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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K/A
                                  AMENDMENT NO. 1

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

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2004
                                              --------------

         [ ]      TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
                  FROM _________ TO _________.

Commission file number 0-23049
                       -------

                              ISLAND PACIFIC, INC.
                              --------------------

                     (FORMERLY KNOWN AS SVI SOLUTIONS, INC.)
                     ---------------------------------------
             (Exact Name of Registrant as specified in its charter)

                 DELAWARE                                 33-0896617
--------------------------------------------  ----------------------------------
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)               Identification Number)

19800 MACARTHUR BLVD, SUITE 1200, IRVINE, CA                92612
--------------------------------------------  ----------------------------------
  (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code:  (949) 476-2212
                                                     --------------

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

       Title of each class            Name of each exchange on which registered
 Common Stock, $0.0001 Par Value               American Stock Exchange
 -------------------------------               -----------------------

Securities registered under Section 12(g) of the Act:  None

Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

Yes [ ]  No [X]

The aggregate market value of the registrant's voting and non-voting common
stock held by non-affiliates, based on the closing sale price of the
registrant's common stock on September 30 2003 as reported on the American Stock
Exchange, was approximately $65.5 million. Excludes shares of common stock held
by directors, officers and each person who holds 5% or more of the registrant's
common stock.

The number of shares outstanding of the registrant's Common Stock was 53,974,532
on June 1, 2004.

                       DOCUMENTS INCORPORATED BY REFERENCE
None.

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                                 EXPLANATORY NOTE

         This annual report on Form 10-K/A is an amendment to the Form 10-K
filed by the Registrant on June 29, 2004.

         This annual report on Form 10-K/A is being filed to reflect the
restatement of the Registrant's Consolidated Financial Statements (the
"Restatement"). The Restatement reflects the following:

         1.       Reversal of revenue recognized on an one-time sale of software
                  technology rights,
         2.       Presentation of total revenues and cost of revenues as product
                  and services revenues and corresponding costs of revenues,
         3.       Reclassification of amortization expense of software products
                  from depreciation and amortization expense to cost of product
                  revenue,
         4.       Reversal of a purchase of software technology ("Software
                  Technology") and related amortization,
         5.       Accrual of a royalty liability and related recognition of
                  royalty fees pursuant to the purchase agreement of Software
                  Technology,
         6.       Recognition of amortization of debt discount on the March '03,
                  April '03, May '03 and Toys "R" Us convertible debt as
                  interest expense,
         7.       Capitalization and amortization of beneficial conversion
                  interest charges related to the March '03, April '03, May '03
                  and March '04 convertible debentures,
         8.       Capitalization of legal fees related to the acquisitions of
                  Page Digital Incorporated and Retail Technologies
                  International, Inc.,
         9.       Reclassification of impairment of prepaid development expense
                  from other expense to selling, general and administrative
                  expense, and
         10.      Reclassification of a gain on debt forgiveness from
                  extraordinary item to other income.

         The Company will not file an amended Form 10-K/A for the year ended
March 31, 2003 due to the immateriality of adjustments. However, certain
disclosures that relate to and appear in Form 10-K/A for the year ended March
31, 2003 have been updated in the restated filings.

         THIS REPORT DOES NOT OTHERWISE ATTEMPT TO UPDATE THE INFORMATION
         PROVIDED HEREIN BEYOND THE ORIGINAL FILING DATE.




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<TABLE>
                                                   TABLE OF CONTENTS
<CAPTION>
<S>                                                                                                                  <C>
PART I
         Item 1.  Business............................................................................................2
         Item 2.  Properties.........................................................................................16
         Item 3.  Legal Proceedings..................................................................................17
         Item 4.  Submission of Matters to a Vote of Security Holders................................................18

PART II
         Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters..............................18
         Item 6.  Selected Financial Data............................................................................20
         Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations..............21
                  Business Risks.....................................................................................40
         Item 7A. Quantitative and Qualitative Disclosures About Market Risk.........................................51
         Item 8.  Financial Statements and Supplementary Data........................................................51
         Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosures..............51
         Item 9A. Controls and Procedures............................................................................52

PART III
         Item 10. Directors and Executive Officers of the Registrant.................................................52
         Item 11. Executive Compensation.............................................................................55
         Item 12. Security Ownership of Certain Beneficial Owners and Management.....................................58
         Item 13. Certain Relationship and Related Transactions......................................................61
         Item 14. Principal Accountant Fees and Services.............................................................65

PART IV
         Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................66
                  Signatures.........................................................................................72
                  Certifications.....................................................................................
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INTRODUCTORY NOTE


         THE ANNUAL REPORT ON FORM 10-K/A CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934 AND THE COMPANY INTENDS THAT CERTAIN
MATTER DISCUSSED IN THIS REPORT ARE "FORWARD-LOOKING STATEMENTS" INTENDED TO
QUALIFY FOR THE SAFE HARBOR FROM LIABILITY ESTABLISHED BY THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS CAN GENERALLY BE
IDENTIFIED BY THE CONTEXT OF THE STATEMENT WHICH MAY INCLUDE WORDS SUCH AS THE
COMPANY ("ISLAND PACIFIC", "IPI", "WE" OR "US") "BELIEVES", "ANTICIPATES",
"EXPECTS", "FORECASTS", "ESTIMATES" OR OTHER WORDS SIMILAR MEANING AND CONTEXT.
SIMILARLY, STATEMENTS THAT DESCRIBE FUTURE PLANS, OBJECTIVES, OUTLOOKS, TARGETS,
MODELS, OR GOALS ARE ALSO DEEMED FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE FORECASTED OR
ANTICIPATED AS OF THE DATE OF THIS REPORT. CERTAIN OF SUCH RISKS AND
UNCERTAINTIES ARE DESCRIBED IN CLOSE PROXIMITY TO SUCH STATEMENTS AND ELSEWHERE
IN THIS REPORT, INCLUDING ITEM 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS." STAKEHOLDERS, POTENTIAL
INVESTORS AND OTHER READERS ARE URGED TO CONSIDER THESE FACTORS IN EVALUATING
THE FORWARD-LOOKING STATEMENTS AND ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
SUCH FORWARD-LOOKING STATEMENTS OR CONSTRUE SUCH STATEMENTS TO BE A
REPRESENTATION BY US THAT OUR OBJECTIVES OR PLANS WILL BE ACHIEVED. THE
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT ARE MADE ONLY AS OF THE DATE
OF THIS REPORT, AND WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE SUCH
FORWARD-LOOKING STATEMENTS TO REFLECT SUBSEQUENT EVENTS OR CIRCUMSTANCES.


ITEM 1.  BUSINESS

GENERAL

         We are a provider of software solutions and services to the retail
industry. We provide solutions that help retailers understand, create, manage
and fulfill consumer demand. The Company is organized in three strategic
business units - Retail Management Solutions, Store Solutions and Multi-channel
Retail Solutions.

         Our solutions and services have been developed specifically to meet the
needs of the retail industry. Our solutions help retailers improve the
efficiency and effectiveness of their operations and build stronger, longer
lasting relationships with their customers.

         We market our software solutions through direct and indirect sales
channels primarily to retailers who sell to their customers through traditional
retail stores, catalogs and/or Internet-enabled storefronts. To date, we have
licensed our solutions to more than 200 retailers across a variety of retail
sectors.

ISLAND PACIFIC

         Historically, retailers have relied upon custom-built systems, often
self-developed, to manage business processes and business information with both
trading partners and customers. These legacy systems are typically built on
1960s business models and 1970s technology. They are not Internet-enabled, and
do not permit collaboration among a retailer's customers, partners, suppliers
and other members of the supply/demand chain. Moreover, they reflect the
thinking of a seller's market.

         Over the past few years, retailers have begun to purchase packaged
solutions designed specifically for the retail industry. Most of these systems
are very expensive to license, and very expensive, time-consuming and difficult
to implement. They have been primarily positioned to the largest companies, who
have enormous amounts of managerial, technical and financial resources at their
disposal - organizations for which distraction and mistakes are affordable.

         These solutions ignore the needs of the small to medium sized
retailers, who have many of the same needs and face many of the same challenges
as do the larger retailers, but lack the managerial, financial and technological
capacity of the larger retailers.

         Our solutions serve the small to medium sized market.

         All retailers today face the challenge of operating in a very
competitive environment, an environment that can be best described as
over-stored and over-homogenized -- an environment in which power has shifted
from the seller to the buyer.

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         As retailers expand their businesses to include the Internet, catalog,
kiosk and other distribution channels, the complexity of managing inventory and
meeting customer demands places tremendous pressure on their business processes
and their technology infrastructure.

         To meet an ever more mobile and demanding consumer's expectations,
retailers need to deliver on the customer's terms. This means having the right
product, at the right time and in the right place across multi-channel touch
points. To do this, retailers need valuable consumer insights, intelligence on
external factors that shape consumer response such as how the weather, the
economy and changing consumer attitudes will affect future buying patterns. This
intelligence, augmented by powerful communications, comprehensive loss
prevention, strong forecasting, planning, assortment planning, allocation, event
planning, replenishment and merchandising functions are critical to profitably
achieve this goal. These represent the content of our product offering.

         Small to medium sized retailers need a cost-effective, easily
installed, affordable, comprehensive, integrated software infrastructure that
spans supplier to consumer and gives the retailer visibility, flexibility and
control of all business processes to meet all competitive challenges.

         We believe a market opportunity exists to provide these retailers with
a software solution that is designed specifically for their needs. This solution
should be easy-to-use, leverage a retailer's existing investments in information
technology and be sufficiently flexible to meet the specific needs of a broad
range of retail sectors, such as fashion, hard-lines, mass merchandise or food
and drug.

         We have developed and deployed software solutions that enable retailers
to manage the entire scope of their operations. These operations include
point-of-sale, customer relationship management, vendor relationship management,
merchandising, demand chain management, planning, and forecasting.

         Key areas, which differentiate our software solutions, include:

         o        VALUE - Our integrated and modular architecture helps
                  retailers meet return on investment objectives by allowing
                  them to implement the most critical and valuable applications
                  first. This modular architecture decreases migration path risk
                  for the replacement of legacy systems and increases the
                  probability of an on-time, on-budget implementation project.

         o        PROVEN - We are a leading provider of retail infrastructure
                  software and services. We understand the complex needs of
                  retailers and have designed our solutions specifically for the
                  retail industry. We provide certain software products and
                  services infrastructure for retailers with combined revenues
                  of over $200 billion annually.

         o        SCALABLE - Our solutions are engineered to provide scalability
                  to efficiently handle large volumes of transactions and users.
                  Our solutions work in environments that span from one to five
                  thousand stores.

         o        INNOVATIVE - Our partnerships and our solutions include some
                  of the most advanced technologies available to retailers.

STRATEGY

         Our mission is to provide the small to medium sized retailer all the
intelligence, tools and infrastructure necessary to success in a highly
competitive environment.

         Our mission is to make this information and these tools and
infrastructure useable, affordable and reliable for end-use in highly volatile
environments.

         Our mission is to make our products and services easy to acquire, easy
to install and easy to live with.

         Our mission is to create value for retailers by providing valuable
intelligence and innovative technology solutions that help to understand,
create, manage, and fulfill consumer demand.

         Our strategies are as follows:

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         o        INCREASE OUR MARKET SHARE. We believe we can continue to build
                  and expand our position of leadership within the retail
                  packaged software applications market as the retail industry
                  increasingly turns to packaged software applications as an
                  alternative to expensive in-house and custom developed
                  applications.

         o        PROVIDE HIGH LEVELS OF CUSTOMER SATISFACTION. The retail
                  industry is strongly influenced by formal and informal
                  references. We believe we have the opportunity to expand
                  market share by providing high levels of customer satisfaction
                  with our current customers, thereby fostering strong customer
                  references to support sales activities.

         o        DELIVER VALUE TO OUR CUSTOMERS. We believe that maximizing our
                  customers' return on investment will help us compete in our
                  market space and increase our market share.

         o        BECOME THE PREFERRED APPLICATION AND TECHNOLOGY ARCHITECTURE
                  FOR THE SMALL TO MEDIUM SIZED RETAILERS GLOBALLY. By
                  leveraging our 25 years of success, we believe we are uniquely
                  positioned to become the preferred application and technology
                  architecture provider for retail software and associated
                  services to this market.

         o        FULFILL THE MULTI-CHANNEL REQUIREMENTS OF RETAILERS. Through
                  the acquisition of Page Digital, we believe we will be able to
                  address the expanding needs of retailers to cohesively manage
                  their varied channels of distribution.

RECENT DEVELOPMENTS

OPERATIONAL IMPROVEMENTS

         In recent periods, we have taken a number of steps designed to improve
our balance sheet and operations, including:

         o        Purchased complementary businesses, with substantial revenues
                  and earnings potential.

         o        Revamped our management team by adding a new President and COO
                  and CTO with longstanding industry experience, as well as a
                  new CFO.

         o        Recapitalized our balance sheet, eliminating substantial debt
                  and raising new equity in its place.

         o        Improved our IBM-based core products through continuing
                  internal research and development.

         o        Obtained the rights to distribute complementary products,
                  including a new easy-to-install and easy-to-use,
                  open-architecture software system for very small retailers,
                  which we will introduce in 2004.

         o        Established partnerships with several value added resellers to
                  provide a variety of options and product extensions.

         o        Improved our distribution capabilities by adding new third
                  party channels, such as IBM and IBM's resellers, and
                  professional service firms such as CGI and LakeWest.

We believe that these actions have positioned us for a return to sustained
revenue growth and profitability.

ACQUISITION OF PAGE DIGITAL


         As part of our strategy to meet the expanding needs of multi-channel
retailers, on January 30, 2004, we acquired Page Digital Incorporated ("Page
Digital" through a merger transaction for total consideration of $7.1 million,
consisting of $2.0 million in cash, 2,500,000 shares of our common shares valued
at $2.00 per share and $138,000 in acquisition costs. Page Digital develops
multi-channel commerce software solutions and has a suite of direct commerce
applications that complete the multi-channel retail distribution and customer
service chain for Internet, telephone, brick and mortar, catalog and other
direct commerce channels. Our acquisition of Page Digital will continue to

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enhance our ability to provide our combined customer bases with e-commerce,
customer relationship management and catalog management solutions. In connection
with the Page Digital acquisition, we added approximately 40 employees. Page
Digital had total assets of $2.1 million as of October 31, 2003 and generated
annual revenues of $5.3 million in the fiscal year ended October 31, 2003.


         The legitimization of business to business and business to consumer
direct commerce (Internet, brick-and-mortar, catalog, and other) has rapidly
created a substantial market for the Page Digital suite of direct commerce
applications. According to the United States Department of Commerce, the market
for multi-channel direct commerce applications was just $15 billion in 1999,
grew to $27.3 billion in 2000, grew to $32.6 billion in 2001, and it is growing
at a rate 2.5 times greater than traditional retailing (Source: Internet
Retailer, April 2002). The acquisition of Page Digital will enable us to
continue to provide our customers with Page Digital's e-commerce, customer
relations management, and Catalog Management solutions. We expect to further
integrate these solutions into our offerings to enable customers to complete the
multi-channel retail distribution and customer service chain. In addition, the
acquisition will also allow us to offer Page Digital's customers the IP
Merchandising solution, as well as Point of Sale, Loss Prevention, and IP's
other alliance solutions.

ACQUISITION OF RTI

         Pursuant to an agreement dated June 1, 2004, we acquired Retail
Technologies International, Inc. ("RTI") from Michael Tomczak, Jeffrey Boone and
Intuit Inc. ("Intuit") in a merger transaction. On March 12, 2004, we, RTI, IPI
Merger Sub, Inc., ("Merger Sub") and Michael Tomczak and Jeffrey Boone (the
"Shareholders") entered the initial Agreement of Merger and Plan of
Reorganization (the "March 12, 2004 Merger Agreement") which provided we would
acquire RTI in a merger transaction in which RTI would merge with and into
Merger Sub. The merger consideration contemplated by the March 12, 2004 Merger
Agreement was a combination of cash and shares of our common stock. The March
12, 2004 Merger Agreement was amended by the Amended and Restated Agreement of
Merger and Plan of Reorganization, dated June 1, 2004, by and between us, RTI,
Merger Sub, IPI Merger Sub II, Inc. ("Merger Sub II") and the Shareholders (the
"Amended Merger Agreement").


         Pursuant to the Amended Merger Agreement, the Merger (as defined below)
was completed with the following terms: (i) we assumed RTI's obligations under
those certain promissory notes issued by RTI on December 20, 2002 with an
aggregate principal balance of $2.3 million; (ii) the total consideration paid
at the closing of the Merger was $11.6 million paid in shares of our common
stock with fair value of $1.2 million, newly designated Series B convertible
preferred stock ("Series B Preferred") with fair value of $5.7 million,
promissory notes totaling $3.6 million, assumption of incentive stock options
with fair value of $1.0 million and acquisition costs of $110,000; (iii) the
Shareholders and Intuit are entitled to price protection payable if and to the
extent that the average trading price of our common stock is less than $0.76 at
the time the shares of our common stock issued in the Merger and issuable upon
conversion of the Series B Preferred are registered pursuant to the registration
rights agreement dated June 1, 2004 between us, the Shareholders and Intuit (the
"Registration Rights Agreement"); and (iv) the merger consisted of two steps
(the "Merger"), first, Merger Sub merged with and into RTI, Merger Sub's
separate corporate existence ceased and RTI continued as the surviving
corporation (the "Reverse Merger"), immediately thereafter, RTI merged with and
into Merger Sub II, RTI's separate corporate existence ceased and Merger Sub II
continued as the surviving corporation (the "Second-Step Merger").


         As a result of the Merger, each Shareholder received 1,258,616 shares
of Series B Preferred and a promissory note payable monthly over two years in
the principal amount of $1,295,000 bearing interest at 6.5% per annum. As a
result of the Merger, Intuit, the holder of all of the outstanding shares of
RTI's Series A Preferred stock, received 1,546,733 shares of our common stock
and a promissory note payable monthly over two years in the principal amount of
$530,700 bearing interest at 6.5% per annum.

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         The Shareholders and Intuit were also granted registration rights.
Under the Registration Rights Agreement, we agreed to register the common stock
issuable upon conversion of the Series B Preferred issued to the Shareholders
within 30 days of the automatic conversion of the Series B Preferred into common
stock. The automatic conversion will occur upon us filing an amendment to our
certificate of incorporation with the Delaware Secretary of State increasing the
authorized number of shares of our common stock ("Certificate of Amendment")
after securing shareholder approval for the Certificate of Amendment. Under the
Registration Rights Agreement, Intuit is entitled to demand registration or to
have its shares included on any registration statement filed prior the
registration statement covering the Shareholders' shares, subject to certain
conditions and limitations, or if not previously registered to have its shares
included on the registration statement registering the Shareholders' shares. The
Shareholders and Intuit are entitled to price protection payments of up to a
maximum of $0.23 per share payable by promissory note, if and to the extent that
the average closing price of our common stock for the 10 days immediately
preceding the date the registration statement covering their shares is declared
effective by the Securities and Exchange Commission, is less than the 10 day
average closing price as of June 1, 2004, which was $0.76. We have not recorded
the liability relating to the price protection at the date of acquisition as the
contingency is based on future events and cannot yet be determined. We will
compute the total liability as soon as it can be determined and recorded as a
liability. The total cost of the price protection contingency will be deferred
and amortized over the shortest of the remaining useful lives of the assets
acquired in the acquisition in accordance with SFAS 141, "Business
Combinations".


         Pursuant to the Amended Merger Agreement, The Sage Group, plc as well
as certain officers and directors signed voting agreements that provide they
will not dispose of or transfer their shares of our capital stock and that they
will vote their shares of our capital stock in favor of the Certificate of
Amendment and the Amended Merger Agreement and transactions contemplated
therein.

         Upon the consummation of the Merger, Michael Tomczak, RTI's former
President and Chief Executive Officer, was appointed our President, Chief
Operating Officer and director and Jeffrey Boone, RTI's former Chief Technology
Officer, was appointed our Chief Technology Officer. We entered into two-year
employment agreements and non-competition agreements with Mr. Tomczak and Mr.
Boone.

         The combination of Island Pacific, RTI and Page Digital, will enable us
to offer a fully integrated solution to mid-tier retailers that will be unique
in the marketplace. As a result of this transaction, smaller retailers will now
be able to cost-effectively acquire a solution that provides both front and
back-end support. The combination instantly expands our products, services
offerings and distribution channels.

FINANCIAL INFORMATION ABOUT SEGMENTS AND GEOGRAPHIC AREAS

         We currently structure our operations into three strategic business
units. The business units are retail management solutions, store solutions and
multi-channel retail solutions. Our operations are conducted principally in the
United States and the United Kingdom. In addition, we manage long-lived assets
by geographic region. The business units are as follows:

         o        RETAIL MANAGEMENT SOLUTIONS ("RETAIL MANAGEMENT") - offers a
                  suite of applications, which builds on our long history in
                  retail software design and development. We provide our
                  customers with extremely reliable, widely deployed,
                  comprehensive and fully integrated retail management
                  solutions. Retail Management Solutions includes merchandise
                  management that optimizes workflow and provides the highest
                  level of data integrity. This module supports all operational
                  areas of the supply chain including planning, open-to-buy
                  purchase order management, forecasting, warehouse and store
                  receiving distribution, transfers, price management,
                  performance analysis and physical inventory. In addition,
                  Retail Management Solutions includes a comprehensive set of
                  tools for analysis and planning, replenishment and
                  forecasting, event and promotion management, warehouse,
                  ticketing, financials and sales audit. Through collaborations
                  with strategic partners, Retail Management offers tools for
                  loss prevention, communication with stores and vendors,
                  integration needs, purchase and allocation decisions, analysis
                  of weather impact, control and management of business
                  processes, consumer research, tracking consumer shopping
                  patterns, forecasting and replenishment, and analyzing store
                  people productivity.

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         o        STORE SOLUTIONS - offers a suite of applications that builds
                  on our long history of providing multi-platform, client server
                  in-store solutions. We market this set of applications under
                  the name "OnePointe," which is a feature-rich application
                  created with the specialty retailer in mind. More than 15
                  years of development has resulted in a solution with a high
                  degree of fit and value out of the box. Additionally, the
                  software was designed for easy customization, enabling our
                  development team to quickly develop solutions to meet
                  retailers' specific point-of-sale ("POS")and in-store
                  processor (server) requirements.

                  In connection with our acquisition of RTI, Store Solutions
                  also offers POS application under the name "Retail Pro(R)"
                  which provides a total solution for small to mid-tier
                  retailers worldwide. Today, Retail Pro(R) is used by
                  approximately 9,000 businesses in over 24,000 stores in 63
                  countries. The product is translated into fourteen languages
                  making it one of the few quality choices for the global
                  retailer. At its core, Retail Pro(R) is a high performance,
                  32-bit Windows application offering point-of-sale, inventory
                  control and customer relations management. Running on
                  WindowsNT, Windows2000, Windows XP Professional and
                  Windows.Net platforms, Retail Pro(R) combines a fully
                  user-definable graphical interface with support for a variety
                  of input devices (from keyboard to touch screen). Its Retail
                  Business Analytics module includes an embedded Oracle(r) 9i
                  database. Retail Pro(R) is fast and easy to implement. The
                  software has been developed to be very flexible and adaptable
                  to the way a retailer runs its business.

         o        MULTI-CHANNEL RETAIL SOLUTIONS ("MULTI-CHANNEL RETAIL") - Page
                  Digital designs its application to specifically address direct
                  commerce business processes, which primarily relate to
                  interactions with the end-user. Having developed its software
                  out of necessity to manage its own former direct commerce
                  operation, Page Digital has been extremely attentive to
                  functionality, usability and scalability. Its software
                  components include applications for customer relations
                  management, order management, call centers, fulfillment, data
                  mining and financial management. Specific activities like
                  partial ship orders, payments with multiple tenders, back
                  order notification, returns processing and continuum marketing
                  represent just a few of the more than 1,000 parameterized
                  direct commerce activities that have been built into its
                  "Synaro"(TM)applications. Page Digital makes these components
                  and its interfacing technology available to customers, systems
                  integrators and independent software developers who may modify
                  them to meet their specific needs. This growing base of
                  inherited functionality continues to improve the market
                  relevance of its products.

For further financial information about our business segments and geographic
areas see our Financial Statements section and "Notes to Consolidated Financial
Statements for the Year Ended March 31, 2004 - Note 15" thereunder.

PRODUCTS

         We develop, partner and sell business intelligence and software
solutions that support virtually all of the operational activities of a typical
retailer. Our business intelligence is critical to sound strategy and execution.
Our software solutions create value by applying innovative technology that helps
our customers efficiently and effectively understand, create, manage and fulfill
consumer demand. Our products can be deployed individually to meet specific
business needs, or as part of a fully integrated, end-to-end solution.

         Our solution set consists of the following components:

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         THE RETAIL MANAGEMENT SOLUTIONS are a combination of collaborations
with partner companies and solutions developed internally by us. They are all
completely integrated. Our offerings include:

         o        IP GLADIATOR: is a collaborative solution with Wazagua that
                  orchestrates a myriad of processes across retail enterprise to
                  deliver effective loss prevention. To do so, IP Gladiator
                  enables an integrated asset protection workflow spanning
                  exception management, investigation management, case
                  management and civil collection. The salient features of this
                  solution include: (a) availability in ASP or in-house modes,
                  (b) advanced data mining to recognize loss patterns, and (c)
                  POS platform independence.

         o        IP GLOBAL NETWORK: is an offering that cost-effectively
                  enables retailer collaboration with vendors, including product
                  design collaboration, and facilitates improved communication
                  with stores. This will feature services such as
                  teleconferencing, voice-over-IP, and instant messaging to
                  deliver the collaboration capabilities.

         o        IP INTEGRATOR: is a common integration platform that
                  seamlessly unifies all IP applications with partner
                  applications as well as enables integrations to 3rd party and
                  legacy applications of a retailer. It leverages an industry
                  proven technology to deliver speed, reliability,
                  maintainability and shorter implementation cycles in
                  addressing integration needs. This solution is jointly
                  developed with Bostech.

         o        IP BUYER'S WORKMATE: features a suite of integrated modules
                  that enable, automate and enforce best practices leading to
                  sound merchandise purchase and allocation decisions, in
                  compliance with the approved budgets. This suite, along with
                  the range of capabilities provided through IP Consumer
                  Research, IP Weather Impacts, IP Profiling and the IP Core
                  Merchandising suite, enables the retailer to plan and execute
                  consumer-sensitive merchandising, placement, pricing and
                  promotion decisions. The suite consists of:

                  o        IP DECISION SUPPORT: features an analytical
                           processing tool designed to provide retailers with
                           relevant, timely and detailed business information.

                  o        IP ASSORTMENT PLANNING: enables retailers to arrive
                           at a well-researched and sound buying decisions -
                           yielding merchandise assortments that meet local
                           consumer demand, minimize inventory investment,
                           accelerate sales, reduce inter-store transfers and
                           reduce markdowns.

                  o        IP ALLOCATION: enables allocation of purchase order
                           receipts, advanced shipping notices and warehouse
                           back-stock in a manner sensitive to the assortment
                           plan, merchandise performance, and store stocking
                           levels.


         o        IP BUSINESS PROCESS OPTIMIZATION: is a collaborative retail
                  process management solution offered in partnership with KMG
                  that enables the retailers to improve productivity and reduce
                  inefficiencies through better control and management of
                  business processes. The applications of interest to retailers
                  can range from operational activities such as new store
                  construction and opening, global sourcing, distribution center
                  optimization and promotions management to fiduciary
                  responsibilities and processes such tracking and control of
                  financial reporting.


         o        IP FORECASTING AND REPLENISHMENT: is a collaborative offering
                  of a full feature forecasting and replenishment solution to
                  address the needs of retailers seeking a higher end solution
                  in this area.

         o        IP STORE PEOPLE PRODUCTIVITY: application helps retailers
                  analyze the productivity of stores, people and items, and
                  transaction level sales productivity.

                                       8



<PAGE>

         At the foundation of our application suite are the integrated modules
that comprise our core-merchandising solution. They are as follows:

         1.       Merchandising Management
                  ------------------------

                  o        The Island Pacific Merchandising module is a
                           comprehensive solution for management of core retail
                           processes, which optimizes workflow and provides the
                           highest level of data integrity.

                  o        This module supports all operational areas of the
                           supply chain: Planning, Open-To-Buy, Purchase Order
                           Management, Forecasting, Warehouse and Store
                           Receiving, Distribution, Transfers, Price Management,
                           Performance Analysis, and Physical Inventory.

         2.       The Eye(TM) Analysis and Planning
                  ---------------------------------

                  o        The Eye(TM), our datamart is a comprehensive analysis
                           and planning tool that provides answers to retailers'
                           merchandising questions. The specific "who, what,
                           where, when and why" are defined in a
                           multi-dimensional format. The Eye is completely
                           integrated to IP Core Merchandising.

                  o        This application enables retailers to develop
                           completely user-defined inquiries and reports. The
                           capacity of The Eye to store, manipulate, and present
                           information is limited only by a retailer's
                           imagination.

         3.       Replenishment and Forecasting
                  -----------------------------

                  o        The Island Pacific Replenishment module is a tool
                           that ensures retailers will have the right
                           merchandise in the right stores at the right time by
                           dynamically forecasting accurate merchandise need,
                           reducing lost sales, increasing stock turn, and
                           reducing cost of sales.

         4.       Promotions and Events
                  ---------------------

                  o        The Island Pacific Event and Promotion Management
                           tool enables retailers to manage, plan and track all
                           promotional and event related activities including
                           price management, in-store display, deal, and media
                           related promotions. The promotions addressed through
                           this module can include non-price promotions as well.
                           The analysis includes actual to plan comparisons
                           prior to, during and after the event.

         5.       Warehouse
                  ---------

                  o        The Island Pacific Warehouse module provides enhanced
                           control and visibility of product movement through
                           the warehouse. Item, quantity and bin integrity is
                           ensured through directed put away, task confirmation,
                           RF procedures, automated cycle counts and carton
                           control.

         6.       Ticketing
                  ---------

                  o        The Island Pacific Ticketing module supports both
                           merchandise and warehouse location identification
                           utilizing multiple printers and bar codes.
                           User-configured tickets may include desired product
                           characteristics, including but not limited to retail
                           price, compare at pricing, item, style, color and
                           size information.

                                       9



<PAGE>


         7.       Financials
                  ----------

                  o        The Island Pacific Financials module incorporates a
                           General Ledger that is synchronized with the
                           Merchandising Stock Ledger.

                  o        This module also includes a robust Accounts Payable
                           application, which supports 3-way automated matching
                           of invoices, receipts, and purchase orders that
                           streamline workflow to optimize operations.

         8.       Sales Audit
                  -----------

                  o        This module is an integrated conduit between
                           Point-of-Sale applications and the Island Pacific
                           Host System, which manages the upload- and download-
                           processes. The upload process manages all
                           transactional information that occurs at the store
                           such as Sales, Customer Returns, Physical Inventory,
                           Transfers, Acknowledgements, Purchase Order Drop Ship
                           Receipts, Layaway, and Special Order. The Download
                           process manages all Store pricing including Price
                           Look Up, Promotional pricing, Deal pricing, Event
                           pricing, Price Changes, Markdowns, On Order to
                           Stores, In-transit, Current Inventory, Company
                           definitions (Hierarchy, Constants, Vendors, Stores)

                  o        This application is flexible relative to POS
                           requirements, while featuring full integration to IP
                           POS product, OnePointe.

         THE STORE SOLUTIONS offers applications under the names "OnePointe,"
and "Retail Pro(R)."

         "OnePointe" is a complete application providing all point-of-sale and
in-store processor (server) features along with multi-channel capability
(peer-to-peer) for traditional "brick and mortar" retail operations. The
features are as follows:

         o        POS Terminal is a robust, easy to use system. Some of key
                  features are transaction processing, merchandise recording,
                  handling tendering, handling exceptions and administrative
                  functions

         o        In-Store Processor houses the back-office functions and allows
                  central management of the store and POS system. This is a
                  full-featured, easy-to-use application. Functions supported by
                  the system include modifiable parameters, reports, store
                  operations, back office operations and maintenance functions.

         o        For Multi-Channel capability, "OnePointe" utilizes advanced
                  communications technology that provides connectivity between
                  different retail touch points in real time, allowing any
                  devise on the network, via LAN, WAN, internet or intranet, the
                  ability to access another at any time.

         Retail Pro(R) is a leading point-of-sale and inventory management
software used by specialty retailers worldwide. The following is brief
description of some of the functionality of Retail Pro(R):

POINT OF SALE
-------------
CASH DRAWER AND RECEIPT    Data is captured for analysis and inventory is
FUNCTIONS                  updated in real time. Drives all required hardware at
                           point of sale.

INTEGRATED CREDIT CARD     Supports authorization and processing of all major
PROCESSING                 payment types including credit, debit and gift cards.

CUSTOMER DATA              Customer name and address information is entered at
                           point of sale where buying history can be viewed.
                           Purchase history can aid in controlling merchandise
                           returns and discounts.

                                      10



<PAGE>

LAYAWAYS AND SPECIAL       Layaways are tracked and special orders can be
ORDERS                     created for out-of-stock merchandise or custom item.

ITEM QUANTITY AND PRICE    Retail Pro(R) allows an instant view of whether an
LOOKUP                     item is in stock at any location and of correct
                           price.

POS SUMMARY REPORTS        Daily x/z out report provides summary of each day's
                           activity for each clerk and store and reconciles the
                           cash drawer.

INVENTORY CONTROL
-----------------
STOCK ON HAND, IN          Inventory information can be sorted in variety of
TRANSIT, ON ORDER          ways and viewed in a matrix based on user-defined
                           filters. This information can be viewed either in a
                           report or while generating a purchase order or other
                           activity.

PURCHASE ORDERS,           Purchase orders can be created and are integrated
RECEIVING AND TICKETING    with data from the inventory files. Merchandise may
                           be received against the purchase order and returns
                           can be generated. Bar codes for the merchandise can
                           be generated based on receiving information.


PRICING AND MARKDOWNS      Retail Pro(R) displays margin % by item number to aid
                           in determining price. Alternate pricing levels can be
                           set up for employees, preferred customers and
                           wholesale accounts.

MULTI-STORE DISTRIBUTION   Retail Pro(R) will automatically inform all the
AND TRANSFERS              sending and receiving stores as part of the daily
                           polling process. By comparing days of supply the
                           system can recommend transfers to optimize sales.

PRE-SET AND USER DEFINED   Retail Pro(R) comes with a variety of pre-designed
REPORTS                    reports for any store or group of stores and a
                           built-in report designer. Retail Pro(R) also allows
                           for a retailer to set preferences as to how it will
                           view reports.

PHYSICAL INVENTORY         Physical inventories can be taken with a portable
                           terminal or PDA to promote accuracy and speed.

CUSTOMER FUNCTIONS
------------------
CUSTOMER LISTS AND         Information by customer such as total amount spent,
MAILINGS                   time since last visit, size, birthday, etc. can be
                           sorted and viewed. In a multi-store operation, names
                           can be distributed to all stores so each customer can
                           be recognized

PREFERRED CUSTOMER         Retail Pro(R) allows pricing to be based on a
PRICING                    customers level. It can also plan for a predetermined
                           markdown schedule for preferred customers.

GIFT REGISTRY              The system will keep track of a list of items that
                           someone would like other people to buy for them and
                           keep track of those items already purchased.

The MULTI-CHANNEL RETAIL SOLUTIONS offered through our SYNARO(R) products were
designed for plug-and-play use to allow companies to rapidly capitalize on
direct commerce opportunities, both through the Internet as well as through call
centers and catalogs that augment Web-based components or as a complete
integrated solution. The table below provides a brief description of the
associated benefits of each of SYNARO(R) products.

                                      11



<PAGE>

                         SYNARO(R) PRODUCT DESCRIPTIONS
--------------------------------------------------------------------------------
PRODUCT             DESCRIPTION
-------             -----------

INTEGRATOR          A powerful middleware processor that seamlessly integrates
                    disparate front- and back-end business systems to allow for
                    the creation of best-of-breed solutions. Integrator is
                    specially tuned to provide real-time integration for high
                    volume and high performance requirements. SYNARO(R)
                    components are tightly integrated out-of-the-box for rapid
                    deployment of best practice functionality.

ERM                 A platform to manage communications between a company and
                    its customers across all mediums, which utilizes
                    segmentation, list management, campaign management and
                    forecasting functions that can be applied to both
                    interactive and traditional channels. ERM provides a
                    graphical user interface that allows our customers to
                    configure screens and keystrokes to accommodate their
                    specific requirements. It includes features such as
                    multi-channel order entry, e-mail management and response,
                    closed loop workflow and real-time communications with
                    customers to name a few.

WEBSTORE            A real-time, online front-end for manufacturers, retailers,
                    wholesalers, direct marketers and other businesses who seek
                    to facilitate sales transactions over the Internet. WebStore
                    comes with preset templates, a shopping cart metaphor, SSL
                    security, search engine and databases for configuring the
                    site to handle product information, special selling
                    situations, etc. It is compatible with multiple web servers
                    such as BEA's WebLogic, IBM's WebSphere, and Sun's iPlanet.

ORDER MANAGEMENT    A multi-faceted component application, which ensures proper
                    accounting for orders e.g. back order, customer hold, hold
                    until complete, date sensitive orders, continuity orders,
                    etc.; exceptions are brought to management's attention; and
                    orders can be processed and verified from any Web
                    application. It includes a comprehensive Call Center
                    capability including Computer Telephony Integration and
                    customer relations management.

ORDER FULFILLMENT   A comprehensive application that monitors and controls all
                    fulfillment parameters including specifications,
                    replenishment orders, continuity programs, drop ship orders,
                    ship complete orders, gift orders, backorders and shipping
                    and handling orders.

MARKETING           Controls offer and promotion set-up, which includes customer
                    list segmentation, campaign management including targeted
                    e-mail capability, item selection and placement and pricing.
                    Targeted marketing promotions and offers provide the
                    opportunity to improve margins and accelerate return on
                    investment.


PRODUCT             Controls inventory management issues such as item type and
MANAGEMENT          attributes. Multiple item types such as configured, kits,
                    gift certificates, serialized, drop ship, special order, and
                    club membership allow for significant flexibility.

WAREHOUSE           Provides pick ticket processing, cycle count physical
MANAGEMENT          inventory, bin location control, cross docking and location
                    maintenance.

WORK FLOW           Provides for closed loop issues management and future chain
MANAGEMENT          of events processing of marketing campaigns.

DATA ANALYSIS       A report writer and query tool for mining, visualizing and
                    analyzing data that supports Business Objects, Crystal
                    Reports, FOCUS and any ORACLE SQL-compliant DB.

FORECASTING         The Oracle-based Forecasting application allows for flexible
                    inventory and merchandise forecasting that enables direct
                    commerce companies to increase turns and reduce back orders.

                                      12



<PAGE>

FINANCIALS          A product suite that includes all financial components
                    necessary to run a business, including real-time or batch
                    credit card processing, accounts receivable and accounts
                    payable management and general ledger operations.

         Our PROFESSIONAL SERVICES provide our customers with expert retail
business consulting, project management, implementation, application training,
technical and documentation services. This product offering ensures that our
customers' technology selection and implementation projects are planned and
implemented timely and effectively. We also provide development services to
customize our applications to meet specific requirements of our customers and
ongoing support and maintenance services.

         We market our applications and services through an experienced
professional direct sales force in the United States and in the United Kingdom.
We believe our knowledge of the complete needs of multi-channel retailers
enables us to help our customers identify the optimal systems for their
particular businesses. The customer relationships we develop build recurring
support, maintenance and professional service revenues and position us to
continuously recommend changes and upgrades to existing systems.

         Our executive offices are located at 19800 MacArthur Boulevard, Suite
1200, Irvine, California 92612, telephone number (949) 476-2212.

MARKETS AND CUSTOMERS

         Our software is installed in over 200 retailers. With the acquisition
of Page Digital in January 2004 and Retail Technologies, Inc. in June 2004, our
software is installed in over 9,000 retailers worldwide. Our applications are
used by the full spectrum of retailers including specialty goods sellers, mass
merchants and department stores. Most of our U.S. customers are in the Tier 1 to
Tier 3 retail market sectors.

<TABLE>
<CAPTION>
         A sample of some of our active customers is listed below:
<S>      <C>                         <C>                       <C>                              <C>
         Nike                        Limited Brands            American Eagle Outfitters        Disney
         Phillips-Van Heusen         Signet (UK)               Shoefayre (UK)                   Pacific Sunwear
         Timberland                  Vodaphone (UK)            Academy Sports                   Michaels' Stores
         IBM                         Lands' End                Hershey Foods                    Mason Shoe Company
         A&E Television Network      Turner Broadcasting       Betsey Johnson                   The Luggage Center
         IKEA                        Play it Again Sports      Patagonia                        Squaw Valley Ski Resort
         SafeCo Field                The Body Shop             Staples Center                   Gucci Group
         Swarovsky                   Louis Vuitton Fashion Group
</TABLE>


MARKETING AND SALES

         We sell our applications and services primarily through a direct sales
force that operates in the United States and the United Kingdom. Sales efforts
involve comprehensive consultations with current and potential customers prior
to completion of the sales process. Our Sales Executives, Retail Application
Consultants (who operate as part of the sales force) and Marketing and
Technology Management associates use their collective knowledge of the needs of
multi-channel retailers to help our customers identify the optimal solutions for
their individual businesses.


         We maintain a comprehensive web site describing our applications,
services and company. We regularly engage in cooperative marketing programs with
our strategic alliance partners. We annually host a Users Conference in which
hundreds of our customers attend to network and to share experiences and ideas
regarding their business practices and implementation of our, and our partners'
technology. This Users Conference also provides us with the opportunity to meet
with many of our customers on a concentrated basis to provide training and
insight into new developments and to gather valuable market requirements
information.

                                      13



<PAGE>

         We are aggressively focusing on our Product Marketing and Product
Management functions to better understand the needs of our markets in advance of
required implementation, and to translate those needs into new applications,
enhancements to existing applications and related services. These functions are
also responsible for managing the process of market need identification through
product or service launch and deployment. It is the goal of these functions to
position Island Pacific optimally with customers and prospects in our target
market.

         We distribute our Retail Pro(R) products in North America, South
America, Europe, Asia, Australia, and Africa via a network of value-added
resellers (VARs). In general, each VAR is responsible for a particular
geographical region. Currently, RTI has 27 VARs in North America, 7 in South
America, 19 in Europe and the Middle East, 11 in Asia, 2 in Australia/New
Zealand and 1 in Africa. These resellers are trained and certified on Retail
Pro(R) and provide users with technical expertise, and a localized and
translated product.

COMPETITION

         The markets for our application technology and services are highly
competitive, subject to rapid change and sensitive to new product introductions
or enhancements and marketing efforts by industry participants. We expect
competition to increase in the future as open systems architecture becomes more
common and as more companies compete in the emerging electronic commerce market.

         The largest of our competitors offering end-to-end retail solutions is
JDA Software Group, Inc. Other suppliers offer one or more of the components of
our solutions. In addition, new competitors may enter our markets and offer
merchandise management systems that target the retail industry. For enterprise
solutions, our competitors include Retek Inc., SAP AG, nsb Retail Systems PLC,
Essentus, Inc., GERS, Inc., Marketmax, Inc., Micro Strategies Incorporated and
Evant, Inc., formerly NONSTOP Solutions. For Store Solutions, our competitors
include Datavantage, Inc., CRS Business Computers, NSB Retail Systems PLC,
Triversity, ICL, NCR and IBM. Our Direct applications compete with Smith Gardner
& Associates, Inc., and CommercialWare, Inc. Our primary competitors in the
multi-channel retail market include Ecometry, CommercialWare and Sigma-Micro.
RTI's primary competitors include Celerant Technology Corp., 360 Commerce, CRS
Business Computers, NSB Retail Systems PLC, Micro Strategies Incorporated,
Retek, Inc. and JDA Software Group, Inc. Our professional services offerings
compete with the professional service groups of our competitors, major
consulting firms associated or formerly associated with the "Big 4" accounting
firms, as well as locally based service providers in many of the territories in
which we do business. Our strategic partners, including IBM, NCR and Fujitsu,
represent potential competitors as well.

         We believe the principal competitive factors in the retail solutions
industry are price, application features, performance, retail application
expertise, availability of expert professional services, quality, reliability,
reputation, timely introduction of new offerings, effective distribution
networks, customer service, and quality of end-user interface. We believe we
currently compete favorably with respect to these factors. In particular, we
believe that our competitive advantages include:

         o        Proven, single version technology, reducing implementation
                  costs and risks and providing continued forward migration for
                  our customers.
         o        Extensive retail application experience for all elements of
                  the customer's business, including Professional Services,
                  Development, Customer Support, Sales and Marketing/Technology
                  Management.
         o        Ability to provide expert Professional Services.
         o        Large and loyal customer base.
         o        Hardware platform independent Store Solution (POS)
                  application.
         o        Breadth of our application technology suite including our
                  multi-channel retailing capabilities.
         o        Our corporate culture focusing on the customer.

         Many of our current and potential competitors are more established,
benefit from greater name recognition, have greater financial, technical,
production and/or marketing resources, and have larger distribution networks,
any or all of which could give them a competitive advantage over us. Moreover,
our current financial condition has placed us at a competitive disadvantage to
many of our larger competitors, as we are required to provide assurance to
customers that we have the financial ability to support the products we sell. We
believe strongly that we provide and will continue to provide excellent support
to our customers, as demonstrated by the continuing upgrade purchases by our
top-tier established customer base.

                                      14



<PAGE>

PROPRIETARY RIGHTS

         Our success and ability to compete depend in part on our ability to
develop and maintain the proprietary aspects of our technologies. We rely on a
combination of copyright, trade secret and trademark laws, and nondisclosure and
other contractual provisions, to protect our various proprietary applications
and technologies. We seek to protect our source code, documentation and other
written materials under copyright and trade secret laws. We license our software
under license agreements that impose restrictions on the ability of the customer
to use and copy the software. These safeguards may not prevent competitors from
imitating our applications and services or from independently developing
competing applications and services, especially in foreign countries where legal
protections of intellectual property may not be as strong or consistent as in
the United States.

         We hold no patents. Consequently, others may develop, market and sell
applications substantially equivalent to our applications, or utilize
technologies similar to those used by us, so long as they do not directly copy
our applications or otherwise infringe our intellectual property rights.

         We integrate widely-available platform technology from third parties
for certain of our applications. These third-party licenses generally require us
to pay royalties and fulfill confidentiality obligations. Any termination of, or
significant disruption in, our ability to license these products could cause
delays in the releases of our software until equivalent technology can be
obtained and integrated into our applications. These delays, if they occur,
could have a material adverse effect on our business, operating results and
financial condition.

         Intellectual property rights are often the subject of large-scale
litigation in the software and Internet industries. We may find it necessary to
bring claims or litigation against third parties for infringement of our
proprietary rights or to protect our trade secrets. These actions would likely
be costly and divert management resources. These actions could also result in
counterclaims challenging the validity of our proprietary rights or alleging
infringement on our part. We cannot guarantee the success of any litigation we
might bring to protect our proprietary rights.

         Although we believe that our application technology does not infringe
on any third-party's patents or proprietary rights, we cannot be certain that we
will not become involved in litigation involving patents or proprietary rights.
Patent and proprietary rights litigation entails substantial legal and other
costs, and we do not know if we will have the necessary financial resources to
defend or prosecute our rights in connection with any such litigation.
Responding to, defending or bringing claims related to our intellectual property
rights may require our management to redirect our human and monetary resources
to address these claims. In addition, these actions could cause delivery delays
or require us to enter into royalty or license agreements. Royalty or license
agreements, if required, may not be available on terms acceptable to us, if they
are available at all. Any or all of these outcomes could have a material adverse
effect on our business, operating results and financial condition.


         Certain of our standard software license agreements contain a limited
infringement indemnity clause under which we agree to indemnify and hold
harmless our customers and business partners against certain liability and
damages arising from claims of various copyright or other intellectual property
infringement by our products. These terms constitute a form of guarantee that is
subject to the disclosure requirements, but not the initial recognition or
measurement provisions of Financial Accounting Standards Board issued FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of the Indebtedness of others." We
have never lost an infringement claim and our cost to defend such lawsuits have
been insignificant. Although it is possible that in the future third parties may
claim that our current or potential future software solutions infringe on their
intellectual property, we do not currently expect a significant impact on our
business, operating results or financial condition.


