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

The following discussion and analysis provides information which the Company believes is relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read in conjunction with the financial statements and notes thereto.

Results of Operations

For the six months ended June 30, 1998 as compared to the six months ended June 30, 1997

Revenues. Total revenues decreased $489,715 to $566,691 in the first six months of 1998 from $1,056,106 in the first six months of 1997. This decrease was primarily attributable to a decrease of sales of integration services and data collection equipment due to the increased emphasis in the development of FIS
2.0. This decrease was offset in part by an increase in software Licensing revenue and in the hardware and software maintenance and support revenue.

Cost of Revenues. Total cost of revenues decreased $269,015 to $258,146 in the first six months of 1998 from $527,161 in the first six months of 1997. This decrease was primarily attributable to a decrease in data collection equipment costs and integrated software costs as a result of lower sales levels. In addition, a shift in research and development activities to development of FIS 2.0 resulted in a reduction of salary expense.

The cost of revenues as a percentage of total revenues was 46% and 50% in the first six months of 1998 and 1997, respectively. Accordingly, the gross margin was 54% and 50% in the first six months of 1998 and 1997, respectively.

Research and Development. Research and development costs decreased $161,982 to $43,132 in the first six months of 1998 from $205,114 in the first six months of 1998. During the first six months of 1998, the Company continued to focus on development activities related to the completion of Version 2.0 of the FIS System. Research and development costs represented approximately 8% and 19% of the total revenues for the first six months of 1998 and 1997, respectively. It is expected that the Manufacturing Execution Management (MEM) module of Version 2.0 of the FIS System will be available for general release during the third quarter of 1998. The MEM module is the fourth and final module scheduled to complete the FIS 2.0 system.

General and Administrative. General and administrative expenses, including interest expense, increased $140,040 to $629,122 in the first six months of 1998 from $489,082 in the first six months of 1997. This increase was partially attributable to the addition of an administrative assistant to the President, a Vice President of Operations and a systems engineer. The elimination of the in-house counsel and the reduction of salaries of the principals as well as a reduction in rent expense as the Raleigh, North Carolina office was closed in the fourth quarter of 1997, helped offset these increases. An increase in the professional fees accounted for the major increase in general and administrative expenses. General and administrative expenses, including interest expense, represented approximately 111% and 46% of total revenues in the first six months of 1998 and 1997, respectively.

Sales and Marketing. Sales and marketing expenses increase $68,743 to $167,164 in the first six months of 1998 from $98,421 in the first six months of 1997. This increase was primarily attributable to an increase in the development of marketing materials, the attendance of the International Hosiery Exposition and Conference as an exhibitor and the development of a Web Site as well as an increase in travel expenses. This increase was partially offset by a decrease in marketing commission due to a decrease in sales. Sales and marketing expenses represented approximately 30% and 9% of total revenues for 1998 and 1997, respectively.

Financial Condition at June 30, 1998

Cash and cash equivalents decreased by $24,439 during the six months ended June 30, 1998, and were utilized mainly for working capital needs and to fund software development as previously discussed.

Accounts receivable decreased by $101,309 during the period, reflecting decreased sales of integration services and data collection equipment.

The $261,743 increase in capitalized software is mainly attributable to the continued focus on completion of Version 2.0 of the FIS System.

The $247,752 increase in current liabilities during the period is due to the continued research and development focus and cash availability. Management believes that it will be able to service these payables out of cash generated through operations and planned financing transactions.

Overall, the Company's current liabilities exceeded its current assets at June 30, 1998 by $466,249.

Liquidity and Capital Resources

Since its inception the Company has primarily financed its operations through revenues from operations, including funded research and development revenues, and occasional short term loans from the Company's principals or their acquaintances. The Company, however, has had a net loss every year of its existence except 1994, in which year it had net income of $31,373; therefore, the Company's operations have led to a growing working capital deficit and a decrease in share-holders' equity. Accordingly, the Company has had liquidity problems from time to time. As of June 30, 1998 the shareholders' deficit was $290,367. As of June 30, 1998 the Company's working capital deficit was $466,249.

In December 1995, the Company entered into a factoring arrangement that is currently being administered as a short term borrowing arrangement collateralized by accounts receivable, which generally permits borrowings of up to 75% of accounts receivable. In February 1996, the Company entered into a loan for $180,000 collateralized by substantially all of the assets of the Company. This loan is being repaid in sixty equal monthly installments.

The Company also issued two convertible promissory notes in March 1997 in the principal amount of approximately $190,000 to two investors, and, in March 1997, executed a promissory note to a significant vendor of the Company in the amount of approximately $320,000 in connection with various payments owed to this vendor.

On June 3, 1997, the Company sold 1,300,000 shares of Common Stock at a price of $0.50 (Cdn.) per share for gross proceeds to the Company, after payment of a commission to Wolverton Securities Ltd. ("Wolverton"), of approximately $420,000. After deducting offering costs of approximately $100,000 the net proceeds to the Company from that offering were approximately $320,000.00

In the fourth quarter of 1996, the Company made a strategic decision to concentrate on completing the FIS System Version 2.0, and initiating the sales and marketing efforts relating thereto. Accordingly, during the period this development continues, the Company expects a reduction in revenues and an increase in sales and marketing expenses.

