U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the quarterly period ended June 30, 2003.

Commission file number: 1-13704

PROLOGIC MANAGEMENT SYSTEMS, INC.
(Name of small business issuer in its charter)

Arizona 86-0498857
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3708 E. Columbia Street, #110, Tucson, Arizona 85714
(Address of principal executive offices) (Zip Code)

Issuer's telephone number (520) 747-4100

Securities registered under Section 12(g) of the Exchange Act:

Common Stock

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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 .
--- ---

Number of shares of common stock outstanding on June 30, 2003 was 7,275,048.

Transitional Small Business Disclosure Format:
Yes No X
--- ---

Prologic Management Systems, Inc.
Index

Page

Part I. FINANCIAL INFORMATION 3

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets at June 30, 2003 (unaudited) and
March 31, 2003 3

Condensed Consolidated Statements of Operations for the Three Months Ended
June 30, 2003 (unaudited) and June 30, 2002 (unaudited) 4

Condensed Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 2003 (unaudited) and June 30, 2002 (unaudited) 5

Notes to Condensed Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition 10

Item 3. Controls and Procedures 15

Part II. OTHER INFORMATION 16

Item 1. Legal Proceedings 16

Item 2. Changes in Securities 16

Item 3. Defaults upon Senior Securities 16

Item 4. Submission of Matters to a Vote by Security Holders 16

Item 5. Other Information 16

Item 6. Exhibits and Reports on Form 8-K 16

SIGNATURES 17

PART I. Financial Information
Item 1. Condensed Consolidated Financial Statements

Prologic Management Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

June 30, March 31,
2003 2003
---------------- ---------------
ASSETS (unaudited)

Current assets:

Cash $ 32,631 $ 216,904
Accounts receivable, less allowance for doubtful accounts of $95,383 at June
30, 2003 and $217,264 at March 31, 2003 4,253,265 4,175,496
Inventory 257,746 245,257
Prepaid expenses 153,079 175,270
---------------- ---------------

Total current assets 4,696,721 4,812,927

Property and equipment, net 287,652 324,494
Deferred financing costs, net 71,745 93,267
Other assets 186,332 163,049
---------------- ---------------

TOTAL ASSETS $ 5,242,450 $ 5,393,737
================ ===============

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

Current liabilities:
Line of Credit $ 447,500 $ 205,000
Short term debt and notes payable 2,137,298 2,782,770
Accounts payable 4,187,181 3,931,356
Sales tax payable 744,177 762,160
Accrued expenses 553,209 616,008
Deferred maintenance revenue 927,212 916,545
---------------- ---------------
Total current liabilities 8,996,577 9,213,839

Long term interest on accrued liabilities 749,132 653,708
Long-term debt and notes payable 6,337,686 6,349,686
---------------- ---------------

Total liabilities 16,083,395 16,217,233
---------------- ---------------

Preferred stock:
Series A cumulative convertible preferred stock, no par value, 16,667 shares
authorized, 16,667 shares issued and outstanding 100,000 100,000
Series B cumulative convertible preferred stock, no par value, 100,000
shares authorized, 9,500 shares issued and outstanding 68,588 68,588
Series C cumulative convertible preferred stock, no par, 100,000 shares
authorized, 55,850 shares issued and outstanding 750,000 750,000
Stock subscription receivable (191,500 ) (191,500 )
---------------- ---------------
727,088 727,088
---------------- ---------------
Stockholders' deficit:
Common stock, no par value, 50,000,000 shares authorized, 7,275,048 shares
issued and outstanding at June 30, 2003 and March 31, 2003 10,205,073 10,205,073
Warrants 970,766 961,366
Accumulated deficit (22,743,872 ) (22,717,023 )
---------------- ---------------
Total stockholders' deficit (11,568,033 ) (11,550,584 )
---------------- ---------------
Total liabilities, preferred stock and stockholders' deficit $ 5,242,450 $ 5,393,737
================ ===============

See accompanying notes to condensed consolidated financial statements.

Prologic Management Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

Three Months Ended
June 30,
--------------------------------
2003 2002
------------- -------------

(unaudited) (unaudited)
Revenue:

Computer hardware $ 3,271,053 $ 3,718,026
Software licenses 1,004,759 370,226
Professional services 2,389,824 1,468,948
------------- -------------

Total net revenue 6,665,636 5,557,200

Costs of revenue:
Computer hardware 2,790,730 3,358,337
Software licenses 894,814 325,069
Professional services 1,518,216 976,691
------------- -------------

Total costs of revenue 5,203,760 4,660,097
------------- -------------

Gross profit 1,461,876 897,103
------------- -------------

Operating expenses:
General and administrative 987,153 887,020
Selling and marketing 357,116 278,020
------------- -------------

Total operating expenses 1,344,269 1,165,040
------------- -------------

Operating income (loss) 117,607 (267,937 )
------------- -------------

Interest and other income (expense):
Interest expense (144,482 ) (144,110 )
Other income (expense) 25 --
------------- -------------

Total interest and other income (expense) (144,457 ) (144,110 )
------------- -------------

Net loss (26,850 ) (412,047 )

Preferred stock dividend (18,338 ) (18,338 )
------------- -------------

Net loss available to common stockholders $ (45,188 ) $ (430,385 )
============= =============

Weighted average number of common shares:
Basic and diluted 7,014,591 7,097,594
============= =============

Loss per common share:
Basic and diluted $ (0.01 ) $ (0.06 )
============= =============

See accompanying notes to condensed consolidated financial statements.

