<PAGE>   1
                                  UNITED STATES
                        SECURITES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

           (Mark One)

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

           For the quarterly period ended June 30, 1997

                                       OR

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

           For the transition period from       to
                                         -------  -------

                         Commission File Number: 0-21633

                         BRISTOL RETAIL SOLUTIONS, INC.

        (Exact name of small business issuer as specified in its charter)

<TABLE>
<CAPTION>
      <S>                                                                                          <C>
      Delaware                                                                                        58-2235556
      (State or other jurisdiction of                                                               (IRS Employer
      incorporation or organization)                                                             Identification No.)

      5000 Birch Street, Suite 205, Newport Beach, California                                           92660
      (Address of principal executive offices)                                                        (Zip code)

      </TABLE>

                                 (714) 475-0800
                (Issuer's telephone number, including area code)

                        BRISTOL TECHNOLOGY SYSTEMS, INC.
          18201 Von Karman Avenue, Suite 305, Irvine, California 92612
   (Former name, former address and former fiscal year, if changed since last
   report.)

         Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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
                                             ----    ----
         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:

Common Stock, $.001 par value - 5,466,159 shares as of July 31, 1997
Class A Redeemable Common Stock Purchase Warrants - 718,750 as of July 31, 1997



                                     Page 1
<PAGE>   2

                         BRISTOL RETAIL SOLUTIONS, INC.

                                      Index

<TABLE>
<CAPTION>

Part I     --- FINANCIAL INFORMATION                                                                                   Page
<S>        <C>                                                                                                          <C>
           Item 1.  Financial Statements (Unaudited)

                BRISTOL RETAIL SOLUTIONS, INC. AND SUBSIDIARIES (SUCCESSOR):
                CASH REGISTERS, INCORPORATED (PREDECESSOR):

                Consolidated Balance Sheet as of June 30, 1997 (Successor)                                               3

                Consolidated Statements of Operations for the three months ended June 30, 1997 (Successor) 
                and for the three months ended June 30, 1996 (Predecessor)                                               4

                Consolidated Statements of Operations for the six months ended June 30, 1997 (Successor) 
                and for the six months ended June 30, 1996 (Predecessor)                                                 5

                Consolidated Statements of Cash Flows for the six months ended June 30, 1997 (Successor) 
                and for the six months ended June 30, 1996 (Predecessor)                                               6-7

                Notes to Consolidated Financial Statements                                                            8-11

           Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations            12-19

Part II    --- OTHER INFORMATION

           Item 2.  Changes in Securities                                                                               20
           Item 4.  Submission of Matters to a Vote of Security Holders                                                 20
           Item 6.  Exhibits and Reports on Form 8-K                                                                 21-22

Signature                                                                                                               23

</TABLE>



                                     Page 2
<PAGE>   3

                         BRISTOL RETAIL SOLUTIONS, INC.
                     Consolidated Balance Sheet (Successor)
                                   (Unaudited)
                                  June 30, 1997
<TABLE>
<CAPTION>
                                                 ASSETS
<S>                                                                                                        <C>
Current assets
       Cash and cash equivalents                                                                                 $       765,943
       Accounts receivable, net of allowance for doubtful accounts of $199,327                                         2,812,439
       Inventories                                                                                                     3,298,748
       Prepaid expenses and other current assets                                                                         797,111
       Current portion of note receivable                                                                                 78,110
       Amounts due from related parties                                                                                   60,051
                                                                                                           ----------------------
             Total current assets                                                                                      7,812,402 
       Property and equipment, at cost:
       Furniture and equipment                                                                                           586,488
       Automobiles                                                                                                       168,012
       Leasehold improvements                                                                                            102,452
                                                                                                           ----------------------
                                                                                                                         856,952
       Less accumulated depreciation and amortization                                                                     91,453
                                                                                                           ----------------------
             Property and equipment, net                                                                                 765,499
Intangible assets, net of accumulated amortization of $85,189                                                          5,921,357
Note receivable - noncurrent portion                                                                                     366,414
Other assets                                                                                                             717,269
                                                                                                           ----------------------
             Total assets                                                                                        $    15,582,941
                                                                                                           ======================

                                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
       Short-term borrowings                                                                                     $       704,599
       Accounts payable                                                                                                1,911,766
       Accrued salaries, wages and related benefits                                                                      692,808
       Accrued expenses                                                                                                  478,804
       Deferred revenue                                                                                                1,392,815
       Customer advances                                                                                                 506,376
       Note payable to related party                                                                                      50,000
       Current portion of capital lease obligations                                                                       20,195
       Current portion of long-term debt                                                                                  43,796
                                                                                                           ----------------------
             Total current liabilities                                                                                 5,801,159
Capital lease obligations - noncurrent portion                                                                            30,042
Other long-term liabilities                                                                                               51,909
Commitments and contingencies
Stockholders' equity
        Preferred stock, $.001 par value:
             Authorized shares - - - 4,000,000                                                                               - -
             None issued and outstanding
        Common stock, $.001 par value:
             Authorized shares - - - 20,000,000
             Issued and outstanding shares - - - 5,466,159                                                                 5,466
       Additional paid-in capital                                                                                     11,033,829
       Accumulated deficit                                                                                            (1,314,839)
                                                                                                           ----------------------
                                                                                                                       9,274,456
       Less treasury stock, at cost, 5,000 shares                                                                        (24,625)
                                                                                                           ----------------------
             Total stockholders' equity                                                                                9,699,831
                                                                                                           ----------------------
             Total liabilities and stockholders' equity                                                          $    15,582,941
                                                                                                           ======================
</TABLE>
See accompanying notes.



                                     Page 3
<PAGE>   4

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

<TABLE>
<CAPTION>

                                                                       (Successor)                (Predecessor)
                                                                             Three Months Ended June 30,
                                                                          1997                        1996
                                                                  ----------------------     ------------------------
<S>                                                               <C>                        <C>
Revenue:
        System sales and installation                              $          3,092,157       $            1,722,402
        Service and supplies sales                                            1,492,264                      529,294
                                                                  ----------------------     ------------------------
Net revenue                                                                   4,584,421                    2,251,696
Costs and expenses:
        Cost of system sales and installation                                 2,107,872                    1,196,549
        Cost of service and supplies sales                                    1,089,623                      316,059
        Selling, general and administrative expenses                          2,113,141                      644,597
        Research and development costs                                           72,102                           --
        Write-off of cash surrender value of life insurance                          --                       76,140
                                                                  ----------------------     ------------------------
                Total costs and expenses                                      5,382,738                    2,233,345
                                                                  ----------------------     ------------------------
Operating income (loss)                                                        (798,317)                      18,351
Other (income) expense:
        Interest income                                                         (44,681)                      (2,036)
        Interest expense                                                         19,592                        5,174
                                                                  ----------------------     ------------------------
                Total other (income) expense                                    (25,089)                       3,138
                                                                  ----------------------     ------------------------
Income (loss) before income taxes                                              (773,228)                      15,213
Income tax provision (benefit)                                                      - -                        5,335
                                                                  ----------------------     ------------------------
Net income (loss)                                                  $           (773,228)        $              9,878
                                                                  ======================     ========================

Net income (loss) per common share                                 $              (0.15)        $               9.68
                                                                  ======================     ========================

Common shares used in computing per share amounts                             5,001,932                        1,020
                                                                  ======================     ========================

</TABLE>
See accompanying notes.