                                       15



<PAGE>

         Our application Retail Pro(R) is licensed from a third party. On
December 6, 2002, RTI sold certain intellectual property for $7,500,000 to the
third party. In connection with the sale, RTI also sold certain property and
equipment for proceeds of $44,000 and 1,445,000 shares of series A preferred
stock at $0.346 per share, for $500,000 respectively. RTI recognized a total
gain of $7.5 million on the sale of the intellectual property and property and
equipment due to the tangible assets being fully depreciated as of the date of
sale. The third party also entered into employment agreements with several of
RTI's employees and a covenant not-to-compete with one of the original
stockholders. Under a license agreement, the third party granted back to RTI the
right to sell various products and licenses. Under the terms of the license
agreement, RTI is obligated to pay royalties equal to 75% of the sales made to
certain customers. The terms of the license agreement vary depending on the
product with the minimum term being approximately three years. Any termination
of, or disruption in this license could have a material adverse affect on RTI's
business.

EMPLOYEES

         As of June 4, 2004, following the acquisition of RTI, we had a total of
224 employees, 208 of which were based in the United States. Of the total, 14%
were engaged in sales and marketing, 45% were engaged in application technology
development projects, 24% were engaged in professional services, and 17% were in
general and administrative. We believe our relations with our employees overall
are good. We have never had a work stoppage and none of our employees are
subject to a collective bargaining agreement.

         We file registration statements, periodic and current reports, proxy
statements and other materials with the Securities and Exchange Commission. You
may read and copy any materials we file with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains a web site at WWW.SEC.GOV that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC, including our filings.

         Our Internet address is WWW.ISLANDPACIFIC.COM. We make available, free
of charge, our annual reports on Form 10-K and 10-K/A, quarterly reports on Form
10-Q and Form 10-Q/A and current reports on Form 8-K and Form 8-K/A, and any
amendments to those reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 through our website, as soon as reasonably
practicable after they are electronically filed with or furnished to the SEC.
The contents of our website are not incorporated into, or otherwise to be
regarded as a part of, this Annual Report on Form 10-K/A.


ITEM 2.  PROPERTIES

         Our principal corporate headquarters consists of 26,521 square feet in
a building located in Irvine, California. The corporate headquarters is also
used for certain of our sales, marketing, consulting, customer support, training
and product development functions. This facility is occupied under a lease that
expires on June 30, 2005. The current monthly rent is $56,000. We also occupy
premises in the United Kingdom located at The Old Building, Mill House Lane,
Wendens Ambo, Essex, England. The lease for this office building expires June
30, 2008. Annual rent is $72,000 (payable quarterly) plus common area
maintenance charges and real estate taxes. We also lease 44,505 square-foot
office space in Englewood, Colorado for our Page Digital subsidiary. This lease
commenced on January 1, 2004 and expires on December 31, 2013 with a five-year
renewal option. The monthly rent is $71,000. We assumed this lease in connection
with the acquisition of Page Digital. Prior to our assumption, the lease was
entered between CAH Investments, LLC ("CAH"), which is wholly owned by the
spouse of Lawrence Page, Page Digital's former president and our current
Executive Vice President - Special Projects and director, and Southfield
Crestone, LLC. We also lease an office that consists of 12,717 square feet of
rentable space in a building located in Folsom, California for our RTI
subsidiary. This lease expires in January 2006 and has a monthly rent of
$22,000.

                                      16


<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

         In April of 2002, our former CEO, Thomas Dorosewicz, filed a demand
with the California Labor Commissioner for $256,250 in severance benefits
allegedly due under a disputed employment agreement, plus attorney's fees and
costs. Mr. Dorosewicz's demand was later increased to $283,894. On June 18,
2002, we filed an action against Mr. Dorosewicz, Michelle Dorosewicz and an
entity affiliated with him in San Diego Superior Court, Case No. GIC790833,
alleging fraud and other causes of action relating to transactions Mr.
Dorosewicz caused us to enter into with his affiliates and related parties
without proper board approval. On July 31, 2002, Mr. Dorosewicz filed
cross-complaints in that action alleging breach of statutory duty, breach of
contract, fraud and other causes of action related to his employment with the
Company and other transactions he entered into with the Company. The parties
agreed to resolve all claims in binding arbitration. The dispute was heard by an
arbitrator the week of October 3, 2003. The arbitrator issued an award on
November 7, 2003, resolving most of the disputed issues in favor of the Company
as follows: (a) the Company was awarded a refund of rental payments amounting to
$66,951; (b) the excessive equipment leasing financing charges by Mr. Dorosewicz
were recast substantially reducing the Company's unpaid balance; (c) Mr.
Dorosewicz was ordered to repay attorneys' fees reimbursement he had previously
been provided by the Company; (d) Mr. Dorosewicz was denied severance benefits;
(e) Mr. Dorosewicz's claims with respect to options were denied; and (f) Mr.
Dorosewicz was awarded his unpaid bonus in the amount of $56,719. The net amount
awarded to Mr. Dorozewicz was $85,339, which was paid in January 2004.

         The sale of our Australian subsidiary in the third quarter of fiscal
2002 was subject to the approval of National Australia Bank, the subsidiary's
secured lender. The bank did not approve the sale and the subsidiary ceased
operations in February 2002. The bank caused a receiver to be appointed in
February 2002 to sell substantially all of the assets of the Australian
subsidiary and pursue collections on any outstanding receivables. The receiver
proceeded to sell substantially all of the assets for $300,000 in May 2002 to an
entity affiliated with former management, and is actively pursuing the
collection of receivables. If the sale proceeds plus collections on receivables
are insufficient to discharge the indebtedness to National Australia Bank, we
may be called upon to pay the deficiency under our guarantee to the bank. We
have accrued $187,000 as our potential exposure. The receiver has also claimed
that we are obligated to it for inter-company balances of $636,000, but we do
not believe any amounts are owed to the receiver, who has not as of the date of
this report acknowledged the monthly corporate overhead recovery fees and other
amounts charged by us to the Australian subsidiary offsetting the amount claimed
to be due.


         On May 15, 2002, an employee who was out on disability/worker's
compensation leave, Debora Hintz, filed a claim with the California Labor
Commissioner seeking $41,000 in alleged unpaid commissions. In or about December
of 2002, Ms. Hintz filed a discrimination claim against us with the Department
of Fair Employment and Housing, alleging harassment and sexual orientation
discrimination. We had responded appropriately to both the wage claim and the
discrimination allegations, which we believed lack merit based on present
information. On December 1, 2003, the Department of Fair Housing and Employment
closed the case on the basis of no probable cause to prove violation of statute,
and gave notice of right to sue. In January 2004, we terminated Ms Hintz's
employment with us and, as a result, her medical insurance was terminated. On
February 12, 2004, Ms. Hintz filed a petition for violation of Labor Code
Section 132(a) before the Workers' Compensation Appeals Board of the State of
California.

         On August 30, 2002, Cord Camera Centers, Inc., an Ohio corporation
("Cord Camera"), filed a lawsuit against one of our subsidiaries, SVI Retail,
Inc. ("SVI Retail") as the successor to Island Pacific Systems Corporation, in
the United States District Court for the Southern District of Ohio, Eastern
Division, Case No. C2 02 859. The lawsuit claims damages in excess of $1.5
million, plus punitive damages of $250,000, against SVI Retail for alleged
fraud, negligent misrepresentation, breach of express warranties and breach of
contract. These claims pertain to the following agreements between Cord Camera
and Island Pacific: (i) a License Agreement, dated December 1999, as amended,
for the use of certain software products, (ii) a Services Agreement for
consulting, training and product support for the software products and (iii) a
POS Software Support Agreement for the maintenance and support services for a
certain software product. We settled this case on September 30, 2003. The terms
of the settlement agreement are subject to a confidentiality covenant.


                                      17



<PAGE>

         In mid-2002, we were the subject of an adverse judgment entered in
favor of Randall's Family Golf Centers, ("Randall") in the approximate sum of
$61,000. The judgment was entered as a default judgment, and is based on
allegations that we received a preferential transfer of funds within 90 days of
the filing by Randall of a chapter 11 case in the United States Bankruptcy Court
for the Southern District of New York. We settled this matter by an agreement to
pay $12,500 to Randall.

         On November 22, 2002, UDC Homes, Inc. and UDC Corporation now known as
Shea Homes, Inc. served Sabica Ventures, Inc. ("Sabica"), our wholly owned
subsidiary and then our Island Pacific division (now are retail management
solutions division) with a cross-complaint for indemnity on behalf of an entity
identified in the summons as Pacific Cabinets. We filed a notice of motion and
motion to quash service of summons on the grounds that we have never done
business as Pacific Cabinets and have no other known relation to the
construction project that is the subject of the cross-complaint and underlying
complaint. A hearing on our motion to quash occurred on May 22, 2003 and was
subsequently denied.


         On April 2, 2004, we filed a federal court action in the Southern
District of California against 5R Online, Inc. ("5R"), John Frabasile, Randy
Pagnotta, and Terry Buckley for fraud, breach of fiduciary duty, breach of
contract, and unfair business practice arising from their evaluation of,
recommendation for, and ultimately engagement in a development arrangement
between IPI and 5R. Pursuant to the development agreement entered into in June
2003 upon reliance of the representations of the individual defendants that
product development was progressing, we paid $640,000 in development payments
but received no product. Responsive pleadings will be served shortly, and the
parties are exploring a business solution to the dispute. For fiscal year ended
March 31, 2004, we have expensed payments of $640,000 and shown in selling,
general and administration expenses.

Certain of our standard software license agreements contain a limited
infringement indemnity clause under which we agree to indemnify and hold
harmless our customers and business partners against certain liability and
damages arising from claims of various copyright or other intellectual property
infringement by our products. These terms constitute a form of guarantee that
is subject to the disclosure requirements, but not the initial recognition or
measurement provisions of Financial Accounting Standards Board issued FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of the Indebtedness of others." We
have never lost an infringement claim and our cost to defend such lawsuits
have been insignificant. Although it is possible that in the future third
parties may claim that our current or potential future software solutions
infringe on their intellectual property, we do not currently expect a
significant impact on our business, operating results or financial condition.


         Except as set forth above, we are not involved in any material legal
proceedings, other than ordinary routine litigation proceedings incidental to
our business, none of which are expected to have a material adverse effect on
our financial position or results of operations. However, litigation is subject
to inherent uncertainties, and an adverse result in existing or other matters
may arise from time to time which may harm our business.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during fourth
quarter of fiscal year ended March 31, 2004.

PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock is traded on the American Stock Exchange since July 8,
1998 under the symbol "IPI". Up until July 16, 2003, our common stock was traded
under the symbol "SVI". The following table indicates the high and low sales
prices for our shares for each quarterly period for each of our two most recent
fiscal years.

YEAR ENDING MARCH 31, 2004                               HIGH            LOW
First Quarter                                         $    2.65       $    0.88
Second Quarter                                        $    3.65       $    2.10
Third Quarter                                         $    2.38       $    1.77
Fourth Quarter                                        $    2.93       $    0.84

YEAR ENDED MARCH 31, 2003                                HIGH             LOW
First Quarter                                         $    0.66       $    0.30
Second Quarter                                        $    1.30       $    0.21
Third Quarter                                         $    1.25       $    0.40
Fourth Quarter                                        $    1.17       $    0.55


         As of June 1, 2004, the last reported sale price on the American Stock
Exchange for our common stock was $0.77. On this date, there were approximately
204 holders of record of our common stock. That number does not include
beneficial owners of common stock whose shares are held in the name of banks,
brokers, nominees or other fiduciaries.

                                      18



<PAGE>

         We have never declared any dividends on our common stock. We are
required to pay dividends on our Series A Convertible Preferred Stock in
preference and priority to dividends on our common stock. We currently intend to
retain any future earnings to discharge indebtedness and finance the growth and
development of the business. We, therefore, do not anticipate paying any cash
dividends on our common stock in the foreseeable future. Any future
determination to pay cash dividends on our common stock when we are permitted to
do so will be at the discretion of the board of directors and will be dependent
upon the future financial condition, results of operations, capital
requirements, general business conditions and other factors that the board of
directors may deem relevant.

         During the quarter ended March 31, 2004, we issued the following
securities without registration under the Securities Act of 1933:

         o        239,739 shares of common stock upon conversion of a
                  convertible note initially issued to Union Bank of California
                  pursuant to a Loan Discount Payout agreement, valued at
                  $500,000.

         o        9% Debentures to Omicron Master Trust and Midsummer
                  Investment, Ltd. convertible into our common stock at a
                  conversion price of $1.32 per share, for aggregate proceeds of
                  $3.0 million. These debentures were accompanied by five-year
                  warrants to purchase up to 1,043,479 shares of our common
                  stock at an exercise price of $1.15 per share and warrants to
                  purchase up to 8,500,000 shares of our common stock at an
                  exercise price of $5.00 per share with an expiration date of
                  the earlier of the six-month anniversary of the effective date
                  of a registration statement or September 15, 2005.

         o        warrants to an investor relations consulting firm to purchase
                  up to an aggregate of 103,000 shares of our common stock at
                  exercise prices ranging from $1.50 to $1.75 per share.

         The foregoing securities were offered and sold without registration
under the Securities Act to sophisticated investors who had access to all
information, which would have been in a registration statement, in reliance upon
the exemption provided by Section 4(2) under the Securities Act and Regulation D
thereunder, and an appropriate legend was placed on the shares.

         Information concerning securities authorized for issuance under our
equity compensation plans is included below under Item 12 under the heading
"Security Ownership of Certain Beneficial Owners and Management."

                                      19


<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA (AS RESTATED)

         The following selected financial data (as restated) should be read in
conjunction with our consolidated financial statements and related notes and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The selected consolidated financial data presented below under the
captions "Statement of Operations Data" and "Balance Sheet Data" for, and as of
the end of, each of our last five fiscal years are derived from our consolidated
financial statements. The consolidated financial statements as of March 31,
2004, 2003, and 2002 and the independent auditors' report thereon, are included
elsewhere in this report.

<TABLE>
<CAPTION>
                                                                           YEAR ENDED MARCH 31, (1)
                                                   ------------------------------------------------------------------------
                                                       2004           2003           2002            2001           2000
                                                   -----------     ----------     -----------    -----------    -----------
                                                   (Restated)
                                                                     (in thousands except for per share data)
<S>                                                <C>             <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
    Product                                        $   13,214      $  11,550      $   10,360     $   12,315     $   14,466
    Services                                            4,625         10,746          16,355         15,734         10,561
                                                   -----------     ----------     -----------    -----------    -----------
        Total revenues                                 17,839         22,296          26,715         28,049         25,027

Cost of revenues:
    Product                                             5,533          4,782           4,407          4,879          4,665
    Services                                            2,338          6,165           9,466          9,310          4,346
                                                   -----------     ----------     -----------    -----------     ----------
        Total cost of revenues                          7,871         10,947          13,873         14,189          9,011
                                                   -----------     ----------     -----------    -----------    -----------
    Gross profit                                        9,968         11,349          12,842         13,860         16,016

Expenses:
    Application development                             1,082          4,643           4,203          5,333          4,877
    Depreciation and amortization                       1,215          1,246           3,853          4,925          4,366
    Selling, general and administrative                15,246          8,072          12,036         16,985         13,769
    Impairment of intangible assets                        --             --              --          6,519             --
    Impairment of note receivable received in
      connection with the sale of IBIS Systems
      Limited                                              --             --              --          7,647             --
                                                   -----------     ----------     -----------    -----------    -----------
       Total expenses                                  17,543         13,961          20,092         41,409         23,012
                                                   -----------     ----------     -----------    -----------    -----------
Loss from operations                                   (7,575)        (2,612)         (7,250)       (27,549)        (6,996)

Other income (expense):
    Interest income                                        20              1               7            620          1,069
    Other income (expense)                                 (7)         2,208             (56)            74           (202)
    Interest expense                                   (1,952)        (1,796)         (3,018)        (3,043)        (1,493)
                                                   -----------     ----------     -----------    -----------    -----------
       Total other expense                             (1,939)           413          (3,067)        (2,349)          (626)
                                                   -----------     ----------     -----------    -----------    -----------
Loss before provision (benefit) for income taxes       (9,514)        (2,199)        (10,317)       (29,898)        (7,622)

    Provision (benefit) for income taxes                 (586)            11               2         (4,778)        (2,435)
                                                   -----------     ----------     -----------    -----------    -----------
Loss before change in accounting principle             (8,928)        (2,210)        (10,319)       (25,120)        (5,187)

    Cumulative effect of changing accounting
      principle - Goodwill valuation under
      SFAS No. 142                                         --           (627)             --             --             --
                                                   -----------     ----------     -----------    -----------    -----------
Loss from continuing operations                        (8,928)        (2,837)        (10,319)       (25,120)        (5,187)

Income (loss) from discontinued operations                 --            119          (4,339)        (3,825)         1,133
                                                   -----------     ----------     -----------    -----------    -----------

       Net loss                                        (8,928)        (2,718)        (14,658)       (28,945)        (4,054)

Cumulative preferred dividends                         (1,024)        (1,015)           (254)            --             --
                                                   -----------     ----------     -----------    -----------    -----------

Net loss available to common stockholders          $   (9,952)     $  (3,733)     $  (14,912)    $  (28,945)    $   (4,054)
                                                   ===========     ==========     ===========    ===========    ===========


                                                            20
</TABLE>


<PAGE>


<TABLE>
<CAPTION>
                                                                               YEAR ENDED MARCH 31, (1)
                                                        -------------------------------------------------------------------
                                                          2004            2003           2002          2001          2000
                                                        ---------     -----------     ---------     ---------     ---------
                                                       (Restated)
                                                                                   (in thousands)
<S>                                                     <C>           <C>             <C>           <C>           <C>
Basic and diluted earnings (loss) per share:
    Loss before change in accounting principle          $  (0.22)     $    (0.07)     $  (0.29)     $  (0.72)     $  (0.15)
    Loss from change in accounting principle                  --           (0.02)           --            --            --
                                                        ---------     -----------     ---------     ---------     ---------
    Loss from continuing operations                        (0.22)          (0.09)        (0.29)        (0.72)        (0.15)
    Income (loss) from discontinued operations                --              --         (0.12)        (0.11)         0.13
    Cumulative preferred dividends                         (0.02)          (0.04)        (0.01)           --            --
                                                        ---------     -----------     ---------     ---------     ---------
       Net loss available to common stockholders        $  (0.24)     $    (0.13)     $  (0.42)     $  (0.83)     $  (0.12)
                                                        =========     ===========     =========     =========     =========

Weighted average common shares:
    Basic                                                 41,450          29,599        35,698        34,761        32,459
    Diluted                                               41,450          29,599        35,698        34,761        32,459

BALANCE SHEET DATA:
Working capital                                         $    727      $   (4,056)     $ (5,337)     $ (2,782)     $  2,628
Total assets                                            $ 48,527      $   37,637      $ 40,005      $ 56,453      $ 94,083
Long-term obligations                                   $  2,224      $    2,807      $  8,013      $ 18,554      $ 21,586
Stockholders' equity                                    $ 38,775      $   23,842      $ 21,952      $ 26,993      $ 53,497
</TABLE>


(1) Except for the year ended March 31, 2004, certain reclassifications are
reflected in the above data since the filing of such annual reports on forms 10K
and 10K/A. Such reclassifications did not result in changes in net income
(loss), net income (loss) per share or stockholders' equity.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

OVERVIEW


         We are a provider of software solutions and services to the retail
industry. We provide solutions that help retailers understand, create, manage
and fulfill consumer demand. We derive the majority of our revenues from three
sources: the initial sale of application software licenses, or license revenues,
professional services and support, or maintenance services. Application software
license fees are dependent upon the sales volume of our customers, the number of
users of the application(s), and/or the number of locations in which the
customer plans to install and utilize the application(s). As the customer grows
in sales volume, adds additional users and/or adds additional locations, we
charge additional license fees. Professional services relate to implementation
of our software, training of customer personnel and modification or
customization work. Support, maintenance and software updates are a source of
recurring revenues and are generally based on a percentage of the software
license revenues and are charged on an annual basis pursuant to renewable
maintenance contracts. We typically charge for professional services including
consulting, implementation and project management services on an hourly basis.

         As the vast majority of our revenues are derived from the retail
industry, we are heavily dependent on the financial strength of retailers and
their capital budgets. Deterioration in the health of retailers or a reduction
in their capital budget or a decision to delay the purchase of new systems have
a direct impact on our business. Our sales cycles are long, generally three to
twelve months, and our ability to close a pipeline of potential transaction is
very unpredictable. As such, management believes that license revenue and growth
in license revenue are the best indicator of the Company's business as they
signify either new customers or an expansion of licenses of existing customers.
While there's generally a time lag between a sale of new license and when we
provide services and support, an increase in license revenue will generally lead
to an increase in services and support revenues in future quarters.

                                      21



<PAGE>

         In recent periods, we have reported flat to decreased revenues and have
suffered operating and net losses, largely attributable to general economic and
competitive conditions. In this regard, we have taken a number of steps designed
to improve our balance sheet and operations, including:


         o        Acquired two complementary companies with substantial revenues
                  and earnings potential;
         o        Revamped our management team by adding a new President and COO
                  and CTO, as well as a new CFO;
         o        Recapitalized our balance sheet, eliminating substantial debt
                  and raising new equity in its place;
         o        Improved our IBM-based core products through continuing
                  internal research and development;
         o        Obtained the rights to distribute complementary products,
                  including a new easy-to-install and easy-to-use,
                  open-architecture software system for very small retailers,
                  which we will introduce in 2004;
         o        Established partnerships with several value added resellers to
                  provide a variety of options and product extensions;
         o        Improved our distribution capabilities by adding new third
                  party channels, such as IBM and IBM's resellers, and
                  professional service firms, such as CGI and LakeWest.

We believe that these actions have positioned us to achieve sustained revenue
growth and profitability.


RESTATEMENT OF FISCAL 2004 INFORMATION

We restated our March 31, 2004 financial statements to:

         1.       Reverse $3.9 million revenue recognized on a one-time sale of
                  software technology rights,
         2.       Separately present revenues from product and services and
                  corresponding costs of revenues,
         3.       Reclassify amortization of software products from depreciation
                  and amortization expense to cost of product revenue,
         4.       Reverse a $3.9 million purchase of software technology
                  ("Software Technology" and related amortization,
         5.       Accrue $450,000 royalty liability and related recognition of
                  royalty fees pursuant to the purchase agreement of Software
                  Technology,
         6.       Recognize amortization of debt discount on the March '03,
                  April '03, May '03 and Toys "R" Us convertible debts as
                  interest expense,
         7.       Capitalize and amortize beneficial conversion interest charge
                  related to the convertible debentures acquired in March 2003,
                  April 2003, May 2003 and March 2004,
         8.       Capitalize legal fees incurred in connection with the
                  acquisitions of Page Digital Incorporated and Retail
                  Technologies International, Inc.,
         9.       Reclassify $640,000 impairment of prepaid development expense
                  from other expense to selling, general and administrative
                  expense, and
         10.      Reclassify a $1.5 million gain on debt forgiveness from
                  extraordinary item to other income.

These changes had no impact on the net cash flows from operations.


RECENT ACQUISITIONS

ACQUISITION OF PAGE DIGITAL


         On January 30, 2004, we acquired Page Digital, a developer of
multi-channel commerce software, through a merger transaction for total
consideration of $7.1 million, consisting of $2.0 million in cash, 2,500,000
shares of our common shares valued at $2.00 per share and $138,000 in
acquisition costs. The acquisition was accounted for as a purchase, and
accordingly, the operating results of Page Digital have been included in our
consolidated financial statements from the date of acquisition. In connection
with the Page Digital acquisition, we added approximately 40 employees and
recorded $6.1 million of goodwill, $1.4 million in software technology, $904,000
in customer relationships and $285,000 in trademark. For pro forma operating
results, see "Notes to Consolidated Financial Statements - Note 2" in the
Financial Statements section.


                                      22



<PAGE>

         The legitimization of business to business and business to consumer
direct commerce (Internet, brick-and-mortar, catalog, and other) has rapidly
created a substantial market for the Page Digital suite of direct commerce
applications. According to the United States Department of Commerce, the market
for multi-channel direct commerce applications was just $15 billion in 1999,
grew to $27.3 billion in 2000, grew to $32.6 billion in 2001, and it is growing
at a rate 2.5 times greater than traditional retailing (Source: Internet
Retailer, April 2002). The acquisition of Page Digital will enable us to
continue to provide our customers with Page Digital's e-commerce, customer
relations management, and Catalog Management solutions. We expect to further
integrate these solutions into our offerings to enable customers to complete the
multi-channel retail distribution and customer service chain. In addition, the
acquisition will also allow us to offer Page Digital's customers the IP
Merchandising solution, as well as Point of Sale, Loss Prevention, and IP's
other alliance solutions.

ACQUISITION OF RTI

         Pursuant to an agreement dated June 1, 2004, we acquired RTI from
Michael Tomczak, Jeffrey Boone and Intuit in a merger transaction. On March 12,
2004, we, RTI, Merger Sub and the Shareholders entered the March 12, 2004 Merger
Agreement which provided we would acquire RTI in a merger transaction in which
RTI would merge with and into Merger Sub. The merger consideration contemplated
by the March 12, 2004 Merger Agreement was a combination of cash and shares of
our common stock. The March 12, 2004 Merger Agreement was amended by the Amended
Merger Agreement dated June 1, 2004.


         Pursuant to the Amended Merger Agreement, the Merger was completed with
the following terms: (i) we assumed RTI's obligations under those certain
promissory notes issued by RTI on December 20, 2002 with an aggregate principal
balance of $2.3 million; (ii) the total consideration paid at the closing of the
Merger was $11.6 million paid in shares of our common stock with fair value of
$1.2 million, newly designated Series B Preferred Stock with fair value of $5.7
million, promissory notes totaling $3.6 million, incentive stock options with
fair value of $1.0 million and acquisition costs of $110,000; (iii) the
Shareholders and Intuit are entitled to price protection payable if and to the
extent that the average trading price of our common stock is less than $0.76 at
the time the shares of our common stock issued in the Merger and issuable upon
conversion of the Series B Preferred are registered pursuant to the Registration
Rights Agreement dated June 1, 2004 between us, the Shareholders and Intuit; and
(iv) the merger consisted of two steps (the "Merger"), first, Merger Sub merged
with and into RTI, Merger Sub's separate corporate existence ceased and RTI
continued as the surviving corporation (the "Reverse Merger"), immediately
thereafter, RTI merged with and into Merger Sub II, RTI's separate corporate
existence ceased and Merger Sub II continued as the surviving corporation (the
"Second-Step Merger").


         As a result of the Merger, each Shareholder received 1,258,616 shares
of Series B Preferred and a promissory note payable monthly over two years in
the principal amount of $1,295,000 bearing interest at 6.5% per annum. As a
result of the Merger, Intuit, the holder of all of the outstanding shares of
RTI's Series A Preferred stock, received 1,546,733 shares of our common stock
and a promissory note payable monthly over two years in the principal amount of
$530,700 bearing interest at 6.5% per annum.

         The Shareholders and Intuit were also granted registration rights.
Under the Registration Rights Agreement, we agreed to register the common stock
issuable upon conversion of the Series B Preferred issued to the Shareholders
within 30 days of the automatic conversion of the Series B Preferred into common
stock. The automatic conversion will occur upon us filing the Certificate of
Amendment with the Delaware Secretary of State increasing the authorized number
of shares of our common stock after securing shareholder approval for the
Certificate of Amendment. Under the Registration Rights Agreement, Intuit is
entitled to demand registration or to have its shares included on any
registration statement filed prior the registration statement covering the

                                      23



<PAGE>


Shareholders' shares, subject to certain conditions and limitations, or if not
previously registered to have its shares included on the registration statement
registering the Shareholders' shares. The Shareholders and Intuit are entitled
to price protection payments of up to a maximum of $0.23 per share payable by
promissory note, if and to the extent that the average closing price of our
common stock for the 10 days immediately preceding the date the registration
statement covering their shares is declared effective by the Securities and
Exchange Commission, is less than the 10 day average closing price as of June 1,
2004, which was $0.76. We have not recorded the liability relating to the price
protection at the date of acquisition as the contingency is based on future
events and cannot yet be determined. We will compute the total liability as soon
as it can be determined and recorded as a liability. The total cost of the price
protection contingency will be deferred and amortized over the shortest of the
remaining useful lives of the assets acquired in the acquisition in accordance
with SFAS 141, "Business Combinations".


         Pursuant to the Amended Merger Agreement, The Sage Group, plc as well
as certain officers and directors signed voting agreements that provide they
will not dispose of or transfer their shares of our capital stock and that they
will vote their shares of our capital stock in favor of the Certificate of
Amendment and the Amended Merger Agreement and transactions contemplated
therein.

         Upon the consummation of the Merger, Michael Tomczak, RTI's former
President and Chief Executive Officer, was appointed our President, Chief
Operating Officer and director and Jeffrey Boone, RTI's former Chief Technology
Officer, was appointed our Chief Technology Officer. We entered into two-year
employment agreements and non-competition agreements with Mr. Tomczak and Mr.
Boone.

         The combination of Island Pacific, RTI and Page Digital, will enable us
to offer a fully integrated solution to mid-tier retailers that will be unique
in the marketplace. As a result of this transaction, smaller retailers will now
be able to cost-effectively acquire a solution that provides both front and
back-end support. The combination instantly expands our products, services
offerings and distribution channels.

DISCONTINUED OPERATIONS

         Effective April 1, 2003, we sold our subsidiary, SVI Training Products
("Training Products") to its president and our former director, Arthur
Klitofsky, for the sale price of $180,000 plus earn-out payments equal to 20% of
the total gross revenues of the Training Products unit in each of its next two
fiscal years, if the revenues in each of those years exceed certain targets. We
received a promissory note for the amount of $180,000 and the earn-out payments,
if any, will be made in quarterly installments following each fiscal year,
bearing an annual interest rate of 5%. The sale of Training Products resulted in
a loss of $129,000, net of estimated income taxes, which was accrued as of March
31, 2003. Training Product's $248,000 of operating results are shown as
discontinued operations, net of the loss on sale of the Training Products unit
at March 31, 2003. In April 2004, we agreed to defer the payments due in January
2004 and April 2004 until April 2008. The balance of the note receivable was
$153,000 as of June 22, 2004.

         Due to the declining performance of our Australian subsidiary, we sold
certain assets of the Australian subsidiary to its former management and ceased
Australian operations in February 2002. However, the sale was subject to the
approval of National Australia Bank, the subsidiary's secured lender. The bank
did not approve the sale and caused a receiver to be appointed in April 2002 to
sell substantially all of the assets of the Australian subsidiary and pursue
collections on any outstanding receivables. The receiver sold substantially all
of the assets for $300,000 in May 2002 to the entity affiliated with former
management, and is actively pursuing the collection of receivables. If the sale
proceeds plus collections on receivables are insufficient to discharge the
indebtedness to National Australia Bank, we may be called upon to pay the
deficiency under our guarantee to the bank. We have accrued $187,000 as our
potential exposure but could be subject to further liability.

         The disposal of our Australian subsidiary resulted in a loss of $3.2
million. The operating results of the Australian subsidiary are shown on our
financial statements as discontinued operations at March 31, 2002.

                                      24



<PAGE>

RESULTS OF OPERATIONS

        Results of operations for the fiscal year ended March 31, 2004 ("Fiscal
2004") reflect continued weakness in new license sales of our application
software suites. As a result of our net losses, we experienced significant
strains on our cash resources throughout the Fiscal 2004. We have taken a number
of affirmative steps to address our operating situation and liquidity problems,
and to position us for improved results of operations.

         o        On June 4, 2004, we completed the acquisition of RTI, a
                  provider of management systems for retailers. See "Recent
                  Transactions - Acquisition of RTI" above.

         o        Upon completion of RTI's acquisition, Michael Tomczak, RTI's
                  CEO and President, was appointed our President, Chief
                  Operating Officer and director and Jeffrey Boone, RTI's CTO,
                  was appointed our Chief Technology Officer. Mr. Tomczak
                  replaced Steve Beck, who was serving as our president and Mr.

                  Page, who was serving as our COO and CTO. Mr. Beck served as
                  our President from April 2003 to June 2004 and our COO from
                  April 2003 to February 2004. Mr. Page served as our CTO from
                  January 2004 to June 2004 and as our COO from February 2004 to
                  June 2004.

         o        Effective January 30, 2004, we completed the acquisition of
                  Page Digital, a provider of direct commerce solutions to
                  retailers. See "Recent Transactions - Acquisition of Page
                  Digital" above.

         o        In February 2004, Michael Silverman was appointed to the
                  position of Chairman of the Board of Directors. Mr. Silverman
                  has been on our board of directors since January 2001. He
                  founded Advanced Remote Communication Solutions, Inc.
                  (formerly known as Boatracs, Inc.) in 1990. He served as its
                  Chairman until May 2002, and as Chief Executive Officer and
                  President until October 1997, and again from November 1999 to
                  May 2002. Mr. Silverman replaced Harvey Braun who was serving
                  as Chief Executive Officer and Chairman of the board. Mr.
                  Braun was our Chief Executive Officer from January 2003
                  through May 2004 and our Chairman of the board from July 2004
                  to February 2004.

         o        In January 2004, David Joseph, Page Digital's Senior Vice
                  President of Sales, was appointed our Senior Vice President of
                  Sales. Mr. Joseph has over 20 years of sales and marketing
                  experience in the software industry.

         o        In July 2003, our Board of Directors appointed Ran Furman to
                  the position of Chief Financial Officer.

         o        We completed a number of debt and equity financing
                  transactions. See "Liquidity and Capital Resources - Financing
                  Transactions" below.

                                      25



<PAGE>


The following table sets forth, for the periods indicated, the relative
percentages that certain income and expense items bear to total revenues for the
fiscal years ended March 31, 2004, 2003 and 2002 (in thousands):

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED MARCH 31,
                                                    -----------------------------------------------------------------------------
                                                             2004                        2003                       2002
                                                    -----------------------    -----------------------    -----------------------
                                                                 PERCENTAGE                 PERCENTAGE                 PERCENTAGE
                                                     AMOUNT      OF REVENUE     AMOUNT      OF REVENUE     AMOUNT      OF REVENUE
                                                    ---------    ----------    ---------    ----------    ---------    ----------
                                                         (AS RESTATED)
<S>                                                 <C>               <C>      <C>               <C>      <C>               <C>
Revenues:
   Product                                          $ 13,214           74%     $ 11,550           52%     $ 10,360           39%
   Services                                            4,625           26%       10,746           48%       16,355           61%
                                                    ---------    ----------    ---------    ----------    ---------    ----------
      Total revenues                                  17,839          100%       22,296          100%       26,715          100%

Cost of revenues:
   Product                                             5,533           31%        4,782           21%        4,407           16%
   Services                                            2,338           13%        6,165           28%        9,466           36%
                                                    ---------    ----------    ---------    ----------    ---------    ----------
      Total cost of sales                              7,871           44%       10,947           49%       13,873           52%
                                                    ---------    ----------    ---------    ----------    ---------    ----------
   Gross profit                                        9,968           56%       11,349           51%       12,842           48%

Expenses:
   Application development                             1,082            6%        4,643           21%        4,203           16%
   Depreciation and amortization                       1,215            7%        1,246            6%        3,853           14%
   Selling, general and administration                15,246           85%        8,072           36%       12,036           45%
                                                    ---------    ----------    ---------    ----------    ---------    ----------
      Total expenses                                  17,543           98%       13,961           63%       20,092           75%
                                                    ---------    ----------    ---------    ----------    ---------    ----------

Loss from operations                                  (7,575)         (42)%      (2,612)         (12)%      (7,250)         (27)%

Other income (expense)
   Interest income                                        20           -- %           1            0%            7           -- %
   Other income (expense)                                 (7)          -- %       2,208           10%          (56)          -- %
   Interest expense                                   (1,952)         (11)%      (1,796)         (8)%       (3,018)         (11)%
                                                    ---------    ----------    ---------    ----------    ---------    ----------
      Total other expense                             (1,939)         (11)%         413            2%       (3,067)         (11)%
                                                    ---------    ----------    ---------    ----------    ---------    ----------

Loss before provision (benefit) for income taxes      (9,514)         (53)%      (2,199)         (10)%     (10,317)         (38)%

      Provision (benefit) for income taxes              (586)          (3)%          11            0%            2           -- %
                                                    ---------    ----------    ---------    ----------    ---------    ----------

Loss before change in accounting principle            (8,928)         (50)%      (2,210)         (10)%     (10,319)         (38)%

   Cumulative effect of changing accounting
     principle - Goodwill valuation under
     SFAS No. 142                                         --                       (627)                        --
                                                    ---------                  ---------                  ---------

Loss from continuing operations                       (8,928)                    (2,837)                   (10,319)

Income (loss) from discontinued operations,
   net of taxes                                           --                        119                     (4,339)
                                                    ---------                  ---------                  ---------

Net loss                                              (8,928)                    (2,718)                   (14,658)

Cumulative preferred dividends                        (1,024)                    (1,015)                      (254)
                                                    ---------                  ---------                  ---------

Net loss available to common stockholders           $ (9,952)                  $ (3,733)                  $(14,912)
                                                    =========                  =========                  =========
</TABLE>


FISCAL YEAR ENDED MARCH 31, 2004 COMPARED TO FISCAL YEAR ENDED MARCH 31, 2003

                                      26



<PAGE>


TOTAL REVENUES

         Product revenues consist of license sales, recurring maintenance
revenues and sale of partner products and hardware. Service revenue consists of
professional services incurred in implementation, training and modifications, as
well as reimbursed costs. Product revenues were $13.2 million and $11.6 million
in the fiscal years ended March 31, 2004 and 2003, respectively. Product
revenues increased by $1.7 million, or 14%, primarily due to an increase of $1.8
million from the sale of partner products, the inclusion of $0.9 million of
product revenues for Page Digital, an increase of $0.5 million in maintenance
revenue, offset by $1.7 million decrease in license sales. We established
relationships with strategic partners and began to offer their products,
including IP Viewpoint, IP Buyers' Workmate, IP Integrator and IP Synaro, in the
fourth quarter of fiscal 2003. Services revenues were $4.6 million and $10.7
million in fiscal years ended March 31, 2004 and 2003, respectively. Services
revenues decreased by $6.1 million, or 57%, due primarily to a $5.9mm decrease
from Toys R Us., Inc. "(Toys"), offset by the inclusion of $0.2 million of
services revenues for Page Digital. The decrease in Toys revenue is due to
completion of development contract in fiscal 2003. Toys revenue in fiscal 2004
consisted primarily of implementation services. Toys had been a major customer
since fiscal 2000 and terminated its contract in third quarter of fiscal 2004.
As we don't anticipate additional material Toys revenue in the near future, the
loss of Toys will have a significant impact on future revenues as we attempt to
replace those revenues with revenues generated from new customers. Total
revenues decreased $4.5 million, or 20%, to $17.8 million in the fiscal year
ended march 31, 2004 from $22.3 million in the fiscal year ended March 31, 2003
due to the above factors. Excluding Toys revenues, total revenues were $16.3
million for the fiscal year ended March 31, 2004 compared to $14.8 million in
the fiscal year ended March 31, 2003.


         Fiscal 2004 and 2003 were challenging years for the sale of new
application licenses. The slow down in the U.S. and world economies combined
with the fear of future terrorist attacks and the ongoing hostilities in the
world caused the retail industry to be more cautious with their investment in
information systems and deliberately evaluating solutions, which resulted in
decreases in sales and in extended sales cycles. In addition, our financial
condition may have interfered with our ability to sell new application software
licenses, as implementation of our applications generally requires extensive
future services and support, and some potential customers have expressed concern
about our financial ability to provide these ongoing services. We believe
strongly that we provide and will continue to provide excellent support to our
customers, as demonstrated by the continuing upgrade purchases by our top-tier
established customer base. Significant sales growth may however depend in part
on our ability to improve our financial condition.


COST OF REVENUES/GROSS PROFIT

         Cost of revenues decreased $3.1 million, or 28%, to $7.9 million in the
fiscal year ended March 31, 2004 from $10.9 million in the fiscal year ended
March 31, 2003. Cost of product revenues increased $0.8 million, or 16%, to $5.5
million in fiscal year ended March 31, 2004 from $4.8 million in fiscal year
ended March 31, 2003. Cost of product revenues included amortization expense of
$2.6 million and $2.9 million for the fiscal years ended March 31, 2004 and
2003, respectively. Cost of services revenue decreased $3.8 million, or 62%, to
$2.3 million in the fiscal year ended March 31, 2004 from $6.2 million in the
fiscal year ended March 31, 2003. Total gross profit decreased $1.4 million, or
12%, to $10.0 million in the fiscal year ended March 31, 2004 from $11.3 million
in the fiscal year ended march 31, 2003 due primarily to a large decrease in
service revenues, offset by an increase in product revenues. Total gross profit
was 56% and 51% for the fiscal years ended March 31, 2004 and 2003, re
spectively, primarily due to product sales, which generally have higher margins,
comprising 74% of total sales in the fiscal year ended March 31, 2004 compared
to 52% in the fiscal year ended March 31, 2003. Gross profit on products
remained relatively consistent 58% and 59% for the fiscal years ended March 31,
2004 and 2003, respectively, while gross profit on services was 49% and 43% for
the fiscal years ended March 31, 2004 and 2003, respectively. The increase in
gross profit margin on services was due primarily to a decrease in modification
and professional services sales, which have low margins. Modification and
professional services sales represented 5% and 15%, respectively, of total
revenues during fiscal 2004 and 22% and 23%, respectively, of total revenues
during fiscal 2003.

                                      27



<PAGE>

         Cost of revenues for fiscal 2004 and 2003 included $0.4 million and
$2.4 million, respectively, in costs associated with the development or
modification of modules for Toys, including the use of higher cost outsource
development services (subcontractors) for certain components of the overall
project. These costs are neither capitalized nor included in application
technology development expenses, but we consider them to be part of our overall
application technology development program.


APPLICATION DEVELOPMENT EXPENSE

         Application development expense decreased by $3.6 million, or 78%, to
$1.0 million in fiscal year ended March 31, 2004 from $4.6 million in the fiscal
year ended March 31, 2003. The decrease in application development expense is
primarily due to capitalization of $3.1 million development costs on our new
modules and products which have reached technological feasibility.


DEPRECIATION AND AMORTIZATION

         Depreciation and amortization remained at $1.2 million in fiscal years
ended March 31, 2004 and march 31, 2003.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses increased by $7.2 million,
or 89%, to $15.2 million in the fiscal year ended March 31, 2004 compared to
$8.1 million in the fiscal year ended March 31, 2003 due to the following:

         o        $4.8 million increase in sales and administrative expenses as
                  we focused on developing our sales organization, increasing
                  marketing efforts and building infrastructure in the current
                  year,
         o        $0.6 million prepaid development expenses relating to 5R,
         o        $0.3 million operating expenses for Page Digital which was
                  acquired on January 31, 2004,
         o        $0.7 million increase in bad debt expense resulted from a
                  write-off of an account receivable due to the termination of
                  Toys agreement,
         o        $0.3 million accounting  costs for acquisitions of
                  Page Digital and RTI and
         o        $0.4 million increase in audit, accounting and legal fees
                  relating to financing activities during fiscal 2003 and 2004.

OTHER INCOME

         Other income for the fiscal year ended 2003 represents $2.2 million
gain on debt forgiveness On March 31, 2003, we entered into a Discounted Loan
Payoff Agreement with Union Bank of California (the "Bank"), our senior lender.
Under this agreement, we paid the Bank $2.8 million acquired from the sale of 9%
convertible debentures to certain investors. We also issued to the Bank 1
million shares of our common stock and a $500,000 one-year unsecured,
non-interest bearing convertible note payable in either cash or stock, at our
option. The cash payment, shares and convertible note were accepted by the Bank
in full satisfaction of our debt to the Bank. The Bank also canceled the warrant
to purchase 1.5 million shares of our common stock and returned all collateral
held, including 10.7 million shares of our common stock pledged as security. In
connection with the settlement of the debt to the Bank, we reported a gain of
$2.2 million.

INTEREST EXPENSE

         Interest expense increased by $0.2 million, or 11%, to $2.0 million in
the fiscal year ended March 31, 2004 from $1.8 million in the fiscal year ended
March 31, 2003. The increase is due to primarily to an increase in the
amortization of debt discounts on convertible debt, offset by $0.5 million
decrease in interest expense due to 72% decrease in average balance of
interest-bearing loans as compared to prior year.

PROVISION FOR INCOME TAXES

         Provision for income taxes produced an income of $0.6 million in the
fiscal year ended March 31, 2004. The income tax refund of $0.6 million in the
fiscal 2004 resulted from amending prior years' income tax returns to carry back
net operating losses incurred in the past two years.



                                      28



<PAGE>

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE

         The cumulative effect of accounting change in the fiscal year end March
31, 2003 was a non-cash, net-of-tax transitional goodwill impairment charge of
$0.6 million which relates to the adoption of SFAS No. 142.

CUMULATIVE PREFERRED DIVIDEND

         Cumulative dividends on the outstanding Series A convertible preferred
stock attributable to the fiscal years ended March 31, 2004 and 2003 were $1.0
million. During fiscal 2004, a dividend of $.04 million on Series A convertible
preferred stock was declared and paid by issuing 500,000 shares of our common
stock.

FISCAL YEAR ENDED MARCH 31, 2003 COMPARED TO FISCAL YEAR ENDED MARCH 31, 2002


TOTAL REVENUES

         Product revenues were $11.6 million and $10.4 million in the fiscal
years ended March 31, 2003 and 2002, respectively. Product revenues increased by
$1.2 million, or 11%, primarily due to an increase of $0.8 million in license
sales and $0.3 million in maintenance revenue. Services revenues were $10.7
million and $16.4 million in fiscal years ended March 31, 2003 and 2002,
respectively. Services revenues decreased by $5.7 million, or 35%, due primarily
to a $5.9mm decrease from Toys, offset by $0.4 million in professional services.
The decrease in Toys revenue is due to completion of development contract in
fiscal 2003. Total revenues decreased $4.4 million, or 17%, to $22.3 million in
the fiscal year ended march 31, 2003 from $26.7 million in the fiscal year ended
March 31, 2002 due to the above factors. Excluding Toys revenues, total revenues
were $14.8 million for the fiscal year ended March 31, 2003 compared to $13.3
million in the fiscal year ended March 31, 2003.

COST OF REVENUES/GROSS PROFIT

         Cost of revenues decreased $2.9 million, or 21%, to $10.9 million in
the fiscal year ended March 31, 2003 from $13.9 million in the fiscal year ended
March 31, 2002. Cost of product revenues increased $0.4 million, or 9%, to $4.8
million in fiscal year ended March 31, 2003 from $4.4 million in fiscal year
ended March 31, 2002. Cost of product revenues included amortization expense of
$2.9 million for the fiscal years ended March 31, 2003 and 2002. Cost of
services revenue decreased $3.3 million, or 35%, to $6.2 million in the fiscal
year ended March 31, 2003 from $9.5 million in the fiscal year ended March 31,
2002. Total gross profit decreased $1.5 million, or 12%, to $11.3 million in the
fiscal year ended March 31, 2003 from $12.8 million in the fiscal year ended
march 31, 2002 due primarily to a large decrease in service revenues, offset by
an increase in product revenues. Total gross profit was 51% and 48% for the
fiscal years ended March 31, 2003 and 2002, respectively, primarily due to
product sales, which generally have higher margins, comprising 52% of total
sales in the fiscal year ended March 31, 2004 compared to 39% in the fiscal year
ended March 31, 2003. Gross profit on products remained relatively consistent
58% and 57% for the fiscal years ended March 31, 2003 and 2002, respectively,
while gross profit on services also remained relatively consistent at 43% and
42% for the fiscal years ended March 31, 2003 and 2002, respectively.

         Cost of revenues for fiscal 2003 and 2002 included $2.4 million and
$3.6 million, respectively, in costs associated with the development or
modification of modules for Toys, including the use of higher cost outsource
development services (subcontractors) for certain components of the overall
project. These costs are neither capitalized nor included in application
technology development expenses, but we consider them to be part of our overall
application technology development program.