Prologic Management Systems, Inc. and Subsidiaries
Condensed CONSOLIDATED STATEMENTS OF CASH FLOWS

Increase (Decrease) in Cash Three Months Ended June 30,
2003 2002
------------- -------------

(unaudited) (unaudited)
Cash flows from operating activities:

Net loss $ (26,850 ) $ (412,047 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 58,364 53,112
Issuance of warrants for services 9,400 --
Change in assets and liabilities:
Accounts receivable (77,769 ) (111,013 )
Inventory (12,489 ) (73,910 )
Prepaid expenses 22,191 (60,191 )
Other assets (23,281 ) 15,414
Accounts payable 255,825 1,130,922
Accrued expenses 14,642 (117,436 )
Deferred maintenance revenue 10,667 (131,461 )
------------- -------------

Total adjustments 257,550 705,437
------------- -------------

Net cash provided by operating activities 230,700 293,390
------------- -------------

Cash flows from investing activities:
Purchase of equipment -- (54,905 )
------------- -------------

Net cash used in investing activities -- (54,905 )
------------- -------------

Cash flows from financing activities:
Net change in line of credit 242,500 149,666
Repayment of debt (657,473 ) (21,000 )
------------- -------------

Net cash provided by (used in) financing activities (414,973 ) 128,666
------------- -------------
Net increase (decrease) in cash (184,273 ) 367,151
Cash, beginning of period 216,904 81,280
------------- -------------
Cash, end of period $ 32,631 $ 448,431
============= =============

Supplemental statement of cash flow information:
Cash paid during the quarter for interest $ 35,923 $ 11,963
Cash paid during the quarter for taxes -- --

Non-cash financing and investing activities:
Preferred stock dividends paid in common stock $ -- $ 59,905

See accompanying notes to condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation - Interim Periods

The accompanying unaudited condensed consolidated financial statements
include the accounts of Prologic Management Systems, Inc. (the
"Company") and its wholly-owned subsidiary, BASIS, Inc. ("BASIS"),
including its Solid Systems division which was acquired May 31, 2002.
All significant inter-company balances and transactions have been
eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements
have been prepared by the Company in accordance with generally accepted
accounting principles, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
accompanying condensed consolidated financial statements include all
adjustments (of a normal recurring nature) which are necessary for a
fair presentation of the results for the interim periods presented.
Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to such
rules and regulations. Although the Company believes that the
disclosures are adequate to make the information presented not
misleading, these financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto
included in the Company's Report on Form 10-KSB for the fiscal year
ended March 31, 2003. The results of operations for the three-month
periods ended June 30, 2003 and 2002 are not necessarily indicative of
the results to be expected for the full fiscal year.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
previously reported, the Company has suffered recurring losses from
operations and has negative working capital and a stockholders'
deficit. These factors raise substantial doubt about the Company's
ability to continue as a going concern. The Company's independent
auditors qualified their opinion on the Company's March 31, 2003
financial statements by including an explanatory paragraph in which
they expressed substantial doubt about the Company's ability to
continue as a going concern.

2. Acquisition of Assets from Solid Systems, Inc.

On June 15, 2002, the Company completed an acquisition, effective May
31, 2002, whereby the Company acquired, in a non-cash asset purchase,
four (4) additional offices and associated personnel and equipment from
Solid Systems, Inc., an information technology service provider. The
results of operations of Solid Systems have been included in the
Company's consolidated results of operations since May 31, 2002, the
acquisition date.

The unaudited proforma combined historical results of operations, as if
Solid Systems had been acquired at the beginning of the first quarter
ended June 30, 2002, were estimated to be:

Three months
ended
June 30, 2002
----------------------

Revenue $ 6,599
Net loss available to common shareholders $ (808)
Basic and diluted loss per share $ (0.11)

The proforma results include the operations of the Company for the
three months ended June 30, 2002 and the operations of Solid Systems
for the three months ended March 31, 2002 and were not necessarily
indicative of what actually would have occurred if the acquisition had
been completed as of the beginning of the period presented, nor are
they necessarily indicative of future consolidated results.

3. Line of Credit

During the quarter ended June 30, 2001, the Company entered into a
financing agreement with a key lender. This agreement provides the
Company with an immediate partial advance on all sales and requires the
Company to immediately assign the related receivables to the lender.
Upon collection of the related receivables, the lender pays the
remaining balance, if any, to the Company. The receivables are assigned
with recourse and advances over 90 days outstanding bear interest at a
rate of 10% per annum. At June 30, 2003, the Company was liable for
$1,040,247 under this agreement, which is included in the current
portion of short-term debt and notes payable.

On March 26, 2003, the Company entered into an agreement with a key
lender in the form of a line of credit with an interest rate of eight
percent (8%) per annum, which shall be payable in arrears on the 10th
day of each month commencing April 10, 2003. All outstanding principal
and accrued, but unpaid interest, if not paid earlier, shall be due and
payable on September 26, 2003. The note is secured by all of the
Company's assets. The total advance shall not exceed $610,000. At March
31, 2003 and June 30, 2003, the Company was liable for $205,000 and
$447,500, respectively, under this agreement. As of the date of this
report, the Company is liable for $610,000 under this agreement.

