has been reflected within the
      accompanying financial statements. Earnings per share for 1997 have been
      restated. See Note 6.

      CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, the
      Company considers all money market instruments to be cash equivalents.

      RECLASSIFICATION - Certain fiscal 1997 amounts have been reclassified in
      order to conform to fiscal 1998 presentation.




                                      -8-



<PAGE>   10
3.    MARKETABLE SECURITIES


      The Company maintains various investments in treasury bills and federal
      agency notes which are classified as held-to-maturity and are reported at
      amortized cost in accordance with FASB Statement No. 115 "Accounting for
      Certain Investments in Debt and Equity Securities". All items mature
      within one year. The cost and market value of the investments are
      summarized below:

                                                                        Net
                                               Amortized            Unrealized
Description                                      Cost       Market     Gain

June 30, 1998 - Federal Agency Notes           $909,147   $915,957    $6,810

June 30, 1997 - United States Treasury Bills   $363,095   $372,677    $9,582


4.    OPERATING LEASES

      OPERATING LEASES - The Company leases its office facility in Norwood,
      Ohio. This operating lease, which began in March 1995 and expires in April
      2002, calls for escalating lease payments over the term of the lease. The
      Company records lease expense on a straight-line basis over the life of
      the lease.

      The annual minimum rent to be paid under the operating lease agreement for
      the facility in Norwood, Ohio is as follows:

                    Year Ending June 30:
                       1999    $ 205,000
                       2000      210,000
                       2001      220,000
                       2002      183,000

      Rent expense for the leased office space was $293,105 and $295,506 in 1998
      and 1997, respectively.

5.    NOTES PAYABLE

      The Company had a Term Note Payable - Bank bearing interest at the prime
      lending rate (8.25% at June 30, 1997) which was paid in full, principal
      and interest, on December 19, 1997. The note was secured by various
      securities on deposit with the bank.

6.    CAPITAL STOCK AND INCOME (LOSS) PER SHARE

      The following schedule is a summary of the Company's shares of capital
      stock at June 30, 1998 and 1997.


                              Common Stock In

                   Authorized       Issued        Outstanding      Treasury

     Balance        15,000,000     12,281,751       12,279,751       2,000


      Income (loss) per common share was based on the weighted average number of
      common shares outstanding during each period. Exercise of stock options is
      not assumed in 1997 as the effect is antidilutive.



                                      -9-


<PAGE>   11



      In accordance with FASB No. 128 "Earnings Per Share," the Company's basic
      and diluted earnings per share were determined as follows:


<TABLE>
                                                 1998                                          1997
                                  ---------------------------------------    ---------------------------------------
                                    INCOME         SHARES       PER SHARE      INCOME          SHARES      PER SHARE
BASIC EPS                         (NUMERATOR)   (DENOMINATOR)    AMOUNT      (NUMERATOR)    (DENOMINATOR)    AMOUNT

<S>                               <C>            <C>             <C>         <C>              <C>           <C>    
Income (loss) available to
  common stockholders             $1,246,173     12,279,751      $0.10       $(1,263,907)     12,279,751    $(0.10)

EFFECT OF DILUTIVE SECURITIES

Stock options                                       133,719
                                  ----------     ----------      -----       -----------      ----------    ------ 

DILUTED EPS

Income (loss) available to
  common stockholders
  and assumed conversions         $1,246,173     12,413,470      $0.10       $(1,263,907)     12,279,751    $(0.10)
                                  ==========     ==========      =====       ===========      ==========    ====== 
</TABLE>


7.    STOCK OPTION PLAN

      During 1994, the Board of Directors approved a plan providing for the
      granting, to employees, options for the purchase of a maximum of 1,500,000
      shares of common stock. In 1996, the plan was amended to provide for
      non-employee eligibility. Excluding certain options granted in February
      1994, all options have been granted at an exercise price equal to the fair
      market value at the date of grant and become exercisable equally over a
      four-year period. The February 1994 options were granted at a price below
      fair market value at the date of grant and were subsequently adjusted to
      market. The 1994 options granted become exercisable equally over a
      two-year period. All options expire at the end of ten years from the date
      of grant.

