Edgar Filing: EMTEC INC/NJ

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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FORM 10-K

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

For the fiscal year ended March 31, 2001

Commission file number: 2-54020

EMTEC, INC.
(Exact name of registrant as specified in its charter)

Delaware 87-0273300
(State of incorporation or organization) (I.R.S. Employer Identification No.)

817 East Gate Drive
Mount Laurel, New Jersey 08054
(Address of principal executive offices, including zip code)

(856) 235-2121
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Registration Pending: Common Stock, par value $.01 per share

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) had been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

As of July 1, 2001, the aggregate market value of the common stock of
the Registrant held by non-affiliates of the Registrant was approximately
$594,000.

As of July 1, 2001, there were outstanding 7,080,498 shares of the
registrant's common stock.

EMTEC, INC.
2001 FORM 10-K ANNUAL REPORT

Table of Contents

PART I

Item 1. Business........................................................................................1
Item 2. Properties.....................................................................................10
Item 3. Legal Proceedings..............................................................................11
Item 4. Submission of Matters to a Vote of Security Holders............................................11

PART II

Item 5. Market for the Company's Common Equity and Related Stockholder Matters.........................12
Item 6. Selected Financial Data........................................................................12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..........13
Item 7A. Quantitative and Qualitative Information About Market Risk.....................................22
Item 8. Financial Statements and Supplementary Data....................................................22
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...........22

PART III

Item 10. Directors and Executive Officers...............................................................24
Item 11. Executive Compensation.........................................................................26
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................28
Item 13. Certain Relationships and Related Transactions.................................................29

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports and Reports of Form 8-K...................30

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References in this Annual Report to "we," "us," or "our" are to Emtec,
Inc. and its subsidiaries, unless the context specifies or requires otherwise.

Cautionary Statement Regarding Forward-Looking Statements

You should carefully review the information contained in this Annual
Report and in other reports or documents that we file from time to time with the
Securities and Exchange Commission (the "SEC"). In this Annual Report, we state
our beliefs of future events and of our future financial performance. In some
cases, you can identify those so-called "forward-looking statements" by words
such as "may," "will," "should," expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of those
words and other comparable words. You should be aware that those statements are
only our predictions. Actual events or results may differ materially. In
evaluating those statements, you should specifically consider various factors,
including the risks discussed in this Annual Report for the year ended March 31,
2001 and other reports or documents that we file from time to time with the SEC.
Those factors may cause our actual results to differ materially from any of our
forward-looking statements. All forward-looking statements attributable to us or
a person acting on our behalf are expressly qualified in their entirety by this
cautionary statement.

Assumptions relating to budgeting, marketing, and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause us to alter our marketing, capital
expenditure, or other budgets, which may in turn affect our business, financial
position, results of operations, and cash flows.

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PART I

Item 1. Business

Introduction

We are an e-Business and information technology ("IT") consulting and
services provider that structures and implements complex, highly integrated
systems that enable our customers to exchange information with their partners
and customers in a purely digital format, making them more efficient and
effective. We also offer our clients a variety of IT services ranging from basic
product support to complex network and applications design. Our e-Business
services include, among others, web enablement, consulting, application
development, and information security. Our customers are primarily Fortune 2000
and other large and mid-sized companies located principally in the New York/New
Jersey Metropolitan area and the Southeastern United States, with annual
revenues ranging from $50 million to $500 million. We service our customer base
from leased facilities in New Jersey, Connecticut, and Georgia.

Historically, the most significant portion of our revenues has been
derived from our activities as a reseller of IT products, such as workstations,
servers, microcomputers, applications software and networking and communications
equipment. In the fiscal years ended March 31, 2001, 2000 and 1999,
respectively, such reseller activities accounted, respectively, for 83.73%,
86.58% and 89.26% of our total revenues. However, we are actively endeavoring to
increase the portion of our revenues that are derived from e-Business and IT
consulting and services. We anticipate that an increasing percentage of our
future revenues will be derived such business.

Prior to January 17, 2001, we were engaged in the oil and gas
exploration and development business under the name American Geological
Enterprises, Inc. At that time our principal asset, other than cash, was a 5.49%
working interest in a geothermal power unit. Upon the merger we retained all of
our assets, subject to liabilities, and assumed all of the assets and
liabilities of Emtec-NJ. Although we have retained the lease in the geothermal
power unit, we have not yet decided whether to seek other opportunities in the
gas and oil field. On January 17, 2001, we completed a merger with Emtec, Inc.,
a privately held New Jersey corporation ("Emtec-NJ"), which since 1980 had been
engaged in the business of providing IT products and services to the computer
industry . As a consequence of this merger, Emtec's executive officers replaced
our executive officers; its designees assumed majority control of our board of
directors; its shareholders collectively acquired approximately 75.3% of our
outstanding equity; persons facilitating the transaction received 5.2%, and we
changed our name to "Emtec, Inc."

Our executive offices are located at 817 East Gate Drive, Mount Laurel,
New Jersey; telephone: (856) 235-2121. Our website is located at
www.emtecinc.com. The information on our website is not part of this Annual
Report.

Industry Background

The broad market in which we compete is the provision of IT services.
This marketplace consists of traditional IT services such as hardware and
software procurement, life-cycle services, and network consulting, as well as
new and innovative Internet services such as web

enablement, e-Business consulting, e-Business application development, and
information security.

As the market for IT products has matured over the past several years,
price competition has intensified. That factor, combined with abbreviated
product lifecycles, has forced IT product manufacturers to pursue lower cost
manufacturing and distribution strategies. Resellers who were able to serve the
needs of corporate end users requiring diverse brands of products and related IT
services were initial beneficiaries of this heightened competition. More
recently, however, continuing competition and manufacturers' renewed efforts to
improve their cost structure have led to both consolidations and business
failures among resellers. Manufacturers have shifted from exclusive distribution
partners to "open sourcing" and some have begun direct selling efforts with a
view to capturing market share from resellers.

At the same time that the market for IT products is consolidating, the
market for IT services and, in particular, for e-Business services, is
expanding. Many companies have become increasingly dependent on the use of IT as
a competitive tool in today's business environment. The need to distribute and
access data on a real-time basis throughout an organization and between
organizations has led to the rapid growth in network computing infrastructures
that connect numerous and geographically dispersed end users through local and
wide area networks. This growth has been driven by the emergence of industry
standard hardware, software, and communications tools, as well as the
significant improvement in the performance, capacity, and utility of such
network-based equipment and applications.

The decision-making process that confronts companies when planning,
selecting, and implementing IT infrastructure and services continues to grow
more complex. Organizations are continually faced with technology obsolescence
and must design new networks and upgrade and migrate to new systems. As a result
of the rapid changes in IT products and the risks associated with the commitment
of large capital expenditures for products and services whose features and
perceived benefits are not within the day-to-day expertise of operating
management, many businesses increasingly are outsourcing some or all of their
network management and support functions and are seeking the expertise of
independent providers of IT products and services.

Our Strategy

Our primary business objective is to become a leading single-source
provider of high quality and innovative IT products, services, and support. We
believe that by working with a single-source provider, business organizations
will be able to adapt more quickly to technological changes and reduce their
overall IT costs. To this end, we are pursuing the following strategies:

o Capitalizing on Existing Relationships

We are striving to grow the e-Business applications and e-Business
infrastructure components of our business, predicated upon our ability to
successfully cultivate our long-term relationships with both our client base and
with manufacturers of IT products. We have invested in training and committed
resources to obtain company certifications from key industry manufacturers, and
have entered into written agreements with most of these manufacturers, such

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as Sun, IBM, CISCO, Microsoft, Novell and Citrix. These agreements grant us a
nonexclusive right to purchase the manufacturer's hardware and license its
software for our internal business use and for commercial integration and
resale. Typically, our agreements with such manufacturers, such as those with
Sun, IBM, CISCO, Microsoft, Novell and Citrix, provide for a one year term,
renewable by the parties for additional one year terms and are terminable by
either party on prior written notice ranging from 30 to 45 days. They generally
do not contain financial terms for resale of the manufacturer's products, which
terms are separately governed by purchase orders.

Moreover, we believe that our history of satisfying our larger clients'
IT product requirements will facilitate our efforts to successfully market our
broad range of e-Business services to this particular segment of our client
base.

o Developing New Relationships

We will focus on directing new prospects to our web site, as well as
encouraging their use of our strategy workshops and e-Business innovation
centers.

o Promoting New Products

In the last several years, we have cultivated an internal application
development practice that has yielded several product offerings, the most
significant of which focuses on sales force automation. Our sales force
automation system, which goes well beyond traditional sales prospect management,
encompasses a number of alternative strategies for lead and prospect
development, as well as a means of tracking sales progress according to specific
selling processes and methodologies. This software package, which we utilize as
part of our own sales and marketing strategy, is marketed to our clients as
well. We intend to enhance promotional efforts for this new product and others
in the coming years.

o Pursuing Strategic Acquisitions

We will seek to expand our service offerings, to add to or enhance our
base of technical or sales personnel, and to nurture and expand client
relationships by means of acquisitions of companies whose businesses complement
our businesses and, in particular, our IT consulting services. We intend to
focus on companies with management teams that are willing to commit to their
continued long-term participation in our growth, in the following candidate
categories:

o Sun Microsystems resellers that possess solution-oriented
sales staffs and certified engineers;

o e-Business consultants that complement our existing
e-Business infrastructure; and

o Companies that specialize in, or have broad experience
with, Oracle database development.

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Our Business

o e-Business and IT Services

o Web Self-Service Application Programs

Many businesses are seeking ways to improve client
communication, to provide access to account, shipping, and order information,
and generally to manage their client relationships more efficiently in "real
time". We help structure web enabling for websites and web applications and
company "frequently asked questions" libraries, providing productive ways to
expand a client's business and service its clients. We also structure web
enabling for mainframe computer proprietary databases and legacy applications
that afford access by authorized employees, clients, and suppliers to order
entry, account, and shipping status.

o Business Relationship Management

The rapid creation and sometimes equally rapid disappearance
of e-marketplaces or other business to business resources require that
organizations find ways to quickly develop new online relationships that can
help them achieve their business objectives. Our business relationship
management integration services provide clients with a business partner
integration platform that streamlines and simplifies connectivity and
integration with trading partners and any trading exchanges (e-marketplaces or
e-hubs) within a given industry. Based on an open data model, it extends the
enterprise by sharing data, both inside and outside the enterprise, with key
suppliers, manufacturers, and clients.

o Data Management

The emergence of e-Business, combined with the introduction of
data-intensive technologies such as multimedia and data warehousing, has
resulted in an explosive growth of information to manage within an enterprise.
Management of this information is essential to the success of the enterprise. We
help manage and protect our clients' critical data by offering options to store
and manage data; creating tailored backup capability to preserve data in the
event of system failure; designing highly available systems that protect against
lost productivity; delivery times, and profitability that occur when a company's
IT resources fail; and building a strategic resource that includes an entity's
full computer infrastructure from server to desktop and backup and storage,
which simplifies management of complex computing environments, while ensuring
consistently high levels of service to end users.

o E-Infrastructure Architecture

Configuration management is a process applied over the life
cycle of any product that provides visibility and control of a product's
functional, performance, and physical attributes. We offer configuration
management services to assure that a product performs as intended and its
physical configuration is adequately identified and documented to a level of
detail sufficient to repeatedly produce the product and meet anticipated needs
for operation, maintenance, repair, and replacement.

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If revisions to systems are not tracked, the benefits of
having a documented configuration management system diminish over time. The
tracking and management of revisions are an integral part of maintaining an
accurate database of configurations. We help clients implement processes to
manage revisions made to systems and help manage the loading of patches and
updates, from testing through to installation. Security concerns are also a
vital component of infrastructure architecture. Design and implementation of
systems require authentication and authorization services for users and the
construction of network firewalls.

o Information Appliance Services

System architecture has evolved over time from mainframes to
client/server models. "Thin Client" architecture is a new approach that removes
everything from the desktop except the physical components a user needs --
keyboard, mouse, a display, and audio input and output. All of the computing is
performed on centralized shared servers. We utilize thin client technology in
developing desktop infrastructure capability for our clients and provide
maintenance and upgrade services for such technology. Use of thin client
technology decreases acquisition and maintenance costs for clients implementing
it, as all installation and maintenance is completed at the server level rather
than at individual workstations.

We offer our clients a network design and implementation
services that facilitate the development of detailed network specifications and
implementation tactics. We work with our clients to produce design documentation
for the physical, logical, and operational network infrastructures. When
producing this documentation, we consider how the new technology will integrate
existing hardware and software and how it will be managed on an ongoing basis.

o Lifecycle Management Services

Our lifecycle management services are designed to provide
clients with continuous availability of service and support throughout the
lifecycle of their IT investments, including the full spectrum of IT product
acquisition and support services needed to support server environments. Our
services include:

o Evaluation and prioritization of business
objectives to determine the best course of action
for our clients;

o Consultation with clients to identify the right IT
products and services for their needs;

o Leveraging our vendor relationships to quickly
source the right combination of products;

o Providing logistical support needed to deploy a
major technology roll out;

o Offering assistance to reduce the overall
operating cost of maintaining current technology
through a private label lease program; and

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o Providing continuous support to enable a client to
improve end-user satisfaction, minimize downtime,
and lower the total cost of ownership.

o e-Business Solution Development

In fiscal 2000, we initiated an effort to develop e-Business
applications. To date, we have:

o Developed two human resources web self-service
applications programs for clients; and

o Developed a proprietary application for automating
and enhancing the front-end sales process.

