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

                                   Form 10-KSB
(Mark One)

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

            For the fiscal year ended May 31, 2002

      |_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

            For the transition period from ____________ to ____________.

                         Commission File Number 0-22735

                       ROBOCOM SYSTEMS INTERNATIONAL INC.
                 (Name of small business issuer in its charter)

                   New York                                   11-2617048
(State or other jurisdiction of incorporation             (I.R.S. Employer
              or organization)                           Identification No.)

    511 Ocean Avenue, Massapequa, New York                     11758
    (Address of principal executive offices)                 (Zip Code)

Issuer's telephone number: (516) 795-5100

Securities registered under Section 12(b) of the Act: None

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

                          Common Stock, $.01 par value
                          ----------------------------
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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 |_|

Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure is contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|

State issuer's revenues for its most recent fiscal year. $3,106,510

As of August 15, 2002, the issuer had outstanding 4,495,984 shares of its common
stock.

As of August 15, 2002, the aggregate market value of the issuer's common stock
held by non-affiliates was $1,213,916 (based upon the closing price of the
issuer's common stock on The Over-the-Counter Bulletin Board on such date).

Transitional Small Business Disclosure Format (check one) Yes |_| No |X|

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                                     Part I

Item 1. Description of Business.

General

      Robocom Systems International Inc. (the "Company"), incorporated in 1982,
develops, markets and supports advanced warehouse management software solutions
that enable companies to realize significant cost savings by automating their
warehouse operations and providing inventory visibility throughout the supply
chain. The Company's primary product, RIMS(TM), is a client-configurable
software solution that enables a company's warehouse to respond to a customer
order with greater accuracy and in a more timely manner, thereby turning the
warehouse into a competitive advantage. RIMS operates in an open system
environment and interfaces with an organization's existing information systems.
In addition to providing RIMS software licenses, the Company provides
installation, training, implementation support and maintenance services and
resells related hardware.

Industry Background

      In recent years, a number of business trends have converged to change the
historical relationships among retailers, manufacturers and suppliers, and
distributors. Increasing globalization of the marketplace has resulted in
greater geographic diversity of supply and production facilities and has
increased competition as more suppliers are offering a greater range of product
offerings at multiple price levels. In addition, a number of trends in
retailing, including the emergence of virtual electronic commerce, shorter
product life cycles, a significant increase in the number and variety of product
offerings, and a more informed and price conscious consumer, have put increased
pressure on retailers to reduce expenses to remain competitive. Consequently,
distributors and retailers are seeking to reduce inventory and inventory
management costs by selecting suppliers that can respond to "just-in-time"
purchasing and "quick response" delivery techniques that enable the distributor
or retailer to better match product inventory to actual customer demand.
Retailers and other vendors also are increasingly demanding that their suppliers
comply with standards for electronic commerce and very specific labeling
requirements.

      As a result of these trends, manufacturers and suppliers are experiencing
significant pressures to satisfy customer demands for improved product delivery
visibility and reduced delivery times. Historically, manufacturers have
organized their businesses primarily to increase manufacturing efficiency and
output. However, as major customers shift the burden of inventory management to
the manufacturer or distributor, manufacturers and distributors have refocused
their business process re-engineering efforts to evaluate the service and value
provided to customers from existing operations and supply chains and are seeking
alternatives for streamlining the supply, warehousing and distribution process.
The need to satisfy customer demand for more effective and efficient order
fulfillment has caused manufacturers and distributors to seek greater
communication, understanding and control over the entire supply chain. This is
necessary to minimize materials inventories, ensure the timing of deliveries
from suppliers, reduce manufacturing cycle times, minimize finished goods
inventories, maximize the efficiency of warehousing and transportation systems
and provide superior response times to customers.

      Retailers, manufacturers and suppliers, and distributors are increasingly
recognizing that significant cost savings can be achieved through warehouse
computerization and automation. An effective warehouse management system will
improve customer service and reduce costs by achieving the following objectives:

      o     Improve Inventory Accuracy. The self-checking nature of an automated
            warehouse management system ensures inventory accuracy and
            eliminates the costly series of manual checks and backtracking that
            results when the inventory on the books and the physical inventory
            in a warehouse do not match. As a result of the poor accuracy in
            traditional printed paper-based warehouses, costly physical
            inventories need be taken to reconcile the system inventory to the
            actual inventory. The inherent accuracy and cycle counting features
            of a warehouse management system can eliminate the need for a
            physical inventory.

<PAGE>

      o     Reduce Errors. Receiving, stocking and picking errors are common in
            a manual paper-based warehouse. An automated warehouse management
            system is self-checking and ensures virtually 100% accuracy for
            every transaction.

      o     Improve Space Utilization. A warehouse management system tracks all
            warehouse locations and can direct where each product can best be
            stored for maximum space utilization.

      o     Increase Productivity. A warehouse management system maximizes the
            time operators spend adding value to the distribution process,
            filling orders and receiving goods. System direction minimizes
            search time and dispatches operators and pickers to the best task
            given the equipment and current location. A warehouse management
            system also gives the warehouse control of the workload and provides
            visibility into the entire range of tasks that need be performed
            within a given time period.

      o     Improve Labor Management and Reporting. Paperwork in a warehouse for
            picking and stocking drastically hampers productivity. Paperless
            warehouse management system applications provide real-time
            information, reduce the possibility for data entry errors and
            information delays and improve productivity. In addition, a
            warehouse management system has vast reporting capabilities because
            every transaction is recorded. In paper-based warehouses, the only
            method available for tracking productivity and performance is a
            manual log that is time consuming to keep, susceptible to error and
            is only as good as the information each operator provides.

      o     Support Internet Transaction and Electronic Commerce. Trading
            partners are increasingly expecting that systems with which they
            interface will be able to support electronic commerce as well as
            specific labeling and packaging requirements. A warehouse management
            system can provide compliant labeling and the data required to
            support electronic commerce.

      o     Integration. Manufacturers and suppliers require warehouse
            activities to be integrated with their manufacturing, transportation
            and accounting systems and those of their customers. Such levels of
            data processing and system integration require a capable,
            highly-integrated warehouse management system solution.

      The Company believes the increasing need of manufacturers and distributors
to satisfy customer demand for more effective and efficient order fulfillment
will continue the trend of manufacturers and distributors to seek the benefits
of a state-of-the-art warehouse management system. Additionally, electronic
commerce provides the means for customers, vendors and suppliers to collaborate
and share data to make the supply chain more efficient. The Company believes its
products are well positioned for the growth anticipated in the electronic
commerce market.

Strategy

      The Company's objective is to continue to be a leading provider of
warehouse management software solutions and services, be an integral part of the
E-business/electronic commerce thrust and supply chain market and expand its
presence worldwide. To achieve these objectives, the Company has adopted the
following strategies:

      o     Strategic Alliances. The Company intends to supplement its marketing
            efforts by aligning itself with complementary solutions providers
            and technology partners, such as E-business providers and
            transportation providers, as well as supply chain management and
            enterprise resource management solutions. Strategic alliances also
            will assist the Company in keeping pace with technological
            developments within the marketplace. Through such alliances, the
            Company expects to gain greater exposure and acceptance of its
            products and services. See "-- Sales and Marketing."

      o     New Product Development. The Company intends to continue to produce
            a quality warehouse management system product that meets client
            expectations in terms of functionality, flexibility, procurement
            cost, implementation cost and ongoing maintenance cost. The Company
            believes RIMS


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<PAGE>

            meets these expectations and will continue to do so as the product
            evolves. The Company is committed to continuous product improvement
            through a software development program that is driven by customer
            input. The Company intends to continue to utilize its industry,
            customer and supplier relationships to keep abreast of emerging
            standards, protocols and application programming interfaces as such
            trends are introduced and gain market acceptance. The Company
            believes Internet-based applications will drive the next significant
            technology change in the warehouse management system industry. The
            Company believes that an event driven, open, world wide web-based,
            multi-tiered application architecture will supplant the traditional
            rule-based, proprietary client/server technology currently employed
            by its competitors. See "-- Products,""-- Third Party Hardware
            Products," and "-- Product Development." In addition, the Company
            believes the incorporation of certain management decision support
            tools will make the product more unique.

      o     Improve Vertical Market Concentration. By tailoring RIMS to support
            the unique size requirements of certain targeted vertical markets,
            the Company believes it will have a competitive advantage in selling
            to prospective clients regardless of size in the same industry. The
            Company believes the expertise developed in each of these vertical
            markets also will further contribute to its standard RIMS product.
            See "-- Products."

      o     International Expansion. The Company intends to continue to
            establish itself in the international business market. In this
            regard, the Company has established formal relationships with
            distributors in Argentina, Belgium, Luxembourg, the Netherlands and
            the United Kingdom that are established systems integrators with
            large client bases in their respective regions. The Company has
            established an international sales and support office in the
            Netherlands. The Company intends to establish additional
            international relationships. See "-- Sales and Marketing."

      o     Training, Implementation and Support. A key to the success of a
            warehouse management system supplier is its ability to provide the
            necessary services and expertise required to effectively implement a
            complex warehouse management system. The Company believes the
            efficiency of its implementation process will allow the Company to
            increase sales to prospective clients seeking standard, configurable
            software solutions and enable the Company to increase its market
            share with respect to its competitors. See "-- Service and
            Maintenance" and "-- Sales and Marketing."

Products

      The Company's principal product, RIMS, is a full-featured,
state-of-the-art warehouse management solution. RIMS is a highly scaleable,
highly configurable and flexible product with baseline functionality and
features sufficient for most warehouse installations. The strength of RIMS is
its adaptability to varied environments with little or no modification. In the
United States, RIMS is generally sold as an entire turnkey solution that
provides the Company's clients with the software, services and hardware
necessary for a comprehensive warehouse management system solution.
Internationally, RIMS is generally sold to clients via distributors and
implemented by distributors and/or implementers.

      The Company also markets pre-configured versions of RIMS that are
specifically targeted to various vertical markets, such as food distribution,
medical and automotive. These pre-configured versions use the basic RIMS system
as the core with additional industry-specific features and functions.

      As a standard, "off-the-shelf," highly-configurable software system, RIMS
is designed to be deployed in approximately four months and to achieve
measurable cost savings for clients. The efficiency of implementing the
Company's software solutions results from the open systems architecture of RIMS,
which runs on various operating platforms (most notably Unix, Linux and NT), has
a "Windows or screen" configurator and uses either Oracle or Progress database
management system software. The Company believes its clients recognize cost
savings throughout the warehousing and distribution processes as a result of
increases in worker productivity, efficiencies in space utilization, increases
in inventory accuracy due to lot number controls, product expiration date
controls and product serialization controls, and the elimination of costly
shipping errors through the use of bar code technology.


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<PAGE>

      RIMS. RIMS is a responsive software application designed to manage an
entire warehouse operation. As a user configurable solution, RIMS incorporates
numerous warehousing practices and strategies as standard capability. RIMS is an
open systems solution that is not restricted to any particular equipment or
computer system. As such, the application software has been installed on
numerous hardware platforms and database management systems. RIMS can interface
with an organization's current materials handling equipment and is easily
integrated with customer or third party purchasing, electronic data exchange,
bar coding, accounting, manufacturing resource planning ("MRP") and enterprise
resource planning ("ERP") applications. RIMS also utilizes radio frequency
communications and bar coding to provide real-time management, validation and
tracking of all warehouse activities. RIMS directs personnel and equipment and
manages the inventory, space, labor and equipment in the warehouse in an
efficient and cost effective manner.

      RIMS is a comprehensive application that manages the receiving, put away,
outbound order processes, and general warehouse operations. With each warehouse
process, RIMS provides a variety of tactical choices that can be user defined to
a client's specific requirements and needs and that are designed to maximize
efficiency. Major system functions include:

      o     Internet and Intranet Ready. The product has been engineered using
            Internet and intranet compatible technologies and standards.
            Warehouse users and authorized trading partners can access warehouse
            data (e.g. shipment details or inventory levels) either in real-time
            local access, via the World Wide Web or via telnet remote access.

      o     Receiving. The receiving process provides control over the receipt
            of inventory through scanning the bar codes of incoming product to
            ensure accuracy of inventory in the warehouse. This process
            facilitates the matching of purchase orders, transfer orders,
            advanced shipping notices and customer returns. The receiving
            process supports pre-storage activities, such as returned goods
            processing and quality assurance inspection.

      o     Putaway Process. The putaway process ensures that all inventory is
            stored in the most efficient location available based on
            pre-configured management strategies. The Company or the client will
            configure the system to implement the client's unique business
            demands, assigning locations based on the client's parameters with
            consideration given to product characteristics, product velocity,
            demand codes, delivery and shipping requirements, storage devices
            and cross-docking strategies.

      o     Picking and Shipping. The RIMS outbound order process analyzes each
            order to determine the most efficient packing, loading and shipping
            procedures. The order processing function is configured to match
            each client's management strategies. The outbound order process
            includes, among other features, order selection, allocation,
            picking, loading and shipping.

      o     Management. The general warehouse operations process manages the
            availability of space and the movement of warehouse personnel,
            inventory and material handling equipment through information shared
            by management and warehouse employees. The real-time information and
            product flexibility allows a client to test or implement different
            strategies to maximize productivity and efficiency. The system
            allows clients to combine multiple tasks into a single job
            assignment, such as grouping a put-away and picking assignment into
            one trip. RIMS facilitates cycle counting, automatic replenishment,
            product moves, inventory control and consolidation, labor tracking,
            system security, space utilization, vehicle management and
            rewarehousing.

      o     Standard Interfaces. The Company has developed standard, certified
            interfaces to two leading ERP products: MFG/PRO (QAD) and R/3 (SAP).
            These interfaces will enable users of these ERP products to
            seamlessly benefit from RIMS warehouse management.


