Activant Solutions 10-Q 2008 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2008

o TRANSITION REPORT UNDER 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 (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, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filero	Accelerated filero	Non-accelerated filerþ	Smaller reporting companyo
		(Do not check if a smaller reporting company)

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 6, 2008
Common Stock, par value $0.01 per share	10 shares

ACTIVANT SOLUTIONS INC.
REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008

INDEX

FORWARD-LOOKING STATEMENTS	3
PART I — FINANCIAL INFORMATION
Item 1 — Financial Statements (Unaudited)	4
Condensed Consolidated Balance Sheets as of September 30, 2007 and June 30, 2008	4
Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended June 30, 2008 and June 30, 2007	5
Condensed Consolidated Statements of Cash Flows for the Nine Months ended June 30, 2008 and June 30, 2007	6
Notes to Condensed Consolidated Financial Statements	7
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3 — Quantitative and Qualitative Disclosures About Market Risk	35
Item 4 — Controls and Procedures	35
PART II — OTHER INFORMATION
Item 1 — Legal Proceedings	36
Item 1A — Risk Factors	36
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3 — Defaults Upon Senior Securities	36
Item 4 — Submission of Matters to a Vote of Security Holders	37
Item 5 — Other Information	37
Item 6 — Exhibits	37
SIGNATURE	38
Certification Pursuant to Section 302-Pervez A. Qureshi
Certification Pursuant to Section 302-Kathleen M. Crusco
Certification Pursuant to Section 906-Pervez A. Qureshi
Certification Pursuant to Section 906-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 heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. 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 heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Some of the risks and uncertainties 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;

• 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 acquisitions of Silk Systems and 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 or 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 retail, residential housing market and 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” in our Annual Report on Form 10-K for the year ended September 30, 2007 and elsewhere in this report.

Given these risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements included in this report. 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.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30,			June 30,
(in thousands, except share data)	2007			2008
ASSETS:
Current assets:
Cash and cash equivalents	$	33,379		$	59,225
Trade accounts receivable, net of allowance for doubtful accounts of $7,765 and $6,466 at September 30, 2007 and June 30, 2008, respectively		58,213			46,222
Inventories, net		5,359			4,966
Deferred income taxes		8,622			10,655
Income taxes receivable		2,681			2,813
Prepaid expenses and other current assets		5,736			6,482
Total current assets		113,990			130,363
Property and equipment, net		10,074			9,634
Intangible assets, net		235,566			223,471
Goodwill		672,206			666,672
Deferred financing costs		15,501			13,758
Other assets		4,341			1,881
Total assets	$	1,051,678		$	1,045,779
LIABILITIES AND STOCKHOLDER’S EQUITY:
Current liabilities:
Accounts payable	$	18,401		$	14,315
Payroll related accruals		15,974			16,885
Deferred revenue		29,671			31,985
Current portion of long-term debt		750			750
Accrued expenses and other current liabilities		21,618			22,777
Total current liabilities		86,414			86,712
Long-term debt, net of discount		632,113			631,550
Deferred tax liabilities		67,072			59,374
Other liabilities		9,885			11,785
Total liabilities		795,484			789,421
Commitments and contingencies		—			—
Common Stock:
Par value $0.01, authorized 1,000 shares, 10 shares issued and outstanding, at September 30, 2007 and June 30, 2008		—			—
Additional paid-in capital		250,893			253,159
Retained earnings		8,003			9,099
Other accumulated comprehensive income (loss):
Unrealized loss on cash flow hedges		(2,891	)		(5,577	)
Cumulative translation adjustment		189			(323	)
Total stockholder’s equity		256,194			256,358
Total liabilities and stockholder’s equity	$	1,051,678		$	1,045,779

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

4

ACTIVANT SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(in thousands)	2007			2008			2007			2008
Revenues:
Systems	$	43,686		$	40,440		$	132,970		$	130,969
Services		56,563			63,283			168,585			189,756
Total revenues		100,249			103,723			301,555			320,725
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems (1)		24,646			22,220			71,928			73,439
Services (1)		20,771			22,531			60,749			68,419
Total cost of revenues		45,417			44,751			132,677			141,858
Gross profit		54,832			58,972			168,878			178,867
Operating expenses:
Sales and marketing (1)		14,939			15,356			47,669			47,883
Product development (1)		10,848			10,774			31,183			33,910
General and administrative (1)		7,673			8,906			22,019			26,180
Depreciation and amortization		7,448			9,640			21,785			27,561
Acquisition related costs		72			264			72			922
Restructuring costs		276			1,636			563			2,126
Total operating expenses		41,256			46,576			123,291			138,582
Operating income		13,576			12,396			45,587			40,285
Interest expense		(11,774	)		(11,800	)		(35,644	)		(39,672	)
Other income, net		327			469			786			1,542
Income before income taxes		2,129			1,065			10,729			2,155
Income tax expense		783			236			4,414			790
Net income	$	1,346		$	829		$	6,315		$	1,365
Comprehensive income (loss):
Net income	$	1,346		$	829		$	6,315		$	1,365
Unrealized gain (loss) on cash flow hedges		2,042			3,966			1,793			(2,686	)
Foreign currency translation adjustment		18			(292	)		87			(512	)
Comprehensive income (loss)	$	3,406		$	4,503		$	8,195		$	(1,833	)

(1) Includes share-based payment expense as follows:
Cost of revenues
Systems	$	11	$	6	$	35	$	22
Services		88		32		289		173
Operating expenses
Sales and marketing		252		194		837		612
Product development		97		71		320		215
General and administrative		632		204		1,812		1,257
Total	$	1,080	$	507	$	3,293	$	2,279

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

5

ACTIVANT SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended June 30,
(in thousands)	2007			2008
Operating activities:
Net income	$	6,315		$	1,365
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based payment expense		3,293			2,279
Depreciation		4,489			4,554
Amortization of intangible assets		17,296			23,007
Amortization of deferred financing costs		1,586			1,860
Provision for doubtful accounts		2,970			2,418
Deferred income taxes, net		(8,386	)		(9,731	)
Other, net		1,697			(512	)
Changes in assets and liabilities:
Trade accounts receivable		3,963			9,573
Inventories		(1,371	)		393
Prepaid expenses and other assets		8,972			1,582
Accounts payable		(515	)		(4,086	)
Deferred revenue		(4,012	)		2,314
Accrued expenses and other liabilities		(4,260	)		549
Net cash provided by operating activities		32,037			35,565
Investing activities:
Business acquisitions		(6,502	)		—
Purchase of property and equipment		(4,989	)		(4,114	)
Capitalized computer software costs and databases		(3,987	)		(4,912	)
Purchase price adjustments		700			—
Net cash used in investing activities		(14,778	)		(9,026	)
Financing activities:
Repurchase of common stock		—			(13	)
Payment on long-term debt		(27,000	)		(563	)
Debt issuance costs		(1,077	)		(117	)
Net cash used in financing activities		(28,077	)		(693	)
Net change in cash and cash equivalents		(10,818	)		25,846
Cash and cash equivalents, beginning of period		36,383			33,379
Cash and cash equivalents, end of period	$	25,565		$	59,225
Supplemental disclosures of cash flow information
Cash paid during the period for interest	$	38,097		$	41,089
Cash paid during the period for income taxes (net of receipts)	$	9,993		$	6,952

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

6

ACTIVANT SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2008

(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, 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 Bravo, Inc. 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. (the “Company”) 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.

Our accompanying unaudited condensed 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, 2008, actual results may differ from these estimates and operating results for the three and nine months ended June 30, 2008 are not necessarily indicative of the results that may be achieved for the year ending September 30, 2008. In the opinion of our management, the accompanying unaudited condensed 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 Report on Form 10-K for the year ended September 30, 2007. Certain reclassifications have been made to prior period presentation to conform to current period presentation.

We allocate certain infrastructure costs such as facilities, information technology (“IT”) support, and telecommunications expense in determining segment contribution margin. Effective October 1, 2007, we reorganized our management and business structure along vertical markets and, accordingly, we revised the methodology for determining the value of those infrastructure services provided to each segment. As a result, $2.2 million and $6.9 million of costs previously reported as general and administrative expenses have been reclassified for the three and nine months ended June 30, 2007, respectively, in the accompanying condensed consolidated statement of operations. Additional disclosures associated with this reorganization and changes in segment reporting are included in Note 7 and 8, respectively. For comparative purposes, information on corporate allocations for the three and nine months ended June 30, 2007 is as follows:

	Three Months Ended June 30, 2007									Nine Months Ended June 30, 2007
	as previously									as previously
(in thousands)	reported			revised			change			reported			revised			change
Systems cost of revenues	$	404		$	952		$	548		$	1,212		$	2,754		$	1,542
Services cost of revenues		1,038			1,512			474			3,114			4,682			1,568
Sales and marketing expense		468			946			478			1,404			2,950			1,546
Product development expense		217			966			749			651			2,918			2,267
General and administrative expense		(2,127	)		(4,376	)		(2,249	)		(6,381	)		(13,304	)		(6,923	)
Net allocations	$	—		$	—		$	—		$	—		$	—		$	—

7

2. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 162,The Hierarchy of Generally Accepted Accounting Principles. FASB No. 162 is intended to improve financial reporting by moving from the American Institute of Certified Public Accountants framework to a FASB framework that applies equally to preparers as well as auditors. This statement is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411,The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The FASB does not expect that this statement will result in a change to current practice.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3,Determination of the Useful Lives of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142,Goodwill and Other Intangible Assets. FSP No. 142-3 is intended to improve the consistency between the factors used to determine the useful lives of intangible assets. FSP No. 142-3 is effective for fiscal years beginning after December 15, 2010. We are currently in the process of evaluating the impact FSP No. 142-3 will have on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133, which requires additional disclosures about the objectives of using derivative instruments, the method by which the derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and the effect of derivative instruments and related hedged items on financial position, financial performance, and cash flows. SFAS No. 161 also requires disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged. We are currently in the process of evaluating the impact SFAS No. 161 will have on our consolidated financial statement disclosures.

