FORM 10-Q

SECURITIES AND EXCHANGE ~~COMMISSION Washington,~~ ~~D.C. 20549~~COMMISSION

Washington, D.C. 20549

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~June~~ September 30, 2001

orOR

o 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: 1-5513

TRIDEX CORPORATION ~~(Exact name of registrant as specified in its charter)~~

Connecticut		06-0682273
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
61 Wilton Road, Westport CT		06880
(Address of principal executive offices)		(Zip Code)

(Exact name of registrant as specified in its charter)

(203) 226-1144 (Registrant’s telephone number, including area code)

Connecticut	06-0682273
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~Former~~6836 ~~address:~~Morrison ~~(Former name~~Boulevard, ~~former address and former fiscal year~~ Charlotte, ifNC ~~changed since last report.)~~28211

~~Indicate by check mark whether the registrant~~ (1)Address ~~has filed all reports required to be filed by Section 13 or 15(d)~~ of ~~the~~principal ~~Securities Exchange Act of 1934 during the preceding 12 Months (or~~executive ~~for such shorter period that the registrant was required to file such reports),~~ ~~and (2~~offices) ~~has been subject to such filing requirements for the past 90 days. YES ý NO o~~

~~APPLICABLE~~(Zip ~~ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS:~~Code)

~~Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15~~(d704) ~~of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES ý NO o~~295-7000

(Registrant’s telephone number, including area code)

Former address:	61 Wilton Road, Westport, CT 06880
(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 Months (or 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 ý NO o

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDING DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

YES o NO o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	~~Outstanding July 15, 2001~~	Outstanding as of October 15, 2001
Common stock, no par value	~~5,654,289~~	5,654,289

TRIDEX CORPORATION AND SUBSIDIARIES

INDEX

PART I.	Financial Information:	~~Financial Information:~~
Item 1.	~~Item 1.~~	Financial Statements (unaudited)	~~Financial Statements (unaudited)~~
			Consolidated Condensed Balance Sheets June 30, 2001 and December 31, 2000
		Consolidated Condensed Balance Sheets September 30, 2001 and December 31, 2000
			Consolidated Statements of Income for the Quarters and Six Months Ended June 30, 2001 and June 30, 2000
		Consolidated Statements of Income for the Quarters and Nine Months Ended September 30, 2001 and September 30, 2000
			Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and June 30, 2000
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and September 30, 2000
			Notes To Consolidated Condensed Financial Statements
		Notes to Consolidated Condensed Financial Statements
Item 2.	~~Item 2.~~	Management’s Discussion and Analysis of the Results of Operations and Financial Condition	~~Management’s Discussion and Analysis of the Results of Operations and Financial Condition~~
PART II.	Other Information:	~~Other Information:~~
Item 6.	~~Item 6.~~	Reports on Form 8-K	~~Reports on Form 8-K~~
Signatures

TRIDEX CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (Dollars in Thousands) (Unaudited)

			June 30, 2001			December 31, 2000
ASSETS
Current assets:
	Cash and cash equivalents		$	1,338		$	397
	Restricted cash (Note 2)		995			1,440
	Receivables, net		601			1,967
	Inventories		24			393
	Other current assets		432			387
		Total current assets	3,390			4,584
	Plant and equipment (Note 3)		1,402			1,385
	Less accumulated depreciation		(857		)	(690		)
			545			695
	Goodwill and intangible assets, net		4,752			5,587
	Other assets		1,334			1,348
			$	10,021		$	12,214
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Bank loan payable (Note 6)		$	3,017		$	3,017
	Long term debt (Note 6)		13,420			14,100
	Accounts payable		1,626			2,990
	Accrued liabilities		5,798			4,469
	Deferred revenue		1,218			347
		Total current liabilities	25,079			24,923
Shareholders’ (deficit) equity:
	Common stock, no par value		1,455			1,455
	Additional paid-in capital		33,893			33,893
	Accumulated deficit		(49,091		)	(46,742		)
	Receivable from sale of stock		(350		)	(350		)
	Common shares held in treasury, at cost		(965		)	(965		)
		Total shareholders’ (deficit) equity	(15,058		)	(12,709		)
			$	10,021		$	12,214

Consolidated Condensed Balance Sheets

~~See~~(Dollars ~~notes to~~in ~~consolidated condensed financial statements.~~ Thousands)

~~TRIDEX CORPORATION AND SUBSIDIARIES Consolidated Statements of Income~~ (~~Dollars in Thousands Except Per Share Amounts) (~~Unaudited)

		Quarters Ended						Six Months Ended
		September 30, 2001			December 31, 2000
		June 30, 2001			June 30, 2000			June 30, 2001			June 30, 2000
ASSETS
Net sales		$	2,687		$	4,116		$	4,292		$	8,068
Current assets:
Operating costs and expenses:
Cash and cash equivalents		$	434		$	397
	Cost of sales	268			1,948			934			5,024
Restricted cash (Note 2)		780			1,440
	Engineering, design and product development costs	440			1,004			931			2,277
Receivables, net		891			1,967
	Selling, administrative and general expenses	1,342			1,558			2,565			2,912
Inventories		40			393
	Depreciation and amortization	486			1,015			995			2,068
Other current assets		160			387
		2,536			5,525			5,425			12,281
Total current assets		2,305			4,584
Operating profit (loss)		151			(1,409		)	(1,133		)	(4,213		)
Property and equipment (Note 3)		1,288			1,385
Other charges (credits):
Less accumulated depreciation		(922		)	(690		)
	Interest expense, net	461			650			949			1,595
		366			695
	Other, net	424			182			447			176
Goodwill and intangible assets, net (Note 3)		4,334			5,587
		885			832			1,396			1,771
Other assets		1,325			1,348
Loss from continuing operations before income taxes		(734		)	(2,241		)	(2,529		)	(5,984		)
		$	8,330		$	12,214
Benefit of (Provision for) income taxes		181			(70		)	181			(70		)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Net loss from continuing operations		$	(553	)	$	(2,311	)	$	(2,348	)	$	(6,054	)
Current liabilities:
Discontinued Operations (Note 3):
Bank loan payable (Note 6)		$	3,017		$	3,017
	Net loss from discontinued operations	0			0			0			(26		)
Long term debt (Note 6)		13,324			14,100
	Net gain on sale of discontinued operations	(35		)	0			(35		)	5,588
Accounts payable		1,486			2,990
Net loss before extraordinary item		(588		)	(2,311		)	(2,383		)	(492		)
Accrued liabilities		5,916			4,469
Extraordinary loss due to debt modification (Note 6)		0			0			0			(695		)
Deferred revenue		1,200			347
Net loss		(588		)	(2,311		)	(2,383		)	(1,187		)
Total current liabilities		24,943			24,923
Loss per share – basic and diluted:
Shareholders’ (deficit) equity:
	Loss from continuing operations	$	(0.10	)	$	(0.36	)	$	(0.42	)	$	(0.94	)
Common stock, no par value		1,455			1,455
Income from discontinued operations		0.00			0.00			0.00			0.87
Additional paid-in capital		33,893			33,893
Extraordinary loss		0.00			0.00			(0.00		)	0.11
Accumulated deficit		(50,646		)	(46,742		)
Net income/(loss)		(0.10		)	(0.36		)	(0.42		)	(0.18		)
Receivable from sale of stock		(350		)	(350		)
Weighted average shares outstanding
Common shares held in treasury, at cost		(965		)	(965		)
	Basic and diluted	5,654,289			6,368,289			5,654,289			6,368,289
Total shareholders’ (deficit) equity		(16,613		)	(12,709		)
		$	8,330		$	12,214

See notes to consolidated condensed financial statements.

TRIDEX CORPORATION AND ~~SUBSIDIARY Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)~~SUBSIDIARIES

									Quarters Ended
									June 30,2001			June 30, 2000
Cash flows from operating activities:
	Net income (loss)								$	(2,383	)	$	(1,187	)
		Adjustments to reconcile net income (loss) to net cash used in operating activities:
					Depreciation				167			289
					Amortization of goodwill and intangible assets and purchased and internally developed software				835			1,779
						Debt discount amortization			—			404
							Gain on sale of assets		(7		)	(8		)
							Gain on sale of discontinued operations		—			(5,588		)
							Loss/(gain) from discontinued operations		35			26
							Extraordinary loss due to debt modification		—			695
							Changes in operating assets and liabilities:
								Receivables	1,366			1,879
								Inventory	369			312
								Other current assets	(44		)	(117		)
								Other assets	14			(348		)
								Accounts payable, accrued liabilities, deferred revenue and income taxes payable	837			1,307
								Net cash used in operating activities of continuing operations	1,189			(557		)
Cash flows from investing activities:
	Purchases of plant and equipment								(17		)	(49		)
	Capitalized software development costs								—			0
	Proceeds from sale of assets								3			8
	Proceeds from sale of discontinued operations, net of transaction expenses								—			11,443
			Net cash provided by investing activities of continuing operations						(14		)	11,402
Cash flows from financing activities:
	Collection of stock sale receivable								—			300
	Net change in borrowings under line of credit								—			(2,723		)
	Withdrawal from restricted cash								446			—
	Net change in borrowings of long term debt								(680		)	(8,000		)
	Net cash flow of discontinued operations								--			--
				Net cash (used in)/provided by financing activities					(234		)	(10,423		)
Increase in cash and cash equivalents									941			422
Cash and cash equivalents at beginning of period									397			367
Cash and cash equivalents at end of period									$	1338		$	789
Supplemental cash flow information:
	Interest paid								$	338		$	1,062
	Income taxes paid								0			50

Consolidated Statements of Income

~~See~~(Dollars ~~notes~~in Thousands toExcept ~~consolidated~~Per ~~condensed~~Share ~~financial statements.~~Amounts)