4. Property and Equipment

Property and equipment consists of the following:

June 30, 2003 March 31, 2003
------------- --------------

Furniture and leasehold improvements $ 236,250 $ 236,250
Equipment and software 1,131,665 1,131,665
------------- --------------
Total property and equipment 1,367,915 1,367,915
Less accumulated depreciation (1,080,263) (1,043,421)
------------- --------------
Net property and equipment $ 287,652 $ 324,494
============= ==============

5. Inventory

Inventory consists primarily of parts associated with servicing
maintenance contracts and, to a lesser degree, third-party computer
hardware and third-party software products which are typically awaiting
transfer to a customer, and is stated at the lower of cost (first-in,
first-out) or market.

6. Long Term Debt

In December 2000, the Company signed a $5 million note, converting
approximately $5 million of its accounts payable, with 10% interest and
an initial due date of April 2, 2002. The note is secured by a pledge
to the note holder of substantially all of the Company's assets. In
August 2002, the Company renegotiated the terms of the note. The
current note bears interest at 6% and is due in April 2004, with the
option of the maker to extend the maturity date to April 2005. The
balance of the current promissory note at June 30, 2003 is $6,337,686
with approximately $749,132 accrued interest at June 30, 2003. The
current note requires the Company to make monthly payments of 40% of
its available operating profits each month. This note further requires
that the Company direct 50% of any future sums received by, committed
to, or invested in the Company as an additional equity capital
infusion, towards repayment of the unpaid balance of this note. In
August 2002, the Company further amended the note to add weekly
payments of $1,000.

7. Earnings Per Share

FASB Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128") provides for the calculation of Basic and Diluted
earnings per share. Basic earnings per share includes no dilution and
is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of the entity. For the
three month periods ended June 30, 2003 and June 30, 2002, potential
common stock, consisting of stock options, warrants and convertible
preferred stock totaling 2,537,523 and 2,713,723, respectively, are
excluded from the computation of diluted earnings per share because
they are antidilutive.

8. Stock-Based Compensation

The Company accounts for employee stock options or similar equity
instruments in accordance with Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation"
(SFAS No. 123). SFAS No. 123 defines a fair-value-based method of
accounting for employee stock options or similar equity instruments.
This statement gives entities a choice to recognize employee related
compensation expense by adopting the new fair-value method or to
measure compensation using the intrinsic value method under Accounting
Principles Board (APB) Opinion No. 25 "Accounting for Stock Issued to
Employees", the former standard. If the former standard for measurement
is elected, SFAS No. 123 requires supplemental disclosure to show the
effect of using fair value measurement criteria.

The Company has elected to account for its stock-based compensation
plans under APB No. 25 and has therefore recognized no compensation
expense in the accompanying consolidated financial statements for
stock-based awards granted as the option price for all options grants
exceeded the fair value of the Company's common stock on the date of
grant.

If the Company had accounted for its stock-based compensation plans
using a fair value based method of accounting, the Company's net loss
and loss per common and common share equivalent would have been as
follows:

Quarter Quarter
Ended Ended
06/30/2003 06/30/2002
------------- -------------

Net loss available to common stockholders, as reported $ (45,188 ) $ (430,385 )
Deduct: Total stock-based compensation expense determined under
fair value based method for all awards, net of related tax effects (13,000 ) (10,927 )
Pro forma net loss available to common stockholders (58,188 ) (441,312 )
Net loss per share (basic and diluted), as reported (.01 ) (0.06 )
Net loss per share (basic and diluted), pro forma (.01 ) (0.06 )

The effects of applying SFAS No. 123 for pro forma disclosures for the
quarters ended June 30, 2003 and June 30, 2002 are not likely to be
representative of the effects on reported net loss and loss per common
and common share equivalent for future years, because options vest over
several years and additional awards generally are made each year.

9. Recently Issued Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." SFAS No. 145 rescinded three previously issued
statements and amended SFAS No. 13, "Accounting for Leases." The
statement provides reporting standards for debt extinguishments and
provides accounting standards for certain lease modifications that have
economic effects similar to sale-leaseback transactions. The statement
is effective for certain lease transactions occurring after May 15,
2002 and all other provisions of the statement shall be effective for
financial statements issued on or after May 15, 2002. The
implementation of SFAS No. 145 did not have a material impact on the
Company's consolidated financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which updates accounting
and reporting standards for personnel and operational restructurings.
The Company will be required to adopt SFAS No. 146 for exit, disposal
or other restructuring activities that are initiated after December 31,
2002, with early application encouraged. The Company does not expect
the adoption of SFAS No. 146 to have a material effect on the Company's
consolidated financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an Amendment to
SFAS No. 123." SFAS No. 148 provides alternative methods of transition
for a voluntary change to the fair value based method on accounting for
stock-based employee compensation. The Company currently does not
intend to adopt SFAS No. 123 for stock-based employee compensation and
accordingly does not expect the implementation of SFAS No. 148 to have
a material effect on the Company's consolidated financial position or
results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities," to improve
accounting for derivative instruments. SFAS 149 requires that contracts
with comparable characteristics be accounted for similarly. It
clarifies when a contract with an initial net investment should be
considered a derivative. Additionally, it clarifies when a derivative
includes a financing component that should be reported as a financing
activity in the statement of cash flows. SFAS No. 149 generally is
effective for contracts entered into or modified after June 30, 2003,
and for hedging relationships designated after June 30, 2003. The
Company does not expect the adoption of SFAS No. 149 to have a material
effect on the Company's consolidated financial position or results of
operations.