Our proprietary application has been sold to one client and is
being branded and packaged for sales to others. We currently offer it both for
internal deployment by clients and for remote deployment by means of our own
application hosting services.

We have also developed proprietary software applications to be
used in conjunction with configuration management (cataloguing a product's
attributes and performance so as to optimize operational life) and disaster
recovery (recovering data in the event of system malfunction or failure) of
large enterprise servers. Presently, we incorporate these applications into our
configuration management of large enterprise servers Our current version permits
Web deployment via third parties and by January 2002, we anticipate that we will
have built-in Web deployment capability.

Our e-Business and IT services activities accounted for
approximately 16.24%, 13.42% and 10.74% of our total revenues for fiscal years
2001, 2000 and 1999, respectively.

o IT Reseller

We are an authorized reseller of the products of many leading IT
manufacturers, such as 3Com, CISCO, Compaq, HP, IBM, Intel, Microsoft, NEC,
Veritas, Novell, and Sun. Such products include workstations, servers,
networking and communications equipment, enterprise computing products, and
application software. Our business depends in large part upon our ongoing access
to well established aggregators, in particular Ingram Micro, Inc. and Tech Data
Corp. to enable us to acquire IT products at competitive prices and on
reasonable terms for resale to our clients.

Through our alliances with Ingram and Tech Data, we provide our
customers with competitive pricing and value-added services such as electronic
product ordering, product configuration, testing, warehousing, and delivery. Our
relationships with our aggregators allow us to minimize inventory risk by
ordering products primarily on an as-needed basis. We believe that in most cases
our ability to acquire products on a cost-plus basis affords us the opportunity
to avail ourselves of prices lower than those that could be obtained
independently from manufacturers or other vendors. We utilize electronic
ordering and pricing systems that provide real-time status checks on the
aggregators' inventories and maintain electronic data interchange

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links to other suppliers, thereby enabling our sales team to schedule shipments
more accurately and to provide electronically-generated client price lists.

In particular, we rely upon products manufactured by Sun, which
accounted for 50%, 36% and 21% of our computer products acquired for resale
fiscal years 2001, 2000 and 1999, respectively.

We have not entered into any long-term supply contracts with any of our
suppliers, as we purchase computers, computer systems, components, and parts on
a purchase order basis. Our agreements with Ingram and Tech Data, who
collectively supplied approximately 80%, 43% and 22% of our resale products in
the fiscal years 2001, 2000 and 1999, respectively, may be terminated by such
companies at any time upon 30 days' prior written notice.

We may receive manufacturer rebates resulting from equipment sales. In
addition, we receive volume discounts and other incentives from various
suppliers. Except for products in transit or products awaiting configuration at
our facility, we generally do not maintain large inventory balances. Both of our
primary vendors limit price protection to that provided by the manufacturer
(generally less than 30 days) and they restrict product returns, other than
defective returns, to a percentage (the percentage varies depending on the
vendor and when the return is made) of product purchased. Those returns must
occur during a defined period, at the lower of the invoiced price or the current
price, subject to the specific manufacturer's requirements and restrictions.

Our IT reseller activities accounted for approximately 83.73%, 86.58%
and 89.26% of our total revenues for the fiscal years ended March 31, 2001, 2000
and 1999, respectively.

o Consulting Services

o Strategy Workshops

We conduct e-strategy workshops to help our clients determine
where to start and what to build. Participation enables our clients to evaluate
critical business processes and organizational structures. It also helps them to
define their e-Business objectives and then translate them into a roadmap for
implementation.

In these workshops, we examine organizational or project
goals, target clients, marketplace, competitive environment, and a variety of
other factors to identify the best opportunities for the client, and we then
create a plan for developing the best solution. We benchmark best practices
across industries to help leverage what others have already successfully
implemented. Competitors' e-Business efforts are also examined for a strategic
comparison. The strategy can be used to mold ideas into manageable projects that
can be implemented immediately. Finally, opportunities are prioritized, a
program plan and business case are created, and a roadmap is set-up to move
forward with definition, design, and implementation.

o e-Business Innovation Centers

We have developed e-Business innovation centers at our
Norcross, Georgia and northern New Jersey locations. These facilities offer our
clients the ability to test the scalability

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and suitability of a hardware and software configuration before investing in the
technology. Equipped with high-end Sun TM servers, Sun Ray TM thin clients, Sun
TM storage arrays, and 600MHz eight-processor NT servers, as well as a wide
array of software applications including Lotus Notes/Domino, Cognos Business
Intelligence software, IBM's DB2 product family, WebSphere Application Server,
and Commerce Suite, and staffed by high-level certified engineers, each
e-Business innovation center can simulate up to a 2,000-user load, including a
complete e-Business framework from the end-user to the back-office system.

Our e-Business consulting services generated approximately $40,000 in
revenue during the fiscal year ended March 31, 2001.

o Other Services

o K-12 Specialized Services for Student and Faculty Needs

We integrate top-quality curriculum software and computer
products into the classroom. We have significant experience in building local
area networks that link many campuses together. We also provide district-wide
support and sustain Internet access to educational resources worldwide. We
tailor our array of services to make the best use of limited funds.

Marketing

Our marketing efforts are focused on:

o Broadening our public image as an e-Business and IT service
provider;

o Promoting our new e-Business and e-Infrastructure offerings to
current clients, prospects, partners, and investors;

o Maintaining a constant flow of marketing communications to increase
and maintain our market presence;

o Driving prospects to our web site; and

o Increasing overall inquiries and sales from all sources.

Our business development center is charged with sales lead generation.
We have developed a computer-based process by which a series of letters or
e-mails are sent to a prospective customer to provide initial information about
us before a sales call is made. The system executes strategies automatically and
prompts the sales representative when action is required. Because its
fundamental concept is to create multiple and frequent "touches" of the prospect
through letters, faxes, e-mails, and phone calls, multiple and frequent contacts
of prospective clients will be the basis of our marketing efforts. This process
will be supplemented with seminars and consulting- and services-oriented direct
mail.

We have developed two proprietary software programs that track the
success of a number of our sales and marketing programs. One software package
manages the business development

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center process, while the other tracks the progress of sales engagements
ensuring that the correct process is followed. These software packages are not
only utilized as part of our sales and marketing strategy, but are also marketed
to our clients as well.

Customers

Our targeted client base is companies with sales revenues of between
$50 and $500 million. Although we have approximately 150 clients, our two
largest clients, Gwinnett County School System (Georgia) and Instinet
Corporation, accounted, respectively, for approximately 10.23% and 10.18% of our
revenues for the year ended March 31, 2001. These same two customers accounted
for, respectively, approximately 16.88% and 3.89% of our revenues in fiscal year
2000 and for approximately 26.29% and 0.00% of our revenues in fiscal year 1999.
An additional eight customers, BellSouth Corporation, Educational Testing
Service, Tiffany & Co., MBNA, Novo Nordisk, Atlanta Newspapers, Bally's Park
Place Casinos, and Matsushita Electric Corporation, collectively accounted for
38.96%, 38.77% and 29.29% of our revenues for the years ended March 31, 2001,
2000 and 1999, respectively.

Intellectual Property

Our business also includes the development of custom software
applications in connection with specific client engagements. Ownership of such
software is generally assigned to our client.

Competition

The IT services industry is highly competitive. Our competitors
include:

o established computer product manufacturers (some of which
supply products to us);

o distributors;

o computer resellers;

o systems integrators; and

o other IT service providers.

Many computer product manufacturers also sell to clients through their
direct sales organizations and certain of them have announced their intentions
to enhance such direct sales efforts. Many of our current and potential
competitors have longer operating histories and financial, sales, marketing,
technical, and other resources substantially greater than we do. As a result,
our competitors may be able to adapt more quickly to changes in client needs or
to devote

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greater resources than we can to the sales of IT products and the provision of
IT services. Such competitors could also attempt to increase their presence in
our markets by forming strategic alliances with our other competitors or with
our clients, offering new or improved products and services to our clients or
increasing their efforts to gain and retain market share through competitive
pricing. We have no ongoing written commitments by clients to purchase products,
and all product sales are made on a purchase-order basis.

We are also in direct competition with local, regional, and national
distributors of microcomputer products and related services as well as with
various IT consulting companies. These run the gamut from new dot com consulting
companies to the established consulting arms of nationwide accounting and
auditing firms. Several of these competitors offer most of the same basic
products as we do. We also encounter competition from microcomputer suppliers
that sell their products through direct sales forces, rather than through
resellers such as ourselves, and from manufacturers and distributors that
emphasize mail order and telemarketing sales techniques.

The tri-state metropolitan Connecticut, New Jersey, and New York area
and parts of New England, which, on a revenue basis, accounted for 67.7%, 49.5%,
and 43.6% of our revenues during the fiscal years 2001, 2000 and 1999,
respectively, are particularly characterized by highly discounted pricing on
microcomputer products from various sources.

Depending on the client, the principal areas of competition may include
price, pre-sale and post-sale technical support and service, availability of
inventory, and breadth of product line. We have an insignificant market share of
sales in the microcomputer industry and the service markets that we serve. Most
of our competitors at the regional and national levels are substantially larger,
have more personnel, have materially greater financial and marketing resources,
and operate within a larger geographic area than we do.

Employees

As of July 1, 2001, we employed 164 individuals, including 34 sales,
marketing and related support personnel, 92 service and support employees, 27
operations and administration personnel, and 11 employees in accounting,
finance, and human resources. We believe that our ability to recruit and retain
highly skilled technical and other management personnel will be critical to our
ability to execute our business model and growth strategy. None of our employees
are represented by a labor union or are subject to a collective bargaining
agreement. We believe that our relations with our employees are good.

Item 2. Properties

We lease office space in six locations. Our corporate headquarters and
principal operational facilities are currently located in Mount Laurel, New
Jersey. The following table contains certain information about each of our
leased facilities:

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Size
Address (in square feet) Monthly Rent Expiration Date
------- --------------- ------------ ---------------

817 East Gate Drive 15,596 $14,166.37 March 31, 2004
Mount Laurel, NJ 08054

70 Jackson Drive 13,360 $9,575.00 June 30, 2004
Cranford, NJ 07016

2990 Gateway Drive, Suite 500
Norcross, GA 06855 17,102 $11,532.95 August 14, 2004

4995 LaCross Road, Suite 1300 2,337 $3,462.37 June 30, 2004(1)
Charleston, SC 29406

14 Strawberry Hill 2,000 $2,151.00 July 31, 2002
Norwalk, CT 06855

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(1) These premises were sublet at cost to the new owners of our South Carolina
operation.

We believe these facilities will satisfy our anticipated needs for the
foreseeable future.

Item 3. Legal Proceedings

In 1999 we instituted an action against Dan. F. Williams & Co. Inc.,
one of our customers, in the Court of Common Pleas, Greenville County, South
Carolina, for breach of contract in an amount approximating $50,000. The
defendant counterclaimed for damages in excess of $8.0 million, alleging that
our negligence corrupted its computer system. The case is currently in the
discovery phase.

Item 4. Submission of Matters to a Vote of Security Holders

None

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PART II

Item 5. Market for the Company's Common Equity and Related Stockholder Matters

Our common stock is quoted on the OTC Bulletin Board under the symbol
"ETEC." The following table sets forth the high and low closing prices of our
common stock for the periods indicated:

Three Months Ended High Low
------------------ ---- ----

March 31, 2001 $1.81 $0.44
December 31, 2000 $0.56 $0.44
September 30, 2000 0.56 0.44
June 30,2000 0.44 0.44
March 31, 2000 0.44 0.44
December 31, 1999 $0.75 $0.44
September 30, 1999 0.75 0.56
June 30,1999 0.63 0.38
March 31, 1999 1.00 0.44

The above quotations represent prices between dealers and do not
include retail mark-ups, markdowns or commissions. They do not necessarily
represent actual transactions.

As of July 1, 2001, there were 701 recordholders of our common stock,
although we believe that beneficial holders approximate 800.

We have never declared any dividends on our common stock and we have no
intention to do so in the foreseeable future.

Item 6. Selected Financial Data

The following selected consolidated financial data below should be read
in conjunction with our consolidated financial statements including the
accompanying notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations, both elsewhere in this Report. The data as
of March 31, 2001 and 2000 and for each of the three years in the period ended
March 31, 2001 have been derived from, and should be read in conjunction with,
our audited consolidated financial statements and accompanying notes, which are
contained elsewhere in this Report. The data for each of the two years in the
period ended March 31, 1998 and 1997 have been derived from our audited
financial statements, which are not contained in this Report.