APPLICATION DEVELOPMENT EXPENSE

         Application development expense increased by $0.4 million, or 10%, to
$4.6 million in fiscal year ended March 31, 2003 from $4.2 million in the fiscal
year ended March 31, 2002. The increase in application development expense is
primarily due to the ongoing enhancement of our suites of applications.

                                      29



<PAGE>


DEPRECIATION AND AMORTIZATION

         Depreciation and amortization decreased by $2.6 million, or 68%, to
$1.2 million in the fiscal year ended March 31, 2003 from $3.9 million in the
fiscal year ended March 31, 2002. The decrease is mainly due to a reduction of
$2.2 million in amortization pursuant to the non-amortization provisions of
Statement Financial Accounting Standard ("SFAS") No. 142 for goodwill with
indefinite useful lives.


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


         Selling, general and administrative expenses decreased by $3.9 million,
or 33%, to $8.1 million compared to $12.0 million in the fiscal year ended March
31, 2002. The decrease is due to decrease in revenues, the personnel reduction
implemented in the third quarter of 2002 and fourth quarter of 2003 and control
of expenditures.

OTHER INCOME

         On March 31, 2003, we entered into a Discounted Loan Payoff Agreement
with Union Bank of California (the "Bank"), our senior lender. Under this
agreement, we paid the Bank $2.8 million acquired from the sale of 9%
convertible debentures to certain investors. We also issued to the Bank 1
million shares of our common stock and a $500,000 one-year unsecured,
non-interest bearing convertible note payable in either cash or stock, at our
option. The cash payment, shares and convertible note were accepted by the Bank
in full satisfaction of our debt to the Bank. The Bank also canceled the warrant
to purchase 1.5 million shares of our common stock and returned all collateral
held, including 10.7 million shares of our common stock pledged as security. In
connection with the settlement of the debt to the Bank, we reported a
gain of $2.2 million.


INTEREST EXPENSE


         Interest expense decreased by $1.2 million, or 40%, to $1.8 million in
the fiscal year ended March 31, 2003 from $3.0 million in the fiscal year ended
March 31, 2002. Interest expense in fiscal 2002 included $1.2 million interest
expense on the $10.0 million note payable to Softline. Our obligations related
to this note were released by Softline effective in January 1, 2002 in
connection with the integrated series of recapitalization transactions with
Softline. The decrease was also due to $0.7 million decrease in amortization of
debt discount.


DISCONTINUED OPERATIONS

         Income from discontinued operations in fiscal 2003 represents a profit
of $0.2 million from operations of the Training Products subsidiary; offset in
part by $0.1 million accrual for loss on the sale of our Training Products
subsidiary. Our Training Products subsidiary was sold effective April 1, 2003.


CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE

         The cumulative effect of accounting change in the fiscal year end March
31, 2003 was a non-cash, net-of-tax transitional goodwill impairment charge of
$0.6 million which relates to the adoption of SFAS No. 142.

CUMULATIVE PREFERRED DIVIDEND

         Cumulative dividends on the outstanding preferred stock attributable to
the fiscal years ended March 31, 2003 and 2002 were $1.0 million and $0.3
million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

         During the fiscal year ended March 31, 2004, we financed our operations
using cash on hand, internally generated cash, proceeds from the sale of common
stock and proceeds from sale of convertible debentures. At March 31, 2004 and
2003, we had cash of $2.1 million and $1.3 million, respectively.

                                      30



<PAGE>


         Operating activities used cash of $8.9 million in the fiscal year ended
March 31, 2004 and $1.1 million in the fiscal year ended March 31, 2003. Cash
used for operating activities in the fiscal year ended March 31, 2004 resulted
from $8.9 million net loss, $4.2 million decrease in accounts payable and
accrued expenses and $2.1 increase in accounts receivable and other receivables;
offset in part by non-cash charges of $3.8 million for depreciation and
amortization, $1.6 million interest charges on convertible debt and $0.8 million
for provision for allowance for doubtful accounts.

         Investing activities used cash of $5.6 million in the fiscal year ended
March 31, 2004 and $0.1 million in the fiscal year ended March 31, 2003. Cash
used for investing activities in the current year was primarily for
capitalization of $3.1 million software development costs, acquisition of Page
Digital totaling $2.1 million and $0.5 million purchases of furniture and
equipment.


         Financing activities provided cash of $15.3 million and $1.3 million in
the fiscal years ended March 31, 2004 and 2003, respectively. The financing
activities in the current year included net proceeds of $11.8 million from the
sale of common stock and $3.7 million from the issuance of convertible
debentures.

         Changes in the currency exchange rates of our foreign operation had the
effect of decreasing cash by $.01 million in the fiscal years ended March 31,
2004, 2003 and 2002.

         Accounts receivable increased to $4.6 million at March 31, 2004 from
$4.0 million at March 31, 2003. The increase is primarily due to receivables
acquired in connection with the acquisition of Page Digital.


         We believe that our cash and cash equivalent and funds generated from
operations will provide adequate liquidity to meet our normal operating
requirements for at least the next twelve months. Our future capital
requirements depend on many factors, including our application development,
sales and marketing activities. In addition, we have incurred losses for the
last three fiscal years and we had a negative working capital in fiscal 2003.
In the next twelve months, we anticipate raising additional capital through
public or private equity or debt financings. In the long-term, we anticipate
that cash from operations will be sufficient to provide liquidity for our
normal operating requirements. As such, we do not know whether additional
financing will be available when needed, or available on terms acceptable to
us. We may raise capital through public or private equity or debt financings.
If we are unable to raise the needed funds, we may be forced to curtail some
or all of our activities and we may not be able to grow.

CASH POSITION

         As a result of our indebtedness and net losses for the past three
years, we have experienced significant strains on our cash resources. In order
to manage our cash resources, we have extended payment terms with many of our
trade creditors wherever possible, have diligently focused our collection
efforts on our accounts receivable and have been actively engaged in raising
capital. See "Financing Transactions" below. We had a working capital of $0.7
million at March 31, 2004 compared to a negative working capital of $4.1 million
at March 31, 2003.


         During fiscal 2003 and the first half of fiscal 2004, we were unable to
make timely, monthly rent payments due for our Irvine and Carlsbad facilities.
We renegotiated rent terms with the landlords of our Irvine and Carlsbad
facilities, and we have been in compliance with the renegotiated terms. In July
2003, we terminated the lease for the Carlsbad office. We are current with rent
payments for all our presently leased facilities.

                                      31



<PAGE>

         We have been actively engaged in attempts to resolve our liquidity
problems. In April and May 2003, we sold 9% convertible debentures for an
aggregate of $0.7 million. On June 27, 2003, we sold 5,275,000 shares of our
common stock for an aggregate of $7.9 million, less expenses and placement fees,
in a private placement transaction. On November 7, 2003, we sold 3,180,645
shares of our common stock for an aggregate of $4.9 million, less expenses and
placement fees, in a private placement transaction. On March 15, 2004, we issued
9% convertible debentures and warrants for an aggregate of $3.0 million, less
expenses, in a private placement transaction. We believe we will have sufficient
cash to remain in compliance with our debt obligations, and meet our critical
operating obligations, for the next twelve months. We may continue to seek
private or public equity and/or debt placements to help discharge aged payables,
pursue growth initiatives and prepay bank indebtedness. We have no binding
commitments for funding at this time. If we do decide to seek financing, it may
not be available on terms and conditions acceptable to us, or at all.

FINANCING TRANSACTIONS

ICM ASSET MANAGEMENT, INC.

         In May and June 2001, we issued a total of $1.25 million in convertible
notes to a limited number of accredited investors related to ICM Asset
Management. The notes were originally due August 30, 2001, and accrued interest
at the rate of 12% per annum to be paid until maturity, with the interest rate
increasing to 17% in the event of a default in payment of principal or interest.
We also issued the investors three-year warrants to purchase 250 common shares
for each $1,000 in notes purchased, at an exercise price of $1.50 per share.

         In July 2002, we replaced the existing notes with new notes having a
maturity date of September 30, 2003. The interest rate on the new notes was
reduced to 8% per annum, increasing to 13% in the event of a default in payment
of principal or interest. We were required to pay accrued interest on the new
notes calculated from July 19, 2002, in quarterly installments beginning
September 30, 2002. The investors agreed to reduce accrued interest and late
charges on the original notes by up to $16,000, and to accept the reduced amount
in 527,286 shares of our common stock valued at $0.41 per share which was the
average closing price of our shares on the American Stock Exchange for the 10
trading days prior to July 19, 2002. The new notes were convertible at the
option of the holders into shares of our common stock valued at $0.60 per share.

         In July 2002, we also replaced the warrants previously issued to the
investors to purchase an aggregate of 3,033,085 shares at exercise prices
ranging from $0.85 to $1.50, and expiring on various dates between December 2002
and June 2004, with new warrants to purchase an aggregate of 1,600,000 shares at
$0.60 per share, expiring July 19, 2007. The replacement warrants are not
callable by us. None of the warrants have been exercised as of June 1, 2004.

         In September 2003, the investors converted the outstanding principal
and accrued interest totaling $1.4 million into 2,287,653 shares of our common
stock.

SOFTLINE/THE SAGE GROUP

         In May 2002, we entered into a series of transactions with Softline by
which:

         1.   We transferred Softline the note received in connection with the
              sale of IBIS Systems Limited ("IBIS Note").

         2.   We issued Softline 141,000 shares of newly-designated Series A
              Convertible Preferred Stock ("Series A Preferred").

         3.   Softline released us from approximately $12.3 million in
              indebtedness due to Softline under a promissory note.

         4.   Softline transferred us 10,700,000 shares of our common shares.

         These transactions were recorded for accounting purposes on January 1,
2002, the date when Softline took effective control of the IBIS note and we
ceased accruing interest on the Softline note. We did not recognize any gain or
loss in connection with the disposition of the IBIS Note or the other components
of the transactions.

                                      32



<PAGE>

         The Series A Preferred has a stated value of $100 per share and is
redeemed at our option any time prior to the maturity date of December 31, 2006
("Maturity Date") for 107% of the stated value and accrued and unpaid dividends.
The shares are entitled to cumulative dividends of 7.2% per annum, payable
semi-annually. At June 1, 2004, cumulative dividends amount to $2.2 million. The
holders may convert each share of Series A Preferred at any time into the number
of shares of our common stock determined by dividing the stated value plus all
accrued and unpaid dividends, by a conversion price initially equal to $0.80.
The conversion price will increase at an annual rate of 3.5% calculated on a
semi-annual basis. As of June 1, 2004, the conversion price is $0.86 per share.
On the Maturity Date, any outstanding shares of Series A Preferred will be
automatically converted into shares of our common stock at a conversion price
equal to 95% of the average closing price of our common stock for the last ten
business days. The Series A Preferred is entitled upon liquidation to an amount
equal to its stated value plus accrued and unpaid dividends in preference to any
distributions to common stockholders. The Series A Preferred has no voting
rights prior to conversion into common stock, except with respect to proposed
impairments of the Series A Preferred rights and preferences, or as provided by
law. We have the right of first refusal to purchase all but not less than all of
any shares of Series A Preferred or shares of common stock received on
conversion which the holder may propose to sell to a third party, upon the same
price and terms as the proposed sale to a third party.

         On September 17, 2003, an aggregate 500,000 shares of common stock,
consisting of accrued dividends on the Series A Convertible Preferred Stock,
were issued to certain institutional investors.

         On November 14, 2003, the Sage Group acquired substantially all of the
assets of Softline, which included 141,000 shares of our Series A Convertible
Preferred Stock, 8,923,915 shares of our common stock and 71,812 shares of our
common stock underlying stock options. In connection with this acquisition,
certain agreements of Softline were also assigned to and assumed by the Sage
Group, including the rights and obligations respecting and arising from the
Option Agreement between Softline and Steven Beck, as trustee of a certain
management group of the Company. Accordingly, the Optionees under the Option
Agreement had the right to purchase 8,000,000 shares of common stock of the
Company and such number of shares of Series A Convertible Preferred Stock
convertible into 17,125,000 shares of common stock of the Company from the Sage
Group for a price of $0.80 per Option Share. The Option expired, unexercised, on
March 24, 2004.


TOYS "R" US, INC.

         In May 2002, Toys agreed to invest $1.3 million for the purchase of a
non-recourse convertible note and a warrant to purchase 2,500,000 of our common
shares. The purchase price was received in installments through September 27,
2002. The note was non-interest bearing, and the face amount, which was 16% of
the $1.3 million purchase price as of May 29, 2002 was either convertible into
shares of our common stock valued at $0.553 per share or payable in cash at our
option, at the end of the term. The note was due May 29, 2009, or if earlier
than that date, three years after the completion of the development project
contemplated in the development agreement between us and Toys entered into at
the same time. In November 2002, the Board decided that this note would be
converted solely for equity and would not be repaid in cash and the $1.3 million
balance was presented as committed common stock on our consolidated balance
sheet at March 31, 2003. However, in order to comply with SFAS No. 150,
"Accounting for Certain Financial Instruments With Uncertainties of Both
Liabilities and Equity", we have re-classified this note from equity to
liabilities at September 30, 2003. The warrant entitled Toys to purchase up to
2,500,000 of our common shares at $0.553 per share. 400,000 shares had vested as
of May 29, 2002, and continued to vest at the rate of 100,000 shares per month
until February 28, 2004.


         In November 2003, we entered an agreement with Toys to terminate the
software development and services agreement. Pursuant to the agreement, the $1.3
million outstanding convertible note due to Toys, which would have been
converted solely for equity, was settled in full by offsetting against accounts
receivable due to us from Toys and the warrant to purchase 2,500,000 shares of
our common stock was cancelled.

         In accordance with generally accepted accounting principles, the
difference between the conversion price of the note of $0.553 and our stock
price on the date of issuance of the note was considered to be beneficial
interest expense and amounted to $473,000. A total of $151,000 had been
amortized during the period from the date of issuance to the date of the note
was classified as equity. Upon classifying the note as equity, the remaining
balance of $322,000 was expensed.

                                      33



<PAGE>

         We have also allocated the proceeds received from debt or convertible
debt with detachable warrants using the relative fair value of the individual
elements at the time of issuance. The amount allocated to warrant was $405,000.
A total of $20,000 had been amortized during the period from the date of
issuance to the date of the note was classified as equity. Upon classifying the
note as equity, the remaining balance of $386,000 was expensed..


9% CONVERTIBLE DEBENTURES

         On March 15, 2004, we sold Omicron and Midsummer (collectively, the
"Purchasers") convertible debentures (the "March 2004 Debentures") for an
aggregate price of $3.0 million pursuant to a securities purchase agreement (the
"Purchase Agreement"). The March 2004 Debentures bear an interest rate of 9% per
annum, and provide for interest only payments on a quarterly basis, payable, at
our option, in cash or shares of our common stock. The March 2004 Debentures
mature on May 15, 2006. The March 2004 Debentures are convertible into shares of
our common stock at a conversion price of $1.32 per share, subject to adjustment
if we offer or sell any securities for an effective per share price that is less
than 87% of the then current conversion price, negatively restate any of our
financial statements or make any public disclosure that negatively revises or
supplements any prior disclosure regarding a material transaction consummated
prior to March 15, 2004 or trigger other customary anti-dilution protections. If
certain conditions are met, we have the option to redeem the 9% Debentures at
110% of their face value, plus accrued but unpaid interest.

         We must redeem the March 2004 Debentures at the initial monthly amount
of $233,333 commencing on February 1, 2005. If the daily volume weighted average
price of our common stock on the American Stock Exchange exceeds $1.15 by more
than 200% for 15 consecutive trading days, we have the option to cause the
Purchasers to convert the then outstanding principal amount of the March 2004
Debentures into our common stock at the conversion price then in effect.

         We also issued the Purchasers two warrants as follows: (1) Series A
Warrants to purchase up to an aggregate of 1,043,479 shares of our common stock
at an exercise price of $1.15 per share with a five-year term, exercisable at
anytime after September 16, 2004, subject to adjustment if the we offer or sell
any securities for an effective per share price that is less than the then
current exercise price, negatively restate any of our financial statements or
make any public disclosure that negatively revises or supplements any prior
disclosure regarding a material transaction consummated prior to March 15, 2004
or trigger other customary anti-dilution protections and (2) Series B Warrants
to purchase up to 8,500,000 shares of our common stock with an exercise price of
$5 per share, these warrants are immediately exercisable and expire on the
earlier of the six-month anniversary of the effective date of a registration
statement that is required to be filed or 18 months from March 15, 2004, subject
to adjustment upon the issuance or sale of securities in a public offering for
an effective per share price that is less than the then-current exercise price
and upon the trigger of other customary anti-dilution protections.

         For a period of one hundred eighty (180) days following the date the
registration statement is declared effective ("Effective Date"), each Purchaser
has the right, in its sole discretion, to elect to purchase such Purchaser's pro
rata portion of additional Debentures and Series A Warrants for an aggregate
purchase price of up to $2.0 million in a second closing (the "Second Closing").
The terms of the Second Closing shall be identical to the terms set forth in the
Purchase Agreement and related documents, except that, the conversion price for
the additional debentures and the exercise price for the additional warrants
shall be equal to 115% of the ten day average of the daily volume weighted
average price of our common stock on the American Stock Exchange preceding the
Second Closing ("Second Closing Price"). The Series A Warrant coverage for the
Second Closing shall be 40% of each Purchaser's subscription amount in the
Second Closing divided by the Second Closing Price.

         For a period of one hundred eighty (180) days following the Effective
Date, if the daily volume weighted average price of our common stock for twenty
(20) consecutive trading days exceeds $2.00, subject to adjustment, we may, on
one occasion, in our sole determination, require the Purchasers to purchase each
such Purchaser's pro rata portion of additional debentures and Series A Warrants
for an aggregate purchase price of up to $2.0 million. Any such additional
investment shall be under the terms set forth in the Purchase Agreement and
related documents, except that, the conversion price for the additional
debentures and the exercise price for the additional warrants shall be equal to
the then current conversion price and warrant exercise price for the March 2004
Debentures and warrants purchased on March 15, 2004.

                                      34



<PAGE>

         For a period of six (6) months following the Effective Date, the
Purchasers have a right of first refusal to participate in certain future
financings by us involving the sale of our common stock or equivalent
securities. The Purchasers were also granted registration rights under a
Registration Rights Agreement dated March 15, 2004, pursuant to which we were
required to file a registration statement respecting the common stock issuable
upon the conversion of the debentures and exercise of the warrants within thirty
(30) days after March 15, 2004, and to use best efforts to have the registration
statement declared effective at the earliest date. If a registration statement
was not filed within such thirty (30) day period or declared effective within
such ninety (90) day period (or within one hundred twenty (120) days in the
event of a full review by the SEC), we became obligated to pay liquidated
damages to the Purchasers equal to 2% per month of each such Purchasers'
subscription amount under the Purchase Agreement plus the value of any warrants
issued pursuant to the Purchase Agreement then held by such Purchaser. Omicron
and Midsummer waived their registration rights with respect to the shares
issuable upon exercise of the Series B Warrant. The registration statement has
not been filed as of June 15, 2004; therefore, $120,000 in liquidated damages
has been accrued and included in accrued expenses at March 31, 2004.


         In accordance with generally accepted accounting principles, the
difference between the conversion price of $1.32 and our stock price of the date
of issuance of the debentures amounted to $265,000 and is being amortized over
the term of the debentures. We recognized beneficial interest expense of $5,000
in the fiscal year ended March 31, 2004.

         We have also allocated the proceeds received from convertible debt with
detachable warrants using the relative fair market value of the individual
elements at the time of issuance. The amount allocated to the warrants was
determined to be $720,000 and is being amortized over the life of the
convertible debentures. We recorded an interest expense of $14,000 in the fiscal
year ended March 31, 2004.


         In March 2003, we entered into a Securities Purchase Agreement for the
sale of convertible debentures (the "March '03 Debentures") to Omicron,
Midsummer and Islandia, L.P. ("Islandia") for the total proceeds of $3.5
million. The March '03 Debentures were convertible into shares of our common
stock at a conversion price of $1.02 per share. The March '03 Debentures were
due to mature in May 2005 and bore an interest rate of 9% per annum. Interest
was payable on a quarterly basis beginning June 1, 2003, at our option, in cash
or shares of common stock. If certain conditions were met, we had the right, but
not the obligation, to redeem the debentures at 110% of their face value, plus
accrued interest. Commencing in February 2004, we would have been obligated to
redeem $219,000 per month of the debenture. In August 2003, the daily volume
weighted average price of our common stock on the American Stock Exchange
exceeded $1.02 by more than 200% for 15 consecutive trading days; therefore, we
exercised the option to cause the investors to convert their debentures into
common stock. As a result, all outstanding balances of the March '03 Debentures
were converted into an aggregate of 3,419,304 shares of our common stock during
the second quarter of fiscal year ended March 31, 2004.


         In accordance with generally accepted accounting principles, the
difference between the conversion price of $1.02 and our stock price on the date
of issuance of the notes amounted to $715,000 and was being amortized over the
term of the debt. A total of $165,0000 had been amortized during the period from
the date of issuance to the date of conversion to common stock. Upon the
conversion to common stock, the remaining balance of $550,000 was expensed.

         Omicron, Midsummer and Islandia also received warrants to purchase up
to, in the aggregate, 1,572,858 shares of common stock with an exercise price
equal to $1.02 per share. The warrants expire five years from the date of
issuance. We allocated the proceeds received from debt or convertible debt with
detachable warrants using the relative fair value of the individual elements at
the time of issuance. The amount allocated to the warrants was $625,000 and was
being amortized over the term of the convertible debentures. A total of
$144,0000 had been amortized during the period from the date of issuance to the
date of conversion into common stock. Upon the conversion of the debentures into
common stock, the remaining balance of $481,000 was expensed.


                                      35



<PAGE>

         In April 2003, we entered into a Securities Purchase Agreement with
MBSJ, LLC for a sale of convertible debenture (the "April '03 Debenture"). The
debenture was convertible into shares of our common stock at a conversion price
of $1.02 per share, for the total proceeds of $400,000. Interest was due on a
quarterly basis commencing on June 1, 2003, payable in cash or shares of common
stock at our option. Commencing on February 1, 2004, we would have been
obligated to redeem $20,000 per month of the debenture. The April '03 Debenture
was due to mature in October 2005. In August 2003, the daily volume weighted
average price of our common stock on the American Stock Exchange exceeded $1.02
by more than 200% for 15 consecutive trading days; therefore, we exercised the
option to cause the investors to convert their debentures into common stock. As
a result, all outstanding balance of the April '03 Debenture was converted into
390,777 shares of our common stock during the second quarter of fiscal year
ended March 31, 2004.


         In accordance with generally accepted accounting principles, the
difference between the conversion price of $1.02 and our stock price on the date
of issuance of the notes amounted to $69,000 and was being amortized over the
term of the debt. A total of $16,000 had been amortized during the period from
the date of issuance to the date of conversion into common stock. Upon the
conversion of the debentures into common stock, the remaining balance of $53,000
was expensed.

         The April '03 Debenture was accompanied by a five-year warrant to
purchase 156,311 shares of our common stock with an exercise price of $1.02 per
share. We allocated the proceeds received from debt or convertible debt with
detachable warrants using the relative fair value of the individual elements at
the time of issuance. The amount allocated to the warrants was determined to be
$63,000 and was being amortized over the term of the convertible debentures. A
total of $15,000 had been amortized from the date of issuance to the date of
conversion into common stock. Upon the conversion of the debenture into common
stock, the remaining balance of $48,000 was expensed.


         In May 2003, we entered into an agreement with Crestview Capital Fund
I, L.P., Crestview Capital Fund II, L.P. and Crestview Capital Offshore Fund,
Inc. (collectively, the "Crestview Investors") for the sale of 9% debentures,
convertible into shares of our common stock at a conversion price of $1.02 for
the gross proceeds of $300,000 (the "May '03 Debentures"). Interest was due on a
quarterly basis commencing on June 1, 2003, payable in cash or shares of common
stock at our option. The debentures were due to mature in May 2005. Commencing
on February 1, 2004, we would have been obligated to redeem $19,000 per month of
the debentures. In August 2003, the daily volume weighted average price of our
common stock on the American Stock Exchange exceeded $1.02 by more than 200% for
15 consecutive trading days; therefore, we exercised the option to cause the
investors to convert their debentures into common stock. As a result, all
outstanding balance of the May '03 Debentures were converted into an aggregate
of 293,083 shares of our common stock in the second quarter of fiscal year ended
March 31, 2004.


         In accordance with generally accepted accounting principles, the
difference between the conversion price of $1.02 and our stock price on the date
of issuance of the debentures amounted to $38,000 and was being amortized over
the term of the debt. A total of $7,000 had been amortized during the period
from the date of issuance to the date of conversion into common stock. Upon the
conversion of the debenture into common stock, the remaining balance of $31,000
was expensed..

         The May '03 Debentures were accompanied by five-year warrants to
purchase an aggregate of 101,112 shares of common stock with an exercise price
of $1.02 per share. We allocated the proceeds received from debt or convertible
debt with detachable warrants using the relative fair value of the individual
elements at the time of issuance. The amount allocated to the warrants is
$39,000 and was being amortized over the term of the convertible debentures. A
total of $7,000 had been amortized from the date of issuance to the date of
conversion into common stock. Upon the conversion of the debenture into common
stock, the remaining balance of $32,000 was expensed..

         In connection with the financing in June 2003, we also issued five-year
warrants to purchase 375,000 shares of common stock at an exercise price of
$1.65 to Omicron, Midsummer, Islandia and the Crestview Investors in order to
obtain their requisite consents and waivers of rights they possessed to
participate in the financing. We filed a registration statement covering shares
sold and warrants issued in connection with this transaction.


                                      36



<PAGE>

COMMON STOCK INSTITUTIONAL INVESTORS

         On June 27, 2003, we sold an aggregate of 5,275,000 shares of common
stock at a $1.50 per share to various institutional investors in a private
placement transaction for an aggregate purchase price of $7.9 million (the "June
27, 2003 PIPE Transaction").

         On November 7, 2003, we sold an aggregate of 3,180,645 shares of common
stock at a price of $1.55 per share to various institutional investors in a
private placement transaction for an aggregate purchase price of $4.9 million
(the "November 7, 2003 PIPE Transaction" and together with the June 27, 2003
PIPE Transaction, the "PIPE Transactions"). We also granted registration rights
to the PIPE Transactions investors under registration rights agreements in which
we agreed to file registration statements with the SEC for the resale of the
shares sold in the PIPE Transactions. A registration statement covering the
shares sold in the June 27, 2003 PIPE Transaction was declared effective by the
SEC on September 26, 2003. A registration statement covering shares sold in the
November 7, 2003 PIPE Transaction was declared effective by the SEC on February
3, 2004.

         In connection with the PIPE Transactions, we paid Roth Capital, as
placement agent, an aggregate of $812,000 as cash compensation and five-year
warrants to purchase an aggregate of 809,565 shares of common stock, 527,500
shares at $1.65 per share and 282,065 shares at $1.71 per share. We also granted
Roth Capital 115,226 shares of our common stock in connection with the November
7, 2003 PIPE Transaction. In connection with the June 27, 2003 PIPE Transaction
we also issued warrants to purchase 375,000 shares of common stock at an
exercise price of $1.65 to Midsummer, Omicron, Islandia and the Crestview
Investors, all holders of the March 2003 Debentures, in order to obtain their
requisite consents and waivers of rights they possessed to participate in the
June 27, 2003 PIPE Transaction. In accordance with the warrant agreements, these
warrants were adjusted to $1.55 due to the sale of common stock at that price on
November 7, 2003 and further adjusted to $1.32 due to the sale of March 2004
Debentures on March 15, 2004. We also issued an additional 1,509,227 shares of
common stock to the November 7, 2003 PIPE investors in connection with the sale
of March 2004 Debentures on March 15, 2004 pursuant to anti-dilution provision
in the securities purchase agreement for the November 7, 2003 PIPE Transaction.

CONTRACTUAL OBLIGATIONS

         The following table summarizes our contractual obligations, including
purchase commitments at March 31, 2004, and the effect such obligations are
expected to have on our liquidity and cash flow in future periods.

<TABLE>
<CAPTION>
                                                         PAYMENT DUE BY PERIOD
                                                         ---------------------
                                                       LESS THAN
CONTRACTUAL CASH OBLIGATIONS                  TOTAL     1 YEAR    -13 YEARS    3-5 YEARS   THEREAFTER
----------------------------                  -----     ------    ---------    ---------   ----------
                                                               (in thousands)
<S>                                         <C>         <C>         <C>         <C>         <C>
Long-term debt obligations                  $ 3,371     $   723     $ 2,648     $    --     $    --

Capital lease obligations                       273         182          91          --          --
Operating leases                             10,678       1,786       2,277       1,922       4,693
Purchase obligations                          1,312       1,137         175          --          --
                                            --------    --------    --------    --------    --------

     Total contractual cash obligations     $15,634     $ 3,828     $ 5,191     $ 1,922     $ 4,693
                                            ========    ========    ========    ========    ========
</TABLE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         Our discussion and analysis of financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, based on
historical experience, and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

                                      37



<PAGE>

         We believe the following critical accounting policies affect
significant judgments and estimates used in the preparation of our consolidated
financial statements:

         o        REVENUE RECOGNITION. Our revenue recognition policy is
                  significant because our revenue is a key component of our
                  results of operations. In addition, our revenue recognition
                  determines the timing of certain expenses such as commissions
                  and royalties. We follow specific and detailed guidelines in
                  measuring revenue; however, certain judgments affect the
                  application of our revenue policy.

                  We license software under non-cancelable agreements and
                  provide related services, including consulting, training,
                  customization of software and customer support. We recognize
                  revenue in accordance with Statement of Position 97-2
                  (SOP 97-2), Software Revenue Recognition, as amended and
                  interpreted by Statement of Position 98-9, Modification of
                  SOP 97-2, Software Revenue Recognition, with respect to
                  certain transactions, as well as Staff Accounting Bulletin
                  ("SAB") 101, "Revenue Recognition", updated by SAB's
                  103 and 104, "Update of Codification of Staff Accounting
                  Bulletins", and Technical Practice Aids issued from time to
                  time by the American Institute of Certified Public
                  Accountants.

                  Software license revenue, including third party license
                  revenues or partner products, is generally recognized when a
                  license agreement has been signed, the software product has
                  been delivered, there are no uncertainties surrounding product
                  acceptance, the fees are fixed and determinable, and
                  collection is considered probable. If a software license
                  contains an undelivered element, the fair value of the
                  undelivered element is deferred and the revenue recognized
                  once the element is delivered. We can establish vendor
                  specific objective evidence ("VSOE") for all elements and not
                  just undelivered elements. The undeliverable elements are
                  primarily training, consulting and maintenance services. VSOE
                  of fair value for training and consulting services is based
                  upon hourly rates charged when those services are sold
                  separately. VSOE of fair value for maintenance is the price
                  the customer will be required to pay when it is sold
                  separately (that is, the renewal rate). In addition, if a
                  software license contains contingencies, such as specific
                  customer acceptance customer acceptance criteria, right of
                  return or a cancellation right, the software revenue is
                  recognized upon the later of customer acceptance or the
                  expiration of the acceptance period or cancellation right.
                  Typically, payments for our software licenses are due in
                  installments within twelve months from the date of delivery.
                  Where software license agreements call for payment terms of
                  twelve months or more from the date of delivery, revenue is
                  recognized as payments become due and all other conditions for
                  revenue recognition have been satisfied. Deferred revenue
                  consists primarily of prepaid maintenance support revenues,
                  prepaid services revenue and deferred licenses.

                  Consulting services are separately priced, are generally
                  available from a number of suppliers, and are not essential to
                  the functionality of our software products. Consulting
                  services, which include project management, system planning,
                  design and implementation, customer configurations, and
                  training are billed on both an hourly basis and under fixed
                  price contracts. Consulting services revenue billed on an
                  hourly basis is recognized as the work is performed. Under
                  most fixed price contracts, consulting services revenue is
                  recognized using the percentage of completion method of
                  accounting by relating hours incurred to date to total
                  estimated hours at completion. In instances where our fixed
                  price contracts require the achievement of certain milestones,
                  the milestones are agreed with the customer and revenues are
                  recognized only when the milestones are delivered and accepted
                  by the customer.

                                      38



<PAGE>

                  Customization of software is billed on both an hourly basis
                  and under fixed price contracts. Customization services billed
                  on an hourly basis are recognized as the work is performed.
                  Under most fixed price contracts, customization services
                  revenue is recognized using the percentage of completion
                  method of accounting by relating hours incurred to date to
                  total estimated hours at completion. In instances where our
                  fixed price contracts require the achievement of certain
                  milestones, the milestones are agreed with the customer and
                  revenues are recognized only when the milestones are delivered
                  and accepted by the customer.

                  Customer support services include post-contract support and
                  the rights to unspecified upgrades and enhancements.
                  Maintenance revenues from ongoing customer support services
                  are billed on a monthly basis and recorded as revenue in the
                  applicable month, or on an annual basis with the revenue being
                  deferred and recognized ratably over the maintenance period.
                  If an arrangement includes multiple elements, the fees are
                  allocated to the various elements based upon vendor-specific
                  objective evidence of fair value.

         o        ACCOUNTS RECEIVABLE. We typically extend credit to our
                  customers. Software licenses are generally due in installments
                  within twelve months from the date of delivery. Billings for
                  customer support and consulting services performed on a time
                  and material basis are due upon receipt. From time to time
                  software and consulting services are provided under fixed
                  price contracts where the revenue is only recognized and the
                  payments are only due upon customer acceptance and the
                  achievement of certain milestones. Management estimates the
                  probability of collection of the receivable balances and
                  provides an allowance for doubtful accounts based upon an
                  evaluation of our customers ability to pay and general
                  economic conditions.

         o        VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS AND GOODWILL.
                  Starting fiscal 2003, we adopted SFAS No. 142 resulting in a
                  change in the way we value long-term intangible assets and
                  goodwill. We completed an initial transitional analysis of
                  goodwill impairment as of April 1, 2002 and recorded an
                  impairment of $0.6 million as a cumulative effect of a change
                  in accounting principle in the first quarter of fiscal 2003.

                  We no longer amortize goodwill, but instead test goodwill for
                  impairment on an annual basis or more frequently if certain
                  events occur. Goodwill is to be measured for impairment by
                  reporting units, which currently consist of our operating
                  segments. At each impairment test for a business unit, we are
                  required to compare the carrying value of the business unit to
                  the fair value of the business unit. If the fair value exceeds
                  the carrying value, goodwill will not be considered impaired.
                  If the fair value is less than the carrying value, we will
                  perform a second test comparing the implied fair value of
                  reporting unit goodwill with the carrying amount of that
                  goodwill. The difference if any between the carrying amount of
                  that goodwill and the implied fair value will be recognized as
                  an impairment loss, and the carrying amount of the associated
                  goodwill will be reduced to its implied fair value. These
                  tests require us to make estimates and assumptions concerning
                  prices for similar assets and liabilities, if available, or
                  estimates and assumptions for other appropriate valuation
                  techniques.

                  For our intangible assets with finite lives, including our
                  capitalized software and non-compete agreements, we assess
                  impairment at least annually or whenever events and

                  circumstances suggest the carrying value of an asset may not
                  be recoverable based on the net future cash flows expected to
                  be generated from the asset on an undiscounted basis in
                  accordance with SFAS No. 144, "Accounting for the Impairment
                  or Disposal of Long-Lived Assets". When we determine that the
                  carrying value of intangibles with finite lives may not be
                  recoverable, we measure any impairment based on a projected
                  discounted cash flow method using a discount rate determined
                  by our management to be commensurate with the risk inherent in
                  our current business model.

                                      39


<PAGE>

         o        APPLICATION DEVELOPMENT. The costs to develop new software
                  products and enhancements to existing software products are
                  expensed as incurred until technological feasibility has been
                  established. Technological Feasibility has occurred when all
                  planning, designing, coding and testing have been completed
                  according to design specifications. Once technological
                  feasibility is established, any additional costs would be
                  capitalized, in accordance with SFAS No. 86, "Accounting for
                  the Costs of Computer Software to Be Sold, Leased or Otherwise
                  Marketed".

         o        STOCK-BASED COMPENSATION. We do not record compensation
                  expense for options granted to our employees as all options
                  granted under our stock option plans have an exercise price
                  equal to the market value of the underlying common stock on
                  the date of grant. In addition, we do not record compensation
                  expense for shares issued under our employee stock purchase
                  plan. As permitted under SFAS No. 123, "Accounting for
                  Stock-Based Compensation" and SFAS No. 148, "Accounting for
                  Stock-Based Compensation-Transition and Disclosure", we
                  account for costs of stock based compensation in accordance
                  with the provisions of Accounting Principles Board Opinion No.
                  25, "Accounting for Stock Issued to Employees," and
                  accordingly, discloses the pro forma effect on net income
                  (loss) and related per share amounts using the fair-value
                  method defined in SFAS No. 123, updated by SFAS No. 148.

RECENT ACCOUNTING PRONOUNCEMENTS

         In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." SFAS No. 149 further
clarifies accounting for derivative instruments. The adoption of this statement
did not have a material impact on our consolidated financial statements.


         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. Upon adoption of SFAS No. 150, the convertible note payable to Toys with
the balance of $1.3 million was reclassified from equity to liabilities at
September 30, 2003.

BUSINESS RISKS

         Investors should carefully consider the following risk factors and all
other information contained in this Form 10-K/A. Investing in our common stock
involves a high degree of risk. In addition to those described below, risks and
uncertainties that are not presently known to us or that we currently believe
are immaterial may also impair our business operations. If any of the following
risks occur, our business could be harmed, the price of our common stock could
decline and our investors may lose all or part of their investment. See the note
regarding forward-looking statements included at the beginning of this Form
10-K/A.

WE INCURRED LOSSES FOR FISCAL YEARS 2004, 2003 AND  2002.

         We incurred losses of $8.9 million, $2.7 million and $14.7 million in
the fiscal years ended March 31, 2004, 2003, and 2002 respectively. The losses
in the past three years have generally been due to difficulties completing sales
for new application software licenses, the resulting change in sales mix toward
lower margin services, and debt service expenses. We will need to generate
additional revenue to achieve profitability in future periods. If we are unable
to achieve profitability, or maintain profitability if achieved, our business
and stock price may be adversely effected and we may be unable to continue
operations at current levels, if at all.


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<PAGE>

WE HAD NEGATIVE WORKING CAPITAL IN PRIOR FISCAL YEAR, AND WE HAVE EXTENDED
PAYMENT TERMS WITH A NUMBER OF OUR SUPPLIERS.

         At March 31, 2003, we had negative working capital of $4.1 million. We
have had difficulty meeting operating expenses, including interest payments on
debt, lease payments and supplier obligations. We have at times deferred payroll
for our executive officers, and borrowed from related parties to meet payroll
obligations. We have extended payment terms with our trade creditors wherever
possible.

         As a result of extended payment arrangements with suppliers, we may be
unable to secure products and services necessary to continue operations at
current levels from these suppliers. In that event, we will have to obtain these
products and services from other parties, which could result in adverse
consequences to our business, operations and financial condition, and we may be
unable to obtain these products from other parties on terms acceptable to us, if
at all.


OUR REVENUES HAVE DECLINED IN RECENT FISCAL YEARS. WE EXPERIENCED A SUBSTANTIAL
DECREASE IN APPLICATION SOFTWARE LICENSE SALES. OUR GROWTH AND PROFITABILITY IS
DEPENDENT ON THE SALE OF HIGHER MARGIN LICENSES.

         Our revenues decreased by 20% in the fiscal year ended March 31, 2004,
compared to the fiscal year ended March 31, 2003. Our revenues decreased by 17%
in the fiscal year ended March 31, 2003 compared to the fiscal year ended March
31, 2002. We experienced a substantial decrease in application license software
sales in fiscal year 2003 and 2002, which typically carry a much higher margin
than other revenue sources. We must improve new application license sales to
become profitable. We have taken steps to refocus our sales strategy on core
historic competencies, but our typically long sales cycles make it difficult to
evaluate whether and when sales will improve. We cannot be sure that the decline
in sales has not been due to factors which might continue to negatively affect
sales.


OUR FINANCIAL CONDITION MAY INTERFERE WITH OUR ABILITY TO SELL NEW APPLICATION
SOFTWARE LICENSES.

         Future sales growth may depend on our ability to improve our financial
condition. Our past financial condition has made it difficult for us to complete
sales of new application software licenses. Because our applications typically
require lengthy implementation and extended servicing arrangements, potential
customers require assurance that these services will be available for the
expected life of the application. These potential customers may defer buying
decisions until our financial condition improves, or may choose the products of
our competitors whose financial conditions are, or are perceived to be,
stronger. Customer deferrals or lost sales will adversely affect our business,
financial conditions and results of operations.

OUR SALES CYCLES ARE LONG AND PROSPECTS ARE UNCERTAIN. THIS MAKES IT DIFFICULT
FOR US TO PREDICT REVENUES AND BUDGET EXPENSES.

         The length of sales cycles in our business makes it difficult to
evaluate the effectiveness of our sales strategies. Our sales cycles
historically have ranged from three to twelve months, which has caused
significant fluctuations in revenues from period to period. Due to our
difficulties in completing new application software sales in recent periods and
our refocused sales strategy, it is difficult to predict revenues and properly
budget expenses.

         Our software applications are complex and perform or directly affect
mission-critical functions across many different functional and geographic areas
of the retail enterprise. In many cases, our customers must change established
business practices when they install our software. Our sales staff must dedicate
significant time consulting with a potential customer concerning the substantial
technical and business concerns associated with implementing our products. The
purchase of our products is often discretionary, so lengthy sales efforts may
not result in a sale. Moreover, it is difficult to predict when a license sale
will occur. All of these factors can adversely affect our business, financial
condition and results of operations.

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<PAGE>

OUR OPERATING RESULTS AND REVENUES HAVE FLUCTUATED SIGNIFICANTLY IN THE PAST,
AND THEY MAY CONTINUE TO DO SO IN THE FUTURE, WHICH COULD ADVERSELY AFFECT OUR
STOCK PRICE.


         Our quarterly operating results have fluctuated significantly in the
past and may fluctuate in the future as a result of several factors, which are
outside of our control including: the size and timing of orders, the general
health of the retail industry, the length of our sales cycles and technological
changes. If revenue declines in a quarter, our operating results will be
adversely affected because many of our expenses are relatively fixed. In
particular, sales and marketing, application development and general and
administrative expenses do not change significantly with variations in revenue
in a quarter. It is likely that in some future quarter our revenues or operating
results will be below the expectations of public market analysts or investors.
If that happens, our stock price will likely decline.


         Further, due to these fluctuations, we do not believe period to period
comparisons of our financial performance are necessarily meaningful nor should
they be relied on as an indication of our future performance.

WE MAY EXPERIENCE SEASONAL DECLINES IN SALES, WHICH COULD CAUSE OUR OPERATING
RESULTS TO FALL SHORT OF EXPECTATIONS IN SOME QUARTERS.

         We may experience slower sales of our applications and services from
October through December of each year as a result of retailers' focus on the
holiday retail-shopping season. This can negatively affect revenues in our third
fiscal quarter and in other quarters, depending on our sales cycles.

WE HAVE RELIED ON CAPITAL CONTRIBUTED BY RELATED PARTIES, AND SUCH CAPITAL MAY
NOT BE AVAILABLE IN THE FUTURE.

         Our cash from operations has not been sufficient to meet our
operational needs, and we have relied on capital from related parties. A company
affiliated with Donald S. Radcliffe, our former director, made short-term loans
to us in fiscal 2002 and in fiscal 2003 to meet payroll. Softline Limited
("Softline") loaned us $10 million to make a required principal payment on our
Union Bank term loan in July 2000. A subsidiary of Softline loaned us an
additional $600,000 in November 2000 to meet working capital needs. This loan
was repaid in February 2001, in part with $400,000 we borrowed from Barry M.
Schechter, our former Chairman. We borrowed an additional $164,000 from Mr.
Schechter in March 2001, which was repaid in July 2001, for operational needs
related to our Australian subsidiary.

         We may not be able to obtain capital from related parties in the
future. No officer, director, stockholder or related party is under any
obligation to provide cash to meet our future liquidity needs.

WE MAY NEED TO RAISE CAPITAL TO GROW OUR BUSINESS. OBTAINING THIS CAPITAL COULD
IMPAIR THE VALUE OF YOUR INVESTMENT.

         We may need to raise capital to:

         o        Support unanticipated capital requirements;

         o        Take advantage of acquisition or expansion opportunities;

         o        Continue our current development efforts;

         o        Develop new applications or services; or

         o        Address working capital needs.

         Our future capital requirements depend on many factors including our
application development, sales and marketing activities. We do not know whether
additional financing will be available when needed, or available on terms
acceptable to us. If we cannot raise needed funds for the above purposes on
acceptable terms, we may be forced to curtail some or all of the above
activities and we may not be able to grow our business or respond to competitive
pressures or unanticipated developments.

         We may raise capital through public or private equity offerings or debt
financings. To the extent we raise additional capital by issuing equity
securities or convertible debt securities, our stockholders may experience
substantial dilution and the new securities may have greater rights, preferences
or privileges than our existing common stock.

                                      42



<PAGE>

INTANGIBLE ASSETS MAY BE IMPAIRED MAKING IT MORE DIFFICULT TO OBTAIN FINANCING.


         Goodwill, capitalized software, non-compete agreements and other
intangible assets represent approximately 82% of our total assets as of March
31, 2004. We may have to impair or write-off these assets, which will cause a
charge to earnings and could cause our stock price to decline.


         Any such impairment will also reduce our assets, as well as the ratio
of our assets to our liabilities. These balance sheet effects could make it more
difficult for us to obtain capital, and could make the terms of capital we do
obtain more unfavorable to our existing stockholders.

FOREIGN CURRENCY FLUCTUATIONS MAY IMPAIR OUR COMPETITIVE POSITION AND AFFECT OUR
OPERATING RESULTS.


         Fluctuations in currency exchange rates affect the prices of our
applications and services and our expenses, and foreign currency losses will
negatively affect profitability or increase losses. Approximately 21%, 12% and
9% of our revenues from continuing operations were outside North America,
principally in Australia and the United Kingdom, in the fiscal years ended March
31, 2004, 2003 and 2002, respectively. Many of our expenses related to foreign
sales, such as corporate level administrative overhead and development, are
denominated in U.S. dollars. When accounts receivable and accounts payable
arising from international revenues and services are converted to U.S. dollars,
the resulting gain or loss contributes to fluctuations in our operating results.
We do not hedge against foreign currency exchange rate risks.


HISTORICALLY WE HAVE BEEN DEPENDENT ON A SMALL NUMBER OF CUSTOMERS FOR A
SIGNIFICANT AMOUNT OF OUR BUSINESS.


         Toys "R" Us ("Toys") accounted for 9%, 34% and 47% of our revenues from
continuing operations for the fiscal years ended March 31, 2004, 2003 and 2002,
respectively. In November 2003, Toys terminated their software development and
services agreement with us. We cannot provide any assurances that Toys or
any of our current customers will continue at current or historical levels or
that we will be able to obtain orders from new customers.


IF WE LOSE THE SERVICES OF ANY MEMBER OF OUR SENIOR MANAGEMENT OR KEY TECHNICAL
AND SALES PERSONNEL, OR IF WE ARE UNABLE TO RETAIN OR ATTRACT ADDITIONAL
TECHNICAL PERSONNEL, OUR ABILITY TO CONDUCT AND EXPAND OUR BUSINESS WILL BE
IMPAIRED.

         We are heavily dependent on our President and Chief Operating Officer,
Michael Tomczak and our Chief Technology Officer, Jeffrey Boone. We are also
heavily dependent on our former Chairman, Barry Schechter, who remains as a
consultant to us. We do not have a written consulting agreement with Mr.
Schechter. We also believe our future success will depend largely upon our
ability to attract and retain highly-skilled software programmers, managers, and
sales and marketing personnel. Competition for personnel is intense,
particularly in international markets. The software industry is characterized by
a high level of employee mobility and aggressive recruiting of skilled
personnel. We compete against numerous companies, including larger, more
established companies, for our personnel. We may not be successful in attracting
or retaining skilled sales, technical and managerial personnel, which could
negatively affect our financial performance and cause our stock price to
decline.

