UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                  For the fiscal year ended September 30, 1997

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

                          Commission File No.: 0-22693

                        SYSCOMM INTERNATIONAL CORPORATION
             (Exact name of registrant as specified in its charter)

             Delaware                                     11-2889809
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                      Identification No.)


                   275 Marcus Boulevard, Hauppauge, N.Y. 11788
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (516) 273-3200

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

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

                     Common Stock, par value $.01 per share
                                (Title of Class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     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. [ ]

     The aggregate  market value of the 1,800,860 shares of Common Stock held by
non-affiliates of the Company as of December 4, 1997 is $10,129,837.50.

     The number of shares  outstanding  of each of the  registrant's  classes of
common equity as of December 4, 1997 is as follows:

     Class of Common Equity                            Number of Shares
          Common Stock                                     4,555,540
         par value $.01


     The  information  required by Part III of this Form 10-K is incorporated by
reference from the Registrant's  definitive proxy statement to be filed with the
Commission on or before January 29, 1998.








                                     PART I

     Item 1. BUSINESS

     General

     SysComm International Corporation ("SysComm" or the "Company"), through its
wholly owned subsidiary,  Information Technology Services, Inc. ("InfoTech"), is
a leading  systems  integrator  and  reseller  of computer  hardware,  operating
software and  networking  applications  to Fortune 1000  companies.  The Company
provides its customers with cost efficient, comprehensive solutions that satisfy
their  information  technology  requirements.  Since 1985, the Company's primary
focus has been on the sale,  integration and servicing of International Business
Machine  Corporation  ("IBM") products including personal  computers,  mid-range
systems  based on the IBM  RS/6000,  servers,  the IBM AS/400 and, as of October
1997, the System/390 mainframe. In addition, the Company integrates, resells and
services products from  manufacturers  such as Hewlett Packard,  Compaq,  Apple,
Microsoft, 3Com, Bay Networks and Novell.

     In March  1997,  the Company  commenced  the  assembly  and sale of IBM PCs
through IBM's Authorized  Assembler  Program ("AAP")  providing the Company with
greater  flexibility in meeting its customers'  needs. The Company believes that
this  relationship  with IBM will provide it with the opportunity to enhance its
responsiveness to client specific requests and orders, and improve its operating
efficiencies.

     A significant  percentage of the Company's  revenues are derived from sales
to customers in the financial and investment communities. However, the Company's
customer base also includes  mid-size  retailers,  manufacturers,  distributors,
colleges,   universities  and  state  and  local  government   agencies  in  the
Northeastern United States. The Company's customers include:


                                                                                    


Astra Pharmaceutical                        CPC International                           Merrill Lynch
Barnes & Noble                              Deutsche Bank                               Northeastern University
Boston College                              Fidelity Investments                        Oxford Healthcare
Boston Financial Group                      Harvard University                          PaineWebber
Brown Brothers Harriman                     Healthsource                                Pepsico
Citibank                                    International Business                      Prudential Insurance Company
The City of New York                        Machines Corporation                        The Pershing Division of
The City University of                      J.P. Morgan                                 Donaldson Lufkin & Jenrette
     New York                               Liberty Mutual                              Smith Barney
                                                                                        The Stop & Shop Companies


     The  Company  intends to pursue new  business  by  focusing on the sale and
integration  of high-end  systems in the  financial,  commercial,  governmental,
healthcare  and  educational  areas.  To this end, the Company has the following
growth strategies:  (i) targeting markets,  (ii) offering a complete line of IBM
products,  (iii)  expanding its role as an IBM Premier  Business  Partner,  (iv)
enhancing  competitiveness  through  the  AAP,  and  (v)  expanding  into  other
geographic regions through selected acquisitions and strategic alliances.

     The Company currently has six operating locations.  From its Hauppauge, New
York headquarters it operates a distribution  center, a computer  configuration,
integration and PC assembly  facility and its technical  support  services.  The
Company  conducts its sales  operations from offices  located in Hauppauge,  New
York City, and Buffalo, New York; Waltham,  Massachusetts;  Marlton, New Jersey;
and Fairfield, Connecticut.

     Strategy

     The  Company  strives to offer its  customers  high  quality  computer  and
networking system hardware (particularly IBM products), related operating system
software  and  network  design,  system  installation  and  testing in a timely,
cost-effective  and value-added  manner. The Company believes that the following
factors  are  significant  elements  to the  successful  implementation  of this
strategy:

     Targeting Markets

     The  Company  has a ten  year  track  record  as a  market  leader  in  the
installation  and integration of high-level  information  systems to the banking
and financial services  communities.  In addition,  the Company focuses on other
selected,  major markets,  including retailers,  manufacturers and distributors,
institutions of higher learning,  health care and pharmaceutical  companies, and
state and local government agencies. The Company's in-depth understanding of its
customers  current and future needs  combined with its  experience  and in-depth
market focus enable it to offer an optimum  range of products and services  that
meet each customer's requirements.

     Offering a Complete Line of IBM Products

     The Company has chosen to represent  IBM products  because it believes that
IBM is the world's  premier  designer and  manufacturer  of computer  equipment,
software  and  networking  products.  The wide range of  products  and  services
offered by the Company,  include personal computers (desktop workstations,  file
servers  and  notebook  computers),  mid-range  computers  (RS/6000  and  AS/400
systems),  IBM S/390  mainframe,  networking  products  (network hubs,  routers,
bridges and  switches) and IBM software  products,  including  OS/2,  Netfinity,
Eduquest  and Lotus  Notes.  The Company also offers  warranty  repair,  systems
support and customized training programs.  The Company believes that its current
mix of IBM products  meets the needs of its  customers and brings the Company to
its goal of becoming a total  solution  integrator  of the  complete IBM product
line.

     Expanding the Company's Role as an IBM Premier Business Partner

     The Company's  designation as an IBM Premier  Business  Partner provides it
with important  competitive  advantages.  In 1997, the Company was among a small
number of original  value-added  resellers selected by IBM as a Premier Business
Partner.   This   designation  by  IBM  was  in  recognition  of  the  Company's
long-standing   relationship   with  IBM,   combined  with  its  overall  value,
performance  and  contribution in value to its customers.  The Company  believes
that  the  principal  advantage  to  being a  Premier  Business  Partner  is the
potential referral of business by the IBM sales force.



                                        1





     Enhancing Competitiveness Through the IBM AAP

     Within  the  past  eighteen  months,  the PC  industry  has  experienced  a
fundamental  change  as major PC  suppliers,  led by IBM,  have  begun  shifting
responsibility  for the final  assembly  and delivery of PC products to a select
number of  companies,  including  the  Company.  The AAP allows  the  Company to
assemble and sell IBM PCs configured to the exact customer hardware and software
specifications  in a more timely and efficient manner. In addition to permitting
the Company to offer greater product selection, the Company believes AAP affords
it future opportunities and competitive  advantages,  including the potential to
increase gross margins on build-to-order  systems,  and the ability to act as an
assembler and  distributor to other  resellers.  The Company is also planning on
becoming an assembler of the RS/6000 product line and SSA Storage Systems.

     Expanding Into Other Geographic  Regions Through  Acquisition and Strategic
Alliance

     The Company's  participation in the AAP will make it an attractive acquirer
and/or joint venture  partner to companies  that do not possess the expertise or
resources  to  attain  this  status.  The  Company  believes  that  the  systems
integration  business  which targets  Fortune 1000  companies is both  extremely
competitive and based on existing relationships.

     The Company  believes  that the  expansion  of its  business  into  growing
markets and varied geographic regions, including the possibility of acquisitions
of  qualified  systems  integrators  and  resellers,  will  allow it to  service
existing customers in these new locations,  expand its customer base, expand its
product and service offerings,  and obtain more competitive  pricing as a result
of increased purchasing volumes of particular  products.  The Company intends to
focus its  expansion  efforts  on  value-added  resellers  that  complement  its
existing operations. In particular,  the Company believes that IBM resellers who
do not  participate  in the AAP  will be at a  competitive  disadvantage  to the
Company  and other AAP  participants.  Accordingly,  the Company  believes  that
certain of these  companies will find that an acquisition by, or a joint venture
with, the Company to be an attractive alternative.

     Industry Background

     Complex computer  information  processing systems,  the foundation on which
business and  organizations  now function,  are continuously  being  redesigned,
modified and upgraded as new computer and  telecommunications  technologies  are
introduced.  Until  the  mid-1980's,  either  mid-range  or  mainframe  computer
systems,    were   used   to   manage   an   organization's    mission-critical,
transaction-oriented  commerce and business functions,  such as banking,  credit
transactions,   retail  point-of-sale  transactions  and  airline  reservations.
Client/server networks support access to these functions, either within a single
site or from numerous geographically-dispersed sites.

     In the late 1980's, a new architecture  for information  processing  called
"client/server" computing emerged, fueled by the growing intelligence in desktop
computers,   expanding   capabilities  of  software   applications  and  growing
capabilities of networks.  A client/server system typically consists of multiple
intelligent  desktop  client  computers  linked  with  high  performance  server
computers  by a local  and/or  wide area  network  ("LAN"  and/or  "WAN") and is
characterized  by the flexibility and mobility of both  application and user. In
order to take  advantage  of their  established  operational  staff and physical
plant,   many   corporations   are  seeking  to   reconfigure   their   existing
mainframe/mid-range  computers  (sometimes  referred to as "legacy"  systems) to
operate in parallel with client/server networks.

     The Company  believes  that these two  information  system  models - legacy
systems  and  client/server  systems  - will  continue  to  coexist,  each  with
advantages for certain applications.  Thus, organizations are faced with complex
decisions concerning the current and future  configurations of their information
systems,  based upon  factors  such as the  re-engineering  of aspects of legacy
systems to function more efficiently  with related  client/server  systems,  the
explosive  growth of the Internet (and related  World Wide Web) and  stand-alone
intranets,  the convergence of computer and telecommunications  technologies and
the universal  recognition  of  information  systems as the medium for commerce,
finance, education and administration.  Mid-range and mainframe computer systems
remain  important  in this  changing  environment,  and the  Company  intends to
exploit  opportunities in both segments of the high end computer system markets.
At the same time,  manufacturers  such as IBM are increasing their reliance upon
companies  such as  SysComm  to work with mid- and  large-sized  businesses  and
organizations   to  provide   single-source   responsibility   for  the  design,
procurement, installation and implementation of such systems.

     Principal Markets and Customers

     Since 1994, the Company has sold and delivered  computer  systems,  network
products,  software,  maintenance  and system support  services to more than 700
customers  throughout the United States and in more than 20 countries worldwide.
Based on its installed  customer base, the Company  believes it is a leading IBM
supplier/systems  integrator  of mid-range and  computer/network  systems in the
northeast United States.  In fiscal year 1995,  revenues from sales to The Chase
Manhattan Bank and Deutsche Bank accounted for 23% and 14%, respectively, of the
Company's  total  revenues;  revenues  from sales to Deutsche  Bank and Citibank
accounted  for 19% and 16%,  respectively,  of the Company's  total  revenues in
fiscal  year  1996;  and no one  customer  accounted  for  more  than  6% of the
Company's total revenues in fiscal year 1997. In fiscal year 1997, the Company's
top five  customers  (three of which were new  customers)  accounted  for 28% of
total revenues.

     Dependence on Major Customers; Risk of Industry Concentration

     For the last three fiscal years, 1995, 1996 and 1997, a significant portion
(55%,  50% and 28%,  respectively)  of the Company's  revenues were derived from
sales to five principal customers,  which customers vary annually, and encompass
markets  wherein the demands of any one customer may vary greatly.  In addition,
the  Company  does  not  have  any  exclusive  long-term  arrangements  with its
customers for the continued sales of computer systems. In fiscal year 1995 sales
to The  Chase  Manhattan  Bank  and  Deutsche  Bank  accounted  for 23% and 14%,
respectively,  of the Company's total revenues;  revenues from sales to Deutsche
Bank and Citibank  accounted  for 19% and 16%,  respectively,  of the  Company's
total revenues in fiscal year 1996 and no customer accounted for more than 6% of
the Company's  total revenues for fiscal 1997.  Although the number of customers
who  purchase  at least  $250,000  of  computer  systems  from the  Company  has
increased  from 29 in fiscal year 1995 to 60 in fiscal year 1997, the failure to
acquire a significant or principal customer could have a material adverse effect
on the Company's operations

     In the fiscal  year ended  September  30,  1997,  approximately  33% of the
Company's sales of computer systems were to customers in the banking,  financial
and securities  industry based in the Northeastern  United States.  Although the
Company continues to broaden its market focus to include sales to other markets,
such as educational institutions,  government agencies, healthcare and insurance
companies,  the Company  expects that it will  continue to derive a  substantial
percentage  of its sales of computer  systems from such  banking,  financial and
securities businesses.  Accordingly,  unfavorable economic conditions or factors
that relate to these  industries,  particularly  any such  conditions that might
result in  reductions  in capital  expenditures  or  changes  in such  company's
information processing system requirements, would have a material adverse affect
on the Company's results of operations.