In December 2007, FASB issued SFAS No. 141(R),Business Combinations. SFAS No. 141(R) will significantly change current practices regarding business combinations. Among the more significant changes, SFAS No. 141(R) expands the definition of a business and a business combination; requires the acquirer to recognize the assets acquired, liabilities assumed and non-controlling interests (including goodwill), measured at fair value at the acquisition date; requires acquisition-related expenses and restructuring costs to be recognized separately from the business combination; requires assets acquired and liabilities assumed from contractual and non-contractual contingencies to be recognized at their acquisition-date fair values with subsequent changes recognized in earnings; and requires in-process research and development to be capitalized at fair value as an indefinite-lived intangible asset. SFAS No. 141(R) is effective for financial statements issued for fiscal years beginning after December 15, 2008. Earlier application is not permitted. Accordingly, SFAS No. 141(R) will be applied by the Company to business combinations occurring on or after October 1, 2009.

In February 2007, FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value. It also establishes presentation and disclosure requirements to facilitate comparisons between companies using different measurement attributes for similar types of assets and liabilities. The statement is effective for fiscal years beginning after November 15, 2007. Earlier application is permitted provided we also apply the provisions of SFAS No. 157,Fair Value Measurements. We are currently in the process of evaluating the impact SFAS No. 159 will have on our consolidated financial statements.

In September 2006, FASB issued SFAS No. 157,Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, rather it applies to existing accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently in the process of evaluating the impact SFAS No. 157 will have on our consolidated financial statements.

In June 2006, FASB issued FASB Interpretation (“FIN”) No. 48,Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109. FIN No. 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. We adopted FIN No. 48 on October 1, 2007. See Note 5 for further information on the impact of this adoption.

8

3. 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. In the nine months ended June 30, 2008, we decreased goodwill and increased intangible assets by $6.0 million, related to the final valuation of the Intuit Eclipse Distribution Management Solutions business (“Eclipse”) by independent third-party consultants. In addition in conjunction with the adoption of FIN No. 48 and the identification of additional pre-acquisition income tax liabilities, we recorded a net increase to goodwill of approximately $0.5 million for the nine months ended June 30, 2008.

Silk Systems, Inc.

On May 31, 2007, we acquired the common stock of Silk Systems, Inc. (“Silk Systems”) for a total purchase price of $6.9 million, net of $0.7 million cash received. Acquired intangible assets consisted primarily of customer contracts, customer lists and acquired technology with a weighted average useful life of seven years. The amortization expense related to the acquired intangible assets is approximately $0.4 million per annum. The goodwill recorded as a result of this acquisition is not expected to be deductible for tax purposes.

Eclipse Distribution Management Solutions

On August 17, 2007, we acquired substantially all of the assets of Eclipse for cash consideration of approximately $101.3 million. Acquired intangible assets consist primarily of customer contracts, customer lists and acquired technology with a weighted average useful life of six years. The amortization expense related to the acquired intangible assets is approximately $6.8 million per annum. The goodwill recorded as a result of this acquisition is expected to be deductible for tax purposes.

Pro Forma Results

The results of operations include the results of Silk Systems commencing after May 31, 2007 and of Eclipse commencing after August 17, 2007. Accordingly, our results of operations for the three and nine months ended June 30, 2007 and 2008 are not directly comparable.

The following table presents the pro forma combined results of our operations with Silk Systems and Eclipse for the three and nine months ended June 30, 2007, assuming that the acquisitions had both occurred on the first day of the respective periods after giving effect to certain pro forma adjustments primarily related to the elimination of certain allocations, restructuring activities, amortization of acquired intangible assets and interest expense. These pro forma results are not necessarily indicative of what the actual consolidated results of operations would have been had the acquisition actually occurred on the first day of the respective period or of future results of operations of the consolidated entities.

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2008			2007			2008
(in thousands)	(pro forma)			(actual)			(pro forma)			(actual)
Total revenues	$	113,964		$	103,723		$	343,909		$	320,725
Total cost of revenues		52,866			44,751			155,154			141,858
Gross profit		61,098			58,972			188,755			178,867
Total operating expenses		46,156			46,576			138,494			138,582
Operating income		14,942			12,396			50,261			40,285
Interest expense		(13,735	)		(11,800	)		(41,526	)		(39,672	)
Other income, net		540			469			1,133			1,542
Income before income taxes		1,747			1,065			9,868			2,155
Income tax expense		649			236			4,113			790
Net income	$	1,098		$	829		$	5,755		$	1,365

9

4. DEBT

Long-term debt consisted of the following:

	September 30,			June 30,
(in thousands)	2007			2008
Senior secured term loan due 2013	$	437,863		$	437,300
Senior subordinated notes due 2016		175,000			175,000
Revolving credit facility due 2011		20,000			20,000
Total debt		632,863			632,300
Current portion		(750	)		(750	)
Long-term debt	$	632,113		$	631,550

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 payable on May 2, 2013, and (ii) a five-year revolving credit facility that permits loans in an aggregate amount of up to $40.0 million, which includes a $5.0 million 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. Proceeds of the term loan on the initial borrowing date 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. During the year ended September 30, 2006, we repaid $2.0 million in principal towards the $390.0 million term loan per the amortization schedule. During the year ended September 30, 2007, we repaid $25.2 million in principal towards the $390.0 million term loan (which reduced the future unamortized principal payments due per the amortization schedule) and for the nine months ended June 30, 2008, we have repaid approximately $0.6 million in principal. In addition, subject to certain terms and conditions, the senior secured credit agreement provided for one or more uncommitted incremental term loan and/or revolving credit facilities in an aggregate amount not to exceed $75.0 million. In August 2007, we borrowed the $75.0 million incremental term loan, which matures on May 2, 2013, as well as $20.0 million of the revolving credit facility. These amounts were used to partially finance the acquisition of Eclipse.

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 plus 1/2 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:

• 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;

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

• under the incremental term loan, 1.5% with respect to base rate borrowings and 2.50% with respect to Eurodollar rate borrowings.

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. In November 2007, one of the interest rate swaps with a notional amount of $25.0 million matured. As of June 30, 2008, we had outstanding interest rate swaps with a notional amount of $220.0 million. We believe any ineffectiveness of our interest rate swaps is immaterial.

In addition to paying interest on outstanding principal under the senior secured credit agreement, we will be 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, 2008. We must also pay customary letter of credit fees for issued and outstanding letters of credit.

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

10

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. The notes were issued in a private transaction that was not subject to the registration requirements of the Securities Act of 1933. The notes subsequently were exchanged for substantially identical notes registered with the Securities and Exchange Commission, pursuant to a registration rights agreement entered into in connection with the indenture.

Each of our domestic subsidiaries, as primary obligors and not 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 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 indenture governing the senior subordinated notes restrict certain activities by us, 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 and the indenture also contain certain customary affirmative covenants and events of default. At June 30, 2008, we were in compliance with all of the senior secured credit agreement’s and the indenture’s covenants.

5. INCOME TAXES

We recorded a provision for income tax expense before discrete items at an estimated annual effective tax rate of 45.1% for the nine months ended June 30, 2008, which was based on our anticipated results for the full fiscal year. The effective rate differed from the U.S. federal statutory rate primarily due to the impact of permanently non-deductible expenses, estimated changes in valuation allowances, and state income taxes. The provision for income tax was further adjusted by discrete period events such as adjustments to contingent tax reserves, changes in effective state rates, and reconciliations of income tax on prior period tax provisions to actual tax returns filed. The overall effective rate after discrete items was 22.2% and 36.6% for the three and nine months, respectively, ending June 30, 2008.

Effective October 1, 2007, we adopted FIN No. 48. As a result of implementing FIN No. 48, we recognized an increase of $2.1 million in the liability for unrecognized tax benefits which was recorded primarily as adjustments of $1.5 million to goodwill and $0.3 million to the opening balance of retained earnings.

Our balance sheet included unrecognized tax benefits of approximately $8.0 million as of October 1, 2007 and $7.8 million as of June 30, 2008. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $0.9 million as of October 1, 2007 and June 30, 2008.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of October 1, 2007 and June 30, 2008 the balance of accrued interest and penalties was approximately $0.4 million and $0.5 million, respectively.

At the date of FIN No. 48 adoption, we believed it was reasonably possible that total unrecognized tax benefits would decrease by approximately $0.3 million within twelve months due to the expiration of statute of limitations. As of June 30, 2008, we believe it is reasonably possible that total unrecognized tax benefits will approximately decrease by an additional $3.5 million within the following twelve months due to the expected settlement of United States and Canadian tax examinations. The adjustments will primarily be recorded as adjustments to goodwill.

The tax years 2002 through 2007 remain open to examination by the major taxing jurisdictions to which we are subject. We are currently under U.S. federal examination for the 2002 through 2007 tax years and under a Canadian limited scope examination relating to research credits for the 2005 and 2006 tax periods.

6. STOCK OPTION PLANS

Activant Solutions Inc.

