<PAGE>
                                   FORM 10-QSB



                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


(Mark One)

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

         For the quarterly period ended December 31, 2001


[     ]  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 0-13732



                           COMTREX SYSTEMS CORPORATION
                           ---------------------------
        (Exact name of small business issuer as specified in its charter)


           Delaware                                        22-2353604
-------------------------------                      --------------------------
(State or other jurisdiction of                           (IRS Employer
 incorporation or organization)                         Identification No.)


                 102 Executive Drive, Moorestown, NJ 08057-4224
                 -----------------------------------------------
                    (Address of principal executive offices)


                                 (856) 778-0090
                                 --------------
                           (Issuer's telephone number)


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

                         Yes     X                 No
                              -------                  -------


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:


             Class                          Outstanding at February 8, 2002
             -----                          -------------------------------
Common Stock, par value $.003                         1,417,120


Transitional Small Business Disclosure Form (check one):

                          Yes                       No     X
                               -------                  -------


<PAGE>


                           COMTREX SYSTEMS CORPORATION

                                TABLE OF CONTENTS
                                   FORM 10-QSB


                                     PART I
                              FINANCIAL INFORMATION


Item 1.   Financial Statements, Unaudited

                   Unaudited Consolidated Balance Sheets
                     at December 31, 2001 and March 31, 2001                 3

                   Unaudited Consolidated Statement of Operations            4
                     for the nine months ended December 31, 2001 and 2000

                   Unaudited Consolidated Statement of Cash Flows            5
                     for the nine months ended December 31, 2001 and 2000

                   Notes to Unaudited Consolidated Financial Statements      6


Item 2.   Management's Discussion and Analysis or                           11
                   Plan of Operation


                                     PART II
                                OTHER INFORMATION


Item 6.   Exhibits and Reports on Form 8-K                                  15

Signatures                                                                  16

Exhibit Index                                                               17

Exhibits



<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                  COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                        (These statements are unaudited.)

                                     ASSETS
                                     ------

<TABLE>
<CAPTION>
Current assets:                                        December 31, 2001        March 31, 2001
                                                       -----------------        --------------
<S>                                                       <C>                    <C>
  Cash and cash equivalents                               $    86,544            $   164,866
  Accounts receivable, net of reserve of
    $137,657 and $136,704 as of December 31, 2001
    and March 31, 2001, respectively                        2,263,496              2,752,426
  Inventories                                               1,663,591              1,845,357
  Prepaid expenses and other                                  124,668                131,705
                                                          -----------            -----------
      Total current assets                                  4,138,299              4,894,354
                                                          -----------            -----------
Property and equipment:
  Land                                                        156,244                156,244
  Building                                                    312,656                312,656
  Machinery, equipment, furniture and leasehold             1,933,393              1,855,039
                                                          -----------            -----------
                                                            2,402,293              2,323,939
  Less - accumulated depreciation                          (1,563,319)            (1,475,320)
                                                          -----------            -----------
      Net property and equipment                              838,974                848,619
                                                          -----------            -----------
Other assets:
  Purchased and capitalized software and design,
    net of amortization                                       664,072                473,297
  Goodwill, net of amortization                               497,431                520,443
                                                          -----------           ------------
      Total other assets                                    1,161,503                993,740
                                                          -----------            -----------

        TOTAL ASSETS                                      $ 6,138,776            $ 6,736,713
                                                          ===========            ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
Current liabilities:
  Revolving line of credit loan                           $   900,000            $   574,482
  Accounts payable                                            480,888                951,316
  Current portion of long term debt                            72,215                115,370
  Income and V.A.T. payable                                    89,337                 14,234
  Accrued expenses                                            157,087                192,301
  Deferred revenue                                            403,709                661,403
  Customer deposits                                            11,285                  6,551
                                                          -----------            -----------
      Total current liabilities                             2,114,521              2,515,657
                                                          -----------            -----------
Deferred income taxes                                          50,653                 17,704
                                                          -----------            -----------
Long term liabilities:
  Long term debt, net of current                              384,568                279,517
  Convertible debentures payable, net of current                    -                173,332
                                                          -----------            -----------
      Total long term liabilities                             384,568                452,849
                                                          -----------            -----------
Shareholders' equity:
  Preferred stock, $1 par value, 1,000,000
    shares authorized, none outstanding                             -                      -
  Common stock, $.003 par value, 10,000,000
    shares authorized, 1,417,120 and 1,416,453
    issued and outstanding as of
    December 31, 2001 and March 31, 2001, respectively          4,252                  4,250
  Additional paid-in capital                                5,999,654              5,998,477
  Foreign currency translation adjustment                     (12,841)               (14,357)
  Accumulated deficit                                      (2,402,031)            (2,237,867)
                                                          -----------            -----------
      Total shareholders' equity                            3,589,034              3,750,503
                                                          -----------            -----------

       LIABILITIES AND SHAREHOLDERS' EQUITY               $ 6,138,776            $ 6,736,713
                                                          ===========            ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>
                  COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
                       (These statements are unaudited.)