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<PAGE>

Service and Maintenance

      In addition to licensing of RIMS, the Company provides its clients with a
wide range of services that include:

      o     Computer software and hardware configuration services

      o     Operational process review and consultation

      o     Project management of the implementation

      o     Implementation support

      o     Configuration and user training

      o     Customization

      o     Material handling and facility layout consulting

      o     Software and hardware maintenance services.

      With a goal of total client satisfaction, the Company offers a structured
program that typically lasts four to six months and begins with the development
of joint business scenarios between the Company and its client. This program
includes configuration of the software and hardware, configuration training, a
prototype "pilot training" program, project management and implementation
support services. These programs facilitate and integrate the skill of the
Company into the client's processes and operations resulting in a modeling of
the client's warehouse management operations. The outcome of this program is the
early identification of client operating issues prior to client implementation.
In addition, this program aids in the development of standard warehouse
operating procedures for the client. The Configuration course explains basic
RIMS terminology and methodology related to system configuration and setup. The
Company provides management and installation of operating systems, hardware,
networks, communication links and relational database management tools. Standard
user training for RIMS includes a Supervisors' course that provides supervisory
warehouse management training that is necessary to effectively control and
monitor the warehouse facility and an Operators' course that is a hands-on
training course for warehouse workers concentrating on the execution of RIMS
related tasks. In addition, curricula include a post-implementation class and an
audit of client operational procedures after implementation. Customized courses
are also made available on request. A Train-the-Trainer course provides
information and materials to third-party trainers who will perform the future
RIMS training.

      The Company offers turnkey maintenance services for the RIMS software,
third party software and certain hardware components of the system under a
separate maintenance agreement. Maintenance agreements are typically initiated
at the time of implementation, are renewable annually, and entitle the client to
telephone support, software upgrades, installation assistance and priority
problem resolution, including software fixes. Maintenance fees are typically a
percentage of the license fees (excluding hardware), with additional fees for
extended hours. If elected by the client, maintenance support is offered
24-hours per day, seven days per week. In the event a client does not enter into
a maintenance agreement with the Company, it would still be entitled to software
fixes for reported problems during the first year of its system's installation
pursuant to the one-year warranty provided to the Company's clients in the end
user contract; however, to date, all RIMS clients have entered into a
maintenance agreement with the Company after system implementation.

      In those cases in which the standard RIMS product cannot meet the client's
needs, the Company can enter into contracts to perform certain modifications to
the baseline product.

Third Party Hardware Products

      The Company's RIMS products use an open architecture that enables clients
to use various operating systems, operate on multiple hardware platforms and
inter-operate with many third party software applications and legacy systems.
This open system capability enables clients to continue using their existing
computer resources and to choose among a wide variety of existing and emerging
computer hardware and peripheral technologies.


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<PAGE>

      In conjunction with domestic sales of RIMS, the Company offers for resale
a variety of hardware products developed by third parties, including computer
hardware, radio frequency terminal networks, bar code printers and scanners, and
other peripherals. The Company resells all third-party products pursuant to
agreements with the products' manufacturers or through distributor authorized
reseller agreements pursuant to which the Company is entitled to purchase
products at discount prices and to receive technical support in connection with
product installations and subsequent product malfunctions. The RIMS
hardware-related agreements generally permit the Company to resell the
third-parties' products to any RIMS user in the United States. The Company
anticipates that its foreign distributors or other third party vendors will sell
any hardware or peripherals required in connection with the sale of RIMS outside
of the United States.

Clients

      The Company targets its marketing efforts primarily on manufacturers,
distributors, retailers and wholesalers in the food processing, consumer
products, petro chemical products, public utilities and pharmaceutical sectors,
as well as other high-volume wholesalers.

      Client orders for the Company's RIMS products over the last three fiscal
years have ranged from approximately $50,000 to over $1 million. Due to the size
of most orders and the need for differing amounts of modification for each
installation, the Company historically has obtained orders from a relatively
small number of new clients each fiscal quarter. As a result, individual clients
have often accounted for more than 10% of total revenues in a particular fiscal
period. For each of the fiscal years ended May 31, 2000, 2001 and 2002, the
Company had one client that accounted for approximately 27%, 14% and 19% of
total revenues, respectively. Because of the nature of the Company's business
operations, the Company anticipates that the number of clients that account for
more than 10% of total revenues for a fiscal period will vary from period to
period depending on the status and timing of significant orders by a particular
client or clients in any given fiscal period.

Sales and Marketing

      The Company currently markets its products and services primarily through
a direct sales force in North America and directly and indirectly in other parts
of the world. The Company conducts marketing and sales programs that include
strategic partner development, public relations, direct mail, advertising,
seminars, trade shows and ongoing client communications programs. Sales and
marketing personnel are located at the Company's headquarters in Massapequa, New
York. The Company has an international sales and support office in Amsterdam,
Netherlands that seeks viable distributors in its region of operation and
technically supports RIMS products.

      The Company obtains sales leads through partners, advertising, seminars,
trade shows and relationships with industry consultants and other key players. A
typical sales cycle begins with the generation of a sales lead or the receipt of
a Request for Proposal ("RFP") from a prospective client or his representative.
After qualification of the sales lead and analysis of the prospective client's
requirements, a formal proposal in response to the RFP is prepared. The proposal
generally describes how RIMS is expected to meet the RFP requirements and
associated costs. Product demonstrations are often conducted at the prospective
client's facilities using realistic data and scenarios. Site visits to other
RIMS installations are also encouraged by the Company's sales staff. While the
sales cycle varies substantially from opportunity to opportunity, it typically
ranges from six months for a standard system and from six to twelve months for a
system requiring substantial modification.

      The Company has developed a standardized, comprehensive and detailed
implementation plan to guide new clients smoothly from contract signing to
system startup. The Company's project managers utilize this methodology to
ensure that projects are completed effectively and within budget. Depending on
the experience level of the client and the ease of host integration, a first
time client will be placed on a plan that ranges from sixteen to twenty-four
weeks after the contract signing. Subsequent sites can typically be implemented
four to eight weeks apart.


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<PAGE>

      The Company intends to supplement its marketing efforts by aligning itself
with complimentary solutions providers and technology partners. Strategic
alliances also assist the Company in keeping pace with technological
developments of the major software and hardware vendors and, in certain
instances, provide the Company with product development services. The Company
has entered into a strategic alliance with QAD, Inc., the developer of the
MFG/PRO ERP system. This relationship includes co-marketing and
technology-sharing arrangements, and provides the Company access to a very large
existing client bases. Purchasers of the MFG/PRO ERP system may be linked to
RIMS through an application program interface module that contains software of
the Company as an integral component. In addition, the Company has entered into
a Solutions Integrator Agreement with Symbol Technologies, Inc. as an authorized
reseller of its products and licensed software.

      The Company markets RIMS through resellers located in the Argentina,
Belgium, Luxembourg, the Netherlands and the United Kingdom. The Company's
resellers are established systems integrators with large client bases in their
respective regions. The Company's agreements with such resellers are not
exclusive. The Company intends to establish additional non-exclusive
international resellers in Europe.

      For the fiscal years ended May 31, 2000, 2001, and 2002, approximately
5.9%, 16.8% and 11.0%, respectively, of the Company's revenues were generated
outside the United States. The Company expects that international sales will
increase as the Company adds additional international resellers. There are a
number of risks inherent in the Company's current and proposed international
business activities. There can be no assurance that such factors will not have
an adverse effect on the ability of the Company to increase revenues from future
international sales and, consequently, on the Company's results of operations.

Product Development

      The Company seeks to offer an extensive, integrated product line that
provides complete warehouse management functionality to warehouses worldwide. To
effect this strategy, the Company intends to continue to introduce new modules,
upgraded functionality and enhancements to existing products.

      The Company, through its development and support personnel, works closely
with its clients and prospective clients to determine their requirements and to
design enhancements and new products to meet client needs. Using input from the
user community, the Company's steering committee will select suitable
enhancements for inclusion in future releases of RIMS. Product improvements are
often initiated by client-funded modifications that can be incorporated into the
standard package. Clients benefit by funding enhancements that improve the
baseline product through lower maintenance costs and future ability to upgrade.
All Company product development is performed by its employees. The Company's
capitalized software development costs were $1,261,600, $494,668 and $331,290 in
fiscal 2000, 2001 and 2002, respectively.

      The Company plans to undertake continuous product improvement to ensure
competitiveness. New modules and features are constantly being added to the
product. In December 1999, the Company released Version 4.2, which enables users
to manage and operate their warehouses using an easily managed web browser
interface on either a corporate Intranet or the Internet without the need for
additional software. This new Data View technology provides secure, real-time
visibility and access directly into a RIMS warehouse.

      The Company is continuing its software development efforts by designing
enhancements to RIMS using Internet technology that focuses on the Java
programming language and Extensible Markup Language (XML). By incorporating this
technology into RIMS, authorized users and their supply chain applications on
the World Wide Web are able to access and manage a RIMS controlled warehouse
from anywhere on the Internet. For example, a RIMS client is able to permit its
authorized users to access its RIMS data repository via the Internet, which will
reduce the burden on its own customer service department because the status of
orders and the location of inventory for an order may be monitored directly by
the authorized user (i.e., a retail client or plant manager). Protection of the
client's data and restriction of unauthorized access are provided within the
RIMS system using standards-based authorization and encryption. Scalability and
ease of maintenance are additional benefits of this architecture. The first
Internet- and intranet-based, Windows NT enabled RIMS Version was released in
April 1999 as Version 4.0.


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<PAGE>

Version 4.2, which provides additional Internet- and intranet-based
capabilities, was released in December 1999, and Version 4.3 was released in
July 2000. RIMS Version 4.3 features multiwarehouse functionality, a yard
management system for inbound trucks and a link to a transportation management
system (TMS). RIMS Version 4.3 also highlights tasks interleaving and new system
directed RF task for increased operator productivity. During Fiscal 2001,
additional features were added to RIMS 4.3, including batch picking, cycle
counting by item velocity, and an interface to external systems structured
around the technology of Extensible Markup Language (XML). RIMS.alert, an
event-driven tool that employs XML technology to trigger electronic mail
messages to subscribers, was released in May 2001 and can be integrated with a
customer's RIMS application or implemented independently.

      The Company intends to continue development of enhancements and to explore
new opportunities as they relate to the acceleration of electronic commerce over
the Internet. New products that extend the capabilities of a traditional
warehouse management system to enhance a user's position in the supply chain,
such as transportation management, sharing data with trading partners, and
decision support tools, are typical applications of this technology. In
addition, the Company intends to continue to develop certified interfaces with
complementary third-party products, including leading ERP products. The Company
is also in the initial research and development stages of developing a new
product aimed at a different market base than that of it's traditional RIMS
product. This new product will combine the Company's extensive warehouse systems
experience, leading state of the art technology, and system flexibility and
configure ability.

      There can be no assurance that the development of these product
enhancements and new products will be completed successfully or that they will
include the features required to achieve market acceptance. The introduction of
each new release of RIMS has resulted in enhancements of earlier releases as the
new releases offer improved features and functionality over prior versions. At
the present time, the Company offers maintenance services for earlier releases
of RIMS, the obsolescence of earlier releases has not had and is not expected to
have a material impact on the Company's results of operations or financial
condition. Delays or difficulties associated with introductions of new features,
modules and products could have a material adverse effect on the Company's
business, results of operations or financial condition.

Competition

      The market for warehouse management and distribution software and related
services is very competitive and is characterized by rapid changes in technology
and user needs and the frequent introduction of new products and product
enhancements. The Company's competitors and potential market entrants range from
small, privately-held firms to large national and international organizations
with more extensive technical staffs and technological resources, larger
marketing and sales organizations, and greater financial resources than the
Company. The Company also competes with software applications developed by the
internal management information system departments of its potential clients. The
Company, however, believes that potential clients increasingly will purchase
software applications from outside vendors, including the Company, due to high
development costs, poor support, the lack of comparable functionality,
inconsistent or delayed development schedules and lack of programming talent
within most organizations.

      The Company believes that historically the market for warehouse management
and distribution software could be characterized by the size of the client or
the complexity of the client's warehouse handling environment. Competitors in
the high end of the market offered turnkey systems that typically integrated all
aspects of software, hardware and services related to the warehouse management
system, including electronic commerce functionality, real-time labor management
functionality, labor planning, tracking and management functionality, integrated
host system communications, modular software development, material handling
device control, automated storage equipment control, inbound/outbound traffic
management, and full receiving, putaway/storage, order processing, picking,
shipping, inventory control and management reporting functionality. Middle
market competitors differ from high end competitors primarily by offering
systems with limited hardware flexibility, little or no management, labor and
storage reporting, little or no radio frequency functionality and reduced
hardware and software costs. Middle market systems generally provide excellent
tracking and control, but do not actively help to manage the warehouse
operation. At the lower end of the market, competitors tend to specialize in a
specific aspect of warehouse functionality, such as receipts tracking, warehouse
data collection tasks or carousel control, and have smaller technical and
development staffs.


