<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               -------------------

                                  FORM 10-QSB/A

(Mark One)

( X )    Quarterly report under Section 13 or 15(d) of the Securities Exchange
         Act of 1934

         FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998

(   )    Transition report under Section 13 or 15(d) of the Exchange Act

         For the transition period from ______________________ to ______________

                         Commission file number: 0-21633

                         BRISTOL RETAIL SOLUTIONS, INC.
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)

          Delaware                                        58-2235556
(STATE OR OTHER JURISDICTION OF                (IRS EMPLOYER IDENTIFICATION NO).
INCORPORATION OR ORGANIZATION)

5000Birch Street, Suite 205, Newport Beach, California 92660 (ADDRESS OF
    PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (714) 475-0800
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                 Not Applicable
      (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE
                                  LAST REPORT)

      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:

      Common Stock, $.001 par value - 5,556,746 shares as of April 30, 1998
      Class A Redeemable Common Stock Purchase Warrants - 718,750 as of April
      30, 1998

      Transitional Small Business Disclosure Format (check one):
   Yes______   No  X

                                     Page 1

<PAGE>
                         BRISTOL RETAIL SOLUTIONS, INC.

                                      Index

Part I    --- FINANCIAL INFORMATION                                         Page

  Item 1.  Financial Statements (Unaudited)

       Consolidated Balance Sheet as of March 31, 1998 (As Restated)         3

       Consolidated Statements of Operations for the three months
       ended March 31, 1998 (As Restated) and 1997                           4

       Consolidated Statements of Cash Flows for the three months
       ended March 31, 1998 and 1997                                         5

       Notes to Consolidated Financial Statements                           6-8

  Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                              9-15

Part II   --- OTHER INFORMATION

  Item 1.  Legal Proceedings                                                 16
  Item 2.  Changes in Securities and Use of Proceeds                       16-17
  Item 6.  Exhibits and Reports on Form 8-K                                  18

Signature                                                                    19

                                     Page 2

<PAGE>

<TABLE>
<CAPTION>

                         BRISTOL RETAIL SOLUTIONS, INC.
                           Consolidated Balance Sheet
                                   (Unaudited)
                                 March 31, 1998
                                  (As Restated)

                                     ASSETS

<S>                                                                                          <C>
Current assets
        Cash and cash equivalents                                                            $    1,327,807
        Accounts receivable, net of allowance for doubtful accounts of $392,809                   2,960,951
        Inventories                                                                               3,171,255
        Prepaid expenses and other current assets                                                   381,973
        Current portion of note receivable                                                          147,187
                                                                                             ---------------
               Total current assets                                                               7,989,173
 Property and equipment, at cost:
        Furniture and equipment                                                                     695,024
        Automobiles                                                                                 214,688
        Leasehold improvements                                                                      110,327
                                                                                             ---------------
                                                                                                  1,020,039
        Accumulated depreciation and amortization                                                  (304,714)
                                                                                             ---------------
               Property and equipment, net                                                          715,325
Intangible assets, net of accumulated amortization of $326,775                                    4,099,990
Note receivable - noncurrent portion                                                                259,271
Other assets                                                                                        867,798
                                                                                             ---------------
               Total assets                                                                  $   13,931,557
                                                                                             ================

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
        Short-term borrowings                                                                $    2,122,805
        Accounts payable                                                                          1,857,716
        Accounts payable to related party                                                            32,778
        Accrued salaries, wages and related benefits                                                789,411
        Accrued expenses                                                                            360,125
        Deferred revenue                                                                          1,576,297
        Customer advances                                                                           462,082
        Current portion of long-term debt                                                            36,275
        Current portion of capital lease obligations                                                 20,371
                                                                                             ---------------
               Total current liabilities                                                          7,257,860
Capital lease obligations - noncurrent portion                                                        9,299
Other long-term liabilities                                                                          76,187
Commitments and contingencies
Stockholders' equity
          Preferred stock, $.001 par value:
               4,000,000 shares authorized;
               Series A Convertible Preferred Stock: 10,000 shares issued
                 and outstanding (aggregate liquidation preference $1,000,000)                           10
         Common stock, $.001 par value:
               20,000,000 shares authorized; 5,556,746 and 5,551,746 shares issued
               and outstanding                                                                        5,557
        Additional paid-in capital                                                               12,607,518
        Accumulated deficit                                                                      (6,000,249)
                                                                                             ---------------
                                                                                                  6,612,836
        Less 5,000 shares of treasury stock, at cost                                                (24,625)
                                                                                             ---------------
               Total stockholders' equity                                                         6,588,211
                                                                                             ---------------
               Total liabilities and stockholders' equity                                    $   13,931,557
                                                                                             ===============

</TABLE>

See accompanying notes to consolidated financial statements.

                                     Page 3

<PAGE>

<TABLE>

                         BRISTOL RETAIL SOLUTIONS, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)

<CAPTION>

                                                                                       Three Months Ended March 31,
                                                                                          1998              1997
                                                                                     ---------------   ---------------
                                                                                      (As Restated)
<S>                                                                                  <C>               <C>
Revenue:
         System sales and installation                                               $    3,792,303    $    1,748,821
         Service and supplies sales                                                       2,469,593           911,477
                                                                                     ---------------   ---------------

Total revenue                                                                             6,261,896         2,660,298
Cost of revenue:
         System sales and installation                                                    2,322,228         1,171,596
         Service and supplies sales                                                       1,739,654           689,335
                                                                                     ---------------   ---------------

Total cost of revenue                                                                     4,061,882         1,860,931
                                                                                     ---------------   ---------------

Gross margin                                                                              2,200,014           799,367

Operating expenses:
            Selling, general and administrative expenses                                  2,427,702         1,284,821
            Research and development costs                                                  165,807                --
                                                                                     ---------------   ---------------

Total operating expenses                                                                  2,593,509         1,284,821
                                                                                     ---------------   ---------------

Operating loss                                                                             (393,495)         (485,454)

Other expense (income)                                                                       57,184           (51,518)
                                                                                     ---------------   ---------------

Loss before income taxes                                                                   (450,679)         (433,936)
Provision for income tax                                                                      2,500             1,050
                                                                                     ---------------   ---------------

Net loss                                                                             $     (453,179)   $     (434,986)
                                                                                     ===============   ===============

Net loss before preferred stock accretion and dividends                              $     (453,179)   $     (434,986)
Preferred stock accretion and dividends:
            Accretion related to Series A Convertible Preferred Stock                      (241,916)               --
            Imputed dividends for Series A Convertible Preferred Stock                     (227,589)               --
            Cumulative dividends for Series A Convertible Preferred Stock                    (2,333)               --
                                                                                     ---------------   ---------------

Net loss applicable to common stockholders                                           $     (925,017)   $     (434,986)
                                                                                     ===============   ===============

Basic and diluted net loss to common stockholders per share                          $        (0.17)   $        (0.09)
                                                                                     ===============   ===============

Basic and diluted weighted average common shares outstanding                              5,551,654         4,745,654
                                                                                     ===============   ===============
</TABLE>

See accompanying notes to consolidated financial statements.