<TABLE>
<CAPTION>
                                                   Three months ended           Nine months ended
                                                       December 31,                December 31,
                                                   2001         2000           2001         2000
                                                ------------------------    ------------------------
<S>                                             <C>          <C>            <C>          <C>
Net sales                                       $ 1,620,232  $ 2,197,585    $ 5,044,738  $ 6,223,579

Costs and expenses
  Cost of sales                                     762,335    1,023,420      2,411,540    2,905,703
  Administrative                                    209,651      328,764        722,625      983,354
  Research and development                           15,733       34,625         61,372      145,240
  Sales and marketing                               190,236      241,308        634,242      748,125
  Customer support                                  346,858      398,058      1,084,189    1,203,765
  Depreciation and amortization                      62,552       52,522        177,088      159,360
                                                -----------   ----------    -----------  -----------

                                                  1,587,365    2,078,697      5,091,056    6,145,547
                                                -----------   ----------    -----------  -----------

Income (loss) from operations                        32,867      118,888        (46,318)      78,032

Loss on equipment disposal                                -       (1,940)             -       (1,940)
Interest expense, net                               (23,781)     (28,395)       (70,357)    (100,719)
                                                -----------   ----------    -----------  -----------

Income (loss)
  before income taxes                                 9,086       88,553       (116,675)     (24,627)

Provision for income taxes                           13,870       (7,260)        47,490        5,435
                                                -----------   ----------    -----------  ------------

Net income (loss)                               $    (4,784)  $   95,813    $  (164,165) $   (30,062)
                                                ===========   ==========   ============  ===========

Basic earnings per share:
  Net income (loss)                                  $  .00       $  .07         $ (.12)      $ (.02)
                                                ===========    =========    ===========  ===========

Diluted earnings per share:
  Net income (loss)                                  $  .00       $  .07         $ (.12)      $ (.02)
                                                ===========   ==========    ===========  ===========
</TABLE>


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


                                       4
<PAGE>
                  COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                        (These statements are unaudited.)

<TABLE>
<CAPTION>
                                                              Nine months ended
                                                                 December 31,
                                                             2001           2000
                                                          -------------------------
<S>                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                       $ (164,165)    $  (30,062)
  Adjustments to reconcile net income (loss)
    to net cash provided by (used in)
    operating activities -
      Depreciation and amortization                          177,088        159,360
      Deferred income taxes                                   32,560              -
     Provisions for losses on accounts
        receivable                                               146         22,088
      Provisions for losses on inventories                       964         10,000
      Loss on disposition of equipment                             -          1,940
      Foreign currency translation adjustment                  4,772        (19,588)
    (Increase) decrease in -
      Accounts receivable                                    513,309         (3,655)
      Inventories                                            188,944        206,056
      Prepaid expenses and other                               8,053        (73,360)
    Increase (decrease) in -
      Accounts payable                                      (482,460)      (468,570)
      Current portion of long term debt                      (79,704)        15,260
      Accrued expenses and V.A.T.                             41,699         23,825
      Customer deposits                                        4,734        (25,367)
      Deferred revenue                                      (269,715)       422,661
                                                          -----------    -----------

        Net cash provided by (used in)
          operating activities                               (23,775)       240,588
                                                         -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Sale (purchases) of property and equipment:
  Purchases of property and equipment                        (97,190)       (64,596)
  Purchases of software and capitalized
    software and design                                     (244,786)      (107,295)
  Proceeds from fixed asset disposal                               -            475
                                                         -----------    -----------

        Net cash provided by (used in)
          investing activities                              (341,976)      (171,416)
                                                         -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Borrowings under line of credit, net                       323,880         75,000
  Proceeds from debt                                         119,088              -
  Payments on debt                                          (156,719)       (47,068)
  Proceeds from issuing equity securities                      1,180        241,180
                                                         -----------    -----------

        Net cash provided by (used in)
          financing activities                               287,429        269,112
                                                         -----------    ------------

        Net increase (decrease) in cash                      (78,322)       338,284

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD               164,866        246,270
                                                         -----------    -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                 $    86,544    $   584,554
                                                         ===========    ===========
</TABLE>

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

                                       5
<PAGE>
                  COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Nature of business:

         Comtrex Systems Corporation ("Comtrex" or "the Company") is a Delaware
corporation, initially incorporated in New Jersey in April, 1981. Comtrex
designs, develops, assembles, markets, sells and provides services for computer
software, electronic terminals and turn-key systems for restaurants, both table
and quick service. The Company's hardware and software systems provide
transaction processing, operational controls and management information, both
in-store and on an enterprise level. The Company markets its products through a
network of authorized distributors in Canada, France, Belgium, Germany,
Portugal, Holland, Ireland and Australia, and through a wholly owned subsidiary
in the United Kingdom. In the United States, the Company markets its products
through a network of dealers and through its own direct sales offices.