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<PAGE>

      The Company believes that, unlike most of its competitors, it can compete
effectively in both the high end and middle segments of the market due to the
scaleability, flexibility, configurability, functionality and price of RIMS. The
Company has a large number of competitors in these markets and believes that its
primary competitors in these markets are Red Prairie, Manhattan Associates, EXE
Technologies, Inc. and Catalyst International, Inc., each of which provides
complete warehouse management and distribution software. In addition, certain
well-known computer manufacturers and software developers, such as SAP AG, J.D.
Edwards & Co., Great Plains Software Inc. and PeopleSoft, Inc., offer integrated
manufacturing or accounting software packages that include a warehouse
management component. Many of the Company's competitors have greater name
recognition, more extensive engineering, management and marketing capabilities
and significantly greater financial, technological and personnel resources than
the Company.

      Over the last few years, as software developers began to develop software
for more than one client in the same industry, the market for warehouse
management systems has increasingly been characterized by the industry in which
the client competes. By easily tailoring RIMS to support the unique features of
certain targeted markets, the Company believes it will have a competitive
advantage in selling prospective clients in the same industry in which similar
functionality and implementation issues arise.

      The Company believes that the competitive factors affecting its markets
include features such as compatibility with electronic commerce, openness,
scalability, ability to integrate with third party products, functionality,
adaptability, ease of use, product reputation, quality, performance, price,
client service and support, effectiveness of sales and marketing efforts and
company reputation. Although the Company believes that it currently competes
favorably on most factors, there can be no assurance that the Company can
maintain its competitive position against current and potential competitors,
especially those with greater financial, market presence, product functionality
and/or other resources than the Company.

Proprietary Rights, Licenses and Pricing

      The Company relies on a combination of contract, copyright, trademark and
trade secret laws, and other measures to protect its proprietary information.
The Company does not have any software patents or patent applications. Trade
secret and copyright laws afford only limited protection. The Company believes
that, because of the rapid pace of technological change in the computer software
industry, trade secret and copyright protection are less significant in
affecting the Company's business, results of operations or financial condition
than factors such as the knowledge, ability and experience of the Company's
employees, frequent product enhancements and timeliness and quality of support
services.

      The Company sells its products to its clients under a non-transferable
perpetual license. The Company generally licenses its products solely for the
clients' internal operations and only at designated sites. The Company also
makes available multi-site licenses. Multi-site licenses are discounted from the
first license fee for the second site and beyond. Licensing of RIMS is based on
the number of concurrent users.

      The Company does not provide source code to the client under its licenses.
The Company believes that providing source code increases the likelihood of
misappropriation or other misuse of the Company's intellectual property. The
Company has, however, entered into source code escrow agreements with certain
clients whereby, under certain circumstances, source code is made available to a
client. This is a common practice in the software industry. Under the terms of
the Company's license agreements, the Company generally owns all modifications
to its software that are implemented for a client.

      The Company is not aware of any case in which its products, trademarks or
other proprietary rights infringe the property rights of third parties, but has
not performed any independent investigations to determine whether such
infringement exists. Accordingly, there can be no assurance that third parties
will not assert infringement claims against the Company in the future with
respect to current or future products or that any such assertion may not require
the Company to enter into royalty arrangements or result in litigation. As the
number of software products in the industry increases and the functionality of
these products further overlap, the Company believes that software


                                       9
<PAGE>

developers may become increasingly subject to infringement claims. Any such
claims, with or without merit, can be time consuming and expensive to defend.

Employees

      As of August 15, 2002, the Company had 27 employees, of which six were
employees primarily in management and administration, nine in product
development, ten in client support, and two in sales and marketing. The
Company's employees are not represented by any collective bargaining
organization and the Company has never experienced a work stoppage. The Company
considers its relations with its employees to be satisfactory.

Item 2. Description of Property.

      The Company's headquarters are located in Massapequa, New York in
approximately 10,000 square feet of office space that is leased from Robocom
Properties, Inc., a corporation of which the principal shareholders are
currently officers or directors of the Company. See "Item 12. Certain
Relationships and Related Transactions". The annual rental on the corporate
headquarters is $177,991 (excluding operating expenses, insurance, property
taxes and assessments), subject to increases based upon fluctuations in the
prime rate, as published in the Wall Street Journal. The lease expires on
December 31, 2010.

      The Company also leases approximately 1,300 square feet in Hoofddorp in
the Netherlands. The lease expires on April 30, 2003, and may be extended by the
Company for an additional five-year period. The lease has an annual rental rate
of approximately $13,000 (excluding operating expenses and insurance).

      The Company believes that its existing facilities are sufficient for its
current operations.

Item 3. Legal Proceedings.

      The Company is not a party to any material legal proceeding.

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

      No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 2002.


                                       10
<PAGE>

                                     Part II

Item 5. Market for Common Equity and Related Shareholder Matters.

      The Company's Common Stock has been listed on The Over-the-Counter
Bulletin Board since April 5, 2001 under the symbol RIMS. From January 25, 1999
to April 4, 2001, the Company's Common Stock had been listed on The Nasdaq
SmallCap Market under the same symbol. From June 26, 1997, the date of the
initial public offering of the Common Stock, to January 24 1999, the Common
Stock had been listed on The Nasdaq Stock Market. The following table represents
the high and low price information for the Company's Common Stock for each
quarterly period in fiscal 2001 and 2002.

                                          Fiscal 2001            Fiscal 2002
                                       High        Low         High       Low
                                       ----        ---         ----       ---
      Quarter ended August 31         $3.750     $1.438       $0.35      $0.12
      Quarter ended November 30        2.188      0.688        0.11       0.03
      Quarter ended February 28        0.938      0.219        0.30       0.03
      Quarter ended May 31             1.000      0.270        0.65       0.13

      Quotations listed above since April 5, 2001, the date on which the
Company's Common Stock was first listed on the Over-the-Counter Bulletin Board,
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.

      As of August 15, 2002, there were 4,495,984 shares of the Company's Common
Stock outstanding held by approximately 30 shareholders of record.

      The Company does not currently pay dividends on its Common Stock. It is
management's intention not to declare or pay dividends on the Common Stock, but
to retain earnings, if any, for the operation and expansion of the Company's
business.


                                       11
<PAGE>

Item 6. Management's Discussion and Analysis or Plan of Operation.

      Certain statements in this Report constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Factors
that might cause such a difference include, among others, uncertainties relating
to general economic and business conditions; industry trends; changes in demand
for the Company's product; uncertainties relating to client plans and
commitments and the timing of orders received from clients; announcements or
changes in pricing policies by the Company or its competitors; unanticipated
delays in the development, market acceptance or installation of the Company's
products; availability of management and other key personnel; availability,
terms and deployment of capital; relationships with third-party equipment
suppliers; governmental export and import policies; global trade policies; and
worldwide political stability and economic growth. 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.

Overview

      The Company's principal activities include marketing and support of
comprehensive warehouse management software systems. The Company licenses its
RIMS warehouse management systems; it provides related services (including
customization and modification, project management, training and implementation)
and maintenance support; and it sells related third-party hardware products.
Prior to fiscal 1997, the Company's revenues were principally derived from
highly-customized RIMS warehouse systems and adaptations that required
substantial modifications to meet the functionality required by clients. Over
the past five fiscal years, the Company's has replaced virtually all of the
customized revenues with revenues from the sale of the Company's standard RIMS
warehouse management software system. As a result, the Company's future
operating results are significantly dependent upon continued market acceptance
of RIMS and enhancements thereto. In addition, since a substantial portion of
the Company's revenues in any fiscal period are derived from relatively few
sales of RIMS, both the number of new sales of RIMS and the timing of orders
for, and installations of, new systems in any fiscal period, has caused and is
expected to continue to cause, significant fluctuations in revenue from period
to period.

      The Company's revenues are derived from software license fees, fees for
services, sales of hardware and maintenance fees. Software license fees include
revenue from the licensing of the Company's proprietary RIMS software and, to a
limited extent, revenue from the sublicensing of certain third-party software.
Software license fee revenue is recorded when the software has been delivered,
the license agreement with the client has been executed and collection of the
resulting receivable is deemed probable. Service revenues are derived from
project management, customization and modification of licensed software,
training, on-site support and implementation services. Service revenues are
recorded when the service is performed. Hardware revenues are derived from the
Company's resale of a variety of third-party hardware products on behalf of
other manufacturers, including computer hardware, radio frequency equipment, bar
code printers and other peripherals. Such revenues are recognized when the title
to such hardware passes to the client. Clients typically enter into one-year
maintenance agreements with the Company upon the completion of the software
utilization and pay maintenance fees annually or monthly in advance. The Company
recognizes revenue from each maintenance agreement ratably over the period
covered by the agreement, but is only required to perform maintenance services
as and when the client requests them. Historically, all of the Company's RIMS
clients have entered into, and substantially all of the Company's RIMS clients
have renewed, maintenance agreements with the Company.

      Prior to fiscal 2000, the Company's total revenues in any period had
become less dependent upon a relatively small number of large sales. However,
during fiscal 2000, the Company experienced two anomalies. First, in the fall of
1999, the Company executed a $4 million contract with one customer. In addition,
during fiscal 2000, the Company experienced fewer sales of RIMS due to the year
2000 slowdown. This combination resulted in fewer new customer installations in
fiscal 2000, while the large contract with one customer contributed
significantly to revenues. Revenues from the Company's five largest clients in
each of fiscal 2000, 2001 and 2002 accounted for


                                       12
<PAGE>

approximately 45%, 38% and 44% of total revenues, respectively. The general
economic slowdown of 2001 and 2002 has further affected the Company's sales.

      Costs of revenues represents the cost of software modification, system
implementation and other services, hardware and maintenance support. Costs of
services and costs of maintenance consist primarily of labor costs for client
support, including personnel costs, and costs relating to subcontracted services
and overhead. Typically, costs of maintenance associated with the Company's
standard maintenance contract decrease over the life of the maintenance
contract. The number of programmers and service and support personnel employed
by the Company was 29 at May 31, 2000, 21 at May 31, 2001, and 18 at May 31,
2002. Programmers also function as engineers in the development of software, as
described below. Cost of hardware consists primarily of the cost of hardware
sold by the Company on behalf of other manufacturers.

      Amortization of software development costs consists of the amortization of
costs of engineering personnel and related development expenses, such as the
development of software tools and documentation, capitalized starting at the
point technological feasibility is demonstrated. The Company believes that a
significant level of investment in software development is essential to achieve
and maintain a market leadership position. The Company capitalized $1,261,600,
$494,668 and $331,290 in fiscal 2000, 2001 and 2002, respectively, for software
development costs. Research and development costs for these periods were not
significant. The Company employed 14, 13 and seven software development
employees at May 31, 2000, 2001 and 2002, respectively, some of which also
functioned as programmers for the installation or modification of the Company's
software. Amortization of software development costs has decreased primarily due
to the final amortization of capitalized software development costs for early
versions of RIMS in the 2002 period. RIMS has been technologically feasible
since 1992 and saleable since the beginning of fiscal 1995. The Company's past,
current and planned product development efforts are directed at enhancing and
improving RIMS. Version 4.0, based on Internet technology, enables authorized
users to monitor and manage their warehouses and enables supply chain partners
to access order and shipment status in real time, for the cost of an Internet
connection. Version 4.0 provides Internet functionality with Microsoft Windows
NT compatibility while maintaining compatibility with UNIX. Version 4.2 provides
additional Internet- and intranet-based capabilities. Features in RIMS Version
4.3 include multiwarehouse functionality, a yard management system for inbound
and outbound trucks and a link to a transportation management system (TMS). The
Company anticipates that the dollar amount of the costs capitalized will
increase during fiscal 2003, as new product enhancements are developed. As a
percentage of total revenue, the Company anticipates that amortization of
software development expenses will decrease as older versions are fully
amortized and revenues increase.

      Selling, general and administrative expenses consist primarily of salaries
for sales, marketing, administrative, executive and financial personnel,
commissions paid to sales personnel, and travel and promotional expenses. The
sales and marketing, general and administrative staff consisted of 20, 10 and
eight employees at May 31, 2000, 2001 and 2002, respectively. The Company
anticipates that such expenses will decrease as a percentage of total revenues
as revenues increase.

New Strategy and Restructure of Operations

      In July 2001, the Company implemented a new strategy to improve its
financial position that significantly increased its emphasis on strengthening
its relationships with existing customers in an effort to increase revenues from
new modifications to RIMS and additional training and consulting services, while
continuing to seek new customers. As existing customers upgrade to the latest
version of RIMS, Version 4.3, the Company intends to more aggressively market
additional implementation services, new state-of-the-art hardware, as well as
its new RIMS.alert product. The Company also has begun to offer additional
maintenance services for its existing customers' computer systems
administration. Management anticipates that these additional services and
product sales, as well as sales to new customers, will increase revenues.

      In addition, the Company intends to continue the advancement of its RIMS
product by developing new features and accessory software directly related to
RIMS. The Company is also in the initial research and development stages of
developing a new product aimed at a different market base than that of its
standard RIMS product. It is anticipated that this new product will combine the
Company's extensive warehouse systems experience and leading state of the art
technology, and include system flexibility.


                                       13
<PAGE>

      The Company's shift in strategy was accompanied by a restructuring of its
operations to more closely align operating costs with revenues. During fiscal
2001, the Company sold its computer systems network and office hardware
division. In July 2001, the Company took actions designed to reduce selling,
general and administrative expenses. The majority of these cost reductions were
attributable to a workforce restructuring that eliminated 11 positions, which
represented approximately 30% of the workforce at that time, including all
software developers and support staff in non-RIMS related areas. In addition,
overhead expenditures were reviewed and reduced, resulting in additional cost
savings.