WE ARE DEPENDENT ON THE RETAIL INDUSTRY, AND IF ECONOMIC CONDITIONS IN THE
RETAIL INDUSTRY FURTHER DECLINE, OUR REVENUES MAY ALSO DECLINE. RETAIL SALES
HAVE BEEN AND MAY CONTINUE TO BE SLOW.

         Our future growth is critically dependent on increased sales to the
retail industry. We derive the substantial majority of our revenues from the
licensing of software applications and the performance of related professional
and consulting services to the retail industry. The retail industry as a whole
is currently experiencing increased competition and weakening economic
conditions that could negatively impact the industry and our customers' ability
to pay for our products and services. In addition, the retail industry may be
consolidating, and it is uncertain how consolidation will affect the industry.
Such consolidation and weakening economic conditions have in the past, and may

                                      43



<PAGE>

in the future, negatively impact our revenues, reduce the demand for our
products and may negatively impact our business, operating results and financial
condition. Specifically, uncertain economic conditions and the specter of
terrorist activities have adversely impacted sales of our software applications,
and we believe mid-tier specialty retailers may be reluctant during the current
economic climate to make the substantial infrastructure investment that
generally accompanies the implementation of our software applications, which may
adversely impact our business.

THERE MAY BE AN INCREASE IN CUSTOMER BANKRUPTCIES DUE TO WEAK ECONOMIC
CONDITIONS.

         We have in the past and may in the future be impacted by customer
bankruptcies. During weak economic conditions, such as those currently being
experienced in many geographic regions around the world, there is an increased
risk that certain of our customers will file bankruptcy. When our customers file
bankruptcy, we may be required to forego collection of pre-petition amounts
owed, and to repay amounts remitted to us during the 90-day preference period
preceding the filing. Accounts receivable balances related to pre-petition
amounts may in certain of these instances be large due to extended payment terms
for software license fees, and significant billings for consulting and
implementation services on large projects. The bankruptcy laws, as well as the
specific circumstances of each bankruptcy, may severely limit our ability to
collect pre-petition amounts, and may force us to disgorge payments made during
the 90-day preference period. We also face risk from international customers who
file for bankruptcy protection in foreign jurisdictions, in that the application
of foreign bankruptcy laws may be less certain or harder to predict. Although we
believe that we have sufficient reserves to cover anticipated customer
bankruptcies, there can be no assurance that such reserves will be adequate, and
if they are not adequate, our business, operating results and financial
condition would be adversely affected.

WE MAY NOT BE ABLE TO MAINTAIN OR IMPROVE OUR COMPETITIVE POSITION BECAUSE OF
THE INTENSE COMPETITION IN THE RETAIL SOFTWARE INDUSTRY.

         We conduct business in an industry characterized by intense
competition. Most of our competitors are very large companies with an
international presence. We must also compete with smaller companies which have
been able to develop strong local or regional customer bases. Many of our
competitors and potential competitors are more established, benefit from greater
name recognition and have significantly greater resources than us. Our
competitors may also have lower cost structures and better access to the capital
markets than us. As a result, our competitors may be able to respond more
quickly than we can to new or emerging technologies and changes in customer
requirements. Our competitors may:

         o        Introduce new technologies that render our existing or future
                  products obsolete, unmarketable or less competitive;

         o        Make strategic acquisitions or establish cooperative
                  relationships among themselves or with other solution
                  providers, which would increase the ability of their products
                  to address the needs of our customers; and

         o        Establish or strengthen cooperative relationships with our
                  current or future strategic partners, which would limit our
                  ability to compete through these channels.

         We could be forced to reduce prices and suffer reduced margins and
market share due to increased competition from providers of offerings similar
to, or competitive with, our applications, or from service providers that
provide services similar to our services. Competition could also render our
technology obsolete. For a further discussion of competitive factors in our
industry, see "Description of Business - Competition" below.

OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE, SO OUR SUCCESS DEPENDS
HEAVILY ON OUR ABILITY TO DEVELOP AND INTRODUCE NEW APPLICATIONS AND RELATED
SERVICES.

         The retail software industry is characterized by rapid technological

change, evolving standards and wide fluctuations in supply and demand. We must
cost-effectively develop and introduce new applications and related services
that keep pace with technological developments to compete. If we do not gain
market acceptance for our existing or new offerings or if we fail to introduce
progressive new offerings in a timely or cost-effective manner, our financial
performance will suffer.

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<PAGE>

         The success of application enhancements and new applications depends on
a variety of factors, including technology selection and specification, timely
and efficient completion of design, and effective sales and marketing efforts.
In developing new applications and services, we may:

         o        Fail to respond to technological changes in a timely or
                  cost-effective manner;

         o        Encounter applications, capabilities or technologies developed
                  by others that render our applications and services obsolete
                  or non-competitive or that shorten the life cycles of our
                  existing applications and services;

         o        Experience difficulties that could delay or prevent the
                  successful development, introduction and marketing of these
                  new applications and services; or

         o        Fail to achieve market acceptance of our applications and
                  services.

         The life cycles of our applications are difficult to estimate,
particularly in the emerging electronic commerce market. As a result, new
applications and enhancements, even if successful, may become obsolete before we
recoup our investment.

OUR PROPRIETARY RIGHTS OFFER ONLY LIMITED PROTECTION AND OUR COMPETITORS MAY
DEVELOP APPLICATIONS SUBSTANTIALLY SIMILAR TO OUR APPLICATIONS AND USE SIMILAR
TECHNOLOGIES WHICH MAY RESULT IN THE LOSS OF CUSTOMERS. WE MAY HAVE TO INITIATE
COSTLY LITIGATION TO PROTECT OUR PROPRIETARY RIGHTS.

         Our success and competitive position is dependent in part upon our
ability to develop and maintain the proprietary aspects of our intellectual
property. Our intellectual property includes our trademarks, trade secrets,
copyrights and other proprietary information. Our efforts to protect our
intellectual property may not be successful. Effective copyright and trade
secret protection may be unavailable or limited in some foreign countries. We
hold no patents. Consequently, others may develop, market and sell applications
substantially equivalent to ours or utilize technologies similar to those used
by us, so long as they do not directly copy our applications or otherwise
infringe our intellectual property rights.

         We may find it necessary to bring claims or initiate litigation against
third parties for infringement of our proprietary rights or to protect our trade
secrets. These actions would likely be costly and divert management resources.
These actions could also result in counterclaims challenging the validity of our
proprietary rights or alleging infringement on our part. The ultimate outcome of
any litigation will be difficult to predict.

OUR APPLICATIONS MAY BE SUBJECT TO CLAIMS THEY INFRINGE ON THE PROPRIETARY
RIGHTS OF THIRD PARTIES, WHICH MAY EXPOSE US TO LITIGATION.

         We may become subject to litigation involving patents or proprietary
rights. Patent and proprietary rights litigation entails substantial legal and
other costs, and we do not know if we will have the necessary financial
resources to defend or prosecute our rights in connection with any such
litigation. Responding to and defending claims related to our intellectual
property rights, even ones without merit, can be time consuming and expensive
and can divert management's attention from other business matters. In addition,
these actions could cause application delivery delays or require us to enter
into royalty or license agreements. Royalty or license agreements, if required,
may not be available on terms acceptable to us, if they are available at all.
Any or all of these outcomes could have a material adverse effect on our
business, operating results and financial condition.

DEVELOPMENT AND MARKETING OF OUR OFFERINGS DEPENDS ON STRATEGIC RELATIONSHIPS
WITH OTHER COMPANIES. OUR EXISTING STRATEGIC RELATIONSHIPS MAY NOT ENDURE AND
MAY NOT DELIVER THE INTENDED BENEFITS, AND WE MAY NOT BE ABLE TO ENTER INTO
FUTURE STRATEGIC RELATIONSHIPS.

         Since we do not possess all of the technical and marketing resources
necessary to develop and market our offerings to their target markets, our
business strategy substantially depends on our strategic relationships,
including licensing software and technology that is integrated into our
applications. While some of these relationships are governed by contracts, most
are non-exclusive and all may be terminated on short notice by either party. If
these relationships terminate or fail to deliver the intended benefits, our
development and marketing efforts will be impaired and our revenues may decline.
We may not be able to enter into new strategic relationships, which could put us
at a disadvantage to those of our competitors which do successfully exploit
strategic relationships.

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<PAGE>

OUR PRIMARY COMPUTER AND TELECOMMUNICATIONS SYSTEMS ARE IN A LIMITED NUMBER OF
GEOGRAPHIC LOCATIONS, WHICH MAKES THEM MORE VULNERABLE TO DAMAGE OR
INTERRUPTION. THIS DAMAGE OR INTERRUPTION COULD HARM OUR BUSINESS.

         Substantially all of our primary computer and telecommunications
systems are located in two geographic areas, and these systems are vulnerable to
damage or interruption from fire, earthquake, water damage, sabotage, flood,
power loss, technical or telecommunications failure or break-ins. Our insurance
may not adequately compensate us for our lost business and will not compensate
us for any liability we incur due to our inability to provide services to our
customers. Although we have implemented network security measures, our systems
are vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions. These disruptions could lead to interruptions, delays, loss of data
or the inability to service our customers. Any of these occurrences could impair
our ability to serve our customers and harm our business.

IF PRODUCT LIABILITY LAWSUITS ARE SUCCESSFULLY BROUGHT AGAINST US, WE MAY INCUR
SUBSTANTIAL LIABILITIES AND MAY BE REQUIRED TO LIMIT COMMERCIALIZATION OF OUR
APPLICATIONS.

         Our business exposes us to product liability risks. Our applications
are highly complex and sophisticated and they may occasionally contain design
defects or software errors that could be difficult to detect and correct. In
addition, implementation of our applications may involve customer-specific
customization by us or third parties, and may involve integration with systems
developed by third parties. These aspects of our business create additional
opportunities for errors and defects in our applications and services. Problems
in the initial release may be discovered only after the application has been
implemented and used over time with different computer systems and in a variety
of other applications and environments. Our applications have in the past
contained errors that were discovered after they were sold. Our customers have
also occasionally experienced difficulties integrating our applications with
other hardware or software in their enterprise.

         We are not currently aware of any material defects in our applications
that might give rise to future lawsuits. However, errors or integration problems
may be discovered in the future. Such defects, errors or difficulties could
result in loss of sales, delays in or elimination of market acceptance, damage
to our brand or to our reputation, returns, increased costs and diversion of
development resources, redesigns and increased warranty and servicing costs. In
addition, third-party products, upon which our applications are dependent, may
contain defects which could reduce or undermine entirely the performance of our
applications.

         Our customers typically use our applications to perform
mission-critical functions. As a result, the defects and problems discussed
above could result in significant financial or other damage to our customers.
Although our sales agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims, we do not
know if these limitations of liability are enforceable or would otherwise
protect us from liability for damages to a customer resulting from a defect in
one of our applications or the performance of our services. Our product
liability insurance may not cover all claims brought against us.

THE SAGE GROUP HAS THE RIGHT TO ACQUIRE A SIGNIFICANT PERCENTAGE OF OUR COMMON
STOCK, WHICH IF ACQUIRED BY THE SAGE GROUP, MAY ENABLE THE SAGE GROUP TO
EXERCISE EFFECTIVE CONTROL OF US.

         On November 14, 2003, the Sage Group acquired substantially all of the
assets of Softline, including Softline's 141,000 shares of our Series A
Convertible Preferred Stock which are convertible into 18,905,269 shares of our
common stock within 60 days of June 1, 2004, 8,923,915 shares of our common
stock and options to purchase 71,812 shares of our common stock. The Sage Group
beneficially owns approximately 38.2% of our outstanding common stock, including
shares the Sage Group has the right to acquire upon conversion of its Series A
Convertible Preferred Stock and exercise of its outstanding options. Although
the Series A Convertible Preferred Stock is non-voting as to most matters and is
redeemable by us, if the Sage Group converts its Series A Convertible Preferred
Stock to common stock, it may have effective control over all matters affecting
us, including:

         o        The election of all of our directors;

         o        The allocation of business opportunities that may be suitable
                  for the Sage Group and us;

         o        Any determinations with respect to mergers or other business
                  combinations involving us;

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<PAGE>

         o        The acquisition or disposition of assets or businesses by us;

         o        Debt and equity financing, including future issuance of our
                  common stock or other securities;

         o        Amendments to our charter documents;

         o        The payment of dividends on our common stock; and

         o        Determinations with respect to our tax returns.

THE SAGE GROUP'S POTENTIAL INFLUENCE ON US COULD MAKE IT DIFFICULT FOR ANOTHER
COMPANY TO ACQUIRE US, WHICH COULD DEPRESS OUR STOCK PRICE.

         The Sage Group beneficially owns a significant percentage of our common
stock. In addition, two of the current members of our board of directors are
employed by a subsidiary of the Sage Group. The Sage Group's potential effective
voting control could discourage others from initiating any potential merger,
takeover or other change of control transaction that may otherwise be beneficial
to our business or our stockholders. As a result, the Sage Group's potential
effective control could reduce the price that investors may be willing to pay in
the future for shares of our stock, or could prevent any party from attempting
to acquire us at any price.

OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE.

         The market price of our common stock has been, and is likely to
continue to be, volatile. When we or our competitors announce new customer
orders or services, change pricing policies, experience quarterly fluctuations
in operating results, announce strategic relationships or acquisitions, change
earnings estimates, experience government regulatory actions or suffer from
generally adverse economic conditions, our stock price could be affected. Some
of the volatility in our stock price may be unrelated to our performance.
Recently, companies similar to ours have experienced extreme price fluctuations,
often for reasons unrelated to their performance. For further information on our
stock price trends, see "Price Range of Common Stock" below.

WE HAVE NEVER PAID A DIVIDEND ON OUR COMMON STOCK AND WE DO NOT INTEND TO PAY
DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE.

         We have not previously paid any cash or other dividend on our common
stock. We anticipate that we will use our earnings and cash flow for repayment
of indebtedness, to support our operations, and for future growth, and we do not
have any plans to pay dividends on our common stock in the foreseeable future.
Holders of our Series A Convertible Preferred Stock are entitled to dividends in
preference and priority to common stockholders. Future equity financing(s) may
further restrict our ability to pay dividends.

THE TERMS OF OUR PREFERRED STOCK MAY REDUCE THE VALUE OF YOUR COMMON STOCK.

         We are authorized to issue up to 5,000,000 shares of preferred stock in
one or more series. We issued 141,000 shares of Series A Convertible Preferred
Stock in May 2002 and 2,517,232 shares of Series B Convertible Preferred Stock
in June 2004. Our board of directors may determine the terms of subsequent
series of preferred stock without further action by our stockholders. If we
issue additional preferred stock, it could affect your rights or reduce the
value of your common stock. In particular, specific rights granted to future
holders of preferred stock could be used to restrict our ability to merge with
or sell our assets to a third party. These terms may include voting rights,
preferences as to dividends and liquidation, conversion and redemption rights,
and sinking fund provisions. We are actively seeking capital, and some of the
arrangements we are considering may involve the issuance of preferred stock.

FAILURE TO COMPLY WITH THE AMERICAN STOCK EXCHANGE'S LISTING STANDARDS COULD
RESULT IN OUR DELISTING FROM THAT EXCHANGE AND LIMIT THE ABILITY TO SELL ANY OF
OUR COMMON STOCK.

         Our stock is currently traded on the American Stock Exchange. The
Exchange has published certain guidelines it uses in determining whether a
security warrants continued listing. Pursuant to these guidelines the Exchange
will consider suspending trading in a listed security or delisting a security
when, in the opinion of the Exchange: (i) the financial condition and/or
operating results of the issuer appear to be unsatisfactory; (ii) the aggregate
market value of the security has become so reduced as to make further dealings
on the Exchange inadvisable; (iii) the issuer has sold or otherwise disposed of
its principal operating assets, or has ceased to be an operating company; (iv)
the issuer has failed to comply with its listing agreements with the Exchange;

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<PAGE>

or (v) any other event shall occur or any condition shall exist which makes
further dealings on the Exchange unwarranted. As a result of our financial
condition or other factors, the American Stock Exchange could in the future
determine that our stock does not merit continued listing. If our stock were
delisted from the American Stock Exchange, the ability of our stockholders to
sell our common stock could become limited, and we would lose the advantage of
some state and federal securities regulations imposing lower regulatory burdens
on exchange-traded issuers.

SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS OR WARRANTS, CONVERSION OF
DEBENTURES OR DIVIDENDS ON CONVERTIBLE PREFERRED STOCK OR UNDER ANTI-DILUTION
PROVISIONS IN CERTAIN AGREEMENTS COULD DILUTE YOUR STOCK HOLDINGS AND ADVERSELY
AFFECT OUR STOCK PRICE.

         We have issued options and warrants to acquire common stock to our
employees and certain other persons at various prices, some of which are or may
in the future have exercise prices at below the market price of our stock. We
currently have outstanding options and warrants for 28,965,623 shares as of June
1, 2004. Of these options and warrants, as of June 1, 2004, 17,596,785 have
exercise prices above the recent market price of $0.77 per share (as of June 1,
2004), and 11,368,838 have exercise prices at or below that recent market price.

         Our existing stock option plan currently has approximately 906,663
shares available for issuance as of June 1, 2004. Future options issued under
the plan may have further dilutive effects.

         The issuance of additional shares pursuant to these options, warrants,
convertible debentures or anti-dilution provisions will cause immediate and
possibly substantial dilution to our stockholders. Further, subsequent sales of
the shares in the public market could depress the market price of our stock by
creating an excess in supply of shares for sale. Issuance of these shares and
sale of these shares in the public market could also impair our ability to raise
capital by selling equity securities.

SUBSTANTIALLY ALL OF OUR AUTHORIZED COMMON STOCK IS ISSUED AND OUTSTANDING OR IS
RESERVED FOR ISSUANCE PURSUANT TO EXERCISE OF OUTSTANDING OPTIONS OR WARRANTS OR
CONVERSION OF DEBENTURES OR PREFERRED STOCK. OUR INABILITY TO ISSUE
ADDITIONAL SHARES OF COMMON STOCK IN THE FUTURE MAY LIMIT OUR ABILITY TO RAISE
CAPITAL, ENTER STRATEGIC TRANSACTIONS AND SATISFY CONTRACTUAL OBLIGATIONS.

         Our authorized capital stock under our Amended and Restated Certificate
of Incorporation is 100,000,000 shares of common stock, 53,974,532 of which were
issued and outstanding as of June 1, 2004 and 5,000,000 shares of preferred
stock consisting of 141,000 shares of Series A Preferred, all of which were
issued and outstanding as of June 1, 2004, and 2,517,232 Series B Preferred
Stock, all of which were issued and outstanding as of June 4, 2004. In addition,
we have 43,856,654 shares of common stock reserved for issuance upon exercise of
options or warrants or conversion of debentures or preferred stock. As a result,
we only have 2,168,814 authorized shares of common Stock that are not reserved
and that may be issued for any future business purposes. We intend to submit a
proposal to amend our Certificate of Incorporation to increase the number of
shares of Common Stock we are authorized to issue from 100,000,000 to
250,000,000 to our stockholders at our next annual meeting and certain of our
stockholders and members of management have signed voting agreements obligating
them to vote their shares in favor of such amendment at the meeting. However,
there can be no assurances that such a proposal will be approved by the
requisite vote of the stockholders. If we are unable to increase our authorized
Common Stock our ability to obtain additional capital through sales of our
common stock, to engage in acquisitions or other strategic transactions and to
satisfy contractual commitments will be severely limited.

WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE OUR OPERATIONS WITH PAGE DIGITAL OR
RTI OR REALIZE ALL OF THE ANTICIPATED BENEFITS OF THESE ACQUISITIONS.

         On January 30, 2004, we acquired Page Digital and on June 1, 2004, we
 acquired Retail Technologies, Inc. (see "Recent Transactions" below). These
 acquisitions involve integrating two companies that previously
operated independently into Island Pacific. These integrations will be complex,
costly and time-consuming processes. The difficulties of combining these
companies' operations include, among other things:

         o        Coordinating geographically disparate organizations, systems
                  and facilities;

         o        Strain on management resources due to integration demands;

         o        Integrating personnel with diverse business backgrounds;

                                      48



<PAGE>

         o        Consolidating corporate and administrative functions;

         o        Coordinating product development;

         o        Coordinating sales and marketing functions;

         o        Retaining key employees; and

         o        Preserving relationships with key customers.

BUSINESS RISKS FACED BY PAGE DIGITAL COULD DISADVANTAGE OUR BUSINESS.

         Page Digital is a developer of multi-channel commerce software and
faces several business risks that could disadvantage our business. These risks
include many of the risks that we face, described above, as well as:

         o        LONG AND VARIABLE SALES CYCLES MAKE IT DIFFICULT TO PREDICT
                  OPERATING RESULTS - Historically, the period between initial
                  contact with a prospective customer and the licensing of Page
                  Digital's products has ranged from one to twelve months. Page
                  Digital's average sales cycle is currently three months. The
                  licensing of Page Digital's products is often an enterprise
                  wide decision by customers that involves a significant
                  commitment of resources by Page Digital and its prospective
                  customer. Customers generally consider a wide range of issues
                  before committing to purchase Page Digital's products,
                  including product benefits, cost and time of implementation,
                  ability to operate with existing and future computer systems,
                  ability to accommodate increased transaction volume and
                  product reliability. As a part of the sales process, Page
                  Digital spends a significant amount of resources informing
                  prospective customers about the use and benefits of Page
                  Digital products, which may not result in a sale, therefore
                  increasing operating expenses. As a result of this sales
                  cycle, Page Digital's revenues are unpredictable and could
                  vary significantly from quarter to quarter causing our
                  operating results to vary significantly from quarter to
                  quarter.

         o        DEFECTS IN PRODUCTS COULD DIMINISH DEMAND FOR PRODUCTS AND
                  RESULT IN LOSS OF REVENUES - From time to time errors or
                  defects may be found in Page Digital's existing, new or
                  enhanced products, resulting in delays in shipping, loss of
                  revenues or injury to Page Digital's reputation. Page
                  Digital's customers use its products for business critical
                  applications. Any defects, errors or other performance
                  problems could result in damage to Page Digital's customers'
                  businesses. These customers could seek significant
                  compensation from Page Digital for any losses. Further, errors
                  or defects in Page Digital's products may be caused by defects
                  in third-party software incorporated into Page Digital
                  products. If so, Page Digital may not be able to fix these
                  defects without the assistance of the software providers.

         o        FAILURE TO FORMALIZE AND MAINTAIN RELATIONSHIPS WITH SYSTEMS
                  INTEGRATORS COULD REDUCE REVENUES AND HARM PAGE DIGITAL'S
                  ABILITY TO IMPLEMENT PRODUCTS - A significant portion of Page
                  Digital's sales are influenced by the recommendations of
                  systems integrators, consulting firms and other third parties
                  who assist with the implementation and maintenance of Page
                  Digital's products. These third parties are under no
                  obligation to recommend or support Page Digital's products.
                  Failing to maintain strong relationships with these third
                  parties could result in a shift by these third parties toward
                  favoring competing products, which could negatively affect
                  Page Digital's software license and service revenues.

         o        PAGE DIGITAL'S PRODUCT MARKETS ARE SUBJECT TO RAPID
                  TECHNOLOGICAL CHANGE, SO PAGE DIGITAL'S SUCCESS DEPENDS
                  HEAVILY ON ITS ABILITY TO DEVELOP AND INTRODUCE NEW
                  APPLICATIONS AND RELATED SERVICES - The retail software
                  industry is characterized by rapid technological change,
                  evolving standards and wide fluctuations in supply and demand.
                  Page Digital must cost-effectively develop and introduce new
                  applications and related services that keep pace with
                  technological developments to compete. If Page Digital fails
                  to gain market acceptance for its existing or new offerings or
                  if Page Digital fails to introduce progressive new offerings
                  in a timely or cost-effective manner, our financial
                  performance may suffer.

                                      49



<PAGE>

         o        FAILURE TO PROTECT PROPRIETARY RIGHTS OR INTELLECTUAL
                  PROPERTY, OR INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST
                  PAGE DIGITAL COULD RESULT IN PAGE DIGITAL LOSING VALUABLE
                  ASSETS OR BECOMING SUBJECT TO COSTLY AND TIME-CONSUMING
                  LITIGATION - Page Digital's success and ability to compete
                  depend on its proprietary rights and intellectual property.
                  Page Digital relies on trademark, trade secret and copyright
                  laws to protect its proprietary rights and intellectual
                  property. Page Digital also has one issued patent. Despite
                  Page Digital's efforts to protect intellectual property, a
                  third party could obtain access to Page Digital's software
                  source code or other proprietary information without
                  authorization, or could independently duplicate Page Digital's
                  software. Page Digital may need to litigate to enforce
                  intellectual property rights. If Page Digital is unable to
                  protect its intellectual property it may lose a valuable
                  asset. Further, third parties could claim Page Digital has
                  infringed their intellectual property rights. Any claims,
                  regardless of merit, could be costly and time-consuming to
                  defend.

         o        COMPETITION IN THE SOFTWARE MARKET IS INTENSE AND COULD REDUCE
                  PAGE DIGITAL'S SALES OR PREVENT THEM FROM ACHIEVING
                  PROFITABILITY - The market for Page Digital's products is
                  intensely competitive and subject to rapid technological
                  change. Competition is likely to result in price reductions,
                  reduced gross margins and loss of Page Digital's market share,
                  any one of which could reduce future revenues or earnings.
                  Further, most of Page Digital's competitors are large
                  companies with greater resources, broader customer
                  relationships, greater name recognition and an international
                  presence. As a result, Page Digital's competitors may be able
                  to better respond to new and emerging technologies and
                  customer demands.

BUSINESS RISKS FACED BY RTI COULD DISADVANTAGE OUR BUSINESS.

         RTI is a provider of retail management store solutions to small through
mid-tier retailers via an international network of retailers and faces several
business risks that could disadvantage our business. These risks include many of
the risks that we face, described above, as well as:

         o        RTI FACES INTENSE COMPETITION IN THE RETAIL POINT OF SALE
                  INDUSTRY - RTI operates in an extremely competitive industry,
                  which is subject to rapid technological and market changes. We
                  anticipate that the competition will increase as more
                  companies focus on providing technology solutions to small and
                  mid-tier retailers. Many of our current and potential
                  competitors, such as Microsoft, have more resources to devote
                  to product development, marketing and distribution. While RTI

                  believes that it has competitive strengths in its market,
                  there can be no assurance that RTI will continue to compete
                  successfully against larger more established competitors.

         o        RTI IS DEPENDENT ON THEIR VALUE-ADDED RESELLLERS (VARS) - RTI
                  does not have a direct sales force and relies on VARs to
                  distribute and sell its products. RTI currently has
                  approximately 67 VARs - 27 in North America, 7 in South
                  America, 11 in Asia, 19 in Europe and the Middle East, 1 in
                  Africa, and 1 each in Australia and New Zealand. Combined,
                  RTI's four largest VARs account for approximately 35% of its
                  revenues, although no one is over 15%. RTI's VARs are
                  independently owned businesses and there can be no assurance
                  that one or more will not go out of business or cease to sell
                  RTI products. Until a replacement VAR could be recruited, and
                  trained, or until an existing VAR could expand into the
                  vacated territory, such a loss could result in a disruption in
                  RTI's revenue and profitability. Furthermore, there can be no
                  assurance that an adequate replacement could be located.

         o        A PROLONGED SLOWDOWN IN THE GLOBAL ECONOMY COULD ADVERSELY
                  IMPACT RTI'S REVENUES - A slowdown in the global economy might
                  lead to decreased capital spending, fewer new retail business
                  start ups, and slower new store expansion at existing retail
                  businesses. Such conditions, even on a regional basis could
                  severely impact one or more of RTI's VARs and result to a
                  disruption in RTI's revenues, and profitability.

                                      50



<PAGE>

         o        RTI'S PRODUCT MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL
                  CHANGE, SO RTI'S SUCCESS DEPENDS HEAVILY ON ITS ABILITY TO
                  DEVELOP AND INTRODUCE NEW APPLICATIONS AND RELATED SERVICES -
                  We believe RTI's ability to succeed in its market is partially
                  dependent on its ability to identify new product opportunities
                  and rapidly, cost-effectively bring them to market. However,
                  there is no guarantee that they will be able to gain market
                  acceptance for any new products. In addition, there is no
                  guarantee that one of RTI competitors will not be able to
                  bring competing applications to market faster or market them
                  more effectively. Failure to successfully develop new
                  products, bring them to market and gain market acceptance
                  could result in decreased market share and ultimately have a
                  material adverse affect on RTI.

         o        RTI DOES NOT HOLD ANY PATENTS OR COPYRIGHTS, ANY TERMINATION
                  OF OR ADVERSE CHANGE TO RTI'S LICENSE RIGHTS COULD HAVE A
                  MATERIAL ADVERSE EFFECT ON ITS BUSINESS - RTI has a license to
                  develop, modify, market, sell, and support its core technology
                  from a third party. Any termination of, or disruption in this
                  license could have a material adverse affect on RTI's
                  business. Further, we believe that most of the technology used
                  in the design and development of RTI's core products is widely
                  available to others. Consequently, there can be no assurance
                  that others will not develop, and market applications that are
                  similar to RTI's, or utilize technologies that are equivalent
                  to RTI's. Likewise, while RTI believes that its products do
                  not infringe on any third party's intellectual property, there
                  can be no assurance that they will not become involved in
                  litigation involving intellectual property rights. If such
                  litigation did occur, it could have a material adverse affect
                  on RTI's business.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk represents the risk of loss that may impact our
consolidated financial position, results of operations or cash flows. We are
exposed to market risks, which include changes in interest rates and changes in
foreign currency exchange rate as measured against the U.S. dollar.

INTEREST RATE RISK

         We do not have financial instruments with variable interest rates or
investment securities.

FOREIGN CURRENCY EXCHANGE RATE RISK


         We conduct business in various foreign currencies, primarily in Europe.
Sales are typically denominated in the local foreign currency, which creates
exposures to changes in exchange rates. These changes in the foreign currency
exchange rates as measured against the U.S. dollar may positively or negatively
affect our sales, gross margins and retained earnings. We attempt to minimize
currency exposure risk through decentralized sales, development, marketing and
support operations, in which substantially all costs are local-currency based.
There can be no assurance that such an approach will be successful, especially
in the event of a significant and sudden decline in the value of the foreign
currency. We do not hedge against foreign currency risk. Approximately 17%, 12%
and 9% of our total revenues from continuing operations were denominated in
currencies other than the U.S. dollar for the periods ended March 31, 2004, 2003
and 2002, respectively.


EQUITY PRICE RISK

         We have no direct equity investments.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Our consolidated financial statements at March 31, 2004 (restated),
2003 and 2002 and the report of Singer Lewak Greenbaum & Goldstein LLP,
Independent accountants, are included in this report on pages beginning on F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.

                                      51



<PAGE>

ITEM 9A. CONTROLS AND PROCEDURES

         Our management, including our principal executive officer and principal
financial and accounting officer, have conducted an evaluation of the
effectiveness of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that were in effect at the end of the period
covered by this report. Based on their evaluation, our principal executive
officer and principal financial and accounting officer have concluded that our
disclosure controls and procedures that were in effect on March 31, 2004 were
effective to ensure that all material information relating to us that is
required to be included in the reports that we file with the SEC is recorded,
processed, summarized and reported, within the time periods specified in the
SEC's rules and forms. There have been no changes in internal controls over
financial reporting that were identified during the evaluation that occurred
during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Our directors and executive officers, and their ages as of June 1,
2004, are as follows:

       NAME                    AGE              POSITION
       ----                    ---              --------

Michael Silverman (1) (2)      59         Chairman of the Board

Michael Tomczak                49         President, Chief Operating Officer
                                          and Director

Jeffrey Boone                  40         Chief Technology Officer

Ran Furman                     34         Chief Financial Officer

Steven Beck                    63         Executive Vice President - Product
                                          Visionary and Director

Lawrence Page                  49         Executive Vice President - Special
                                          Projects and Director

Ivan M. Epstein                43         Director

Ian Bonner (1) (2)             49         Director

Robert P. Wilkie               34         Director

David S. Joseph                55         Senior Vice President, Sales and
                                          Marketing

Kavindra Malik                 43         Executive Vice President, Product
                                          Management

Mike Dotson                    37         Managing Director, European Operations

         (1) Member of the Compensation Committee
         (2) Member of the Audit Committee

         Michael Silverman became a director in January 2001 and Chairman in
February 2004. Mr. Silverman founded Advanced Remote Communications Solutions,
Inc. (formerly known as Boatracs, Inc.) in 1990 and serves on its board of
directors. He previously served as its Chairman until May 2002, and as Chief
Executive Officer and President until October 1997, and from November 1999 to
May 2002. Mr. Silverman is a Chartered Accountant (South Africa) and has an
M.B.A. from Stanford University. Mr. Silverman is a member of the Audit and
Compensation Committees.

         Michael Tomczak became our President, Chief Operating Officer and
director in June 2004 after our acquisition of RTI. Mr. Tomczak served as RTI's
CEO and President since December 2002 and its CFO for the previous two years.
Mr. Tomczak has been an executive with high-growth firms for the past twelve
years including having served as Chief Financial Officer of a publicly traded
technology company. Previously, Mr. Tomczak served as head director of Ernst &
Young's Sacramento office's Entrepreneurial Services Group. Mr. Tomczak holds a
Bachelor of Science degree in business administration from Western Michigan
University and is a Certified Public Accountant in both California and Michigan.

                                      52



<PAGE>

         Jeffrey Boone became the Chief Technical Officer of Island Pacific in
June 2004, following the acquisition of RTI. Mr. Boone served as Chief Technical
Officer since 2001. Previously, Mr. Boone served as VP of Products and
Technology and later CIO for Objective Systems Integrators ("OSI"), before its
acquisition by Agilent Technologies, where he directed product development and
information services. Before joining OSI, he held key technical positions with
Systems Center and IBM. Mr. Boone received his Bachelor of Science degree in
computer science from California State University, Sacramento.

         Ran Furman joined Island Pacific in July 2003 from e.Digital
Corporation where he served as Chief Financial Officer since 2001. Prior to
that, he was a Managing Director at DP Securities, Inc. He was also a Senior
Vice President at Jesup & Lamont Securities between 1995 and 2000, and
previously held positions at Bank of Montreal/Nesbitt Burns and Deloitte &
Touche. He was awarded a Bachelor of Arts from the University of Washington and
an M.B.A. from Columbia Business School.

         Steven Beck became a director in April 2003. Mr. Beck currently serves
as Executive Vice President - Product Visionary. He served as President from
April 2003 to June 2004 and as Chief Operating Officer from April 2003 to
February 2004. He had been President and Chief Operating Officer of our Retail
Management Solutions division (formerly our Island Pacific division) from
September 2002 to March 2003. Since January 2002, he had served as an
independent consultant to various retailers. From March 1998 until January 2002,
he was co-founder and Chief Operating Officer of Planalytics, the foremost
provider of past and future weather analytics to the retail industry, the
inventor of ARTHUR (a trademark of JDA), the most widely installed Merchandise
Planning System for retailers, an officer of The Limited, and President of
Dennison TRG. Mr. Beck received a B.A. from Adelphi University.

         Lawrence Page became a director in March 2004 after our acquisition of
Page Digital. Mr. Page currently serves as Executive Vice President - Special
Projects. He served as Chief Technology Officer from January 2004 to June 2004
and as Chief Operating Officer from February 2004 to June 2004. He is the former
Chief Executive Officer and Chairman of the board of Page Digital, which he
founded in 1980. Mr. Page has over 25 years of direct commerce experience. Mr.
Page attended the California Institute of Technology for three years, when he
departed to pursue his business interests in software.

         Ian Bonner became a director in May 1998. He is President and Chief
Executive Officer of Terraspring, Inc., a software and Internet infrastructure
company. From 1993 until April 2001, he held various positions with IBM
Corporation, including Vice President of Partner Marketing and Programs for the
IBM/Lotus/Tivoli Software Group. His responsibilities included the development
and implementation of marketing campaigns and programs designed to serve the
business partners of IBM, Lotus and Tivoli, including major accounts,
independent software vendors and global systems integrators. He also oversaw the
IBM BESTeam and the Lotus Business Partner programs which are designed to
provide enhanced opportunities, including education, marketing and training
support, to qualified providers of IBM's and Lotus's portfolio of network
solutions. Mr. Bonner received a Bachelor of Commerce from the University of the
Witwatersrand in 1976 and a graduate degree in Marketing Management and Market
Research and Advertising from the University of South Africa in 1978. Mr. Bonner
is a member of the Audit and Compensation Committees.

         Ivan M. Epstein became a director of the Company in May 1998. He is
Chief Executive Officer of Softline PTY Ltd, a subsidiary of Sage Group, plc.
Softline PTY Ltd is one of the leading accounting software vendors in the world.
Mr. Epstein co-founded Softline Limited in 1988 and served as its CEO and
chairman until November 2003, when it was acquired by Sage Group plc.

         Robert P. Wilkie became a director in June 2002. He is Chief Financial
Officer of Softline PTY Ltd, a subsidiary of Sage Group plc. Prior to this, Mr.
Wilkie was CFO and director of Softline Limited, which he joined in 1997 as
controller. Mr. Wilkie received a Bachelor of Commerce from the University of
Cape Town in 1989 and Bachelor of Accounting from the University of
Witwatersrand in 1992. Mr. Wilkie is a Chartered Accountant (South Africa).

         David S. Joseph became Senior Vice President of Sales and Marketing in
January 2004 after our acquisition of Page Digital. He is the former Executive
Vice President and director of Page Digital. Prior to joining Page Digital he
served as senior Vice President of Sales at Computer Systems Dynamics, a
software solution provider to the retail lumber and building materials industry,
which he joined in 1980. At Page Digital, Mr. Joseph was responsible for
establishing markets for new products through sales to major accounts such as
IBM, Lands' End, FAO Schwarz and Hershey Foods. He received a B.A. in English
from Michigan State University and has completed graduate level coursework in
Computer Science.

                                      53



<PAGE>

         Kavindra Malik became Executive Vice President in May 2003. Mr. Malik
served as Vice President from January 2003 to April 2003. Mr. Malik is
responsible for the product vision and roadmap for Island Pacific unit. Prior to
joining Island Pacific, Mr. Malik served as Vice President of Product Management
for Spotlight Solutions from 2002. From 1997 to 2002, Mr. Malik was the Director
of Retail and Consumer Goods Solutions Management for i2 Technologies. Mr. Malik
received a Ph.D. in Decision Sciences from the University of Pennsylvania in
1988.

         Mike Dotson became Managing Director of our United Kingdom Operations
in April 2001. Prior to that appointment, Mr. Dotson held various positions with
Island Pacific's United Kingdom office since January 1998. Mr. Dotson received a
B.A. in Political Science and Economy from University of California at Irvine in
May 1988.

         There are no family relationships among the directors. There are no
arrangements or understandings between any director and any other person
pursuant to which that director was or is to be elected.

CODE OF ETHICS AND BUSINESS CONDUCT

         We have adopted a Code of Ethics and Business Conduct ("Code of
Ethics") that applies to all of our employees, officers and directors. The Code
of Ethics meets the requirements of the rules of the SEC.

BOARD COMMITTEES

         We have established a Compensation Committee and an Audit Committee.

         The Board of Directors formed a Compensation Committee in April 1998.
The Compensation Committee's primary function is to establish the compensation
policies and recommend compensation arrangements for senior management and
directors to the Board of Directors. The Compensation Committee also recommends
the adoption of compensation plans, in which officers and directors are eligible
to participate, and the granting of stock options or other benefits to executive
officers. The Compensation Committee is composed entirely of independent
directors (as "independence" is defined in Section 121(A) of the listing
standards of the American Stock Exchange). The Audit Committee is composed
entirely of independent directors. Current members of the Compensation Committee
are Ian Bonner and Michael Silverman. The Compensation Committee met 4 times
during the fiscal year ended March 31, 2004

         The Board of Directors also formed an Audit Committee in April 1998.
The purpose of the Audit Committee is to assist the Board of Directors in
fulfilling its responsibilities for our financial reporting. The Audit Committee
recommends the engagement and discharge of independent auditors, reviews the
audit plan and the results of the audit with independent auditors, reviews the
independence of the independent auditors, reviews internal accounting procedures
and discharges such other duties as may from time to time be assigned to it by
the Board of Directors. Current members of the Audit Committee are Ian Bonner
and Michael Silverman. The Audit Committee met 4 times during Fiscal 2004.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Ian Bonner and Michael Silverman served as the members of the
Compensation Committee during Fiscal 2004. No member of our Compensation
Committee has ever been an officer of the Company or any of its subsidiaries.
During the last completed fiscal year, none of our executive officers served as
a member of a compensation committee or board of directors of any entity that
had one or more of its executive officers serving as a member of our
Compensation Committee.

COMPENSATION OF DIRECTORS

         During Fiscal 2004, we issued the following options to purchase shares
of our common stock to our directors: (a) Ian Bonner and Michael Silverman each
5,000 options at exercise price of $2.55 per share, 5,000 options at $2.17 per
price, 5,000 options at $2.23 per share, 5,000 options at $1.34 per share and
5,000 options at $0.92 per share, vesting immediately; (b) Ivan Epstein 5,000
options with exercise price of $2.55 per share, 5,000 options at $2.17 per share
and 5,000 options at $0.92 per share, vesting immediately; and (c) Robert Wilkie
5,000 options at exercise price of $2.55 per share, 5,000 options at $2.17 per
share, 5,000 options at $1.34 per share and 5,000 options at $0.92 per share,
vesting immediately. We also paid cash compensation totaling $154,000 to Barry
Schechter, who served as the Chairman of the Board until July 2003.

                                      54



<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires our officers, directors and persons who own more than
10% of a class of our securities registered under Section 12 of the Exchange Act
to file reports of ownership and changes in ownership with the SEC and the
National Association of Securities Dealers. Officers, directors and greater than
10% stockholders are required by SEC regulations to furnish us with copies of
all Section 16(a) forms they file.

         Based solely on a review of copies of such reports furnished to us and
written representations that no Form 5 report was required for the fiscal year
ended March 31, 2004, we believe that all persons subject to the reporting
requirements of Section 16(a) were complied with during the fiscal year ended
March 31, 2004, except as follows: David Joseph was late in filing initial Form
3 report; Ivan Epstein and Robert Wilkie, each of whom were late in filing Form
4 reports reporting two grants of options to each such individual; Ian Bonner
was late in filing Form 4 reports reporting three option grants, exercises of
two options and sale of 30,000 shares; Michael Silverman was late in filing Form
4 reports reporting three option grants and shares gifted; Donald Radcliffe, our
former director, was late in filing Form 4 reporting two option grants and
exercise of an option; and Michael Lenaghan and George Brocco, our former
officers, were late in filing Form 4 reports reporting two option grants to each
such individual.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth summary information concerning the compensation
for the last three fiscal years received by each person who served as Chief
Executive Officer during the last completed fiscal year, the four other most
highly compensated persons serving as executive officers at the end of the last
completed fiscal year, and two other persons who were executive officers during
the last completed fiscal year but were not executive officers at the end of the
last completed fiscal year. These individuals are referred to as the "named
executive officers."

<TABLE>
<CAPTION>
<S>     <C>
                                                                                            LONG TERM
                                         ANNUAL COMPENSATION                              COMPENSATION
                           -----------------------------------------------------------    ------------
                                                                                           SECURITIES         ALL OTHER
     NAME AND                                                           OTHER ANNUAL        UNDERLYING      COMPENSATION
PRINCIPAL POSITION         YEAR       SALARY($)      BONUS($)          COMPENSATION($)     OPTIONS/SARS        ($) (1)
------------------         ----       ---------      --------          ---------------     ------------     -------------

Harvey Braun (2)           2004        598,000              --                --                   --               --
(Former Chief              2003        163,000              --                --            2,000,000               --
Executive Officer)

Steven Beck (3)            2004        651,000              --                --                   --               --
(Excecutive Officer)       2003        379,431              --                --            2,000,000               --

Ran Furman (4)             2004        100,000              --                --              100,000               --
(Chief Financial
Officer)

Kavindra Malik (5)         2004        212,000              --                --               20,000               --
(Executive Vice            2003         41,000          11,000                --               75,000               --
President)

Mike Dotson                2004        170,000              --                --                   --            7,000
(Vice President)           2003        154,000              --                --                   --            6,000
                           2002        143,000              --                --               25,000            5,000

Cheryl Valencia (6)        2004        121,000              --                --                   --               --
(Former Vice               2003         69,000          17,000                --               40,000               --
President)

George Brocco (7)          2004        169,000              --                --               50,000               --
(Former Vice
President)
</TABLE>

                                      55



<PAGE>

---------

         (1) We also provide certain compensatory benefits and other non-cash
compensation to the named executive officers. Except as set forth above, our
incremental cost of all such benefits and other compensation paid in the years
indicated to each such person was less than 10% of his or her reported
compensation and also less than $50,000.
         (2) Mr. Braun was employed with us from January 2003 to May 2004.
         (3) Mr. Beck began his employment with us in October 2002.
         (4) Mr. Furman began his employment with us in August 2003.
         (5) Mr. Malik began his employment with us in January 2002.
         (6) Ms. Valencia was employed with us from September 2002 to November
             2003.
         (7) Mr. Brocco was employed with us from May 2003 to May 2004.

STOCK OPTION GRANTS AND EXERCISES

         The following table sets forth the information concerning individual
grants of stock options during the last fiscal year to the named executive
officers.

<TABLE>
<CAPTION>
<S>     <C>
                                    OPTION GRANTS IN LAST FISCAL YEAR
                                                                                               POTENTIAL REALIZABLE VALUE
                                                                                                 AT ASSUMED ANNUAL RATES
                                                                                                     OF STOCK PRICE
                                                                                                 APPRECIATION FOR OPTION
                                            INDIVIDUAL GRANTS                                           TERM ($)
                       ----------------------------------------------------------------------- --------------------------
                                                                       EXERCISE OR
                       DATE OF        OPTIONS                         BASE PRICE    EXPIRATION
       NAME             GRANT        GRANTED(#)        % OF TOTAL        ($/SH.)       DATE            5%          10%
       ----             -----        ----------        ----------        -------       ----            --          ---
Ran Furman             08/04/03        94,041(1)           7.02%          3.19        08/04/13      189,000     478,000
Ran Furman             08/04/03         5,959(2)           0.44%          3.19        08/04/13       12,000      30,000
Kavindra Malik         05/01/03        20,000(1)           1.49%          0.98        05/01/13       12,000      31,000
George Brocco          05/16/03        40,000(1)           2.99%          1.12        05/16/13       28,000      71,000
George Brocco          06/10/03        10,000(1)           0.75%          2.17        06/10/13       14,000      35,000
</TABLE>

(1)      Options vest as to one-third of the shares on the first anniversary of
         the grant and the remaining two-thirds of the shares in 24 equal
         monthly installments after the first vesting date, subject to
         continuing service.

(2)      Options granted outside of the plan and vest on the first anniversary
         of the grant, subject to continuing service.

         The potential realizable value is calculated based on the term of the
option at its time of grant and the number of shares underlying the grant at
fiscal year end. It is calculated based on assumed annualized rates of total
price appreciation from the market price at the date of grant of 5% and 10%
(compounded annually) over the full term of the grant with appreciation
determined as of the expiration date. The 5% and 10% assumed rates of
appreciation are mandated by SEC rules and do not represent our estimate or
projections of future common stock prices. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common stock and
overall stock market conditions. The amounts reflected in the table may not be
achieved.

                                      56



<PAGE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES

         The following table sets forth the information concerning the fiscal
year end value of unexercised options held by the named executive officers. None
of the named executive officers exercised options during the last fiscal year.

<TABLE>
<CAPTION>
<S>     <C>
                             FISCAL YEAR END OPTION VALUES

                             NUMBER OF SECURITIES
                            UNDERLYING UNEXERCISED              VALUE OF UNEXERCISED IN-THE-MONEY
                             OPTIONS AT FY END (#)                    OPTIONS AT FY END ($)
       NAME                EXERCISABLE/UNEXERCISABLE              EXERCISABLE/UNEXERCISABLE (1)
       ----                -------------------------              -----------------------------
Harvey Braun                     2,000,000/--                             1,460,000/--
Steven Beck                      1,620,754/--                             1,183,000/--
Ran Furman                        --/100,000                                  --/--
Kavindra Malik                   29,167/65,833                            8,000/14,000
Mike Dotson                      34,138/5,862                              6,000/2,000
George Brocco                      --/50,000                                  --/--
</TABLE>

(1)  Based upon the market price of $1.01 per share, determined on the basis of
     the closing sale price per share of our common stock on the American Stock
     Exchange on the last trading day of the 2004 fiscal year, less the option
     exercise price payable per share.

