Activant Solutions 10-Q 2007 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2007

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

For the transition period from                    to                    

Commission File Number 333-49389

Activant Solutions Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	94-2160013 (I.R.S. Employer Identification No.)
7683 Southfront Road Livermore, CA 94551 (Address of principal executive offices)	94551 (Zip Code)

(925) 449-0606
(Registrant’s telephone number,
including area code)

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. Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero      Accelerated filero      Non-accelerated filerþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

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

Class	Outstanding at August 13, 2007
Common Stock, par value $0.01 per share	10 shares

ACTIVANT SOLUTIONS INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2007

INDEX

	PAGE
FORWARD-LOOKING STATEMENTS		3
PART I — FINANCIAL INFORMATION
ITEM 1. — FINANCIAL STATEMENTS (Unaudited)		4
Consolidated Balance Sheets as of September 30, 2006 and June 30, 2007		4
Consolidated Statements of Operations and Comprehensive Income for the three months ended June 30, 2007 and the period from Inception to June 30, 2006 (Activant Solutions Inc.) and the period from April 1, 2006 to May 2, 2006 (Predecessor Company)		5
Consolidated Statements of Operations and Comprehensive Income for the nine months ended June 30, 2007 and the period from Inception to June 30, 2006 (Activant Solutions Inc.) and the period from October 1, 2005 to May 2, 2006 (Predecessor Company)		6
Consolidated Statements of Cash Flows for the nine months ended June 30, 2007 and the period from Inception to June 30, 2006 (Activant Solutions Inc.) and the period from October 1, 2005 to May 2, 2006 (Predecessor Company)		7
Notes to Consolidated Financial Statements		8
ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		28
ITEM 3. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		42
ITEM 4. — CONTROLS AND PROCEDURES		42
PART II — OTHER INFORMATION
ITEM 1. — LEGAL PROCEEDINGS		43
ITEM 1A. – RISK FACTORS		43
ITEM 2. – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		49
ITEM 3. — DEFAULTS UPON SENIOR SECURITIES		49
ITEM 4. — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		49
ITEM 5. — OTHER INFORMATION		49
ITEM 6. — EXHIBITS		50
SIGNATURE		51
Certification Pursuant to Section 302 by Pervez Qureshi
Certification Pursuant to Section 302 by Kathleen M. Crusco
Certification Pursuant to Section 906 by Pervez Qureshi
Certification Pursuant to Section 906 by Kathleen M. Crusco

2

FORWARD-LOOKING STATEMENTS

This report on Form 10-Q includes forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this report under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements such as we believe that we have sufficient liquidity to fund our business operations for at least the next twelve months. We have based these forward-looking statements on our current expectations about future events. While we believe these expectations are reasonable, these forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. Our actual results may differ materially from those suggested by these forward-looking statements for various reasons, including those discussed in this report under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors”.

Some of the key factors that could cause actual results to differ from our expectations are:

• failure to anticipate or respond to our customers’ needs and requirements;

• failure of our proprietary technology to support our customers’ future needs or it becoming obsolete;

• failure to develop new relationships and maintain existing relationships with key industry participants and/or key customers and/or loss of significant customer revenues;

• discontinuance by one of our largest customers of the use of certain of our products;

• loss of recurring subscription service revenues;

• transition of certain of our senior management personnel and the failure to attract, retain and integrate qualified management personnel;

• failure of our Activant Eagle and Vision products to gain acceptance within the automotive parts aftermarket;

• our substantial indebtedness and our ability to incur additional indebtedness;

• certain covenants in our debt documents;

• costs and difficulties of integrating acquisitions, including our recently completed acquisition of Silk Systems and our recently announced acquisition of Intuit’s distribution software management division;

• possible future impairment charges, depending upon the financial results of our business, in view of the fact that a significant portion of our total assets consist of goodwill and other intangible assets;

• changes in the manner or basis on which we receive third-party information used to maintain our electronic automotive parts and applications catalog;

• failure by certain of our existing customers to upgrade to our current generation of systems;

• failure to effectively compete;

• substantial fluctuations in, or failure to maintain current systems sales levels of one-time sales of software licenses and hardware;

• consolidation trends among our customers and consolidation trends in the market segments in which we operate;

• failure to adequately protect our proprietary rights and intellectual property or limitations on the availability of legal or technical means of effecting such protection;

• claims by third parties that we are infringing on their proprietary rights or other adverse claims;

• defects or errors in our software or information services;

• interruptions of our connectivity applications or catastrophic failure of our data center, telecommunications or information technology infrastructure;

• claims for damages against us in the event of a failure of our customers’ systems;

• our ability to assume additional debt on favorable terms, if at all;

• prolonged unfavorable general economic and market conditions, especially in the lumber industry;

• differing interests of debt security holders and our controlling stockholders or investors; and

• the other factors described under the heading “Risk Factors” and elsewhere in this report.

Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this document are made only as of the date hereof. Except as required by law, we do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.

3

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ACTIVANT SOLUTIONS INC.

CONSOLIDATED BALANCE SHEETS

	September 30,			June 30,
(in thousands, except share data)	2006			2007
				(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents	$	36,383		$	25,565
Trade accounts receivable, net of allowance for doubtful accounts of $2,205 and $5,175 at September 30, 2006 and June 30, 2007, respectively		55,689			49,824
Inventories, net		4,355			5,963
Deferred income taxes		5,401			7,453
Income taxes receivable		12,906			2,672
Prepaid expenses and other current assets		5,231			5,954
Total current assets		119,965			97,431
Property and equipment, net		8,727			9,328
Intangible assets, net		221,380			210,340
Goodwill		598,532			600,821
Deferred financing costs		15,137			14,628
Other assets		3,945			4,418
Total assets	$	967,686		$	936,966
LIABILITIES AND STOCKHOLDER’S EQUITY:
Current liabilities:
Accounts payable	$	13,944		$	13,437
Payroll related accruals		18,266			16,557
Deferred revenue		29,688			26,194
Current portion of long-term debt		3,900			—
Accrued expenses and other current liabilities		23,436			20,679
Total current liabilities		89,234			76,867
Long-term debt		561,150			538,050
Deferred tax liabilities		64,817			58,483
Other liabilities		4,812			4,418
Total liabilities		720,013			677,818
Commitments and contingencies		—			—
Common Stock:
Par value $0.01, authorized 1,000 shares, 10 shares issued and outstanding, at September 30, 2006 and June 30, 2007		—			—
Additional paid-in capital		246,744			250,024
Retained earnings		3,080			9,395
Other accumulated comprehensive income (loss):
Unrealized loss on cash flow hedges		(2,103	)		(310	)
Cumulative translation adjustment		(48	)		39
Total stockholder’s equity		247,673			259,148
Total liabilities and stockholder’s equity	$	967,686		$	936,966

The accompanying notes are an integral part of these Consolidated Financial Statements.

4

ACTIVANT SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)

(in thousands)	Predecessor			Activant Solutions			Activant Solutions
	Company			Inc.			Inc.
	Period from			Period from			Three Months
	April 1, 2006 to			Inception to			Ended
	May 2, 2006			June 30, 2006			June 30, 2007
Revenues:
Systems	$	9,813		$	25,867		$	41,490
Services		18,218			37,549			58,759
Total revenues		28,031			63,416			100,249
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems (1)		5,334			13,549			22,695
Services (1)		6,852			14,732			21,699
Total cost of revenues		12,186			28,281			44,394
Gross profit		15,845			35,135			55,855
Operating expenses:
Sales and marketing (1)		4,469			9,134			14,071
Product development (1)		3,057			6,242			10,490
General and administrative (1)		3,209			5,842			9,922
Depreciation and amortization		2,195			4,690			7,448
Acquisition-related costs		30,515			194			72
Restructuring costs		116			115			276
Total operating expenses		43,561			26,217			42,279
Operating income (loss)		(27,716	)		8,918			13,576
Interest expense		(6,199	)		(8,166	)		(11,774	)
Write-off of prior deferred financing costs		(14,459	)		—			—
Premiums on debt repurchase		(26,671	)		—			—
Other income (loss), net		(268	)		(38	)		327
Income (loss) before income taxes		(75,313	)		714			2,129
Provision for (benefit from) income taxes		(25,490	)		119			783
Net income (loss)	$	(49,823	)	$	595		$	1,346
Comprehensive income:
Net income (loss)	$	(49,823	)	$	595		$	1,346
Unrealized gain on cash flow hedges		—			1,423			2,042
Foreign currency translation adjustment		22			(61	)		18
Comprehensive income (loss)	$	(49,801	)	$	1,957		$	3,406
(1) Includes share-based payment expense as follows:
Cost of revenues
Systems	$	—		$	—		$	11
Services		—			—			88
Operating expenses
Sales and marketing		—			—			252
Product development		—			—			97
General and administrative	$	1,249		$	—		$	632

The accompanying notes are an integral part of these Consolidated Financial Statements.

5

ACTIVANT SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)

(in thousands)	Predecessor			Activant Solutions			Activant Solutions
	Company			Inc.			Inc.
	Period from			Period from			Nine Months
	October 1, 2005			Inception to			Ended
	to May 2, 2006			June 30, 2006			June 30, 2007
Revenues:
Systems	$	91,404		$	25,867		$	126,998
Services		133,811			37,549			174,557
Total revenues		225,215			63,416			301,555
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems (1)		47,547			13,549			66,116
Services (1)		48,581			14,732			63,451
Total cost of revenues		96,128			28,281			129,567
Gross profit		129,087			35,135			171,988
Operating expenses:
Sales and marketing (1)		30,549			9,134			45,046
Product development (1)		21,986			6,242			29,993
General and administrative (1)		21,459			5,842			28,942
Depreciation and amortization		15,511			4,690			21,785
Acquisition-related costs		32,291			194			72
Restructuring costs		116			115			563
Total operating expenses		121,912			26,217			126,401
Operating income		7,175			8,918			45,587
Interest expense		(33,000	)		(8,166	)		(35,644	)
Write-off of prior deferred financing costs		(15,994	)		—			—
Premiums on debt repurchase		(26,671	)		—			—
Other income (loss), net		733			(38	)		786
Income (loss) before income taxes		(67,757	)		714			10,729
Provision for (benefit from) income taxes		(22,553	)		119			4,414
Net income (loss)	$	(45,204	)	$	595		$	6,315
Comprehensive income:
Net income (loss)	$	(45,204	)	$	595		$	6,315
Unrealized gain on cash flow hedges		—			1,423			1,793
Foreign currency translation adjustment		(131	)		(61	)		87
Comprehensive income (loss)	$	(45,335	)	$	1,957		$	8,195
(1) Includes share-based payment expense as follows:
Cost of revenues
Systems	$	—		$	—		$	35
Services		—			—			289
Operating expenses
Sales and marketing		—			—			837
Product development		—			—			320
General and administrative	$	1,393		$	—		$	1,812

The accompanying notes are an integral part of these Consolidated Financial Statements.

6

ACTIVANT SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(in thousands)	Predecessor			Activant Solutions			Activant Solutions
	Company			Inc.			Inc.
	Period from			Period from			Nine Months
	October 1, 2005			Inception to			Ended
	to May 2, 2006			June 30, 2006			June 30, 2007
OPERATING ACTIVITIES
Net income (loss)	$	(45,204	)	$	595		$	6,315
Adjustments to reconcile net income to net cash provided by operating activities:
Stock compensation expense		1,393			—			3,293
Depreciation		3,498			1,022			4,489
Amortization of intangible assets		12,013			3,668			17,296
Amortization of deferred financing costs		1,783			315			1,586
Write-off of prior deferred financing costs		15,994			—			—
Write-off capitalized IPO costs		1,776			—			—
Provision for doubtful accounts		1,558			747			2,970
Deferred income taxes, net		(10,192	)		(341	)		(8,386	)
Other, net		1,331			(221	)		1,697
Changes in assets and liabilities:
Trade accounts receivable		1,797			(3,087	)		3,963
Inventories		(2,128	)		950			(1,371	)
Prepaid expenses and other assets		(22,531	)		(1,116	)		8,972
Accounts payable		(224	)		(1,221	)		(515	)
Deferred revenue		(4,944	)		7,789			(4,012	)
Accrued expenses and other liabilities		56,751			2,731			(6,053	)
Net cash provided by operating activities		12,671			11,831			30,244
INVESTING ACTIVITIES
Purchase of Activant Solutions Inc.		—			(782,893	)		—
Acquisition, net of cash acquired		—			—			(6,502	)
Purchase of property and equipment		(3,586	)		(596	)		(4,989	)
Capitalized computer software costs and databases		(3,455	)		(860	)		(3,987	)
Unrealized gain on cash flow hedge, net		—			—			1,793
Purchase price adjustments		508			—			700
Proceeds from disposition of equity interest		679			—			—
Net cash used in investing activities		(5,854	)		(784,349	)		(12,985	)
FINANCING ACTIVITIES
Issuance of common stock at inception		—			245,625			—
Proceeds from long-term debt		185,000			565,000			—
Repayment of senior unsecured bridge loan		(180,000	)		—			—
Proceeds from credit facility		10,000			—			—
Repayment of credit facility		(10,000	)		—			(27,000	)
Payment on long-term debt		(149	)		(975	)		—
Repurchase of common stock		(840	)		—			—
Exercise of stock options		105			—			—
Debt issuance costs		(3,561	)		(15,910	)		(1,077	)
Net cash provided by (used in) financing activities		555			793,740			(28,077	)
Net change in cash and cash equivalents		7,372			21,222			(10,818	)
Cash and cash equivalents, beginning of period		10,952			—			36,383
Cash and cash equivalents, end of period	$	18,324		$	21,222		$	25,565
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	26,155		$	116		$	38,097
Income taxes	$	8,311		$	282		$	9,993

The accompanying notes are an integral part of these Consolidated Financial Statements.

7

ACTIVANT SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)

1. BASIS OF PRESENTATION

On May 2, 2006, Activant Group Inc. (formerly known as Lone Star Holding Corp.), or Activant Group, Lone Star Merger Corp., or Merger Sub, and Activant Solutions Holdings Inc., or Holdings (the “Predecessor Company”), consummated a merger, whereupon Holdings became wholly owned by Activant Group, which is wholly owned by investment funds affiliated with Hellman & Friedman LLC, Thoma Cressey Equity Partners, Inc., or Thoma Cressey, and JMI Equity and certain members of our management. Following the merger, on May 2, 2006, Holdings merged with and into Activant Solutions Inc., with Activant Solutions Inc. (“we”, “us”, or “our”) continuing as the surviving corporation and wholly owned subsidiary of Activant Group. These mergers are referred to as the “mergers” and the transactions related to the mergers are referred to collectively as the “transactions.” The transaction was treated as a purchase and thus the assets and liabilities were recorded at their fair value as of the closing date. Activant Group was incorporated on March 7, 2006 for the purpose of acquiring Holdings and did not have any operations prior to May 2, 2006 other than in connection with the Holdings acquisition.

The accompanying consolidated statements of operations for the period from October 1, 2005 to May 2, 2006 and the period from April 1, 2006 to May 2, 2006, and cash flows for the period from October 1, 2005 to May 2, 2006 represent the results of operations and cash flows of the Predecessor Company and its wholly owned subsidiaries. The accompanying consolidated balance sheets as of September 30, 2006 and June 30, 2007, consolidated statements of operations for the period from Inception to June 30, 2006 and the three and nine months ended June 30, 2007, and cash flows for the nine months ended June 30, 2007 represent our financial position, results of operations and cash flows. Certain reclassifications have been made to prior periods’ consolidated financial statements to conform to current period presentation.

Our accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While our management has based their assumptions and estimates on the facts and circumstances existing at June 30, 2007, actual results may differ from these estimates and operating results for the three and nine months ended June 30, 2007 are not necessarily indicative of the results that may be achieved for the year ending September 30, 2007.

In the opinion of our management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results for the interim periods presented. These financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Financial Report for the year ended September 30, 2006.

2. NEW ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for our fiscal year beginning October 1, 2007. We are currently evaluating the impact of adopting FIN 48 on our consolidated financial statements.