     Products/IBM Relationship

     The  Company  has  access  to a  full  range  of  computer  product  lines,
networking  and  interconnectivity  systems and  operating  software,  from IBM,
Hewlett Packard and Compaq,  as well as other selected  manufacturers.  However,
the Company has concentrated its efforts in developing strong relationships with
IBM  because  it  believes  that  IBM  offers  the most  comprehensive  and well
established  product  line in the  industry.  The  Company  has had a long  term
relationship  with IBM whereby it has the  opportunity  to  configure,  sell and
service IBM's full line of PCs, mid-range  information and mainframe  processing
systems.  In  addition,  as a member of several  IBM  advisory  committees,  the
Company maintains close  communications  with IBM's future plans and directions.
The Company  believes its strong  marketing and technical  skills  enabled it to
become North America's  largest  reseller of IBM's RS/6000 product line in 1996,
and the Company believes it will continue to have a close business  relationship
with IBM. The Company's principal sales are derived from the following:  (i) IBM
PC systems; (ii) IBM RS/6000 systems; (iii) IBM S/390 Mainframe; (iv) IBM AS/400
systems; and (v) communication and networking systems.

     IBM PC  Product  Line and  Participation  in IBM's  PC  Company  Authorized
Assembler Program

     IBM is one of the world's leading  designers and  manufacturers of personal
computer   systems.   IBM's  personal  computer  product  line  includes  mobile
(notebook) and desktop  workstations  as well as file,  application  and network
servers.

     IBM PC systems feature  Pentium(TM)processors  from Intel and are available
with a choice of operating  software which allows  end-users to select operating
system   software,    including   IBM   OS/2,    Microsoft    DOS/Windows,    or
Microsoft(R)Windows 95(TM)and Microsoft Windows NT(TM). For the last five years,
due to the amount of sales volume for IBM products generated by the Company, IBM
has enabled the Company to purchase products directly from IBM for resale at the
lowest prices  available.  There can be no  assurances  that the Company will be
able to  continue  to purchase  at these  prices,  and loss of this  competitive
pricing  could have a material  adverse  affect on the  Company's  business  and
results of operations.

     In  fiscal  year  1997,  the  Company's  sales  of  IBM  PC  products  were
approximately $35 million, or 39%, of the Company's annual sales.

     In March 1997, the Company commenced operation of an IBM PC system assembly
facility  under IBM's  Authorized  Assembler  Program (the  "AAP").  In order to
participate in the AAP, the Company has committed,  and will continue to commit,
significant  capital to hire and train a high quality work force to establish an
appropriate  assembly  facility  and to  initially  increase  its  inventory  of
components to satisfy  anticipated  customer demand. As a component assembler of
finished products, the Company will face operational concerns,  which it has not
faced as a  reseller.  These  operational  concerns  include  the ability of the
Company to hire and train qualified  assembly personnel and maintain an adequate
supply of component parts inventory.

     The  continued  operation of this assembly  facility is dependent  upon the
Company complying with the terms of its AAP agreement (the "AAP Agreement") with
IBM, including satisfying certain minimum purchase requirements, compliance with
strict  quality  control  provisions  and  maintaining   trained  and  certified
personnel.  The AAP Agreement is terminable by either IBM or the Company upon 30
days' prior notice and is  immediately  terminable  by IBM in the event that IBM
determines, in its sole discretion, that (i) the assembled products fail to meet
required  specifications,  (ii) the Company materially breaches the terms and/or
conditions  of the AAP  Agreement,  (iii)  the  Company  engages  in a course of
conduct that has injured IBM's reputation or the reputation of its products,  or
(iv) the Company's  status with IBM as a Business  Partner is terminated for any
reason, expires or if the Company is no longer eligible to purchase IBM personal
computer components  directly from IBM. In addition,  the Company is required to
maintain ISO 9002 registration standards,  the registered international standard
for ensuring the  consistent  and  measurable  quality of products and services.
Subject to the terms of the AAP  Agreement,  IBM is  permitted  to  periodically
review  the  Company's  performance  in order to monitor  and  assess  continued
compliance.  The AAP  Agreement  expires on December 31, 1998 and,  although the
Company plans to renew it, there can be no assurance  that it will be renewed on
similar terms, if at all.

     The  Company  currently  plans to expand  its  participation  in the AAP to
include IBM's RS/6000 computer and SSA Storage systems. The Company's ability to
successfully  participate  in the  program  with  respect  to such  products  is
contingent  upon the Company moving into larger  facilities to accommodate  such
operations,  equipping such facilities for assembly activities, hiring technical
employees  and approval from IBM. The Company's  planned  operations  and future
growth,  to a significant  extent,  are  dependent on the  Company's  ability to
participate in the AAP with respect to a broad range of IBM product lines. There
can be no assurance that the Company will be able to successfully operate an IBM
approved  facility  capable of serving an expanded  product line,  that IBM will
authorize the  Company's  participation  in assembly  programs  beyond  personal
computers,  that the Company will maintain necessary  industry  registrations or
that the computer  systems  produced by such assembly  programs will gain market
acceptance.

     By  being  part of the  AAP,  the  Company  believes  it may  increase  its
inventory turnover rate, expand the range of products available to its customers
and improve  delivery  time to its  customers.  In  addition,  the Company  will
maintain  an  inventory  of  component  parts,   rather  than  an  inventory  of
fully-configured PC models.

     IBM RISC System/6000

     The IBM RISC  System/6000 is a mid-range  computer  workstation  and server
configuration providing  industry-leading computing and graphic performance that
meets  large-scale,  data handling and network management demands for many types
of businesses.  RS/6000 systems perform mission critical  applications,  such as
those found in financial trading systems,  from the combination of a robust UNIX
operating  system  with fast 2D and 3D graphic  capabilities.  The  RS/6000 is a
flexible  and  scalable  system  incorporating  (1)  symmetric   multiprocessing
capabilities,  a design that makes it  possible  for a number of  processors  to
share memory and other existing features more efficiently; (2) scalable parallel
processing,  a technology that allows several hundred  processor nodes to run in
tandem as application servers,  data servers,  Internet or Intranet servers; and
(3) a multi-operating  system support,  allowing a user to run existing programs
simultaneously.

     RS/6000  systems  have  been  used  for  general   business  and  financial
applications, including billing, payroll and accounts receivable, as well as for
advanced  graphics  programs for mechanical and  electrical  design,  scientific
visualization,   communications   and   networking   applications   for  optimum
client/server  and  Internet  performance,   and  word  processing  and  desktop
publishing  applications  for both  scientific and commercial  documents.  These
applications are particularly useful for the securities,  manufacturing, retail,
education and transportation industries.

     As  Internet  and   Intranet-based   transactions  grow,  RS/6000  systems'
networking capabilities, including security and integrity features, are becoming
increasingly important.

     In 1996,  IBM  recognized  the Company  (ranked by dollar  value of systems
sold) as its largest "Industry Remarketer" for RS/6000 systems in North America.
For the year ended  December  31, 1996 the  Company's  sales of the RS/6000 was
approximately  $59 million,  or 59%, of the Company's  annual sales.  For fiscal
1997, the Company's sales of the RS/6000 was approximately $40 million,  or 45%,
of the Company's  annual sales. The Company  considers  RS/6000 systems to be an
integral product for future increases in the Company's sales volume.

     IBM System/390

     The IBM  System/390 is IBM's large scale  mainframe.  The System/390 is the
current  generation  of  IBM  mainframe  computer  systems,   which  were  first
introduced  in the early 1960's as the  System/360.  System/390 is the computing
platform used by a majority of Fortune 1000 corporations for "legacy"  computing
applications,  that assist  businesses  to perform  core  applications,  such as
accounting,  operations,  order entry,  customer service and inventory tracking.
The System/390 has evolved into the central hub of network  computing  strategy,
enabling businesses to provide  applications on demand,  secure and available 24
hours a day,  365  days a year.  Industry  analyst's  estimate  that  70% of all
mission  critical  data  resides on a  mainframe  and that 75% of all  real-time
transactions  run on  mainframe  based  networks.  IBM is  the  world's  largest
supplier of mainframe computer systems.

     All Other Products

     IBM AS/400  Product Line.  Although the IBM  Application  System/400  (also
known as AS/400)  has not been a major  source of revenue  to the  Company,  the
Company is  attempting  to increase  its revenue in this  market.  The AS/400 is
designed and built as a multi-user commercial application platform integrating a
relational database and networking capabilities into the operating system of the
computer.  It is designed as a general purpose business computer,  optimized for
the commercial  environment.  Its design reflects the dominant  requirements for
businesses,  i.e.,  integration of new technology  without  disrupting  existing
applications,  large  portfolio  of business  solutions  allowing  companies  to
discover the most suitable application for their needs, integration of functions
including  security,  database,  system  management,  communications and on-line
teleprocessing,  enabling companies to manage a system with limited resources in
a demanding business climate.

     The AS/400  provides  businesses with a cost effective  solution,  allowing
them to adopt advanced technologies at their own pace,  integrating high quality
PC technology  and associated  software to enhance the  computer's  speed for PC
file serving.  The AS/400 is a popular business computing system due to its ease
of  installation,  implementation,  usage (it can support up to 7,000 users) and
ability to upgrade.

     Communication   --  Networking   Systems.   The  Company  provides  various
communications  and networking  products  including complex data  communications
equipment and software such as bridges,  hubs and routers, as well as modems and
network  interface cards (NIC) to connect  personal  computers to local and wide
area networks  (LAN/WAN).  Nearly every  computer  sold today in the  commercial
marketplace is connected to a communications network.

     Other.  The Company is  authorized  to sell other  manufacturers'  personal
computer  systems,  networking,  printers and software products  including:  Bay
Networks, Compaq, Lexmark, Hewlett Packard, Apple, MicroSoft,  Novell, and 3Com.
Certain of the  Company's  agreements  with such  suppliers  provide for minimum
annual purchase  requirements.  Although the Company, to date, has complied with
these  agreements,  there is no assurance that the Company will continue to meet
such minimum  purchase  requirements or other terms of such  agreements.  To the
extent that it does not comply with such terms,  the Company may lose its status
as an  authorized  reseller  for such  suppliers.  For  fiscal  year  1997,  the
Company's sales of non-IBM products accounted for approximately $13 million,  or
15%, of total revenue.

     Dependence on IBM as a Supplier

     For the fiscal years ended September 30, 1996 and 1997, in excess of 84% of
the Company's revenues resulted from the sale of personal  computers,  mid-range
computer  systems,  networking  systems and operating  software  manufactured by
International  Business Machines Corporation  ("IBM").  Although the Company has
had a long  standing  reseller  relationship  with IBM, IBM may  terminate  this
relationship  with the  Company at will or upon  relatively  short  notice.  The
Company's reseller arrangements with IBM are not exclusive. Moreover, IBM is not
obligated  to have product on hand for timely  delivery to the Company,  nor can
IBM  guarantee  product  availability  in  sufficient  quantities  to  meet  the
Company's demands.

     In September 1997, IBM announced new criteria which its resellers must meet
in order to be  eligible  to  acquire  personal  computers  directly  from  IBM.
Beginning on January 1, 1998, in order to directly purchase from IBM,  resellers
must have  purchased a minimum of $100  million  worth of  computer  systems and
other products  directly from IBM during the period between  January 1, 1997 and
December 31, 1997. Beginning on January 1, 1999, resellers must have purchased a
minimum of $150 million worth of computer  systems and other  products  directly
from IBM during the period  January 1, 1998 through  December 31, 1998.  IBM has
stated that  resellers  who are approved to assemble IBM PCs under the AAP, must
meet this new criteria to continue to purchase components directly from IBM.

     For the period  January 1, 1997  through  October  31,  1997,  the  Company
purchased approximately $61 million worth of computer systems and other products
directly  from IBM.  Although  the  Company has not met IBM's new  criteria  for
continuing  to purchase PCs  directly  from IBM after  December  31,  1997,  the
Company  believes  that IBM will  continue  to allow the  Company to continue to
purchase  computer systems and other products  directly from IBM, although there
can be no  assurance  that IBM will  continue  to allow the  Company to purchase
directly from IBM without the Company meeting IBM's new purchase criteria.

     If IBM were to  discontinue  direct  sales to the  Company  as a result  of
insufficient  purchase  volumes or for any other  reason,  the Company  would be
required to purchase IBM products  from a wholesaler  or other  reseller,  which
would likely be on terms less favorable than those currently  obtained from IBM.
There can be no assurance, therefore, that all IBM products will be available in
a timely  fashion as required by the Company.  The loss of IBM as the  Company's
prime vendor or the loss of the Company's  status as an  authorized  reseller of
IBM products,  the deterioration of the Company's  relationship with IBM, or the
deterioration of the industry's  perception of IBM as a leading  manufacturer of
high quality  computers  would have a material  adverse  effect on the Company's
business, results of operations or financial condition.