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YEAR ENDED MARCH 31
-------------------
2001 2000 1999 1998 1997
------------------ ------------------ --------------- ----------------- ---------------

Net revenues $92,602,735 $100,752,490 $91,683,046 $77,273,483 $52,810,313

Income (loss) from continuing
operations $(1,217,825) $ 316,004 $ 971,468 $ 454,232 $ 30,836

Income (loss) per common share
from continuing operations
(basic and diluted) $ (0.220) $ 0.057 $ 0.175 $ 0.080 $ 0.002

Total assets $18,636,677 $ 21,401,172 $26,910,725 $15,488,303 $15,855,608

The Company had no long term debt obligations or outstanding preferred stock
during the 5 years ended March 31, 2001. In addition, no dividends were paid to
common stockholders during the same period.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Reference is made to the "Risk Factors" below for a discussion of
important factors that could cause actual results to differ from expectations
and any of our forward-looking statements contained herein. In addition, the
following discussion should be read in conjunction with our audited consolidated
financial statements as of and for the fiscal years ended March 31, 2001, 2000
and 1999.

Results of Operations

Comparison of Years Ended March 31, 2001 and 2000

Total Revenues

Total revenues for IT procurement decreased by 8.12%, or $8.18 million,
to $92.57 million for the year ended March 31, 2001. Product procurement
revenues decreased by 11.12%, or $9.70 million, to $77.53 million for the year
ended March 31, 2001. This decline in product procurement revenue is mainly due
to our continued focus on our services and consulting organization. Services and
consulting revenue increased by 11.23%, or $1.52 million, to $15.03 million for
the year ended March 31, 2001 compared to $13.52 million for the year ended
March 31, 2000.

Geothermal Revenues of $34,366 from the date of the merger are
consistent with the previous period's revenues for a comparable period.

Gross Profit

Our aggregate gross profit for IT procurement declined by 13.41%, or
$1.69 million, to $10.95 million for the year ended March 31, 2001. Measured as
a percentage of net sales, our

-13-

overall gross profit margin also decreased to 11.83% of net sales for the year
ended March 31, 2001 from 12.55% for the year ended March 31, 2000. Due to
continued downward pricing pressure on product sales, gross profit margin
attributable to product sales decreased to 10.54% for the year ended March 31,
2001 from 10.68% for the year ended March 31, 2000. We expect that downward
pricing pressure on products will persist due to the continued commoditization
of computer products.

Gross margin attributable to services and consulting revenue decreased
to 18.48% of services and consulting revenue for the year ended March 31, 2001
from 24.62% for the year ended March 31, 2000. We believe this decline was due
primarily to lower utilization rates and the lack of Y2K revenue during the year
ended March 31, 2001.

The geothermal gross profit of $24,102 from the date of the merger is
consistent with the revenues for comparable previous periods.

Sales, General, and Administrative Expenses

Sales, general, and administrative expenses decreased by 5.97%, or
$650,245, to $10.24 million for the year ended March 31, 2001. This decrease is
primarily a result of lower sales commission expenses as well as our efforts to
streamline many of our operational functions.

Startup Costs; e-Business

Startup Costs; e-Business for the year ended March 31, 2001 was $1.30
million, or 10.58% of total operating expenses. We started our e-Business
division in January 2000. This cost mainly includes the building of a sales and
consulting team of approximately 13 employees, including training, certifying,
marketing, and advertising expenses.

Other Income (Expense)

Total other income (expense) for the year ended March 31, 2001 of
$24,108 relates primarily to legal settlement income, net of costs, as well as a
loss from the disposition of marketable securities. Legal settlement income net
of cost is $170,993. This includes approximately $355,000 in cash and marketable
securities worth $176,000, less legal and other operating expenses equal to
approximately $355,000. Loss from the disposition of marketable securities
received in legal settlement equals $146,885.

Income Taxes

All income tax benefit of $75,029 was recorded for the year ended March
31, 2001. This amount included a deferred tax benefit of $86,765 netted against
a current income tax expense of $11,736. The $75,029 income tax benefit amount
was allocated as a $73,059 benefit from continuing operations and a $1,970
benefit from discontinued operations. A net current income tax benefit of
$64,311 was recorded for the year ended March 31, 2000. This amount was
allocated as a $326,318 expense charged to income from continuing operations and
a $390,629 benefit reducing the loss from discontinued operations. Valuation
allowances of 90% and 100% of the book value of deferred tax assets were
recorded at March 31, 2001 and 2000, respectively.

-14-

Loss from Discontinued Operations

Loss from discontinued operations, net of income taxes, for the year
ended March 31, 2001 equaled $63,649, as compared to $618,030 for the year ended
March 31, 1999. The loss from discontinued operations for the year ended March
31, 2001 was primarily due to lease payments, contracted advertising expenses,
and additional reserve for bad debt.

Comparison of Years Ended March 31, 2000 and 1999

Total Revenues

Total revenues in 2000 of $100.75 million increased 9.89% or $9.06
million, from total revenue of $91.68 million in 1999. We continued to focus on
the strategy of transition from primarily a reseller of products to a services
and consulting organization. As a result of this transition, procurement
revenues only increased by 6.60%, or $5.40 million, to $87.23 million, while
services and consulting revenues increased by 37.22%, or $3.66 million, to
$13.51 million for the year ended March 31, 2000.

Gross Profit

Our total gross profit increased by 2.62%, or $323,000, to $12.64
million for the year ended March 31, 2000. Measured as a percentage of net
sales, our overall gross profit margin decreased to 12.55% of total revenues for
the year ended March 31, 2000 from 13.44% for the year ended March 31, 1999. Due
to continued downward pricing pressure on product sales, gross profit
attributable to product sales decreased to 10.68% for the year ended March 31,
2000 from 12.38% for the year ended March 31, 1999. We expect that downward
pricing pressure on products will persist due to the continued commoditization
of computer products. Gross margin attributable to services and consulting
revenue increased to 24.62% of services and consulting revenue for the year
ended March 31, 2000 from 22.18% for the year ended March 31, 1999. During the
year ended March 31, 2000, services and consulting contributed 26.32% of our
gross profit dollars, as compared to 17.73% during the year 1999.

Sales, General, and Administrative Expenses

Sales, general, and administrative expenses in 2000 of $10.89 million
increased 5.02%, or $520,000, from $10.37 million in 1999. This increase is
primarily due to an increase in sales staff and in commissions paid on services
and consulting activities.

Startup Costs; e-Business

Startup Costs; e-Business for the year ended March 31, 2000 was
$355,933. We started our e-Business division in January 2000. This cost mainly
includes building of the sales and consulting team, training costs,
certification costs, and marketing and advertisement expense related to
e-Business.

-15-

Income Taxes

A net current income tax benefit of $64,311 was recorded for the year
ended March 31, 2000. This amount was allocated as a $326,318 expense charged to
income from continuing operations and a $390,629 benefit reducing the loss from
discontinued operations. A net current income tax expense of $118,723 was
recorded for the year ended March 31, 1999. This amount was allocated as a
$136,085 expense charged to income from continuing operations and a $17,362
benefit reducing the loss from discontinued operations. No deferred tax benefit
has been recognized in the periods due to a 100% valuation allowance for
deferred tax assets.

Loss from Discontinued Operations

Loss from discontinued operations, net of income taxes for the year
2000 equals to $618,030, as compared to $171,528 for the year 1999. We sold our
Charleston and Greenville, South Carolina operations in February of 2000.

Liquidity and Capital Resources

Cash and cash equivalents at March 31, 2001 of $2.09 million increased
by 205.68%, or $1,411,785, from $686,413 at March 31, 2000. The increase in cash
and cash equivalents is primarily the result of the merger We are a net
borrower, so our cash and cash equivalents balance must be analyzed along with
the balance on our line of credit. Working capital, which is the excess of
current assets over current liabilities, at March 31, 2001, March 31, 2000, and
March 31, 1999, was $1,002,007, $1,109,691, and $1,862,394, respectively.

Since our inception, we have funded our operations primarily from
borrowings under our credit facility. On September 24, 1999, the Company and IBM
Credit Corporation ("IBM") executed an Inventory and Working Capital Financing
Agreement whereby IBM expanded the Company's credit facility to enable the
Company to borrow up to $15 million. Interest on the borrowings is charged
monthly at one half point above the current prime rate. The loan is secured by
substantially all of our assets. At March 31, 2001, we had $6.53 million
outstanding under the credit facility.

Our lending agreement with IBM contains financial covenants that
require us to maintain a minimum current ratio, minimum total liabilities to net
tangible worth ratio, and minimum results of operations. As of March 31, 2001,
the Company was not in compliance with the net profit, current assets to current
liabilities ratio, and total liabilities to net tangible worth ratio. In June
2001, IBM offered to waive such non-compliance in consideration of a cash
payment to IBM of $40,000, an increased interest rate of one and one half points
above prime and a decrease in our credit line to $10 million.. We are currently
negotiating the amended terms of our facility but cannot state with any
certainty the terms upon which the credit facility will be continued or its
duration. The lending agreement may be renewed on September 23, 2001 for an
additional one year term, or terminated on that date, at the option of either
party,

We have open credit lines with our primary trade vendors such as Ingram
Micro and Tech Data. As of March 31, 2001, the credit line with Ingram Micro was
$4.5 million, with net 30 terms, an 18% APR interest rate and an outstanding
balance of $4.5 million. As of March 31, 2001, the credit line with Tech Data
was $1.5 million, with net 30 terms, no interest charged and

-16-

an outstanding balance of $1.3 million. There are no termination provisions in
effect with either of these trade vendors.

Capital expenditures of $372,834 and $616,003 during years ended March
31, 2001 and March 31, 2000, respectively, were primarily for the purchase of
computer equipment for internal use, as well as for the development of our
e-Business innovation centers located in our Cranford, New Jersey and Atlanta,
Georgia facilities. The centers allow us to pilot and test drive the scalability
and suitability of applications in a production environment, verify
configurations, conduct transactional benchmark testing, test application
development, and tune applications. We do not anticipate additional material
capital expenditures will be needed in the foreseeable future to continue to run
our innovation centers.

We believe that our available funds, together with existing and
anticipated credit facilities, will be adequate to satisfy our current and
planned operations for at least the next 12 months.

Risk Factors

WE CANNOT ASSURE YOU THAT WE CAN SUCCESSFULLY INCREASE THE PORTION OF
OUR REVENUES DERIVED FROM E-BUSINESS AND IT CONSULTING AND SERVICES. IF WE ARE
UNSUCCESSFUL OUR FUTURE RESULTS MAY BE ADVERSELY AFFECTED.

Our transition from an emphasis on reselling IT products to an emphasis
on providing e-Business and IT consulting and services has placed significant
demands on our managerial, administrative, and operational resources. Our
ability to manage this transition effectively is dependent upon our ability to
develop and improve operational, financial, and other internal systems, as well
as our business development capabilities, and to attract, train, retain,
motivate, and manage our employees. If we are unable to do so, our ability to
effectively deliver and support our services may be adversely affected. Further,
our transitional efforts to access higher-margin services and consulting
revenues have resulted in reduced IT product sales. If we successfully expand
our e-Business offerings, periods of variability in utilization may continue to
occur. In addition, we are likely to incur greater technical training costs
during such periods. Historically, our IT reseller activities accounted for
83.72%, or $77.53 million, of our total revenue of $92.6 million for the fiscal
year ended March 31, 2001, 86.58%, or $87.23 million, of our total revenue of
$100.75 million for the fiscal year ended March 31, 2000 and 89.26%, or $81.83
million ,of our total revenues of $91.68 million for the fiscal year ended March
31, 1999. In contrast, our e-Business and IT services activities accounted for
approximately 16.24%, or $15.03 million, 13.42%, or $13.52 million, and 10.74%,
or $9.85 million, of our total revenue for the fiscal years ended March 31,
2001, 2000 and 1999, respectively. Our e-Business Consulting Services, including
our Strategy Workshop and e-Business Innovation Centers, generated revenue for
the first time in the fiscal year ended March 31, 2001 in the amount of $40,000,
which was less than one percent of our total revenue for that fiscal year.

-17-

OUR NEW SERVICES HAVE NOT ACHIEVED WIDESPREAD CLIENT ACCEPTANCE. IF
THEY DO NOT ACHIEVE MARKET ACCEPTANCE, OUR PROFIT POTENTIAL MAY BE ADVERSELY
AFFECTED

While we have offered IT services to our clients since 1983, our major
emphasis on IT consulting and services began in 1995 and we started focusing on
our new e-Business offerings during the fiscal year 2000.

We have limited experience in developing, marketing, or providing these
services. We cannot assure you that we will be able to successfully market such
services to either new or existing clients, that our services will achieve
market acceptance, or that we will be able to effectively hire, integrate, and
manage additional technical personnel to enable us to perform these services to
our clients' expectations.

OUR INABILITY TO MAINTAIN HIGH PERSONNEL UTILIZATION RATES MAY
ADVERSELY IMPACT OUR PROFIT POTENTIALITY.