EMPLOYMENT AGREEMENTS

         We entered into an employment agreement with Lawrence Page on January
30, 2004. The term of the agreement is two years. Under the agreement, Mr. Page
is entitled to $190,000 in annual compensation and was granted an option to
purchase 200,000 shares of our common stock. Mr. Page's right to purchase 66,666
of the shares subject to the option shall vest on the first anniversary date of
the agreement, thereafter, the option shall vest at the rate of 5,556 shares per
month during the second year of this agreement. The remaining unvested option
shares shall either: (i) vest at the second anniversary date of this agreement,
or (ii) vest at the rate of 5,556 shares per month if Mr. Page continues to be
our employee after the second anniversary date of this agreement in accordance
with and subject to our current Stock Option Plan. If Mr. Page's employment with
us is terminated without cause during the term of the agreement, he will receive
severance in the amount of the greater of $190,000 or the balance of his base
compensation for the remaining term of the agreement. We also entered a
non-competition agreement with Mr. Page, pursuant to which Mr. Page agreed not
to engage in any business or activity that in any way competes with us for a
period of two years after the termination of his employment with us.

         We entered into an employment agreement with David S. Joseph on January
30, 2004. The term of the agreement is two years. Under the agreement, Mr.
Joseph is entitled to $170,000 in annual compensation. He also received an
option to purchase 150,000 shares of our common stock. Mr. Joseph's right to
purchase 50,000 of the shares subject to the option shall vest at the first
anniversary date of this agreement, thereafter, the option shall vest at the
rate of 4,166 shares per month during the second year of this agreement. The
remaining unvested options shall either: (i) vest at the second anniversary date
of this agreement, or (ii) vest at the rate of 4,166 shares per month if Mr.
Joseph continues to be employed by us after the second anniversary date of this
agreement, all in accordance with and subject to our current Stock Option Plan.
If Mr. Joseph's employment with us is terminated without cause during the term
of the agreement, he will receive severance in the amount of the greater of
$170,000 or the balance of his compensation payable over the remaining term of
the agreement.

         We entered into an employment agreement with Michael Tomczak on June 1,
2004. The term of the agreement is two years. Under the agreement, Mr. Tomczak
is entitled to $360,000 in annual compensation. He also received an option to
purchase 1,772,354 shares of our common stock. Mr. Tomczak's right to purchase
886,178 of the shares subject to the option shall vest at the first anniversary
date of this agreement, thereafter, the remaining option shall vest at the rate
of 73,848 shares per month during the second year of this agreement. If Mr.
Tomczak's employment with us is terminated without cause during the term of the
agreement, he will receive severance in the amount of the lesser of $360,000 or
the balance of compensation payable over the remaining term of the agreement,
but in no event should the amount be less than $180,000. We also entered into
non-competition agreement with Mr. Tomczak, pursuant to which Mr. Tomczak agreed
not to engage in any business or activity that in any way competes with us for a
period of two years after the termination of his employment with us.

                                       57


<PAGE>

         We entered into an employment agreement with Jeffrey Boone on June 1,
2004. The term of the agreement is two years. Under the agreement, Mr. Boone is
entitled to $240,000 in annual compensation. He also received an option to
purchase 1,572,354 shares of our common stock. Mr. Boone's right to purchase
786,179 of the shares subject to the option shall vest at the first anniversary
date of this agreement, thereafter, the remaining option shall vest at the rate
of 65,514 shares per month during the second year of this agreement. If Mr.
Boone's employment with us is terminated without cause during the term of the
agreement, he will receive severance in the amount of the lesser of $240,000 or
the balance of his compensation payable over the remaining term of the
agreement, but in no event should the amount be less than $120,000. We also
entered into non-competition agreement with Mr. Boone, pursuant to which Mr.
Boone agreed not to engage in any business or activity that in any way competes
with us for a period of two years after the termination of his employment with
us.

         We entered into an employment agreement with Barry M. Schechter
effective October 1, 2000. Under the employment agreement, Mr. Schechter had the
right to annual compensation of $325,000 for the first year of the agreement,
$350,000 for the second year of the agreement and $375,000 for the third year of
the agreement. In addition, Mr. Schechter was entitled to receive on each
anniversary of the date of the agreement, an option to purchase the number of
shares of common stock determined by dividing 150% of his base compensation for
the prior year by the closing price of our common stock on the anniversary date.
The agreement stated that options will be fully vested when issued and
exercisable for ten years after the date of the grant. This agreement was
terminated in July 2003 upon Mr. Schechter's resignation from the position of
Chairman of the Board. Mr. Schechter remains as a consultant to us. .The expense
for Mr. Schechter's consulting services was $295,000 in the fiscal year ended
March 31, 2004.

LONG TERM INCENTIVE PLANS/BENEFIT OR ACTUARIAL PLANS

         We do not have any long-term incentive plans, as those terms are
defined in SEC regulations. We have no defined benefit or actuarial plans
covering any named executive officer.

STOCK INCENTIVE PLANS

         We have two stock incentive plans. Our Incentive Stock Option Plan
("1989 Plan") terminated in October 1999. It provided for issuance of incentive
stock options to purchase up to 1,500,000 shares of common stock to employees.
438,735 of such shares remain subject to option as of June 1, 2004. The 1989
Plan was administered by the Board of Directors, which established the terms and
conditions of each option grant.

         Our 1998 Incentive Stock Plan ("1998 Plan") authorizes the issuance of
shares of common stock through incentive stock options, non-statutory options,
stock bonuses, stock appreciation rights and stock purchase agreements. The 1998
Plan was amended in August 2000 to increase the number of shares reserved for
issuance from 3,500,000 to 4,000,000. The August 2000 amendments authorized a
further automatic annual increase in reserved shares to take place on the first
trading day of each fiscal year. The amount of the automatic annual increase is
2% of the total number of shares of common stock outstanding on the last trading
day of the immediately prior fiscal year. The automatic annual increase cannot
however be more than 600,000 shares, and the Board may in its discretion provide
for a lesser increase. The 1998 Plan was further amended in August 2002 to
increase the number of shares reserved for issuance from 4,600,000 to 5,600,000.
The August 2000 amendment also implemented a limit on stock awards to any one
person in excess of 500,000 shares in any calendar year, which limit was
increased to 1,000,000 shares in August 2002. Our stockholders approved the
August 2000 amendment at our annual meeting held November 16, 2000 and the
August 2002 amendment at our annual meeting held September 19, 2002. On April 1,
2003 and April 1, 2004, the automatic increase of 600,000 shares was effected,
so that the total number of shares reserved under the 1998 Plan is currently
7,365,872. The exercise price of options is determined by the Board of
Directors, but the exercise price may not be less than 100% of the fair market
value on the date of the grant, in the case of incentive stock options, or 85%
of the fair market value on the date of the grant, in the case of non-statutory
stock options.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table shows beneficial ownership of shares of our common
stock as of June 1, 2004 (except as otherwise stated below) (i) by all persons
known by us to beneficially own more than 5% of such stock, (ii) by each
director, (iii) each of the named executive officers, and (iv) all directors and
executive officers as a group. Except as otherwise specified, the address for
each person is 19800 MacArthur Boulevard, 12th Floor, Irvine, California 92612.
As of June 1, 2004, there were 53,974,532 shares of common stock outstanding.
Each of the named persons has sole voting and investment power with respect to
the shares shown (subject to community property laws), except as stated below.

                                       58


<PAGE>

<TABLE>
<CAPTION>
<S>     <C>
  Name and Address of                        Amount and Nature of
  Beneficial Owner (1)                       Beneficial Ownership                              Percent of Class*
----------------------                       --------------------                              ----------------

The Sage Group plc                                  27,900,996(2)                                    38.2%
Sage House
Benton Park Road
Newcastle upon Tyne NE7 7LZ, England

ICM Asset Management, Inc.                           2,766,275(3)                                     5.0%
601 W. Main Ave., Suite 600
Spokane, WA 99201

Omicron Master Trust                                 7,106,199(4)                                    11.6%
c/o Omicron Capital L.P.
810 Seventh Avenue, 39th Floor
New York, New York 10019

Midsummer Investments, Ltd.                          5,255,937(5)                                     8.9%
485 Madison Avenue
23rd Floor
New York, NY 10022

Michael Tomczak                                      3,775,848(6)                                     6.5%
Jeffrey Boone                                        3,775,848(6)                                     6.5%
Steven Beck                                          1,920,754(7)                                     3.5%
Harvey Braun                                         2,033,000(8)                                     3.6%
Kavindra Malik                                          95,278(9)                                      <1%

Mike Dotson                                             36,916(10)                                     <1%
Lawrence Page                                        1,755,784                                        3.3%

David S. Joseph                                        249,649                                         <1%

Michael Silverman                                       81,654(11)                                     <1%
345 S. Reeves Drive, #203
Beverly Hills, CA 90212

Ian Bonner                                             150,054(10)                                     <1%
5527 Inverrary Court
Dallas, Texas 75287

Ivan M. Epstein                                        151,388(10)                                     <1%
2 Victoria Eastgate Extension 13
Sandton 2148
South Africa

Robert P. Wilkie                                        42,222(10)                                     <1%
16 Commerce Crescent
Eastgate Extension 13
Sandton 2148
South Africa

All directors and executive officers as             14,068,395(12)                                   21.4%
a group (13 persons)
</TABLE>

      *    Percent of shares of common stock beneficially owned by each investor
           is based upon 53,974,532 shares of our common stock outstanding as of
           June 1, 2004, plus all shares of common stock issuable to such
           investor within 60 days of June 1, 2004 pursuant to outstanding
           options, warrants and preferred stock.

      (1)  This table is based on information supplied by officers, directors
           and principal stockholders. The inclusion in this table of such
           shares does not constitute an admission that the named stockholder is
           a direct or indirect beneficial owner of, or receives the economic
           benefit of, such shares.

      (2)  Includes 71,812 shares issuable pursuant to outstanding options
           exercisable within 60 days of June 1, 2004 and 18,905,269 shares
           issuable upon conversion of Series A Convertible Preferred Stock
           within 60 days of June 1, 2004, based on the July 1, 2004 conversion
           price of $0.87224.

      (3)  In addition to 28,328 shares held by ICM Asset Management Inc.,
           includes 851,627 shares held by Koyah Leverage Partners, L.P.,
           228,197 shares held by Koyah Partners, L.P., and 72,829 shares held
           by Raven Partners, L.P. Also includes 1,257,925 shares issuable upon
           exercise of outstanding warrants held by Koyah Leverage Partners,
           L.P., 309,784 shares issuable upon exercise of outstanding warrants
           held by Koyah Partners, L.P., and 12,535 shares issuable upon
           exercise of outstanding warrants held by Raven Partners, L.P. Koyah
           Ventures, LLC is the general partner of Koyah Leverage Partners,
           L.P., Koyah Partners, L.P. and Raven Partners, L.P., and as a result

                                       59


<PAGE>

           has shared voting and dispositive power over shares held by all three
           entities. Raven Ventures, LLC is an additional general partner of
           Raven Partners, L.P. and as a result has shared voting and
           dispositive power over shares held by Raven Partners, L.P. ICM Asset
           Management, Inc. is the investment advisor to Koyah Leverage
           Partners, L.P., Koyah Partners, L.P. and Raven Partners, L.P., and as
           a result has shared voting and dispositive power over shares held by
           all three entities. Also includes 5,050 shares held by other clients
           of ICM Asset Management, Inc. ICM Asset Management, Inc. has
           discretionary authority over these shares held by its other clients
           and as a result has shared voting and dispositive power over these
           shares. James M. Simmons is the managing member of Koyah Ventures,
           LLC and Raven Ventures, LLC and the President and Chief Investment
           Officer and the controlling stockholder of ICM Asset Management, Inc.
           and as a result has shared voting and dispositive power over shares
           held by Koyah Leverage Partners, L.P., Koyah Partners, L.P., Raven
           Partners, L.P., ICM Asset Management, Inc. and these other clients of
           ICM Asset Management, Inc. Each of these entities or persons
           disclaims beneficial ownership in these securities except to the
           extent of such entity's or person's pecuniary interest in these
           securities and disclaims membership in a group with any other entity
           or person within the meaning of Rule 13d-5(b)(1) under the Exchange
           Act.

      (4)  Includes 5,708,441 shares issuable pursuant to outstanding warrants
           exercisable and 1,325,758 shares issuable upon conversion of the 9%
           Debenture within 60 days of June 1, 2004. Omicron Capital, L.P., a
           Delaware limited partnership ("Omicron Capital"), serves as
           investment manager to Omicron, a trust formed under the laws of
           Bermuda, Omicron Capital, Inc., a Delaware corporation ("OCI"),
           serves as general partner of Omicron Capital, and Winchester Global
           Trust Company Limited ("Winchester") serves as the trustee of
           Omicron. By reason of such relationships, Omicron Capital and OCI may
           be deemed to share dispositive power over the shares of our common
           stock owned by Omicron, and Winchester may be deemed to share voting
           and dispositive power over the shares of our common stock owned by
           Omicron. Omicron Capital, OCI and Winchester disclaim beneficial
           ownership of such shares of our common stock. Omicron Capital has
           delegated authority from the board of directors of Winchester
           regarding the portfolio management decisions with respect to the
           shares of common stock owned by Omicron and, as of April 21, 2003,
           Mr. Olivier H. Morali and Mr. Bruce T. Bernstein, officers of OCI,
           have delegated authority from the board of directors of OCI regarding
           the portfolio management decisions of Omicron Capital with respect to
           the shares of common stock owned by Omicron. By reason of such
           delegated authority, Messrs. Morali and Bernstein may be deemed to
           share dispositive power over the shares of our common stock owned by
           Omicron. Messrs. Morali and Bernstein disclaim beneficial ownership
           of such shares of our common stock and neither of such persons has
           any legal right to maintain such delegated authority. No other person
           has sole or shared voting or dispositive power with respect to the
           shares of our common stock owned by Omicron, as those terms are used
           for purposes under Regulation 13D-G of the Exchange Act, Omicron and
           Winchester are not "affiliates" of one another, as that term is used
           for purposes of the Exchange Act, or of any other person named in
           this prospectus as a selling stockholder. No person or "group" (as
           that term is used in Section 13(d) of the Exchange Act, or the SEC's
           Regulation 13D-G) controls Omicron and Winchester. Omicron's
           beneficial ownership is limited to 4.99% pursuant to limitations in
           the March 2004 Debentures and warrants sold on March 15, 2004.

      (5)  Includes 4,308,698 shares issuable pursuant to outstanding warrants
           exercisable and 946,970 shares issuable upon conversion of the 9%
           Debenture within 60 days of June 1, 2004. Midsummer Capital, LLC is
           the investment manager to Midsummer. By virtue of such relationship,
           Midsummer Capital, LLC may be deemed to have dispositive power over
           the shares owned by Midsummer. Midsummer Capital, LLC disclaims
           beneficial ownership of such shares. Mr. Michel Amsalem and Mr. Scott
           Kaufman have delegated authority from the members of Midsummer
           Capital, LLC with respect to the shares of common stock owned by
           Midsummer. Messrs. Amsalem and Kaufman may be deemed to share
           dispositive power over the shares of our common stock owned by
           Midsummer. Messrs. Amsalem and Kaufman disclaim beneficial ownership
           of such shares of our common stock and neither person has any legal
           right to maintain such delegated authority. Midsummer's beneficial
           ownership is limited to 4.99% pursuant to limitations in the March
           2004 Debentures and warrants sold on March 15, 2004.

      (6)  Consist of shares issuable upon conversion of Series B Convertible
           Preferred Stock within 60 days of June 1. 2004.

      (7)  Includes 1,620,754 shares of common stock issuable pursuant to
           outstanding options exercisable within 60 days of June 1, 2004.

      (8)  Includes 2,000,000 shares of common stock issuable pursuant to
           outstanding option exercisable within 60 days of June 1, 2004. Mr.
           Braun terminated his employment with us effective May 11, 2004.

                                       60


<PAGE>

      (9)  Includes 45,278 shares of common stock issuable pursuant to
           outstanding options exercisable within 60 days of June 1, 2004.

      (10) Consists of outstanding options exercisable within 60 days of June 1,
           2004.

      (11) Includes 44,027 shares of common stock issuable pursuant to
           outstanding options exercisable within 60 days of June 1, 2004.

      (12) Includes 4,090,639 shares of common stock issuable pursuant to
           outstanding options exercisable and 7,551,696 shares of common stock
           issuable upon conversion of Series B Convertible Preferred Stock
           within 60 days of June 1, 2004.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

We have two equity incentive plans under which our equity securities are or have
been authorized for issuance to our employees or directors: the Incentive Stock
Option Plan (1989 Plan), which terminated in October 1999, but under which
options remain outstanding, and the 1998 Incentive Stock Plan (1998 Plan). Both
the 1989 Plan and the 1998 Plan have been approved by our stockholders. In
addition, from time to time we issue non-employee options and warrants to
service providers to purchase shares of our common stock, and these grants have
not been approved by our stockholders. The following table sets forth
information as of March 31, 2004 concerning securities that are authorized under
our equity compensation plans.
<TABLE>
<CAPTION>
<S>     <C>
                                                                         (a)                 (b)                   (c)
                                                                                                                Number of
                                                                                                                securities
                                                                                                                remaining
                                                                                                              available for
                                                                      Number of                              future issuance
                                                                  securities to be      Weighted-average       under equity
                                                                     issued upon         exercise price        compensation
                                                                     exercise of         of outstanding           plans
                                                                     outstanding            options,            (excluding
                                                                      options,              warrants           securities
                                                                    warrants and             and               reflected in
       Plan Category                                                   rights                rights            column (a))
       -------------                                                   ------                                  -----------
       Equity compensation plans approved by security
         holders                                                      4,788,942              $1.70              2,336,826
       Equity compensation plans not approved by security
         holders                                                     18,382,245              $2.66                  --
                                                                     -----------             -----              ----------

            Total                                                    23,171,187              $2.46              2,336,826
                                                                     ===========             =====              ==========
</TABLE>

(1) Does not include an automatic increase of 600,000 shares available for
issuance under the 1998 Plan, which occurred April 1, 2004. After such increase,
we had 2,936,826 shares available for grant under our 1998 Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The following is a description of transactions since April 1, 2003 to
which we have been a party, in which any director, executive officer or holder
of more than 5% of our common stock had or will have a direct or indirect
interest, other than compensation arrangements with our directors and named
executive officers described above under "Executive Compensation." Certain of
these transactions will continue in effect and may result in conflicts of
interest between the Company and such individuals. Although these persons may
owe fiduciary duties to our stockholders, there is a risk that such conflicts of
interest may not be resolved in our favor.

                                      61



<PAGE>

         On November 14, 2003, the Sage Group acquired substantially all the
assets of Softline, who was our majority shareholder from October 1997 through
November 2003, including 141,000 shares of our Series A Convertible Preferred
Stock, 8,923,915 shares of our common stock and options exercisable for 71,812
shares of our common stock. As a result of this transaction the Sage Group
became the beneficial owner of 41.7% of our outstanding common stock as of
November 14, 2003 and remains the beneficial owner of 38.2% of our outstanding
common stock as of March 31, 2004. On September 17, 2003, an aggregate of
500,000 shares of common stock, consisting of accrued dividends on the Series A
Convertible Preferred Stock, were issued to institutional investors. Cumulative
preferred dividends was $2.2 million as of June 1, 2004.

         The Sage Group was also assigned and assumed certain agreements of
Softline, including the rights and obligations respecting and arising from the
Option Agreement between Softline and Steven Beck, as trustee of a certain
management group of the Company. Under the Option Agreement the Optionees had
the right to purchase up to 8,000,000 shares of common stock of the Company and
such number of shares of Series A Convertible Preferred Stock convertible into
17,125,000 shares of common stock of the Company. The right to exercise the
Option was to be distributed as determined by the Company's Board to the
Optionees, who may have included Mr. Beck and other members of the Company's
management, as an incentive to continue service for the Company. The Option
expired, unexercised, on March 24, 2004.

         In May and June 2001, we issued a total of $1.25 million in convertible
notes to a limited number of accredited investors related to ICM. The notes were
originally due August 30, 2001, and required interest at the rate of 12% per
annum to be paid until maturity, with the interest rate increasing to 17% in the
event of a default in payment of principal or interest. Any portion of the
unpaid amount of principal and interest was convertible at any time by the
investors into shares of common stock valued at $1.35 per share. We also agreed
to issue to the investors three-year warrants to purchase 250 common shares for
each $1,000 in notes purchased, at an exercise price of $1.50 per share.

         In July 2002, the terms of the notes issued to the investors related to
ICM were amended. The investors agreed to replace the existing notes with new
notes having a maturity date of September 30, 2003. The interest rate on the new
notes was reduced to 8% per annum, increasing to 13% in the event of a default
in payment of principal or interest. We are required to pay accrued interest on
the new notes calculated from July 19, 2002, in quarterly installments beginning
September 30, 2002. In December 2002, the investors agreed to extend the accrued
interest payments on the new notes to September 30, 2003. The investors agreed
to reduce accrued interest and late charges on the original notes by $16,000,
and to accept the reduced amount in 527,286 shares of our common stock valued at
$0.41 per share, which was the average closing price of our shares on the
American Stock Exchange for the ten trading days prior to July 19, 2002. The new
notes were convertible at the option of the holders into shares of common stock
valued at $0.60 per share. In September 2003, the investors converted the
outstanding balance and accrued interest totaling $1.4 million into 2,287,653
shares of our common stock.

         In July 2002, we also replaced the warrants previously issued to the
investors related to ICM to purchase an aggregate of 3,033,085 shares at
exercise prices ranging from $0.85 to $1.50, and expiring on various dates
between December 2002 and June 2004, with new warrants to purchase an aggregate
of 1,600,000 shares at $0.60 per share, expiring July 19, 2007. The replacement
warrants are not callable by us. No warrants have been exercised as of June 1,
2004.

         During fiscal year 2004, we retained an entity owned by an immediate
family member of our former CEO to provide recruiting and marketing services.
The expense for this service was $138,000 in the fiscal year ended March 31,
2004.

         We retain Radcliffe & Associates, an entity affiliated with Donald S.
Radcliffe, our former director, to perform financial advisory services. During
fiscal year 2004, we incurred $22,000 in fees and costs to Radcliffe &
Associates. We also incurred $6,000 in expenses to this former director for
accounting services. The former director is currently employed with us on a
part-time basis.

         Effective April 1, 2003, we sold our wholly-owned Training Products
subsidiary to its president, Arthur Klitofsky, for the sale price of $180,000
plus earn-out payments equal to 20% of the total gross revenues of Training
Products in each of its next two fiscal years, to the extent the revenues in
each of those years exceed certain targets. We received a promissory note for
the amount of $180,000 and the earn-out payments, if any, will be made in
quarterly installments following each fiscal year, bearing an annual interest
rate of 5%. We agreed to defer the payments due in January 2004 and April 2004
until July 2004. The balance of the note receivable is $162,000 as of June 1,
2004.

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<PAGE>

         In June 2003, we entered into a development and marketing license
agreement with 5R Online, Inc., a software and services company affiliated with
John Frabasile and Randy Pagnotta, our two former officers (the "Former
Officers"). Under this agreement, we obtain an exclusive right to sell and
distribute this company's software. In return, we committed to fund $1.2 million
toward development of this product. We also agreed to pay a royalty of 30% of
the software license sales up until we have recuperated all the development
funding, at which point the royalty will increase to 50% thereafter. We paid
$640,000 toward this development but received no product. In April 2004, we
filed a federal court action against 5R Online, Inc. and the Former Officers.
For further discussion, see Item 3 under the heading "Legal Proceedings" above.

         On January 30, 2004, we acquired Page Digital for a total consideration
of $7.0 million, consisting of $2.0 million in cash and 2,500,000 shares of our
common shares valued at $2.00. Upon the consummation of this transaction
Lawrence Page and David S. Joseph became executive officers of Island Pacific.
Mr. Page received a total consideration of $1.4 million and 1,755,784 shares of
our common stock in connection with the acquisition. Mr. Joseph received a total
consideration of $200,000 and 249,649 shares of our common stock in connection
with the acquisition. We also entered two year employment agreements with both
Mr. Page and Mr. Joseph. For a further description of the terms of these
employment agreements see "Employment Agreements" above.

         On March 15, 2004, we sold Omicron and Midsummer the March 2004
Debentures for an aggregate price of $3.0 million pursuant to a securities
purchase agreement (the "Purchase Agreement"). The March 2004 Debentures bear an
interest rate of 9% per annum, and provide for interest only payments on a
quarterly basis, payable, at our option, in cash or shares of our common stock.
The March 2004 Debentures mature on May 15, 2006. The March 2004 Debentures are
convertible into shares of our common stock at a conversion price of $1.32 per
share, subject to adjustment if we offer or sell any securities for an effective
per share price that is less than 87% of the then current conversion price,
negatively restate any of our financial statements or make any public disclosure
that negatively revises or supplements any prior disclosure regarding a material
transaction consummated prior to March 15, 2004 or trigger other customary
anti-dilution protections. If certain conditions are met, we have the option to
redeem the 9% Debentures at 110% of their face value, plus accrued but unpaid
interest.

         We must redeem the March 2004 Debentures at the initial monthly amount
of $233,333 commencing on February 1, 2005. If the daily volume weighted average
price of our common stock on the American Stock Exchange exceeds $1.15 by more
than 200% for 15 consecutive trading days, we have the option to cause the
Purchasers to convert the then outstanding principal amount of the March 2004
Debentures into our common stock at the conversion price then in effect.

         We also issued the Purchasers two warrants as follows: (1) Series A
Warrants to purchase up to an aggregate of 1,043,479 shares of our common stock
at an exercise price of $1.15 per share with a five-year term , exercisable at
anytime after September 16, 2004, subject to adjustment if we offer or sell any
securities for an effective per share price that is less than the then current
exercise price, negatively restate any of our financial statements or make any
public disclosure that negatively revises or supplements any prior disclosure
regarding a material transaction consummated prior to March 15, 2004 or trigger
other customary anti-dilution protections and (2) Series B Warrants to purchase
up to 8,500,000 shares of our common stock with an exercise price of $5 per
share, these warrants are immediately exercisable and expire on the earlier of
the six-month anniversary of the effective date of the registration statement
that is required to be filed or 18 months from March 15, 2004, subject to
adjustment upon the issuance or sale of securities in a public offering for an
effective per share price that is less than the then-current exercise price and
upon the trigger of other customary anti-dilution protections.

         We previously sold the March 2003 Debentures to Omicron, Midsummer and
Islandia, L.P. ("Islandia") on March 31, 2003, MBSJ Investors, LLC on April 1,
2003 and the Crestview Investors on May 6, 2003 for an aggregate amount of $3.5
million for Omicron, Midsummer and Islandia, $400,000 for MBSJ and $300,000 for
the Crestview Investors. The March 2003 Debentures were convertible into shares
of our common stock at a conversion price equal to $1.0236 per share. We also
issued Omicron, Midsummer and Islandia 5-year warrants to purchase an aggregate
of 1,572,858 shares of common stock at an exercise price of $1.0236.

         In August 2003, we exercised our rights to convert the March 2003
Debentures into an aggregate of 4,103,164 shares of common stock at the
conversion rate of $1.0236 pursuant to their terms. The conversions were
completed as of September 30, 2003.

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<PAGE>

         Pursuant to an agreement dated June 1, 2004, we acquired RTI from
Michael Tomczak, Jeffrey Boone and Intuit in a merger transaction. On March 12,
2004, we, RTI, Merger Sub and the Shareholders entered the March 12, 2004 Merger
Agreement, which provided we would acquire RTI in a merger transaction in which
RTI would merge with and into Merger Sub. The merger consideration contemplated
by the March 12, 2004 Merger Agreement was a combination of cash and shares of
our common stock. The March 12, 2004 Merger Agreement was amended by the Amended
Merger Agreement dated June 1, 2004.

         Pursuant to the Amended Merger Agreement, the Merger was completed with
the following terms: (i) we assumed RTI's obligations under those certain
promissory notes issued by RTI on December 20, 2002 with an aggregate principal
balance of $2.3 million; (ii) the total consideration paid at the closing of the
Merger was $10.0 million paid in shares of our common stock and newly designated
Series B Preferred and promissory notes; (iii) the Shareholders and Intuit are
entitled to price protection payable if and to the extent that the average
trading price of our common stock is less than $0.76 at the time the shares of
our common stock issued in the Merger and issuable upon conversion of the Series
B Preferred are registered pursuant to the Registration Rights Agreement dated
June 1, 2004 between us, the Shareholders and Intuit; and (iv) the Merger
consisted of two steps, first, Merger Sub merged with and into RTI, Merger Sub's
separate corporate existence ceased and RTI continued as the surviving
corporation (the "Reverse Merger"), immediately thereafter, RTI merged with and
into Merger Sub II, RTI's separate corporate existence ceased and Merger Sub II
continued as the surviving corporation (the "Second-Step Merger").

         As a result of the Merger, each Shareholder received 1,258,616 shares
of Series B Preferred and a promissory note payable monthly over two years in
the principal amount of $1,295,000 bearing interest at 6.5% per annum. As a
result of the Merger, Intuit, the holder of all of the outstanding shares of
RTI's Series A Preferred, received 1,546,733 shares of our common stock and a
promissory note payable monthly over two years in the principal amount of
$530,700 bearing interest at 6.5% per annum.

         The Shareholders and Intuit were also granted registration rights.
Under the Registration Rights Agreement, we agreed to register the common stock
issuable upon conversion of the Series B Preferred issued to the Shareholders
within 30 days of the automatic conversion of the Series B Preferred into common
stock. The automatic conversion will occur upon us filing the Certificate of
Amendment with the Delaware Secretary of State increasing the authorized number
of shares of common stock after securing shareholder approval for the
Certificate of Amendment. Under the Registration Rights Agreement, Intuit is
entitled to demand registration or to have its shares included on any
registration statement filed prior the registration statement covering the
Shareholders' shares, subject to certain conditions and limitations, or if not
previously registered to have its shares included on the registration statement
registering the Shareholders' shares. The Shareholders and Intuit are entitled
to price protection payments of up to a maximum of $0.23 per share payable by
promissory note, if and to the extent that the average closing price of our
common stock for the 10 days immediately preceding the date the registration
statement covering their shares is declared effective by the Securities and
Exchange Commission is less than the 10 day average closing price as of June 1,
2004, which was $0.76.

         Pursuant to the Amended Merger Agreement, The Sage Group, plc as well
as certain officers and directors signed voting agreements that provide they
will not dispose of or transfer their shares of our capital stock and that they
will vote their shares of our capital stock in favor of the Certificate of
Amendment and the Amended Merger Agreement and transactions contemplated
therein.

         Upon the consummation of the Merger, Michael Tomczak, RTI's former
President and Chief Executive Officer, was appointed our President, Chief
Operating Officer and director and Jeffrey Boone, RTI's former Chief Technology
Officer, was appointed our Chief Technology Officer. We entered into two-year
employment agreements and non-competition agreements with Mr. Tomczak and Mr.
Boone. For a further description of the terms of these employment agreements,
see "Employment Agreements" above.

         On June 27, 2003, we sold an aggregate of 5,275,000 shares of common
stock at a $1.50 per share to various institutional investors in a private
placement transaction for an aggregate purchase price of $7.9 million (the "June
27, 2003 PIPE Transaction"). On November 7, 2003, we sold an aggregate of
3,180,645 shares of common stock at a price of $1.55 per share to various
institutional investors in a private placement transaction for an aggregate
purchase price of $4.9 million (the "November 7, 2003 PIPE Transaction" and
together with the June 27, 2003 PIPE Transaction, the "PIPE Transactions").

                                      64



<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES

         During fiscal years ended March 31, 2004 and 2003, we retained our
principal auditors, Singer Lewak Greenbaum and Goldstein LLP in several
capacities (in thousands):

                                                     2004             2003
                                               --------------    --------------

              Audit fees                       $         262     $          84
              Audit-related fees                         308                 6
              Tax fees                                    31                16
              All other fees                               9                --
                                               --------------    --------------
                  Total                        $         610     $         106
                                               ==============    ==============

AUDIT FEES


         Audit Fees represent aggregate fees billed, including out-of-pocket
expenses, associated with the annual audits of our consolidated financial
statements, including the work performed in connection with consents and comfort
letters, and review of consolidated financial statements included in our Forms
10-Q.


AUDIT-RELATED FEES


         Audit-Related Fees represent fees billed, including out-of-pocket
expenses, for services rendered during the fiscal years ended March 31, 2004 and
2003, for assistance with acquisitions and financing transactions.


TAX FEES

         Tax fees represent amounts billed primarily for tax compliance services
and include assistance with tax audits.

ALL OTHER FEES

         All other fees represent the aggregate fees billed for services
rendered by our principal auditors, other than "audit fees," "audit-related
fees," and "tax fees," as defined above.

         All of the audit and non-audit services listed above under the
categories "Audit Fees," "Audit-Related Fees," "Tax Fees" or "All Other Fees"
were pre-approved by the Audit Committee for the fiscal year ended March 31,
2004. Because pre-approval of audit and permitted non-audit services of the
independent auditor was a new requirement beginning in fiscal year 2004, none of
the non-audit services listed above under the categories "Audit-Related Fees,"
"Tax Fees" or "All Other Fees" were pre-approved by the Audit Committee for the
fiscal year ended March 31, 2003.

POLICY FOR APPROVING AUDIT AND PERMITTED NON-AUDIT SERVICES OF THE INDEPENDENT
AUDITOR

         The Audit Committee has established procedures to pre-approve all audit
and permitted non-audit services provided by our independent auditor. These
services may include audit services, audit-related services, certain tax
services and other services. Under our policy, pre-approval is generally
provided for up to one year and any pre-approval is detailed as to the
particular service or category of services and is generally subject to a
specific budget. Although the rules of the SEC permit DE MINIMIS exceptions, it
is our policy to pre-approve all audit and permitted non-audit services
performed by our independent auditor. The Audit Committee has delegated
pre-approval authority to the Chairman of the Audit Committee when expedition of
services is necessary and such service has not been previously pre-approved
under our pre-approval policy or when, pursuant to our pre-approval policy,
pre-approval is required on a case-by-case basis. The Chairman is required to
report any such pre-approval decisions to the full Audit Committee at its next
regularly scheduled meeting.

                                      65



<PAGE>

<TABLE>
<CAPTION>
<S>     <C>
PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      Financial statements and financial statement schedules

         Independent Auditor's Report of Singer Lewak Greenbaum &
         Goldstein LLP.............................................................. F-1


         Consolidated Balance Sheets as of March 31, 2004 (restated) and 2003....... F-2

         Consolidated Statements of Operations for the Fiscal Years ended
         March 31, 2004 (restated), 2003, and 2002.................................. F-3

         Consolidated Statements of Stockholders' Equity for the Fiscal Years
         Ended March 31, 2004 (restated), 2003 and 2002............................. F-4

         Consolidated Statements of Cash Flows for the Fiscal Years Ended
         March 31, 2004 (restated), 2003 and 2002................................... F-6


         Notes to Consolidated Financial Statements................................. F-8

         Supplemental Information

              Independent Auditor's Report on Financial Statement Schedule.......... F-38

              Valuation and Qualifying Accounts - Schedule II....................... F-39
</TABLE>

         All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not considered necessary and therefore have been
omitted.

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<PAGE>

(b)      Reports on Form 8-K

         We filed a Form 8-K dated January 30, 2004 with the Securities and
         Exchange Commission on February 4, 2004 to report the completion of our
         acquisition of Page Digital Incorporated.

         We filed a Form 8-K/A dated January 30, 2004 with the Securities and
         Exchange Commission on March 5, 2004 to report financial statements and
         exhibits in connection with our acquisition of Page Digital
         Incorporated.

         We filed a Form 8-K dated March 10, 2004 with the Securities and
         Exchange Commission on March 10, 2004 to report the appointment of
         Lawrence Page to the position of director of the Board.

         We filed a Form 8-K dated March 14, 2004 with the Securities and
         Exchange Commission on March 17, 2004 to report that we executed an
         agreement to acquire Retail Technologies International, Inc. and issued
         $3.0 million in 9% convertible debentures to Omicron Master Trust and
         Midsummer Investment, Ltd.

         We filed a Form 8-K dated June 1 , 2004 with the Securities and
         Exchange Commission on June 14, 2004 to report the completion of our
         acquisition of Retail Technologies, Inc.

(c)      Exhibits

EXHIBIT           DESCRIPTION
-------           -----------

 2.1              Purchase and Exchange Agreement dated as of January 1, 2002
                  between the Company and Softline Limited, incorporated by
                  reference to exhibit 2.1 to the Company's 8-K filed May 16,
                  2002. Exhibits and schedules have been omitted pursuant to
                  Item 601(b)(2) of Regulation S-K, but a copy will be furnished
                  supplementally to the Securities and Exchange Commission upon
                  request.

 2.2              Deed of Appointment dated February 20, 2002 between the bank
                  and the receivers of SVI Retail (Pty) Limited, incorporated by
                  reference to exhibit 2.2 to the Company's 10-K for fiscal year
                  ended March 31, 2002.

 2.3              Business Sale Agreement dated May 3, 2002 among the receivers
                  and managers of the assets of SVI Retail (Pty) Limited and QQQ
                  Systems PTY Limited, incorporated by reference to exhibit 2.3
                  to the Company's 10-K for fiscal year ended March 31, 2002.

 2.4              Securities Purchase Agreement dated March 31, 2003 by and
                  among the Company, Midsummer Investment, Ltd., Omicron Master
                  Trust, and Islandia, L.P., incorporated by reference to
                  exhibit 2.1 to the Company's Form 8-K filed April 15, 2003.

 2.5              Securities Purchase Agreement dated April 1, 2003 by and among
                  the Company and MBSJ Investors, LLC, incorporated by reference
                  to exhibit 2.2 to the Company's Form 8-K filed on April 15,
                  2003.

 2.6              Agreement dated May 6, 2003 by and among the Company,
                  Crestview Capital Fund I, L.P., Crestview Capital Fund II,
                  L.P. and Crestview Capital Offshore Fund, Inc., incorporated
                  by reference to exhibit 2.12 to the Company's Form S-1 filed
                  on May 12, 2003.

 2.7              Stock Purchase Agreement effective April 1, 2003 between SVI
                  Solutions, Inc. and Arthur Klitofsky, incorporated by
                  reference to exhibit 4.1 to the Company's Form 8-K filed on

                  May 21, 2003.

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<PAGE>

 2.8              Pledge Agreement effective April 1, 2003 between SVI
                  Solutions, Inc. and Arthur Klitofsky, incorporated by
                  reference to exhibit 4.2 to the Company's Form 8-K filed on
                  May 21, 2003.

 2.9              Securities Purchase Agreement dated June 27, 2003 by and among
                  the Company and the purchasers named therein, incorporated by
                  reference to exhibit 2.1 to the Company's Form 8-K filed on
                  July 2, 2003.

 2.10             Securities Purchase Agreement dated November 7, 2003 by and
                  among the Company and the purchasers named within,
                  incorporated by reference to exhibit 2.1 to the Company's Form
                  8-K filed on November 12, 2003.

 2.11             Agreement of Merger and Plan of Reorganization dated November
                  20, 2003 by and among the Company, Page Digital Incorporated
                  and IPI Acquisition, Inc, incorporated by reference to exhibit
                  2.1 to the Company's Form 8-K filed on November 24, 2003.

 2.12             Agreement of Merger and Plan of Reorganization dated March 12,
                  2004 by and among the Company, Retail Technologies
                  International, Inc. and IPI Merger Sub, Inc., incorporated by
                  reference to the Company's Form 8-K filed on March 17, 2004.

 2.13             Amended and Restated Agreement of Merger and Plan of
                  Reorganization dated June 1, 2004 by and between Island
                  Pacific, Inc., Retail Technologies International, Inc., IPI
                  Merger Sub, Inc., IPI Merger Sub II, Inc., Michael Tomczak and
                  Jeffrey Boone, incorporated by reference to exhibit 2.1 to the
                  Company's Form 8-K filed on June 14, 2004.

 2.14             Agreement of Merger dated June 1, 2004 between IPI Merger Sub
                  II, Inc. and Retail Technologies International, Inc.,
                  incorporated by reference to exhibit 2.2 to the Company's Form
                  8-K filed on June 14, 2004.

 2.15             Securities Purchase Agreement dated March 15, 2004 by and
                  among the Company, Omicron Master Trust and Midsummer
                  Investments, Ltd, incorporated by reference to exhibit 4.1 to
                  the Company's Form 8-K filed on March 17, 2004.

 3.1              Amended and Restated Certificate of Incorporation,
                  incorporated by reference to exhibit 3.1 to the Company's Form
                  10-K for the fiscal year ended March 31, 2001.

 3.2              Certificate of Designation for Series A of Convertible
                  Preferred Stock, incorporated by reference to exhibit 4.1 of
                  the Company's Form 8-K filed May 16, 2002.

 3.3              Certificate of Designation for Series B of Convertible
                  Preferred Stock, incorporated by reference to exhibit 3.1 to
                  the Company's Form 8-K filed on June 14, 2004.

 3.4              Restated Bylaws, incorporated by reference to exhibit 3.2 to
                  the Company's Form 10-K for the fiscal year ended March 31,
                  2001.

 4.1              Registration Rights Agreement dated as of March 31, 2003 by
                  and among the Company, Midsummer Investment, Ltd., Omicron
                  Master Trust and Islandia, L.P., incorporated by reference to
                  exhibit 4.1 to the Company's Form 8-K filed April 15, 2003.

 4.2              Registration Rights Agreement dated as of April 1, 2003
                  between the Company and MBSJ Investors LLC, incorporated by
                  reference to exhibit 4.2 to the Company's Form 8-K filed April
                  15, 2003.

 4.3              Registration Rights Agreement dated June 27, 2003 by and among
                  the Company and the parties named therein, incorporated by
                  reference to exhibit 4.1 to the Company's Form 8-K filed on
                  July 2, 2003.

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<PAGE>

 4.4              Registration Rights Agreement dated November 7, 2003 by and
                  among the Company and the parties named therein, incorporated
                  by reference to exhibit 4.1 to the Company's Form 8-K filed on
                  November 12, 2003.

 4.5              Settlement Agreement, Mutual Release and Covenant Not to Sue
                  by and among the Company and Cord Camera Centers, Inc. dated
                  September 30, 2003, incorporated be reference to exhibit 4.5
                  to the Company's Form S-1 filed on December 8, 2003.

 4.6              Registration Rights Agreement dated March 15, 2004 by and
                  among the Company, Omicron Master Trust and Midsummer
                  Investments, Ltd., incorporated by reference to exhibit 4.2 to
                  the Company's Form 8-K filed on March 17, 2004.

 4.7              Registration Rights Agreement dated June 1, 2004 by and
                  between Island Pacific, Inc., Michael Tomczak, Jeffrey Boone
                  and Intuit, Inc., incorporated by reference to exhibit 4.1 to
                  the Company's Form 8-K filed on June 14, 2004.

 4.8              Form of Voting Agreement, incorporated by reference to exhibit
                  4.2 to the Company's Form 8-K filed on June 14, 2004.

 10.1             Letter Agreement between the Company and Union Bank of
                  California, N.A. dated April 24, 2001, incorporated by
                  reference to exhibit 10.18 to the Company's Form 10-K for the
                  fiscal year ended March 31, 2001.

 10.2             Letter Agreement between the Company and Union Bank of
                  California, N.A. dated June 22, 2001, incorporated by
                  reference to exhibit 10.19 to the Company's Form 10-K for the
                  fiscal year ended March 31, 2001.

 10.3             Amended and Restated Term Loan Agreement between the Company
                  and Union Bank of California, N.A. dated as of June 29, 2001,
                  incorporated by reference to exhibit 10.20 to the Company's
                  Form 10-K for the fiscal year ended March 31, 2001.

 10.4             First Amendment to Amended and Restated Term Loan Agreement
                  between the Company and Union Bank of California, N.A. dated
                  as of March 18, 2002, and First Amendment to Amended and
                  Restated Pledge Agreement between the Company, Sabica
                  Ventures, Inc., SVI Retail, Inc., SVI Training Products, Inc.,
                  and Union Bank of California, N.A. dated as of March 18, 2002,
                  incorporated by reference to exhibit 10.4 to the Company's
                  form 10-K for fiscal year ended March 31, 2002.

 10.5             Second Amendment to Amended and Restated Term Loan Agreement
                  between the Company and Union Bank of California, N.A. dated
                  as of May 21, 2001, incorporated by reference to exhibit 10.5
                  to the Company's form 10-K for fiscal year ended March 31,
                  2002.

 10.6             Third Amendment to Amended and Restated Term Loan Agreement
                  between the Company and Union Bank of California, N.A. dated
                  as of July 15, 2002, incorporated by reference to exhibit 10.6
                  to the Company's form 10-K for fiscal year ended March 31,
                  2002.

 10.7             Fourth Amendment to Amended and Restated Term Loan Agreement
                  between the Company and Union Bank of California, N.A. dated
                  as of November 15, 2002, incorporated by reference to exhibit
                  10.3 to the Company's 10-Q filed on February 14, 2003.

 10.8             Warrant in favor of UNIONBANCAL EQUITIES, Inc. dated January
                  2, 2003, incorporated by reference to exhibit 10.4 to the
                  Company's 10-Q filed on February 14, 2003.

 10.9             Discounted Loan Payoff Agreement dated March 31, 2003 by and
                  among Union Bank of California, N.A., SVI, SVI Retail, Inc.,
                  Sabica Ventures, Inc. and SVI Training Products, Inc.,
                  incorporated by reference to exhibit 10.3 to the Company's
                  Form 8-k filed on April 15, 2003.

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<PAGE>

 10.10            Unsecured Promissory Note dated March 31, 2003 in favor of
                  Union Bank of California, incorporated by reference to exhibit
                  10.47 to the Company's Form S-1 filed on May 12, 2003.

 10.11            Amended and Restated Subordinated Promissory Note of the
                  Company in favor of Softline Limited dated June 30, 2001,
                  incorporated by reference to exhibit 10.26 to the Company's
                  Form 10-K for the fiscal year ended March 31, 2001.

 10.12            Investor Rights Agreement between the Company and Softline
                  Limited dated as of January 1, 2002, incorporated by reference
                  to exhibit 4.2 of the Company's Form 8-K filed May 16, 2002.

 10.13            Investors' Rights Agreement between the Company, Koyah
                  Leverage Partners, L.P. and Koyah Partners, L.P., incorporated
                  by reference to exhibit 10.3 to the Company's Form 8-K filed
                  January 8, 2001.

 10.14            Investors' Rights Agreement among SVI Holdings, Inc., Koyah
                  Leverage Partners, L.P. and Koyah Partners, L.P. dated July
                  19, 2002, incorporated by reference to exhibit 10.25 to the
                  Company's Form S-1 filed on May 12, 2003.

 10.15            Form of Convertible Promissory Note, incorporated by reference
                  to exhibit 10.31 to the Company's Form 10-K for the fiscal
                  year ended March 31, 2001.

 10.16            Amendment Agreement to between the Company, Koyah Leverage
                  Partners, Koyah Partners, L.P., Raven Partners, L.P., Nigel
                  Davey, and Brian Cathcart dated July 15, 2002, incorporated by
                  reference to exhibit 10.11 to the Company's 10-K for fiscal
                  year ended March 31, 2002.

 10.17            First Amendment to Amendment Agreement between the Company,
                  Koyah Leverage Partners, Koyah Partners, L.P., Raven Partners,
                  L.P., Nigel Davey, and Brian Cathcart dated December 5, 2002,
                  incorporated by reference to exhibit 10.6 to the Company's
                  10-Q filed on February 14, 2003.

 10.18            Second Amendment to Amendment Agreement between the Company,
                  Koyah Leverage Partners, Koyah Partners, L.P., and Raven
                  Partners, L.P. dated March 14, 2003, incorporated by reference
                  to exhibit 10.29 to the Company's Form S-1 filed on May 12,
                  2003.

