Overview

Our product offerings are currently separated into two main categories, "enterprise systems" (software and hardware) and "packaged software". Our suite of solutions, both enterprise and packaged, were specifically developed or acquired to provide customers with quantifiable reduction of packaging, labor, inventory, distribution and/or logistics costs.

In enterprise systems, we design, develop, produce, market and support a suite of Linux and Windows-based warehouse management system ("WMS") software and "light-directed" systems for inventory, warehouse and distribution center management. The WMS technology includes a number of standard functions that can be custom configured to suit the physical warehouse and inventory control requirements of the customer and can be installed on a standalone basis or integrated with the customer's core enterprise system such as SAP. The system is scalable as a "top tier" product which is defined as able to handle warehouse space in excess of 250,000 square feet and at least 100 simultaneous users of wireless devices at any one time. While these solutions are applicable to a wide variety of industries, our current enterprise customer list includes companies in the pharmaceutical, consumer goods, cosmetics, publishing, third-party logistic, and retail industries. From our offices in North America, we provide a full range of software and hardware services which also includes: reselling third party software and hardware as part of our integrated solutions; and, providing maintenance on a 24-hour, 7-days a week, 365-days a year basis.

Our packaged software, which was obtained through the acquisition of CAPE Systems & Consulting Services Ltd. and CAPE Systems, Inc. in January 2005, is designed to assist in evaluating and maximize packaging and palletizing configuration and truck/container loading in order to optimize package shape/size and pallet and truck utilization, thereby reducing packaging, storage and transportation costs. The programs (which can be bundled or sold individually) create new product packaging and case sizes, create efficient bundles of corrugated flat packs, analyze pallet patterns, build and display pallet loads and test the strength of corrugated board. Our packaged software customer base numbers approximately 3,700 and includes, among others, Fortune 500 companies such as Wal-Mart, Nestle, Procter & Gamble, Smurfit-Stone and International Paper.

We are currently in the process of completing development of and have begun to sell two new product offerings: "PicRite Dashboard"- a web-based graphical dashboard to provide managers with real-time reporting via seamless, mobile integration with WMS software; and, PicRite Robotic Palletizing System- robotic integration software which uses our existing pallet optimization capabilities to provide enterprise-level and off-the-shelf robotic automation capabilities.

Historically, we have sold our products and services worldwide, but now operate primarily in North America and the United Kingdom through a direct sales force and through strategic reseller alliances with complementary software vendors and consulting organizations. We target customers with a need to manage high volumes of activity along their supply chains from order intake and fulfillment, through inventory, warehouse and distribution center management to the ultimate delivery of goods to end users.

In fiscal 2006, we had one customer, Sanford Corporation, a subsidiary of Newell Rubbermaid Inc., whose sales were approximately 7% of total revenue. At September 30, 2006 the customer accounted for approximately 14% of total accounts receivable. In fiscal 2005, we had one customer, Regis Corp, whose sales were approximately 10% of total revenue. At September 30, 2005, Regis accounted for approximately 14% of total accounts receivable.

Our principal executive offices are located at 3619 Kennedy Road, South Plainfield, New Jersey and our telephone number is (908) 756-2000. We were organized in the State of New Jersey in November 1974.

Outlook

The successful implementation of our business plan has required, and our ability to continue as a going concern will require on a going forward basis, we raise substantial funds to finance: (i) continuing operations; (ii) increased sales and marketing efforts; (iii) the continuing development of our technologies; (iv) the settlement of existing liabilities and our obligations under existing or possible litigation settlements; and, (v) selective acquisitions to achieve the scale we believe will be necessary to enable us to remain competitive in the global "supply chain management" ("SCM") industry. There can be no assurance that we will be successful in raising the necessary funds

The Supply Chain Management Industry

SCM refers to a wide spectrum of software applications, consulting services, maintenance and other services and hardware products intended to enable businesses to manage their chains of supply. The primary goals of successful supply chain planning and execution are to reduce the costs of sales, recognize early opportunities and act on them to increase sales and to detect problems as they emerge to address them promptly to reduce their impact on the operations of the business. The SCM industry is continuing to evolve toward a software-driven model as enterprises increasingly seek ways to manage their supply chains in real-time at a lower cost and in a more decentralized environment.