During 2006, Activant Group adopted the Activant Group Inc. 2006 Stock Incentive Plan (the “2006 Option Plan”), which as of June 30, 2008 had 7,961,958 shares of Activant Group common stock reserved for issuances pursuant to existing and future awards thereunder. The exercise price of options granted under the 2006 Option Plan 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 granted under the 2006 Option Plan vest in varying amounts over a period up to five years and expire ten years from the date of the grant.

The Company estimates the fair value of stock options using a Black-Scholes option pricing model that uses certain assumptions

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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 Activant Group 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. For the three and nine months ended June 30, 2008, we recorded share-based payment expense of approximately $0.5 million and $2.3 million, respectively, with a total income tax benefit recognized in the income statement of approximately $0.2 million and $0.9 million, respectively. For the three and nine months ended June 30, 2007, we recorded share-based payment expense of approximately $1.1 million and $3.3 million, respectively, with a total income tax benefit recognized in the income statement of approximately $0.5 million and $1.4 million, respectively

The fair value of each award granted from the 2006 Option Plan during the three and nine months ended June 30, 2007 and 2008 were estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2008			2007			2008
Expected term	6.66 years			6.66 years			6.66 years			6.66 years
Expected volatility		50.00	%		50.00	%		50.00	%		50.00	%
Expected dividends		0.00	%		0.00	%		0.00	%		0.00	%
Risk-free rate		4.77	%		3.21	%		4.68	%		3.20	%

The weighted average estimated fair value for options granted during the nine months ended June 30, 2007 and 2008 was $2.46 and $2.42 per share, respectively.

Information with respect to stock option activity for the nine months ended June 30, 2008 is as follows:

	2006 Option Plan
				Weighted
				Average Exercise
	Number of Shares			Price
Total options outstanding at September 30, 2007		6,759,073		$	4.38
Options granted		875,250			4.53
Options forfeited		(802,600	)		4.37
Options exercised		—			—
Total options outstanding at June 30, 2008		6,831,723		$	4.40
Total options exercisable at June 30, 2008		2,306,528		$	4.37

At June 30, 2008, there was approximately $9.8 million of total unrecognized shared-based payment expense related to unvested stock options which we expect to recognize as expense in future periods through fiscal year 2013.

Predecessor Company

In connection with the mergers, Activant Group entered into an option rollover agreement with Mr. Pervez A. 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 to purchase Predecessor Company common stock 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. The share-based payment expense for these options has been fully recognized.

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Information on stock options for the six months ended June 30, 2008 under the Predecessor Company Plan is as follows:

	Predecessor Company Plan
	Number of		Weighted Average
	Shares		Exercise Price
Total options outstanding at September 30, 2007		333,334	$	1.00
Options granted		—		—
Options forfeited		—		—
Options exercised		—		—
Total options outstanding at June 30, 2008		333,334	$	1.00

7. RESTRUCTURING COSTS

During fiscal year 2008, our management approved restructuring plans for eliminating certain employee positions associated with the integration of Eclipse and for eliminating certain additional employee positions with the intent to streamline and focus our operations and more properly align our cost structure with our projected future revenue streams. In accordance with SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities, during the three and nine months ending June 30, 2008, we recorded approximately $1.6 million and $2.1 million, respectively, related to workforce reductions, comprised of severance and related benefits, and consolidation of facilities. All restructuring charges were recorded in “Restructuring Costs” in the condensed consolidated statements of operations.

Our restructuring liability at March 31, 2008 was approximately $0.2 million. During the three months ended June 30, 2008, approximately $0.1 million of accrued restructuring costs were paid out. As of June 30, 2008, our restructuring liability was approximately $0.8 million and such amount is anticipated to be paid prior to December 31, 2008.

8. SEGMENT REPORTING

We are a provider of business management solutions serving small and medium-sized retail and wholesale distribution businesses. With over 25 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 automotive, which are considered our segments for reporting purposes. The segments are determined in accordance with how our management views and evaluates our business and based on the criteria as outlined in SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information.We previously considered our segments along product lines. Effective October 1, 2007, we reorganized our management and business structure along vertical markets and, accordingly, we have changed our segment reporting. All periods have been reclassified to conform to the current period presentation.

Because these segments reflect the manner in which our management reviews our business, they necessarily involve judgments that our management believes are reasonable in light of the circumstances under which they are made. These judgments may change over time or may be modified to reflect new facts or circumstances. Segments may also be changed or modified to reflect technologies and applications that are newly created, or that change over time, or other business conditions that evolve, each of which may result in reassessing specific segments and the elements included within each of those segments. Recent events, including changes in our senior management, may affect the manner in which we present segments in the future. A description of the businesses served by each of our reportable segments follows:

§	Hardlines and Lumber segment— 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.
§	Wholesale Distribution segment— 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; 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.
§	Automotive segment— The automotive vertical market 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.

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§ Other— Other primarily consists of our productivity tools business, which is involved with software migration services and application development tools.

Segment Revenue and Contribution Margin

The results of the reportable segments are derived directly from our management reporting system. The results are based on our method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States. Our management measures the performance of each segment based on several metrics, including contribution margin as defined below, which is not a financial measure calculated in accordance with GAAP. Asset data is not reviewed by our management at the segment level and therefore is not included.

Segment contribution margin includes all segment revenues less the related cost of sales, direct marketing, sales expense, and product development expenses. A portion of each segment’s expenses arises from shared services and centrally managed infrastructure support costs that we allocate to the segments to determine segment contribution margin. These expenses primarily include information technology services, facilities, and telecommunications costs.

Financial information for each reportable segment is as follows for the three and nine months ended June 30, 2007 and 2008:

	Three Months Ended June 30, 2007										Nine Months Ended June 30, 2007
	Hardlines										Hardlines
	and		Wholesale		Auto-						and		Wholesale		Auto-
(in thousands)	Lumber		Distribution		motive		Other		Total		Lumber		Distribution		motive		Other		Total
Revenues	$	42,534	$	29,105	$	22,268	$	6,342	$	100,249	$	128,472	$	89,814	$	67,586	$	15,683	$	301,555
Contribution Margin	$	10,931	$	10,551	$	7,358	$	877	$	29,717	$	34,091	$	31,779	$	24,137	$	2,168	$	92,175

	Three Months Ended June 30, 2008										Nine Months Ended June 30, 2008
	Hardlines										Hardlines
	and		Wholesale		Auto-						and		Wholesale		Auto-
	Lumber		Distribution		motive		Other		Total		Lumber		Distribution		motive		Other		Total
Revenues	$	36,343	$	41,172	$	20,795	$	5,413	$	103,723	$	113,243	$	127,056	$	65,017	$	15,409	$	320,725
Contribution Margin	$	9,621	$	15,820	$	6,610	$	1,318	$	33,369	$	26,754	$	48,343	$	22,029	$	2,002	$	99,128

Certain of our operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include marketing costs other than direct marketing, general and administrative costs, such as legal and finance, share-based payment expense, acquisition related costs, depreciation, amortization, restructuring costs, interest expense, and other income.

There are significant judgments that our management makes with respect to the direct and indirect allocation of costs that may affect the calculation of contribution margins. While our management believes these and other related judgments are reasonable and appropriate, others could assess such matters differently.

The exclusion of costs not considered directly allocable to individual business segments results in contribution margin not taking into account substantial costs of doing business. We use contribution margin, in part, to evaluate the performance of, and allocate resources to, each of the segments. While our management may consider contribution margin to be an important measure of comparative operating performance, this measure should be considered in addition to, but not as a substitute for, net income, cash flow and other measures of financial performance prepared in accordance with GAAP that are otherwise presented in our financial statements. In addition, our calculation of contribution margin may be different from the calculation used by other companies and, therefore, comparability may be affected.

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The reconciliation of total segment contribution margin to our consolidated income before income taxes is as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
(in thousands)	2007			2008			2007			2008
Segment contribution margin	$	29,717		$	33,369		$	92,175		$	99,128
Corporate and unallocated costs		(7,265	)		(8,926	)		(20,875	)		(25,955	)
Share-based payment expense		(1,080	)		(507	)		(3,293	)		(2,279	)
Depreciation and amortization		(7,448	)		(9,640	)		(21,785	)		(27,561	)
Acquisition related costs		(72	)		(264	)		(72	)		(922	)
Restructuring costs		(276	)		(1,636	)		(563	)		(2,126	)
Interest expense		(11,774	)		(11,800	)		(35,644	)		(39,672	)
Other income, net		327			469			786			1,542
Income before income taxes	$	2,129		$	1,065		$	10,729		$	2,155

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:

	Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands)	2007		2008		2007		2008
Revenues:
Americas	$	98,510	$	102,454	$	296,434	$	316,258
Europe		1,739		1,269		5,121		4,467
Total revenues	$	100,249	$	103,723	$	301,555	$	320,725

	September 30,		June 30,
	2007		2008
Assets:
Americas	$	1,049,029	$	1,043,363
Europe		2,649		2,416
Total assets	$	1,051,678	$	1,045,779

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9. GUARANTOR CONSOLIDATION

We guarantee the senior secured credit agreement and the senior subordinated notes together with our existing, wholly-owned domestic subsidiaries: HM COOP LLC, Speedware USA, Inc., Prelude Systems Inc., Activant Wholesale Distribution Solutions Inc., Speedware America, Inc., Speedware Group, Inc., and Greenland Holding Corp. (the “Guarantor Subsidiaries”). Our other subsidiaries (the “Non-Guarantor Subsidiaries”) are not guarantors of the senior secured credit agreement and the senior subordinated notes. The accompanying condensed consolidating balance sheets as of September 30, 2007 and June 30, 2008, the accompanying condensed consolidating statements of operations for the three and nine months ended June 30, 2007 and 2008, and the accompanying condensed consolidating statements of cash flows for the nine months ended June 30, 2007 and 2008, represent the financial position, results of operations and cash flows of the Company’s Guarantor Subsidiaries and Non-Guarantor Subsidiaries.