                                     Page 4

<PAGE>
<TABLE>

                         BRISTOL RETAIL SOLUTIONS, INC.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<CAPTION>

                                                                                             Three Months Ended March 31,
                                                                                                 1998               1997
                                                                                            ---------------   ---------------
                                                                                            
<S>                                                                                         <C>               <C>
Cash flows from operating activities:
      Net loss                                                                              $     (453,179)   $     (434,986)
      Adjustments to reconcile net loss to net cash used in operating
         activities:
         Depreciation                                                                               67,815            21,301
         Amortization                                                                              116,220            28,522
         Provision for doubtful accounts                                                            40,459             9,162
         Provision for excess and obsolete inventories                                                  --            25,500
         Stock compensation expense                                                                     --             8,021
         Changes in operating assets and liabilities:
                  Accounts receivable                                                              201,377            30,408
                  Inventories                                                                      154,313           (82,350)
                  Prepaid expenses and other assets                                                (92,304)          (42,018)
                  Accounts payable                                                                (136,796)         (124,344)
                  Other accrued expenses                                                          (232,357)          (54,401)
                  Deferred revenue                                                                 (19,999)           64,144
                  Customer advances                                                                 62,324           (13,082)
                  Other long-term liabilities                                                        9,189            12,249
                                                                                            ---------------   ---------------

Net cash used in operating activities                                                             (282,938)         (551,874)

Cash flows from investing activities:
         Receivables from rescinded acquisition                                                     31,761                --
         Purchases of property and equipment                                                       (27,690)          (13,359)
                                                                                            ---------------   ---------------

Net cash provided by (used in) investing activities                                                  4,071           (13,359)

Cash flows from financing activities:
         Repayment of capital lease obligations                                                     (4,421)           (2,230)
            Net borrowings (repayments) on line of credit                                           62,664          (388,441)
         Repayment of long-term debt                                                               (17,835)               --
         Issuance of preferred stock, net of offering costs                                        827,584                --
         Issuance of common stock, net of offering costs                                            22,753                --
                                                                                            ---------------   ---------------

Net cash provided by (used in) financing activities                                                890,745          (390,671)

Net increase (decrease) in cash and cash equivalents                                               611,878          (955,904)
Cash and cash equivalents at beginning of period                                                   715,929         5,475,674
                                                                                            ---------------   ---------------

Cash and cash equivalents at end of period                                                  $    1,327,807    $    4,519,770
                                                                                            ===============   ================

Supplemental disclosures of cash flow information:
         Cash paid for interest                                                             $       89,815    $       12,734
                                                                                            ===============   ===============
         Cash paid for income taxes, net                                                    $        4,758    $       96,459
                                                                                            ===============   ===============
Supplemental disclosures of non-cash transactions:
           Warrants issued in connection with the sale of preferred stock                   $       69,500    $           --
                                                                                            ===============   ===============
           Inventory received in payment of rescinded acquisition receivable                $       33,484    $           --
                                                                                            ===============   ================

For non-cash transactions relating to Series A Convertible Preferred Stock, see
Stockholders' Equity

</TABLE>

See accompanying notes to consolidated financial statements.

                                     Page 5
<PAGE>

                         BRISTOL RETAIL SOLUTIONS, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                                 March 31, 1998

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

         Bristol Retail Solutions, Inc. (the Company) was incorporated on April
3, 1996 in the state of Delaware for the purpose of acquiring and operating a
national network of full service retail automation solution providers. From its
inception through March 31, 1998, the Company has acquired six companies. The
Company earns revenue from the sale and installation of point-of-sale (POS)
systems and turnkey retail automation (VAR) systems, the sale of supplies and
from service fees charged to customers under maintenance agreements. Sales and
service operations are located in various states throughout the western and
midwestern United States.

         The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. The Company's acquisitions
were accounted for in the Company's consolidated financial statements as
purchases in accordance with Accounting Principles Board Opinion (APB) No. 16.
The purchase prices were allocated to the underlying assets and liabilities
based upon their respective fair market values. The results of the acquisitions
are included in the Company's consolidated financial statements subsequent to
the respective dates of acquisition. Accordingly, the financial statements for
the periods subsequent to the acquisitions are not comparable to the financial
statements for the periods prior to the acquisitions.

         The accompanying consolidated financial statements have been prepared
by the Company without audit in accordance with generally accepted accounting
principles for interim financial information and with instructions to Form
10-QSB and Item 310 of Regulation S-B. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. The accompanying consolidated
financial statements do not include certain footnotes and financial
presentations normally required under generally accepted accounting principles
and, therefore, should be read in conjunction with the audited financial
statements included in the Company's Annual Report on Form 10-KSB/A for the year
ended December 31, 1997. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.

         The American Institute of Certified Public Accountants (AICPA) recently
adopted Statement of Position (SOP) 97-2, Software Revenue Recognition, that
supersedes SOP 91-1 and becomes effective for years beginning after December 15,
1997. The Company adopted SOP 97-2 at the beginning of the current year. Such
adoption did not have a significant impact on the Company's financial statements
for the three months ended March 31, 1998.

RESTATEMENT

         On March 18, 1998, the Company issued preferred stock with a future
conversion discount, the Series A Convertible Preferred Stock (see STOCKHOLDERS
EQUITY). This preferred stock includes a conversion feature which permits the
holders of the preferred stock to convert their holdings to common shares at a
discount from the market price of the common stock when converted. At the March
13, 1997, meeting of the Emerging Issues Task Force (EITF), the staff of the
Securities and Exchange Commission (SEC) issued announcement EITF D-60 regarding
Accounting for the Issuance of Convertible Preferred Stock and Debt Securities
with a Nondetachable Conversion Feature. The announcement dealt with, among
other things, the belief by the SEC staff that any discounts on future
conversions of securities are analogous to a dividend and should be recognized
as a return to the preferred shareholders.

         Subsequent to the issuance of the Company's consolidated financial
statements for the three months ended March 31, 1998, in conjunction with a
review of the Company's registration statement on Form S-3 filed on April 17,
1998 relating to the registration of common stock underlying the Series A
Convertible Preferred Stock, the SEC requested that the Company apply the
accounting suggested in their announcement to the Company's Series A Convertible
Preferred Stock.

        Accordingly, the consolidated statement of operations for the
three-month period ended March 31, 1998 contained in this Form 10-QSB/A has been
restated from that originally issued to show on the face of the statement of
operations the amount of accretion recorded to increase the Series A Convertible
Preferred Stock to its issuance value; the value of the beneficial conversion
feature at the date of issuance of the Series A Convertible Preferred Stock,
shown as imputed dividends; cumulative dividends for the Series A Convertible
Preferred Stock; and a line item for net loss applicable to common stockholders.
The calculation of net loss per share has also been revised to reflect such
accounting. These changes resulted in an increase in net loss applicable to
common stockholders from $453,000 to $925,000 and an increase in the basic and
diluted net loss per share from $ (0.08) to $ (0.17). The consolidated balance
sheet at March 31, 1998 has been restated to reflect a reclassification of
$228,000 from accumulated deficit to additional paid-in capital related to the
beneficial conversion feature of the Series A Convertible Preferred Stock.

                                     Page 6

<PAGE>

INCOME TAXES

         The Company provides for income taxes in interim periods based on the
estimated effective income tax rate for the complete year. For the three months
ended March 31, 1998 and 1997, the estimated effective income tax rate is less
than the U.S. statutory rate primarily due to a 100% valuation allowance
provided against the deferred tax assets that arose from the current operating
loss.

BASIC AND DILUTED PER SHARE INFORMATION

         In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per
Share, which is effective for financial statements for interim and annual
periods ending after December 15, 1997. SFAS No. 128 redefines earnings per
share under generally accepted accounting principles. SFAS No. 128 requires the
Company to report Basic EPS, as defined therein, which excludes all common share
equivalents from the earnings per share computation, and Diluted EPS, as defined
therein, which is calculated similar to the Company's primary earnings per share
computation. All historical earnings per share information has been restated as
required by SFAS No. 128.