~~TRIDEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~ (Unaudited)

1. General

	Quarters Ended						Nine Months Ended
	September 30, 2001			September 30, 2000			September 30, 2001			September 30, 2000

Net sales	$	1,224		$	4,405		$	5,516		$	12,473

Operating costs and expenses:
Cost of sales	265			2,389			1,199			7,413
Engineering, design and product development costs	422			1,011			1,353			3,288
Selling, administrative and general expenses	1,023			1,452			3,588			4,364
Depreciation and amortization	482			1,019			1,477			2,607
Impairment Charge (Note 3)	0			12,300			0			12,300
	2,192			18,171			7,617			30,452

Operating profit (loss)	(968		)	(13,766		)	(2,101		)	(17,979		)

Other charges (credits):
Interest expense, net	447			651			1,396			2,247
Other, net	93			367			540			536
	540			1,018			1,936			2,783

Loss from continuing operations before income taxes	(1,508		)	(14,784		)	(4,037		)	(20,762		)

Benefit of (provision for) income taxes	(13		)	(35		)	168			(105		)

Net loss from continuing operations	(1,521		)	(14,819		)	(3,869		)	(20,762		)

Discontinued operations (Note 4):
Net loss from discontinued operations	0			0			0			(26		)
Net gain on sale of discontinued operations	0			0			(35		)	5,588

Net loss before extraordinary item	(1,521		)	(14,819		)	(3,904		)	(15,305		)

Extraordinary loss due to debt modification (Note 6)	0			0			0			(695		)

Net loss	(1,521		)	(14,819		)	(3,904		)	(16,000		)
Loss per share – basic and diluted:
Loss from continuing operations	$	(0.27	)	$	(2.33	)	$	(0.68	)	$	(3.28	)
Income from discontinued operations	0.00			0.00			(0.01		)	0.87
Extraordinary loss	0.00			0.00			(0.00		)	(0.10		)
Net income(loss)	(0.27		)	(2.33		)	(0.69		)	(2.51		)
Weighted average shares outstanding
Basic and diluted	5,654,289			6,368,289			5,654,289			6,368,289

~~Tridex Corporation~~See ~~(the~~notes ~~“Company”), through its wholly owned operating subsidiary,~~to ~~Progressive Software, Inc. (“Progressive”), is a leading designer, developer,~~ ~~and~~consolidated ~~marketer~~condensed offinancial ~~specialized point-of-sale, back office and enterprise technology for the food service industry~~statements.

~~As more~~TRIDEX ~~fully~~CORPORATION ~~discussed~~AND in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, the Company experienced net losses from continuing operations of approximately $22.0 million and $16.3 million in each of the years ended December 31, 2000 and 1999, respectively. In addition, all of the Company’s debt matured on December 31, 2000 and no agreements with respect to extension or terms under which any extensions may be offered has been reached with the holders of the matured debt. These matters and their effect on the Company’s liquidity raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from this uncertainty.SUBSIDIARY

~~2. Restricted~~Consolidated Statements of Cash Flows

~~Restricted~~(Dollars cash represents the proceeds received under the terms of the settlement with the former owner of Progressive. The Debtholder requires the value of the proceeds to be applied against its outstanding debt. The proceeds have also been attached by the plaintiffs in ~~the~~ ~~Foley Street matter (see Note 7~~ thousands).

~~3. Impairment of Long-Lived Assets.~~(Unaudited)

The Company periodically reviews goodwill, intangibles and other long-term assets to assess recoverability based upon expectations of non-discounted cash flows from operations. The operating results of Progressive during fiscal 2000 were below management's expectations and as a result, in August 2000, management instituted a reduction-in-force at Progressive, revised its operating forecasts and initiated an evaluation of the carrying value of long-lived assets. The evaluation commenced with estimates of the future cash flows, on an undiscounted basis, expected to result from the assets and their eventual disposition. Based on this evaluation, management concluded that an impairment of the acquired assets had occurred and recorded a write down of such assets to fair value. In accordance with the provisions of the Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of”, the Company recorded an impairment charge of $12.3 million, consisting of $9.8 million of goodwill, reducing it to zero, $2.2 million of purchased technology and internally developed software costs and $294,000 of plant and equipment. Following the impairment charge, the carrying value of goodwill is zero. Considerable management judgment was involved in estimating fair value and, therefore, operating results could vary significantly from management’s estimates.

	Nine Months Ended
	September 30, 2001			September 30, 2000

Cash flows from operating activities:
Net income (loss)	$	(3,904	)	$	(16,000	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation	232			419
Amortization of goodwill and intangible assets and purchased and internally developed software	1,252			2,668
Debt discount amortization	--			559
Gain on sale of assets	(7		)	(8		)
Gain on sale of discontinued operations	--			(5,588		)
Loss/(gain) from discontinued operations	35			26
Extraordinary loss due to debt modification	--			695
Impairment charge on long-lived assets				12,300
Changes in operating assets and liabilities:
Receivables	1,076			3,377
Inventory	353			323
Other current assets	227			188
Other assets	23			(597		)
Accounts payable, accrued liabilities, deferred revenue and income taxes payable	796			1,972
Net cash used in operating activities of continuing operations	83			344

Cash flows from investing activities:
Purchases of plant and equipment				(95		)
Capitalized software development costs	--			0
Proceeds from sale of assets	69			8
Proceeds from sale of discontinued operations, net of transaction expenses	--			11,443
Net cash provided by investing activities of continuing operations	69			11,356

Cash flows from financing activities:
Collection of stock sale receivable	--			400
Net change in borrowings under line of credit	--			(2,723		)
Withdrawal from restricted cash	661			0
Net change in borrowings of long term debt	(776		)	(8,000		)
Net cash flow of discontinued operations	--			0
Net cash (used in)/provided by financing activities	(115		)	(10,323		)

Increase in cash and cash equivalents	37			1,367
Cash and cash equivalents at beginning of period	397			367
Cash and cash equivalents at end of period	$	434		$	1,734


Supplemental cash flow information:
Interest paid	$	1,106		$	1,062
Income taxes paid	(181		)	50

~~4. Discontinued~~See ~~Operations:~~notes to consolidated condensed financial statements.

OnTRIDEX ~~February 18, 2000, the Company sold its wholly-owned subsidiary, Ultimate~~ ~~Technology,~~CORPORATION ~~Inc.~~AND (“Ultimate”), for approximately $12.5 million in cash. The gain on the sale was $5.6 million. As described in Note 6, the Company used $8.0 million of the sale proceeds to repay a portion of the Fleet Term Loan and $3.0 million to repay a portion of the Working Capital FacilitySUBSIDIARIES

~~5. Earnings~~NOTES ~~(Loss)~~TO CONSOLIDATED ~~per~~CONDENSED ~~Common~~FINANCIAL ~~Share:~~STATEMENTS

~~Basic earnings~~ (~~loss~~Unaudited) per common share is based on the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share assumes the exercise of options and warrants and the conversion of dilutive securities, when the result is dilutive.

~~Computation of Per Share Earnings (Dollars in Thousands) (Unaudited)~~1. General

	Quarters Ended
	June 30, 2001			June 30, 2000
BASIC: EARNINGS (LOSS) Net Income (Loss)	$	(588	)	$	(2,311	)
SHARES: Weighted average shares outstanding	5,654,289			6,368,289
EARNINGS (LOSS) PER SHARE – BASIC:	(0.10		)	(0.36		)
DILUTED: EARNINGS (LOSS) Net income(loss)	$	(588	)	$	(2,311	)
SHARES: Weighted average shares outstanding	5,654,289			6,368,289
EARNINGS (LOSS) PER SHARE – DILUTED:	(0.10		)	(0.36		)

Tridex Corporation (the “Company”), through its wholly-owned operating subsidiary, Progressive Software, Inc. (“Progressive”), is a leading designer, developer, and marketer of specialized point-of-sale, back office and enterprise technology for the food service industry.

6As more fully discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, the Company experienced net losses from continuing operations of approximately $22.0 million and $16.3 million in each of the years ended December 31, 2000 and 1999, respectively, and such losses have continued during the first nine months of 2001. In addition, all of the Company’s debt matured on December 31, 2000 and no agreements with respect to extension or terms under which any extensions may be offered has been reached with the holders of the matured debt. These matters and their effect on the Company’s liquidity raise substantial doubt about the Company’s ability to continue as a going concern. ~~Bank~~The ~~Credit~~consolidated ~~Agreement~~financial statements do not include any adjustments to reflect the possible future effects on the recoverability and ~~Subordinated~~classification ~~Debt:~~of assets or the amounts and classification of liabilities that might result from this uncertainty.

~~The components~~2. Restricted ~~of debt are:~~Cash

	June 30, 2001		December 31, 2000
	(Dollars in thousands)
Term loan payable	$	2,420	$	3,100
Senior subordinated notes, net of discount	11,000		11,000
	13,420		14,100
Current portion	13,420		14,100
Long term portion	$	0	$	0

Restricted cash represents a portion of the proceeds received under the terms of the settlement of litigation with the former owner of Progressive in October , 2000. The terms of the Company’s Credit Agreement (see Note 6) required the proceeds be used to reduce the outstanding amounts of that debt. However, before that could be accomplished, a portion of the proceeds were attached by the plaintiffs in the Foley Street matter (see Note 7). Subsequently, the amount of the cash proceeds of the settlement in excess of the claim of the Foley Street plaintiffs ($445,000) was applied to the outstanding balance of the debt issued under the terms of the Credit Agreement. The remainder, $780,000, remains in escrow pending resolution of the matter and has been reflected in the Company’s financial statements as restricted cash.