 10.19            Third Amendment to Amendment Agreement between the Company,
                  Koyah Leverage Partners, Koyah Partners, L.P., and Raven
                  Partners, L.P. dated March 28, 2003, incorporated by reference
                  to exhibit 10.30 to the Company's Form S-1 filed on May 12,
                  2003..

 10.20            Fourth Amendment to Amendment Agreement between the Company,
                  Koyah Leverage Partners, Koyah Partners, L.P., and Raven
                  Partners, L.P. dated April 3, 2003, incorporated by reference
                  to exhibit 10.31 to the Company's Form S-1 filed on May 12,
                  2003.

 10.21            Fifth Amendment to Amendment Agreement between the Company,
                  Koyah Leverage Partners, Koyah Partners, L.P., and Raven
                  Partners, L.P. dated June 27, 2003 (included herewith).

 10.22            Professional Services Agreement between SVI Retail, Inc. and
                  Toys "R" Us dated July 10, 2001, incorporated by referenced to
                  exhibit 10.2 to the Company's Form 10-Q for the quarter ended
                  September 30, 2001. Portions of this exhibit (indicated by
                  asterisks) have been omitted pursuant to a request for
                  confidential treatment pursuant to Rule 24b-2 of the
                  Securities Exchange Act of 1934.

                                       70



<PAGE>

 10.23            Purchase Agreement between the Company and Toys "R" Us, Inc.
                  dated May 29, 2002, incorporated by reference to exhibit 10.14
                  to the Company's form 10-K for fiscal year ended March 31,
                  2002.

 10.24            Convertible Note in favor of Toys "R" Us, Inc. dated May 29,
                  2002, incorporated by reference to exhibit 10.15 to the
                  Company's form 10-K for fiscal year ended March 31, 2002.

 10.25            Warrant in favor of Toys "R" Us, Inc. dated May 29, 2002,
                  incorporated by reference to exhibit 10.16 to the Company's
                  form 10-K for fiscal year ended March 31, 2002.

 10.26            Development Agreement between the Company and Toys "R" Us,
                  Inc. dated May 29, 2002, incorporated by reference to exhibit
                  10.17 to the Company's form 10-K for fiscal year ended March
                  31, 2002.

 10.27            Summary of lease terms for Carlsbad facility, incorporated by
                  reference to exhibit 10.20 to the Company's form 10-K for
                  fiscal year ended March 31, 2002.

 10.28            Termination Agreement between the Company and Toys "R" Us,
                  Inc. dated November 13, 2003 (included herewith).

 10.29            Option Agreement between Softline Ltd. and Steven Beck, as
                  trustee of a certain management group of Island Pacific, Inc.
                  (included herewith).

 10.30            Employment Agreement dated January 30, 2004 by and between
                  Island Pacific, Inc. and Larry Page (included herewith).

 10.31            Employment Agreement dated January 30, 2004 by and between
                  Island Pacific, Inc. and David Joseph (included herewith).

 10.32            Employment Agreement dated June 1, 2004 by and between Island
                  Pacific, Inc. and Michael Tomczak, incorporated by reference
                  to exhibit 10.1 to the Company's form 8-K filed on June 14,
                  2004.

 10.33            Employment Agreement dated June 1, 2004 by and between Island
                  Pacific, Inc. and Jeffrey Boone, incorporated by reference to
                  exhibit 10.2 to the Company's form 8-K on June 14, 2004.

 10.34            Option Agreement dated September 3, 2003 by and between SVI
                  Solutions, Inc. and Harvey Braun (included herewith).

 10.35            Option Agreement dated September 3, 2003 by and between SVI
                  Solutions, Inc. and Steven Beck (included herewith).

 10.36            Code of Ethics and Business Conduct (included herewith).

 10.37            Summary of loan transactions between the Company and World
                  Wide Business Centres, incorporated by reference to exhibit
                  10.12 to the Company's form 10-K for fiscal year ended March
                  31, 2002.

 21               List of Subsidiaries.

 23.1             Consent of Independent Auditor

 31.1             Rule 13a-14(a) Certification of Chief Executive Officer

 31.2             Rule 13a-14(a) Certification of Chief Financial Officer

 32.1             Certification of Chief Executive Officer and Chief Financial
                  Officer pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                       71



<PAGE>

                                   SIGNATURES

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


Date:  November 15, 2004         ISLAND PACIFIC, INC., A DELAWARE CORPORATION

                                 By:  /S/ MICHAEL TOMCZAK
                                      ------------------------------------------
                                 Michael Tomczak
                                 President, Chief Operating Officer and Director
                                 (Principal Executive Officer)


                                 By:  /S/ RAN FURMAN
                                      ------------------------------------------
                                 Ran Furman, Chief Financial Officer
                                 (Principal Financial and Accounting Officer)

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.


<TABLE>
<CAPTION>
<S>     <C>
SIGNATURES                                             CAPACITY                                 DATE

/s/ Michael Silverman                            Chairman of the Board                     November 15, 2004
---------------------------------------
Michael Silverman

/s/ Michael Tomczak                         President, Chief Operating Officer             November 15, 2004
---------------------------------------              and Director
Michael Tomczak

/s/ Steven Spector                                     Director                            November 15, 2004
---------------------------------------
Steven Spector

/s/ Donald Radcliffe                                   Director                            November 15, 2004
---------------------------------------
Donald Radcliffe

/s/ Julia Eakes                                        Director                            November 15, 2004
---------------------------------------
Julia Eakes

/s/ Ian Bonner                                         Director                            November 15, 2004
---------------------------------------
Ian Bonner

/s/ Lawrence Page                                      Director                            November 15, 2004
---------------------------------------
Lawrence Page
                                                   72
</TABLE>




<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Island Pacific, Inc. and subsidiaries
Irvine, California


We have audited the accompanying consolidated balance sheets of Island Pacific,
Inc. and subsidiaries as of March 31, 2004 and 2003, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.



We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.


In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Island Pacific, Inc.
and subsidiaries as of March 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 2004 in conformity with U.S. generally accepted accounting principles.

/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
------------------------------------------
Los Angeles, California
June 11, 2004, except for Note 19 as to which
the date is November 4, 2004


                                      F-1



<PAGE>


<TABLE>
ISLAND PACIFIC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                                                     MARCH 31,     MARCH 31,
                                                                                        2004          2003
                                                                                     ---------     ---------
                                                                                   (As restated
                                                                                  - See Note 19)
                                                                              (in thousands, except share amounts)
<S>                                                                                  <C>           <C>
ASSETS
Current assets:
     Cash and cash equivalents                                                       $  2,108      $  1,319
     Accounts receivable, net of allowance for doubtful
       accounts of $409 and $364, respectively                                          4,572         3,974
     Other receivables, including $37 and $3 from related
       parties, respectively                                                              143            97
     Inventories                                                                           46            91
     Current portion of non-compete agreements                                            668           917
     Current portion of note receivable                                                    36            --
     Net assets from discontinued operations                                               --           309
     Prepaid expenses and other current assets                                            682           225
                                                                                     ---------     ---------
         Total current assets                                                           8,255         6,932

Note receivable, less current maturities, net                                             126            --
Property and equipment, net                                                               821           380
Goodwill, net                                                                          20,607        14,795
Other intangibles, net                                                                 18,297        15,472
Other assets                                                                              421            58
                                                                                     ---------     ---------

         Total assets                                                                $ 48,527      $ 37,637
                                                                                     =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Debt due to stockholders                                                        $     --      $  1,320
     Current portion of long-term debts                                                   146           649
     Current portion of capital leases                                                    169            --
     Accounts payable                                                                   1,255         2,941
     Accrued expenses                                                                   3,301         4,517
     Deferred revenue                                                                   2,657         1,561
                                                                                     ---------     ---------
         Total current liabilities                                                      7,528        10,988

Convertible debentures, less current maturities                                         1,900         2,726
Capital lease obligations, less current maturities                                         89            --
Other long-term liabilities                                                               235            81
                                                                                     ---------     ---------
         Total liabilities                                                              9,752        13,795
                                                                                     ---------     ---------

Commitments and contingencies (Note 10)

Stockholders' equity:
     Preferred stock, $0.0001 par value; 5,000,000 shares authorized; Series A
         Convertible Preferred stock, 7.2% cumulative convertible 141,100 shares
         authorized and outstanding with a stated value of $100 per
         share, dividends in arrears of $2,002 and $1,269                              14,100        14,100
     Committed common stock - 2,500,000 shares                                             --         1,383
     Common stock, $.0001 par value; 100,000,000 shares authorized;
         52,427,799 and 42,199,632 shares issued and 52,427,799 and
         31,499,632 shares outstanding                                                      5             4
     Additional paid-in capital                                                        74,088        57,751
     Retained (deficit) earnings                                                      (49,418)      (40,490)
     Treasury stock, at cost - 10,700,000 shares                                           --        (8,906)
                                                                                     ---------     ---------
         Total stockholders' equity                                                    38,775        23,842
                                                                                     ---------     ---------
         Total liabilities and stockholders' equity                                  $ 48,527      $ 37,637
                                                                                     =========     =========

                                                       F-2
</TABLE>






<PAGE>
<TABLE>
ISLAND PACIFIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>

                                                                               YEAR ENDED MARCH 31,
                                                                      ------------------------------------
                                                                        2004          2003          2002
                                                                      ---------     ---------     ---------
                                                                   (As restated -
                                                                    See Note 19)
                                                                      (in thousands, except per share data)

<S>                                                                   <C>           <C>           <C>
Revenues:
   Product                                                            $ 13,214      $ 11,550      $ 10,360
   Services                                                              4,625        10,746        16,355
                                                                      ---------     ---------     ---------
      Total revenues                                                  $ 17,839      $ 22,296      $ 26,715

Cost of revenues
   Product                                                               5,533         4,782         4,407
   Services                                                              2,338         6,165         9,466
                                                                      ---------     ---------     ---------
      Total cost of revenues                                             7,871        10,947        13,873
                                                                      ---------     ---------     ---------
         Gross profit                                                    9,968        11,349        12,842
                                                                      ---------     ---------     ---------
Expenses:
   Application development                                               1,082         4,643         4,203
   Depreciation and amortization                                         1,215         1,246         3,853
   Selling, general and administrative                                  15,246         8,072        12,036
                                                                      ---------     ---------     ---------
   Total expenses                                                       17,543        13,961        20,092
                                                                      ---------     ---------     ---------
Loss from operations                                                    (7,575)       (2,612)       (7,250)

Other income (expense):
   Interest income                                                          20             1             7
   Other income (expense)                                                   (7)        2,208           (56)
   Interest expense, including $52, $128 and
      $1,988 to related parties                                         (1,952)       (1,796)       (3,018)
                                                                      ---------     ---------     ---------
         Total other income (expenses)                                  (1,939)          413        (3,067)
                                                                      ---------     ---------     ---------

Loss before provision (benefit) for income taxes                        (9,514)       (2,199)      (10,317)

Provision (benefit) for income taxes                                      (586)           11             2
                                                                      ---------     ---------     ---------
Loss before change in accounting principle                              (8,928)       (2,210)      (10,319)

  Cumulative effect of changing accounting principle - Goodwill
      valuation under SFAS No. 142                                          --          (627)           --
                                                                      ---------     ---------     ---------
Loss from continuing operations                                         (8,928)       (2,837)      (10,319)

Discontinued operations:
   Income (loss) from operations of SVI Training
      Products, Inc., net of estimated income
      tax expense (benefit) of $0, ($57) and $37                            --           119           220
   Loss from Australian operations, net of estimated
      income taxes benefit of $0                                            --            --        (4,559)
                                                                      ---------     ---------     ---------
Income (loss) from discontinued operations                                  --           119        (4,339)
                                                                      ---------     ---------     ---------

Net loss                                                                (8,928)       (2,718)      (14,658)

   Cumulative preferred dividends                                       (1,024)       (1,015)         (254)
                                                                      ---------     ---------     ---------
Net loss available to common stockholders                             $ (9,952)     $ (3,733)     $(14,912)
                                                                      =========     =========     =========
Basic and diluted earnings (loss) per share:
   Loss before change in accounting principle                         $  (0.22)     $  (0.07)     $  (0.29)
   Loss from change in accounting principle                                 --         (0.02)           --
                                                                      ---------     ---------     ---------
       Loss from continuing operations                                   (0.22)        (0.09)        (0.29)
   Discontinued operations                                                  --            --         (0.12)
   Cumulative preferred dividends                                        (0.02)        (0.04)        (0.01)
                                                                      ---------     ---------     ---------
       Net loss available to common stockholders                      $  (0.24)     $  (0.13)     $  (0.42)
                                                                      =========     =========     =========

Basic and diluted weighted average common shares outstanding            41,450        29,599        35,698
                                                                      =========     =========     =========

                                                     F-3
</TABLE>




<PAGE>

<TABLE>
ISLAND PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
                                                                                                             ACCUMULATED
                                                                                                   OTHER        OTHER
                                                  ADDITIONAL                          RETAINED     COMPRE-     COMPRE-
                            PREFERRED    COMMON    PAID-IN     TREASURY     SHARES    EARNINGS     HENSIVE     HENSIVE
                              STOCK      STOCK     CAPITAL      STOCK     RECEIVABLE  (DEFICIT)     LOSS         LOSS       TOTAL
                            ---------  ---------  ---------   ---------   ---------   ---------   ---------   ---------   ---------
                                                            (in thousands, except share amounts)
<S>                         <C>        <C>         <C>         <C>         <C>         <C>            <C>       <C>         <C>
Balance, April 1, 2001            --   $      4   $ 57,108    $ (4,306)         --    $(23,114)         --    $ (2,699)   $ 26,993
Issuance of common stock
  for services and
  severance payments              --         --        441          --          --          --          --          --         441
Common stock to be
  returned                        --         --        485          --    $   (485)         --          --          --          --
Compensation expense for
  warrants
  granted                         --         --        579          --          --          --          --          --         579
Interest charges on
  convertible notes
  due to stockholders             --         --        438          --          --          --          --          --         438
Warrants issued for late
  effectiveness of the
  registration for common
  stock sold in
  a private placement
  in fiscal 2001                  --         --        711          --          --          --          --          --         711
Offering costs                    --         --       (711)         --          --          --          --          --        (711)
Liquidated damages for
  late effectiveness of
  the registration
  statement                       --         --        (60)         --          --          --          --          --         (60)
Issuance of Series A
  Preferred stock in
  exchange for common
  stock, sale of IBIS
  note receivable and
  Settlement of Softline
  note payable              $ 14,100         --         --      (8,580)         --          --          --          --       5,520
Retired treasury stock            --         --     (4,306)      4,306          --          --          --          --          --
Comprehensive loss:
   Net loss                       --         --         --          --          --     (14,658)   $(14,658)         --     (14,658)
   Other comprehensive
    loss:
   Translation adjustment         --         --         --          --          --          --          --       2,699       2,699
                                                                                                  ---------
     Comprehensive loss           --         --         --          --          --          --    $(14,658)         --          --
                            ---------  ---------  ---------   ---------   ---------   ---------   =========   ---------   ---------
Balance, March 31, 2002     $ 14,100   $      4   $ 54,685    $ (8,580)   $   (485)   $(37,772)               $     --    $ 21,952

Issuance of common stock
  for services and
  interest expense                --         --        761          --          --          --          --          --         761
Issuance of common stock
  to payoff a
  stockholders' note
  payable                         --         --        388          --          --          --          --          --         388
Issuance of common stock
  and convertible note to
  payoff term loan                --         --        787          --          --          --          --          --         787
Issuance of common stock
  for liquidated damage
  charge for late
  effectiveness of the
  registration statement          --         --         60          --          --          --          --          --          60

                       The accompanying notes are an integral part of these consolidated financial statements.
                                                                                                                         (Continued)
                                                                F-4
</TABLE>




<PAGE>

<TABLE>
ISLAND PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
<CAPTION>
<S>     <C>
                                                                                                                ACCUMULATED
                                                                                                        OTHER      OTHER
                                                           ADDITIONAL                      RETAINED    COMPRE-    COMPRE-
                           PREFERRED  COMMITTED  COMMON     PAID-IN    TREASURY   SHARES   EARNINGS    HENSIVE    HENSIVE
                             STOCK      STOCK     STOCK     CAPITAL     STOCK   RECEIVABLE (DEFICIT)     LOSS       LOSS     TOTAL
                           --------- ---------  ---------  ---------  ---------  --------- ---------  ---------  --------- ---------
                                                                (in thousands, except share amounts)
Issuance of
  convertible note payable
  solely in common stock         --     1,383         --         --         --         --        --         --         --     1,383
Common stock returned            --        --         --       (474)        --        485        --         --         --        11
Compensation expense for
  warrants and options
  granted                        --        --         --         32         --         --        --         --         --        32
Interest charges on
  convertible note due to
  major customer                 --        --         --        879         --         --        --         --         --       879
Interest charges on
  convertible debentures         --        --         --        633         --         --        --         --         --       633
Adjustment to cost of
  treasury stock                 --        --         --         --       (326)        --        --         --         --      (326)
Comprehensive loss:
  Net loss                       --        --         --         --         --         --    (2,718)  $ (2,718)        --    (2,718)
  Comprehensive                                                                                       ---------
    loss                         --        --         --         --         --         --        --   $ (2,718)        --        --
                           --------- ---------  ---------  ---------  ---------  --------- ---------  =========  --------- ---------
Balance, March 31, 2003    $ 14,100  $  1,383   $      4   $ 57,751   $ (8,906)  $     --  $(40,490)             $     --  $ 23,842

Exercise of
  stock options                  --        --         --        144         --         --        --         --         --       144
Issuance of common
  stock for services             --        --         --         74         --         --        --         --         --        74
Issuance of common stock
  for commissions and
  bonuses due to employees       --        --         --         83         --         --        --         --         --        83
Sale of common stock             --        --          1     12,842         --         --        --         --         --    12,843
Offering costs                   --        --         --     (1,213)        --         --        --         --         --    (1,213)
Issuance of common stock
  in connection with
  acquisition of Page Digital
  Incorporated                   --        --         --      5,000         --         --        --         --         --     5,000
Conversion of convertible
  notes                          --        --         --      1,872         --         --        --         --         --     1,872
Conversion of convertible
  debentures                     --        --          1      4,200         --         --        --         --         --     4,201
Debt discount on
  convertible debentures         --        --         --      1,903         --         --        --         --         --     1,903
Issuance of common stock
  for settlement cost            --        --         --        120         --         --        --         --         --       120
Compensation expense for
  stock options and
  warrants granted               --        --         --        217         --         --        --         --         --       217
Declared dividend on
  Series A Preferred             --        --         --       (421)        --         --        --         --         --      (421)
Conversion of accrued
  dividend into common
  stock                          --        --         --        421         --         --        --         --         --       421
Reclassify to liability          --    (1,383)        --         --         --         --        --         --         --    (1,383)
Retirement of treasury
  stock                          --        --         (1)    (8,905)     8,906         --        --         --         --        --
Comprehensive loss:
   Net loss                      --        --         --         --         --         --    (8,928)  $ (8,928)        --    (8,928)
     Comprehen-                                                                                       ---------
       sive loss                 --        --         --         --         --         --        --   $ (8,928)        --        --
                           --------- ---------  ---------  ---------  ---------  --------- ---------  =========  --------- ---------
Balance, March 31, 2004(1) $ 14,100  $     --   $      5   $ 74,088   $     --   $     --  $(49,418)             $     --  $ 38,775
                           ========= =========  =========  =========  =========  ========= =========             ========= =========

                       The accompanying notes are an integral part of these consolidated financial statements.

(1) Committed stock, additional paid-in capital and the retained deficit have been restated in the year ended March 31, 2004,
    see Note 19.

                                                                 F-5
</TABLE>




<PAGE>

<TABLE>
ISLAND PACIFIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                     YEAR ENDED MARCH 31,
                                                                            -------------------------------------
                                                                               2004          2003          2002
                                                                            ---------     ---------     ---------
                                                                          (As restated -
                                                                           See Note 19)
                                                                             (in thousands, except share amounts)
<S>                                                                         <C>           <C>           <C>
Cash flows from operating activities:
     Net loss                                                               $ (8,928)     $ (2,718)     $(14,658)
     Adjustments to reconcile net loss to net cash provided
       by (used for) operating activities:
     Depreciation and amortization                                             3,798         4,148         7,069
     Cumulative effect of a change in accounting principle -
        Goodwill valuation under SFAS No. 142                                     --           627            --
     Gain on debt forgiveness                                                     --        (2,184)           --
     Loss on disposal of Training Products and Australian operations              --           129         3,171
     Compensation expense for stock options and warrants                         217             8           579
     Interest charges on convertible debt                                      1,562           879           438
     Provision for allowance for doubtful accounts, net of recoveries            823           159            (3)
     Common stock issued for services rendered, severance and
       interest payments                                                          75           115           245
     Deferred income tax provision                                                --            --          (149)
     Loss on sale of furniture and equipment                                     170            --            64
     Changes in assets and liabilities, net of effects of acquisitions:
         Accounts receivable and other receivables                            (2,131)       (2,205)        2,551
         Accrued interest on note receivable                                      --            --            --
         Inventories                                                              52            24            61
         Prepaid expenses and other current assets                              (641)         (286)           60
         Accounts payable and accrued expenses                                (4,188)        1,394        (1,892)
         Accrued interest on stockholders' loans and note payable                200           853         2,295
         Deferred revenue                                                         61        (1,967)        1,642
         Income taxes payable                                                     --           (98)           98
                                                                            ---------     ---------     ---------
         Net cash provided by (used for) operating activities                 (8,930)       (1,122)        1,571
                                                                            ---------     ---------     ---------
Cash flows from investing activities:
     Acquisition of Page Digital Incorporated, net                            (2,045)           --            --
     Purchase of furniture and equipment                                        (509)          (67)         (301)
     Proceeds from sale of furniture and equipment                                --            --            13
     Payment received on note receivable                                          18            --            --
     Purchase of software and capitalized software development costs          (3,053)          (93)         (409)
                                                                            ---------     ---------     ---------
         Net cash used for investing activities                               (5,589)         (160)         (697)
                                                                            ---------     ---------     ---------
Cash flows from financing activities:
     Proceeds from issuance of common stock, net                              11,774            --            --
     Increase (decrease) in amounts due to stockholders, net                      --          (287)         (844)
     Proceeds from committed stock                                                --         1,383            --
     Proceeds from convertible notes due to stockholders                          --            --         1,260
     Proceeds from convertible debentures                                      3,700         3,500            --
     Payments on convertible debentures                                         (135)           --            --
     Payments on capital lease obligations                                       (28)           --            --
     Payments on term loans                                                       --        (3,303)       (1,243)
     Proceeds from short-term loan from related party                             --           120            --
     Payments on short-term loan from related party                               --          (120)           --
                                                                            ---------     ---------     ---------
         Net cash provided by (used for) financing activities                 15,311         1,293          (827)
                                                                            ---------     ---------     ---------

                                                                                                      (Continued)
                                                        F-6
</TABLE>




<PAGE>

<TABLE>
ISLAND PACIFIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<CAPTION>

                                                                                    YEAR ENDED MARCH 31,
                                                                            ----------------------------------
                                                                              2004         2003         2002
                                                                            --------     --------     --------
                                                                         (As restated -
                                                                          See Note 19)
                                                                           (in thousands, except share amounts)

<S>                                                                         <C>          <C>          <C>
Effect of exchange rate changes on cash                                          (3)          (1)          (5)
                                                                            --------     --------     --------

Net increase (decrease) in cash and cash equivalents                            789           10           42
Cash and cash equivalents, beginning of year                                  1,319        1,309        1,267
                                                                            --------     --------     --------
Cash and cash equivalents, end of year                                      $ 2,108      $ 1,319      $ 1,309
                                                                            ========     ========     ========

Supplemental disclosure of non-cash information:
     Interest paid                                                          $   146      $   492      $ 1,194
     Income taxes paid                                                      $     4      $    40      $    --

Supplemental disclosure of non-cash investing and financing activities:
     Issued 84,849 shares of common stock to employees in lieu of
        cash payments for commissions and bonuses                           $    83           --           --
     Issued 2,509,543 shares of common stock in connection with
        acquisition of Page Digital Incorporated                            $ 5,014           --           --
     Issued 4,103,161 shares of common stock upon conversion of
        convertible debentures                                              $ 4,200           --           --
     Issued 2,287,653 shares of common stock upon conversion of
        convertible notes due to stockholders                               $ 1,372           --           --
     Issued 239,739 shares of common stock upon conversion of
        convertible note                                                    $   500           --           --
     Wrote-off convertible note payable to Toys "R" Us, Inc. ("Toys")
        by offsetting against accounts receivable due from Toys             $ 1,383           --           --
     Issued 100,000 shares of common stock and re-purchased
        our software license from a customer pursuant to a settlement
        agreement                                                           $   600           --           --
     Issued 500,000 shares of common stock in lieu of cash payment
        for declared dividends on Series A Preferred stock                  $   421           --           --
     Retired 10,700,000 shares of treasury stock                            $ 8,906           --           --
     Issued 1,000,000 shares of common stock for part of term loan
        payoff                                                                   --      $   788           --
     Issued 1,010,000 shares of common stock to payoff a stockholder's
        loan                                                                     --      $   388           --
     Issued 38,380 shares of common stock for services to be provided            --           --      $    31
     629,500 shares of common stock returned for service contract
        canceled after shares were issued                                        --      $  (474)     $   485
     Issuance of 141,000 shares of Series A Preferred Stock and
        transfer of note receivable received from the sale of
        IBIS Systems Limited in exchange for 10,700,000 shares
        of common stock and settlement of Softline note payable                  --           --      $ 5,520
     Issued 78,000, 1,223,580 and 168,208 shares of common stock
        for services rendered and interest payments                         $    60      $   657      $   165
     Issued 140,000 shares of common stock for accrued liquidated
        damages for late effectiveness of the registration statement             --      $    60           --

                                                                                                   (Concluded)

                                                     F-7
</TABLE>




<PAGE>

ISLAND PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (AS RESTATED)


         BUSINESS CONDITIONS - We are a leading provider of software solutions
         and services to the retail industry. We provide high value innovative
         solutions that help retailers understand, create, manage and fulfill
         consumer demand. Our solutions and services have been developed
         specifically to meet the needs of the retail industry. Our solutions
         help retailers improve the efficiency and effectiveness of their
         operations and build stronger, longer lasting relationships with their
         customers. Up until April 1, 2003, we also developed and distributed PC
         courseware and skills assessment products for both desktop and retail
         applications through our SVI Training Products subsidiary. Effective
         April 1, 2003, we discontinued this line of business.

         PRINCIPLES OF CONSOLIDATION AND FINANCIAL STATEMENT PRESENTATION - The
         consolidated financial statements include the accounts of Island
         Pacific, Inc. and our wholly-owned subsidiaries, SVI Retail, Inc., Page
         Digital Incorporated, Sabica Ventures, Inc., SVI Training Products,
         Inc. ("Training Products"), based in U.S., and SVI Retail (Pty) Limited
         based in Australia. The Australian subsidiary ceased operations
         effective February 2002 and the Training Products ceased operations
         effective April 1, 2003 (see Note 3). All material intercompany
         balances and transactions have been eliminated in consolidation. The
         consolidated financial statements are stated in U.S. dollars and are
         prepared under accounting principles generally accepted in the United
         States of America.

         RECLASSIFICATIONS - Certain amounts in the prior periods have been
         reclassified to conform to the presentation for the fiscal year ended
         March 31, 2004. Such reclassifications did not have any effect on
         losses reported in prior periods.

         ESTIMATES - The preparation of financial statements in conformity with
         accounting principles generally accepted in the United States of
         America requires us to make estimates and assumptions that affect the
         amounts reported in the consolidated financial statements and
         accompanying notes. Actual results could differ from those estimates.

         CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash and
         highly liquid investments with original maturities of not more than
         three months.

         FAIR VALUE OF FINANCIAL INSTRUMENTS - The fair value of short-term
         financial instruments, including cash and cash equivalents, trade
         accounts receivable, other receivables, prepaid expenses, other assets,
         accounts payable, accrued expenses, lines of credit and demands due to
         stockholders approximate their carrying amounts in the financial
         statements due to the short maturity of and/or the variable nature of
         interest rates associated with such instruments.

         The amounts shown for convertible notes due to stockholders and
         convertible debentures approximate fair value because current interest
         rates offered to us for debt of similar maturity are substantially the
         same or the difference is immaterial.

         INVENTORIES - Inventories consist of finished goods and are stated at
         the lower of cost or market, on a first-in, first-out basis.

         PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
         Depreciation is provided using the straight-line method over the
         estimated useful lives of the assets, generally ranging from three to
         ten years.

         Leasehold improvements are amortized using the straight-line method,
         over the shorter of the life of the improvement or lease term.
         Expenditures for maintenance and repairs are charged to operations as
         incurred while renewals and betterments are capitalized.

         GOODWILL - Goodwill represents the excess of the purchase price over
         the fair value of net assets acquired in our business combinations.
         Beginning April 1, 2002, we adopted Statement of Financial Accounting
         Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets" and
         ceased amortization of goodwill recorded in business combinations prior
         to June 30, 2001 (see Note 5). We review goodwill for impairment at
         least annually or on an interim basis if an event occurs or
         circumstances change that could indicate that its value has diminished

                                      F-8



<PAGE>

         or been impaired. Goodwill recorded in business combinations prior to
         June 30, 2001 was amortized using the straight-line method through
         March 31, 2002 over various periods not exceeding 10 years.

         INTANGIBLE ASSETS - Intangible assets consist of the values allocated
         to purchased and capitalized software costs, non-compete agreements,
         customer relationships and trademark in connection with various
         business combinations.

         Pursuant to the provisions of SFAS No. 86, "Accounting for the Costs of
         Computer Software to Be Sold, Leased or Otherwise Marketed," we
         capitalize internally developed software and software purchased from
         third parties if the related software product under development has
         reached technological feasibility or if there are alternative future
         uses for the purchased software. These costs are amortized on a
         product-by-product basis typically over three to ten years using the
         greater of the ratio that current gross revenue for a product bears to
         the total of current and anticipated future gross revenue for that
         product or the straight-line method over the remaining estimated
         economic life of the product. At each balance sheet date, we evaluate
         on a product-by-product basis the unamortized capitalized cost of
         computer software compared to the net realizable value of that product.
         The amount by which the unamortized capitalized costs of a computer
         software product exceed its net realizable value is written off (see
         Note 5).

         Non-compete agreements represent agreements to retain key employees of
         acquired subsidiaries for a certain period of time and prohibit those
         employees from competing with us within a stated period of time after
         terminating employment with us. The amounts incurred are capitalized
         and amortized over the life of the agreements, generally ranging from
         two to six years.

         Amortization of customer relationships is computed on a straight-line
         basis over estimated useful lives of five years.

         Our capitalized trademark was acquired in connection with the
         acquisition of Page Digital Incorporated in January 2004 (see Note 2).
         Trademark has indefinite useful life and is not subject to
         amortization. However, in accordance with SFAS No. 142, we will test
         trademark for impairment annually or more frequently if events or
         changes in circumstances indicate that the asset might be impaired.

         IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
         - We adopted SFAS No. 144, "Accounting for the Impairment or Disposal
         of Long-Lived Assets". SFAS No. 144 addresses financial accounting and
         reporting for the impairment of disposal of long-lived assets, and
         supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
         Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 144
         applies to all long-lived assets (including discontinued operations)
         and consequently amends APB Opinion 30, "Reporting the Results of
         Operations - Reporting the Effects of Disposal of a Segment of a
         Business, and Extraordinary, Unusual and Infrequently Occurring Events
         and Transactions." SFAS No. 144 develops one accounting model for
         long-lived assets that are to be disposed of by sale. SFAS No. 144
         requires that long-lived assets that are to be disposed of by sale be
         measured at the lower of book value or fair value cost to sell.
         Additionally SFAS No. 144 expands the scope of discontinued operations
         to include all components of an entity with operations that (1) can be
         distinguished from the rest of the entity and (2) will be eliminated
         from the ongoing operations of the entity in a disposal transaction.
         SFAS No. 144 is effective for fiscal years beginning after December 15,
         2001. The accounting prescribed in SFAS No. 144 was applied in
         connection with the disposal of the Australian operations in fiscal
         2002 and the Training Products subsidiary sold on April 1, 2003.

         Prior to the adoption of SFAS No. 144, we evaluated our long-lived
         assets for impairment whenever events or changes in circumstances
         indicated that the carrying amount of such assets or intangibles might
         not be recoverable. Recoverability of assets to be held and used was
         measured by a comparison of the carrying amount of an asset to future
         undiscounted net cash flows expected to be generated by the asset. If
         such assets were considered to be impaired, the impairment to be
         recognized is measured by the amount by which the carrying amount of
         the assets exceeded the fair value of the assets (see Notes 3 and 5).
         Assets to be disposed of are reported at the lower of the carrying
         amount or fair value less costs to sell.


         REVENUE RECOGNITION - We license software under non-cancelable
         agreements and provide related services, including consulting,
         training, customization of software and customer support. We recognize
         revenue in accordance with Statement of Position ("SOP") 97-2,
         "Software Revenue Recognition", as amended and interpreted by SOP 98-9,
         "Modification of SOP 97-2, Software Revenue Recognition", with respect
         to certain transactions, as well as Staff Accounting Bulletin ("SAB")
         101, "Revenue Recognition", updated by SAB's 103 and 104, "Update of
         Codification of Staff Accounting Bulletins", and Technical Practice
         Aids issued from time to time by the American Institute of Certified
         Public Accountants.

                                      F-9



<PAGE>

         Software license revenue, including third party license revenues or
         partners products, is generally recognized when a license agreement has
         been signed, the software product has been delivered, there are no
         uncertainties surrounding product acceptance, the fees are fixed and
         determinable, and collection is considered probable. If a software
         license contains an undelivered element, the fair value of the
         undelivered element is deferred and the revenue recognized once the
         element is delivered. We can establish vendor specific objective
         evidence ("VSOE") for all elements and not just undelivered elements.
         The undeliverable elements are primarily training, consulting and
         maintenance services. VSOE of fair value for training and consulting
         services is based upon hourly rates charged when those services are
         sold separately. VSOE of fair value for maintenance is the price the
         customer will be required to pay when it is sold separately (that is,
         the renewal rate). In addition, if a software license sale contains
         contingencies, such as specific customer acceptance criteria, right
         of return or a cancellation right, the software revenue is recognized
         upon the later of customer acceptance or the expiration of the
         acceptance period or cancellation right. Typically, payments for our
         software licenses are due in installments within twelve months from
         the date of delivery. Where software license agreements call for
         payment terms of twelve months or more from the date of delivery,
         revenue is recognized as payments become due and all other conditions
         for revenue recognition have been satisfied. Deferred revenue consists
         primarily of prepaid maintenance support revenues, prepaid services
         revenue and deferred license.

         Consulting services are separately priced, are generally available from
         a number of suppliers, and are not essential to the functionality of
         our software products. Consulting services, which include project
         management, system planning, design and implementation, customer
         configurations, and training are billed on both an hourly basis and
         under fixed price contracts. Consulting services revenue billed on an
         hourly basis is recognized as the work is performed. Under most fixed
         price contracts, consulting services revenue is recognized using the
         percentage of completion method of accounting by relating hours
         incurred to date to total estimated hours at completion. In instances
         where our fixed price contracts require the achievement of certain
         milestones, the milestones are agreed with the customer and revenues
         are recognized only when the milestones are delivered and accepted by
         the customer.

         Customization of software is billed on both an hourly basis and under
         fixed price contracts. Customization services billed on an hourly basis
         are recognized as the work is performed. Under most fixed price
         contracts, customization services revenue is recognized using the
         percentage of completion method of accounting by relating hours
         incurred to date to total estimated hours at completion. In instances
         where our fixed price contracts require the achievement of certain
         milestones, the milestones are agreed with the customer and revenues
         are recognized only when the milestones are delivered and accepted by
         the customer.

         Customer support services include post contract support and the rights
         to unspecified upgrades and enhancements. Maintenance revenues from
         ongoing customer support services are billed on a monthly basis and
         recorded as revenue in the applicable month, or on an annual basis with
         the revenue being deferred and recognized ratably over the maintenance
         period. If an arrangement includes multiple elements, the fees are
         allocated to the various elements based upon vendor-specific objective
         evidence of fair value.

         REIMBURSABLE OUT-OF-POCKET EXPENSES - We adopted Financial Accounting
         Standards Board Emerging Issues Task Force No. 01-14 ("EITF 01-14"),
         "Income Statement Characterization of Reimbursements Received for
         Out-of-Pocket Expenses Incurred". EITF 01-14 establishes that
         reimbursements received for out-of-pocket expenses should be reported
         as revenue in the income statement. Through March 31, 2002, we
         classified reimbursed out-of-pocket expenses as a reduction in cost of
         consulting services. The adoption of EITF 01-14 increased reported net
         sales and cost of sales; however, it did not affect the net income or
         loss in any past or future periods. Reimbursed expenses of $275,000 and
         $615,000 have been classified in both revenues and cost of sales for
         the years ended March 31, 2004 and 2003, respectively, and we have
         reclassified reimbursed expenses of $1.1 million to revenues and cost
         of sales in the consolidated statement of operations for the year ended
         March 31, 2002.

         NET INCOME (LOSS) PER SHARE - As required by SFAS No. 128, "Earnings
         per Share," we have presented basic and diluted earnings per share
         amounts. Basic earnings per share is calculated based on the
         weighted-average number of shares outstanding during the year, while
         diluted earnings per share also gives effect to all potential dilutive
         common shares outstanding during the year such as stock options,
         warrants and contingently issuable shares.

         INCOME TAXES - We utilize SFAS No. 109, "Accounting for Income Taxes,"
         which requires the recognition of deferred tax liabilities and assets
         for the expected future tax consequences of events that have been
         included in the financial statements or tax returns. Under this method,
         deferred income taxes are recognized for the tax consequences in future
         years of differences between the tax bases of assets and liabilities
         and their financial reporting amounts at each period end based on
         enacted tax laws and statutory tax rates applicable to the periods in
         which the differences are expected to affect taxable income. Valuation
         allowances are established, when necessary, to reduce deferred tax
         assets to the amount expected to be realized. The provision for income
         taxes represents the tax payable for the period and the change during
         the period in deferred tax assets and liabilities.

         TRANSLATION OF FOREIGN CURRENCY - The financial position and results of
         operations of our foreign division are measured using local currency as
         the functional currency. Revenues and expenses of such division have
         been translated into U.S. dollars at average exchange rates prevailing
         during the period. Assets and liabilities have been translated at the
         rates of exchange at the balance sheet date. Transaction gains and
         losses are deferred as a separate component of stockholders' equity,
         unless there is a sale or complete liquidation of the underlying
         foreign investments. Aggregate foreign currency transaction gains and
         losses are included in determining net earnings.

                                      F-10



<PAGE>

         ADVERTISING AND PROMOTIONAL EXPENSES - Advertising and promotional
         expenses are charged to expense as incurred and amounted to $129,000,
         $60,000 and $38,000 for the years ended March 31, 2004, 2003 and 2002,
         respectively.

         COMPREHENSIVE INCOME - We utilize SFAS No. 130, "Reporting
         Comprehensive Income." This statement establishes standards for
         reporting comprehensive income and its components in a financial
         statement. Comprehensive income as defined includes all changes in
         equity (net assets) during a period from non-owner sources. Examples of
         items to be included in comprehensive income, which are excluded from
         net income, include foreign currency translation adjustments and
         unrealized gains and losses on available-for-sale securities and are
         included as a component of stockholders' equity.

         STOCK-BASED COMPENSATION - As permitted under SFAS No. 123, "Accounting
         for Stock-Based Compensation", we account for costs of stock based
         compensation in accordance with the provisions of Accounting Principles
         Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
         accordingly, discloses the pro forma effect on net income (loss) and
         related per share amounts using the fair-value method defined in SFAS
         No. 123.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
         Stock-Based Compensation-Transition and Disclosure." This Statement
         amends SFAS No. 123, "Accounting for Stock-Based Compensation," to
         provide alternative methods of transition for a voluntary change to the
         fair value based method of accounting for stock-based employee
         compensation. In addition, SFAS No. 148 amends the disclosure
         requirements of SFAS No. 123 to require prominent disclosures in both
         annual and interim financial statements about the method of accounting
         for stock-based employee compensation and the effect of the method used
         on reported results. The transition guidance and annual disclosure
         provisions of SFAS No. 148 are effective for fiscal years ending after
         December 15, 2002, with earlier application permitted in certain
         circumstances. The interim disclosure provisions are effective for
         financial reports containing financial statements for interim periods
         beginning after December 15, 2002.

         The following table presents pro forma disclosures required by SFAS No.
         123 and SFAS No. 148 of net income (loss) and basic and diluted
         earnings (loss) per share as if stock-based employee compensation had
         been recognized during the fiscal years ended March 31, 2004 and 2003.
         The compensation expense for these periods has been determined under
         the fair value method using the Black-Scholes pricing model, and
         assumes graded vesting.

<TABLE>
<CAPTION>

                                                              YEAR ENDED    YEAR ENDED    YEAR ENDED
                                                               MARCH 31,     MARCH 31,     MARCH 31,
                                                                  2004         2003           2002
                                                               ---------     ---------     ---------
                                                             (As restated)
                                                               (in thousands, except per share data)

<S>                                                           <C>           <C>           <C>
                  Net loss as reported                        $ (8,928)     $ (2,718)     $(14,658)
                  Less: stock-based compensation expense,
                      net of related tax effects                (2,162)       (1,713)       (1,305)
                                                              ---------     ---------     ---------
                  Pro forma net loss                          $(11,090)     $ (4,431)     $(15,963)
                                                              =========     =========     =========

                  Basic and diluted loss per share:
                      As reported                             $  (0.22)     $  (0.09)     $  (0.29)
                      Pro forma                               $  (0.27)     $  (0.15)     $  (0.45)
</TABLE>


         CONCENTRATIONS - We maintain cash balances and short-term investments
         at several financial institutions. Accounts at each institution are
         insured by the Federal Deposit Insurance Corporation up to $100,000. As
         of March 31, 2004, the uninsured portion of these balances held at
         financial institutions aggregated to approximately $2.0 million. We
         have not experienced any losses in such accounts and believe it is not
         exposed to any significant credit risk on cash and cash equivalents.


         For the fiscal years ended March 31, 2004, 2003 and 2002, sales to one
         customer accounted for 9%, 34% and 47%, respectively, of total
         consolidated revenues. As of March 31, 2004 and 2003, our trade
         receivables from this customer accounted for 0% and 43%, respectively,
         of total consolidated receivables. As of March 31, 2004 and 2003,
         deferred revenues from this customer accounted for 0% and 0%,
         respectively, of total consolidated deferred revenue.


                                      F-11



<PAGE>

         RECENT ACCOUNTING PRONOUNCEMENTS - In April 2003, the FASB issued SFAS
         No. 149, "Amendment of Statement 133 on Derivative Instruments and
         Hedging Activities." SFAS No. 149 further clarifies accounting for
         derivative instruments. The adoption of SFAS No. 149 did not have a
         material impact on our consolidated financial statements.


         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
         Financial Instruments with Characteristics of both Liabilities and
         Equity". SFAS No. 150 establishes standards for how an issuer
         classifies and measures certain financial instruments with
         characteristics of both liabilities and equity. It requires that an
         issuer classify a financial instrument that is within its scope as a
         liability (or an asset in some circumstances). Many of those
         instruments were previously classified as equity. SFAS No. 150 is
         effective for financial instruments entered into or modified after May
         31, 2003, and otherwise is effective at the beginning of the first
         interim period beginning after June 15, 2003. Upon adoption of SFAS No.
         150, we have re-classified a convertible note payable to our major
         customer from equity to liabilities at September 30, 2003.

2.       ACQUISITION (AS RESTATED)

         Effective January 30, 2004, we acquired all of the issued and
         outstanding shares of Page Digital Incorporated ("Page Digital"), a
         Colorado-based developer of multi-channel commerce software, through a
         merger with our newly-formed wholly-owned subsidiary. The purchase
         price for the acquisition was $7.1 million, consisting of $2.0 million
         in cash, 2.5 million shares of our common stock valued at $2.00 per
         share and $138,000 in acquisition costs. Upon the consummation of this
         transaction, we entered into two-year employment agreements for
         executive officer positions with two of the principals of Page Digital
         and a two-year non-compete agreement with one of the two principals of
         Page Digital.

         The acquisition has been accounted for as a purchase. The results of
         the operations of Page Digital have been included in the consolidated
         financial statements since the date of the acquisition. The excess of
         purchase price over the fair values of net assets acquired was
         approximately $5.8 million and has been recorded as goodwill

         The fair value of assets acquired and liabilities assumed were as
         follows (in thousands):

                  Cash                                                 $    94
                  Accounts receivable                                      694
                  Inventory                                                  7
                  Prepaids and other assets                                202
                  Property and equipment                                   366
                  Software technology                                    1,446
                  Customer relationships                                   904
                  Trademark                                                285
                  Capital lease obligations                               (284)
                  Accounts payable                                        (287)
                  Accrued expenses                                      (1,067)
                  Deferred revenue                                      (1,035)
                                                                       --------
                        Net assets                                       1,325

                  Excess of cost over fair value of net
                    assets acquired                                      5,812
                                                                       --------

                        Total purchase price                           $ 7,137
                                                                       ========

         The following unaudited pro forma consolidated results of continuing
         operations for the twelve months ended March 31, 2004 and 2003 assume
         the Page Digital acquisition occurred as of April 1, 2003 and 2002,
         respectively. The pro forma results are not necessarily indicative of
         the actual results that would have occurred had the acquisition been
         completed as of the beginning of the period presented, nor are they
         necessarily indicative of future consolidated results.

<TABLE>
<CAPTION>
                                                                         Fiscal Years Ended
                                                                              March 31,
                                                                          2004          2003
                                                                        --------      --------
                                                                            (As restated)
                                                                             (unaudited)
                                                               (in thousands, except per share data)
<S>                                                                    <C>           <C>
                  Total revenues                                       $  22,041      $ 28,749
                  Net loss                                             $ (11,150)     $ (4,194)
                  Net loss available to common stockholders            $ (12,173)     $ (5,209)
                  Basic and diluted loss per share of common stock     $   (0.27)     $  (0.13)
                  Basic and diluted loss per share available to
                      common stockholders                              $   (0.29)     $  (0.16)

                                               F-12
</TABLE>




<PAGE>

3.       DISCONTINUED OPERATIONS

         Effective April 1, 2003, we sold our wholly-owned subsidiary, SVI
         Training Products, Inc. ("Training Products") to our former president
         of Training Products for the sale price of $180,000 plus earn-out
         payments equal to 20% of the total gross revenues of Training Products
         in each of its next two fiscal years, to the extent the revenues in
         each of those years exceed certain target. We received a promissory
         note for the amount of $180,000 and the earn-out payments, if any, will
         be made in quarterly installments following each fiscal year, bearing
         an annual interest rate of 5%. We agreed to defer the payments due in
         January 2004 and April 2004 until April 2008. As of March 31, 2004, the
         note has a balance of $162,000, with current maturities of $36,000. We
         evaluated recoverability of the note and consider it collectible.