         Basic net income (loss) per share is computed using the weighted
average number of common shares outstanding during the periods presented.
Diluted net income (loss) per share is computed using the weighted average
number of common and common equivalent shares outstanding during the periods
presented assuming the exercise of the Company's stock options and warrants and
conversion of outstanding preferred stock and preferred stock dividends on
Series A Convertible Preferred Stock . Common equivalent shares have not been
included where inclusion would be antidilutive.

         At March 31, 1998 and 1997, basic and diluted loss per share is based
on the weighted average number of common shares outstanding and net loss
applicable to common stockholders. Common stock equivalents, which consist of
stock options, warrants and conversion of preferred stock and preferred stock
dividends, were antidilutive for the three months ended March 31, 1998 and 1997.
Net loss applicable to common stockholders for the three months ended March 31,
1998 is computed as net loss for the quarter of $453,000 plus preferred stock
accretion of $242,000, imputed dividends related to the beneficial conversion
feature of the preferred stock of $228,000 and cumulative preferred stock
dividends of $2,000.

STOCKHOLDERS' EQUITY

         On January 2, 1998, the Company issued 8,236 shares of common stock to
its employees under the 1997 Employee Stock Purchase Plan.

         On March 18, 1998, the Company entered into a definitive agreement for
a private placement of shares of Series A Convertible Preferred Stock (the
Preferred Stock). The investment commitment is up to $2,000,000 and will be
issued in three installments. The Preferred Stock agreement also contains
certain registration rights. The first installment of $1,000,000, consisting of
10,000 shares, funded on March 18, 1998. The second and third installments of up
to $500,000 each will close within thirty and sixty days, respectively, after
the effective date of the Company's registration statement on Form S-3 (No.
333-50385), filed with the Securities and Exchange Commission on April 17, 1998,
assuming that the various conditions set forth in the purchase agreement are
met. As of the date of this filing, the Securities and Exchange Commission has
not declared the registration statement effective. The Preferred Stock is
convertible by the holders into common stock of the Company at any time into a
number of shares of common stock determined by dividing the issue price by the
conversion price, which is defined to be 78% of the lowest five-day average
closing bid price for the 25-day period prior to the date of the conversion
notice. At no time shall the conversion price be greater than $3.26 (110% of the
five-day average bid price prior to the date such shares were purchased). The
dividends on the Preferred Stock are cumulative and are payable quarterly in
stock or in cash, at the holder's option, at the rate of 6% per annum of the
original issue price of the stock. The liquidation preference of each share of
Preferred Stock is $100 plus unpaid dividends. The purchaser of the Preferred
Stock received warrants to purchase 125,000 shares of the Company's common stock
concurrently with the first $1,000,000 installment. These warrants were valued
by the Company at $181,000 using a Black-Scholes option pricing model. The
amounts that may be purchased under the second and third installments are
limited by a provision in the Preferred Stock agreement that prohibits the
purchaser from owning more than 20% of the Company's common stock on an
as-converted basis. In connection with the sale of the Preferred Stock, the
Company issued warrants to purchase 25,000 shares of the Company's common stock
to each of Wharton Capital Partners, Ltd. and HD Brous & Co., Inc., as
compensation for services provided by them as placement agents. These warrants
were valued by the Company at $70,000 using a Black-Scholes option pricing
model.

                                     Page 7
<PAGE>

         The Preferred Stock was recorded at fair value on the date of issuance
less issue costs. The Company recorded accretion of $242,000 to increase the
carrying value to the issuance value of $1,000,000. The Preferred Stock is
convertible by the holders at any time into common stock at a conversion rate
which is less than the fair value of the common stock. Accordingly, the Company
recorded as imputed dividends the value of the beneficial conversion feature of
$228,000. The Company also accrued cumulative preferred dividends of $2,000 at
March 31, 1998. 

COMPREHENSIVE INCOME

         The Company adopted SFAS No. 130, REPORTING COMPREHENSIVE INCOME,
during the quarter ended March 31, 1998. The Company's total comprehensive loss
for the quarter ended March 31, 1998, was $925,000, consisting of the Company's
net loss for the quarter of $453,000, Preferred Stock accretion of $242,000,
imputed dividends related to the beneficial conversion feature of the Preferred
Stock of $228,000 and cumulative preferred dividends of $2,000. There were no
items of other comprehensive income for the quarter ended March 31, 1997.

CONTINGENCIES

         The Company's subsidiaries have been, from time to time, parties to
various lawsuits and other matters involving ordinary and routine claims arising
in the normal course of business. In the opinion of management of the Company,
although the outcomes of these claims and suits are not presently determinable,
in the aggregate, the outcome of any of these matters will not have a material
adverse affect on the Company's business, financial position or results of
operations or cash flows.

         On or about August 7, 1997, a class action complaint was filed against
the Company and certain of the Company's officers and directors. Underwriters
for the Company's initial public offering are also named as defendants. The
class action plaintiffs are Lincoln Adair, Antique Prints, Ltd., and Martha
Seamons, on behalf of themselves and all others similarly situated. The case is
pending in the United States District Court for the Southern District of New
York. In addition to seeking themselves declared proper plaintiffs and having
the case certified as a class action, plaintiffs seek unspecified monetary
damages. The plaintiffs' complaint alleges claims under the federal securities
laws for alleged misrepresentations and omissions in connection with purchases
of securities. The Company disputes the allegations made in the complaint and is
vigorously defending itself. 

SUBSEQUENT EVENTS

         On May 8, 1998, the Company, through its wholly-owned subsidiary
Automated Register Systems, Inc., acquired all of the outstanding common stock
of Quality Business Machines Co. (QBM), a POS dealer with operations in
Sacramento, California, for an aggregate purchase price of $900,000 paid as
follows: $500,000 in common stock of the Company, valued as of the closing date
of the acquisition; $330,000 in cash; and a promissory note in the principal
amount of $70,000 executed by the Company in favor of QBM. The aggregate
purchase price is subject to post-closing reduction in the event certain
financial targets of QBM are not met. The transaction was recorded under the
purchase method of accounting. Had the acquisition occurred at the end of the
period, the effect on the weighted-average common shares outstanding would have
been immaterial.

                                     Page 8
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                 MARCH 31, 1998

         The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this
Quarterly Report on Form 10-QSB/A, as well as the Company's audited consolidated
financial statements for the year ended December 31, 1997.

         The Company's financial condition and results of operations have
changed considerably since the Company's inception in April 1996, as a result of
the Company's acquisition strategy. The Company has completed six acquisitions
since its inception through the end of December 31, 1997, all of which were
accounted for under the purchase method of accounting. No acquisitions were
completed by the Company during the quarter ended March 31, 1998. Due to the
Company's growth through acquisitions, year-to-year comparisons of the
historical results of the Company's operations have been affected primarily by
the addition of acquired companies. The dollar increases in the various revenue
and expense components of the Company's results are due primarily to growth from
acquisitions. Therefore, these year-over-year changes are not necessarily
indicative of changes that will occur in the future. The Company expects that
acquisitions will continue to impact the Company's future operating results
based on the Company's current acquisition strategy.

         This Quarterly Report on Form 10-QSB/A contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed under "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Additional Factors That May Affect
Future Results."