      Since restructuring its operations in July 2001, the Company has been able
to regain positive operating results, excluding the amortization of software
development costs, while maintaining relationships with existing customers, and
has obtained sales from new domestic customers. The Company believes that it
will continue to improve its operating results during fiscal 2003.

Results of Operations:

      The following table sets forth, for the periods indicated, certain
statement of operations data:

                                 (In thousands)

                                                         Year ended May 31,
                                                  -----------------------------
                                                    2000       2001       2002
                                                  -------    -------    -------
Revenue:
   Software license fees ......................   $   916    $   685    $   667
   Services ...................................     1,733      1,313        533
   Hardware ...................................     2,804        440        403
   Maintenance ................................     1,310      1,399      1,503
                                                  -------    -------    -------
   Total revenues .............................     6,763      3,837      3,106
                                                  -------    -------    -------

Cost of revenue:
  Cost of license fees ........................       161         80        107
  Cost of services ............................     1,255        871        452
  Cost of hardware ............................     2,128        285        356
  Cost of maintenance .........................     1,012      1,239      1,055
                                                  -------    -------    -------
  Total cost of revenues ......................     4,556      2,475      1,970
                                                  -------    -------    -------

Amortization of software
  development costs ...........................     1,477      2,072      1,524
                                                  -------    -------    -------
Gross margin ..................................       730       (710)      (388)
Selling, general and administrative expenses ..     3,673      2,332        904
                                                  -------    -------    -------
Loss from operations ..........................    (2,943)    (3,042)    (1,292)
Interest (income) expense, net ................       (46)        17         39
                                                  -------    -------    -------
Loss before income taxes ......................    (2,897)    (3,059)    (1,331)
Benefit of income taxes .......................        --        (44)        --
                                                  -------    -------    -------
Net loss ......................................   $(2,897)   $(3,015)   $(1,331)
                                                  =======    =======    =======

Note: For the year ended May 31, 2002, the Company recorded a net profit of
$193,000 excluding the amortization of software development costs.


                                       14
<PAGE>

Comparison of Fiscal Years Ended May 31, 2001 and May 31, 2002

      Revenue. Total revenue decreased from $3,836,741 in the year ended May 31,
2001 to $3,106,510 for the year ended May 31, 2002. Software license fees
decreased by approximately 3% in fiscal 2002 as compared to fiscal 2001,
primarily due to fewer international RIMS license sales, offset, in part, by the
sale of domestic licenses to one customer with a large number of users in the
2002 period. Services revenues decreased by approximately 59% in fiscal 2002 as
compared to fiscal 2001, primarily due to lower revenues from services related
to installations in the 2002 period. Hardware revenues decreased by
approximately 8% in fiscal 2002 as compared to fiscal 2001, primarily due to one
significant sale of hardware to one customer during the 2001 period, offset, in
part, by equipment purchases from existing customers in the 2002 period.
Maintenance revenues increased by approximately 7% in fiscal 2002 as compared to
fiscal 2001, due to a larger number of maintenance contracts in operation in the
2002 period.

      Cost of Revenues. Total cost of revenues decreased by approximately 20%
from $2,475,036 in fiscal 2001 to $1,970,238 in fiscal 2002. As a percentage of
revenue, total cost of revenues decreased from approximately 65% in fiscal 2001
as compared to approximately 63% in fiscal 2002. As a percentage of license fee
revenues, cost of license fees increased to approximately 16% in fiscal 2002 as
compared to approximately 12% in fiscal 2001. This increase is primarily due to
increased license fee revenues with associated third party fees in the 2002
period as compared to the 2001 period. As a percentage of services revenues, the
cost of services increased to approximately 85% in fiscal 2002 as compared to
approximately 66% in the 2001 period. This increase is primarily due to lower
billable implementation support services in the 2002 period. As a percentage of
hardware revenues, the cost of hardware was higher in fiscal 2002 due to higher
hardware costs from suppliers. As a percentage of maintenance revenues, the cost
of maintenance was lower in the 2002 period as compared to the 2001 period due
to lower maintenance costs relating to RIMS Version 4.3, which was released in
the 2001 period. As customers gain experience using the latest version of RIMS,
the costs of maintenance are expected to decrease.

      Amortization of Software Development Costs. Amortization of software
development costs decreased by approximately 26% from $2,071,718 in fiscal 2001
to $1,524,021 in fiscal 2002. The decrease was due to the final amortization of
capitalized software development costs for early versions of RIMS in the 2002
period. As a percentage of revenue, the amortization of software development
costs was approximately 54% in fiscal 2001 and approximately 49% in fiscal 2002.

      Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by approximately 61% from $2,331,836 in fiscal
2001 to $904,294 in fiscal 2002. As a percentage of revenue, selling, general
and administrative expenses decreased from approximately 61% in fiscal 2001 to
approximately 29% for the 2002 period. In July 2001, the Company took actions
designed to reduce selling, general and administrative expense. The majority of
these cost reductions were attributable to a workforce restructuring that
eliminated 11 positions, which represented approximately 30% of the workforce at
that time. In addition, overhead expenditures were reviewed and reduced,
resulting in additional cost savings.

      Interest (Income) Expense, Net. Interest income decreased by $29,961 to
$4,227 in fiscal 2002 as compared to $34,188 in fiscal 2001. The decrease is
primarily due to the reduction of the remaining net proceeds from the Company's
private placement in fiscal 2000, which was utilized for software development
and working capital requirements. Interest expense decreased by $7,508 to
$43,488 from $50,996, primarily due to the reduction in the prime rate during
the 2002 period.

      Provision (Benefit) of Income Taxes. In fiscal 2002, no net deferred tax
expense was recorded as the Company continued to record a valuation allowance to
reserve for the net deferred tax asset. The valuation allowance at May 31, 2001
and 2002 was provided because of uncertainty, based on the Company's historical
results, with respect to realization of deferred tax assets. The benefit of
income taxes of $44,139 in the 2001 period consisted of a reduction of the prior
years liability related to software costs.


                                       15
<PAGE>

Comparison of Fiscal Years Ended May 31, 2000 and May 31, 2001

      Revenue. Total revenue decreased from $6,762,891 in the year ended May 31,
2000 to $3,836,741 for the year ended May 31, 2001. Software license fees
decreased by approximately 25% in fiscal 2001 as compared to fiscal 2000,
primarily due to the sale of domestic licenses to one customer with a large
number of users during the 2000 period. Services revenues decreased by
approximately 24% in fiscal 2001 as compared to fiscal 2000, primarily due to
the cessation of installations of computer systems networks and office software
in the 2001 period, and, to a lesser extent, lower services revenues from
services related to installations. Hardware revenues decreased by approximately
84% in fiscal 2001 as compared to fiscal 2000, primarily due to a significant
sale of hardware to one customer during the 2000 period, in addition to the
cessation of sales of computer systems network and office hardware in the
earlier part of the 2001 period. Maintenance revenues increased by approximately
7% in fiscal 2001 as compared to fiscal 2000, due to a larger number of
maintenance contracts in operation in the 2001 period offset, in part, by the
election by several customers to discontinue hardware maintenance on older
equipment.

      Cost of Revenues. Total cost of revenues decreased by approximately 45%
from $4,556,178 in fiscal 2000 to $ 2,475,036 in fiscal 2001. As a percentage of
revenue, total cost of revenues decreased from approximately 67% in fiscal 2000
to approximately 65% in fiscal 2001. As a percentage of license fee revenues,
cost of license fees decreased to approximately 12% in fiscal 2001 as compared
to approximately 18% in fiscal 2000. This decrease is primarily due to higher
license fee revenues with no associated third party or distributor fees in the
2001 period as compared to the 2000 period. As a percentage of services
revenues, the cost of services decreased to approximately 66% in fiscal 2001 as
compared to approximately 72% in the 2000 period. This decrease is primarily due
to the cessation of installations of computer systems networks and office
software and the reduction in related personnel in the 2001 period. As a
percentage of hardware revenues, the cost of hardware was lower in fiscal 2001
due to a credit from a hardware supplier for defective equipment. As a
percentage of maintenance revenues, the cost of maintenance was higher in the
2001 period as compared to the 2000 period due to higher maintenance costs
relating to RIMS Version 4.3, which was released in the 2001 period, offset, in
part, by a larger number of maintenance contracts in operation in the 2001
period.

      Amortization of Software Development Costs. Amortization of software
development costs increased by approximately 40% from $1,476,708 in fiscal 2000
to $2,071,718 in fiscal 2001. The increase was due to the inclusion of
amortization of capitalized software development costs for RIMS Version 4.3 in
the 2001 period, as well as the write down of certain non-core products that are
no longer emphasized. As a percentage of revenue, the amortization of software
development costs was approximately 22% in fiscal 2000 and approximately 54% in
fiscal 2001.

      Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by approximately 37% from $3,673,533 in fiscal
2000 to $2,331,836 in fiscal 2001. As a percentage of revenue, selling, general
and administrative expenses increased from approximately 54% in fiscal 2000 to
approximately 61% for the 2001 period. The increase in selling, general and
administrative expenses as a percentage of revenues is due to lower revenues in
the 2001 period as selling, general and administrative expenses did not result
in attendant increases in revenues. Lower selling, general and administrative
expenses resulted from reductions in the operating costs of the Company's
international offices, professional fees, sales and marketing expenses and the
costs associated with the office that provided the installation of computer
systems networks and office software.

      Interest (Income) Expense, Net. Interest income decreased by $13,956 to
$34,188 in fiscal 2001 as compared to $48,144 in fiscal 2000. The decrease is
primarily due to the reduction of the remaining net proceeds from the Company's
private placement in fiscal 2000, which was utilized for software development
and working capital requirements. Interest expense increased by $49,285 to
$50,996 from $1,711, primarily due to expense incurred in connection with the
outstanding borrowings under the Company's lines of credit during the 2001
period.

      Provision (Benefit) of Income Taxes. In fiscal 2001 and 2000, no net
deferred tax expense was recorded as the Company continued to record a valuation
allowance to reserve for the net deferred tax asset. The valuation allowance at
May 31, 2000 and 2001 was provided because of uncertainty, based on the
Company's historical results, with respect to realization of deferred tax
assets. The benefit of income taxes of $44,139 in the 2001 period consisted of a
reduction of the prior years liability related to software costs.


                                       16
<PAGE>

Fluctuations in Operating Results

      The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future, depending upon a number of factors, such as the length of
the Company's sales cycle, the unanticipated cancellation of significant license
agreements, the timing of new version releases by the Company and its
competitors, budgeting cycles of the Company's clients, demand for the Company's
software, software life cycles, acceptance of new software introduced by the
Company and its competitors, the size and timing of client orders, changes in
the proportion of revenues attributable to software license fees versus
services, changes in the level of operating expenses and general economic
conditions. In addition, a significant portion of the Company's revenues has
been derived from relatively few sales of licenses for RIMS, and, consequently,
the timing of such sales has caused material fluctuations in the Company's
operating results. Accordingly, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as an indication of future performance.

      Because the Company recognizes a significant portion of revenues over the
installation period of the system (which, although designed to be completed in
approximately four months, generally ranges from four to eight months in
duration as a result of the client's scheduling requirements) and because
installation commences promptly after execution of the related license
agreement, the Company does not maintain a significant backlog. Software license
fees for each quarter depend in part on orders for which implementation has
begun during that quarter and on license agreements under implementation that
were executed in prior quarters. The sales cycle for RIMS typically ranges from
four to six months, and contract signing may be delayed for a number of reasons,
including client budgetary constraints and internal authorization reviews. In
addition, delays in the completion of a contract may require that the revenues
associated with such contract be recognized over a longer period. Consequently,
the Company's business, results of operations or financial condition for a
quarter could be materially adversely affected by implementation delays.

Liquidity and Capital Resources

      During fiscal 2002, the Company funded its operations through cash flows
from operations. The Company did not require any additional draw down of its
existing line of credit during fiscal 2002.

      Net cash provided by operating activities was $461,337 in fiscal 2002. Net
cash used in operating activities was $571,276 in fiscal 2001, and net cash used
in operating activities was $613,737 in fiscal 2000. Cash flows from operations
increased in the 2002 period primarily due to a profit from operations before
amortization expenses.

      The Company capitalized $1,261,600, $494,668 and $331,290 in fiscal 2000,
2001 and 2002, respectively, for software development costs. Any costs
associated with the development of new products or enhancements to the existing
RIMS product will be financed through working capital.

      As of May 31, 2002, the Company had $219,370 in cash and cash equivalents
and a working capital deficiency of $103,550.

      As of September 19, 2001, the Company secured a line of credit from
Baseboard Investments LLC, a limited liability company, the members of which
consist of three principal shareholders and directors of the Company. This line
of credit provides for borrowings of up to $1,250,000, and expires on September
19, 2004. Borrowings under this line of credit were used to satisfy the amounts
outstanding under the lines of credit that matured on September 19, 2001.
Borrowings bear interest at the prime rate plus two percent (6.75% at August 15,
2002). As of August 16, 2002, $540,146 had been drawn down from this line of
credit.


                                       17
<PAGE>

      Management has taken actions to significantly reduce operating, selling,
general and administrative expenses and capital expenditures. These actions
include restructuring operations to more closely align operating costs with
revenue, reducing selling, general and administrative expenses and capital
expenditures through workforce reductions and reviewing and revising other
expenditures. Management expects to continue to seek ways in which it can reduce
operating costs and selling, general and administrative expenses.