SCM spending falls within the Information Technology industry. Because SCM technologies and services enable enterprises to manage a critical aspect of their operations, namely the chain of supply of components into products to be manufactured, sold and delivered to end customers, we believe that, despite some cyclicality that may always characterize investment in software, over the long-term, SCM solutions are likely to remain significant factors in corporate IT budgeting. We further believe that software applications designed to provide mobile, real-time management oversight capabilities or to reduce labor costs will begin to play a more significant role in the overall IT investment of companies in our target market as enterprises increasingly place greater burdens on fewer and fewer managers and seek to mechanize operations to focus on generating the highest return possible on their asset base- the primary goal of SCM technology.

The Opportunity

The industry opportunity is defined by three worldwide trends: 1) expanding global competition; 2) focused IT spending to deliver measurable results; and, 3) the expanded use of mobile communications to provide managers with greater flexibility in and access to real-time operational information without physical restriction.

Global Competition

As competitive barriers continue to fall around the world, we believe that there is a growing trend toward more open global commerce that has the potential to impact businesses of nearly every size. Unless other obstacles remain, manufacturers are no longer limited by geography and frequently outsource production to the cheapest locales. To remain competitive, domestic manufacturers in industrialized nations have been forced to automate as much of the production process as possible to limit rising labor costs. This mechanization process in manufacturing, while still continuing, has to a large extent, been significantly accomplished.

While efficiencies in the manufacturing processes have been gained, such level of analysis and technology investment has not been evident in the warehouse or distribution chain to the same extent. However, diminishing returns on technology investments in manufacturing productivity has given rise to a new emphasis on the analysis of costs beyond the production floor. Furthermore, foreign-produced goods must still be imported and be handled by a domestic warehouse and distribution system such that domestic investment in cost-saving technology should continue.

Providing distribution-focused technology and services in an increasingly distribution-oriented environment lies at the heart of our suite of products.

Focused technology spending

Despite billions of dollars of capital investment in new software systems in past decades, the benefits of this investment have been achieved more slowly than corporate buyers had expected. As corporate buyers review their technology needs, their approach is a more modest one, seeking affordable solutions targeted at specific problems and whose projected return on investment can be more rigorously assessed.

This transition to a new operating model with distinct benefits poses challenges for corporate managers because few internal IT systems or business practices are yet fully capable of taking advantage of the new opportunity to access and manage specific enterprise information in a decentralized environment. Increasingly, corporations are taking advantage of opportunities to add value (or reduce costs) at many more places along the supply chain. This is placing a more complex set of functional needs on legacy supply chain management practices and technologies and is providing significant opportunity for targeted technology applications. These challenges include:

o Implementing and managing more dynamic, customer-driven fulfillment processes;

o Enhancing visibility into order, inventory, warehouse and transportation productivity and status;

o Improving real-time coordination among enterprise facilities;

o Extending supply chain visibility beyond the enterprise;

o Permitting dynamic scalability to address unpredictable increases in transaction volumes;

o Providing means to monitor activity along the supply chain; and

o Managing events in the supply chain in real- time to take advantage of revenue opportunities and avoid costs.

A premium is developing on SCM systems and software that: focus on specific needs and information requirements; provide a rapid return on investment; are capable of being integrated with legacy systems; are scaleable; and offer real-time capabilities that can support a complex and dynamic web of business requirements.

We believe that our current software and services, coupled with our expertise in the areas of order fulfillment, inventory and warehouse management offer important value-added capabilities in the specializing SCM marketplace. We focus the development and marketing of our product portfolio to meet buyer expectations of immediate functional utility, predictable total cost of ownership and a predictable time to complete implementation.

Expanded use of mobile communications

The pervasive expansion of broadband wireless technologies, inexpensive but powerful devices upon which information may be received, greater amounts of operating information available due to focused and innovative software applications, and increased demands on management as a result of downsizing for efficiency, has created both the requirement that and ability for operational management to elect not to be tied to a stationary location to receive real-time, detailed operating data. This cutting of the wired-technology "umbilical cord" allows for better decision-making with live or current information, better real-time business insight and proactive and timely action with exception management and alerts.