         In April, 1996, Comtrex acquired the operations of a distributor in
Atlanta, Georgia and engaged in the direct sale and service of its products in
both the Atlanta metropolitan area and in the southeast United States. In
October, 1997, Comtrex acquired its distributor in the United Kingdom and
engaged in the direct sale and service of its products throughout the United
Kingdom In June, 1999, Comtrex acquired its dealer in Pontiac, Michigan and
engaged in the direct sale and service of its products in the Detroit
metropolitan area and in the mid-western United States. Hereinafter, Comtrex and
its subsidiary in the United Kingdom are referred to as the Company.

         Basis of presentation:

         The accompanying consolidated financial statements have been prepared
by the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the SEC. In the opinion of the
Company's management, all adjustments necessary for a fair presentation of the
accompanying unaudited consolidated financial statements are reflected herein.
All such adjustments are normal and recurring in nature. All significant
intercompany transactions and balances have been eliminated. Interim results are
not necessarily indicative of the results for the full year or for any future
interim periods. For more complete financial information, these consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements included in the Company's Annual Report on Form 10-KSB for
the fiscal year ended March 31, 2001, as filed with the SEC.

         Foreign currency translation:

         Adjustments resulting from translating foreign functional currency
financial statements into U.S. dollars are included in the foreign currency
translation adjustment in shareholders' equity.

         Reverse Stock Split:

         On February 12, 2001, the shareholders approved a one for three reverse
stock split, effective as of February 14, 2001 with the filing of a Certificate
of Amendment to the Company's Certificate of Incorporation with the Secretary of
State of the State of Delaware. All amounts have been restated to reflect such
reverse stock split.

                                       6

<PAGE>
                  COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


2.       INVENTORIES:

         Inventories include the cost of materials, labor and overhead and are
valued at the lower of cost (first-in, first-out) or market as follows:
<TABLE>
<CAPTION>
                                                      December 30,        March 31,
                                                         2001               2001
                                                      -----------        -----------
<S>                                                   <C>                <C>
Raw materials                                         $   727,660        $   854,816
Work-in-process                                             2,424             31,456
Finished goods                                          1,069,270          1,049,085
Reserve for excess and obsolete inventory                (135,763)           (90,000)
                                                      -----------        -----------
                                                      $ 1,663,591        $ 1,845,357
                                                      ===========        ===========
</TABLE>

3.       INCOME TAXES:

         The Company has net operating loss carryforwards for federal income tax
purposes of approximately $2,660,000, which begin to expire in 2004. Such loss
carryforwards result in a deferred tax asset of approximately $1,025,000, which
has been offset by a valuation allowance of equal amount. During the quarter
ended December 31, 2001, the valuation account was increased by $25,000.

         The components of the provision for income taxes for the nine months
ended December 31, 2001 consist of current expense (foreign) of $34,044, and
current expense (U.S.) of $13,446, respectively.


4.       EARNINGS PER SHARE DISCLOSURE:

         In the quarter ended December 31, 1997, the Company adopted Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 specifies the computation, presentation and disclosure requirements for
earnings per share ("EPS"). It replaces the presentation of primary and fully
diluted EPS with basic and diluted EPS. Basic EPS excludes all dilution. It is
based upon the weighted average number of common shares outstanding during the
period. Diluted EPS reflects the potential dilution that would occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.

         A reconciliation of the basic and diluted EPS for the three months
ended December 31, 2001 and 2000 is as follows:
<TABLE>
<CAPTION>
                                                             Three months ended
                                                             December 31, 2001
                                                   -----------------------------------
                                                     Income       Shares    Per Share
                                                   ---------    ---------   ----------
<S>                                                <C>              <C>        <C>
Net income (loss)                                  $  (4,784)
Basic EPS:
  Income (loss) available to common shareholders      (4,784)   1,417,120    $  0.00
Effect of dilutive securities, options and
  warrants                                                              -
Effect of dilutive convertible debenture                   -            -
Diluted EPS:
  Income (loss) available to common shareholders   $  (4,784)   1,417,120    $  0.00
</TABLE>

     The debenture converted to debt as of April 1, 2001. There is no dilutive
effect from stock options or warrants because there was a net loss for the
period.


                                       7

<PAGE>
                  COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4.       EARNINGS PER SHARE DISCLOSURE: (CONTINUED)
<TABLE>
<CAPTION>
                                                                    Nine months ended
                                                                    December 31, 2001
                                                         ------------------------------------
                                                         Income(Loss)    Shares     Per Share
                                                         ------------  ---------    ---------
<S>                                                       <C>             <C>          <C>
Net income (loss)                                         $(164,165)
Basic EPS:
  Income (loss) available to common shareholders           (164,165)   1,416,972     $ (0.12)
Effect of dilutive securities, options                                         -
Effect of dilutive convertible debenture                          -            -
Diluted EPS:
  Income (loss) available to common shareholders          $(164,165)   1,416,972     $ (0.12)
</TABLE>

     The debenture converted to debt as of April 1, 2001. There is no dilutive
effect from stock options or warrants because there was a net loss for the
period.
<TABLE>
<CAPTION>
                                                         Three months ended
                                                          December 31, 2000
                                                 ----------------------------------
                                                   Income       Shares    Per Share
                                                 ----------   ----------  ---------
<S>                                              <C>              <C>        <C>
Net income                                       $  95,813
Basic EPS:
  Income available to common shareholders           95,813    1,331,364      $  0.07
Effect of dilutive securities, options and
  warrants                                                        2,864
Effect of dilutive convertible debenture             5,200       86,667
Diluted EPS:
  Income available to common shareholders        $ 101,013    1,420,895      $  0.07
</TABLE>

     For purposes of computing diluted per share data, $5,200 of interest
related to the convertible debenture was added to net income.