In June 2003 the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity" SFAS No. 150 requires certain instruments, including
mandatorily redeemable shares, to be classified as liabilities, not as
part of shareholders' equity or redeemable equity. For instruments that
are entered into or modified after May 31, 2003, SFAS No. 150 is
effective immediately upon entering the transaction or modifying the
terms. For other instruments covered by Statement 150 that were entered
into before June 1, 2003, Statement 150 is effective for the first
interim period beginning after June 15, 2003. The Company is evaluating
the provisions of SFAS No. 150. The Company anticipates conversion of
all its redeemable preferred stock into common stock by the end of the
second quarter of fiscal 2004 and, accordingly, does not expect SFAS
No. 150 to have a material effect on the Company's consolidated
financial position or results of operations.

In November 2002, the FASB issued interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees. Including
indirect Guarantees of Indebtedness of Others," which disclosures are
effective for financial statements for periods ending after December
15, 2002. While the Company has various guarantees included in
contracts in the normal course of business, primarily in the form of
indemnities, these guarantees would only result in immaterial increases
in future costs, but do not represent significant commitments or
contingent liabilities of the indebtedness of others.

In January 2003, the FASB issued interpretation No. 46, "Consolidation
of Variable Interest Entities" (FIN 46) which requires the
consolidation of variable interest entities, as defined. FIN 46 is
applicable immediately for variable interest entities created after
January 1, 2003. For variable interest entities created prior to
January 1, 2003, the provisions of FIN 46 are applicable no later than
July 1, 2003. The Company does not currently believe that any material
entities will be consolidated as a result of FIN 46.

10. Recent Developments

In the first quarter of fiscal 2004, holders of the Company's Series A,
Series B and Series C Preferred Stock tentatively agreed to convert
their shares of Preferred Stock to shares of the Company's common
stock, utilizing the same formula as that of the Pace settlement (see
Part II, Item 1. Legal Proceedings). The agreement is expected to be
finalized during the second quarter. The total additional shares to be
issued over and above the initial conversion rate for all shares of
Series A, B and C Preferred Stock will be recorded as a deemed dividend
of approximately $190,000 when effective in the second quarter of
fiscal 2004.

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

Introduction

The Company provides systems integration services, maintenance
services, technology products and related services. The Company's revenues are
generated from systems integration, maintenance services, and related product
sales. The Company's services include systems integration, maintenance services,
and national and regional support in Internet and intranet application and
framework design, enterprise and workgroup client/server design and
optimization, relational database development, LAN/WAN and workgroup solutions,
network design and connectivity, and security and encryption design and
deployment. The discussion should be read in conjunction with the Condensed
Consolidated Financial Statements of the Company and its subsidiary and Notes
thereto, included herein at Item 1 of Part I.

The Company's securities were delisted from both the NASDAQ Stock
Market and the Boston Stock Exchange in August 1998. Delisting resulted from the
Company's failure to maintain the minimum net tangible asset requirement of the
NASDAQ Stock Market. Trading of the Company's securities may continue to be
conducted on the OTC Electronic Bulletin Board or in the non-NASDAQ
over-the-counter market. As a result, a holder of the Company's securities may
find it more difficult to dispose of, or to obtain accurate quotations as to the
market value of, the Company's securities. In addition, purchases and sales of
the Company's securities may be subject to Rule 15g-9 (the "Rule") promulgated
by the Securities and Exchange Commission (the "SEC"). The Rule imposes various
sales practice requirements on broker-dealers who sell securities governed by
the Rule to persons other than established customers and accredited investors
(generally institutions with assets in excess of $5 million or individuals with
a net worth in excess of $1 million or annual income exceeding $200,000 or
$300,000 jointly with their spouse). For transactions covered by the Rule, the
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. Consequently, the Rule may have an adverse effect on the ability of
broker-dealers to sell the Company's securities and may affect the salability of
the Company's securities in the secondary market.

The SEC has also adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price less than $5.00 per share, other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system. With the Company's securities delisted from the NASDAQ Small Cap Market,
they may come within the definition of penny stocks because the trading price of
the Company's common stock is currently below the $5.00 per share threshold. The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not exempt from the rules, to deliver a standardized document prepared by
the SEC that provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer must also provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information must be given to the customer prior to
effecting the transaction. These disclosure requirements may have the effect of
reducing the level of trading activity in the secondary market for a stock that
becomes subject to the penny stock rules.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes revenue from the sale of third-party hardware
and software products upon shipment from the vendor to the end user or when
shipped from the Company, whichever is appropriate. Title transfers FOB shipping
point. Revenue is recognized on sales of third-party maintenance agreements upon
receipt of the billing invoice from the vendor at which time the Company retains
no further obligation to the customer or vendor. Revenue from professional
services is recognized upon completion of the work and notification from the
customer of their acceptance. Revenue from software licensing is recognized in
accordance with Statement of Position 97-2, Software Revenue Recognition.
Revenue from software licensing is recognized when delivery of the software has
occurred, a signed non-cancelable license agreement has been received from the
customer and any remaining obligations under the license agreement are
insignificant. Revenue associated with agreements to provide product support
services is recognized as related services are provided. Revenue from annual or
other renewals of maintenance contracts is deferred and recognized on a
straight-line basis over the term of the contracts.