In ~~April~~ addition ~~1998~~to cash, the ~~Company~~settlement ~~entered~~returned ~~into~~to athe ~~credit~~Company ~~agreement~~714,000 ~~with~~shares ~~Fleet~~of ~~National~~its ~~Bank~~ common stock which ~~provided~~were ~~a $12~~retired.~~0 million Senior Term Loan (the “Term Loan”) with a~~ The ~~maturity~~ terms of ~~March~~the ~~31,~~Credit ~~2003~~Agreement ~~and~~required anthat ~~$8.0 million Working Capital Facility (~~the ~~“WCF”). At~~ ~~the~~cash ~~same~~equivalent ~~time,~~of ~~the~~those ~~Company~~shares ~~sold~~ be ~~Senior~~used ~~Subordinated~~to ~~Notes~~further ~~due~~pay ~~April~~down ~~17, 2005 (~~the ~~“Notes”) in the~~debt. ~~principal~~ This ~~amount~~was ofnot ~~$11~~done.0 ~~million~~As tomore ~~Massachusetts~~fully ~~Mutual~~discussed ~~Life~~in ~~Insurance Company~~Note ~~and affiliates (collectively~~6, the ~~“Mass~~Company ~~Mutual~~is ~~Investors”). The~~in default ~~proceeds~~ of the ~~Term~~Credit ~~Loan~~Agreement and ~~the Notes were used in the acquisition of Progressive.~~is ~~The~~ seeking ~~Term Loan and the WCF are secured by~~ a ~~first~~restructuring ~~priority security interest in substantially all~~ of the ~~Company’s assets~~debt. ~~In February 2000, the~~ ~~Company~~ As ~~used~~ a ~~portion~~result, of the ~~proceeds~~Company ~~from~~may ~~the~~be ~~sale~~required ~~of Ultimate~~ to ~~retire~~reissue ~~$8.0 million principal amount of~~ the ~~Term~~714,000 ~~Loan and $3.0 million to repay a portion~~shares of ~~the~~common ~~WCF. At June 30~~stock, ~~2001,~~or ~~the interest~~provide ~~rates~~their ~~were~~equivalent ~~11.25%~~in cash, ~~11.25%~~to ~~and~~the ~~12.0%~~holders onof the debt ~~Term~~issued ~~Loan,~~under the ~~WCF~~terms ~~and~~of the ~~Notes,~~ ~~respectively~~Credit Agreement.

~~The Company issued to the MassMutual Investors on May 27, 1998 warrants to purchase 350,931 shares of the Company’s common stock at $7~~3.~~00 per share.~~ ~~The~~Impairment ~~estimated fair market value~~ of ~~the warrants~~Long-Lived ~~of $1,228,000 was recorded as a discount to the principal amount of the outstanding Notes and was being amortized to interest expense over the term of the Notes using the interest rate method~~Assets. In consideration for a March 26, 1999 amendment to the Notes and in exchange for the warrants issued in 1998, the Company issued new stock purchase warrants to the MassMutual Investors to purchase 800,000 shares of common stock at $2.03 per share. The incremental estimated fair value of the new warrants over the estimated fair value of the old warrants of $600,000 was recorded as additional debt discount.

OnThe ~~February~~ Company ~~18,~~periodically ~~2000~~reviews goodwill, ~~the~~intangibles ~~MassMutual~~and ~~Investors~~other ~~agreed~~long-term assets to ~~certain~~assess ~~modifications~~recoverability based upon expectations of ~~the~~ ~~Notes~~non-discounted ~~including~~cash ~~the~~flows from ~~acceleration~~operations. The operating results of ~~their~~Progressive ~~maturity~~during tofiscal ~~December~~2000 were below ~~31,~~management's expectations and as a result, in August 2000~~. That~~, ~~acceleration~~management ofinstituted ~~the~~a ~~maturity~~reduction-in-force at of Progressive, ~~the~~revised ~~Notes~~its ~~constituted~~operating aforecasts ~~substantial~~and ~~debt~~initiated ~~modification,~~an ~~which~~evaluation ~~under~~of ~~EITF~~the ~~96-19~~ carrying ~~"Debtor's~~value ~~Accounting~~of ~~for~~long-lived aassets. The ~~Modification~~evaluation orcommenced ~~Exchange~~with estimates of ~~Debt Instruments"~~the future cash flows, ~~requires~~on ~~the~~an undiscounted ~~Notes~~basis, expected to beresult ~~adjusted~~from tothe assets and their ~~fair~~eventual disposition. Based ~~value~~on asthis ofevaluation, ~~the~~ management ~~date~~concluded that an impairment of the ~~February~~acquired ~~18,~~assets ~~2000~~had ~~amendment~~occurred and recorded a write down of such assets to fair value. ~~The~~In ~~Company~~accordance ~~calculated~~with the ~~present~~ ~~value~~ provisions of the ~~principal~~Statement ~~and~~of ~~interest~~Financial ~~due~~Accounting ~~December~~Standards 31No. 121, “Accounting ~~2000~~for ~~using~~ the ~~remaining maturity~~Impairment ~~period~~ of ~~the~~Long-Lived ~~Notes~~Assets and anfor ~~estimated~~Long-Lived ~~fair~~Assets to ~~value~~be ~~interest~~Disposed ~~rate~~Of”, at the ~~modification~~ ~~date.~~Company Asrecorded aan ~~result~~impairment charge of ~~this~~$12.3 ~~modification~~million, consisting ~~the~~of ~~Company~~$9.8 ~~recognized~~million ~~a debt~~of ~~extinguishment~~goodwill, ~~loss~~$2.2 million of purchased technology and internally developed software costs and $~~695~~294,000 ~~which~~of ~~was~~plant ~~recorded~~and equipment. Following asthe animpairment charge, ~~extraordinary~~the carrying value of goodwill is zero. Considerable management ~~item~~ judgment was involved in ~~the~~estimating ~~quarter~~fair ~~ending~~value ~~March~~and, 31therefore, ~~2000~~operating results could vary significantly from management’s estimates.

As reported previously, the Company, at various times, has been in violation of the covenants of both the Term Loan, the WCF and the Notes, resulting in several modifications of the terms of each, including an acceleration of the maturities of both loans to December, 31, 20004. ~~The~~Discontinued Company does not have the capability to repay or replace either the Term Loan or the Notes. As a result, both credit facilities are due upon demand and that fact raises substantial doubt about the Company’s ability to continue as a going concern. The Term Loan, WCF and Notes are reflected as current liabilities in the Company’s financial statements.Operations:

InOn ~~December~~ February 18, 2000, ~~Fleet~~the ~~National~~Company ~~Bank~~ sold its ~~interest~~wholly-owned insubsidiary, ~~the Term Loan and the~~Ultimate ~~WCF~~ Technology, toInc. ~~ARK~~(“Ultimate”), ~~CLO~~for ~~2000-1,~~approximately ~~Limited~~$12. ~~Inasmuch~~5 asmillion ~~the~~in ~~Company,~~cash. The atgain ~~present,~~on ~~still lacks~~ the ~~capability~~sale towas ~~repay or~~$5.6 ~~replace~~million. As ~~its~~described ~~existing~~in ~~credit~~Note ~~facilities~~6, itthe ~~intends~~Company ~~to seek accommodation~~used ~~with~~ $8.0 ~~its~~million ~~lenders~~of ~~which~~the ~~will~~sale ~~allow~~proceeds it to ~~continue~~repay ~~operating while seeking either~~ a ~~modification~~portion ~~to, or replacement~~ of, the ~~facilities. However,~~Fleet ~~there~~Term ~~can~~Loan ~~be no assurance that the Company will be~~and ~~successful~~ $3.0 inmillion ~~such~~to ~~efforts~~repay ora asportion toof ~~what~~ the ~~form~~Working ~~such~~Capital ~~modification or replacement might be.~~Facility

75. ~~Commitments~~Earnings ~~and~~(Loss) ~~Contingencies~~per Common Share:

~~Allu~~Basic ~~Realty~~ earnings (~~“Allu”~~loss), aper ~~Massachusetts~~common ~~business~~share ~~trust~~is ~~owned~~based byon the ~~Company,~~weighted isaverage ~~the former~~number ~~owner~~ of common ~~land~~shares ~~located~~outstanding atduring ~~100 Foley Street, Somerville, Massachusetts (~~the ~~“Site”)~~period. ~~Allu sold the Site to 100~~ ~~Foley~~ Diluted ~~Street~~earnings ~~Incorporated~~ (~~“Foley”~~loss), anper ~~unrelated~~common ~~entity. In~~share ~~1984,~~assumes ~~Allu and~~ the ~~Company~~exercise ~~disclosed to the Massachusetts Department~~ of ~~the Attorney General the existence of chromium,~~options ~~oil and grease at the Site. As a result, the Environmental Protection Division~~ ~~of the Department of the Attorney General~~ and ~~the~~warrants ~~Massachusetts Department of Environmental Protection conducted an investigation of the Site. In 1993, the Company entered into an agreement with Foley pursuant to which the Company~~ and ~~Foley~~ ~~agreed to pay 75% and 25%, respectively, of~~ the ~~costs~~conversion ~~incurred after January 1, 1992 in connection with the investigation and remediation~~ of ~~the Site~~dilutive ~~(the "Site Participation Agreement"). The Site Participation Agreement also provided that~~securities, towhen the ~~extent~~result ~~there are available proceeds from~~is ~~the sale of the Site, the Company would be reimbursed approximately $200,000 of~~ ~~the $250,000 it expended in connection with the Site prior to January 1, 1992~~dilutive. ~~As of March 31, 2001, the Company had spent approximately $810,000 in connection with the Site.~~