      The Company has adopted the disclosure only provision of SFAS No. 123 and
      applies APB Opinion No. 25 in accounting for its stock options. Had
      compensation cost for stock option grants made in fiscal years 1998 and
      1997 been determined using the fair value method consistent with SFAS No.
      123, the Company's net income (loss) and net income (loss) per share would
      have been effected as follows:


<TABLE>
<CAPTION>
                                                                 1998            1997

<S>                                                           <C>            <C>         
For the year ended June 30:
  Net income (loss) - as reported                             $1,246,173     $(1,263,907)
  Net income (loss) - proforma                                 1,135,946      (1,282,310)
Basic and diluted earnings (loss) per share - as reported           0.10           (0.10)
Basic and diluted earnings (loss) per share - proforma              0.09           (0.10)
</TABLE>


      The fair value of each option is estimated on the date of grant using the
      Black-Scholes option pricing model with the following weighted average
      assumptions:



                                      -10-



<PAGE>   12
'
                                      1998         1997

Expected volatility                     69%         15%
Risk-free interest rate               5.52%        6.1%
Expected term of options           5 years      5 years
Expected dividend yield                  0%          0%


      Information regarding the Company's stock option plan for the years ended
      June 30, 1998 and 1997 is as follows:


<TABLE>
<CAPTION>
                                                    1998                     1997
                                            ----------------------  ----------------------
                                                         WEIGHTED                WEIGHTED
                                                         AVERAGE                 AVERAGE
                                                         EXERCISE                EXERCISE
                                            OPTIONS       PRICE      OPTIONS      PRICE
                                           ---------     --------    -------     ---------
<S>                                         <C>          <C>        <C>          <C>     
Outstanding at beginning of year             380,112      $   0.95    365,417     $   0.98
Granted                                      650,855          0.51     57,000         0.78
Forfeited                                   (109,318)         0.61    (41,925)        1.04
Exercised                                                                (380)        0.69
                                           ---------                              --------

Outstanding at end of year                   921,649      $   0.68    380,112     $   0.95
                                           =========                 ========

Options exercisable at end of year           213,429      $   0.92    148,119     $   0.91
                                           =========                 ========

Weighted average fair value of options
  granted during year                      $    0.17                 $   0.20
</TABLE>


<TABLE>
<CAPTION>
                                                    OUTSTANDING                      EXERCISABLE
                                          ---------------------------------     ----------------------
                                                      WEIGHTED     WEIGHTED                   WEIGHTED
                                                      REMAINING    AVERAGE                    AVERAGE
                                                     CONTRACTUAL   EXERCISE                   EXERCISE
                                          OPTIONS    LIFE (YEARS)   PRICE       OPTIONS         PRICE

<S>                                     <C>           <C>          <C>         <C>           <C>   
Range of exercise price
 .29  - .69                                340,351       8.99         $0.38       51,138        $ 0.69
 .71  - .80                                350,600       9.74          0.72       12,500          0.80
 .88  -1.14                                230,698       7.22          1.05      149,791          1.01
                                          -------                               -------              

                                          921,649       8.83         $0.68      213,429        $ 0.92
                                          =======                               =======                
</TABLE>


8.    INCOME TAXES

      Deferred income tax assets and liabilities are computed for differences
      between the financial statement and tax basis of assets and liabilities
      that will result in taxable or deductible amounts in the future based on
      enacted tax laws and rates applicable to the periods in which the
      differences are expected to affect taxable income. Valuation allowances
      are established when necessary to reduce deferred tax assets to the amount
      expected to be realized. Income tax expense is the tax payable or
      refundable for the period plus or minus the change during the period in
      deferred tax assets and liabilities.