The most significant cost relating to the services component of our
business is personnel expense, which consists of salaries, benefits, and payroll
related expenses. Thus, the financial performance of our service business is
based primarily upon billing margins (billable hourly rates less the costs to us
of service personnel on an hourly basis) and utilization rates (billable hours
divided by paid hours). The future success of the services component of our
business will depend in large part upon our ability to maintain high utilization
rates at profitable billing margins. The competition for quality technical
personnel has continued to intensify, resulting in increased personnel costs.
This intense competition has caused our billing margins to be lower than they
might otherwise have been. Our utilization rates for service personnel likely
will also be adversely affected during periods of rapid and concentrated hiring.

OUR REVENUES AND EXPENSES ARE UNPREDICTABLE. A DECREASE IN REVENUES OR
INCREASE IN EXPENSES COULD MATERIALLY ADVERSELY AFFECT OUR OPERATING RESULTS.

Our operating results have been, and will continue to be, impacted by
changes in technical personnel billing and utilization rates. Moreover, we
expect that downward pricing pressure on certain of our products will persist
due to the continued commoditization of computer products. These products
include computer equipment such as desktops, laptops, printers and monitors
which currently comprise approximately 40% of our total product sales.

Our operating results have been, and will continue to be, impacted by
changes in technical personnel billing and utilization rates. Further, there are
numerous other factors, which are not within our control, that can contribute to
fluctuations in our operating results, including the following:

o patterns of capital spending by clients;

o the timing, size, and mix of product and service orders and
deliveries;

o the timing and size of new projects, including projects for new
clients; and

-18-

o changes in trends affecting outsourcing of IT services;

We also believe that, to a limited degree, our business is seasonal
with a greater proportion of our product sales occurring in the fourth quarter
due to the capital budgeting and spending patterns of some of our larger
clients. Operating results have been, and may in the future also be, affected by
the cost, timing, and other effects of acquisitions, including the mix of
product and service revenues of acquired companies.

SINCE OUR INCEPTION, WE HAVE FUNDED OUR OPERATIONS PRIMARILY FROM
BORROWINGS UNDER OUR CREDIT FACILITY. WE ARE CURRENTLY IN DEFAULT UNDER OUR
CREDIT FACILITY, WHICH COULD RESULT IN A DEMAND FOR IMMEDIATE REPAYMENT. REVISED
TERMS OF OUR INDEBTEDNESS COULD MATERIALLY LIMIT OUR FINANCIAL AND OPERATING
FLEXIBILITY

Our lending agreement with IBM contains financial covenants that
require us to maintain a minimum current ratio, minimum total liabilities to net
worth ratio, and minimum results of operations. As of March 31, 2001, the
Company was not in compliance with the net profit, current assets to current
liabilities ratio, and total liabilities to net tangible worth ratio. In June
2001, IBM offered to waive such non-compliance in consideration of a cash
payment to IBM of $40,000, an increased interest rate of one and one half points
above prime and a decrease in our credit line to $10 million.. We are currently
negotiating the amended terms of our facility but cannot state with any
certainty the terms upon which it will be continued or its duration.

WE DO NOT HAVE LONG TERM COMMITMENTS FROM ANY OF OUR CUSTOMERS AND OUR
PRODUCT SALES ARE ON A PURCHASE ORDER BASIS. OUR REVENUES ARE CONCENTRATED AND A
LOSS OF EITHER ONE OF OUR TWO TOP CLIENTS COULD MATERIALLY AFFECT OUR OPERATIONS
AND BUSINESS.

In general, there are no ongoing written commitments by clients to
purchase products from us. All product sales we make are on a purchase order
basis. Moreover, our client base is highly concentrated, with our top two
clients in fiscal years 2001 and 2000 accounting in the aggregate for
approximately 20.42% and 32.68%, respectively, of our revenues. An additional
eight clients, collectively accounted for approximately 38.96% and 29.05% of our
net revenues during these respective fiscal years. We anticipate that a
substantial portion of our net revenues and gross profits will continue to be
derived from sales to a concentrated group of clients. A loss of any of these
clients, or a material decrease in the value of the purchase orders from any
other them could materially affect our profitability.

Further, most of our clients are located in the New York/New Jersey
metropolitan area of the United States. Total revenue derived from in this area
amounted to 64.57%, 48% and 50% of our total revenues for the fiscal years ended
March 31, 2001, 2000 and 1999. Adverse economic conditions affecting this region
could have an adverse effect on the financial condition of our clients located
there, which, in turn, could adversely impact our business and future growth.

-19-

WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE IT
SERVICES INDUSTRY.

The IT services business is highly competitive. Our competitors
include:

o established computer product manufacturers, some of which
supply products to us;

o distributors;

o computer resellers;

o systems integrators; and

o other IT service providers.

WE MUST MAINTAIN OUR STATUS AS AN AUTHORIZED RESELLER/SERVICER OF IT
PRODUCTS. THE LOST ON ANY ONE OF SUCH AUTHORIZATIONS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS AND OPERATIONS.

We are materially dependent on our continued status as an approved
reseller of IT products and our continued authorization as an IT service
provider. Without such authorizations, we would be unable to provide the range
of products and services we currently offer, including warranty services. Our
resale agreements with manufacturers generally are terminable by manufacturers
upon 30 days' prior written notice. The loss of one or more of such
authorizations could have a material adverse effect on our business and results
of operations. In particular, we rely upon products manufactured by Sun, which
accounted for 50%, 36% and 21% of our computer products acquired for resale
fiscal years 2001, 2000 and 1999, respectively.

WE HAVE NO LONG-TERM SALES COMMITMENTS FROM ANY OF OUR SUPPLIERS. A
LOSS OF EITHER OF OUR TWO PRINCIPAL SUPPLIERS WOULD MATERIAL ADVERSELY AFFECT
OUR IT RESELLER BUSINESS.

Our IT reseller business depends on large part upon our access to
aggregators, in particular Ingram and Tech Data, to supply us with products at
competitive prices and on reasonable terms for resale by us to our clients. Our
agreements with Ingram and Tech Data may be terminated by such companies upon 30
days prior written notice. We cannot assure you that we will be able to continue
to obtain products from Ingram and Tech Data or our other vendors at prices or
on terms acceptable to us, if at all.

-20-

OUR CLIENT ENGAGEMENTS ENTAIL SIGNIFICANT RISKS; A FAILURE TO MEET A
CLIENT'S EXPECTATIONS COULD MATERIALLY ADVERSELY AFFECT OUR REPUTATION AND
BUSINESS.

Many of our engagements involve projects that are critical to the
operations of our clients' businesses and provide benefits that may be difficult
to quantify. Our failure or inability to meet a client's expectations in the
performance of our services could result in a material adverse change to the
client's operations and therefore could give rise to claims against us or damage
our reputation, adversely affecting our business, results of operations, and
financial condition.

Our ability to protect our intellectual property rights is
questionable. If we are unable to protect such right, our financial condition
could be materially adversely affected.

We rely upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright, and trademark laws to protect our
proprietary rights and the proprietary rights of third parties from whom we
license intellectual property. We enter into confidentiality agreements with our
employees and limit distribution of proprietary information. However, we cannot
assure you that the steps taken by us in this regard will be adequate to deter
misappropriation of proprietary information or that we will be able to detect
unauthorized use and take appropriate steps to enforce our intellectual property
rights. We are subject to the risk of litigation alleging infringement of
third-party intellectual property rights. Any such claims could require us to
spend significant sums in litigation, pay damages, develop non-infringing
intellectual property, or acquire licenses to the intellectual property that is
the subject of the alleged infringement. Our inability or failure to establish
rights or to protect our rights may have a material adverse effect on our
business, results of operations, and financial condition.

WE INTEND TO EXPAND OUR BUSINESS THROUGH ACQUISITIONS OF COMPLEMENTARY
BUSINESSES. THERE IS NO CERTAINTY, HOWEVER, THAT WE WILL BE SUCCESSFUL IN
ACQUIRING ANY NEW BUSINESSES OR THAT ANY SUCH ACQUISITIONS WILL HELP US ACHIEVE
OUR STRATEGIC OBJECTIVES.

As a part of our business development strategy, we intend to pursue
acquisitions of IT product and service businesses in order to expand our service
offerings, to add to or enhance our base of technical or sales personnel, or to
provide desirable client relationships. The success of this strategy depends not
only upon our ability to acquire complementary businesses on a cost-effective
basis, but also upon our ability to integrate acquired operations into our
organization effectively, to retain and motivate key personnel, and to retain
clients of acquired firms. We cannot assure you that we will be able to acquire
or integrate such businesses successfully. Furthermore, we cannot assure you
that financing for any such acquisitions will be available on satisfactory
terms, or that we will be able to accomplish our strategic objectives as a
result of any such transaction or transactions. In addition, we expect to
compete for attractive acquisition candidates with other companies or investors
in the IT industry, which could have the effect of increasing the cost of
pursuing our acquisition strategy, or it could reduce the number of

-21-

attractive candidates to be acquired. Acquisitions also may involve a number of
specific risks, including:

o possible adverse short-term effects on our operating results;

o dependence on retaining key clients and personnel;

o diversion of management's attention;

o amortization of acquired intangible assets; and

o risks associated with unanticipated problems, liabilities, or
contingencies.

Item 7A. Quantitative and Qualitative Information About Market Risk

We do not engage in trading market risk sensitive instruments and do
not purchase hedging instruments or "other than trading" instruments that are
likely to expose us to market risk, whether interest rate, foreign currency
exchange, commodity price or equity price risk. We have issued no debt
instruments, entered into no forward or future contracts, purchased no options
and entered into no swaps. Our primary market risk exposures are those of
interest rate fluctuations. A change in interest rates would affect the rate at
which we could borrow funds under our revolving credit facility. Our average
balance on the line of credit for the past two years has been approximately
$7.40 million. Assuming no material increase or decrease in such balance, a one
percent change in the interest rate would change our interest expense by
approximately $74,000 annually.

Item 8. Financial Statements and Supplementary Data

Reference is made to Item 14(a)(i) herein.

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

On March 22, 2001, we dismissed KPMG LLP as our independent auditor.

KPMG's reports on our financial statements for each of our two fiscal
years ended December 31, 2000 and 1999, respectively (collectively, the "prior
fiscal years"), did not contain an adverse opinion or disclaimer of opinion, nor
were such reports qualified or modified as to uncertainty, audit scope or
accounting principles.

Our dismissal of KPMG was unanimously approved by our board of
directors.

There were no disagreements between us and KPMG during either (i) the
prior fiscal years, or (ii) the period January 1, 2001 through March 22, 2001
(the "interim period") on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of KPMG, would have caused
KPMG to make reference to the subject matter of the disagreement in connection
with its reports for the prior fiscal years.

-22-

There were no "reportable events," as such term is defined in Item
304(A)(1)(v) of Regulation S-K, during either (i) the prior fiscal years or (ii)
the interim period.

We have engaged Baratz & Associates ("BA") as our independent auditor
for our fiscal year ending March 31, 2001. We did not consult with BA during
either the prior fiscal years or the interim period with respect to (i) either
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
our financial statements, or (ii) any matter that was either the subject of a
disagreement or a reportable event.

-23-

PART III

Item 10. Directors and Executive Officers

The following table sets forth certain information as to each of our
executive officers and directors:

Positions and
Name Age Offices Presently Held
--------------------------- ------ -------------------------------------

John P. Howlett 56 Chairman of the Board and President
Ronald A. Seitz 53 Executive Vice President and Director
R. Frank Jerd 59 Director
James S. Fishkin 53 Director(1)

------------------

(1) James S. Fishkin replaced Milton Fisher, who had been one of our
directors since 1969. Under the terms of the Merger Agreement, dated as
of December 15, 2000 pursuant to which our subsidiary merged with
Emtec, Inc., a privately owned New Jersey corporation, and now our
wholly owned subsidiary, we agreed that one fifth of the members of our
Board were to be designees of Mr. Fisher. Mr. Fisher continued to serve
as a director until his death in late April 2001. Prior to his death,
he designated Dr. Fishkin, his son-in-law, as his successor designee.

John P. Howlett has been our President and Chairman since January 17,
2001 and President of Emtec-NJ since August, 1997 and Chairman of Emtec-NJ since
August, 1998. He has been a director of Emtec-NJ since October, 1996. Mr.
Howlett was the founder (in 1983) of Cranford, New Jersey-based Comprehensive
Business Systems, Inc. (CBSI). CBSI primarily provided microcomputer systems,
network integration, training, and data communications to mid-size and Fortune
1000 corporations. In October 1996, CBSI merged into Emtec-NJ. Prior to founding
CBSI, Mr. Howlett was with the AT&T Long Lines Division for twelve years. He
earned a Bachelor of Science degree in Electrical Engineering from Rose Hulman
Institute of Technology in Terre Haute, Indiana, and a Master of Business
Administration degree from Fairleigh Dickinson University in New Jersey. A
Vietnam veteran, Mr. Howlett served in the U.S. Army for four years.

Ronald A. Seitz has been our Executive Vice-President and a director
since January 17, 2001 and Executive Vice President of Emtec-NJ since March,
1996. Prior to that he was the Chief Operating Officer of Emtec-NJ. He has been
a director of Emtec-NJ since April, 1995. Mr. Seitz was the founder (in 1980) of
Charleston, South Carolina-based Computer Source, Inc. (CSI). CSI primarily
provided microcomputer systems, network integration, and data communications to
mid-size and Fortune 1000 corporations. In April 1995, CSI merged with Landress
Information Systems of Mt. Laurel, New Jersey to become Emtec-NJ. Prior to
founding CSI, Mr. Seitz was employed for six years as an engineer with the U.S.
government in Washington, DC. He graduated from North Carolina State University
with a Bachelor of Science degree and from George Washington University with an
MBA in computer science.