~~In 1997,~~Computation ~~Foley sold the Site to an affiliate~~ of ~~Stop~~Per ~~& Shop, Inc. ("Stop~~Share ~~& Shop"). As part of the sale transaction, Foley was required to place~~ approximately $875,000 in escrow (the "Stop & Shop Escrow") to cover the costs of remediation, which was completed in 1999. In 1997, Foley brought suit in the United States District Court, District of Massachusetts, against the Company claiming that the Company failed to contribute its shares of the remediation costs pursuant to the Site Participation Agreement. Foley asserted that Allu and the Company remain liable for payment of certain costs associated with the remediation of the Site after its sale to Stop & Shop, and claimed that it is entitled to reimbursement from the Company of a portion of the Stop & Shop Escrow. The Company filed a counterclaim, and sought reimbursement of funds previously expended in accordance with the Site Participation Agreement. Mediation between the parties was not successful and in July 2000, after trial of the case, the jury made certain factual findings upholding the parties' obligations under the Site Participation Agreement, including the Company's obligation to pay 75% of the remediation costs and the obligation of Foley to reimburse the Company out of sale proceeds.Earnings

~~On October~~(Dollars ~~16, 2000, the United States District Court for Massachusetts entered judgment against the Company~~ in the amount of approximately $791,000, of which approximately $156,000 represented legal fees awarded to the opposing party and approximately $108,000 represented interest. The Company has filed various post-trial motions seeking to vacate the judgment or to have it modified. If these motions are unsuccessful, the Company intends to appeal the judgement of the Court. Subsequently, Foley attached $791,000 in cash being held for the account of the Company by a third party. The Company has moved to discharge the attachment, which motion has not yet been heard. As of December 31, 2000, the Company had accrued $791,000 with respect to its potential liability under this judgment. The Company is unable to forecast when this litigation will finally be resolved or the amount of its ultimate exposure with respect thereto.Thousands)

~~8. Recent Accounting Pronouncements~~(Unaudited)

In June 2001, the Financial Accounting Standards Board issued two Statements of Financial Accounting Standards, No. 141, Business Combinations (SFAS No. 141), and No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, Business Combinations, and FASB Statement No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises. All business combinations in the scope of SFAS No. 141 are to be accounted for using one method, the purchase method. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method for those business combinations is prohibited. The provisions of SFAS No. 141 also apply to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001, or later.

	Quarters Ended
	September 30, 2001		September 30, 2000
BASIC: EARNINGS (LOSS)
Net Income (Loss)	$	(1,521)	$	(14,819)

SHARES:
Weighted average shares outstanding	5,654,289		6,368,289

EARNINGS (LOSS) PER SHARE – BASIC:	(0.27)		(2.33)

DILUTED: EARNINGS (LOSS)
Net income(loss)	$	(1,521)	$	(14,819)

SHARES:
Weighted average shares outstanding	5,654,289		6,368,289

EARNINGS (LOSS) PER SHARE – DILUTED:	(0.27)		(2.33)

~~SFAS No~~6. Bank ~~142~~Credit ~~addresses~~Agreement ~~financial accounting~~ and ~~reporting~~Subordinated for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. SFAS No. 142 also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Under SFAS No. 142, goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives, but without the constraint of the 40-year maximum life previously required. The provisions of SFAS No. 142 are required to be applied starting with fiscal years beginning after December 15, 2001.Debt:

The ~~Company expects to adopt the~~ ~~provisions~~components of ~~SFAS~~debt ~~No. 142 effective January 1, 2002. The Company is in the process of determining the impact the adoption of the provisions of SFAS No. 142 will have on financial position and results of operations.~~are:

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	June 30, 2001		December 31, 2000
	(Dollars in thousands)
Term loan payable	$	2,324	$	3,100
Senior subordinated notes, net of discount	11,000		11,000
	13,324		14,100
Current portion	13,324		14,100
Long term portion	$	0	$	0

~~The~~In April ~~statements~~1998, ~~contained~~the ~~herein~~Company ~~not~~entered ~~based~~into ona ~~historic~~credit ~~facts~~agreement with Fleet National ~~are~~ Bank ~~forward-looking~~which ~~statements,~~provided ~~within~~a $12.0 million Senior Term Loan (the ~~meaning~~“Term ofLoan”) ~~Section~~with ~~27A~~a maturity of March 31, 2003 and an $8.0 million Working Capital Facility (the ~~Securities~~ “WCF”). At ~~Act~~the ofsame ~~1933~~time, asthe ~~amended,~~Company sold ~~and~~Senior ~~Section~~Subordinated ~~21E~~Notes ofdue April 17, 2005 (the ~~Securities~~“Notes”) ~~Exchange~~in the ~~Act~~ principal amount of ~~1934,~~$11.0 asmillion ~~amended,~~to ~~that~~Massachusetts ~~involve~~Mutual ~~risks~~Life Insurance Company and ~~uncertainties~~affiliates (collectively, the “Mass Mutual Investors”). ~~Past~~The ~~performance~~proceeds isof ~~not~~the ~~necessarily~~Term Loan and the Notes were used in the acquisition of Progressive. The Term Loan and the WCF are secured by a ~~strong~~first priority security or interest ~~reliable~~in ~~indicator~~substantially all of ~~future~~the ~~performance~~Company’s assets. ~~Actual~~In ~~results~~February ~~could~~2000, ~~differ~~the ~~materially~~ Company used a portion of the proceeds from ~~past~~the ~~results,~~sale ~~estimates,~~of ~~projections,~~Ultimate orto ~~forward~~retire ~~looking~~$8.0 ~~statements~~ million ~~made~~principal ~~by,~~amount orof onthe ~~behalf~~Term Loan and $3.0 million to repay a portion of, the ~~Company~~WCF. At September 30, ~~including~~2001, ~~but~~the interest ~~not~~rates ~~limited to~~were 10.5%, ~~the~~10.5% ~~Company’s~~and ~~expectations~~12.0% ~~regarding~~on ~~net~~the ~~sales,~~Term ~~gross profit~~Loan, ~~operating income~~the WCF and ~~financial~~the Notes, ~~condition~~respectively.

~~Results~~The Company issued to the MassMutual Investors on May 27, 1998 warrants to purchase 350,931 shares of ~~Operations~~the Company’s common stock at $7.00 per share. The estimated fair market value of the warrants of $1,228,000 was recorded as a discount to the principal amount of the outstanding Notes and was being amortized to interest expense over the term of the Notes using the interest rate method. In consideration for a March 26, 1999 amendment to the Notes and in exchange for the warrants issued in 1998, the Company issued new stock purchase warrants to the MassMutual Investors to purchase 800,000 shares of common stock at $2.03 per share. The incremental estimated fair value of the new warrants over the estimated fair value of the old warrants of $600,000 was recorded as additional debt discount.

AsOn February ~~discussed~~18, ~~more fully below~~2000, the MassMutual Investors agreed to certain modifications of ~~Company~~ the ~~has~~Notes ~~experienced~~including ~~recurring~~the ~~net~~acceleration ~~losses~~of ~~and~~their ~~negative~~maturity ~~cash~~to ~~flow~~December 31, 2000. That ~~and~~acceleration isof the maturity ~~currently~~ of inthe ~~default~~Notes ~~under~~constituted ~~its~~a ~~credit~~substantial ~~agreements~~debt ~~with~~modification, ~~its~~which ~~lenders.~~under ~~These~~EITF ~~matters~~ 96-19 ~~raise~~"Debtor's ~~substantial~~Accounting ~~doubt~~for ~~about~~a Modification or Exchange of Debt Instruments", required the ~~Company’s~~Notes ~~ability~~to be adjusted to ~~continue~~their fair value as aof ~~going~~ the ~~concern~~date of the February 18, 2000 amendment. ~~Management’s~~The ~~plan~~Company tocalculated ~~amend~~the present value of the ~~credit~~principal ~~agreements~~and interest due December 31, ~~increase~~2000 using the remaining ~~liquidity~~ maturity period of the Notes and ~~meet~~an ~~planned~~estimated ~~cash~~fair ~~requirements~~value ~~are~~interest ~~discussed~~rate ~~below~~at ~~under~~the ~~Liquidity~~ modification ~~and~~date. ~~Capital~~As ~~Resources~~a result of this modification, the Company recognized a debt extinguishment loss of $695,000 which was recorded as an extraordinary item in the quarter ending March 31, 2000.

~~Quarter~~As reported ~~Ended~~previously, ~~June~~the 30Company, ~~2001~~at ~~Compared~~various totimes, ~~Quarter~~has ~~Ended~~been ~~June~~in violation of 30 the covenants of both the Term Loan, the WCF and the Notes, resulting in several modifications of the terms of each, including an acceleration of the maturities of the Term Loan and the Notes to December, 31, 2000. As a result, all of the Company’s debt is due upon demand and that fact raises substantial doubt about the Company’s ability to continue as a going concern. The Term Loan, WCF and Notes are reflected as current liabilities in the Company’s financial statements.