In September 2006, FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for our fiscal year beginning October 1, 2008. Early adoption is permitted for our fiscal year beginning October 1, 2007. We do not believe the adoption of SFAS 157 will have a material impact on our consolidated financial statements.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS

8

159”). SFAS 159 permits, but does not require, entities to measure certain financial instruments and other items at fair value. Election of the fair value option for any financial instrument or other eligible item is irrevocable and requires that changes in fair value be recognized in the statement of operations. SFAS 159 is effective for our fiscal year beginning October 1, 2008. We may also elect early adoption effective October 1, 2007 provided the provisions of SFAS 157 are also applied. We are currently in the process of evaluating the impact of SFAS 159 on our consolidated financial statements.

3. MERGERS AND RELATED TRANSACTIONS

On May 2, 2006, the Predecessor Company merged with and into Activant Solutions Inc., with Activant Solutions Inc. continuing as the surviving corporation and as a wholly owned subsidiary of Activant Group. The transaction was treated as a purchase and thus the assets and liabilities were recorded at their fair value as of the closing date.

The mergers and related transactions were funded by a combination of approximately $245.7 million of proceeds from the issuance of common stock, a $390.0 million senior secured term loan facility and $175.0 million in senior subordinated notes, less cash received. The mergers have been recorded using the purchase method of accounting. The purchase price allocation is based upon the relative fair values of the identifiable assets acquired and liabilities assumed. The excess purchase price over those fair values is recorded as goodwill.

During the nine months ended June 30, 2007, we recorded a purchase price adjustment to goodwill of $0.7 million related to the release by Thoma Cressey, and the other former stockholders of Prophet 21, Inc., to us of such amount from the indemnification escrow account established in conjunction with the purchase of Prophet 21, Inc by the Predecessor Company. The goodwill recorded as a result of the transaction is not expected to be deductible for tax purposes. We also decreased goodwill by $1.4 million related to the resolution of additional pre-acquisition income tax uncertainties and basis adjustments related to temporary differences of acquired assets that are not expected to reverse.

4. ACQUISITIONS

Acquisitions have been recorded using the purchase method of accounting, and, accordingly, the results of operations are included in our consolidated results as of the date of each acquisition. We allocate the purchase price of our acquisitions to the tangible assets, liabilities and intangible assets acquired, based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The goodwill recorded as a result of these acquisitions is not expected to be deductible for tax purposes.

On May 31, 2007, we acquired 100% of the common stock of Silk Systems, Inc. for a total purchase price of $6.5 million, net of $0.7 million cash received. We allocated $4.4 million of the purchase price to goodwill. Our financial statements include the results of operations of this business for the period from June 1, 2007 to June 30, 2007. The results of operations and financial position of this business are not material to our results of operations and financial position. We are in the process of determining values of certain tangible and intangible assets; thus, the allocation of the purchase price to the assets acquired and liabilities assumed in connection with this acquisition is subject to change. The preliminary purchase price allocation is based upon our best estimates of the relative fair values of the identifiable assets acquired and liabilities assumed.

We recorded a charge to operations of $0.1 million for the three months ended June 30, 2007 which related to our acquisition of Silk Systems Inc. and was primarily composed of travel expenses associated with the integration of Silk Systems Inc. We expect to incur additional integration costs related to Silk Systems Inc. and the below referenced Asset Purchase Agreement with Intuit Inc. throughout the remainder of 2007.

During the period from October 1, 2005 to May 2, 2006, the Predecessor Company incurred $32.3 million in acquisition-related costs. $30.5 million of these expenses were transaction costs related to the mergers. The remaining $1.8 million was for professional services expenses related to an initial public offering of the Predecessor Company’s stock which offering was withdrawn in connection with the mergers. During the period from Inception to June 30, 2006, we incurred acquisition-related costs of $0.2 million related to the mergers. These charges primarily include outside financial advisory, accounting, legal and consulting fees, and other costs incurred directly related to integrating acquired companies.

9

5. SUBSEQUENT EVENT

On July 2, 2007, we and Greenland Holding Corp., a newly formed and wholly owned subsidiary of ours (“Greenland”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Intuit Inc. (“Intuit”). The Asset Purchase Agreement provides for the acquisition and assumption by us from Intuit of specified assets (the “Transferred Assets”) and liabilities (the “Assumed Liabilities”) that comprise Intuit Eclipse, Intuit’s distribution management software division (the “Transaction”).

Under the terms of the Asset Purchase Agreement, we will acquire the Transferred Assets and assume the Assumed Liabilities for an aggregate consideration of approximately $100.0 million in cash subject to certain adjustments related to severance payments and working capital. We expect to finance the Transaction, including related fees and expenses, with a combination of borrowings under the Acquisition Facility (defined below), borrowings under our existing $40.0 million revolving credit facility described below and our cash on hand at the time of the closing of the Transaction. Consummation of the Transaction is subject to the satisfaction or waiver of customary conditions, including (1) the expiration or termination of the applicable Hart-Scott-Rodino waiting period which occurred on July 20, 2007, (2) subject to certain exceptions, the material accuracy of the representations and warranties of the parties and (3) the absence of any Material Adverse Effect (as defined in the Asset Purchase Agreement) with respect to Intuit Eclipse.

Concurrently, and in connection with entering into the Asset Purchase Agreement, we entered into a commitment letter with Deutsche Bank Trust Company Americas and Deutsche Bank Securities Inc. (the “Debt Commitment Letter”) to obtain a new incremental term loan facility to be used to finance the Transaction and to pay fees and expenses in connection therewith (the “Acquisition Facility”). Under the terms of the Debt Commitment Letter, the Acquisition Facility will be documented pursuant to an incremental term loan amendment under our existing senior credit agreement pursuant to which we will borrow $75.0 million as a new tranche of loans under the credit agreement.

The Acquisition Facility will mature on May 2, 2013 and will amortize in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount of the Acquisition Facility, with the balance payable on May 2, 2013. Repayment of the Acquisition Facility will be guaranteed by the same guarantors who are required to guarantee our existing senior secured credit agreement and secured by the same assets that are required to secure our existing senior secured credit agreement.

The loans under the Acquisition Facility will bear interest rates based on rates plus a margin to be agreed upon with the lenders prior to the closing of the Transaction.

We expect the Transaction and the entry into the Acquisition Facility to close in the fourth fiscal quarter of 2007.

6. RESTRUCTURING

During the three months ended June 30, 2007, our management approved a restructuring plan for eliminating certain positions associated with outsourcing certain activities to third-party providers. In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”), we recorded a charge of approximately $0.2 million related to workforce reductions, which events were communicated to the impacted employees or incurred during the period. The charge was comprised of severance and other employee termination benefits related to these workforce reductions. Approximately $0.3 million remains to be paid as of June 30, 2007 related to these actions and are anticipated to be paid over the next twelve months.

During the three months ended June 30, 2007, our management also approved a restructuring plan for eliminating certain positions with the intent to streamline and focus our efforts and more properly align our cost structure with our projected revenue streams. In accordance with SFAS 146, we recorded a charge of approximately $0.1 million related to this workforce reduction which was communicated to impacted employees during the period. All payments related to this action were made by June 30, 2007.

During the periods from October 1, 2006 to May 2, 2006 and Inception to June 30, 2006, the Predecessor Company and we, incurred, in accordance with SFAS 146, restructuring costs of $0.1 million and $0.1 million, respectively. These were one-time benefits paid to certain employees separated in connection with the relocation of our corporate offices from Austin, Texas to Livermore, California. We also incurred $0.3 million in costs related to this action during the nine months ended June 30, 2007. All payments related to this action were made by June 30, 2007.

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7. DEBT

Our long-term debt consisted of the following at the indicated dates:

	September 30,			June 30,
(dollars in thousands)	2006			2007
101/2 % senior notes due 2011	$	2,000		$	—
Senior secured credit agreement		388,050			363,050
Senior subordinated notes		175,000			175,000
Total debt		565,050			538,050
Current portion		(3,900	)		—
Long-term debt	$	561,150		$	538,050

10¹/2%senior notes due 2011

On March 21, 2007, we made a final payment of $2.0 million on the 10¹/2% senior notes due 2011. The $0.1 million repurchase premium on the notes was recorded as additional interest expense.

Senior secured credit agreement

On May 2, 2006, in connection with the consummation of the mergers, we entered into a senior secured credit agreement. The senior secured credit agreement provides for (i) a seven-year term loan in the amount of $390.0 million, amortized at a rate of 1.00% per year on a quarterly basis for the first six and three-quarters years after May 2, 2006, with the balance paid at maturity, and (ii) a five-year revolving credit facility that permits loans in an aggregate amount of up to $40.0 million, which includes a letter of credit facility and a swing line facility. During the nine months ended June 30, 2007, we repaid $25.0 million in principal, which reduced the future unamortized principal payments due per the amortization schedule. There were no borrowings under the revolving credit facility during the nine months ended June 30, 2007.

Substantially all of our assets and those of our subsidiaries are pledged as collateral on the senior secured credit agreement.

The borrowings under the senior secured credit agreement bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the prime rate of Deutsche Bank Trust Company Americas, and (2) the federal funds rate plus¹/2 of 1%; or (b) a reserve adjusted Eurodollar rate on deposits for periods of one-, two-, three-, or six-months (or, to the extent agreed to by each applicable lender, nine- or twelve-months or less than one month). In addition to paying interest on outstanding principal under the senior secured credit agreement, we are required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. The initial commitment fee rate is 0.50% per annum. The commitment fee rate may be reduced subject to our attaining certain leverage ratios, none of which had been obtained as of June 30, 2007. We must also pay customary letter of credit fees for issued and outstanding letters of credit.

Senior subordinated notes due 2016

On April 27, 2006, we issued $175.0 million aggregate principal amount of 9.50% senior subordinated notes due May 2, 2016. Each of our domestic subsidiaries, as primary obligors and not merely as sureties, jointly and severally, irrevocably and unconditionally guaranteed, on an unsecured senior subordinated basis, the performance and full and punctual payment when due, whether at maturity, by acceleration or otherwise, of all of our obligations under the indenture and the notes. The notes are our unsecured senior subordinated obligations and are subordinated in right of payment to all of our existing and future senior indebtedness (including the senior secured credit agreement), are effectively subordinated to all of our secured indebtedness (including the senior secured credit agreement); and senior in right of payment to all of our existing and future subordinated indebtedness.

On February 23, 2007, we completed an exchange offer to provide the holders of our senior subordinated notes with freely tradable notes that have been registered under the Securities Act of 1933, as amended.

The terms of the senior secured credit agreement and the senior subordinated notes restrict certain activities, the most significant of which include limitations on additional indebtedness, liens, guarantees, payment or declaration of dividends, sale of assets and transactions with affiliates. In addition, the senior secured credit agreement requires us to maintain a maximum total net leverage ratio and a minimum interest coverage ratio. The senior secured credit agreement also contains certain customary affirmative covenants and events of default. At June 30, 2007, we were in compliance with all of the covenants of the senior secured credit agreement and the senior subordinated notes.

11

8. INCOME TAXES

We recorded a provision for income tax expense at an overall estimated annual effective tax rate of 36.8% and 41.1% for the three and nine months ended June 30, 2007, respectively, which was based on our anticipated results for the full fiscal year. Our income tax expense differed from the amount computed by applying the statutory rate to income before provision for income taxes due to the impact of permanent differences.

9. COMMON STOCK OPTION PLAN

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which replaced SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), and superseded APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This revised standard addresses the accounting for stock-based payment transactions in which a company receives employee services in exchange for either equity instruments of the company or liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first interim or annual period after June 15, 2005, with early adoption encouraged.

At June 30, 2007, the total intrinsic value of outstanding stock options was approximately $3.5 million. At June 30, 2007, there was approximately $13.4 million of total unrecognized shared-based payment expense related to unvested stock options which we expect to recognize as expense in future periods through 2012.

Activant Solutions Inc.

During 2006 Activant Group, our parent company, adopted the Activant Group Inc. 2006 Stock Incentive Plan (the “2006 Option Plan”), which provides for the grant of incentive and non–qualified stock options to employees associated with us. The option price may not be less than the fair market value at the date of grant as determined in good faith by the Board of Directors of Activant Group from time to time. Options vest in varying amounts over a period up to five years and expire ten years from the date of the grant. We recorded share-based payment expense of approximately $3.3 million for the nine months ended June 30, 2007, with a total income tax benefit recognized in the income statement of approximately $1.4 million.

The following table summarizes share-based payment expense recorded under SFAS 123R for the three and nine months ended June 30, 2007 and its allocation within the Consolidated Statements of Operations:

Information on stock options from September 30, 2006 to June 30, 2007 under the 2006 Option Plan is as follows:

	2006 Option Plan
	Number of			Weighted Average
	Shares			Exercise Price
Total options outstanding at September 30, 2006		—		$	—
Options granted		7,295,073			4.38
Options forfeited		(520,000	)		4.35
Options exercised		—			—
Total options outstanding at June 30, 2007		6,775,073		$	4.38

The fair value of each award granted from the 2006 Option Plan during the nine months ended June 30, 2007 was estimated at the date of grant using a Black-Scholes option pricing model that uses certain assumptions including expected term, expected volatility of the underlying stock, expected dividend pay-out rate and risk-free rate of return. The expected term was based on historical data and represents the period of time that stock options granted were expected to be outstanding. Due to the fact that the common stock underlying the options is not publicly traded, the expected volatility was based on a comparable group of companies for the period. We do not intend to pay dividends on our common stock for the foreseeable future, and accordingly, used a dividend yield of zero. The risk-free rate for periods within the contractual life of the option was based on the Treasury Bill coupon rate for U.S Treasury securities in effect at the time of the grant with a maturity approximating the expected term.

12

Following are the weighted average assumptions utilized to value stock options granted during the periods indicated:

	Three months			Nine months
	ended			ended
	June 30, 2007			June 30, 2007
Expected term	6.66 years			6.66 years
Expected volatility		50.00	%		50.00	%
Expected dividends		0.00	%		0.00	%
Risk-free rate		4.77	%		4.68	%

The weighted average estimated grant date fair value, as defined by SFAS 123R, for options granted under the 2006 Option Plan during the first nine months of fiscal year 2007 was $2.46 per share.

Predecessor Company

The Predecessor Company adopted SFAS 123R in the quarter ended December 31, 2005 using the prospective method. The Predecessor Company recorded a charge of approximately $1.4 million for the period from October 1, 2005 to May 2, 2006, with a total income tax benefit recognized in the income statement of approximately $0.5 million.

In connection with the mergers, Activant Group entered into an option rollover agreement with Mr. Pervez Qureshi, our Chief Executive Officer and President, pursuant to which Mr. Qureshi agreed to rollover $1.0 million of spread value of his then outstanding stock options into 333,334 vested stock options to purchase shares of common stock of Activant Group at an exercise price of $1.00 per share. Pursuant to the option rollover agreement, Activant Group agreed to assume these options pursuant to the terms of the Activant Solutions Holdings Inc. Second Amended and Restated Stock Option Plan for Key Employees, as amended (the “Predecessor Company Plan”), which is the stock option plan under which these options were originally granted.

Information on stock options from September 30, 2006 to June 30, 2007 under the Predecessor Company Plan is as follows:

	Predecessor Company Plan
	Number of		Weighted Average
	Shares		Exercise Price
Total options outstanding at September 30, 2006		333,334	$	1.00
Options granted		—		—
Options forfeited		—		—
Options exercised		—		—
Total options outstanding at June 30, 2007		333,334	$	1.00

10. SEGMENT REPORTING

We have organized our business around our products and services (“Segments”) as follows:

• Systems, which is comprised primarily of proprietary software applications, third-party hardware and peripherals and implementation and training;

• Product Support, which is comprised of daily operating support through our advice line, software updates, preventive and remedial on-site maintenance and depot repair services;

• Content and Supply Chain, which is comprised primarily of databases, exchanges and other information services, including our electronic catalog in the automotive parts aftermarket, and

• Other Services, which is comprised primarily of business products, such as forms and other paper products.

Each reportable Segment is managed separately on a revenue and gross profit basis. We do not allocate operating expenses, interest expense, other expenses or assets to each Segment, as this information is not used to measure the operating performance of the Segments. Organizationally, the functional operating areas that support all of our Segments, including product development, marketing and general and administrative, are integrated under a common reporting and management structure to achieve operating efficiencies.