-24-

Mr. Seitz also holds a DMD degree from the Dental School at the Medical
University of South Carolina.

R. Frank Jerd was appointed as a director upon the consummation of our
merger with Emtec-NJ. Mr. Jerd is, and has been, a securities analyst for
Josepthal and Company in New York since 1994. From 1992 to 1993, he was chief
executive officer of Benesys, Inc., a medical software company. He was also CEO
of Gandalf Systems Corporation from 1993 to 1994. Mr. Jerd earned a Bachelor of
Science Degree in Mathematics at Marshall University.

James S. Fishkin was appointed as a director on May 29, 2001. Dr.
Fishkin is, and has been since September 1984, a Professor of Government and
Philosophy at the University of Texas at Austin. He currently occupies the
Patterson-Bannister Chair in Government, Law and Philosophy. From 1974 to 1984
he taught at Yale University. Dr. Fishkin received a Ph.D. in Philosophy from
the University of Cambridge in December 1976 and a Ph.D. in Political Science
from Yale University in May 1975. He has numerous publications to his credit in
the fields of political science and ethics.

During 2001, the Board of Directors met five times. Each director
attended all of the meetings of the Board of Directors. The Board of Directors
has no audit committee or compensation committee. The Board of Directors as a
whole makes all such determinations and any director who as is an "interested"
party in a specific matter abstains from voting on such matter.

In May, 2001, a nominating committee was appointed to select nominees
for election as directors. Messrs. Seitz and Jerd are its current members.

Compliance With Section 16(A) Of The Securities Exchange Act Of 1934

Registration of our common stock under Section 12(g) of the Exchange
Act is pending. As soon as our registration has been effectuated, Section 16(a)
of the Exchange Act will require our directors and executive officers and
persons who own beneficially more than 10% of our common stock to file reports
of ownership and changes in ownership of such common stock with the SEC, and to
file copies of such reports with us.

-25-

Item 11. Executive Compensation

The following table sets forth the aggregate compensation that we paid
for services rendered to us in all capacities during our fiscal years ended
March 31, 2001, 2000 and 1999 by our chief executive officer and by our only
other executive officer whose cash compensation exceeded $100,000 per year in
any such year.

Summary Compensation Table

Long Term Compensation
-------------------------------------------------
Annual Compensation Awards Payouts
----------------------- ----------------------- --------
Restricted Long Term
Name and Fiscal Other Annual Stock Number of Incentive All Other
Principal Position Year Salary Bonus Compensation Awards Options Payouts Compensation
------------------ ------ ------ ----- ------------ -------- ------- ------- -------------

John P. Howlett
President and 2001 $200,000 $54,000 __ __ __
Chief Executive 2000 $169,245 $50,000 __ __ __
Officer 1999 $140,396 $ -- __ __ __ $13,724(1)

Ronald A. Seitz 2001 $200,000 $54,000 __ __ __
Executive Vice- 2000 $169,076 $50,000 __ __ __
President 1999 $140,396 $ -- __ __ __ $ 6,944(2)

Sam Bhatt 2001 $ 95,983 $ 9,826 __ __ $ --
-Vice President
-Finance &
Operations

------------------

(1) Reflects employer contributions of $4,828 for life insurance premiums
and $8,896 for disability insurance premiums.

(2) Reflects employer contribution for life insurance premiums.

-26-

Stock Option Grants During Fiscal Year 2001

The table below sets forth information concerning individual grants of
stock options made during the fiscal year ended March 31, 2001 to the named
executive officers in the Executive Compensation Summary.

Number of Percent of
Shares Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration Grant Date
Name Granted Fiscal Year (S/SH) Date Present Value(1)
---- ------- -------------- ----------- --------- ---------------

Sam Bhatt 5,000 2.2% $1 8/01/05 $0
R. Frank Jerd 15,000 6.61% $1 6/06/05 $0

-----------

(1) Present value is estimated on the date of grant.

Set forth below is information with respect to unexercised options held
by our executive officers to purchase our common stock:

Aggregated Option Exercises in Fiscal Year 2001
and Fiscal Year End Option Values

Number of Unexercised
Number of Securities Underlying Options Value of Unexercised
Shares at March 31, 2001 In-the-Money Options
Acquired on Value ------------------------------ ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------------- ----------- -------- ----------- ------------- ----------- -------------

John P. Howlett......... -- $ 0 0 0 $ 0 $ 0
Ronald A. Seitz........ -- $ 0 166,227 0 $107,216 $ 0
Sam Bhatt............... -- $ 0 5,575 15,425 $ 0 $ 0
R. Frank Jerd........... -- $ 0 30,000 0 $ 0 $ 0
$ 0 $ 0

Compensation of Directors

Non-employee directors receive annual compensation of $10,000.
Directors also receive stock options at the discretion of the Board. In February
2000, we granted to Frank Jerd options to purchase 15,000 shares of common
stock. Such options have an exercise price of $1.00 per share and are
immediately exercisable. Non-employee directors receive reimbursement of
out-of-pocket expenses incurred for each board meeting or committee meeting
attended.

Compensation Committee Interlocks and Insider Participation

Currently, there is no compensation committee. The members of the
entire board deliberate and decide compensation. Neither Mr. Jerd nor Mr.
Fishkin is or has been an employee or an officer of our company. Mr. Howlett is
our Chairman, President and Chief Executive Officer, and Mr. Seitz is our
Executive Vice President.

-27-

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of July, 2001, based on information
obtained from the persons named below, with respect to the beneficial ownership
of our common stock held by:

o each person known by us to be the owner of more than 5% of our
outstanding shares;

o each director; and

o all executive officers and directors as a group.

Name and Address of Amount and Percentage of
Beneficial Owner(1) Beneficial Ownership(2)
-------------------------------------------------------- --------------------------

John P. Howlett 1,400,910 19.78%

Ronald A. Seitz 995,746(3) 13.74%

Sam Bhatt 28,329 .42%

R. Frank Jerd 30,000 .42%

James S. Fishkin 15,000 .21%

Tom Dresser 1,029,774 14.54%
3505 S. Ocean Boulevard
Hollywood, FL 33019

Richard Landon 1,029,774 14.54%
142 York Road
Delran, NJ 08075

Carla Seitz 782,707(4) 11.05%
P.O. Box 2243
Mt. Pleasant, SC 29465

All executive officers and directors as a group 3,235,210 34.36%
(5 persons)

(1) Each stockholder's address is c/o Emtec, 817 East Gate Drive, Mount
Laurel, New Jersey, unless otherwise indicated.

(2) As used herein, beneficial ownership means the sole or shared power to
vote, or direct the voting of, a security, or the sole or shared power
to invest or dispose, or direct the investment or disposition, of a
security. Except as otherwise indicated, all persons named herein have
(i) sole voting power and investment power with respect to their
shares, except to the extent that authority is shared by spouses under
applicable law and (ii) record and beneficial ownership with respect to
their shares; also includes any shares issuable upon exercise of
options or warrants that are currently exercisable or will become
exercisable within 60 days of after the date of this proxy statement.

-28-

(3) Excludes 782,707 shares owned by Carla Seitz, Mr. Seitz's spouse. Mr.
Seitz disclaims any beneficial interest in these shares.

(4) Excludes 995,746 shares owned by Ronald A. Seitz, Mrs. Seitz's spouse.
Mrs. Seitz disclaims any beneficial ownership in these shares.

Item 13. Certain Relationships and Related Transactions

At March 31, 2001 and 2000, we owed an aggregate of $19,000 to
relatives of our President. We made aggregate annual interest payments on the
loan of $2,280 during each of the fiscal years 2001 and 2000.

There are no other relationships or related party transactions of a
nature required to be disclosed hereunder.

-29-

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports and Reports of
Form 8-K

(a) Documents filed as part of this report:

(i) Financial Statements

Report of Independent Public Accountants.........................................
Consolidated Balance Sheets as of March 31, 2001 and 2000........................
Consolidated Statements of Operations for the Fiscal Years Ended March 2001,
2000 and 1999...............................................................
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended
March 31, 2001, 2000 and 1999...............................................
Consolidated Statements of Cash Flows for the Years Ended March 2001, 2000 and
1999........................................................................
Pro Forma Statements of Operations for the Fiscal Year Ended March 31, 2001......
Notes to Consolidated Financial Statements.......................................

(ii) Financial Statement Schedules

None

(iii) Exhibits:

Exhibit No. Description
----------- -----------

2.1 Agreement and Plan of Merger and Reorganization dated as of December
14, 2000 between Registrant, then known as American Geological
Enterprises, Inc., and Emtec, Inc.(1)

3.1 Certificate of Incorporation, as amended(2)

3.2 Amended and Restated Bylaws(2)

4.1 Certificate evidencing shares of common stock(2)

4.2 1996 Stock Option Plan, as amended(2)

10.1 Resale Agreement dated September 29, 1997 between Registrant and
Ingram Micro, Inc.(2)

10.2 Volume Purchase Agreement dated January 28, 1998 between Registrant
and Tech Data Corporation(2)

10.3 Revolving Credit Agreement dated September 24, 1999 between Registrant
and IBM Global Financing Corp.(2)

10.4 Agreement of Lease dated April 1, 1992 between Registrant and Bell
Atlantic Properties, Inc., as amended, for Mt. Laurel, New Jersey
facility(2)

10.5 Lease Agreement dated May 5, 1993 between registrant and Central
Cranford Associates, for Cranford, New Jersey facility(2)

-30-

Exhibit No. Description
----------- -----------

10.6 Lease Agreement dated July 7, 1994 between Registrant and
Connecticut General Life Insurance Company, as amended, for
Norcross, Georgia facility(2)

10.7 Lease Agreement dated August 8, 1995 between Registrant and
Charlestowne Rivergate Associates I, as amended, for Charleston,
South Carolina facility(2)

10.8 Lease Agreement dated July 21, 2000 between Registrant and
Strawberry Hill Associates, for Norwalk, Connecticut facility(2)

10.9 Microsoft Certified Partner Agreement, dated December 20,2000,
between Microsoft and Registrant(3)

10.10 IBM Business Partner Agreement, dated May 31, 2000, between
International Business Machines Corporation and Registrant(3)

10.11 Letter Agreement, dated April 24, 2001, between Novell Inc. and
Registrant(3)

10.12 Citrix Solutions Network Gold Renewal Membership Agreement, dated
April 30, 2001, between Citrix Systems, Inc. and Registrant(3)

10.13 U.S. Systems Integrator Agreement, dated December 22, 1999, between
Cisco System, Inc. and Registrant.(3)

10.14 Sun Microsystem, Inc. Channel Agreement, dated February 1, 2000,
between Sun Microsystems, Inc. and Emtec, Inc.

21 Subsidiaries(2)

------------------

(1) Previously filed as an exhibit to Registrant's Current Report on Form
8K dated January 17, 2001, filed on January 31, 2001, and incorporated
herein by reference.

(2) Previously filed as an exhibit to Registrant's Registration Statement
on Form 10 filed on May 21, 2001, and incorporated herein by reference.

(3) Previously filed as an exhibit to Amendment No. 1 to Registration
Statement on Form 10, filed on July 12, and incorporated herein by
reference.

(b) Reports on Form 8-K:

None.

-31-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Dated: July 12, 2001

EMTEC, INC.

By: /s/ John P. Howlett
----------------------------------------
John P. Howlett
Chairman President and Chief
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/John P. Howlett Chairman President and July 12, 2001
------------------------------------ Chief Executive Officer
John P. Howlett

/s/Sam Bhatt Vice President-Finance July 12, 2001
------------------------------------ and Operations
Sam Bhatt (Principal Financial Officer)

/s/Ronald A. Seitz Executive Vice President, July 12, 2001
------------------------------------ Director
Ronald A. Seitz

/s/Frank Jerd Director July 12, 2001
------------------------------------
Frank Jerd

/s/James S. Fishkin Director July 12, 2001
------------------------------------
James S. Fishkin

EMTEC, INC.
YEARS ENDED MARCH 31, 2001, 2000 AND 1999

CONTENTS

Page(s)
-------

INDEPENDENT AUDITORS' REPORT F-1

CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheets F-2 & F-3

Statements of Operations F-4

Statements of Shareholders' Equity F-5

Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7 - F-17

Pro Forma Statement of Operations F-18 & F-19

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Emtec, Inc.
817 Eastgate Drive
Mount Laurel, NJ 08054

We have audited the accompanying consolidated balance sheets of Emtec,
Inc. as of March 31, 2001 and 2000 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended March 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Emtec, Inc. at March
31, 2001 and 2000, and the results of its operations and its cash flows for each
of the three years in the period ended March 31, 2001 in conformity with
generally accepted accounting principles.

BARATZ & ASSOCIATES, P.A.