Our Business and Products

We are a provider of products designed to meet the emerging opportunity described above. These products principally involve the provision of services and enterprise level software for order fulfillment comprising order management, warehouse and inventory management and distribution management. This market is sometimes referred to as supply chain "execution management" software. The business benefits from an established, revenue-producing suite of proven products which have been sold to a client base consisting of some Fortune 500 clients in the United States, in our target vertical markets. These vertical markets are pharmaceuticals; consumer packaged goods, third party logistics providers; consumer products, cosmetics, publishing and retail.

Enterprise Products

1. Warehouse Management Systems (WMS)

eWMS is designed to fully automate a warehouse. The system is a fully integrated, scalable product designed to address day-to-day "operational" functions and inventory availability. It operates on platforms such as Linux or Windows and utilizes industry-standard Relational Database Management Systems. The system includes integral RF support to facilitate product movement processes within the warehouse. receiving, inventory control, replenishment, and picking are automated. The system includes comprehensive inventory control functions such as receiving, system-directed, automatic replenishment, consolidation and cycle counting. The product includes a number of standard functions that can be custom configured to suit the physical warehouse and inventory control requirements of the customer. It can control and record all material movements including: planned and unplanned receipts, adjustments, and order processing.

2. Light-Directed Picking and Put Away Systems

The terms "light-directed" or "light-prompted" systems refer to the stock picking (or put away) functions in warehousing management systems whereby a light automatically shines in the sector where stock needs to be picked. Such "light-directed" stock picking systems have a proven track record for making the order fulfillment process dramatically more efficient with a very significant reduction in the error rate in the stock picking function and a measured improvement in productivity.

Our light-directed picking solutions interface with a number of enterprise resource planning ("ERP") systems and can be modified to work with almost any system. The order control/fulfillment systems represent an important facet of the complete E-commerce system. While E-commerce marketing and order taking engines can generate substantial sales, without an optimized order fulfillment process, the promise of efficient E-commerce will not be fully realized by companies.

The industry has recognized our products and services and they were awarded the "Modern Materials Handling" Productivity Achievement Award in 1999 and the Vendor of the Year for Merck Pharmaceuticals in 1998. Our product line includes a mobile cart based system that appeals to a broader customer base. This system, CartRite, utilizes light panels and advanced wireless communications in its warehouse management application.

Typically, after introduction of our light-directed order fulfillment system, clients eliminate a portion of the staff they previously required to fill warehouse orders. This is achieved by automating and optimizing the scheduling, method and the order of picking items without any paper. The system thus, among other things, eliminates the multiple steps associated with paper handling and manual reconciliation.

The software products automate the process from order receipt to final shipment. We have developed standard communication interfaces with the leading ERP vendors including SAP, JD Edwards, Oracle, Peoplesoft and Microsoft Great Plains Resources, and other enterprise level systems. We are an authorized software provider for all the major shippers in the US which includes UPS/FedEx/RPS/USPS. The software is capable of simultaneous production of shipping bar codes when labels are generated.

Hundreds of our installations of our PicRite, TurnRite, and PutRite light-prompt systems are providing results in a wide range of industries, including: pharmaceuticals, cosmetics, publishing, mail order industries, automotive, electronics, direct selling associations, retail and wholesale distribution. The above product lines along with the CartRite system have the potential to enhance its clients' E-commerce related processes. Customers include Merck Pharmaceutical, Pfizer, Wyeth, Estee Lauder, OfficeMax, Rite Aid, Braun Electronics (a wholly owned subsidiary of Gillette) and Dr. Mann Pharma in Germany.

3. Robotic Palletization Software

Robotic automation in the past was generally confined to production lines and manufacturing processes. Recently, the need for robotic automation in warehousing and distribution operations is increasing significantly. To meet this rapidly growing demand in the distribution environment, as well as in manufacturing, we have engaged to develop software to handle robotic palletizing for homogeneous and random pallet patterns on the fly. We believe that we are one of the only companies that is aggressively tackling this demand for on-the-fly robotic order fulfillment. We believe our unique experience in pallet optimization software combined with our enterprise supply chain expertise provides us with a competitive advantage and a head start in this market.