~~Consolidated net sales~~In ~~for~~ December ~~the quarter ended June 30~~2000, ~~2001~~Fleet ~~decreased~~National ~~$1.4~~Bank ~~million~~sold ~~(35%)~~its tointerest ~~$2.7 million from $4.1 million~~ in the ~~comparable~~Term ~~2000~~Loan ~~period.~~and ~~Sales of hardware decreased by $2.9 million during~~ the ~~period reflecting the fact that the~~ ~~Company is de-emphasizing its participation as principal in transactions~~ ~~involving~~WCF ~~hardware~~to ~~used~~ARK inCLO ~~conjunction~~2000-1, ~~with its software~~Limited. ~~Gross margins associated with such~~ ~~transactions are substantially less than those generated by sale of software~~ ~~and~~Inasmuch ~~the~~as ~~financial resources currently available to~~ the Company, ~~cannot fund~~at ~~the~~present, ~~investment~~still inlacks ~~inventories~~the ~~and accounts~~capability ~~receivable required~~ to ~~support~~repay or ~~such~~replace ~~sales.~~its ~~The~~existing ~~reduction~~credit infacilities, ~~hardware sales~~it ~~during~~intends ~~the period was offset~~ to aseek ~~certain extent by an increase in~~accommodation ~~software~~ with ~~sales~~its oflenders ~~$1.6~~which ~~million~~will ~~all~~allow ~~which~~it ~~related~~ to ~~the~~continue ~~sale~~operating ofwhile anseeking ~~enterprise~~either ~~license to Starbucks Corporation in~~ ~~April.~~a ~~Revenues~~modification ~~related~~ to, ~~the~~or ~~Company’s~~replacement ~~service~~of, ~~operations~~the ~~declined by a small amount~~facilities. AsHowever, ~~noted~~there incan ~~the~~be ~~Company’s~~no ~~Quarterly Report~~assurance onthat ~~Form 10-Q for~~ the ~~period~~Company ~~ended~~will ~~March 31, 2001, management believes~~be ~~that~~ successful ~~the decrease~~ in ~~technology~~such ~~investment~~efforts inor ~~the~~as ~~aftermath of investments made~~ to ~~insure~~what ~~against~~the ~~problems~~form ~~associated~~such ~~with~~modification ~~Year 2000 issues may have affected~~or ~~sales~~ replacement ~~levels.However,~~might ~~it is not possible to quantify such impact, if any~~be.

~~Consolidated gross profit increased $251,000 (12%) to $2~~7.~~4 million from $2.2 in the prior year.~~ ~~The~~Commitments ~~increase resulted principally from the magnitude of the gross margins associated with the sales of software~~ and ~~services~~ ~~when compared with those related to hardware sales. Such sales contributed 94% of total revenues in 2001 compared to 27% in 2000.~~Contingencies:

~~Consolidated~~Allu Realty ~~engineering~~(“Allu”), ~~design~~a ~~and~~Massachusetts ~~product~~business ~~development~~trust owned by the Company, is the ~~costs~~ former ~~decreased~~owner ~~$564~~of land located at 100 Foley Street,~~000~~ Somerville, Massachusetts (~~56%~~the “Site”). Allu ~~during~~sold the ~~current~~Site ~~quarter~~ to ~~$440~~100 Foley Street Incorporated (“Foley”),~~000~~ ~~from~~an $1unrelated entity.0 In ~~million~~1984, inAllu and the ~~same~~Company disclosed to ~~period~~ the aMassachusetts ~~year~~Department ~~ago. In~~of the ~~second quarter~~Attorney General the existence of ~~2000~~chromium, oil ~~these~~and ~~expenses~~grease ~~reflected~~at the ~~efforts~~Site. ~~directed~~As ~~toward~~a ~~final~~result, the Environmental Protection Division ~~enhancements~~ of the Department of the ~~new~~Attorney ~~version~~General and the Massachusetts Department of Environmental Protection conducted an investigation of the Site. In 1993, the Company's ~~IRIS~~entered ~~software~~into ~~product~~an asagreement ~~well as~~with ~~contract~~Foley ~~work~~pursuant ~~for~~to awhich ~~third~~the ~~party.~~ Company and ~~These~~ Foley ~~efforts~~agreed ~~were~~to ~~completed~~pay ~~during~~75% ~~that~~and ~~quarter. As~~25%, arespectively, ~~result~~of the costs incurred after January 1, 1992 in ~~August~~connection ofwith ~~last~~the ~~year~~investigation and remediation of the ~~Company~~ Site ~~effected~~(the a"Site ~~reduction~~Participation inAgreement"). ~~engineering~~The ~~personnel,~~Site ~~including contract~~Participation ~~personnel~~ Agreement also provided that, ~~thereby~~to ~~substantially~~the ~~reducing~~extent there are available proceeds from the ~~level~~sale of ~~these~~the ~~expenses~~Site, the Company would be reimbursed approximately $200,000 of the $250,000 it expended in connection with the ~~final~~ ~~months~~Site prior to January 1, 1992. As of ~~2000~~September as30, ~~well~~2001, asthe Company had spent approximately $810,000 in ~~the~~ ~~current~~connection ~~year~~with the Site.

~~Consolidated~~In ~~selling~~1997, ~~administrative~~Foley ~~and~~sold ~~general~~the ~~expenses~~Site to an affiliate of Stop ~~decreased~~ & Shop, Inc. ("Stop & Shop"). As part of the sale transaction, Foley was required to place approximately $~~216~~875,000 in escrow (~~14%~~the "Stop & Shop Escrow") to $1cover the costs of remediation, which was completed in 1999.3 ~~million~~In ~~from~~1997, $1Foley brought suit in the United States District Court, District of Massachusetts, against the Company claiming that the Company failed to contribute its share of the remediation costs pursuant to the Site Participation Agreement.6 ~~million~~Foley asserted that Allu and the Company remain liable for payment of certain costs associated with the remediation of the Site after its sale to Stop & Shop, and claimed that it is entitled to reimbursement from the Company of a ~~year~~portion ~~ago~~of the Stop & Shop Escrow. The ~~overall~~Company ~~decrease~~filed ~~results~~a ~~from~~counterclaim, and sought ~~substantial~~ reimbursement ~~reductions~~of funds previously expended in ~~staff~~accordance with the Site Participation Agreement. Mediation between the parties was not successful and ~~related~~in ~~expenses~~July ~~both~~2000, atafter ~~corporate~~trial of the ~~headquarters~~ case, the jury made certain factual findings upholding the parties' obligations under the Site Participation Agreement, including the Company's obligation to pay 75% of the remediation costs and atthe ~~Progressive~~obligation of Foley to reimburse the Company out of sale proceeds.

~~Consolidated~~On October ~~depreciation~~16, ~~and~~2000, ~~amortization~~ the United States District Court for Massachusetts entered judgment against the ~~current~~Company ~~period~~in ~~was~~the amount of approximately $~~509~~791,000, ~~a decrease~~ of which approximately $~~529~~156,000 ~~(52%)~~represented ~~from~~legal fees awarded to the ~~same~~opposing party and ~~period~~ approximately a$108,000 ~~year~~represented ~~ago~~interest. As The ~~noted~~Company infiled ~~Note~~various 3post-trial motions seeking to vacate the ~~above~~ judgment ~~and~~or ~~more~~to ~~fully~~have ~~described~~it inmodified. If these motions are unsuccessful, the Company’s intends ~~Quarterly~~to ~~Report~~appeal onthe ~~Form~~judgement ~~10-Q and~~of ~~Annual~~the ~~Report~~Court. onSubsequently, ~~Form~~Foley ~~10-K~~attached $791,000 in cash being held for the ~~periods~~account ~~ended~~of ~~September~~the 30Company ~~and~~by ~~December~~a third party. ~~31,~~ The ~~2000,~~Company ~~last~~has ~~year~~moved to discharge the ~~Company~~attachment, ~~recorded~~which anmotion ~~impairment~~has ~~charge~~not yet been heard. As of ~~$12~~September 30,~~300~~ 2001,~~000, reducing~~ the ~~value~~Company ofhad ~~goodwill~~accrued $791,000 ~~purchased~~with respect ~~and~~to ~~internally~~its ~~developed~~potential ~~software~~liability ~~and plant~~under ~~and~~this ~~equipment~~judgment. AsThe aCompany ~~result,~~is ~~during~~unable ~~the~~to forecast ~~current~~when ~~period~~this ~~the~~litigation ~~amounts provided~~will ~~for~~finally ~~depreciation~~be ~~and~~resolved ~~amortization~~or of the ~~remaining~~amount ~~asset~~of ~~values have~~its ~~been~~ ultimate ~~substantially~~exposure ~~reduced~~with respect thereto.

~~Consolidated continuing operating profits for the period were $151,000 compared to losses of $1~~8.~~4 million in the comparable period last year. The profit resulted entirely from the revenue associated with the Starbucks enterprise license referred to above.~~ ~~Management~~Recent ~~does~~Accounting ~~not expect the Company to operate profitably during the balance of the year.~~Pronouncements

~~Consolidated~~In June ~~net~~2001, ~~interest~~the ~~expense~~Financial Accounting Standards Board issued two Statements of ~~for~~ Financial ~~the~~Accounting ~~current~~Standards, ~~period~~No. ~~was~~141, ~~$461~~Business Combinations (SFAS No. 141),~~000~~ ~~compared~~and toNo. ~~$650~~142,~~000~~ aGoodwill ~~year~~and ~~ago~~Other Intangible Assets (SFAS No. ~~The~~142). SFAS No. 141 addresses financial accounting and reporting for ~~decrease~~ business ~~results~~combinations ~~primarily~~and ~~from~~supersedes aAPB ~~reduction~~Opinion inNo. ~~the~~16, ~~amount~~Business ofCombinations, ~~the~~and FASB ~~Term~~Statement ~~Loan~~No. 38, Accounting for Preacquisition Contingencies of ~~effected~~ Purchased byEnterprises. All business combinations in the ~~release~~scope of SFAS aNo. ~~portion~~141 ofare ~~the~~to ~~settlement~~be ~~proceeds~~accounted offor ~~litigation and~~using byone method, the ~~release~~purchase method. The provisions of ~~funds~~SFAS inNo. ~~May~~141 ~~related~~apply to ~~the~~all ~~sale~~business combinations initiated after June 30, 2001. Use of ~~Ultimate~~the ~~which~~pooling-of-interests ~~had~~method for those business ~~been~~ combinations ~~held~~is inprohibited. ~~escrow~~The provisions of SFAS No. ~~Interest~~ ~~expense~~141 also apply to all is business ~~net~~combinations ofaccounted ~~interest~~for ~~income~~by the purchase method for which the date of ~~$58,000~~acquisition ~~this~~is ~~year~~July ~~and~~1, ~~$20~~2001,~~000~~ inor ~~2000~~later.