Marlton, New Jersey
June 27, 2001

F-1

EMTEC, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2001 AND 2000

2001 2000
---- ----

Assets

Current Assets

Cash and cash equivalents $ 2,098,198 $ 686,413
Marketable securities 292,346 7,086
Receivables:
Trade, less allowance
for doubtful accounts
of $432,892 and $368,058 at
March 31, 2001 and 2000, respectively 12,828,456 16,313,411
Others 433,580 1,710,003
Inventories, net of reserve 1,019,715 1,091,463
Prepaid expenses 296,939 459,690
------------ ------------

Total Current Assets 16,969,234 20,268,066

Property and equipment at cost, less
accumulated depreciation of
$1,946,440 and $1,551,092 at
March 31, 2001 and 2000, respectively 919,110 941,624

Investment in geothermal power unit,
at cost, less accumulated amortization
of $4,936 at March 31, 2001 549,626 -

Deferred tax asset 22,996 -

Other assets 175,711 191,482
------------ ------------

Total Assets $ 18,636,677 $ 21,401,172
============ ============

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

F-2

EMTEC, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2001 AND 2000

2001 2000
---- ----

Liabilities and Shareholders' Equity

Current Liabilities

Line of credit $ 6,535,405 $ 8,310,741
Due to related party 19,000 19,000
Accounts payable 7,284,625 8,182,484
Income taxes payable 2,087 -
Customer deposits 203,202 358,000
Accrued liabilities 1,023,556 1,145,599
Deferred revenues 899,352 1,142,551
------------ ------------

Total Current Liabilities 15,967,227 19,158,375

Deferred revenue 841,922 -
------------ ------------

Total Liabilities 16,809,149 19,158,375
------------ ------------

Shareholders' Equity

Common stock, $.01 par value; 25,000,000
shares authorized; 7,080,498 and
5,329,501 shares issued and outstanding
at March 31, 2001 and 2000 70,805 53,295
Additional paid-in capital 2,210,805 1,314,876
Accumulated other comprehensive (loss) income (5,458) 1,776
(Accumulated deficit) retained earnings (448,624) 872,850
------------ ------------

Total Shareholders' Equity 1,827,528 2,242,797
------------ ------------

Total Liabilities and
Shareholders' Equity $ 18,636,677 $ 21,401,172
============ ============

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

F-3

EMTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 2001, 2000 AND 1999

2001 2000 1999
---- ---- ----

Revenues:
Procurement services $ 77,533,872 $ 87,235,968 $ 81,832,879
Service and consulting 15,034,497 13,516,522 9,850,167
Geothermal 34,366 - -
------------ ------------ ------------

Total Revenues 92,602,735 100,752,490 91,683,046
------------ ------------ ------------

Cost of Revenues:
Procurement services 69,365,115 77,921,447 71,698,058
Service and consulting 12,255,785 10,188,181 7,665,474
Geothermal 10,264 - -
------------ ------------ ------------

Total Cost of Revenues 81,631,164 88,109,628 79,363,532
------------ ------------ ------------

Gross Profit:
Procurement services 8,168,757 9,314,521 10,134,821
Service and consulting 2,778,712 3,328,341 2,184,693
Geothermal 24,102 - -
------------ ------------ ------------

Total Gross Profit 10,971,571 12,642,862 12,319,514
------------ ------------ ------------

Operating Expenses:
Selling, general and
administrative 10,240,596 10,890,841 10,370,696
Termination costs 90,000 74,480 127,412
Interest 692,227 679,286 713,853
Startup costs, E-Business 1,303,740 355,933 -
------------ ------------ ------------

Total Operating Expenses 12,326,563 12,000,540 11,211,961
------------ ------------ ------------

(Loss) Income From Continuing Operations
Before Other Income And Income
Tax Benefit (Expense) (1,354,992) 642,322 1,107,553

Other income- litigation settlement 24,108 - -

Income tax benefit (expense) 73,059 (326,318) (136,085)
------------ ------------ ------------

(Loss) Income From Continuing Operations,
Net of Income Taxes (1,257,825) 316,004 971,468

Loss from discontinued operations,
net of income taxes (63,649) (618,030) (171,528)
Loss from sale of discontinued
operations, net of income taxes - (971) -
------------ ------------ ------------

Net (Loss) Income $ (1,321,474) $ (302,997) $ 799,940
============ ============ ============

(Loss) Income Per Share From Continuing
Operations {Basic And Diluted} $(0.22) $ 0.06 $ 0.17

Net (Loss) Income Per Share
{Basic And Diluted} $(0.23) $(0.06) $ 0.14

Weighted Average Number Of Shares
Outstanding {Basic And Diluted} 5,679,700 5,503,284 5,563,563

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

F-4

EMTEC, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 2001, 2000 AND 1999

(Accumulated
Additional Deficit) Accumulated Total
Common Stock Paid-In Retained Comprehensive Shareholders'
Shares Amount Capital Earnings (Loss) Income Equity
------ ------ --------- ------------ ------------- --------------

Balance, April 1, 1998 5,563,563 $ 55,636 $ 1,375,535 $ 375,907 $ - $ 1,807,078

Net income for the year 799,940 799,940
--------- -------- ----------- ----------- ------- -----------

Balance, March 31, 1999 5,563,563 55,636 1,375,535 1,175,847 - 2,607,018

Net loss for the year (302,997) (302,997)

Unrealized gain on
marketable securities 1,776 1,776

Acquisition of
treasury stock (234,062) (2,341) (60,659) (63,000)
--------- -------- ----------- ----------- ------- -----------

Balance, March 31, 2000 5,329,501 53,295 1,314,876 872,850 1,776 2,242,797

Stock issued in
reverse acquisition 1,750,997 17,510 895,929 913,439

Net loss for the year (1,321,474) (1,321,474)

Unrealized loss on
marketable securities (7,234) (7,234)
--------- -------- ----------- ----------- ------- -----------

Balance, March 31, 2001 7,080,498 $ 70,805 $ 2,210,805 $ (448,624) $(5,458) $ 1,827,528
========= ======== =========== =========== ======= ===========

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

F-5

EMTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2001, 2000 AND 1999

2001 2000 1999
---- ---- ----

Cash Flows From Operating Activities

Net (loss) income for the year $(1,321,474) $ (302,997) $ 799,940

Adjustments to Reconcile Net (Loss)
Income To Net Cash Provided By (Used
In) Operating Activities

Depreciation and amortization 422,256 387,061 382,425
Loss on sale of discontinued operations - 971 -

Changes In Operating Assets and
Liabilities

Decrease (increase) in marketable securities 7,189 (7,086) -
Decrease (increase) in receivables 4,775,110 6,223,281 (11,428,201)
Decrease (increase) in inventories 71,748 (137,146) 230,557
Decrease (increase) in prepaid expenses 162,819 (327,207) 78,585
(Increase) decrease in other assets (2,313) 5,832 8,452
Increase in deferred tax asset (86,765) - -
(Decrease) increase in accounts payable (958,818) (7,154,251) 9,204,112
Increase (decrease) in income taxes payable 505 (10,555) 10,555
(Decrease) increase in customer deposits (154,798) (276,000) 331,000
(Decrease) increase in accrued liabilities (123,974) (759,151) 409,777
(Decrease) increase in deferred revenue (251,871) 498,698 324,342
----------- ----------- ------------

Net Cash Provided By (Used In)
Operating Activities 2,539,614 (1,858,550) 351,544
----------- ----------- ------------

Cash Flows From Investing Activities
Purchases of equipment (338,045) (824,280) (197,079)
Proceeds from sale of equipment - 43,710 -
----------- ----------- ------------

Net Cash Used In Investing Activities (338,045) (780,570) (197,079)
----------- ----------- ------------

Cash Flows From Financing Activities
Net (decrease) increase in line of credit (1,775,336) 2,555,927 207,832
Repayments to related parties - - (148,654)
Debt reduction - - (19,482)
Purchase of treasury stock - (63,000) -
Cash acquired in reverse acquisition 985,552 - -
----------- ----------- ------------

Net Cash (Used In) Provided By
Financing Activities (789,784) 2,492,927 39,696
----------- ----------- ------------

Net Increase (Decrease) in
Cash and Cash Equivalents 1,411,785 (146,193) 194,161

Beginning Cash and Cash Equivalents 686,413 832,606 638,445
----------- ----------- ------------

Ending Cash and Cash Equivalents $ 2,098,198 $ 686,413 $ 832,606
=========== =========== ============

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

F-6

EMTEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2001, 2000 AND 1999

1. Organization and Summary of Significant Accounting Policies

Organization

The Company is an e-Business and information technology ("IT") consulting
and services provider that structures and implements complex, highly
integrated systems that enable our customers to exchange information with
their partners and customers in a purely digital format, making them more
efficient and effective. We also offer our clients a variety of IT services
ranging from basic product support to complex network and applications
design. Our e-Business services include, among others, web enablement,
consulting, application development, and information security. Our customers
are primarily Fortune 2000 and other large and mid-sized companies located
principally in the New York/New Jersey metropolitan area and Southeastern
United States, with annual revenues ranging from $50 million to $500
million. We service our customer base from leased facilities in New Jersey,
Connecticut and Georgia.

The Company, a New Jersey corporation formed on April 1, 1995, is a result
of the 1995 and 1996 mergers of three information technology companies that
were originally founded between 1980 and 1983.

Reverse Acquisition

On January 17, 2001, Emtec, Inc., a New Jersey corporation (the Company) was
acquired by American Geological Enterprises, Inc. (AGE) through an exchange
of stock at a ratio of .9753 shares of AGE stock for 1 share of Company
stock whereas AGE issued stock to the shareholders of the Company in
exchange for stock representing 100% of the outstanding shares of the
Company. Pursuant to the acquisition agreement, AGE changed its name to
Emtec, Inc. and a majority of the directors and officers of the former AGE
resigned in favor of the directors and officers of the Company. In addition,
Emtec, Inc. (formerly AGE) increased its authorized capitalizaton from
2,500,000 to 25,000,000 shares of common stock. Emtec, Inc. intends to seek
a listing of its common stock on NASDAQ's Over-The-Counter Bulletin Board.
Immediately after the transaction, the stock ownership of Emtec, Inc.
{formerly AGE} was as follows:

Shares Percent
------ -------

Former shareholders of the Company 5,329,501 75.3

Original shareholders of AGE 1,380,997 19.5
(including public owners)

Transaction brokers 370,000 5.2
--------- -----

Total 7,080,498 100.0
========= =====

F-7

Because the former shareholders of the Company acquired control of Emtec,
Inc.{formerly AGE}, the transaction is considered a "reverse acquisition" by
the Company for accounting purposes. The Company is treated as the
accounting acquirer of Emtec, Inc. {formerly AGE}, the legal acquirer. For
accounting purposes, the acquisition has been treated as an acquisition of
Emtec, Inc. (formerly AGE) by Emtec. Inc., a New Jersey Corporation (the
Company) and as a recapitalization of the Company. The historical financial
statements of the Company are those of Emtec, Inc., a New Jersey
corporation.

The historical shareholders' equity of the Company prior to the reverse
acquisition has been retroactively restated for the equivalent number of
shares received in the transaction after giving effect to the difference in
par value between the issuer's and acquirer's stock. Net (loss) income per
share for the three years ended March 31, 2001 has also been restated to
reflect the number of equivalent shares received by the former shareholders
of Emtec, Inc. a New Jersey corporation.

Principles of Consolidation

The consolidated financial statements include the accounts of the issuer and
its wholly owned subsidiary (the Company) as described above (see Reverse
Acquisition).

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.

Revenue Recognition

Staff Accounting Bulletin #101 (SAB 101) was recently issued by the SEC. SAB
101 states that revenue recognition cannot occur until the earnings process
is complete, evidenced by an agreement between the Company and the customer,
there has been delivery and acceptance, collectibility is probable, and
pricing is fixed and determinable. If significant obligations remain after
delivery, revenue is deferred until such obligations are fulfilled. The
Company had followed these principles of revenue recognition prior to the
implementation of SAB 101. Therefore, SAB 101 has had no impact on revenue
reporting. Procurement services represent sales of computer hardware and
prepackaged software. In general, the Company is involved in determining the
nature, type, and specifications of the products ordered by the customer.
The Company also provides to its customers information systems design,
configuration, installation and support under separate consulting and
service contracts. Revenues from these consulting and service contracts are
recognized as services are rendered over the contract or service period.
Consulting contracts range from 1 day to 6 months; service contracts range
from 1 to 3 years. Customer payment terms for all of the above are net 30
days.

Cash Equivalents

Cash equivalents are principally liquid money market accounts.

Trade Receivables

The Company provides an allowance for losses on trade receivables based on a
review of the current status of existing receivables and management's
evaluation of periodic aging of the accounts.

F-8

Other Receivables

Other receivables represent rebates, price protection receivables and
amounts due from vendors for purchase returns made in the ordinary
course of business.