Impairment of Long Lived Assets

In assessing the recoverability of long lived assets, including
goodwill, we must make assumptions regarding estimated future cash flows and
other factors to determine the fair value of the respective assets. If these
estimates or their related assumptions change in the future, we may be required
to record impairment charges for these assets not previously recorded. In the
fourth quarter of the fiscal year ended March 31, 2003, the Company determined
its goodwill was impaired and wrote-off the entire balance of $408,942.

Results of Operations

Net Revenue. Net revenue for the quarter ended June 30, 2003 was
$6,665,636 compared to $5,557,200 for the same period of the previous year, an
increase of $1,108,436, or approximately 19.9%. The revenue increase was due
primarily to an increase in revenue from sales of services and software
licenses, offset somewhat by a decrease in hardware revenue. Revenue from sales
of third party hardware for the quarter ended June 30, 2003 was $3,271,053, a
decrease of approximately 12.0%, compared to $3,718,026 for the same period of
the previous year. Revenue from sales of software licenses for the quarter ended
June 30, 2003, which included third party licenses as well as proprietary
software, was $1,004,759, an increase of approximately 171.4%, compared to
$370,226 for the same period of the previous year. Revenue from sales of
professional services for the quarter ended June 30, 2003, which was comprised
predominately of integration services, was $2,389,824, an increase of
approximately 62.7%, compared to $1,468,948 for the same period of the previous
year. The Company continues to concentrate on sales of services, which carry
higher margins than hardware and third party software sales.

Historically, the Company's revenues vary significantly from period to
period. This is due to the high revenues associated with the initial stages of a
typical system implementation in contrast to the relatively lower revenues
associated with services and products which may be furnished by the Company to
the customer after completion of the initial installation. Accordingly, the
Company's revenues may vary significantly from period to period for a variety of
reasons, including but not limited to the timing of customer orders for products
and services, deferrals and cancellations of orders, and capital spending
patterns of customers and prospective customers in the specific industries and
areas in which the Company's customers have historically been concentrated.

Costs of Revenue. Costs of revenue were $5,203,760, or 78.1% of net
revenue, for the quarter ended June 30, 2003, compared to $4,660,097, or 83.9%
of net revenue, for the same period of the previous year. The overall increased
costs of revenue were primarily the result of the increase in sales. The Company
expects to see the margins on sales of third party products continue to decline
in the long term as a result of continued competition and pricing pressure in
the computer market. The Company is attempting to offset the increasing cost of
third party products by increasing sales of higher-margin related services.

General and Administrative. General and administrative expenses for the
quarter ended June 30, 2003 were $987,153, or 14.8% of net revenue, compared to
$887,020, or 16.0% of net revenue, for the same period of the previous year. The
increase in these expenses is attributable to the increase in sales. The Company
normally expects general and administrative expenses to generally reflect long
range sales trends, rather than short-term sales cycles.

Selling and Marketing. Selling and marketing expenses were $357,116, or
5.4% of net revenue, for the quarter ended June 30, 2003, compared to $278,020,
or 5.0% of net revenue, for the same period of the previous year. The increase
in the amount of expenses is primarily the result of increased sales.

Operating Income (loss). Operating income for the quarter ended June
30, 2003 was $117,607, or income of 1.8% of net revenue, compared to an
operating loss of $267,937, or a loss of 4.8% of net revenue, for the same
period of the previous year. The improvement resulted from a favorable change in
the sales mix toward increased revenues from sales of higher margin services and
software licenses in the first quarter of fiscal 2004.

Interest Expense and Other Income. Interest expense and other income
for the quarter ended June 30, 2003 was $144,457, compared to $144,110 for the
same period of the previous year. Interest expense is on both long-term and
short-term debt.

Income Taxes. The Company had no income tax expense for the first
quarters of fiscal 2004 and 2003. As of June 30, 2003, the Company had Federal
net operating loss carry forwards of approximately $17,900,000. The utilization
of net operating loss carry forwards will be limited pursuant to the applicable
provisions of the Internal Revenue Code and Treasury regulations.

Net Loss. Net loss for the quarter ended June 30, 2003 was $26,850, or
a loss of approximately $0.01 per share, compared to a loss of $412,047, or a
loss of approximately $0.06 per share, for the same period of the previous year.
The net loss improvement resulted from a favorable change in the sales mix
toward increased revenues from sales of higher margin services and software
licenses in the first quarter of fiscal 2004.

Liquidity and Capital Resources

At June 30, 2003 the Company had a working capital deficit of
approximately $4,300,000 versus a deficit of approximately $4,401,000 at March
31, 2003. As a result of the working capital deficit at March 31, 2003 (the
Company's fiscal year end), the Company's independent certified public
accountants have expressed substantial doubt about the Company's ability to
continue as a going concern. The total cash balance at June 30, 2003 was
$32,631.

Cash provided by operations during the quarter ended June 30, 2003 was
$230,700, compared to $293,390 for the corresponding period in fiscal 2003. Cash
used in investing activities was $0 at June 30, 2003 and $54,905 at June 30,
2002. Cash used in financing activities for the quarter ended June 30, 2003 was
$414,972, compared to cash provided by financing activities of $128,666 for the
corresponding period in fiscal 2003.