     Risk of Losing Price Protection

     Prior to January 1, 1997,  resellers who  purchased  directly from IBM were
fully  protected  against any  reduction in prices by IBM. If, for example,  the
Company  purchased  products  from IBM, but  subsequently  IBM lowered its sales
price,  then the Company would receive a credit in the amount of the  difference
between  the  current  sales  price and the  actual  purchase  price.  Effective
November 1, 1997,  resellers  will only receive price  reduction  credits on new
products  based on the  previous 15 days of IBM's net  shipments  to the Company
from the date the product is shipped from IBM. In addition,  as an inducement to
the Company to accept these new terms,  IBM will rebate to the Company an amount
equal  to 2.5% of its net  purchases.  If the  Company  is  unable  to sell  its
inventory  within  those 15 days and IBM lowers the sales price on these  items,
the Company would be unable to recoup the  difference on the lowered price which
could  have a  material  adverse  effect on the  Company's  business,  financial
condition or results of operation.

     Periodic IBM Product Shortages

     From time to time,  including  during the quarter ended September 30, 1997,
IBM has been  unable to deliver  its  products  in a timely  fashion to meet the
Company's outstanding orders, which has affected the Company's quarterly results
of operations. Specifically, during the quarter ended September 30, 1997, delays
by IBM in shipment of products resulted in a backlog of approximately $2,400,000
of  sales  by the  Company.  There  can be no  assurance  that  IBM  (and  other
manufacturers who the Company deals with) will consistently  provide an adequate
supply of products  in order for the  Company to fulfill  all of its  customers'
orders in a timely manner. The failure to obtain adequate product supplies would
have a  material  adverse  effect on the  Company's  results  of  operations  or
financial condition.

     Financing Agreement

     The Company's  business  activities  are capital  intensive,  requiring the
Company to finance  accounts  receivable  and  inventory.  The failure to obtain
adequate  product  financing  on a timely  basis  could have a material  adverse
affect on the Company's business, results of operations and financial condition.
Pursuant to the Company's financing agreement  ("Financing  Agreement") with IBM
Credit  Corporation  ("IBM  Credit"),  the Company is  permitted to borrow up to
$27,500,000,  based upon 85% of all eligible  receivables due within 90 days and
up to 100% of all  eligible  inventory.  As of September  30,  1997,  borrowings
outstanding  under the Financing  Agreement  were  $10,164,138.  Pursuant to the
Financing  Agreement,  the  Company's  credit  availability  is  reduced  by the
aggregate  amount of accounts  payable owed to IBM Credit which, as of September
30, 1997, was $12,035,345.  The Financing Agreement,  which expires on September
23, 1998,  is subject to temporary  increases,  thereby  increasing  the line of
credit to $41,500,000  during certain  periods.  The Company is also required to
comply with certain additional financial covenants.

     The amount of credit  available  to the Company  pursuant to the  Financing
Agreement  at any point in time may be  adversely  affected  by factors  such as
delays in collection or deterioration  in the quality of the Company's  accounts
receivable, inventory obsolescence, economic trends in the computer industry and
interest rate fluctuations. Any decrease or material limitation on the amount of
capital  available to the Company under the Financing  Agreement would limit the
ability of the Company to fill  existing  sales  orders,  purchase  inventory or
expand its sales levels and, therefore,  would have a material adverse effect on
the Company's financial  conditions and results of operations.  As stated above,
the Financing  Agreement  expires on September  23, 1998.  The Company has had a
credit  facility  with IBM Credit since 1992,  and the Company  believes that it
will enter  into a renewal of this  credit  facility  with IBM.  There can be no
assurance that the financing to the Company under this renewal will be available
in amounts at  comparable  or better terms than those in effect,  if at all. The
inability  of the  Company  to  have  continuous  access  to such  financing  at
reasonable costs would  materially and adversely impact the Company's  financial
condition and results of operations.

     Dependence on IBM's Volume Discount Schedules and Market Development Funds

     As part of its overall  reseller  arrangements  with IBM,  IBM provides the
Company with volume discounts and market development funds on products purchased
from  IBM.  These  discounts  and  funds  are used to  offset a  portion  of the
Company's cost of IBM's products sold,  thereby affecting income from operations
and the Company's expenses relating to marketing and technical support resources
for IBM products.  Any adverse change in the volume discount schedule  available
to the  Company,  which the  Company  believes  is  currently  at IBM's  highest
discount  level,  or changes  in the  availability,  structure  or timing of the
receipt of development  funds,  would materially  adversely affect the Company's
business, results of operations and financial condition.

     Sales and Marketing

     The Company has a broad customer base of primarily  Fortune 1000 companies.
The  Company's  sales and marketing  efforts are focused on high level  decision
making executives,  whose purchasing  decisions are based on factors such as the
overall cost of purchasing and maintaining a system and the Company's reputation
and  expertise  in  delivering  and  installing   effective  total   information
technology  solutions,  which  initially  may not be the  least  expensive.  The
Company relies on its marketing and sales programs, its industry-wide expertise,
its  relationship  with  existing  customers  and its  status as an IBM  Premier
Business Partner to generate sales opportunities.

     The Company  currently has sales offices in six  locations:  New York City,
Hauppauge, and Buffalo, New York; Waltham,  Massachusetts;  Marlton, New Jersey;
and Fairfield,  Connecticut.  Currently,  the Company employs  approximately  35
field sales  representatives and system engineers.  The sales efforts are led by
the Company's senior  executives,  John H. Spielberger,  Thomas Baehr and Norman
Gaffney,  who  have  more  than 69  years  of  combined  experience  in sales of
high-level computer systems. The Company believes that due to the complex nature
of the computer products it sells and supports,  maximum marketing effectiveness
can only be  achieved  by sales  specialization.  Each sales  representative  is
trained in one specific product line and representatives of one product line can
call upon  specialized  sales and systems  engineering  personnel  from  another
product line.

     The Company  pursues new business  opportunities  by referrals  from IBM or
other manufacturers,  referrals from existing customers,  direct solicitation by
telephone or mail of pre-qualified customers, and participation in IBM and other
industry trade shows.

     The Company has developed and maintained  automated sales tools intended to
improve sales  productivity,  quality and  reliability  and  increased  customer
satisfaction.  These systems include on-line systems  configuration and pricing,
real time order entry,  order  confirmation  and  electronic  mail for customers
through privately leased telephone lines and through the Internet.

     Customer Support and Service

     The Company believes that its ability to provide  effective total solutions
to meet the  needs of its  customers  is  enhanced  by its  internal  management
information system,  which combines accounting,  purchasing,  inventory control,
sales order processing and work order  management.  The Company provides a large
array  of  services  to its  customers,  including  warranty  repair  on all IBM
personal  computer  products;  toll-free  telephone number for sales and product
information and order placement; toll-free telephone number for customer service
on all products sold, including technical assistance and repair warranty; E-mail
network access for customers to receive real time price quotations, place orders
and check order status; on-site system engineers to provide technical assistance
for  installations  and  upgrades;  partnership  with IBM to provide  customized
services such as helpdesk,  consulting,  extended warranty, extended maintenance
coverage; and IBM Credit Corporation financing options on all products sold

     Competition

     The  markets in which the Company  operates  are  characterized  by intense
competition  from several types of network  integrators  and  technical  service
providers,   including  mainframe  and  mid-range  computer   manufacturers  and
outsourcers,   including,  among  others,  Digital  Equipment  Corporation,  Sun
Microsystems,  Electronic Data Systems Corporation,  Hewlett-Packard Company and
Integrated  Systems  Solution  Corporation.  Other  competitors  which  purchase
directly from IBM,  like the Company,  include  value added  resellers,  systems
integrators and third-party service companies, including AmeriData Technologies,
Inc.,  CompuCom  Systems,  Inc.,  Entex  Information  Services,   InaCom  Corp.,
MicroAge,  Inc.  and Vanstar.  While the Company  receives  sales and  marketing
assistance  from  IBM,  including   introductions  and  referrals  to  potential
customers,  the Company,  from time to time,  faces direct  competition from IBM
with respect to large contracts. The Company expects to face further competition
from new market  entrants  and possible  alliances  between  competitors  in the
future.  Certain of the Company's current and potential competitors have greater
financial,  technical,  marketing  and other  resources  than the Company.  As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in  customer  requirements  or to devote  greater  resources  to the
development,  promotion  and  sales  of their  services  than  the  Company.  No
assurance  can be given that the  Company  will be able to compete  successfully
against current and future competitors.

     The  Company's  ability  to  compete  successfully  depends  on a number of
factors such as breadth of product and service  offerings,  sales and  marketing
efforts,  pricing,  quality  and  reliability  of  services  and  other  support
capabilities.  While there can be no assurance  that the Company will be able to
continue to compete  successfully with existing or new competition,  the Company
believes that it currently  competes favorably due to its focus and expertise of
network integration and its concentration on sales of IBM product lines.

     Limited Backlog of Orders

     Customers  typically  do not place  recurring  "long-term"  orders with the
Company,  resulting in a limited order backlog at any point in time. The failure
by the Company to receive orders from customers on a continuous basis would have
a material  adverse effect on the Company's  financial  condition and results of
operations given the Company's lack of recurring orders.

     Rapid Technological Change

     The  industry  in which the  Company  competes  is  characterized  by rapid
technological  change and  frequent  introduction  of new  products  and product
enhancements  which  result in  relatively  short  product life cycles and rapid
product  obsolescence.  The  expectation  or  announcement  of new or  enhanced
products often causes customers to delay their  purchasing  decisions until such
new or enhanced products are announced and available. Furthermore, the Company's
success depends in large part on IBM's ability to identify and develop  products
that meet the changing requirements of the marketplace. In the event that IBM is
unable to do so, the Company's continued success will depend upon its ability to
identify and source  substitute  products  from other  vendors.  There can be no
assurance  that the  Company  will be able to identify  and offer such  products
necessary to remain  competitive or avoid losses  related to obsolete  inventory
and drastic price reductions.

     Management of Growth

     The  Company's  ability  to manage  growth  effectively  and expand its AAP
operations will require it to continue to implement and improve its operational,
technical,  financial,  and sales systems, to develop the skills of its managers
and supervisors,  and to hire, train,  motivate and manage its employees.  There
can be no assurance that the Company will be successful in managing growth.  The
failure  to do so would  materially  adversely  affect the  Company's  financial
position  and  results of  operations.  The Company has  recently  opened  sales
offices  in  Connecticut  and New  Jersey.  In  October  1995 it  closed a sales
facility in Princeton, New Jersey after eleven months of operations.  In October
1997, the Company  purchased land and commenced  construction of a 40,000 square
foot facility in Yaphank,  New York. The Company  anticipates  that it will cost
approximately  $2.5  million to  construct  and supply  furniture,  fixtures and
equipment for this facility.  There can be no assurance that the Company will be
able to further expand its operations successfully either through acquisition or
the establishment and operation of an IBM PC assembly facility. Expansion of the
Company's  operations will be dependent upon, among other things,  the continued
growth of the computer  industry,  the  Company's  ability to withstand  intense
price  competition,  its  ability to obtain new  customers,  and retain  skilled
technicians,  engineers, sales and other personnel. If the Company does not have
sufficient  cash  resources,  its growth  could be limited  unless it is able to
obtain  additional  capital through debt or equity  financings.  There can be no
assurance  that  additional  financings  will be  available  to the  Company  on
commercially reasonable terms, if at all.

     Dependence on Key Personnel

     The Company's  success  during the  foreseeable  future will depend largely
upon the continued services of its founder and Chief Executive Officer,  John H.
Spielberger,  and the  executive  team of Dennis R. Wilson,  Thomas J. Baehr and
Norman  Gaffney,  who joined the Company in 1995,  1994 and 1994,  respectively.
Each of the executive  officers entered into employment  agreements in June 1997
that  expire on  September  30,  1999.  The loss of any of the  services  of the
Company's key personnel  could have a material  adverse  affect on the Company's
business,  ongoing results and financial condition.  These employment agreements
contain confidentiality,  non-competition,  and non-solicitation  provisions. In
addition,  the Company has attempted to mitigate the risks  associated  with its
dependence on John H.  Spielberger and Thomas Baehr by obtaining  $1,000,000 key
person  life  insurance  policies  on each of such  individuals.  The  Company's
success  also  depends in part on its  ability to attract  and retain  qualified
managerial,  technical,  sales and marketing personnel. The Company's results of
operations  could be  adversely  affected if the Company were unable to attract,
hire, assimilate, and train these personnel in a timely manner.

     Control by Principal Stockholder

     As of  September  30,  1997,  John H.  Spielberger,  Chairman of the Board,
President  and  Chief  Executive  Officer  of the  Company,  beneficially  owned
approximately 55% of the Company's  outstanding Common Stock. As a result of his
stock ownership,  Mr.  Spielberger has effective  control of the Company and the
power to control the  outcome of matters  submitted  to a vote of the  Company's
stockholders,  such as the election of at least a majority of the members of the
Company's Board of Directors and to direct the future operations of the Company.
Such concentration may have the effect of discouraging, delaying or preventing a
change in control of the Company.

