<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-K

(Mark One)

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

For the fiscal year ended   December 31, 2001

                                       OR

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

For the transition period from _______________ to _______________

                         Commission file number 0-23239

                                  UBICS, Inc.
             (Exact name of registrant as specified in its charter)

           Delaware                                  34-1744587
(State or other Jurisdiction of         (I.R.S. Employer Identification No.)
 Incorporation or Organization)


333 Technology Drive, Suite 210, Canonsburg, Pennsylvania           15317
      (Address of Principal Executive Offices)                    (Zip Code)

                                     (724) 746-6001
                  (Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:  None.

Securities registered pursuant to Section 12(g) of the Act:  Common Stock, par
value $.01 per share

          Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                    Yes  [ x ]  No  [   ]

          Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [x]

          The aggregate market value of the voting and non-voting common equity
of the registrant held by non-affiliates of the registrant as of March 15, 2002
(based on the closing price of such stock on the Nasdaq National Market on such
date) was $3,955,064

          The number of shares of the registrant's Common Stock, par value $.01
per share, outstanding as of March 15, 2002 was 6,938,709.

                      DOCUMENTS INCORPORATED BY REFERENCE

          The following documents are incorporated by reference into the
indicated Part of this Form 10-K:

          Proxy Statement relating to 2002 Annual Meeting of Stockholders (Part
III), except for the performance graph, Report of the Compensation Committee and
Report of the Audit Committee.
<PAGE>

UBICS, INC.

                                   Form 10-K

                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<CAPTION>
  PART I                                                                                           Page
                                                                                                   ----
<S>         <C>                                                                                    <C>

Item 1.     Business                                                                                1

Item 2.     Properties                                                                              6

Item 3.     Legal Proceedings                                                                       6

Item 4.     Submission of Matters to a Vote of Security Holders                                     7

PART II

Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters                   7

Item 6.     Selected Financial Data                                                                 8

Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations   8

Item 7A.    Quantitative and Qualitative Disclosure About Market Risk                              15

Item 8.     Financial Statements and Supplementary Data                                            15

                Management's Responsibility for Financial Reporting

                Report of Independent Public Accountants

                Consolidated Balance Sheets as of December 31, 2001 and December 31, 2000

                Consolidated Statements of Operations for the years ended December 31,
                2001, 2000 and 1999

                Consolidated Statements of Changes in Stockholders' Equity for the years
                ended December 31, 1999, 2000 and 2001

                Consolidated Statements of Cash Flows for the years ended December 31,
                2001, 2000 and 1999

                Notes to Consolidated Financial Statements


PART III

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  33

Item 10.    Directors and Executive Officers of the Registrant                                    33

Item 11.    Executive Compensation                                                                34

Item 12.    Security Ownership of Certain Beneficial Owners and Management                        34

Item 13.    Certain Relationships and Related Transactions                                        34

PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K                       34

SIGNATURES                                                                                        37

</TABLE>
<PAGE>

PART I

Item 1.  Business

Summary

  UBICS, Inc. ("UBICS" or the "Company") provides information technology ("IT")
professional services to large and mid-sized organizations. UBICS provides its
clients with a wide range of professional services in such areas as
client/server design and development, enterprise resource planning ("ERP")
package implementation and customization, e-commerce applications design and
development, applications maintenance programming and database and systems
administration. UBICS' services are provided primarily on a time-and-materials
basis to client-managed projects, with UBICS IT professionals providing integral
support as project team members. With respect to website design and development
projects, UBICS' services are provided on a fixed price basis.  During 2001,
UBICS provided IT professional services to more than 250 clients in a range of
industries and locations.  Several of the Company's clients include Advance Auto
Parts, Caterpillar, Eddie Bauer, General Electric, Johnson Controls, and The
Hartford.  UBICS' high standards for responsiveness and service quality promote
growing client relationships and recurring revenues. The Company believes that
its centralized, low-overhead operating model enables it to respond quickly to
client demand for IT professional services.  UBICS meets this demand through its
employed IT professionals and its management of an extensive network of
subcontractors. The Company currently has approximately 200 IT professionals
deployed with its clients worldwide.

  One of the key factors supporting UBICS' growth has been its ability to
recruit and deploy, on short notice, skilled IT professionals. The Company
recruits IT professionals from India and other countries worldwide. In order to
ensure a continuous supply of IT professionals the Company has established a
recruiting and training center in India.  The initial phase of the center was
placed in operation in the fall of 1998 and an expansion was completed in 1999.
The Company uses this center to enhance its recruiting efforts and to train its
IT professionals prior to placement. The Company also selectively uses the
substantial resources and established reputation of the UB Group, to support its
recruiting efforts. The UB Group is a multinational group of companies
headquartered in Bangalore, India with operations in Asia, the Far East, the
Middle East, Africa, Europe and the U.S. The UB Group consists of companies
under the control of Vijay Mallya, Chairman of the Company and the indirect
beneficial owner of approximately 55% of the outstanding shares of common stock
of the Company.  Companies in the UB Group are principally engaged in the
manufacture and sale of beer, spirits, pharmaceuticals, paint and coating
products and in the hotel and resort business. The worldwide revenue of the
companies in the UB Group is currently approximately $2 billion per annum.

  The Company completed the acquisitions of UBICS (UK) Limited (formerly Oakwood
Technical Services Limited), Square Radius (UK) Limited (formerly European
Software Services (UK) Limited) and Reflex I.T. Solutions Limited (collectively,
"UBICS UK") in March 2001, and seventy percent (70%) of the equity share capital
of DSF Internet Services Private Limited ("DSF") in India in September 2001.
During 2000, the Company had acquired Square Radius, Inc. (formerly Cobalt
Creative, Inc.).  The Company currently has offices in the Pittsburgh,
Pennsylvania; Scottsdale, Arizona; London, U.K.; Bangalore, India and Delhi,
India areas.


Services

  The Company's IT professionals help clients identify, analyze and solve data
processing and computing problems in such areas as: (i) client/server design and
development; (ii) ERP package implementation and customization; (iii) e-commerce
applications design and development; (iv) applications maintenance programming;
and (v) database and systems administration. These services are provided in a
variety of computing environments utilizing leading technologies including
client/server architectures, object-oriented programming languages and tools,
distributed database management systems, computer-aided software engineering
("CASE") tools, ERP packages, groupware and advanced networking and
communications technologies. The Company's engagements cover every aspect of the
life cycle of computer systems, from strategy and design to development and
implementation and, finally, to maintenance and support.

  The majority of the Company's services are provided on a time-and-materials
basis with UBICS IT professionals providing services as members of the client's
project team. The Company's SquareRadius subsidiary provides web-site design
services on a fixed-price basis.  Generally, these services are provided on-site
to clients whose current personnel do not have the requisite technical skills or
to clients with specific projects requiring additional staffing that do not
justify permanent personnel increases. The scope of the work performed by the
Company ranges from specific, minor tasks of
<PAGE>

three months in duration involving a single IT professional to large, complex
tasks that require several IT professionals for a year or longer. Examples of
larger tasks include developing new client/server systems and maintaining mature
mainframe systems that cannot be quickly replaced.

  ERP software services consist primarily of assisting clients in implementing
and customizing package application software on client/server systems. Clients
seeking these services are generally businesses that are migrating from legacy
mainframe applications or are implementing enterprise-wide client/server
architectures.  The Company is seeking to expand the volume of ERP software
services that it provides by developing relationships with package software
firms. In addition, the Company has purchased additional hardware and software
and supporting facilities that will enable it to train its IT professionals in
the use and implementation of such ERP package software. The Company also
continually adjusts the scope of services which it provides in order to meet the
changing needs of its clients.

  The Company's SquareRadius subsidiary provides a complete cycle of service,
from strategic planning and project management, to the creative and technical
services required in the areas of website design and development, digital media,
corporate design and branding, e-commerce and virtual tours. While most of this
work is done at UBICS' facility in Scottsdale, Arizona, customer participation
is generally very high.  Customers seeking these services range from small
start-ups to niche firms to large companies. The project length and scope can
range from one week to year long development and marketing campaigns.

  The Company's UBICS UK subsidiaries engage in the business of information,
consulting and technical services ranging from high-level strategic human
resources planning to project outsourcing and on-site consulting.

  The Company's DSF subsidiary engages in the business of software development,
including video/audio streaming, web designing and content management.

                                       2
<PAGE>

  The Company's services are described below:

<TABLE>
<CAPTION>
                    UBICS SERVICES                                  METHODS/TOOLS                      DESCRIPTION
--------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                                  <C>
Client/Server Design and                                 . Tools/Languages:                    . System design
Development                                                PowerBuilder, Visual Basic,         . Requirements analysis and
                                                           Developer 2000, Delphi, SQL           definition
                                                           Windows, Visual C++, Java,          . Data modeling
                                                           Lotus Notes, Smalltalk              . Prototyping
                                                                                               . Development
                                                         . Databases: Oracle,                  . Testing and
                                                           Informix, Sybase, SQL Server, Unify   implementation
                                                                                               . Network design
                                                         . CASE Tools: ER-Win,                 . Internet/intranet
                                                           Designer 2000, IEF                    solutions
                                                                                               . Legacy transformation/
                                                                                                 data porting

ERP Package Implementation                               . ERP Packages: Baan,                 . Implementation of
and Customization                                          PeopleSoft, Oracle, SAP               packaged
                                                                                                 software solutions
                                                                                               . Customization
                                                                                               . Integration
                                                                                               . Data modeling
                                                                                               . System support
                                                                                               . Database administration
                                                                                               . End-user training
--------------------------------------------------------------------------------------------------------------------------
E-Commerce / Internet                                    . Tools/Languages:                    . Web development, Internet/
                                                           Java, Pearl, CGI, Java Beans, HTML    intranet solutions, Applet
                                                           DHTML, ActiveX, ASP, Domino,          developments, Workflow,
                                                           Oracle Webserver                      Firewalls (security)
--------------------------------------------------------------------------------------------------------------------------
Applications Maintenance                                 . Programming environments:           . System design
Programming                                                COBOL, CICS, PL/1,                  . Development
                                                           RPG/400, COBOL/400                  . Program conversion
                                                                                               . Data conversion
                                                         . Databases: DB2, IMS, IDMS           . User interface conversion
                                                                                               . Testing and
                                                         . Y2K Tools: MicroFocus                 implementation
                                                           Revolve                             . Date conversion
--------------------------------------------------------------------------------------------------------------------------
 Database and System                                     . Databases: Oracle,                 . Database administration
 Administration                                            Informix, Sybase, SQL Server,      . Datawarehousing
                                                           Unify                              . Network administration
                                                         . Tools: HP OpenView,                . Unix and Windows NT
                                                           CiscoWorks, Bytex Network            System administration
                                                           Management System,
                                                           AT&T OneVision
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


Sales and Marketing

  UBICS focuses its sales effort primarily on placing its IT professionals in
high value-added positions within large and mid-sized organizations through a
direct sales force currently consisting of 14 professionals. The Company serves
the U.S. market primarily through its headquarters in the Pittsburgh,
Pennsylvania area. UBICS leverages the mobility of its IT professionals and its
centralized, low-overhead sales and marketing effort to service all areas of the
U.S.

  The Company's sales force is organized primarily by geographic region and/or
practice lines.  The Company's sales professionals are responsible for managing
client relationships and identifying new business opportunities within their
assigned regions and/or practice lines. UBICS' sales professionals are required
to meet monthly targets for new accounts and placements, based upon the
experience and tenure of the sales professional. Compensation of sales
professionals is based heavily upon incentives for strong financial performance,
including gross margin contribution, within their region and/or practice lines.

  The Company's sales organization employs a variety of methods to identify
potential clients and industry trends, including referrals from existing clients
and the Company's IT professionals. The Company's sales professionals begin the
sales process by identifying and analyzing the prospective client's existing
software configuration and development

                                       3
<PAGE>

requirements, and the size and scope of its internal IT resources. The sales
professional then submits a proposal with the resumes of IT professionals having
skills that match the prospective client's project requirements. After the
client has engaged the Company, the sales professional continuously monitors and
builds the relationship between the client and the IT professionals to ensure
client satisfaction and the successful progress and completion of the
assignment.

  While the Company's focus remains on expanding its sales and marketing efforts
in the U.S., it has expanded its international operations by opening its
recruiting and training center in India.  Because UBICS currently has a
sufficient supply of IT professionals awaiting deployment, the Company has
deferred previously disclosed plans to establish offshore recruiting offices in
various foreign locations (other than stated above).

  In addition to UBICS' pursuit of new clients, the Company actively markets its
services to its existing clients, seeking to proactively meet the needs of its
clients and maximize placement success. The Company's success in developing and
retaining clients is due, in large part, to its ability to maintain a continuous
supply of qualified IT professionals.  This is made possible by the Company's
extensive network of nearly 80 subcontracting firms from which it can source
qualified IT professionals to supplement, if necessary, its employed IT
professionals. The Company believes that this network of subcontractors provides
the Company with a significant sales and marketing advantage.  The Company's
relationship with these subcontractors ensures that the Company can effectively
meet client needs quickly, thus establishing UBICS as a primary provider of IT
professional services.