We have developed and currently offer automation software which integrates our pallet optimization and enterprise software to allow for on-the-fly-palletizing of consistent-size cartons using Motoman robots. This system is currently installed at Bolthouse Farms. We are currently enhancing this capability to include palletization of mixed carton sizes or bundles and several major robotic systems. We currently have orders for this upgraded software to be installed at a major US consumer products company and a major European steel fabricator. We believe that there will be a significant market for this technology that will provide concrete functionality to major robotics manufacturers, thereby enhancing their revenue opportunities in both warehouse and manufacturing situations.

4. Mobile Dashboard

Supply chain visibility is imperative for companies to stay ahead and to achieve greater investment returns on their systems. Visibility software is also critical for supply chain software companies to remain competitive in the future marketplace. We are in the process of completing development of an advanced suite of supply chain visibility and dashboard products to enhance our product suite and to provide our customers with the necessary tools for the next generation supply chain. Our dashboard suite will provide productivity metrics and key performance indicators (KPI) across the entire supply chain.

We are completing development of and currently offer a highly-graphical, Web-based portal to seamlessly access our enterprise WMS product suite using mobile technology such as mobile phones, PDAs, etc. We are also currently in the process of developing dashboard interfaces with other leading enterprise resource planning, customer relationship management and other WMS systems. We believe this "business intelligence" application will have significant opportunity for growth as it provides:

o Geographic flexibility for operational managers;

o Better decision-making with live or current information;

o Better business insight due to improved data visibility through enhanced visualization;

o Proactive and timely action with exception management and immediate alerts;

o Better customer service and enhanced value to customers and/or vendors; and,

o Reduction of time in coordinating and monitoring complex processes.

This application has been sold as beta-test sites to two customers.

Packaged Software Products

1. Packaging and Transportation Software

We offer a full range of software solutions for all packaging design, palletizing and truck or container loading needs. The CAPE PACK and TRUCKFILL programs can be fully integrated with other systems and offer simple import and export features. Sharing pallet specifications and container load diagrams is easy with the email feature and the Web Page Publisher program. Companies using CAPE PACK, palletizing and packaging design software, can increase profitability without having to sell more products, raise prices or increase market share.

CAPE PACK palletizing and package design software calculates efficient pallet loads, enables users to design custom packages, evaluate alternative product dimensions, review optional pack arrangements and test package integrity using the compression strength testing feature. CAPE PACK also includes extensive import and exporting capabilities, making integration with other systems, such as SAP, much easier for customers. Product data can be imported into CAPE PACK and stored in product, bundle and case size databases.

The Pallet Group allows the improvement of pallet utilization and load stability by entering in a product size, basic pallet restrictions and letting the program calculate the most efficient pallet stacking patterns. The program will also allow evaluation of the efficiencies of the product on up to three different sets of pallet criteria at one time.

The Arrange Group takes the design process a step further and helps to design improved case sizes, better product arrangements, or bundles, within the case and get more product on a pallet. Beginning with a fixed product size, the user can set a range of desired product quantities and the program would calculate alternative bundles, secondary packaging sizes and arrangements, while also calculating the most efficient pallet pattern.

The Design Group is used to evaluate alternative product dimensions so more product will fit in the case, on the store shelf, and on the pallet. This group builds on Pallet and Arrange so beginning with a variable product dimension, the user can specify how much each dimension can vary up or down and in certain increments. The program then calculates alternative product dimensions, bundles, cases and the resulting pallet load.

CAPE PACK's graphics technology enables users to view true to life representations of solutions and the power to share the results with other people. The program generates three dimensional, color displays of full, quarter and club-store pallet loads.

CASEFILL, DISPLAY PALLET, AND KDF are utilities which can aid in the consolidation of cases, automatically calculate mixed product pallets for club-stores, and to generate pallet loads using bundles of KDF's flat glued cases. All of these features are included with any of the above program groups within CAPE PACK.

DISPLAY PALLET PROGRAM accesses a customer's product database to help manufacturers and retailers build 3-dimensional displays of single and mixed sized products for club stores. By setting load restrictions and using the very powerful multiple product calculation algorithms, pallet loads that are "shoppable" as well as efficient.