<TABLE>
<CAPTION>
                                                         Nine months ended
                                                         December 31, 2000
                                                  --------------------------------
                                                  Income(Loss)  Shares   Per Share
                                                  ------------  ------   ---------
<S>                                               <C>             <C>       <C>
Net income (loss)                                 $ (30,062)
Basic EPS:
  Income (loss) available to common shareholders    (30,062)   1,298,656   $ (0.02)
Effect of dilutive securities, options                                 -
Effect of dilutive convertible debenture                  -            -
Diluted EPS:
  Income (loss) available to common shareholders  $ (30,062)   1,298,656   $ (0.02)
</TABLE>

     There is no dilutive effect from stock options, warrants or convertible
debentures because there was a net loss for the period.

                                       8

<PAGE>
                  COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


5.       SEGMENT INFORMATION

         In the fiscal year ended March 31, 1999, the Company adopted Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. SFAS 131 supersedes SFAS 14, "Financial
Reporting for Segments of a Business Enterprise", replacing the "industry
segment" approach with the "management" approach. The management approach
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the Company's
reportable segments. The Company has two reportable segments: the United States
and the United Kingdom.

<TABLE>
<CAPTION>
                                           Three months ended         Nine Months Ended
                                               December 31,              December 31,
                                           2001         2000        2001          2000
                                       ------------------------   -----------------------
<S>                                         <C>          <C>         <C>           <C>
Net sales:
    United States, domestic            $   587,565  $   733,640   $ 1,998,198 $ 2,212,334
    United States, export                  325,021      770,408     1,183,580   2,071,214
    United Kingdom                         745,374      834,481     2,311,220   2,651,225
    Transfers between segments         (    37,728) (   130,944)  (   448,260) (  711,194)
                                       -----------  -----------   -----------  ----------

      Net sales                        $ 1,620,232  $ 2,197,585   $ 5,044,738 $ 6,223,579
                                       ===========  ===========   =========== ===========
</TABLE>

<TABLE>
<CAPTION>
                                           Three months ended         Nine Months Ended
                                               December 31,              December 31,
                                           2001         2000        2001          2000
                                       ------------------------   -----------------------
<S>                                          <C>           <C>          <C>          <C>
Income (loss) before income taxes:
    United States                      $   (87,656) $    65,133   $  (246,886) $  (70,707)
    United Kingdom                          61,494          (15)      171,055      63,774
    Corporate                               35,248       23,435       (40,844)  (  17,694)
                                      ------------  -----------   -----------  ----------

      Income before
        income taxes                   $     9,086  $    88,553   $  (116,675) $  (24,627)
                                       ===========  ===========   ===========  ==========

Depreciation and amortization:
    United States                      $    38,365  $    35,188   $   112,809  $  108,692
    United Kingdom                          17,087       10,234        42,979      29,368
    Corporate                                7,100        7,100        21,300      21,300
                                       -----------  -----------   -----------  ----------

                                       $    62,552  $    52,522   $   177,088  $  159,360
                                       ===========  ===========   ===========  ==========
</TABLE>
<TABLE>
<CAPTION>
                                            December 31, 2001         March 31, 2001
                                            -----------------         --------------
<S>                                               <C>                       <C>
Identifiable assets:
  United States                               $ 4,730,408               $ 5,302,642
  United Kingdom                                2,026,890                 2,005,105
  Corporate                                       346,498                   362,998
  Eliminations                               (    965,020)             (    934,032)
                                              -----------               -----------

    Total assets                              $ 6,138,776               $ 6,736,713
                                              ===========               ===========


Long lived assets:
  United States                               $   233,076               $   225,844
  United Kingdom                                  605,898                   622,775
                                              -----------               ------------

                                              $   838,974               $   848,619
                                              ===========               ===========
</TABLE>
                                       9
<PAGE>



                  COMTREX SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


6.       COMPREHENSIVE INCOME

         In the fiscal year ended March 31, 1999, the Company adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for the reporting and displaying of
comprehensive income and its components in the Company's consolidated financial
statements. Comprehensive income is defined in SFAS 130 as the change in equity
(net assets) of a business enterprise during the period from transactions and
other events and circumstances from non-owner sources. It includes all changes
in equity during a period except those resulting from investments by owners and
distributions to owners. The Company's comprehensive income is comprised of net
income and foreign currency translation adjustments. Comprehensive income (loss)
was $808 and $113,190 for the quarters ended December 31, 2001 and 2000,
respectively, and $(162,649) and $(49,650) for the nine months ended December
31, 2001 and 2000, respectively. The difference from net income as reported is
the tax effected change in the foreign currency translation adjustment component
of shareholders' equity.