      The Company's capital requirements depend on many factors, including the
level and timing of revenues, new product development and the proposed expansion
of the Company's sales and marketing efforts. However, the Company is limited to
its current cash, cash equivalents and available unused lines of credit for
funding such internal growth and development. No significant capital
expenditures are anticipated in the next 12 months.

      For the year ended May 31, 2002, the Company operated on a positive cash
flow basis and recorded net income of $192,717, or $.04 per share, excluding the
amortization of software development costs. The Company believes its existing
cash and cash equivalents, anticipated revenues from existing maintenance
contracts, and anticipated revenues from existing contracts for implementation
of RIMS at new sites, including license fees, hardware and services, is
sufficient to fund the Company's operations at the current levels beyond fiscal
2003.

Inflation and Seasonality

      The Company does not believe its operations have been materially affected
by inflation or seasonality.


                                       18
<PAGE>

Item 7. Financial Statements

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                   Form 10-KSB
                                                                                   Page Numbers
<S>                                                                                      <C>
Reports of Independent Auditors ..................................................       20

Balance Sheets as of May 31, 2001 and 2002 .......................................       22

Statements of Operations for the years ended May 31, 2000, 2001 and 2002 .........       23

Statements of Shareholders' Equity for the years ended May 31, 2000, 2001 and 2002       24

Statements of Cash Flows for the years ended May 31, 2000, 2001 and 2002 .........       25

Notes to Financial Statements ....................................................       26
</TABLE>


                                       19
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders
 Robocom Systems International Inc.

We have audited the accompanying balance sheets of Robocom Systems International
Inc. as of May 31, 2002 and 2001, and the related statements of operations,
shareholders' equity and cash flows for each of the two years in the period
ended May 31, 2002. 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. 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 provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Robocom Systems International
Inc. at May 31, 2002 and 2001, and the results of its operations, and its cash
flows for each of the two years in the period ended May 31, 2002 in conformity
with accounting principles generally accepted in the United States.


                                                /s/ Eisner & Lubin LLP

New York, New York
July 18, 2002, except for the second paragraph of Note 1 and
the last paragraph of Note 6, as to which the date is
August 16, 2002.


                             20
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders
 Robocom Systems International Inc.

We have audited the accompanying statements of operations, shareholders' equity
and cash flows of Robocom Systems International Inc. for the year ended May 31,
2000. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations, and cash flows of Robocom
Systems International Inc. for the year ended May 31, 2000 in conformity with
accounting principles generally accepted in the United States.


                                             /s/ Ernst & Young LLP

Melville, New York
August 7, 2000


                                       21
<PAGE>

                       ROBOCOM SYSTEMS INTERNATIONAL INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            2001               2002
                                                                        ------------       ------------
<S>                                                                     <C>                <C>
Assets
Current assets:
     Cash and cash equivalents ...................................      $     93,878       $    219,370
     Accounts receivable, less allowance for doubtful accounts of
        $9,180 in 2002 ...........................................           559,281            448,056
     Unbilled revenue ............................................           140,791            163,408
     Deferred taxes ..............................................            40,740             29,128
     Other current assets ........................................            68,662            125,097
                                                                        ------------       ------------

Total current assets .............................................           903,352            985,059

Property and equipment, less depreciation of $367,105 in
    2001 and $311,453 in 2002 ....................................           134,509             64,689
Capitalized software, net ........................................         2,840,050          1,647,319
Other assets .....................................................             7,422                 --
                                                                        ------------       ------------
Total assets .....................................................      $  3,885,333       $  2,697,067
                                                                        ============       ============

Liabilities and Shareholders' Equity
Current liabilities:
     Accounts payable ............................................      $    298,590       $     94,293
     Accrued expenses ............................................           375,978            252,454
     Deferred revenue ............................................           553,693            741,862
                                                                        ------------       ------------
Total current liabilities ........................................         1,228,261          1,088,609
                                                                        ------------       ------------

Loans payable to shareholders ....................................           550,000             90,888
Loans payable to Baseboard Investments, LLC ......................                --            566,542
Loan payable to Robocom Properties Inc. ..........................                --            161,872
Other liabilities ................................................                --             25,000
Deferred tax liabilities .........................................            40,740             29,128
                                                                        ------------       ------------
Total liabilities ................................................         1,819,001          1,962,039
                                                                        ------------       ------------

Shareholders' equity:
     Preferred stock, $.01 par value; 1,000,000 shares authorized;
        None issued ..............................................                --                 --
     Common stock, $.01 par value; 10,000,000 shares authorized;
       4,495,984 issued and outstanding at May 31, 2001 and
       2002 ......................................................            44,960             44,960
     Additional paid-in capital ..................................        11,832,246         11,832,246
     Accumulated deficit .........................................        (9,810,874)       (11,142,178)
                                                                        ------------       ------------
Total shareholders' equity .......................................         2,066,332            735,028
                                                                        ------------       ------------
Total liabilities and shareholders' equity .......................      $  3,885,333       $  2,697,067
                                                                        ============       ============
</TABLE>

See accompanying notes.


                                       22
<PAGE>

                       ROBOCOM SYSTEMS INTERNATIONAL INC.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                          Year ended May 31,
                                               -----------------------------------------
                                                   2000           2001           2002
                                               -----------    -----------    -----------
<S>                                            <C>            <C>            <C>
Revenues:
   Software license fees ...................   $   915,774    $   684,624    $   666,664
   Services ................................     1,732,558      1,313,395        533,037
   Hardware ................................     2,804,092        439,921        403,187
   Maintenance .............................     1,310,467      1,398,801      1,503,622
                                               -----------    -----------    -----------
   Total revenues ..........................     6,762,891      3,836,741      3,106,510
                                               -----------    -----------    -----------

Cost of revenues:
   Cost of license fees ....................       161,253         79,906        107,404
   Cost of services ........................     1,254,964        870,925        451,805
   Cost of hardware ........................     2,128,212        285,006        356,005
   Cost of maintenance .....................     1,011,749      1,239,199      1,055,024
                                               -----------    -----------    -----------
   Total cost of revenues ..................     4,556,178      2,475,036      1,970,238
Amortization of software development costs .     1,476,708      2,071,718      1,524,021
                                               -----------    -----------    -----------
                                                 6,032,886      4,546,754      3,494,259
                                               -----------    -----------    -----------
Gross margin ...............................       730,005       (710,013)      (387,749)

Selling, general and administrative expenses     3,673,533      2,331,836        904,294
                                               -----------    -----------    -----------
Loss from operations .......................     2,943,528)    (3,041,849)    (1,292,043)
Interest income (expense) and other ........        46,432        (16,809)       (39,261)
                                               -----------    -----------    -----------
Loss before benefit of income taxes ........    (2,897,096)    (3,058,658)    (1,331,304)
Benefit of income taxes ....................            --        (44,139)            --
                                               -----------    -----------    -----------
Net loss ...................................   $(2,897,096)   $(3,014,519)   $(1,331,304)
                                               ===========    ===========    ===========

Net loss per basic and diluted share .......   $      (.73)   $      (.67)   $      (.30)
                                               ===========    ===========    ===========

Weighted average shares outstanding ........     3,965,776      4,495,984      4,495,984
                                               ===========    ===========    ===========
</TABLE>

See accompanying notes.


                                       23
<PAGE>

                       ROBOCOM SYSTEMS INTERNATIONAL INC.

                       STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                       Common Stock
                                  ---------------------
                                                            Additional                                              Total
                                               Par Value      Paid-In        Accumulated        Deferred        Shareholders'
                                    Shares        $.01        Capital          Deficit        Compensation         Equity
                                  ------------------------------------------------------------------------------------------
<S>                               <C>           <C>         <C>             <C>               <C>                <C>
Balance, June 1, 1999 .........   3,467,984     $34,680     $10,571,882     $ (3,899,259)     $   (84,587)       $ 6,622,716
Private placements, net .......   1,028,000      10,280       1,260,364               --               --          1,270,644
Net loss ......................          --          --              --       (2,897,096)              --         (2,897,096)
Amortization of deferred
   compensation ...............          --          --              --               --           75,900             75,900
                                  ------------------------------------------------------------------------------------------
Balance, May 31, 2000 .........   4,495,984      44,960      11,832,246       (6,796,355)          (8,687)         5,072,164
Net loss ......................          --          --              --       (3,014,519)                         (3,014,519)
Amortization of deferred
   compensation ...............          --          --              --               --            8,687              8,687
                                  ------------------------------------------------------------------------------------------
Balance, May 31, 2001 .........   4,495,984      44,960      11,832,246       (9,810,874)              --          2,066,332
Net loss ......................          --          --              --       (1,331,304)                         (1,331,304)
                                  ------------------------------------------------------------------------------------------
Balance, May 31, 2002 .........   4,495,984     $44,960     $11,832,246     $(11,142,178)              --        $   735,028
                                  ==========================================================================================

</TABLE>

See accompanying notes.


                                       24
<PAGE>

                       ROBOCOM SYSTEMS INTERNATIONAL INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                               Year ended May 31,
                                                                              -----------------------------------------------------
                                                                                  2000                 2001                 2002
                                                                              -----------          -----------          -----------
<S>                                                                           <C>                  <C>                  <C>
Operating activities
Net loss ............................................................         $(2,897,096)         $(3,014,519)         $(1,331,304)
Adjustments to reconcile net loss to net
   cash provided by (used in) operating activities:
       Depreciation and amortization of property and
       equipment ....................................................             118,659              105,640               74,375
       Benefit of deferred taxes ....................................                  --              (44,139)                  --
       Amortization of software development costs ...................           1,476,708            2,071,718            1,524,021
       Amortization of deferred compensation ........................              75,900                8,687                   --
       Provision for bad debts ......................................                  --               (8,823)               9,180
       Gain on sales of fixed assets ................................                  --              (13,167)                  --
       Changes in operating assets and liabilities:
         Accounts receivable ........................................             296,895              802,278              102,045
         Unbilled revenue ...........................................             100,710               31,232              (22,617)
         Other current assets .......................................              65,397              108,521              (56,435)
         Accounts payable ...........................................             161,406             (157,395)              90,005
         Accrued expenses ...........................................             (61,593)            (509,410)            (123,524)
         Deferred revenue ...........................................              44,461               44,348              188,169
         Other assets ...............................................               4,816                3,753                7,422
                                                                              -----------          -----------          -----------
Net cash provided by (used in) operating activities .................            (613,737)            (571,276)             461,337
                                                                              -----------          -----------          -----------

Investing activities
Software development costs ..........................................          (1,261,600)            (494,668)            (331,290)
Purchase of short-term investments ..................................          (5,479,486)                  --                   --
Redemption of short-term investments ................................           6,159,789              463,833                   --
Proceeds from sales of fixed assets .................................                  --               22,558                   --
Capital expenditures ................................................             (45,261)              (8,066)              (4,555)
                                                                              -----------          -----------          -----------
Net cash used in investing activities ...............................            (626,558)             (16,343)            (335,845)
                                                                              -----------          -----------          -----------

Financing activities
Net proceeds from sale of common stock ..............................           1,270,644                   --                   --
Loan payable to shareholders ........................................                  --              550,000                   --
Deferred costs related to private placement in
process .............................................................             (70,824)            (159,012)                  --

Write off of deferred costs related to private placement ............                  --              229,836                   --
                                                                              -----------          -----------          -----------
Net cash provided by financing activities ...........................           1,199,820              620,824                   --
                                                                              -----------          -----------          -----------

Increase (decrease) in cash and cash equivalents ....................             (40,475)              33,205              125,492
Cash and cash equivalents at beginning of year ......................             101,148               60,673               93,878
                                                                              -----------          -----------          -----------
Cash and cash equivalents at end of year ............................         $    60,673          $    93,878          $   219,370
                                                                              ===========          ===========          ===========

Supplemental disclosures of cash flow information:
  Cash paid for interest ............................................         $     1,712          $    28,469          $     2,303
                                                                              ===========          ===========          ===========
</TABLE>

See accompanying notes.


                                       25
<PAGE>

                       Robocom Systems International Inc.
                        Notes to the Financial Statements

1. Organization and Significant Accounting Policies

Organization

      Robocom Systems International Inc. (the "Company") was incorporated in
June 1982 in the State of New York. The Company is engaged in the development
and marketing of automated warehouse management systems and related software,
which is used by various commercial enterprises located in the United States and
abroad. Since June 1994, the Company licenses and installs its proprietary
software product RIMS, which is an "off-the-shelf" inventory management system.
The Company also provides related services, including modification, project
management, training, implementation support, maintenance and the sale of
hardware and third party software.

      The Company had a working capital deficiency of $103,550 at May 31, 2002
and net losses of $2,897,096, $3,014,519 and $1,331,304 for the years ended May
31, 2000, 2001 and 2002, respectively. The Company's ability to maintain a
satisfactory level of working capital during 2003 depends on its ability to
increase revenue and reduce costs. During fiscal 2001, the Company secured a
line of credit of $1,050,000 from three principal shareholders and directors of
the Company. The line of credit bore interest at the prime rate plus two percent
and expired on September 19, 2001. As of May 31, 2001, $550,000 had been drawn
down from this line of credit. Concurrent with the expiration of this line of
credit, the Company secured a line of credit from Baseboard Investments, LLC, a
limited liability corporation, the members of which consist of three principal
shareholders and directors of the Company. This line of credit provides for
borrowings of up to $1,250,000 and was to expire on September 19, 2002. As of
August 16, 2002, this line of credit was extended until September 19, 2004,
under the existing terms. Borrowings bear interest at the prime rate plus two
percent (6.75% at August 15, 2002). As of May 31, 2002, $540,146 had been drawn
down from this line of credit. In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 6, "Classification of Short-term Obligations
Expected to be Refinanced," this amount has been classified as long-term debt.