  The Company's efforts in the area of web design have been towards building a
focused and penetrative approach. Utilizing the customer base in all areas of
the Company, sales managers are compensated based on the development of
additional services and products to these customers.  Vertical focus areas
within real estate, insurance, manufacturing, and financial services are
identified through national, regional and local periodicals and research forums.
The sales process begins with an initial phone call but outside sales is the
primary communication model.  A consultative and creative approach is taken to
match the Company's services with the immediate needs of the potential customer.
Once a formal proposal is submitted and approved, the customer is assigned a
full time project manager who is responsible for delivery, quality, budget and
coordination. Long term relationships are developed through adherence to strict
timelines and quality standards.

Clients

  Substantially all of the Company's clients are large and mid-sized companies,
systems integrators or other significant users of IT.  During 2001, the Company
provided services to over 250 clients in a range of industries.  During 2001,
approximately 21% of the Company's revenues were derived from its top five
clients--The Hartford, Electronic Computer Services, Advent Inc., MRJ Technology
Solutions and Visual Services.  The Hartford accounted for approximately 9%, 6%
and 5% of the Company's revenues for 2001, 2000 and 1999, respectively.

The following is a partial list of organizations to which the Company has
provided, or is providing, services:

<TABLE>
<CAPTION>
          Technology                         Retail                       Industrial
-------------------------------  ------------------------------  -----------------------------
<S>                              <C>                             <C>
         Ansys, Inc.                    Advance  Auto Parts                Caterpillar
     Creo Products, Inc.             Boscov's Department Stores             ABB Power
          GE Access                          Eddie Bauer                 Johnson Controls
McHugh Software International           Spartan Stores, Inc.             General Electric
</TABLE>

<TABLE>
<CAPTION>
     Consumer Products                     Financial
----------------------------  ------------------------------------
<S>                           <C>
      Dow Corning                    AGFirst Farm Credit Union
   Fruit of the Loom               International Monetary Fund
     Greenheck Fans               Moodys Risk Management Service
Phillips-Van Heusen Corp.                 The Hartford
</TABLE>


  The Company seeks to provide high quality, responsive service in order to
maximize its client retention rate and secure follow-on engagements. A
significant number of the Company's clients have selected UBICS to provide
additional services.

                                       4
<PAGE>

Human Resources

  The Company's success depends in large part on its ability to attract,
develop, motivate and retain highly skilled IT professionals.  As of December
31, 2001, the Company had 204 IT professionals deployed at client sites.  The
Company currently has three full-time practice managers, all of whom have
technical backgrounds that enable them to effectively evaluate the skills and
qualifications of potential candidates. The Company also has a recruiting team
dedicated to managing relationships with the Company's network of
subcontractors.  UBICS takes a proactive approach to recruiting based on skill
requirement forecasts.  The Company continually receives resumes from
prospective employees in response to advertisements placed in trade publications
and newspapers and on the internet.  In addition, UBICS IT professionals are
actively involved in identifying and referring new employees and screening
candidates for new positions.  The Company recruits primarily in India, but also
has recruited from other areas of the world, including the U.S., the United
Kingdom, the Middle East and the Far East.

  As a result of its relationship with the UB Group, UBICS benefits from the
established reputation and infrastructure that the UB Group has in India. The
Company has also established a recruiting and training infrastructure in India.

  UBICS employs a stringent selection method that consists of a three-stage
interview process. During the first stage, a general interview is conducted to
gather background information and references. The candidate next has a technical
interview with a technical panel, which is comprised of experts in their
respective skill areas. During the final step, the candidate is interviewed to
assess the candidate's client interaction skills and to verify the candidate's
suitability for assignment to a project in the U.S.

  The Company believes that the qualifications of its IT professionals give it a
competitive edge. To maintain and enhance their skills, UBICS IT professionals
attend training workshops and seminars where they learn to use the latest tools
and techniques. The Company utilizes its training facility in India, to train
UBICS IT professionals in ERP software packages and other higher value-added
technologies, and thereby enhance the skill base of such professionals.

  The Company maintains a database which catalogs the technical profiles,
location, availability, mobility and other factors relating to available IT
professionals.  This database enables the Company to quickly identify and deploy
appropriate IT professionals for various client engagements.

  The Company's IT professionals typically have Masters or Bachelors degrees in
Computer Science or another technical discipline as well as at least two years
of IT experience.  As of December 31, 2001, the Company had 250 employees
worldwide comprised of 177 IT professionals, 28 sales and marketing personnel
and 45 general and administrative personnel.  Over 90% of the Company's IT
professionals are citizens of other countries, with most of those in the U.S.
working under H-1B temporary work permits.  UBICS engages legal counsel to
prepare, file and process H-1B visa applications with the U.S. Immigration and
Naturalization Service.

  The Company also uses subcontracted IT professionals to effectively meet
client needs when UBICS IT professionals are unavailable.  The Company maintains
strong relationships with nearly 80 vendor subcontractors located worldwide.  As
of December 31, 2001, 74 of its deployed IT professionals, or approximately 36%,
were supplied by subcontractors. As the Company increases its investment in
recruiting and retaining qualified IT professionals, it believes the ratio of
UBICS IT professionals to IT professionals deployed from subcontractors will
increase. It has been and continues to be to the Company's advantage, however,
to maintain this subcontractor network to help meet its clients' needs. The
Company applies the same process and standards in selecting IT professionals
from subcontractors as it does in recruiting its employed IT professionals.

  The Company has a focused employee retention strategy that includes career
planning, training and benefits.

Competition

  The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company.  Primary competitors include participants
from a variety of market segments, including "Big Five" accounting firms,
systems consulting and implementation firms, applications software firms,
service groups of computer equipment companies, general management consulting
firms, contract programming companies and temporary staffing firms.  Many of
these competitors have substantially greater financial, technical and marketing
resources and greater name recognition than the Company.  In addition, there is
a risk that clients

                                       5
<PAGE>

may elect to increase their internal IT resources or limit the number of outside
service providers to satisfy their applications solutions needs. The Company
believes that the principal competitive factors in the IT services industry
include the range of services offered, technical expertise, responsiveness to
client needs, quality of service and perceived value. The Company believes that
it competes favorably with respect to these factors.

  The interactive and multimedia market is very diverse and competitive, making
it difficult for the various competitors to distinguish themselves.  In most
regional markets, the Company competes against traditional advertising and IT
companies as well as individuals operating out of a small office or home.  With
this vast difference, competition based on actual capability and depth is often
overshadowed by price and relationship.  The Company believes that it is well
positioned from a pricing and size perspective and its biggest competitive edge
is in penetration of services and products within specific industries.

Intellectual Property Rights

  The Company relies upon a combination of nondisclosure and other contractual
arrangements, including entering into confidentiality agreements with its
employees, and trade secret, copyright and trademark laws to protect its
proprietary rights and the proprietary rights of third parties from whom the
Company licenses intellectual property.  The Company has filed a U.S. trademark
registration application covering the service mark "UBICS" which, if granted,
would give the Company the presumption of ownership in the U.S. of the "UBICS"
mark for the services identified in the registration. Although the Company does
not deem trademarks or service marks to be material to its business, when in its
best interests, the Company seeks such protection for its services.  There can
be no assurance that the steps taken by the Company in this regard will be
adequate to deter misappropriation of proprietary information or that the
Company will be able to detect unauthorized use and take appropriate steps to
enforce its intellectual property rights.

Item 2.  Properties

  The Company's corporate headquarters is located in the Borough of Canonsburg,
Pennsylvania, approximately 15 miles south of Pittsburgh, Pennsylvania.  The
Company's senior management, administrative personnel, human resources and sales
and marketing functions are housed in this 22,815 square foot facility which is
leased by the Company pursuant to a lease agreement, which expires on August 27,
2003. The Company believes that this location has sufficient space for its
current and anticipated near-term needs.

  The Company leased two facilities in Scottsdale, Arizona to house SquareRadius
administrative personnel, production team, design team, and sales and marketing
personnel.  The first facility of 3,653 square feet is leased by the Company
pursuant to a lease agreement which expires on May 31, 2003.  The second
facility is approximately 1,400 square feet which was leased pursuant to a lease
agreement which expired on December 31, 2001 and was vacated.  The Company also
subleases a 4,439 square foot office in the San Francisco suburb of Sausalito,
California for use as a sales and marketing office. The Company subleases this
space from a member of the UB Group.

  The Company leases a facility in Bangalore City, India to house UBICS India
Private Limited management, administrative personnel, human resources and
technical personnel.  The 5,000 square foot facility is leased by the Company
pursuant to a lease agreement which expires on July 31, 2002.

  The Company leases a facility in Basingstoke, U.K., approximately 50 miles
southwest of London, to house UBICS (UK) Limited and SquareRadius (UK) Limited
management, administrative personnel, human resources, sales and marketing
personnel and technical personnel.  The 2,198 square foot facility is leased by
the Company pursuant to a lease agreement which expires on August 4, 2002.

  The Company leases a facility in New Delhi to house DSF management,
administrative personnel, human resources, sales and marketing personnel and
technical personnel.  The 4,000 square foot facility is leased by the Company
pursuant to a lease agreement which expires on April 1, 2003.


Item 3.  Legal Proceedings

  The Company is not a party to any litigation that is expected to have a
material adverse effect on the consolidated financial position, results of
operation or liquidity of the Company or its business.

                                       6
<PAGE>

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

  No matters were submitted to a vote of the Company's security holders during
the fourth quarter of the fiscal year ended December 31, 2001.


PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

          (a)  Market Information:
               ------------------

  The sole class of outstanding equity securities of the Company is its common
stock, par value $.01 per share (the "Common Stock").  The Common Stock is
traded on the Nasdaq National Market under the symbol "UBIX".  The following
table sets forth, for the periods indicated the range of high and low closing
sale prices for the Common Stock on the Nasdaq National Market.  The Common
Stock commenced trading on the Nasdaq National Market on October 31, 1997 at an
initial public offering price of $10.00 per share.

          Quarter Ended          High    Low
          ------------------    ------  -----

          March 31, 2000        $11.75  $2.56
          June 30, 2000         $ 5.25  $2.38
          September 30, 2000    $ 3.44  $2.25
          December 31, 2000     $ 2.38  $1.25

          March 31, 2001        $ 2.38  $1.38
          June 30, 2001         $ 1.74  $1.00
          September 30, 2001    $ 1.86  $0.48
          December 31, 2001     $ 0.83  $0.51


          As of March 20, 2002, there were approximately 70 record holders of
Common Stock.

  The Company has never paid dividends on its Common Stock.  The Company
currently intends to retain all of its future earnings to fund growth and the
operation of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.  The payment of future cash dividends, if
any, will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, the Company's future operations and earnings,
capital requirements and surplus, general financial condition, contractual
restrictions and such other factors as the Board of Directors may deem relevant.

                                       7
<PAGE>

Item 6.   Selected Financial Data

<TABLE>
<CAPTION>
                                                                                (In thousands, except per share data)

                                                                                         Year Ended December 31,
                                                                         -----------------------------------------------------
                   Income Statement Data:                                  2001          2000         1999      1998     1997
------------------------------------------------------------------       -------       -------      -------   -------  -------
<S>                                                                      <C>           <C>          <C>       <C>      <C>
Revenues..........................................................       $38,895       $42,324      $37,875   $30,314  $20,549
Cost of revenues..................................................        28,771        31,344       27,722    20,896   13,695
                                                                         -------       -------      -------   -------  -------
Gross profit......................................................        10,124        10,980       10,153     9,418    6,854
Selling, general and
  administrative expenses.........................................        15,631        10,635        8,849     6,495    3,738
Merger related expenses (1).......................................            --            --          869        --       --
Restructuring.....................................................           892           902           --        --       --
                                                                         -------       -------      -------   -------  -------
Income / (Loss) from operations...................................        (6,399)         (557)         435     2,923    3,116
Interest income, net..............................................           361           659          556       611       71
                                                                         -------       -------      -------   -------  -------
Income before income taxes........................................        (6,038)          102          991     3,534    3,187
Provision / (Benefit) for
   income taxes...................................................        (1,690)           95          382     1,438    1,307
                                                                         -------       -------      -------   -------  -------
Net income / (loss)...............................................       $(4,348)      $     7      $   609   $ 2,096  $ 1,880
                                                                         =======       =======      =======   =======  =======
Basic and diluted earnings / (loss)
  per share.......................................................        $(0.62)        $0.00        $0.09     $0.32    $0.36
                                                                         =======       =======      =======   =======  =======
Basic - weighted average shares...................................
  outstanding.....................................................         7,025         6,747        6,480     6,496    5,259
Diluted - weighted average shares
  outstanding.....................................................         7,025         6,831        6,489     6,530    5,275
</TABLE>

<TABLE>
<CAPTION>
                                                                        December 31,
                                                        -------------------------------------------
                   Balance Sheet Data:                    2001     2000     1999     1998     1997
------------------------------------------------------  -------  -------  -------  -------  -------
<S>                                                     <C>      <C>      <C>      <C>      <C>
  Working capital.....................................  $ 7,548  $14,753  $15,544  $15,459  $15,158
  Total assets........................................   20,608   24,898   21,684   21,218   18,132
  Total debt..........................................       --       --       --       --       --
  Total stockholders' equity..........................   14,414   18,774   17,889   17,280   15,284
</TABLE>
_________________

(1)  These expenses relate to the termination of the Company's proposed
     acquisition of R Systems, Inc.