REVENUE

         The Company's consolidated total revenue is comprised of two
components: (i) revenue derived from the sale and installation of hardware and
software (Systems Revenue) and (ii) revenue derived from the sale of services
and supplies (Service Revenue). Total revenue for the quarter ended March 31,
1998 was $6,262,000 and was comprised of revenue from the six companies the
Company had acquired prior to such quarter. This represents an increase of 135%
from the Company's total revenue of $2,660,000 for the quarter ended March 31,
1997. The increase in revenue from the quarter ended March 31, 1997 to the
quarter ended March 31, 1998 was due primarily to the revenue contributed by the
additional businesses acquired during 1997.

         Total revenue for the quarter ended March 31, 1998 was comprised of 61%
Systems Revenue and 39% Service Revenue, as compared to a revenue composition of
66% Systems Revenue and 34% Service Revenue for the quarter ended March 31,
1997. The mix of revenue changed from 1997 to 1998 primarily due to an emphasis
on service revenue at the companies acquired in the latter half of 1997.

         No customer accounted for more than 10% of total revenue for the
quarter ended March 31, 1998. Sales to one customer accounted for approximately
10% of total revenue for the quarter ended March 31, 1997. Sales of products
from the Company's three principal hardware vendors, Panasonic, ERC Parts, Inc.
(ERC), a distributor of Panasonic products, and NCR Corporation (NCR), accounted
for approximately 21% of total revenue for the quarter March 31, 1998, and
approximately 60% of total revenue for the quarter ended March 31, 1997. The
Company has supply agreements with these manufacturers. The agreements are
non-exclusive, have geographic limitations and may have renewable one-year terms
depending upon the Company's achievement of a previously-agreed-to procurement
quota. Geographical limitations are the assignment of sales territories that
define the municipalities and states where the Company's subsidiaries can sell a
manufacture's hardware or software. The actual sales territories for each
manufacturer are subsidiary-specific and some subsidiaries may not have
permission to sell hardware or software of certain manufactures in certain
regions or territories of the country. A change in the Company's relationships
with these principal vendors could have a material adverse effect on the
Company's financial condition and results of operations.

GROSS MARGIN

         Gross margin increased to $2,200,000 for the three months ended March
31, 1998, from $799,000 for the three months ended March 31, 1997. As a
percentage of sales, gross margin for the quarter ended March 31, 1998 was 35%
and was comprised of gross margin for Systems Revenue of 39% and gross margin
for Service Revenue of 30%. Gross margin for the quarter ended March 31, 1997
was 30% and was comprised of gross margin for Systems Revenue of 33% and gross
margin for Service Revenue of 24%. The increase in gross margin for Systems
Revenue between years was primarily due to an improved product mix. The increase
in gross margin for Service Revenue was due to an increase in pricing and cost
reductions.

                                     Page 9
<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Total selling, general and administrative expenses in the first quarter
of 1998 of $2,428,000 increased by $1,143,000 from the comparable prior-year
period and represented 39% of total revenue, versus 48% of total revenue in the
comparable prior year period. The increase in expenses between years was
primarily due to the inclusion of the results of the companies acquired in the
second and third quarters of 1997. The decrease in selling, general and
administrative expenses as a percentage of revenue during the quarter ended
March 31, 1998, compared to the comparable prior year quarter is primarily due
to cost reductions realized through the consolidation of certain redundant
branch locations and job functions. This decrease was partially offset by
increases in administrative expenses at corporate headquarters needed to
integrate acquired companies and support future growth.

RESEARCH AND DEVELOPMENT COSTS

         Research and development costs were $166,000 during the three-month
period ended March 31, 1998 and consist primarily of internal costs to develop
and design point-of-sale licensed software for the golf course and resort
markets. The Company's policy is to expense such costs until technological
feasibility is established. At March 31, 1998, such technological feasibility
had not been established.

OTHER EXPENSE (INCOME)

         The Company earned interest income of $33,000 for the three-month
period ended March 31, 1998 compared to $64,000 for the quarter ended March 31,
1997. In the prior year, the Company had earned interest income on the proceeds
from an offering in November of 1996. These proceeds were subsequently used to
fund the cash consideration for acquisitions consummated during 1997. The
Company recognized interest expense of $90,000 for the three-month period ended
March 31, 1998 compared to $13,000 for the quarter ended March 31, 1997.
Interest expense in both years consisted primarily of interest on outstanding
balances on the Company's lines of credit. The increase was a direct result of
increased borrowings under the existing credit facilities over the prior year.

INCOME TAX PROVISION

         The Company recorded an effective income tax provision of (0.6%) and
(0.2%) for the three-month periods ended March 31, 1998 and 1997, respectively.
Income tax expense in both years consisted solely of state taxes as the Company
had a taxable loss for federal income tax purposes.

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS

         The Company's loss applicable to common stockholders for the quarter
ended March 31, 1998, was $925,000, consisting of the Company's net loss for the
quarter of $453,000, accretion of $242,000 to increase the Series A Convertible
Preferred Stock issued on March 18, 1998 (see LIQUIDITY AND CAPITAL RESOURCES OF
THE COMPANY) to its issuance value of $100 per share, imputed dividends related
to the beneficial conversion feature of the Series A Convertible Preferred Stock
of $228,000 and cumulative preferred dividends of $2,000.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

         The Company had cash and cash equivalents of $1,328,000, working
capital of $731,000 and capitalization of $6,588,000 at March 31, 1998. During
the three months ended March 31, 1998, the Company used $283,000 of cash in
operations; generated $4,000 from investing activities; and generated $891,000
from financing activities, which consists of the net impact of borrowings and
repayments under the Company's various debt agreements and the issuance of
preferred stock. During the three months ended March 31, 1997, the Company
utilized $552,000 for operations; utilized $13,000 for the purchase of property
and equipment; and utilized $391,000 for financing activities, primarily
representing net repayments under the Company's line of credit facilities.

         On March 18, 1998, the Company entered into a definitive agreement for
a private placement of shares of Series A Convertible Preferred Stock (the
Preferred Stock). The investment commitment is up to $2,000,000 and will be
issued in three installments. The first installment of $1,000,000, consisting of
10,000 shares, funded on March 18, 1998. The second and third installments of up
to $500,000 each will close within thirty and sixty days, respectively, after
the effective date of the Company's registration statement on Form S-3 (No.
333-50385), filed with the Securities and Exchange Commission on April 17, 1998,
assuming that the various conditions set forth in the purchase agreement are
met. As of the date of this filing, the Securities and Exchange Commission has
not declared the registration statement effective. The Preferred Stock is
convertible by the holders into common stock of the Company at any time into a
number of shares of common stock determined by dividing the issue price by the
conversion price, which is defined to be 78% of the lowest five-day average
closing bid price for the 25-day period prior to the date of the conversion
notice. At no time shall the conversion price be greater than $3.26 (110% of the
five-day average bid price prior to the date such shares were purchased). The
dividends on the Preferred Stock are cumulative and are

                                    Page 10

<PAGE>

payable quarterly in stock or in cash, at the holder's option, at the rate of 6%
per annum of the original issue price of the stock. The liquidation preference
of each share of Preferred Stock is $100 plus unpaid dividends. The purchaser of
the Preferred Stock received warrants to purchase 125,000 shares of the
Company's common stock concurrently with the first $1,000,000 installment. These
warrants were valued by the Company at $181,000 using a Black-Scholes option
pricing model. The amounts that may be purchased under the second and third
installments are limited by a provision in the Preferred Stock agreement that
prohibits the purchaser from owning more than 20% of the Company's common stock
on an as-converted basis. In connection with the sale of the Preferred Stock,
the Company issued warrants to purchase 25,000 shares of the Company's common
stock to each of Wharton Capital Partners, Ltd. and HD Brous & Co., Inc., as
compensation for services provided by them as placement agents. These warrants
were valued by the Company at $70,000 using a Black-Scholes option pricing
model. The Company incurred $242,000 of issuance costs which were charged
against the carrying value of the preferred stock. The Company recorded
accretion of $242,000 to increase the carrying value to the issuance value of
$1,000,000. The Preferred Stock is convertible by the holders at any time into
common stock at a conversion rate which is less than the fair value of the
common stock. The Company recorded imputed dividends related to this beneficial
conversion feature of $228,000. 