     Anti-Takeover Provisions

     Certain  provisions of the Company's  Amended and Restated  Certificate  of
Incorporation  ("Certificate  of  Incorporation"),  Amended and Restated By-laws
("By-Laws") and Delaware law may be deemed to have an anti-takeover  effect. The
Company's Certificate of Incorporation  provides that the Board of Directors may
issue  additional  shares of Common  Stock or  establish  one or more classes or
series of  Preferred  Stock  with such  designations,  relative  voting  rights,
dividend rates,  liquidation and other rights,  preferences and limitations that
the  Board of  Directors  fixes  without  stockholder  approval.  Moreover,  the
Company's  Certificate of  Incorporation  and By-Laws  provide that its Board of
Directors  is divided into three  classes  serving  staggered  three year terms,
resulting in  approximately  one-third of the directors  being elected each year
and also contain certain other provisions  relating to voting and the removal of
the  officers  and  directors.  In  addition,  the  Company  is  subject  to the
anti-takeove  provisions of Section 203 of the Delaware General Corporation Law.
In general,  the statute  prohibits a publicly  held Delaware  corporation  from
engaging in a "business  combination"  with an  "interested  stockholder"  for a
period of three  years  after the date of the  transaction  in which the  person
became an interested stockholder, unless the business combination is approved in
a prescribed  manner.  Each of the foregoing  provisions  may have the effect of
rendering more difficult, delaying,  discouraging,  preventing or rendering more
costly an acquisition of the Company or a change in control of the Company

     Significant Fluctuations to Quarterly Results

     The Company's  quarterly  operating results have fluctuated in the past and
will continue to do so in the future.  Quarterly operating results may fluctuate
as a result of a variety of  factors,  including:  the  timing of the  Company's
delivery of  significant  orders,  the  ability of IBM to  deliver,  in a timely
fashion,  products for which the Company has received orders,  the length of the
sales  cycle,  receipt of volume  discounts  by IBM, the demand for products and
services  offered by the Company,  the  introduction or announcements by IBM and
other  manufacturers  relating  to new  products,  the  hiring and  training  of
additional personnel,  problems or delays associated with the Company's assembly
of  personal  computer  systems  (under  the  AAP) as well as  general  business
conditions.

     Historically,  the size and timing of the Company's sales transactions have
varied  substantially  from  quarter to quarter  and the  Company  expects  such
variations to continue in future periods, including the possibility of losses in
one or more fiscal  quarters.  The fluctuations may be caused by IBM's delays in
shipping  certain computer systems for which the Company received orders that it
expected to deliver during that quarter. In addition,  the Company's  collection
periods  have  fluctuated  due to periodic  unavailability  of product from IBM,
which resulted in the Company not receiving payment from certain customers until
their entire orders were shipped.  Accordingly, it is likely that in one or more
future  fiscal  quarters,  the  Company's  operating  results  may be below  the
expectations  of public market analysts and investors.  As a result,  the market
price of the Company's Common Stock would be materially adversely affected.

     Potential Volatility of Stock Price

     The  market  price  of the  Common  Stock  may be  subject  to  significant
fluctuations  in response to numerous  factors,  including,  but not limited to,
fluctuations  or  uncertainties  in the Company's  quarterly  operating  results
(including   losses),   delays  with  respect  to  the  AAP,   announcements  of
technological innovations of new products by IBM or other suppliers,  conditions
in the  markets in which the  Company and its  competitors  compete,  changes by
financial  analysts  in their  estimates  of the  earnings of the  Company,  the
trading  volume of the Company's  common stock and the economy in general.  From
time to  time,  the  stock  market  experiences  significant  price  and  volume
volatility  which may affect the market price of the Company's  Common Stock for
reasons  unrelated to the performance of the Company.  In addition,  because the
Company is closely  dependent upon and associated  with IBM, the Company's stock
price may be adversely affected based on the performance of IBM's operations.

     Employees

     As of September  30,  1997,  the Company had 75  full-time  employees.  The
Company has no collective  bargaining agreements and believes its relations with
its employees are good.



                                        2







     Disclosures Regarding Forward Looking Statements

     This report on Form 10-K includes  "forward-looking  statements" within the
meaning of the Private Securities  Litigation Reform Act of 1995. All statements
other than statements of historical  facts included in this Form 10-K including,
but not limited  to,  statements  contained  in this  "Business,"  "Management's
Discussion  and  Analysis"  and "Notes to  Consolidated  Financial  Statements,"
located elsewhere herein regarding the Company's  financial  position,  business
strategy,  plans  and  objectives  of  management  of  the  Company  for  future
operations,  and industry conditions, are forward-looking  statements.  Although
the Company  believes that the  expectations  reflected in such  forward-looking
statements are reasonable,  it can give no assurance that such expectations will
prove correct.

     Item 2. Properties

     In October  1997,  the  Company  purchased  land in  Yaphank,  New York and
entered into a contract to construct a 40,000 square foot assembly and warehouse
facility.  The total costs for this facility are  estimated to be  approximately
$2.5 million (excluding the cost to purchase the land). The Company expects that
the  facility,  which  will  also  act as the  Company's  headquarters,  will be
operational by late spring 1998.

     The Company  leases  11,200  square feet of executive  office and warehouse
space in Hauppauge,  New York pursuant to a five year contract  which expires on
January 31, 1999.  The lease  provides for payments  totaling  $288,580 over the
course of the lease.

     The Company  leases 5,027  square feet of general  office space in New York
City pursuant to a five year lease at an annual  rental of $130,704.  This lease
expires on February 28, 2002.

     The Company  leases 5,350  square feet of general  office space in Waltham,
Massachusetts  pursuant to a five year lease which  expires on October 31, 1999.
The lease  provides  payments in the amount of $70,085  annually  for the period
from December 1, 1994 through  September  30, 1997 and $76,772  annually for the
period from October 1, 1997 through December 31, 1999.

     The Company leases 300 square feet of general office space in Marlton,  New
Jersey  and North  Haven,  Connecticut  for $7,800 per year and $8,100 per year,
expiring on January 31, 1998 and December 31, 1997, respectively.

     Commencing  on December 1, 1997,  the Company will lease 795 square feet of
general office space in Fairfield,  Connecticut  for $11,130 per year. The lease
expires on November  30,  2002.  This sales office will replace the North Haven,
Connecticut office, whose lease expires on December 31, 1997.

     Item 3. Legal Proceedings

     The Company is involved in a legal  proceeding  that is  incidental  to the
conduct of its business.  This  proceeding is not, in the opinion of management,
material.  In the ordinary course of its business,  the Company is, from time to
time, subject to litigation. The Company does not believe that any litigation to
which the  Company  is  currently  subject  is  likely,  individually  or in the
aggregate,  to have a material adverse effect on the financial  condition of the
Company.

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

     None


                                        3







                                     PART II

     Item 5. Market for Common Equity and Related Stockholder Matters

     (a) The  Company's  Common  Stock,  par value $.01 per share  (the  "Common
Stock"),  trades on the NASDAQ Stock Market under the symbol SYCM. The following
table sets forth for each period indicated the high and low sales prices for the
Common Stock for the period June 17,  1997,  the date of the  Company's  initial
public offering, through September 30, 1997, as reported by NASDAQ:




                       Fiscal 1997                                                  Sales Prices

                                                                        High                            Low
                                                                                                

Quarter Ended June 30, 1997                                              51/2                          51/4
Quarter Ended September 30, 1997                                        6 5/8                            5





     The foregoing  over-the-counter  market quotations  represent  inter-dealer
prices,  without  retail  mark-up,  markdown or commission and may not represent
actual transactions.

     (b) The number of record holders of the Common Stock as of December 4, 1997
is approximately 40. The Company believes that there are a substantially greater
number of beneficial owners of shares of its Common Stock.

     (c) The Company  currently intends to retain all future earnings for use in
the operations of its business and,  therefore,  does not anticipate paying cash
dividends  on its  Common  Stock  in the  foreseeable  future.  The  payment  of
dividends  is  within  the  discretion  of the  Board of  Directors  and will be
dependent,  among other things, upon earnings,  capital requirements,  financing
agreement covenants, the financial condition of the Company and applicable law.

     (d) Use of Proceeds from Registered Securities

     On June 17, 1997,  the Company  registered  1,437,500  shares of its Common
Stock,  $.01  par  value  (the  "Common  Stock")  (Registration   Statement  No.
333-25593). The offering of the Common Stock terminated prior to the sale of all
of the securities  registered,  because the managing  underwriter,  Commonwealth
Associates, did not exercise all of its over-allotment option.

     The Company  registered  1,437,500  shares of Common  Stock;  the aggregate
price of the  offering  amount  registered  was  $7,187,500;  the  Company  sold
1,385,000 shares of Common Stock; and the aggregate offering price of the amount
sold was $6,925,000.

     The  following  information  discloses  the amount of expenses  incurred in
connection with the issuance of the Common Stock  registered for the period June
17, 1997 through September 30, 1997:




                                                  Direct or indirect payments to
                                                  directors, officers, general partners of
                                                  the Company or their  associates; to persons
                                                  owning ten percent or more of any class
                                                  of equity securities of the Company and to     Direct or indirect payments
                                                  Affiliates of the Company                                to others
                                                                                                 
Underwriting discounts and
 commissions........................                           _____                                   $   484,750
Finders' fees.......................                           _____                                            _
Expenses paid to or for
 Underwriters.......................                           _____                                       207,750
Other expenses......................                           _____                                       746,341
Total expenses......................                                                                    $1,438,841




     The net  offering  proceeds to the issuer after the total  expenses  listed
above; $5,486,159.

     The following lists the amount of net offering  proceeds to the Company for
the period June 17, 1997  through  September  17, 1997 for each of the  purposes
listed below:



                                                  Direct or indirect  payments to directors,
                                                  officers,  general partners of the Company 
                                                  pr their associates; to persons owning ten
                                                  percent or more of any class of equity  
                                                  securities of the  Company  and to Affiliates   Direct or indirect payments 
                                                  of the Company                                          to others

                                                                                                 
                                                                                

Construction of plant, building and facilities
                                                                     _____          $  439,300
Purchase and installation of machinery and equipment
                                                                     -----               -----
Purchase of real estate                                              _____               _____
Acquisition of other business(es)
                                                                     -----               -----
Repayment of indebtedness                                            _____           5,046,859
Working capital.................                                     _____               _____
Temporary Investment
  (if any)..........................                                 _____               _____
Other purposes (for which at least 5% of 
the Company's total offering proceeds of 
$100,000 (whichever is less))                                        -----               -----


Total                                                                _____            ________
                                                                                     5,486,159
                                                                     =====           =========






     The use of proceeds described above does not represent a material change in
the use of proceeds described in the Company's Prospectus.

     Item 6. Selected Financial Data

     The following financial statement data as of and for the fiscal years ended
September  30,  1995,  1996 and 1997 are  derived  from,  and are  qualified  by
reference to, the audited Consolidated  Financial Statements included herein and
should be read in conjunction with those Consolidated  Financial  Statements and
the Notes thereto.  The financial  statement data as of and for the fiscal years
ended  September  30,  1993 and  1994  are  derived  from  audited  consolidated
financial statements not included herein.



                                                                   Year Ended September 30,


Consolidated Statement of Operations Data
                                                      1993              1994             1995           1996             1997
                                                                                                                 

Net sales...........................               $51,085,000 (1)  $45,459,575 (1)   $55,195,507    $98,446,698      $89,725,938
Cost of sales.......................                46,948,000       40,796,425        49,441,544     89,025,331       78,049,310
Gross profit........................                 4,137,000        4,663,150         5,753,963      9,421,367       11,676,628
Selling and administrative expenses                  3,565,000        3,406,316         4,079,184      5,028,812        6,534,552
Income from operations...............                  572,000        1,256,834         1,674,779      4,392,555        5,142,076
Interest expense (net)...............                 (498,000)        (713,778)       (1,207,316)    (1,390,867)        (979,185)
Other income........................                      --             39,630            37,126         63,151            2,570
Realized loss on available-for-sale securities
                                                          --                --                -       (1,406,250)        _________
Income from continuing operations
 before income taxes                                    74,000          582,686           504,589      1,658,589        4,165,461
Provision for income taxes...........                   31,000          242,889           223,769        735,886        1,761,855
Income from continuing operations                       43,000          339,797           280,820        922,703        2,403,606
Discontinued operations..............                     --          1,485,698               --            --                 --
Cumulative effect of a change in
 accounting principle                                   78,000              --                 -             -          __________
Net income..........................             $     121,000      $ 1,825,495     $     280,820    $   922,703    $   2,403,606

Per Share Data:
Income from continuing operations
                                        $                  .01   $         .10      $         .08  $         .25              .61

Income from discontinued
operations..........................                       --              .43                --              --
Income from accounting changes                             .02              --                --              --
Weighted average number of shares outstanding        3,615,830       3,448,900          3,614,040       3,677,290        3,931,846





                                                       4












                                                                         September 30,


                                               1993         1994             1995             1996             1997
                                                                                             
Consolidated Balance Sheet Data:

Working capital.......................   $    661,000    $  1,171,764     $  1,769,589   $  3,342,545      10,356,416
Total assets..........................     16,067,000      18,867,758       18,471,659     32,102,557      38,104,036
Short term debt.......................      7,677,000       6,469,072       10,797,111     12,510,017      10,658,451
Long term debt........................             --              --              --      67,291           66,416
Stockholders' equity..................      1,041,000       2,412,564        2,355,884      3,998,587      11,827,636





     (1) Includes sales of the Company's former  subsidiary,  Romel  Technology,
Inc. (d/b/a MSG) of $29,272,300 and $4,127,768 for the two years ended September
30, 1994,  respectively,  which was sold in November 1993. The profit/loss  from
this subsidiary during these periods were de minimis.  After adjusting for these
sales figures,  the Company's  revenues were $21,812,700 and $41,331,807 for the
two years ended September 30, 1994.

