SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 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:  0-24031

                 INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
                 (Name of Small Business Issuer in Its Charter)

   South Carolina                                            57-0910139
----------------------------------                    -------------------------
  (State or Other Jurisdiction of                          (I R S Employer
  Incorporation or Organization)                         Identification No. )

      1601 Shop Road, Suite E
      Columbia, South Carolina                                  29201
----------------------------------                    --------------------------
 (Address of Principal Executive Offices)                     (Zip Code)

          Issuer's Telephone Number, Including Area Code: 803-736-5595

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

         Securities registered under Section 12(g) of the Exchange Act:
                           Common Stock, no 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 issuer 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 will be contained,
to the best of the issuer'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. [___]

 The issuer's revenues for the year ended December 31, 2002, the issuer's most
                      recent fiscal year, were $3,387,546.


The aggregate market value of voting stock held by non-affiliates of the
issuer on March 28, 2002 was approximately $609,336. This value was calculated
by excluding all shares held by officers, directors and controlling shareholders
of issuer without conceding that all such persons are "affiliates" of issuer for
purposes of the federal securities laws.

The number of shares outstanding of the issuer's common stock, no par
value, at March 28, 2002 was 22,230,258.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the issuer's Proxy Statement to be filed in connection with its 2003
Annual Meeting of Shareholders are incorporated by reference in Items 9 through
                      12 of Part III of this Form 10-KSB.

   Transitional Small Business Disclosure Format (check one): Yes ___ No __X__



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                 INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.

                              INDEX TO FORM 10-KSB


           PART I                                                       PAGE


Item 1.    Description of Business

Item 2.    Description of Property

Item 3.    Legal Proceedings

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

           PART II

Item 5.    Market for Common Equity and Related Stockholder Matters

Item 6.    Management's Discussion and Analysis of Financial Condition
            and Results of Operations

Item 7.    Financial Statements

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

           PART III

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

Item 10.   Executive Compensation

Item 11.   Security Ownership of Certain Beneficial Owners and Management
            and Related Stockholder Matters

Item 12.   Certain Relationships and Related Transactions

Item 13.   Exhibits and Reports on Form 8-K

Item 14.   Controls and Procedures


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PART I

Advisory Note Regarding Forward-Looking Statements

     Some of the statements contained in this report on Form 10-KSB constitute
forward-looking statements that involve risks and uncertainties. We caution
readers of this report that these statements involve a number of known and
unknown risks that may cause our actual results to be materially different from
those contemplated by these statements. Factors that might cause such a
difference include, but are not limited to, those discussed in this report under
the captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Factors That May Affect Our Operating Results," both
of which are contained in Item 6 of Part II of this report, as well as those
factors set forth in other periodic reports and filings that we make with the
Securities and Exchange Commission. Copies of these filings may be obtained from
the Securities and Exchange Commission at its principal office in Washington, DC
at prescribed rates by calling 1-800-SEC-0330. These filings are also available
electronically through the Internet web site maintained by the Securities and
Exchange Commission at the Internet address: http://www.sec.gov.

Item 1.     Description of Business

General Overview

     Integrated Business Systems and Services, Inc. ("IBSS" or the "Company") is
a national software provider of solutions to complex, industry-specific business
problems. Our flagship product, Synapse(SM), is targeted to be the preferred
architecture for dynamic, distributed, real-time software applications. The
Synapse(SM) suite of products includes: Synapse for Manufacturing(SM), Synapse
Government e-Printing(SM), Synapse Composer(SM), and the Synapse Application
Development Platform(SM).

     Our objective is to become the nation's vendor-of-choice among businesses
seeking the most advanced and cost-effective systems tracking and integration
solutions. We currently provide application software for manufacturing processes
and printing, along with application development and execution products for
software engineers. Our applications offer a high degree of flexibility, rapid
granular implementation, and scalability across virtually any operating system
and hardware platform. In addition to our software, we provide our customers
with a variety of services, including custom design, implementation assistance,
project planning and training.

     Founded and incorporated as a South Carolina corporation in 1990 in
Columbia, South Carolina, IBSS originally was a systems integrator to
manufacturing and credit card processing companies. As the founders of the
Company implemented various systems integration projects based on their prior
backgrounds, it became clear to them that their marketplace needed a new
technology model. Traditional database models worked adequately in static
environments. However, in the dynamic and rapidly changing production
environments in which the Company's customers operated, IBSS' management saw the
need for a new technology model that would provide a more effective and
efficient way to deliver on-line, real time critical data in a distributed
environment, while also simultaneously providing similar information both at
multiple locations and at the customer's head office.

     Out of these observations, IBSS commenced the development of a software
system designed to be more flexible, scalable and logical than competing systems
and that was oriented much more toward the business logic of the end user than
the technical programming logic of the system's vendor. One of the primary
objectives in designing the new design was to enable the customer to avoid as
much as possible the costs and delays associated with the installation, use and
maintenance of the traditional, industry-standard programming and application
development systems. At the outset, this aggressive design objective led the
Company to steer clear of the rigid, object-code programming template that
comprised and supported competing systems. Instead of basing its system on
traditional object-code architecture, IBSS developed a rules-based software
system. This and other features of the new system support many of its
competitive advantages.

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     Synapse(SM) is the name of the underlying software engine of the IBSS'
system. Included among the advantages of Synapse, and the various related IBSS
modules that it supports, are:

-    the ease and speed in which IBSS can run customer demonstrations of the
     system that already incorporate the highly customized operating profiles of
     the customer's work flows,

-    the ease in which IBSS and the customer can implement and maintain the
     system,

-    the benefit not available in competing systems that enables end users to
     make changes at any point in their versions of the system without having to
     incur the costs and delays of rewriting programming code elsewhere, and

-    the ability of the system to be run in multiple operating environments.

     The Synapse platform is designed to be the glue in heterogeneous
environments, easily interacting with and extending disparate and best-of-breed
applications and operating environments, database management systems, and legacy
applications. IBSS believes that one of the greatest challenges for information
technology ("IT") organizations is that today's technologies do not adequately
address the complexity inherent in aggregating applications from distributed
systems. Developers describe how their applications are distributed directly
with the Synapse model, and never have to resort to another language or tool.

     Synapse has been designed to provide a complete integrated development and
implementation platform that reacts in business terms, not programmer terms - an
environment capable of defining and maintaining the entire enterprise's topology
in business process terms. Synapse has been designed to extend the functionality
of legacy systems, integrate rapidly, and extend business functionality,
allowing the customer to quickly embrace and deploy new standards as they emerge
without starting over or re-creating applications.

     Our current line of Synapse-based products includes:

-    Synapse for Manufacturing(SM) - providing manufacturing plant automation,
     such as shop floor tracking, data collection, and manufacturing execution
     for customers with multiple locations and who have already installed or may
     be planning to install enterprise resource planning (ERP) systems.

-    Synapse Government e-Printing(SM) - providing a fully integrated, turn-key
     approach for the printing industry's publishing and distribution processes,
     including web-based, front-end ordering and interface capabilities with any
     high volume printing equipment and legacy application software.

-    Synapse Composer(SM) - providing a productivity tool for use with Synapse
     to create a complete development environment allowing the user to define
     and maintain all of the elements of a distributed, web-based application
     from a single screen.

-    Synapse Application Development Platform(SM) - providing a complete
     integrated application development environment designed for rapid
     production of mission critical, distributed and web-based enterprise
     solutions.

     Our common stock is listed under the symbol "IBSS.OB" and traded on the
Over-the-Counter Bulletin Board maintained by the National Association of
Securities Dealers, Inc. Our principal executive offices are located at 1601
Shop Road, Suite E, Columbia, South Carolina, 29201. Our telephone number is
(803) 736-5595.


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<PAGE>

Software Product Architecture

     Synapse is an application development and execution platform for developing
dynamic, distributed, real-time software applications. Synapse has been designed
to be highly connectable, flexible, scalable and complete. Using Synapse, an
enterprise is able to model its business processes directly, allowing third
party systems, such as enterprise resource planning, supply chain and Web
portals, to be more loosely coupled. Moreover, Synapse reacts in business terms,
not programmer terms, and is hardware and operating system independent. It is an
environment in which a large library of rule sets has been assembled. Rules sets
are combined to provide discrete functions. This functionality is then assembled
into applications.

     Our applications are designed for use in dynamic environments requiring
real-time transmission of mission-critical data to be used in making critical
event-driven decisions. Synapse has been designed to enable rapid and easy
integration into other enterprise applications and legacy systems that may exist
in an organization's information technology environment. Synapse can be
configured either to perform all transactions that need to be processed, or to
route selected transactions among multiple systems. All Synapse applications are
scaleable, permitting changes in network size, server platforms and other
architectural components with minimal disruption. Furthermore, Synapse is
capable of running in conjunction with any relational database.

     Additional software applications are built by Synapse designers and
consultants without the need to develop any new code. Through the use of the
Synapse Composer, new applications are developed using existing functions,
commands and tools that are assembled in the correct sequence to produce the
desired results. To date, we have built applications for multiple industries,
including the following:

-    Textile and Apparel Manufacturing

-    Commercial Printing

-    Furniture Manufacturing

-    Automotive Manufacturing

-    Wireless device applications in all industries


Synapse Advantages

     Synapse-based applications provide the following advantages to
organizations in monitoring, maintaining and integrating their business systems,
applications and processes, both internally and with their external electronic
relationships:

     Incrementally Deployed

     Synapse's incremental deployment feature allows for the solving of point
specific solutions now, while providing for easy expansion later, overtime. This
lets the user quickly solve problems today and facilitates additional
enhancements in a rapidly changing environment. Application deployment can be
planned and executed in manageable increments. This allows real cost savings and
productivity enhancements to begin accruing to the benefit of the customer much
more quickly than is possible with the traditional data base model.

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<PAGE>

     Completely Self-Contained

     By being fully self-contained, Synapse enables organizations to describe
any distributed application without the use of other third party supporting
software. In addition, no third party programming tool is needed to modify or
extend Synapse functionality in order to deliver the desired application.

     Real-Time Distributed

     By possessing a real-time and naturally distributed architecture, Synapse
has been designed to allow any business to instantaneously update its entire
system through any Synapse node on the enterprise network, thereby eliminating a
business's reliance on a central critical server, while maintaining efficient
management of logic between systems. It is also designed to take advantage of an
organization's existing investments in information technologies by working with
and connecting to multiple financial, human resource and enterprise resource
planning systems. As a result, application development is greatly simplified,
and Synapse enables businesses to extend the life and functionality of their
existing system applications.


Existing Synapse Modules

     As noted above, our objective is to become the nation's vendor-of-choice
among businesses seeking the most advanced and cost-effective systems tracking
and integration solutions. We are currently focusing our marketing of our
Synapse-based offerings through the following three modules:

     Synapse for Manufacturing(SM)

     Synapse for Manufacturing(SM) bundles the integration capability of the
Synapse architecture with the application modules capable of fully automating
the manufacturing plant. Synapse for Manufacturing, first released in September
2000, is a powerful Manufacturing Execution Management System (MES) that enables
the sharing of real-time information with the manufacturing plant, the
manufacturer's customers, the supply chain and the manufacturer's corporate
headquarters.

     Synapse for Manufacturing provides on-line process management for
manufacturing shop floor environments. This application utilizes our proprietary
on-line transaction processing configuration environment to provide maximum
configurability, maintainability and efficiency for our customers' systems. The
system is designed so that a manufacturing or industrial analyst can configure
the unique processes and process requirements of a manufacturing facility
without the typical costs and development time associated with the application
programming required of competing MES applications.

     Synapse for Manufacturing is based on a "bill of operations" concept and
can be configured to provide detailed shop floor management for any specific
manufacturing facility, in many cases without requiring the customer to modify
its manufacturing shop floor methodologies or procedures. As a result, customers
are able to achieve a return on their IT investment more quickly than by using
other MES systems. Other MES applications are based on current application
development tools to achieve "configurable" shop floor applications specific to
individual manufacturing industries such as electronics, food processing or
pharmaceuticals. Synapse for Manufacturing is designed to allow a manufacturing
industrial analyst to configure MES applications for any manufacturing industry,
effectively eliminating the traditional need to also involve computer
programmers for custom software development.


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<PAGE>

         Synapse Government e-Printing(SM)

     Synapse Government e-Printing(SM) is a fully integrated software system
that we designed specifically for the printing industry. It includes robust and
flexible capabilities in the automation of shop floor processes. It offers a
full turn-key approach for the publishing and distribution processes, including
interface capabilities with any high volume printing equipment, legacy
application software or other equipment and software systems. The system also
can be easily expanded over time with any hardware and software changes.

     As with each of our other product modules, Synapse Government e-Printing is
built on our proprietary, robust online transaction processing technology. It
provides extensive job-tracking capabilities, as well as comprehensive shop
floor execution, providing the printing customer with information on scheduling,
tracking, delivery and billing of every print job. Once an order is received,
either online or by telephone, Synapse Government e-Printing's shop floor
execution capabilities can track every step of the order's processing, from
pre-press production to on-press production and to out-the-door delivery
confirmation. With Synapse Government e-Printing, customers can also check on
their orders in real-time via the Internet.

         Synapse Composer(SM)

     Synapse Composer is a next generation software application development
tool. We believe Synapse Composer is significantly ahead of the current software
development industry in being the only development tool that enables the
customer to see all of the functional components of the customer's software
applications in a single view. Armed with this unified view of the customer's
entire system, the customer can use Synapse Composer in one unified and complete
development environment to create, troubleshoot and modify every dimension of
its software applications, all in real time, and all while the customer's
systems are up and running.

     Synapse Composer's revolutionary functionality includes the ability to
create, define and control complete software applications - spanning browser,
web server, application server, database server, and integration with other
systems- within a single, stable and complete environment.


         Synapse Application Development Platform(SM)


     Synapse Application Development Platform provides a platform with which the
modern business can more effectively react to change. Global industry and
commerce are rapidly becoming more and more interconnected and interdependent.
In addition to market globalization, the need for flexibility to handle rapid
change in today's business world comes from other multiple agents of change,
including market globalization, and corporate mergers and acquisitions, and the
establishment of collaborative relationships.

     In the area of mergers and acquisitions, it is a financial imperative that
dissimilar operations be brought into the broader enterprise quickly and with
little disruption. Likewise, with the growing emergence of collaborative
relationships, greater levels of flexibility are required because of the
necessity to efficiently integrate disparate systems and end-points that are not
under the exclusive control of any one of the participating enterprises.
Collaboration in manufacturing, distribution, and product development dictates
the requirement for the creation of a virtual operation that no longer is
physically contained within one facility.

     We believe that in order for businesses to compete effectively in this
changing environment, the businesses need an efficient information technology
platform with which they can produce immediate solutions, without having to
incur the costs of scaling back or otherwise abandoning any of the on-going
synergies of their legacy systems. Accordingly, our approach in designing the
Synapse Application Development Platform has been to allow businesses to be
prepared for yet-to-be-defined future systems and emerging standards in areas
such as supply chain collaboration and web-based solutions. In attempting to
keep up with these dynamic new demands, we believe it is unnecessarily costly
and cumbersome for any business to continue to adopt the traditional approach of
using custom programming based upon a procedural or object-oriented language and
its associated tools.


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<PAGE>


     The Synapse Application Development Platform has been designed as an
implementation platform that is unified, extensible, and scalable. Application
developer's jobs are complex enough without adding difficult and confusing
development environments to the mix. The object-oriented programming based
application server does not provide the needed level of flexibility or developer
productivity to properly react to change and rapid implementation of new
applications. Our new Synapse architecture has been developed to address this
reality of today's business world.


Customer Support

     Customer support is provided for all of our maintenance customers. These
services are provided by professionals focused on resolving any customer's
needs. Our Customer Support Center is available 24 hours a day, seven days a
week.


Consulting Services

     We offer a variety of consulting services to our customers and to
third-party consulting firms, including implementation assistance, project
planning, process design, system configuration and implementation. We can
provide these services directly to customers or indirectly by working closely
with third-party consulting and systems integrators, such as EDS, USM, and
Silenus, to provide the customer with a full range of re-engineering,
customization and project management services.


Customer Education and Training

     We offer comprehensive training courses for our customers and partners with
the goal of ensuring each customer's success with our software applications.
Training is also available for third-party consultants. Services include project
team training classes, end-user training classes and consulting services.


Sales and Marketing

     We generate our revenues primarily through the licensing, installation and
servicing of our suite of Synapse-based products. Our growth strategy seeks to
use Synapse to rapidly capitalize on the absence in the current technology
markets of an integrated application development and execution environment that
is as affordable, as easy-to-implement and as fully-scalable as our Synapse
software engine.

     We market and license our software products in North America primarily
through a small sales, marketing and business development organization. Our
marketing strategy is to focus on third party consultants and system integrators
who are positioned in the particular industry verticals for which our
applications have been designed. Within the last twelve months, we have have
been accepted into the IBM partnerworld program. These partners are looking for
applications with which they can expand their service revenue with their
existing customer base, and build greater market share with a strategic
advantage over their competition. Because Synapse and its related applications
are new to the market, we recognize that we cannot rely solely on third parties
to sell our products. Accordingly, we continue to market and sell on a targeted,
direct basis. As these assignments grow, we anticipate sharing the workload with
our consulting and system integrator partners.


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<PAGE>


Our Sales and Growth Strategies

         Expand and Leverage Strategic Relationships

     We intend to access new markets and distribution channels by continuing to
establish and leverage business relationships with more system integrators,
application software vendors, hardware and wireless technology suppliers. These
strategic relationships enable us to reach a broader range of customers in a
wider variety of industries than would be possible through a direct sales force
alone. As a result, we expect to enhance our customer base, cultivate additional
market expertise, and achieve our growth objectives more quickly and
cost-effectively.

         Target Vertical Markets with Industry Focused Solutions

     We believe that we have a competitive edge in providing e-business
solutions to organizations requiring frequent changes or adjustments to their
systems and applications, as well as the integration of those systems and
applications. Our belief is a function of the demonstrated ability of Synapse to
provide these dynamic solutions more quickly and at a lower cost than our
competition.

     We have currently developed and have implemented these solutions for
organizations in such diverse marketplaces as textile and apparel manufacturing,
furniture manufacturing, commercial printing, and wireless. Accordingly, we have
specifically focused our business development efforts in these targeted
industries where we believe our Synapse products provide us with the greatest
competitive advantages. We expect to benefit significantly from the vertical
market potential offered by each of these targeted industries, and we intend to
dedicate more sales and marketing resources to establish more strategic
alliances to penetrate these industries.

     We are pursuing this strategy in order to enable us to develop
industry-specific templates for e-business solutions at competitive cost levels.
This template approach is designed to allow us to be incrementally more
profitable by reducing both the cost and the implementation time otherwise
required for e-business solutions, and rapidly expanding the business
opportunities within an industry.

         Enhance the Synapse Product and Technology Leadership

     We believe that in Synapse and its related suite of products, we have
developed the broadest, most comprehensive and most cost-effective e-business
solution to address the needs of an organization in a dynamic business
environment. We have filed a patent application on our basic Synapse technology.
We intend to continue investing in research and development to enhance the
capability of Synapse to provide solutions that will enable our customers'
operations to be more efficient and extend their organizations more rapidly and
cost effectively. Currently, our development efforts are focused on enhancing
the Web Services enablement, database connectivity, performance and
configuration productivity capabilities of Synapse.

     Consistent with revenue growth, our objective is to expand upon our
experienced team of developers and engineers and further enhance our corporate
culture to foster innovation in the product development, application
configuration and design areas. Furthermore, we are constantly assessing
available opportunities to achieve synergies through the acquisition of
complementary technologies or businesses that we believe will further our growth
strategy. At this time, however, we are not indiscussions or negotiations with
any third parties with respect to any acquisition, merger or similar
transactions.


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<PAGE>

         Leverage Customer Base through Network Effect

     We intend to provide the best possible service to our installed base of
customers in order to expand the use of our Synapse products within our
customers' organizations. The strategic importance of the Synapse products to
our customers is expected to provide what we believe will become the foundation
for our preferred access to additional projects within their organizations. This
visibility to our customers' senior management, combined with our focused
implementation and service approach, is expected to facilitate the rapid
adoption and deployment of the Synapse products throughout the customer's
enterprise.

     Furthermore, as our customers deploy the use of the Synapse products
throughout their extended organizations, including their supply chains and
electronic markets, their customers, suppliers and partners will be exposed to
the robust scope of the functionality provided by the Synapse products in the
context of the exchange of mission-critical business information. We believe
that this exposure, which will allow non-customer participants in the supply
chain to benefit from the Synapse solution first-hand, should enable us to
create a powerful network effect in the acceleration of industry recognition and
adoption of our Synapse products. We, therefore, are focused on this positioning
to leverage our opportunities across multiple target markets in order to grow
our revenue base.


Research and Development

     We have focused our research and development efforts primarily on expanding
the core capabilities of Synapse. We plan to continue to devote design and
research resources to continue to enhance the base Synapse products, develop
more industry-specific applications, and add functionality to our existing
applications. Our research and development expenses were $376,660, 735,540, and
$306,721 for the fiscal years ended December 31, 2002, 2001 and 2000,
respectively.