         On May 8, 1998, the Company, through its wholly-owned subsidiary
Automated Register Systems, Inc., acquired all of the outstanding common stock
of Quality Business Machines Co. (QBM), a POS dealer with operations in
Sacramento, California, for an aggregate purchase price of $900,000 paid as
follows: $500,000 in common stock of the Company, valued as of the closing date
of the acquisition; $330,000 in cash; and a promissory note in the principal
amount of $70,000 executed by the Company in favor of QBM. The aggregate
purchase price is subject to post-closing reduction in the event certain
financial targets of QBM are not met. The transaction was recorded under the
purchase method of accounting.

         On or about August 7, 1997, a class action complaint was filed against
the Company and certain of the Company's officers and directors. Underwriters
for the Company's initial public offering are also named as defendants. The
class action plaintiffs are Lincoln Adair, Antique Prints, Ltd., and Martha
Seamons, on behalf of themselves and all others similarly situated. The case is
pending in the United States District Court for the Southern District of New
York. In addition to seeking themselves declared proper plaintiffs and having
the case certified as a class action, plaintiffs seek unspecified monetary
damages. The plaintiffs' complaint alleges claims under the federal securities
laws for alleged misrepresentations and omissions in connection with purchases
of securities. The Company disputes the allegations made in the complaint and is
vigorously defending itself. Future results of operations, financial condition
and liquidity cannot be assessed at this time, because the outcome of the claims
are not presently determinable, no provision for any liability has been made in
the accompanying financial statements.

         The Company has engaged, and in the foreseeable future will likely
continue to engage, in discussions with several other retail automation solution
businesses regarding possible acquisitions, some of which could be material.
However, the Company currently has not entered into any definitive agreements
with respect to any acquisitions that are, individually or in the aggregate,
material to the Company other than the agreement with QBM discussed above. To
continue this acquisition strategy, the Company will need to obtain additional
financing (SEE ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS-NEED FOR
ADDITIONAL FINANCING TO IMPLEMENT ACQUISITION STRATEGY).

         The Company anticipates that its current cash on hand, cash flow from
operations and credit facilities will be sufficient to meet the Company's
liquidity requirements for its operations through the end of 1998. At March 31,
1998, approximately $700,000 was available for the Company to borrow under the
credit facilities. However the Company will require additional financing in
order to continue its acquisition strategy and may incur additional costs and
expenditures to expand operational and financial systems and corporate
management and administration. The Company currently intends to obtain financing
through future issuances of debt or equity securities during the remainder of
1998. However, there can be no assurance that the Company will be able to
successfully obtain financing or that such financing will be available on terms
the Company deems acceptable. The Company's long-term success is dependent upon
its ability to obtain necessary financing, the successful execution of
management's acquisition strategy and the achievement of sustained profitable
operations.

FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS

         The Company's business can be subject to seasonal influences. The POS
dealers and systems integrators which the Company has acquired to date have
typically had lower revenues in the quarters ending March 31 and December 31
primarily due to the lower level of new store openings by customers caused by
inclement weather, contractor delays, budgetary concerns and/or holidays. The
Company believes that this pattern of seasonality will continue in the
foreseeable future.

                                    Page 11
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         Quarterly results in the future may be materially affected by the
timing and magnitude of acquisitions and costs related to such acquisitions, the
timing and extent of staffing additions at corporate headquarters necessary to
integrate acquired companies and support future growth and general economic
conditions. Therefore, results for any quarter are not necessarily indicative of
the results that the Company may achieve for any subsequent quarter or for a
full year.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

         This Quarterly Report on Form 10-QSB contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that are based on current expectations and involve a number of risks and
uncertainties. In addition, the Company may from time to time make oral
forward-looking statements. Factors that may materially affect revenues,
expenses and operating results include, without limitation, the success of the
Company's operating subsidiaries; the impact of the Company's acquisition
strategy and the Company's ability to successfully integrate and manage the
acquired subsidiaries; the ability of the Company to obtain future financing on
acceptable terms; and subsequent changes in business strategy or plan.

         The forward-looking statements included herein are based on current
assumptions that the Company will continue to sell and install products on a
timely basis; that the Company will continue to sell maintenance contracts to
service its installed base; that the Company will successfully implement its
acquisition strategy; that competitive conditions within the Company's market
will not change materially or adversely; that demand for the Company's products
and services will remain strong; that the Company will retain existing key
management personnel; that inventory risks due to shifts in market demand will
be minimized; that the Company's forecasts will accurately anticipate market
demand; that the Company will be able to obtain future financing on acceptable
terms when needed; that the Company will be able to maintain key vendor
relationships; and that there will be no material adverse change in the
Company's operations or business. Assumptions relating to the foregoing involve
judgments that are difficult to predict accurately and are subject to many
factors that can materially affect the Company's business, financial condition,
results of operations and cash flows. Budgeting and other management decisions
are subjective in many respects and are, thus, susceptible to interpretations
and periodic revisions based on actual experience and business developments, the
impact of which may cause the Company to alter its acquisition strategy,
marketing, capital expenditure, or other budgets, which may in turn affect the
Company's business, results of operations, financial condition and cash flows.
In light of the factors that can materially affect the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.

         Because of these and other factors affecting the Company's operating
results, past financial performance should not be considered an indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods. In addition to the factors discussed above
in this section, as well as those discussed under the heading "Fluctuations in
Quarterly Results of Operations," the following factors also may materially
affect the Company's business, results of operations, financial condition and
cash flows and therefore should be considered.

         LIMITED OPERATING HISTORY. The Company was founded in April 1996 and,
prior to the acquisition of CRI in June 1996, the Company had no operations upon
which an evaluation of the Company and its prospects could be based. There can
be no assurance that the Company will be able to implement successfully its
strategic plan, to generate sufficient revenue to meet its expenses or to
achieve or sustain profitability. (See MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.)

         RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY. The Company's
strategy is to increase its revenue and the markets it serves through the
acquisition of additional POS dealers and value added resellers serving retail
end users. From its inception through May 11, 1998, the Company has completed
seven acquisitions. There can be no assurance that the Company will be able to
identify, acquire or profitably manage additional companies or successfully
integrate the operations of additional companies into those of the Company
without encountering substantial costs, delays or other problems. In addition,
there can be no assurance that companies acquired in the future will achieve
sales and profitability that justify the Company's investment in them or that
acquired companies will not have unknown liabilities that could materially
adversely affect the Company's results of operations or financial condition. The
Company may compete for acquisition and expansion opportunities with companies
that have greater resources than the Company. There can be no assurance that
suitable acquisition candidates will continue to be available, that financing
for acquisitions will be obtainable on terms acceptable to the Company, that
acquisitions can be consummated or that acquired businesses can be integrated
successfully and profitably into the Company's operations. Further, the
Company's results of operations in quarters immediately following a material
acquisition may be materially adversely effected while the Company integrates
the acquired business into its existing operations. The Company may acquire
certain businesses either that have been unprofitable or that have had
inconsistent profitability prior to their acquisition. An inability of the
Company to improve the profitability of these acquired businesses could have a
material adverse effect on the Company. Finally, the Company's acquisition
strategy places significant demands on the Company's resources and there can be
no assurance that the Company's management and operational systems and structure
can be expanded to effectively support the Company's continued acquisition
strategy. If the Company is unable to implement successfully its acquisition
strategy, this inability may have a material adverse effect on the Company's
business, results of operations, financial condition and cash flows.