                                     Page 4
<PAGE>   5

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

<TABLE>
<CAPTION>

                                                                       (Successor)                (Predecessor)
                                                                              Six Months Ended June 30,
                                                                          1997                        1996
                                                                  ----------------------     ------------------------
<S>                                                               <C>                        <C>
Revenue:
        System sales and installation                                $        4,840,978       $            3,018,990
        Service and supplies sales                                            2,403,741                      998,774
                                                                  ----------------------     ------------------------
Net revenue                                                                   7,244,719                    4,017,764
Costs and expenses:
        Cost of system sales and installation                                 3,279,468                    2,148,267
        Cost of service and supplies sales                                    1,778,958                      634,195
        Selling, general and administrative expenses                          3,397,962                    1,172,762
        Research and development costs                                           72,102                          - -
        Write-off of cash surrender value of life insurance                         - -                       76,140
                                                                  ----------------------     ------------------------
                Total costs and expenses                                      8,528,490                    4,031,364
                                                                  ----------------------     ------------------------
Operating loss                                                               (1,283,771)                     (13,600)
Other (income) expense:
        Investment income                                                      (108,933)                     (11,583)
        Interest expense                                                         32,326                        8,683
                                                                  ----------------------     ------------------------
                Total other income                                              (76,607)                      (2,900)
                                                                  ----------------------     ------------------------
Loss before income taxes                                                     (1,207,164)                     (10,700)
Income tax provision (benefit)                                                    1,050                       (3,752)
                                                                  ----------------------     ------------------------
Net loss                                                               $     (1,208,214)       $              (6,948)
                                                                  ======================     ========================

Net loss per common share                                              $          (0.25)       $               (6.88)
                                                                  ======================     ========================

Common shares used in computing per share amounts                             4,874,501                        1,010
                                                                  ======================     ========================

</TABLE>

See accompanying notes.



                                     Page 5
<PAGE>   6

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

<TABLE>
<CAPTION>
                                                                                (Successor)                 (Predecessor)
                                                                                           Six Months Ended June 30,
                                                                                        1997                         1996
                                                                                -------------------    ------------------
<S>                                                                             <C>                           <C>
Operating activities
      Net loss                                                                  $      (1,208,214)      $        (6,948)
      Adjustments to reconcile net loss to net cash and cash equivalents
        provided by (used in) operating activities:
        Depreciation                                                                       72,229                 9,930
        Amortization                                                                       66,600                   - -
        Provision for doubtful accounts                                                    38,939                15,224
        Reserve for excess and obsolete inventories                                        38,647                   - -
        Compensation expense                                                                8,021                   - -
        Deferred income taxes                                                                 - -                 8,500
        Changes in operating assets and liabilities
                Accounts receivable                                                       120,891              (195,210)
                Inventories                                                                59,714               218,979
                Prepaid expenses and other assets                                        (389,038)               35,364
                Accounts payable                                                          (23,489)              314,026
                Other accrued expenses                                                    175,384                 9,689
                Deferred revenue                                                            2,785               (66,542)
                Customer advances                                                          67,959              (233,487)
                Other long-term liabilities                                                27,409                   - -
                                                                                ------------------     -----------------
                     Net cash and cash equivalents provided by (used in)
                     operating activities                                                (942,163)              109,525

Investing activities
        Capital expenditures                                                              (84,532)              (20,650)
        Purchase of subsidiary companies, net of cash acquired                         (2,807,554)                  - -
        Receivables from rescinded acquisition                                           (850,000)                  - -
                                                                                ------------------     -----------------
                     Net cash and cash equivalents used in investing
                     activities                                                        (3,742,086)              (20,650)

Financing activities
        Net borrowings (repayments) on lines of credit                                     66,158               (13,406)
        Repayment of note payable to related party                                        (47,922)              (35,000)
        Repayment of capital lease obligations                                             (3,671)                  - -
        Repayment of long-term debt                                                       (15,422)                  - -
        Repurchase of stock                                                               (24,625)              (37,203)
                                                                                ------------------     -----------------
                     Net cash and cash equivalents used in financing
                     activities                                                           (25,482)              (85,609)

Net increase (decrease) in cash and cash equivalents                                   (4,709,731)                3,266
Cash and cash equivalents at beginning of period                                        5,475,674                 2,269
                                                                                ==================     =================
Cash and cash equivalents at end of period                                      $         765,943      $          5,535
                                                                                ==================     =================


Supplemental disclosures of cash flow information:
        Cash paid for interest                                                  $          32,326      $          8,683
                                                                                ==================     =================
        Cash paid for income taxes, net                                         $          97,659      $         14,500
                                                                                ==================     =================

</TABLE>


See accompanying notes.


                                     Page 6
<PAGE>   7

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

<TABLE>
<CAPTION>

Supplemental disclosures of cash flow information (continued):

<S>                                                                                 <C>                 

The Company made certain business acquisitions during the six months ended June
30, 1997 for consideration of cash and the Company's common stock. The fair
values of the assets acquired and the liabilities assumed at the respective
dates of acquisition are as follows:                                                 
        Current assets, net of cash acquired                                        $          3,151,269
        Property and equipment                                                                   861,409
        Long-term assets                                                                         270,032
        Intangible assets                                                                      4,294,557
        Current liabilities                                                                   (2,616,953)
        Long-term debt, net of current portion                                                  (353,104)
                                                                                =========================
           Net assets acquired                                                      $          5,607,210
                                                                                =========================

The acquisitions were funded as follows:
        Cash                                                                                   2,807,554
        Note payable in cash                                                                      21,052
        Common stock                                                                           2,749,656
        Note payable in common stock                                                              28,948
                                                                                =========================
                                                                                     $         5,607,210
                                                                                =========================

</TABLE>

Effective June 1, 1997, the Company transferred certain land, buildings and
building improvements acquired as part of the EBM acquisition with a fair value
of $381,000 and certain loans aggregating $381,000 assumed as part of the EBM
acquisition to the former owner of EBM.




See accompanying notes.


                                     Page 7
<PAGE>   8


                         BRISTOL RETAIL SOLUTIONS, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                                  June 30, 1997


Organization and Basis of Presentation

         Bristol Retail Solutions, Inc. (the Company, formerly Bristol
Technology Systems, Inc.) 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. As of June 30, 1997, the Company
has acquired five companies (three "hubs" and two "spokes") that sell, install
and maintain point-of-sale (POS) systems and turnkey retail automation (VAR)
systems throughout the United States (see Acquisitions). The Company changed its
name to Bristol Retail Solutions, Inc. in July 1997. The Company's former name
was Bristol Technology Systems, Inc.