Intellectual Property

     We regard certain aspects of our internal operations, products and
documentation as proprietary. We rely primarily on a combination of patent,
copyright, trademark and trade secret laws, and other measures to protect our
proprietary rights. We also rely on contractual restrictions in our agreements
with customers, employees and others to protect our intellectual property
rights. However, there can be no assurances that these agreements will not be
breached, that we will have adequate remedies for any breach, or that our trade
secrets will not otherwise become known.

     Our ability to compete and succeed is dependent, in part, upon our
patent-pending technology. We have developed a breakthrough and proven software
solution, and we are in the process of obtaining all related patent rights to
our core technology in the United States and internationally.


Competition and Markets

       Industry Background

     During the last ten years, businesses have invested heavily in enterprise
applications to automate and improve the efficiency of their internal business
processes. In parallel, there has been a shift from in-house custom development
of mission-critical applications to the purchase of packaged applications and
related services from third-party vendors. These applications have spread
throughout the business world addressing many highly strategic business
functions, including resource planning, supply chain management, customer
relationship management, sales force automation, business decision support and
e-commerce. In this new corporate environment, a single business process can
require access to data and information from many distinct applications, none of
which is designed to communicate seamlessly and in real-time with the others.


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     In recent years the competitive environment for businesses has intensified
dramatically. This has caused businesses to seek new ways to generate
sustainable competitive advantages. As competition has increased and markets
have become more dynamic, companies have begun to recognize that they must
coordinate more closely every aspect of their business. In order to achieve a
more efficient working process while taking advantage of the enormous investment
in the broad range of package and custom software applications, it has become
critical that these applications be efficiently integrated. The complexity of
this integration challenge has historically required time-consuming, expensive,
custom developed solutions. In response, the market for third-party enterprise
application integration software providers has emerged to deliver this
integration capability as a packaged solution.

         Competitive Conditions

     The market for our Synapse platform is extremely broad and could be
considered competitive with any provider of transaction processing or real time
data. However, we do not plan, nor do we have the resources, to market the
product as a software platform. Instead, we are focused on creating vertical
solutions to meet the needs of specific industry segments. These segments to
date include manufacturing, printing and application development. We will
continue to develop applications that are a quantum leap forward in solving
problems that run the gamut, from automated procurement, inventory management
and distribution management to order processing, integrated customer support and
collaborative planning.

     In their marketing efforts, almost all of our known competitors have
adopted a "narrow-and-deep" strategy, resulting in their products being tailored
to specific market segments that are not easily adapted to other market segments
without substantial additional application development. In contrast to this
approach, we have developed our Synapse application to be configured
horizontally across many industries, while aligning ourselves with systems
integrators who we have identified as experts in specific markets.

     Many of our competitors promote their products as being configurable using
traditional object-oriented or component-based programming techniques, in most
cases using Microsoft's standards. While these methods may be more efficient
than traditional computer software development, these methods still require
substantial programmer resources. This adherence to Microsoft standards also
limits the ability of a customer to connect to the non-Microsoft applications
and engineering control systems which are still in abundance. Unlike many of our
competitor's products, the Synapse transaction configuration platform, upon
which the Synapse for Manufacturing product is built, provides for the benefits
of Microsoft compatibility in addition to compatibility with the existing
systems and engineering control systems currently deployed within manufacturing
facilities.

     The markets in which we operate are highly competitive. Our competitors are
diverse and offer a variety of solutions targeting various segments of the
industry sectors which we have developed our applications. Some competitors
compete with suites of applications designed to offer out-of-the-box
integration, while most offer point solutions designed specifically to target
particular functions or industries. We have attempted to solve these business
problems with our breakthrough Synapse architecture and industry-specific
applications. In some cases, we compete with large ERP, supply chain and
collaborative product management software firms. These could include large ERP
software vendors, such as Oracle, PeopleSoft, SAP and others that have added or
are attempting to add capabilities for supply chain planning or
business-to-business collaboration to their transaction system products;
companies such as I2, Adexa, Manugistics and others that compete principally in
supply chain management applications; companies such as Agile, Commerce One and
others that compete principally with our supplier relationship management
applications; and companies such as Apriso, CamStar, Datasweep, and others that
compete in the Collaborative Product Management market place.


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     We believe that the primary competitive factors which affect the market for
our products and services include product function and features; quality of
service offered; performance and cost; ease of implementation; the
"time-to-benefit" factor (the time period from identification of technology need
or "fix" to delivery of the application solution); quality of customer support
services; customer training and documentation; and product reputation. The
relative weight of each of these factors is customer-specific. Although we
believe that our products and services carry the most competitive advantage with
respect to each of these factors, we may not be able to maintain our position
against current and future competition.


Employees

     As of February 28, 2003, we had a total of 25 full-time employees and 2
part-time employees.


Government Regulation

       Sarbanes-Oxley Act of 2002

     On July 30, 2002, the Sarbanes-Oxley Act of 2002 was signed into law. It
mandated sweeping reforms and implemented a number of requirements for public
companies. Among the reforms and new requirements, some of which are not yet
effective as a consequence of associated implementing rules, are the following:

-    Creation of the Public Company Accounting Oversight Board to oversee audits
     of public companies.

-    Implementation of a variety of requirements designed to ensure greater
     auditor independence, including the prohibition of certain services that
     auditors had traditionally provided to clients.

-    Implementation of a variety of requirements regarding audit committees,
     including that they be entirely independent; that they establish procedures
     for the confidential, anonymous submission by employees of concerns
     regarding questionable accounting or auditing matters; and that public
     companies disclose whether or not at least one member of the committee is a
     "financial expert."

-    Requirement that changes in equity ownership by directors, officers, and
     10% shareholders be reported more promptly, generally by the end of the
     second business day following the change in ownership (subject to limited
     exceptions).

-    Requirement that Chief Executive Officers and Chief Financial Officers
     certify that the financial information in each annual and quarterly report
     fairly presents in all material respects the financial condition and
     results of operations of the public company as of and for the periods
     presented in the report, and establish and maintain internal controls
     designed to ensure discovery of material information.


                                       12
<PAGE>

-    Implementation of rules relating to disclosure of all material off-balance
     sheet transactions and obligations and regarding the presentation of
     pro-forma financial information in any press release or other public
     disclosure that is "non-GAAP."

-    Requirement that public companies disclose whether or not they have adopted
     a code of ethics for senior executives and any waivers or changes in the
     code.

-    Requirement that Chief Executive Officers and Chief Financial Officers
     disgorge incentive compensation and profits from their sales of company
     securities after any restatement of financial information.

-    Prohibition against directors and executive officers from transacting in
     company equity securities received in connection with employment during any
     pension fund trading blackout relating to such class of equity.

-    Requirement that Securities and Exchange Commission review each public
     companiy's periodic reports (including Forms 10-KSB, Forms 10-QSB, and
     Forms 8-K) at least once every three years.

-    Acceleration of the time schedule during which Forms 10-KSB, Forms 10-QSB,
     and Forms 8-K must be filed for certain public companies and expansion of
     the items reportable under Form 8-K.

-    Issuance of new requirements regarding the obligations of attorneys to
     report evidence of any material violation of securities law or breach of
     fiduciary duty to the public company's chief legal counsel or Chief
     Executive Officer and ultimately to the Board of Directors.

-    Adoption of new rules regarding statutes of limitation and penalties with
     respect to securities law violations.

     The Sarbanes-Oxley Act is expected to have a meaningful impact on certain
of the areas of our operations that are affected by the act. However, we do not
believe that we will be affected by the Sarbanes-Oxley Act in ways that are
materially different or more onerous than the way the act is expected to affect
other public companies of similar size and nature.


Item 2.     Description of Property

     We do not own any real estate. We operate principally from our headquarters
at 1601 Shop Road in Columbia, South Carolina where we currently lease
approximately 7,200 square feet of office space at an annual cost of
approximately $66,000. Our lease expires in January 2013.

Item 3.     Legal Proceedings

           We are not currently involved in any material legal proceedings.


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

     No matters were submitted to a vote of our shareholders during the fourth
quarter of fiscal year 2002.

                                     PART II

Item 5.     Market for Common Equity and Related Stockholder Matters

     Since January 18, 2002, our common stock has been publicly traded on the
over-the-counter bulletin board ("OTCBB") established by the National
Association of Securities Dealers, Inc. under the trading symbol "IBSS.OB."
During the seventeen-month period prior to that date, our common stock was
traded on the Nasdaq National Market. We became a publicly traded company in
October 1997 through our initial public offering of common stock on the
Vancouver Stock Exchange ("VSE"). We voluntarily de-listed our common stock from
the VSE on June 29, 1999. Prior to that date, on July 2, 1998, our common stock
commenced trading in the United States on the OTCBB until our shares became
listed on the Nasdaq National Market August on August 15, 2000. Trading of our
shares on the Nasdaq National Market ceased on January 18, 2002 as a consequence
of the publicly traded share price of our common stock no longer meeting the
minimum bid price requirements for continued listing.


                                       13
<PAGE>

     The share prices set forth below indicate the high and low bid prices as
reported on the OTCBB and the high and low sale prices as reported on the Nasdaq
National Market for the indicated periods.
<TABLE>
<CAPTION>


           Fiscal Year Ended                         Sales Price (Nasdaq)             Bid Price (OTCBB)

                                                     High            Low            High             Low
           December 31, 2001

<S>        <C>                                       <C>            <C>
           1st quarter (1/1/01 - 3/31/01)            $ 4.50         $ 2.13
           2nd quarter (4/1/01 - 6/30/01)              4.60           2.13
           3rd quarter (7/1/01 - 9/30/01)              4.32           1.76
           4th quarter (10/1/01 - 12/31/01)            2.50           1.25

</TABLE>
<TABLE>
<CAPTION>

           December 31, 2002

<S>        <C>                                      <C>            <C>            <C>              <C>
           1st quarter (1/1/02 - 3/31/02)            $ 1.80         $ 1.50         $ 1.50           $ 0.83
           2nd quarter (4/1/02 - 6/30/02)                                            0.95             0.43
           3rd quarter (7/1/02 - 9/30/02)                                            0.53             0.25
           4th quarter (10/1/02 - 12/31/02)                                          0.46             0.14
</TABLE>


     The foregoing quotations from the OTCBB reflect inter-dealer prices without
retail markup, markdown or commission and may not necessarily reflect actual
transactions.

         Shareholders of Record

     As of February 28, 2003, there were 72 shareholders of record of our common
stock. The number of shareholders of record of our common stock is not
representative of the total number of beneficial owners of our common stock
because some of these shareholders of record hold their shares in nominee name
for other beneficial owners.

         Dividends

     We have never paid any cash dividends on our common stock and our
management has no plans to declare cash dividends in the foreseeable future.

         Recent Sales of Unregistered Securities

     During the three months ended December 31, 2002, we issued the securities
identified below in transactions that were not registered under the Securities
Act of 1933 in reliance upon the exemption from registration contained in
Section 4(2) and Rule 506 of Regulation D of that act. Those sections of the act
exempt from registration any securities transactions that do not involve a
general solicitation and in which the purchasers are purchasing solely for
investment, provided the purchasers also possess requisite financial
sophistication and, subject to some limitations, are provided with certain
information regarding the company. We believe that each of the private investors
involved in these transactions was given or had access to detailed financial and
other information with respect to our company and possessed requisite financial
sophistication.

     On October 24, 2002, we issued 1,172,048 shares of our common stock to two
of our private investors in connection with their conversion of $257,851 of the
outstanding obligation to them under our December 31, 2001 convertible
debentures. On November 27, 2002, we issued 595,281 shares of our common stock
to eight of our private investors in connection with their conversion of
$107,151 of the outstanding obligation to them under our December 31, 2001
convertible debentures. For a description of these debentures, please refer to
"Item 2. Changes in Securities" set forth under Part II of the company's
quarterly report on Form 10-QSB filed with the Securities and Exchange
Commission for the quarter ended March 31, 2002.


                                       14
<PAGE>

Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations

     The following discussion and analysis provides information that we believe
is relevant to an assessment and understanding of our results of operations and
financial condition. This discussion should be read in conjunction with the
financial statements and notes thereto included elsewhere in this Form 10-KSB.

Overview

     We were founded in 1990. During our early years, we operated primarily as a
provider of customized computer configuration and related consulting services
for a large variety of industries. Eventually, our focus began to shift toward
providing systems integration services to enhance the flow and on-line tracking
of the shop floor transactions of large manufacturing businesses. The software
industry's standard approach in providing these services had been, and in large
part remains, characterized by the necessity for costly and perpetual
customized, object-oriented programming to keep the customer's systems current
and adaptable in the dynamic operating environments of most businesses. Although
many of our early software solutions remained largely customized to the
particular customer's needs, we continued to build upon a core technological
engine whose novel, rules-based architecture represented a completely new
approach in the delivery of on-line transaction tracking and management systems.

     In our efforts to improve the efficiency and speed in our delivery of our
services, we began to develop the early components of what would eventually
become our core Synapse technology. In doing so, we began to recognize the
tremendous power of our developing software's ability to eliminate much of the
need for significant amounts of customized programming with each new
installation. Furthermore, our solution rarely required the customer to modify
its manufacturing shop floor methodologies or procedures. As a result, the
customer was able to achieve a return on its computer technology investment more
quickly than by using competing applications. In recognition of the potential
value of our software components, we began directing substantially more of our
resources toward the development of our core software products in 1997. These
efforts became the foundation of the continuing shift of our earnings model
toward the generation of an ever-increasing percentage of higher-margin,
product-based revenue through the licensing of our internally-developed software
solutions.

     By 1998, we had embarked upon a strategy of focusing substantially all of
our resources toward the completion and marketing of our core Synapse-based
products, while recognizing that this strategy would inevitably result in a
substantial reduction in our traditional service-based revenues. Synapse, was
formally introduced to the market in late 1999. By the middle of 2000, as a
result of our marketing and sales efforts, we began to experience a substantial
increase in the interest of national accounts in the procurement of our
Synapse-based products.

     Our first license of what was then our Synapse HR Software occurred in late
June 2000, in connection with our establishment of an application service
provider (ASP) transition project with WilCam Systems, LLC, a national provider
of software to enable employers to comply with the requirements of the Family
Medical Leave Act. Several weeks later, Fruit of the Loom, one of the nation's
largest apparel manufacturers, selected Synapse for Manufacturing as its shop
floor tracking system from a field of over sixty of the nation's leading
competing companies and technologies. During the latter part of 2000, Berkline
Corporation, a subsidiary of the national furniture conglomerate, Lifestyles
Furnishings International Ltd., became our first installed application of
Synapse for Manufacturing for the furniture industry.


                                       15
<PAGE>

Revenue Recognition

     Our revenues are generated primarily by licensing to customers standardized
Synapse-based software systems providing configuration services, automation and
administrative support and information services to our customer base; and
reselling computer and related third party hardware associated with our software
installations. Historically, our customer base has been comprised almost
entirely of manufacturers. We recognize revenues related to software licenses
and software maintenance in compliance with the American Institute of Certified
Public Accountants Statement of Position No. 97-2, "Software Revenue
Recognition."

     We license software under non-cancelable license agreements and provide
various related services, including consulting and maintenance, and product
configuration and support services. We recognize our license revenues when a
non-calculable license agreement has been signed, the software product has been
shipped, we see no uncertainties surrounding product acceptance, our fees are
fixed or otherwise determinable, we believe collectability is probable, and
vendor-specific objective evidence exists to allocate the total fee to elements
of the arrangement.

     Our agreements with our customers and resellers do not contain product
return rights. Revenues from maintenance, which consist of fees for ongoing
support and product updates, are recognized ratably over the term of the
contract, which is typically one year. Consulting revenues are primarily related
to services performed on a time-and materials basis under separate service
arrangements and are recognized in the periods during which the services are
performed. We recognize revenues from the sale of third party hardware when the
associated hardware has been shipped to the customer and the risk of loss has
transferred to the customer.


                                       16
<PAGE>
<TABLE>
<CAPTION>

                          Financial Operations Summary

 Year Ended December 31,

                                                        2002              2001              2000
                                                        ----              ----              ----
Revenues
<S>                                                      <C>               <C>                 <C>
         Services                                        $2,728,355        $1,994,653          $752,173
         Software licensing                                 506,590           153,750           850,000
         Maintenance                                         67,799           102,671           146,779
         Hardware sales                                      84,802         1,406,208           633,116
         Total revenues                                   3,387,546         3,657,282         2,382,068

Cost of revenues
         Services                                         1,023,634         1,239,215           791,703
         Software licensing                                 190,023           225,103           172,936
         Maintenance                                         87,623            96,402             6,796
         Hardware sales                                      66,280         1,091,531           527,717
         Total cost of revenues                           1,367,560         2,652,251         1,499,152
         Gross margin                                     2,019,986         1,005,031           882,916

Operating expenses
         Research and development costs                     376,660           735,540           306,721
         General and administrative                       2,512,321         4,161,730         3,310,762
         Sales and marketing                                311,402         1,707,415         1,465,410
         Restructuring and impairment charges             -                 1,841,272         -
         Bad debt expense                                    51,126           232,292         -
         Total operating expenses                         3,251,509         8,678,249         5,082,893
         Loss from operations                            (1,231,523)       (7,673,218)       (4,199,977)

Other income and (expenses)
         Loss on disposal of equipment                      (11,999)           (5,151)           (8,582)
         Other income                                       128,050                83           101,384
         Interest income                                      4,442            32,912           170,207
         Interest expense                                (1,196,384)       (3,800,341)         (117,452)
         Loss on equity investment                        -                  (657,840)         (165,920)
         Non-controlling interest in loss (gain)           (847,353)          847,353         -
         Net loss                                        (3,154,767)      (11,256,202)       (4,220,340)

Loss per share:
         Basic and diluted                                   ($0.17)           ($0.71)           ($0.31)


Balance Sheet Data at December 31,


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

         Working Capital                                   $353,227       ($1,859,844)       $1,630,238
         Property, Plant and Equipment                      399,849           564,067           573,350
         Capitalized Software Costs                         241,294           420,511           599,730
         Other Assets                                        29,679             4,154             4,128
         Total Assets                                     1,020,014         1,529,227         3,540,716
         Long Term Liabilities                            2,051,488         2,228,256         1,250,000
         Shareholders Equity (Deficiency)
         Dollar Amount                                  ($3,584,917)      ($3,071,374)       $1,759,635
         Outstanding Shares (1)                          22,230,258        17,774,694        14,244,869

(1) All share numbers in the table retroactively reflect the Company's stock split on March 5, 1997.

</TABLE>


                                       17
<PAGE>

Results of Operations

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenues

     Our operating revenues decreased by $269,735 (approximately 7%) from
$3,657,282 in 2001 to $3,387,547 in 2002. This decrease was primarily
attributable to the significant decrease in 2002 in our hardware sales to Fruit
of the Loom which accounted for approximately 3% and 38%, of our total revenues
for 2002 and 2001, respectively. This decrease was offset partially by an
increase in service revenue and an increase in license sales.

     Services. Our service revenues increased by $773,703 (approximately 37%)
from $1,994,653 in 2001 to $2,728,356 in 2002. Substantially all of this
increase was attributable to the increase in the service revenues associated
with Fruit of the Loom.

     Software Licenses. Our revenues from the licensing of Synapse-based
products increased by $506,590 (approximately 229%) from $153,750 in 2001 to
$352,840 in 2002. Substantially all of this increase was due to additional
licenses that were sold to Fruit of the Loom.

     Maintenance. Our revenues from software maintenance fees decreased by
$34,872 (approximately 34%) from $102,671 in 2001 to $67,799 in 2002. This
decrease was a consequence of the suspension of operations of WilCam Systems,
LLC late in 2001.

     Hardware. Our revenues from the sales of third party hardware decreased by
$1,321,406 (approximately 94%) from $1,406,208 in 2001 to $84,802 in 2002. As
noted above, this decrease in hardware revenue was attributable primarily to the
fact that hardware sales to our largest customer were significantly lower than
in the prior year.

Cost of Revenues

     Cost of revenues decreased by $1,284,691 (approximately 48%) from
$2,652,250 in 2001 to $1,367,562 in 2002. This decrease was attributable to
several factors, including the decrease in the cost of hardware sales due to the
reduction in 2002 of hardware sales to third parties and a decrease in the human
resource costs to support our maintenance obligations associated with our
license agreements. The reduction of these human resource costs was primarily
attributable to the increase in efficiencies in our overall customer support
operations.

     Services. Our cost of services decreased by $215,581 (approximately 17%)
from $1,239,215 in 2001 to $1,023,634 in 2002. This decrease was attributable to
our ongoing restructuring and cost control programs but was offset by additional
human resource costs required for certain customer projects. Our gross margin
for services for 2002 was approximately 62%, representing a significant increase
over our 38% gross margin for services in 2001.