         The sale of the Training Products subsidiary resulted in a loss of
         $129,000, net of estimated income taxes, which was accrued for at March
         31, 2003. The operating results of Training Products are shown as
         discontinued operations with the prior period results restated. The
         operating results reflected in income (loss) from operations are
         summarized as follows:


                  Year ended March 31,                       2003         2002
                                                             ----         ----
                  Total revenues                           $ 1,517      $ 1,537
                  Income before taxes                      $   191      $   257
                  Income tax (benefits) on loss                (57)          37
                  Net income                               $   248      $   220
                  Net income per share of common stock     $  0.01      $  0.01

         Our Australian subsidiary maintained an AUS$1,000,000 (approximately
         US$510,000) line of credit facility with National Australia Bank
         Limited. The facility was secured by substantially all of the assets of
         the Australian subsidiary, and we have guaranteed all amounts owing on
         the facility. The facility became due in February of each year, but had
         renewed annually. In April 2001, we received a formal demand under the
         guarantee for the full AUS$971,000 (approximately US$495,000) then
         alleged by the bank to be due under the facility. Due to the declining
         performance of the Australian subsidiary, we decided in the third
         quarter of fiscal 2002 to sell certain assets of the Australian
         subsidiary to the former management of such subsidiary, and then cease
         Australian operations. Such sale was however subject to the approval of
         National Australia Bank, the subsidiary's secured lender. The bank did
         not approve the sale and the subsidiary ceased operations in February
         2002. The bank caused a receiver to be appointed in April 2002 to sell
         substantially all of the assets of the Australian subsidiary and pursue
         collections on any outstanding receivables. The receiver proceeded to
         sell substantially all of the assets for $300,000 in May 2002 to the
         entity affiliated with former management, and is actively pursuing the
         collection of receivables. If the sale proceeds plus collections on
         receivables are insufficient to discharge the indebtedness to National
         Australia Bank, we may be called upon to pay the deficiency under our
         guarantee to the bank. We have accrued $187,000 as the maximum amount
         of our potential exposure. The receiver has also claimed that we are
         obligated to it for inter-company balances of $636,000, but we do not
         believe any amounts are owed to the receiver, who has not as of the
         date of this report acknowledged the monthly corporate overhead
         recovery fees and other amounts charged by us to the Australian
         subsidiary offsetting the amount claimed to be due.


         The disposal of the Australian subsidiary resulted in a loss of $3.2
         million. The operating results of the Australian subsidiary are shown
         as discontinued operations with the prior period results restated. The
         operating results reflected in loss from discontinued operations for
         the fiscal year ended March 31, 2002 are summarized as follows (in
         thousands, except per share data):


                  Total revenues                                  $ 2,363
                  Loss before taxes                               $(1,056)
                  Taxes (benefits) on loss                            332
                  Net loss                                        $(1,388)
                  Net loss per share of common stock              $ (0.04)


                                      F-13



<PAGE>

4.       PROPERTY AND EQUIPMENT

         Property and equipment at March 31, 2004 and 2003 consisted of the
         following (in thousands):

                                                                2004       2003
                                                              -------    -------

                  Computer and office equipment and
                    purchased software                        $2,731     $2,321
                  Furniture and fixtures                         467        474
                  Leasehold improvements                         316        406
                  Automobile                                       8         --
                                                              -------    -------
                                                               3,522      3,201
                  Less accumulated depreciation and
                    amortization                               2,701      2,821
                                                              -------    -------
                  Total                                       $  821     $  380
                                                              =======    =======

         Included in property and equipment above are $285,000 of assets under
         capital leases, which are net of accumulated amortization of $23,000 at
         March 31, 2004.

         Depreciation and amortization expense from continuing operations for
         the fiscal years ended March 31, 2004, 2003 and 2002 was $269,000,
         $330,000 and $520,000, respectively. Depreciation and amortization
         expense from discontinued operations for the fiscal years ended March
         31, 2004, 2003 and 2002 was $0, $0 and $46,000, respectively.


5.       GOODWILL AND OTHER INTANGIBLES (AS RESTATED)

         At March 31, 2004 and 2003, goodwill and other intangibles consist of
         the following (in thousands):

<TABLE>
<CAPTION>
                                                            March 31, 2004                             March 31,2003
                                             ------------------------------------------- -------------------------------------------
                                                 Gross                                      Gross
                                               carrying     Accumulated                    carrying     Accumulated
                                                amount      amortization        Net         amount      amortization        Net
                                             -------------  -------------  ------------- -------------  -------------  -------------
                                              (Restated)     (Restated)     (Restated)
<S>                                          <C>            <C>            <C>           <C>            <C>            <C>
                 Goodwill                    $     27,099   $     (6,492)  $     20,607  $     21,287   $     (6,492)  $     14,795
                                             -------------  -------------  ------------- -------------  -------------  -------------
                 Other intangibles:
                 Amortized intangible assets
                     Software technology           30,357        (13,219)        17,138        28,221        (13,417)        14,804
                     Non-compete agreements         6,986         (6,318)           668         6,986         (5,401)         1,585
                     Customer relationships           904            (30)           874            --             --             --

                 Unamortized intangible
                     Trademark                        285             --            285            --             --             --
                                             -------------  -------------  ------------- -------------  -------------  -------------
                                                   38,532        (19,567)        18,965        35,207        (18,818)        16,389
                 Less: current portion of
                   non-Compete agreements             668             --            668           917             --            917
                                             -------------  -------------  ------------- -------------  -------------  -------------
                 Long-term portion of other
                   intangibles                     37,864        (19,567)        18,297        34,290        (18,818)        15,472
                                             -------------  -------------  ------------- -------------  -------------  -------------
                 Long-term portion of
                   goodwill and other
                   intangibles               $     64,963   $    (26,059)  $     38,904  $     55,577   $    (25,310)  $     30,267
                                             =============  =============  ============= =============  =============  =============
</TABLE>

         During the fiscal year ended March 31, 2004, we recorded approximately
         $5.8 million in goodwill, $1.4 million in software, $904,000 in
         customer relationships and $285,000 in trademark in connection with the
         acquisition of Page Digital. Software and customer relationships are
         amortized on a straight-line basis over their useful lives of five
         years. The goodwill and the trademark have indefinite useful lives and
         are not subject to amortization.

         Transactions in goodwill during fiscal years ended March 31, 2004 and
         2003 are as follows (in thousands):

<TABLE>
                                                                                                  Accumulated
                                                                                   Cost           amortization
                                                                              ---------------    ---------------
<S>                                                                           <C>                <C>
                  Balance, April 1, 2002                                      $      21,914      $        6,492
                    Impairment pursuant to SFAS No. 142                                (627)                 --
                                                                              --------------     ---------------
                  Balance, March 31, 2003                                             21,287              6,492
                    Goodwill in connection with Page Digital acquisition               5,812                 --
                                                                              ---------------    ---------------
                  Balance, March 31, 2004                                     $       27,099     $        6,492
                                                                              ===============    ===============
</TABLE>

         In September 2003, we signed a Source Code License and Private Label
         agreement with QQQ Systems Pty Limited ("QQQ) for the sale of software
         technology rights and exclusivity to use our Host Retail Merchandising
         Software (our core product) and Direct Software (Market Place System)
         for the Australasia market. Our management at the time did not see the
         Australasia market as a viable market for our products and therefore
         decided to sell the license rights to that market. We recorded this as
         revenue and an account receivable in the quarter ended September 30,
         2003 as a persuasive evidence of an arrangement existed, the software
         had been delivered to and accepted by QQQ, the price was fixed and
         collectibility was reasonably assured. The total license fee was $3.9
         million and was to be paid $1.95 million on November 15, 2003 and $1.95
         million on December 31, 2003. In addition, we would be entitled to a
         10% royalty on QQQ's net sublicensing revenues for a period of 36
         months from the date of the contract. After the 36 months period, no
         royalty is due. In December 2003, we entered into a separate agreement
         to purchase from QQQ exclusive ownership and rights to use, market,
         reproduce and license QQQ's point of sale software (the "Technology")
         in Europe and North and South America for the purchase price of $3.9
         million. In addition, a portion of the future revenues from our sales
         of the Technology will be payable to QQQ as follows: (a) $150,000 for
         unlimited number of copies from December 31, 2003 through June 30,
         2004; (b) $150,000 for unlimited number of copies from July 1, 2004
         through April 30, 2005; (c) $150,000 for unlimited number of copies
         from May 1, 2005 through April 30, 2006; (d) 20% of net revenue per
         copy thereafter; and (e) effective from the third anniversary of
         December 31, 2003, 20% of the net revenue earned by us during the
         previous year. We will continue sharing revenue until the total of all
         such shared revenue paid to QQQ has reached $2,850,000. However, at any
         time after April 30, 2006, we may elect in our sole discretion to
         either to continue paying 20% revenue split until the total of all
         shared revenues is paid equal to $2,850,000 or make a final, single
         payment to QQQ of $200,000. Initially, the $3.9 million purchase price
         was paid by offsetting the purchase price amount against the
         outstanding account receivable due to us from QQQ. Accordingly, in the
         quarter ended December 31, 2003, the receivable of $3.9 million was
         eliminated and we recorded the $3.9 million as an asset. However,
         subsequent to entering into these transactions, certain facts and
         circumstances relating to these transactions have changed. The
         management of QQQ has indicated that it does not desire to actively
         pursue opportunities for the IP products in Australia, while at the
         same time; our current management has initiated discussions with a
         major Australian retailer about a sale of our products and now
         considers the Australian market a viable market for our products. As
         QQQ has an exclusive license for the Australian market, we are
         currently in negotiations with them to allow us to directly sell to
         this Australian retailer. As part of the restatement of the financial
         statements in this Form 10-K/A, we have reversed the revenue and
         account receivable recognized at September 30, 2003 on this one time
         sale. Also, as part of the restatement, we have reversed the purchase
         of the technology recognized at December 31, 2003 as we cannot assign a
         value to the technology and eliminated the $3.9 million asset from the
         balance sheet. In addition, in connection with the $150,000
         installments due to QQQ for royalties payable, we have accrued a
         liability and a deferred asset in the amount of $450,000 at December
         31, 2003, which is being amortized over the royalty period ending April
         30, 2006. At March 31, 2004, $285,000 of the royalty has been
         classified as a current liability out of the total amount payable of
         $450,000 and $210,000 of the deferred asset has been classified as a
         current asset.


         We adopted SFAS No. 142 effective April 1, 2002 and ceased amortization
         of goodwill we recorded in business combinations prior to June 30,
         2001. SFAS No. 142 prohibits the amortization of goodwill and certain
         other intangible assets with indefinite useful lives but requires that
         these assets be reviewed for impairment at least annually or on an
         interim basis if an event occurs or circumstances change that could
         indicate that their value has diminished or been impaired. Other
         intangible assets continue to be amortized over their useful lives.

         Pursuant to SFAS No. 142, we completed the transitional analysis of
         goodwill impairment as of April 1, 2002 and recorded an impairment of
         $627,000 as a cumulative effect of a change in accounting principle in
         the quarter ended June 30, 2002. We also completed our annual test for
         goodwill impairment during fourth quarter 2004 and 2003 and found no
         indication of impairment of the goodwill allocated to the individual
         reporting units. Accordingly, absent future indications of impairment,
         the next annual impairment test will be performed in fourth quarter
         2005.

         We also evaluated the remaining useful lives of our intangible assets
         in the quarter ended June 30, 2002 and during the fourth quarter 2004
         and 2003. No adjustments have been made to the useful lives of our
         intangible assets.

                                    F-14


<PAGE>


         Amortization expense from continuing operations for fiscal years ended
         March 31, 2004, 2003 and 2002 was $3.5 million, $3.8 million and $6.5
         million, respectively. Amortization expense from discontinued
         operations for fiscal years ended March 31, 2004, 2003 and 2002 was $0,
         $0 and $300,000, respectively. We expect amortization expense for the
         next five years to be as follows (in thousands) (as restated):

           Year Ending March 31:
                  2005                       $3,808
                  2006                       $3,055
                  2007                       $2,800
                  2008                       $2,769
                  2009                       $2,627


         The following table reconciles net loss and loss per share as reported
         for the years ended March 31, 2004, 2003 and 2002 to net loss and loss
         per share as adjusted to exclude amortization expense, net of taxes,
         related to goodwill that are no longer being amortized (in thousands).

<TABLE>
<CAPTION>

                                                        YEAR ENDED    YEAR ENDED     YEAR ENDED
                                                         MARCH 31,     MARCH 31,     MARCH 31,
                                                           2004           2003         2002
                                                         ---------     ---------     ---------
                                                       (As restated)
<S>                                                      <C>           <C>           <C>
                  Reported net loss                      $ (8,928)     $ (2,718)     $(14,658)
                  Add back:  Goodwill amortization             --            --         2,220
                                                         ---------     ---------     ---------
                        Adjusted net loss                $ (8,928)     $ (2,718)     $(12,438)
                                                         =========     =========     =========
                  Basic and diluted loss per share:
                     Reported net loss                   $  (0.22)     $  (0.09)     $  (0.29)
                     Goodwill amortization                     --            --          0.07
                                                         ---------     ---------     ---------
                        Adjusted net loss                $  (0.22)     $  (0.09)     $  (0.22)
                                                         =========     =========     =========
                  Basic and diluted weighted average
                     common shares outstanding             41,450        29,599        35,698
</TABLE>

                                      F-15



<PAGE>

6.       CONVERTIBLE NOTES


         CONVERTIBLE NOTE DUE TO STOCKHOLDERS


         In May and June 2001, we issued a total of $1.3 million in convertible
         notes to a limited number of accredited investors related to existing
         stockholders. The notes were originally due on August 30, 2001, and
         accrued interest at the rate of 12% per annum to be paid until
         maturity, with the interest rate increasing to 17% in the event of a
         default in payment of principal or interest. We also issued the
         investors three-year warrants to purchase 250 common shares for each
         $1,000 in notes purchased, at an exercise price of $1.50 per share. The
         holders of the notes had the option to convert the unpaid principal and
         interest at any time at a conversion price of $1.35.

         In accordance with generally accepted accounting principles, the
         difference between the conversion price of $1.35 and our stock price on
         the date of issuance of the notes was considered to be interest
         expense. It was recognized in the statement of operations during the
         period from the issuance of the debt to the time at which the debt
         first became convertible. We recognized interest expense of $191,000 in
         the accompanying statement of operations for the fiscal year ended
         March 31, 2002.

         Each warrant entitled the holder to purchase one share of our common
         stock at an exercise price of $1.50. The warrants were to expire three
         years from the date of issuance. We allocated the proceeds received
         from debt or convertible debt with detachable warrants using the
         relative fair value of the individual elements at the time of issuance.
         The amount allocated to the warrants was determined to be $247,000 and
         was included in interest expense in the accompanying statement of
         operations for the year ended March 31, 2002.

         In July 2002, we replaced the existing notes with new notes having a
         maturity date of September 30, 2003. The interest rate on the new notes
         was reduced to 8% per annum, increasing to 13% in the event of a
         default in payment of principal or interest. We were required to pay
         accrued interest on the new notes calculated from July 19, 2002, in
         quarterly installments beginning September 30, 2002. The investors
         agreed to reduce accrued interest and late charges on the original
         notes by up to $16,000, and to accept the reduced amount in 527,286
         shares of our common stock valued at $0.41 per share, which was the
         average closing price of the shares on the American Stock Exchange for
         the 10 trading days prior to July 19, 2002. The new notes were
         convertible at the option of the holders into shares of our common
         stock valued at $0.60 per share. We did not have the right to prepay
         the notes. In December 2002, the investors agreed to extend the
         payments of accrued interest to September 30, 2003.

         We also replaced the warrants previously issued to the investors to
         purchase an aggregate of 3,033,085 shares of common stock at exercise
         prices ranging from $0.85 to $1.50, and expiring on various dates
         between December 2002 and June 2004, with new warrants to purchase an
         aggregate of 1,600,000 shares at $0.60 per share, expiring July 19,
         2007. The replacement warrants were not callable by us. None of the
         warrants have been exercised as of March 31, 2004.

         In September 2003, the investors converted all outstanding balances of
         principal and accrued interest totaling $1.4 million into 2,287,653
         shares of our common stock.

         As of March 31, 2004 and 2003, the balance of these convertible notes
         was $0 and $1.3 million, respectively, which included accrued interest
         of $0 and $70,000, respectively. Interest expense related to these
         convertible notes was $52,000 and $115,000 in the fiscal years ended
         March 31, 2004 and 2003, respectively.


         CONVERTIBLE NOTE DUE TO UNION BANK OF CALIFORNIA (RESTATED)


         On May 21, 2002, Union Bank of California (the "Bank") agreed to amend
         the term loan to extend the maturity date to May 1, 2003 and to revise
         other terms and conditions. We agreed to pay to the Bank $100,000 as a
         loan extension fee, payable in four monthly installments of $25,000
         each commencing on June 30, 2002. If we failed to pay any installment
         when due, the loan extension fee would increase to $200,000, and the
         monthly payments would increase accordingly. We also agreed to pay all
         overdue interest and principal by June 30, 2002, and to pay monthly
         installments of $24,000 commencing on June 30, 2002 and ending April
         30, 2003 for the Bank's legal fees.

         We were not able to make the payments required in June 2002. We were
         also out of compliance with certain financial covenants as of June 28,
         2002. Effective July 15, 2002, the Bank further amended the restated
         term loan agreement, and waived the then existing defaults. Under this
         third amendment to the restated agreement, the Bank agreed to waive the
         application of the additional 2% interest rate for late payments of

                                      F-16



<PAGE>

         principal and interest, and to waive the additional $100,000 refinance
         fee required by the second amendment. The Bank also agreed to convert
         $361,000 in accrued and unpaid interest and fees to term loan
         principal, and we executed a new term note in total principal amount of
         $7.2 million. We were required to make a principal payment of $35,000
         on October 15, 2002, principal payments of $50,000 on each of November
         15, 2002 and December 15, 2002, and consecutive monthly principal
         payments of $100,000 each on the 15th day of each month thereafter
         through August 15, 2003. The entire amount of principal and accrued
         interest was due August 31, 2003. The Bank also agreed to eliminate
         certain financial covenants and to ease others, and we were in
         compliance with the revised covenants.

         On January 2, 2003, we issued a warrant to an affiliate of the Bank to
         purchase up to 1.5 million shares of our common stock for $0.01 per
         share. The warrant was exercisable for shares equal to 1% of our
         outstanding common stock on January 2, 2003, and would become
         exercisable for shares equal to an additional 0.5% of outstanding
         common stock on the first day of each month thereafter, until it was
         exercisable for the full 4.99% of the outstanding common stock. The
         warrant would not become exercisable to the extent that the Company
         discharged in full the Bank indebtedness prior to a vesting date.


         On March 31, 2003, we entered into a Discounted Loan Payoff Agreement
         with the Bank. Under this agreement, we paid the Bank $2.8 million from
         the sale of 9% convertible debentures to certain investors (see Note
         7). We also issued to the Bank 1.0 million shares of our common stock,
         valued at $788,000, and a $500,000 one-year unsecured, non-interest
         bearing convertible note payable in either cash or stock, at our
         option. The cash payment, shares and convertible note were accepted by
         the Bank in full satisfaction of our debt to the Bank. The Bank also
         canceled the warrant to purchase 1.5 million shares of our common stock
         and returned all collateral held, including 10.7 million shares of our
         common stock pledged as security. The 10.7 million shares were canceled
         and retired in May 2003. In March 2003, the Board decided that the
         $500,000 convertible note would be converted solely for equity and
         would not be repaid in cash. In connection with the settlement of the
         debt to the Bank, we reported as other income a gain of $2.2 million.


         In September 2003, the Bank assigned the note to Roth Capital Partners,
         LLC ("Roth Capital"), who was the placement agent for the financings in
         June and November 2003. In January 2004, we elected to repay the note
         in shares of our common stock and issued 239,739 shares at a price of
         $2.08 per share, which was 80% of the average share closing price of
         our common stock for the ten trading day period immediately preceding
         the payoff date.

         Interest expense related to the Bank's convertible note was $0,
         $728,000 and $825,000 in the fiscal years ended March 31, 2004, 2003
         and 2002, respectively.


7.       CONVERTIBLE DEBENTURES (AS RESTATED)

         Convertible debentures at March 31, 2004 and 2003 consist of the
         following (in thousands):

<TABLE>
<CAPTION>
                                                                                  2004        2003
                                                                                 -------    -------
                                                                              (As restated)
<S>                                                                             <C>           <C>
                  9% convertible debentures, due May 2006, net of
                      unamortized debt discount of $966 and $0, respectively     $2,046     $   --
                  9% convertible debentures, due May 2005, net of
                      unamortized debt discount of $0 and $625, respectively       --        2,875
                                                                                 -------    -------
                                                                                  2,046      2,875
                  Less: current maturities                                          146        149
                                                                                 -------    -------
                  Current portion of term loans                                  $1,900     $2,726
                                                                                 =======    =======
</TABLE>

         In March 2003, we entered into a Securities Purchase Agreement for the
         sale of convertible debentures (the "March '03 Debentures") to a group
         of investors. The debentures were convertible into shares of our common
         stock at a conversion price of $1.02 per share, for the total proceeds
         of $3.5 million. $2.8 million of the proceeds were used to pay our debt
         to the Bank (see Note 6). The debentures were due to mature in May 2005
         and bore an interest rate of 9% per annum. Interest was payable on a
         quarterly basis beginning June 1, 2003, at our option, in cash or
         shares of common stock. If certain conditions were met, we had the
         right, but not the obligation, to redeem the debentures at 110% of
         their face value, plus accrued interest. Commencing in February 2004,

                                      F-17



<PAGE>

         we would have been obligated to redeem $219,000 per month of the
         debenture. In August 2003, the daily volume weighted average price of
         our common stock on the American Stock Exchange exceeded $1.02 by more
         than 200% for 15 consecutive trading days; therefore, we exercised the
         option to cause the investors to convert their debentures into common
         stock. As a result, the March '03 Debenture investors converted all of
         their debentures into an aggregate of 3,419,304 shares of our common
         stock during the second quarter of fiscal year ended March 31, 2004.


         In accordance with generally accepted accounting principles, the
         difference between the conversion price of $1.02 and our stock price on
         the date of issuance of the notes amounted to $715,000 and was being
         amortized over the term of the debt. A total of $165,000 had been
         amortized during the period from the issuance to the date of conversion
         into common stock. Upon conversion of the debentures into common stock,
         the remaining balance of $550,000 was expensed.

         The March '03 Debenture investors also received warrants to purchase up
         to, in the aggregate, 1,572,858 shares of common stock with an exercise
         price equal to $1.02 per share. The warrants expire five years from the
         date of issuance. We allocated the proceeds received from debt or
         convertible debt with detachable warrants using the relative fair value
         of the individual elements at the time of issuance. The amount
         allocated to the warrants was $625,000 and was being amortized over the
         term of the convertible debentures. A total of $144,000 had been
         amortized during the period from the date of issuance to the date of
         conversion into common stock. Upon the conversion of the debentures
         into common stock, the remaining balance of $481,000 was expensed.


         In April 2003, we entered into a Securities Purchase Agreement with an
         investor for the sale of convertible debentures (the "April '03
         Debentures"). The debenture was convertible into shares of our common
         stock at a conversion price of $1.02 per share, for the total proceeds
         of $400,000. Interest was due on a quarterly basis commencing on June
         1, 2003, payable in cash or shares of common stock at our option.
         Commencing on February 1, 2004, we would have been obligated to redeem
         $20,000 per month of the debenture. The April '03 Debenture was due to
         mature in October 2005. In August 2003, the daily volume weighted
         average price of our common stock on the American Stock Exchange
         exceeded $1.02 by more than 200% for 15 consecutive trading days;
         therefore, we exercised the option to cause the investors to convert
         their debentures into common stock. As a result, the April '03
         Debenture investors converted all of their debentures into 390,777
         shares of our common stock during the second quarter of fiscal year
         ended March 31, 2004.


         In accordance with generally accepted accounting principles, the
         difference between the conversion price of $1.02 and our stock price on
         the date of issuance of the notes amounted to $69,000 and was being
         amortized over the term of the debt. A total of $16,000 had been
         amortized during the period from the date of issuance to the date of
         conversion into common stock. Upon the conversion of the debentures
         into common stock, the remaining balance of $53,000 was expensed.

         The debenture issued to the April '03 Debenture investor was
         accompanied by a five-year warrant to purchase 156,311 shares of our
         common stock with an exercise price of $1.02 per share. We allocated
         the proceeds received from debt or convertible debt with detachable
         warrants using the relative fair value of the individual elements at
         the time of issuance. The amount allocated to the warrants was
         determined to be $63,000 and was being amortized over the term of the
         convertible debentures. A total of $15,000 had been amortized from the
         date of issuance to the date of conversion into common stock. Upon the
         conversion of the debenture into common stock, the remaining balance of
         $48,000 was expensed.


         In May 2003, we entered into an agreement with a group of investors for
         the sale of 9% debentures, convertible into shares of our common stock
         at a conversion price of $1.02 for the gross proceeds of $300,000 (the
         "May '03 Debentures"). Interest was due on a quarterly basis commencing
         on June 1, 2003, payable in cash or shares of common stock at our
         option. The debentures were due to mature in May 2005. Commencing on
         February 1, 2004, we would have been obligated to redeem $19,000 per
         month of the debentures. In August 2003, the daily volume weighted
         average price of our common stock on the American Stock Exchange
         exceeded $1.02 by more than 200% for 15 consecutive trading days;
         therefore, we exercised the option to cause the investors to convert
         their debentures into common stock. As a result, the May '03 Debentures
         investors converted their debentures into an aggregate of 293,083
         shares of our common stock in the second quarter of fiscal year ended
         March 31, 2004.

                                      F-18



<PAGE>


         In accordance with generally accepted accounting principles, the
         difference between the conversion price of $1.02 and our stock price on
         the date of issuance of the debentures amounted to $38,000 and was
         being amortized over the term of the debt. A total of $7,000 had been
         amortized during the period from the date of issuance to the date of
         conversion into common stock. Upon the conversion of the debenture into
         common stock, the remaining balance of $31,000 was expensed..

         These debentures were accompanied by five-year warrants to purchase an
         aggregate of 101,112 shares of common stock with an exercise price of
         $1.02 per share. We allocated the proceeds received from debt or
         convertible debt with detachable warrants using the relative fair value
         of the individual elements at the time of issuance. The amount
         allocated to the warrants was $39,000 and being amortized as over the
         term of the convertible debentures. A total of $7,000 had been
         amortized from the date of issuance to the date of conversion into
         common stock. Upon the conversion of the debenture into common stock,
         the remaining balance of $32,000 was expensed.


         In connection with the financing in June 2003, we also issued five-year
         warrants to purchase 375,000 shares of common stock at an exercise
         price of $1.65 to the March '03 Debentures investors and May '03
         Debentures investors in order to obtain their requisite consents and
         waivers of rights they possessed to participate in the financing. We
         filed a registration statement covering shares sold and warrants issued
         in connection with this transaction.

         In March 2004, we entered into a Securities Purchase Agreement for the
         sale of convertible debentures (the "March '04 Debentures") to two
         investors (the "Purchasers") for the total gross proceeds of $3.0
         million. The debentures mature in May 2006, bear an interest rate of 9%
         per annum and provide for interest only payments on a quarterly basis,
         payable, at our option, in cash or shares of our common stock. The
         debentures are convertible into shares of our common stock at a
         conversion price of $1.32 per share, subject to adjustment if we offer
         or sell any securities for an effective per share price that is less
         than 87% of the then current conversion price, negatively restate any
         of our financial statement or make any public disclosure that
         negatively revises or supplements any prior disclosure regarding a
         material transaction consummated prior to March 15, 2004 or trigger
         other customary anti-dilution protections. If certain conditions are
         met, we have the option to redeem the March '04 Debentures at 110% of
         their face value, plus accrued but unpaid interest.

         We must redeem the debentures at the initial monthly amount of $233,333
         commencing on February 1, 2005. If the daily volume weighted average
         price of our common stock on the American Stock Exchange exceeds $1.15
         by more than 200% for 15 consecutive trading days, we have the option
         to cause the Purchasers to convert the then outstanding principal
         amount of March '04 Debentures into our common stock at the conversion
         price then in effect.

         We also issued the Purchasers two warrants as follows: (1) Series A
         Warrants to purchase up to an aggregate of 1,043,479 shares of our
         common stock at an exercise price of $1.15 per share with a five-year
         term, exercisable at anytime after September 16, 2004, subject to
         adjustment if the we offer or sell any securities for an effective per
         share price that is less than the then current exercise price,
         negatively restate any of our financial statements or make any public
         disclosure that negatively revises or supplements any prior disclosure
         regarding a material transaction consummated prior to March 15, 2004 or
         trigger other customary anti-dilution protections and (2) Series B
         Warrants to purchase up to 8,500,000 shares of our common stock with an
         exercise price of $5 per share, these warrants are immediately
         exercisable and expire on the earlier of the six-month anniversary of
         the effective date of the registration statement that is required to be
         filed or 18 months from March 15, 2004, subject to adjustment upon the
         issuance or sale of securities in a public offering for an effective
         per share price that is less than the then-current exercise price and
         upon the trigger of other customary anti-dilution protections.

         For a period of one hundred eighty (180) days following the date the
         registration statement is declared effective ("Effective Date"), each
         Purchaser has the right, in its sole discretion, to elect to purchase
         such Purchaser's pro rata portion of additional Debentures and Series A
         Warrants for an aggregate purchase price of up to $2,000,000 in a
         second closing (the "Second Closing"). The terms of the Second Closing
         shall be identical to the terms set forth in the Purchase Agreement and
         related documents, except that, the conversion price for the additional
         debentures and the exercise price for the additional warrants shall be
         equal to 115% of the average of the daily volume weighted average price
         of our common stock on the American Stock Exchange for the ten (10)
         days preceding the Second Closing ("Second Closing Price"). The Series
         A Warrant coverage for the Second Closing shall be 40% of each
         Purchaser's subscription amount divided by the Second Closing Price.

         For a period of one hundred eighty (180) days following the Effective
         Date, if the daily volume weighted average price of our common stock
         for twenty (20) consecutive trading days exceeds $2.00, subject to
         adjustment, we may, on one occasion, in our sole determination, require
         the Purchasers to purchase each such Purchaser's pro rata portion of

                                      F-19



<PAGE>

         additional debentures and Series A Warrants for an aggregate purchase
         price of up to $2,000,000. Any such additional investment shall be
         under the terms set forth in the Purchase Agreement and related
         documents, except that, the conversion price for the additional
         Debentures and the exercise price for the additional warrants shall be
         equal to the then current conversion price and warrant exercise price
         for the 9% Debentures and warrants purchased on March 15, 2004.

         For a period of six (6) months from the Effective Date, the Purchasers
         have a right of first refusal to participate in certain future
         financings by us involving the sale of our common stock or equivalent
         securities. The Purchasers were also granted registration rights under
         a Registration Rights Agreement dated March 15, 2004, pursuant to which
         we were required to file a registration statement respecting the common
         stock issuable upon the conversion of the debentures and exercise of
         the warrants within thirty (30) days after March 15, 2004, and to use
         best efforts to have the registration statement declared effective at
         the earliest date. If a registration statement was not filed within
         such thirty (30) day period or declared effective within such ninety
         (90) day period (or within one hundred twenty (120) days in the event
         of a full review by the SEC), we became obligated to pay liquidated
         damages to the Purchasers equal to 2% per month of each such
         Purchasers' subscription amount under the Purchase Agreement plus the
         value of any warrants issued pursuant to the Purchase Agreement then
         held by such Purchaser. The registration statement has not been filed
         as of June 15, 2004; therefore, $120,000 in liquidated damages has been
         accrued and included in accrued expenses at March 31, 2004.


         In accordance with generally accepted accounting principles, the
         difference between the conversion price of $1.32 and our stock price of
         the date of issuance of the debentures amounted to $265,000 and is
         being amortized over the term of the debentures. We recognized interest
         expense of $5,000 in the fiscal year ended March 31, 2004.

         We allocated the proceeds received from convertible debt with
         detachable warrants using the relative fair market value of the
         individual elements at the time of issuance. The amount allocated to
         the warrants was $720,000 and is being amortized over the term of the
         convertible debentures. We recorded an interest expense of $14,000 in
         the fiscal year ended March 31, 2004.

8.       DEFERRED REVENUE (AS RESTATED)

         Deferred revenue at March 31, 2004 and 2003 consists of the following
         (in thousands):

                                                            2004        2003
                                                          --------    --------
                  Prepaid support services                $ 2,528     $ 1,553
                  Customer deposits                           129           8
                                                          --------    --------
                                                          $ 2,657     $ 1,561
                                                          ========    ========

9.       CAPITAL LEASES


         In connection with the acquisition of Page Digital, we assumed capital
         lease obligations on certain office equipment and fixtures leases
         expiring from November 2004 through November 2006. The capital leases
         bear interest at rates between 7% and 11% per annum and monthly lease
         payments range between approximately $1,000 to $8,000.

         The future minimum lease payments under capital lease obligations,
         together with the present value of the net minimum lease payments at
         March 31, 2004 are as follows (in thousands):

                  Fiscal Year ending March 31,
                             2005                            $     183
                             2006                                   91
                                                             ----------
                  Total minimum least payments                     274
                  Less amount representing interest                 16
                                                             ----------
                  Present payment value of net
                    minimum lease payments                   $     258
                                                             ==========

                  Current maturities                         $     169
                  Non-current portion                               89
                                                             ----------
                                                             $     258
                                                             ==========


10.      COMMITTED STOCK (AS RESTATED)


         In May 2002, Toys "R" Us, Inc. ("Toys"), our major customer, agreed to
         invest $1.3 million for the purchase of a non-recourse convertible note
         and a warrant to purchase 2,500,000 shares of common stock. In
         connection with this transaction, Toys signed a two-year software
         development and services agreement (the "Development Agreement") that
         would have expired in February 2004. The purchase price was payable in
         installments through September 27, 2002. The note was non-interest

                                      F-20



<PAGE>

         bearing, and the face amount was either convertible into shares of
         common stock valued at $0.553 per share or payable in cash at our
         option, at the end of the term. The note would have due on May 29,
         2009, or if earlier than that date, three years after the completion of
         the development project contemplated in the Development Agreement. We
         did not have the right to prepay the convertible note before the due
         date. The face amount of the note was 16% of the $1.3 million purchase
         price as of May 29, 2002, and increased by 4% of the $1.3 million
         purchase price on the last day of each succeeding month, until February
         28, 2004, when the face amount was the full $1.3 million purchase
         price. The face amount would cease to increase if Toys terminated the
         Development Agreement for a reason other than our breach. The face
         amount would be zero if we terminated the Development Agreement due to
         an uncured breach by Toys of the Development Agreement.

         The warrant entitled Toys to purchase up to 2,500,000 of shares of our
         common stock at $0.553 per share. 400,000 shares had vested as of May
         29, 2002, and continued to vest at the rate of 100,000 shares per month
         until February 28, 2004. The warrant would cease to vest if Toys
         terminated the Development Agreement for a reason other than our
         breach. The warrant would become entirely non-exercisable if we
         terminated the Development Agreement due to an uncured breach by Toys
         of the Development Agreement. Toys could elect a "cashless exercise"
         where a portion of the warrant was surrendered to pay the exercise
         price.

         The note conversion price and the warrant exercise price were each
         subject to a 10% reduction in the event of an uncured breach by us of
         certain covenants to Toys. These covenants did not include financial
         covenants. Conversion of the note and exercise of the warrant each
         required 75 days advance notice. We also granted Toys certain
         registration rights for the shares of common stock into which the note
         would have been convertible and the warrant would have been
         exercisable.


         In November 2002, the Board decided that this note would be converted
         solely for equity and would not be repaid in cash and the $1.3 million
         was presented as committed common stock on our consolidated balance
         sheet at March 31, 2003. However, in order to comply with SFAS No. 150,
         "Accounting for Certain Financial Instruments With Uncertainties of
         Both Liabilities and Equity", the note was re-classified as long-term
         debt at September 30, 2003.


         In November 2003, we entered into an agreement with Toys to terminate
         the Development Agreement (the "Termination Agreement"). Pursuant to
         the Termination Agreement, the $1.3 million outstanding convertible
         note, which would have been converted solely for equity, was settled in
         full by offsetting against accounts receivable due to us from Toys, as
         opposed to issuance of common stock, and the warrant to purchase
         2,500,000 shares of our common stock was cancelled. Consequently, we
         wrote off $684,000 account receivable as bad debt in the fiscal year
         ended March 31, 2004.


         In accordance with generally accepted accounting principles, the
         difference between the conversion price of the note of $0.553 and our
         stock price on the date of issuance of the note amounted to $473,000
         and was being amortized over the term of the debt. For the year ended
         March 31, 2004 and 2003, we recorded a charge of $0 and $473,000,
         respectively.

         We have also allocated the proceeds received from debt or convertible
         debt with detachable warrants using the relative fair value of the
         individual elements at the time of issuance. The amount allocated to
         warrants was $406,000. For the year ended March 31, 2004 and 2003, we
         recognized $0 and $406,000, respectively, as interest expense.


                                      F-21



<PAGE>


11.      COMMITMENTS AND CONTINGENCIES (AS RESTATED)


         OPERATING LEASES - We lease office spaces, automobile and various
         equipment under non-cancelable operating leases that expire at various
         dates through the fiscal year 2014. Certain leases contain renewal
         options. Future annual minimum lease payments for non-cancelable
         operating leases at March 31, 2004 are summarized as follows (in
         thousands):

                YEAR ENDING MARCH 31:
                        2005                 $    1,786
                        2006                      1,252
                        2007                      1,025
                        2008                        982
                        2009                        940
                        Thereafter                4,693
                                             -----------
                                             $   10,678
                                             ===========

         Rent expense was $1.0 million, $891,000 and $1.2 million for the fiscal
         years ended March 31, 2004, 2003 and 2002, respectively.

         EMPLOYEE BENEFIT PLAN - Effective January 1, 1999, we adopted a defined
         contribution plan under Section 401(k) of the Internal Revenue Code
         covering all eligible employees employed in the United States ("401(k)
         Plan"). Participant contributions vest immediately and are subject to
         the limits established from time-to-time by the Internal Revenue
         Service. Up until July 1, 2000, we matched 50% of the employee's
         contributions, up to 3% of the employee's total compensation and made
         discretionary contributions to the plan. Effective, July 1, 2000, we
         amended the 401(k) Plan as follows: (a) our matching contribution equal
         to 50% of the employee's contributions, up to 6% of the employee's
         total compensation. Our matching contributions vest over a six year
         graded schedule. Effective January 1, 2002, we ceased matching
         contributions. We made matching contributions to the 401(k) Plan of
         approximately $125,000 in the fiscal year ended March 31, 2002.

         LITIGATION - In April of 2002, our former CEO, Thomas Dorosewicz, filed
         a demand with the California Labor Commissioner for $256,250 in
         severance benefits allegedly due under a disputed employment agreement,
         plus attorney's fees and costs. Mr. Dorosewicz's demand was later
         increased to $283,894. On June 18, 2002, we filed an action against Mr.
         Dorosewicz, Michelle Dorosewicz and an entity affiliated with him in
         San Diego Superior Court, Case No. GIC790833, alleging fraud and other
         causes of action relating to transactions Mr. Dorosewicz caused us to
         enter into with his affiliates and related parties without proper board
         approval. On July 31, 2002, Mr. Dorosewicz filed cross-complaints in
         that action alleging breach of statutory duty, breach of contract,
         fraud and other causes of action related to his employment with the
         Company and other transactions he entered into with the Company. The
         parties agreed to resolve all claims in binding arbitration. The
         dispute was heard by an arbitrator the week of October 3, 2003. The
         arbitrator issued an award on November 7, 2003, resolving most of the
         disputed issues in favor of the Company as follows: (a) the Company was
         awarded a refund of rental payments amounting to $66,951; (b) the
         excessive equipment leasing financing charges by Mr. Dorosewicz were
         recast substantially reducing the Company's unpaid balance; (c) Mr.
         Dorosewicz was ordered to repay attorneys' fees reimbursement he had
         previously been provided by the Company; (d) Mr. Dorosewicz was denied
         severance benefits; (e) Mr. Dorosewicz's claims with respect to options
         were denied; and (f) Mr. Dorosewicz was awarded his unpaid bonus in the
         amount of $56,719. The net amount awarded to Mr. Dorozewicz was
         $85,339, which was paid in January 2004.

         On May 15, 2002, an employee who was out on disability/worker's
         compensation leave, Debora Hintz, filed a claim with the California
         Labor Commissioner seeking $41,000 in alleged unpaid commissions. In or
         about December of 2002, Ms. Hintz filed a discrimination claim against
         us with the Department of Fair Employment and Housing, alleging
         harassment and sexual orientation discrimination. We had responded
         appropriately to both the wage claim and the discrimination
         allegations, which we believed lack merit based on present information.
         On December 1, 2003, the Department of Fair Housing and Employment
         closed the case on the basis of no probable cause to prove violation of
         statute, and gave notice of right to sue. In January 2004, we
         terminated Ms Hintz's employment with us and, as a result, her medical
         insurance was terminated. On February 12, 2004, Ms. Hintz filed a
         petition for violation of Labor Code Section 132(a) before the Workers'
         Compensation Appeals Board of the State of California.

                                      F-22



<PAGE>

         On August 30, 2002, Cord Camera Centers, Inc., an Ohio corporation
         ("Cord Camera"), filed a lawsuit against one of our subsidiaries, SVI
         Retail, Inc. ("SVI Retail") as the successor to Island Pacific Systems
         Corporation, in the United States District Court for the Southern
         District of Ohio, Eastern Division, Case No. C2 02 859. The lawsuit
         claims damages in excess of $1.5 million, plus punitive damages of
         $250,000, against SVI Retail for alleged fraud, negligent
         misrepresentation, breach of express warranties and breach of contract.
         These claims pertain to the following agreements between Cord Camera
         and Island Pacific: (i) a License Agreement, dated December 1999, as
         amended, for the use of certain software products, (ii) a Services
         Agreement for consulting, training and product support for the software
         products and (iii) a POS Software Support Agreement for the maintenance
         and support services for a certain software product. We settled this
         case on September 30, 2003. The terms of the settlement agreement are
         subject to a confidentiality covenant.

         In mid-2002, we were the subject of an adverse judgment entered in
         favor of Randall's Family Golf Centers, ("Randall") in the approximate
         sum of $61,000. The judgment was entered as a default judgment, and is
         based on allegations that we received a preferential transfer of funds
         within 90 days of the filing by Randall of a chapter 11 case in the
         United States Bankruptcy Court for the Southern District of New York.
         We settled this matter by an agreement to pay $12,500 to Randall.

         On November 22, 2002, UDC Homes, Inc. and UDC Corporation now known as
         Shea Homes, Inc. served Sabica Ventures, Inc. ("Sabica"), our wholly
         owned subsidiary and then our Island Pacific division (now are retail
         management solutions division) with a cross-complaint for indemnity on
         behalf of an entity identified in the summons as Pacific Cabinets. We
         filed a notice of motion and motion to quash service of summons on the
         grounds that we have never done business as Pacific Cabinets and have
         no other known relation to the construction project that is the subject
         of the cross-complaint and underlying complaint. A hearing on our
         motion to quash occurred on May 22, 2003 and was subsequently denied.


         On April 2, 2004, we filed a federal court action in the Southern
         District of California against 5R Online, Inc., John Frabasile, Randy
         Pagnotta, our former officers, and Terry Buckley for fraud, breach of
         fiduciary duty, breach of contract, and unfair business practice
         arising from their evaluation of, recommendation for, and ultimately
         engagement in a development arrangement between IPI and 5R. Pursuant to
         the development agreement entered into in June 2003 and upon reliance
         of the representations of the individual defendants that product
         development was progressing, we paid $640,000 in development payments
         but received no product. Responsive pleadings will be served shortly,
         and the parties are exploring a business solution to the dispute. For
         fiscal year ended March 31, 2004, we have expensed payments of $640,000
         and included in selling, general and administrative expense.

         Certain of our standard software license agreements contain a limited
         infringement indemnity clause under which we agree to indemnify and
         hold harmless our customers and business partners against certain
         liability and damages arising from claims of various copyright or
         other intellectual property infringement by our products. These terms
         constitute a form of guarantee that is subject to the disclosure
         requirements, but not the initial recognition or measurement
         provisions of Financial Accounting Standards Board issued FASB
         Interpretation No. 45, "Guarantor's Accounting and Disclosure
         Requirements for Guarantees, Including Indirect Guarantees of the
         Indebtedness of others." We have never lost an infringement claim and
         our cost to defend such lawsuits have been insignificant. Although it
         is possible that in the future third parties may claim that our
         current or potential future software solutions infringe on their
         intellectual property, we do not currently expect a significant impact
         on our business, operating results or financial condition.


         Except as set forth above, we are not involved in any material legal
         proceedings, other than ordinary routine litigation proceedings
         incidental to our business, none of which are expected to have a
         material adverse effect on our financial position or results of
         operations. However, litigation is subject to inherent uncertainties,
         and an adverse result in existing or other matters may arise from time
         to time which may harm our business.


12.      PREFERRED STOCK, COMMON STOCK, TREASURY STOCK, STOCK OPTIONS AND
         WARRANTS

         PRIVATE PLACEMENTS - In December 2000, we received $1.5 million from
         the sale of common stock and warrants to a limited number of accredited
         investors. As part of the same transaction, the investors purchased in
         January 2001 an additional $0.5 million of common stock and warrants,
         and two of the investors purchased in February 2001 an additional $0.5
         million of common stock and warrants on the same terms and conditions.
         We issued a total of 2,941,176 shares of common stock and 1,470,590
         warrants to purchase common stock at an exercise price of $1.50 as a
         result of the aforementioned transaction. We agreed to register the
         common shares purchased and the common shares issuable upon the
         exercise of warrants with the SEC. We filed a registration statement in
         January 2001 to register these shares, but it did not become effective.
         We issued 1,249,997 penalty warrants with a strike price of $0.85 per
         share, with a fair value of $740,000, as required under an agreement
         with the investors. We were obligated to issue to each investor a
         warrant for an additional 2.5% of the number of shares purchased by
         that investor in the private placement for each continuing 30-day
         period during which a registration statement is not effective.

         In July 2002, we and the investors agreed to revise the terms of the
         foregoing warrants and to cease accruing penalty warrants from the
         original obligation. We also agreed that the warrants previously issued
         to the investors to purchase an aggregate of 3,033,085 shares of common
         stock at exercise prices ranging from $0.85 to $1.50, and expiring on

                                      F-23



<PAGE>

         various dates between December 2002 and June 2004, would be replaced by
         new warrants to purchase an aggregate of 1,600,000 shares at $0.60 per
         share, expiring July 19, 2007.

         In June 2003, we entered into an agreement with various institutional
         investors ("June 2003 Institutional Investors") for the sale of
         5,275,000 shares of common stock at a per share price of $1.50 for an
         aggregate purchase price of $7.9 million. In connection with this
         financing, we paid Roth Capital Partners as placement agent, cash
         compensation of 8% of the proceeds and issued a five-year warrant to
         purchase 527,500 shares of common stock at an exercise price of $1.65
         per share. We also issued five-year warrants to purchase 375,000 shares
         of common stock at an exercise price of $1.65 to the March '04
         Debentures investors and May '04 Debentures investors in order to
         obtain their requisite consents and waivers of rights they possessed to
         participate in the financing.

         In November 2003, we sold to various institutional investors ("November
         2003 Institutional Investors") 3,180,645 shares of common stock at a
         price of $1.55 per share for an aggregate purchase price of $4.9
         million. In connection with this financing, we paid Roth Capital, as
         placement agent, compensation of $179,000 in cash and 115,226 shares of
         our common stock and issued a five-year warrant to purchase 282,065
         shares of common stock at an exercise price of $1.71 per share, with a
         fair market value of $388,000.

         PREFERRED STOCK - The Series A Preferred has a stated value of $100 per
         share and is redeemed at our option any time prior to the maturity date
         of December 31, 2006 ("Maturity Date") for 107% of the stated value and
         accrued and unpaid dividends. The shares are entitled to cumulative
         dividends of 7.2% per annum, payable semi-annually. At March 31, 2004
         and 2003, dividends in arrears amount to $2.0 million or $14.19 per
         share and $1.3 million or $9.00 per share, respectively. The holders
         may convert each share of Series A Preferred at any time into the
         number of shares of our common stock determined by dividing the stated
         value plus all accrued and unpaid dividends, by a conversion price
         initially equal to $0.80. The conversion price will increase at an
         annual rate of 3.5% calculated on a semi-annual basis. As of March 31,
         2004, the conversion price is $0.86 per share. On the Maturity Date,
         any outstanding shares of Series A Preferred will be automatically
         converted into shares of our common stock at a conversion price equal
         to 95% of the average closing price of our common stock for the last
         ten business days. The Series A Preferred is entitled upon liquidation
         to an amount equal to its stated value plus accrued and unpaid
         dividends in preference to any distributions to common stockholders.
         The Series A Preferred has no voting rights prior to conversion into
         common stock, except with respect to proposed impairments of the Series
         A Preferred rights and preferences, or as provided by law. We have the
         right of first refusal to purchase all but not less than all of any
         shares of Series A Preferred or shares of common stock received on
         conversion which the holder may propose to sell to a third party, upon
         the same price and terms as the proposed sale to a third party.