7.       BANK LOAN, LINE OF CREDIT:

         In November of 2001, the Company entered into a credit facility with
Fleet National Bank (the "Bank"), replacing an existing facility originally
scheduled to expire on September 30, 2001 and subsequently extended through
November of 2001. The new credit facility provides the Company with the
availability of a total amount of $1,500,000 for borrowings and the issuance of
Irrevocable Letters of Credit and expires on September 30, 2002. Outstanding
borrowings bear interest at either the bank's prime rate of interest, or three
percent above the Euro-Rate interest, at the Company's option. The credit
facility is collateralized by substantially all domestic assets of the Company.
The previous facility with the Bank provided the Company with the availability
of a total amount of $2,000,000. Loans under the previous facility bore interest
at the bank's prime rate of interest less one half percent. All other terms and
conditions remained essentially the same.

         The current credit facility, as did the previous facility, also
requires that the Company maintain certain financial covenants as a condition of
the loan. Compliance with these covenants is reported to the Bank on a quarterly
basis. As of December 31, 2001, the Company was unable to meet the debt service
covenant, which requires cash flows from operating activities to be equal to, or
greater than, 125 percent of the Company's debt service, including interest and
taxes. The Company is therefore in technical default on the loan and the entire
amount of the outstanding loan is immediately callable as a consequence of such
technical default. Prior to the execution of the current credit facility, the
Company had reported its non-compliance with the debt service covenant for the
period ended September 30, 2001. The Company believes that it will come into
compliance with the debt service covenant during the fourth quarter of its
current fiscal year, the period ending March 31, 2002. Based on its negotiations
with the Bank, management believes that the credit facility will continue to be
available to the Company through its scheduled term. The terms of any renewal of
the credit facility will be dependent on the Company's ability to comply with
all terms of the credit facility in future quarterly reports to the Bank for the
periods ending March 31 and June 30, 2002.

8.       LONG TERM DEBT:

         On December 31, 2001, the Company repaid in full its obligation under a
convertible debenture issued in October of 1997 to Norman and Shirley Roberts.
At the time of repayment, a total of $216,667 was owed on the debenture, of
which $86,667 was due over the succeeding twelve months. The debenture was
payable in equal quarterly principal installments on the first day of each
calendar quarter, and bore interest at the fixed rate of 8% per annum. To
partially finance this repayment, the Company's wholly-owned subsidiary in the
U.K. entered into a second mortgage on the land and buildings in the U.K. in the
amount of (pound)100,000, or approximately $145,300, and utilized the proceeds
to reduce its accounts payable to the parent company. This note bears interest
at a floating rate of 2% over the base rate of the lending institution (base
rate of 4% as of 12/31/2001), and is payable in equal monthly principal amounts,
plus accrued interest, over a six year period.


<PAGE>


Item 2.  Management's Discussion and Analysis or Plan of Operation


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

This Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The matters discussed in this Form 10-QSB that are
forward-looking statements are based on current management expectations that
involve a number of risks and uncertainties. Potential risks and uncertainties
include, without limitation, the impact of economic conditions generally and in
the intelligent point-of-sale terminal industry; and the risk of unavailability
of adequate capital or financing. Further information on potential risks is
contained in the Item 1 section of the Company's Annual Report on Form 10-KSB
for the fiscal year ended March 31, 2001, as filed with the SEC.


Liquidity and Capital Resources

         As of December 31, 2001, the Company had total current assets of
$4,138,299, including cash and cash equivalents of $86,544, as compared to
$4,894,354 of total current assets and $164,866 of cash and cash equivalents as
of March 31, 2001. The Company had current liabilities of $2,114,521, resulting
in a current ratio of 2.0 as of December 31, 2001, compared to $2,515,657 and
1.9, respectively, as of March 31, 2001.

         Cash and cash equivalents decreased by $78,322 during the first nine
months of fiscal year 2002. Operating activities consumed $23,775 of cash, as
compared with cash generation of $240,588 for the corresponding prior year
period. Investing activities consumed $341,976 during the first nine months of
fiscal year 2002, while financing activities provided $287,429, principally from
borrowings under the Company's line of credit. During the corresponding prior
year period, investing activities consumed $171,416 and financing activities
provided $269,112, principally from proceeds realized on the issuance of equity
securities of $241,270.

         The Company reported a net loss of $164,165 for the nine month period
ended December 31, 2001, as compared to a net loss of $30,062 for the comparable
prior year period. The Company has net operating loss carryforwards of
approximately $2,660,000 for federal income tax purposes, which do not begin to
expire until 2004.

         The financial statements of Comtrex U.K. are translated into U.S.
dollars for financial reporting purposes. Revenues and expenses are translated
at an average exchange rate during the fiscal year, and the assets and
liabilities of Comtrex U.K. are translated at that average rate of exchange at
the end of each fiscal quarter. As a consequence of a difference in the exchange
rate used during fiscal year 2002 and the exchange rate as of March 31, 2001,
differences between accounts on the consolidated balance sheets as of December
31, 2001 and March 31, 2001 do not involve cash outlay to the extent they are
merely the result of a differing rate of exchange. The following analysis
relates to the changes in the Company's balance sheet accounts on a cash flow
basis.