                                    Page 12
<PAGE>

         NEED FOR ADDITIONAL FINANCING TO IMPLEMENT ACQUISITION STRATEGY. The
Company currently intends to effect future acquisitions with cash generated from
operations and future issuance of debt or equity securities. There can be no
assurance that the Company will be able to obtain financing if and when it is
needed on terms the Company deems acceptable. The inability of the Company to
obtain financing would have a material adverse effect on the Company's ability
to implement its acquisition strategy, and as a result, could require the
Company to diminish or suspend its acquisition strategy.

         CONSIDERATION FOR ACQUIRED COMPANIES EXCEEDS ASSET VALUE. Valuations of
the companies acquired by the Company have not been undertaken based on
independent appraisals, but have been determined through arm's-length
negotiations between the Company and representatives of such companies. The
consideration for each such company has been based primarily on the judgment of
management as to the value of such company as a going concern and not on the
book value of the acquired assets. Valuations of these companies determined
solely by appraisals of the acquired assets may have been less than the
consideration paid for the companies. No assurance can be given that the future
performance of such companies will be commensurate with the consideration paid.
Moreover, the Company has incurred and expects to incur significant amortization
charges resulting from consideration paid in excess of the book value of the
assets of the companies acquired and companies which may be acquired in the
future.

         SUBSTANTIAL COMPETITION. The POS industry is highly fragmented and
competitive. Competitive factors within the industry include product prices,
quality of products, service levels, and reputation and geographical location of
dealers. The Company primarily competes with independent POS dealers and some of
these dealers may have greater financial resources available to them than does
the Company. In addition, there are original equipment manufacturers of POS
equipment that compete in certain product areas. The Company's ability to make
acquisitions will also be subject to competition. The Company believes that,
during the next few years, POS dealers may seek growth through consolidation
with entities other than the Company. In addition, no assurance can be given
that the major manufacturers will not choose to effect or expand the
distribution of their products through their own wholesale organizations or
effect distribution directly to many of the retail accounts of the Company in
the markets served by the Company. Any of these developments could have a
material adverse effect on the Company's business, results of operations,
financial condition and cash flows.

         SUBSTANTIAL FLUCTUATIONS IN FUTURE OPERATING RESULTS. The Company may
experience substantial fluctuations in its annual and quarterly operating
results in future periods. The Company's operating results are affected by a
number of factors, many of which are beyond the Company's control. A substantial
portion of the Company's backlog is typically scheduled for delivery within 90
days. Delivery dates for products sold by the Company are subject to change due
to customers changing the required installation date of a retail automation
solution system. The changing of such delivery dates is beyond the Company's
control. Quarterly sales and operating results therefore depend in large part on
customer-driven delivery dates, which are subject to change. In addition, a
significant portion of the Company's operating expenses are relatively fixed in
nature and planned expenditures are based in part on anticipated orders. Any
inability to adjust spending quickly enough to compensate for any revenue
shortfall may magnify the adverse impact of such revenue shortfall on the
Company's results of operations.

         DEPENDENCE ON MANUFACTURERS. A substantial portion of the Company's
total revenue is and will be derived from the sale of POS systems, ECRs and
related equipment, none of which are manufactured by the Company. The Company's
business is dependent upon close relationships with manufacturers of POS
equipment and the Company's ability to purchase equipment in the quantities
necessary and upon competitive terms so that it will be able to meet the needs
of its end user customers. The Company purchases its hardware principally from
three vendors: Panasonic, ERC (a distributor of Panasonic products) and NCR.
Sales of Panasonic, ERC and NCR products accounted for approximately 21% of
revenues for the period ended March 31, 1998. There can be no assurance that the
relationships with these manufacturers will continue or that the Company's
supply requirements can be met in the future. The Company's inability to obtain
equipment, parts or supplies on competitive terms from its major manufacturers
could have a material adverse effect on the Company's business, results of
operations, financial condition and cash flows.

         FIXED FEE CONTRACTS. Many of the Company's service contracts are fixed
fee contracts pursuant to which the customer pays a specified fee for the
Company's performance of all necessary maintenance and remedial services during
the contract's term. Under these agreements, the Company is responsible for all
costs incurred in maintaining and repairing the equipment, including the cost of
replacement parts, regardless of actual costs incurred. Accordingly, the Company
can incur losses from fixed fee contracts if the actual cost of maintaining or
repairing the equipment exceeds the costs estimated by the Company.

                                    Page 13
<PAGE>

         POTENTIAL INABILITY TO MARKET NEWLY DEVELOPED PRODUCTS. The technology
of POS systems, ECRs, VARs and related equipment is changing rapidly. There can
be no assurance that the Company's existing manufacturers will be able to supply
competitive new products or achieve technological advances necessary to remain
competitive in the industry. Further, there can be no assurance that the Company
will be able to obtain the necessary authorizations from manufacturers to market
any newly developed equipment. The Company's Smyth Systems, Inc. (Smyth)
subsidiary operates in the VAR solutions segment, wherein it develops customized
turnkey retail automation solutions, consisting of both hardware and software.
There can be no assurance that Smyth will be able to develop commercially viable
and technologically competitive VAR solutions at competitive prices.

         RELIANCE ON KEY PERSONNEL. Implementation of the Company's acquisition
strategy is largely dependent on the efforts of a few senior officers. In
particular, the Company's operations are dependent to a great degree on the
continued efforts of its Chief Executive Officer, Richard H. Walker.
Furthermore, the Company will most likely continue to be dependent on the senior
management of companies that are acquired. Competition for highly qualified
personnel is intense, and the loss of any executive officer or other key
employee, or the failure to attract and retain other skilled employees, could
have a material adverse effect upon the Company's business, results of
operations or financial condition. The Company is a party to employment
agreements with Mr. Walker, as well as with Executive Vice President Paul
Spindler. The agreements with Messrs. Walker and Spindler terminate in the years
2004 and 2001, respectively, unless terminated earlier pursuant to the
agreements, and each contains confidentiality provisions and covenants not to
compete. State laws, however, may limit the enforceability of the
confidentiality and/or non-competition provisions therein. The Company is
currently the beneficiary of a key man life insurance policy in the amount of
$1,000,000 on the life of Mr. Walker. There can be no assurance that the Company
will maintain the policy in effect or that the coverage will be sufficient to
compensate the Company for the loss of the services of Mr. Walker.

         ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND BYLAW PROVISIONS. Certain
provisions of the Company's Certificate of Incorporation and Bylaws may have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company.
These provisions make it more difficult for stockholders to take certain
corporate actions and could have the effect of delaying or preventing a change
in control of the Company. For example, the Company has not elected to be
excluded from the provisions of Section 203 of the Delaware General Corporation
Law, which impose certain limitations on business combinations with interested
stockholders upon acquiring 15% or more of the common stock. This statute may
have the effect of inhibiting a non-negotiated merger or other business
combination involving the Company, even if such event would be beneficial to the
then-existing stockholders. In addition, the Company's Certificate of
Incorporation authorizes the issuance of up to 4,000,000 shares of preferred
stock with such rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors may, without
stockholder approval, issue preferred stock with dividends, liquidation,
conversion, and voting or other rights, which could adversely affect the voting
power or other rights of the holders of the Company's common stock. The issuance
of preferred stock could have the effect of entrenching the Company's Board of
Directors and making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company.