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

  The following discussion should be read in conjunction with, and is qualified
in its entirety by, the financial statements and notes thereto included in Item
8 of this report.

  The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain forward looking statements that involve
substantial risks and uncertainties.  When used in this section, the words
"anticipate," "believe," "estimate," "expect" and similar expressions as they
relate to the Company or its management are intended to identify such forward
looking statements.  The factors that may cause actual results to differ
materially from the forward-looking statements include ability to recruit and
maintain qualified IT professionals, changes in laws and regulations
specifically immigration laws, competition and economic conditions in the
geographic regions in which the Company conducts its operations, general
economic conditions, success of the Company's marketing efforts and the demand
for outsourced IT professionals.  The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward looking statements.

                                       8
<PAGE>

Overview

  UBICS, founded in 1993, provides IT professional services to large and mid-
sized organizations. UBICS provides its clients with a wide range of
professional services in such areas as client/server design and development, ERP
package implementation and customization, e-commerce applications design and
development, applications maintenance programming and database and systems
administration.  UBICS' services are provided primarily on a time-and-materials
basis to client-managed projects, with UBICS IT professionals providing integral
support as project team members. With respect to website design and development
projects, UBICS' services are provided on a fixed price basis.

  The Company's revenues are based on the hourly billing of its IT professional
services and on the fixed prices for its website design and development
services. Revenue is recognized as services are provided.  The Company has
increased the average billing rates of its IT professionals as the demand for
skilled and experienced professionals has expanded, in particular for IT
professionals placed on ERP package implementation and customization projects.
As of December 31, 2001, 44 IT professionals, or approximately one-fifth of the
Company's deployed IT professionals, were placed on such projects.

  UBICS effectively minimizes the number of days IT professionals are not
assigned to projects by proactively marketing these professionals to clients.
Resource managers closely monitor the availability of IT professionals and
utilize subcontractors when UBICS IT professionals are unavailable.  The Company
maintains strong relationships with nearly 80 subcontractors located worldwide.
During 2001, approximately 35% of the Company's revenues were derived from IT
professionals deployed from subcontractors.  As of  December 31, 2001, IT
professionals deployed from subcontractors comprised 74 of the Company's 204
deployed IT professionals.  The Company believes that its network of
subcontractors enables it to maintain closer relationships with clients by
fulfilling more of their needs for IT professional services.  Management
believes that as the Company increases its investment in recruiting and
retaining qualified IT professionals, the ratio of UBICS IT professionals to
subcontractor IT professionals will increase.

  Since inception, the Company has developed relationships with 655 clients in a
range of industries and currently has IT professionals deployed at nearly 103 of
these clients.  The Company's five largest clients accounted for approximately
21% of revenues for 2001.  While this revenue concentration has remained fairly
constant, the Company believes that the continuing growth in its client base and
revenues should reduce the percentage of revenue attributable to its largest
clients.  The Company's strategy is to continue to provide services to clients
in a range of industries, in order to reduce credit risk from conditions or
occurrences within any specific industry or region in which these clients
operate.

  On March 30, 2001, the Company completed the acquisition of all of the
outstanding common stock of Oakwood Technical Services Limited, European
Software Services (UK) Limited and Reflex I.T. Solutions Limited in the United
Kingdom for a consideration of 1.4 million Pounds Sterling or approximately
US$2.0 million.  On December 21, 2001, the parties agreed to reduce the total
consideration to be paid by the Company to 1.1 million Pounds Sterling or
approximately US$1.6 million.

  On September 6, 2001, the Company, through its UBIX Computer Services Limited
subsidiary, completed the acquisition of seventy percent (70)% of the equity
share capital of DSF Internet Services Private Limited in India for a purchase
price of $825,000.  UBICS also paid $175,000 and issued 219,173 shares of the
common stock of the Company to Fifth Dimension Limited for its services in
connection with the transaction.


Restructuring

  During 2001, the Company recorded a restructuring charge of $892,000, of which
approximately $460,000 was associated with a write-off of unused office space,
approximately $170,000 was related to merging the Company's UB Interactive
division with its SquareRadius subsidiary, approximately $160,000 was associated
with a write-off of obsolete assets, and approximately $100,000 was related to
the elimination of 32 technical, sales & marketing and management positions.

  During 2000, the Company recorded a restructuring charge of $902,000, of which
$450,000 was related to a payable to the Company's former Chief Executive
Officer as part of his severance agreement, $100,000 was related to a signing
bonus paid to the Company's new Chief Executive Officer pursuant to his
employment agreement and $352,000 represented the

                                       9
<PAGE>

value of 100,000 shares of common stock granted to the Company's new Chief
Executive Officer pursuant to his employment agreement.

As of December 31, 2001, $639,000 of the restructuring charges remained as an
accrual on the consolidated balance sheet.

Results of Operations

  The following table sets forth, for the periods indicated, selected statements
of operations data as a percentage of revenues:

<TABLE>
<CAPTION>
                                                                           Percentage of Revenues
                                                                    --------------------------------------
                                                                            Year Ended December 31,
                                                                    --------------------------------------
                                                                     2001            2000            1999
                                                                    ------           -----           -----
<S>                                                                 <C>             <C>             <C>
Revenues...................................................          100.0%          100.0%          100.0%
Cost of revenues...........................................           74.0            74.1            73.2
                                                                    ------           -----           -----
Gross profit...............................................           26.0            25.9            26.8
Selling, general and administrative expenses...............
                                                                      40.2            25.1            23.4
Merger related expenses (1)................................             --              --             2.3
Restructuring..............................................            2.3             2.1              --
                                                                    ------           -----           -----
Income / (Loss) from operations............................          (16.5)           (1.3)            1.1
Interest income, net.......................................            1.0             1.6             1.5
                                                                    ------           -----           -----
Income before income taxes.................................          (15.5)            0.2             2.6
Provision / (Benefit) for income taxes.....................           (4.3)            0.2             1.0
                                                                    ------           -----           -----
Net income / (loss)........................................         (11.2)%            0.0%            1.6%
                                                                    ======           =====           =====
</TABLE>

------------
(1)  These expenses relate to the termination of proposed acquisition of R
     Systems, Inc.


Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Revenues

  Revenues for the year ended December 31, 2001 were $38.9 million, compared to
$42.3 million for the year ended December 31, 2000, a decrease of $3.4 million,
or 8%.  The decrease in revenues was due to weaker demand in the IT staffing
industry.  This was partially offset by revenue generated by UBICS UK and DSF of
$1.6 million and $81,000, respectively.  The number of the Company's deployed IT
professionals decreased to 204 at December 31, 2001 from 291 at December 31,
2000.

Gross Profit

  Gross profit consists of revenues less cost of revenues.  Cost of revenues is
comprised principally of IT professional salaries and benefits, including
subcontractor professional costs and relocation expenses.  Gross profit for 2001
was $10.1 million, compared to $11.0 million for 2000, a decrease of $0.9
million, or 8%.  The decrease in gross profit year over year was due primarily
to the decrease in revenue for the same period.  Gross profit as a percentage of
revenues increased to 26.0% for 2001, compared to 25.9% for 2000.

Selling, General and Administrative Expenses

  Selling, general and administrative expenses consists of costs associated with
the Company's sales and marketing efforts, executive, finance and human resource
functions, facilities, telecommunications and other general overhead expenses.
Selling, general and administrative expenses for 2001 were $15.6 million,
compared to $10.6 million for 2000, an increase of $5.0 million, or 47%.
Selling, general and administrative expenses as a percentage of revenues
increased to 40.2% for 2001 from 25.1% for 2000.  SG&A expenses for 2001
included $3.1 million of special charges.  In the quarter ended June 30, 2001
the Company wrote-off $618,000 of excess costs related to the in-house
implementation of PeopleSoft human resources/finance software.  The weaker
demand in the staffing industry led the Company to conduct a review of its

                                       10
<PAGE>

internal operations and resulted in the following charges taken in the quarter
ended September 30, 2001.  The Company wrote-off $1.3 million of receivables
that were deemed uncollectible.  The Company recorded charges of approximately
$800,000 associated with medical costs, vacation, variable executive
compensation and payroll taxes.  Also during the third quarter, the Company
accrued approximately $130,000 associated with preliminary results of a state
sales tax review presently in progress.  Finally, to conform with lives more
predominantly used in the industry, a decision was made to change the estimated
useful life for the Company's computers to three years from five years and
change the useful life of furniture and equipment to five years from seven
years.  This resulted in a charge of approximately $118,000.  The remainder of
the overall increase, approximately $1.9 million, was primarily comprised of
incremental increases due to acquisitions of $1.4 million, increase in
amortization and depreciation expense of $179,000, increases in goodwill expense
of $170,000 and increase in marketing expense of $99,000.

Restructuring

  The Company recorded a restructuring charge of $892,000 in the quarter ended
September 30, 2001, of which approximately $460,000 was associated with a write-
off of unused office space, approximately $170,000 was related to merging the
Company's UB Interactive division with its SquareRadius subsidiary,
approximately $160,000 was associated with a write-off of obsolete assets, and
approximately $100,000 was related to a reduction in workforce to better reflect
market opportunities.

Interest Income, net

  Interest income, net for 2001 was $361,000 compared to interest income, net of
$659,000 for 2000.  The decrease resulted from the reduction in the amount of
cash available for short-term investments and lower interest rates.

Provision / (Benefit) for Income Taxes

  The Company's effective tax benefit was 28.0% for 2001 compared to an
effective tax rate of 93.1% for 2000.  The decrease is mainly due to the effect
of nondeductible goodwill and the increase in pretax loss in 2001.

Net Income / (Loss)

  Net loss for 2001 was $4,348,000, compared to a net income of $7,000 for 2000,
a decrease of $4,355,000.  The net loss as a percentage of revenues decreased to
(11.2)% for 2001, compared to a net income as a percentage of revenues of 0.0%
for 2000. The decrease in net income was largely due to lower revenue, an
$892,000 restructuring charge, special charges totaling $3.1 million and a
reduction in interest income of approximately $300,000.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Revenues

  Revenues for the year ended December 31, 2000 were $42.3 million, compared to
$37.9 million for the year ended December 31, 1999, an increase of $4.4 million,
or 12%.  Approximately 80% of the increase in revenues was due to an increase in
the number of IT professionals deployed to provide services to new and existing
clients and approximately 20% of the increase in revenues was due to higher
average hourly billing rates. The number of deployed IT professionals increased
to 291 at December 31, 2000 from 270 at December 31, 1999, and the Company
broadened its client base since inception to 586 clients through December 31,
2000 from 427 clients through December 31, 1999.

Gross Profit

  Gross profit consists of revenues less cost of revenues.  Cost of revenues is
comprised principally of IT professional salaries and benefits, including
subcontractor professional costs and relocation expenses.  Gross profit for 2000
was $11.0 million, compared to $10.2 million for 1999, an increase of $0.8
million, or 8%.  The increase in gross profit was primarily due to an increase
in revenue of $4.4 million.  Gross profit as a percentage of revenues decreased
to 25.9% for 2000, from 26.8 for 1999.  The decrease in gross profit as a
percentage of revenues resulted primarily from an increase in the percentage of
employee IT professionals waiting to be deployed and from increases in rates
charged by subcontractors.

                                       11
<PAGE>

Selling, General and Administrative Expenses

  Selling, general and administrative expenses consist of costs associated with
the Company's sales and marketing efforts, executive, finance and human resource
functions, facilities, telecommunications and other general overhead expenses.
Selling, general and administrative expenses for 2000 were $10.6 million,
compared to $8.8 million for 1999, an increase of $1.8 million, or 20%.  The
increase in selling, general and administrative expenses was primarily due to an
increase in selling, general and administrative personnel.  Selling, general and
administrative expenses as a percentage of revenues increased to 25.1% for 2000
from 23.4% for 1999.

Restructuring

  One-time expenses for 2000 were $902,000.  The one-time expenses included
$450,000 payable to the Company's former Chief Executive Officer as part of his
severance agreement, $100,000 paid to the Company's new Chief Executive Officer
as a signing bonus pursuant to his employment agreement and $352,000
representing the value of 100,000 shares of common stock granted to the
Company's new Chief Executive Officer pursuant to his employment agreement.

Merger-related expenses

  Merger related expenses for 1999 were $869,000 or 2.3% as a percentage of
revenues. These are non-recurring in nature and relate to the termination of the
Company's proposed acquisition of R Systems, Inc.

Interest Income, net

  Interest income, net for 2000 was $659,000 compared to interest income, net of
$556,000 for 1999. The increase resulted from reinvesting of interest earned on
short term investments.

Provision for Income Taxes

  The Company's effective tax rate was 93.1% for 2000 compared to 38.5% for
1999. The increase is mainly due to the effect of non-deductible goodwill on a
relatively small pretax income in 2000.

Net Income

  Net income for 2000 was $7,000, compared to $609,000 for 1999, a decrease of
$602,000 or 99%.  The net income as a percentage of revenues decreased to 0% for
2000, compared to 1.6% for 1999. The decrease in net income as a percentage of
revenues resulted primarily from the reduction of gross profit as a percentage
of revenues and increase in selling, general and administrative expenses as a
percentage of revenues.