Condensed Consolidating Balance Sheet as of September 30, 2007

	Guarantor					Non-
	Principal		Guarantor			Guarantor
(in thousands)	Operations		Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	24,862	$	4,154		$	4,363		$	—		$	33,379
Trade accounts receivable, net of allowance for doubtful accounts		40,451		14,408			3,354			—			58,213
Inventories, net		4,061		1,014			284			—			5,359
Income taxes receivable		1,638		514			529			—			2,681
Deferred income taxes		7,534		942			146			—			8,622
Prepaid expenses and other current assets		5,119		398			219			—			5,736
Total current assets		83,665		21,430			8,895			—			113,990
Property and equipment, net		8,066		1,359			649			—			10,074
Intangible assets, net		203,447		29,667			2,452			—			235,566
Goodwill		560,880		103,420			1,869			6,037			672,206
Investments in subsidiaries		9,656		—			885			(10,541	)		—
Intercompany receivables (payables)		78,175		(52,525	)		(25,650	)		—			—
Deferred financing costs		15,501		—			—			—			15,501
Other assets		4,108		143			95			(5	)		4,341
Total assets	$	963,498	$	103,494		$	(10,805	)	$	(4,509	)	$	1,051,678
Liabilities and stockholder’s equity (deficit)
Current liabilities:
Accounts payable	$	13,606	$	3,104		$	1,691		$	—		$	18,401
Payroll related accruals		11,168		3,500			1,306			—			15,974
Deferred revenue		12,277		16,104			1,290			—			29,671
Current portion of long-term debt		750		—			—			—			750
Accrued expenses and other current liabilities		20,111		1,472			35			—			21,618
Total current liabilities		57,912		24,180			4,322			—			86,414
Long-term debt, net of discount		632,113		—			—			—			632,113
Deferred tax liabilities and other liabilities		79,941		(3,049	)		65			—			76,957
Total liabilities		769,966		21,131			4,387			—			795,484
Total stockholder’s equity (deficit)		193,532		82,363			(15,192	)		(4,509	)		256,194
Total liabilities and stockholder’s equity (deficit)	$	963,498	$	103,494		$	(10,805	)	$	(4,509	)	$	1,051,678

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Condensed Consolidating Balance Sheet as of June 30, 2008

	Guarantor
	Principal		Guarantor			Non-Guarantor
(in thousands)	Operations		Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	46,432	$	6,095		$	6,698		$	—		$	59,225
Trade accounts receivable, net of allowance for doubtful accounts		27,732		15,404			3,086			—			46,222
Inventories, net		3,810		1,155			1			—			4,966
Deferred income taxes		9,567		942			146			—			10,655
Income taxes receivable		2,813		—			—			—			2,813
Prepaid expenses and other current assets		5,370		644			468			—			6,482
Total current assets		95,724		24,240			10,399			—			130,363
Property and equipment, net		8,139		966			529			—			9,634
Intangible assets, net		189,738		31,606			2,127			—			223,471
Goodwill		563,007		97,422			206			6,037			666,672
Investments in subsidiaries		9,656		—			885			(10,541	)		—
Intercompany receivables (payables)		27,839		(7,466	)		(20,373	)		—			—
Deferred financing costs		13,758		—			—			—			13,758
Other assets		1,485		376			20			—			1,881
Total assets	$	909,346	$	147,144		$	(6,207	)	$	(4,504	)	$	1,045,779
Liabilities and stockholder’s equity (deficit)
Current liabilities:
Accounts payable	$	10,893	$	2,485		$	931		$	6		$	14,315
Payroll related accruals		10,051		5,157			1,677			—			16,885
Deferred revenue		12,537		18,445			1,003			—			31,985
Current portion of long-term debt		750		—			—			—			750
Accrued expenses and other current liabilities		26,243		(1,354	)		(2,112	)		—			22,777
Total current liabilities		60,474		24,733			1,499			6			86,712
Long-term debt, net of discount		631,550		—			—			—			631,550
Deferred tax liabilities and other liabilities		74,180		(3,049	)		28			—			71,159
Total liabilities		766,204		21,684			1,527			6			789,421
Total stockholder’s equity (deficit)		143,142		125,460			(7,734	)		(4,510	)		256,358
Total liabilities and stockholder’s equity (deficit)	$	909,346	$	147,144		$	(6,207	)	$	(4,504	)	$	1,045,779

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Condensed Consolidating Statement of Operations for the Three Months Ended June 30, 2007

	Guarantor
	Principal			Guarantor		Non-Guarantor
(in thousands)	Operations			Subsidiaries		Subsidiaries			Consolidated
Revenues:
Systems	$	29,767		$	12,101	$	1,818		$	43,686
Services		35,591			17,005		3,967			56,563
Total revenues		65,358			29,106		5,785			100,249
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		16,636			4,982		3,028			24,646
Services		14,660			4,205		1,906			20,771
Total cost of revenues		31,296			9,187		4,934			45,417
Gross profit		34,062			19,919		851			54,832
Operating expenses:
Sales and marketing		9,997			3,619		1,323			14,939
Product development		6,043			4,068		737			10,848
General and administrative		5,621			1,097		955			7,673
Depreciation and amortization		7,158			202		88			7,448
Acquisition-related costs		72			—		—			72
Restructuring costs		276			—		—			276
Total operating expenses		29,167			8,986		3,103			41,256
Operating income (loss)		4,895			10,933		(2,252	)		13,576
Interest expense		(11,771	)		—		(3	)		(11,774	)
Other income		168			4		155			327
Income (loss) before income taxes		(6,708	)		10,937		(2,100	)		2,129
Income tax expense		781			2		—			783
Net income (loss)	$	(7,489	)	$	10,935	$	(2,100	)	$	1,346

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Condensed Consolidating Statement of Operations for the Three Months Ended June 30, 2008.

	Guarantor
	Principal			Guarantor			Non-Guarantor
(in thousands)	Operations			Subsidiaries			Subsidiaries			Consolidated
Revenues:
Systems	$	18,909		$	17,428		$	4,103		$	40,440
Services		34,828			23,715			4,740			63,283
Total revenues		53,737			41,143			8,843			103,723
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		11,959			7,575			2,686			22,220
Services		13,981			6,405			2,145			22,531
Total cost of revenues		25,940			13,980			4,831			44,751
Gross profit		27,797			27,163			4,012			58,972
Operating expenses:
Sales and marketing		8,277			5,814			1,265			15,356
Product development		4,482			5,377			915			10,774
General and administrative		7,433			683			790			8,906
Depreciation and amortization		7,614			1,854			172			9,640
Acquisition related costs		238			26			—			264
Restructuring costs		1,085			—			551			1,636
Total operating expenses		29,129			13,754			3,693			46,576
Operating income (loss)		(1,332	)		13,409			319			12,396
Interest expense		(11,792	)		(5	)		(3	)		(11,800	)
Other income		18			45			406			469
Income (loss) before income taxes		(13,106	)		13,449			722			1,065
Income tax expense		232			3			1			236
Net income (loss)	$	(13,338	)	$	13,446		$	721		$	829

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Condensed Consolidating Statement of Operations for the Nine Months Ended June 30, 2007

	Guarantor
	Principal			Guarantor			Non-Guarantor
(in thousands)	Operations			Subsidiaries			Subsidiaries			Consolidated
Revenues:
Systems	$	88,990		$	39,212		$	4,768		$	132,970
Services		106,504			50,603			11,478			168,585
Total revenues		195,494			89,815			16,246			301,555
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		50,083			15,184			6,661			71,928
Services		42,294			12,369			6,086			60,749
Total cost of revenues		92,377			27,553			12,747			132,677
Gross profit		103,117			62,262			3,499			168,878
Operating expenses:
Sales and marketing		30,696			13,546			3,427			47,669
Product development		17,595			11,626			1,962			31,183
General and administrative		15,993			3,303			2,723			22,019
Depreciation and amortization		20,928			631			226			21,785
Acquisition related costs		72			—			—			72
Restructuring costs		563			—			—			563
Total operating expenses		85,847			29,106			8,338			123,291
Operating income (loss)		17,270			33,156			(4,839	)		45,587
Interest expense		(35,634	)		(2	)		(8	)		(35,644	)
Other income (expense), net		(157	)		216			727			786
Income (loss) before income taxes		(18,521	)		33,370			(4,120	)		10,729
Income tax expense		4,407			7			—			4,414
Net income (loss)	$	(22,928	)	$	33,363		$	(4,120	)	$	6,315

20

Condensed Consolidating Statement of Operations for the Nine Months Ended June 30, 2008

	Guarantor
	Principal			Guarantor			Non-Guarantor
(in thousands)	Operations			Subsidiaries			Subsidiaries			Consolidated
Revenues:
Systems	$	64,003		$	57,291		$	9,675		$	130,969
Services		105,815			70,501			13,440			189,756
Total revenues		169,818			127,792			23,115			320,725
Cost of revenues (exclusive of depreciation and amortization shown separately below):
Systems		39,625			24,285			9,529			73,439
Services		43,039			19,260			6,120			68,419
Total cost of revenues		82,664			43,545			15,649			141,858
Gross profit		87,154			84,247			7,466			178,867
Operating expenses:
Sales and marketing		27,028			17,281			3,574			47,883
Product development		14,624			16,516			2,770			33,910
General and administrative		21,774			2,138			2,268			26,180
Depreciation and amortization		22,417			4,607			537			27,561
Acquisition related costs		896			26			—			922
Restructuring costs		1,575			—			551			2,126
Total operating expenses		88,314			40,568			9,700			138,582
Operating income (loss)		(1,160	)		43,679			(2,234	)		40,285
Interest expense		(39,658	)		(5	)		(9	)		(39,672	)
Other income (expense), net		1,024			(575	)		1,093			1,542
Income (loss) before income taxes		(39,794	)		43,099			(1,150	)		2,155
Income tax expense		783			5			2			790
Net income (loss)	$	(40,577	)	$	43,094		$	(1,152	)	$	1,365