~~Consolidated~~SFAS No. ~~other~~142 ~~expense amounted~~addresses ~~to $424,000~~financial inaccounting ~~the~~and ~~current~~reporting for acquired goodwill and ~~year~~ other ~~compared~~intangible ~~with~~assets ~~$182~~and supersedes APB Opinion No. 17,~~000~~ ~~last~~Intangible ~~year~~Assets. It In addresses ~~July~~how ofintangible ~~this~~assets ~~year,~~that ~~the~~are ~~Company~~acquired ~~closed~~individually ~~its~~or ~~Westport,~~with ~~Connecticut~~a group ~~office,~~ of ~~the~~other ~~lease~~assets ~~for~~(but ~~which~~not ~~had~~those ~~expired,~~acquired ~~and~~in ~~relocated~~a ~~the~~business ~~activities~~combination) ofshould ~~that~~be ~~office~~ accounted tofor ~~Progressive’s~~in ~~Charlotte,~~financial ~~North~~statements ~~Carolina~~upon ~~headquarters~~their acquisition. SFAS No. As a142 ~~result,~~also addresses ~~the~~how ~~Company~~goodwill ~~recorded~~and aother ~~charge of~~intangible ~~$275,000~~assets ~~during~~should ~~the~~be ~~second~~accounted ~~quarter~~for after tothey ~~accommodate~~have ~~the~~been ~~severance~~initially ~~costs associated~~recognized ~~with~~in the ~~closing~~financial statements. In Under ~~addition~~ SFAS No. 142, ~~charges~~goodwill ~~associated~~and ~~with~~intangible ~~the~~assets ~~provisions~~that ofhave ~~the~~indefinite ~~Company’s~~useful ~~outstanding~~lives ~~debt~~ will innot ~~the~~be ~~amount~~amortized ofbut ~~approximately~~rather ~~$100,000~~will ~~were~~be ~~recognized~~tested at least annually for impairment. ~~These~~ ~~costs~~Intangible ~~were~~assets ~~offset,~~that tohave afinite ~~certain~~useful lives will continue to be ~~extent~~ amortized over their useful lives, bybut ~~reductions~~without inthe constraint of the ~~costs~~40-year maximum ~~associated~~life ~~with~~previously ~~the~~required. ~~Foley~~The ~~Street~~provisions ~~matter~~of ~~when~~SFAS No. 142 are required ~~compared~~ to be applied starting with ~~those~~fiscal ofyears abeginning ~~year~~after ~~ago~~December 15, 2001.

~~Consolidated~~The Company ~~provision~~expects ~~for~~to ~~income~~adopt ~~taxes~~the ~~reflects~~ provisions aof ~~provision~~SFAS ~~for~~No. ~~estimated~~142 ~~state taxes~~effective ofJanuary ~~$25~~1,~~000~~ ~~offset~~2002. byThe ~~the~~Company ~~recording~~is in the process of ~~a an~~determining ~~incremental~~the ~~anticipated~~impact ~~refund~~the adoption of ~~previously~~the ~~paid~~provisions ~~federal~~of SFAS No. ~~taxes~~ 142 will have on financial position and results of ~~$206,000~~operations.

~~Six~~ITEM ~~Months~~2. MANAGEMENT'S ~~Ended~~DISCUSSION ~~June~~AND ~~30,~~ANALYSIS OF ~~2001~~FINANCIAL ~~Compared~~CONDITION toAND RESULTS ~~Six Months Ended~~OF ~~June 30, 2000~~ OPERATIONS

~~Consolidated~~The ~~net~~statements ~~sales~~contained ~~for~~herein ~~the~~not ~~six~~based ~~months~~on ~~ended~~historic ~~June~~facts are 30forward-looking statements, ~~2001~~ ~~decreased~~within ~~$3.8~~the ~~million~~meaning ~~(47%)~~of toSection ~~$4.3~~27A ~~million~~of ~~from~~the Securities ~~$8.1~~Act ~~million~~of in1933, ~~the comparable~~as ~~period~~amended, ~~last year. As~~and ~~was~~Section 21E of the ~~case~~Securities ~~with~~Exchange Act ~~the~~of ~~second~~1934, ~~quarter~~as amended, ~~hardware~~ ~~sales~~that ~~decreased~~involve ~~substantially~~risks ~~when~~and ~~compared~~uncertainties. Past toperformance ~~the~~is ~~same~~not ~~period~~necessarily a ~~year~~strong ~~ago. This~~ or ~~decrease~~reliable ~~was~~indicator ~~offset~~of byfuture ~~the revenues~~performance. ~~generated~~Actual byresults ~~the~~could ~~Starbucks~~differ materially ~~enterprise~~from ~~license. For~~past aresults, ~~discussion~~estimates, ofprojections, ~~other~~or ~~factors~~forward ~~which~~looking ~~management~~ statements ~~believes~~made ~~may~~by, ~~have~~or ~~affected~~on ~~revenues~~behalf ~~during~~of, the ~~period~~Company, ~~see~~including, but not limited to, the ~~discussion~~Company’s expectations regarding net sales, gross profit, operating of income ~~quarterly~~and ~~results~~financial ~~above~~condition.

~~Consolidated~~Results ~~gross profit increased $314,000 (10%) to $3.4 million from $3.0 million in the prior year. The increase relates directly to the reduction in the portion~~ of total revenues contributed by hardware sales during the current period when compared to the same period a year ago.. Consolidated gross profit margin increased to 78% of sales from 38% last year. The enterprise license granted to Starbucks Corporation in the second quarter of this year contributed significantly to these results.Operations

~~Consolidated~~As ~~engineering, design~~discussed ~~and~~more ~~product~~fully ~~development~~below, ~~costs~~the Company ~~decreased~~has ~~$1.3~~experienced ~~million~~recurring ~~(81%)~~net tolosses ~~$931,000~~and ~~from~~negative ~~$2.3~~cash ~~million last~~flow, ~~year.~~ and is As currently ~~noted~~in ~~above,~~default ~~this~~under ~~decrease~~its iscredit ~~principally~~agreements ~~the~~with ~~result~~its oflenders. ~~the reduction~~These in matters ~~force~~raise ~~which~~substantial ~~took~~doubt ~~place~~about in the ~~third~~Company’s ~~quarter~~ability ofto ~~2000~~continue as ~~well~~a going asconcern. ~~from~~Management’s ~~a reorganization~~plan ~~effected~~to inamend the ~~first~~credit ~~quarter~~agreements, ~~which~~increase liquidity ~~had~~and ~~the~~meet ~~effect~~planned ~~of eliminating~~cash ~~one~~requirements ~~level~~are ofdiscussed ~~management~~below inunder Liquidity ~~this~~and ~~area~~Capital Resources.

~~Consolidated~~Quarter ~~selling, administrative~~Ended ~~and~~September ~~general expenses decreased $347~~30,~~000~~ ~~(12%)~~2001 Compared to ~~$2.6~~Quarter ~~million from $2.9 million a year~~Ended ~~ago. The~~ ~~decrease~~September ~~results~~30, ~~from reductions in staff and related expenses at both Tridex and Progressive.~~2000

Consolidated ~~depreciation~~net ~~and amortization~~sales for the ~~current~~ quarter ~~period~~ended ~~was~~September ~~$995~~30,~~000~~ ~~compared~~2001 decreased $3.2 million (72%) to $1.2 million from $4.14 million in the comparable 2000 period. Sales of hardware decreased by $2.5 million during the period reflecting the fact that the Company is de-emphasizing its participation as principal in transactions involving hardware used in conjunction with its software. Gross margins associated with such transactions are substantially less than those generated by sale of software and the financial resources currently available to the Company cannot fund the investment in inventories and accounts receivable required to support such sales. Sales of software also decreased during the period when compared to last year from $1. As3 ~~noted~~million ~~above~~in 2000 to $422,000 ~~the~~currently, a reduction of 67%. Revenues generated by development services also declined from ~~decrease~~ $306,000 ~~results~~in ~~principally~~2000 to $256,000 this year. However, revenues associated with help desk and product maintenance increased to $505,000 from ~~the~~$234,000, ~~effect~~or 116%. Management believes this source of revenue will become an increasingly important segment of the ~~impairment~~Company’s ~~charge~~revenue. As ~~taken~~noted in the Company’s Quarterly Report on Form 10-Q for the period ended June 30,2001, management believes that the ~~third~~decrease ~~quarter~~in technology investment in the aftermath of investments made to insure against problems associated with Year 2000 issues as well as current economic conditions have affected sales levels. ~~(See~~ However, it ~~Note~~is 3not possible to quantify the impact of these conditions or the possible ~~above~~ effect, if any, of the terrorist attacks of September 11th and related subsequent events.)

Consolidated ~~continuing~~gross ~~operating~~profit ~~losses~~decreased ~~for~~ 53% ~~the~~to ~~period~~$959,000 ~~amounted~~from to $12.10 million ~~compared~~the toprior ~~losses~~year. However, ofgross ~~$4.2~~profit ~~million~~margins ~~last year. As~~improved ~~noted~~substantially ~~above,~~from ~~the~~46% ~~improvement~~to in 78%. This ~~operating~~increase results isprincipally from athe ~~function~~magnitude of the ~~non-recurring~~gross ~~revenues~~margins ~~generated~~associated by with the ~~Starbucks~~sales ~~enterprise~~of ~~license, reduced depreciation~~ software and ~~amortization resulting~~services ~~from~~when ~~last~~compared ~~year’s~~with ~~impairment~~those ~~charge~~related ~~and~~to ~~reduced~~hardware ~~operating~~sales. ~~expenses,~~Such ~~offset~~sales tocontributed ~~some~~97% ~~extent~~of bytotal ~~reduced~~revenues ~~overall~~ in ~~revenues~~2001 compared to 43% in 2000.