                                       12
<PAGE>

Quarterly Financial Information (unaudited)

<TABLE>
<CAPTION>
                                                                  (In thousands except per share data)
                                                                             Quarter Ended
                                                         Mar. 31,        June 30,        Sep. 30,       Dec. 31,
                                                          2001            2001            2001           2001
                                                        --------------------------------------------------------
<S>                                                     <C>             <C>             <C>             <C>
Revenues........................................        $10,777         $10,599         $ 9,334          $8,185
Income / (Loss) before income taxes.............         (1,102)           (823)         (3,728)           (385)
Provision / (Benefit) for income taxes..........           (387)           (288)         (1,528)            513
Net income / (loss).............................           (715)           (535)         (2,200)           (898)
Basic and diluted earnings / (loss) per
  share.........................................        $ (0.10)        $ (0.08)        $ (0.31)         $(0.13)
</TABLE>


<TABLE>
<CAPTION>
                                                           (In thousands except per share data)
                                                                       Quarter Ended
                                                      Mar. 31,      June 30,        Sep. 30,      Dec. 31,
                                                        2000          2000            2000          2000
                                                      ----------------------------------------------------
<S>                                                    <C>           <C>            <C>            <C>
Revenues......................................         $9,319        $10,213        $11,593        $11,199
Income / (Loss) before income taxes...........            272           (360)           621           (431)
Provision / (Benefit) for income taxes........            105            (11)           302           (301)
Net income / (loss)...........................            167           (349)           319           (130)
Basic and diluted earnings / (loss) per
  share.......................................         $ 0.03        $ (0.05)       $  0.05        $ (0.02)
</TABLE>

  Earnings per share amounts for each quarter are required to be computed
independently and, therefore, may not equal the amount calculated for year end.

Liquidity and Capital Resources

  Net cash used by operating activities was $1.4 million for the year ended
December 31, 2001 compared to net cash used by operating activities of $0.7
million for the comparable period in 2000.  Net cash used by operating
activities for the year ended December 31, 2001 is primarily due to a net loss
of $4.3 million. The net loss was largely due to lower revenue, an $892,000
restructuring charge, special charges totaling $3.1 million and a reduction in
interest income of approximately $300,000. Net cash used by operating activities
for 2000 is primarily due to increase in accounts receivable of $1,559,000
offset by net income and non-cash charges for depreciation, goodwill and stock
based compensation aggregating $695,000.

  Net cash used by investing activities was $2.8 million in 2001, an increase of
$2.0 million compared to 2000. The increase was primarily due to the
acquisition of UBICS UK and DSF for a combined $2.5 million offset with a
decrease in purchases of property and equipment of $238,000 and decreases in
merger related expenses of $269,000.

  Net cash used by financing activities was $140,000 in 2001, an increase of
$140,000 compared to 2000. The increase was primarily due to the Company's stock
repurchase program.

  In 2001, the Company continued its program to repurchase, from time to time,
up to an additional $500,000 of its outstanding capital stock for investment or
other general corporate purposes. This board approved repurchase program was
announced on July 3, 2001. During 2001, the Company purchased 200,000 share of
its capital stock at a total cost of $138,000, bringing the total number of
shares purchased to 220,000 shares. Repurchases may be made from time to time in
the open market, in negotiated or other permissible transactions.

  Capital expenditures for the years ended December 31, 2001 and 2000 were
$183,000 and $415,000, respectively.  Because of the economic slowdown, the
Company has deferred previously disclosed plans to establish offshore recruiting
offices in various foreign locations.  Except as set forth above, the Company
currently has no material commitments for capital expenditures.

  The Company currently anticipates that $7.1 million in available cash
balances, together with the existing sources of liquidity and cash generated
from operations, will be sufficient to satisfy its cash needs at least through
the next twelve months.

                                       13
<PAGE>

Economic Trends

  In periods of an economic slowdown and in light of the recent terroristic
activities, the Company may be subject to additional risks arising in connection
with information technology infrastructure spending resulting in increased
strain on the Company's financial condition.


Effect of Inflation

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


Recently Issued Financial Accounting Standards

  In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Accounting for Business
Combinations" (SFAS No. 141) and Statement of Financial Accounting Standards No.
142, "Accounting for Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS
No. 141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS No. 142, goodwill and
intangible assets with indefinite lives are no longer amortized but are reviewed
annually (or more frequently if impairment indicators arise) for impairment.
Separable intangible assets that are not deemed to have indefinite lives will
continue to be amortized over their useful lives (but with no maximum life). The
amortization provisions of SFAS No. 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company is required to adopt SFAS No. 142
effective January 1, 2002. The Company is currently evaluating the effect that
the adoption of the goodwill impairment provisions of SFAS No. 142, that are
effective January 1, 2002, will have on its consolidated results of operations
and financial position. The adoption of SFAS No. 142 may have a material adverse
effect on consolidated results of operation and financial position.  Goodwill
amortization of $259,036 per annum will no longer be recorded beginning
January 1, 2002.

  In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", was issued.  This statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets.  This
statement supersedes FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", APB Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" and ARB No. 51, "Consolidated Financial Statements".
This statement is effective for fiscal years beginning after December 15, 2001,
and interim periods within those fiscal years.  The Company is currently
evaluating the impact of this statement on its consolidated financial position
and results of operations.

U.S. Regulation of Immigration

  The Company's services historically have been performed in the U.S., and the
Company has recruited most of its IT professionals outside the U.S.  The
Company's business, therefore, is subject to U.S. immigration laws.  Over 90% of
the Company's IT professionals are citizens of other countries, with most of
those in the U.S. working under H-1B temporary work permits.  There is a limit
on the number of new H-1B permits that may be approved in any U.S. government
fiscal year.  In the federal fiscal year ended September 30, 2000, this limit
was reached in March.  In the federal fiscal year ended September 30, 2001, this
limit was not reached.  The inability to obtain H-1B permits during the federal
fiscal year ended September 30, 2000 resulted in increased use of subcontractor
professionals by UBICS.  The possible inability to obtain H-1B permits in future
years could result in increased use of subcontractor professionals by UBICS.

  In October 2000, the U.S. government increased the limit of new H-1B permits
to 195,000 for each of the next three federal fiscal years starting from fiscal
year 2001.

  In future years where the limit on H-1B permits is reached, the Company may
again be unable to obtain enough H-1B permits to meet its requirements.  If the
Company were unable to obtain H-1B permits for its IT professionals in
sufficient quantities or at a sufficient rate, the Company's business, operating
results and financial condition could be materially adversely affected.

                                       14
<PAGE>

  The U.S. government, in connection with its increase in the limit on H-1B
permits, also imposed a fee to be paid by companies for new approvals and for
renewals.  The imposition of such fees has not had a material adverse impact on
the Company's results of operations.

  Congress and administrative agencies with jurisdiction over immigration
matters have, from time to time, expressed concerns over the levels of legal and
illegal immigration into the U.S.  These concerns have often resulted in
proposed legislation, rules and regulations aimed at reducing the number of work
permits that may be issued.  Any changes in such laws making it more difficult
to hire foreign nationals or limiting the ability of the Company to retain
foreign employees could require the Company to incur additional unexpected labor
costs and expenses.  Any such restrictions or limitations on the Company's
hiring practices could have a material adverse effect on the Company's business,
operating result and financial condition.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

  The Company currently does not invest excess funds in derivative financial
instruments or other market risk sensitive instruments for the purpose of
managing its foreign currency exchange rate risk or for any other purpose.

  The fair values and carrying amounts of the Company's financial instruments,
primarily accounts receivable and accounts payable are approximately equivalent.
All other financial instruments are classified as current as current and will be
utilized within the next operating cycle.


Item 8.  Financial Statements and Supplementary Data

  The financial statements and supplemental financial data required by this Item
are set forth on the following pages.

                                       15
<PAGE>

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING


  The accompanying financial statements of UBICS, Inc. have been prepared by
management, which is responsible for their integrity and objectivity.  The
statements have been prepared in conformity with accounting principles generally
accepted in the United States and necessarily include amounts based on
management's best estimates and judgments.

  Management has established and maintains a system of internal controls
designed to provide reasonable assurance that assets are safeguarded and that
the Company's financial records reflect authorized transactions of the Company.
The system of internal controls includes widely communicated statements of
policies and business practices that are designed to require all employees to
maintain high ethical standards in the conduct of Company affairs.  The internal
controls are augmented by organizational arrangements that provide for
appropriate delegation of authority and division of responsibility.

  The Company's financial statements have been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon appears on page 17 of this
Form 10-K.  As part of its audit of the Company's financial statements, Arthur
Andersen LLP considered the Company's system of internal controls to the extent
it deemed necessary to determine the nature, timing and extent of its audit
tests.  Management has made available to Arthur Andersen LLP the Company's
financial records and related data.

  The Board of Directors will pursue its responsibility for the Company's
financial reporting and accounting practices through its Audit Committee, all
the members of which are non-employee directors.  The independent public
accountants have direct access to the Audit Committee with and without the
presence of management representatives, to discuss the results of their audit
work and their comments on the adequacy of internal accounting controls, and the
quality of financial reporting.



/s/Dr. Vijay Mallya
---------------------
Dr. Vijay Mallya
Chairman and Director


/s/ Robert Harbage
---------------------
Robert Harbage
President, CEO and Director


/s/Neil M. Ebner
---------------------
Neil M. Ebner
Vice President Finance and Chief Financial Officer



March 27, 2002

                                       16
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of UBICS, Inc. and Subsidiaries:

  We have audited the accompanying consolidated balance sheets of UBICS, Inc. (a
Delaware corporation) and Subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.

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

  In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of UBICS, Inc. and Subsidiaries as
of December 31, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

                                                             ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania,
 February 18, 2002

                                       17
<PAGE>

                                  UBICS, INC.

                          CONSOLIDATED BALANCE SHEETS
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                     --------------------------
                                                                       2001               2000
                                                                     -------            -------
<S>                                                                  <C>                <C>
                           ASSETS
Current assets:
  Cash and cash equivalents...............................           $ 7,088            $10,477
  Accounts receivable, net of allowance for
     doubtful accounts of $500 and $1,100, respectively...             2,464              5,743
  Unbilled receivables....................................             1,665              2,412
  Employee advances.......................................                50                 83
  Prepaids and other......................................             1,051                683
  Deferred tax asset......................................               761                607
                                                                     -------            -------
     Total current assets.................................            13,079             20,005
                                                                     -------            -------
Property and equipment:
  Leasehold improvements..................................               135                 40
  Vehicles................................................                92                 89
  Computer equipment and software.........................             1,318              2,214
  Furniture and fixtures..................................               714                696
  Office and other equipment..............................                --                 93
                                                                     -------            -------
     Total property and equipment.........................             2,259              3,132
  Accumulated depreciation................................            (1,264)              (849)
                                                                     -------            -------
    Net property and equipment............................               995              2,283
                                                                     -------            -------
    Goodwill, net of accumulated amortization of $290
       and $56,                                                        4,376              1,627
        respectively......................................
    Notes receivable......................................               983                983
    Deferred tax asset and other long-term assets.........             1,175                 --
                                                                     -------            -------
          Total assets....................................           $20,608            $24,898
                                                                     =======            =======


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable........................................           $ 1,172            $ 2,649
  Payroll liabilities.....................................             2,323              2,246
  Other current liabilities...............................             1,935                357
  Deferred revenue........................................                91                 --
  Due to affiliates, net..................................                10                 --
                                                                     -------            -------
    Total current liabilities.............................             5,531              5,252
    Long-term liabilities.................................               100                322
                                                                     -------            -------
     Total liabilities....................................             5,631              5,574
                                                                     -------            -------

Minority interest in consolidated subsidiary..............                13                 --
Common stock, subject to redemption, $0.01 par value,
     183,200 shares issued and outstanding................               550                550

Stockholders' equity:
  Preferred stock, $0.01 par value, 2,000,000
     shares authorized, no shares issued and
     outstanding..........................................                --                 --
  Common stock, $0.01 par value, 20,000,000
     shares authorized, 7,003,324 and 6,849,151 shares
     issued, respectively.................................                70                 68
  Additional paid-in capital..............................            14,171             14,035
  Treasury stock -220,115 and 20,200 shares, respectively,
     at cost..............................................              (239)              (100)
  Retained earnings.......................................               423              4,771
  Accumulated other comprehensive income / (loss).........               (11)                --
                                                                     -------            -------
     Total stockholders' equity...........................            14,414             18,774
                                                                     -------            -------
          Total liabilities and stockholders'
          equity..........................................           $20,608            $24,898
                                                                     =======            =======
</TABLE>



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

                                       18
<PAGE>

                                  UBICS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)


<TABLE>
<CAPTION>

                                                                                   Year Ended December 31,
                                                                      ------------------------------------------------
                                                                            2001                2000              1999
                                                                      ----------          ----------        ----------
<S>                                                                   <C>                 <C>               <C>
Revenues.....................................................         $   38,895          $   42,324        $   37,875
Cost of revenues.............................................             28,771              31,344            27,722
                                                                      ----------          ----------        ----------
  Gross profit...............................................             10,124              10,980            10,153
Selling, general and
  administrative expenses....................................             15,631              10,635             8,849
Merger related expenses......................................                 --                  --               869
Restructuring................................................                892                 902                --
                                                                      ----------          ----------        ----------
Income / (Loss) from
  operations.................................................             (6,399)               (557)              435
Interest income, net.........................................                361                 659               556
                                                                      ----------          ----------        ----------
Income before income taxes...................................             (6,038)                102               991
Provision / (Benefit) for
  income taxes...............................................             (1,690)                 95               382
                                                                      ----------          ----------        ----------
Net income / (loss)..........................................         $   (4,348)         $        7        $      609
                                                                      ==========          ==========        ==========
Basic and diluted earnings / (loss)
  per share..................................................             $(0.62)              $0.00             $0.09
                                                                      ==========          ==========        ==========

Basic - weighted average shares
  outstanding................................................          7,025,272           6,746,900         6,479,800
Diluted - weighted average shares
  outstanding................................................          7,025,272           6,830,545         6,489,258
</TABLE>



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

                                       19
<PAGE>

                                  UBICS, INC.