           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 (GAAP) and, therefore, should be read in
conjunction with the audited financial statements included in the Company's
Annual Report on Form 10-KSB for the period from inception (April 3, 1996) to
December 31, 1996. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.

           Since the Company did not exist before April 3, 1996, but its
wholly-owned subsidiary Cash Registers, Incorporated (CRI) did exist before that
date, GAAP defines CRI as the Predecessor to the Company. As such, GAAP requires
that the statement of operations of CRI for the three months ended June 30, 1996
and the statements of operations and cash flows of CRI for the six months ended
June 30, 1996 be presented herein. The Company's consolidated financial
statements as of June 30, 1997 include the accounts of the Company and its
wholly-owned subsidiaries. Accordingly, the statements of operations and cash
flows presented for the period subsequent to the acquisition of CRI (Successor)
are not comparable to the statements of operations and cash flows for the period
prior to the acquisition of CRI (Predecessor). No statement of operations for
the Company has been presented for the period from inception (April 3, 1996) to
June 30, 1996 because all costs incurred by the Company during that period,
except for salaries of $31,250 that were expensed, were incurred in connection
with the acquisition of CRI and were included as part of the CRI purchase price.

Operations

           The Company anticipates that its current cash on hand, cash flow from
operations and additional financing available under its various credit
facilities will be sufficient to meet the Company's liquidity requirements for
its operations through the end of fiscal 1997. However, the Company intends to
identify, evaluate and acquire additional retail automation solution businesses
during the remainder of the calendar year. These acquisitions are expected to be
funded through a combination of cash and common stock and may necessitate
additional costs and expenditures to expand operational and financial systems
and corporate management and administration. The Company will require additional
financing in order to continue this acquisition program. The Company is
currently in the process of obtaining additional debt financing in order to meet
its anticipated acquisition financial requirements during the remainder of
fiscal 1997. 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 strategic plan and the achievement of sustained profitable
operations.

Acquisitions

           During the period from inception (April 3, 1996) to December 31,
1996, the Company acquired all of the outstanding common stock of CRI and
Automated Register Systems, Inc. (ARS) for aggregate cash consideration of
$2,058,000, including acquisition costs of $150,000, and 58,154 shares of
non-registered, restricted common stock of the Company which were valued at
$683,000 at the acquisition date.

           On April 1, 1997, the Company, though its wholly-owned subsidiary
CRI, acquired all of the outstanding common stock of MicroData, Inc.
(MicroData), a POS dealer with operations in Illinois and Kentucky, for
consideration of $98,000 in 



                                     Page 8
<PAGE>   9

cash, including $19,000 of acquisition costs, and 11,415 shares of
non-registered, restricted common stock of the Company valued at approximately
$136,000.

           On May 29, 1997, the Company acquired Smyth Systems, Inc. (Smyth) for
consideration of $2,369,000 in cash, including $20,000 of acquisition costs, and
569,408 shares of non-registered, restricted common stock of the Company valued
at approximately $2,064,000. Smyth operates through two divisions which (i)
provide VAR systems to customers throughout the United States and (ii) provide
POS systems to customers in Southern California and Ohio.

           On June 6, 1997, the Company, through its wholly-owned subsidiary
CRI, acquired Electronic Business Machines, Inc. (EBM), a POS dealer with
operations in Indiana and Kentucky, for consideration of $452,000 in cash,
including $52,000 of acquisition costs, and 139,682 shares of non-registered,
restricted common stock of the Company valued at approximately $550,000. In
addition, seventy-five (75) days following the closing date additional
consideration of $21,000 in cash and 7,351 shares of non-registered, restricted
common stock of the Company valued at approximately $29,000 will be paid to the
shareholder of EBM. This additional consideration totaling $50,000 is recorded
as a note payable to related party in the accompanying balance sheet at June 30,
1997.

           The acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based upon the fair values at the date of
acquisition. The excess of the purchase price over the fair values of the net
assets acquired has been recorded as intangible assets (goodwill). Goodwill
acquired as part of the CRI and ARS acquisitions aggregating $1,712,000 is being
amortized on a straight-line basis over an estimated life of 15 years and
goodwill acquired as part of all other acquisitions aggregating $4,295,000 is
being amortized on a straight-line basis over an estimated life of 40 years. The
purchase price allocation related to the Smyth and EBM acquisitions is
preliminary and the final purchase price allocation may involve the assignment
of amounts to different intangible assets which may be amortized over different
periods. The Company's consolidated statements of operations include the
revenues and expenses of CRI, ARS, MicroData and Smyth subsequent to the
acquisitions' respective closing dates. Pursuant to the EBM acquisition
agreement, the Company assumed control of EBM's operations on May 31, 1997 and
has included the revenues and expenses of EBM from such date in its consolidated
statements of operations. Effective June 1, 1997, the Company transferred
certain land, buildings and building improvements acquired as part of the EBM
acquisition with a fair value of $381,000 and certain loans aggregating $381,000
assumed as part of the EBM acquisition to the former owner of EBM.

           The following presents the unaudited pro forma results of operations
of the Company for the six-month period ended June 30, 1997 as if the Smyth and
EBM acquisitions had been consummated on January 1, 1997, and includes pro forma
adjustments to amortize intangible assets acquired as part of the acquisitions.

<TABLE>
<CAPTION>
                                                            Six Months Ended
                                                              June 30, 1997
                                                              -------------
<S>                                                         <C>         
   Net revenue                                              $ 13,039,000
   Net loss                                                 $ (1,332,000)
   Net loss per share                                       $       (.24)
   Shares used in computing net income per share               5,464,788
</TABLE>

           The pro forma results of operations are prepared for comparative
purposes only and do not necessarily reflect the results that would have
occurred had the acquisitions occurred on January 1, 1997 or the results which
may occur in the future.

           On May 9, 1997, pursuant to a merger agreement dated April 30, 1997,
the Company acquired all of the outstanding common stock of International
Systems & Electronics Corporation (ISE), a POS dealer with operations in
Florida, for consideration of $1,192,000 in cash, including $92,000 of
acquisition costs, and 130,434 shares of non-registered, restricted common stock
of the Company valued at approximately $750,000. On July 23, 1997, the Company
entered into a Rescission Agreement whereby the merger agreement and all of the
transactions contemplated thereunder were rescinded in their entirety effective
as of April 30, 1997. Under the Rescission Agreement, at the closing date (i)
all of the 130,434 shares of common stock will be returned to the Company and
canceled; (ii) the shareholder of ISE will refund to the Company $250,000 in
cash; (iii) the shareholder of ISE will deliver to the Company a promissory note
in the amount of $350,000 bearing interest at 8.5% to be paid in thirty equal
monthly installments commencing in January 1998; (iv) the shareholder of ISE
will begin from time to time to make monthly transfers of finished goods
inventory to the Company with an aggregate market value of up to $250,000; and
(v) a consulting agreement will be executed by the shareholder of ISE to provide
consulting services to the Company through December 31, 2001 for a fee of
$250,000, which fee has been prepaid by the Company. The transactions
contemplated by the Rescission Agreement are expected to close on August 15,
1997. All costs incurred related to the acquisition and the subsequent
rescission have been expensed in the accompanying statements of operations. The
$1,100,000 cash payment made to the shareholder of ISE in accordance with the
merger agreement has been recorded as receivables and prepaid consulting fees,
in 

                                     Page 9
<PAGE>   10

accordance with the terms of the Rescission Agreement. The shares of common
stock issued in the acquisition and subsequently canceled under the rescission
agreement are not included in the common shares used in computing per share
amounts.