     Software Licenses. Our cost from the licensing of our Synapse-based
products decreased by $35,080 (approximately 16%) from $225,103 in 2001 to
$190,023 in 2002. Substantially all of this decrease was attributable to reduced
legal expenses associated with our license negotiations. Our gross margin for
software licenses for 2002 was 62%, representing an increase from our negative
46% gross margin for software licenses in 2001. This increase was attributable
primarily to additional license sales increasing while the yearly amortization
cost of our capitalized software remained constant.

     Maintenance. Our cost of maintenance decreased by $8,779 (approximately 9%)
from $96,402 in 2001 to $87,623 in 2002. Our gross margin for maintenance for
2002 was a negative 29%, representing a decrease from our 6% gross margin for
maintenance in 2001. This decrease was attributable primarily to the lower
maintenance revenues as noted above with only slight reductions in costs.


                                       18
<PAGE>

     Hardware. Our cost from the sales of third party hardware decreased by
$1,025,251 (approximately 94%) from $1,091,531 in 2001 to $66,280 in 2002. This
decrease was associated solely with the concurrent decrease in the sales of
hardware in connection with the implementations of our contracts. Our gross
margin for hardware sales for 2002 was approximately 22%, remaining constant
with our 22% gross margin for hardware sales in 2001.

Gross Profit and Margins

     Gross profit was $2,019,986 in 2002, representing an increase of $1,014,955
(approximately 101%) over gross profit in 2001 of $1,005,031. Our overall gross
margin increased to approximately 60% in 2002, up from approximately 27% in
2001. This increase was associated with the successful execution of our
comprehensive cost control program, combined with the increase of service
revenues as a proportion of gross revenues and the decrease in hardware sales
where we experienced lower margins.

Operating Expenses

     Research and Development. Research and development expenses decreased by
$358,880 (approximately 49%) from $735,540 in 2001 to $376,660 in 2002. This
decrease was primarily associated with the decrease in resources allocated in
2002 toward product development. Research and development expenses represented
approximately 20% and 11% of total revenues for 2001 and 2002, respectively. We
do expect research and development expenses will increase in absolute dollars in
the foreseeable future as we continue our product development activities,
although we anticipate that these expenses as a percentage of total revenues
will not decrease.

     General and Administrative. General and administrative expenses decreased
by $1,649,409 (approximately 40%) from $4,161,730 in 2001 to $2,512,321 in 2002.
Also, as a percentage of total revenues, general and administrative expenses
decreased from approximately 114% in 2001 to approximately 74% in 2002.
Substantially all of the decrease in general and administrative expenses was
attributable to the cost control program that the company has implemented as
detailed below.

     Sales and Marketing. Sales and marketing expenses decreased by $1,396,013
(approximately 82%) from $1,707,415 in 2001 to $311,402 in 2002. This decrease
was primarily attributable to the reduction of our direct sales team during the
last quarter of 2001, as well as a decrease in the cost of our third party
public relations and investor relations resources. Sales and marketing expense
as a percentage of total revenues decreased from approximately 47% in 2001 to
approximately 9% in 2002. Although we expect that our sales and marketing
expenses will begin to increase in absolute dollars as we implement our market
share growth strategies, we anticipate that these expenses will continue to
decrease as a percentage of total revenues.

     Impairment and Restructuring Charges. Impairment and restructuring charges
decreased to zero in 2002 from approximately $1.842 million in 2001. These 2001
impairment charges were solely related to the December 13, 2001 spin-off by our
affiliate, WilCam Systems, LLC, of certain of its material assets associated
with Synapse HR into our majority-controlled subsidiary, Synamco, LLC. These
assets consisted entirely of software that had been capitalized by WilCam
Systems, LLC. At the time of the transfer of these assets to Synamco, we elected
to write down the assets to their fair value using the guidance of Statement of
Financial Accounting Standards No. 86, resulting in an aggregate impairment and
restructuring charge for 2001.

     Bad Debt Expense. Bad debt expense decreased to $51,126 from $232,292 in
2001. During our spinoff of WilCam Systems, LLC, as detailed above, we elected
to increase the reserve applied to the note receivable from WilCam Systems, LLC,
resulting in a charge to bad debt expense of $232,292 in 2001 and an additional
$50,000 in 2002.


                                       19
<PAGE>

Non-recurring and Non-cash Items.

     During 2002, we recognized an aggregate of approximately $1.66 million in
non-recurring and non-cash charges associated with (a) interest expense
associated with bridge notes, related warrants and debt restructuring and (b)
the write off of a subsidiary's receivable charge.

     Other Income. Other income increased $127,967 from $83 in 2001 to $128,050
in 2002. This increase was due to the forfeiture, by the former CEO of the
company, of a severance package. This amount had been expensed in 2001 and was
forfeited in 2002 and put in other income.

     Interest expense. Interest expense decreased $2,603,957 (approximately 69%)
from $3,800,341 in 2001 to $1,196,384 in 2002. Substantially all (approximately
68% and 95% in 2002 and 2001, respectively) of this expense was related to the
intrinsic value approach that was applied to both the common stock purchase
warrants and the conversion features of our private placements of convertible
debt in 2001 and 2002, all as required by the application of Accounting
Principles Board Opinion No. 14, Emerging Issues Task Force (EITF) Issue No.
98-5 and EITF Issue No. 00-27. The directive of these accounting policies is to
attribute an appropriate value to the conversion feature imbedded in convertible
debt where the conversion price is either below the market price of the common
stock at the commitment date, or where such price may adjust during the life of
the debt to a price that is below the market price of the common stock at the
time of the adjustment. The entire value of the imbedded conversion feature is
charged to interest expense and credited to additional paid in capital at the
time of the commitment. These accounting policies also require recognition of
the fair value of any warrants issued in connection with debt financing. The
fair value is charged to a debt discount that is amortized to interest expense
over the life of the related debt instrument, and an equal amount is credited to
additional paid in capital.

     Net loss (gain) in affiliated company. Net loss (gain) in affiliated
company increased to $847,353 in 2002 from a gain in 2001 of $347,353. This gain
was attributable to the write off of IBSS's accounts receivable from this
affiliate. This write-off created a gain on the affiliated company's books and
is reflected on our consolidated statements. This line item represents the
non-controlling interest gain.


2002 Cash Flow Analysis

     Net cash used in operating activities decreased by approximately $4.4
million (85%) from approximately $5.2 million during the twelve months ended
December 31, 2001 to approximately $783,000 during the twelve months ended
December 31, 2002.  This decrease is attributable with our our cost program
that the company implementedd as detailed below.

     Net cash provided by (used in) investing activities increased by
approximately $594,000 (approximately 102%) from negative approximately $581,000
during the twelve months ended December 31, 2001 to positive approximately
$13,000 during the twelve months ended December 31, 2002. This was comprised of
decreases from 2001 to 2002 of $540,000 in payments for purchases of equity
interests in affiliates and approximately $155,000 in the purchases of property
and equipment. These increases were offset by an decrease from 2001 to 2002 of
$50,000 in sale of investments and $50,000 in related party receivables, net.

     Net cash provided by financing activities was approximately $820,000 during
the twelve months ended December 31, 2002, as compared to approximately $5.1
million during the twelve months ended December 31, 2001. The net cash provided
by financing activities in 2002 resulted primarily from the completion of
private placements of $839,000 in convertible debentures (down 76% from
$2,836,640 in 2001), $100,000 from the completion of private placements of
common stock (down 70% from $408,600 in 2001), proceeds from exercise of common
stock options and warrants of $10,699 (down 99% from $1,032,371 in 2001) and
$45,000 from the issuance of convertible promissory notes (down 94% from
$826,000 in 2001) . All of these proceeds were offset slightly by payments on
notes payable of $175,000.


                                       20
<PAGE>

Liquidity and Capital Resources

         Sources of Operating Capital.

     Prior to 1997, we financed our operations primarily through our revenues
from operations, including funded research and development revenues, and
occasional short-term loans from our principals, their families and other
individuals and entities. Since the middle of 1997, we have financed our
operations primarily through private and public offerings of common stock and
convertible debt, and to a lesser extent from operating revenues and through
borrowings from third parties. We raised net proceeds of approximately $1.22
million in our November 1997 initial public offering. Since that time, we have
raised additional equity of approximately $12.3 million through several private
placements of common stock and stock purchase warrants and the conversion of
approximately $2.1 million of convertible debt into equity. During 2001, we
raised an aggregate of approximately $5.1 million in additional capital,
consisting of approximately $1.03 million from the exercise of common stock
options and warrants, approximately $409,000 from the private placement of
common stock, and approximately $3.66 million from the issuance of convertible
debt. During 2002, we raised approximately $984,000 through the private
placement of common stock, two-year convertible debentures, and common stock
purchase warrants. Although we are seeking to raise additional funds in 2003
from the private placement of additional debt, equity or equity-linked
securities, we expect that we will experience difficulty in obtaining additional
financing until our operating results or overall market conditions reflect
sustained improvement.

         Cost Control Program.

     During September of 2001, in connection with executive managements'
restructuring of our internal operations and in response to the need to reduce
costs in connection with lower than expected year-to-date revenues, we commenced
a comprehensive cost control program. The implementation of that program is
continuing. By the end of March 2003, our monthly cash payments necessary to
fund continuing operational expenses had decreased by over 70% as compared to
the monthly cash required for operations prior to the commencement of our cost
control program.

     Included in our cost control program are measures that have resulted in
substantial reductions in our largest cash expenditure categories of human
resource and payroll-related expenses. Through March of 2003, these measures
have included the reduction of over 50% in the number of our employees; the
deferral of up to 65% in the compensation rates of our executive officers;
reductions of up to 50% in the compensation rates for our remaining
non-executive personnel; reductions of approximately 13% in the rates we pay for
employee health insurance; scale-backs in our employee benefit programs; and
substantial reductions in employee travel, accommodation and hiring costs. In
addition, we have achieved significant cash flow relief through the
discontinuance of non-essential third party consulting and service arrangements
and the renegotiation of other third party contracts, including those in the
areas of public relations, investor relations, financial advisory services,
financial printing and industry research. During the remainder of 2003, in
addition to the reductions outlined above, we intend to pursue additional
reductions in operating expenses where appropriate.

     In addition to the reductions outlined above, we have substantially reduced
more cost associated with rent of facilities. We leased new space to which we
moved during February of 2003. The former leased space was approximately 19,500
square feet with an annual gross rent of approximately $345,000. Our new
facilities are approximately 7,200 square feet with an annual gross rent of
approximately $36,000 with annual payment for up-fit of $30,000. There are no
increases in our gross rent during the term of which expires in 2013. There is
also contiguous space of approximately 4,775 square feet of which we have an
option at an annual rent of $19,100 if the need to expand should arise.


                                       21
<PAGE>

     We currently do not have any commitments or budgeted needs during the
remainder of 2003 for any material capital expenditures, including purchases of
furniture, fixtures or equipment. In the absence of any substantial infusion of
growth capital or an unexpected increase in our expected gross margin for 2003,
we do not expect our capital expenditure plans for the next twelve months to
change.


         Debt and Other Payables.

     On December 31, 2001, we achieved almost complete debt service relief for
2002 and 2003 through the restructuring of substantially all of our short-term
and long-term debt into convertible debentures and notes. Under the restructured
debt instruments as originally in effect, approximately 80% of the entire
principal balance of the restructured debt was not payable until January 1,
2004. Substantially all of the remaining 20% was payable during January of 2003.
Effective December 31, 2002, the holders of substantially all of that 20% agreed
to extend the January 2003 maturity date until January of 2004. In addition, the
holders of the debt already scheduled to mature in January 2003 have agreed to
extend the due dates for the first of two interest installments, effectively
extending the due date of all repayment obligations under that portion of the
debt until maturity of the debt in the first quarter of 2004.

     In the months since the issuance of the company's currently outstanding
convertible debt, a portion of the principal and accrued interest on the debt
has been converted by its holders into shares of our common stock. These and
other holders of the convertible debt may elect to convert additional amounts of
this debt into common stock prior to the maturity date in January of 2004. These
debt conversions have reduced, and if continued in 2003, will continue to reduce
the company's short-term debt obligations. For additional information regarding
our outstanding investor debt, please refer to the matters described above under
the caption "Sources of Operating Capital" and the matters described elsewhere
in this report under the caption "Risk Factors That May Affect Our Financial
Condition and Operating Results."

     With respect to our trade accounts payable, we have established long-term
payout arrangements with respect to substantially all of our unsecured
creditors. In addition, where permitted under securities laws, we have satisfied
and expect to continue to satisfy certain of our unsecured obligations to third
parties through restricted stock grants.

       Additional Capital.

     As noted above, during 2002, we raised approximately $939,000 through the
private placement of common stock, two-year convertible debentures and common
stock purchase warrants. We are seeking to raise additional funds in 2003 from
the private placement of additional debt, equity or equity-linked securities.
Because of several factors, including the operating, market and industry risks
associated with an investment in our common stock; the inclusion of a going
concern paragraph in our annual and quarterly financial reports; the fact that
our common stock is no longer traded on the Nasdaq Stock Market and is currently
traded on the Over-the-Counter Bulletin Board maintained by the NASD; the
continued weakness in the capital markets in general and the technology sectors
in particular; and the other factors described in this report under the heading
"Risk Factors That May Affect Our Financial Condition and Operating Results," we
believe we will experience difficulty in obtaining additional financing until
our operating results or overall market conditions reflect sustained
improvement.


                                       22
<PAGE>

     As a consequence of our comprehensive restructuring and cost control
program described above under the caption "Cost Control Program", we have
achieved substantial cash flow relief during the past twelve months. In the
absence of any substantial infusion of growth capital or a significant increase
in customer revenues over the amounts included in our budget for the remainder
of 2003, we have not budgeted for any material increase in these monthly cash
payments, and as noted above, we will continue in 2003 to pursue further
reductions in our monthly cash payment obligations. We expect that the proceeds
from revenues generated from our operations will be adequate to meet our
projected working capital and other cash requirements for at least the next
twelve months. Management intends to closely monitor the company's progress and
to further reduce our expenses if our marketing and sales strategies do not
result in sufficient new revenues within a reasonable period of time. Any such
reduction will involve scaling back, delaying or postponing any development
activities that are not essential at that time in order for the company to
achieve its stated objectives. In any event, our working capital deficit may
continue to grow unless we are able to sustain revenues sufficient to meet
expenditure levels, or our expenditure levels are further reduced.

Critical Accounting Policies

     We have adopted various accounting policies that govern the application of
accounting principles generally accepted in the United States in the preparation
of our financial statements. Our significant accounting policies are described
in the footnotes to the consolidated financial statements at December 31, 2002,
as included in this annual report on Form 10-KSB. We consider these accounting
policies to be critical accounting policies. Certain accounting policies involve
significant judgments and assumptions by us, but do not have a material impact
on the carrying value of our assets and liabilities and results of operations.
The judgments and assumptions we use are based on historical experience and
other factors that which we believe to be reasonable under the circumstances.
Because of the nature of the judgments and assumptions we make, actual results
could differ from these judgments and from estimates which could have an impact
on our carrying values of assets and liabilities and our results of operations.

Regulatory Matters


     We are not aware of any current recommendations by regulatory authorities,
which, if they were to be implemented, would have a material effect on
liquidity, capital resources, or operations.


Controls Evaluation

         Limitations on the Effectiveness of Controls

     The company's management, including the Chief Executive Officer and the
Chief Financial Officer, does not expect that our Disclosure Controls or our
Internal Controls (each, as defined below in Part III of this report under the
caption "Item 14. Controls and Procedures") will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Furthermore, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs.

     Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple errors or mistakes.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions. Over time, control may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.


                                       23
<PAGE>

         Scope of the Controls Evaluation

     The Chief Executive Officer and Chief Financial Officer evaluation of our
Disclosure Controls and our Internal Controls included a review of the controls'
objectives and design, the controls' implementation by the company, and the
effect of the controls on the information generated for use in this report. In
the course of the Controls Evaluation, we sought to identify data errors,
controls problems, or acts of fraud, and to confirm that appropriate corrective
action, including process improvements, were being undertaken. This kind of
evaluation will be done on a quarterly basis so that the conclusions concerning
controls effectiveness can be reported in our quarterly reports on Form 10-QSB
and in our annual reports on Form 10-KSB. Our Internal Controls are also
evaluated on an ongoing basis by other personnel in our company and by our
independent auditors in connection with their audit and review activities. The
overall goals of these various evaluation activities are to monitor our
Disclosure Controls and our Internal Controls and to make modifications as
necessary. Our intent in this regard is that the Disclosure Controls and the
Internal Controls will be maintained as dynamic systems that change (including
with improvements and corrections) as conditions warrant.

     Among other matters, we sought in our Controls Evaluation to determine
whether there were any "significant deficiencies" or "material weaknesses" in
the company's Internal Controls, or whether the company had identified any acts
of fraud involving personnel who have a significant role in the company's
Internal Controls. This information was important, both for the Controls
Evaluation generally, and because Items 5 and 6 in the Section 302
Certifications of the Chief Executive Officer and Chief Financial Officer
require that the Chief Executive Officer and Chief Financial Officer disclose
that information to our Board's Audit Committee and to our independent auditors
and to report on related matters in this section of this report. In the
professional auditing literature, "significant deficiencies" are referred to as
"reportable conditions." These are control issues that could have a significant
adverse effect on the ability to record, process, summarize and report financial
data in the financial statements. A "material weakness" is defined in the
auditing literature as a particularly serious reportable condition where the
internal control does not reduce to a relatively low level the risk that
misstatements caused by error or fraud may occur in amounts that would be
material in relation to the financial statements and not be detected within a
timely period by employees in the normal course of performing their assigned
functions. We also sought to deal with other controls matters in the Controls
Evaluation, and in each case, we considered what revision, improvement and/or
correction, if any, were necessary to make in accord with our on-going
procedures.

     In accord with requirements of the Securities and Exchange Commission, the
Chief Executive Officer and Chief Financial Officer note that, since the date of
the Controls Evaluation to the filing date of this report, there have been no
significant changes in Internal Controls or in other factors that could
significantly affect Internal Controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.

         Conclusions

     Based upon the Controls Evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that, subject to the limitations noted above,
our Disclosure Controls are effective to ensure that material information
relating to the company is made known to management, including the Chief
Executive Officer and Chief Financial Officer, particularly during the period
when our periodic

                                       24
<PAGE>

reports are being prepared, and that our Internal Controls are
effective to provide reasonable assurance that our financial statements are
fairly presented in conformity with generally accepted accounting principles.


                                       25
<PAGE>

              RISK FACTORS THAT MAY AFFECT OUR FINANCIAL CONDITION
                              AND OPERATING RESULTS

     In addition to other information contained in this report on Form 10-KSB,
the following risk factors should be carefully considered in evaluating our
company and its business. These factors may have a significant impact on our
business, operating results and financial condition. As a consequence of these
risk factors, the other information contained in this report, and the risks
discussed in our other periodic filings with the Securities and Exchange
Commission, our actual results could differ materially from those contemplated
by any forward-looking statements contained in this report.

Risks Related to Our Company

     All of our assets are pledged as collateral under all of our investor and
other debt. The Internal Revenue Service has placed a lien on all of our assets
until our second quarter 2002 payroll tax obligation to them is satisfied. A
default by us under our secured debt or the failure to satisfy our obligation to
the Internal Revenue Service could result in a foreclosure on all of our assets
and the discontinuation of our operations. Funds from any resulting liquidation
of all of our assets would not be sufficient to fully repay our secured
creditors. In such event, our unsecured creditors and our shareholders would
receive nothing.

     At December 31, 2002, we had approximately $2.8 million in outstanding debt
under convertible debentures and notes that we issued in 2001 and in 2002. This
debt has a security interest in all of our assets, including our proprietary
technologies. Of this amount, approximately $300,000 in principal and interest
is due during the remainder of 2003, and the remainder is due during the first
quarter of 2004.

     In the months since the issuance of the company's currently outstanding
convertible debt, holders of a portion of this debt have converted the principal
and accrued interest on all or a portion of their debt into common stock. These
and other holders of the convertible debt may also indicated their desire to
convert additional amounts of their debt into common stock during the current
year. Although these conversions have reduced and will continue to reduce the
company's principal and interest obligations, we expect that in the first
quarter of 2004 we may still be faced with principle and interest obligations on
the remaining convertible debt that we will not be able to satisfy from
currently projected cash flows from operations. Accordingly, unless our cash
flow is substantially greater than currently projected, we will need to
renegotiate the amount and timing of payments on any substantial amount of this
debt that is not converted into equity prior to January 2004. While we believe
we will be able to restructure such debt under terms that are reasonable to the
company, we can not provide any assurance that we will be able to finalize any
definitive agreement with the holders of any significant portion of this debt
that remains outstanding at the end of this year.

     At March 31, 2003, we owed $199,535 in federal payroll taxes and $18,632 in
state payroll taxes, including interest and penalties. These taxes relate to
payrolls in the second and third quarters of this year. Our tax obligations have
continued to decline since August of this year through the periodic tax payments
we have made and are continuing to make under arrangements with both federal and
state tax authorities. We expect to have all past due state payroll tax
obligations fully satisfied by the middle of next year, and we expect to have
all past due federal tax obligations fully satisfied by the middle of 2004. In
the meantime, the Internal Revenue Service has placed a lien on all of our
assets until our second quarter payroll tax obligation (currently $105,308) to
them is satisfied.