     Item 7. Management's Discussion and Analysis

     Results of Operations

     Overview.  The Company operates in a highly  competitive  industry which in
turn places constant pressures on maintaining gross profit margins.  Many of the
Company's sales are high volume equipment sales which produce lower than average
gross profit margins,  but are often accompanied by a service  arrangement which
yields higher than average gross profit margins.

     The following table sets forth, for the periods  indicated,  the percentage
relationship  to net  sales  of  certain  items  in the  Company's  consolidated
statements of operations.



                                                                      Year Ended September 30,

                                                       1995                       1996                        1997
                                                                                                     

Net sales.............................                 100.0%                    100.0%                      100.0%
Cost of sales.........................                 (89.6)                    (90.4)                      (87.0)
Gross profit..........................                  10.4                       9.6                        13.0
Selling and administrative
  expenses............................                  (7.4)                    ( 5.1)                       (7.3)
Income from operations                                   3.0                       4.5                         5.7
Interest expense (net)                                  (2.1)                    ( 1.4)                       (1.1)
Realized loss on available-for-sale securities
                                                          --                     ( 1.4)                              --
Income before income taxes                                .9                       1.7                         4.6
Income taxes..........................                  ( .4)                    (  .7)                       (1.9)
Net income............................                    .5                       1.0                         2.7




     Fiscal Year 1997 Compared to Fiscal Year 1996

     Sales  for  fiscal  1997  decreased   approximately  9%  or  $8,720,760  to
$89,725,938  from  $98,446,698  in fiscal year 1996.  The  decrease in sales was
anticipated  in light of the fact that the  Company  did not have any large SP-2
sales similar to those that it had in fiscal 1996. Additionally, the Company did
not have any single customer who accounted for more than approximately 6% of the
Company's total sales.

     Gross  profit as a  percentage  of sales  increased to 13.0% in fiscal 1997
from 9.6% in  fiscal  1996.  This  increase  was  primarily  attributable  to an
increase in the  Company's  service  business  (which  tripled in fiscal  1997),
including the on-site billings of systems  engineers as well as income generated
from the sale of vendor leases and warranties.

     Selling and  administrative  expenses  increased  by  approximately  30% or
$1,505,740  to  $6,534,552  in fiscal year 1997 from  $5,028,812  in fiscal year
1996.  Included  in the  increase of  $1,505,740  were  increases  in payroll of
approximately  $900,000  due to the  hiring of 20  additional  personnel  during
fiscal 1997. In addition, the Company expanded an existing office and opened two
new offices in Marlton, New Jersey and North Haven, Connecticut.

     Interest expense  decreased 29% or $405,365 to $986,087 in fiscal year 1997
from  $1,391,452 in fiscal 1996.  This decrease is primarily  attributable  to a
reduction in debt as a result of the use of proceeds from the  Company's  recent
public  offering.  The Company also  believes  that its constant  monitoring  of
accounts receivable has helped to keep interest costs at a minimum. In addition,
the Company uses all available funds to reduce its outstanding loan balance on a
daily basis. Net interest expense  (interest  expenses less interest income) for
fiscal year 1997 and 1996 was $979,185 and $1,390,867, respectively.

     Income from continuing  operations before income taxes increased by 151% to
$4,165,461  in fiscal  year 1997 from  $1,658,589  in  fiscal  year  1996.  This
increase resulted from a significant increase in the Company's gross profit.

     The Company's effective tax rate was 42.3% in fiscal year 1997 and 44.4% in
fiscal year 1996.

     The Company's net income for fiscal year 1997 increased to $2,403,606  from
$922,703 in fiscal year 1996 resulting from all the factors described above.

     Fiscal Year 1996 Compared to Fiscal Year 1995

     Sales for fiscal 1996  increased 78% or  $43,251,191  to  $98,446,698  from
$55,195,507 in fiscal year 1995. This increase in sales was primarily due to the
increase in sales in IBM's mid-range RS/6000 computer systems.  The Company also
participated  in major  rollouts  for a number of financial  institutions  which
produced  substantial  sales.  In  addition,  two  of  the  Company's  customers
accounted  for 16% and 19%, of those fiscal year 1996 sales.  During fiscal year
1996,  the Company  also  increased  the amount of service  and service  related
billings from the prior year.

     Gross profit as a  percentage  of sales  slightly  decreased in fiscal year
1996 from fiscal year 1995. This decrease was the result of pricing competition,
major customer  rollouts  which  typically  produce lower gross profit  margins,
vendor pricing,  and rebate policies. A reduction of cost of goods sold resulted
from rebates and other favorable  pricing from many vendors.  These rebates,  if
cancelled  or  lowered,  will  have an effect on gross  profit  percentages  and
profitability.

     Selling  and  administrative  expenses  increased  by  23% or  $949,628  to
$5,028,812 in fiscal year 1996 from $4,079,184 in fiscal year 1995.  Included in
the  increase of $949,628  were  increases in  commission  expenses of $456,587,
which was a direct  result of the  significant  increase in sales during  fiscal
year 1996. In addition, payroll expenses increased by approximately $350,000 due
to  additional  personnel,   payroll  increases  and  management  incentives  of
approximately  $100,000,  which  were  paid  based on the  profitability  of the
Company.

     Interest  expense for fiscal year 1996  increased  15% to  $1,391,452  from
$1,211,727 in fiscal year 1995,  due to an increase in  borrowings  necessary to
fund the  Company's  continuing  sales  growth.  The Company  believes  that its
constant  monitoring of accounts receivable has helped to keep interest costs at
a minimum.  In  addition,  the Company  uses all  available  funds to reduce its
outstanding  loan  balance on a daily  basis.  Net  interest  expense  (interest
expenses less interest  income) for fiscal year 1996 and 1995 was $1,390,867 and
$1,207,316, respectively.

     As of September 30, 1996, the Company  determined that the decline in value
of its  available-for-sale  securities was  other-than-temporary  and recorded a
realized loss on these securities.  The effect of this was to reduce income from
continuing operations,  income taxes and net income by $1,406,250,  $562,500 and
$843,750, respectively, for the year ended September 30, 1996.

     Income from continuing  operations before income taxes increased by 229% to
$1,658,589 in fiscal year 1996 from $504,589 in fiscal year 1995.  This increase
resulted from a significant increase in sales during 1996.

     The  Company's  effective tax rate was 44.4% for fiscal year 1996 and 44.3%
for fiscal year 1995.

     The  Company's  net income for fiscal year 1996  increased to $922,703 from
$280,820 in fiscal year 1995 resulting from all the factors described above.

     Liquidity and Capital Resources

     The Company's  current  ratios at September 30, 1997 and 1996 were 1.40 and
1.12,  respectively.  Working capital at September 30, 1997 was $10,356,416,  an
increase of $7,013,871  over the prior  period.  This increase was the result of
the Company  raising  approximately  $5,500,000 in an initial public offering in
June 1997 along with the Company's earnings for the year.

     Cash used in operating  activities  was  $5,528,240 in fiscal year 1997 and
$1,375,934 in fiscal year 1996.  Cash used in investing  activities was $796,017
and $234,938 for the fiscal years 1997 and 1996,  respectively,  and was used to
finance capital expenditures including approximately $400,000 for land in fiscal
year 1997.  The land is being used to  construct a 40,000  square foot  facility
which  will  house  the  Company's  corporate  office,  warehouse  and  assembly
facility.  Cash provided by financing  activities  was $3,581,171 and $1,726,603
for the fiscal years 1997 and 1996, respectively.  Included in the cash provided
by  financing  operation  for the  fiscal  year  1997  was the  proceeds  of the
Company's initial public offering.

     Since 1992,  the Company has had a series of credit  arrangements  with IBM
Credit Corporation.  Pursuant to the Financing Agreement, the Company may borrow
up to 85% of its  eligible  receivables  and 100% of  eligible  inventory,  to a
maximum of  $27,500,000.  In addition to the  permanent  credit line,  there are
various  credit  line  uplifts  during the year which can  increase  the line of
credit  by as much as 50%.  As of  September  30,  1997 and  1996,  interest  on
outstanding borrowings was prime and prime plus 1.375%,  respectively,  or prime
plus 6.5%, should the Company fail to meet certain collateral  requirements.  As
of September 30, 1997 and 1996, borrowings  outstanding under this facility were
$10,614,838  and  $12,483,391,   respectively.   Additionally,  $12,035,345  and
$12,560,441  were  included in accounts  payable at September 30, 1997 and 1996,
respectively, and are included against the maximum credit available.

     The  Company  believes  that its  present  line of credit  with IBM  Credit
Corporation  coupled with its current  earning  capacity and the proceeds of its
recently  completed  initial  public  offering  will be  sufficient  to meet its
capital  and  operational  requirements  for at least  the next  twelve  months,
including but not limited to establishing a new corporate office,  warehouse and
assembly  facility.  This new facility which is currently under  construction is
being financed during the construction  period with the Company's current credit
facility with IBM Credit. It is the Company's  intention to secure a mortgage on
this facility upon its completion.  Throughout fiscal year 1997, the Company has
been in a positive  collateral  position with IBM Credit and has had the ability
to draw down against its current line of credit whenever needed. Although fiscal
year 1997 did not show an increases in sales, net income increased 161% over the
same period last year. The number of days sales outstanding for fiscal year 1997
was 68 days  down  from 74 days in  fiscal  year  1996.  This  decrease  in days
outstanding is a direct result of the Company's increased effort in the accounts
receivable  collection area, including increased collection personnel as well as
utilizing its existing sales force in its collection effort

     Seasonality and Quarterly Fluctuations

     The  Company  has  historically  experienced,  and  expects to  continue to
experience, seasonal fluctuations in its net sales, earnings from operations and
net earnings.  As the Company continues to increase its percentage of sales from
business,  education  and  government  markets,  management  believes  that  the
Company's quarterly net sales will be less impacted by seasonality.  The revenue
for  the  quarter  ended  June  30,  1996  reflected  an  unusually  large  sale
(approximately  $10  million)  of a major  system  to a  financial  institution.
Disregarding  that sale, the Company's upward revenue trend would have continued
through the quarter ended  September 30, 1996.  Sales declined  during the first
and second  quarters of fiscal year 1997 due to the  postponement  by one of the
Company's  customers of the purchase of computer  equipment  associated with the
completion of that customer's  project and the postponement of orders by several
customers in anticipation  of IBM's  announcement  of  "upgrades/refreshers"  of
certain products which the Company would otherwise have sold in that quarter.



                                        5







     The  following  table  sets forth  certain  quarterly  information  for the
periods indicated:




                                                                    Fiscal Year 1997

                                                                        (in thousands)
                                                       Dec. 31, 1996       Mar. 31, 1997       June 30, 1997      Sept. 30, 1997
                                                                                                            

Net sales......................                            $21,283             $17,876             $24,719             $25,848
Gross profit...................                              2,640               2,629               2,617               3,791
Income from continuing
operations before income taxes                                 962                 855                 868               1,481
Net income.....................                                560                 490                 502                 851





                                                 Fiscal Year 1996                              Fiscal Year 1995

                                                    (in thousands)                                        (in thousands)

                                    Dec. 31,     Mar.31,   June 30,      Sept.30,     Dec. 31,     Mar.31,     June 30,     Sept.30,
                                      1995        1996       1996          1996        1994          1995        1995          1995
                                                                                                       


Net sales.........................    $14,556    $23,487   $33,644      $26,760      $10,135      $13,723      $15,840      $15,497
Gross profit......................      1,490      2,393     2,497        3,041       1,333        1,059        1,376        1,986
Income (loss) from continuing
 operations before income taxes           198        678     1,022         (239)         198         (306)            73        539
Net income (loss).................        114        390       547         (128)         116         (223)            73        315


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

     (1) Taxes are  computed  based on  effective  tax rates for the  respective
fiscal years.

     Recent Pronouncement of the Financial Accounting Standards Board

     A  recent   pronouncement  of  the  Financial  Accounting  Standards  Board
("FASB"),  which is not  required to be adopted at this date,  is  Statement  of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," issued in
February 1997. This statement establishes standards for computing and presenting
earnings per share and is effective for periods  ending after December 15, 1997.
This  standard  requires  the Company to present  basic  earnings  per share and
diluted  earnings per share.  The impact of adopting  this  standard is shown in
Note 1 to the Consolidated Financial Statements included herein.

     Disclosures Regarding Forward Looking Statements

     This report on Form 10-K includes  "forward-looking  statements" within the
meaning of the Private Securities  Litigation Reform Act of 1995. All statements
other than statements of historical  facts included in this Form 10-K including,
but not limited to, statements  contained in this  "Management's  Discussion and
Analysis," "Business" and "Notes to Consolidated  Financial Statements," located
elsewhere herein regarding the Company's financial position,  business strategy,
plans and  objectives of management  of the Company for future  operations,  and
industry  conditions,  are  forward-looking  statements.  Although  the  Company
believes that the expectations reflected in such forward-looking  statements are
reasonable, it can give no assurance that such expectations will prove correct.