      Management has taken actions to significantly reduce both operating,
selling, general and administrative expenses and capital expenditures. These
actions include restructuring operations to more closely align operating costs
with revenue, reducing selling, general and administrative expenses and capital
expenditures through workforce reductions and reviewing and revising other
expenditures. Management expects to continue to seek ways in which it can reduce
operating costs and selling, general, and administrative expenses.

Significant Accounting Policies

      Use of Estimates

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

      Concentration of Credit Risk

      The Company's client base is comprised of large clients in diversified
industries. Ongoing credit evaluations of its clients' financial condition are
made and generally no collateral is required. For the years ended May 31, 2000,
2001 and 2002, the Company had one client that accounted for 27%, 14% and 19% of
total revenues, respectively. Revenues from the Company's five largest clients
in each of fiscal 2000, 2001 and 2002 accounted for approximately 45%, 38% and
44% of total revenues, respectively. Management does not believe significant
credit risk existed at May 31, 2002.


                                       26
<PAGE>

                       Robocom Systems International Inc.
                  Notes to the Financial Statements (continued)

      Revenue Recognition

      The Company's revenues are derived from software license fees, fees for
services, sales of hardware and maintenance contracts. Software license fees
include revenue from the licensing of the Company's proprietary RIMS software
and revenue from the sublicensing of certain third-party software. Software
license fee revenue is recorded when the software has been delivered, the
license agreement with the client has been executed, and collection of the
resulting receivable is deemed probable. Service revenues are derived from
project management, training, on-site support and implementation services, and,
to a lesser extent, from customization and modification of licensed software.
The majority of service revenues are recorded when the service is performed.
Service revenues for project management and modifications are recorded using the
percentage of completion method. Hardware revenues are derived from the sale of
products of other manufacturers, including computer hardware, radio frequency
equipment, bar code printers and other peripherals. Such revenues are recognized
when title to such hardware passes to the client. Clients typically enter into
one-year maintenance agreements with the Company upon utilization of RIMS and
pay maintenance fees annually or monthly in advance. The Company recognizes
revenue from each maintenance agreement ratably over the period covered by the
agreement, but is only required to perform maintenance services as and when the
client requests them. The Company recognized revenues, in all periods presented,
in accordance with the American Institute of Certified Public Accountants
Statement of Position ("SOP") 97-2, "Software Revenue Recognition," and SOP
98-9, "Modification of SOP 97-2, Software Revenue Recognition with Respect to
Certain Transactions," which amends paragraphs 11 and 12 of SOP 97-2, to require
recognition of revenue using the residual method under certain circumstances.
Unbilled revenues represent aggregate revenues earned in excess of related
billings and are shown as a current asset. Deferred revenues relate to billings
in advance of the services and are shown as a current liability.

      Software Development Costs

      Software development costs have been capitalized in accordance with SFAS
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." The capitalization of these costs begins when a product's
technological feasibility has been established, and ends when the product is
available for general release to clients. The establishment of technological
feasibility and the ongoing assessment of recoverability of capitalized software
development costs require considerable judgment by management with respect to
certain external factors, including, but not limited to, technological
feasibility, anticipated future gross revenues, estimated economic life, and
changes in software and hardware technologies. The Company capitalizes software
development costs associated with each subsequent enhancement of its product
upon the achievement of technological feasibility. Software development costs
including enhancements are amortized to cost of revenue using the straight-line
method over five years or the expected life of the product, whichever is less.
Research and development costs incurred prior to the establishment of
technological feasibility are expensed as incurred. Such amounts for the periods
presented are not significant.

      Cash and Cash Equivalents

      The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.

      Property and Equipment

      Property and equipment consists of computers and other office equipment.
The Company depreciates the cost of computers and other office equipment using
the straight-line method over the estimated useful lives (three to five years).


                                       27
<PAGE>

                       Robocom Systems International Inc.
                  Notes to the Financial Statements (continued)

      Basic and Diluted Net Loss Per Share

      Basic and diluted net loss per share is computed by dividing net loss by
the weighted average number of shares of common stock outstanding for the
periods presented. Since the Company's common equivalent shares, which consist
of stock options and warrants, are antidilutive, the basic and diluted net loss
per share amounts are the same.

      Stock Options

      SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair
value method of accounting for the issuance of stock options and other equity
instruments. Under the fair value method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service period, which is usually the vesting period. Pursuant to SFAS No. 123,
companies are encouraged, but are not required, to adopt the fair value method
of accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," but
are required to disclose in the financial statement footnotes, pro forma net
income and per share amounts as if the Company had applied the new method of
accounting for all grants made since 1997. SFAS No. 123 also requires increased
disclosures for stock-based compensation arrangements. The Company adopted the
disclosure requirements of SFAS No. 123.

      Income Taxes

      The Company provides for income taxes under SFAS No. 109, "Accounting for
Income Taxes," which employs an asset and liability approach in accounting for
income taxes payable or refundable at the date of the financial statements as a
result of all events that have been recognized in the financial statements and
as measured by the provisions of enacted laws.

      Advertising Costs

      Advertising costs are expensed as incurred and for the years ended May 31,
2000, 2001 and 2002 amounted to approximately $208,000, $138,000 and $53,000,
respectively.

      Segment Information

      The Company operates in one business segment, as defined by SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information."

      The Company's revenues by geographic markets are summarized below:

                                2000              2001              2002
                            ----------        ----------        ----------

      Domestic .....        $6,360,854        $3,192,716        $2,765,234
      Europe .......           254,464           522,797           243,124
      Pacific ......           125,413           106,670            85,084
      Other ........            22,160            14,558            13,068
                            ----------        ----------        ----------
                            $6,762,891        $3,836,741        $3,106,510
                            ==========        ==========        ==========


                                       28
<PAGE>

                       Robocom Systems International Inc.
                  Notes to the Financial Statements (continued)

2. Shareholders' Equity

      Private Placements

      During fiscal 2000, the Company raised aggregate net proceeds of
approximately $1,271,000 in private placement offerings of its common stock (the
"Private Placement"), primarily from a group of the Company's founders and
executive management team. In exchange for the net proceeds, 1,028,000 shares of
common stock were issued, together with five-year warrants to purchase up to
385,500 shares of common stock at exercise prices ranging from $1.50 to $4.00
per share.

      Stock Option Plan

      Effective May 15, 1997, the Board of Directors and shareholders approved
the Company's Stock Option and Long-term Incentive Compensation Plan (the
"Plan") for the issuance of up to 325,000 shares of the Company's common stock.
Effective November 4, 1998, the Board of Directors and shareholders approved for
the issuance of an additional 325,000 shares of the Company's common stock.
Effective November 1, 2000, the board of directors and shareholders approved for
the issuance of an additional 500,000 shares of the Company's common stock.
Outstanding options were granted at an exercise price equal to or in excess of
the prevailing market price on the grant date. These options contain a vesting
schedule determined at the date of grant. Incentive stock options are granted to
employees. All other options granted, including those granted to directors and
consultants, are nonqualified options.

      The following summarizes stock option activity during fiscal 2000, 2001
and 2002:

                                                              Weighted-
                                             Shares            Average
                                              under           Exercise
                                             Option             Price
                                             ------           --------
           Balance, June 1, 1999             428,425           $5.04
           Grants                            234,000           $2.17
           Cancelled                         (29,475)          $3.70
                                            --------
           Balance, May 31, 2000             632,950           $3.91
           Grants                            358,000           $0.95
           Cancelled                        (200,500)          $2.35
                                            --------
           Balance, May 31, 2001             790,450           $2.96
           Cancelled                        (506,750)          $2.22
                                            --------
           Balance, May 31, 2002             283,700           $4.29
                                            ========

      The options exercisable at May 31, 2000, 2001 and 2002 were 197,227,
391,699 and 246,700, respectively. The weighted average price of options
exercisable at May 31, 2000, 2001 and 2002 was $5.86, $4.29 and $4.76,
respectively.

      The weighted-average fair value of options granted during the years ended
May 31, 2000 and 2001 was $1.58 per share and $0.64 per share. No options were
granted during fiscal 2002.


                                       29
<PAGE>

                       Robocom Systems International Inc.
                  Notes to the Financial Statements (continued)

      The following table summarizes information about these plans at May 31,
2002:

                          Options Outstanding

                                                             Options
                                      Weighted Average      Exercisable
    Exercise                             Remaining          -----------
      Prices          Shares          Contractual Life        Shares
      ------          ------          ----------------        ------
      $0.500          75,000              8.6 years            50,000
      $0.750          15,000              8.5 years            15,000
      $2.000           5,000              6.8 years             5,000
      $2.625          36,000              7.9 years            24,000
      $6.500          42,700              5.1 years            42,700
      $7.150         110,000              5.1 years           110,000
                     -------                                  -------
                     283,700                                  246,700
                     =======                                  =======

      In fiscal 2000, stock options to purchase 30,000 shares of common stock at
an exercise price of $1.75 were granted to the Senior Vice President of the
Company, under his employment agreement. In addition, 10,000 shares of common
stock at an exercise price of $1.4375 were granted to the Chief Financial
Officer of the Company during fiscal 2000. In August 2000, stock options to
purchase 90,000 shares of common stock at an exercise price of $2.00 were
granted to the President and Chief Executive Officer of the Company under his
employment agreement. All of these options were cancelled in fiscal 2002.

      In connection with the Company's May 1997 initial public offering of
Common Stock, the managing underwriters received five-year warrants to purchase
up to 150,000 shares of common stock at an exercise price of $7.80 per share.

      Pro forma information regarding net loss and net loss per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company had accounted for its employee stock option grants under the
fair value method required by SFAS No. 123. The fair value of each option grant
has been estimated as of the date of grant using the Black-Scholes option
pricing model with the following assumptions:

                                        For the year ended May 31,
                                       ----------------------------
                                          2000              2001
                                          ----              ----
      Expected life..............      3-5 years          2-5 years
      Interest rate..............        6.0%            4.64-6.26%
      Volatility.................        1.20               1.30
      Dividend yield.............         0%                 0%


                                       30
<PAGE>

                       Robocom Systems International Inc.
                  Notes to the Financial Statements (continued)

      If the Company had recognized compensation cost for stock-based employee
compensation in accordance with SFAS No. 123, the Company's net loss for the
years ended May 31, 2000, 2001 and 2002 would have increased as follows:

<TABLE>
<CAPTION>
                                                                           For the year ended May 31,
                                                              ----------------------------------------------------
                                                                 2000                2001                2002
                                                              -----------         -----------         -----------
<S>                                                           <C>                 <C>                 <C>
     Pro forma net loss:
         As reported ......................................   $(2,897,096)        $(3,014,519)        $(1,331,304)
         Pro forma in accordance with SFAS No. 123 ........   $(2,909,530)        $(3,175,934)        $(1,400,825)
     Pro forma basic and diluted net loss per share:
         As reported ......................................   $      (.73)        $      (.67)        $      (.30)
         Pro forma in accordance with SFAS No. 123 ........   $      (.73)        $      (.71)        $      (.31)
</TABLE>

      The compensation expense and pro forma net loss may not be indicative of
amounts to be included in future periods.

      The total number of shares reserved for options and warrants at May 31,
2002 was 1,300,000.

      Deferred Compensation

      In February 1996, the Company issued 56,400 shares of common stock to
certain employees under a restricted stock agreement. Compensation expense,
representing the fair value ($90,000) of the common shares issued to these
employees, is recognized ratably over the five-year vesting period. In May 1997,
31,584 shares of common stock were issued to an employee of the Company who
performs various accounting and administrative services. These shares had
certain restrictions as to transferability. Compensation expense, representing
the excess of the fair value ($173,712) of the common shares over the amount
paid for such stock, was recognized ratably over the three-year vesting period.

3. Detail of Certain Balance Sheet Accounts

      Software Development Costs, net

      Software development costs, net, consist of the following:

                                                             May 31
                                                  -----------------------------
                                                      2001              2002
                                                  -----------       -----------

            Software development costs ......     $ 6,569,812       $ 6,923,582
            Less accumulated amortization ...      (3,729,762)       (5,276,263)
                                                  -----------       -----------
                                                  $ 2,840,050       $ 1,647,319
                                                  ===========       ===========


                                       31
<PAGE>

                       Robocom Systems International Inc.
                  Notes to the Financial Statements (continued)

      Accrued Expenses

      Accrued expenses consist of the following:

                                                           May 31,
                                                    ----------------------
                                                      2001          2002
                                                    --------      --------

            Accrued third party software costs      $ 32,925      $ 32,925
            Payroll and related taxes ........       101,849        63,640
            Accrued hardware costs ...........        23,792         1,152
            Professional fees and other ......       217,412       154,737
                                                    --------      --------
                                                    $375,978      $252,454
                                                    ========      ========

4. Employee Benefit Plan

      The Company has a 401(k) defined contribution plan. This plan covers
virtually all full-time employees subject to certain service requirements. Under
the terms of the 401(k) plan, the Company will match 50% of an employee's
contribution up to 4% of the participating employee's compensation. Plan
expenses for each of the years ended May 31, 2000, 2001 and 2002 amounted to
$51,000, $45,000 and $23,000, respectively.