     In the event that we are unable to satisfy our prior payroll tax
obligations, or our repayment obligations under our secured debt, or we
otherwise default under the terms of such debt, the holders of this debt may
seek to foreclose their security interests and liens on our assets. In such
event, if we are unable to reach a pay out arrangement satisfactory to the
holders of this secured debt or seek satisfactory debt relief under federal
bankruptcy laws, we believe that our company would no longer be able to operate.
In that event, we believe that it is most likely that our company's assets would
be sold and that the proceeds from such sale would not be sufficient to satisfy
the liens of our secured creditors. This would leave no funds for the payment of
any of our unsecured obligations to third parties, including any judgment
creditors that might arise, and would leave no funds or assets available for
distribution to our shareholders.


                                       26
<PAGE>

Our most recent financial statements include a going concern paragraph.

     Our independent accountants' report for our most recent year-end audit and
the notes to our year-end 2002 audited financial statements included in this
report on Form 10-KSB identify factors that, in the opinion of our independent
accountants, raise substantial doubts about our ability to continue as a going
concern.

Substantially all of our 2002 revenue was associated with only one
customer, the loss of whom would severely jeopardize our ability to maintain our
operations.

     In 2002, our largest customer accounted for more than 88% of our revenue,
and our second largest customer accounted for more than 10% of our revenue.
Consequently, the loss of our largest customer would have a material adverse
effect on our revenue and would be likely to result in the cessation of our
operations if we not otherwise able to expand our revenue base. Even if we are
successful in growing the size and depth of our customer base, we have
historically generated substantially all of our revenue from a limited number of
customers, substantially all of which are in the manufacturing industry. We
remain focused on expanding our sales and marketing efforts toward companies in
other industries and other vertical markets, particularly for
business-to-business integration. Nevertheless, we expect that a small number of
customers in the manufacturing industry will continue to account for a
substantial portion of our revenue for the foreseeable future. Any significant
decline in the demand for, and market acceptance of, our software in the
manufacturing industry would hurt our ability to execute our business plan in
the short-term. Even if we expand our customer base, we believe that our current
customers will continue to provide a substantial portion of our revenue through
additional license, implementation services and maintenance fees. Moreover, if
we successfully market our products in new vertical markets, we expect that
customers in some of those new vertical markets are likely to have different
requirements and may require us to change our product design or features, sales
methods, support capabilities or pricing policies. Any failure by us to
successfully address any new vertical markets will have an adverse effect on our
results of operations.

We have a large accumulated deficit, we expect future losses, and we may
never achieve or maintain profitability.

     Excluding the third quarter of this year, we have experienced operating
losses in each of our fiscal years since January 1, 1995. As of December 31,
2002, we had an accumulated deficit of approximately $23.29 million. In
addition, since 1997, we have continued to allocate a substantial proportion of
our internal resources to activities associated with the development, marketing
and sale of our current suite of new software products. During the last three
years, we have also undertaken a complete restructuring of our sales and
marketing organization and have commenced several new customer acquisition
strategies. This strategy of increased emphasis on new product development and
the suspension of much of our traditional sales activities while we began
implementing our sales team reorganization resulted in a substantial reduction
in our traditional service revenues during the affected periods. Despite our
history of losses, we believe it is vital to our future success that we continue
to allocate working capital toward our sales and marketing strategies, although
at a lower percentage of revenue than our allocation of working capital in this
area during our most recent fiscal years.

     If expenditures related to our sales and marketing activities are not
accompanied or shortly followed by increased revenue, our quarterly and annual
operating losses could be greater than expected until we are able to delay or
reduce expenditures. While we achieved profitability during the third quarter of
2002, many factors, including the factors described in this report, may result
in our incurring losses in 2003. We need to significantly increase our quarterly
revenues or significantly reduce our quarterly expenses from their historical
levels in order for us to sustain the profitability achieved during the third
quarter of 2002.


                                       27
<PAGE>

The recent restructuring of our operations has strained our existing
resources and may cause our business to suffer.

     Our ability to successfully offer products and services and implement our
business plan in our rapidly evolving markets requires an effective planning and
management process. During the latter part of 2001 and the first eight months of
2002, we restructured our entire executive, administrative and operating teams
in order to achieve greater efficiencies in execution, better allocation of
skills across departments and better project tracking. In connection with that
restructuring, we have reduced by over 50% the number of our employees from a
high of approximately 60 employees during 2001 to 27 at the end of 2002. We
anticipate that if we are able to achieve our anticipated growth in our customer
base during 2003, we will need to increase the number of our employees in some
areas later this year. In the meantime, the staffing requirements necessary to
support our existing business and our growth strategies have placed a
significant strain on our currently reduced management systems, infrastructure
and resources. If we are able to achieve our anticipated growth in our customer
base, concurrently with the need to expand, train and manage our workforce, we
expect that we will also be required to manage an increasing number of
relationships with these new customers, various strategic alliance partners and
other third parties. Failure to expand any of the foregoing areas efficiently
and effectively could interfere with and possibly limit our ability to expand
our business as a whole.

Significant unanticipated fluctuations in our actual or anticipated
quarterly revenues and operating results may cause us not to meet securities
analysts' or investors' expectations and may result in a decline in our stock
price.

     Our quarterly operating results have fluctuated significantly in the past
and may vary significantly in the future. Moreover, as a result of our limited
operating history with our new suite of Synapse-based software products and the
evolving nature of the markets in which we compete, it is difficult to
accurately forecast our revenue in any given period. Accordingly, we believe
that period-to-period comparisons of our historical results of operations are
not necessarily meaningful and should not be relied upon as indications of
sustainable trends or other future performance. If our revenues, operating
results or earnings are below the levels expected by investors or securities
analysts, our stock price is likely to decline.

     In addition, we expect to experience significant fluctuations in our future
quarterly revenues and operating results as a result of many factors specific to
our operations, including:

-    the difficulty in predicting the size and timing of our customer orders

-    the mix of our products and services sold and the mix of our distribution
     channels

-    the lengthy sales cycle for some of our products

-    the market acceptance of our products

-    the terms and timing of our financing activities

-    whether we are able to successfully expand our sales and marketing programs

-    the possible loss of any of our key personnel

-    the difficulty in predicting the amount and timing of employee stock option
     exercises

     Our revenues and operating results depend upon the volume and timing of
customer orders and payments, and the date of product delivery. New software
licensing, service and maintenance contracts


                                       28
<PAGE>

may not result in revenues in the quarter in which the contracts are
signed, and we may not be able to predict accurately when revenues from these
contracts will be recognized. A substantial portion of our revenues has been and
will continue to be derived from large licensing and software implementation
orders. We expect this trend to continue for the foreseeable future. We also
expect that increases in the dollar size of individual license transactions will
increase the risk of fluctuation in future quarterly results. We realize
substantially higher gross margins on our license revenues as compared to our
services and maintenance revenues. Consequently, our margins for any particular
quarter will be highly dependent on the mix of license, service and maintenance
revenues in that quarter. If we cannot generate large customer orders, or our
customers delay or cancel their orders in a particular quarter, these factors
will have a material adverse effect on our revenues, and more significantly on a
percentage basis, on our net income or loss in that quarter.

Variations in the time it takes us to sell our products may cause
fluctuations in our operating results.

     Our customers generally consider a wide range of factors before committing
to purchase our products, including product benefits, the ability to operate
with existing and future computer systems, the ability to accommodate increased
transaction volumes, and product reliability. Some of our customers are
addressing these factors for the first time when they consider whether to buy
our products and services. As a result, we or other parties must educate
potential customers on the use and benefits of our products and services. In
addition, the purchase of our products generally involves a significant
commitment of capital and other resources by a customer. This commitment often
requires significant technical review, assessment of competitive products, and
approval at a number of management levels within a customer's organization.

     The length of our sales cycles may vary based on the industry in which the
potential customer operates, and is difficult to predict for any particular
license transaction. Because of the number of factors influencing our sales
process, the period between our initial contact with a new customer and the time
when we are able to recognize revenue from that customer varies widely in
length. Our sales cycles typically range from two to six months. For larger
opportunities with new customers, however, these cycles may be longer. The
length and variability of our sales cycles makes it difficult to predict whether
particular sales will be concluded in any given quarter. If one or more of our
license transactions are not consummated in a given quarter, our results of
operations for that quarter may be below our expectations and the expectations
of analysts and investors which would be likely to cause a decline in our stock
price.

If we do not effectively compete with new and existing competitors, our
revenues and operating margins will decline.

     The market for our products is intensely competitive, evolving, and subject
to rapid technological change. We expect the intensity of competition to
increase in the future. As a result of increased competition, we may have to
reduce the prices of our products and services, and we may experience reduced
gross margins and loss of market share, any one of which could significantly
reduce our future revenues and operating results. Many of our current and
potential competitors have longer operating histories, significantly greater
financial, technical, product development and marketing resources, as well as
better name recognition and larger customer bases than we do. These competitors
may be able to develop products comparable or superior to those offered by us,
or adapt more quickly than we can to new technologies, evolving industry trends
or customer requirements. They are also positioned to devote greater resources
to the development, promotion and sale of their products than we are.
Accordingly, we may not be able to compete effectively in our markets, and
competition may intensify and harm our business and its operating results. If we
are not successful in developing enhancements to existing products and new
products in a timely manner, garnering customer acceptance or generating average
licensing prices, our gross margins may decline and cause our business and
operating results to suffer. For additional information on our competitive
posture in our industry, please refer to the description set forth in this Form
10-KSB under the caption "Item 1 - Description of Business - Competition and
Markets."


                                       29
<PAGE>

We must expand our network of distribution partners in order to
successfully sell our products.

     We have recently implemented a sales model under which we are focusing more
efforts toward the sale of our products through indirect sales channels such as
resellers, system integrators, application software vendors and infrastructure
technology companies. We plan to continue to invest resources toward the
development of our relationships with these third parties. We may not be
successful in the implementation of our sales strategies, and even if we are,
such strategies may not result in an increase in our revenues. If we fail to
maintain our existing relationships with indirect sales channel arrangements or
fail to establish new ones, or if our revenue does not increase correspondingly
with the expenses we incur in pursuing such relationships, our business will
suffer.

If we do not retain our key management personnel and attract and retain
other highly skilled employees, our business will suffer.

     Our future success depends on the skills, experience and performance of our
senior management team, other key personnel and advisors, and their ability to
operate effectively, both individually and as a group. Each of our key employees
is bound by an employment agreement with the company. Although we maintain "key
man" insurance in the amount of $1 million on the lives of each of George E.
Mendenhall, Chairman and Chief Executive Officer, and Stuart E. Massey,
Executive Vice President, recovery under such insurance may not be adequate to
compensate us for the full impact resulting from the death of either of these
officers. If any of our existing senior management or other key research,
engineering and development or sales and marketing personnel were to leave the
company, it would be difficult to replace them, and our business would be
materially harmed. If we are able to achieve our anticipated sales growth, our
success will also depend on our ability to recruit, retain and motivate
additional highly skilled sales, marketing and engineering personnel. We believe
we will face significant competition for individuals with the skills required to
develop, market and support our products and services. We believe that
attracting and retaining these personnel is particularly difficult for us
because:

-    the market for connectivity infrastructure software is still emerging

-    our company and our products are not yet widely known in the marketplace

-    the relative scarcity of qualified technical personnel in the Columbia,
     South Carolina metropolitan area makes it difficult to attract and retain
     technical personnel

     If we fail to recruit and retain sufficient numbers of these highly skilled
employees our ability to compete will be significantly harmed, and our business
will suffer.

Defects in, or slow performance of, our software products could diminish
demand for our products and expose us to costly liability which would adversely
affect our operating results.

     The Synapse software products we offer are internally complex. Complex
software may contain errors or defects, particularly when first introduced or
when new versions or enhancements are released. Although we conduct extensive
testing, we may not discover software defects that affect our current or new
products or enhancements until after they are sold. Although we have not
experienced any material software defects to date, any errors, defects or slow
performance that may be discovered could result in:

-    loss of revenue

-    product returns or order cancellations

-    delay in market acceptance of our products

-    diversion of our development resources


                                       30
<PAGE>

-    distraction of our management

-    damage to our customer relationships and our reputation

-    increased service and warranty costs

-    costly litigation defense

     Our license and service agreements with our customers typically contain
provisions designed to limit our exposure to potential product liability claims.
It is possible, however, that the limitation of liability provisions contained
in our license and service agreements may not be effective as a result of
existing or future federal, state or local laws, ordinances or judicial
decisions. Although we have not experienced any product liability claims to
date, sale and support of our products entails the risk of such claims, which
could be substantial in light of our customers' use of many of our products in
mission-critical applications. We do not maintain product liability insurance.
If a claimant brings a product liability claim against us, it could have a
material adverse effect on our business, results of operations and financial
condition.

Risks Related to Our Industry

If we fail to adapt to the rapid technological change that characterizes
our markets, we could lose market share, or our products could become obsolete.

     The market for our current suite of software products is characterized by:

-    rapid technological change

-    frequent new product introductions and enhancements

-    uncertain product life cycles

-    changing customer requirements

-    evolving industry standards

     The introduction of products embodying new technologies, the emergence of
new industry standards, or changes in customer requirements could render some or
all of our existing products obsolete and unmarketable. Moreover, decreases in
the cost of existing competing products or services could enable our current or
potential customers to fulfill their own needs for transaction processing and
integration systems and services in a more cost-efficient manner than through
the purchase of our products and services. As a result, our success depends upon
our ability to respond to changing customer requirements and to enhance existing
products and services to keep pace with technological developments and emerging
industry standards. We have invested significantly in technology, and we
anticipate that it will be necessary for us to continue to do so. Failure to
develop and introduce enhancements to our existing products and services in a
timely manner in response to changing market conditions or customer requirements
will materially and adversely affect our business, results of operations and
financial condition.

Because our products could interfere with our customers' other software
applications and hardware, we may be subject to claims by these customers, which
may be costly and may not be adequately covered by insurance.

     Our products inter-operate with many parts of complicated computer systems
of our customers, such as mainframes, servers, personal computers, application
software, databases, operating systems and data transformation software. Failure
of any one of these parts could cause all or large parts of our customers'
computer systems to fail. In such circumstances, it may be difficult to
determine which part failed, and it is likely that customers will bring lawsuits
against several suppliers. Even if our software is not at fault, we could suffer
material expenses and material diversion of management time in defending any
such lawsuits, causing our business to suffer.


                                       31
<PAGE>

     If we fail to adequately protect our proprietary rights, we may lose these
rights and our business may be seriously harmed.

     Our success depends upon our proprietary technology. To establish and
protect our proprietary rights, we rely primarily on a combination of:

-    patent law

-    copyright law

-    trademark and trade secret laws

-    confidentiality procedures and agreements

-    licensing arrangements

-    the complex nature of our technologies

     As part of our confidentiality procedures, we enter into non-disclosure
agreements with our employees upon hiring them, and with our customers and
strategic partners when we enter into license, service and maintenance
agreements with respect to our software, documentation and other proprietary
information. Despite these precautions, third parties could copy or otherwise
obtain and use our products or technologies without authorization, or develop
similar technologies independently. It is difficult for us to police
unauthorized use of our products. Because of this difficulty in determining the
extent to which piracy of our software products may exist, software piracy
remains a persistent problem. Expensive litigation may be necessary in the
future to enforce our intellectual property rights. Moreover, effective
protection of intellectual property rights is unavailable or limited in certain
foreign countries. While we believe that our products and technologies are
protected against infringement, as a practical matter, existing laws may afford
only limited protection. Consequently, the protection of our proprietary rights
may not be adequate, and our competitors could independently develop similar
technologies, duplicate our products, reverse-engineer, or design around the
intellectual property rights we hold.

Our products may infringe upon the intellectual property rights of others,
which may cause us to incur unexpected costs or prevent us from selling our
products.

     The commercial success of our business depends upon our products not
infringing any intellectual property rights of others and upon no claims for
infringement being made against us. We have conducted periodic patent searches
to determine whether or not we may be infringing the patent or trademark rights
of any third parties. We have also applied for patent protection of our
proprietary Synapse software. Because patent applications in the United States
are not publicly disclosed until the patent is issued, applications of which we
are not aware may have been filed which are similar to our software products.
Consequently, we may be subject to legal proceedings and claims from time to
time in the ordinary course of our business, including claims of alleged
infringement of the patents, trademarks and other intellectual property rights
of third parties by us or our licensees in connection with their use of our
products. Intellectual property litigation is expensive and time-consuming, and
could divert our management's attention away from running our business. If we
were to discover that any of our products violated the intellectual property
rights of others, we would have to obtain licenses from these parties in order
to continue marketing our products without substantial re-engineering. We might
not be able to obtain the necessary licenses on acceptable terms or at all. If
we could not obtain such licenses, we might not be able to re-engineer our
products successfully or in a timely manner. We believe that we are not
infringing any intellectual property rights of third parties, but there can be
no assurance that such infringement will not occur. If we fail to address any
infringement issues successfully, we will be forced to incur significant costs
and could be prevented from selling our products.

Other Risks


                                       32
<PAGE>

The price of our common stock may fluctuate significantly and may be
negatively affected by factors beyond our ability to control or predict.

     The price of our common stock is subject to the volatility generally
associated with Internet, middleware, software and technology stocks in general,
and may also be affected by broader market trends unrelated to our or our
competitors' operating performances. Our stock price and the stock prices of
many other companies in the technology and emerging growth sectors have
historically experienced wide fluctuations, including rapid rises and declines
in stock prices that have often been unrelated to the operating performance of
such companies. In this connection, we note that since 2001, a substantial
downward trend, especially during the most recent year, has been experienced in
the markets for stocks across substantially all market sectors, and particularly
in the technology sectors in which our stock may be included by various market
analysts. These downward trends and fluctuations are typically the result of the
combination of general economic, political and market conditions, most recently
including recessions, the threat of terrorist activities, and concerns over the
accuracy of financial reporting by several large publicly traded corporations.
These factors are beyond our ability to control or predict. We believe that the
downward trends in the securities trading markets as a whole have had and will
continue to have a comparable adverse impact on the trading market for our
common stock. We can provide no assurance that these downward trends and the
events giving rise to them will not continue for the foreseeable future, or that
they will not materially adversely affect the market price of our common stock.

The number of our shares of common stock that are or may become eligible
for sale in the near future may cause the market price for our common stock to
decline significantly, even if our business is doing well.

     Trading in our common stock has historically been very limited and has made
the market price of our common stock vulnerable to significant fluctuations. At
December 31, 2002, we had 22,230,258 outstanding shares of common stock, with an
additional 8,121,556 shares of common stock issuable upon the exercise of
employee stock options and common stock purchase warrants and an additional
25,563,091 shares issuable upon conversion of debt which would total 55,914,905
shares at December 31, 2002, if all of the outstanding options and warrants and
all of the outstanding debt was converted.

     Of the outstanding shares, 2,604,877 were held by members of management and
may be publicly sold only pursuant to the volume and manner of sale restrictions
of Rule 144 under the Securities Act of 1933. Approximately 7,464,995 of the
remaining outstanding shares are restricted securities issued under federal and
state exemptions from registration and may not be publicly sold. Once these
restricted shares, or the shares issuable pursuant to outstanding options,
warrants and convertible debt, become eligible for resale under Rule 144, or
their resale is otherwise registered by us with the Securities and Commission,
if the holders of these shares sell substantial amounts of their shares into the
public market during a short period of time, or if those shareholders are
perceived by the market as intending to sell them, our stock price may decline
significantly. The issuance of these shares will also result in dilution to our
shareholders, and may make it more difficult for us to sell equity or
equity-related securities in the future at a time and at a price that we deem
appropriate.

Failure to raise additional capital or generate the significant capital
necessary to expand our operations and invest in new products could reduce our
ability to compete and result in lower revenues.

     We expect that our current cash balance and cash from expected sales of our
products and services should be sufficient to meet our working capital and
capital expenditure needs for at least the next six months. Nevertheless, even
if we are successful in realizing our expected 2003 sales objectives, we expect
that we will still require additional third party financing in the future to
implement our growth strategies and achieve our long-term objectives. In light
of the recent downward trends experienced by the capital markets, we cannot be
certain that we will be able to obtain additional debt or equity financing on
favorable terms, or at all. If we obtain additional equity financing, our
shareholders may experience significant dilution of their ownership interests
and the per share value of our common stock could decline. If we engage in debt
financing, we may be required to accept terms that restrict our ability to incur
additional indebtedness or that force us to maintain specified liquidity or
other ratios, any of which could harm our business. If we need additional
capital and cannot raise it on acceptable terms, we may not be able to, among
other things:


                                       33
<PAGE>

-    develop or enhance our products and services

-    continue to implement our sales and marketing strategies

-    acquire complementary technologies, products or businesses

-    expand operations, in the United States or internationally

-    hire, train and retain employees

-    respond to competitive pressures or unanticipated working capital
     requirements

Our failure to do any of these things could result in lower revenues and
could seriously harm or result in the discontinuation of our operations.