         A decrease in accounts receivable of $513,309, a decrease in
inventories of $188,944, and depreciation of $177,088 represented significant
positive contributions to cash flow for the nine month period ending December
31, 2001. These positive cash flows were offset by the net loss of $164,165, a
decrease in accounts payable of $482,460, and a decrease in deferred revenues of
$269,715. Each of these amounts is largely a result of timing, and not
necessarily indicative of trends for the balance of the fiscal year. The
decrease of current receivables is a reflection of the Company's aggressive
collections efforts, coupled with a decline in revenues for the comparable
quarterly periods. The decrease in inventory for the nine month period was
primarily driven by a reduction of raw materials inventory achieved through
reduced product lead times and greater outsourcing initiatives.

         Another negative contribution to cash flow from operating activities
was a decrease in deferred revenue. Deferred revenue is principally comprised of
prepayments on maintenance contracts in the Company's U.K. subsidiary and its
U.S. district offices, which are billed on an annual basis. The decrease is of a
recurring nature, and not necessarily indicative of any trend representing a
decline in maintenance revenue or billings.

                                       11
<PAGE>
Liquidity and Capital Resources (continued)

         Of the $341,976 of cash used in investing activities, $244,786
represents capitalized software and design costs. The Company has increased its
investment in software development during this fiscal year as it prepares to
roll out new product offerings. The first component of the new product suite was
released during November of 2001. All development resources are now being
allocated toward the second component of the product suite, a set of 32-bit
Windows point-of-sale software modules. The capitalization of software and
design costs is expected to continue through the fourth quarter of the current
fiscal year at essentially the same rate. The complete product suite is
scheduled for initial release in the first quarter of fiscal year 2003, which is
the quarter ending June 30, 2002.

         Adjustments resulting from translating foreign functional currency
financial statements into U.S. dollars are included in the consolidated
statements of cash flows as an adjustment to reconcile net income to cash used
in operating activities. For the nine months ended December 31, 2001, these
adjustments had the effect of a cash provision of $4,772 on the consolidated
cash flows. On the consolidated balance sheets, these adjustments are recorded
in a currency translation adjustment in shareholders' equity. As a result of a
slightly improved exchange rate between the pound sterling and the U.S. dollar,
this adjustment to shareholders' equity changed from a negative impact of
$14,357 as of March 31, 2001, to a negative impact of $12,841 as of December 31,
2001.

         In February of 2001, the Company's wholly-owned subsidiary in the U.K.,
Comtrex Systems Corporation LTD, signed a line of credit agreement with National
Westminster Bank PLC. The agreement calls for borrowings of up to
(pound)150,000, and was renewed in December of 2001 through December 3, 2002.
Borrowings bear interest at the rate of 2 percent above the bank's base rate and
are collateralized by substantially all assets of the subsidiary. The Company is
not a guarantor on this line of credit.

     In November of 2001, the Company entered into a credit facility with Fleet
National Bank (the "Bank"), replacing an existing facility originally scheduled
to expire on September 30, 2001 and subsequently extended through November of
2001. The new credit facility provides the Company with the availability of a
total amount of $1,500,000 for borrowings and the issuance of Irrevocable
Letters of Credit and expires on September 30, 2002. Outstanding borrowings bear
interest at either the bank's prime rate of interest, or three percent above the
Euro-Rate interest, at the Company's option. The credit facility is
collateralized by substantially all domestic assets of the Company. The previous
facility with the Bank provided the Company with the availability of a total
amount of $2,000,000. Loans under the previous facility bore interest at the
bank's prime rate of interest less one half percent. All other terms and
conditions of the line of credit facility remained essentially the same.

         Both the current and prior credit facility also require that the
Company maintain certain financial covenants as a condition of the loan.
Compliance with these covenants is reported to the Bank on a quarterly basis. As
of December 31, 2001, the Company was unable to meet the debt service covenant,
which requires cash flows from operating activities to be equal to or greater
than 125 percent of the Company's debt service, including interest and taxes.
The Company is, therefore, in technical default on the loan and the entire
amount of the outstanding loan is immediately callable as a consequence of such
technical default.

         Prior to the execution of the current credit facility, the Company had
reported its non-compliance with the debt service covenant for the period ended
September 30, 2001 to the Bank. The Company believes that it will come into
compliance with the debt service covenant during the fourth quarter of its
current fiscal year, the period ending March 31, 2002. Based on its negotiations
with the Bank, management believes that the credit facility will continue to be
available to the Company throughout its scheduled term. The terms of any renewal
of the credit facility will be dependent on the Company's ability to comply with
all terms of the credit facility in future quarterly reports to the Bank for the
periods ending March 31 and June 30, 2002.