13

The following tables set forth, for the periods indicated, our revenues, cost of revenues, gross profit and gross profit as a percentage of revenue by Segment:

	Period from April 1, 2006 to May 2, 2006
(dollars in thousands)	Predecessor Company
				Product			Content &
	Systems			Support			Supply Chain			Other			Total
Revenues	$	9,813		$	12,874		$	4,554		$	790		$	28,031
Cost of Revenues		5,334			5,194			1,118			540			12,186
Gross Profit	$	4,479		$	7,680		$	3,436		$	250		$	15,845
Gross Profit as a Percentage of Revenues		45.6	%		59.7	%		75.5	%		31.6	%		56.5	%

	Period from Inception to June 30, 2006
(dollars in thousands)	Activant Solutions, Inc.
				Product			Content &
	Systems			Support			Supply Chain			Other			Total
Revenues	$	25,867		$	25,346		$	10,696		$	1,507		$	63,416
Cost of Revenues		13,549			11,037			2,555			1,140			28,281
Gross Profit	$	12,318		$	14,309		$	8,141		$	367		$	35,135
Gross Profit as a Percentage of Revenues		47.6	%		56.5	%		76.1	%		24.4	%		55.4	%

	Three Months Ended June 30, 2007
(dollars in thousands)	Activant Solutions, Inc.
				Product			Content &
	Systems			Support			Supply Chain			Other			Total
Revenues	$	41,490		$	40,017		$	16,401		$	2,341		$	100,249
Cost of Revenues		22,695			16,460			3,837			1,402			44,394
Gross Profit	$	18,795		$	23,557		$	12,564		$	939		$	55,855
Gross Profit as a Percentage of Revenues		45.3	%		58.9	%		76.6	%		40.1	%		55.7	%

The following tables set forth, for the periods indicated, our revenues, cost of revenues, gross profit and gross profit as a percentage of revenue by Segment:

	Period from October 1, 2005 to May 2, 2006
(dollars in thousands)	Predecessor Company
				Product			Content &
	Systems			Support			Supply Chain			Other			Total
Revenues	$	91,404		$	91,739		$	36,665		$	5,407		$	225,215
Cost of Revenues		47,547			36,694			8,125			3,762			96,128
Gross Profit	$	43,857		$	55,045		$	28,540		$	1,645		$	129,087
Gross Profit as a Percentage of Revenues		48.0	%		60.0	%		77.8	%		30.4	%		57.3	%

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	Period from Inception to June 30, 2006
(dollars in thousands)	Activant Solutions Inc.
				Product			Content &
	Systems			Support			Supply Chain			Other			Total
Revenues	$	25,867		$	25,346		$	10,696		$	1,507		$	63,416
Cost of Revenues		13,549			11,037			2,555			1,140			28,281
Gross Profit	$	12,318		$	14,309		$	8,141		$	367		$	35,135
Gross Profit as a Percentage of Revenues		47.6	%		56.5	%		76.1	%		24.4	%		55.4	%

	Nine months ended June 30, 2007
(dollars in thousands)	Activant Solutions, Inc.
				Product			Content &
	Systems			Support			Supply Chain			Other			Total
Revenues	$	126,998		$	119,368		$	49,217		$	5,972		$	301,555
Cost of Revenues		66,116			48,023			11,157			4,271			129,567
Gross Profit	$	60,882		$	71,345		$	38,060		$	1,701		$	171,988
Gross Profit as a Percentage of Revenues		47.9	%		59.8	%		77.3	%		28.5	%		57.0	%

Geographic segments

The Americas geographic area covers the United States and Canada. The Europe geographic area covers the United Kingdom, Ireland and France. The following tables set forth, for the periods and at the dates indicated, our revenues and assets by geographic area:

(in thousands)	Predecessor
	Company		Activant Solutions Inc.
	Period from		Period from		Three Months
	April 1, 2006 to		Inception to		Ended
	May 2, 2006		June 30, 2006		June 30, 2007
Revenues:
Americas	$	27,499	$	62,432	$	98,510
Europe		532		984		1,739
Total revenues	$	28,031	$	63,416	$	100,249

	Period from		Period from		Nine Months
	October 1, 2005		Inception to		Ended
	to May 2, 2006		June 30, 2006		June 30, 2007
Revenues:
Americas	$	221,247	$	62,432	$	296,434
Europe		3,968		984		5,121
Total revenues	$	225,215	$	63,416	$	301,555

(in thousands)

	September 30,		June 30,
	2006		2007
Assets:
Americas	$	965,217	$	934,142
Europe		2,469		2,824
Total assets	$	967,686	$	936,966

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11. GUARANTOR CONSOLIDATION

The senior secured credit agreement and the senior subordinated notes are guaranteed by our existing, wholly-owned domestic subsidiaries Triad Systems Financial Corporation, Speedware USA, Inc., Prelude Systems Inc., Enterprise Computing Inc., Prophet 21, Inc., Speedware Holdings, Inc., Prophet 21 New Jersey, Inc., STANPak Systems, Inc. and HM Coop LLC. Our former wholly-owned domestic subsidiaries (i) CCI/TRIAD Gem, Inc., Triad Data Corporation, CCI/ARD, Inc. and Triad Systems Corporation were merged into us during our quarter ended December 31, 2006; (ii) Distributor Information Systems Corporation, Prophet 21 Canada, Inc., Prophet 21 Investment Corporation, and Trade Services Systems, Inc. were merged into Prophet 21 New Jersey, Inc. during our quarter ended December 31, 2006; and (iii) SDI Merger Corporation was merged into Prophet 21 New Jersey, Inc. during our quarter ended March 31, 2007. As a result of such mergers, they are no longer guarantors of the senior secured credit agreement and the senior subordinated notes. Our other subsidiaries (the “Non-Guarantors”) are not guarantors of the senior secured credit agreement and the senior subordinated notes. The following tables set forth financial information of the Guarantors and Non-Guarantors for the condensed consolidating balance sheets as of September 30, 2006 and June 30, 2007; the condensed consolidating statements of operations for the three months ended June 30, 2007 and the period from Inception to June 30, 2006 (Activant Solutions Inc.), and the period from April 1 2006 to May 2, 2006 (Predecessor Company); the condensed consolidating statements of operations for the nine months ended June 30, 2007 and the period from Inception to June 30, 2006 (Activant Solutions Inc.), and the period from October 1, 2005 to May 2, 2006 (Predecessor Company); and the condensed consolidating statements of cash flows for the nine months ended June 30, 2007 and the period from Inception to June 30, 2006 (Activant Solutions Inc.), and the period from October 1, 2005 to May 2, 2006 (Predecessor Company.)

16

Condensed Consolidating Balance Sheet as of June 30, 2007
Activant Solutions Inc.

(in thousands)	Guarantor
	Principal			Guarantor		Non-Guarantor
	Operations			Subsidiaries		Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	18,472		$	2,877	$	4,216		$	—		$	25,565
Trade accounts receivable, net of allowance for doubtful accounts		38,903			7,955		2,966			—			49,824
Inventories, net		5,283			386		294			—			5,963
Prepaid expenses and other current assets		14,013			1,524		542			—			16,079
Total current assets		76,671			12,742		8,018			—			97,431
Property and equipment, net		7,536			1,035		757			—			9,328
Intangible assets, net		208,071			—		2,269			—			210,340
Goodwill		600,821			—		—			—			600,821
Investments in subsidiaries		(48,245	)		68,746		(15,998	)		(4,503	)		—
Deferred financing costs		14,628			—		—			—			14,628
Other assets		4,165			142		111			—			4,418
Total assets	$	863,647		$	82,665	$	(4,843	)	$	(4,503	)	$	936,966
Liabilities and stockholder’s equity (deficit)
Current liabilities:
Accounts payable	$	10,318		$	1,963	$	1,156		$	—		$	13,437
Payroll related accruals		11,126			3,987		1,444			—			16,557
Deferred revenue		12,377			12,312		1,505			—			26,194
Accrued expenses and other current liabilities		20,106			1,585		(1,018	)		6			20,679
Total current liabilities		53,927			19,847		3,087			6			76,867
Long-term debt		538,050			—		—			—			538,050
Deferred tax liabilities and other liabilities		54,318			7,560		1,023			—			62,901
Total liabilities		646,295			27,407		4,110			6			677,818
Total stockholder’s equity (deficit)		217,352			55,258		(8,953	)		(4,509	)		259,148
Total liabilities and stockholder’s equity (deficit)	$	863,647		$	82,665	$	(4,843	)	$	(4,503	)	$	936,966

17

Condensed Consolidating Balance Sheet as of September 30, 2006
Activant Solutions Inc.

(in thousands)	Guarantor
	Principal			Guarantor			Non-Guarantor
	Operations			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	26,498		$	7,772		$	2,113		$	—		$	36,383
Trade accounts receivable, net of allowance for doubtful accounts		39,134			12,681			3,874			—			55,689
Inventories, net		3,724			467			164			—			4,355
Prepaid expenses and other current assets		(10,021	)		34,195			(636	)		—			23,538
Total current assets		59,335			55,115			5,515			—			119,965
Property and equipment, net		6,717			1,341			669			—			8,727
Intangible assets, net		221,380			—			—			—			221,380
Goodwill		598,532			—			—			—			598,532
Investments in subsidiaries		16,911			(7,772	)		3,437			(12,576	)		—
Deferred financing costs		15,137			—			—			—			15,137
Other assets		3,734			127			84			—			3,945
Total assets	$	921,746		$	48,811		$	9,705		$	(12,576	)	$	967,686
Liabilities and stockholder’s equity
Current liabilities:
Accounts payable	$	10,996		$	2,597		$	351		$	—		$	13,944
Payroll related accruals		13,362			3,362			1,542			—			18,266
Deferred revenue		14,186			11,763			3,739			—			29,688
Current portion of long-term debt		3,900			—			—			—			3,900
Accrued expenses and other current liabilities		21,798			1,585			53			—			23,436
Total current liabilities		64,242			19,307			5,685			—			89,234
Long-term debt		561,150			—			—			—			561,150
Deferred tax liabilities and other liabilities		61,006			7,599			1,024			—			69,629
Total liabilities		686,398			26,906			6,709			—			720,013
Total stockholder’s equity		235,348			21,905			2,996			(12,576	)		247,673
Total liabilities and stockholder’s equity	$	921,746		$	48,811		$	9,705		$	(12,576	)	$	967,686

18

Consolidating Statement of Operations for the Three Months Ended June 30, 2007
Activant Solutions Inc.

(in thousands)	Guarantor
	Principal			Guarantor		Non-Guarantor
	Operations			Subsidiaries		Subsidiaries			Consolidated
Revenues:
Systems	$	27,571		$	12,101	$	1,818		$	41,490
Services		37,787			17,005		3,967			58,759
Total revenues		65,358			29,106		5,785			100,249
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		14,685			4,982		3,028			22,695
Services		15,588			4,205		1,906			21,699
Total cost of revenues		30,273			9,187		4,934			44,394
Gross profit		35,085			19,919		851			55,855
Operating expenses:
Sales and marketing		9,129			3,619		1,323			14,071
Product development		5,685			4,068		737			10,490
General and administrative		7,870			1,097		955			9,922
Depreciation and amortization		7,158			202		88			7,448
Acquisition-related costs		72			—		—			72
Restructuring costs		276			—		—			276
Total operating expenses		30,190			8,986		3,103			42,279
Operating income (loss)		4,895			10,933		(2,252	)		13,576
Interest expense		(11,771	)		—		(3	)		(11,774	)
Other income, net		168			4		155			327
Income (loss) before provision for income taxes		(6,708	)		10,937		(2,100	)		2,129
Provision for income taxes		781			2		—			783
Net income (loss)	$	(7,489	)	$	10,935	$	(2,100	)	$	1,346

19

Consolidating Statement of Operations for the period from April 1, 2006 to May 2, 2006
Predecessor Company

(in thousands)				Guarantor
	Parent			Principal			Guarantor			Non-Guarantor
	Company			Operations			Subsidiaries			Subsidiaries			Consolidated
Revenues:
Systems	$	—		$	6,396		$	2,563		$	854		$	9,813
Services		—			12,447			5,173			598			18,218
Total revenues		—			18,843			7,736			1,452			28,031
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		—			4,170			1,010			154			5,334
Services		—			4,458			1,373			1,021			6,852
Total cost of revenues		—			8,628			2,383			1,175			12,186
Gross profit		—			10,215			5,353			277			15,845
Operating expenses:
Sales and marketing		—			3,319			867			283			4,469
Product development		—			1,654			1,239			164			3,057
General and administrative		—			2,316			684			209			3,209
Depreciation and amortization		—			2,003			96			96			2,195
Acquisition-related costs		—			30,473			—			42			30,515
Restructuring costs		—			116			—			—			116
Total operating expenses		—			39,881			2,886			794			43,561
Operating income (loss)		—			(29,666	)		2,467			(517	)		(27,716	)
Interest expense		(485	)		(5,712	)		(1	)		(1	)		(6,199	)
Write-off of prior debt issuance costs		—			(14,459	)		—			—			(14,459	)
Premiums on debt repurchase		—			(26,671	)		—			—			(26,671	)
Other income, net		(6,565	)		6,285			12			—			(268	)
Income (loss) before provision for income taxes		(7,050	)		(70,223	)		2,478			(518	)		(75,313	)
Provision for (benefit from) income taxes		—			(26,109	)		1			618			(25,490	)
Net income (loss)	$	(7,050	)	$	(44,114	)	$	2,477		$	(1,136	)	$	(49,823	)

20

Consolidating Statement of Operations for the period from Inception to June 30, 2006
Activant Solutions Inc.

(in thousands)	Guarantor
	Principal			Guarantor			Non-Guarantor
	Operations			Subsidiaries			Subsidiaries			Consolidated
Revenues:
Systems	$	16,366		$	8,990		$	511		$	25,867
Services		25,301			9,813			2,435			37,549
Total revenues		41,667			18,803			2,946			63,416
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		9,019			3,462			1,068			13,549
Services		10,726			2,789			1,217			14,732
Total cost of revenues		19,745			6,251			2,285			28,281
Gross profit		21,922			12,552			661			35,135
Operating expenses:
Sales and marketing		5,781			2,696			657			9,134
Product development		3,407			2,443			392			6,242
General and administrative		4,013			1,233			596			5,842
Depreciation and amortization		4,469			173			48			4,690
Acquisition-related costs		194			—			—			194
Restructuring costs		115			—			—			115
Total operating expenses		17,979			6,545			1,693			26,217
Operating income (loss)		3,943			6,007			(1,032	)		8,918
Interest expense		(8,159	)		(6	)		(1	)		(8,166	)
Other income, net		(1,052	)		801			213			(38	)
Income (loss) before provision for income taxes		(5,268	)		6,802			(820	)		714
Provision for (benefit from) income taxes		(386	)		505			—			119
Net income (loss)	$	(4,882	)	$	6,297		$	(820	)	$	595

21

Consolidating Statement of Operations for the Nine Months Ended June 30, 2007
Activant Solutions Inc.