On November 26, 1997, the Company consummated an initial public offering of its common stock. In this initial public offering, the Company sold 2,500,000 shares of Common Stock at a price of $1.00 (Cdn.) per share for gross proceeds to the Company, after payment of Wolverton's commission, of approximately $1,587,000. After deducting offering costs of approximately $368,000, the net proceeds to the Company from that offering were approximately $1,219,000. The Company used a portion of these proceeds to repay the promissory note to a significant vendor of the Company in the amount of approximately $320,000 discussed above.

In addition, in connection with the consummation of the initial public offering, one of the convertible notes issued by the Company in March 1997 in the principal amount of $116,700 was converted into shares of Common Stock. The other convertible note in the principal amount of $70,532 plus approximately $5,100 in interest was repaid by the Company with a portion of the proceeds from the initial public offering.

On April 24, 1998, the Company issued 100,000 shares of Common Stock at a price of $1.00 (Cdn.) per share pursuant to the exercise by Wolverton of 100,000 of the Warrants. The gross proceeds to the Company from the exercise of such Warrants were approximately $69,000.

On May 12, 1998, the Company issued 50,000 shares of Common Stock at a price of $1.00 (Cdn.) per share pursuant to the exercise of 50,000 of the Warrants. The Gross proceeds to the company from the exercise of such Warrants were $35,000.

On May 19, 1998, the Company issued 50,000 shares of Common Stock at a price of $1.00 (Cdn.) per share pursuant to the exercise of 50,000 of the Warrants. The Gross proceeds to the company from the exercise of such Warrants were $34,000.

On June 12, 1998, the Company completed a private placement of five-year convertible notes in the amount of $500,000 (or C$715,000, using an exchange rate of US$1.00 - C$1.43) and non-transferable share purchase warrants entitling the holders to purchase an aggregate of 541,000 common shares of the Company. The notes, which bear interest at the rate of 12% per year, may be converted into common shares of the Company at a conversion price of US$0.923 (or C$1.32) during the first year and, during each of the remaining four years of the term of the notes, a conversion price that is higher than the conversion price in the previous year by US$0.175 (or C$0.25) per share.

The Company expects that the proceeds from its capital raising activities along with revenues generated from operations will be adequate to meet the Company's projected working capital and other cash requirements for at least the next 6 months, which is the period the Company believes will be required to implement and achieve its business objectives. Management intends, however, to closely follow the Company's progress and to reduce expenses if the Company's strategies do not result in sufficient revenues within a reasonable period. Any such reduction will involve scaling back, delaying or postponing those development activities that are not essential to the Company achieving its stated objectives. In any event, the working capital deficit will continue to grow unless and until revenues increase sufficiently to meet expenditure levels.

The Year 2000

It is possible that the Company's currently installed computer systems, software products or other business systems, or those of the Company's vendors, working either alone or in conjunction with other software or systems, will not accept input of, store, manipulate or output dates in the years 1999, 2000 or thereafter without error or interruption (commonly know as the "Year 2000" problem). The Company has conducted a review of its business systems, including its computer systems, and is querying its vendors as to their progress in identifying and addressing problems that their computer systems may face in correctly processing date information as the year 2000 approaches and is reached. However, there can be not assurance that the Company will identify all such Year 2000 problems in its computer systems or those of its vendors or resellers in advance of their occurrence or that the Company will be able to successfully remedy any problems that are discovered. The expenses of the Company's efforts to identify and address such problem, or the expenses or liabilities to which the Company may become subject as a result of such problems, could have a material adverse effect on the Company's business, financial condition and results of operations. Maintenance or modification costs will be expensed as incurred, while the costs of any new software will be capitalized over the software's useful life.

This Form 1O-QSB contains forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The Company cautions readers of this Form 10-QSB that such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Although the Company's management believes that their expectations of future performance are based on reasonable assumptions within the bounds of their knowledge of their business and operations, there can be no assurance that actual results will not differ materially from their expectations. Factors which could cause actual results to differ from expectations include, among other things, the risks associated with start-up companies, including start-up losses, liquidity problems, uncertainty of revenues, markets, profitability and the need for additional funding; the risks that the Company may be unable to raise additional capital through private financings, debt or equity offerings or collaborative arrangements with others on acceptable terms; intense competition from a variety of competitors with greater resources and market acceptance; the Company's limited experience in assembling a sales and marketing team and strategy; the potential need to make continuing significant investments in software development in response to rapidly evolving technologies and technological shifts; the risks associated with the potential loss of one or more key customers of the Company; the Company's dependence upon key personnel; the challenges and uncertainties in the implementation of the Company's expansion and development strategies; and other factors described in other reports filed by the Company with the Securities and Exchange Commission.