Anti-takeover provisions in our articles of incorporation and state
corporate laws could discourage or prevent a takeover, even if an acquisition of
our company would be beneficial to our shareholders.

     In many cases, shareholders receive a premium for their shares when a
company is purchased by another enterprise. Various provisions in our articles
of incorporation, our bylaws and South Carolina corporate laws could deter and
make it more difficult for a third party to bring about a merger, sale of
control, or similar transaction without approval of our board of directors, even
if the transaction would be beneficial to our shareholders. These provisions
tend to perpetuate existing management. As a result, our shareholders may be
deprived of opportunities to sell some or all of their shares at prices that
represent a premium over market prices. These provisions, which could make it
less likely that a change in control will occur, include:

-    provisions in our articles of incorporation establishing three classes of
     directors with staggered terms, which means that only one-third of the
     members of the board of directors is elected each year, and each director
     serves for a term of three years.

-    provisions in our articles of incorporation authorizing the board of
     directors to issue a series of preferred stock without shareholder action,
     which issuance could discourage a third party from attempting to acquire,
     or make it more difficult for a third party to acquire, a controlling
     interest in us.

-    provisions in our articles of incorporation prohibiting cumulative voting
     in the election of directors, which would otherwise allow less than a
     majority of shareholders to elect director candidates.

-    provisions in our bylaws relating to meetings of shareholders which limit
     who may call a meeting and what matters may be voted upon.

-    provisions in our bylaws establishing advance notice requirements for
     nominations for election to the board of directors and for proposing
     matters that can be acted upon by shareholders at shareholder meetings.

-    state law provisions that require two-thirds of the shareholders to approve
     mergers and similar transactions, and amendments to our articles of
     incorporation.


                                       34
<PAGE>

     In addition, the South Carolina Business Combination Act, the South
Carolina Control Share Acquisition Act and the vesting terms of our stock option
plans may discourage, delay or prevent a change in control of our company.


Item 7.     Financial Statements

            Reference is made to the Index to Financial Statements on Page F-1.

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

            Not applicable.

                                    PART III

     Information called for by Part III (Items 9, 10, 11 and 12) of this Annual
Report on Form 10-KSB has been omitted as we intend to file with the Securities
and Exchange Commission not later than 120 days after the close of our fiscal
year ended December 31, 2002 a definitive proxy statement pursuant to Regulation
14A promulgated under the Securities Exchange Act of 1934. Such information will
be set forth in such proxy statement.

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

            (See introductory paragraph above.)

Item 10.     Executive Compensation

             (See introductory paragraph above.)

Item 11.     Security Ownership of Certain Beneficial Owners and Management

            (See introductory paragraph above.)

Item 12.     Certain Relationships and Related Transactions

             (See introductory paragraph above.)

Item 13.     Exhibits and Reports on Form 8-K

(a)  Exhibits:

     The accompanying Exhibit Index on page E-1 sets forth the exhibits that are
     filed as part of this Annual Report on Form 10-KSB.

(b)  Reports on Form 8-K:

     None.

Item 14. Controls and Procedures


                                       35
<PAGE>

Quarterly Evaluation of the Company's Disclosure Controls and Internal Controls

     Within the 90 days prior to the filing date of this report on Form 10-KSB,
the company evaluated the effectiveness of the design and operation of its
"disclosure controls and procedures" ("Disclosure Controls"), and its "internal
controls and procedures for financial reporting" ("Internal Controls"). This
evaluation (the "Controls Evaluation") was done under the supervision and with
the participation of management, including our Chief Executive Officer and Chief
Financial Officer. Rules adopted by the Securities and Exchange Commission
require that in this section of this report we present the conclusions of the
Chief Executive Officer and Chief Financial Officer about the effectiveness of
our Disclosure Controls and Internal Controls based on and as of the date of the
Controls Evaluation.

Officer Certifications

     Appearing immediately following the "Signatures" section of this report
there is a form of certification by our Chief Executive Officer and Chief
Financial Officer. The form of certification is required in accordance with
Section 302 of the Sarbanes-Oxley Act of 2002 (the "Section 302 Certification").
This section of the report that you are currently reading is the information
concerning the Controls Evaluation referred to in the Section 302
Certifications, and this information should be read in conjunction with the
Section 302 Certifications for a more complete understanding of the topics
presented.

Disclosure Controls and Internal Controls

     Disclosure Controls are procedures that are designed with the objective of
ensuring that the information required to be disclosed in our reports filed
under the Securities Exchange Act of 1934, such as this report, is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission. Disclosure Controls
are also designed with the objective of ensuring that such information is
accumulated and communicated to our management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. Internal Controls are procedures that are
designed with the objective of providing reasonable assurance that (1) our
transactions are properly authorized; (2) our assets are safeguarded against
unauthorized or improper use; and (3) our transactions are properly recorded and
reported, all to permit the preparation of our financial statements in
conformity with generally accepted accounting principles.


                                       36
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Integrated Business Systems and Services,
Inc., has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                  INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.

Dated:  March 31, 2003             By: /s/ GEORGE E. MENDENHALL
                                   -----------------------------
                                   George E. Mendenhall
                                   Chairman and 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 indicated.
<TABLE>
<CAPTION>

             Signature                                    Title                                Date

<S>                                         <C>                                        <C>
/s/ GEORGE E. MENDENHALL                    Chairman, Chief Executive Officer           March 31, 2003
------------------------                    and Director
George E. Mendenhall

/s/ STUART E. MASSEY                        Executive Vice President                    March 31, 2003
--------------------                        and Director
Stuart E. Massey

/s/ WILLIAM S. McMASTER                     Chief Financial Officer and                 March 31, 2003
-----------------------                     General Counsel (principal
William S. McMaster                         financial and accounting officer)


/s/ C. JOSEPH BERGER, JR.                   Director                                    March 31, 2003
-------------------------
C. Joseph Berger, Jr.

                                            Director                                    March 31, 2003
---------------
Dollie Cole

/s/ RICHARD D. PULFORD                      Director                                    March 31, 2003
----------------------
Richard D. Pulford
</TABLE>


                                       37
<PAGE>

                            SECTION 302 CERTIFICATION

I, George E. Mendenhall, certify that:


1.   I have reviewed this annual report on Form 10-KSB of Integrated Business
     Systems and Services, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14) for the
     registrant and we have:

     a)   Designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   Presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a)   All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  March 31, 2003                      /s/ GEORGE E. MENDENHALL
                                           ------------------------
                                           George E. Mendenhall
                                           Chief Executive Officer


                                       38
<PAGE>


                            SECTION 302 CERTIFICATION

I, William S. McMaster, certify that:


1.   I have reviewed this annual report on Form 10-KSB of Integrated Business
     Systems and Services, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14) for the
     registrant and we have:

     a)   Designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   Presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a)   All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.

Date: March 31, 2003                             /s/ WILLIAM S. MCMASTER
                                                 -----------------------
                                                 William S. McMaster
                                                 Chief Financial Officer


                                       39
<PAGE>



                                       40
<PAGE>

                 Integrated Business Systems and Services, Inc.

                   Index to Consolidated Financial Statements



                                                                           Pages

Report of Independent Accountants............................................F-2

Consolidated Financial Statements:
    Balance Sheets...........................................................F-3
    Statements of Operations.................................................F-4
    Statements of Changes in Shareholders' Equity (Deficiency) ..............F-5
    Statements of Cash Flows.................................................F-6
    Notes to Financial Statements................................... F-7 to F-30





<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS
                                    --------



To the Board of Directors
Integrated Business Systems and Services, Inc.
Columbia, South Carolina

We have audited the accompanying consolidated balance sheets of Integrated
Business Systems and Services, Inc. and its subsidiary (the "Company") as of
December 31, 2002 and 2001, and the related consolidated statements of
operations, changes in shareholders' equity (deficiency) and cash flows for each
of the three years in the period ended December 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 of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2002 and 2001, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has a current year net loss, an
accumulated deficit, and a working capital deficiency. These and other factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.


Columbia, South Carolina
March 24, 2003



<PAGE>
<TABLE>
<CAPTION>


                 Integrated Business Systems and Services, Inc.
                                 Balance Sheets
                                  December 31,

                                                                                  2002                 2001
                                                                             ----------------    ------------------
Assets
Current assets:
<S>                                                                          <C>                 <C>
   Cash and cash equivalents                                                 $      55,874       $       6,100
   Accounts receivable, trade, net of allowance of $0 and
     $8,399 in 2002 and 2001, respectively                                         202,970             347,969
   Accounts receivable, other                                                           --               9,000
   Related party notes receivable, net of allowance for loan losses of
     $207,200 in 2001                                                                   --              50,000
   Interest receivable                                                              26,539              24,635
   Unbilled revenue                                                                     --              38,856
   Other prepaid expenses                                                           63,809              35,941
                                                                             ----------------    ------------------

Total current assets                                                               349,192             512,501
Capitalized software costs, net                                                    241,294             420,511
Property and equipment, net                                                        399,849             564,067
Related party receivable                                                            18,200              27,994
Other assets                                                                        11,479               4,154
                                                                             ----------------    ------------------

Total assets                                                                 $   1,020,014       $   1,529,227
                                                                             ================    ==================

Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
    Notes payable, net of discount                                           $     696,000       $     696,227
    Current portion of long-term debt                                              150,000                  --
    Accounts payable                                                               190,423             405,145
    Accrued liabilities:
      Accrued compensation and benefits                                            519,576             521,305
      Accrued payroll taxes                                                        241,726             322,772
      Accrued professional fees                                                    170,920             254,420
      Accrued interest                                                             377,857              35,050
      Accrued rent                                                                 100,223                  --
      Other                                                                         33,391              44,049
    Deferred revenue                                                                73,327              93,377
                                                                             ----------------    ------------------

Total current liabilities                                                        2,553,443           2,372,345
Long-term debt, net of discount                                                  2,051,488           2,145,037
Long-term accrued compensation and benefits                                             --              83,219
                                                                             ----------------    ------------------
                                                                             ----------------    ------------------
Total liabilities                                                                4,604,931           4,600,601
                                                                             ----------------    ------------------

Commitments and contingencies

Shareholders' equity (deficiency):
   Preferred stock, undesignated par value, 10,000,000 shares
      authorized, issued none                                                           --                  --
   Common shares, voting, no par value, 100,000,000 shares authorized,
      22,230,258 and 17,774,694 shares outstanding at December 31, 2002 and
      2001, respectively                                                        19,877,678          18,041,226
   Notes receivable officers/directors                                            (131,080)           (131,080)
   Unearned compensation                                                           (42,581)                 --
   Accumulated deficit                                                         (23,288,934)        (20,134,167)
   Non-controlling interest in net assets                                               --            (847,353)
                                                                             ----------------    ------------------
Total shareholders' equity (deficiency)                                         (3,584,917)         (3,071,374)
                                                                             ----------------    ------------------

Total liabilities and shareholders' equity (deficiency)                      $   1,020,014       $   1,529,227
                                                                             ================    ==================
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       F-3

<PAGE>



<PAGE>
<TABLE>
<CAPTION>



                 Integrated Business Systems and Services, Inc.
                            Statements of Operations
                        for the years ended December 31,


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

Revenues
<S>                                                  <C>                     <C>                    <C>
  Services                                           $     2,728,355         $  1,994,653           $  752,173
  Hardware sales                                              84,802            1,406,208              633,116
  Software licensing                                         506,590              153,750              850,000
  Maintenance                                                 67,799              102,671              146,779
                                                     -----------------    ----------------     ----------------

Total revenues                                             3,387,546            3,657,282            2,382,068
                                                     -----------------    ----------------     ----------------

Cost of revenues
  Services                                                 1,023,634            1,239,215              654,502
  Maintenance                                                 87,623               96,402              143,997
  Software licensing                                         190,023              225,103              172,936
  Hardware                                                    66,280            1,091,531              527,717
                                                     -----------------    ----------------     ----------------
                                                           1,367,560            2,652,251            1,499,152
                                                     -----------------    ----------------     ----------------
                                                     -----------------    ----------------     ----------------

Gross margin                                               2,019,986            1,005,031              882,916
                                                     -----------------    ----------------     ----------------

Operating expenses
  General and administrative                               2,512,321            4,161,730            3,310,762
  Sales and marketing                                        311,402            1,707,415            1,465,410
  Research and development costs                             376,660              735,540              306,721
  Restructuring and impairment charges                            --            1,841,272                   --
  Bad debt expense                                            51,126              232,292                   --
                                                     -----------------    ----------------     ----------------

         Total operating expenses                          3,251,509            8,678,249            5,082,893
                                                     -----------------    ----------------     ----------------

         Loss from operations                             (1,231,523)          (7,673,218)          (4,199,977)

Loss on disposal of equipment                                (11,999)              (5,151)              (8,582)
Other income                                                 128,050                   83              101,384
Interest income                                                4,442               32,912              170,207
Interest expense                                          (1,196,384)          (3,800,341)            (117,452)
Loss on equity investment                                         --             (657,840)            (165,920)
Non-controlling interest                                    (847,353)             847,353                   --
                                                     -----------------    ----------------     ----------------
         Net loss                                    $    (3,154,767)       $ (11,256,202)      $   (4,220,340)
                                                     =================    ================     ================

Loss per share:
         Net loss
           Basic and diluted                         $        (0.17)          $     (0.71)      $        (0.31)

                                                     =================    ================     ================

                      The accompanying notes are an integral part of these financial statements.
</TABLE>

                                      F-4
<PAGE>
<TABLE>
<CAPTION>


                 Integrated Business Systems and Services, Inc.
           Statements of Changes in Shareholders' Equity (Deficiency)
                   for the three years ended December 31, 2002





                                  Number of        Common         Notes                          Accumulated          Total
                                   Common          Shares      Receivable                        Deficit and      Shareholders'
                                   Shares         Carrying      Officers/        Unearned          Minority          Equity
                                 Outstanding       Value        Directors      Compensation        Interest       (Deficiency)
                                --------------  -------------  ------------  ----------------- ----------------- ----------------

<S>                               <C>           <C>            <C>           <C>               <C>               <C>
Balance, December 31, 1999        10,537,635    $  4,142,098   $  (190,800)  $          --     $   (4,657,625)   $     (706,327)
Sale of common shares              1,700,000        4,899,190           --              --                 --         4,899,190
Subordinated debt converted
   to common shares                  163,934          180,000           --              --                 --           180,000
Exercise of options                  256,300          168,574           --              --                 --           168,574
Exercise of warrants               1,587,000        1,438,538           --              --                 --         1,438,538
Net loss                                  --               --           --              --         (4,220,340)       (4,220,340)
                                --------------  -------------  ------------  ----------------- ----------------- ----------------
                                                                             -----------------

Balance, December 31, 2000        14,244,869      10,828,400      (190,800)             --         (8,877,965)        1,759,635

Sale of common shares              1,020,000          408,600           --              --                 --           408,600
Subordinated debt converted to
    common shares                  1,320,000        1,650,000           --              --                 --         1,650,000
Payment of notes receivable
    officers/directors                    --               --       59,720              --                 --            59,720
Issuance of warrants                      --        1,979,131           --              --                 --         1,979,131
Long-term debt beneficial
    conversion                            --        2,142,724           --              --                 --         2,142,724
Exercise of options                   21,700           22,908           --              --                 --            22,908
Exercise of warrants               1,168,125        1,009,463           --              --                 --         1,009,463
Net loss                                  --               --           --              --        (11,256,202)      (11,256,202)
Non-controlling interest in
    net assets                            --               --           --              --           (847,353)         (847,353)
                                --------------  -------------  ------------  ----------------- ----------------- ----------------

Balance, December 31, 2001        17,774,694      18,041,226      (131,080)             --        (20,981,520)       (3,071,374)

Sale of common shares                523,985          142,000           --              --                 --           142,000
Subordinated debt converted to
    common shares                  3,821,010          767,851           --              --                 --           767,851
Accounts payable converted to
    common shares                     38,117           62,845           --              --                 --            62,845
Accounts payable converted to
    warrants                              --           30,000           --              --                 --            30,000
Issuance of warrants                      --          472,112           --              --                 --           472,112
Deferred stock compensation               --          122,869           --         (42,581)                --            80,288
Long-term debt beneficial
    conversion                            --          228,076           --              --                 --           228,076
Exercise of options                   72,452           10,699           --              --                 --            10,699
Net loss                                  --               --           --              --         (3,154,767)       (3,154,767)
Non-controlling interest in
    net assets                            --               --           --              --            847,353           847,353
                                --------------  -------------  ------------  ----------------- ----------------- ----------------
Balance, December 31, 2002        22,230,258    $ 19,877,678   $  (131,080)  $     (42,581)    $  (23,288,934)   $   (3,584,917)
                                ==============  =============  ============  ================= ================= ================

</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>


<TABLE>
<CAPTION>



                 Integrated Business Systems and Services, Inc.
                            Statements of Cash Flows
                        for the years ended December 31,

                                                             2002                 2001                2000
                                                       -----------------    -----------------    ----------------
Operating activities
<S>                                                    <C>                    <C>                <C>
Net loss                                               $     (3,154,767)      $  (11,256,202)    $    (4,220,340)

Adjustments to reconcile net loss to cash used in operating activities:
  Depreciation                                                 148,879              154,312               93,342
  Provision for losses on notes and accounts
     receivable                                                 41,601              215,599                   --
  Amortization of software costs                               179,217              179,219              168,271
  Loss on disposal of equipment                                 11,999                5,151                8,582
  Loss on equity investments                                        --              657,840              165,920
  Non-controlling interest in net loss                         847,353             (847,353)                  --
  Non-cash interest expense                                    815,263            3,525,606                   --
  Non-cash restructuring and impairment charges                     --            1,841,272                   --
  Deferred compensation                                         80,288                   --                   --
  Issuance of warrants and stock for professional
     services                                                   72,000              174,873                   --
  Exercise of options in exchange of accounts
     receivable                                                     --                   --             (283,760)
  Write off of accounts payable                                     --                   --              (90,285)
Changes in operating assets and liabilities:
  Accounts receivable                                          162,398           (1,191,310)            (923,692)
  Unbilled revenue                                              38,856              (38,856)              28,885
  Interest receivable                                           (1,904)                 627              (25,262)
  Prepaid expenses and other assets                            (35,193)              28,868              (15,744)
  Accounts payable                                            (151,877)             159,728              206,479
  Accrued expenses                                             182,878            1,128,271             (239,358)
  Deferred revenue                                             (20,050)              45,227              (40,123)
                                                       -----------------    -----------------    ----------------
Cash used in operating activities                             (783,059)          (5,217,128)          (5,167,085)
                                                       -----------------    -----------------    ----------------

Investing activities
Payment for purchases of equity interests in
   affiliates                                                       --             (540,000)                  --
Sale (purchase) of investments                                      --               50,000              (50,000)
Purchases of property and equipment                               (560)            (155,883)            (519,620)
Proceeds from sale of property and equipment                     3,900                5,703                   --
Related party receivables, net                                   9,794               58,905             (122,725)
                                                       -----------------    -----------------    ----------------
Cash provided by (used in) investing activities                 13,134             (581,275)            (692,345)
                                                       -----------------    -----------------    ----------------

Financing activities
Payments on notes payable, net                                (175,000)                  --              (28,976)
Proceeds from issuance of convertible debt                     839,000            2,836,640                   --
Sale of common shares                                          100,000              408,600            4,872,069
Proceeds from exercise of common stock options and
  warrants                                                      10,699            1,032,371            1,634,233
Proceeds from issuance of convertible promissory
  notes                                                         45,000              826,000                   --
                                                       -----------------    -----------------    ----------------
Cash provided by financing activities                          819,699            5,103,611            6,477,326
                                                       -----------------    -----------------    ----------------

Net increase (decrease) in cash                                 49,774             (694,792)             617,896
Cash and cash equivalents at beginning of period                 6,100              700,892               82,996
                                                       -----------------    -----------------    ----------------
Cash and cash equivalents at end of period             $        55,874      $         6,100      $       700,892
                                                       =================    =================    ================

                        The accompanying notes are an integral part of these financial statements.
</TABLE>

                                      F-6
<PAGE>



                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements

Note 1.  Going Concern:

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, Integrated Business Systems and Services, Inc. ("IBSS") has a
working capital deficiency and an accumulated deficit, including minority
interests, of approximately $2,204,000 and $23,289,000, respectively at December
31, 2002. Ultimately, IBSS' viability as a going concern is dependent upon its
ability to generate positive cash flows from operations, maintain adequate
working capital and obtain satisfactory long-term financing. However, there can
be no assurances that IBSS will be successful in the above endeavors.

The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
IBSS be unable to continue as a going concern. IBSS' plans include the
following, although it is not possible to predict the ultimate outcome of IBSS'
efforts.