                                       -11-


<PAGE>   13


Deferred taxes consist of the following:

                                        JUNE 30,       JUNE 30,
                                          1998           1997

Current deferred tax asset:
 Deferred revenue                      $ 150,488      $  59,951
 Inventory reserve                       296,866        304,617
 Accrued compensation                      8,197          7,581
 Reserves not currently deductible         9,655         12,785
 Accrued rent                             26,554         23,629
                                       ---------      --------- 
     Total                               491,760        408,563
 Less valuation allowance               (491,760)      (408,563)
                                       ---------      --------- 

Net                                    $      --      $      -- 
                                       =========      =========


                                            JUNE 30,        JUNE 30,
                                             1998             1997

Non-current deferred tax asset:
  Net operating loss carryforward         $ 2,027,953      $2,312,046
  Research and development credits            178,925         156,725
                                          -----------      ----------
     Total                                  2,206,878       2,468,771
Non-current deferred tax liability:
  Deferred software development costs         (76,540)       (121,832)
                                          -----------      ----------
  Net non-current deferred tax asset        2,130,338       2,346,939
  Less valuation allowance                 (2,130,338)     (2,346,939)
                                          -----------      ----------

Net                                       $        --      $       -- 
                                          ===========      ==========


The provision for income taxes for the year ended June 30, 1998 and 1997
consists of the following:


                                                      1998          1997

Current provision                                  $      --     $      --
Deferred credit (provision)                         (133,404)      460,315
                                                   ---------     ---------
          Total                                     (133,404)      460,315
Decrease (increase) in the valuation allowance       133,404      (460,315)
                                                   ---------     ---------

Income tax expense                                 $      --     $      --
                                                   =========     =========


At June 30, 1998, the Company has net operating loss carryforwards of
approximately $5,900,000 for U.S. Federal tax purposes. Such loss carryforwards,
if unused as offsets to future taxable income, will expire beginning in 2002 and
continuing through 2011. Also at June 30, 1998, for U.S. Federal tax purposes,
the Company has research and development credit carryforwards available to
offset future income taxes of approximately $178,000 which will begin to expire
in 2002.



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<PAGE>   14



9.    RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
      PRINCIPLES ("CANADIAN GAAP AND U.S. GAAP")

      These financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States.

      During the years ended June 30, 1998 and 1997, differences between
      Canadian GAAP and U.S. GAAP arose as a result of depreciation. For U.S.
      GAAP purposes, furniture and fixtures and equipment are depreciated over
      useful lives of seven and three years, respectively, using an accelerated
      method. For Canadian GAAP purposes, furniture and fixtures and equipment
      are to be depreciated over useful lives of five and three years,
      respectively, using a straight-line method. For the year ended June 30,
      1998, the difference in methodology results in a reported US GAAP net
      income in excess of Canadian GAAP of $11,768. For the year ended June 30,
      1997, the difference in methodology results in a reported US GAAP net loss
      in excess of Canadian GAAP of $91,015. The difference does not have a
      material effect on the earnings per share calculation for either year.

10.   SIGNIFICANT FOURTH QUARTER ADJUSTMENTS

      The Company's fiscal 1998 and 1997 results are inclusive of significant
      adjustments recorded in the fourth quarter. In 1998, the Company recorded
      a change in estimate of the economic life of certain products and a change
      in estimate for warranty reserves. In 1997, the Company recorded a change
      in estimate associated with the service lives of computer equipment and a
      change in estimate for outstanding fees due to an outside party. The
      effects of the adjustments on income and related per share amounts were as
      follows:


<TABLE>
<CAPTION>
                                         1998                         1997
                              --------------------------   -------------------------
                              INCOME/(LOSS)    PER-SHARE   INCOME/(LOSS)   PER-SHARE

<S>                            <C>            <C>           <C>            <C>
Software Development Costs     $(181,042)     $  (0.01)
Warranty Reserves                (98,291)        (0.01)
Depreciation                                                 $ (94,696)    $  (0.01)
Outstanding fees                                               160,611         0.01
</TABLE>



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