Concentration of Credit Risk

The Company provides its services to a wide variety of commercial,
governmental and institutional customers. Financial instruments which
potentially subject the Company to concentrations of credit risk are
cash (and cash equivalents) and trade receivables. The Company performs
ongoing credit evaluations of its customers' financial condition and,
generally, does not require collateral from its customers. The Company
has not experienced significant credit losses. The Company maintains
deposit accounts with high quality financial institutions; at times,
such deposits may exceed FDIC insurance limits.

Marketable Securities

Marketable securities consist of investments in debt and equity
securities. The Company classifies all of its investments in securities
as "available-for-sale". Available-for-sale securities are recorded at
fair value. Unrealized holding gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from income and
reported as accumulated other comprehensive income in stockholders'
equity until realized.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or
market. Cost is based on standard costs generated principally by the
most recent purchase prices. The Company provides an inventory reserve
for obsolescence and deterioration based on a review of products and
sales.

Property and Equipment

Property and equipment are stated at original cost. Depreciation and
amortization for financial accounting purposes is computed using the
straight line method over the estimated lives of the respective assets.
The total original cost for each class of property and equipment along
with the estimated life for each class is as follows:

Original Cost Estimated Life
------------- --------------
March 2001 March 2000 (Years)
---------- ---------- -------

Computer equipment $ 2,303,162 $ 1,965,117 3
Office equipment 143,432 143,432 5
Furniture and fixtures 244,294 221,536 5
Leasehold improvements 107,917 107,917 5
Vehicles 66,745 54,714 2
----------- -----------

$ 2,865,550 $ 2,492,716
=========== ===========

For income tax purposes, accelerated methods of depreciation are used.
Maintenance and repair costs are charged to expense as incurred. The
cost and accumulated depreciation relating to property and equipment
retired or otherwise disposed of are eliminated from the accounts and
any resulting gains or losses are credited or charged to income.

F-9

Valuation of Long Lived Assets

The Company evaluates its long lived assets by measuring the carrying
amount of the assets against the estimated undiscounted future cash
flows associated with them. If such evaluations indicate that the future
undiscounted cash flows of certain long lived assets are not sufficient
to recover the carrying value of such assets, the assets are adjusted to
their fair values.

Income Taxes

Income taxes are accounted for under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns. In estimating
future tax consequences, the Company generally considers all expected
future events other than the enactment of changes in tax laws or rates.
A valuation allowance is recognized if, on weight of available evidence,
it is more likely than not that some portion or all the deferred tax
assets will not be realized.

Advertising Costs

Advertising costs are charged to expense as incurred. Advertising
expense for the years ended March 31, 2001, 2000 and 1999 was $617,265,
$426,605 and $324,070 respectively.

Stock-Based Compensation

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (SFAS No. 123) encourages, but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to
account for employer stock-based compensation utilizing the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Accordingly, compensation
cost for stock options issued to employees is measured as the excess, if
any, of the fair market price of the Company stock at the date of grant
over the amount an employee must pay to acquire the stock. SFAS No. 123
requires companies that continue to follow APB No. 25 to provide a pro
forma disclosure of the impact of applying the fair value method of SFAS
No. 123.

Earnings (Loss) Per Share

Basic earnings (loss) per share are computed by dividing net earnings
(loss) by the weighted average shares outstanding during the reporting
period. Diluted earnings (loss) per share are computed similar to basic
earnings (loss) per share except that the weighted average shares
outstanding are increased to include additional shares from the assumed
exercise of stock options, if dilutive. Based upon the pricing of the
stock options in excess of the underlying value of the Company stock
during the three year period ended March 31, 2001 the stock options are
antidilutive.

F-10

2. Inventories

The components of inventories at March 31, 2001 and 2000 are as follows:

2001 2000
---- ----

Hardware, software and
accessories $ 1,265,569 $ 1,089,635
Service parts 145,330 177,315
----------- -----------
1,410,899 1,266,950
Less inventory reserve 391,184 175,487
----------- -----------

$ 1,019,715 $ 1,091,463
=========== ===========

Appropriate consideration has been given to deterioration, obsolescence
and other factors in evaluating net realizable value.

3. Financing Arrangements

The Company has a revolving line of credit under a business financing
agreement whereas the Company may borrow on 85% of its eligible trade
receivables and 95% on its eligible inventory value. Eligible inventory
value is defined as 100% of the total aggregate wholesale inventory price
financed by the lender that is unsold and in the Company's possession and
control at each inventory report date. Weighted average interest rates on
the borrowings were 9.72%, 9.08% and 9.42% for the years 2001, 2000 and
1999 respectively. The interest rate at March 31, 2001 and 2000 was 8.50%
and 9.50%, respectively. Substantially all Company assets collateralize
amounts borrowed. The lending agreement contains financial covenants that
require the Company to maintain a minimum current ratio, a minimum total
liabilities to net worth ratio and minimum results of operations. The
Company was in default of the financial covenants at March 31, 2001,
however, the Company has subsequently obtained a commitment from the
lender to waive the defaults and amend the existing financing agreement.
The credit line shall be amended reducing it to $ 10 million from $ 15
million. The interest rate charged on borrowings shall be amended
increasing it to 1.50% over prime from 0.50% over prime. The financial
covenants shall be amended lowering them to levels that the Company
believes are obtainable going forward. At March 31, 2001, the Company had
approximately $3.5 million available under the amended terms of the
agreement. The credit line may be renewed for another year or terminated
at the option of either the Company or the lender at September 23, 2001.

4. Income Tax (Benefit) Expense

Deferred income taxes reflect the net tax effects of (a) temporary
differences between carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) net operating loss carryforwards (when available).
Income tax (benefit) expense consisted of the following for the years
ended March 31:

2001 2000 1999
---- ---- ----

Continuing Operations

Current taxes
Federal $ 9,627 $ 298,722 $ 101,801
State and local 1,289 27,596 30,265
--------- --------- ---------
10,916 326,318 132,066
Deferred taxes
Federal (68,035) - 4,019
State and local (15,940) -
--------- --------- ---------
(73,059) 326,318 136,085
--------- --------- ---------
Discontinued Operations

Current taxes
Federal - (347,053) (17,362)
State and local 820 (43,576) -
--------- --------- ---------
820 (390,629) (17,362)

Deferred taxes
Federal (2,259) - -
State and local (531) - -
--------- --------- ---------
(1,970) (390,629) (17,362)
--------- --------- ---------

Net Income Tax (Benefit)
Expense $ (75,029) $ (64,311) $ 118,723
========= ========= =========

F-11

Significant items comprising the Company's deferred tax assets and
liabilities at March 31, are as follows:

2001 2000 1999
---- ---- ----

Deferred Tax Assets

Differences between book and tax basis:
Trade receivables $ 181,815 $ 144,573 $ 82,251
Inventories 196,744 99,277 77,103
Property and equipment (3,959) (58,281) 29,422
Accrued liabilities 28,718 1,195 11,062
Others 35,263 25,875 14,692
Net Operating loss carryforwards 414,933 - -
--------- --------- ---------
853,514 212,639 214,530

Deferred Tax Liability

Differences between book and tax basis:
Investment in geothermal
power unit (62,355) - -
--------- --------- ---------

Net Deferred Tax Asset 791,159 212,639 214,530

Less Valuation Allowance (768,163) (212,639) (214,530)
--------- --------- ---------

Net Deferred Tax Balance $ 22,996 $ - $ -
========= ========= ==========

At March 31, 2001, 2000 and 1999 the Company recorded a valuation
allowance against its deferred tax assets, reducing those assets to
amounts which are more likely than not to be realized. Federal and state
net operating loss carryforwards approximated $980,000 and $1,075,000
respectively at March 31, 2001. Federal net operating loss carryforwrds
expire in 2021; state net operating loss carryforwards expire in 2008.

5. Related Party Transactions

At March 31, 2001 and 2000 the Company owed $19,000 to a Company
officer's relative. Except for quarterly interest payments there was no
other loan activity during the two year period. Interest paid on the
loan was $2,280 (2001), $2,280 (2000) and $5,249 (1999).

6. Major Customers

Two major customers in years 2001 and 2000 and one major customer in
1999 approximated 20%, 34% and 24% of the Company's net sales in the
years 2001, 2000 and 1999 respectively. Major customer sales by
locations are as follows:

% Of Total Revenues Locations
------------------- ---------

10% Education - Atlanta
10% Cranford, NJ
--

2001 20%
---- ==

17% Education - Atlanta
17% Atlanta, GA
--

2000 34%
---- ==

1999 24% Education - Atlanta
---- ==

While the Company believes its relationship with these customers will
continue, there can be no assurance that sales to these customers will
continue at all or at the same level.

F-12

7. Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in
estimating fair value of its financial instruments at March 31, 2001.

Short-term financial instruments (cash equivalents, receivables,
payables, customer deposit and accrued liabilities - cost
approximates fair value because of the short maturity period.

Line of credit - cost approximates fair value because of the short
interest-reset period.

8. 401(k) Plan

The Company sponsors a 401(k) plan for all employees with at least 6
months of service and who are at least 20 years of age. Eligible
employees may contribute 2% to 15% of their annual compensation to the
plan. The Company matches 25% of the first 6% of employee plan
contributions and may contribute additional amounts at the Company's
discretion. Participants are vested 20% for each year of service and are
fully vested after 6 years. Company contributions to the plan were
$95,374, $103,087 and $86,382 in fiscal years 2001, 2000 and 1999
respectively.

9. Stock Option Plan

The Company's 1996 Stock Option Plan (the Plan) (amended in 1999)
authorizes the granting of stock options to directors and eligible
employees. The Company has reserved 1,000,000 shares of its common stock
for issuance under the Plan at prices not less than 100% of the fair
value on the date of grant (110% in the case of shareholders owning more
than 10% of the Company's common stock). Options vest at the rate of 25%
per year commencing on the first anniversary of, and expire at the
earliest of 5 years after the date of grant, three months from date of
retirement, or upon date of other termination of employment. The Company
used the minimum value option pricing model as prescribed by SFAS No. 123
to determine the impact of applying the fair value method required by
SFAS No. 123. All stock options granted for the three year period ended
March 31, 2001 were determined to have a fair value of zero. The exercise
price of these options was set at $ 1 per share, an amount in excess of
150% of the fair value of the underlying stock. No options granted during
the three year period have been exercised as of March 31, 2001. A pro
forma presentation of compensation cost and earnings per share is not
required due to the zero fair value determination. At September 23, 1996,
options to purchase 372,895 shares were issued primarily to the founders
of the Company at an exercise price of $ .48 per share. At March 31,
2001, 166,227 of these founder options were outstanding. Option activity
is summarized as follows:

Options outstanding - April 1, 1998 811,160

For the year ended March 31, 1999:

Options granted 191,900
Options exercised -
Options forfeited or expired (432,186)
--------

Options outstanding - March 31, 1999 570,874

For the year ended March 31, 2000:

Options granted 29,250
Options exercised -
Options forfeited or expired (176,042)
--------

Options outstanding - March 31, 2000 424,082

Options granted 226,907
Options exercised -
Options forfeited or expired (185,730)
--------

Options outstanding - March 31, 2001 465,259
========

F-13

10. Termination Costs

The Company paid termination costs of $90,000 (2001), $74,480 (2000) and
$127,412 (1999) to former Company executives.

11. Commitments and Contingencies

Leases:

The Company leases warehouse and office facilities, vehicles and certain
office equipment under noncancellable operating leases. Future minimum
lease payments under such leases are as follows:

Fiscal Years
------------

2002 $ 807,871
2003 661,576
2004 577,525
2005 539,622
Thereafter 96,026
-----------

Total $ 2,682,620
===========

Aggregate rent expense for the years ended March 31, 2001, 2000 and 1999
approximated $855,000, $792,000 and $761,000 respectively.

Litigation:

In a previous year Emtec Inc. instituted litigation against two companies
(defendants) that were in discussions with Emtec about a possible merger.
The complaint in the action charged the two companies for breach of
contract, interference with business relationships and misappropriation
of trade secrets. The parties settled the litigation in June 2000. Under
terms of the settlement, the Company received a $350,000 cash payment and
333,116 shares of the defendant's common stock. Costs related to the
litigation and realized losses on disposition of the common stock reduced
net income from the litigation settlement to $24,108.

In 1999 Emtec, Inc. instituted litigation against a company (defendant)
for breach of contract action in an amount approximating $50,000. The
defendant has stated a counter claim in excess of $8 million for damages
resulting from Emtec's alleged negligence, causing the defendant's
computer system to become corrupted and unavailable. Damages will be
contested by Emtec, as will liability. At March 31, 2001, the case is in
the discovery phase.

F-14

12. Supplemental Cash Flow Information

Cash paid for interest and income taxes were as follows:

2001 2000 1999
---- ---- ----

Interest $ 705,473 $ 731,723 $ 770,573
Income Taxes $ 11,231 $ 168,030 $ 104,149

Noncash investing and financing activities were restricted to the
issuance of common stock in the reverse acquisition as described in
Note 1.