At June 30, 2003, the Company had current debt obligations, or debt
that will become due within twelve months, of $2,137,298. It is unlikely that
the Company will be able to service this debt from funds generated by operations
alone. As a result, the Company will require additional equity, debt financing,
or deferment of debt repayment to maintain current operations and service
current debt.

During the three months ended June 30, 2003, the Company did not
purchase any capital equipment or software.

Historically the Company has been unable to generate sufficient
internal cash flows to support operations, and has been dependent upon outside
capital sources to supplement cash flow. New equity investments, lines of credit
and other borrowings, and credit granted by its suppliers have enabled the
Company to sustain operations over the past several years. In August 1998, the
Company had failed to meet the "continued listing criteria" established by
NASDAQ and the Company's securities were delisted from the NASDAQ Small Cap
Market. The subsequent lack of shareholder liquidity in the Company's securities
has materially adversely affected the Company's ability to attract equity
capital. Additionally, the lack of capital resources has precluded the Company
from effectively executing its strategic business plan. The ability to raise
capital and maintain credit sources is critical to the continued viability of
the Company.

During fiscal 2000, the Company authorized a class of securities
designated Series C 10% Cumulative Convertible Preferred Stock, consisting of
100,000 shares with a Stated Value of $10.00 per share, a dividend rate of 10%
and an Applicable Conversion Value of $2.25. On December 30, 1999, the Company
authorized the sale of 75,000 shares of the Series C Preferred, including 37,500
shares to a related party and 37,500 shares to an entity in which officers of
the Company have a minority interest, for an aggregate of $750,000, pursuant to
two subscription agreements. Of the $750,000 in proceeds, $220,780 represented
conversion of current debt from a related party, and $529,220 was subscribed to
in cash. Including the conversion of debt, and $337,720 in cash payments, the
Company received $558,500, representing 55,850 shares of the Series C Preferred
stock, and extended the due date for the remaining $191,500. In the first
quarter of fiscal 2004, all holders of the Company's Series A, Series B and
Series C Preferred Stock agreed to convert their preferred shares to shares of
the Company's common stock utilizing the same formula as that of the Pace
settlement (see Part II, Item 1 of this report). The shares will be issued in
the second quarter of fiscal 2004.

During fiscal 2002, the Company entered into a financing agreement with
a key lender. This agreement provides the Company with an immediate partial
advance on all sales and requires the Company to immediately assign the related
receivables to the lender. Upon collection of the related receivables, the
lender pays the remaining balance, if any, to the Company. The receivables are
assigned with recourse and advances over 90 days outstanding bear interest at a
rate of 10% per annum. At June 30, 2003, the Company was liable for $1,040,247
under this agreement, which is included in the current portion of short-term
debt and notes payable.

On March 26, 2003, the Company entered into an agreement with a key
lender in the form of a line of credit with an interest rate of eight percent
(8%) per annum, which shall be payable in arrears on the 10th day of each month
commencing April 10, 2003. All outstanding principal and accrued, but unpaid
interest, if not paid earlier, shall be due and payable on September 26, 2003.
The note is secured by all of the Company's assets. The total advance shall not
exceed $610,000. At March 31, 2003 and June 30, 2003, the Company was liable for
$205,000 and $447,500, respectively, under this agreement. As of the date of
this report, the Company is liable for $610,000 under this agreement.

During fiscal 2000, the Company and one of its primary vendors agreed
to convert $1,212,000 of the Company's trade payables to the vendor into a
promissory note. The promissory note includes interest at 11%. At June 30, 2003,
the principal balance was approximately $723,000.

During fiscal 2001, the Company signed a settlement agreement with
Sunburst Acquisitions IV, Inc. The settlement agreement resulted in 1,959,972
shares of the Company's common stock being returned to the Company and
cancelled, and $100,000 in settlement expense cost reimbursement to be paid to
Sunburst, of which $25,000 was paid in cash and the Company executed a
short-term promissory note for the remaining $75,000, bearing interest at 10%
per annum. As of June 30, 2003, the principal balance of this note remains
$75,000.

In December 2000, the Company signed a $5 million note, converting
approximately $5 million of its accounts payable, with 10% interest and an
initial due date of April 2, 2002. The note is secured by a pledge to the note
holder of substantially all of the Company's assets. In August 2002, the Company
renegotiated the terms of the note. The current note bears interest at 6% and is
due in April 2004, with the option of the maker to extend the maturity date to
April 2005. The balance of the current promissory note at June 30, 2003 is
$6,337,686 with approximately $749,132 accrued interest at June 30, 2003. The
current note requires the Company to make monthly payments of 40% of its
available operating profits each month. The note further requires that the
Company direct 50% of any future sums received by, committed to, or invested in
the Company as an additional equity capital infusion, towards repayment of the
unpaid balance of the note. In August 2002, the Company further amended the note
to include weekly payments of $1,000.

In fiscal 1997, the Company borrowed $100,000 with an interest rate of
8% and a scheduled maturity date of June 30, 1997. Subsequently, the maturity
date was extended with a revised interest rate of 2% per month plus 10,000
shares per month of restricted common stock. During fiscal 2000, the Company
issued 120,000 shares of common stock as interest towards the note. In March
2000, the Company renegotiated the terms of the note and eliminated the common
stock interest component. The replacement note is unsecured, in the amount of
$164,500, which includes interest and expenses previously accrued, and bears
interest at 3% per month. As of June 30, 2003, the remaining balance of this
note, including principal and interest, was $21,466.