         As of March 31, 1998, the Company had issued 10,000 shares of Series A
Convertible Preferred Stock (the Preferred Stock), at an issue price of $100 per
share. Each share of Preferred Stock is convertible at the option of the holder
thereof at any time into a number of shares of common stock determined by
dividing the issue price by the conversion price, which is defined to be 78% of
the lowest non-consecutive five-day average closing bid price for the common
stock for the 25-day period prior to conversion. Each holder of shares of the
Preferred Stock is entitled to the number of votes equal to the number of shares
of common stock into which it could be converted. The Company cannot, without
the vote or written consent of the holders of at least 66-2/3% of the then
outstanding shares of Preferred Stock, (i) redeem, purchase or otherwise acquire
for value any share of the Preferred Stock; (ii) redeem, purchase or otherwise
acquire any of the Company's common stock; (iii) authorize or issue any other
equity security senior to or on parity with the Preferred Stock as to voting
rights, dividend rights, conversion rights, redemption rights or liquidation
preferences; (iv) declare or pay any dividend or make any distribution with
regard to any share of common stock; (v) sell, convey, lease or otherwise
dispose of all or substantially all of its property or business; liquidate,
dissolve or wind up the Company's business; or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary); (vi) effect any
transaction or series of transactions in which more than 50% of the voting power
of the Company is disposed of, unless the Company's stockholders of record as
constituted immediately prior to such transaction will, immediately thereafter,
hold at least a majority of the voting power of the surviving or acquiring
entity; (vii) permit any subsidiary to issue or sell any of its capital stock
(except to the Company); (viii) increase or decrease (other than by redemption
or conversion) the total number of authorized shares of Preferred Stock; or (ix)
alter or change the rights, preferences or privileges of the shares of Preferred
Stock so as to adversely affect the shares. In the event of any liquidation
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of the Preferred Stock shall be entitled to receive, prior and in
preference to any distributions to holders of common stock, an amount per share
equal to $100 plus any declared but unpaid dividends.

         VOLATILITY OF STOCK PRICE. The stock market from time to time
experiences significant price and volume fluctuations that are unrelated to the
operating performance of the particular companies. These broad market
fluctuations may materially adversely affect the market price of the Company's
common stock. In addition, the market price of the Company's common stock has
been and may continue to be highly volatile. Factors such as possible
fluctuations in the Company's business, results of operations or financial
condition, failure of the Company to meet expectations of security analysts and
investors, announcements of new acquisitions, the timing and size of
acquisitions, the loss of suppliers or customers, the announcement of new or
terminated supply agreements by the Company or its competitors, changes in
regulations governing the Company's operations or its suppliers, the loss of the
services of a member of senior management, litigation and changes in general
market conditions all could have a material adverse affect on the market price
of the Company's common stock.

                                    Page 14
<PAGE>

         MAINTENANCE CRITERIA FOR NASDAQ; RISKS OF LOW-PRICED SECURITIES. The
Company's common stock is presently traded on the Nasdaq SmallCap Market. To
maintain inclusion on the Nasdaq SmallCap Market, the Company's common stock
must continue to be registered under Section 12(g) of the Exchange Act, and the
Company must continue to have at least $2,000,000 in net tangible assets or
$500,000 in income in two of the last three years, a public float of at least
500,000 shares, $1,000,000 in market value of public float, a minimum bid price
of $1.00 per share, at least two market makers and at least 300 stockholders.
While the Company currently meets the maintenance standards, there is no
assurance that the Company will be able to maintain the standards for Nasdaq
SmallCap Market inclusion with respect to its securities. At March 31, 1998, the
Company had $2,488,000 in net tangible assets. If the Company fails to maintain
Nasdaq Small Cap Market listing, the market value of the Company's common stock
in all likelihood would decline and stockholders would find it more difficult to
dispose of or to obtain accurate quotations as to the market value of the common
stock.

         INDEMNIFICATION AND LIMITATION OF LIABILITY. The Company's Certificate
of Incorporation (the Certificate) and Bylaws include provisions that eliminate
the directors' personal liability for monetary damages to the fullest extent
possible under Delaware Law or other applicable law (the Director Liability
Provision). The Director Liability Provision eliminates the liability of
directors to the Company and its stockholders for monetary damages arising out
of any violation by a director of his fiduciary duty of due care. Under Delaware
Law, however, the Director Liability Provision does not eliminate the personal
liability of a director for (i) breach of the director's duty of loyalty, (ii)
acts or omissions not in good faith or involving intentional misconduct or
knowing violation of law, (iii) payment of dividends or repurchases or
redemptions of stock other than from lawfully available funds, or (iv) any
transaction from which the director derived an improper benefit. The Director
Liability Provision also does not affect a director's liability under the
federal securities laws or the recovery of damages by third parties.

         ABSENCE OF DIVIDENDS. The Company has not paid dividends on its
preferred stock or common stock to date. The Company is obligated to pay,
quarterly, cumulative dividends at a rate of six percent (6%) per annum of the
issue price of the Series A Convertible Preferred Stock, payable, at the
holders' option, in cash or in common stock at the conversion price of the
Series A Convertible Preferred Stock. So long as any shares of Series A
Convertible Preferred Stock remain outstanding, the Company may not, without the
vote or written consent of the holders of at least 66-2/3% of the then
outstanding shares of Series A Convertible Preferred Stock, voting together as a
single class, declare or pay any dividend with regard to any share of common
stock. (See ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS, ANTI-TAKEOVER
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS.) Additionally, although the
current line of credit does not expressly prohibit the Company from paying
dividends, the line of credit does contain certain covenants which restrict the
reduction or depletion of the Company's capital. The Company anticipates that
future financing, including any lines of credit, may further restrict or
prohibit the Company's ability to pay dividends. Under the terms of the
underwriting agreement entered into by the Company in connection with its
initial public offering, the Company is restricted until November 20, 1998, from
paying dividends in excess of the amount of the Company's current or retained
earnings derived from November 20, 1996, unless the consent of the underwriters
is obtained.

         YEAR 2000 COMPLIANCE. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. The Company's Smyth
subsidiary is currently upgrading its software for golf course applications to a
Windows version. The Company currently estimates it will expend approximately
$150,000 to $200,000 in 1998 to make such software Year 2000 compliant.
Although the Company believes that such software will be Year 2000 compliant,
there can be no assurances that compliance will be achieved. In the event such
compliance is not achieved, it may have a material adverse effect on the
Company's business, financial condition, results of operations and cash flows.
In addition, the Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues as companies expend
significant resources to correct their current software systems for Year 2000
compliance. These expenditures may result in reduced funds available to purchase
software products such as those offered by the Company. The Company is making
inquiries of its vendors of POS systems and cash registers regarding whether the
systems upon which they rely are Year 2000 compliant and whether they anticipate
any impairment of their ability to deliver product and services as a result of
Year 2000 issues. If the Company determines a particular vendor will be impacted
by this problem, the Company may attempt to identify additional or replacement
vendors, which could delay accessibility of the products and/or services
provided by such vendors. Such delay or failure to identify an additional or
replacement vendor could have a material adverse effect on the Company's
business, financial condition, results of operations and cash flows.