Income Taxes

           The Company provides for income taxes in interim periods based on the
estimated effective income tax rate for the complete fiscal year. For the six
months ended June 30, 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.

Per Share Information

           Net loss per share is based on the weighted average number of common
shares outstanding. Common stock equivalents, which consist of stock options and
warrants, were antidilutive for the six months ended June 30, 1997. No common
stock equivalents were outstanding during the six months ended June 30, 1996.

           In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods to conform to the new method. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options and warrants
will be excluded from the calculation. The new requirements do not significantly
change the calculation of fully diluted earnings per share. Statement No. 128 is
not expected to impact the Company's net loss per share for the six months ended
June 30, 1997 and 1996, as no dilutive stock options and warrants were included
in those calculations.

Contingencies

           The Company is subject to legal proceedings and claims which arise in
the normal course of its business. Management believes that the resolution of
such matters will not have a material effect on the Company's financial position
or future results of operations.

Debt

           CRI has a line of credit with a commercial bank which does not have a
termination date, but which is reviewed annually for renewal. At June 30, 1997,
the line permitted borrowings up to $350,000. Borrowings under the line bear
interest at a rate which the Company and the bank mutually agree upon and are
secured by CRI's accounts receivable. The line prohibits the reduction or
depletion of CRI's capital without 30 days prior written notice to the bank. At
June 30, 1997, $320,000 was outstanding under the line at an interest rate of
9.5%.

           ARS has a line of credit with a bank which provides for aggregate
borrowings up to $475,000 based on the value of ARS's accounts receivable and
inventory; bears interest at the bank's prime rate plus 1%; matures on June 1,
1998; and is collateralized by ARS's accounts receivable and inventory. ARS had
outstanding borrowings of $185,000 bearing interest at 9.5% at June 30, 1997.
The line requires ARS to maintain certain financial covenants with which ARS was
in compliance at June 30, 1997. The line is guaranteed by the Company and
restricts the Company's ability to dispose of substantially all of its assets
without the approval of the bank.

           Smyth has available a $1 million line of credit with a commercial
bank which bears interest at the bank's base lending rate plus 0.5%. Borrowings
under the line are collateralized by the assets of Smyth and are payable on
demand. At June 30, 1997, $200,000 was outstanding under the line at an interest
rate of 9%. The line requires Smyth to maintain certain financial covenants with
which Smyth was in compliance at June 30, 1997. The line is guaranteed by the
Company and restricts the Company's ability to dispose of substantially all of
its assets without the approval of the bank.

Subsequent Events

           On August 5, 1997, the Company acquired all of the outstanding common
stock of Pacific Cash Register and Computer, Inc. (PCR), a POS dealer with
operations in Northern California. As consideration for the merger, the
shareholders of PCR received cash of $152,000; 55,417 shares of non-registered,
restricted common stock of the Company valued at approximately $166,000 at the
acquisition date (the Restricted Stock); and 19,583 additional shares of
non-registered, restricted common stock of the Company valued at approximately
$59,000 at the acquisition date (the Additional Shares). The retention by the
former shareholders of PCR of the Additional Shares is contingent upon PCR
achieving a specified level of pre-tax earnings, as defined, for the fiscal year
ended December 31, 1997. To the extent that PCR's pre-tax earnings are less than
the specified 



                                    Page 10
<PAGE>   11

level, then a proportional amount of the Additional Shares will be
returned to the Company and canceled. In addition, at the closing date 25,000
shares of the Restricted Stock valued at approximately $75,000 (the Escrow
Shares) were retained in escrow subject to the final determination of PCR's net
worth at the closing date. A proportionate amount of the Escrow Shares will be
returned to the Company if PCR's net worth at the closing date is less than
$107,000.

           Effective July 22, 1997, CRI increased the borrowing availability
under its line of credit facility to $600,000 at an interest rate of prime plus
1% and the Company executed a guarantee of borrowings outstanding under the
line.



                                    Page 11
<PAGE>   12

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                  JUNE 30, 1997

           The following information includes forward-looking statements, the
realization of which may be impacted by certain important factors discussed in
"Additional Factors That May Affect Future Results," below.

OVERVIEW

           The Company was formed on April 3, 1996 to establish a national
network of full service retail automation solution providers. As of June 30,
1997, the Company has acquired five subsidiaries (three "hubs" and two "spokes")
that sell, install and maintain point-of-sale (POS) systems and turnkey retail
automation (VAR) systems. The Company changed its name to Bristol Retail
Solutions, Inc. in July 1997. The Company's former name was Bristol Technology
Systems, Inc.

           The following discussion and analysis of the results of operations
relates to 1) the consolidated financial statements of the Company as of and for
the three- and six-month periods ended June 30, 1997 and 2) the stand-alone
statements of operations and cash flows of CRI for the three- and six-month
periods ended June 30, 1996. Because the consolidated results of operations of
the Company for the three- and six-month periods ended June 30, 1997 include the
results of the Company and its wholly-owned subsidiaries, whereas the results of
operations of CRI for the three- and six-month periods ended June 30, 1996
include only the results of CRI, the results of operations for the three- and
six-month periods ended June 30, 1997 and June 30, 1996 are not comparable.
Accordingly, the discussion of the results of operations stated below does not
compare the three- and six-month periods ended June 30, 1997 and June 30, 1996,
but instead discusses each period separately. The discussion and analysis of
financial condition relates to the consolidated balance sheet of the Company at
June 30, 1997. No statement of operations for the Company has been presented for
the period from inception (April 3, 1996) to June 30, 1996 because all costs
incurred by the Company during that period, except for salaries of $31,250 that
were expensed, were incurred in connection with the acquisition of CRI and were
included as part of the CRI purchase price.


RESULTS OF OPERATIONS OF THE COMPANY

           Three- and Six-month Periods Ending June 30, 1997

           Net revenue

           The Company's net 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). Net revenue for the quarter ended June 30, 1997 was
$4,584,000 and was comprised of net revenue from the Company's wholly-owned
subsidiaries CRI, ARS and MicroData for the entire quarter and Smyth and EBM
from the date of their respective acquisitions (see Notes to Consolidated
Financial Statements, Acquisitions). Net revenue for the quarter ended June 30,
1997 was comprised of $3,092,000, or 67%, of Systems Revenue and $1,492,000, or
33%, of Service Revenue. Net revenue for the six months ended June 30, 1997 was
$7,245,000 and was comprised of net revenue from the Company's wholly-owned
subsidiaries CRI and ARS for the entire six-month period and MicroData, Smyth
and EBM from the date of their respective acquisitions. Net revenue for the six
months ended June 30, 1997 was comprised of $4,841,000, or 67%, of Systems
Revenue and $2,404,000, or 33%, of Service Revenue. This compares to a
composition of net revenue for the period from inception (April 3, 1996) to
December 31, 1996 of 74% Systems Revenue and 26% Service Revenue, which is
comprised solely of revenues of CRI. The mix of revenue changed during the first
six months of 1997 due to a decline in systems sales to Seed Restaurant Group,
CRI's largest customer during 1996; due to an increase in Service Revenue
derived from additional maintenance contracts obtained as a result of a high
volume of systems sold by CRI during the last half of 1996; and due to different
revenue mixes at ARS and at the subsidiaries acquired in 1997.