TRUCKFILL software specializes in the organization and priority loading of products into trucks and containers. TRUCKFILL helps users reduce shipping costs by planning, creating, editing, printing and maintaining multi-product load plans, while avoiding the shipment of empty space or wasted time manually calculating how many products can be loaded onto containers and trucks. For existing CAPE software users, importing previously saved pallet loads from CAPE PACK can be accomplished quickly and easily.

The customer can enter the details for the products, pallet loads and truck/container sizes into the appropriate database then the software will calculate the load configurations. Sharing the results is made easy with the email, custom reports and exporting capabilities. Creating export documentation in advance and communicating results via the Internet can improve customer relations, help create shipment quotes and reduce refused shipments.

PALLET-LITE is a scaled-down version of the Pallet Group capabilities within CAPE PACK that has recently been released into the European market. It provides users with a program to develop simple pallet patterns. Given it's lower price point and ease of purchase via credit card, we anticipate that this application will have significant incremental revenue opportunities as it is targeted at a different class of user than CAPE PACK.

2. RFID

While we believe that Radio Frequency Identification (RFID) has significant future potential and will therefore, be looking to expand our product offerings as the technology evolves and use becomes more pervasive, current commercial application is generally limited to high-value products at retail and to case/pallet tracking within warehouse/distribution operations. We have accordingly, initially focused on the warehouse segments.

Apply and Comply is a simple, low cost, turnkey RFID labeling solution that gives users the capability to be compliant with Wal-Mart, Target, Gillette, Best Buy and Department of Defense mandates, among others. Designed for companies that are facing RFID compliance mandates on low to mid volume products, the Apply and Comply(TM) product offers a complete portable solution containing all of the hardware, software, and equipment necessary to provide an out-of-the-box RFID compliance label tagging solution.

We also distribute RFID Tag Locators. This application uses commercially available RFID tags and readers to measure RFID performance at the case and pallet level under real-world conditions. Results from these measurements are displayed using interactive color-coded 3D models to show RF properties. This unique and intuitive visualization system conveys an immediate understanding of the RF behavior of a product. This in turn leads to optimal tag placement and significantly improved case and pallet reading.

Competition

The industry today is marked by competition focused on either SCM planning and SCM execution. We compete primarily in SCM execution and face competition from numerous foreign and domestic companies of various sizes, most of which are larger and have greater capital resources. Competition in both of these SCM areas is further complicated by possible shifts in market share due to technological innovation, changes in product emphasis and applications and new entrants with greater capabilities or better prospects.

Order Management

The order management market is becoming a center of focus for every business in the world whether or not they run distribution centers. The importance of this emerging opportunity is highlighted by the recent entry of JD Edwards, PeopleSoft, i2 and Manugistics into this market. The competition for our eOrder product is believed to be as follows:

PeopleSoft, an ERP vendor with estimated revenues of approximately $3 billion. We believe that PeopleSoft has a Java-based product offering which is very competitive with that offered by us. PeopleSoft acquired JD Edwards & Co Inc, an ERP vendor with a presence in the order management segment. PeopleSoft has recently been acquired by Oracle.

i2 Technologies, the largest planning supply chain vendor in the US based on revenues, with sales of approximately $400 million.

Execution Management

In the execution management segment in the US there are approximately 275 companies offering a WMS product, of which only a small number have a top tier product (defined as able to handle warehouse space in excess of 250,000 square feet and at least 100 simultaneous users of wireless devices at any one time) and revenues in excess of $10 million. We believe that we are the only supplier with a complete Linux based cross-platform solution for Supply Chain Management. In this segment of the industry, our major competitors for the warehouse and inventory management components and the transportation and logistics components of our eSuite product are:

EXE Technologies, a subsidiary of SSA Global Technologies since 2003, with revenues believed to be approximately $80 million, competes most directly with us in warehouse management in our main vertical markets.

Manhattan Associates, the largest warehouse management software vendor in the world with annual revenues of approximately $250 million. They focus principally on the markets in retail distribution and fast moving consumer goods.

Catalyst International, owned by ComVest Investment Partners since 2004, with estimated revenues of $37 million, provides principally UNIX solutions in our vertical markets.

Light-Directed Systems

In the "Pick-to-light" business, we believe that there are some 25 competitors, of which the largest are Real Time Solutions, Siemens, Kingway and Lightning Pick, all privately held companies. These companies compete with aggressive pricing and turnkey solutions.