                                        6







     Inflation

     In the opinion of  management,  inflation has not had a material  effect on
the operations of the Company.

     Item 8. Consolidated Financial Statements

     The information is contained on Pages F-1 through F-18 hereof.

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

     None.


                                        7







                                     PART IV

     Item 14. Exhibits, Financial Statement Schedule and reports on Form 8-K




(a)(1)   CONSOLIDATED FINANCIAL STATEMENTS                                                     PAGE(S)
                                                                                                
Index to Consolidated Financial Statements........................................................F-1

Independent Auditors' Report......................................................................F-2

Consolidated Balance Sheets as of September 30, 1997 and 1996                                     F-3

Consolidated Statements of Income for the years ended
  September 30, 1997, 1996 and 1995...............................................................F-4

Consolidated Statements of Stockholders' Equity for the years
  ended September 30, 1997, 1996 and 1995.........................................................F-5

Consolidated Statements of Cash Flows for the years ended
  September 30, 1997, 1996 and 1995...............................................................F-6

Notes to Consolidated Financial Statements.................................................F-7 - F-18

(a)(2)  FINANCIAL STATEMENT SCHEDULE

Combined Consent and Report of Independent Accountants on Schedule                                S-1

Schedule II - Valuation and Qualifying Accounts...................................................S-2




(a)(3)  EXHIBITS

     * 3.1 Form of Amended and Restated Certificate of Incorporation

     * 3.2 Form of Amended and Restated By-Laws

     * 4.1 Form of Common Stock Certificate

     *10.1 1988 Incentive Stock Option Plan

     *10.2 Inventory and Working Capital  Financing  Agreement,  dated September
26, 1996, and amendment thereto, dated October 31, 1996

     *10.3  Form  of  Employment  Agreement  between  the  Company  and  John H.
Spielberger

     *10.4 Form of Employment Agreement between the Company and Thomas J. Baehr

     *10.5 Form of Employment Agreement between the Company and Dennis R. Wilson

     *10.6 Form of Employment Agreement between the Company and Norman Gaffney

     *10.7  Agreement  for   participation  in  the  IBM  Business   Partner-PC,
Authorized  Assembler  Program  (certain  portions  of this  exhibit  have  been
omitted.  Confidential  treatment  has been  granted with respect to the omitted
portions)

     *22.1 List of Subsidiaries

     23 Consent of Albrecht, Viggiano, Zureck & Company, P.C.

     27 Financial Data Schedule


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

     *Incorporated by reference from the Registrant's  Registration Statement on
Form S-1, Registration Number 333-25593.

     (b)(1) REPORTS ON FORM 8-K

     The Registrant did not file any reports on Form 8-K during the last quarter
of its fiscal year ended September 30, 1997.



                                        8






                                   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.

                                            SYSCOMM INTERNATIONAL CORPORATION
                                            Registrant

                                         By:/s/John H. Spielberger
                                            --------------------------------
                                            John H. Spielberger , President
Dated:  December  24, 1997

     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 H. Spielberger                  Chairman of the Board,
- -----------------------                 President and Chief Executive
John H. Spielberger                     Officer (Principal Operating Officer)                 December 24, 1997



/s/Thomas J. Baehr                      Vice President and Director                           December 24, 1997
- -----------------------
Thomas J. Baehr


/s/Dennis R. Wilson                     Chief Financial Officer, 
- -----------------------                 Vice President, Secretary and
Dennis R. Wilson                        Director                                               December 24, 1997

/s/Norman M. Gaffney                    Director                                               December 24, 1997
- -----------------------
Norman M. Gaffney



/s/John C. Spielberger                  Director                                               December 24, 1997
- -----------------------
John C. Spielberger


/s/Cornelia Eldridge                    Director                                               December 24, 1997
- -----------------------
Cornelia Eldridge

                                                                                               
/s/Lee Adams                            Director                                               December 24, 1997
- -----------------------
Lee Adams



                                        9






                       SYSCOMM INTERNATIONAL CORPORATION
                                 AND SUBSIDIARY

                       CONSOLIDATED FINANCIAL STATEMENTS











TABLE OF CONTENTS


                                                               Page No.
     

INDEPENDENT AUDITORS' REPORT                                     F-2

FINANCIAL STATEMENTS

        Consolidated Balance Sheets                              F-3

        Consolidated Statements of Income                        F-4

        Consolidated Statements of Stockholders Equity           F-5

        Consolidated Statements of Cash Flows                    F-6

        Notes to Consolidated Financial Statements               F-7













                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
SysComm International Corporation and Subsidiary
Hauppauge, New York


     We have audited the  accompanying  consolidated  balance  sheets of SysComm
International  Corporation  and Subsidiary as of September 30, 1997 and 1996 and
the related  consolidated  statements of income,  stockholders  equity, and cash
flows for each of the years in the three-year  period ended  September 30, 1997.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
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 audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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 consolidated  financial  statements  referred to above
present fairly in all material respects,  the consolidated financial position of
SysComm  International  Corporation  and Subsidiary as of September 30, 1997 and
1996 and the results of its  operations and its cash flows for each of the years
in the three-year  period ended September 30, 1997, in conformity with generally
accepted accounting principles.



A L B R E C H T ,  V I G G I A N O ,  Z U R E C K &  C O M P A N Y, P.C.
Hauppauge, New York
November 4, 1997




                                      F-2





                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
                          September 30, 1997 and 1996



                                                        1997                    1996
ASSETS
                                                                               

Current Assets
        Cash and cash equivalents               $       437,594           $     1,180,680
        Accounts and note receivable, net            23,209,156                21,012,242
        Inventory                                    12,644,343                 8,936,845
        Prepaid expenses                                103,672                    43,207
        Investments                                      84,375                   206,250
        Deferred income taxes                            87,260                      -0-
                                                    -----------                ----------
                     Total Current Assets            36,566,400                31,379,224
                                                    

Property, Plant and Equipment, Net                    1,201,549                   539,174

Other Assets                                            336,087                   184,159
                                                    -----------                 ---------
                     Total Assets            $       38,104,036        $       32,102,557
                                                    ===========                 =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

        Supplier credit facility                $    10,614,838         $      12,483,391
        Accounts payable and accrued liabilities     15,052,319                14,440,421
        Current portion of long-term liabilities         43,613                    26,626
        Income taxes payable                            499,214                 1,069,197
        Deferred income taxes                             -0-                      17,044
                                                    -----------                ----------
                     Total Current Liabilities       26,209,984                28,036,679
                                                    -----------                ----------

Long-Term Liabilities                                    66,416                    67,291
                                                    -----------                ----------
                     Total Liabilities               26,276,400                28,103,970

Commitments and Contingencies

Stockholders' Equity
        Preferred stock; no par value; 1,000,000
          shares authorized; none issued                   -0-                        -0-
        Common stock; $.01 par value; 5,000,000
          shares  authorized  in 1996;  40,000,000
          shares  authorized  in 1997;  3,632,200
          shares  issued in 1996;  5,017,200  shares  
          issued in 1997; 3,170,540 shares outstanding 
          in 1996; 4,555,540 shares outstanding 
          in 1997                                        50,172                    36,322
        Additional paid-in capital                    5,610,452                   138,143
        Unrealized loss on available-for-sale
          securities                                    (60,716)                     -0-
        Retained earnings                             6,369,898                 3,966,292
                                                    -----------                ----------
                                                     11,969,806                 4,140,757
        Less:  Treasury stock (at cost)
               461,660 shares                          (142,170)                 (142,170)
                                                    -----------                ----------
                   Total Stockholders' Equity        11,827,636                 3,998,587
                                                    -----------                ----------
                   Total Liabilities and 
                     Stockholders Equity        $    38,104,036        $       32,102,557
                                                    ===========                ==========


     See accompanying notes to consolidated financial statements.

                                      F-3





                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                       CONSOLIDATED STATEMENTS OF INCOME
                 Years ended September 30, 1997, 1996 and 1995




                                                        1997                    1996                    1995
                                                                                                     

Sales                                       $       89,725,938      $       98,446,698      $       55,195,507

Cost of Sales                                       78,049,310              89,025,331              49,441,544

             Gross Profit                           11,676,628               9,421,367               5,753,963

Selling and Administrative Expenses                  6,534,552               5,028,812               4,079,184

             Income from Operations                  5,142,076               4,392,555               1,674,779

Other Income (Expense)
        Interest expense                              (986,087)             (1,391,452)             (1,211,727)
        Interest income                                  6,902                     585                   4,411
        Other income                                     2,570                  63,151                  37,126
        Realized loss on available-for-sale
          securities                                      -0-               (1,406,250)                   -0-

             Total Other Expense                      (976,615)             (2,733,966)             (1,170,190)

        Income Before Provision for Income Taxes     4,165,461               1,658,589                 504,589

Provision for Income Taxes                           1,761,855                 735,886                 223,769

             Net Income                      $       2,403,606       $         922,703         $       280,820

Earnings Per Common and Common
  Equivalent Share                           $             .61       $             .25         $           .08

             Number of Common and
             Common Equivalent Shares                3,931,846               3,677,290               3,614,040




     See accompanying notes to consolidated financial statements.

                                      F-4





                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
                 Years ended September 30, 1997, 1996 and 1995





 
                                                        Additional                    Unrealized                   Total
                                      Common Stock       Paid-In     Treasury Stock   Loss             Retained    Stockholders
                                    Shares    Amount      Capital     Shares   Amount  on Securities    Earnings    Equity

                                                                                            

Balance as of September 30, 1994   3,170,540  $36,322    $ 138,143   461,660 $(142,170) $(382,500)    $2,762,769   $2,412,564



Net Income                                                                                               280,820      280,820
Unrealized Loss on Available-for-
  Sale Securities                                                                        (337,500)                   (337,500)
                                   ---------  -------     --------  --------  --------  ---------      ---------    ----------

Balance as of September 30, 1995   3,170,540   36,322      138,143   461,660  (142,170)  (720,000)     3,043,589    2,355,884


Net Income                                                                                               922,703      922,703
Unrealized Loss on Available-for-
  Sale Securities                                                                        (123,750)                   (123,750)
Realized Loss on Available-for-Sale
  Securities                                                                              843,750                     843,750
                                   ---------  -------     --------   -------   -------   ---------      ---------    ---------

Balance as of September 30, 1996   3,170,540   36,322      138,143   461,660  (142,170)       -0-      3,966,292    3,998,587

Common Stock Sold in Public Offerings
  Net of Offering Costs            1,385,000   13,850    5,472,309                                                  5,486,159

Net Income                                                                                             2,403,606    2,403,606
Unrealized Loss on Available-for-
  Sale Securities                                                                         (60,716)                    (60,716)
                                   ---------   -------   ----------  --------  ---------  --------     ---------    ----------

Balance as of September 30, 1997  4,555,540 $  50,172  $ 5,610,452   461,660 $(142,170) $ (60,716) $   6,369,898 $ 11,827,636
                                  =========    =======   ==========  ======== =========   ========     =========   ==========


 




     See accompanying notes to consolidated financial statements.

                                      F-5





                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 Years ended September 30, 1997, 1996 and 1995




                                                                              1997                    1996                    1995
                                                                                                                     

Cash Flows From Operating Activities
        Net income                                                    $     2,403,606       $       922,703         $       280,820
        Adjustments to reconcile net income to net
                cash used in operating activities:
                        Depreciation and amortization                         188,759               149,090                 134,139
                        Deferred tax benefit                                  (43,145)               (1,614)                 (5,442)
                        (Gain) loss on disposition of fixed assets             (2,570)                  (23)                    114
                        Realized loss on available-for-sale securities            -0-               843,750                     -0-
                        Changes in assets and liabilities:
                                Accounts and note receivable               (2,255,884)          (10,647,117)               (543,905)
                                Inventory                                  (3,707,498)           (2,960,653)                 93,808
                                Prepaid expenses and other assets            (153,423)               25,819                 (55,666)
                                Accounts payable and accrued liabilities      611,898             9,245,967                (287,525)
                                Income taxes payable                         (569,983)            1,046,144                (164,451)
                                                                           -----------          -----------               ----------

        Net Cash Used in Operating Activities                              (3,528,240)           (1,375,934)               (548,108)
                                                                           -----------          -----------               ----------
Cash Flows From Investing Activities
        Purchase of fixed assets                                             (803,317)             (235,388)                (92,697)
        Proceeds from disposition of fixed assets                               7,300                   450                     400
                                                                           -----------          -----------               ----------
                                Net Cash Used in Investing Activities        (796,017)             (234,938)                (92,297)
                                                                           -----------          -----------               ----------

Cash Flows From Financing Activities
        Net proceeds from (payments under) supplier
          credit facility                                                  (1,868,553)            1,686,280                 343,000
        Net proceeds from long-term debt                                         -0-                 58,229                     -0-
        Payments of long-term liabilities                                     (36,435)              (17,906)                    -0-
        Net proceeds from issuance of common stock                          5,486,159                   -0-                     -0-
                                                                            ----------          -----------               ---------
        Net Cash Provided by Financing Activities                           3,581,171             1,726,603                 343,000
                                                                            ----------          -----------               ---------
        Net Increase (Decrease) in Cash and
        Cash Equivalents                                                     (743,086)              115,731                (297,405)

Cash and Cash Equivalents at Beginning of Year                              1,180,680             1,064,949               1,362,354
                                                                            ----------           ----------               ---------

Cash and Cash Equivalents at End of Year                              $       437,594       $     1,180,680       $       1,064,949
                                                                            ==========           ==========               =========

Supplemental Disclosures of Cash Flow Information Cash 
paid during the year for:
                Income taxes                                          $     2,386,580       $       248,606          $      219,543
                Interest                                                      986,087             1,391,452               1,211,727

Supplemental Schedules of Noncash Investing
  and Financing Activities
        Acquisition of equipment:
                Cost of equipment                                      $       52,547  $             53,594            $        -0-
                        Less:  Equipment financed                             (52,547)              (53,594)                    -0-
                                                                            ----------           -----------               --------

                               Cash Paid for Capital Expenditures      $          -0-     $             -0-            $        -0-
                                                                            ==========          ============               ========



     See accompanying notes to consolidated financial statements.