Cost and Expense Reductions. IBSS has continued the comprehensive internal
restructuring and cost reduction program implemented during the third quarter of
2001. The implementation of that program is now substantially complete and has
resulted in a reduction of almost 70% in IBSS' monthly gross cash requirements.
Included in the program were measures that resulted in substantial reductions in
IBSS' largest expense categories of human resource and payroll-related expenses.
These measures included reductions in non-essential staff, deferrals of
executive compensation, reductions in overall staff compensation rates,
scale-backs in certain employee benefit programs, reductions in rates paid for
health insurance and reductions in employee travel, accommodation and hiring
costs. In addition, IBSS has achieved significant cash flow relief through the
discontinuance of non-essential third party consulting and service arrangements
and the renegotiation of other third party contracts, including those in the
areas of public relations, investor relations, financial advisory services,
financial printing and industry research. During the first quarter of 2003, in
addition to the reductions outlined above, IBSS was able reduce by approximately
80% the costs associated with its operating facilities, including reductions in
its lease obligations and its expenditures for furniture, fixtures and
equipment. In the absence of any substantial infusion of growth capital during
the year, IBSS has no plans during 2003 for any significant capital expenditures
or any material increases in its monthly cash requirements.

Investor Debt and Other Payables. On December 31, 2001, IBSS achieved almost
complete debt service relief for 2002 and 2003 through the restructuring of
substantially all of its short-term and long-term investor debt. Under the
restructured debt instruments, approximately 90% of the principal balance is not
payable until the first quarter of 2004. The first interest payment is not due
until January 2003, and the second interest payment is not due until maturity in
2004.


                                      F-7

<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 1.  Going Concern (continued):

In the months since the issuance of IBSS' currently outstanding convertible
debt, holders of a portion of this debt have converted the principal and accrued
interest on all or a portion of their debt into common stock.
Holders of the convertible debt have also indicated their desire to convert
additional amounts of their debt into common stock during the first quarter of
2003. Although these conversions have reduced and will continue to reduce IBSS'
principal and interest obligations, in the first quarter of 2003, IBSS will be
faced with principal and interest obligations on the remaining convertible debt
that it will not be able to satisfy from currently projected cash flows from
operations. Accordingly, IBSS is in the process of renegotiating with
the holders of this debt the amount and timing of payments to be made on such
remaining debt. (See Note 1s)

IBSS has also established long-term payout arrangements with respect to
substantially all of its unsecured trade accounts payable. In addition, where
permitted under securities laws, IBSS has satisfied certain third party
obligations through restricted stock grants.

Additional Capital. Since December 31, 2001, IBSS has raised approximately
$984,000 in additional investor funding through the issuance of common stock,
two-year convertible debentures and common stock purchase warrants. IBSS is
seeking to raise additional capital during 2003 through the private placement of
convertible debt or equity securities. Because of several factors, including the
operating, market and industry risks associated with an investment in its common
stock, the fact that IBSS' common stock is no longer traded on the Nasdaq Stock
Market and is currently traded on the Over-the-Counter Bulletin Board maintained
by the NASD, and the continued weakness in the capital markets in general and
the technology sectors in particular, IBSS may experience difficulty in raising
additional financing until its operating results or overall market conditions
reflect sustained improvement.

Note 2.  Summary of Significant Accounting Policies:

All financial information presented in these financial statements is
expressed in U.S. dollars, except as otherwise noted. The Canadian exchange
rates to one U.S. dollar at December 31, 2002 and 2001 were $1.5769 and $1.5911,
respectively.

IBSS is in the business of providing computer technology products and services
to industrial manufacturers and on-line transaction processing businesses
primarily in the United States. IBSS' principal business areas are: (1)
installing, licensing and servicing systems developed by IBSS that help manage
the shop floor transactions of manufacturing facilities (the "Synapse for
Manufacturing System") using IBSS' software Synapse, which manages on-line
computer transactions; (2) providing systems integration services to
manufacturing companies; and (3) developing and marketing Synapse for Printing
(for the printing industry's publishing and distribution processes).

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


IBSS' primary efforts are now directed to the development of a market for its
Synapse for Manufacturing, Synapse for Printing and Synapse HR software and
integration services.


                                      F-8
<PAGE>


                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements

Note 2.  Summary of Significant Accounting Policies (continued):

Basis of Consolidation - In 2002 and 2001, the consolidated financial statements
include the accounts of IBSS and its majority-owned subsidiary (Synamco, L.L.C.)
(collectively "IBSS"). At December 31, 2000, IBSS did not have any consolidated
affiliates.

Cash and Cash Equivalents - IBSS considers all highly liquid investments with a
maturity of three months or less at date of acquisition to be cash equivalents.

Property and Equipment - Property and equipment, including certain support
software acquired for internal use, are stated at cost less accumulated
depreciation and amortization. Property and equipment are depreciated on a
straight-line basis over their estimated useful lives, generally ranging from
five to seven years. Leasehold improvements are amortized over the lesser of the
term of the respective lease or estimated useful life of the improvement.
Expenditures for major renewals and betterments that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and repairs
are charged to expense as incurred. Upon retirement or sale, the cost of the
disposed asset and the related accumulated depreciation are removed from the
accounts, and any resulting gain or loss is credited or charged to income.

Goodwill and Other Intangible Assets - In accordance with the provisions of SFAS
No. 142, IBSS tests goodwill and other intangible assets with indefinite lives
for impairment on an annual basis (or on an interim basis if an event occurs
that might reduce the fair value of the reporting unit below its carrying
value.).

Investment in Affiliated Company - The equity method of accounting is used for
companies and other investments in which IBSS has significant influence;
generally this represents common stock ownership or partnership equity of at
least 20% and not more than 50%. IBSS' investments in affiliates are stated at
cost, adjusted for equity in undistributed earnings or losses, since
acquisition.

Revenue Recognition - IBSS' revenues are generated primarily by licensing to
customers standardized manufacturing software systems and providing integration
services, automation and administrative support and information services to the
manufacturing industry. IBSS recognizes revenues related to software licenses
and software maintenance in compliance with the American Institute of Certified
Public Accountants Statement of Position No. 97-2, "Software Revenue
Recognition," as amended.

IBSS generally recognizes revenue when all of the following criteria are met as
set forth in paragraph 8 of SOP 97-2: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the fee is fixed or determinable; and (4)
collectibility is probable. Each of these four criteria above is defined as
follows:

Persuasive evidence of an arrangement exists. It is IBSS' customary practice to
have a written contract, which is signed by both the customer and IBSS or, in
situations where a contract is not required; a customer purchase order has been
received.

                                      F-9
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements

Note 2.  Summary of Significant Accounting Policies (continued):

Revenue Recognition (continued) - Delivery has occurred. IBSS' software may be
either physically or electronically delivered to the customer. Delivery is
deemed to have occurred upon the delivery of the electronic code or the shipment
of the physical product based on standard contractual committed shipping terms,
whereby risk of loss passes to the customer when the shipment is picked up by
the carrier. If undelivered products or services exist in an arrangement that
are essential to the functionality of the delivered product, delivery is not
considered to have occurred until these products or services are delivered as
described above.

The fee is fixed or determinable. IBSS' customers generally pay a per-license
fee that is based on the number of servers on which the software is installed,
the size of the application that they will develop for the software, the options
provided for those servers, and the number of client workstations that access
the server. Additional license fees are due when the total number of subscribers
using IBSS' products increases beyond the specified number for which a license
was purchased or when additional options are added. License fees are generally
due within 30-45 days from product delivery.

Collectibility is probable. Collectibility is assessed on a customer-by-customer
basis. IBSS typically sells to customers with high credit ratings and solid
payment practices. New customers are subjected to a credit review process in
which IBSS evaluates the customers' financial position and ultimately their
ability to pay. If it is determined from the outset of an arrangement that
collectibility is not probable based upon the credit review process, revenue is
recognized as cash payments are received.

IBSS' agreements with its customers and resellers do not contain product return
rights. Revenues from maintenance, which consist of fees for ongoing support and
product updates, are recognized ratably over the term of the contract, typically
one year. Consulting revenues are primarily related to implementation services
performed on a time and materials basis under separate service arrangements.

Research and Development - Research and development costs consist of
expenditures incurred during the course of planned search and investigation
aimed at discovery of new knowledge which will be useful in developing new
products or processes, or significantly enhancing existing products or
production processes, and the implementation of such through design, testing of
product alternatives or construction of working models. Such costs are charged
to operations as incurred.

                                      F-10
<PAGE>


                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 2.  Summary of Significant Accounting Policies (continued):

Impairment of Long-Lived Assets - In 2002, IBSS adopted Statement of Financial
Accounting Standards ("SFAS") No. 144. SFAS No. 144 replaced SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." SFAS No. 144 establishes a single accounting model for the
impairment or disposal of long-lived assets including discontinued operations.
On determining that assets have been impaired or are to be disposed of,
including discontinued operations, IBSS measures the lower of the carrying value
of fair value less costs to sell, whether reported in continuing operations or
discontinued operations. IBSS reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets held and used other
than goodwill is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of their carrying
amount or fair value of the assets. The recoverability of goodwill is assessed
whenever the facts and circumstances suggest that the asset may be impaired and
that the write-down is material. IBSS assesses the recoverability of goodwill by
determining whether the unamortized goodwill balance can be recovered through
undiscounted future cash flows.

Software Development Costs - Under the provisions of SFAS No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
issued by the Financial Accounting Standards Board ("FASB"), certain costs
incurred in the internal development of computer software, which is to be
licensed to customers, are capitalized. Amortization of capitalized software
costs is provided upon commercial release of the products at the greater of the
amount using (i) the ratio that current gross revenues for a product bear to the
total of current and anticipated future gross revenues of that product or (ii)
the straight-line method over the remaining estimated economic life of the
product including the period being reported on. IBSS generally amortizes
capitalized software costs on a straight-line basis over five years.

Costs that are capitalized as part of internally developed software primarily
include direct and indirect costs associated with payroll, computer time and
allocable depreciation and other direct allocable costs, among others. All costs
incurred prior to the establishment of technological feasibility, which IBSS
defines as the earlier to occur of (1) establishment of a detail program design
or (2) the development of a working model, have been expensed as research and
development costs during the periods in which they were incurred. Once
technological feasibility has been achieved, costs of producing the product
master are capitalized. Capitalization stops when the product is available for
general release. The amount by which unamortized software costs exceed the
estimated net realizable value, if any, is charged to income in the period it is
determined. IBSS evaluates the net realizable value of capitalized computer
software costs and intangible assets on an ongoing basis relying on a number of
factors, including operating results, business plans, budgets and economic
projections.


                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Because IBSS believes its current process for developing software is essentially
completed concurrently with the establishment of a working model, no costs have
been capitalized during 2002 or 2001.

                                      F-11
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 2.  Summary of Significant Accounting Policies (continued):

Stock-Based Compensation - IBSS applies Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its stock-based compensation plans and applies
the disclosure-only provisions of FASB Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), as amended by FASB Statement No. 148,
"Accounting for Stock-Based Compensation-Transition and Disclosure" ("SFAS
148").

IBSS recognizes stock-based compensation expense for stock options granted to
employees and non-employee directors if the quoted market price of the stock at
the date of the grant or award exceeds the price, if any, to be paid by an
employee for the exercise of the stock.

In 2002, IBSS recalculated the fair values of options granted during 2001 and
2000, utilizing estimates more in alignment with its experiences, and changed
its method of accounting for forfeitures from estimation to actual. These
changes have been reflected in the disclosures below. Had compensation cost for
options granted under IBSS' stock-based compensation plans and purchased under
the employee stock purchase plan been determined based on the fair value at the
grant dates consistent with SFAS 123, IBSS' net income and earnings per share
would have changed to the pro forma amounts listed below:
<TABLE>
<CAPTION>

                                                         2002                  2001                   2000
                                                  -------------------   -------------------    -------------------
Net loss:
<S>                                               <C>                   <C>                    <C>
As reported                                       $     (3,154,767)     $    (11,256,202)      $     (4,220,340)
Add:  stock-based compensation expense
    included in reported net loss                           80,288                     -                      -
Deduct: stock-based compensation expense
    determined under the fair value based
    method for all awards                                 (750,043)             (749,615)            (3,015,834)
                                                  -------------------   -------------------    -------------------
Pro forma net loss                                $     (3,824,522)     $    (12,005,817)      $     (7,236,174)
                                                  ===================   ===================    ===================

Net loss per common share:
    As reported:
      Basic and diluted                           $             (0.17)  $             (0.71)   $             (0.31)
                                                  ===================   ===================    ===================
    Pro forma:
      Basic and diluted                           $             (0.20)  $             (0.76)   $             (0.54)
                                                  ===================   ===================    ===================
</TABLE>

See Note 11 for more information regarding IBSS' stock compensation plans and
the assumptions used to prepare the pro forma information presented above.

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

                                      F-12
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 2.  Summary of Significant Accounting Policies (continued):

Equity Instruments - IBSS issues various types of debt and equity instruments in
its efforts to meet the capital needs of the company.

IBSS follows APB 14, "Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants" ("APB 14") in its accounting for issuances of convertible
debt with detachable stock purchase warrants. In accordance with APB 14, IBSS
allocates the portion of proceeds of debt securities issued with detachable
stock purchase warrants, which is allocable to warrants as paid-in capital,
included as a component of its no par value common stock. IBSS determines the
fair value of stock purchase warrants using Black-Scholes valuation techniques.

From time to time, IBSS issues convertible securities with beneficial conversion
features, whereby the conversion feature is "in the money" and therefore there
is a presumption that the debt will be converted prior to, or at, maturity. In
accordance with FASB Emerging Issues Task Force ("EITF") 98-5, "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios", IBSS allocates a portion of the proceeds equal to
the intrinsic value of the embedded beneficial conversion feature to additional
paid-in-capital, included as a component of its no par value common stock. IBSS
recognizes the proceeds allocated to the beneficial conversion feature as
interest expense through the date of earliest conversion. IBSS limits the
discount assigned to the beneficial conversion feature to the amount of proceeds
allocated to the convertible instrument. During the year ended December 31, 2002
and 2001, interest expense attributable to the beneficial conversion feature was
reduced by approximately $615,000 and $600,000, respectively, due to the limits
imposed upon IBSS by EITF 98-5.

In accordance with EITF 00-27, "Application of Issue 98-5 to Certain Convertible
Instruments" IBSS allocates the proceeds received in a financing transaction
that includes a convertible instrument to the convertible instrument and any
other detachable instruments included in the exchange on a relative fair value
basis.

During the year ended December 31, 2001, IBSS granted fully exercisable warrants
for services rendered. The fair market value of the warrants was calculated on
the measurement date using the Black-Scholes pricing model and is generally
amortized ratably over the term of the respective agreement or service period,
whichever is shorter.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Accordingly, actual results could materially differ from
those estimates.

                                      F-13
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 2.  Summary of Significant Accounting Policies (continued):

Concentrations of Credit Risk - Financial instruments, which potentially subject
IBSS to concentrations of credit risk, consist principally of accounts
receivable and cash in banks.

IBSS performs ongoing credit evaluations on certain of its customers' financial
condition, but generally does not require collateral to support customer
receivables. IBSS places its cash and cash equivalents with high credit quality
entities and limits the amount of credit exposure with any one entity.

Major Customers - IBSS derives a substantial portion of its gross revenues from
sales to two major customers in 2002 and 2001, and sales to three major
customers in 2000. For the years ended December 31, 2002, 2001 and 2000 sales to
these customers totaled approximately $3,345,000, $3,526,000, and $2,006,000,
respectively. Accounts receivable due from these customers were approximately
$183,000 and $346,000 at December 31, 2002 and 2001, respectively.

Foreign Currency Transactions - Transaction gains and losses are included in the
results of operations in the period in which they occur. Assets and liabilities
are translated utilizing year-end exchange rates. IBSS did not have any
transaction losses for the three years ended December 31, 2002.

Net Loss Per Share of Common Stock - All net loss per share of Common Stock
amounts presented have been computed based on the weighted average number of
shares of Common Stock outstanding in accordance with SFAS No. 128. Stock
warrants and stock options are not included in the calculation of dilutive loss
per common share because IBSS has experienced operating losses in all periods
presented and, therefore, the effect would be antidilutive.

Financial Instruments - The carrying values of cash equivalents, accounts
receivable and accounts payable approximate fair value due to their short
maturities. The carrying value of IBSS' notes payable and long-term debt at
December 31, 2002 and 2001 approximate fair value as they bear interest at
market rates.

Non-Controlling Interest in Net Assets - IBSS records the minority interest
portion of its majority-owned operations, which are applicable to the minority
interest partners, as a component of equity and in its statements of operations.

New Accounting Standards - In June 2001, the FASB issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." FAS No. 143 requires IBSS to
record the fair value of an asset retirement obligation as a liability in the
period in which it incurs a legal obligation associated with the retirement of
tangible long-lived assets that result from the acquisition, construction,
development, and/or normal use of the assets. IBSS also records a corresponding
asset that is depreciated over the life of the asset. Subsequent to the initial
measurement of the asset retirement obligation, the obligation will be adjusted
at the end of each period to reflect the passage of time and changes in the
estimated future cash flows underlying the obligation. IBSS

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements

was required to adopt SFAS No. 143 on January 1, 2003. The adoption of SFAS
No. 143 is not expected to have a material effect on IBSS' financial statements.

                                      F-14
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 2.  Summary of Significant Accounting Policies (continued):

New Accounting Standards (continued) - In April 2002, the FASB issued SFAS No.
145, "Rescission of Financial Accounting standards Board Statements No. 4, 44,
and 64, Amendment of FASB Statement No. 13, and Technical Corrections." The
Statement rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment
of Debt," and an amendment of that Statement, SFAS No. 64, "Extinguishments of
Debt Made to Satisfy Sinking-Fund Requirements." SFAS No. 145 recognizes that
the use of debt extinguishment can be a part of the risk management strategy of
a company and hence, the classification of all early extinguishment of debt as
an extraordinary item may no longer be appropriate. In addition, the Statement
amends SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency
between the required account for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. Provisions of this Statement, as they
relate to Statement No. 13, are to be effective for transactions occurring after
May 15, 2002. Provisions, which relate to Statement No. 4, are effective for
fiscal years beginning after May 15, 2002. IBSS adopted SFAS No. 145 on January
1, 2003 and it is not expected to materially impact IBSS' financial statements.

SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities." This Statement addresses the accounting for costs associated with
disposal activities covered by SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," and with exit (restructuring) activities
previously covered by Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity." This Statement nullifies EITF Issue No. 94-3 in its
entirety and requires that a liability for all costs be recognized when the
liability is incurred. Generally, the ability to accrue for the cost of a
workforce reduction plan at the communication date will be limited. The cost of
the plan will be recognized over the future service period of the employees. The
Statement will be applied prospectively to exit or disposal activities initiated
after December 31, 2002.

In November 2002, the FASB issued Interpretation No. 45 "Guarantor's Accounting
and Disclosure Requirements for Guarantees Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107
and a rescission of FASB Interpretation No. 34." This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation are
applicable to guarantees issued or modified after December 31, 2002 and are not
expected to have a material effect on IBSS' financial statements. The disclosure
requirements are effective for financial statements of interim and annual
periods ending after December 15, 2002.

                                      F-15
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements

Note 2.  Summary of Significant Accounting Policies (continued):

New Accounting Standards (continued) - In December 2002, the FASB issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure
and amendment of FASB Statement No. 123." This statement amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation and
amends the disclosure requirements of SFAS 123 to require prominent disclosures
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The transition and annual disclosure provisions of SFAS No.
148 are effective for fiscal years ending after December 15, 2002. Effective
January 1, 2003, IBSS adopted the disclosure requirements of SFAS No. 148
regarding disclosure requirements for financial statements for interim periods.
IBSS has not yet determined whether it will voluntarily change to the fair value
based method of accounting for stock-based employee compensation.

In January 2003, The FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51." This
interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. The application of this Interpretation is not
expected to have a material effect on IBSS' financial statements. The
Interpretation requires certain disclosures in financial statements issued after
January 31, 2003 if it is reasonably possible that IBSS will consolidate or
disclosure information about variable interest entities when the Interpretation
becomes effective.

Reclassifications - Certain reclassifications have been made to the 2001 and
2000 financial statements to conform to the 2002 presentation.

Note 3.  Acquisitions:

In June 2000, IBSS established the corporate charter of ASP*N, LLC ("ASP*N"), as
a 25% joint venture with a financial services company. ASP*N's primary purpose
was to develop and implement technological strategies for application service
providers.

During 2000, IBSS invoiced ASP*N approximately $500,000 for professional and
technology services provided to Wilcam Systems, LLC ("Wilcam") through ASP*N. On
December 29, 2000, IBSS exercised its option for an additional 25% interest in
ASP*N's membership interests in exchange for the receivable balance of
approximately $500,000 due from ASP*N, which management believes is recorded in
accordance with EITF 00-8, "Accounting by a Grantee for an Equity Instrument to
be Received in Conjunction with Providing Goods or Services." After IBSS'
eliminations, the sale of services resulted in a net services revenue
recognition of approximately $284,000. Expenses associated with these services
were general and administrative expenses and are accordingly reflected as such
in these financial statements. At December 31, 2000, IBSS owned a 43.02%
interest in ASP*N, after certain dilutive effects occurring as a result of third
party investments in ASP*N.