5. Income Taxes

      Deferred tax assets and liabilities are determined based on the difference
between the financial accounting and the tax bases of assets and liabilities.
Significant components of the Company's deferred tax assets and liabilities as
of May 31, 2001 and 2002 were as follows:

                                                               May 31,
                                                     --------------------------
                                                         2001            2002
                                                     ----------      ----------
            Deferred tax assets:
               Accrued expenses ...............      $   40,740      $   25,456
               Allowance for doubtful accounts               --           3,672
               Net operating loss carryforwards       3,463,024       3,490,487
               Deferred compensation ..........         105,485              --
                                                     ----------      ----------
            Total deferred tax assets .........       3,609,249       3,519,615
            Valuation allowance ...............       2,473,229       2,860,687
                                                     ----------      ----------
            Net deferred tax assets ...........       1,136,020         658,928
            Deferred tax liabilities:
                Software development costs ....       1,136,020         658,928
                                                     ----------      ----------
            Net deferred tax liabilities ......      $       --      $       --
                                                     ==========      ==========

      The valuation allowance at May 31, 2000, 2001 and 2002 was provided
because of uncertainty, based on the Company's historical results, with respect
to realization of deferred tax assets. The valuation allowance increased during
the years ended May 31, 2000, 2001, and 2002 by $1,116,072, $1,135,760, and
$387,458, respectively.


                                       32
<PAGE>

                       Robocom Systems International Inc.
                  Notes to the Financial Statements (continued)

      The components of the tax benefit for the three years ended May 31, 2000,
2001 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                                    For the year ended May 31,
                                                            -------------------------------------------
                                                              2000             2001             2002
                                                            ---------        ---------        ---------
<S>                                                               <C>        <C>              <C>
            Deferred:
                Federal ..............................             --        $ (34,208)              --
                State ................................             --           (9,931)              --
                                                            ---------        ---------        ---------
            Total ....................................                                        $ (44,139)
                                                            =========        =========        =========
</TABLE>

      The benefit of income taxes for the fiscal years ended May 31, 2000, 2001
and 2002 differs from the statutory U.S. federal income tax rate due to the
following:

<TABLE>
<CAPTION>
                                                                      For the year ended May 31,
                                                            -------------------------------------------
                                                              2000             2001             2002
                                                            ---------        ---------        ---------
<S>                                                             <C>              <C>              <C>
            Federal statutory tax rate ...............          (34.0%)          (34.0%)          (34.0%)
            State income taxes, net of Federal benefit           (5.9)            (5.9)            (5.9)
            Valuation allowance ......................           38.9             37.1             29.1
            Other ....................................            1.0              1.4             10.8
                                                            ---------        ---------        ---------
                                                                  0.0%            (1.4%)            0.0%
                                                            =========        =========        =========
</TABLE>

      At May 31, 2002, the Company had net operating loss carryforwards of
approximately $8.7 million for income tax purposes, which may be able to reduce
taxable income in future years. The utilization of these losses to reduce future
income taxes will depend on the generation of sufficient taxable income prior to
the expiration of the net operating loss carryforwards. Net operating loss
carryforwards will expire through May 31, 2022.

6. Related Party Transactions

      The Company leases its principal facilities from Robocom Properties, Inc.
("Properties"). The shareholders of Properties are also shareholders of the
Company. In connection therewith, the Company incurred expenses of $168,000,
$174,365 and $177,991 in fiscal 2000, 2001 and 2002, respectively, of which
$90,365 and $161,872 was unpaid at May 31, 2001 and 2002, respectively. This
amount was converted to long-term debt as of May 30, 2002, bearing interest at
3% per annum and maturing on May 30, 2004. In connection with the purchase by
Properties in 1989 of the Company's corporate headquarters building, the Company
guaranteed three mortgage loans in an aggregate original principal amount of
$1,053,000 that mature in 2010 and bear interest at rates ranging from 8.25% to
8.877% per annum. At May 31, 2002, the outstanding aggregate principal amount of
the mortgage loans was approximately $610,000.

      As of May 2000, a director and principal shareholder of the Company
entered into a one-year consulting agreement with the Company to provide
consulting services. No fees were accrued or paid under this agreement during
fiscal 2000. At May 31, 2001, approximately $18,000 was unpaid relating to such
services. This agreement was not renewed in fiscal 2001. At May 31, 2002, $9,661
remained unpaid under this agreement. This amount was converted to long-term
debt as of May 30, 2002, bearing interest at 3% per annum and maturing on May
30, 2004.

      As of November 1999, a director of the Company entered into a one-year
consulting agreement with the Company. During fiscal 2000 and 2001, consulting
fees of approximately $26,000 and $12,000, respectively, were incurred under
this agreement. This agreement was not renewed in fiscal 2001.


                                       33
<PAGE>

                       Robocom Systems International Inc.
                  Notes to the Financial Statements (continued)

      As of April 1999, the chairman of the board and a principal shareholder of
the Company entered into a three-year consulting agreement with the Company to
provide consulting services with respect to new product development and related
technical matters. During fiscal 2000, 2001 and 2002 consulting fees of
approximately $22,000, $28,000 and $28,000, respectively, were incurred under
this agreement. At May 31, 2002, $37,196 was unpaid relating to such services.
This amount was converted to long-term debt as of May 30, 2002, bearing interest
at 3% per annum and maturing on May 30, 2004.

      As of May 1998, a director and principal shareholder of the Company
entered into a three-year consulting agreement with the Company to provide
consulting services. During 2000, consulting fees of approximately $17,000 were
paid under this agreement. At May 31, 2001, $6,000 was unpaid relating to such
services. $5,853 remained unpaid at May 31, 2002. This amount was converted to
long-term debt as of May 30, 2002, bearing interest at 3% per annum and maturing
on May 30, 2004.

      During fiscal 2001, the Company secured a line of credit of $1,050,000
from three principal shareholders and directors of the Company, including Irwin
Balaban, the Company's Chief Executive Officer. As of May 31, 2001, $550,000 had
been drawn down from this line of credit. The line of credit expired on
September 19, 2001 and has been replaced with a line of credit from Baseboard
Investments LLC, a limited liability company, the members of which consist of
the same three principal shareholders and directors of the Company. This line of
credit provides for borrowings of up to $1,250,000, and was to expire in
September 2002. As of August 16, 2002, this line of credit was extended until
September 19, 2004, under the existing terms. As of May 31, 2002, $540,146 had
been drawn down from this line of credit. In connection therewith, interest
expense of $40,089 and $41,177 was incurred in fiscal 2001 and 2002,
respectively, of which $64,574 remains unpaid at May 31, 2002. This amount was
converted to long-term debt as of May 30, 2002, bearing interest at 3% per annum
and maturing on May 30, 2004.

7. Lease Commitments

      The Company is obligated, under noncancellable operating leases covering
its facilities (Note 6), to pay minimum annual rentals of approximately:

            Fiscal year ending:

            2003............................ $  180,000
            2004............................    168,000
            2005............................    168,000
            2006............................    168,000
            2007............................    168,000
            2008 and thereafter.............    602,000
                                             ----------
                                             $1,454,000
                                             ==========

      Total rental expense for each of the years ended May 31, 2000, 2001 and
2002 amounted to approximately, $247,000, $216,000 and $178,000, respectively.


                                       34
<PAGE>

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

      There were no changes in and disagreements with accountants on accounting
and financial disclosures during the fourth quarter of fiscal 2002.


                                       35
<PAGE>

                                    Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Sections 16(a) of the Exchange Act

Directors and Executive Officers

      The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
        Name                Age                   Position
        ----                ---                   --------

<S>                        <C>    <C>
Irwin Balaban              70     Chairman of the Board, President and Chief Executive Officer

Judy Frenkel               50     Chief Operating Officer and Senior Vice President - Systems Development

Herbert Goldman            71     Director

Lawrence B. Klein          68     Director
</TABLE>

      Irwin Balaban, a co-founder of the Company, has been Chairman of the Board
since 1983. From 1983 until his retirement in March 1999, he was President and
Chief Executive Officer of the Company. Since March 1999, he has been providing
consulting services to the Company. In his capacity as a consultant to the
Company, in July 2001, Mr. Balaban assumed the offices of President and Chief
Executive Officer.

      Judy Frenkel has been Chief Operating Officer of the Company since July
2001. Prior thereto, Ms. Frenkel had been Senior Vice-President - Systems
Development since September 2000. From September 1999 to September 2000 she had
been Vice President - Systems Development of the Company. From September 1992 to
September 1999, she was the Manager of Systems Analysis of the Company.

      Herbert Goldman, a co-founder of the Company, has been a director since
1983. He provided consulting services to the Company from his retirement in 1996
until May 2000. From 1991 until his retirement, Mr. Goldman had been Executive
Vice President - Operations of the Company.

      Lawrence B. Klein, a co-founder of the Company, has been a director since
1991. He was Executive Vice President - Worldwide from May 1999 until his
retirement in May 2000, and from May 2000 to May 2001, provided consulting
services to the Company. From 1991 to May 1999, Mr. Klein was the Executive Vice
President, Marketing and Sales of the Company.

      All directors hold office until the next annual meeting of shareholders
and until their successors have been duly elected and qualified. Executive
officers are elected by, and serve at the discretion of, the Board of Directors.


                                       36
<PAGE>

Committees of the Board of Directors

      The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee recommends to the Board of Directors
the engagement of independent certified public accountants and reviews the audit
engagement, including the scope of services and results of the auditors' review
of the Company's accounting and control procedures and the accuracy of its
system of internal accounting and control procedures. The Compensation Committee
reviews and makes recommendations to the Company's Board of Directors relating
to the compensation of executives of the Company and administers the Company's
stock option and incentive plans. All of the members of the Audit Committee and
the Compensation Committee are non-employee directors.

Directors' Compensation

      Each non-employee director receives $500 for each Board meeting attended
and is reimbursed for all out-of-pocket expenses incurred in connection with
attendance at meetings of the Board or any committee thereof. Upon election to
the Board of Directors, each non-employee director is granted five-year options
to purchase 5,000 shares of Common Stock at an exercise price equal to fair
market value of the Common Stock at the date of grant. In addition, directors
serving on either the Audit Committee or the Compensation Committee are granted
additional five-year options to purchase 2,500 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock at the date of
grant. These options vest immediately.


                                       37
<PAGE>

Item 10. Executive Compensation.

      The following table sets forth all compensation awarded to, earned by or
paid to the chief executive officer ("CEO") of the Company and the Company's
four most highly compensated executive officers, whose salary and bonus exceeded
$100,000 in compensation for the last three fiscal years (collectively, the
"Named Executives"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                         Long-Term
                                                             Annual Compensation                     Compensation Awards
                                                                                               Securities
            Name and                   Fiscal                             Other Annual         Underlying         All Other
       Principal Position               Year              Salary        Compensation(1)       Options/SARs     Compensation(2)
<S>                                      <C>              <C>                 <C>                 <C>                <C>
Irwin Balaban (3)                        2002            $      0            $28,180                  0            $     0
  President and Chief                    2001            $      0             28,000                  0                  0
  Executive Officer                      2000            $      0             22,000                  0                  0

C. Kenneth Morrelly (4)                  2002              71,290                537                  0             24,759(5)
  President and Chief                    2001             240,116             16,399            140,000              5,078
  Executive Officer                      2000             152,488             11,700             70,000              1,475

David Dinin(6)                           2002                   0                  0                  0                  0
   President and Chief                   2001              80,769              2,935                  0              1,126
   Executive Officer                     2000             261,779             16,107             25,000              3,414

Elizabeth A. Burke (7)
  Vice President - Finance,              2002              24,873              2,850                  0              5,498(8)
  Chief Financial Officer and            2001             151,971                  0             45,000              3,039
  Treasurer                              2000             141,154                  0             50,000              1,781

                                         2002             130,000                  0                  0              2,600
Judy Frenkel (9)                         2001             110,000                  0             30,000              2,200
  Chief Operating Officer                2000             102,343                  0             10,000              1,962

Arthur B. Kahn (10)                      2002              17,626                659                  0                350
  Vice President Sales and               2001             118,408              8,317             30,000              1,759
  Marketing                              2000              26,953                  0              5,000                  0

Robert O'Connor (11)                     2002              28,439              1,335                  0              9,362(12)
  Vice President -                       2001             139,768             11,570             30,000              3,027
  Systems Development                    2000             137,522             12,015              5,000              2,880
</TABLE>

----------


                                       38
<PAGE>

(1)   Represents amounts paid for automobile expenses, certain non-accountable
      expenses, and commissions, and consulting fees.

(2)   Represents matching contributions made by the Company pursuant to the
      Company's 401(k) Plan.

(3)   Since 1983, Mr. Balaban has been Chairman of the Board, and since his
      retirement in March 1999, has been providing consulting services to the
      Company under a consulting agreement. In his capacity as a consultant to
      the Company, Mr. Balaban assumed the offices of President and Chief
      Executive Officer in July 2001.

(4)   Mr. Morrelly became Sr. Vice President - Sales and Marketing in June 1999
      and became President and Chief Executive Officer on August 25, 2000. Mr.
      Morrelly resigned from employment with the Company in July 2001.

(5)   Represents amounts paid as severance and health insurance reimbursements
      made by the Company and matching contributions made by the Company
      pursuant to the Company's 401(k) Plan.

(6)   Mr. Dinin became President and Chief Executive Officer in April 1999 and
      resigned from employment with the Company in August 2000.

(7)   Ms. Burke separated employment with the Company in July 2001.