Consolidated ~~net~~engineering, ~~interest~~design and product development ~~expense~~ costs ~~for~~decreased during the current ~~period~~quarter ~~was~~to $~~949~~422,000, ~~compared~~a to58% reduction from $1.~~6million~~0 million in the same period a year ago. In ~~The~~the ~~decrease~~third isquarter of 2000, these expenses reflected the ~~result~~efforts directed toward final enhancements of ~~decreases~~ inthe ~~prevailing~~new version of ~~interest~~ the ~~rates~~Company's ~~during~~IRIS ~~the~~software ~~current~~product. These ~~period~~efforts ~~compared~~were ~~with~~completed ~~rates~~during that quarter. As a result, in ~~effect~~August of last year ~~and~~ the Company effected a reduction in ~~the~~engineering ~~amount~~personnel, ofincluding ~~extant~~contract personnel, ~~bank~~thereby ~~debt. Interest~~substantially ~~expense~~reducing isthe ~~net~~level of ~~interest~~these ~~income~~expenses in the finalmonths of ~~$86,000~~2000 inas ~~2001~~well ~~and~~as ~~$61,000~~in the ~~last~~current year.

Consolidated ~~other expense~~selling, asadministrative and general expenses decreased ~~noted~~ 30% ~~above,~~to $1.0 million from $1.5 million a year ago. ~~consists~~The ofoverall ~~principally~~decrease ofresults ~~charges~~from substantial reductions in staff and related toexpenses ~~the~~both ~~relocation~~at ofcorporate headquarters and at Progressive. In July, the Company’s ~~offices~~closed its headquarters facility in Westport, CT and ~~expense~~relocated ~~related~~all remaining operations to ~~certain~~ Progressive’s ~~provisions~~headquarters ofin ~~its~~Charlotte, ~~existing debt~~NC.

Consolidated ~~net~~depreciation ~~loss~~and amortization for the current period was $482,000, a decrease of $537,000 (53%) from the same period ~~continuing~~ a ~~operations~~year ago. As noted in Note 3 above and more fully described in the ~~first~~Company’s ~~six~~Quarterly ~~months~~Report ofon ~~2001~~Form ~~was~~10-Q ~~$2.3~~and Annual orReport on Form 10-K for the periods ended September 30 and December 31, 2000, last year the Company recorded an impairment charge of $~~0.40~~12,300,000, reducing ~~per~~the ~~share~~value of goodwill, ~~compared~~purchased and internally developed software and to plant $6and equipment.0 ~~million~~As or a ~~loss~~result, during the current period the amounts provided for depreciation and amortization of $0the remaining asset values have been substantially reduced.94 Additionally, ~~per~~in ~~share~~July of this year, ~~for~~in conjunction with the ~~first~~closing ~~six~~of the ~~months~~facility as described above, the Company sold all of ~~2000~~the furniture and fixtures located in its Westport headquarters for $96,000. The proceeds were used to reduce the principal amount of the Term Loan described in Note 6 above.

Consolidated ~~net~~continuing ~~income~~operating ~~from discontinued~~losses ~~operations~~for ~~resulted from~~ the period ~~sale~~were ~~of Ultimate in February~~$957, ~~2000~~000, ~~was~~an ~~$5.6 million,~~improvement orof ~~$0.87~~35% ~~per~~compared ~~share,~~to ~~for~~losses ~~the first six months~~ of ~~2000~~$1. ~~There~~5 ~~was~~million in ~~no such income during~~ the comparable period ~~this~~last year~~; however~~, abefore ~~provision~~giving ~~for~~effect ato ~~reduction~~the ofimpairment charge ~~$35,000~~described in the ~~amount~~preceding ofparagraph. Management ~~the~~does ~~final~~not ~~escrow~~expect ~~payment~~the ~~related~~Company to operate profitably during the balance ~~sale~~of ~~was~~the ~~recognized~~year.

~~Liquidity~~Consolidated net interest expense for the current period was $447,000 compared to $678,000 a year ago. The decrease results from reductions in the principal amount of the Term Loan effected by the release of a portion of the settlement proceeds of litigation, the release of funds related to the sale of Ultimate which had been held in escrow and ~~Capital~~the proceeds ~~Resources~~from the sale of certain assets related to the closing of the Westport offices as well as from reductions in effective interest rates from those experienced a year ago. Interest expense is net of interest income of $24,000 this year and $27,000 in 2000.

~~The~~Consolidated ~~Company's~~other ~~negative~~expense ~~working capital~~amounted ~~(current~~ to $93,000 ~~assets~~in ~~less~~the current ~~liabilities)~~year atcompared with ~~June 30~~$367,000 ~~2001~~last ~~was~~year ~~$21.7~~which ~~million compared~~included ~~with~~a ~~negative~~provision ~~working capital~~ of $~~20.3~~360,000 ~~million~~for ~~at December 31,~~liabilities ~~2000. At~~ related ~~June~~to ~~30,~~the ~~2001,~~100 ~~the~~Foley ~~Company~~Street ~~had no~~litigation ~~material~~described ~~commitments~~in ~~for~~Note ~~capital~~7 ~~expenditures~~above. ~~The~~ A ~~Company's~~provision ~~negative~~for ~~working~~$60,000 ~~capital~~related into litigation ~~both~~at ~~periods~~Progressive ~~results primarily~~has ~~from~~been ~~net~~included ~~losses~~in ~~and~~ the ~~maturity~~results onfor ~~December 31, 2000 of~~ the ~~Company's~~ ~~outstanding debt~~current quarter.

AsConsolidated ~~reported~~provision infor ~~Note~~income 6taxes ~~above,~~reflects ~~the Company,~~a ~~at various times, had been in violation of the provisions of its several loan~~ ~~agreements~~provision ~~resulting~~for inestimated ~~modifications~~state oftaxes ~~the terms~~ of ~~each including an acceleration of the maturities of the Term Loan and the Notes December~~$13, ~~31, 2000~~000. Currently, the Company does not have the capability to repay or replace any of the obligations which are currently due upon demand and that fact raises substantial doubt about the Company’s ability to continue as a going concern.

InNine earlyMonths January,Ended theSeptember Company accepted the resignation of Progressive’s President and Vice President of Sales and Marketing and has since replaced them with individuals who possess substantial experience in the food service industry. In addition30, the2001 directCompared sales force has been increased and the Chairman of the Company has assumed the position of Chief Executive Officer of Progressive. The Company believes these changes will assist materially in the efforts to increaseNine revenuesMonths andEnded relatedSeptember gross profits. Late in the first quarter the Company also eliminated one level of management in the engineering and development area. Management believes this action will improve efficiency as well as reduce costs within the Company. Additionally30, management is attempting to effect a restructuring designed to improve the financial condition the Company. No agreements with respect to this action have been achieved.2000

~~NASDAQ~~Consolidated ~~Listing~~net sales for the nine months ended September 30, 2001 decreased $7.0 million (56%) to $5.5 million from $12.5 million in the comparable period last year. As was the case in previous quarters, hardware sales decreased substantially when compared to the same period a year ago. In addition, software sales and services decreased by approximately 32% before giving effect to the enterprise license granted to Starbucks Corporation in April. For a discussion of the factors which management believes have affected revenues during the period, see the discussion of quarterly results above.

~~The~~Consolidated ~~Company~~gross ~~does~~profit ~~not~~decreased ~~meet~~15% ~~the~~to ~~net tangible~~$4.3 ~~asset~~million orfrom ~~price~~$5.1 ~~per~~million ~~share~~in ~~requirements for listing on~~ the ~~Nasdaq Stock~~prior ~~MarketÒ~~ ~~(“Nasdaq”)~~year. ~~Accordingly,~~ ~~during~~The ~~2000, the~~decrease ~~Company's~~relates ~~common~~principally ~~stock~~to ~~was~~the ~~delisted~~reduction ~~from~~in ~~Nasdaq. As~~the aportion ~~result~~ of ~~delisting,~~total revenues ~~current~~contributed ~~information~~by ~~regarding~~hardware ~~bid~~sales ~~and asked~~during ~~prices for~~ the ~~common~~current ~~stock~~period when ~~may~~compared ~~become~~to ~~less~~the ~~readily~~same ~~available~~period toa ~~brokers,~~year ~~dealers,~~ ago. Consolidated ~~and/or~~gross ~~their~~profit ~~customers~~margin increased ~~which~~to ~~may~~78% ~~reduce the liquidity~~ of ~~the~~sales ~~market for~~from ~~the~~41% ~~common~~last ~~stock~~year. ~~which,~~The inenterprise ~~turn,~~license ~~could~~granted ~~result in decreased demand for the~~to ~~common~~ Starbucks ~~stock,~~Corporation ~~a decrease~~ in the ~~stock~~second ~~price,~~quarter ~~and~~of anthis ~~increase~~year ~~in the spread~~contributed ~~between~~ significantly ~~the~~to ~~bid~~these ~~and asked prices for the common stock~~results.

~~Recent~~ Consolidated ~~Accounting~~engineering, ~~Pronouncements~~design and product development costs decreased $1.9 million (59%) to $1.4 from $3.3 million last year. As noted above, this decrease is principally the result of the reduction in force which took place in the third quarter of 2000 as well as from a reorganization effected in the first quarter of this year which had the effect of eliminating one level of management in this area.