           No customer accounted for more than 10% of sales for the three- and
six-month periods ended June 30, 1997. Sales of products from the Company's
three main hardware vendors, Panasonic, ERC Parts, Inc. (ERC), a distributor of
Panasonic products, and NCR Corporation (NCR), accounted for approximately 25%
and 47% of net revenue for the three- and six-month periods ended June 30, 1997.
The Company has supply agreements with these manufacturers. The agreements are
non-exclusive, have geographic limitations and have renewable one-year terms. 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.


                                    Page 12
<PAGE>   13

           Gross Margin

           Gross margin for the quarter ended June 30, 1997 was 30% and was
comprised of gross margin for Systems Revenue of 32% and gross margin for
Service Revenue of 27%. Gross margin for the six months ended June 30, 1997 was
30% and was comprised of gross margin for Systems Revenue of 32% and gross
margin for Service Revenue of 26%. This compares to gross margin for the period
from inception (April 3, 1996) to December 31, 1996 of 32%, which is comprised
solely of gross margin of CRI. Gross margins have decreased slightly in 1997 due
primarily to lower margins realized at ARS and at the subsidiaries acquired in
1997.

           Selling, General and Administrative Expenses

           Selling, general and administrative expenses for the quarter ended
June 30, 1997 were $2,113,000, or 46% of net revenue. Six-month selling, general
and administrative expenses were $3,398,000, or 47% of net revenue. Selling,
general and administrative expenses increased during the quarter due to planned
staffing additions at corporate headquarters needed to integrate acquired
companies and to support future growth.

           Research and Development Costs

           Research and development costs were $72,000 during the three- and
six-month periods ended June 30, 1997 and consist primarily of internal costs to
develop proprietary software incurred at the Company's wholly-owned subsidiary
Smyth, which was acquired on May 29, 1997. The Company's policy is to expense
such costs until technological feasibility is established.

           Interest Income and Interest Expense

           Interest income of $45,000 and $109,000 for the three- and six-month
periods ended June 30, 1997, respectively, was derived primarily from interest
earned on the investment of the Company's proceeds from its initial public
offering. The proceeds are invested in a short-term, interest-bearing money
market fund.

           Interest expense of $20,000 and $32,000 for the three- and six-month
periods ended June 30, 1997, respectively, consisted primarily of interest on
outstanding balances on the Company's lines of credit.

           Income Tax Provision

           The Company recorded an effective income tax provision of 0% for the
three- and six-month periods ended June 30, 1997. Income tax expense consisted
solely of state taxes as the Company had a taxable loss for federal income tax
purposes.

RESULTS OF OPERATIONS OF CRI

           Three- and Six-Month Periods Ended June 30, 1996

           Net revenue

           Net revenue for the quarter ended June 30, 1996 was $2,252,000,
comprised of $1,723,000, or 76%, of Systems Revenue and $529,000, or 24%, of
Service Revenue. Net revenue for the six months ended June 30, 1996 was
$4,018,000, comprised of $3,019,000, or 75%, of Systems Revenue and $999,000, or
25%, of Service Revenue.

           CRI's largest customer, Seed Restaurant Group, accounted for
approximately 54% and 49% of net revenue, respectively, for the three- and
six-month periods ended June 30, 1996. No other customer accounted for more than
10% of CRI's net revenue for the three- and six-month periods ended June 30,
1996. Sales of products from CRI's two main hardware vendors, ERC and NCR,
accounted for approximately 53% and 51% of net revenue, respectively, for the
three- and six-month periods ended June 30, 1996.

           Gross Margin

           Gross margin for the quarter ended June 30, 1996 was $739,000, or
33%, and was comprised of gross margin for Systems Revenue of 31% and gross
margin for Service Revenue of 40%. Gross margin for the six months ended June
30, 1996 was $1,235,000, or 31%, and was comprised of gross margin for Systems
Revenue of 29% and gross margin for Service Revenue of 37%.



                                    Page 13
<PAGE>   14

           Selling, General and Administrative Expenses

           Selling, general and administrative expenses for the quarter ended
June 30, 1996 were $645,000, or 29% of net revenue. Six-month selling, general
and administrative expenses were $1,173,000, or 29% of net revenue.

           Write-off of Cash Surrender Value of Officers' Life Insurance

           The write-off of the cash surrender value of officers' life insurance
in the quarter ended June 30, 1996 represents amounts written off because the
ownership of the life insurance policies was transferred to former owners and a
former director of CRI in contemplation of the acquisition of CRI by the
Company.

           Income Tax Benefit

           CRI recorded an effective income tax provision of 35% for the quarter
ended June 30, 1996 and an effective income tax benefit of 35% for the six
months ended June 30, 1996.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

           The Company had cash and cash equivalents of $766,000 and working
capital of $2,011,000 at June 30, 1997, compared to cash and cash equivalents of
$5,476,000 and working capital of $6,164,000 at December 31, 1996. During the
six months ended June 30, 1997, the Company utilized $942,000 for operations;
utilized $85,000 for the purchase of property and equipment and utilized
$2,808,000 for the acquisitions of MicroData, Smyth and EBM; and utilized
$25,000 for financing activities, which consists of the net impact of borrowings
and repayments under the Company's various debt agreements and the purchase of
treasury stock. In addition, the Company utilized $850,000 during the period for
an acquisition which was later rescinded. These funds are recorded as
receivables at June 30, 1997 and will be returned to the Company as provided in
the Rescission Agreement (see Notes to Consolidated Financial Statements -
Acquisitions).

           CRI has a line of credit with a commercial bank which does not have a
termination date, but which is reviewed annually for renewal. At June 30, 1997,
the line permitted borrowings up to $350,000. Borrowings under the line bear
interest at a rate which the Company and the bank mutually agree upon and are
secured by CRI's accounts receivable. The line prohibits the reduction or
depletion of CRI's capital without 30 days prior written notice to the bank. At
June 30, 1997, $320,000 was outstanding under the line at an interest rate of
9.5%. Effective July 22, 1997, CRI increased the borrowing availability under
its line of credit to $600,000 at an interest rate of prime plus 1% and the
Company executed a guarantee of borrowings outstanding under the line.