                                      F-16
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 3.  Acquisitions (continued):

On November 10, 2000, ASP*N contributed professional and technology consulting
services to Wilcam for a 50% equity interest in Wilcam's Class B membership
interests and purchased an additional 4% of Wilcam's Class C non-voting
membership interests for $600,000. On December 29, 2000, ASP*N exercised its
option for 3.5% of Wilcam's Class D membership interests. The November 10 and
December 29, 2000 purchases of Class C and Class D non-voting membership
interests diluted the Class B membership interests by 3.75%. At December 31,
2000, ASP*N's resulting ownership percentages in Wilcam were 46.25% Class B, 4.0
% Class C and 3.5% Class D membership interests.

During 2000, IBSS loaned $305,000 to Wilcam for operational purposes. The note
bears interest at the prime rate plus 1% and is due on demand. In addition, IBSS
invoiced Wilcam approximately $165,000 for maintenance and consulting services.
On January 17, 2001, IBSS converted approximately $180,000 of the Wilcam loan to
a 1.2% equity interest in Wilcam's Class D membership interests.

On March 22, 2001, IBSS purchased an additional 2.4% investment in Wilcam's
Class D non-voting membership interests for $360,000.

On October 1, 2001, IBSS assigned 12.05% of its investment in ASP*N to a
3rd party, resulting in a residual interest in ASP*N of 30.97%, and a cost basis
of $500,000. In December 2001, Synamco, LLC was formed to continue development
of Synapse-HR, a web-based federal Family Medical Leave Act, attendance and
benefits management software. On December 13, 2001, IBSS exchanged its residual
interest in ASP*N of 30.97% for 50.38% and 3.6% voting and non-voting membership
interest, respectively of Synamco, LLC membership interest. In accordance with
EITF 98-7 "Accounting for Exchanges of Similar Equity Method Investments," IBSS
recorded the exchange transaction at the fair value of the net assets received
by IBSS.

As of December 13, 2001, Synamco, LLC had software capitalized in
accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed" of approximately $860,000, goodwill of
approximately $982,000, and liabilities of approximately $1,842,000. The
capitalized software was comprised principally of a Synapse license purchased
from IBSS by Wilcam for approximately $500,000, and a portion of professional
services purchased from IBSS by Wilcam for approximately $1,787,000.

At December 31, 2001, IBSS determined its investment in Synamco, L.L.C. and the
related goodwill to be impaired under the provisions of SFAS No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." Due to significant capital constraints, IBSS has not budgeted for any sales
from Synamco, L.L.C. and therefore, the present value of estimated future cash
flows is estimated by management to be minimal. As a result of the impairment
analysis performed by IBSS, approximately $1,842,000 has been charged against
2001 operations.

                                      F-17
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements

Note 3.  Acquisitions (continued):

Summarized financial information for the equity affiliate at December 31, 2000:

<TABLE>
<CAPTION>

<S>                                                                      <C>
Accounts receivable                                                      $       51,548
Note receivable                                                                  85,000
Investment in affiliate, at equity                                              506,770
                                                                         ------------------
Total assets                                                             $      643,318
                                                                         ==================

Current liabilities                                                      $       51,448
Note payable
                                                                                 93,691
Total capital                                                                   498,179
                                                                         ------------------
Total liabilities and capital                                            $      643,318
                                                                         ==================

Net sales                                                                $           --
                                                                         ==================
Net loss                                                                 $     (599,921)
                                                                         ==================
</TABLE>

During the fourth quarter of 2002, due to inactivity in Synamco, L.L.C., and no
plans to expend significant efforts for the sales of Synapse-HR, IBSS forgave
the receivable owed it for Synamco, L.L.C. in the approximate amount of
$1,860,000, which had previously eliminated in consolidation. The effects of the
forgiveness of the obligation eliminated the minority interest position in these
financial statements.

Note 4.  Capitalized Software Costs:

Capitalized software costs consist of the following at December 31:
<TABLE>
<CAPTION>

                                                                                2002                   2001
                                                                         -------------------    -------------------

<S>                                                                        <C>                    <C>
Internally developed software                                              $    998,105           $    998,105
Less accumulated amortization                                                  (756,811)              (577,594)
                                                                         -------------------    -------------------

Capitalized software costs, net                                            $    241,294           $    420,511
                                                                         ===================    ===================
</TABLE>

IBSS has determined that no write-down of capitalized software costs for
impairment is necessary for the reporting periods included in these financial
statements.

                                      F-18
<PAGE>

Note 5.  Property and Equipment:

Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>

                                                                                 2002                   2001
                                                                          -------------------    -------------------

<S>                                                                         <C>                    <C>
Computer equipment                                                          $    300,989           $    353,733
Furniture and fixtures                                                           145,399                178,086
Marketing equipment                                                              107,514                107,514
Office and other equipment                                                        95,582                 95,878
Computer software                                                                 76,800                 78,986
Leasehold improvements                                                            39,071                 52,516
                                                                          -------------------    -------------------
                                                                                 765,355                866,713
Less accumulated depreciation                                                   (365,506)              (302,646)
                                                                          -------------------    -------------------

Property and equipment, net                                                 $    399,849           $    564,067
                                                                          ===================    ===================

</TABLE>

Note 6.  Convertible Notes Payable:
<TABLE>
<CAPTION>

                                                                                 2002                   2001
                                                                          -------------------    -------------------
Notes payable to a third party bearing interest at 10%, principal and interest
  due January 1, 2003. Principal and interest are convertible into common shares
  at $0.90 per share.
<S>                                                                       <C>                    <C>
                                                                          $      621,000         $      576,000
Notes payable to a third party bearing interest at 10%, principal and interest
  due on demand. Principal and interest are convertible into common shares at
  $1.00 per share.
                                                                                  75,000                250,000
                                                                          -------------------    -------------------
                                                                                 696,000                826,000
Less discount                                                                         --               (129,773)
                                                                          -------------------    -------------------
                                                                          $      696,000         $      696,227
                                                                          ===================    ===================
</TABLE>

As part of the notes payable financing, IBSS issued the debt holders 423,000
detachable warrants with 3-year terms, which entitle the holder to purchase one
common share for each warrant. The warrants are exercisable at prices ranging
from $1.00 to $3.30 per share.

                                      F-19
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 7.  Long-Term Debt:

During 1999, IBSS issued $1,250,000 principal amount of convertible notes (the
"Convertible Notes") that were due in full on January 1, 2002. Interest on the
Convertible Notes was payable quarterly commencing in October 1999 at rates
ranging from 7% to 10%. The Convertible Notes were convertible into common
shares at $2.50 per share, at the option of the holder. The Convertible Notes
were amended and restated on March 2, 2001 and June 29, 2001. The resulting
conversion rate was $1.25 per share. On June 29, 2001, the Convertible Notes
were redeemed in full and 1,000,000 shares were issued.

On March 2, 2001, IBSS issued $1,413,000 principal amount of notes payable.
These notes were due in full on November 1, 2001 with an interest rate of 10%.
On June 29, 2001, in conjunction with an amendment of the agreement, $400,000
was converted into common shares and 320,000 shares were issued. In December
2001, $1,013,000 of the notes payable was refinanced. IBSS amended certain
outstanding warrants to lower the per share price for consideration of this note
payable.

On October 15, 2001, IBSS issued $150,000 principal amount of notes payable, due
in full on October 15, 2003 with an interest rate of 10%. Interest is payable
quarterly in arrears beginning October 15, 2002 and quarterly thereafter. The
note is partially convertible at the option of the holder up to $75,000 of
principal, at any time at $1.00 per share.

On December 31, 2001, IBSS issued $2,286,640 principal amount of convertible
notes, including a $1,013,000 refinance of the March 2, 2001 debt issue, due in
full on January 1, 2004 or at the point proceeds greater than $1 million are
received from investor funding. The December 31, 2001 debt issue refinanced
various cash advances received by IBSS during 2001, totaling $1,273,640.
Interest on the notes is payable in arrears on January 1, 2003 and January 1,
2004. Interest accrues at a graduating scale beginning at 9% for the first 90
days and increases by 1% each 90-day period thereafter. If all principal and
interest amounts due are paid by January 1, 2003, and there are no events of
default, interest remains at 9%. The notes are convertible in whole or part at
any time at the option of the holder at $1.00 per share or 50% of the average
closing for the 30 days prior to conversion. IBSS issued 1,822,519
warrants at an exercise price of $1.60 in consideration for these convertible
notes. During 2002, approximately $568,000 of the notes were converted into
shares of common stock.

During 2002, IBSS issued $839,000 principal amount of convertible debt due
in full on January 1, 2004 or at the point proceeds greater than $1 million are
received from investor funding. The terms of the notes issued in 2002 are the
same as the December 31, 2001 debt issue. IBSS issued 839,000 warrants at an
original exercise price of $1.60. During 2002, $200,000 of the notes were
converted into shares of common stock. In relation to the warrants issued with
the December 2001 and the 2002 debt issues, the warrant price was reduced to
$6.60 due to non-payment of the outstanding amounts.


                                      F-26
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 8.  Shareholders' Equity (Deficiency):

Performance Shares - As a requirement of the British Columbia Securities
Commission, the total common shares of management (3,600,000) were held pursuant
to the terms of an escrow agreement, as performance shares ("Escrowed Shares").

Prior to 2001, the performance shares were to be released from escrow, on a
pro-rata basis, based upon the cumulative cash flow of IBSS, as evidenced by
annual audited financial statements. "Cash flow" was defined to mean net income
or loss before tax, adjusted for certain add-backs. For each $0.91 (Canadian) of
cumulative cash flow generated by IBSS from its operations, one performance
share would be released from escrow.

During 2001, the Canadian laws were amended to allow release of the escrowed
share based upon the passage of time. Management believes that release of the
Escrowed Shares to officers, directors, employees and consultants of IBSS will
not be deemed compensatory, as there is no longer a service requirement and the
owners are not required to remain with IBSS.

On September 19, 2001, March 19, 2002, and Sept. 19, 2002 releases of a 25%
pro-rata share of the original escrow stock were made. These releases leave a
cumulative balance of 900,000 shares held in escrow.

Preferred Stock - IBSS' authorized shares of preferred stock may be issued in
one or more series, and the Board of Directors is authorized, without further
action by the shareholders, to designate the rights, preferences, limitations
and restrictions of and upon shares of each series, including dividend, voting,
redemption and conversion rights. The Board of Directors also may designate par
value, preferences in liquidation and the numbers of shares constituting any
series. There are not any shares of preferred stock outstanding at December 31,
2002 or 2001.


                                      F-21
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 8.  Shareholders' Equity (Deficiency) (continued):

Warrants - The following table shows warrants outstanding for the purchase of
common shares at December 31, 2002. Warrants are exercisable at the option of
the holder.
<TABLE>
<CAPTION>

       Issue Date                                       Exercise Price                                  Outstanding
-------------------------    ---------------------------------------------------------------------    -----------------

<S>                          <C>                                                                               <C>
January 3, 2000              $1.87 per share in years one through five.                                        11,855
February 4, 2000             $5.94 and $10.38 in years one through five.                                      259,680
February 15, 2000            $5.50, $6.00, and $6.50 per share in years one through three,
                                 respectively. 250,000
February 25, 2000            $2.50 for Group A; and $3.50 for Group B                                         501,875
May 30, 2000                 $6.00 per share in years one through nine.                                        50,002
November 7, 2000             $7.69 per share in years one though five.                                         30,000
December 15, 2000            $3.94 per share in years one through three.                                       20,000
January 1, 2001              $3.91 per share in years one through five.                                       100,000
March 2, 2001                $0.60 per share in years one through two.                                      1,123,000
March 2, 2001                Lesser of $1.00 per share or 1/3 of average trading price for the
                               10 days ended 2 days prior to exercise.                                        600,000
May 8, 2001                  $3.00 per share in years one through three.                                       40,000
May 30, 2001                 $3.00 per share in years one through three.                                       20,000
May 31, 2001                 $3.00 per share in years one through three.                                       10,000
August 7, 2001               $3.30 per share in years one through three.                                       87,500
August 14, 2001              $1.00 per share in years one through three.                                      125,000
August 17, 2001              $3.00 per share in years one through three.                                       10,000
September 11, 2001           $2.85 per share in years one through ten.                                        100,000
September 14, 2001           $2.90 per share in years one through three.                                       75,000
October 15, 2001             $1.80 per share in years one through five.                                       100,000
November 14, 2001            $1.90 per share in years one through three.                                      135,500
November 20, 2001            $1.84 per share in years one through five.                                        25,000
December 13, 2001            $1.00 per share in years one through three.                                       10,625
December 31, 2001            $0.60 per share in years one through three.                                    2,497,519
January 1, 2002              Lesser of $1.00 per share or 1/2 of average trading price for the                100,000
                               10 days ended 2 days prior to exercise.
January 3, 2002              $0.60 per share in years one through three.                                      100,000
January 15, 2002             $0.60 per share in years one through three.                                       75,000
January 30, 2002             $0.60 per share in years one through three.                                       10,000
February 19, 2002            $0.65 per share in years one through two.                                        200,000
March 1, 2002                $0.60 per share in years one through three.                                      164,000
March 15, 2002               $0.60 per share in years one through three.                                      160,000
March 21, 2002               Lesser of $1.00 per share or 1/2 of average trading price for the                100,000
                               10 days ended 2 days prior to exercise.
April 10, 2002               $1.60 per share in years one through three.                                       30,000
                                                                                                      -----------------

Total Outstanding Warrants                                                                                  7,121,556
                                                                                                      =================

Substantially all warrants outstanding are fully vested and exercisable at December 31, 2002.
</TABLE>

                                      F-22
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements

Note 8.  Shareholders' Equity (Deficiency) (continued):
<TABLE>
<CAPTION>




                                                                                               Weighted average
                                                                                                   exercise
                                                                         Warrants              price per share
                                                                 ------------------------- -------------------------
<S>                                                                        <C>            <C>
Outstanding at December 31, 2000                                            2,936,535      $             3.35
Granted during the year                                                     4,464,146      $             1.63
Exercised during the year                                                  (1,168,125)     $             0.86
                                                                 ------------------------- -------------------------
Outstanding at December 31, 2001                                            6,232,556      $             2.07
Granted during the year                                                       939,000      $             1.22
Exercised during the year                                                          --      $               --
Expired during the year                                                        50,000      $             1.87
                                                                 ------------------------- -------------------------
Outstanding at December 31, 2002                                            7,121,556      $             1.54
                                                                 ========================= =========================
</TABLE>


Note 9.  Loss per share:

The following table shows a reconciliation of the numerators and denominators
used in calculating basic and diluted loss per share:
<TABLE>
<CAPTION>

                                                                2002                 2001               2000
                                                         --------------------  ------------------ ------------------
Numerator:
<S>                                                      <C>                   <C>                <C>
   Numerator for basic and diluted loss per share        $     (3,154,767)     $    (11,256,202)  $     (4,220,340)
                                                         --------------------  ------------------ ------------------

Denominator:
   Weighted average common shares - basic and diluted
     calculation                                               18,941,043            15,872,128         13,483,211
                                                         --------------------  ------------------ ------------------

Basic and diluted loss per share                         $         (0.17)      $         (0.71)   $            (0.31)
                                                         ====================  ================== ==================
</TABLE>


The warrants and options were not included in the computation of diluted loss
per share because the warrants and options are antidilutive when included in the
computation due to IBSS's net loss.

Note 10:  Accrued Compensation and Benefits:

During the year 2001, the President and Chief Executive Officer ("CEO")
terminated his employment with IBSS. As part of the CEO's termination package,
IBSS agreed to pay the CEO approximately $305,000 as salary continuance and
health benefits of approximately $12,000 through October 2003. Of the total
amount charged to expense for the year ended December 31, 2001, approximately
$134,000 was paid during 2001 and the remaining $183,000 is included in accrued
compensation and benefits. During 2002, the severance package was forfeited by
the CEO and reverted to the minimum package provided under the CEO's prior
employment agreement. Accordingly, approximately $165,000 was no longer payable
to the CEO. All amounts have been paid under all severance agreements as of
December 31, 2002.

                                      F-23
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements



Note 11.  Employee Benefits:

Retirement Plan - IBSS maintains a 401(k) retirement plan, which is managed by
an outside trustee. All employees are eligible to participate. IBSS has not
contributed to the 401(k) plan.

Stock Option Plan - IBSS' Board of Directors adopted a stock option plan (the
"1997 Option Plan"), effective April 29, 1997. Options normally extend for 5
years and under committee policy generally become exercisable in installments of
50 percent per six months commencing six months from the date of grant. The
maximum number of common shares IBSS has reserved for issuance under the 1997
Option Plan, including options currently outstanding, is 1,860,000. The number
of common shares reserved for issuance to any one person cannot exceed 5% of the
number of issued and outstanding common shares, and no person is entitled to
receive in any one year grants regarding more than 50,000 shares. On June 28,
2000, IBSS adopted the 2001 Stock Incentive Plan (the "2001 Option Plan"),
effective January 1, 2001. The 2001 Option Plan provides for option awards of up
to 1,200,000 shares, stock appreciation rights and restricted stock awards. The
options have terms up to ten years. During 2002, IBSS' Board of Directors
adopted a non-qualified stock option plan (the "2002 Option Plan"), effective
August 1, 2002. The maximum number of common shares reserved for issuance under
the 2002 Option Plan is 800,000 shares.

Information with respect to options granted under the 1997 Option Plan is as
follows:
<TABLE>
<CAPTION>

                                                                                               Weighted average
                                                                                                   exercise
                                                                      Stock Options            price per share
                                                                 ------------------------- -------------------------
<S>                                                                          <C>          <C>
Outstanding at December 31, 2000 (1)                                          321,000      $             1.42
Outstanding at December 31, 2000                                              842,898                    5.64
Granted during the year                                                        68,000                    2.67
Exercised during the year (1)                                                 (21,700)                   1.56
Expired or cancelled during the year (1)                                      (34,500)                   3.40
Expired or cancelled during the year                                         (320,000)                   4.87
                                                                 ------------------------- -------------------------
Outstanding at December 31, 2001 (1)                                          264,800      $             1.16
                                                                 ========================= =========================
Outstanding at December 31, 2001                                              590,898      $             5.71
                                                                 ========================= =========================
Granted during the year                                                       418,000      $             0.97
Exercised during the year (1)                                                 (30,452)                   1.05
Expired or cancelled during the year (1)                                      (99,848)                   0.99
Expired or cancelled during the year                                         (197,400)                   3.75
                                                                 ------------------------- -------------------------
Outstanding at December 31, 2002 (1)                                          134,500      $             1.21
                                                                 ========================= =========================
Outstanding at December 31, 2002                                              811,498      $             4.86
                                                                 ========================= =========================
Exercisable at December 31, 2002 (1)                                          134,500      $             1.21
                                                                 ========================= =========================
Exercisable at December 31, 2002                                              418,198      $             4.92
                                                                 ========================= =========================
(1)      Canadian Dollars
</TABLE>

                                      F-24
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 11.  Employee Benefits (continued):

Information with respect to options granted under the 2001 Option Plan is as
follows:
<TABLE>
<CAPTION>

                                                                                               Weighted average
                                                                                                   exercise
                                                                      Stock Options            price per share
                                                                 ------------------------- -------------------------
<S>                                                                               <C>     <C>
Outstanding at December 31, 2000                                                   --      $            --
Granted during the year                                                        88,000                 3.41
Exercised during the year                                                          --                   --
Expired or cancelled during the year                                          (10,000)                3.41
                                                                 ------------------------- -------------------------
Outstanding at December 31, 2001                                               78,000                 3.41
Granted during the year                                                       565,625                 0.68
Expired or cancelled during the year                                          (28,813)                1.78
                                                                 ------------------------- -------------------------
Outstanding at December 31, 2002                                              614,812      $          0.98
                                                                 ========================= =========================
Exercisable at December 31, 2002                                              238,034      $          1.63
                                                                 ========================= =========================

Information with respect to options granted under the 2002 Option Plan is as
follows:

                                                                                               Weighted average
                                                                                                   exercise
                                                                      Stock Options            price per share
                                                                 ------------------------- -------------------------
Outstanding at December 31, 2001                                                   --      $            --
Granted during the year                                                       308,723                 0.01
Exercised during the year                                                          --                   --
Expired or cancelled during the year                                               --                   --
                                                                 ------------------------- -------------------------
Outstanding at December 31, 2002                                              308,723      $          0.01
                                                                 ========================= =========================
</TABLE>


For the year ended December 31, 2002, IBSS recognized expense related to
stock-based compensation of $80,288. IBSS did not recognize any expense related
to stock-based compensation during 2001 and 2000.

The pro forma disclosures required by SFAS 123 regarding net loss and net loss
per share are stated as if IBSS had accounted for stock options using fair
values. Using the Black-Scholes option-pricing model the fair value at the date
of grant for these options was estimated using the following assumptions:
<TABLE>
<CAPTION>

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

<S>                                                  <C>                      <C>                     <C>
Dividend yield                                        --                       --                      --
Expected volatility                                  122%                     131%                    141%
Risk-free rate of return                         2.9-3.3%               4.5 - 5.0%               5.6 - 6.7%
Expected option life, years                            5                       5                        5

</TABLE>

The weighted average fair value for options granted under the Option Plans
during 2002, 2001, and 2000 was $.68, $2.64 and $7.33, respectively.