13. Discontinued Operations

During fiscal 2000, the Company completed the sale of assets of its two
South Carolina locations (Greenville and Charleston) to a company formed
by some of its prior employees. The Company incurred a loss of $971, net
of an income tax benefit of $613 on the disposition of the assets.
Financial information with respect to the discontinued operations is
summarized as follows:

2001 2000 1999
---- ---- ----

Net revenues $ 7,017 $ 7,606,953 $ 13,090,516

Cost of revenues 10,014 6,551,899 11,001,801
-------- ----------- ------------

Gross profit (2,997) 1,055,054 2,088,715

Operating expenses 62,622 2,063,100 2,277,605
-------- ----------- ------------

Loss before income taxes (65,619) (1,008,046) (188,890)

Income tax benefit (1,970) (390,016) (17,362)
-------- ----------- ------------

Net Loss from
Discontinued Operations $(63,649) $ (618,030) $ (171,528)
======== =========== ============

14. Segment Information

The Company has organized business segments based upon branch office
locations in the Mid-Atlantic and Southeastern United States. These
branch office locations offer similar business information systems
services with the exception of the educational services unit at the
Atlanta, GA office. The Company started a new e-business solutions
segment in fiscal 2000 at the Atlanta, GA and Mt. Laurel, NJ locations.

The Company has adopted Statement of Financial Accounting Standards No.
131 "Disclosures about Segments of an Enterprise and Related
Information"(SFAS No. 131). Operating segments are defined by SFAS No.
131 as components of an enterprise about which separate financial
information is available and evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Emtec's chief operating decision maker is the Chief
Executive Officer of the Company. Reportable operating segments include
the individual branch offices as outlined below and the educational and
e-business units. The educational unit services schools, kindergarten
through 12th grade. The e-business unit is focused on marketing internet
business solutions. The branch offices in Greenville and Charleston,
South Carolina which discontinued operations in fiscal 2000 as described
in Note 12 have been combined as one reportable segment. The accounting
policies of the segments are the same as those described in Note 1. The
Company had no intersegment revenues for the three year period ended
March 31, 2001. Corporate overhead is allocated to segments based upon a
combination of revenues earned and the number of employees attributable
to each segment. The Company maintains segment level accounting for
accounts receivable, inventory, and property and equipment. All other
assets are accounted for at the corporate level. The following is
financial information relating to the operating segments:

F-15

Years Ended March 31:
---------------------------------
2001 2000 1999
---- ---- ----

External Sales
Mt. Laurel, NJ $ 17,807,882 $ 19,480,769 $ 16,846,512
Cranford, NJ 41,960,532 29,003,759 28,639,312
Atlanta, GA 19,691,550 29,521,736 19,252,643
Norwalk, CT 2,326,671 5,125,806 64,987
Education-Atlanta 10,798,600 17,620,420 26,879,592
e-Business 17,500 - -
------------- ------------- -------------

Total External Sales $ 92,602,735 $ 100,752,490 $ 91,683,046
============= ============= =============

Interest Expense
Mt. Laurel, NJ $ 129,073 $ 109,029 $ 109,598
Cranford, NJ 288,094 188,810 173,987
Atlanta, GA 147,969 156,318 103,148
Norwalk, CT 29,126 35,273 1,349
Education-Atlanta 70,463 177,104 320,642
e-Business - - -
------------- ------------- -------------
Allocated Interest Expense 664,725 666,534 708,724
Unallocated Interest Expense 27,502 12,752 5,129
------------- ------------- -------------

Total Interest Expense $ 692,227 $ 679,286 $ 713,853
============= ============= =============

Depreciation and Amortization
Mt. Laurel, NJ $ 46,868 $ 92,585 $ 69,960
Cranford, NJ 78,234 95,028 135,288
Atlanta, GA 135,790 77,927 63,072
Norwalk, CT 8,150 1,397 -
Education-Atlanta 2,748 1,223 6,000
e-Business - - -
------------- ------------- -------------
Allocated Depreciation
and Amortization 271,790 268,160 274,320
Unallocated Depreciation
and Amortization 150,466 85,598 60,501
------------- ------------- -------------

Total Depreciation
and Amortization $ 422,256 $ 353,758 $ 334,821
============= ============= =============

Operating (Loss)/Profit
Mt. Laurel, NJ $ (669,097) $ 70,729 $ (413,703)
Cranford, NJ 795,794 (61,993) 537,820
Atlanta, GA (326,249) (374,670) (663,693)
Norwalk, CT (503,807) (140,350) (95,275)
Education-Atlanta 699,749 1,211,918 2,119,215
e-Business (1,303,740) (355,933) -
------------- ------------- -------------
Net Segment Operating
(Loss) Profit (1,307,350) 349,701 1,484,364
(Under) Over Allocated
Corporate Expenses (23,534) 292,621 (376,811)
------------- ------------- -------------

(Loss)/Profit From Continuing
Operations Before Income
Tax Benefit (Expense) $ (1,330,884) $ 642,322 $ 1,107,553

Income Tax Benefit (Expense)-
Continuing Operations 73,059 (326,318) (136,085)
------------- ------------- -------------

(Loss) Income From Continuing
Operations Net Of Income
Tax Benefit (Expense) $ (1,257,825) $ 316,004 $ 971,468
============= ============= =============

F-16

Identifiable Assets:

As of March 31: 2001 2000
---- ----

Mt. Laurel, NJ $ 2,691,963 $ 2,038,961
Cranford, NJ 7,690,440 5,728,955
Atlanta, GA 2,239,838 5,297,044
Norwalk, CT 433,860 1,368,780
Education-Atlanta 1,401,107 3,147,826
e-Business - -
------------ ------------
Identifiable Assets From
Continuing Operations 14,457,208 17,581,566
Discontinued Operations - 416,566
------------ ------------

Total Identifiable Assets 14,457,208 17,998,132
Corporate And Other Assets 4,179,469 3,403,040
------------ ------------

Total Assets $ 18,636,677 $ 21,401,172
============ ============

15. Investment In Geothermal Power Unit

The investment in Geothermal Power Unit (Unit) was acquired in the reverse
acquisition described in Note 1 and represents a 5.49% working interest in
the Roosevelt Hot Springs geothermal power unit. An agreement is in place to
sell all of the steam from the Unit through 2023 to PacifiCorp, which has
constructed the Blundell power plant to utilize the steam. This agreement,
entered into in 1993, included an advance payment. The balance of the
advance payment in the amount of $841,922 is reported in the March 31, 2001
financial statements as deferred revenue (a non-current liability) and will
be recognized into income ratably through 2023. PacifiCorp pays the Company
for operating and maintenance services and a reimbursement of royalties for
one lease that is included in the Unit. The Company pays its proportionate
share of operating and maintenance expenses to the operator of the Unit.

F-17

EMTEC, INC.
(Formerly AMERICAN GEOLOGICAL ENTERPRISES, INC.)
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)

The Company's pro forma statement of operations gives effect to the January 17,
2001 acquisition by Emtec, Inc. {Delaware Corp- formerly American Geological
Enterprises, Inc. ("AGE")} of Emtec, Inc. {New Jersey Corp} as set forth in Note
(1), as if such transaction had occurred at April 1, 2000. Because the former
shareholders of Emtec, Inc. {NJ Corp} end up with control of Emtec, Inc.
{formerly AGE}, the transaction is considered a "reverse acquisition" purchase
by Emtec, Inc. {NJ Corp} of Emtec, Inc. {formerly AGE}. Emtec, Inc. {NJ Corp}
has a March 31 fiscal year, whereas Emtec, Inc. {formerly AGE} had a December 31
fiscal year. Therefore, the pro forma statement of operations combines the
results of operations for the companies based upon their most recent fiscal
years adjusted for events that are directly attributed to the transaction and
expected to have a continuing impact on the Company.

The historical financial statements of Emtec, Inc. {NJ Corp} are the historical
financial statements of the combined Company. The pro forma financial statements
and the accompanying notes should be read in conjunction with a reading of the
financial statements of Emtec, Inc. {NJ Corp.} and Emtec, Inc. {formerly AGE}.
All pro forma adjustment note references pertain to Note 2.

F-18

EMTEC, INC.
(Formerly AMERICAN GEOLOGICAL ENTERPRISES, INC.)
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)

Historical

Emtec, Inc. Emtec, Inc.
(New Jersey (Delaware Corp) Pro Forma Pro Forma
Corp) (Formerly AGE) Adjustments Totals
----------- --------------- ----------- ---------

Year Ended: March 31, 2001 December 31, 2000
---------- -------------- ------------------

Total Revenues $ 92,602,735 $ 172,030 $(51,494)a $ 92,723,271

Total Cost of Revenues 81,631,164 88,764 (29,685)a 81,688,301
(1,942)b
------------ --------- -------- ------------
Total Gross Profit 10,971,571 83,266 (19,867) 11,034,970
------------ --------- -------- ------------

Operating Expenses

Sales, general & administrative
expenses 10,240,596 114,647 (11,313)a 10,343,930
Termination costs 90,000 - - 90,000
Interest expense 692,227 - (69,081)c 623,146
Startup costs; E-Business 1,303,740 - - 1,303,740
------------ --------- -------- ------------
Total Operating Expenses 12,326,563 114,647 (80,394) 12,360,816
------------ --------- -------- ------------

Loss From Continuing Operations
Before Other Income and
Income Taxes (1,354,992) (31,381) 60,527 (1,325,846)

Other Income 24,108 56,038 (9,984)a 24,108
(46,054)c

Income tax benefit (expense) 73,059 (3,083) (4,194)a 65,296
(486)b
------------ --------- -------- ------------
(Loss) Income From Continuing
Operations, Net of Income Taxes $ (1,257,825) $ 21,574 $ (191) $ (1,236,442)
------------ --------- -------- ------------

Loss per share from
continuing operations $ (0.22) $ (0.17)
(basic and diluted)

Weighted average number
of shares outstanding 5,679,700 7,080,498
(basic and diluted)

F-19

EMTEC, INC.
(Formerly AMERICAN GEOLOGICAL ENTERPRISES, INC.)
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)

1. Acquisition of Emtec, Inc.

At January 17, 2001, Emtec, Inc. {NJ Corp} was acquired by American
Geological Enterprises, Inc. ("AGE") through an exchange of stock at a ratio
of .9753 shares of AGE stock for 1 share of Emtec, Inc. {NJ Corp} stock
whereas AGE issued stock to the shareholders of the Emtec, Inc. {NJ Corp} in
exchange for stock representing 100% of the outstanding shares of the Emtec,
Inc. {NJ Corp}. Pursuant to the acquisition agreement, AGE changed its name
to Emtec, Inc. and a majority of the directors and officers of the former
AGE resigned in favor of the directors and officers of the Emtec, Inc. {NJ
Corp}. Emtec, Inc. intends to seek a listing of its common stock on NASDAQ's
Over-The-Counter Bulletin Board. Immediately after the transaction, the
stock ownership of Emtec, Inc. {formerly AGE} was as follows:

Shares Percent
------ -------

Original shareholders 1,380,997 19.5
(including public owners)

Transaction brokers 370,000 5.2

Former shareholders of the Company 5,329,501 75.3
--------- -----

Total 7,080,498 100.0
========= =====

Because the former shareholders of the Emtec, Inc. {NJ Corp} acquired
control of Emtec, Inc. {formerly AGE}, the transaction is considered a
"reverse acquisition" by Emtec, Inc. {NJ Corp} for accounting purposes. The
Company is treated as the accounting acquirer of Emtec, Inc. {formerly AGE},
the legal acquirer.

2. Pro Forma Adjustments

a.) The historical statement of operations for Emtec, Inc. {NJ Corp}
includes the revenues earned and expenses incurred by the acquired
company {formerly AGE} from the January 17, 2001 date of acquisition to
March 31, 2001. The historical statement of operations for the acquired
company {formerly AGE} reports revenues earned and expenses incurred for
its fiscal year ended December 31, 2000. This pro forma presentation
reports results of operations as if the reverse acquisition occurred at
April 1, 2000. Therefore, pro forma adjustments have been made to remove
the revenues and expenses of the acquired company {formerly AGE} for the
three month period ended March 31, 2000 and add the revenues and
expenses of the acquired company {formerly AGE} for the period from
January 1, 2001 to January 16, 2001.

F-20

b.) The Company accounted for the reverse acquisition as a purchase under
Accounting Principles Board Opinion No. 16 "Business Combinations" (APB
No. 16). APB No. 16 states that assets acquired for issuances of stock
should be stated at "cost" when acquired and cost may be determined by
the fair value of the consideration given or by the fair value of the
property acquired, whichever is more clearly evident. Due to inactive
trading of Company stock, the Company has determined cost based upon the
fair value of the property acquired including direct costs of
acquisition. A pro forma adjustment is presented in the pro forma
statement of operations to account for the reduction in amortization
expense attributable to the determination of the purchase cost of the
investment in geothermal power unit as an amount below its prior balance
sheet value. The tax effect of the amortization reduction is also
presented as a pro forma adjustment.

c.) A pro forma adjustment has been made to capture the effect of the
utilization by Emtec. Inc. {NJ Corporation} of cash and marketable
securities acquired in the transaction to pay down the line of credit.
This pro forma adjustment had the effect of eliminating the other income
of the former AGE which consisted of interest and dividends generated
from cash equivalents and marketable securities. In addition, interest
expense was reduced to show the effect of a lower outstanding balance
for the line of credit over a twelve month period.

F-21