(in thousands)	Guarantor
	Principal			Guarantor			Non-Guarantor
	Operations			Subsidiaries			Subsidiaries			Consolidated
Revenues:
Systems	$	83,018		$	39,212		$	4,768		$	126,998
Services		112,476			50,603			11,478			174,557
Total revenues		195,494			89,815			16,246			301,555
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		44,271			15,184			6,661			66,116
Services		44,996			12,369			6,086			63,451
Total cost of revenues		89,267			27,553			12,747			129,567
Gross profit		106,227			62,262			3,499			171,988
Operating expenses:
Sales and marketing		28,073			13,546			3,427			45,046
Product development		16,405			11,626			1,962			29,993
General and administrative		22,916			3,303			2,723			28,942
Depreciation and amortization		20,928			631			226			21,785
Acquisition-related costs		72			—			—			72
Restructuring costs		563			—			—			563
Total operating expenses		88,957			29,106			8,338			126,401
Operating income (loss)		17,270			33,156			(4,839	)		45,587
Interest expense		(35,634	)		(2	)		(8	)		(35,644	)
Other income, net		(157	)		216			727			786
Income (loss) before provision for income taxes		(18,521	)		33,370			(4,120	)		10,729
Provision for income taxes		4,407			7			—			4,414
Net income (loss)	$	(22,928	)	$	33,363		$	(4,120	)	$	6,315

22

Consolidating Statement of Operations for the period from October 1, 2005 to May 2, 2006
Predecessor Company

(in thousands)				Guarantor
	Parent			Principal			Guarantor			Non-Guarantor
	Company			Operations			Subsidiaries			Subsidiaries			Consolidated
Revenues:
Systems	$	—		$	62,373		$	27,108		$	1,923		$	91,404
Services		—			89,292			35,759			8,760			133,811
Total revenues		—			151,665			62,867			10,683			225,215
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		—			35,001			11,201			1,345			47,547
Services		—			32,396			10,146			6,039			48,581
Total cost of revenues		—			67,397			21,347			7,384			96,128
Gross profit		—			84,268			41,520			3,299			129,087
Operating expenses:
Sales and marketing		—			20,375			8,256			1,918			30,549
Product development		—			11,606			9,037			1,343			21,986
General and administrative		679			13,755			4,951			2,074			21,459
Depreciation and amortization		—			14,310			613			588			15,511
Acquisition-related costs		—			32,249			—			42			32,291
Restructuring costs		—			116			—			—			116
Total operating expenses		679			92,411			22,857			5,965			121,912
Operating income (loss)		(679	)		(8,143	)		18,663			(2,666	)		7,175
Interest expense		(3,213	)		(29,760	)		(9	)		(18	)		(33,000	)
Write-off of prior debt issuance costs		(1,774	)		(14,220	)		—			—			(15,994	)
Premiums on debt repurchase		(5,120	)		(21,551	)		—			—			(26,671	)
Other income, net		—			281			234			218			733
Income (loss) before provision for income taxes		(10,786	)		(73,393	)		18,888			(2,466	)		(67,757	)
Provision for (benefit from) income taxes		(1,436	)		(21,708	)		7			584			(22,553	)
Net income (loss)	$	(9,350	)	$	(51,685	)	$	18,881		$	(3,050	)	$	(45,204	)

23

Consolidating Statement of Operations for the period from Inception to June 30, 2006
Activant Solutions Inc.

(in thousands)	Guarantor
	Principal			Guarantor			Non-Guarantor
	Operations			Subsidiaries			Subsidiaries			Consolidated
Revenues:
Systems	$	16,366		$	8,990		$	511		$	25,867
Services		25,301			9,813			2,435			37,549
Total revenues		41,667			18,803			2,946			63,416
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		9,019			3,462			1,068			13,549
Services		10,726			2,789			1,217			14,732
Total cost of revenues		19,745			6,251			2,285			28,281
Gross profit		21,922			12,552			661			35,135
Operating expenses:
Sales and marketing		5,781			2,696			657			9,134
Product development		3,407			2,443			392			6,242
General and administrative		4,013			1,233			596			5,842
Depreciation and amortization		4,469			173			48			4,690
Acquisition-related costs		194			—			—			194
Restructuring costs		115			—			—			115
Total operating expenses		17,979			6,545			1,693			26,217
Operating income (loss)		3,943			6,007			(1,032	)		8,918
Interest expense		(8,159	)		(6	)		(1	)		(8,166	)
Other income, net		(1,052	)		801			213			(38	)
Income (loss) before provision for income taxes		(5,268	)		6,802			(820	)		714
Provision for (benefit from) income taxes		(386	)		505			—			119
Net income (loss)	$	(4,882	)	$	6,297		$	(820	)	$	595

24

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended June 30, 2007
Activant Solutions Inc.

(in thousands)	Guarantor
	Principal			Guarantor			Non-Guarantor
	Operations			Subsidiaries			Subsidiaries			Consolidated
Net cash provided by (used in) operating activities	$	26,008		$	(4,572	)	$	8,808		$	30,244
Investing activities
Acquisition, net of cash acquired		—			—			(6,502	)		(6,502	)
Purchase of property and equipment		(4,463	)		(323	)		(203	)		(4,989	)
Capitalized computer software costs and databases		(3,987	)		—			—			(3,987	)
Unrealized loss on cash flow hedge, net		1,793			—			—			1,793
Purchase price adjustments		700			—			—			700
Net cash used in investing activities		(5,957	)		(323	)		(6,705	)		(12,985	)
Financing activities
Repayment of credit facility		(27,000	)		—			—			(27,000	)
Debt issuance costs		(1,077	)		—			—			(1,077	)
Net cash used in financing activities		(28,077	)		—			—			(28,077	)
Net change in cash and cash equivalents		(8,026	)		(4,895	)		2,103			(10,818	)
Cash and cash equivalents, beginning of period		26,498			7,772			2,113			36,383
Cash and cash equivalents, end of period	$	18,472		$	2,877		$	4,216		$	25,565

25

Condensed Consolidating Statement of Cash Flows for the period from October 1, 2005 to May 2, 2006
Predecessor Company

(in thousands)				Guarantor
	Parent			Principal			Guarantor			Non-Guarantor
	Company			Operations			Subsidiaries			Subsidiaries			Consolidated
Net cash provided by (used in) operating activities	$	(6,856	)	$	20,888		$	(998	)	$	(363	)	$	12,671
Investing activities
Purchase of property and equipment		—			(3,232	)		(210	)		(144	)		(3,586	)
Capitalized computer software costs and databases		—			(3,455	)		—			—			(3,455	)
Purchase price adjustments		—			508			—			—			508
Proceeds from disposition of equity interest		—			679			—			—			679
Net cash used in investing activities		—			(5,500	)		(210	)		(144	)		(5,854	)
Financing activities
Proceeds from long-term debt		40,000			145,000			—			—			185,000
Repayment of senior unsecured bridge loan		(40,000	)		(140,000	)		—			—			(180,000	)
Proceeds from credit facility		—			10,000			—			—			10,000
Repayment of credit facility		—			(10,000	)		—			—			(10,000	)
Payment on long-term debt		—			—			(149	)		—			(149	)
Repurchase of common stock		(840	)		—			—			—			(840	)
Exercise of stock options		105			—			—			—			105
Dividend to/from parent		8,384			(8,384	)		—			—			—
Debt issuance costs		(793	)		(2,768	)		—			—			(3,561	)
Net cash provided by (used in) financing activities		6,856			(6,152	)		(149	)		—			555
Net change in cash and cash equivalents		—			9,236			(1,357	)		(507	)		7,372
Cash and cash equivalents, beginning of period		—			5,800			3,943			1,209			10,952
Cash and cash equivalents, end of period	$	—		$	15,036		$	2,586		$	702		$	18,324

26

Condensed Consolidating Statement of Cash Flows for the period from Inception to June 30, 2006
Activant Solutions Inc.

(in thousands)	Guarantor
	Principal			Guarantor			Non-Guarantor
	Operations			Subsidiaries			Subsidiaries		Consolidated
Net cash provided by operating activities	$	5,823		$	5,296		$	712	$	11,831
Investing activities
Purchase of Activant Solutions Inc.		(782,893	)		—			—		(782,893	)
Purchase of property and equipment		(589	)		(75	)		68		(596	)
Capitalized computer software costs and databases		(860	)		—			—		(860	)
Net cash provided by (used in) investing activities		(784,342	)		(75	)		68		(784,349	)
Financing activities
Issuance of common stock at inception		245,625			—			—		245,625
Proceeds from long-term debt		565,000			—			—		565,000
Intercompany transfers		(3,398	)		2,516			882		—
Payment of long-term debt		(975	)		—			—		(975	)
Debt issuance costs		(15,910	)		—			—		(15,910	)
Net cash provided by financing activities		790,342			2,516			882		793,740
Net change in cash and cash equivalents		11,823			7,737			1,662		21,222
Cash and cash equivalents, beginning of period		—			—			—		—
Cash and cash equivalents, end of period	$	11,823		$	7,737		$	1,662	$	21,222

27

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

The terms “we,” “us” and “our” refer to Activant Solutions Inc. and Activant Solutions Holdings Inc. (also known as the “Predecessor Company”), and their respective periods of operations, except where specifically stated otherwise. You should read the following discussion and analysis in conjunction with our financial statements and related notes included in Item 1. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors listed below.

A merger of Activant Group Inc., (formerly known as Lone Star Holding Corp.), or Activant Group, Lone Star Merger Corp., or Merger Sub, and the Predecessor Company was consummated on May 2, 2006, whereupon the Predecessor Company became wholly owned by investment funds affiliated with Hellman & Friedman LLC, Thoma Cressey Equity Partners, Inc., or Thoma Cressey, and JMI Equity and certain members of our management. Following the merger, on May 2, 2006, the Predecessor Company merged with and into Activant Solutions Inc., with Activant Solutions Inc. continuing as the surviving corporation and as a wholly-owned subsidiary of Activant Group. These mergers are referred to as the “mergers” and the transactions related to the mergers are referred to collectively as the “transactions.” Activant Group was incorporated on March 7, 2006 for the purpose of acquiring the Predecessor Company and did not have any operations prior to May 2, 2006 other than in connection with the Predecessor Company acquisition.

In our discussion of our results of operations for 2006, we discuss each line item in the statement of operations on a combined basis for comparative purposes. For the three months ended June 30, 2006, we combine the period from April 1, 2006 to May 2, 2006 for the Predecessor Company with the period from Inception to June 30, 2006 for Activant Solutions Inc. For the nine months ended June 30, 2006, we combine the period from October 1, 2005 to May 2, 2006 for the Predecessor Company with the period from Inception to June 30, 2006 for Activant Solutions, Inc. These combined amounts are presented for informational purposes only.

Overview

We are a provider of business management solutions serving small and medium-sized retail and wholesale distribution businesses. With over 30 years of operating history, we have developed substantial expertise in serving businesses with complex distribution requirements in three primary vertical markets: hardlines and lumber, wholesale distribution and the automotive parts aftermarket (“Auto”). Using a combination of proprietary software and extensive expertise in these vertical markets, we provide complete business management solutions consisting of tailored systems, product support and content and supply chain designed to meet the unique requirements of our customers. Our fully integrated systems and services include point-of-sale, inventory management, general accounting and enhanced data management that enable our customers to manage their day-to-day operations. Our revenues are derived from our four reporting segments organized around the following business management solutions:

• Systems, which is comprised primarily of proprietary software applications, implementation and training and third-party software, hardware and peripherals. For the nine months ended June 30, 2007, systems revenues accounted for 42% of our total revenues;

• Product Support, which is comprised primarily of customer support activities, including support through our advice line, software updates, preventive and remedial on-site maintenance and depot repair services. Our product support services are generally provided on a subscription basis, and accordingly, revenues from this segment are generally recurring in nature. For the nine months ended June 30, 2007, product support revenues accounted for 40% of our total revenues;

• Content and Supply Chain, which is comprised primarily of proprietary database and data management products for the vertical markets we serve (such as our comprehensive electronic automotive parts and applications catalog and point-of-sale business analysis data), connectivity services, e-commerce, networking and security monitoring management solutions. Our content and supply chain products are generally provided on a monthly subscription basis and accordingly, revenues from this segment are generally recurring in nature. For the nine months ended June 30, 2007, content and supply chain revenues accounted for 16% of our total revenues; and

• Other Services, which is comprised primarily of business products, such as forms and other paper products. For the nine months ended June 30, 2007, other services revenues accounted for 2% of our total revenues.

Our revenues are derived from customers that operate in three vertical markets — Hardlines and Lumber, Wholesale Distribution and Auto — and from our productivity tools business.

• The Hardlines and Lumber vertical market consists of independent hardware retailers, home improvement centers, paint, glass and wallpaper stores, farm supply stores, retail nurseries and garden centers and independent lumber and building material dealers primarily in the United States. For the nine months ended June 30, 2007, we generated approximately 43% of our total revenues from the hardlines and lumber vertical market.

• The Wholesale Distribution vertical market consists of distributors of a range of products including electrical supply, plumbing, medical supply, heating and air conditioning, brick, stone and related materials, roofing, siding, insulation,

28

industrial machinery and equipment, industrial supplies, fluid power, janitorial and sanitation products, paper and packaging, and service establishment equipment vendors, primarily in the United States. For the nine months ended June 30, 2007, we generated approximately 30% of our total revenues from the wholesale distribution vertical market.

• Auto consists of customers involved in the manufacture, distribution, sale and installation of new and remanufactured parts used in the maintenance and repair of automobiles and light trucks, and includes manufacturers, warehouse distributors, parts stores, professional installers and several chains in North America and Europe. For the nine months ended June 30, 2007, we generated approximately 22% of our total revenues from Auto.

• The Productivity Tools business consists of software migration and application development tools. For the nine months ended June 30, 2007, we generated approximately 5% of our total revenues from the productivity tools business.

Recent Acquisitions

On May 31, 2007, we acquired 100% of the common stock of Silk Systems, Inc. for a total purchase price of $6.5 million, net of $0.7 million cash received. Silk customers will be primarily in the Hardlines and Lumber vertical market. We allocated $4.4 million of the purchase price to goodwill. Our financial statements include the results of operations of this business for the period from June 1, 2007 to June 30, 2007. The results of operations and financial position of this business are not material to our results of operations and financial position. We are in the process of determining values of certain tangible and intangible assets; thus, the allocation of the purchase price to the assets acquired and liabilities assumed in connection with this acquisition is subject to change. The preliminary purchase price allocation is based upon our best estimates of the relative fair values of the identifiable assets acquired and liabilities assumed.

On July 2, 2007, we and Greenland Holding Corp., a newly formed and wholly owned subsidiary of ours entered into an asset purchase agreement with Intuit Inc., or Intuit. The asset purchase agreement provides for the acquisition and assumption by us from Intuit of specified assets and liabilities that comprise Intuit Eclipse, Intuit’s distribution management software division. After completion of the acquisition, we expect the percentage of our revenues generated from the wholesale distribution market to increase.

Under the terms of the asset purchase agreement, we will acquire the transferred assets and assume the assumed liabilities for an aggregate consideration of approximately $100.0 million in cash subject to certain adjustments related to severance payments and working capital. We expect to finance the transaction, including related fees and expenses, with a combination of borrowings under a new incremental term loan facility described below, borrowings under our existing $40.0 million revolving credit facility described below and our cash on hand at the time of the closing of the transaction. Consummation of this transaction is subject to the satisfaction or waiver of customary conditions, including (1) the expiration or termination of the applicable Hart-Scott-Rodino waiting period which occurred on July 20, 2007, (2) subject to certain exceptions, the material accuracy of the representations and warranties of the parties and (3) the absence of any Material Adverse Effect (as defined in the asset purchase agreement) with respect to Intuit Eclipse.

Concurrently, and in connection with entering into the asset purchase agreement, we entered into a commitment letter with Deutsche Bank Trust Company Americas and Deutsche Bank Securities Inc. to obtain a new incremental term loan facility to be used to finance this acquisition transaction and to pay fees and expenses in connection therewith. For more information regarding the terms of this commitment letter, see “—Liquidity and Capital Resources” below. We expect the acquisition of Intuit Eclipse and the entry into the incremental term loan facility to close in the fourth fiscal quarter of 2007.

29

Historical Results of Operations

Three months ended June 30, 2007 compared to three months ended June 30, 2006

Revenues.The following table sets forth, for the periods indicated, our Segment revenues by vertical market and for productivity tools and the variance thereof.