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Condensed Consolidating Statement of Cash Flows for the Nine Months Ended June 30, 2007

	Guarantor
	Principal			Guarantor			Non-Guarantor
(in thousands)	Operations			Subsidiaries			Subsidiaries			Consolidated
Net cash provided by (used in) operating activities	$	27,801		$	(4,572	)	$	8,808		$	32,037
Investing activities
Business acquisitions		—			—			(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	)
Purchase price adjustments		700			—			—			700
Net cash used in investing activities		(7,750	)		(323	)		(6,705	)		(14,778	)
Financing activities
Payment on long-term debt		(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

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended June 30, 2008

	Guarantor
	Principal			Guarantor			Non-Guarantor
(in thousands)	Operations			Subsidiaries			Subsidiaries			Consolidated
Net cash provided by operating activities	$	30,988		$	2,091		$	2,486		$	35,565
Investing activities
Purchase of property and equipment		(3,813	)		(150	)		(151	)		(4,114	)
Capitalized computer software costs and databases		(4,912	)		—			—			(4,912	)
Net cash used in investing activities		(8,725	)		(150	)		(151	)		(9,026	)
Financing activities
Repurchase of common stock		(13	)		—			—			(13	)
Payment on long-term debt		(563	)		—			—			(563	)
Debt issuance costs		(117	)		—			—			(117	)
Net cash used in financing activities		(693	)		—			—			(693	)
Net change in cash and cash equivalents		21,570			1,941			2,335			25,846
Cash and cash equivalents, beginning of period		24,862			4,154			4,363			33,379
Cash and cash equivalents, end of period	$	46,432		$	6,095		$	6,698		$	59,225

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

You should read the following discussion and analysis in conjunction with our financial statements and related notes included above. 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, including those set forth under “Risk Factors” included in our Annual Report onForm 10-K for the year ended September 30, 2007.

On May 2, 2006, Activant Group Inc. (formerly known as Lone Star Holding Corp.), or Activant Group, Lone Star Merger Corp., and Activant Solutions Holdings Inc., or Holdings, 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 Bravo, Inc. 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., continuing as the surviving corporation and as a wholly-owned subsidiary of Activant Group. These mergers are referred to in this report as the “mergers” and the transactions related to the mergers are referred to collectively in this report as the “transactions.” The transactions closed on May 2, 2006.

Overview

We are a provider of business management solutions serving small and medium-sized retail and wholesale distribution businesses. With over 25 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 automotive. For reporting purposes, we consider each of these vertical markets separate segments. The segments are determined in accordance with how our management views and evaluates our business and based on the criteria as outlined in FASB Statement No. 131,“Disclosures about Segments of an Enterprise and Related Information.”We previously considered our segments along product lines. Effective October 1, 2007, we reorganized our management and business structure along vertical markets and, accordingly, all periods have been reclassified to conform to the current period presentation. See Note 8 to the Unaudited Condensed Consolidated Financial Statements for additional information.

Our revenues are primarily derived from customers that operate in three vertical markets — Hardlines and Lumber, Wholesale Distribution, and Automotive. We also derive revenue from our Productivity Tools business, which we include in Other.

§	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.
§	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; 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.
§	The Automotive vertical market 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.
§	Other primarily consists of our Productivity Tools business, which is involved with software migration services and application development tools.

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 services 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 the following business management solutions:

§

Systems, which is comprised primarily of proprietary software applications; implementation services; training; forms and paper products; and third-party software, hardware and peripherals.

§

Services, which is comprised primarily of product support, content, and supply chain services. Product support services are comprised of customer support activities, including hardware, software and network support through our advice line, software updates, preventive and remedial on-site maintenance and depot repair services. Our content services are comprised of proprietary database and data management products such as our comprehensive electronic automotive parts

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and applications catalog and point-of-sale business analysis data. Supply chain services are comprised of connectivity services, e-commerce, networking and security monitoring management solutions. We generally provide our services on a subscription basis, and accordingly, revenues are generally recurring in nature.

Historical Results of Operations

Segment Information

A description of the businesses served by each of our reportable segments as well as selected financial data for each segment can be found in Note 8 to the Unaudited Condensed Consolidated Financial Statements. Future changes to our organizational structure or business, such as the recent change to vertical market segments from product segments, may result in changes to our reportable segments disclosed. The discussions below include the results of each of our segments for the three and nine months ended June 30, 2008 and 2007.

Because these segments reflect the manner in which our management reviews our business, they necessarily involve judgments that our management believes are reasonable in light of the circumstances under which they are made. These judgments may change over time or may be modified to reflect new facts or circumstances. Segments may also be changed or modified to reflect technologies and applications that are newly created, or that change over time, or other business conditions that evolve, each of which may result in reassessing specific segments and the elements included within each of those segments. Recent events, including changes in our senior management, may also affect the manner in which we present segments in the future.

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Revenues

Our Hardlines and Lumber, Wholesale Distribution and Automotive segments accounted for approximately 35%, 40% and 20%, respectively, of our revenues during the three months ended June 30, 2008. This compares to the three months ended June 30, 2007, where our Hardlines and Lumber, Wholesale Distribution, and Automotive segments accounted for approximately 42%, 29% and 22%, respectively, of our revenues. See Note 8 to the Unaudited Condensed Consolidated Financial Statements for further information on our segments, including a summary of our segment revenues and contribution margin.

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The following table sets forth, for the periods indicated, our segment revenues by business management solution and the variance thereof:

	Three Months Ended June 30,
(in thousands)	2007		2008		Variance $			Variance %
Hardlines and Lumber revenues:
Systems	$	23,226	$	16,162	$	(7,064	)		(30.4	)%
Services		19,308		20,181		873			4.5	%
Total Hardlines and Lumber revenues	$	42,534	$	36,343	$	(6,191	)		(14.6	)%
Wholesale Distribution revenues:
Systems	$	12,101	$	17,425	$	5,324			44.0	%
Services		17,004		23,747		6,743			39.7	%
Total Wholesale Distribution revenues	$	29,105	$	41,172	$	12,067			41.5	%
Automotive revenues:
Systems	$	3,783	$	2,964	$	(819	)		(21.6	)%
Services		18,485		17,831		(654	)		(3.5	)%
Total Automotive revenues	$	22,268	$	20,795	$	(1,473	)		(6.6	)%
Other revenues:
Systems	$	4,576	$	3,889	$	(687	)		(15.0	)%
Services		1,766		1,524		(242	)		(13.7	)%
Total Other revenues	$	6,342	$	5,413	$	(929	)		(14.6	)%
Total revenues:
Systems	$	43,686	$	40,440	$	(3,246	)		(7.4	)%
Services		56,563		63,283		6,720			11.9	%
Total revenues	$	100,249	$	103,723	$	3,474			3.5	%

Revenues were $103.7 million for the three months ended June 30, 2008 as compared to $100.2 million for the three months ended June 30, 2007. The increase in revenues over the comparable year ago period primarily reflects increased sales in our systems and services revenues in Wholesale Distribution as a result of our acquisition of Eclipse in August 2007, partially offset by declines in systems revenues in Hardlines and Lumber, Automotive and Other.

§	Hardlines and Lumber revenues— Hardlines and Lumber revenues decreased by $6.2 million, or 14.6%. The systems revenue decrease was attributed to a reduction in the volume of new system sales and the decrease in the sale of additional products and modules, primarily as a result of our co-op partners opening fewer new stores and exhibiting caution on making capital expenditures both due to the weak economy and a slowing retail environment. These decreases in systems revenue were partially offset by systems revenue attributable to the acquisition of Silk Systems. The services revenue increase relates primarily to the Silk Systems acquisition as well as price increases for support services.
§	Wholesale Distribution revenues— Wholesale Distribution revenues increased by $12.1 million, or 41.5%. The systems revenue increase was substantially attributable to the Eclipse acquisition. The services revenue increase was attributable to services revenue related to the Eclipse acquisition, as well as price increases for support services and a net increase in the support customer base.
§	Automotive revenues— Automotive revenues decreased by $1.5 million, or 6.6%. Systems revenue decreased primarily as a result of fewer hardware upgrades this year versus last year. Services revenue decreased primarily as a result of the known attrition of a major customer, General Parts Inc.
§	Other revenues— Other revenues decreased $0.9 million, or 14.6%, driven by lower systems sales primarily due to the extension of sales cycles as a result of a slow down in planned migrations due to Hewlett-Packard Company’s announcement to continue to support one of its legacy systems through 2010.