During fiscal 1998 and 1997, the Company borrowed $365,000 in
short-term notes collateralized by its computer equipment and office
furnishings. Subsequently, $170,000 of these notes was exchanged for 288,000
shares of common stock and $65,000 in principal was repaid. The interest rate on
the notes is 2% per month. As of June 30, 2003, the remaining principal balance
on these notes, which is currently overdue, is $100,000.

At June 30, 2003, the Company owed approximately $383,590 in prior
sales tax. The Company has negotiated monthly payments on this outstanding
balance. The Company is remitting sales taxes on a timely basis on current sales
and is current on all other tax obligations.

Plan of Operations

The Company's apparent improving performance in fiscal 2001 was
subsequently adversely impacted by the general national and regional economic
downturn, and the situation was further aggravated by the terrorist attacks and
threats that began in September 2001. In fiscal 2002, the Company's management
implemented aggressive measures to reduce operating costs, increase service
sales, and other strategies to minimize the impact on revenues as customers and
potential customers took an increasingly conservative position on hardware and
software spending.

The Company, during fiscal 2003, continued to reduce controllable
expenses, reduce its reliance upon low margin hardware sales, and focused on
securing higher margin maintenance contracts, professional service engagements
and third party software license revenues, which have been less susceptible to
adverse economic conditions than the demand for computer hardware.

In the first quarter of fiscal 2004, the Company continued to effect a
favorable change in its sales mix, increasing sales of higher margin services
and software licenses, while reducing its reliance on hardware sales. For the
quarter ended June 30, 2003, revenue from sales of services and software
licenses represented 50.9% of total sales, compared to 33.1% of total sales for
the same period of the prior fiscal year, while hardware sales represented 49.1%
of total sales, compared to 66.9% of total sales for the same period of the
prior fiscal year.

During the past few years, the Company has considered the acquisition
of one or more systems integration/high technology service companies in other
regions of the United States to increase its market coverage, expand its product
offerings and achieve higher sales and profitability. At this time there are no
ongoing discussions of a substantive nature with any such acquisition
candidates. The Company, without detracting from its primary goal of returning
to profitability through geographic expansion and product diversification, will
continue to consider potential acquisitions. However, in conjunction with any
such suitable acquisition, the Company would likely need to raise capital to
provide the necessary working capital for the consolidated entity. The Company
has no commitments at this time from third parties for any such financing nor is
it likely that any third parties would provide such financing on terms
acceptable to the Company until the Company has demonstrated that it is
foreseeable that the Company will achieve profitability.

Recently Issued Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." SFAS No. 145 rescinded three previously issued
statements and amended SFAS No. 13, "Accounting for Leases." The statement
provides reporting standards for debt extinguishments and provides accounting
standards for certain lease modifications that have economic effects similar to
sale-leaseback transactions. The statement is effective for certain lease
transactions occurring after May 15, 2002 and all other provisions of the
statement shall be effective for financial statements issued on or after May 15,
2002. The implementation of SFAS No. 145 did not have a material impact on the
Company's consolidated financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which updates accounting and
reporting standards for personnel and operational restructurings. The Company
will be required to adopt SFAS No. 146 for exit, disposal or other restructuring
activities that are initiated after December 31, 2002, with early application
encouraged. The Company does not expect the adoption of SFAS No. 146 to have a
material effect on the Company's consolidated financial position or results of
operations.

In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an Amendment to SFAS No.
123." SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method on accounting for stock-based employee
compensation. The Company currently does not intend to adopt SFAS No. 123 for
stock-based employee compensation and accordingly does not expect the
implementation of SFAS No. 148 to have a material effect on the Company's
consolidated financial position or results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities," to improve accounting for
derivative instruments. SFAS 149 requires that contracts with comparable
characteristics be accounted for similarly. It clarifies when a contract with an
initial net investment should be considered a derivative. Additionally, it
clarifies when a derivative includes a financing component that should be
reported as a financing activity in the statement of cash flows. SFAS No. 149
generally is effective for contracts entered into or modified after June 30,
2003, and for hedging relationships designated after June 30, 2003. The Company
does not expect the adoption of SFAS No. 149 to have a material effect on the
Company's consolidated financial position or results of operations.

In June 2003 the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity" SFAS
No. 150 requires certain instruments, including mandatorily redeemable shares,
to be classified as liabilities, not as part of shareholders' equity or
redeemable equity. For instruments that are entered into or modified after May
31, 2003, SFAS No. 150 is effective immediately upon entering the transaction or
modifying the terms. For other instruments covered by Statement 150 that were
entered into before June 1, 2003, Statement 150 is effective for the first
interim period beginning after June 15, 2003. The Company is evaluating the
provisions of SFAS No. 150. The Company anticipates conversion of all its
redeemable preferred stock into common stock by the end of the second quarter of
fiscal 2004 and, accordingly, does not expect SFAS No. 150 to have a material
effect on the Company's consolidated financial position or results of
operations.