	Predecessor		Activant				Activant
(dollars in thousands)	Company		Solutions Inc.		Combined		Solutions Inc.
	Period from		Period from		April 1, 2006		Three months
	April 1, 2006 to		Inception to		to		ended
	May 2, 2006		June 30, 2006		June 30, 2006		June 30, 2007		Variance $			Variance %
Systems Revenues:
Hardlines and Lumber	$	4,890	$	12,693	$	17,583	$	21,057	$	3,474			19.8	%
Auto		1,761		2,296		4,057		3,783		(274	)		(6.8	)
Wholesale Distribution		2,564		8,990		11,554		12,101		547			4.7
Productivity Tools		598		1,888		2,486		4,549		2,063			83.0
Total Systems Revenues		9,813		25,867		35,680		41,490		5,810			16.3
Product Support Revenues:
Hardlines and Lumber		5,421		11,331		16,752		17,601		849			5.1
Auto		2,272		4,647		6,919		6,460		(459	)		(6.6	)
Wholesale Distribution		4,589		8,342		12,931		14,449		1,518			11.7
Productivity Tools		592		1,026		1,618		1,507		(111	)		(6.9	)
Total Product Support Revenues		12,874		25,346		38,220		40,017		1,797			4.7
Content and Supply Chain Revenues:
Hardlines and Lumber		627		1,520		2,147		1,821		(326	)		(15.2	)
Auto		3,350		7,705		11,055		12,025		970			8.8
Wholesale Distribution		577		1,471		2,048		2,555		507			24.8
Productivity Tools		—		—		—		—		—			—
Total Content and Supply Chain Revenues		4,554		10,696		15,250		16,401		1,151			7.5
Other Services Revenues:
Hardlines and Lumber		790		1,507		2,297		2,341		44			1.9
Auto		—		—		—		—		—			—
Wholesale Distribution		—		—		—		—		—			—
Productivity Tools		—		—		—		—		—			—
Total Other Revenues		790		1,507		2,297		2,341		44			1.9
Total Revenues:
Hardlines and Lumber		11,728		27,051		38,779		42,820		4,041			10.4
Auto		7,383		14,648		22,031		22,268		237			1.1
Wholesale Distribution		7,730		18,803		26,533		29,105		2,572			9.7
Productivity Tools		1,190		2,914		4,104		6,056		1,952			47.6
Total Revenues	$	28,031	$	63,416	$	91,447	$	100,249	$	8,802			9.6	%

Total revenues for the three months ended June 30, 2007 increased by $8.8 million, or 9.6%, compared to the three months ended June 30, 2006. This increase was primarily attributable to higher Systems revenues, particularly in the Hardlines and Lumber and Productivity Tools vertical markets as described below.

Factors affecting Systems revenues for the three months ended June 30, 2007.

Systems revenues for the three months ended June 30, 2007 increased by $5.8 million, or 16.3%, compared to the three months ended June 30, 2006. This increase was primarily attributable to higher Systems revenues in the Hardlines and Lumber and Productivity Tools vertical markets.

• Systems revenues from our Hardlines and Lumber vertical market increased by $3.5 million, or 19.8%, primarily due to increased revenues from members of the cooperatives (“co-ops”) that we serve and, to a lesser extent, the inclusion of Silk Systems Inc. revenues for June 2007. One of the co-ops we serve announced that they are ending support for their legacy system and have encouraged their member stores to purchase our Activant Eagle product in 2007, which resulted in increased sales for the three months ended June 30, 2007. As more and more of the member stores convert to our systems, the opportunity for future conversions declines and we expect this decline will be rapid.

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• Systems revenues from our Auto vertical market decreased by $0.3 million, or 6.8%, primarily due to decreased revenues on certain warehouse systems as a result of a product transition cycle whereby sales of our new product have not yet been recognized as revenue pending our completion of the installations, and also as a result of a reduced number of shipments of add-ons and upgrades for our legacy products.

• Systems revenue from our Wholesale Distribution vertical market increased by $0.5 million, or 4.7%, due to an increase in software sales, related professional services and custom development.

• Systems revenues for Productivity Tools increased by $2.1 million, or 83.0%, primarily due to an increase in the number of platform migration projects currently being implemented and the completion of key milestones for those customers.

Factors affecting Product Support revenues for the three months ended June 30, 2007.

Product Support revenues for the three months ended June 30, 2007 increased by $1.8 million, or 4.7% compared to the three months ended June 30, 2006. This increase was primarily attributable to higher Product Support revenues in the Wholesale Distribution, and Hardlines and Lumber vertical markets.

• Product Support revenues from our Hardlines and Lumber vertical market increased by $0.8 million, or 5.1%. This increase is attributable to our increased systems sales in prior periods, which over time, results in increased Product Support revenues.

• Product Support revenues for Auto decreased by $0.4 million, or 6.6%. This decline is associated with customer attrition from our older systems that we continue to support but do not actively sell to new customers. We expect that product support revenues from our older systems will continue to decline

• Product Support revenues from our Wholesale Distribution vertical market increased by $1.5 million, or 11.7%, due to addition of add-on licenses and prior period sales that we are now supporting.

Factors affecting Content and Supply Chain revenues for the three months ended June 30, 2007.

Content and Supply Chain revenues for the three months ended June 30, 2007 increased by $1.2 million, or 7.5%, compared to the three months ended June 30, 2006. This increase was primarily attributable to higher Content and Supply Chain revenues in the Auto vertical market.

• Content and Supply Chain revenues from our Hardlines and Lumber vertical market decreased by $0.3 million, or 15.2%,primarily due to the reclassification of IDW/IDX revenues to the Wholesale Distribution vertical market.

• Content and Supply Chain revenues for Auto increased by $1.0 million, or 8.8%, due to new customers and increased demand from existing customers for Catalog and Data Warehouse data content.

• Content and Supply Chain revenues from our Wholesale Distribution vertical market increased by $0.5 million, or 24.8%, primarily due to the reclassification of IDX/IDW from the Hardlines and Lumber vertical market.

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Total cost of revenues and gross margins as a percentage of revenues.

The following table sets forth, for the periods indicated, our cost of revenues and the variance thereof.

	Predecessor		Activant				Activant
(dollars in thousands)	Company		Solutions Inc.		Combined		Solutions Inc.
	Period from		Period from		April 1, 2006		Three months
	April 1, 2006 to		Inception to		to		Ended
	May 2, 2006		June 30, 2006		June 30, 2006		June 30, 2007		Variance $			Variance %
Cost of Revenues:
Systems	$	5,334	$	13,549	$	18,883	$	22,695	$	3,812			20.2	%
Product Support		5,194		11,037		16,231		16,460		229			1.4
Content and Supply Chain		1,118		2,555		3,673		3,837		164			4.5
Other Services		540		1,140		1,680		1,402		(278	)		(16.5	)
Total Cost of Revenues	$	12,186	$	28,281	$	40,467	$	44,394	$	3,927			9.7	%

The following table sets forth, for the periods indicated, our gross margin as a percentage of revenues.

	Predecessor			Activant						Activant
	Company			Solutions Inc.			Combined			Solutions Inc.
	Period from			Period from			April 1, 2006			Three months
	April 1, 2006 to			Inception to			to			ended
	May 2, 2006			June 30, 2006			June 30, 2006			June 30, 2007
Gross margin as a percentage of revenues by segment:
Systems		45.6	%		47.6	%		47.1	%		45.3	%
Product Support		59.7			56.5			57.5			58.9
Content and Supply Chain		75.5			76.1			75.9			76.6
Other Services		31.7			24.4			26.9			40.1
Total gross margin as a percentage of revenues		56.5	%		55.4	%		55.7	%		55.7	%

Total Cost of Revenues.Total cost of revenues for the three months ended June 30, 2007 increased by $3.9 million, or 9.7%, compared to the three months ended June 30, 2006. This increase was comprised primarily of an increase in cost of Systems revenues, partially offset by declines in cost of other services revenues. Gross margin as a percentage of revenues remained flat at 55.7% for the three months ended June 30, 2006 and 2007. Cost of Systems revenues, cost of Product Support revenues and cost of Content and Supply Chain revenues included share-based payment expense of $11,000, $81,000 and $7,000, respectively, for the three months ended June 30, 2007.

• Cost of Systems Revenues.Cost of Systems revenues for the three months ended June 30, 2007 increased by $3.8 million, or 20.2%, compared to the three months ended June 30, 2006 primarily as a result of increased system sales. Gross margin as a percentage of revenues declined from 47.1% for the three months ended June 30, 2006 to 45.3% for the three months ended June 30, 2007. The decline in Systems gross margin is predominantly attributable to longer than expected Vision implementations and average sales prices declining in Hardlines and Lumber from continued weakness and competition in the Lumber industry.

• Cost of Product Support Revenues.Cost of Product Support revenues for the three months ended June 30, 2007 increased by $0.2 million, or 1.4%, compared to the three months ended June 30, 2006. Gross margin as a percentage of revenues increased from 57.5% for the three months ended June 30, 2006 to 58.9% for the three months ended June 30, 2007.

• Cost of Content and Supply Chain Revenues.Cost of Content and Supply Chain revenues for the three months ended June 30, 2007 increased by $0.2 million, or 4.5%, compared to the three months ended June 30, 2006. Gross margin as a percentage of Content and Supply Chain revenues increased from 75.9% for the three months ended June 30, 2006 to 76.6% for the three months ended June 30, 2007.

• Cost of Other Services Revenues.Cost of Other Services revenues for the three months ended June 30, 2007 declined by $0.3 million, or 16.5%, compared to the three months ended June 30, 2006. Gross margin as a percentage of Other Services revenues increased from 26.9% for the three months ended June 30, 2006 to 40.1% for the three months ended June 30, 2007. The improvement in our gross margin was a result of our increased focus on business operations resulting in year over year cost reductions on flat revenues.

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Total Operating Expenses.The following table sets forth, for the periods indicated, operating expenses and the variance thereof.

	Predecessor		Activant				Activant
(dollars in thousands)	Company		Solutions Inc.		Combined		Solutions Inc.
	Period from		Period from		April 1, 2006		Three months
	April 1, 2006 to		Inception to		to		ended
	May 2, 2006		June 30, 2006		June 30, 2006		June 30, 2007		Variance $			Variance %
Operating expenses:
Sales and marketing	$	4,469	$	9,134	$	13,603	$	14,071	$	468			3.4	%
Product development		3,057		6,242		9,299		10,490		1,191			12.8
General and administrative		3,209		5,842		9,051		9,922		871			9.6
Depreciation and amortization		2,195		4,690		6,885		7,448		563			8.2
Acquisition-related costs		30,515		194		30,709		72		(30,637	)		(99.8	)
Restructuring costs		116		115		231		276		45			19.5
Total operating expenses	$	43,561	$	26,217	$	69,778	$	42,279	$	(27,499	)		(39.4	)%

The following table sets forth, for the periods indicated, our operating expenses as a percentage of revenues.

	Predecessor			Activant						Activant
	Company			Solutions Inc.			Combined			Solutions Inc.
	Period from			Period from			April 1, 2006			Three months
	April 1, 2006 to			Inception to			to			ended
	May 2, 2006			June 30, 2006			June 30, 2006			June 30, 2007
Operating expenses as a percentage of revenues:
Sales and marketing		15.9	%		14.4	%		14.9	%		14.0	%
Product development		10.9			9.8			10.2			10.5
General and administrative		11.4			9.2			9.9			9.9
Depreciation and amortization		7.8			7.4			7.5			7.4
Acquisition-related costs		108.9			0.3			33.6			0.1
Restructuring costs		0.4			0.2			0.3			0.3
Total operating expenses as a percentage of revenues		155.4	%		41.3	%		76.3	%		42.2	%

Total operating expenses decreased by $27.5 million, or 39.4%, for the three months ended June 30, 2007 compared to the three months ended June 30, 2006. The decrease was primarily a result of $30.6 million of acquisition related costs incurred in the three months ended June 30, 2006 which did not recur in 2007.

• Sales and Marketing Expense.Sales and marketing expense increased by $0.5 million, or 3.4%, for the three months ended June 30, 2007 compared to the three months ended June 30, 2006. The increase was primarily due to increased salaries of $0.9 million as we continue to expand the sales force and higher commission expense of $0.5 million. These increased expenses were partially offset by lower bad debt expense of $0.7 million as our experience rate continues to improve and $0.4 million of third-party services. Sales and marketing expense also included share-based payment expense of $0.3 million for the three months ended June 30, 2007.

• Product Development Expense.Product development expense increased by $1.2 million, or 12.8%, for the three months ended June 30, 2007 compared to the three months ended June 30, 2006. The increase was primarily due to increased salaries of $0.7 million and $0.5 million of costs related to outsourcing certain operations off shore. Product development expense included share-based payment expense of $0.1 million for the three months ended June 30, 2007.

• General and Administrative Expense.General and administrative expense increased by $0.9 million, or 9.6%, for the three months ended June 30, 2007 compared to the three months ended June 30, 2006. The increase was a result of higher salary, bonus and related benefit expenses which were partially offset by lower third-party costs. General and administrative expense included share-based payment expense of $0.6 million for the three months ended June 30, 2007 compared to $1.2 million for the three months ended June 30, 2006.

• Depreciation and Amortization.Depreciation and amortization expense increased by $0.6 million, or 8.2%, for the three months ended June 30, 2007 compared to the three months ended June 30, 2006. The increase resulted from an increase in purchased intangible assets as a result of the mergers, which was partially offset by longer lives of finite-lived intangible assets associated with the mergers.

• Acquisition-Related Costs.We incurred acquisition-related costs of $0.1 million for the three months ended June 30, 2007 which related to our acquisition of Silk Systems Inc. and were primarily composed of travel expenses associated with the integration of Silk Systems Inc. For the three months ended June 30, 2006 we and the Predecessor Company incurred $30.7 million in acquisition-related costs all of which were related to the mergers. These charges primarily include outside financial advisory, accounting, legal and consulting fees, and other costs incurred directly related to integrating acquired companies.

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• Restructuring costs.We incurred restructuring costs of $0.3 million for the three months ended June 30, 2007 which related to outsourcing certain activities to third-party providers and eliminating certain positions with the intent to streamline and focus our operations and more properly align our cost structure with our projected revenue streams.

Operating Income.Due to the above factors, operating income for the three months ended June 30, 2007 increased by $32.4 million, from an operating loss of $18.8 million to operating income of $13.6 million. Excluding acquisition-related costs, operating income for the three months ended June 30, 2007 would have increased by $4.0 million or 41.7%. Operating income was 13.5% of total revenues for the three months ended June 30, 2007.

Interest Expense.Interest expense for the three months ended June 30, 2007 was $11.8 million compared to $14.4 million for the three months ended June 30, 2006, a decrease of $2.6 million or 18.0%. The decrease is primarily a result of lower interest rates associated with our new debt structure, partially offset by an increase in debt.

Net Income.As a result of the above factors, we realized net income of $1.3 million for the three months ended June 30, 2007 compared to a net loss of $49.2 million for the three months ended June 30, 2006.

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Nine months ended June 30, 2007 compared to nine months ended June 30, 2006

Revenues.The following table sets forth, for the periods indicated, our Segment revenues by vertical market and for productivity tools and the variance thereof.

	Predecessor		Activant				Activant
(dollars in thousands)	Company		Solutions Inc.		Combined		Solutions Inc.
	Period from		Period from		October 1, 2005		Nine months
	October 1, 2005		Inception to		to		ended
	to May 2, 2006		June 30, 2006		June 30, 2006		June 30, 2007		Variance $			Variance %
Systems Revenues:
Hardlines and Lumber	$	49,784	$	12,693	$	62,477	$	65,948	$	3,471			5.6	%
Auto		10,590		2,296		12,886		11,439		(1,447	)		(11.2	)
Wholesale Distribution		27,108		8,990		36,098		39,213		3,115			8.6
Productivity Tools		3,922		1,888		5,810		10,398		4,588			79.0
Total Systems Revenues		91,404		25,867		117,271		126,998		9,727			8.3
Product Support Revenues:
Hardlines and Lumber		38,012		11,331		49,343		51,682		2,339			4.7
Auto		17,612		4,647		22,259		19,952		(2,307	)		(10.4	)
Wholesale Distribution		31,365		8,342		39,707		43,058		3,351			8.4
Productivity Tools		4,750		1,026		5,776		4,676		(1,100	)		(19.0	)
Total Product Support Revenues		91,739		25,346		117,085		119,368		2,283			1.9
Content and Supply Chain Revenues:
Hardlines and Lumber		4,607		1,520		6,127		5,478		(649	)		(10.6	)
Auto		27,935		7,705		35,640		36,195		555			1.6
Wholesale Distribution		4,123		1,471		5,594		7,544		1,950			34.9
Productivity Tools		—		—		—		—		—			—
Total Content and Supply Chain Revenues		36,665		10,696		47,361		49,217		1,856			3.9
Other Services Revenues:
Hardlines and Lumber		5,407		1,507		6,914		5,972		(942	)		(13.6	)
Auto		—		—		—		—		—			—
Wholesale Distribution		—		—		—		—		—			—
Productivity Tools		—		—		—		—		—			—
Total Other Revenues		5,407		1,507		6,914		5,972		(942	)		(13.6	)
Total Revenues:
Hardlines and Lumber		97,810		27,051		124,861		129,080		4,219			3.4
Auto		56,137		14,648		70,785		67,586		(3,199	)		(4.5	)
Wholesale Distribution		62,596		18,803		81,399		89,815		8,416			10.3
Productivity Tools		8,672		2,914		11,586		15,074		3,488			30.1
Total Revenues	$	225,215	$	63,416	$	288,631	$	301,555	$	12,924			4.5	%

Total revenues for the nine months ended June 30, 2007 increased by $12.9 million, or 4.5%, compared to the nine months ended June 30, 2006. This increase was primarily attributable to higher Systems revenues in all vertical markets except Auto as described below.