           ARS has a line of credit with a bank which provides for aggregate
borrowings up to $475,000 based on the value of ARS's accounts receivable and
inventory; bears interest at the bank's prime rate plus 1%; matures on June 1,
1998; and is collateralized by ARS's accounts receivable and inventory. ARS had
outstanding borrowings of $185,000 bearing interest at 9.5% at June 30, 1997.
The line requires ARS to maintain certain financial covenants with which ARS was
in compliance at June 30, 1997. The line is guaranteed by the Company and
restricts the Company's ability to dispose of substantially all of its assets
without the approval of the bank.

           Smyth has available a $1 million line of credit with a commercial
bank which bears interest at the bank's base lending rate plus 0.5%. Borrowings
under the line are collateralized by the assets of Smyth and are payable on
demand. At June 30, 1997, $200,000 was outstanding under the line at an interest
rate of 9%. The line requires Smyth to maintain certain financial covenants with
which Smyth was in compliance at June 30, 1997. The line is guaranteed by the
Company and restricts the Company's ability to dispose of substantially all of
its assets without the approval of the bank.

           On April 1, 1997, the Company, though its wholly-owned subsidiary
CRI, acquired all of the outstanding common stock of MicroData, a POS dealer
with operations in Illinois and Kentucky, for consideration of $98,000 in cash,
including $19,000 of acquisition costs, and 11,415 shares of non-registered,
restricted common stock of the Company valued at approximately $136,000.
The transaction was recorded under the purchase method of accounting.

           On May 29, 1997, the Company acquired Smyth for consideration of
$2,369,000 in cash, including $20,000 of acquisition costs, and 569,408 shares
of non-registered, restricted common stock of the Company valued at
approximately $2,064,000. Smyth operates through two divisions which (i) provide
VAR systems to customers throughout the United States and (ii) provide POS
systems to customers in Southern California and Ohio. The transaction was
recorded under the purchase method of accounting.



                                    Page 14
<PAGE>   15

           On June 6, 1997, the Company, through its wholly-owned subsidiary
CRI, acquired EBM, a POS dealer with operations in Indiana and Kentucky, for
consideration of $452,000 in cash, including $52,000 of acquisition costs, and
139,682 shares of non-registered, restricted common stock of the Company valued
at approximately $550,000. In addition, seventy-five (75) days following the
closing date additional consideration of $21,000 in cash and 7,351 shares of
non-registered, restricted common stock of the Company valued at approximately
$29,000 will be paid to the shareholder of EBM. The transaction was recorded
under the purchase method of accounting.

           On August 5, 1997, the Company acquired all of the outstanding common
stock of PCR, a POS dealer with operations in Northern California. As
consideration for the merger, the shareholders of PCR received cash of $152,000;
55,417 shares of non-registered, restricted common stock of the Company valued
at approximately $166,000 at the acquisition date (the Restricted Stock); and
19,583 additional shares of non-registered, restricted common stock of the
Company valued at approximately $59,000 at the acquisition date (the Additional
Shares). The retention by the former shareholders of PCR of the Additional
Shares is contingent upon PCR achieving a specified level of pre-tax earnings,
as defined, for the fiscal year ended December 31, 1997. To the extent that
PCR's pre-tax earnings are less than the specified level, then a proportional
amount of the Additional Shares will be returned to the Company and canceled. In
addition, at the closing date 25,000 shares of the Restricted Stock valued at
approximately $75,000 (the Escrow Shares) were retained in escrow subject to the
final determination of PCR's net worth at the closing date. A proportionate
amount of the Escrow Shares will be returned to the Company if PCR's net worth
at the closing date is less than $107,000. The transaction will be recorded
under the purchase method of accounting.

           The Company is currently engaged 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 PCR
discussed above.

           The Company anticipates that its current cash on hand, cash flow from
operations and additional financing available under its various credit
facilities will be sufficient to meet the Company's liquidity requirements for
its operations through the end of fiscal 1997. However, the Company intends to
identify, evaluate and acquire additional retail automation solution businesses
during the remainder of the calendar year. These acquisitions are expected to be
funded through a combination of cash and common stock and may necessitate
additional costs and expenditures to expand operational and financial systems
and corporate management and administration. The Company will require additional
financing in order to continue this acquisition program. The Company is
currently in the process of obtaining additional debt financing in order to meet
its anticipated acquisition financial requirements during the remainder of
fiscal 1997. 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 strategic plan 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 which the Company has acquired to date have typically had lower net
revenues in the first quarter of the fiscal year primarily due to the lower
level of new store openings by customers during January through March. As the
Company grows through acquisition, this pattern of seasonality may or may not
continue.

           Quarterly results in the future may be materially affected by the
timing and magnitude of acquisitions, the timing and magnitude of 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 fiscal quarter or for a full fiscal 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


                                    Page 15
<PAGE>   16

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 and results of operations. Budgeting
and other management decisions are subjective in many respects and 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, financial condition and results
of operations. 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. The following factors also may materially
affect the Company's business, financial condition and results of operations 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 has
an aggressive acquisition strategy that is expected to involve the acquisition
of a significant number of additional retail automation solution providers. From
its inception through August 5, 1997, the Company has completed three "hub"
acquisitions and three "spoke" 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 business, results of
operations and 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 to the Company or that financing for acquisitions will
be obtainable on terms acceptable to the Company, if at all.

           There can be no assurance that acquisitions can be consummated or
that acquired businesses can be integrated successfully and profitably into the
Company's operations. While the Company's decentralized management strategy,
together with operating efficiencies resulting from the elimination of
duplicative functions and economies of scale, may present opportunities to
reduce costs, such strategies may initially necessitate costs and expenditures
to expand operational and financial systems and corporate management and
administration. Such costs and expenditures may materially affect the Company's
financial condition and results of operations in fiscal quarters immediately
following a material acquisition and, further, there can be no assurance that
such strategies will ultimately result in cost reductions. In addition, there
can be no assurance that the pace of the Company's acquisitions will not
adversely affect the Company's efforts to implement its cost-savings and
integration strategies and to manage its acquisitions profitability. Likewise,
delays in implementing planned integration strategies and activities also could
adversely affect the Company's quarterly earnings. The Company may acquire
certain businesses that have either 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 and financial condition.

           Need for Additional Financing to Implement Acquisition Strategy. The
Company has financed its prior acquisitions, and intends to finance future
acquisitions, by using cash and shares of common stock. The Company will need to
obtain additional cash through future debt or equity financing in order to
continue its acquisition program. There can be no assurance that the Company
will be able to obtain such financing when it is needed or that any such
financing will be available on terms the Company deems acceptable, if at all. In
addition, there can be no assurance that the Company will be able to continue to
finance acquisitions by using shares of common stock. For example, if the price
of a share of the Company's common stock declines for 


                                    Page 16
<PAGE>   17
a prolonged period, the owners of potential acquisition targets may not be
willing to receive shares of common stock in exchange for their businesses,
thereby adversely affecting the pace of the Company's acquisition program. Such
an effect on the pace of the Company's acquisition program could further reduce
the price of a share of common stock, to the further detriment of the Company's
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 automated retail solutions 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 automated retail solution providers and some of these providers are
currently larger and have greater financial resources than the Company. In
addition, there are original equipment manufacturers of automated retail
solution 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, competing automated retail solution providers
may seek growth through consolidation through and with entities other than the
Company. Furthermore, 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 and financial condition.