In November 2002, the FASB issued interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees. Including indirect
Guarantees of Indebtedness of Others," which disclosures are effective for
financial statements for periods ending after December 15, 2002. While the
Company has various guarantees included in contracts in the normal course of
business, primarily in the form of indemnities, these guarantees would only
result in immaterial increases in future costs, but do not represent significant
commitments or contingent liabilities of the indebtedness of others.

In January 2003, the FASB issued interpretation No. 46, "Consolidation
of Variable Interest Entities" (FIN 46) which requires the consolidation of
variable interest entities, as defined. FIN 46 is applicable immediately for
variable interest entities created after January 1, 2003. For variable interest
entities created prior to January 1, 2003, the provisions of FIN 46 are
applicable no later than July 1, 2003. The Company does not currently believe
that any material entities will be consolidated as a result of FIN 46.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995

Management's discussion and analysis should be read in conjunction with
the audited Consolidated Financial Statements contained elsewhere in this
quarterly report on Form 10-QSB for the quarter ended June 30, 2003. Except for
the historical information contained herein, the matters discussed in this
report on Form 10-QSB are forward-looking statements that involve a number of
risks and uncertainties. There are numerous important factors and risks,
including the rapid change in hardware and software technology, market
conditions, the anticipation of growth of certain market segments and the
positioning of the Company's products and services in those segments,
seasonality in the buying cycles of certain of the Company's customers, the
timing of product announcements, the release of new or enhanced products, the
introduction of competitive products and services by existing or new competitors
and the significant risks associated with the acquisition of new products,
product rights, technologies, businesses, the management of growth, the
Company's ability to attract and retain highly skilled technical, managerial and
sales and marketing personnel, and the other risks detailed from time to time in
the Company's SEC reports, including reports on Form 10-KSB and Form 10-QSB,
that could cause results to differ materially from those anticipated by the
forward-looking statements made herein. Therefore, historical results and
percentage relationships will not necessarily be indicative of the operating
results of any future period.

Item 3. Controls and Procedures

At June 30, 2003, we evaluated, under the supervision and with the
participation of management, including the Chief Executive Officer (CEO) and the
Chief Financial Officer (CFO), the effectiveness of the design and operation of
our disclosure controls and procedures pursuant to Rule 15d-14 under the
Securities Exchange Act of 1934 (Exchange Act). Based upon that evaluation, the
CEO and CFO concluded that Prologic's disclosure controls and procedures are
effective to ensure that information required to be disclosed in Prologic's
reports filed or submitted under the Exchange Act are recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.

Subsequent to the date of our evaluation, there were no significant
changes in our internal controls or in other factors that could significantly
affect the disclosure controls.

PART II. Other Information

Item 1. Legal Proceedings

Pace Investment Co., Inc., et al. v. Prologic Management Systems, Inc.,
CV 20003999 (previously reported in the Company's reports on 10-QSB):
In the first quarter of fiscal 2004, the parties negotiated a
settlement agreement whereby the Company would issue the plaintiffs
2.63 shares of Prologic common stock for each dollar ($1.00) of money
originally invested by the plaintiffs, reduced by the number of common
shares that have been issued to each current preferred stockholder as
dividends on the preferred stock. The total number of shares of common
stock to be issued to the plaintiffs is 1,197,634 shares. The parties
have agreed to dismiss with prejudice all claims in this case. The
settlement agreement will be effective upon execution by the parties,
after which time the common shares due thereunder will be issued. The
Company expects the settlement agreement to be executed in the second
quarter of fiscal 2004. Holders of the Company's Series A, Series B and
Series C Preferred Stock have also agreed to convert their preferred
shares to shares of the Company's common stock utilizing the same
formula as that of the Pace settlement.

AVNET Computer Marketing Group v. Prologic Management Systems, Inc.,
C20032814, Superior Court for the State of Arizona in and for the
County of Pima, filed May 16, 2003. A complaint was filed by AVNET
against Prologic to collect approximately $150,000 AVNET is owed for
product delivered to Solid Systems, Inc. Prologic has received an
extension of time to answer the complaint and/or settle the dispute.

Item 2. Changes in Securities

None.

Item 3. Defaults upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

A. Exhibits filed herewith:

31.1 Certification of Chief Executive Officer pursuant to Item
601(b)(31) of Regulation S-B. (Filed herewith)

31.2 Certification of Chief Financial Officer pursuant to Item
601(b)(31) of Regulation S-B. (Filed herewith)

32.1 Certification of Chief Executive Officer pursuant to item
601(b)(32) of Regulation S-B. (Filed herewith)

32.2 Certification of Chief Financial Officer pursuant to item
601(b)(32) of Regulation S-B. (Filed herewith)

B. Reports:

On April 30, 2003, the Company filed a Report on Form 8-K, reporting
under Item 5. Other Events, the April 22, 2003 resignation of
Prologic's founder and CEO, James M. Heim. On April 28, 2003, the
Company's President and Director, Mr. John W. Olynick, was elected
Chief Executive Officer, and its Chief Operations Officer and
Director, Mr. Edwin G. Hubert, was elected Chief Financial Officer of
the Company.

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

PROLOGIC MANAGEMENT SYSTEMS, INC.

DATED: August 14, 2003 By: /s/ John W. Olynick
--------------------------------
John W. Olynick
Chief Executive Officer

By: /s/ Edwin G. Hubert
--------------------------------
Edwin G. Hubert
Chief Financial Officer