Factors affecting Systems revenues for the nine months ended June 30, 2007.

Systems revenues for the nine months ended June 30, 2007 increased by $9.7 million, or 8.3%, compared to the nine months ended June 30, 2006. This increase was primarily attributable to higher Systems revenues in the Hardlines and Lumber, Wholesale Distribution and Productivity Tools vertical markets, partially offset by Systems revenues in Auto.

• Systems revenues from our Hardlines and Lumber vertical market increased by $3.5 million, or 5.6%, primarily due to increased revenues from members of the cooperatives (“co-ops”) that we serve and, to a lesser extent, the inclusion of Silk Systems Inc. revenues for June 2007. One of the co-ops we serve announced that they are ending support for their legacy system and have encouraged their member stores to purchase our Activant Eagle product in 2007, which resulted in increased sales for the nine months ended June 30, 2007. As more and more of the member stores convert to our systems, the opportunity for future conversions declines and we expect this decline will be rapid.

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• Systems revenues for Auto declined by $1.4 million, or 11.2%, primarily due to decreased revenues on certain warehouse systems as a result of a product transition cycle whereby sales of our new product have not yet been recognized as revenue pending our completion of the installations, and also as a result of a reduced number of shipments of add-ons and upgrades for our legacy products.

• Systems revenues from our Wholesale Distribution vertical market increased by $3.1 million, or 8.6%, due to a higher percentage of sales to large strategic customers, who generally have a higher average selling price, or ASP, due to their size and complexity.

• Systems revenues from Productivity Tools increased $4.6 million, or 79.0%, due to an increase in the number of platform migration projects currently being implemented by our customers.

Factors affecting Product Support revenues for the nine months ended June 30, 2007.

Product Support revenues for the nine months ended June 30, 2007 increased by $2.3 million, or 1.9%, compared to the nine months ended June 30, 2006. Increased Product Support revenues from the Hardlines and Lumber, and Wholesale Distribution vertical markets were partially offset by a decline in Auto and Productivity Tools Product Support revenues.

• Product Support revenues from our Hardlines and Lumber vertical market increased by $2.3 million, or 4.7%. This increase is primarily attributable to increased systems sales in prior periods, which over time, results in increased Product Support revenues.

• Product Support revenues for Auto declined by $2.3 million, or 10.4%. Auto experienced a decline of approximately $1.3 million in product support revenues associated with customer attrition from our older systems that we continue to support but do not actively sell to new customers. We expect that product support revenues from our older systems will continue to decline. Approximately $1.0 million of the decline was associated with General Parts, Inc.’s decision to begin replacing our J-CON system with its own branded store system as well as a contractual decline in support revenues for their warehouse systems. We do not expect to recapture this product support revenue.

• Product Support revenues from our Wholesale Distribution vertical market increased by $3.4 million, or 8.4%, due to an increase in add-on licenses, support from prior period Systems sales, and increased support fees.

• Product Support revenues from Productivity Tools declined by $1.1 million, or 19.0%, due to attrition in legacy products.

Factors affecting Content and Supply Chain revenues for the nine months ended June 30, 2007.

Content and Supply Chain revenues for the nine months ended June 30, 2007 increased by $1.9 million, or 3.9%, compared to the nine months ended June 30, 2006. Increased Content and Supply Chain revenues from the Auto and Wholesale Distribution vertical markets were partially offset by a decline in Hardlines and Lumber Content and Supply Chain revenues.

• Content and Supply Chain revenues from our Hardlines and Lumber vertical market declined by $0.7 million, or 10.6%, primarily due to the reclassification of IDW/IDX revenues to the Wholesale Distribution vertical market.

• Content and Supply Chain revenues for Auto increased by $0.6 million, or 1.6%, due to new customers and increased demand from existing customers for Catalog and Data Warehouse data content.

• Content and Supply Chain revenues from our Wholesale Distribution vertical market increased by $2.0 million, or 34.9%, primarily due to an increase in web hosting services and the reclassification of IDW/IDX revenues from the Hardlines and Lumber vertical market.

Factors affecting Other Services revenues for the nine months ended June 30, 2007.

Other Services revenues for the nine months ended June 30, 2007 decreased by $0.9 million, or 13.6%, compared to the nine months ended June 30, 2006 primarily due to a decline in our business products revenues of forms and other paper products.

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Total cost of revenues and gross margins as a percentage of revenues.

The following table sets forth, for the periods indicated, our cost of revenues and the variance thereof.

	Predecessor		Activant				Activant
(dollars in thousands)	Company		Solutions Inc.		Combined		Solutions Inc.
	Period from		Period from		October 1, 2005		Nine months
	October 1, 2005		Inception to		to		ended
	to May 2, 2006		June 30, 2006		June 30, 2006		June 30, 2007		Variance $			Variance %
Cost of Revenues:
Systems	$	47,547	$	13,549	$	61,096	$	66,116	$	5,020			8.2	%
Product Support		36,694		11,037		47,731		48,023		292			0.6
Content and Supply Chain		8,125		2,555		10,680		11,157		477			4.5
Other Services		3,762		1,140		4,902		4,271		(631	)		(12.9	)
Total Cost of Revenues	$	96,128	$	28,281	$	124,409	$	129,567	$	5,158			4.1	%

The following table sets forth, for the periods indicated, our gross margin as a percentage of revenues.

	Predecessor			Activant						Activant
(dollars in thousands)	Company			Solutions Inc.			Combined			Solutions Inc.
	Period from			Period from			October 1, 2005			Nine months
	October 1, 2005			Inception to			to			ended
	to May 2, 2006			June 30, 2006			June 30, 2006			June 30, 2007
Gross margin as a percentage of revenues by segment:
Systems		48.0	%		47.6	%		47.9	%		47.9	%
Product Support		60.0			56.5			59.2			59.8
Content and Supply Chain		77.8			76.1			77.4			77.3
Other Services		30.4			24.4			29.1			28.5
Total gross margin as a percentage of revenues		57.3	%		55.4	%		56.9	%		57.0	%

Total Cost of Revenues.Total cost of revenues for the nine months ended June 30, 2007 increased by $5.2 million, or 4.1%, compared to the nine months ended June 30, 2006. This increase was primarily in Systems cost of revenues. Gross margin as a percentage of revenues increased from 56.9% for the nine months ended June 30, 2006 to 57.0% for the nine months ended June 30, 2007. Cost of Systems revenues, cost of Product Support revenues and cost of Content and Supply Chain revenues included share-based payment expense of $35,000, $0.3 million and $24,000, respectively, for the nine months ended June 30, 2007.

• Cost of Systems Revenues.Cost of Systems revenues for the nine months ended June 30, 2007 increased by $5.0 million, or 8.2%, compared to the nine months ended June 30, 2006. This increase was comprised primarily of increased Systems revenues. Gross margin as a percentage of revenues remained flat at 47.9% for the nine months ended June 30, 2006 and 2007.

• Cost of Product Support Revenues.Cost of Product Support revenues for the nine months ended June 30, 2007 increased by $0.3 million, or 0.6%, compared to the nine months ended June 30, 2006. Gross margin as a percentage of revenues increased from 59.2% for the nine months ended June 30, 2006 to 59.8% for the nine months ended June 30, 2007.

• Cost of Content and Supply Chain Revenues.Cost of Content and Supply Chain revenues for the nine months ended June 30, 2007 increased by $0.5 million, or 4.5%, compared to the nine months ended June 30, 2006. Gross margin as a percentage of Content and Supply Chain revenues decreased slightly from 77.4% for the nine months ended June 30, 2006, to 77.3% for the nine months ended June 30, 2007.

• Cost of Other Services Revenues.Cost of Other Services revenues for the nine months ended June 30, 2007 declined by $0.6 million, or 12.9%, compared to the nine months ended June 30, 2006. Gross margin as a percentage of Other Services revenues decreased from 29.1% for the nine months ended June 30, 2006 to 28.5% for the nine months ended June 30, 2007. The decline in our gross margin was a result of costs declining at a slower rate than revenues associated with those costs. However, we have improved our gross margin during the most recent quarter ended June 30, 2007 due to our increased focus on business operations resulting in year over year cost reductions on flat revenues.

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Total Operating Expenses.The following table sets forth, for the periods indicated, operating expenses and the variance thereof.

	Predecessor		Activant				Activant
(dollars in thousands)	Company		Solutions Inc.		Combined		Solutions Inc.
	Period from		Period from		October 1, 2005		Nine months
	October 1, 2005		Inception to		to		ended
	to May 2, 2006		June 30, 2006		June 30, 2006		June 30, 2007		Variance $			Variance %
Operating expenses:
Sales and marketing	$	30,549	$	9,134	$	39,683	$	45,046	$	5,363			13.5	%
Product development		21,986		6,242		28,228		29,993		1,765			6.3
General and administrative		21,459		5,842		27,301		28,942		1,641			6.0
Depreciation and amortization		15,511		4,690		20,201		21,785		1,584			7.8
Acquisition-related costs		32,291		194		32,485		72		(32,413	)		(99.8	)
Restructuring costs		116		115		231		563		332			143.7
Total operating expenses	$	121,912	$	26,217	$	148,129	$	126,401	$	(21,728	)		(14.7	)%

The following table sets forth, for the periods indicated, our operating expenses as a percentage of revenues.

	Predecessor			Activant						Activant
(dollars in thousands)	Company			Solutions Inc.			Combined			Solutions Inc.
	Period from			Period from			October 1, 2005			Nine months
	October 1, 2005			Inception to			to			ended
	to May 2, 2006			June 30, 2006			June 30, 2006			June 30, 2007
Operating expenses as a percentage of revenues:
Sales and marketing		13.6	%		14.4	%		13.7	%		14.9	%
Product development		9.8			9.8			9.8			9.9
General and administrative		9.5			9.2			9.5			9.6
Depreciation and amortization		6.9			7.4			7.0			7.2
Acquisition-related costs		14.3			0.3			11.2			0.0
Restructuring costs		0.1			0.2			0.1			0.2
Total operating expenses as a percentage of revenues		54.1	%		41.3	%		51.3	%		41.9	%

Total operating expenses decreased by $21.7 million, or 14.7%, for the nine months ended June 30, 2007 compared to the nine months ended June 30, 2006. Excluding acquisition related costs, operating expenses increased by $8.4 million, or 7.1%, primarily from increased costs in sales and marketing.

• Sales and marketing expense.Sales and marketing expense increased by $5.4 million, or 13.5%, for the nine months ended June 30, 2007 compared to the nine months ended June 30, 2006. The increase was primarily due to increased salary expense of $2.2 million as we continue to expand the sales force, higher commission expense of $2.0 million, and an increase in bad debt expense of $0.6 million. Sales and marketing expense also included share-based payment expense of $0.8 million for the nine months ended June 30, 2007.

• Product development expense.Product development expense increased by $1.8 million, or 6.3%, for the nine months ended June 30, 2007 compared to the nine months ended June 30, 2006. The increase was primarily a result of $1.1 million in third-party outsourcing costs and $0.4 million in higher salary expense. Product development expense also included share-based payment expense of $0.3 million for the nine months ended June 30, 2007.

• General and administrative expense.General and administrative expense increased by $1.6 million, or 6.0%, for the nine months ended June 30, 2007 compared to the nine months ended June 30, 2006. In the nine months ended June 30, 2007, we incurred $0.5 million of costs associated with relocating our corporate headquarters, severance costs to our former CFO of $0.4 million, higher salary and related benefit expense of $0.7 million, and $0.3 million of increased bonus expense, which were partially offset by rebates and refunds of $0.8 million related to telecom and insurance costs. General and administrative expense included share-based payment expense of $1.8 million and $1.4 million for the nine months ended June 30, 2007 and June 30, 2006, respectively.

• Depreciation and Amortization.Depreciation and amortization expense increased by $1.6 million, or 7.8%, for the nine months ended June 30, 2007 compared to the nine months ended June 30, 2006. The increase resulted from an increase in

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purchased intangible assets as a result of the merger, which was partially offset by longer lives of finite-lived intangible assets associated with the mergers.

• Acquisition-Related Costs.We incurred acquisition-related costs of $0.1 million for the nine months ended June 30, 2007 which related to our acquisition of Silk Systems Inc. and were primarily composed of travel expenses associated with the integration of Silk Systems Inc. For the nine months ended June 30, 2006 we and the Predecessor Company incurred $32.5 million in acquisition-related costs. $30.7 million of these expenses were transaction costs related to the mergers. These charges primarily include outside financial advisory, accounting, legal and consulting fees, and other costs incurred directly related to integrating acquired companies. The remaining $1.8 million was for professional services expenses related to an initial public offering of the Predecessor Company’s stock which offering was withdrawn in connection with the mergers.

• Restructuring costs.We incurred restructuring costs of $0.6 million for the nine months ended June 30, 2007 which related to outsourcing certain activities to third-party providers, eliminating certain positions with the intent to streamline and focus our efforts and more properly align our cost structure with our projected revenue streams, and one-time benefits paid to certain employees separated in connection with the relocation of our corporate offices from Austin, Texas to Livermore, California.

Operating Income.Due to the above factors, operating income for the nine months ended June 30, 2007 increased by $29.5 million, or 183.2%, from $16.1 million to $45.6 million. Excluding acquisition-related costs and restructuring costs, operating income for the nine months ended June 30, 2007 would have decreased by $2.6 million or 5.3%. Excluding acquisition related costs and restructuring costs, operating income as a percentage of total revenues decreased to 15.3% of total revenues for the nine months ended June 30, 2007 compared to 16.9% of total revenues for the nine months ended June 30, 2006.

Interest Expense.Interest expense for the nine months ended June 30, 2007 was $35.6 million compared to $41.2 million for the nine months ended June 30, 2006, a decrease of $5.6 million or 13.6%. The decrease is primarily a result of lower interest rates associated with our new debt structure, partially offset by an increase in debt.

Net Income.As a result of the above factors, we realized net income of $6.3 million for the nine months ended June 30, 2007, compared to net loss of $44.6 million for the nine months ended June 30, 2006.

Liquidity and Capital Resources

Overview

Our principal liquidity requirements are for debt service, capital expenditures and working capital.

Our ability to service our indebtedness will depend on our ability to generate cash in the future. For the nine months ended June 30, 2007, our net cash provided by operating activities was $30.2 million, which included depreciation and amortization expenses of $23.4 million and non-cash stock option expense of $3.3 million.

Our cash balance at June 30, 2007 was $25.6 million. As of June 30, 2007, we had $538.1 million in outstanding indebtedness comprised primarily of $363.1 million of a senior secured term loan pursuant to our senior secured credit agreement and $175.0 million senior subordinated notes due 2016. Our senior secured credit agreement provides for maximum revolving credit facility borrowings of up to $40.0 million, including letters of credit up to a maximum of $5.0 million. There are no borrowings or letters of credit outstanding under the $40.0 million revolving credit facility as of June 30, 2007. As described in greater detail below, we expect to finance a portion of the purchase price of the Intuit Eclipse business with borrowings under the revolving credit facility.