           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 automation retail
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 part of the Company's net
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 equipment manufacturers 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. During the six months ended June 30, 1997, the Company purchased its
hardware principally from three main vendors, Panasonic, ERC, a distributor of
Panasonic products, and NCR. Sales of Panasonic, ERC and NCR products accounted
for approximately 25% and 47% of net revenue for the three- and six-month
periods ended June 30, 1997, respectively. The Company has supply agreements
with these manufacturers. The agreements are non-exclusive, have geographic
limitations and have renewable one-year terms. While the Company does not
foresee why any of these relationships will not continue in the future, 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
through alternative sources. 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.

           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.

           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 POS and ECR 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 

                                    Page 17
<PAGE>   18
developed equipment. The Company's 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
advanced VAR solutions at competitive prices.

           Possible Environmental Liabilities. Under various federal, state and
local environmental laws, ordinances and regulations, a current or previous
owner or operator of real property may be held liable for the costs of removal
or remediation of certain hazardous or toxic substances which could be located
on, in or under such property. These laws and regulations often impose liability
whether or not the owner or operator knew of or was responsible for the presence
of the hazardous or toxic substances. The costs for any required remedy or
removal of these substances could be substantial, and the liability as to any
property is generally not limited under these laws and regulations and could
exceed the value of the property and the aggregate assets of the owner or
operator. The presence of these substances or failure to remediate these
substances properly may also adversely affect the owner's ability to sell or
rent the property or to borrow using the property as collateral. In connection
with the ownership or operation of its acquired companies, the Company could be
liable for these and other related costs.

           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 on a great
degree on the continued efforts of Chief Executive Officer Richard H. Walker.
Furthermore, the Company will likely 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 and Maurice R. Johnson,
President of CRI. Each of the agreements with Messrs. Walker, Spindler and
Johnson terminate in the year 2001, unless terminated earlier pursuant to the
agreements, and each contains confidentiality and/or noncompetition provisions
therein. The Company is the beneficiary of a key man life insurance policy in
the amount of $1,000,000 on the life of Mr. Walker for a term of one year; 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, 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. The Company currently has no
plans, arrangements or understanding to issue shares of preferred stock.

           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 18
<PAGE>   19
           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 total tangible assets of at least $2,000,000,
total stockholders' equity of at least $1,000,000, a public float of at least
100,000 shares with a market value of at least $200,000, at least 300
stockholders, a minimum bid price of $1.00 per share and at least two market
makers. The Nasdaq Stock Market, Inc. has proposed certain changes to the
maintenance criteria for listing eligibility on the Nasdaq SmallCap Market. The
proposed maintenance standards would require 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 million 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 current 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.
If the Company fails to maintain Nasdaq Small Cap Market listing, the market
value of the Company's common stock likely 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 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 Directory 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
common stock and does not anticipate paying cash dividends in the foreseeable
future. In addition, line of credit agreements entered into by the Company's
subsidiaries contain certain provisions which restrict the paying of dividends
without the prior consent of the lender.



                                    Page 19
<PAGE>   20
                                     PART II

                                OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES

       The following is a summary of transactions by the Company during the
three months ended June 30, 1997, involving sales of the Company's Securities
that were not registered under the Securities Act.

         (1)      On April 1, 1997, the Company issued 11,415 shares of Common
                  Stock to the former shareholders of MicroData, Inc., as
                  partial consideration paid in connection with the acquisition
                  of the outstanding shares of MicroData, Inc. by Cash
                  Registers, Incorporated ("CRI"), a wholly-owned subsidiary of
                  the Company. 

         (2)      On May 29, 1997, the Company issued 569,408 shares of Common
                  Stock to the former shareholders of Smyth Systems, Inc., as
                  partial consideration paid in connection with the acquisition
                  of the outstanding shares of Smyth Systems, Inc. by the
                  Company.

         (3)      On June 6, 1997, the Company issued 139,682 shares of Common
                  Stock to the former shareholders of Electronic Business
                  Machines, Inc., as partial consideration paid in connection
                  with the acquisition of the outstanding shares of Electronic
                  Business Machines, Inc. by CRI.

       Exemption from the registration requirements of the Securities Act for
the transactions described above is claimed under Section 4(2) of the
Securities Act, among others, on the basis that such transactions did not
involve any public offering and the purchasers were sophisticated with access
to the kind of information registration would provide. No underwriting fees or
broker's commissions were paid in connection with the foregoing transactions.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       The annual meeting of the Company's stockholders was held on May 20, 1997
in Irvine, California. Matters submitted to a vote of security holders were as
follows:

         (1)      The election of the following six directors to hold office
                  until the next annual meeting and until their successors are
                  elected and duly qualified:
<TABLE>
<CAPTION>
                             Director            For               Withheld
                     ---------------------  -------------        -----------
                     <S>                      <C>                    <C>   
                     Richard H. Walker        4,004,593              46,700
                     Paul Spindler            4,004,593              46,700
                     Lawrence Cohen           4,004,593              46,700
                     Maurice R. Johnson       4,004,593              46,700
                     Dr. Jack Borsting        4,004,593              46,700
                     Dr. Thomas Lutri         4,004,593              46,700
</TABLE>
                  Immediately following the annual meeting, Mr. Johnson resigned
                  as a director of the Company and the Board of Directors voted
                  to reduce the number of directors from six to five.

         (2)      The approval of the appointment of Ernst & Young LLP as
                  independent auditors for the fiscal year ending December 31,
                  1997.
<TABLE>
                                 <S>                  <C>      
                                 In Favor             3,990,643
                                 Opposed                 37,300
                                 Abstentions             23,350
</TABLE>
         (3)      The approval of the amendment of the Company's 1996 Equity
                  Participation Plan to increase the number of shares authorized
                  to be issued under the Plan to 2,450,000 shares from 450,000
                  shares.
<TABLE>
                                 <S>                   <C>      
                                 In Favor              2,710,782
                                 Opposed                 102,597
                                 Abstentions              18,150
                                 Broker Non-Votes      1,219,764
</TABLE>
         (4)      The approval of the Company's 1997 Employee Stock Purchase 
                  Plan.
<TABLE>
                                 <S>                   <C>
                                 In Favor              2,729,542
                                 Opposed                  70,167
                                 Abstentions              34,450
                                 Broker Non-Votes      1,217,134
</TABLE>

                                    Page 20
<PAGE>   21
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8 - K

                  (a)      Exhibits

                           10.27    Agreement and Plan of Merger by and among
                                    Bristol Technology Systems, Inc., Bristol
                                    Merger Corp., International Systems &
                                    Electronics Corporation and Pedro Penton
                                    (Incorporated by reference to Exhibit 10.27
                                    of the Company's Form 8-K dated May 9, 1997
                                    as filed with the Securities and Exchange
                                    Commission on May 23, 1997, File No.
                                    0-21633). On July 23, 1997, this agreement
                                    was rescinded effective as of April 30,
                                    1997.