                                      F-6





                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 1 - Summary of Significant Accounting Policies

     Business Organization and Basis of Presentation

     SysComm   International   Corporation  (the  "Company"),   incorporated  on
September  30,  1987,  is a Delaware  corporation  with one  active  subsidiary:
Information  Technology  Services,  Inc. (doing business as InfoTech, a New York
Corporation since 1980).

     The Company,  through its subsidiary,  is authorized to conduct business in
New York, New Jersey,  Connecticut and Massachusetts.  The Company is a supplier
and systems integrator of a broad range of computer and related products.

     On March 31,  1997,  the  Company  effected a  two-for-one  split of common
stock. All references in the accompanying  consolidated financial statements and
notes thereto  relating to common stock and additional  paid-in  capital,  stock
options,  per share and share data have been  retroactively  adjusted to reflect
the two-for-one stock split.

     On April 21, 1997, a special meeting of the  stockholders was held to amend
the Certificate of Incorporation to increase the aggregate of authorized  shares
of common stock from  5,000,000  shares of common stock to 40,000,000  shares of
common stock and to authorize 1,000,000 shares of preferred stock. The preferred
stock is not expected to be issued at any time in the near future. The preferred
stocks rights,  preferences and characteristics  will be determined by the Board
of Directors at such time as the preferred stock is issued.

     On June 17, 1997, the Company  consummated  an initial  public  offering of
common  stock (the  Offering).  The Company sold  1,250,000  shares at $5.00 per
share. On July 21, 1997, the underwriters  exercised their over-allotment option
to purchase an  additional  135,000  shares.  In  connection  with the Offering,
125,000 warrants were granted to the Companys  representative  underwriter.  The
fair value was  estimated at $.52 per warrant  using the  Black-Scholes  pricing
model.  The fair  value of these  warrants  were  offset  against  the  Offering
proceeds.

     Basis of Consolidation

     The  consolidated  financial  statements  include  the  accounts of SysComm
International   Corporation  and  its   wholly-owned   subsidiary.   Significant
intercompany accounts and transactions have been eliminated in consolidation.

     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 could differ from those estimates.


                                      F-7

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 1 - Summary of Significant Accounting Policies (continued)

     Stock-Based Compensation

     The  Company  accounts  for  stock  options  as  prescribed  by  Accounting
Principles Board Opinion No. 25 and includes pro forma  information in the stock
option plan  footnote,  as  permitted by Financial  Accounting  Standards  Board
Statement No. 123, Accounting for Stock-Based Compensation (FASB 123).

     Accounts and Note Receivable

     Accounts and note  receivable  are presented net of allowances for doubtful
accounts and for sales returns. The allowances are based on prior experience and
managements evaluation of the collectibility of accounts receivable and returned
merchandise  credits.  Authorized sales returns from the supplier are classified
as receivables.  Management believes that the allowances are adequate.  However,
further  additions  to the  allowances  may be  necessary  based on  changes  in
economic conditions.

     The  allowance  for  doubtful  accounts  was  $108,343  and  $63,846  as of
September 30, 1997 and 1996, respectively.

     The  allowance  for sales  returns was $37,389 as of September 30, 1997 and
1996.

     Inventory

     Inventory  consists  principally of computer hardware and software,  and is
valued at the lower of cost (first-in,  first-out) or market.  Substantially all
inventory items are finished goods.

     Property, Plant and Equipment

     Property,  plant  and  equipment  is  stated  at cost,  net of  accumulated
depreciation.  Expenditures  for  maintenance  and repairs  are charged  against
operations as incurred. Upon retirement or sale, the assets disposed are removed
from the accounts and any resulting  gain or loss is reflected in the results of
operations.  Capitalized  values of property under leases are amortized over the
life of the lease or the estimated life of the asset, whichever is less.

     Depreciation and amortization are computed using the  straight-line  method
over the following  estimated useful lives:  Estimated Useful Lives Vehicles 1-5
years  Computer  equipment  5 years  Furniture  and  fixtures 7 years  Leasehold
improvements 5 years Building 40 years


                                      F-8

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 1 - Summary of Significant Accounting Policies (continued)

     Income Taxes

     The Company uses the asset and liability  method of  accounting  for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are  recognized  for the future tax  consequences  attributable  to  differences
between the financial  statement  carrying amounts and the tax basis of existing
assets and liabilities.

     Investments

     The Company  evaluates its investment  policies  consistent  with Financial
Accounting Standards Board Statement No. 115, Accounting for Certain Investments
in Debt and Equity Securities (FASB 115). Accordingly, investment securities are
classified  as  available-for-sale  securities  and carried at fair value,  with
temporary  unrealized  gains and  losses  reported  as a separate  component  of
stockholders  equity.  Realized  losses are  recorded  for any  decline in value
determined to be other-than-temporary on available-for-sale securities.

     Revenue Recognition

     Revenue related to the sales of computer  equipment is recorded at the time
of  shipment.  Service  revenue  and  costs are  recognized  when  services  are
provided.

     Earnings Per Common Share

     Earnings per common share are computed using the weighted average number of
shares of common stock and dilutive common stock equivalents  outstanding during
the period. Dilutive common stock equivalents include stock options. There is no
difference  between primary and fully diluted  earnings per common share for all
periods presented.

     In February 1997,  Financial  Accounting Standards Board Statement No. 128,
Earnings per Share,  (FASB 128) was issued.  FASB 128 alters the computation and
presentation  of reported  earnings per share.  The  Statement is required to be
adopted for the periods ending after December 15, 1997.  Earlier  application is
not permitted.  Had earnings per share been determined consistent with FASB 128,
earnings per common share would be increased to the pro forma amounts  indicated
below:

                                     1997           1996             1995

Earnings per share
        As reported                   .61            .25              .08
        Pro forma:
                Basic                 .67            .29              .09
                Diluted               .61            .25              .08



                                      F-9

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 1 Summary of Significant Accounting Policies (continued)

     Cash and Cash Equivalents

     The Company considers all liquid  instruments  purchased with a maturity of
three months or less to be cash equivalents.

     Fair Value of Financial Instruments

     The  carrying  amounts of  financial  instruments  including  cash and cash
equivalents, accounts receivable, prepaid expenses, accounts payable and accrued
liabilities,  approximate  fair value due to the  relatively  short  maturity of
these  instruments  The fair value of investments  is estimated  based on quoted
market price.  The carrying value of the supplier  credit facility and long-term
debt,  including  the  current  portion,  approximates  fair value  based on the
incremental  borrowing  rates  currently  available to the Company for financing
with similar terms and maturities.

     Note 2 - Investments

     Investments  consist of the following:

                                          1997          1996
 Ameriquest  Technologies,Inc. 
 (Formerly CMS  Enhancements,  Inc.)
      Number of Shares                   300,000       300,000
 Fair Value                             $ 84,375     $ 206,250
 Cost                                $ 1,612,500   $ 1,612,500

     At September  30, 1997 and 1996,  marketable  equity  securities  have been
categorized as available-for-sale and are stated at fair value. At September 30,
1997, an unrealized  holding loss of $60,716 is shown as a separate component of
stockholders equity until realized.  The increase in the net unrealized loss for
the years ended September 30, 1997,  1996, and 1995 totaled  $60,716,  $123,750,
and   $337,500,   respectively.   The  Company   recorded  a  realized  loss  on
available-for-sale  securities  of  $1,406,250,  which  net  of  deferred  taxes
amounted to $843,750,  for the year ended September 30, 1996,  since the decline
in value was determined to be other-than-temporary as of that date.












                                      F-10

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 3 - Property, Plant and Equipment

     Property, plant and equipment is set forth below:

                                               1997          1996

        Land                         $       437,660  $       -0-
        Building                              26,740          -0-
        Vehicles                             119,159       93,412
        Computer equipment                   698,911      733,297
        Furniture and fixtures               327,627      360,106
        Leasehold improvements               117,691       93,243

                                           1,727,788    1,280,058

        Accumulated   depreciation          (526,239)    (740,884) 
                                           ---------   ----------
        Property,  plant and 
          equipment,  net           $      1,201,549 $    539,174
                                           =========   ==========

     Note 4 Other Assets

     The Company is the owner and beneficiary of a $1,000,000  whole life policy
covering the life of the principal stockholder/officer. The cash surrender value
of life  insurance  included in Other Assets as of  September  30, 1997 and 1996
amounted to $176,350 and $145,046, respectively.

     Note 5 - Financing Arrangements

     The Company  entered  into a formal  credit  agreement  with the  financing
subsidiary of its major  supplier.  Under the credit  facility,  the Company may
borrow up to 85% of  receivables  due within 90 days and up to 100% of  eligible
inventory, to a maximum of $27,500,000.  The agreement,  which expires September
23, 1998,  is subject to temporary  increases,  thereby  increasing  the line of
credit to $41,500,000 during certain periods. As of September 30, 1997 and 1996,
borrowings  outstanding  under this facility were  $10,614,838 and  $12,483,391,
respectively.  As of September  30, 1997 and 1996,  interest on the  outstanding
borrowings is payable monthly at prime and prime plus 1.375%,  respectively,  or
prime  plus  6.5%,   should  the  Company  fail  to  meet   certain   collateral
requirements.  Interest costs  included in interest  expense for the years ended
September 30, 1997, 1996 and 1995 totaled  $970,912,  $1,381,373 and $1,188,525,
respectively.   Additionally,  $12,035,345  and  $12,560,441  were  included  in
accounts payable at September 30, 1997 and 1996, respectively,  and are included
against the maximum credit available.






                                      F-11

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 6 - Long-Term Liabilities

     Long-term liabilities consist of the following: 
1997 1996
 FORD MOTOR CREDIT CORP. 
 Collateralized by a lien 
 on a Company  automobile; 
 payable in 36 monthly installments 
 of $815  including  interest of 9.0%
 per annum;  final payment due 
 October 1999.                                     $ 18,517           $ -0-

Collateralized  by a lien on a
 Company  automobile;  payable  in 36
 monthly installments of $1,194 including
 interest of 9.9% per annum; final payment due
 December 1998.                                      16,781          27,832

Collateralized by a lien on a Company 
automobile; payable in 36 monthly 
installments of $678 including interest
of 9.0% per annum; final payment
 due November 1998.                                   8,978           16,480

AT&T CREDIT CORP.
Capital lease collateralized by a 
lien on the Companys phone system;
 payable in monthly installments of 
$708 including interest of 14.446% 
per annum; final payment due May 2001.              24,069          29,497

Capital lease collateralized by a lien
on the Companys phone system; payable
in monthly installments of $542 including 
interest of 15.089% per annum;
final payment due January 2001.                     17,158          20,108

Capital lease collateralized by a lien 
on the Companys phone system; payable in 
monthly installments of $560 including
 interest of 9.5% per annum; final 
payment due March 2002.                             24,526             -0-
                                                  --------       ---------
                                                   110,029          93,917

        Less:  Current maturities                  (43,613)        (26,626)
                                                  --------       ---------
                                           $        66,416   $      67,291
                                                  ========       =========



                                      F-12

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 6 Long Term Liabilities (continued)

     Maturities of long-term liabilities are as follows:

                          September 30, 1998      $     43,613
                                        1999            30,335
                                        2000            19,245
                                        2001            13,566
                                        2002             3,270
                                                       -------
                                                  $    110,029
                                                       =======

     Note 7 - Capital Leases

     As  further  described  in Note 6,  the  Company  began  leasing  telephone
equipment  during  December  1995. As of September 30, 1997 and 1996,  the gross
assets capitalized under telephone equipment leases totaled $80,745 and $54,486,
respectively,  and the  accumulated  amortization  totaled  $13,851  and $3,892,
respectively.  The  amortization  expense for the years ended September 30, 1997
and 1996 of  $9,959  and  $3,892,  respectively,  is  included  in  depreciation
expense.