On May 2, 2006, in connection with the consummation of the transactions, we entered into a senior secured credit agreement. The senior secured credit agreement provides for (i) a seven-year term loan in the amount of $390.0 million, amortized at a rate of 1.00% per year on a quarterly basis for the first six and three-quarters years after May 2, 2006, with the balance paid at maturity, and (ii) a five-year revolving credit facility that permits loans in an aggregate amount of up to $40.0 million, which includes a letter of credit facility and a swing line facility. Principal amounts outstanding under the revolving credit facility are due and payable in full at maturity on May 2, 2011. In addition, subject to certain terms and conditions, the senior secured credit agreement provides for one or more uncommitted incremental term loan and/or revolving credit facilities in an aggregate amount not to exceed $75.0 million. As described in greater detail below, we expect to enter into a $75.0 million incremental term loan in connection with the acquisition of the Intuit Eclipse business, after which our senior secured credit agreement will no longer provide for any uncommitted incremental term loans. Proceeds of the term loan on the initial borrowing date on May 2, 2006 were used to partially finance the mergers, to refinance certain of our indebtedness and to pay fees and expenses incurred in connection with the mergers and the related financings and transactions.

The borrowings under the senior secured credit agreement bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the prime rate of Deutsche Bank Trust Company Americas, and (2) the federal funds rate plus¹/2 of 1%; or (b) a reserve adjusted Eurodollar rate on deposits for periods of one-, two-, three-, or six-months (or, to the extent agreed to by each applicable lender, nine- or twelve-months or less than one month). The initial applicable margin for borrowings is:

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• under the revolving credit facility, 1.25% with respect to base rate borrowings and 2.25% with respect to Eurodollar rate borrowings, which may be reduced subject to our attainment of certain leverage ratios; and

• under the term loan facilities, 1.00% with respect to base rate borrowings and 2.00% with respect to Eurodollar rate borrowings.

In addition to paying interest on outstanding principal under the senior secured credit agreement, we are required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. The initial commitment fee rate is 0.50% per annum. The commitment fee rate may be reduced subject to our attaining certain leverage ratios, none of which had been obtained as of June 30, 2007. We must also pay customary letter of credit fees for issued and outstanding letters of credit.

On April 27, 2006, in connection with the consummation of the transactions, we issued $175.0 million aggregate principal amount of 9.50% senior subordinated notes due May 2, 2016. Each of our domestic subsidiaries, as primary obligors and not merely as sureties, jointly and severally, irrevocably and unconditionally guaranteed, on an unsecured senior subordinated basis, the performance and full and punctual payment when due, whether at maturity, by acceleration or otherwise, of all of our obligations under the senior subordinated notes indenture and the senior subordinated notes due 2016. The notes are our unsecured senior subordinated obligations and are subordinated in right of payment to all of our existing and future senior indebtedness (including the senior secured credit agreement), are effectively subordinated to all of our secured indebtedness (including the senior secured credit agreement), and are senior in right of payment to all of our existing and future subordinated indebtedness.

The terms of the senior secured credit agreement and the senior subordinated notes restrict certain activities, the most significant of which include limitations on additional indebtedness, liens, guarantees, payment or declaration of dividends, sale of assets and transactions with affiliates. In addition, the senior secured credit agreement requires us to maintain a maximum total net leverage ratio and a minimum interest coverage ratio. The senior secured credit agreement also contains certain customary affirmative covenants and events of default. At June 30, 2007, we were in compliance with all of the senior secured credit agreement’s and the senior subordinated notes covenants.

In connection with our acquisition of Intuit Eclipse, we entered into a commitment letter with Deutsche Bank Trust Company Americas and Deutsche Bank Securities Inc., with respect to a new incremental term loan facility, which we refer to as the acquisition facility, to be used to finance the acquisition and to pay fees and expenses in connection therewith. Under the terms of this commitment letter, the acquisition facility will be documented pursuant to an incremental loan amendment under our existing senior secured credit agreement pursuant to which we will borrow $75.0 million as a new tranche of loans under the credit agreement.

The acquisition facility will mature on May 2, 2013 and will amortize in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount of the acquisition facility, with the balance payable on May 2, 2013. Repayment of the acquisition facility will be guaranteed by the same guarantors that currently guarantee the senior secured credit agreement and secured by the same assets that currently secure the senior secured credit agreement. The loans under the acquisition facility will bear interest at rates plus a margin to be agreed upon with the lenders prior to the closing of the acquisition. We expect the acquisition of Intuit Eclipse and the entry into the incremental term loan facility to close in the fourth fiscal quarter of 2007.

We believe that cash flows from operations, together with amounts available under our senior revolving credit facility, will be sufficient to fund our working capital, capital expenditures and debt service requirements for at least the next twelve months. Our ability to meet our working capital and debt service requirements, however, is subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. If we are not able to meet such requirements, we may be required to seek additional financing. There can be no assurance that we will be able to obtain financing from other sources on terms acceptable to us, if at all.

From time to time, we intend to pursue acquisitions in addition to the acquisitions of Silk Systems and Intuit Eclipse, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted. We expect to fund future cash acquisitions primarily with cash flow from operations and borrowings, including borrowing from amounts available under our senior revolving credit facility or through new debt issuances. We may also issue additional equity either directly or in connection with any such acquisitions. There can be no assurance that acquisition funds will be available on terms acceptable to us, or at all.

Nine Months Ended June 30, 2007 Compared to Nine Months Ended June 30, 2006.

Our net cash provided by operating activities was $30.2 million and $24.5 million for the nine months ended June 30, 2007 and 2006, respectively.

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Our investing activities used net cash of $13.0 million and $790.2 million during the nine months ended June 30, 2007 and 2006, respectively. For the nine months ended June 30, 2006, cash used in investing activity was primarily related to the acquisition of Predecessor Company. We used cash of $6.5 million in the nine months ended June 30, 2007 to purchase Silk Systems, Inc. Our capital expenditures were $9.0 million and $8.5 million for the nine months ended June 30, 2007 and 2006, respectively. These amounts included capitalized computer software and database costs of $4.0 million and $4.3 million for the nine months ended June 30, 2007 and 2006, respectively.

Our financing activities used cash of $28.1 million for the nine months ended June 30, 2007 and provided $794.3 million for the nine months ended June 30, 2006. The use of cash for the nine months ended June 30, 2007 included payments totaling $25.0 million on our senior secured term loan and a $2.0 million final payment on our 10¹/2 % senior notes. For the nine months ended June 30, 2006, cash provided by financing activities was used to fund the acquisition of Predecessor Company.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Risk

At June 30, 2007, we had outstanding $363.1 million aggregate principal amount of a term loan due 2013, $175.0 million of senior subordinated notes and no borrowings under our revolving credit facility. The term loan due 2013 bears interest at floating rates. In May 2006, we entered into four interest rate swaps to manage and reduce the risk inherent in interest rate fluctuations and to effectively convert a notional amount of $245.0 million of floating rate debt to fixed rate debt. Giving effect to the interest rate swap, a 0.25% increase in floating rates would increase our interest expense by approximately $0.3 million annually.

Foreign Currency Risk

The majority of our operations are based in the United States and, accordingly, the majority of our transactions are denominated in U.S. dollars; however, we do have foreign based operations where transactions are denominated in foreign currencies and are subject to market risk with respect to fluctuations in the relative value of currencies. Currently, we have operations in Canada, the United Kingdom, Ireland and France and conduct transactions in the local currency of each location.

We monitor our foreign currency exposure and, from time to time, may attempt to reduce our exposure through hedging. At June 30, 2007, we had no foreign currency contracts outstanding.

Item 4. Controls and Procedures.

(a) Disclosure controls and procedures.An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and procedures are the controls and other procedures that we have designed to ensure that information required to be disclosed by us in the reports that we file with or submit to the SEC is recorded, processed, summarized and reported within the time periods specified by the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file with or submit to the SEC is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures. Based on this evaluation of our disclosure controls and procedures as described above, our CEO and CFO have concluded that as of June 30, 2007 our disclosure controls and procedures were effective.

(b) Internal controls over financial reporting. During the fiscal quarter ended June 30, 2007, there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are a party to various legal proceedings and administrative actions, all of which are of an ordinary or routine nature incidental to our operations. We do not believe that such proceedings and actions will, individually or in the aggregate, have a material adverse effect on our results of operations, financial condition or cash flows.

Item 1A. Risk Factors.

Any of the following risks could materially and adversely affect our business, financial condition or results of operations. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations.

If we cannot successfully anticipate or respond to our customers’ needs and requirements, our revenues could decline significantly and our operating results could be materially adversely affected.

The business management solutions industry is characterized by technological advances, adoption of evolving industry standards in computer hardware and software technology and new product introductions. Our future success will depend in part on our ability to:

• maintain and enhance our systems and services;

• successfully anticipate or respond to our customers’ needs and requirements; and

• develop and market our electronic automotive parts and applications catalog and other products and services in order to meet changing customer needs.

We may not be able to effectively respond to the changing technological requirements of the vertical markets we serve. To the extent we determine that new software and hardware technologies are required to remain competitive or our customers demand more advanced offerings, the development, acquisition and implementation of these technologies are likely to require significant capital investments by us. Capital may not be available for these purposes and investments in technologies may not result in commercially viable products. In addition, we may not be able to maintain our electronic automotive parts and applications catalog or introduce new versions or releases in a timely manner, and we may not be able to implement these new versions or releases in a manner that will meet the needs of our customers and maintain their proprietary nature. In the event we are not able to respond to changing technological requirements in the vertical markets we serve or our customers’ needs, our revenues could decline significantly and our operating results could be materially adversely affected.

If we do not develop new relationships and maintain our existing relationships with key customers and/or well-known market participants, our revenues could decline significantly and our operating results could be materially adversely affected.

We have developed strategic relationships with many well-known market participants in the hardlines and lumber vertical market and the automotive parts aftermarket. For example, we are an exclusive, a preferred and/or a recommended business management solutions provider for the members of the Ace Hardware Corp. and Do it Best Corp. cooperatives and Aftermarket Auto Parts Alliance, Inc. We believe that our ability to increase revenues depends in part upon maintaining our existing customer and market relationships, including exclusive, preferred and/or recommended provider status, and developing new relationships. We may not be able to renew or replace our existing licensing agreements upon expiration or maintain our market relationships that allow us to market and sell our products effectively. The loss or diminishment of key relationships, in whole or in part, could materially adversely impact our business.

General Parts, Inc., our largest customer, intends to discontinue the use of certain of our products and, as a result, our revenues in the automotive parts aftermarket could decline significantly and our operating results could be materially adversely affected.

In June 2004, General Parts, Inc., one of our largest customers, informed us of its intention to replace our J-CON parts store system with its own branded product at its company-owned stores and to recommend that its independent affiliated stores also replace the J-CON system. We believe the majority of this transition was completed by the end of calendar year 2006. J-CON product support revenues for all of General Parts’ company-owned stores and independent affiliated stores were approximately $3.7 million for the year ended September 30, 2006.

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Approximately 59% of our total revenues for our fiscal year 2006 was derived from product support and content and supply chain and other services, which generally are subscription based and not governed by long-term contracts, and therefore, if our current customers do not continue their subscriptions, our revenues could decline significantly and our operating results could be materially adversely affected.

Our product support and content and supply chain are typically provided on a subscription basis, subject to cancellation on 30 to 60 days’ notice without penalty. Accordingly, our customers may not continue to subscribe to our services. As we stop actively improving and selling several of our older systems, we experience reduced rates of customer retention, which has been particularly evident in the automotive parts aftermarket. These developments have resulted in a decrease in our automotive parts aftermarket product support revenues from $34.5 million for fiscal year 2005 to $29.2 million for fiscal year 2006, representing a decrease of 15.4%. We expect the decreases in automotive parts aftermarket product support revenues to continue, although we cannot predict with certainty the magnitude and timing of future decreases.

Our success is dependent in part upon the performance and integration of our new chief executive officer and on the performance and integration of new members of our senior management replacing those members of our senior management who left us in 2006-2007. If we are unable to integrate our new chief executive officer and other members of senior management who replaced members of our senior management who have terminated their employment with us, there could be a negative effect on our ability to operate our business.

Our success and ability to implement our business strategy, including integrating acquisitions, depend upon the continued contributions of our management team and others, including our technical employees. On May 2, 2006, Mr. Pervez Qureshi, formerly our chief operating officer, became our chief executive officer and president. Our business and operations are substantially dependent on the performance and integration of our new chief executive officer and president. We have also relocated our headquarters to our Livermore, California office. Mr. Greg Petersen resigned as Executive Vice President effective January 5, 2007 and Mr. Christopher Speltz resigned as Senior Vice President of Finance and Treasurer effective January 2, 2007 due to their inability to relocate to Livermore. Mr. Richard Rew (our former vice president, general counsel and secretary) resigned effective on July 14, 2006. Mr. Timothy Taich joined us as our new Vice President and General Counsel as of September 18, 2006. In addition, Mr. Brian Agle, who joined us as our Senior Vice President and Chief Financial Officer as of November 16, 2006, resigned, effective February 9, 2007. Ms. Kathleen M. Crusco joined us as our new Senior Vice President and Chief Financial Officer as of May 3, 2007. Our future success also depends on the performance and integration of our new senior management and our ability to attract and retain qualified personnel. A failure to retain members of our senior management team or attract other qualified personnel could reduce our revenues, increase our expenses and reduce our profitability.

Our new Activant Eagle and Vision products developed for the automotive parts aftermarket are key elements to our strategy to re-establish growth in the automotive parts aftermarket, and if this product does not gain market acceptance within that market our future growth and operating results could be adversely affected.

A component of our business strategy is to re-establish growth in the automotive parts aftermarket through the introduction of new systems and services. We have developed a version of our Activant Eagle product, a Windows-based system that has versions currently targeted at the hardlines and lumber vertical markets, that targets the automotive parts aftermarket. In the event our version of Activant Eagle for the automotive parts aftermarket does not gain acceptance within that market, our future growth and operating results could be adversely affected.

Our substantial indebtedness could adversely affect our business.

We have a substantial amount of indebtedness. As of June 30, 2007, we had total debt of $538.1 million and $40.0 million was available for additional borrowing under our senior secured revolving credit facility, including letters of credit up to a maximum of $5.0 million. Our substantial indebtedness has important consequences, including:

• requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;

• exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our senior secured credit facilities, the outstanding floating rate senior notes and our receivables facility will be at variable rates of interest;

• restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;

• increasing our vulnerability to general adverse economic and industry conditions;

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• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, other general corporate requirements and acquisitions;

• limiting our flexibility in planning for, or reacting to, changes in our business and the industry; and

• placing us at a competitive disadvantage compared to our competitors with less indebtedness.

In addition, our senior secured credit facilities and the indenture governing the notes permit us to incur substantial additional indebtedness in the future. For example, subject to certain terms and conditions, our senior secured credit agreement provides for one or more uncommitted incremental term loan facilities in an aggregate amount not to exceed $75.0 million. In connection with the completion of our expected acquisition of Intuit Eclipse, which is the distribution management software division of Intuit Inc., we expect to enter into a $75.0 million incremental term loan in connection with the acquisition, after which our senior secured credit agreement will no longer provide for any uncommitted incremental term loans. If new indebtedness is added to our and our subsidiaries’ current debt levels, the risks described above would intensify.

We may be unable to service our indebtedness.

Our ability to make scheduled payments on or to refinance our obligations with respect to our indebtedness depends on our financial and operating performance, which are affected by general economic, financial, competitive, business and other factors beyond our control. Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us under our senior secured revolving credit facility in an amount sufficient to enable us to service our debt or to fund our other liquidity needs. In addition, in connection with our expected acquisition of Intuit Eclipse, we expect to enter into a new $75.0 million incremental term loan facility and to borrow under our existing $40.0 million revolving credit facility. If we are unable to meet our debt obligations or fund our other liquidity needs, including after the completion of our expected acquisition of Intuit Eclipse and the related new borrowings, we may need to restructure or refinance all or a portion of our debt or sell certain of our assets on or before the maturity of our debt. We may not be able to restructure or refinance any of our debt on commercially reasonable terms, if at all, which could cause us to default on our debt obligations and impair our liquidity. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations.

Our operations are substantially restricted by the terms of our indebtedness, which could adversely affect us.

Our senior secured credit facilities, including our anticipated new acquisition facility, and the indenture governing our senior subordinated notes contain a number of significant covenants. These covenants limit our ability and the ability of our restricted subsidiaries to, among other things:

• incur additional indebtedness and issue additional preferred stock;

• make capital expenditures and other investments;

• merge, consolidate or dispose of our assets or the capital stock or assets of any restricted subsidiary;

• engage in sale-leaseback transactions;

• pay dividends, make distributions or redeem capital stock;

• change our line of business;

• enter into transactions with our affiliates; and

• grant liens on our assets or the assets of our restricted subsidiaries.