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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 gross margin as a percentage of revenues:

	Three Months Ended June 30,
(in thousands)	2007			2008			Variance
Cost of systems revenues	$	24,646		$	22,220		$	(2,426	)
Systems gross margins		43.6	%		45.1	%
Cost of services revenues	$	20,771		$	22,531		$	1,760
Services gross margins		63.3	%		64.4	%
Total cost of revenues	$	45,417		$	44,751		$	(666	)
Total gross margins		54.7	%		56.9	%

§	Cost of systems revenues and systems gross margins— Cost of systems revenues consists primarily of direct costs of software duplication, our logistics organization, cost of hardware, salary costs of professional services and installation headcount, royalty payments, and allocations of overhead expenses, including facility and IT costs.
	Cost of systems revenues decreased by $2.4 million primarily as a result of lower direct costs associated with lower systems revenues in Hardlines and Lumber, Automotive and Other partially offset by $2.6 million in costs attributable to Eclipse and Silk Systems revenues. System gross margins increased by 1.5 percentage points in the three months ended June 30, 2008 from the comparable period in 2007. The increase is primarily attributable to an increase in Wholesale Distribution margins as a result of sales of higher margin products in that segment constituting a greater percentage of our overall systems revenues and in Other (primarily Productivity Tools business) margins as a result of lower outside services costs, partially offset by lower gross margins in Hardlines and Lumber and Automotive as a result of the impact of relatively fixed costs on a lower revenue base, as well as reductions in average selling prices in those segments.
§	Cost of services revenues and services gross margins— Cost of services revenues primarily consist of material and direct labor associated with our advice line, material, labor and production costs associated with our automotive catalog, share-based payment expense and allocations of overhead expenses, including facility and IT costs. Generally, our services revenues have a higher gross margin than our systems revenues.
	Cost of services revenues increased by $1.8 million primarily as a result of costs associated with the acquisition of Eclipse and Silk Systems. Services gross margins increased by 1.1 percentage points in the three months ended June 30, 2008 from the comparable period in 2007, primarily as a result of higher services revenues due to both increases in the support customer base and price increases for customer support on a relatively fixed cost structure.

Total operating expenses

The following table sets forth, for the periods indicated, operating expenses and the variance thereof:

	Three Months Ended June 30,
(in thousands)	2007		2008		Variance $			Variance %
Sales and marketing	$	14,939	$	15,356	$	417			2.8	%
Product development		10,848		10,774		(74	)		(0.7	)%
General and administrative		7,673		8,906		1,233			16.1	%
Depreciation and amortization		7,448		9,640		2,192			29.4	%
Acquisition related costs		72		264		192			266.7	%
Restructuring costs		276		1,636		1,360			492.8	%
Total operating expenses	$	41,256	$	46,576	$	5,320			12.9	%

Total operating expenses increased by $5.3 million, or 12.9%, for the three months ended June 30, 2008 compared to the three months ended June 30, 2007. The increase was driven primarily by higher depreciation and amortization, fiscal 2008 restructuring activities, and overall general and administrative expenses.

§ Sales and marketing— Sales and marketing expense consists primarily of salaries and commissions for our sales forces, share-based payment expense, marketing expenses and an allocation of overhead expenses including facilities and IT costs. Sales and marketing expenses increased by $0.4 million, or 2.8%, for the three months ended June 30, 2008 compared to

26

	the three months ended June 30, 2007. The increase was primarily a result of $1.2 million of expenses associated with the acquisition of Eclipse and Silk Systems, partially offset by $0.9 million of lower commission, salary and bad debt expense in our pre-acquisition business.
§	Product development— Product development expense consists primarily of salaries, share-based payment expense, outside services and an allocation of overhead expenses, including facilities and IT costs. Product development expense remained flat for the three months ended June 30, 2008 compared to the three months ended June 30, 2007. This was because increased expenses of $1.9 million related to the Silk Systems and Eclipse acquisitions were substantially offset by lower software development expenses of $0.3 million, resulting from more of these costs being capitalized, $0.5 million lower third-party service costs, and $1.0 million of lower compensation expense.
§	General and administrative— General and administrative expense primarily consists of salaries and bonuses; share-based payment expense; facility costs; finance, human resource and legal services; IT support and telecommunication costs. General and administrative expenses increased by $1.2 million, or 16.1%, for the three months ended June 30, 2008 compared to the three months ended June 30, 2007. The increase is primarily due to $1.9 million of costs related to strategic initiatives and $0.7 million of accounting and legal costs partially offset by $0.7 million lower variable compensation expense and $0.4 million lower share-based compensation expense.
§	Depreciation and amortization— Depreciation and amortization expense consists of depreciation of our fixed assets and amortization of our purchased intangible assets. We do not allocate depreciation and amortization to our segments. Depreciation and amortization expense was $9.6 million for the three months ended June 30, 2008 compared to $7.4 million for the three months ended June 30, 2007. The increase resulted primarily from the amortization of the additional $38.6 million of intangible assets associated with the acquisitions of Silk Systems and Eclipse.
§	Acquisition related costs— Acquisition related costs for the three months ended June 30, 2008 were $0.3 million, which primarily included consulting fees and other professional services incurred in connection with systems integration activities related to Eclipse compared to $0.1 million during the three months ended June 30, 2007.
§	Restructuring costs— During the three months ended June 30, 2008, our management approved additional restructuring actions primarily related to eliminating certain additional employee positions with the intent to streamline and focus our operations and more properly align our cost structure with our projected revenue streams. In accordance with SFAS No. 146, we recorded a charge of approximately $1.6 million related to these actions.
§	Interest expense— Interest expense for both the three months ended June 30, 2008 and 2007 was $11.8 million. Additional interest expense associated with incremental borrowings to fund the acquisition of Eclipse in August 2007 was substantially offset by lower interest rates on our unhedged floating rate debt.
§	Other income, net— Other income primarily consists of interest income, foreign currency gains or losses and gains or losses on marketable securities. Other income, net increased during the three months ended June 30, 2008 over the comparable prior year periods primarily due to interest income on higher average cash balances.
§	Income tax expense— We recognized income tax expense of $0.2 million, or 22.2% of pre-tax income, for the three months ended June 30, 2008 compared to an income tax expense of $0.8 million, or 36.8% of pre-tax income, in the comparable period in 2007. The decrease in income tax expense is due to a reduction in the estimated effective tax rate for fiscal year 2008 resulting in the year-to-date impact being recognized entirely in the quarter, as well as true-up differences between tax expense estimated in a prior period compared to actual taxes from recently filed tax returns.

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Contribution margin

Segment contribution margin is a non-GAAP financial measure that includes all segment revenues less the related cost of sales, direct marketing, sales expense and product development expenses. A significant portion of each segment’s expenses arises from shared services and centrally managed infrastructure support costs that we allocate to the segments to determine segment contribution margin. These expenses primarily include IT services, facilities and telecommunications costs. We use contribution margin, in part, to evaluate the performance of, and to allocate resources to, each of the segments. Certain costs and operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include marketing costs other than direct marketing, general and administrative costs, such as legal and finance, share-based payment expense, acquisition-related costs, depreciation and amortization of purchased intangible assets, restructuring costs, interest expense and other income.

	Three Months Ended June 30,
(in thousands)	2007		2008		Variance $			Variance %
Hardlines and Lumber	$	10,931	$	9,621	$	(1,310	)		(12.0	)%
Wholesale Distribution		10,551		15,820		5,269			49.9	%
Automotive		7,358		6,610		(748	)		(10.2	)%
Other		877		1,318		441			50.3	%
Total contribution margin	$	29,717	$	33,369	$	3,652			12.3	%

There are significant judgments our management makes with respect to the direct and indirect allocation of costs that may affect the calculation of contribution margins. While our management believes these and other related judgments are reasonable and appropriate, others could assess such matters in ways different than our company’s management.

The exclusion of costs not considered directly allocable to individual business segments results in contribution margin not taking into account substantial costs of doing business. We use contribution margin, in part, to evaluate the performance of, and allocate resources to, each of the segments. While our management may consider contribution margin to be an important measure of comparative operating performance, this measure should be considered in addition to, but not as a substitute for, net income, cash flow and other measures of financial performance prepared in accordance with GAAP that are otherwise presented in our financial statements. In addition, our calculation of contribution margin may be different from the calculation used by other companies and, therefore, comparability may be affected.

§	Hardlines and Lumber contribution margin— The contribution margin for Hardlines and Lumber decreased by $1.3 million, primarily as a result of $7.1 million in lower system revenues which drove lower gross margins. Gross margin declines were partially offset by lower sales and marketing and product development expenses. Sales and marketing expenses decreased as a result of lower salary, commission and bonus expense, partially offset by the increases in Silk Systems sales expenses. Product development expenses decreased primarily as a result of lower salary and bonus expense and lower software development expenses resulting from more of these costs being capitalized.
§	Wholesale Distribution contribution margin— The $5.3 million increase in contribution margin for Wholesale Distribution is primarily a result of revenues and gross margins associated with the acquisition of Eclipse as well as customer support price increases and an increase in the support customer base. These increases were partially offset by increases in sales and marketing and product development expenses also associated with the acquisition of Eclipse.
§	Automotive contribution margin— The $0.7 million decrease in contribution margin for Automotive was primarily due to lower revenues and gross margin associated with the known attrition of a major customer, General Parts, Inc., and lower hardware sales partially offset by lower product development expenses. Product development expenses decreased primarily as a result of lower salary and bonus expense.
§	Other contribution margin— The contribution margin for Other increased by $0.4 million, primarily due to lower outside services costs.

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Nine Months Ended June 30, 2008 Compared to Nine Months Ended June 30, 2007

Revenues

Our Hardlines and Lumber, Wholesale Distribution, and Automotive segments accounted for approximately 35%, 40% and 20%, respectively, of our revenues during the nine months ended June 30, 2008. This compares to the nine months ended June 30, 2007, where our Hardlines and Lumber, Wholesale Distribution, and Automotive segments accounted for approximately 43%, 30% and 22%, respectively, of our revenues. See Note 8 to the Unaudited Condensed Consolidated Financial Statements for further information on our segments, including a summary of our segment revenues and contribution margin.