InConsolidated ~~June 2001~~selling, ~~the Financial Accounting~~ ~~Standards Board issued two Statements of Financial Accounting Standards, No.~~ ~~141,~~administrative ~~Business Combinations (SFAS No. 141),~~ and ~~No.~~general ~~142, Goodwill and~~expenses ~~Other Intangible Assets (SFAS No. 142). SFAS No. 141 addresses~~ ~~financial~~decreased ~~accounting~~18% ~~and~~to ~~reporting for business combinations and supersedes APB Opinion No~~$3.6 ~~16,~~million ~~Business~~from ~~Combinations, and FASB Statement No~~$4.4 ~~38,~~million ~~Accounting for~~a ~~Preacquisition~~year ~~Contingencies of Purchased Enterprises~~ago. ~~All business combinations in the scope of SFAS No. 141 are to be accounted for using one method, the purchase method.~~ The ~~provisions~~decrease ofresults ~~SFAS~~from ~~No.~~reductions ~~141 apply to~~in ~~all business combinations initiated after June 30, 2001. Use of the~~ ~~pooling-of-interests~~staff ~~method~~and ~~for~~related ~~those~~expenses ~~business~~at ~~combinations~~both isTridex ~~prohibited.~~and ~~The provisions of SFAS No~~Progressive. ~~141 also apply to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001, or later.~~

~~SFAS~~Consolidated ~~No.~~depreciation ~~142 addresses financial accounting~~ and ~~reporting for acquired goodwill and other intangible assets and~~ ~~supersedes APB Opinion No. 17, Intangible Assets. It addresses how~~ ~~intangible~~amortization ~~assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted~~ for inthe ~~financial~~current ~~statements~~period ~~upon~~was ~~their acquisition~~$1. ~~SFAS No. 142 also addresses~~5 ~~how goodwill and other intangible assets should be accounted for after they~~ ~~have~~compared ~~been~~to ~~initially recognized in the financial statements~~$3.1 ~~Under~~million ~~SFAS~~last Noyear. ~~142,~~ As ~~goodwill and intangible assets that have indefinite useful lives will not be~~ ~~amortized~~noted ~~but~~above, ~~rather~~the ~~will~~decrease beresults ~~tested~~principally atfrom ~~least annually for impairment.~~the ~~Intangible assets that have finite useful lives will continue to be amortized~~ ~~over~~effect ~~their useful lives, but without the constraint~~ of the ~~40-year~~impairment ~~maximum~~charge ~~life previously~~taken ~~required.~~in ~~The~~the ~~provisions~~third quarter of ~~SFAS~~2000 ~~No.~~as ~~142 are required to be applied~~described ~~starting~~ in ~~with~~Note ~~fiscal~~3 ~~years beginning after December 15, 2001~~above.

~~The~~Consolidated ~~Company~~continuing ~~expects~~operating tolosses ~~adopt~~for the period ~~provisions~~amounted to $2.1 million compared to losses of ~~SFAS~~$18.0 Nomillion last year. Before ~~142~~giving ~~effective~~effect to the ~~January~~ impairment 1,charge ~~2002.~~described ~~The~~above ~~Company~~such islosses inreflect ~~the~~an ~~process~~improvement of approximately ~~determining~~63% over the ~~impact~~comparable results a year ago. As noted above, the improvement in operating ~~adoption~~ results is a function of the ~~provisions~~non-recurring ofrevenues ~~SFAS~~generated ~~No.~~by ~~142~~the ~~will~~Starbucks enterprise ~~have~~license, onreduced ~~financial~~depreciation ~~position~~and amortization resulting from last year’s impairment charge and reduced operating expenses, offset to some extent ~~results~~ by ofreduced ~~operations~~revenues.

~~PART~~Consolidated IInet interest expense for the current period was $1.4 million compared to $2.2 million a year ago. The decrease is principally the result of decreases in prevailing interest rates during the current period compared with rates in effect last year and the reduction in the amount of extant bank debt. ~~OTHER~~Interest ~~INFORMATION~~expense is net of interest income of $110,000 in 2001 and $87,000 last year.

~~ITEM~~Consolidated 5.other ~~Other~~expense, ~~Information~~as noted above, consists of principally of charges related to the relocation of the Company’s offices, expense related to certain provisions of its extant debt and a provision for $60,000 for litigation at Progressive.

~~The information~~Consolidated ~~regarding~~net ~~the~~loss ~~Company’s~~from continuing ~~delisting~~operations ~~from~~in the ~~NASDAQ~~first ~~National~~nine ~~Market~~months of ~~System~~ 2001 ~~contained~~was in$3.8 ~~Item~~or 2$0.67 ofper ~~Part~~share, Icompared ~~hereof~~to is$20.1 ~~hereby~~million ~~incorporated~~or ~~herein~~a byloss of $3.28 ~~reference~~ per share, for the first nine months of 2000.

~~ITEM~~Consolidated net income from discontinued operations resulted from the sale of Ultimate in February 2000 and was $5.6 million, or $0. ~~Reports~~87 onper ~~Form~~share, ~~8-K~~for the first nine months of 2000. There was no such income during the comparable period this year, however, a provision for a reduction of $35,000 in the amount of the final escrow payment related to the sale was recognized.

~~a. Reports~~Liquidity onand ~~Form~~Capital ~~8-K~~Resources

The Company's ~~filed Reports~~negative onworking ~~Form 8-K~~capital ~~during~~ (current ~~the~~assets ~~period~~less ~~relating~~current toliabilities) ~~the~~at ~~replacement~~September of30, ~~its~~2001 ~~previous~~was ~~independent~~$22.6 ~~public~~ million ~~accounting~~compared ~~firm~~with negative working capital of ~~PricewaterhouseCoopers~~$20.3 million at December 31, 2000. At ~~LLP~~September ~~with~~30, ~~Cherry~~2001, ~~Bekaert~~the & Company ~~Holland~~had no material commitments for capital expenditures. The Company's negative working capital in both periods results primarily from net losses and the maturity on December 31, 2000 ~~LLP~~of the Company's outstanding debt.

~~SIGNATURES~~As reported in Note 6 above, the Company, at various times, had been in violation of the provisions of its several loan agreements resulting in modifications of the terms of each including an acceleration of the maturities of the Term Loan and the Notes to December, 31, 2000. Currently, the Company does not have the capability to repay or replace any of the obligations which are currently due upon demand and that fact raises substantial doubt about the Company’s ability to continue as a going concern. The Company continues to negotiate a restructuring of its debt.

~~Pursuant~~In toearly January, the ~~requirements~~Company accepted the resignation of Progressive’s President ~~the Securities~~and ~~Exchange~~Vice ~~Act~~President of ~~1934~~Sales and Marketing and has since replaced them with individuals who possess substantial experience in the food service industry. In addition, the ~~Registrant~~direct sales force has ~~duly~~been ~~caused~~increased and the Chairman of the Company has assumed the position of Chief Executive Officer of Progressive. The Company believes these changes will assist materially in the efforts to increase revenues and related gross profits. Late in the first quarter the Company also eliminated one level of management in the engineering and development area. Management believes this ~~report~~action will improve efficiency as well as reduce costs within the Company. Additionally, management is attempting to effect a restructuring be designed ~~signed~~to onimprove ~~its~~the ~~behalf~~financial bycondition the ~~undersigned~~Company. No ~~thereunto~~agreements ~~duly~~with ~~authorized~~respect to this action have been achieved.

	TRIDEX CORPORATION
	(Registrant)
August 10, 2001	/s/ Seth M. Lukash
	Seth M. Lukash Chairman of the Board, President, Chief Executive Officer, and Chief Operating Officer
August 10, 2001	/s/ William A. Beebe
	William A. Beebe Vice President and Chief Financial Officer

NASDAQ Listing

The Company does not meet the net tangible asset or price per share requirements for listing on the Nasdaq Stock MarketÒ (“Nasdaq”). Accordingly, during 2000, the Company's common stock was delisted from Nasdaq. As a result of delisting, current information regarding bid and asked prices for the common stock may become less readily available to brokers, dealers, and/or their customers which may reduce the liquidity of the market for the common stock which, in turn, could result in decreased demand for the common stock, a decrease in the stock price, and an increase in the spread between the bid and asked prices for the common stock.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued two Statements of Financial Accounting Standards, No. 141, Business Combinations (SFAS No. 141), and No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, Business Combinations, and FASB Statement No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises. All business combinations in the scope of SFAS No. 141 are to be accounted for using one method, the purchase method. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method for those business combinations is prohibited. The provisions of SFAS No. 141 also apply to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001, or later.

SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. SFAS No. 142 also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Under SFAS No. 142, goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives, but without the constraint of the 40-year maximum life previously required. The provisions of SFAS No. 142 are required to be applied starting with fiscal years beginning after December 15, 2001.

The Company expects to adopt the provisions of SFAS No. 142 effective January 1, 2002. The Company is in the process of determining the impact the adoption of the provisions of SFAS No. 142 will have on financial position and results of operations.

PART II. OTHER INFORMATION

ITEM 5. Other Information

The information regarding the Company’s delisting from the NASDAQ National Market System contained in Item 2 of Part I hereof is hereby incorporated herein by reference.

ITEM 6. Reports on Form 8-K

a. Reports on Form 8-K

The Company filed no Reports on Form 8-K during the period.

SIGNATURES

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

		TRIDEX CORPORATION
		(Registrant)


October 30, 2001		/s/ Seth M. Lukash
		Seth M. Lukash
		Chairman of the Board, President, Chief Executive
		Officer, and Chief Operating Officer



October 30, 2001		/s/ William A. Beebe
		William A. Beebe
		Vice President and Chief Financial Officer




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