Our senior secured credit facilities, including our anticipated new acquisition facility, require us to meet certain financial tests. The failure to comply with any of these covenants or tests would cause a default under our senior secured credit facilities. A default, if not waived, could result in acceleration of the outstanding indebtedness under the notes and our senior secured credit facilities, in which case the debt would become immediately due and payable. In addition, a default or acceleration of indebtedness under our senior subordinated notes or our senior secured credit facilities could result in a default or acceleration of other indebtedness we may incur with cross-default or cross-acceleration provisions. If this occurs, we may not be able to pay our debt or borrow sufficient funds to refinance it. Even if new financing is available, it may not be available on terms that are acceptable to us. Complying with these covenants and tests may cause us to take actions that we otherwise would not take or not take actions that we otherwise could take.

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The costs and difficulties of integrating current and future acquisitions could impede our future growth, diminish our competitiveness and materially adversely affect our operations.

In March 2005, we acquired Speedware Corporation Inc. and in September 2005, we acquired Prophet 21, Inc. In addition, in May 2007, we acquired Silk Systems, Inc. and in July 2007 we entered into an agreement to acquire Intuit Eclipse. We expect our acquisition of Intuit Eclipse will be completed in the fourth fiscal quarter of 2007. These acquisitions increased the size and geographic scope of our operations. Additionally, we may pursue further acquisitions as part of our expansion strategy or to augment our sales, including additional acquisitions that extend our presence outside of North America. We cannot be certain that our current or future transactions will be successful and will not materially adversely affect the conduct, operating results or financial results of our business. With respect to any future acquisitions, we may be unable to identify additional potential acquisition targets, integrate and manage successfully any acquired businesses or achieve a substantial portion of any anticipated cost savings or other anticipated benefits from other acquisitions in the timeframe we anticipate, or at all. In addition, many transactions, including our pending acquisition of Intuit Eclipse, are subject to closing conditions, which may not be satisfied, and transactions may not be successfully completed even after their public announcement. Once completed, acquisitions, including, Silk Systems and Intuit Eclipse (when completed), involve numerous risks, such as difficulties in the assimilation of the operations, technologies, services and products of the acquired companies, market acceptance of our integrated product offerings, risks related to potential unknown liabilities associated with acquired businesses, personnel turnover and the diversion of management’s attention from other business concerns. Acquisitions of foreign businesses involve numerous additional risks, including difficulty enforcing agreements and collecting receivables under foreign laws and regulations, unexpected political, legal, trade or economic changes or instability, more stringent regulatory requirements or rules relating to labor or the environment, difficulty enforcing our intellectual property rights and increased exposure to foreign exchange rate fluctuations. We generally have paid cash for our recent acquisitions, including Speedware, Prophet 21 and Silk Systems, and we will be paying cash in connection with our acquisition of Intuit Eclipse. Any future acquisitions may involve further use of our cash resources, the issuance of equity or debt securities and/or the incurrence of other forms of debt.

A significant portion of our total assets consist of goodwill and other intangible assets, which may be subject to impairment charges in the future depending upon the financial results of our business.

Approximately $597 million of the purchase price paid in connection with the transactions completed in May 2006 was allocated to acquired goodwill. In addition, portions of the purchase prices for Silk Systems and Intuit Eclipse are also expected to be allocated to acquired goodwill. Acquired goodwill must be assessed for impairment at least annually. In the future, if our business does not yield expected financial results we may be required to take charges to our earnings based on this impairment assessment process, which could materially adversely affect our financial position.

We rely on third-party information for our electronic automotive parts and applications catalog and we are increasingly facing pressure to present our electronic automotive parts and applications catalog in a flexible format, each of which could expose us to a variety of risks, including increased pressure on our pricing.

We are dependent upon third parties to supply information for our electronic automotive parts and applications catalog. Currently, we obtain most of this information without a contract. In the future, more third-party suppliers may require us to enter into a license agreement and/or pay a fee for the use of the information or may make it more generally available to others. For example, an industry association is currently developing a data collection format that would make this information more accessible to consumers and provide it in a more usable format. We rely on this third-party information to continuously update our catalog. In addition, as a result of competitive pressures, we may begin providing our electronic automotive parts and applications catalog in a flexible format which could make it more difficult for us to maintain control over the way information presented in our catalog is used. Any change in the manner or basis on which we currently receive this information or in which it is made available to others who are or who could become competitors could have a material adverse effect on our electronic automotive parts and applications catalog business, which could have a material adverse effect on our business and results of operations.

If our existing customers who operate systems that we no longer actively sell do not upgrade or delay upgrading to our current generation of systems or upgrade to a system not sold by us, our operating results could be materially adversely affected.

Approximately half of our existing customers currently operate systems that we service and maintain but do not actively sell. Although we have developed upgrade paths to newer technologies for substantially all of these older systems, we cannot predict if or when our customers will upgrade to these newer technologies. If our customers do not upgrade or delay the upgrade cycle, or if they upgrade to a competitive system, our systems sales and services revenues and operating results could be materially adversely affected.

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We compete with many other technology providers in connection with the sale of our business management solutions to the retail and wholesale distribution market and our failure to effectively compete may negatively impact our market share and/or revenue.

The retail and wholesale distribution market is highly fragmented and the technology needs in this market are supplied by many competitors. In the hardlines and lumber vertical market we compete primarily with smaller, niche-focused companies, many of which target specific geographic regions. In the automotive parts aftermarket, we compete primarily with smaller software companies that may operate regionally or in a specific niche of the market. In addition, we may also experience future competition from some of our current larger customers to the extent they decide to develop their own systems and/or provide related services to themselves or their respective affiliated companies or members in lieu of obtaining such systems and services from us. We also compete with several companies in the wholesale distribution vertical market that are larger than us, including Infor Global Solutions, Inc. and, prior to the completion of our expected acquisition of the Intuit Eclipse business, Intuit Inc. In addition, there are also several niche competitors in the wholesale distribution vertical market. Further, several large software companies have made public announcements regarding the attractiveness of various small and medium-sized business markets and their intention to expand their focus in these markets, including Intuit Inc., Microsoft Corporation, Oracle Corporation, SAP AG and The Sage Group plc. To date, we have rarely competed directly with any of these larger software companies; however, we expect such competition may develop in the future.

Many of the competitors described above price their products and services below our prices, which over time may impact our pricing and profit margins. Our present and future competitors may have greater financial and other resources than we do and may develop better solutions than those offered by us. If increased spending is required to maintain market share or a rapid technological change in the industry occurs, we may encounter additional competitive pressures which could materially adversely affect our market share and/or profit margin.

Because of the varying sales cycles applicable to our systems sales, our quarterly systems revenues and other operating results can be difficult to predict and may fluctuate substantially.

Our systems revenues have increased from approximately 27% of our total revenues for fiscal year 2002 to approximately 41% of our total revenues for fiscal year 2006. We expect our systems revenues to continue to represent a material percentage of our total revenues. The sales cycle for our systems generally ranges from 90 days to 12 months, and it may be difficult to predict when a sale will close, if at all. It is therefore difficult to predict the quarter in which a particular sale will occur and to plan our expenditures accordingly.

Because of quarterly fluctuations, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful. The delay or failure to complete systems sales in a particular quarter would reduce our revenues in that quarter and until any such sale is made, and increase revenues in any subsequent quarters over which revenues for any such sale would likely be recognized.

Future consolidation among our customers and other businesses in the markets in which we operate may reduce our revenues, which would negatively impact our financial performance.

The markets we serve are highly fragmented. These markets have in the past and are expected to continue to experience consolidation. For example, the hardlines and lumber vertical market has experienced consolidation as retail hardware stores and lumber and building materials dealers try to compete with mass merchandisers such as The Home Depot Inc., Lowe’s Companies, Inc. and Menard, Inc. In addition, some of the mass merchandisers, such as The Home Depot Inc., and many large distributors have been acquiring smaller chains and independent stores. We may lose customers as a result of this consolidation. Our customers may be acquired by companies with their own proprietary business management systems or by companies that utilize a competitor’s system, or our customers may be forced to shut down due to this competition. Additionally, if original equipment manufacturers successfully increase sales into the automotive parts aftermarket, our customers in this vertical market may lose revenues, which could adversely affect their ability to purchase and maintain our solutions or stay in business.

If we fail to adequately protect our proprietary rights and intellectual property, we may incur unanticipated costs and our competitive position may suffer.

Our success and ability to compete effectively depend in part on our proprietary technology. We have approximately 275 registered copyrights, 90 registered trademarks and six registered patents in the United States. We attempt to protect our proprietary technology through the use of trademarks, patents, copyrights, trade secrets and confidentiality agreements. Legal protections for information products may be limited and technical means may not be available to protect against unauthorized use, access, display, reproduction or distribution. We may not be able to adequately protect our technology and competitors may develop similar technology independently.

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If we become subject to adverse claims alleging infringement of third-party proprietary rights, we may incur unanticipated costs and our competitive position may suffer.

We are subject to the risk that we are infringing on the proprietary rights of third parties. Although we are not aware of any infringement by our technology on the proprietary rights of others and are not currently subject to any legal proceedings involving claimed infringements by our products, we may be subject to such third-party claims, litigation or indemnity demands and these claims may be successful. If a claim or indemnity demand were to be brought against us, it could result in costly litigation or product shipment delays or force us to stop selling such product or providing such services or to enter into royalty or license agreements that may require substantial royalty or licensing payments. There can be no assurance we would be able to enter into these agreements on commercially acceptable terms.

Our software and information services could contain design defects or errors that could affect our reputation, result in significant costs to us and impair our ability to sell our products.

Our software and information services are highly complex and sophisticated and could, from time to time, contain design defects or errors. Additionally, third-party information supplied to us for inclusion in our electronic automotive parts and applications catalog may not be complete, accurate or timely. These defects or errors may delay the release or shipment of our products or, if the defect or error is discovered only after customers have received the products, that these defects or errors could result in increased costs, litigation, customer attrition, reduced market acceptance of our systems and services or damage to our reputation.

If we fail to obtain software and information we license from third parties on acceptable terms, we may experience delays and disruptions that could materially and adversely affect our business and results of operations.

We license and use software and information from third parties in our business. These third party software and information licenses may not continue to be available to us on acceptable terms. Also, these third parties may from time to time receive claims that they have infringed the intellectual property rights of others, including patent and copyright infringement claims, which may affect our ability to continue licensing their software or information. Our inability to use any of this third party software and information could result in shipment delays or other disruptions in our business, which could materially and adversely affect our operating results.

Interruptions in our connectivity applications and our systems could disrupt the services that we provide and materially adversely affect our business and results of operations.

Certain of our customers depend on the efficient and uninterrupted operation of our software connectivity applications, such as AConneX. In addition, our businesses are highly dependent on our ability to communicate with our customers in providing services and to process, on a daily basis, a large number of transactions. We rely heavily on our telecommunications and information technology infrastructure, as well as payroll, financial, accounting and other data processing systems. These applications and systems are vulnerable to damage or interruption from a variety of sources, including natural disasters, telecommunications failures and electricity brownouts or blackouts. If any of these systems fail to operate properly or become disabled, we could suffer financial loss, a disruption of our businesses, or damage to our reputation. Our insurance policies may not adequately compensate us for any losses that may occur due to any failures in our connectivity applications or in these services. We have disaster recovery plans in place to protect our businesses against natural disasters, security breaches, power or communications failures or similar events. At the same time, we have concluded it is not cost effective at this time to maintain any secondary “off-site” systems to replicate our connectivity applications, and we do not maintain and are not contractually required to maintain a formal disaster recovery plan with respect to these applications. Despite our preparations, in the event of a catastrophic occurrence, our disaster recovery plans may not be successful in preventing loss of customer data, service interruptions, disruptions to our operations or ability to communicate with our customers, or damage to our important locations. To the extent that any disruptions result in a loss or damage to our data center, telecommunications or information technology infrastructure, or our connectivity applications, it could result in damage to our reputation and lost revenues due to service interruptions and adverse customer reactions.

In the event of a failure in a customer’s computer system installed by us, a claim for damages may be made against us regardless of our responsibility for the failure, which could expose us to liability.

We provide business management solutions that we believe are critical to the operations of our customers’ businesses and provide benefits that may be difficult to quantify. Any failure of a customer’s system installed by us could result in a claim for substantial damages against us, regardless of our responsibility for the failure. Although we attempt to limit our contractual liability for damages resulting from negligent acts, errors, mistakes or omissions in rendering our services, the limitations on liability we include in our agreements may not be enforceable in all cases, and those limitations on liability may not otherwise protect us from liability for damages. Furthermore, our insurance coverage may not be adequate and that coverage may not remain available at acceptable costs. Successful claims brought against us in excess of our insurance coverage could seriously harm our business, prospects, financial condition and results of operations. Even if not successful, large claims against us could result in significant legal and other costs and may be a distraction to our senior management.

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Because we sell to small and medium-sized retail and wholesale distribution businesses, prolonged unfavorable general economic and market conditions could negatively impact our sales.

We sell our systems and services to a large number of small and medium-sized businesses. These businesses may be more likely to be impacted by unfavorable general economic and market conditions than larger and better capitalized companies. Furthermore, the businesses of our customers in the hardlines and lumber vertical market are affected by trends in the new housing and home improvements market, and our customers in the wholesale distribution vertical market are affected by trends in general construction and industrial production markets, which could be negatively impacted by an increase in interest rates or a decline in the general economy. Therefore, unfavorable general economic and market conditions in the United States (including as a result of terrorist activities) could have a negative impact on our sales.

The interests of our controlling stockholders or investors, may differ from the interests of the holders of our other security holders.

We are a wholly-owned subsidiary of Activant Group. Affiliates of Hellman & Freidman LLC, Thoma Cressey Equity Partner Inc. and JMI Equity, which we refer to as the “sponsors,” beneficially own, in the aggregate, over 99% of Activant Group’s common stock and an affiliate of Hellman & Friedman LLC beneficially owns the only authorized share of Activant Group’s Series A preferred stock. In addition, a stockholders agreement entered into by Activant Group, us and the sponsors prior to the mergers provides affiliates of Hellman & Friedman LLC with the right to vote the shares of Activant Group common stock held by the other sponsors under certain circumstances. As a result of this ownership of common stock and the share of Series A preferred stock and the terms of the stockholders agreement, these affiliates of Hellman & Friedman LLC are entitled to elect directors with majority voting power with respect to the Activant Group board of directors, to appoint new management and to approve most actions requiring the approval of the holders of outstanding Activant Group voting shares as a single class, including adopting most amendments to the Activant Group certificate of incorporation and approving mergers or sales of all or substantially all of our assets. These affiliates of Hellman & Friedman LLC, through their control of Activant Group, will also control us and all of our subsidiaries that are guarantors of our senior subordinated notes.

The interests of the sponsors may differ from our other security holders in material respects. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of the sponsors and their affiliates, as equity holders of Activant Group, might conflict with the interests of the holders of our senior subordinated notes. The sponsors and their affiliates may also have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to the holders of our senior subordinated notes, including the incurrence of additional indebtedness. Additionally, the indentures governing the senior subordinated notes permits us to pay fees, dividends or make other restricted payments under certain circumstances, and the sponsors may have an interest in our doing so.

The sponsors and their affiliates are in the business of making investments in companies and may, from time to time in the future, acquire interests in businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. You should consider that the interests of the sponsors may differ from yours in material respects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

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Item 6. Exhibits.

The exhibits filed with this report are as follows:

Exhibit
No.	Description
31.1*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Pervez Qureshi.
31.2*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Kathleen M. Crusco.
32.1**	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Pervez Qureshi.
32.2**	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Kathleen M. Crusco.

*	Exhibit is filed herewith.
**	Exhibit is furnished herewith and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

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SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 13^th day of August 2007.

ACTIVANT SOLUTIONS INC.
By:	/s/ KATHLEEN M. CRUSCO
Kathleen M. Crusco
Senior Vice President and Chief Financial Officer
(Duly Authorized and Principal Financial Officer)

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