                           10.28+   Employment Agreement to be effective as of
                                    May 1, 1997 by and between Pedro Penton and
                                    International Systems & Electronics
                                    Corporation (Incorporated by reference to
                                    Exhibit 10.28 of the Company's Form 8-K
                                    dated May 9, 1997 as filed with the
                                    Securities and Exchange Commission on May
                                    23, 1997, File No. 0-21633). On July 23,
                                    1997, this agreement was rescinded effective
                                    as of April 30, 1997.

                           10.29    Agreement and Plan of Reorganization by and
                                    among Bristol Technology Systems, Inc.,
                                    Smyth Systems, Inc., the Managing
                                    Stockholders of Smyth Systems, Inc. and
                                    Smyth Merger Corp. (Incorporated by
                                    reference to Exhibit 10.29 of the Company's
                                    Form 8-K dated May 29, 1997 as filed with
                                    the Securities and Exchange Commission on
                                    June 12, 1997, File No. 0-21633).

                           10.30    Second Amendment to Agreement and Plan of
                                    Reorganization (Incorporated by reference to
                                    Exhibit 10.30 of the Company's Form 8-K
                                    dated May 29, 1997 as filed with the
                                    Securities and Exchange Commission on June
                                    12, 1997, File No. 0-21633).

                           10.31+   Employment Agreement by and between Robert
                                    T. Smyth and Smyth Systems, Inc. and First
                                    Amendment to Employment Agreement
                                    (Incorporated by reference to Exhibit 10.31
                                    of the Company's Form 8-K dated May 29, 1997
                                    as filed with the Securities and Exchange
                                    Commission on June 12, 1997, File No.
                                    0-21633).

                           10.32+   Employment Agreement by and between Larry D.
                                    Smyth and Smyth Systems, Inc. and First
                                    Amendment to Employment Agreement
                                    (Incorporated by reference to Exhibit 10.32
                                    of the Company's Form 8-K dated May 29, 1997
                                    as filed with the Securities and Exchange
                                    Commission on June 12, 1997, File No.
                                    0-21633).

                           10.33+   Employment Agreement by and between William
                                    A. Smyth and Smyth Systems, Inc. and First
                                    Amendment to Employment Agreement
                                    (Incorporated by reference to Exhibit 10.33
                                    of the Company's Form 8-K dated May 29, 1997
                                    as filed with the Securities and Exchange
                                    Commission on June 12, 1997, File No.
                                    0-21633).

                           10.34    Agreement and Plan of Merger by and among
                                    Bristol Technology Systems, Inc., Cash
                                    Registers, Inc., Floyd Shirrell and
                                    Electronic Business Machines, Inc.
                                    (Incorporated by reference to Exhibit 10.34
                                    of the Company's Form 8-K dated June 6, 1997
                                    as filed with the Securities and Exchange
                                    Commission on June 20, 1997, File No.
                                    0-21633).

                           10.35    First Amendment to Agreement and Plan of
                                    Merger by and among Bristol Technology
                                    Systems, Inc., Cash Registers, Inc., Floyd
                                    Shirrell and Electronic Business Machines,
                                    Inc. (Incorporated by reference to Exhibit
                                    10.35 of the Company's Form 8-K dated June
                                    6, 1997 as filed with the Securities and
                                    Exchange Commission on June 20, 1997, File
                                    No. 0-21633).


                                    Page 21
<PAGE>   22
                           10.36+   Independent Contractor Agreement by and
                                    between Bristol Technology Systems, Inc.,
                                    Cash Registers, Inc. and Floyd Shirrell
                                    (Incorporated by reference to Exhibit 10.36
                                    of the Company's Form 8-K dated June 6, 1997
                                    as filed with the Securities and Exchange
                                    Commission on June 20, 1997, File No.
                                    0-21633).

                           10.37+   Amendment to the 1996 Equity Participation
                                    Plan of Bristol Technology Systems, Inc.
                                    (Incorporated by reference to Exhibit A of
                                    the Company's Definitive Proxy Statement
                                    Pursuant to Section 14(a) as filed with the
                                    Securities and Exchange Commission on April
                                    14, 1997, File No. 0-21633).

                           10.38    Bristol Technology Systems, Inc. 1997
                                    Employee Stock Purchase Plan (Incorporated
                                    by reference to Exhibit B of the Company's
                                    Definitive Proxy Statement Pursuant to
                                    Section 14(a) as filed with the Securities
                                    and Exchange Commission on April 14, 1997,
                                    File No. 0-21633).

                           10.39*   Business Loan Agreement and Promissory Note
                                    by and between Smyth Systems, Inc. and
                                    United National Bank & Trust Co. dated June
                                    2, 1997.

                           10.40*   Borrowing Agreement by and between Automated
                                    Retail Systems, Inc. and Seafirst Bank dated
                                    June 3, 1997.

                           10.41*   Agreement and Plan of Merger by and among
                                    Bristol Technology Systems, Inc., Pacific
                                    Merger Corp., Pacific Cash Register and
                                    Computer, Inc., Robert Freaney and Abbass
                                    Barzgar dated June 27, 1997.

                           10.42*   Rescission Agreement by and among Bristol
                                    Retail Solutions, Inc. (formerly known as
                                    Bristol Technology Systems, Inc.),
                                    International Systems & Electronics
                                    Corporation and Pedro Penton dated July 23,
                                    1997.

                           10.43*   Closing Agreement by and among Bristol
                                    Retail Solutions, Inc. (formerly, Bristol
                                    Technology Systems, Inc.), Pacific Merger
                                    Corp., Pacific Cash Register and Computer,
                                    Inc., Robert Freaney and Abbass Barzgar
                                    dated August 4, 1997.

                           11*      Calculation of Earnings per Share

                           27*      Financial Data Schedule

                           * Filed herewith.

                           + Indicates a management contract or compensatory
                           plan or arrangement.

                  (b)      Reports on Form 8 - K

                           During the three months ended June 30, 1997, the
                           Company filed the following Current Reports on
                           Form 8-K:

                           Form 8-K dated April 3, 1997 filed with the
                           Commission on April 17, 1997 reporting information
                           under Items 5 and 7.

                           Form 8 - K dated May 9, 1997 filed with the
                           Commission on May 23, 1997 reporting information
                           under Items 2 and 7.

                           Form 8 - K dated May 22, 1997 filed with the
                           Commission on May 29, 1997 reporting information
                           under Item 5.

                           Form 8-K dated May 29, 1997 filed with the Commission
                           on June 12, 1997 reporting information under Items 2
                           and 7.

                           Form 8-K dated June 6, 1997 filed with the Commission
                           on June 20, 1997 reporting information under Items 2
                           and 7.


                                    Page 22
<PAGE>   23

                                    SIGNATURE

       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.


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


     August 13, 1997           By: /s/ ROGER T. MONACO
---------------------------    ------------------------------------------
         Date                  Roger T. Monaco
                               Senior Vice President and Chief Financial Officer
                               (Principal financial and accounting officer)



                                    Page 23