     Note 8 - Income Taxes

     The provision (benefit) for income taxes consists of the following:

                                      Years Ended September 30,
                            1997             1996               1995
      Current:
       Federal         $ 1,285,000    $    956,000    $       148,504
       State               520,000         344,000             80,707
                         ---------      ----------          ---------
      Total Current      1,805,000       1,300,000            229,211
                         ---------      ----------          ---------
      Deferred:
       Federal             (32,440)       (479,642)            (4,626)
       State               (10,705)        (84,472)              (816)
                         ----------     -----------         ---------
      Total Deferred       (43,145)       (564,114)            (5,442)
                         ----------     -----------         ---------
       Provision for 
       Income Taxes    $ 1,761,855   $     735,886    $       223,769
                         ==========     ===========         =========









                                      F-13

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 8 - Income Taxes (continued)

     The  difference  between the  provision  for income  taxes at the  Companys
effective income tax rate and the federal statutory rate of 34% is as follows:


                                            Years Ended September 30,
                                           1997          1996          1995

  Income taxes at statutory rate       $ 1,416,258  $  563,920   $  171,560
  State taxes, net of federal benefit      333,237     132,687       52,728
  Other                                     12,360      39,279         (519)

        Provision for Income Taxes     $ 1,761,855  $  735,886   $  223,769


     The tax  effects  of  temporary  differences  giving  rise  to  significant
portions of deferred taxes are as follows:

                                                     September 30,
                                                1997                 1996

   Allowance for doubtful accounts     $       45,504       $       25,538
   Inventory capitalization                    40,701               15,742
   Investments                                (17,342)             (78,500)
   Depreciation                                   508                5,840
   Other                                       17,889               14,336

   Net Deferred Tax Asset (Liability)  $       87,260       $      (17,044)


     Note 9 - Stock Option Plan

     On July 29, 1988, the stockholders approved a stock option plan (the Plan).
In  connection  therewith,  1,000,000  shares of common  stock are  reserved for
issuance  pursuant to options that may be granted  under the Plan through May 5,
1998. In the case of options  granted to an employee of the Company who is a 10%
or more  stockholder,  the option  price is an amount per share of not less than
110% of the fair market  value per share on the date the option is granted.  The
option price for options  granted to all other  employees is an amount per share
of not less than the fair market  value on the date the option is  granted.  The
options  granted in 1995 vest over a  three-year  period  following  the date of
grant and expire on September 1, 1998.  The options  granted in 1997 vest over a
four-year  period  following  the date of grant and expire  within five years or
September 1, 2001, whichever comes first.








                                      F-14





                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 9 - Stock Option Plan (continued)

     A summary  of stock  option  activity  related to the  Companys  plan is as
follows:



                                           Beginning         Granted         Exercised     Canceled    Ending
                                           Balance           During          During        During      Balance
                                           Outstanding       Period          Period        Period      Outstanding     Exercisable
                                                                                                     

Year ended September 30, 1995
Number of shares                             302,000       768,000               0        502,000         568,000            0
Weighted average exercise price
  per share                             $       0.95    $     0.72               0    $      0.90    $       0.69            0

Year ended September 30, 1996
Number of shares                             568,000             0               0         70,000         498,000      164,340
Weighted average exercise price
  per share                             $       0.69             0               0    $      0.68    $       0.69    $    0.69

Year ended September 30, 1997
Number of shares                             498,000        69,500               0          3,000         564,500      328,680
Weighted average exercise price
  per share                             $       0.69    $     5.59               0    $      5.56    $       1.26    $    0.69



     The weighted average per share fair value of the options granted during the
years  ended  September  30,  1997 and 1995 was  estimated  as $2.89  and  $.20,
respectively,  on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions:

                                                1997               1995

       Risk-free interest rates                5.698%          5.92-7.84%
       Expected option lives               4.57 years     3.17-3.75 years
       Expected volatilities                      60%        22.03-23.87%
       Expected dividend yields                    0%                  0%

     The weighted-average  remaining contractual life of the options outstanding
at September 30, 1997 is as follows:

                                                Weighted-Average Remaining
               Range of Exercise Price             Contractual Life

              $ 0.68  - $ 0.75                         0.85 years
                5.56  -   6.12                         4.57 years

     The Company  applies APB Opinion  No. 25,  Accounting  for Stock  Issued to
Employees, and related interpretations in accounting for the stock option plans.
Accordingly, no compensation expense was recognized in 1997 for the stock option
awards made in 1997, since the exercise price of the stock options granted under
the Stock  Option  Plan was not less than the fair  market  value of the  Common
Stock at the date the option was granted.

                                      F-15

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 9 - Stock Option Plan (continued)

Had  compensation  expense  for stock  option  awards  granted in 1997 been
determined  consistent with FASB 123, net income and earnings per share would be
reduced to the pro forma amounts indicated below:

                                                  1997
Net income
        As reported                  $       2,403,606
        Pro forma                            2,375,739

Net income
        As reported                  $             .61
        Pro forma                                  .60

     Note 10 - 401(k) Plan

     On January 1, 1994,  the Company  adopted a 401(k)  Savings Plan (the Plan)
for the benefit of all eligible  employees.  All  employees as of the  effective
date of the Plan became eligible.  An employee who became employed after January
1, 1994,  would  become a  participant  after the  completion  of a half-year of
service and the attainment of 20 years of age.

     Participants may elect to contribute from their  compensation any amount up
to  the  maximum  deferral  allowed  by  the  Internal  Revenue  Code.  Employer
contributions  are a  discretionary  percentage  match.  The  Company  may  make
optional contributions for any plan year at its discretion.

     During the years ended  September  30, 1997,  1996,  and 1995,  the Company
incurred 401(k) costs totaling $42,986, $31,738, and $19,148, respectively.

     Note 11 - Concentration of Credit Risk

     Cash

     The  Company  places  most  of its  temporary  cash  investments  with  one
financial  institution  and  normally  exceeds  the  Federal  Deposit  Insurance
Corporation  limit. The Company has not experienced any loss to date as a result
of this policy.

     Major Customers

     Computer sales  encompass  markets  wherein the demands of any one customer
may vary greatly due to changes in technology. No single customer comprised more
than 10% of sales or accounts  receivable as of and for the year ended September
30, 1997. In comparison,  two customers comprised 16% and 19%, respectively,  of
sales for the year ended  September 30, 1996. One of these  customers  accounted
for 33% of accounts  receivable as of September  30, 1996.  Two customers of the
Company  accounted  for 23% and 14%,  respectively,  of sales for the year ended
September 30, 1995.







                                      F-16

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 12 - Commitments and Contingencies

     Purchases

     As further  discussed  in Note 5, the  Company  purchases a majority of its
products from  International  Business  Machines  Corporation,  whose subsidiary
represents the Company's major lending  source.  The loss of this supplier could
materially  affect  the  Company.   Purchases  from  this  supplier  represented
approximately  90% of total  purchases for the each of the years ended September
30, 1997, 1996 and 1995.

     Leases

     The Company has operating  leases on real  property and equipment  expiring
through the year 2002. In addition to fixed  rentals,  the real property  leases
have  escalation  clauses that require the Company to pay a percentage of common
area maintenance, real estate taxes, and insurance.

     Rent expense and other charges totaled $309,861, $253,412, and $255,307 for
the years ended September 30, 1997, 1996, and 1995, respectively.

     The  future  minimum  rental  commitments  for the  Companys  years  ending
September 30 are as follows:

                           1998    $       356,473
                           1999            280,171
                           2000            175,870
                           2001            147,499
                           2002             57,730
                                         ---------
                                   $     1,017,743
                                         =========    
     

     Employment Agreements

     Effective  June 17,  1997,  the Company  entered into  two-year  employment
agreements  with four  senior  executives.  The  employment  agreements  include
compensation plans for fiscal 1997 as follows:  John H. Spielberger will receive
a base  salary of  $140,000  plus a bonus of 3% of all  pre-tax  earnings of the
Company;  Thomas J.  Baehr  will  receive  $150,000  plus a bonus of 3.5% of all
pre-tax  earnings of  Information  Technology  Services,  Inc.  (InfoTech),  the
Companys wholly-owned subsidiary;  Dennis R. Wilson will receive $120,000 plus a
discretionary  bonus  determined by the  Compensation  Committee;  and Norman M.
Gaffney will receive  $125,000 plus a bonus of 1.5% of the gross profit  dollars
of InfoTech.  These annual  performance  incentive plans will be reviewed during
each fiscal year and new  incentive  plans will be  implemented  by the Companys
Compensation Committee for the fiscal year 1998, and thereafter as applicable.





                                      F-17

                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Note 12 - Commitments and Contingencies (continued)

     Purchase Commitment

     In March  1997,  the  Company  commenced  operation  of an IBM PC  assembly
facility under IBMs Authorized  Assembler  Program (the AAP). Under the terms of
the AAP Agreement  with IBM, the Company will use its best efforts to purchase a
sufficient  number of Base System Units and Approved  Components to enable it to
assemble at least 20% of the Companys actual sales volume of PCs.

     Litigation

     The Company is a defendant in a lawsuit which alleges wrongful  termination
of employment.  The action has been in the discovery stage since 1992. While the
results  of  litigation  cannot  be  predicted  with any  certainty,  management
believes  that the final  outcome  of such  litigation  will not have a material
adverse  effect on the  Companys  consolidated  financial  position,  results of
operations or cash flows. Changes in assumptions,  as well as actual experience,
could cause the estimates made by management to be altered.

     Note 13 Quarterly Financial Data (unaudited)

     Quarterly  financial  data for the years ended  September 30, 1997 and 1996
follow:



                                              First                   Second                  Third                   Fourth
                                             Quarter                 Quarter                 Quarter                 Quarter
                                                                                                            

For the year ended September 30, 1997:

Net sales                          $       21,282,537      $       17,876,338      $       24,718,664      $       25,848,399
Gross profit                                2,639,498               2,629,349               2,617,138               3,790,643
Income from operations                      1,275,495               1,036,205               1,072,381               1,757,995
Net income                                    559,642                 490,673                 502,347                 850,944
Net income per share                             0.16                    0.14                    0.14                    0.17

For the year ended September 30, 1996:

Net sales                          $       14,555,620      $       23,487,203      $       33,644,269      $       26,759,606
Gross profit                                1,490,660               2,392,934               2,496,850               3,040,923
Income from operations                        497,195               1,003,673               1,373,325               1,518,362
Net income (loss)                             114,214                 389,489                 547,000                (128,000)
Net income (loss) per share                      0.03                    0.11                    0.15                   (0.04)



    Note 14 Subsequent Event

     In October  1997,  the Company  entered  into a contract to construct a new
facility in Yaphank, New York for approximately $1,982,000.

                                      F-18




                         COMBINED CONSENT AND REPORT OF
                       INDEPENDENT ACCOUNTANTS ON SCHEDULE





To the Board of Directors
SysComm International Corporation and Subsidiary
Hauppauge, New York




     The audits  referred  to in our  report on page F-2  included  the  related
financial  statement schedule on page S-2 as of September 30, 1997, and for each
of the years in the three-year period ended September 30, 1997, included in this
Form 10-K.  This  financial  statement  schedule  is the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an  opinion on this
financial statement schedule based on our audits. In our opinion, such financial
statement  schedule,  when  considered  in  relation  to the basic  consolidated
financial statements taken as a whole,  presents fairly in all material respects
the information set forth therein.

     We consent to the use of our reports  included  herein and to the reference
to our firm under the heading "Experts" in this Form 10-K.




ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C.


Hauppauge, New York
December 15, 1997













                                       S-1







                SYSCOMM INTERNATIONAL CORPORATION AND SUBSIDIARY
                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS




                                                                                 Additions
                                                          Balance at   (1) Charged       (2) Charged                       Balance
                                                          Beginning        to Costs and   to Other                          at End
    Deducted from Assets                                  of Period        Expenses       Accounts       Deductions      of Period
                                                                                                               

 Allowance for Doubtful Accounts:
  Year ended September 30, 1995                        $    -0-        $    50,000    $     -0-        $   -0-          $ 50,000
  Year ended September 30, 1996                            50,000          107,273          -0-          93,427(a)        63,846
  Year ended September 30, 1997                            63,846          125,000          -0-          80,503(a)       108,343
 Allowance for Sales Returns:
  Year ended September 30, 1995                        $    -0-        $   125,000    $     -0-        $   -0-         $ 125,000
  Year ended September 30, 1996                           125,000              -0-          -0-          87,611(a)        37,389
  Year ended September 30, 1997                            37,389              -0-          -0-            -0-            37,389
Allowance for Net Unrealized Losses
  on Marketable Equity Securities:
  Year ended September 30, 1995                      $    382,500      $       -0-    $ 337,500(b)     $   -0-        $  720,000
  Year ended September 30, 1996                           720,000              -0-      123,750(b)      843,750(c)           -0-
  Year ended September 30, 1997                               -0-              -0-       60,716(b)         -0-            60,716



     (a) Amounts written off, net of recoveries.

     (b) Net  unrealized  loss  on  marketable  equity  securities  recorded  in
stockholders' equity.

     (c) Net realized loss on marketable equity securities.




                                       S-2