(8)   Represents amounts paid for health insurance reimbursements made by the
      Company and matching contributions made by the Company pursuant to the
      Company's 401(k) Plan.

(9)   Ms. Frenkel became Chief Operating Officer of the Company in July 2001.

(10)  Mr. Kahn became Manager, Business Development in February 2000 and became
      Vice President of Sales and Marketing in September 2000. Mr. Kahn was
      terminated from the Company in July 2001.

(11)  Mr. O'Connor was terminated from the Company in July 2001

(12)  Represents amounts paid as severance by the Company.

Consulting Agreement

      On April 1, 1999, the Company and Mr. Balaban entered into a three-year
agreement pursuant to which Mr. Balaban is to receive $12,000 per year for
providing consulting services on an as-needed basis. During fiscal 2000, 2001
and 2002, consulting fees of approximately $22,000, $28,000 and $28,200,
respectively, were incurred under this agreement. At May 31, 2002, $37,196 was
unpaid relating to such services. This amount was converted to long-term debt as
of May 30, 2002, bearing interest at 3% per annum and maturing on May 30, 2004.
This agreement was not renewed in fiscal 2002. In July 2001, Mr. Balaban assumed
the offices of President and Chief Executive Officer.


                                       39
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management.

      The following table sets forth, as of August 15, 2002, the names,
addresses and number of shares of Common Stock beneficially owned by (i) all
persons known to the management of the Company to be beneficial owners of more
than 5% of the outstanding shares of Common Stock, (ii) each director of the
Company, (iii) each named Executive Officer and (iv) all executive officers and
directors of the Company as a group (except as indicated, each beneficial owner
listed exercises sole voting power and sole dispositive power over the shares
beneficially owned):

<TABLE>
<CAPTION>
                                                                 Number of Shares
                     Name and Address of                           Beneficially          Percentage of Outstanding
                    Beneficial Owner (1)                             Owned(2)          Shares Beneficially Owned(2)
                    --------------------                             --------          ----------------------------

<S>                                                                  <C>                          <C>
Irwin Balaban .............................................          1,030,000(3)                 22.63%
Judy Frenkel ..............................................             78,200(4)                  1.72
Herbert Goldman ...........................................            909,000(5)                 20.11
Lawrence B. Klein .........................................            694,000(6)                 15.27
All executive officers and directors as a group (4 persons)          2,711,200(7)                 57.98
</TABLE>

----------

      (1)   The address of each beneficial owner of more than 5% of the
            outstanding shares of Common Stock is c/o Robocom Systems
            International Inc., 511 Ocean Avenue, Massapequa, New York 11758.

      (2)   Except as indicated in the footnotes to this table, the Company
            believes that all persons named in the table have sole voting and
            investment power with respect to all Common Stock shown as
            beneficially owned by them. In accordance with the rules of the
            Securities and Exchange Commission (the "Commission"), a person or
            entity is deemed to be the beneficial owner of Common Stock that can
            be acquired by such person or entity within 60 days upon the
            exercise of options or warrants or other rights to acquire Common
            Stock. Each beneficial owner's percentage ownership is determined by
            assuming that options and warrants that are held by such person (but
            not those held by any other person) and which are exercisable within
            60 days have been exercised. The inclusion herein of such shares
            listed as beneficially owned does not constitute an admission of
            beneficial ownership.

      (3)   Includes 564,000 shares held by I&T Balaban L.P. and 55,000 shares
            subject to options that are presently exercisable.

      (4)   Includes 50,000 shares subject to options that are presently
            exercisable.

      (5)   Includes 564,000 shares held by H & N Goldman L.P., 160,000 shares
            held by the Herbert Goldman Revocable Trust, 160,000 shares held by
            the Naomi J. Goldman Revocable Trust and 25,000 shares subject to
            options that are presently exercisable.

      (6)   Includes 50,000 shares subject to options that are presently
            exercisable.

      (7)   Includes 180,000 shares subject to options that are presently
            exercisable.

Item 12. Certain Relationships and Related Transactions.

      The Company leases approximately 10,000 square feet of office space, which
functions as its corporate headquarters, in Massapequa, New York, pursuant to a
lease between the Company and Robocom Properties Inc. ("Robocom Properties")
that expires on December 31, 2010. The shareholders of Robocom Properties are
Messrs. Balaban, Goldman and Klein and Robert O'Connor, a former executive
officer of the Company. In connection therewith, the Company incurred expenses
of $168,000, $174,365 and $177,991 in fiscal 2000, 2001 and 2002, respectively,
of which $161,872 was unpaid at May 31, 2002. This amount was converted to
long-term debt as of May 30, 2002, bearing interest at 3% per annum and maturing
on May 30, 2004. Since January 1, 1998, the annual


                                       40
<PAGE>

base rental of $168,000 payable under the lease has been adjusted and thereafter
will be adjusted each year by the ratio of the prime rate as published in the
Wall Street Journal on January 2 of such year to the prime rate as published in
the Wall Street Journal on January 2, 1997, which was 8.25%. The prime rate on
January 2, 2002 was 4.75%. However, the parties have agreed that rent will not
be less than $14,000 per month. The Company believes that these rental terms are
at least as favorable to the Company as could be obtained from an unaffiliated
third party.

      In connection with the purchase by Robocom Properties in 1989 of the
Company's corporate headquarters building, the Company guaranteed three mortgage
loans in an aggregate original principal amount of $1,053,000 that mature in
2010 and bear interest at rates ranging from 8.25% to 8.877% per annum. At May
31, 2002, the outstanding aggregate principal amount of the mortgage loans was
approximately $610,000.

      Irwin Balaban, Chairman of the Board of the Company, has been acting as a
consultant to the Company since his retirement as President and Chief Executive
Officer of the Company effective April 1, 1999. On April 1, 1999, the Company
and Mr. Balaban entered into a three-year agreement pursuant to which Mr.
Balaban was to receive $12,000 per year for providing consulting services on an
as-needed basis. During fiscal 2000, 2001 and 2002, consulting fees of
approximately $22,000, $28,000 and $28,000, respectively, were incurred under
this agreement. At May 31, 2002, $37,196 was unpaid relating to such services.
This amount was converted to long-term debt as of May 30, 2002, bearing interest
at 3% per annum and maturing on May 30, 2004. In his capacity as a consultant to
the Company, in July 2001, Mr. Balaban reassumed the offices of President and
Chief Executive Officer.

      William J. Hancock, a former director of the Company, served as a
consultant to the Company from November 23, 1999 to November 22, 2000. On
November 23, 1999, the Company and Mr. Hancock entered into a one-year agreement
pursuant to which Mr. Hancock was to receive $36,000 per year for providing
consulting services to the Company on an as-needed basis. During fiscal 2001 and
2000, consulting fees of approximately $12,000 and $26,000, respectively, were
paid under this agreement. This agreement was not renewed in fiscal 2001.

      Lawrence Klein, a director of the Company, served as a consultant to the
Company from his retirement as Vice President - Worldwide of the Company
effective May 15, 2000 to May 14, 2001. On May 16, 2000, the Company and Mr.
Klein entered into a one-year agreement pursuant to which Mr. Klein was to
receive $18,000 per year for providing consulting services to the Company on an
as-needed basis. No fees were accrued or paid under this agreement during fiscal
2000. This agreement was not renewed in fiscal 2001. At May 31, 2002, $9,661
remained unpaid under this agreement. This amount was converted to long-term
debt as of May 30, 2002, bearing interest at 3% per annum and maturing on May
30, 2004.

      Herbert Goldman, a director of the Company, acted as consultant to the
Company commencing on his retirement as Executive Vice President - Operations of
the Company effective July 1996 through May 2000. On May 15, 1997, the Company
and Mr. Goldman entered into a three-year agreement pursuant to which Mr.
Goldman received $12,000 per year for providing consulting services on an
as-needed basis. For the fiscal year ended May 31, 2000, Mr. Goldman received
approximately $17,000, under this agreement. This agreement was not renewed in
fiscal 2001. At May 31, 2002, $5,853 remained unpaid under this agreement. This
amount was converted to long-term debt as of May 30, 2002, bearing interest at
3% per annum and maturing on May 30, 2004.

      During fiscal 2001, the Company secured a line of credit of $1,050,000
from three principal shareholders and directors of the Company, including Irwin
Balaban, the Company's Chief Executive Officer. As of May 31, 2001, $550,000 had
been drawn down from this line of credit. The line of credit expired on
September 19, 2001 and has been replaced with a line of credit from Baseboard
Investments, LLC, a limited liability company, the members of which consist of
the same three principal shareholders and directors of the Company. This line of
credit provides for borrowings of up to $1,250,000, and was to expire in
September 2002. As of August 16, 2002, this line of credit was extended until
September 19, 2004, under the existing terms. As of May 31, 2002, $540,146 had
been drawn down from this line of credit.


                                       41
<PAGE>

Item 13. Exhibits and Reports on Form 8-K.

      (a) Exhibits.

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

3.1         Restated Certificate of Incorporation of the Company (incorporated
            herein by reference to Exhibit 3.1 to the Company's Registration
            Statement on Form SB-2 (Registration No. 333-27587)).

3.2         Amendment dated November 9, 1998 to Restated Certificate of
            Incorporation of the Company to reflect name change to Robocom
            Systems International Inc. (incorporated herein by reference to
            Exhibit 3.2 to the Company's Annual Report on Form 10-KSB for the
            year ended May 31, 1999 as filed with the Commission on August 25,
            1999 (File No. 0-22735)).

3.3         Amended and Restated By-laws of the Company (incorporated herein by
            reference to Exhibit 3.2 to the Company's Registration Statement on
            Form SB-2 (Registration No. 333-27587)).

10.2        Lease Agreement, dated December 21, 1989, between Robocom
            Properties, Inc. and the Company relating to 511 Ocean Avenue,
            Massapequa, New York (incorporated herein by reference to Exhibit
            10.7 to the Company's Registration Statement on Form SB-2
            (Registration No. 333-27587)).

10.3        Guaranty dated December 21, 1989 from the Company to New York Job
            Development Authority. (incorporated herein by reference to Exhibit
            10.10 to the Company's Annual Report on Form 10-KSB for the year
            ended May 31, 1997 as filed with the Commission on September 25,
            1997 (File No. 0-22735)).

10.4        Guaranty dated December 14, 1989 from the Company to Long Island
            Development Authority. (incorporated herein by reference to Exhibit
            10.11 to the Company's Annual Report on Form 10-KSB for the year
            ended May 31, 1997 as filed with the Commission on September 25,
            1997 (File No. 0-22735)).

10.5        1997 Stock Option and Long-Term Incentive Compensation Plan
            (incorporated herein by reference to Exhibit 10.14 to the Company's
            Registration Statement on Form SB-2 (Registration No. 333-27587)).

10.6        Tax Indemnification Agreement, dated June 6, 1997, between the
            Company and certain shareholders of the Company (incorporated herein
            by reference to Exhibit 10.21 to the Company's Annual Report on Form
            10-KSB for the year ended May 31, 1997 as filed with the Commission
            on September 25, 1997 (File No. 0-22735)).

10.7        Promissory Note dated May 30, 2002 from the Company to Irwin
            Balaban.

10.8        Promissory Note dated May 30, 2002 from the Company to Lawrence
            Klein.

10.9        Promissory Note dated May 30, 2002 from the Company to Herbert
            Goldman.

10.10       Promissory Note dated May 30, 2002 from the Company to Robocom
            Properties, Inc.

10.11       Promissory Note dated May 30, 2002 from the Company to Baseboard
            Investments, LLP.

10.12       Line of Credit Commitment dated August 16, 2002 from Baseboard
            Investments, LLP.


                                       42
<PAGE>

10.13       Promissory Note dated August 16, 2002 from the Company to Baseboard
            Investments, LLP.

(b)         Reports on Form 8-K.

            No Reports on form 8-K were filed during the fourth quarter of
            fiscal 2002.

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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, in Massapequa, New
York, on August 29, 2002.

                                       ROBOCOM SYSTEMS INTERNATIONAL INC.


                                       By:  /s/ Irwin Balaban
                                            -----------------------------------
                                                Irwin Balaban
                                                Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates stated:

<TABLE>
<CAPTION>
                Signature                                           Title                                  Date
<S>                                         <C>                                                    <C>


  /s/Irwin Balaban                          Chairman of the Board and Chief Executive Officer
  --------------------------------------    (Principal Executive Officer and Principal
  Irwin Balaban                             Accounting Officer)                                    August 29, 2002


  /s/Lawrence B. Klein
  --------------------------------------
  Lawrence B. Klein                         Director                                               August 29, 2002


  /s/Herbert Goldman
  --------------------------------------
  Herbert Goldman                           Director                                               August 29, 2002
</TABLE>


                                       43
<PAGE>

                                  Exhibit Index

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

10.7        Promissory Note dated May 30, 2002 from the Company to Irwin
            Balaban.

10.8        Promissory Note dated May 30, 2002 from the Company to Lawrence
            Klein.

10.9        Promissory Note dated May 30, 2002 from the Company to Herbert
            Goldman.

10.10       Promissory Note dated May 30, 2002 from the Company to Robocom
            Properties, Inc.

10.11       Promissory Note dated May 30, 2002 from the Company to Baseboard
            Investments, LLP.

10.12       Line of Credit Commitment dated August 16, 2002 from Baseboard
            Investments, LLP.

10.13       Promissory Note dated August 16, 2002 from the Company to Baseboard
            Investments, LLP


                                       44