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  (Dollars in thousands, except share amounts)

<TABLE>
<CAPTION>

                                                                                          Accumulated
                                    Common     Common   Additional                           Other           Total
                                    Stock      Stock     Paid-in     Treasury   Retained  Comprehensive  Stockholders Comprehensive
                                    Shares     Amount    Capital       Stock    Earnings  Income/(Loss)      Equity    Income/(Loss)
                                  ----------  -------   ---------    ---------  --------  -------------  ------------- -------------

<S>                               <C>         <C>        <C>         <C>        <C>       <C>            <C>           <C>
Balance, December 31, 1998......  6,500,000      $65      $13,160      $(100)   $ 4,155   $          --     $17,280

  Net income / (loss)...........         --       --           --         --        609              --         609      $   609
                                  ---------      ---      -------      -----    -------   -------------     -------      -------
Balance, December 31, 1999......  6,500,000       65       13,160       (100)     4,764              --      17,889          609
                                                                                                                         =======

  Stock grant...................    100,000        1          252         --         --              --         253           --
  Common stock, subject
    to redemption...............   (183,200)      (2)        (548)        --         --              --        (550)          --
  Issuance of common
    stock for acquisition
    of Cobalt Creative, Inc.....    432,351        4        1,171         --         --              --       1,175           --
  Net income / (loss)...........         --       --           --         --          7              --           7            7
                                  ---------      ---      -------      -----    -------   -------------     -------      -------
Balance, December 31, 2000......  6,849,151       68       14,035       (100)     4,771              --      18,774            7
                                                                                                                         =======

  Issuance of Common Stock
    for acquisition of DSF
    Internet Services Private
    Limited.....................    219,173        3          136         --         --              --         139           --
  Redemption of common
    stock from acquisition of
    Cobalt Creative, Inc........    (65,000)      (1)          --         --         --              --          (1)          --
  Acquisition of treasury
    stock.......................         --       --           --       (139)        --              --        (139)          --
  Comprehensive income/(loss):
    Foreign currency translation
    adjustments.................         --       --           --         --         --             (11)        (11)         (11)
Net income/(loss)...............         --       --           --         --     (4,348)             --      (4,348)      (4,348)
                                  ---------      ---      -------      -----    -------   -------------     -------      -------
Balance, December 31, 2001......  7,003,324      $70      $14,171      $(239)   $   423            $(11)    $14,414      $(4,359)
                                  =========      ===      =======      =====    =======   =============     =======      =======
</TABLE>



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

                                       20
<PAGE>

                                  UBICS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                  Year Ended December 31,
                                                                      -----------------------------------------------
                                                                       2001                2000                1999
                                                                      -------             -------             -------
<S>                                                                   <C>                 <C>                 <C>
Cash flows from operating activities:
  Net income / (loss).....................................            $(4,348)            $     7             $   609
  Adjustments to reconcile net
     income / (loss) to net cash used by
     operating activities--
     Depreciation.........................................                684                 379                 300
     Amortization of goodwill.............................                234                  56                  --
     Asset impairment.....................................                618                  --                  --
     Loss on asset abandonment............................                288                  --                  --
     Stock based compensation.............................                 --                 253                  --
     Changes in operating assets and
     liabilities--
       Accounts receivable, net...........................              3,666              (1,559)                 49
       Unbilled receivables...............................                747                 (49)                610
       Employee advances..................................                 33                 (31)                112
       Other long-term assets.............................               (186)               (733)                (50)
       Due to affiliates, net.............................                 10                  --                 174
       Deferred tax asset, net............................             (1,141)                 10                (289)
       Prepaids and other.................................               (361)               (378)                (41)
       Accounts payable...................................             (1,960)                511                 (53)
       Payroll liabilities................................                 68                 477                  89
       Accrued taxes and other
          current liabilities.............................              1,383                 310                (179)
       Long term liabilities..............................               (224)                 --                  --
                                                                      -------             -------             -------
     Net cash (used) provided by
       operating activities...............................               (489)               (747)              1,331
                                                                      -------             -------             -------

Cash flows from investing
  activities:
  Purchases of property and
     equipment............................................               (177)               (415)               (774)
  Merger related expenses.................................               (119)               (388)                 --
  Cash paid for acquisitions, net of
     Cash acquired........................................             (2,475)                 --                  --
                                                                      -------             -------             -------
     Net cash used by
       investing activities...............................             (2,771)               (803)               (774)
                                                                      -------             -------             -------

Cash flows from financing activities:
  Net proceeds from issuance of
     common stock.........................................                 (2)                 --                  --
  Purchase of treasury stock..............................               (138)                 --                  --
                                                                      -------             -------             -------
     Net cash used by financing activities................               (140)                 --                  --
                                                                      -------             -------             -------

Effect of currency translation on cash....................                 11                  --                  --

Net increase (decrease) in cash and
  cash equivalents........................................             (3,389)             (1,550)                557
Cash and cash equivalents, at
  beginning of year.......................................             10,477              12,027              11,470
                                                                      -------             -------             -------
Cash and cash equivalents, at
  end of year.............................................            $ 7,088             $10,477             $12,027
                                                                      =======             =======             =======

Supplemental data:
  Cash payments for income taxes......                                $   127             $   297             $   752
  Stock issued for purchase of Cobalt
    Creative, Inc.........................................            $    --             $ 1,175             $    --
  Stock issued for purchase of DSF
    Internet Services Private Limited.....................            $   138             $    --             $    --
  Fair  value of:
    Assets acquired                                                   $ 3,660             $    --                  --
    Liabilities assumed                                                  (685)                 --                  --
    Cash paid for acquisition                                          (2,588)                 --                  --
    Acquisition related expenses                                         (119)                 --                  --
    Stock issued for acquisition                                         (138)                 --                  --
    Minority interest                                                     (17)                 --                  --
                                                                      -------             -------             -------
    Cash acquired                                                     $   113             $    --             $    --
                                                                      =======             =======             =======
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       21
<PAGE>

                                  UBICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Operations:

  UBICS, Inc. ("UBICS" or "the Company"), a Delaware corporation, provides
information technology professional services to large and mid-sized
organizations.  The Company provides its clients with a wide range of
professional services in such areas as web design and development, client/server
design and development, enterprise resource planning package implementation and
customization, e-commerce applications design and development, applications
maintenance programming and database and systems administration.

2. Summary of Significant Accounting Policies:

  The accompanying financial statements reflect the application of the following
significant accounting policies:

Principles of Consolidation

  The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries.  All material intercompany transactions and
balances have been eliminated in consolidation.

Cash and Cash Equivalents

  For purposes of the consolidated balance sheets and statements of cash flows,
the Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

Revenue Recognition

  The Company recognizes revenue on its time-and-materials contracts as the
services are performed for clients and upon completion for its website design
and development services, which are performed on a fixed price basis.

Accounts Receivable

  The Company extends credit to clients based upon management's assessment of
their creditworthiness.  Substantially all of the Company's revenues (and the
resulting accounts receivable) are from large companies, major systems
integrators and governmental agencies.

Unbilled Receivables

  Unbilled receivables represent time and materials provided to customers in the
last month of each fiscal period, which are billed early in the following month.

Property and Equipment

  Property and equipment are carried at cost.  Depreciation is computed using
the straight-line method over the estimated useful lives of the properties as
follows:

<TABLE>
<CAPTION>
                                                Years
                                           ----------------
<S>                                        <C>
Computer equipment and software..........         3
Furniture and fixtures...................         5
Leasehold improvements...................    Term of Lease
Vehicles.................................         5
</TABLE>

  To conform with lives more predominantly used in the industry, in the quarter
ended September 30, 2001 the Company

                                       22
<PAGE>

changed the estimated useful life for the Company's computers to three years
from five years and changed the useful life of furniture and equipment to five
years from seven years. The effect of the change was $118,000, and is included
in the selling, general and administrative expenses on the consolidated
statements of operations for the year end December 31, 2001.

Disclosures about Fair Value of Financial Instruments

  The following methods and assumptions were used to estimate fair value of each
class of financial instrument for which it is practicable to estimate that
value:

    Cash and Cash Equivalents--The carrying amount approximates fair value
  because of the short maturity of those instruments.

    Accounts Receivable and Accounts Payable-- The fair values and carrying
  amounts of the Company's financial instruments, primarily accounts receivable
  and accounts payable are approximately equivalent.  All other financial
  instruments are classified as current as current and will be utilized within
  the next operating cycle.

Income Taxes

  Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities. The Company has evaluated its deferred tax asset and recorded a
valuation allowance where appropriate.

  Historically, the government of India has provided incentives, in the form of
tax holidays, to encourage foreign investment. The Company's operation in India
was eligible for a tax holiday for a five-year period beginning in 1997.

Currency Translation Adjustment

  The financial statements of foreign subsidiaries are translated using the
exchange rate in effect at year-end for balance sheet accounts and the average
exchange rate in effect during the year for revenue and expense accounts.

  The Company's functional currency for financial reporting purposes is the U.S.
Dollar.  The Company generally invoices its clients and pays expenses in the
local currency of the country in which the client is located.  Statements of
Operations translation gains and losses arising from differences between the
functional and local currencies are recognized in the Consolidated Statements of
Operations and have not had a significant impact on the results of operations.
Balance Sheet gains and losses as a result of fluctuations in foreign currency
exchange rates are recognized in the Consolidated Statements of Changes in
Stockholders' Equity as a component of accumulated other comprehensive
income/(loss).  The Company continually evaluates the economic conditions of
each country in which it operates, and bases its foreign currency accounting
policies on those assessments.

Recently Issued Accounting Standards

  In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Accounting for Business
Combinations" (SFAS No. 141) and Statement of Financial Accounting Standards No.
142, "Accounting for Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS
No. 141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS No. 142, goodwill and
intangible assets with indefinite lives are no longer amortized but are reviewed
annually (or more frequently if impairment indicators arise) for impairment.
Separable intangible assets that are not deemed to have indefinite lives will
continue to be amortized over their useful lives (but with no maximum life). The
amortization provisions of SFAS No. 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company is required to adopt SFAS No. 142
effective January 1, 2002. The Company is currently evaluating the effect that
the adoption of the goodwill impairment provisions of SFAS No. 142, that are
effective January 1, 2002, will have on its consolidated results of operations
and financial position. The adoption of SFAS No. 142 may have a material adverse
effect on consolidated results of operation and financial position.  Goodwill
amortization of $259,036 per annum will no longer be recorded beginning
January 1, 2002.

  In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", was issued.  This statement

                                       23
<PAGE>

addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement supersedes FASB Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" and ARB No. 51, "Consolidated
Financial Statements". This statement is effective for fiscal years beginning
after December 15, 2001, and interim periods within those fiscal years. The
Company is currently evaluating the impact of this statement on its consolidated
financial position and results of operations.

Use of Estimates

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

Reclassifications

  Certain prior year balances have been reclassified to conform to the current
year presentation.


3. Other Current Liabilities:

 Other current liabilities consist of the following as of December 31 (dollars
in thousands):

                                                   2001           2000
                                                  ---------------------
Restructuring reserve....................         $  539          $ 200
Subcontractor accrual....................            407             --
Payroll taxes and payroll related........            263             --
Medical insurance claims.................            184             --
Other....................................            542            157
                                                  ------          -----
                                                  $1,935          $ 357
                                                  ======          =====


4. Major Customers and Concentrations of Credit Risk:

  The Company has derived a significant portion of its revenues from a
relatively limited number of clients.

  The following table presents the Company's largest clients during each of the
years ended December 31, 2001, 2000 and 1999 and the approximate percentage of
revenue from each client for the respective periods:

<TABLE>
<CAPTION>

                                                                                            Year Ended December 31,
                                                                                      ----------------------------------
                                                                                      2001           2000           1999
                                                                                      ----           ----           ----
<S>                                                                                   <C>            <C>            <C>
The Hartford................................................................             9%             6%             5%
Electronic Computer Services................................................             5%             5%             7%
Advent Inc..................................................................             3%            --             --
MRJ Technology Solutions....................................................             2%             2%            --
Visual Services.............................................................             2%             5%             1%
Dana Corporation............................................................            --              2%             4%
Others, individually and collectively less than 10%
  of revenue................................................................            --             --              4%
                                                                                      ----           ----           ----
     Total of Five Largest Clients..........................................            21%            20%            21%
</TABLE>

  The Company grants credit to clients based upon management's assessment of
their creditworthiness. The Company's revenues and resulting accounts receivable
are derived primarily from large and mid-sized organizations in various
industries throughout the U.S.