                                    Page 15
<PAGE>

                                     PART II

                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On or about August 7, 1997, a class action complaint was filed against
the Company and certain of the Company's officers and directors. Underwriters
for the Company's initial public offering are also named as defendants. The
class action plaintiffs are Lincoln Adair, Antique Prints, Ltd., and Martha
Seamons, on behalf of themselves and all others similarly situated. The case is
pending in the United States District Court for the Southern District of New
York. In addition to seeking themselves declared proper plaintiffs and having
the case certified as a class action, plaintiffs seek unspecified monetary
damages. The plaintiffs' complaint alleges claims under the federal securities
laws for alleged misrepresentations and omissions in connection with purchases
of securities. The Company disputes the allegations made in the complaint and is
vigorously defending itself.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

      (b) On March 18, 1998, the Company sold 10,000 shares of its Series A
          Convertible Preferred Stock, $.001 par value per share (the Preferred
          Stock), to Precision Capital Investors Limited Partnership I
          (Precision), for a purchase price of $100 per share. Under the terms
          of the Certificate of Designation setting forth the rights and
          preferences of the Preferred Stock, the Company cannot, without the
          vote or written consent of the holders of at least 66-2/3% of the then
          outstanding shares of Preferred Stock, declare or pay any dividend or
          make any distribution with regard to any share of common stock. In
          addition, the Company cannot, without the vote or written consent of
          the holders of at least 66-2/3% of the then outstanding shares of
          Preferred Stock, engage in certain other transactions, including,
          without limitation, the redemption, purchase or acquisition of any
          shares of common stock.

      (c) The following is a summary of transactions by the Company during the
          three months ended March 31, 1998, involving sales or issuances of the
          Company's securities that were not registered under the Securities
          Act.

           (1)    On March 18, 1998, the Company sold 10,000 shares of its
                  Series A Convertible Preferred Stock, $.001 par value per
                  share (the Preferred Stock), to Precision Capital Investors
                  Limited Partnership I (Precision), for a purchase price of
                  $100 per share. The total offering price was $1,000,000. In
                  addition, the Company agreed to issue to Precision, subject to
                  the satisfaction of certain conditions, up to an additional
                  10,000 shares of Preferred Stock (the Additional Preferred
                  Stock) for a purchase price of $100 per share. The Additional
                  Preferred Stock will be issued in two separate tranches on a
                  date no later than thirty (30) and sixty (60) days following
                  the effective date of the Registration Statement (defined
                  below), respectively, unless otherwise agreed to by the
                  Company and Precision.

                  The shares of Preferred Stock are convertible into shares of
                  common stock at a conversion price equal to seventy-eight
                  percent (78%) of the lowest non-consecutive five-day average
                  closing bid price during the twenty-five day period prior to
                  conversion; provided, however, that in no event shall the
                  conversion price be greater than $3.26 (110% of the average
                  closing bid price during the five-day period prior to the
                  purchase of the shares of Preferred Stock). The shares of
                  common stock into which the shares of Preferred Stock are
                  convertible have been registered by the Company on Form S-3
                  (No. 333-50385) (the Registration Statement), filed with the
                  Securities and Exchange Commission (the "Commission") on April
                  17, 1998. As of May 15, 1998, the Registration Statement had
                  not been declared effective by the Commission. In connection
                  with the sale of the Preferred Stock, the Company issued
                  warrants to purchase 25,000 shares of the Company's common
                  stock to each of Wharton Capital Partners, Ltd. and H D Brous
                  & Co., Inc., as compensation for services provided by them as
                  placement agents (Section (c)(3) below).

           (2)    On March 18, 1998, concurrently with the sale of the shares of
                  Preferred Stock, the Company issued to Precision warrants to
                  purchase 125,000 shares of common stock (the Investor
                  Warrants). The shares of common stock into which the Investor
                  Warrants are exercisable have been registered by the Company
                  on the Registration Statement. In addition, the Company agreed
                  to issue to Precision, subject to the satisfaction of certain
                  conditions, warrants to purchase an additional 125,000 shares
                  of common stock (the Additional Investor Warrants). The
                  Additional Investor Warrants will be issued in two separate
                  tranches on a date no later than thirty (30) and sixty (60)
                  days following the effective date of the Registration
                  Statement, respectively, unless otherwise agreed to by the
                  Company and Precision.

                                    Page 16
<PAGE>

                  The Investor Warrants are exercisable at an exercise price
                  equal to the lessor of (i) $3.26 (110% of the average closing
                  bid price of the common stock during the five days preceeding
                  the date of issuance) and (ii) 110% of the closing bid price
                  of the common stock on the date the Registration Statement
                  becomes effective. The exercise price of the Investor Warrants
                  is subject to adjustment.

           (3)    On March 18, 1998, concurrently with the sale of the shares of
                  Preferred Stock, the Company issued 25,000 warrants to
                  purchase common stock (the Placement Agent Warrants) to each
                  of Wharton Capital Partners, Ltd., and H D Brous & Co., Inc.,
                  as compensation for services provided by them as placement
                  agents in the sale of the Preferred Stock. The shares of
                  common stock into which the Placement Agent Warrants are
                  exercisable were registered by the Company on the Registration
                  Statement. The exercise price of the Placement Agent Warrants
                  is initially $3.556 per share. The exercise price of the
                  Placement Agent Warrants is subject to adjustment.

                                    Page 17

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits
                  4.7       Securities Purchase Agreement entered into between
                            the Company and Precision Capital Investors Limited
                            Partnership I dated as of March 18, 1998
                            (Incorporated by reference to Exhibit 4.1 of the
                            Company's Registration Statement on Form S-3, filed
                            on April 17, 1998, File No. 333-50385).
                  4.8       Registration Rights Agreement entered into between
                            the Company and Precision Capital Investors Limited
                            Partnership I dated as of March 18, 1998
                            (Incorporated by reference to Exhibit 4.2 of the
                            Company's Registration Statement on Form S-3, filed
                            on April 17, 1998, File No. 333-50385).
                  4.9       Certificate of Designation, Preferences and Rights
                            of Series A Convertible Preferred Stock
                            (Incorporated by reference to Exhibit 4.3 of the
                            Company's Registration Statement on Form S-3, filed
                            on April 17, 1998, File No. 333-50385).
                  4.10      Common Stock Purchase Warrants issued to Precision
                            Capital Investors Limited Partnership I
                            (Incorporated by reference to Exhibit 4.4 of the
                            Company's Registration Statement on Form S-3, filed
                            on April 17, 1998, File No. 333-50385).
                  4.11      Warrant to Purchase Common Stock issued to H D Brous
                            & Co., Inc. (Incorporated by reference to Exhibit
                            4.5 of the Company's Registration Statement on Form
                            S-3, filed on April 17, 1998, File No. 333-50385).
                  4.12      Warrant to Purchase Common Stock issued to Wharton
                            Capital Partners Ltd. (Incorporated by reference to
                            Exhibit 4.6 of the Company's Registration Statement
                            on Form S-3, filed on April 17, 1998, File No.
                            333-50385).
                  11*       Calculation of Earnings per Share
                  27*       Financial Data Schedule

                  *         Filed herewith.

         (b)       Reports on Form 8-K

                  During the three months ended March 31, 1998, the Company did
                  not file any Current Reports on Form 8-K.

                                    Page 18
<PAGE>

                                    SIGNATURE

      In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    Bristol Retail Solutions, Inc.
                                    ----------------------------------
                                    (Registrant)

    June 10, 1998                   By: /s/ MICHAEL S. SHIMADA
----------------------              ----------------------------------
        Date                        Michael S. Shimada
                                    Vice President and Chief Financial Officer
                                    (Principal financial and accounting officer)

                                    Page 19