                                      F-25
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 11.  Employee Benefits (continued):

The Black-Scholes and other option pricing models were developed for use in
estimating fair value of traded options, which have no vesting restrictions and
are fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions. IBSS' employee stock options have characteristics
significantly different than those of traded options, and changes in the
subjective assumptions can materially affect the fair value estimate.
Accordingly, in management's opinion, these existing models may not necessarily
provide a reliable single measure of the fair value of employee stock options.

Note 12.  Income Taxes:

Deferred income taxes reflect the net tax effect of temporary differences and
carryforwards between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of IBSS' deferred tax assets and liabilities consisted of
the following at December 31:
<TABLE>
<CAPTION>

                                                                           2002                      2001
                                                                 ------------------------- -------------------------

Deferred tax assets:
<S>                                                              <C>                       <C>
    Operating loss carryforwards                                 $        7,617,558        $        6,221,020
    Deferred revenue                                                         27,864                    35,483
    Other, net                                                               46,063                   136,633
    Valuation allowance                                                  (7,533,164)               (6,162,463)
                                                                 ------------------------- -------------------------

Total deferred tax assets                                                   158,321                   230,673
                                                                 ------------------------- -------------------------

Deferred tax liabilities:
    Capitalized software costs                                              (91,692)                 (159,795)
    Depreciation                                                            (55,011)                  (61,517)
    Other, net                                                              (11,618)                   (9,361)
                                                                 ------------------------- -------------------------

Total deferred tax liabilities                                             (158,321)                 (230,673)
                                                                 ------------------------- -------------------------

Total                                                            $               --        $               --

                                                                 ========================= =========================

</TABLE>

Temporary differences and carryforwards, which gave rise to significant portions
of deferred tax assets and liabilities at December 31, are as follows:
<TABLE>
<CAPTION>

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

<S>                                           <C>                   <C>                    <C>
 Operating loss carryforward                  $        1,396,538    $        3,212,337     $        1,424,973
 Deferred revenue                                         (7,619)               17,186                (15,247)
 Other, net                                              (86,321)               46,226                 47,706
 Capitalized software costs                               68,103                68,103                 63,943
 Valuation allowance                                  (1,370,701)           (3,343,852)            (1,521,375)
                                              --------------------  ---------------------  -------------------------
          Net deferred income taxes           $               --    $               --     $               --
                                              ====================  =====================  =========================
</TABLE>



                                      F-26
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 12.  Income Taxes (continued):

The principal reasons for the differences between income tax expense and the
amount computed by applying the statutory federal rate to pre-tax loss were as
follows for the three years ended December 31:
<TABLE>
<CAPTION>

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

<S>                                           <C>                    <C>                    <C>
Tax at statutory federal rate                 $       (1,057,321)    $       (3,827,109)    $       (1,384,714)
Effect on rate of:
   Stock options, warrants and other                    (191,386)               914,193                     --
   Life insurance premiums                                 2,428                  3,820                 (4,030)
   Penalties                                              27,688                 12,593                (18,453)
   Non-deductible expenses                                 1,676                  2,899                (23,615)
   State income taxes,  net of federal income
     tax effect                                         (153,786)              (450,248)               (90,563)
   Change in valuation allowance                       1,370,701              3,343,852              1,521,375
                                              ---------------------  ---------------------  ------------------------

Total                                         $               --     $               --     $               --
                                              =====================  =====================  ========================

</TABLE>

As of December 31, 2002, IBSS had federal and state net operating loss
carryforwards of approximately $20,000,000. The net operating loss carryforwards
will expire between 2012 and 2022, if not utilized.

Management of IBSS is evaluating certain limitations which may have occurred as
prescribed under the Internal Revenue Code ("IRC") Section 382, which
potentially could significantly limit the availability of offsetting operating
loss carryforwards against future taxable income. In addition, management is
evaluating the tax consequences of the issuance, and subsequent exercise of,
warrants and options to certain employees and vendors and the impact of the
potential compensation on operating loss carryforwards.

In determining that is was more likely than not that the recorded deferred tax
asset would not be realized, management of IBSS considered the following: (1)
recent operating results, (2) the budgets and forecasts that management and the
Board of Directors had adopted for the next fiscal year, (3) the ability to
utilize NOL's prior to their expiration, (4) the potential limitation of NOL
utilization in the event of a change of ownership and (5) the generation of
future taxable income in excess of income reported on the consolidated financial
statements.

A valuation allowance of approximately $7,533,000 and $6,162,000 at December 31,
2002 and 2001, respectively, remained necessary in the judgment of management
because the factors noted above (i.e. forecasts) did not support the utilization
of less than a full valuation allowance.

                                      F-27
<PAGE>
                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 13.  Related Party Transactions:

For the year ended December 31, 2001, approximately $1,622,000 of total
revenues were from licensing and services provided to related parties. There
were no trade accounts receivables due from the related parties at December 31,
2001.

Related party receivables at December 31, 2002 are advances primarily to Company
directors. Substantially all of these advances are advances to the Chief
Executive Officers.

At December 31, 2002 and 2001, IBSS had approximately $61,000 and $39,000,
respectively, due to related parties included in accounts payable.

At December 31, 2002, IBSS held four notes receivable with balances
totaling $131,080 due from IBSS' chief executive officer and its executive vice
president. IBSS loaned these officers/directors money to exercise Common Stock
purchase warrant agreements to purchase an aggregate of 300,000 shares of IBSS'
common stock at the applicable exercise price of $0.60 to $0.68 per share. These
notes, which bear interest at the prime rate per annum, matured in 2002 and are
due on demand at December 31, 2002. The loans are collaterized by 300,000 shares
of common stock. The receivable is shown on the balance sheets as a reduction in
stockholders' equity.

Note 14.  Supplemental Cash Flow Information:

During the years presented below, interest paid amounted to:
<TABLE>
<CAPTION>

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

<S>                                                                 <C>              <C>              <C>
Interest paid                                                       $       38,315   $      270,935   $      129,608
                                                                    ===============  ===============  ===============

The following table summarizes non-cash investing and financing activities:

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

Repayment of employee advances and notes for purchase of common
   stock                                                            $           --   $      104,970   $           --
                                                                    ===============  ===============  ===============

Conversion of convertible notes into capital                        $      767,851   $    1,650,000   $      180,000
                                                                    ===============  ===============  ===============

Repayment of notes payable issued for common stock purchase and related party
   receivable in exchange for severance package
                                                                    $           --   $      104,970   $          --
                                                                    ===============  ===============  ==============

</TABLE>


                                      F-28
<PAGE>

                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 15.  Commitments and Contingencies:

Litigation - In the normal course of business, IBSS and its subsidiaries are
parties to various legal claims, actions and complaints, and maintains accruals
for such costs that are expected to be incurred. Although it is not possible to
predict the outcome of these matters, management believes that the results will
not have a material impact on its financial statements.

Operating Lease Commitments - IBSS leases its principal facilities under a
noncancellable operating lease expiring in October 2004 with an option to renew
for one five year period at market rates. The lease is subject to annual
adjustments for facility operating costs in excess of an established base year.

At December 31, 2002 minimum lease payments are as follows:

                                 2003                    $        237,589
                                 2004                             197,991
                                                         -------------------

                                                         $        435,580
                                                         ===================

Rent expense was approximately as follows for the years ended December 31:

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

                     $       385,000    $       411,000     $       394,000
                     =================  ==================  =================

Liens - The Internal Revenue Service has place a lien on all of IBSS' assets for
delinquent tax obligations. A default under this obligation could result in a
foreclosure on all of IBSS' assets and the discontinuation of IBSS' operations.

Note 16.  Significant Risks and Uncertainties:

IBSS' operating results and financial condition can be impacted by a number of
factors, including but not limited to the following, any of which could cause
actual results to vary materially from current and historical results or IBSS'
anticipated future results.

Currently, IBSS' business is focused principally within the manufacturing and
transaction processing industries. Significant changes in the regulatory or
market environment of this industry could impact demand for IBSS' software
products and services. Additionally, there is increasing competition for IBSS'
products and services, and there can be no assurance that IBSS' current products
and services will remain competitive, or that IBSS' development efforts will
produce products with the cost and performance characteristics necessary to
remain competitive. Furthermore, the market for IBSS' products and services is
characterized by rapid changes in technology. IBSS' success will depend on the
level of market acceptance of IBSS' products, technologies and enhancements, and
its ability to introduce such products, technologies and enhancements to the
market on a timely and cost effective basis, and maintain a labor force
sufficiently skilled to compete in the current environment.

                                      F-29
<PAGE>
                 Integrated Business Systems and Services, Inc.
                   Notes To Consolidated Financial Statements


Note 16.  Significant Risks and Uncertainties (continued):

As discussed in Note 2, the preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Amounts affected by these estimates
include, but are not limited to, the estimated useful lives, related
amortization expense and carrying values of IBSS' capitalized software
development costs. Changes in the status of certain matters or facts or
circumstances underlying these estimates could result in material changes to
these estimates, and actual results could differ significantly from these
estimates.

IBSS' primary efforts are now directed to the development of a market for
its Synapse for Manufacturing, Synapse for Government eprinting, Synapse
Composer, the Synapse Application Development Platform. Like other companies at
this stage of development, IBSS is subject to numerous risks, including the
uncertainty of its chosen market, its ability to develop its markets and its
ability to finance operations and other risks.

Note 17.  Segment Information:

Management has determined that IBSS operates in one dominant industry segment,
which involves the supply of computer technology products and services. These
products and services have similar economic characteristics, customers and
distribution methods. All of IBSS's operations, assets and employees are located
in the United States and its revenues are generated in the United States.

Note 18. Subsequent Events

In January 2003, IBSS reached agreements with its existing lenders to refinance
certain of its' notes payable, and cure the interest payment default under the
long-term debt agreements.  The new agreements provide for an extended due date
of January 1, 2004 for principal and interest payments under the notes payable.
The agreements also provide for a waiver of the interest payment default under
the long-term debt agreements, resulting in continued interest accrual of 9%
in 2002 in lieu of the escalated interest schedule provided for in the original
agreement.

                                      F-37
<PAGE>

                 INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.

                                   FORM 10-KSB

                                  EXHIBIT INDEX

Exhibit
Number

3.1  Amended and Restated Articles of Incorporation of the Company (incorporated
     by reference to Exhibit 2.1 to the Company's Form 1-A filed July 9, 1997).

3.2  Amended and Restated Bylaws of the Company (incorporated by reference to
     Exhibit 2.2 to the Company's Form 1-A filed July 9, 1997).

10.1 Employment Agreement dated as of January 1, 1997, as amended January 1,
     1999, between the Company and George E. Mendenhall (incorporated by
     reference to Exhibit 6.3 to the Company's Form 1-A filed July 9, 1997).

10.2 Amendment No. 1 dated as of September 1, 1997, to Employment Agreement
     dated as of January 1, 1997, between the Company and George E. Mendenhall
     (incorporated by reference to Exhibit 6.22 to the Company's Amendment No. 1
     to Form 1-A filed September 15, 1997).

10.3 Amendment No. 2 dated as of January 1, 1999 to Employment Agreement dated
     January 1, 1997, between the Company and George E. Mendenhall (incorporated
     by reference to Exhibit 6.17(b) to the Company's Amendment No. 1 to Form
     SB-1 filed April 6, 1999 (Registration No. 333-43437).

10.4 Employment Agreement dated as of December 31, 1996 between the Company and
     Stuart E. Massey (incorporated by reference to Exhibit 6.4 to the Company's
     Form 1-A filed July 9, 1997).

10.5 Amendment No. 1 dated as of September 1, 1997, to Employment Agreement
     dated as of December 31, 1996, between the Company and Stuart E. Massey
     (incorporated by reference to Exhibit 6.23 to the Company's Amendment No. 1
     to Form 1-A filed September 15, 1997).

10.6 Employment Agreement effective as of January 1, 1999 between the Company
     and Donald R. Futch (incorporated by reference to Exhibit 6.20 to the
     Company's Amendment No. 1 to Form SB-1 filed April 6, 1999. Registration
     No. 333-43437).

10.7 Employment Agreement effective as of May 30, 2000 between the Company and
     William S. McMaster. (incorporated by reference to Exhibit 10.10 to the
     Company's 10-KSB for the year ended December 31, 2000).

10.8 Integrated Business Systems and Services, Inc. Stock Option Plan
     (incorporated by reference to Exhibit 6.18 to the Company's Form 1-A filed
     July 9, 1997).

10.9 Integrated Business Systems and Services, Inc. 2001 Stock Incentive Plan,
     as amended (incorporated by reference to Exhibit 10.11 in the Company's
     Form 10-QSB for the three-month period ended March 31, 2002).

10.10 Lease Agreement dated October 1, 2000 between the Company and Atrium
     Northeast Limited Partnership (incorporated by reference as Exhibit 10.16
     of the Company's Form 10-QSB for the quarter ended September 30, 2000).

                                      E-1
<PAGE>



10.11 Escrow Agreement among Pacific Corporate Trust Company, the Company, Harry
     P. Langley, George E. Mendenhall and Stuart E. Massey (incorporated by
     reference to Exhibit 6.24 to the Company's Amendment No. 2 to Form 1-A
     filed October 8, 1997).

10.12 Nonqualified Stock Option Agreement dated as of May 30, 2000 between the
     Company and William S. McMaster (incorporated by reference to Exhibit 10.15
     to the Company's 10-KSB for the year ended December 31, 2000).

10.13 Promissory Note dated March 15, 2002 between the Company and Fitz-John
     Creighton McMaster (incorporated by reference to Exhibit 10.13 in the
     Company's Form 10-QSB for the three-month period ended September 30, 2002).

10.14 Promissory Note dated March 15, 2002 between the Company and Rice Street
     Associates, LLC (incorporated by reference to Exhibit 10.14 in the
     Company's Form 10-QSB for the three-month period ended September 30, 2002).

10.15 Second Amendment to and Restated Promissory Note dated August 15, 2002
     between the Company and Kirkman Finlay III (incorporated by reference to
     Exhibit in the Company's Form 10-QSB for the three-month period ended
     September 30, 2002).

10.16 Letter Agreement between the Company and George E. Mendenhall effective
     September 1, 2001 with respect to cash compensation deferral (incorporated
     by reference to Exhibit 10.16 in the Company's Form 10-QSB for the
     three-month period ended March 31, 2002).

10.17 Letter Agreement between the Company and Stuart E. Massey effective
     September 1, 2001 with respect to cash compensation deferral (incorporated
     by reference to Exhibit 10.17 in the Company's Form 10-QSB for the
     three-month period ended March 31, 2002).

10.18 Letter Agreement between the Company and William S. McMaster effective
     September 1, 2001 with respect to cash compensation deferral (incorporated
     by reference to Exhibit 10.18 in the Company's Form 10-QSB for the
     three-month period ended March 31, 2002).

10.19 Letter Agreement between the Company and Donald R. Futch effective
     September 1, 2001 with respect to cash compensation deferral (incorporated
     by reference to Exhibit 10.19 in the Company's Form 10-QSB for the
     three-month period ended March 31, 2002).

10.20 Letter Agreement between the Company and James V. Hopkins effective
     September 1, 2001 with respect to cash compensation deferral (incorporated
     by reference to Exhibit 10.20 in the Company's Form 10-QSB for the
     three-month period ended March 31, 2002).

10.21 Class A Secured Convertible Debenture dated December 31, 2001 between the
     Company and IBSS Class A Investors (incorporated by reference to Exhibit
     10.21 in the Company's Form 10-QSB for the three-month period ended March
     31, 2002).

10.22 Class B Secured Convertible Debenture dated December 31, 2001 between the
     Company and IBSS Class B Investors (incorporated by reference to Exhibit
     10.22 in the Company's Form 10-QSB for the three-month period ended March
     31, 2002).

10.23 Common Stock Purchase Warrant dated December 31, 2001 between the Company
     and IBSS Class A Investors (incorporated by reference to Exhibit 10.23 in
     the Company's Form 10-QSB for the three-month period ended March 31, 2002).

                                      E-2
<PAGE>

10.24    Common Stock Purchase Warrant dated December 31, 2001 between the
         Company and IBSS Class B Investors (incorporated by reference to
         Exhibit 10.24 in the Company's Form 10-QSB for the three-month period
         ended March 31, 2002).

10.25    Omnibus Security Agreement dated December 31, 2001 by and among the
         Company, IBSS Class A Investors and IBSS Class B Investors
         (incorporated by reference to Exhibit 10.25 in the Company's Form
         10-QSB for the three-month period ended March 31, 2002).

10.26    Inter-Creditor Agreement dated December 31, 2001 by and among the
         Company, IBSS Class A Investors and IBSS Class B Investors
         (incorporated by reference to Exhibit 10.26 in the Company's Form
         10-QSB for the three-month period ended March 31, 2002).

10.27    Security Agreement dated June 12, 2001 by and between the Company and
         Fitz-John Creighton McMaster (incorporated by reference to Exhibit
         10.27 in the Company's Form 10-QSB for the three-month period ended
         September 30, 2002.)

10.28    Security Agreement dated August 2, 2001 by and between the Company and
         Rice Street Associates, LLC (incorporated by reference to Exhibit 10.28
         in the Company's Form 10-QSB for the three-month period ended September
         30, 2002).

10.29    Security Agreement dated August 14, 2001 by and between the Company and
         Kirkman Finlay III (incorporated by reference to Exhibit 10.29 in the
         Company's Form 10-QSB for the three-month period ended September 30,
         2002).

10.30    Integrated Business Systems and Services, Inc. 2002 Stock Option Plan
         (incorporated by reference to Exhibit 10.30 in the Company's Form
         10-QSB for the three-month period ended September 30, 2002).

10.31 Letter Agreement between the Company and Donald R. Futch effective
     September 1, 2002 with respect to cash compensation deferral.

10.32 Letter Agreement between the Company and Stuart E. Massey effective
     September 1, 2002 with respect to cash compensation deferral.

10.33 Letter Agreement between the Company and William S. McMaster effective
     September 1, 2002 with respect to cash compensation deferral.

10.34 Letter Agreement between the Company and George E. Mendenhall effective
     September 1, 2001 with respect to cash compensation deferral.

10.50 Lease Agreement between the Company and Pinebelt, LLC dated October 8,
     2002 with respect to property at 1602 Shop Road, Ste E, Columbia, S.C.

21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21 in the
     Company's Form 10-KSB for fiscal year ended December 31, 2001).

23.1     Consent of Accountants

                                      E-3
<PAGE>

99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
     1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
     1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


                                      E-4
<PAGE>



EXHIBIT 23.1

                         CONSENT OF SCOTT MCELVEEN, LLP

Board of Directors

Integrated Business Systems and Services, Inc.:



                  We consent to the incorporation by reference in the
Registration Statement of Integrated Business Systems and Services, Inc. on Form
S-8 (No. 333-59583), relating to the registration of up to 960,000 shares of its
common stock for issuance pursuant to the Integrated Business Systems and
Services, Inc. 1997 Stock Option Plan, and to the incorporation by reference in
the Registration Statement of Integrated Business Systems and Services, Inc. on
Form S-8 (No. 333-90030), relating to the registration of up to 2,319,786 shares
of its common stock for issuance pursuant to the Integrated Business Systems and
Services, Inc. 1997 Stock Option Plan, the Integrated Business Systems and
Services, Inc. 2001 Stock Incentive Plan, the stock grants to Coffin
Communications Group and Stratecom, and the stock option agreements of William
S. McMaster and Roger A. Kazanowski, of our report dated March 24, 2003, which
is included in the Annual Report on Form 10-KSB of Integrated Business Systems
and Services, Inc. for the year ended December 31, 2002.



                                                     /s/  SCOTT MCELVEEN, LLP

                                                     Scott McElveen, LLP



                                      E-5
<PAGE>



EXHIBIT 99.1


     CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


         In connection with the annual report of Integrated Business Systems and
Services, Inc. (the "Company") on Form 10-KSB for the twelve month period ended
December 31, 2002 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, George E. Mendenhall, Chief Executive Officer of
the Company, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

     1.   The Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   The information contained in the Report fairly presents, in all
          material respects, the financial condition and result of operations of
          the Company.



         March 31, 2003                              /s/ GEORGE E. MENDENHALL
                                                     ------------------------

                              George E. Mendenhall

                              Chief Executive Officer

                              Integrated Business Systems and Services, Inc.

                                      E-6
<PAGE>




         EXHIBIT 99.2



     CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


         In connection with the annual report of Integrated Business Systems and
Services, Inc. (the "Company") on Form 10-KSB for the twelve month period ended
December 31, 2002 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, William S. McMaster, Chief Financial Officer of
the Company, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

     1.   The Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   The information contained in the Report fairly presents, in all
          material respects, the financial condition and result of operations of
          the Company.



         March 31, 2003             /s/ WILLIAM S. MCMASTER
                                    -----------------------

                                 William S. McMaster

                                 Chief Financial Officer

                                 Integrated Business Systems and Services, Inc.


                                      E-7
<PAGE>