                                       24
<PAGE>

5. Commitments and Contingencies:

  The Company leases real estate and facilities at several locations.  Lease
expenses charged to operations were $694,941,  $728,364 and $581,283
respectively, for the years ended December 31, 2001, 2000 and 1999.

  Minimum future rental payments under non-cancelable operating leases for each
of the next five years are as follows :

<TABLE>
<CAPTION>
               Year Ending
               December 31,
              -------------
               <S>                           <C>
                2002......                   $812,850
                2003......                    531,480
                2004......                    164,045
                2005......                     97,313
                2006......                     80,558
</TABLE>

  The Company's CEO has a guaranteed bonus as part of his employment agreement.
Pursuant to his employment agreement, the CEO is guaranteed a bonus of $200,000,
$200,000, and $100,000 respectively, for the years ended December 31, 2002,
2001, and 2000. The $100,000 guaranteed in 2000 was a signing bonus. $100,000
of the 2002 bonus was accrued on the consolidated balance sheets as of
December 31, 2001.

  The Company is a defendant in certain legal proceedings arising out of the
conduct of its businesses.  In the opinion of management, based upon its
investigation of these claims and discussion with legal counsel, the ultimate
outcome of such legal proceedings, individually and in the aggregate, will not
have a material adverse effect on the consolidated financial position, results
or operations or liquidity of the Company.


6. Related Party Transactions:

  Effective April 1, 2001, the Company has renewed an agreement to sublease
office space from United Breweries of America.  The new terms of the agreement
require the Company to pay United Breweries of America $7,700 per month through
March 31, 2003.  The Company paid $79,800 in 2001 related to this agreement.  A
total of $161,700 was charged to the restructuring charge for unused office
space.

  During 2001, UBICS provided Amplified Holdings, Inc. ("Amplified") with
services for which it billed Amplified a total of $121,048.  In May, 2001,
Amplified ceased doing business and was subsequently dissolved following a
public foreclosure sale of its assets by it senior secured creditors. Prior to
dissolution, Amplified had paid UBICS a total of $39,750 for its services,
leaving an unpaid balance of $81,298, which was written off as of December 31,
2001. Christopher C. Melton, Sr., a director of UBICS, was Chief Executive
Officer and a Director of Amplified prior to its dissolution, and is currently
President and Chief Executive Officer of CNP, Inc. ("CNP"), which acquired the
assets of Amplified in the foreclosure sale. During 2001, UBICS provided CNP
with services for which it billed CNP a total of $56,522, all of which has been
paid by CNP.

  As of December 31, 2001, DSF has a payable on its books for a loan made to DSF
by its Chief Executive Officer and his spouse in the amount of $10,174.

  In 2000, Cobalt Creative, Inc. paid $100,000 as a finder's fee to eSeed
Capital, LLC. in connection with the Company's acquisition of Cobalt Creative,
Inc.  One of the directors of the Company is a managing partner of eSeed
Capital.


7. Stock-Based Compensation:

  Effective September 2, 1997, the Company adopted the 1997 Stock Option Plan
(the "Plan") for directors, executive officers and other key employees.  The
Compensation Committee of the Board of Directors is authorized to grant stock
options (with or without stock appreciation rights).  The Plan provides for the
issuance of up to 1,800,000 stock options at no less than the market value of
the stock at the date of grant.  The Company accounts for the Plan under
Accounting

                                       25
<PAGE>

Principles Board Opinion No. 25, "Accounting for Stock issued to Employees". Had
compensation costs for the Plan been determined consistent with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), net income for the years ended December 31,
2001, 2000 and 1999 would have been reduced by $647,000, $539,000 and $720,000,
respectively, and basic and diluted earnings per share would have been reduced
by $0.09, $0.08 and $0.11 per share, respectively, for the same period.

  In 2000, the Company granted stock appreciation rights in connection with the
grant of 300,000 stock options at an exercise price of $3.22 per share to the
Company's new President & CEO.  Since the market value of the Company's common
stock at December 31, 2001 and 2000 was less than $3.22 per share, no
compensation expense was recorded under this grant for these years.

  In 2001, 2000 and 1999 options covering a total of 35,000, 824,000 and 125,000
shares, respectively, of Common Stock were granted under the Plan. The right to
purchase shares upon exercise of these options expires 10 years from the date of
grant or earlier if an option holder ceases to be employed by the Company. A
summary of stock option activity follows:


<TABLE>
<CAPTION>
                                               December 31, 2001             December 31, 2000            December 31, 1999
                                           --------------------------    --------------------------    ------------------------
                                                         Weighted                      Weighted                    Weighted
                                                          Average                       Average                     Average
Number of shares                            Options   Exercise Price      Options   Exercise Price     Options  Exercise Price
-------------------------------------------------------------------------------------------------------------------------------


<S>                                        <C>        <C>                <C>        <C>                <C>      <C>
Options outstanding, beginning of period   1,322,000            $5.44      536,000            $8.82    418,000           $10.78
Granted                                       35,000            $3.22      824,000            $3.20    125,000           $ 2.35
Exercised                                         --               --           --               --         --               --
Lapsed and forfeited                         399,000            $6.32       38,000            $4.56      7,000           $10.51
-------------------------------------------------------------------------------------------------------------------------------
Options outstanding, end of period           958,000            $4.57    1,322,000            $5.44    536,000           $ 8.82
-------------------------------------------------------------------------------------------------------------------------------
Options exercisable, end of period           580,332            $5.44      650,645            $7.41    286,980           $ 9.98
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
Stock options outstanding at December 31, 2001

                                      Options Outstanding                                  Options Exercisable
                  -----------------------------------------------------------  --------------------------------------------
                                      Weighted Average
                                             Remaining       Weighted Average                              Weighted Average
Exercise Price        Options   Contractual life (Yrs)         Exercise Price               Options          Exercise Price
---------------------------------------------------------------------------------------------------------------------------
<S>                   <C>       <C>                          <C>                            <C>            <C>
$  1.88                20,000                     7.84                 $ 1.88                20,000                  $ 1.88
$  2.47                50,000                     7.83                 $ 2.47                33,333                  $ 2.47
$  2.50                35,000                     7.92                 $ 2.50                35,000                  $ 2.50
$  2.63                20,000                     8.50                 $ 2.63                20,000                  $ 2.63
$  3.00                25,000                     8.32                 $ 3.00                25,000                  $ 3.00
$  3.22               519,000                     8.46                 $ 3.22               207,999                  $ 3.22
$  3.47                25,000                     8.34                 $ 3.47                25,000                  $ 3.47
$  3.54                75,000                     8.29                 $ 3.54                25,000                  $ 3.54
$  5.50                 4,000                     6.70                 $ 5.50                 4,000                  $ 5.50
$  10.00              135,000                     5.83                 $10.00               135,000                  $10.00
$  11.00               30,000                     0.83                 $11.00                30,000                  $11.00
$  13.75               20,000                     6.50                 $13.75                20,000                  $13.75
---------------------------------------------------------------------------------------------------------------------------
                      958,000                     7.72                 $ 4.57               580,332                  $ 5.44
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       26
<PAGE>

<TABLE>
<CAPTION>
Summary of stock options                                                                                    Stock Option Price
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                        <C>
Weighted average fair value of options granted during 2001*                                                              $0.61
------------------------------------------------------------------------------------------------------------------------------
Weighted average fair value of options granted during 2000*                                                              $2.18
------------------------------------------------------------------------------------------------------------------------------
Weighted average fair value of options granted during 1999*                                                              $4.26
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
* The fair value of each option is estimated on the date of grant using the Black-Scholes option
 pricing model with the following weighted average assumptions:
                                                                           2001                     2000                  1999
------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                      <C>                          <C>
Risk free interest rate                                          3.15% to 4.62%           5.76% to 6.74%                   4.4%
Expected dividend yield                                                    0.0%                     0.0%                   0.0%
Expected life of options                                               3 years                   3 years               3 years
Expected volatility rate                                                   104%              101% to 108%                 75.0%
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

  There were 842,000 shares reserved for future grants under the Plan at
December 31, 2001.

8. Employee Benefit Plan:

  The Company has an Employee Retirement Savings Plan (the "Retirement Plan")
under section 401(k) of the Internal Revenue Service Code that covers
substantially all U.S.-based employees.  Eligible employees may contribute up to
20% of eligible compensation, subject to limits in the Internal Revenue Service
Code.


9. Income Taxes:

  The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes." Deferred income taxes are
recognized for temporary differences between the tax and financial bases of the
Company's assets and liabilities, using the enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income.

  The reconciliation of income taxes computed using the statutory U.S. income
tax rate and the provision for income taxes was as follows for the years ended
December 31, 2001, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                   ---------------------------------------------------
                                                                           2001              2000             1999
                                                                   ----------------------------------------------------
<S>                                                                <C>               <C>              <C>
Federal income taxes at the
  statutory rate.................................................      $(2,052,920)          $87,428         $330,927
Foreign income taxes at the
  statutory rate.................................................          137,355                --               --
State income taxes, net of federal benefit.......................         (415,100)            7,481           51,444
Other income taxes...............................................          226,024                --               --
Valuation allowance..............................................          415,100                --               --
                                                                       -----------           -------         --------
Provision for income taxes.......................................      $(1,689,541)          $94,909         $382,371
                                                                       ===========           =======         ========
</TABLE>

  The components of income before taxes for U.S. and foreign were $5,721,000 and
$317,000, respectively, for 2001.  For 2000 and 1999 income related solely to
the U.S.

                                       27
<PAGE>

  The provision for income taxes as shown in the accompanying statement of
operations for the years ended December 31, 2001, 2000 and 1999 included the
following components:

<TABLE>
<CAPTION>
                                                               December 31,
                                           ----------------------------------------------------
                                                   2001             2000              1999
                                           ----------------------------------------------------
<S>                                        <C>               <C>              <C>
Current federal provision................      $  (584,666)        $177,553         $ 580,477
Current state provision..................         (415,100)          29,729            90,659
Deferred federal provision...............         (868,117)         (90,125)         (249,550)
Deferred state provision.................         (236,758)         (22,248)          (39,215)
Valuation allowance......................          415,100               --                --
                                               -----------         --------         ---------
Provision for income taxes...............      $(1,689,541)        $ 94,909         $ 382,371
                                               ===========         ========         =========
</TABLE>

  The components of the net deferred tax asset as of December 31, 2001 and 2000
were as follows:


<TABLE>
<CAPTION>
                                                       December 31,
                                             -------------------------------
                                                    2001            2000
                                             -------------------------------
<S>                                          <C>             <C>
Deferred tax asset:
    Allowance for doubtful accounts........     $  170,000       $ 445,500
    Accrued liabilities....................        587,968         161,433
    Net operating losses and tax credit
      carryforwards........................      1,644,654              --
                                                ----------       ---------
    Deferred tax asset.....................       2,402622         606,933
    Valuation allowance....................       (415,100)             --
                                                ----------       ---------
    Deferred tax asset, net................      1,987,522         606,933
Deferred tax liability:
    Property and equipment.................       (240,976)       (122,358)
                                                ----------       ---------
    Deferred tax asset, net................     $1,746,546       $ 484,575
                                                ==========       =========
</TABLE>

  Included in deferred tax assets as of December 31 ,2001, are unrealized tax
benefits of approximately $10,500,000 related to net operating loss
carryforwards.  The realization of these tax benefits is contingent upon the
future taxable net income generated by the Company.  Of this amount, $3,171,000
relates to U.S. federal net operating losses, which expire in 2021, $411,000
relates to net operating losses in the United Kingdom, which can be carried
forward indefinitely, and $6,918,000 relates to state net operating losses, The
life of the carryforwards is determined by various state taxing jurisdictions
with expiration dates ranging from 2006 through 2021.  The Company has
recognized a valuation allowance that reduces the carrying value of the
unrealized deferred tax benefits relating to the state net operating loss
carryforwards to offset the deferred tax benefits that may not be realized.


10. Earnings Per Common Share:

  In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"),
which establishes new standards for computing and presenting earnings per share.

  Basic earnings per share is calculated by dividing net income by the weighted
average number of shares outstanding during the year.  Diluted earnings per
share is calculated by dividing net income by the weighted average number of
shares outstanding during the year adjusted for the assumed conversion of all
dilutive securities.