The following table sets forth, for the periods indicated, our segment revenues by business management solution and the variance thereof:

	Nine Months Ended June 30,
(in thousands)	2007		2008		Variance $			Variance %
Hardlines and Lumber revenues:
Systems	$	71,733	$	53,009	$	(18,724	)		(26.1	)%
Services		56,739		60,234		3,495			6.2	%
Total Hardlines and Lumber revenues	$	128,472	$	113,243	$	(15,229	)		(11.9	)%
Wholesale Distribution revenues:
Systems	$	39,213	$	56,459	$	17,246			44.0	%
Services		50,601		70,597		19,996			39.5	%
Total Wholesale Distribution revenues	$	89,814	$	127,056	$	37,242			41.5	%
Automotive revenues:
Systems	$	11,439	$	10,713	$	(726	)		(6.3	)%
Services		56,147		54,304		(1,843	)		(3.3	)%
Total Automotive revenues	$	67,586	$	65,017	$	(2,569	)		(3.8	)%
Other revenues:
Systems	$	10,585	$	10,788	$	203			1.9	%
Services		5,098		4,621		(477	)		(9.4	)%
Total Other revenues	$	15,683	$	15,409	$	(274	)		(1.7	)%
Total revenues:
Systems	$	132,970	$	130,969	$	(2,001	)		(1.5	)%
Services		168,585		189,756		21,171			12.6	%
Total revenues	$	301,555	$	320,725	$	19,170			6.4	%

Revenues were $320.7 million for the nine months ended June 30, 2008 as compared to $301.6 million for the nine months ended June 30, 2007. The increase in revenues over the comparable year ago period primarily reflects increased sales in our systems and services revenues in Wholesale Distribution as a result of our acquisition of Eclipse in August 2007, partially offset by declines in systems revenues in Hardlines and Lumber and total revenues in Automotive.

§

Hardlines and Lumber revenues— Hardlines and Lumber revenues decreased by $15.2 million, or 11.9%. The systems revenue decrease was attributed to a reduction in the volume of new system sales and the decrease in the sale of additional products and modules, primarily as a result of our co-op partners opening fewer new stores and exhibiting caution on making capital expenditures both due to the weak economy and a slowing retail environment. In addition, one of our co-op partners substantially completed the migration from their legacy systems to Activant’s solution in fiscal 2007. These decreases in systems revenue were partially offset by systems revenue attributable to the acquisition of Silk Systems. The services revenue increase relates primarily to the Silk Systems acquisition as well as price increases for support services.

§

Wholesale Distribution revenues— Wholesale Distribution revenues increased by $37.2 million, or 41.5%. The systems revenue increase was substantially attributable to the Eclipse acquisition. The services revenue increase was related to services revenue attributable to the Eclipse acquisition, as well as price increases for support services and a net increase in the support customer base.

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§	Automotive revenues— Automotive revenues decreased by $2.6 million, or 3.8%. Systems revenue decreased primarily as a result of fewer hardware upgrades this year versus last year. Services revenue decreased primarily as a result of the anticipated attrition of a major customer, General Parts Inc.
§	Other revenues— Other revenues decreased by $0.3 million, or 1.7%, driven by lower systems sales primarily due to the extension of sales cycles as a result of a slow down in planned migrations due to Hewlett-Packard Company's announcement to continue to support one of its legacy platforms through 2010.

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

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

	Nine Months Ended June 30,
(in thousands)	2007			2008			Variance
Cost of systems revenues	$	71,928		$	73,439		$	1,511
Systems gross margins		45.9	%		43.9	%
Cost of services revenues	$	60,749		$	68,419		$	7,670
Services gross margins		64.0	%		63.9	%
Total cost of revenues	$	132,677		$	141,858		$	9,181
Total gross margins		56.0	%		55.8	%

§	Cost of systems revenues and systems gross margins— Cost of systems revenues consists primarily of direct costs of software duplication, our logistics organization, cost of hardware, salary costs of professional services and installation headcount, royalty payments, and allocations of overhead expenses, including facility and IT costs.
	Cost of systems revenues increased by $1.5 million primarily as a result of costs attributable to the Eclipse and Silk Systems revenues, partially offset by lower direct costs associated with lower systems revenues in Hardlines and Lumber and Automotive. System gross margins decreased by 2.0 percentage points in the nine months ended June 30, 2008 from the comparable period last year. The decrease is primarily attributable to the general economic conditions in the Hardlines and Lumber market causing reductions in the base-business system sales volume and the associated impact of fixed costs on the lower revenue base, as well as reductions in average selling prices in this segment. In addition, sales of our lower margin products in our Wholesale Distribution segment constituted a greater percentage of our overall systems revenues during the nine months ended June 30, 2008, which also adversely affected the systems gross margin.
§	Cost of services revenues and services gross margins— Cost of services revenues primarily consist of material and direct labor associated with our advice line, material, labor and production costs associated with our automotive catalog, share-based payment expense and allocations of overhead expenses, including facility and IT costs. Generally, our services revenues have a higher gross margin than our systems revenues.
	Cost of services revenues increased by $7.7 million primarily as a result of costs associated with the acquisition of Eclipse and Silk Systems. Services gross margins were essentially flat with the year-ago period.

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Total operating expenses

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

	Nine Months Ended June 30,
(in thousands)	2007		2008		Variance $		Variance %
Sales and marketing	$	47,669	$	47,883	$	214		0.4	%
Product development		31,183		33,910		2,727		8.7	%
General and administrative expense		22,019		26,180		4,161		18.9	%
Depreciation and amortization		21,785		27,561		5,776		26.5	%
Acquisition related costs		72		922		850		1180.6	%
Restructuring costs		563		2,126		1,563		277.6	%
Total Operating expenses	$	123,291	$	138,582	$	15,291		12.4	%

Total operating expenses increased by $15.3 million, or 12.4%, for the nine months ended June 30, 2008 compared to the nine months ended June 30, 2007. The increase was driven primarily by virtually all major expense categories (except sales and marketing) increasing at rates greater than overall revenue growth.

§	Sales and marketing— Sales and marketing expense consists primarily of salaries and commissions for our sales forces, share-based payment expense, marketing expenses and an allocation of overhead expenses including facilities and IT costs. Sales and marketing expenses increased by $0.2 million, or 0.4%, for the nine months ended June 30, 2008 compared to the nine months ended June 30, 2007. The increase was primarily a result of $3.2 million of expenses associated with the acquisition of Eclipse and Silk Systems partially offset by $1.6 million of lower salary, bonus and commission related expense of our pre-acquisition business, $1.0 million lower bad debt expense and $0.6 million lower travel expenses.
§	Product development— Product development expense consists primarily of salaries, share-based payment expense, outside services and an allocation of overhead expenses, including facilities and IT costs. Product development expense increased by $2.7 million, or 8.7%, for the nine months ended June 30, 2008 compared to the nine months ended June 30, 2007. The increase is primarily due to $5.7 million of expenses related to Silk Systems and Eclipse, partially offset by lower software development expenses of $0.8 million resulting from more of these costs being capitalized, $0.6 million lower third-party service costs and $1.3 million of lower compensation expense related to our pre-acquisition business.
§	General and administrative— General and administrative expense primarily consists of salaries and bonuses; share-based payment expense; facility costs; finance, human resource and legal services; IT support and telecommunication costs. General and administrative expenses increased by $4.2 million, or 18.9%, for the nine months ended June 30, 2008 compared to the nine months ended June 30, 2007. The increase is primarily due to $3.5 million of costs related to strategic initiatives and $1.7 million higher salary costs as we continue to build our management team, partially offset by $1.5 million lower variable compensation expense.
§	Depreciation and amortization— Depreciation and amortization expense consists of depreciation of our fixed assets and amortization of our purchased intangible assets. Depreciation and amortization expense is not allocated to our segments. Depreciation and amortization expense was $27.6 million for the nine months ended June 30, 2008 compared to $21.8 million for the nine months ended June 30, 2007. The increase resulted primarily from the amortization of the additional $38.6 million of intangible assets associated with the acquisitions of Silk Systems and Eclipse.
§	Acquisition related costs— Acquisition related costs for the nine months ended June 30, 2008 were $0.9 million, which primarily included consulting fees and other professional services incurred in connection with systems integration activities with respect to Eclipse compared to $0.1 million during the nine months ended June 30, 2007.
§	Restructuring costs— Restructuring costs for the nine months ended June 30, 2008 of $2.1 million primarily related to closing costs of redundant facilities and severance costs related to eliminating certain employee positions and consolidation of administrative functions. Restructuring costs for the nine months ended June 30, 2007 of $0.6 million primarily related to costs associated with our moving corporate headquarters to Livermore, California in fiscal 2007.
§	Interest expense— Interest expense for the nine months ended June 30, 2008 was $39.7 million compared to $35.6 million for the nine months ended June 30, 2007, an increase of $4.1 million, or 11.5%. The increase is primarily a result of additional borrowings of $95.0 million to fund the acquisition of Eclipse in August 2007, partially offset by a third quarter decline in interest rates on our unhedged floating rate debt.

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§

Other income, net— Other income primarily consists of interest income, foreign currency gains or losses, and gains or losses on marketable securities. Other income, net increased during the nine months ended June 30, 2008 over the comparable prior year period primarily due to interest income on higher average cash balances.