         In fiscal year ended March 31, 2004, we declared $421,000 dividend on
         Series A Preferred, which was paid by issuing 500,000 shares of common
         stock.

         COMMON STOCK - During fiscal year ended March 31, 2004, we issued the
         following:

                  o        an aggregate of 4,103,161 shares of common stock
                           totaling $4.2 million upon conversion of convertible
                           debentures.

                  o        an aggregate of 2,527,392 shares of common stock
                           totaling $1.9 million upon conversion of convertible
                           notes.

                  o        500,000 shares of common stock totaling $421,000 upon
                           conversion of accrued dividends on Series A Preferred
                           stock.

                  o        an aggregate of 8,455,645 shares of common stock to
                           June 2003 Institutional Investors and November 2003
                           Institutional Investors for total gross proceeds of
                           $12.8 million. Offering costs associated with these
                           transactions were $1.2 million, which included
                           115,226 shares of common stock, with a fair value of
                           $179,000, to Roth Capital as placement agent's
                           compensation. o an aggregate of 1,509,226 shares of
                           common stock, with fair value totaling $1.6 million,
                           to November 2003 Institutional Investors pursuant to
                           an anti-dilutive provision of the Securities Purchase
                           Agreement for the sale of 3,180,645 shares of common
                           stock in November 2003.

                  o        100,000 shares of common stock, with fair value of
                           $300,000, to Cord Camera for payment pursuant to the
                           settlement agreement.

                                      F-24



<PAGE>

                  o        an aggregate of 2,499,959 shares of common stock,
                           with a fair value of $5.0 million, to the
                           shareholders of Page Digital in connection with the
                           acquisition of Page Digital.

                  o        84,849 shares of common stock to employees for bonus
                           payment of $84,000 earned in the prior year.

                  o        9,584 shares of common stock, with a fair value of
                           $14,000, for legal fees provided in the current year.

                  o        78,000 shares to common stock, fair value of $60,000,
                           to a consultant for investor relation services
                           provided in the current year.

         TREASURY STOCK - In November 1998, the Board of Directors authorized us
         to purchase up to 1,000,000 shares of our common stock. As of March 31,
         2001, we had repurchased 444,641 shares of our common stock at a cost
         of $4.3 million. The purchased shares were canceled as of March 31,
         2002.

         We received 10,700,000 shares of our common stock valued at $8.6
         million from Softline in connection with the transactions between us
         and Softline described in Note 14. Up until March 31, 2003, these
         shares were pledged to the Bank as collateral for the term loans (see
         Note 6). The 10.7 million treasury shares were canceled and retired in
         May 2003.

         STOCK OPTION PLAN - We adopted an incentive stock option plan during
         fiscal year 1990 (the "1989 Plan"). Options under this plan may be
         granted to our employees and officers. There were initially 1,000,000
         shares of common stock reserved for issuance under this plan. Effective
         April 1, 1998, the board of directors approved an amendment to the 1989
         Plan increasing the number of shares of common stock authorized under
         the 1989 Plan to 1,500,000. The exercise price of the options is
         determined by the board of directors, but the exercise price may not be
         less than the fair market value of the common stock on the date of
         grant. Options vest immediately and expire between three to ten years
         from the date of grant. The 1989 Plan terminated in October 1999.

         On October 5, 1998, the board of directors and stockholders approved a
         new plan entitled the 1998 Incentive Stock Plan (the "1998 Plan"). The
         1998 Plan authorizes 3,500,000 shares to be issued pursuant to
         incentive stock options, non-statutory options, stock bonuses, stock
         appreciation rights or stock purchases agreements. The options may be
         granted at a price not less than the fair market value of the common
         stock at the date of grant. The options generally become exercisable
         over periods ranging from zero to five years, commencing at the date of
         grant, and expire in one to ten years from the date of grant. The 1998
         Plan terminates in October 2008. On August 18, 2000, the Board approved
         certain amendments to the 1998 Plan. On November 16, 2000, the
         shareholders approved certain amendments. These amendments: (a)
         increased number of shares authorized in the Plan from 3,500,000 to
         4,000,000, (b) authorized an "automatic" annual increase in the number
         of shares reserved for issuance by an amount equal to the lesser of 2%
         of total number of shares outstanding on the last day of the fiscal
         year, 600,000 shares, or an amount approved by the Board of Directors,
         and (c) to limit the number of stock awards of any one participant
         under the 1998 Plan to 500,000 shares in any calendar year. On
         September 19, 2002, the shareholders approved to increase the number of
         shares authorized in the 1998 Plan by 1,000,000 shares and to increase
         the number of stock awards that may be granted to any one participant
         in any calendar year under the 1998 Plan from 500,000 shares to
         1,000,000 shares.

                                      F-25



<PAGE>

         The following summarizes our stock option transactions under the stock
         option plans:

                                                                      WEIGHTED
                                                                       AVERAGE
                                                                      EXERCISE
                                                                      PRICE PER
                                                      OPTIONS           SHARE
                                                     ----------      ----------

             Options outstanding, April 1, 2001       3,961,034      $   2.55
             Granted                                  2,117,300      $   0.89
             Expired/canceled                        (1,592,445)     $   1.84
                                                     -----------

             Options outstanding, March 31, 2002      4,485,889      $   2.05
             Granted                                  1,718,000      $   0.51
             Exercised                                 (150,000)     $   0.50
             Expired/canceled                        (1,224,483)     $   1.91
                                                     -----------

             Options outstanding, March 31, 2003      4,829,406      $   1.56
             Granted                                  1,355,580      $   1.91
             Exercised                                 (652,378)     $   0.71
             Expired/canceled                          (743,666)     $   1.97
                                                     -----------

             Options outstanding March 31, 2004       4,788,942      $   1.70
                                                     ===========

             Exercisable, March 31, 2002              2,030,673      $   2.63
                                                     ===========

             Exercisable, March 31, 2003              3,096,559      $   1.84
                                                     ===========

             Exercisable, March 31, 2004              3,296,860      $   1.70
                                                     ===========

         In addition to options issued pursuant to the stock option plans
         described above, we issued additional options outside the plans to
         employees, consultants, and third parties. The following summarizes our
         other stock option transactions:

                                                                     WEIGHTED
                                                                      AVERAGE
                                                                     EXERCISE
                                                                     PRICE PER
                                                       OPTIONS         SHARE
                                                      ----------     ---------
             Options outstanding, April 1, 2001       1,366,812      $   2.28
             Expired/Canceled                          (320,000)     $   1.08
                                                      ----------
             Options outstanding, March 31, 2002      1,046,812      $   2.61
             Granted                                  4,132,500      $   0.32
             Expired/Canceled                          (125,000)     $   4.60
                                                      ----------
             Options outstanding, March 31, 2003      5,054,312      $   0.69
             Granted                                    400,000      $   1.75
             Expired/Canceled                          (439,246)     $   0.37
                                                      ----------
             Options outstanding, March 31, 2004      5,015,066      $   0.80
                                                      ==========
             Exercisable, March 31, 2002              1,046,812      $   2.61
                                                      ==========
             Exercisable, March 31, 2003              5,054,312      $   0.69
                                                      ==========
             Exercisable, March 31, 2004              5,015,066      $   0.80
                                                      ==========

         During the fiscal years ended March 31, 2004, 2003 and 2002, we
         recognized compensation expense of $126,000, $8,000, and $0,
         respectively, for stock options granted to non-employees for services
         provided to us.

                                      F-26



<PAGE>

         The following table summarizes information as of March 31, 2004
         concerning currently outstanding and exercisable options:
<TABLE>
<CAPTION>
<S>     <C>
                                             Options Outstanding                   Options Exercisable
                               -------------------------------------------    -----------------------------
                                                  Weighted
                                                   Average       Weighted      Weighted
                                                  Remaining       Average       Average
             Range Of             Number         Contractual     Exercise       Number            Exercise
         Exercise Prices        Outstanding         Life           Price      Exercisable           Price
         ---------------       ------------     ------------    ---------     -----------        ---------
                                                  (years)

          $0.28 - 0.50           4,323,265           2.48       $   0.28       4,263,681          $   0.28
          $0.51 - 1.00           1,598,544           6.80       $   0.81       1,332,556          $   0.80
          $1.01 - 1.50           1,114,492           7.87       $   1.30         610,712          $   1.34
          $1.51 - 2.00           1,359,912           3.16       $   1.79       1,301,612          $   1.80
          $2.01 - 4.00             877,500           7.99       $   2.68         280,000          $   2.94
          $4.01 - 11.75            530,295           4.42       $   6.42         523,365          $   7.44
                                 ----------         ------      ---------      ----------         ---------
                                 9,804,008           3.54       $   1.24       8,311,926          $   1.15
                                 ==========         ======      =========      ==========         =========
</TABLE>

         WARRANTS - At March 31, 2004 and 2003, we had outstanding warrants to
         purchase 14,560,658 and 6,018,527 shares of common stock, respectively,
         at exercise prices ranging from $0.60 to $5.00 per share. The lives of
         the warrants range from two to five years from the grant date.

         The following summarizes our warrant transactions:

                                                                      WEIGHTED
                                                                       AVERAGE
                                                                      EXERCISE
                                                                      PRICE PER
                                                        OPTIONS         SHARE
                                                      ----------      ---------

             Options outstanding, April 1, 2001        1,614,925      $   1.59
             Granted                                   2,425,243      $   0.96
                                                      -----------
             Options outstanding, March 31, 2002       4,040,168      $   1.21
             Granted                                   7,449,109      $   0.55
             Expired/canceled                         (5,470,750)     $   0.83
                                                      -----------
             Options outstanding, March 31, 2003       6,018,527      $   0.74
             Granted                                  11,229,467      $   4.12
             Exercised                                  (160,000)     $   2.77
             Expired/canceled                         (2,527,336)     $   0.62
                                                      -----------
             Options outstanding March 31, 2004       14,560,658      $   3.36
                                                      ===========
             Exercisable, March 31, 2002               4,040,168      $   1.21
                                                      ===========
             Exercisable, March 31, 2003               6,018,527      $   0.74
                                                      ===========
             Exercisable, March 31, 2004              13,367,179      $   3.55
                                                      ===========

         During the fiscal years ended March 31, 2004 and 2003, we recognized
         compensation expense of $91,000 and $43,000, respectively, for warrants
         granted to non-employees for services provided to us.

                                      F-27



<PAGE>


13.      INCOME TAXES (AS RESTATED)

         The provision (benefit) for income taxes consisted of the following
         components (in thousands):

<TABLE>
<CAPTION>
                                                            YEAR ENDED      YEAR ENDED       YEAR ENDED
                                                             MARCH 31,       MARCH 31,        MARCH 31,
                                                               2004            2003             2002
                                                           ------------     ------------    ------------
<S>                                                        <C>              <C>             <C>
                  Current:
                      Federal                              $      (586)     $        --     $        39
                      State                                         --                4              --
                      Foreign                                       --               --              --
                                                           ------------     ------------    ------------
                  Total                                           (586)               4              39
                                                           ------------     ------------    ------------

                  Deferred:
                      Federal                                       --               --              --
                      State                                         --               --              --
                      Foreign                                       --               --              --
                                                           ------------     ------------    ------------
                  Total                                             --               --              --
                                                           ------------     ------------    ------------

                  Provision (benefit) for income taxes     $      (586)     $        4      $        39
                                                           ============     ============    ============
</TABLE>


         Significant components of our deferred tax assets and liabilities at
         March 31, 2004 and 2003 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           MARCH 31,
                                                                       2004        2003
                                                                     --------     --------
<S>                                                                  <C>          <C>
                  Current deferred tax assets/(liabilities):
                      State taxes                                    $   231      $   300
                      Accrued expenses                                   764          913
                      Prepaid services                                    92           92
                      Deferred revenue                                 1,138          669
                      Warrants for services                               43          298
                      Allowance for bad debts                            175          159
                                                                     --------     --------

                  Net current deferred tax assets                      2,443        2,431
                                                                     --------     --------

                  Non-current deferred tax assets/(liabilities):
                      Research and expenditure credits                 2,541        2,005
                      Net operating loss                               7,618        7,571
                      Fixed assets                                        27          117
                      Deferred rent                                       --           35
                      State taxes                                       (343)        (575)
                                                                     --------     --------

                  Total non-current deferred tax assets                9,843        9,153

                  Intangible assets                                   (5,527)      (6,415)
                                                                     --------     --------
                  Total non-current deferred tax liability            (5,527)      (6,415)
                                                                     --------     --------

                  Net non-current deferred tax asset/(liability)       6,759        5,169
                                                                     --------     --------

                  Valuation allowance                                 (6,759)      (5,169)
                                                                     --------     --------

                  Net deferred tax asset (liability)                 $    --      $    --
                                                                     ========     ========

                                      F-28
</TABLE>



<PAGE>

         The difference between the actual provision (benefit) and the amount
         computed at the statutory United States federal income tax rate of 34%
         for the fiscal years ended March 31, 2004, 2003 and 2002 is
         attributable to the following:


<TABLE>
<CAPTION>
                                                             YEAR       YEAR       YEAR
                                                             ENDED      ENDED      ENDED
                                                            MARCH 31,  MARCH 31,  MARCH 31,
                                                              2004       2003       2002
                                                            --------   --------   -------
                                                           (Restated)
<S>                                                          <C>        <C>       <C>
         Provision (benefit) computed at statutory rate      (34.0)%    (34.0)%   (34.0)%
         Nondeductible goodwill                                --         7.9       5.1
         Interest expense                                      5.7        --        --
         Change in valuation allowance                        33.8       73.9      20.4
         Foreign income taxed at different rates               --        (0.3)      9.7
         Tax credits                                           --       (24.2)     (2.9)
         State income tax, net of federal tax benefit         (2.1)      (2.5)     (0.7)
         Other                                                (9.5)     (20.8)      2.4
                                                            --------   --------   -------

         Total provision (benefit) for income taxes           (6.1)%     (--)%     (--)%
                                                            ========   ========   =======
</TABLE>


         At March 31, 2004, we had Federal and California tax net operating loss
         carryforwards of approximately $20.8 million and $12.0 million,
         respectively. The Federal and California tax net operating loss
         carryforwards will begin expiring after 2008.

         We also have Federal and California research and development tax credit
         carryforwards of approximately $1.8 million and $739,000, respectively.
         The Federal credits will begin expiring after 2008. The California
         credits may be carried forward indefinitely.


14.      EARNINGS (LOSS) PER SHARE (AS RESTATED)

         Earnings (loss) per share for the fiscal years ended March 31, 2004,
         2003 and 2002, are as follows (in thousands, except share amounts and
         per share data):

<TABLE>
<CAPTION>
                                                                      FISCAL YEAR ENDED MARCH 31, 2004
                                                                                (As restated)
                                                                 -----------------------------------------
                                                                      Loss          Shares       Per Share
                                                                  (Numerator)    (Denominator)     Amount
                                                                  -----------    -------------   ---------
<S>                                                               <C>             <C>            <C>
                  Basic and diluted EPS:
                  Loss available to common stockholders           $   (9,952)     41,450,427     $  (0.24)
                                                                  ===========     ===========    =========

                                                                       FISCAL YEAR ENDED MARCH 31, 2003
                                                                  ----------------------------------------
                                                                    Income          Shares       Per Share
                                                                  (Numerator)    (Denominator)     Amount
                                                                  -----------    -------------   ---------
                  Basic and diluted EPS:
                  Loss available to common stockholders           $   (3,733)     29,598,518     $  (0.13)
                                                                  ===========     ===========    =========

                                                                       FISCAL YEAR ENDED MARCH 31, 2002
                                                                  ----------------------------------------
                                                                    Income          Shares       Per Share
                                                                  (Numerator)    (Denominator)     Amount
                                                                  -----------    -------------   ---------
                  Basic and diluted EPS:
                  Loss available to common stockholders           $  (14,912)     35,697,999     $  (0.42)
                                                                  ===========     ===========    =========
</TABLE>

                                                        F-29



<PAGE>

         The following potential common shares have been excluded from the
         computation of diluted net loss per share for the periods presented
         because the effect would have been anti-dilutive:

<TABLE>
<CAPTION>
                                                                                  FOR FISCAL YEARS ENDED MARCH 31,
                                                                                 2004           2003           2002
                                                                             -----------    -----------    -----------
<S>                                                                           <C>            <C>            <C>
                  Options outstanding under our stock option plans            4,788,942      4,829,406      4,485,889
                  Options granted outside our stock option plans              5,015,066      5,054,312      1,046,812
                  Warrants issued in conjunction with private placements      1,730,714      1,625,000      2,944,499
                  Warrants issued for services rendered                       1,211,898        320,669      1,095,669
                  Warrants issued in conjunction with convertible note
                    due to major customer                                            --      2,500,000             --
                  Warrants issued in conjunction with convertible
                    debentures                                               11,618,043      1,572,858             --
                  Convertible notes due to stockholders                              --      2,200,338      1,037,037
                  Series A Convertible Preferred Stock                       18,783,284     18,561,594     17,625,000
                  Convertible debentures                                      2,272,727      3,419,304             --
                  Committed Stock                                                    --      2,976,190             --
                                                                             -----------    -----------    -----------
                         Total                                               45,420,674     43,059,671     28,234,906
                                                                             ===========    ===========    ===========
</TABLE>


15.      RELATED PARTIES


         Included in other receivables at March 31, 2004 and 2003 are amounts
         due from our officers and employees in the amount of $37,000 and
         $3,000, respectively.

         In connection with the Page Digital acquisition, we assumed a
         three-party lease agreement for our Colorado offices between CAH
         Investments, LLC ("CAH"), wholly owned by Mr. Page's spouse, and
         Southfield Crestone, LLC, whereby Page Digital agreed to lease offices
         for ten years expiring on December 31, 2013. CAH and Southfield
         Crestone LLC are equal owners of the leased property. Rent expense
         related to this lease was $166,000 in fiscal year ended March 31, 2004.
         Security deposit of $170,000 relating to this lease is included in
         other long-term assets at March 31, 2004.

         We began occupying our Carlsbad principal executive offices in July
         2001. At that time, the premises were owned by an affiliate of our
         Chief Executive Officer at that time. Monthly rent for these premises
         was set at $13,783. In April, 2002, the premises were sold to an entity
         unrelated to the former Chief Executive Officer. We relocated our
         principal executive offices to Irvine, California and terminated the
         Carlsbad lease in July 2003.

         We retain our former CEO and Chairman of the Board, Barry M. Schechter,
         to provide consulting services starting August 2003. The expense for
         these services was $295,000 in the fiscal year ended March 31, 2004.

         During fiscal year 2004, we retained an entity owned by an immediate
         family member of our former CEO and Chairman, Harvey Braun, to provide
         recruiting and marketing services. The expenses for these services were
         $138,000 in the fiscal year ended March 31, 2004.

         During fiscal year ended March 31, 2003, we had loan due to a
         stockholder who together with Barry M. Schechter, our former CEO and
         Chairman of the Board, and an irrevocable trust forms a beneficial
         ownership group. The original loan from the stockholder included in the
         group described above was $1.5 million and borrowed in June 1999 to
         fund the acquisition of Island Pacific Systems Corporation on April 1,
         1999. This loan was repaid in full at March 31, 2003. Interest was
         calculated monthly at the current prime rate with no stated maturity
         date. Interest expense under these loans for the years ended March 31,
         2004, 2003 and 2002 was $0, $12,000 and $26,000, respectively.

         We retain an entity affiliated with a former director of the board to
         provide financial advisory services. This former director resigned in
         October 2003. During the years ended March 31, 2004, 2003 and 2002, the
         expenses for these services were $22,000, $47,000 and $42,000,
         respectively. We also incurred $6,000, $0 and $19,000 in expenses to
         the same former director for accounting services during the fiscal
         years ended March 31, 2004, 2003 and 2002, respectively. We borrowed
         $50,000, $125,000, $70,000 and $50,000 from another entity affiliated

                                      F-30



<PAGE>

         with this former director in May 2001, December 2001, May 2002 and
         September 2002, respectively, to meet payroll expenses. These amounts
         were repaid together with interest at the then-effective prime rate,
         promptly as revenues were received, and are paid in full as of March
         31, 2003.

         During the second quarter of fiscal 2001, Softline Limited
         ("Softline"), our former major stockholder, loaned us $10 million for
         the purpose of making a $10 million principal reduction on the Bank
         term loan. This loan was unsecured and was subordinated to the term
         loan. The loan bore interest at 14% per annum, payable monthly, and had
         a stated due date of August 1, 2001. We did not pay monthly interest
         and had accrued $1.0 million interest as of March 31, 2001. There were
         no financial covenants or restrictions related to the Softline loan.
         Effective June 30, 2001, the terms of the loan with Softline were
         amended. Included in the amendment was an extension of the maturity
         date to November 1, 2002. We agreed to reimburse Softline for costs
         associated with this loan in the amount of $326,000, which was fully
         accrued for as of March 31, 2001 and was paid off in fiscal 2003. These
         costs were to be amortized over the initial 13-month life of the loan.

         Effective January 1, 2002, we entered into an integrated series of
         transactions with Softline as follows:

                  1.       We transferred to Softline a note received in
                           connection with the sale of IBIS (the "IBIS Note")
                           with a carrying value of $7.0 million.
                  2.       We issued to Softline 141,000 shares of
                           newly-designated Series A Convertible Preferred Stock
                           ("Series A Preferred").
                  3.       In consideration of the above, Softline released us
                           from our obligations related to the note payable due
                           to Softline. Softline also surrendered 10,700,000
                           shares of our common stock held by Softline.

         No gain or loss was recognized in connection with the disposition of
         the IBIS Note or the other components of the transactions.

         Interest expense included interest due to Softline and its subsidiary
         for the fiscal years ended March 31, 2004, 2003, and 2002 of $0, $0 and
         $1.3 million, respectively.

         An option agreement (the "Option Agreement") was prepared and agreed
         upon by Softline and our president and director, as trustee of a
         certain group of our management (the "Optionees"). Under the Option
         Agreement, Softline granted the Optionees the right to purchase from
         Softline 8,000,000 shares of our common stock and such number of shares
         of Series A Preferred convertible into 17,125,000 shares of our common
         stock for a price of $0.80 per option share. The Option Agreement
         expired, unexercised on March 24, 2004.

         In November 2003, the Sage Group plc (the "Sage Group") acquired
         substantially all the assets of Softline, including Softline's 141,000
         shares of our Series A Preferred, 8,923,915 shares of our common stock
         and options to purchase 71,812 shares of our common stock. In
         connection with the acquisition, certain agreements of Softline,
         including the rights and obligations respecting and arising from the
         Option Agreement were also assigned to and assumed by the Sage Group.


16.      BUSINESS SEGMENTS AND GEOGRAPHIC DATA (AS RESTATED)

         We are a provider of software solutions and services to the
         retail industry. Our solutions and services have been developed
         specifically to meet the needs of the retail industry. We provide high
         value innovative solutions that help retailers understand, create,
         manage and fulfill consumer demand. Our solutions help retailers
         improve the efficiency and effectiveness of their operations and build
         stronger, longer lasting relationships with their customers. We
         structured our operations into three business units that have separate
         reporting infrastructures. Effective January 31, 2004, we acquired Page
         Digital subsidiary which offers multi-channel retail solutions.

         Up until April 1, 2003, through our Training Products subsidiary we
         also developed and distributed PC courseware and skills assessment
         products for both desktop and retail applications. Effective April 1,
         2003, we sold the Training Products subsidiary.

         Up to March 31, 2002, we considered our business to consist of one
         reportable operating segment.

         Each unit is evaluated primarily based on total revenues and operating
         income excluding depreciation and amortization. Identifiable assets are
         also managed by business units. The units from continuing operations
         are as follows:

                                      F-31



<PAGE>

                  o        RETAIL MANAGEMENT SOLUTIONS ("RETAIL MANAGEMENT") -
                           offers suite of applications, which builds on our
                           long history in retail software design and
                           development. We provide our customers with an
                           extremely reliable, widely deployed, comprehensive
                           and fully integrated retail management solutions.
                           Retail Management includes merchandise management
                           that optimizes workflow and provides the highest
                           level of data integrity. This module supports all
                           operational areas of the supply chain including
                           planning, open-to-buy purchase order management,
                           forecasting, warehouse and store receiving
                           distribution, transfers, price management,
                           performance analysis and physical inventory. In
                           addition, Retail Management includes a comprehensive
                           set of tools for analysis and planning, replenishment
                           and forecasting, event and promotion management,
                           warehouse, ticketing, financials and sales audit.
                           Through collaborations with strategic partners,
                           Retail Management offers tools for loss prevention,
                           communication with stores and vendors, integration
                           needs, purchase and allocation decisions, analysis of
                           weather impact, control and management of business
                           processes, consumer research, tracking consumer
                           shopping patterns, forecasting and replenishment, and
                           analyzing store people productivity.

                  o        STORE SOLUTIONS - offers suite of applications builds
                           on our long history of providing multi-platform,
                           client server in-store solutions. We market this set
                           of applications under the name "OnePointe,"(TM) which
                           is a feature-rich application created with the
                           specialty retailer in mind. More than 15 years of
                           development has resulted in a solution with a high
                           degree of fit and value out of the box. Additionally,
                           the software was designed for easy customization,
                           enabling our development team to quickly develop
                           solutions to meet retailers' specific point-of-sale
                           ("POS")and in-store processor (server) requirements.

                  o        MULTI-CHANNEL RETAIL SOLUTIONS ("MULTI-CHANNEL
                           RETAIL") - Page Digital designs its application to
                           specifically address direct commerce business
                           processes, which primarily relate to interactions
                           with the end-user. Having developed its software out
                           of necessity to manage its own former direct commerce
                           operation, Page Digital has been extremely attentive
                           to functionality, usability and scalability. Its
                           software components include applications for customer
                           relations management, order management, call centers,
                           fulfillment, data mining and financial management.
                           Specific activities like partial ship orders,
                           payments with multiple tenders, back order
                           notification, returns processing and continuum
                           marketing (e.g., up sells based on time coffee of the
                           month club), represent just a few of the more than
                           1,000 parameterized direct commerce activities that
                           have been built into its "Synaro"(TM)applications.
                           Page Digital makes these components and its
                           interfacing technology available to customers,
                           systems integrators and independent software
                           developers who may modify them to meet their specific
                           needs. This growing base of inherited functionality
                           continues to improve the market relevance of its
                           products.

                                      F-32



<PAGE>


         A summary of the revenues and operating income (loss) and identifiable
         assets attributable to each of these business units from continuing
         operations are as follows (in thousands):

<TABLE>
<CAPTION>

                                                                 Year Ended    Year Ended
                                                                  March 31,     March 31,
                                                                    2004          2003
                                                                  ---------     ---------
                                                                (As restated)
<S>                                                               <C>           <C>
                  Revenues from continuing operations:
                           Retail Management                      $  15,189      $ 20,390
                           Store Solutions                            1,620         1,906
                           Multi-channel Retail                       1,030            --
                                                                   ---------     ---------
                             Consolidated revenues                 $ 17,839      $ 22,296
                                                                   =========     =========
                  Operating income (loss):
                           Retail Management                       $ (2,887)     $    172
                           Store Solutions                           (1,042)         (732)
                           Multi-channel Retail                          34            --
                           Other (see below)                         (3,680)       (2,052)
                                                                   ---------     ---------
                             Consolidated operating loss           $ (7,575)     $ (2,612)
                                                                   =========     =========
                  Other operating loss:
                        Depreciation                               $    (32)     $    (91)
                        Administrative costs and other
                          non-allocated expenses                     (3,648)       (1,961)
                                                                   ---------     ---------
                             Consolidated other operating loss     $ (3,680)     $ (2,052)
                                                                   =========     =========

                                                                          March 31,
                                                                      2004         2003
                                                                   ---------     ---------
                                                                   (Restated)
                  Identifiable assets:
                           Retail Management                       $ 32,757      $ 31,953
                           Store Solutions                            3,790         4,404
                           Multi-channel Retail                      10,093            --
                                                                   ---------     ---------
                             Consolidated identifiable assets      $ 46,640      $ 36,357
                                                                   =========     =========
                  Goodwill, net of amortization:
                           Retail Management                       $ 13,903      $ 13,903
                           Store Solutions                              892           892
                           Multi-channel Retail                       5,812            --
                                                                   ---------     ---------
                             Consolidated goodwill                 $ 20,607      $ 14,795
                                                                   =========     =========

</TABLE>

         Operating income (loss) in Retail Management, Store Solutions and
         Multi-channel Retail business units includes direct expenses for
         software licenses, maintenance services, programming and consulting
         services, sales and marketing expenses, product development expenses,
         and direct general, administrative and depreciation expenses. The
         "Other" caption includes non-allocated costs and other expenses that
         are not directly identified with a particular business unit and which
         we do not consider in evaluating the operating income of the business
         unit.

         During the fiscal year ended March 31, 2004, the Multi-channel Retail
         business unit acquired $5.8 million goodwill in connection with the
         acquisition of Page Digital. There are no changes in goodwill of the
         Retail Management and Store Solutions business units.


                                      F-33



<PAGE>

         We currently operate in the United States and the United Kingdom. In
         February 2002, the Australian subsidiary ceased operations after
         National Australian Bank, the subsidiary's secured lender, placed it in
         receivership (see Note 3). The following is a summary of local
         operations by geographic area (in thousands):


<TABLE>
<CAPTION>
<S>     <C>
                                                        YEAR ENDED     YEAR ENDED     YEAR ENDED
                                                         MARCH 31,      MARCH 31,      MARCH 31,
                                                           2004           2003           2002
                                                         ---------      ---------      ---------
                                                       (As restated)
                                                                     (in thousands)
                  Revenues:
                       Continuing operations:
                           United States                  $14,082        $19,616        $24,246
                           United Kingdom                   3,757          2,680          2,469
                                                          --------       --------       --------
                                                           17,839         22,296         26,715
                                                          --------       --------       --------
                       Discontinued operations:
                           United States                       --          1,370          1,390
                           Australia                           --             --          2,363
                           United Kingdom                      --            147            146
                                                          --------       --------       --------
                                                               --          1,517          3,899
                                                          --------       --------       --------

                           Total revenues                 $17,839        $23,813        $30,614
                                                          ========       ========       ========

                                                                         March 31,
                                                            2004           2003           2002
                                                          --------       --------       --------
                  Long-lived assets:
                           United States                  $40,783        $31,595        $36,154
                           United Kingdom                      30             27             22
                                                          --------       --------       --------
                           Total long-lived assets        $40,813        $31,622        $36,176
                                                          ========       ========       ========
</TABLE>


17.      SIGNIFICANT FOURTH QUARTER ADJUSTMENT (AS RESTATED)

         During the fourth quarter of fiscal 2004, we:

         o        impaired prepaid assets by $640,000 in relation to funding
                  paid to 5R during the year. This amount was initially
                  capitalized and later restated as a Selling, general and
                  administration expense and

         o        reduced revenues by $556,000, of which $238,000 related to the
                  third quarter of fiscal 2004. This amount related to
                  accounting for certain service contracts utilizing
                  percentage-of-completion which were later determined to be too
                  high as well as over recognition of sales of certain partner
                  products.

         The above two adjustments (i) reduced revenues by $556,000, (ii)
         reduced gross profit by $250,000, (iii) reduced loss from operations
         by $1,196,000, (iv) reduced loss before provision (benefit) of income
         taxes by $1,196,000, (v) reduced loss from continuing operations by
         $1,196,000 and reduced net loss by $1,196,000.


18.      SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)(RESTATED)

<TABLE>
<CAPTION>

         MARCH 31, 2004                                   JUNE 30     SEPT. 30      DEC. 31       MAR. 31         TOTAL
         ----------------------------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>          <C>           <C>            <C>
                  Total Revenues                         $  5,466     $  2,779     $  4,890      $  4,704       $ 17,839
                  Gross Profit                              3,229        1,126        2,829         2,784          9,968
                  Net Income (Loss)                           304       (4,495)        (474)       (4,263)        (8,928)
                  Net Income (Loss) Available to
                      Common Stockholders                      32       (4,777)        (658)       (4,549)        (9,952)
                  Basic and diluted Income (Loss)
                      Per Share                              0.01        (0.13)       (0.01)        (0.08)         (0.22)
                  Basic and diluted Income (Loss)
                      Available To Common Stockholders   $     --    $   (0.14)    $  (0.01)     $  (0.09)      $  (0.24)

                                       F-34


<PAGE>

         MARCH 31, 2003                                   JUNE 30     SEPT. 30      DEC. 31       MAR. 31         TOTAL
         ----------------------------------------------------------------------------------------------------------------
                  Total revenues                         $  4,893     $  3,797     $  7,118      $  6,488       $ 22,296
                  Gross Profit                              2,122        1,455        4,220         3,552         11,349
                  Net Income (Loss) from continuing
                      operations                           (2,067)      (3,076)         391         1,915         (2,837)
                  Net Income (Loss)                        (2,017)      (2,967)         384         1,882         (2,718)
                  Net Income (Loss) Available To
                      Common Stockholders                  (2,271)      (3,221)         131         1,628         (3,733)
                  Basic and diluted Earnings (Loss)
                      Per Share                             (0.07)       (0.10)        0.01          0.06          (0.09)
                  Basic and diluted Earnings (Loss)
                      Available To Common Stockholders
                      Per Share                          $  (0.08)    $  (0.11)    $     --      $   0.05       $  (0.13)
</TABLE>


         The summation of quarterly net income (loss) per share may not equate
         to the year-end calculation as quarterly calculations are performed on
         a discrete basis.


19.     RESTATEMENT

         Subsequent to the issuance of our consolidated financial statements for
         the fiscal year ended March 31, 2004, our management determined that:

         o        The revenue from a one-time sale of software technology rights
                  should not have been recorded in the second quarter of fiscal
                  2004,
         o        The total revenues should be presented as product and service
                  revenues and corresponding costs of revenues,
         o        The amortization of capitalized software should be reported as
                  cost of revenues,
         o        The purchase of a software technology right and related
                  amortization should not have been recorded,
         o        The royalty liability in connection with the above software
                  technology right purchase should have been accrued and related
                  royalty fees should have been recognized,
         o        The unamortized balance of debt discount related to the March
                  '03, April '03 and May '03 convertible debentures and Toys
                  convertible note should have been recognized as interest
                  expense when the debentures were converted into common stock,
         o        The beneficial conversion interest charge related to the March
                  '04, April '04 and May '04 convertible debentures should have
                  been capitalized and amortized over the term of the debt,
         o        The legal fees incurred in connection with acquisition of Page
                  Digital and RTI should have been capitalized,
         o        The impairment of prepaid development expense should be
                  reported reported as selling, general and administrative,
                  rather than as other expense, and
         o        The gain on debt forgiveness should be reported as other
                  income, rather than as an extraordinary item.

         As a result, the consolidated financial statements for the fiscal year
         ended March 31, 2004 has been restated from the amounts previously
         reported and certain amounts have been reclassified for the fiscal
         year ended March 31, 2003. A summary of the significant effects of
         the restatement is as follows:

<TABLE>
<CAPTION>
                                                                        As Previously    Restatement
                                                                           Reported      Adjustment     As Restated   Reference
                                                                        ------------    ------------    ------------    -----
        <S>                                                             <C>             <C>             <C>
          For the fiscal year ended March 31, 2004:
                Total revenues                                          $    21,739      $   (3,900)     $    17,839      [1]
                Cost of revenues                                              5,252           2,619            7,871      [2]
                Gross profit                                                 16,487          (6,519)           9,968
                Application development expense                               1,043              39            1,082      [3]
                Depreciation and amortization expense                         3,896           2,681            1,215      [4]
                Selling, general and administrative expense                  14,798             448           15,246      [5]
                Other expense                                                  (647)           (640)              (7)     [6]
                Interest expense                                               (937)         (1,015)          (1,952)     [7]
                Net loss                                                     (4,228)         (4,700)          (8,928)
                Net loss available to common stockholders                    (5,252)         (4,700)          (9,952)
                Basic and diluted EPS available to common stockholders        (0.13)          (0.11)           (0.24)

          At March 31, 2004:
                Prepaid expenses and other current assets               $       472     $       210    $         682      [8]
                Goodwill                                                     20,469             138           20,607      [9]
                Other intangible assets                                      22,099          (3,802)          18,297      [10]
                Other assets                                                    202             219              421      [11]
                Total assets                                                 51,762          (3,235)          48,527
                Accrued expenses                                              3,016             285            3,301      [12]
                Convertible debentures, less current maturities               2,160            (260)           1,900      [13]
                Other long-term liabilities                                      70             165              235      [12]
                Total liabilities                                             9,562             190            9,752
                Additional paid-in capital                                   72,813           1,275           74,088      [14]
                Accumulated deficit                                         (44,718)         (4,700)         (49,418)     [15]
                Total stockholders' equity                                   42,200          (3,425)          38,775

          For the fiscal year ended March 31, 2003:
                Cost of revenues                                        $     8,045       $   2,902      $    10,947      [16]
                Gross profit                                                 14,251          (2,902)          11,349
                Depreciation and amortization expense                         4,148          (2,902)           1,246      [16]
                Other income                                                     24           2,184            2,208      [17]
                Interest expense                                             (1,088)           (708)          (1,796)     [18]
                Extraordinary item                                            1,476          (1,476)              --      [19]
</TABLE>

                                       F-35


<PAGE>

Restatements to the financial statements for fiscal year ended March 31, 2004
are as follow:

         1.       Total revenues was revised to reverse $3.9 million revenue
                  previously recognized on an one-time sale of software
                  technology.
         2.       Cost of revenues was revised to include $2,583,000 software
                  amortization previously reported as depreciation and
                  amortization expense, to record $75,000 royalty expense and to
                  reclassify $39,000 expense to application development expense.
         3.       Application development expense was revised to include $39,000
                  expense, previously reported as cost of revenues.
         4.       In addition to reclassification of $2,583,000 amortization of
                  software to cost of revenues, depreciation and amortization
                  was revised to reverse a $98,000 amortization of a purchased
                  software.
         5.       Selling, general and administrative was revised to include
                  $640,000 development payments previously reported as other
                  expense and to capitalize acquisition costs of $192,000 for
                  Page Digital and RTI acquisitions as goodwill.
         6.       Other expense was revised to re-classify $640,000 development
                  payments to selling, general and administrative expense.
         7.       Interest expense was revised to reclassify $708,000
                  amortization expense, record $567,000 amortization of debt
                  discount previously charged against additional paid-in capital
                  and to defer $260,000 beneficial conversion interest charge
                  related to the March '04 convertible debentures.
         8.       Prepaid expenses and other current assets were revised to
                  include current portion of prepaid royalty fees in the amount
                  of $210,000.
         9.       Goodwill was revised to include $138,000 acquisition costs
                  related to the Page acquisition which were previously expensed
                  as selling, general and administrative expense.
         10.      Other intangible assets were revised to reduce $98,000
                  software amortization previously reported as depreciation and
                  amortization expense in the current period and to include a
                  restatement in fiscal year ended March 31, 2003 to reverse
                  recognition of $3.9 million revenue on a one-time sale of
                  software technology.
         11.      Other long-term assets was revised to include $165,000
                  long-term portion of prepaid royalty fees and $54,000
                  acquisition costs previously expensed as selling, general and
                  administrative expense.
         12.      Accrued expenses and other long-term liabilities were revised
                  to include royalty fee accrual of $285,000 current portion and
                  $165,000 long-term portion, respectively.
         13.      Long-term convertible debentures was revised to include
                  $260,000 beneficial conversion interest charge previously
                  expensed as interest expense.
         14.      Additional paid-in capital was revised to recognize
                  amortization expense relating to beneficial conversion
                  interest charges.
         15.      Accumulated deficit was revised to mainly reflect the
                  following:
                  a.       To reverse recognition of $3.9 million revenue from a
                           sale of software technology rights,
                  b.       To recognize a total of $1,015,000 relating to the
                           amortization of beneficial conversion interest
                           charges,
                  c.       To capitalize $192,000 legal fees as acquisition
                           costs,
                  d.       To recognize $75,000 royalty fees, and
                  e.       To reverse recognition of $98,000 in software
                           Amortization.

Restatements to financial statements for the fiscal year ended March 31, 2003
are as follows:

         16.      Cost of revenues and depreciation and amortization were
                  revised to report $2,902,000 amortization of purchased and
                  capitalized software as cost of revenues, previously reported
                  as depreciation and amortization expense.
         17.      Other income was revised to include a re-classification of a
                  gain on debt forgiveness of $2,184,000 previously reported as
                  an extra-ordinary item.
         18.      Interest expense was revised to reclassify amortization of
                  beneficial conversion interest charge and debt discount
                  related to the convertible note payable to Toys.
         19.      Extra-ordinary income was revised to reclassify $2,184,000
                  gain on debt forgiveness to other income and $708,000 in
                  interest expense.


                                        F-36


<PAGE>


20.      SUBSEQUENT EVENTS (AS RESTATED)


         In May 2004, Harvey Braun resigned from the position as Chief Executive
         Officer.

         Pursuant to an agreement dated June 1, 2004, we acquired Retail
         Technologies International, Inc. ("RTI") from Michael Tomczak, Jeffrey
         Boone and Intuit Inc. ("Intuit") in a merger transaction. On March 12,
         2004, we, RTI, IPI Merger Sub, Inc., ("Merger Sub") and Michael Tomczak
         and Jeffrey Boone (the "Shareholders") entered the initial Agreement of
         Merger and Plan of Reorganization (the "March 12, 2004 Merger
         Agreement") which provided we would acquire RTI in a merger transaction
         in which RTI would merge with and into Merger Sub. The merger
         consideration contemplated by the March 12, 2004 Merger Agreement was a
         combination of cash and shares of our common stock. The March 12, 2004
         Merger Agreement was amended by the Amended and Restated Agreement of
         Merger and Plan of Reorganization, dated June 1, 2004, by and between
         us, RTI, Merger Sub, IPI Merger Sub II, Inc. ("Merger Sub II") and the
         Shareholders (the "Amended Merger Agreement").


         Pursuant to the Amended Merger Agreement, the Merger (as defined below)
         was completed with the following terms: (i) we assumed RTI's
         obligations under those certain promissory notes issued by RTI on
         December 20, 2002 with an aggregate principal balance of $2.3 million;
         (ii) the total consideration paid at the closing of the Merger was
         $11.6 million paid in shares of our common stock with fair value of
         $1.2 million, newly designated Series B convertible preferred stock
         ("Series B Preferred") with fair value of $5.7 million, promissory
         notes totaling $3.6 million, assumption of incentive stock options with
         fair value of $1.0 million and acquisition costs of $110,000; (iii) the
         Shareholders and Intuit are entitled to price protection payable if and
         to the extent that the average trading price of our common stock is
         less than $0.76 at the time the shares of our common stock issued in
         the Merger and issuable upon conversion of the Series B Preferred are
         registered pursuant to the registration rights agreement dated June 1,
         2004 between us, the Shareholders and Intuit (the "Registration Rights
         Agreement"); and (iv) the merger consisted of two steps (the "Merger"),
         first, Merger Sub merged with and into RTI, Merger Sub's separate
         corporate existence ceased and RTI continued as the surviving
         corporation (the "Reverse Merger"), immediately thereafter, RTI merged
         with and into Merger Sub II, RTI's separate corporate existence ceased
         and Merger Sub II continued as the surviving corporation (the
         "Second-Step Merger").


         As a result of the Merger, each Shareholder received 1,258,616 shares
         of Series B Preferred and a promissory note payable monthly over two
         years in the principal amount of $1,295,000 bearing interest at 6.5%
         per annum. As a result of the Merger, Intuit, the holder of all of the
         outstanding shares of RTI's Series A Preferred stock, received
         1,546,733 shares of our common stock and a promissory note payable
         monthly over two years in the principal amount of $530,700 bearing
         interest at 6.5% per annum.

         The Shareholders and Intuit were also granted registration rights.
         Under the Registration Rights Agreement, we agreed to register the
         common stock issuable upon conversion of the Series B Preferred issued
         to the Shareholders within 30 days of the automatic conversion of the
         Series B Preferred into common stock. The automatic conversion will
         occur upon us filing an amendment to our certificate of incorporation
         with the Delaware Secretary of State increasing the authorized number
         of shares of our common stock ("Certificate of Amendment") after
         securing shareholder approval for the Certificate of Amendment. Under
         the Registration Rights Agreement, Intuit is entitled to demand
         registration or to have its shares included on any registration
         statement filed prior the registration statement covering the
         Shareholders' shares, subject to certain conditions and limitations, or
         if not previously registered to have its shares included on the
         registration statement registering the Shareholders' shares. The
         Shareholders and Intuit are entitled to price protection payments of up
         to a maximum of $0.23 per share payable by promissory note, if and to
         the extent that the average closing price of our common stock for the
         10 days immediately preceding the date the registration statement
         covering their shares is declared effective by the Securities and
         Exchange Commission, is less than the 10 day average closing price as
         of June 1, 2004, which was $0.76.

         We have not recorded the liability relating to the price protection at
         the date of acquisition as the contingency is based on future events
         and cannot yet be determined. We will compute the total liability as
         soon as it can be determined and recorded as a liability. The total
         cost of the price protection contingency will be deferred and amortized
         over the shortest of the remaining useful lives of the assets acquired
         in the acquisition in accordance with SFAS 141, "Business
         Combinations".


         Pursuant to the Amended Merger Agreement, The Sage Group, plc as well
         as certain officers and directors signed voting agreements that provide
         they will not dispose of or transfer their shares of our capital stock
         and that they will vote their shares of our capital stock in favor of
         the Certificate of Amendment and the Amended Merger Agreement and
         transactions contemplated therein.

         Upon the consummation of the Merger, Michael Tomczak, RTI's former
         President and Chief Executive Officer, was appointed our President,
         Chief Operating Officer and director and Jeffrey Boone, RTI's former
         Chief Technology Officer, was appointed our Chief Technology Officer.
         We entered into two-year employment agreements and non-competition
         agreements with Mr. Tomczak and Mr. Boone.

         The following unaudited pro forma consolidated results of continuing
         operations for the twelve months ended March 31, 2004 and 2003 assume
         the acquisitions of RTI and Page Digital occurred as of April 1, 2003
         and 2002, respectively. The pro forma results are not necessarily
         indicative of the actual results that would have occurred had the
         acquisitions been completed as of the beginning of the period
         presented, nor are they necessarily indicative of future consolidated
         results.


                                                         Fiscal Years Ended
                                                               March 31,
                                                        2004             2003
                                                        ----             ----
                                                            (As Restated)
                                                            (unaudited)
                                                           (in thousands,
                                                        except per share data)

         Total revenues                                $  30,632       $ 37,273
         Net income (loss)                             $ (12,542)      $   (676)
         Net loss available to common stockholders     $ (13,565)      $ (1,691)
         Basic and diluted loss per share of
           common stock                                $   (0.29)      $  (0.02)
         Basic and diluted loss per share
           available to common stockholders            $   (0.32)      $  (0.05)


                                      F-37



<PAGE>

                            SUPPLEMENTAL INFORMATION

          INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
Island Pacific, Inc. and subsidiaries
Irvine, California



Our audits were conducted in accordance with the standards of the Public
Company Accounting Oversight Board (United States) and were made for the
purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The consolidated supplemental schedule II is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures
applied in our audits of the basic consolidated financial statements and,
in our opinion, is fairly stated in all material respects in relation to
the basic consolidated financial statements taken as a whole.

/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
------------------------------------------
Los Angeles, California
June 11, 2004, except for Note 19, as to which
the date is November 4, 2004


                                      F-38



<PAGE>
<TABLE>
<CAPTION>
                                   VALUATION AND QUALIFYING ACCOUNTS - SCHEDULE II

                              FOR THE FISCAL YEARS ENDED MARCH 31, 2004, 2003 AND 2002

                                                                   Additions
                                                Balance,          (Deductions)         Additions
                                              Beginning of         Charged to         (Deductions)        Balance,
                                                 Year              Operations         from Reserve       End of Year
<S>                                            <C>                 <C>                  <C>               <C>
         Allowance for doubtful accounts

                  March 31, 2004               $ 364               $ 823                $(777)            $ 409

                  March 31, 2003               $ 435               $ 159                $(230)            $ 364

                  March 31, 2002               $ 627               $  (3)               $(189)            $ 435

                                                        F-39
</TABLE>