                                       28
<PAGE>

  The following table sets forth the computation of earnings per share for the
periods indicated:

<TABLE>
<CAPTION>
                                                         (Dollars in thousands, except per
                                                                    share data)
                                                               Year ended December 31,
                                                   -----------------------------------------------
                                                      2001               2000              1999
                                                   ----------         ----------        ----------
<S>                                                <C>                <C>               <C>
Basic earnings per share
 Net income / (loss)                               $   (4,348)        $        7        $      609
                                                   ----------         ----------        ----------
Divided by:
Weighted average common shares                      7,025,272          6,746,900         6,479,800
                                                   ----------         ----------        ----------

 Basic earnings / (loss) per share                 $    (0.62)        $     0.00        $     0.09
                                                   ==========         ==========        ==========

Diluted earnings per share
 Net income / (loss)                               $   (4,348)        $        7        $      609
                                                   ----------         ----------        ----------
Divided by:
Weighted average common shares                      7,025,272          6,746,900         6,479,800
Dilutive effect of common stock
 equivalents                                               --             83,645             9,458
                                                   ----------         ----------        ----------
Dilutive weighted average common shares             7,025,272          6,830,545         6,489,258
                                                   ----------         ----------        ----------

 Diluted earnings / (loss) per share               $    (0.62)        $     0.00        $     0.09
                                                   ==========         ==========        ==========
</TABLE>


  The exercise price of stock options to purchase an aggregate of 958,000,
402,000 and 411,000 shares in 2001, 2000 and 1999 respectively, was less than
the average stock price for the year.  As such, these options have been excluded
from the calculation of diluted earnings per share as their effect would be
anti-dilutive.


11. Acquisitions:

  The Company completed the acquisition of all of the outstanding common stock
of Oakwood Technical Services Limited, European Software Services (UK) Limited
and Reflex I.T. Solutions Limited (collectively referred to as "Oakwood") in the
United Kingdom on March 30, 2001 for a consideration of 1.4 million Pounds
Sterling or approximately US$2.0 million.  The 1.4 million Pounds Sterling was
to be paid to the escrow agent as follows: 1.1 Million Pounds Sterling paid on
the purchase date, 151,667 Pounds Sterling paid twelve months after the closing
and the remaining 151,667 Pounds Sterling eighteen months after the closing.  On
December 21, 2001 the parties agreed to reduce the purchase price to 1.1 million
Pounds Sterling or approximately US$1.6 million, thereby eliminating the
Company's obligation to make subsequent payments to the escrow agent.  The
Company felt the acquisition was necessary to expand its European presence.
Oakwood engages in the business of information, consulting and technical
services ranging from high-level strategic human resources planning to project
outsourcing and on-site consulting.  The Oakwood acquisition expanded the
Company's presence in the European market.  The results of Oakwood's operations
have been included in the consolidated financial statements since April 1, 2001.
The consideration of 1.1 million Pounds Sterling was paid to the escrow agent on
the closing and is to be distributed to the seller as follows:

(a)  First installment of 490,000 Pounds Sterling on closing
(b)  Second installment of 303,333 Pounds Sterling six months after the closing
     date
(c)  Third installment of 60,667 Pounds Sterling on January 1, 2002
(d)  Fourth installment of 60,666 Pounds Sterling on April 1, 2002
(e)  Fifth installment of 60,667 Pounds Sterling on July 1, 2002
(f)  Sixth installment of 60,666 Pounds Sterling on October 1, 2002; and
(g)  Seventh and final installment of 60,667 Pounds Sterling on December 31,
     2002.

  The excess of the purchase price over the net assets acquired ($1,822,583) has
been allocated to goodwill.  None of the goodwill is expected to be deductible
for tax purposes.  The Company was willing to pay the purchase price, which
included the aforementioned goodwill, based on a 20% revenue growth rate in 2000
over the prior year and projected future growth rates of approximately 10 - 20%
annually.  The revenue growth was not guaranteed.

                                       29
<PAGE>

  The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition (in thousands).

<TABLE>
<S>                                                                   <C>
Current assets                                                             $  499
Net property and equipment                                                     34
Goodwill                                                                    1,823
                                                                           ------
     Total assets acquired                                                  2,356
Current liabilities                                                           655
                                                                           ------
     Total liabilities                                                        655
                                                                           ------
     Net assets acquired                                                   $1,701
                                                                           ======
</TABLE>

  The Company, through its UBIX Computer Services subsidiary, completed the
acquisition of seventy percent (70%) of the equity share capital of DSF Internet
Services Private Limited ("DSF") in India on September 6, 2001 for a
consideration of US$825,000.  DSF engages in the business of offshore
development of software, including video/audio streaming, web designing and
content management.  The Company believed the acquisition was necessary to
obtain cost effective offshore capabilities.  The DSF acquisition provides the
Company an offshore development option for its clients.  The results of DSF's
operations have been included in the consolidated financial statements since
that date.  UBICS also paid $175,000 and issued 219,173 shares of the common
stock of the Company to Fifth Dimension Limited for its mediation services in
connection with the transaction.  The $825,000 purchase price is payable as
follows:

(a)  An amount of $87,500 was paid by wire transfer to the seller as a down
     payment on June 5, 2001
(b)  An amount of $125,000 was paid to the seller on the closing date
(c)  An amount of $612,500 was deposited into an escrow account on September
     28,2001.  Of such amount, $112,500 may be released to the seller six months
     after the closing date, $200,000 may be released to the seller on the first
     anniversary of the closing date, $200,000 may be released to the seller
     eighteen months after the closing date, and the remaining $100,000 may be
     released to the seller on the later of:

     i.   May 30, 2003
     ii.  Ten days after all taxes payable by DSF in connection with the
          agreement have been determined
     iii. The business day following the date that UBICS receives payment of the
          working capital adjustment, if any, under the agreement.

  The $175,000 was paid to Fifth Dimension on the closing date.  The 219,173
shares of the common stock of the Company were issued to Fifth Dimension on the
closing date and deposited into escrow.  The shares may be released to Fifth
Dimension as follows:

(a)  65,752 shares of the common stock of the Company may be released to Fifth
     Dimension at any time on or after the closing date
(b)  Second installment of 43,835 shares of the common stock of the Company may
     be released to Fifth Dimension six months after the closing date
(c)  Third installment of 43,835 shares of the common stock of the Company may
     be released to Fifth Dimension on the first anniversary of the closing date
(d)  Fourth installment of 43,835 shares of the common stock of the Company may
     be released to Fifth Dimension eighteen months after the closing date
(e)  Fifth installment of 21,916 shares of the common stock of the Company may
     be released to Fifth Dimension on the later of:
     i.   May 30, 2003
     ii.  Ten days after all taxes payable by DSF in connection with the
          agreement have been determined
     iii. The business day following the date that UBICS receives payment of the
          working capital adjustment, if any, under the agreement

  The excess of the purchase price over the net assets acquired ($1,166,848) has
been allocated to goodwill.  None of the goodwill is expected to be deducible
for tax purposes.  The Company was willing to pay the purchase price, which
included the aforementioned goodwill, based on a 39% revenue growth rate in 2000
over the prior year and projected future growth rates of approximately 15 - 20%
annually.  The revenue growth was not guaranteed.

  The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition (in thousands).

                                       30
<PAGE>

<TABLE>
<S>                                                                   <C>
Current assets                                                             $   81
Net property and equipment                                                     51
Intangible assets                                                               5
Goodwill                                                                    1,167
                                                                           ------
     Total assets acquired                                                  1,304
Current liabilities                                                           147
Long-term liabilities                                                           2
                                                                           ------
     Total liabilities                                                        149
                                                                           ------
     Net assets acquired                                                   $1,155
                                                                           ======
</TABLE>

  The Company has consolidated the results of operations for each of the
acquired entities as of the respective merger date.  The following table reports
pro forma information as if the acquisition of Oakwood and DSF had been
completed at the beginning of the stated periods (unaudited, in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31
                                                                             ---------------------------------
                                                                                             2001       2000
                                                                                           -------    -------
<S>                                                                          <C>          <C>        <C>
Revenues                                                                     As reported   $38,895    $42,324
                                                                              Pro forma     39,806     45,824
Net income / (loss)                                                          As reported   $(4,348)   $     7
                                                                              Pro forma     (4,323)      (105)
Basic and diluted earnings / (loss) per share                                As reported   $ (0.62)   $  0.00
                                                                              Pro forma      (0.62)     (0.02)
</TABLE>


12. Stock Grant and Common Stock Subject to Redemption

  In connection with the employment of the Company's President & CEO (CEO), the
Company granted the CEO 100,000 shares of the Company's common stock.  The
market value of the shares at the date of the grant of $253,000 is included in
selling, general and administrative expenses in 2000.

  In addition, the CEO purchased 183,200 shares of the Company's common stock
from the Company's controlling stockholder for $732,800.  The Company loaned the
CEO the funds to purchase these shares.  In addition, the Company granted the
CEO a put related to these shares at $3.00 per share.  The put value of these
shares is shown as shares subject to redemption in the accompanying consolidated
balance sheets.

  Until the note is repaid, the Company will record compensation expense if the
market value of the shares purchased exceeds the CEO's purchase price.  When the
note is repaid, the Company will record compensation expense if the market value
of these shares is lower than the CEO's put price.  No expense was recorded in
2001 or 2000 under this agreement.

13. Restructuring:

  During 2001, the Company recorded a restructuring charge of $892,000, of which
approximately $460,000 was associated with a write-off of unused office space,
approximately $170,000 was related to merging the Company's UB Interactive
division with its SquareRadius subsidiary, approximately $160,000 was associated
with a write-off of obsolete assets, and approximately $100,000 was related to
the elimination of 32 technical, sales & marketing and management positions.

  During 2000, the Company recorded a restructuring charge of $902,000, of which
$450,000 was related to a payable to the Company's former Chief Executive
Officer as part of his severance agreement, $100,000 was related to a signing
bonus paid to the Company's new Chief Executive Officer pursuant to his
employment agreement and $352,000 represented the value of 100,000 shares of
common stock granted to the Company's new Chief Executive Officer pursuant to
his employment agreement.

                                       31
<PAGE>

  As of December 31, 2001, $639,000 of the restructuring charge was still
remaining as accrued on the balance sheet.  The table below identifies the
significant components of the accrual balance remaining (in thousands):

<TABLE>
<CAPTION>
                                             Rent Payments
                                              for Unused         Write-off of                 Stock
                                             Office Space      Obsolete Assets     Severance  Bonus Total
                                           -----------------   ---------------     ---------  ----- -----
<S>                                        <C>                <C>                 <C>        <C>    <C>
Beginning balance January 1, 2000                $  --              $  --         $  -       $  --  $  --
Amounts provided in 2000.................           --                 --          450         352    802
Amounts paid in 2000.....................           --                 --          150         252    402
                                                  ----               ----         ----        ----   ----
Balance at December 31, 2000.............        $  --              $  --         $300       $100   $400
                                                 =====              =====         ====       ====   ====

Beginning balance January 1, 2001........        $  --              $  --         $300       $100   $400
Amounts provided in 2001.................          460                160           --         --    620
Amounts paid in 2001.....................           56                132          100         93    381
                                                  ----               ----         ----       ----   ----
Balance at December 31, 2001.............         $404               $ 28         $200       $  7   $639
                                                  ====               ====         ====       ====   ====
</TABLE>

                                       32
<PAGE>

14. Quarterly Financial Information (unaudited):

<TABLE>
<CAPTION>
                                                        (In thousands except per share data)
                                                                   Quarter Ended
                                         ---------------------------------------------------------------
                                                Mar. 31,        June 30,        Sep. 30,        Dec. 31,
                                                  2001            2001            2001            2001
                                         ---------------------------------------------------------------
<S>                                        <C>             <C>             <C>             <C>
Revenues.................................        $10,777         $10,599         $ 9,334          $8,185
Cost of revenues.........................          8,616           7,740           6,369           6,046
                                                 -------         -------         -------          ------
Gross profit.............................          2,161           2,859           2,965           2,139
Selling, general and
  administrative expenses................          3,409           3,783           5,871           2,568
Restructuring............................             --              --             892              --
                                                 -------         -------         -------          ------
Income / (Loss) from operations..........         (1,248)           (924)         (3,798)           (429)
Interest income, net.....................            146             101              70              44
                                                 -------         -------         -------          ------
Income / (Loss) before income taxes......         (1,102)           (823)         (3,728)           (385)
Provision / (Benefit) for income taxes...           (387)           (288)         (1,528)            513
                                                 -------         -------         -------          ------
Net income / (loss)......................        $  (715)        $  (535)        $(2,200)         $ (898)
                                                 =======         =======         =======          ======
Basic and diluted earnings / (loss) per
  share..................................         $(0.10)         $(0.08)         $(0.31)         $(0.13)
                                                 =======         =======         =======          ======
</TABLE>




<TABLE>
<CAPTION>
                                                     (In thousands except per share data)
                                                                 Quarter Ended
                                        ------------------------------------------------------------
                                               Mar. 31,       June 30,      Sep. 30,       Dec. 31,
                                                 2000           2000          2000           2000
                                        ------------------------------------------------------------
<S>                                       <C>                <C>             <C>           <C>
Revenues................................         $9,319        $10,213        $11,593        $11,199
Cost of revenues........................          6,888          7,435          8,378          8,643
                                                 ------        -------        -------        -------
Gross profit............................          2,431          2,778          3,215          2,556
Selling, general and
  administrative expenses...............          2,317          2,407          2,753          3,158
Restructuring...........................             --            902             --             --
                                                 ------        -------        -------        -------
Income / (Loss) from operations.........            114           (531)           462           (602)
Interest income, net....................            158            171            159            171
                                                 ------        -------        -------        -------
Income / (Loss) before income taxes.....            272           (360)           621           (431)
Provision / (Benefit) for income taxes..            105            (11)           302           (301)
                                                 ------        -------        -------        -------
Net income / (loss).....................         $  167        $  (349)       $   319        $  (130)
                                                 ======        =======        =======        =======
Basic and diluted earnings / (loss) per
  share.................................          $0.03         $(0.05)         $0.05         $(0.02)
                                                 ======        =======        =======        =======
</TABLE>

  Earnings per share amounts for each quarter are required to be computed
independently and, therefore, may not equal the amount calculated for year end.