Packaging and Transportation Systems

Within the packaging industry there are only a few companies that provide packaging design, palletization or container loading software in some format. There is only one major competitor within this market segment. TOPS Engineering, a privately held company, with revenues believed to be approximately $2 million, competes most directly with us in packaging, palletizing and container loading software, in our main vertical markets.

RFID

The science of best tag placement has usually been conducted at private labs and certain universities. Only over the last couple of years have companies decided to take this science and commercialize it. We have identified two companies that we feel come closest to provided competitive solutions to our RFID Tag Locator. We also feel that as companies like Wal-Mart start mandating that not only must RFID tags be placed on pallets and individual cases, but that the tags must be readable as well, we will see tremendous interest and need in tag readability and placement software, including our RFID Tag Locator.

ODIN Technologies, a privately held company, based in Virginia, competes in the RFID tag location business with a product called Trifecta. Our prior research indicates that the results from ODIN's product are based on simulation models, while our RFID Tag Locator product gathers scientific RFID data and displays results in 3D and most importantly in real-time. We believe the real-time aspects of RFID Tag Locator is an important competitive differentiator.

Venture Research, a privately held company, based in Texas, provides non-graphical analysis of RFID best tag placement through the use of RFID portal and tunnels.

There are many companies that are promoting RFID "slap-and-ship" compliance software, including Manhattan Associates and Venture Research.

Robotic Palletizing and Order Fulfillment

Robotic automation in the past was generally confined to production lines and manufacturing processes. Recently, the need for robotic automation in warehousing and distribution operations is increasing significantly. The current competition in this space is minimal and incomplete. There are robotic manufacturers, such as Kuka and ABB that have developed software to handle homogeneous palletizing, but it is currently limited in its functionality.

Supply Chain Dashboard and Business Intelligence

Most of the leading WMS companies are now starting to add dashboard portals into their product suite; however, we believe we will be among the first to add a mobile dashboard offering providing true anytime/anywhere visibility.

Research and Development

For the fiscal year ended September 30, 2006, while we continued to work on and upgrade our various products and commenced development of the significant initiatives described above, there were limited specifically-designated research and development expenses.

INTELLECTUAL PROPERTY

We have 11 trademarks registered with the United States Patent & Trademark Office. The marks that we have filed and received trademark registration for are as follows:

Application or Registration or Trademark Registration No. Filing Date --------- -------------------- ------------------------------------------- CARTRITE Reg. No. 2,274,410 August 31, 1999 WARERITE Reg. No. 2,054,680 April 22, 1997 (renewed Mar, 2003) TURNRITE Reg. No. 2,060,888 May 13, 1997 (renewed Mar, 2003) SHIPRITE Reg. No. 2,052,389 April 15, 1997 (renewed Mar, 2003) SCALERITE Reg. No. 2,050,615 April 8, 1997 (renewed Mar, 2003) PUTRITE Reg. No. 2,054,679 April 22, 1997 (renewed Mar, 2003) PICRITE Reg. No. 1,659,547 October 8, 1991 (renewed June 4, 2001) CAPE Reg. No. 920,742 September 21, 1971 (renewed June 13, 2001) CAPE PACK Reg. No. 1,948,709 January 16, 1996 (renewal in progress) Truckfill Reg. No. 2,480,542 August 21, 2001 CAPE Reg. No. TMA 210,349 October 31, 1975 (renewed October 31, 2005) (Canada)

EMPLOYEES

At September 30, 2006, we had 23 employees. Nineteen of our employees are in North America and four are in the United Kingdom. Approximately 40% are in Technical Development/Installation & Implementation, 40% in Sales and Marketing (including sales support) and the balance in Executive/Administrative. We rely heavily on non-employee consultant specialists in various technical positions including our acting controller, as well as in product development and international marketing.

Designing and implementing our software solutions requires substantial technical capabilities in many disparate disciplines, from mechanics and computer science to electronics and mathematics. While we believe that the capability and experience of our technical employees compare favorably with other similar companies, there is no guarantee that we can retain existing employees or attract and hire capable technical employees we may need in the future, or if it is successful, that such personnel can be secured on terms deemed favorable to us.