                                       12

<PAGE>


Liquidity and Capital Resources (continued)

         On December 31, 2001, the Company repaid in full its obligation under a
convertible debenture issued in October of 1997 to Norman and Shirley Roberts.
At the time of repayment, a total of $216,667 was owed on the debenture, of
which $86,667 was due over the succeeding twelve months. The debenture was
payable in equal quarterly principal installments on the first day of each
calendar quarter, and bore interest at the fixed rate of 8% per annum. To
partially finance this repayment, the Company's wholly-owned subsidiary in the
U.K. entered into a second mortgage on the land and buildings in the U.K. in the
amount of (pound)100,000, or approximately $145,300, with its primary lender,
National Westminster Bank PLC. The proceeds were utilized to reduce the accounts
payable of the subsidiary to the parent company. This note bears interest at a
floating rate of 2% over the base rate of the bank (base rate of 4% as of
12/31/2001), and is payable in equal monthly principal amounts, plus accrued
interest. The Company is not a guarantor on this note.

         In addition to securing a lower current rate of interest, this
transaction reduces the short term component of consolidated debt by
approximately $62,500. This reduction allows the Company to more readily comply
with the debt service covenant on its line of credit facility with Fleet
National Bank.

         The Company believes that its cash balance, together with its lines of
credit, provides the Company with adequate liquidity to finance its projected
operations for the foreseeable future. As of December 31, 2001, the Company had
no material commitments for capital expenditures.


Results of Operation

         Net sales during the first nine months of fiscal year 2002 decreased by
19%, to $5,044,738, as compared with corresponding sales of $6,223,579 during
the first nine months of fiscal year 2001. For the comparable quarters ended
December 31, sales decreased by 26%, to $1,620,232 from $2,197,585 for fiscal
year 2002 and fiscal year 2001, respectively. Results of operations of the
Company's U.K. distributor, acquired as of October 2, 1997, are consolidated in
both quarters. Results of operations of Comtrex Michigan, acquired on June 23,
1999, have been consolidated with those of the Company effective as of July 1,
1999.

         The Company reported a net loss of $164,165 for the current nine month
period, or $.12 per share, as compared with a loss of $30,062, or $.02 per
share, for the comparable prior year period. For the quarter ended December 31,
2001, the Company reported a net loss of $4,784, or $.00 per share, as compared
with net income of $95,813, or $.07 per share, for the third quarter of the
prior fiscal year.

         Administrative expenses decreased from $983,354 to $722,625 during the
first nine month period of fiscal year 2002 when compared with same period of
fiscal year 2001. This represents a decrease from 16% to 14% of net sales in the
comparative periods, despite the decline in revenues, and is the result of
personnel reductions in both district offices and at the corporate offices.
Sales, marketing and customer support expenses decreased from $1,951,890 during
the nine month period ended December 31, 2000, to $1,718,431, during the current
fiscal year period, representing 31% and 34% of net sales, respectively. The
decrease in absolute expenditures can be attributed to reductions in personnel
at the district office level and reduced corporate marketing and manufacturing
expenditures. Declining revenues caused such expenses to represent a slightly
higher percentage of sales. Neither corporate staffing nor expenditures for
sales or customer support was reduced over the comparative periods.
Substantially all of the operating activities of Comtrex U.K., like the
Company's district offices in Atlanta and Michigan, relate to the direct sale,
installation and service of products to end-users.

         Cost of sales during the third quarter and first nine months of fiscal
year 2002 were 47% and 48% of net sales, respectively, as compared to 47% of net
sales for both the comparable quarter and nine month period of the prior fiscal
year. Direct customer sales represented a higher percentage of sales during both
recent comparable periods. The gross margin on such direct product sales is
greater than sales through a distribution channel. In addition, these direct
sales activities include maintenance and repairs, installation, training and
implementation services. Such service related revenue is at a greater gross
margin than product sales.

                                       13
<PAGE>


Results of Operation (continued)

         The Company is finalizing the software design, development and
documentation of an entirely new suite of in-store software, including both back
office software and point-of-sale software. This development was partially
funded by a major customer during the fiscal year ended March 31, 2001 and
initial installations of the back office software were placed in service at
customer locations, through the Company's district office channel, during the
second quarter of the current fiscal year. The back office software component of
this product suite was released for general sale during the most recent quarter.
This component of the new product suite is designed to interact with the
Company's current point-of-sale product line. The primary market for this
product combination is in the quick service market where the Company's current
point-of-sale software remains extremely competitive from a feature and
functionality perspective. The target customer base is small to medium sized
franchise operations, with between five and fifty locations.

         Management believes that the increased level of sales activity during
the second quarter of the current fiscal year was a direct result of the ongoing
development of its new software product offerings. The functionality and
reporting capabilities of the new software are equal to or better than
competitive product offerings in the opinion of the Company's management.

         Sales during the third quarter were negatively impacted by a
combination of several factors. The release for general delivery of the back
office software has required a significant investment of training time, both
in-house and for the Company's distribution channels. The Company had previously
reported management's belief that this allocation of sales and support resources
during the third quarter of this fiscal year might have an adverse affect on
sales during the quarter. The ability of the Company to essentially break-even
during the third quarter, despite revenue reductions of $269,352, or 14%, when
compared to the second quarter of the current fiscal year, is the result of
aggressive cost cutting measures in the administrative and manufacturing
operating areas of the Company.