Item 9.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure

         None.

PART III

Item 10.  Directors and Executive Officers of the Registrant

  The information required by this item is incorporated by reference to the
information in the registrant's definitive proxy statement to be filed with the
Commission on or about April 17, 2002 in connection with its 2002 annual meeting
of stockholders (the "2002 Proxy Statement") under the captions "Election of
Directors" and "Executive Officers".

                                       33
<PAGE>

Item 11.  Executive Compensation

  The information required by this item is incorporated by reference to the
information in the registrant's 2002 Proxy Statement under the caption
"Executive Compensation", provided that the information in such Proxy Statement
under the captions "Stock Performance Graph" and "Compensation Committee Report
on Executive Compensation" are not incorporated by referenced herein.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

  The information required by this item is incorporated by reference to the
information in the registrant's 2002 Proxy Statement under the captions
"Security Ownership of Certain Beneficial Owners" and "Security Ownership of
Directors and Executive Officers."

Item 13.  Certain Relationships and Related Transactions

  The information required by this item is incorporated by reference to the
information in the registrant's 2002 Proxy Statement under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions."

PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) 1.      Financial Statements
            --------------------

  The following financial statements of the registrant are included on pages 18
to 34 of this Form 10-K and the report of independent public accountants is
included on page 17 of this Form 10-K:

  Consolidated Balance Sheets as of December 31, 2001 and 2000

  Consolidated Statements of Operations for the years ended December 31, 2001,
   2000, and 1999

  Consolidated Statements of Changes in Stockholders' Equity for the years ended
   December 31, 2001, 2000, and 1999

  Consolidated Statements of Cash Flows for the years ended December 31, 2001,
   2000, and 1999

  2.  Financial Statement Schedules
      -----------------------------

  The following consolidated financial statement schedules shown below should be
read in conjunction with the financial statements on pages 18 to 34 of this Form
10-K.  All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or Notes
thereto.

 The following items appear immediately following the signature page:

 Report of Independent Public Accountants on Supplemental Schedules
 Financial Statement Schedules:

  Valuation and Qualifying Accounts for the three years in the period ended
December 31, 2001.

 3.  Exhibits:
     --------

     3.1  Amended and Restated Certificate of Incorporation of UBICS, Inc.(1)

     3.2  Amended and Restated Bylaws of UBICS, Inc.(1)

     10.1  UBICS, Inc. 1997 Stock Option Plan (2)

                                       34
<PAGE>

     10.2  Noncompetition Agreement dated October 27, 1997 among the Company,
           Vijay Mallya and UB Information Consultancy Services, Ltd. (3)

     10.3  Employment Agreement between the Registrant and Vijay Mallya (3)

     10.4  Employment Agreement dated September 1, 1999 between the Registrant
           and Dennis M. Stocker (4)

     10.5  Agreement of Severance, Waiver and Release dated March 18, 1999
           between the Company and Manohar B. Hira (5)

     10.6  Services Agreement dated October 27, 1997 among the Company, Vijay
           Mallya and United Breweries Limited (3)

     10.7  Form of Director Indemnification Agreement (3)

     10.8  Form of Sublease and Consent among the Company, Marin Executive Park
           and United Breweries of American, Inc. (3)

     10.9  Noncompetition Agreement dated October 27, 1997 among the Company,
           Vijay Mallya and United Breweries Limited (3)

     10.10 Noncompetition Agreement dated October 27, 1997 among the Company,
           Vijay Mallya and UB International Limited (3)

     10.11 Services Agreement dated October 27, 1997 among the Company, Vijay
           Mallya and UB International Limited (3)

     10.12 Lease Agreement dated June 30, 1998 between the Company and Stealth
           Technology Associates (6)

     10.13 Amendment to Agreement of Severance Waiver and Release dated
           December 1, 1999 between the Company and Manohar B. Hira (7)

     10.14.Amendment No. 2 to Agreement of Severance Waiver and Release dated
           as of March 31, 1999 between the Company and Manohar B. Hira (7)

     10.15 Amendment No. 3 to Agreement of Severance Waiver and Release dated
           as of March 31, 1999 between the Company and Manohar B. Hira (8)

     10.16 Employment Agreement dated June 7, 2000 between the Company and
           Robert C. Harbage (9)

     10.17 Acquisition and Stock Exchange Agreement dated July 5, 2000 among
           the Company, Cobalt Creative, Inc. and the Shareholders of Cobalt
           Creative, Inc. (9)

     10.18 Share Purchase Agreement dated as of March 30, 2001 between UBICS,
           Inc. and Teksys, Inc. (10)

     10.19 Employment Agreement dated June 18, 2001 between the Company and
           Neil Ebner (11)

     10.20 Share Purchase Agreement dated as of September 4, 2001 between UBIX
           Computer Services Limited and Anmol Taneja and Vani Taneja (12)

                                       35
<PAGE>

     10.21 Amendment to Share Purchase Agreement dated as of December 21, 2001
           between UBICS, Inc. and Teksys, Inc.

     21    Subsidiaries of the Registrant

     99.1  Management Representations Regarding Arthur Andersen LLP

---------------
(1)  Incorporated by reference to the registrant's Registration Statement on
     Form S-1, No. 333-35171, filed September 8, 1997.

(2)  Incorporated by reference to the registrant's Schedule 14A filed on
     November 15, 2000.

(3)  Incorporated by reference to Post-Effective Amendment No. 1, to the
     registrant's Registration Statement on Form S-1, No. 333-35171, filed
     October 29, 1997.

(4)  Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
     for the quarter ended September 30, 1999.

(5)  Incorporated by reference to the registrant's Annual Report on Form 10-K
     for the year ended December 31, 1998.

(6)  Incorporated by reference to the registrant's Quarterly Report on Form 10-A
     for the quarter ended September 30, 1998.

(7)  Incorporated by reference to the registrant's Annual Report on Form 10-K
     for the year ended December 31, 1998.

(8)  Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
     for the quarter ended March 31, 1999

(9)  Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
     for the quarter ended June 30, 2000.

(10) Incorporated by reference to the registrant's current report on Form 8-K
     filed on April 16, 2001.

(11) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
     for the quarter ended June 30, 2001.

(12) Incorporated by reference to the registrant's current report on Form 8-K
     filed on September 21, 2001.

                                       36
<PAGE>

                                   SIGNATURES

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused the report to be signed on its behalf by the undersigned
thereunto duly authorized.

          UBICS, Inc.
          (Registrant)


          By: /s/Robert Harbage
              ----------------------
              Robert Harbage
              President & CEO
           March 29, 2002

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons have signed this report in the capacities indicated on March
29, 2002.

                              /s/Vijay Mallya
                              -----------------------------------
                              Vijay Mallya
                              Chairman and Director

                              /s/Robert Harbage
                              -----------------------------------
                              Robert Harbage
                              President, CEO and Director
                              (Principal Executive Officer)

                              /s/Neil M. Ebner
                              -----------------------------------
                              Neil M. Ebner
                              Vice President, Finance,
                              Chief Financial Officer and Secretary
                              (Principal Finance & Accounting Officer)

                              /s/Scott Heldfond
                              -----------------------------------
                              Scott Heldfond
                              Director

                              /s/Kent D. Price
                              -----------------------------------
                              Kent D. Price
                              Director

                              /s/Christopher C. Melton, Sr.
                              -----------------------------------
                              Christopher C. Melton, Sr.
                              Director

                              /s/Rahul Merchant
                              -----------------------------------
                              Rahul Merchant
                              Director

                              /s/Manohar B. Hira
                              -----------------------------------
                              Manohar B. Hira
                              Director

                                       37
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE



To the Board of Directors and Stockholders of UBICS, Inc.:

  We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements included in this Form 10-K and have
issued our report thereon dated February 18, 2002.  Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole.  The schedule set forth on the following page is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements.  This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.



                                                      /s/ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania
 February 18, 2002

                                       38
<PAGE>

                                                                     SCHEDULE II

                                  UBICS, INC.

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                       Balance at
                                                      Beginning of  Charged to Costs                      Balance at
                                                        Period        and Expenses        Deductions     End of Period
                                                      -----------   ----------------      ----------     -------------
 <S>                                                  <C>            <C>                  <C>             <C>
Allowance for Uncollectible Accounts
  December 31, 2001..............................         $1,100         $1,400              $2,000         $  500
  December 31, 2000..............................            885            215                  --          1,100
  December 31, 1999..............................            305            580                  --            885

Restructuring Charge
  December 31, 2001..............................            300            892                 560            632
  December 31, 2000..............................             --            902                 602            300
  December 31, 1999..............................             --             --                  --             --
</TABLE>
<PAGE>

                                 EXHIBIT INDEX

No.  Description                                                            Page
---  -----------                                                            ----


     3.1   Amended and Restated Certificate of Incorporation of UBICS, Inc.(1)

     3.2   Amended and Restated Bylaws of UBICS, Inc.(1)

     10.1  UBICS, Inc. 1997 Stock Option Plan (2)

     10.2  Noncompetition Agreement dated October 27, 1997 among the Company,
           Vijay Mallya and UB Information Consultancy Services, Ltd. (3)

     10.3  Employment Agreement between the Registrant and Vijay Mallya (3)

     10.4  Employment Agreement dated September 1, 1999 between the Registrant
           and Dennis M. Stocker (4)

     10.5  Agreement of Severance, Waiver and Release dated March 18, 1999
           between the Company and Manohar B. Hira (5)

     10.6  Services Agreement dated October 27, 1997 among the Company, Vijay
           Mallya and United Breweries Limited (3)

     10.7  Form of Director Indemnification Agreement (3)

     10.8  Form of Sublease and Consent among the Company, Marin Executive Park
           and United Breweries of American, Inc. (3)

     10.9  Noncompetition Agreement dated October 27, 1997 among the Company,
           Vijay Mallya and United Breweries Limited (3)

     10.10 Noncompetition Agreement dated October 27, 1997 among the Company,
           Vijay Mallya and UB International Limited (3)

     10.11 Services Agreement dated October 27, 1997 among the Company, Vijay
           Mallya and UB International Limited (3)

     10.12 Lease Agreement dated June 30, 1998 between the Company and Stealth
           Technology Associates (6)

     10.13 Amendment to Agreement of Severance Waiver and Release dated
           December 1, 1999 between the Company and Manohar B. Hira (7)

     10.14 Amendment No. 2 to Agreement of Severance Waiver and Release dated
           as of March 31, 1999 between the Company and Manohar B. Hira (7)

     10.15 Amendment No. 3 to Agreement of Severance Waiver and Release dated
           as of March 31, 1999 between the Company and Manohar B. Hira (8)

     10.16 Employment Agreement dated June 7, 2000 between the Company and
           Robert C. Harbage (9)

     10.17 Acquisition and Stock Exchange Agreement dated July 5, 2000 among
           the Company, Cobalt Creative, Inc. and the Shareholders of Cobalt
           Creative, Inc. (9)
<PAGE>

     10.18 Share Purchase Agreement dated as of March 30, 2001 between UBICS,
           Inc. and Teksys, Inc. (10)

     10.19 Employment Agreement dated June 18, 2001 between the Company and
           Neil Ebner (11)

     10.20 Share Purchase Agreement dated as of September 4, 2001 between UBIX
           Computer Services Limited and Anmol Taneja and Vani Taneja (12)

     10.21 Amendment to Share Purchase Agreement dated as of December 21, 2001
           between UBICS, Inc. and Teksys, Inc.


     21    Subsidiaries of the Registrant

     99.1  Management Representations Regarding Arthur Andersen LLP


-----------------
(1)  Incorporated by reference to the registrant's Registration Statement on
     Form S-1, No. 333-35171, filed September 8, 1997.

(2)  Incorporated by reference to the registrant's Schedule 14A filed on
     November 15, 2000.

(3)  Incorporated by reference to Post-Effective Amendment No. 1, to the
     registrant's Registration Statement on Form S-1, No. 333-35171, filed
     October 29, 1997.

(4)  Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
     for the quarter ended September 30, 1999.

(5)  Incorporated by reference to the registrant's Annual Report on Form 10-K
     for the year ended December 31, 1998.

(6)  Incorporated by reference to the registrant's Quarterly Report on Form 10-A
     for the quarter ended September 30, 1998.

(7)  Incorporated by reference to the registrant's Annual Report on Form 10-K
     for the year ended December 31, 1998.

(8)  Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
     for the quarter ended March 31, 1999

(9)  Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
     for the quarter ended June 30, 2000.

(10) Incorporated by reference to the registrant's current report on Form 8-K
     filed on April 16, 2001.

(11) Incorporated by reference to the registrant's Quarterly Report on Form 10-Q
     for the quarter ended June 30, 2001.

(12) Incorporated by reference to the registrant's current report on Form 8-K
     filed on September 21, 2001.