§

Income tax expense— We recognized an income tax expense of approximately $0.8 million, or 36.7% of pre-tax income, for the nine months ended June 30, 2008 compared to an income tax expense of $4.4 million, or 41.1% of pre-tax income, in the comparable period in 2007. The decrease in income tax expense is due to a reduction in the estimated effective tax rate for fiscal 2008 and due to true-up differences between tax expense estimated in a prior period compared to actual taxes from recently filed tax returns.

Contribution margin

Segment contribution margin is a non-GAAP financial measure that includes all segment revenues less the related cost of sales, direct marketing, sales expense and product development expenses. A significant portion of each segment’s expenses arises from shared services and centrally managed infrastructure support costs that we allocate to the segments to determine segment contribution margin. These expenses primarily include IT services, facilities and telecommunications costs. We use contribution margin, in part, to evaluate the performance of, and to allocate resources to, each of the segments. Certain costs and operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include marketing costs other than direct marketing, general and administrative costs, such as legal and finance, share-based payment expense, acquisition-related costs, depreciation and amortization of purchased intangible assets, restructuring costs, interest expense and other income.

	Nine Months Ended June 30,
(in thousands)	2007		2008		Variance $			Variance %
Hardlines and Lumber	$	34,091	$	26,754	$	(7,337	)		(21.5	)%
Wholesale Distribution		31,779		48,343		16,564			52.1	%
Automotive		24,137		22,029		(2,108	)		(8.7	)%
Other		2,168		2,002		(166	)		(7.6	)%
Total Contribution Margin	$	92,175	$	99,128	$	6,953			7.5	%

§	Hardlines and Lumber contribution margin— The contribution margin for Hardlines and Lumber decreased by $7.3 million, as a result of $18.7 million in lower system revenues which drove lower gross margins. Gross margin declines were partially offset by lower sales and marketing and product development expenses. Sales and marketing expenses decreased as a result of lower salary, commission and bonus expense, partially offset by the increases in Silk Systems sales expenses. Product development expenses decreased as a result of lower salary and bonus expense and lower software development expenses resulting from more of these costs being capitalized.
§	Wholesale Distribution contribution margin— The $16.6 million increase in contribution margin for Wholesale Distribution is primarily a result of the acquisition of Eclipse in August 2007, customer support price increases and increases to the support customer base, as well as lower sales and marketing costs, partially offset by lower gross margins in systems revenues.
§	Automotive contribution margin— The $2.1 million decrease in contribution margin for Automotive was primarily due to lower revenues and gross margin associated with the known attrition of a major customer, General Parts, Inc., and lower hardware sales partially offset by lower product development expenses. Product development expenses decreased primarily as a result of lower salary and bonus expense.
§	Other contribution margin—The $0.2 million decrease in contribution margin for Other was primarily a result of lower gross margins in systems revenues.

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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.

Our cash and cash equivalents balance at June 30, 2008 was $59.2 million. As of June 30, 2008, we had $632.3 million in outstanding indebtedness comprised primarily of $437.3 million aggregate principal amount of a senior secured term loans (including an incremental term loan) pursuant to our senior secured credit agreement, $20.0 million aggregate principal amount of loans pursuant to our revolving credit facility and $175.0 million aggregate principal amount of senior subordinated notes due 2016.

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 payable on May 2, 2013 and (ii) a five-year revolving credit facility that permits loans in an aggregate amount of up to $40.0 million, which includes a $5.0 million 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. Proceeds of the term loan on the initial borrowing date 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. During the year ended September 30, 2006, we repaid $2.0 million in principal towards the $390.0 million term loan per the amortization schedule. During the year ended September 30, 2007, we repaid $25.2 million in principal towards the $390.0 million term loan (which reduced the future unamortized principal payments due per the amortization schedule) and for the nine months ended June 30, 2008, we have repaid approximately $0.6 million in principal. In addition, subject to certain terms and conditions, the senior secured credit agreement provided for one or more uncommitted incremental term loan and/or revolving credit facilities in an aggregate amount not to exceed $75.0 million. In August 2007, we borrowed the $75.0 million incremental term loan, which matures on May 2, 2013, as well as $20.0 million of the revolving credit facility. These amounts were used to partially finance the acquisition of Eclipse.

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 plus 1/2 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:

• 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;

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

• under the incremental term loan, 1.5% with respect to base rate borrowings and 2.50% with respect to Eurodollar rate borrowings.

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. In November 2007, one of the interest rate swaps with a notional amount of $25.0 million matured. As of June 30, 2008, we had outstanding interest rate swaps with a notional amount of $220.0 million. We believe any ineffectiveness of our interest rate swaps is immaterial..

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, 2008. We must also pay customary letter of credit fees for issued and outstanding letters of credit.

On April 27, 2006, we issued $175.0 million aggregate principal amount of 9.5% senior subordinated notes due May 2, 2016. Each of our domestic subsidiaries, as primary obligors and not 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 are senior in right of payment to all of our existing and future subordinated indebtedness.

We believe that cash flows from operations, together with amounts available under the senior secured credit agreement, 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

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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, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted. We expect to fund future acquisitions primarily with cash flow from operations and borrowings, including borrowing from amounts available under our senior secured credit agreement 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 June30, 2008 Compared to Nine Months Ended June 30, 2007

Our net cash provided by operating activities for the nine months ended June 30, 2008 and June 30, 2007 was $35.6 million and $32.0 million, respectively. The increase in cash flow provided by operating activities for the nine months ended June 30, 2008 compared to the nine months ended June 30, 2007 was primarily due to changes in operating assets and liabilities compared to the prior period, primarily in the accounts receivable and accrued expenses and other liabilities balances partially offset by lower net income and a change in accounts payable.

Our investing activities used net cash of $9.0 million during the nine months ended June 30, 2008 and $14.8 million during the nine months ended June 30, 2007. The current year period was $5.8 million lower than the prior year primarily due to the $6.5 million used for the purchase of Silk Systems during the nine months ended June 30, 2007. We purchased property and equipment of $4.1 million and $5.0 million for the nine months ended June 30, 2008 and 2007, respectively.

Our financing activities used cash of $0.7 million and $28.1 million for the nine months ended June 30, 2008 and 2007, respectively. The decrease in cash used in financing activities for the nine months ended June 30, 2008 compared to the nine months ended June 30, 2007 was primarily due to a prepayment of $27.0 million in principal of our long-term debt in the prior period.

We and our subsidiaries, affiliates or significant shareholders may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities (including any publicly issued debt), in privately negotiated or open market transactions, by tender offer or otherwise.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Risk

At June 30, 2008, we had $437.3 million aggregate principal amount outstanding of term loans due 2013, $175.0 million of 9.50% senior subordinated notes due 2016 and $20.0 million borrowings under our revolving credit facility due 2011. The term loans and the revolving credit facility bear 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. In November 2007, one of the interest rate swaps with a notional amount of $25.0 million matured. As of June 30, 2008, we had outstanding interest rate swaps with a notional amount of $220.0 million. Giving effect to the interest rate swap, a 0.25% increase in floating rates would increase our interest expense by $0.6 million annually. See Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements, which is incorporated herein by reference.

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, will attempt to reduce our exposure through hedging. At June 30, 2008, we had no foreign currency contracts outstanding.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer , 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 the evaluation of our disclosure controls and procedures as described above, our CEO and CFO have concluded that as of June 30, 2008 our disclosure controls and procedures were effective.

Internal Controls Over Financial Reporting

During our fiscal quarter ended June 30, 2008, 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.

Limitations on Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can only provide reasonable, not absolute, assurances that the objectives of the control system are met. The design of a control system reflects resource constraints, and the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, have been or will be detected.

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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.

Our Annual Report on Form 10-K for the year ended September 30, 2007 includes a detailed discussion of our risk factors under the heading “Part I, Item 1A. Risk Factors.” Set forth below are certain changes from the risk factors previously disclosed in our Annual Report on Form 10-K. You should carefully consider the risk factors discussed in this report and our Annual Report on Form 10-K as well as the other information in this report. If any of the following risks or the risks discussed in the Annual Report on Form 10-K occur, our business, financial condition, results of operations or future growth could suffer.

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 a preferred and/or a recommended business management solutions provider for the members of the True Value Company 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. In June 2008, our exclusive systems and services marketing agreement with Ace Hardware Corp. (“Ace”) expired. Ace announced to its members that Activant will continue to be a preferred option for its members and that our system will continue to be recommended as a retail store system. We continue to exclusively support members of Ace that currently use our systems. However, going forward we may not be the only recommended system provider for Ace’s new members or members electing to transition to a new system provider. The loss or diminishment of key relationships, such as this, in whole or in part, could materially adversely impact our business.

Our future success is substantially dependent on the continued service of our key management personnel.

Our success and ability to implement our business strategy, including integrating acquisitions, depends upon the continued contributions of our management team and others, including our technical employees. The loss of the services of our senior management, particularly Pervez A. Qureshi, our Chief Executive Officer, could make it more difficult to successfully operate our business and achieve our business goals. We may also be unable retain existing management, attract other qualified managerial, technical, sales and client support personnel that are critical to our success, which could result in harm to our customer and employee relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs. In the past two years, we have experienced significant turnover in the roles of chief financial officer, controller and other key positions in our finance and accounting departments. There is significant competition for such personnel, and there can be no assurance that we will be able to attract and/or retain suitably qualified employees. This turnover and inability to hire and retain qualified personnel could adversely impact our results of operations and business.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

The exhibits to this report are as follows:

Exhibit
No.	Description
31.1*	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Pervez A. 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 A. 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. This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.

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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 8^th day of August 2008.

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

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