         Other factors negatively impacting the most recent quarter include the
overall stagnant economy, which caused several planned installations to be
postponed into calendar year 2002. In addition, the target customer base
represents a market whose sales cycle requires an initial store installation,
followed by a period of evaluation and refinement, prior to any chain-wide
rollout. The Company is involved in such a sales cycle with several potential
customers through its district offices in Atlanta and Michigan.

          The Company also continues to experience a gradual erosion in sales to
customers in the sit-down dining segment of its customer base, coupled with a
gradual decline in sales through its U.S. dealer network. The primary customer
base for the Company's U.S. dealer network is the sit-down dining segment.
Management believes that in order to effectively compete in this market segment,
the Company must release for general delivery its next generation point-of-sale
software. Currently, all development resources of the Company are focused on
this effort. Initial beta installation of the point-of-sale software is
scheduled for the first quarter of fiscal year 2003. While management believes
that the fourth quarter of the current fiscal year will show improved operating
results when compared to both the third quarter of the current fiscal year and
the comparable prior year period, long term sales growth is dependent on the
successful release of the entire product suite currently under development.

         As of February 1, 2002, the Company's backlog was approximately
$618,000. Excluded from this backlog are any orders for delivery to subsidiaries
or district offices from the parent. The Company's backlog as of January 31,
2001 was approximately $956,000. The Company expects that substantially all of
its current backlog will be shipped within the next 90 days.

                                       14
<PAGE>

                           PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits required by Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
Exhibit No.       Description of Instrument
-----------       -------------------------
<S>                                 <C>
3.1  *(h)         Certificate of Incorporation, as amended through February 14, 2001,
                  of the Company
3.2  *(b)         By-Laws, as amended, of the Company
4.1  *(b)         Specimen Common Stock Share Certificate
4.2  *(e)         Subordinated Convertible Debenture, in the original principal amount
                  of $300,000 (the "Debenture"), issued by the Company to Norman and
                  Shirley Roberts
4.4  *(g)         Amendment No. 1, dated July 31, 2000, to the Debenture issued by the Company to Norman and Shirley Roberts
10.1 *(c)         1992 Non-Qualified Stock Option Plan of the Company
10.2 *(d)         1995 Employee Incentive Stock Option Plan of the Company
10.3 *(f)         1999 Stock Option Plan of the Company
10.4 *(i)         Loan Agreement (Business Overdraft Facility) between Comtrex Systems
                  Corporation LTD and National Westminster Bank PLC dated February 8, 2001.
10.5 *(a)         Amended and Restated Master Advance Note between the Company and Fleet National Bank, dated November 19, 2001
10.6 *(a)         Advice of Borrowing Terms between Comtrex Systems Corporation LTD and National Westminster Bank, PLC,
                  dated December 21, 2001
</TABLE>
-------------------------
*(a)     Filed herewith.
*(b)     Incorporated by reference to the exhibits to the Company's Form 8-K
         filed with the Securities and Exchange Commission on May 16, 1989.
*(c)     Incorporated by reference to the exhibits to the Company's definitive
         proxy statement filed with the Securities and Exchange Commission on
         July 16, 1992.
*(d)     Incorporated by reference to the exhibits to the Company's definitive
         proxy statement filed with the Securities and Exchange Commission on
         July 13, 1995.
*(e)     Incorporated by reference to the exhibits to the Company's Form 10-KSB
         filed with the Securities and Exchange Commission on June 29, 1998.
*(f)     Incorporated by reference to the exhibits to the Company's Form 10-KSB
         filed with the Securities and Exchange Commission on June 28, 1999.
*(g)     Incorporated by reference to the exhibits to the Company's Form 10-QSB
         filed with the Securities and Exchange Commission on August 10, 2000.
*(h)     Incorporated by reference to the exhibits to the Company's Form 10-KSB
         filed with the Securities and Exchange Commission on June 15, 2001.
*(i)     Incorporated by reference to the exhibits to the Company's Form 10-QSB
         filed with the Securities and Exchange Commission on August 10, 2001

         (b)      Reports on Form 8-K

         During the quarter ended December 31, 2001, no current reports on Form
8-K were filed by the registrant with the Securities and Exchange Commission.


                                       15

<PAGE>
                                   SIGNATURES



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




                                   COMTREX SYSTEMS CORPORATION
                                          (Registrant)



Date:  February 11, 2002           By:   /s/
      -------------------              --------------------------------------
                                        Jeffrey C. Rice
                                        Chief Executive Officer



Date:  February 11, 2002           By:   /s/
      -------------------              --------------------------------------
                                        Pamela A. Reci
                                        Chief Accounting Officer







                                       16


<PAGE>


                                  Exhibit Index
                                  -------------



Exhibit                                                                 Page
-------                                                                 ----
10.5       Amended and Restated Master Advance Note between the
           Company and Fleet National Bank, dated November 19, 2001      18

10.6       Advice of Borrowing Terms between Comtrex Systems
           Corporation LTD and National Westminster Bank, PLC,
           dated December 21, 2001                                       25


                                       16