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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

or



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

FOR THE TRANSITION PERIOD FROM  TO

Commission File Number: 000-24373



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GLOBAL IMAGING SYSTEMS, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 59-3247752                          
|(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER IDENTIFICATION NO.)
|                                                               | 
|3820 Northdale Boulevard, Suite 200A Tampa, Florida            |  | 33624                               
|(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       |  | (ZIP CODE)                          

REGISTRANTS TELEPONE NUMBER, INCLUDING AREA CODE: 813-960-5508



(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)



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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such

report(s), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

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



|                           |  |                    |  |                       
|-------------------------- |  | ------------------ |  | ----------------------
|Large accelerated filer  x |  | Accelerated filer ̈ |  | Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.).    Yes ̈No  x

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



|                                       |  |                              
|-------------------------------------- |  | -----------------------------
|Class                                  |  | Outstanding at July 31,
2006:
|Common stock, par value $.01 per share |  | 25,932,138                   



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##### Table of Contents

INDEX



|                                                                                                                                       |  |     
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                       |  | Page
|PART I  FINANCIAL INFORMATION                                                                                                         |  |     
|                                                                                                                                       | 
|ITEM 1. 
Consolidated Financial Statements                                                                                            |  |     
|                                                                                                                                       | 
|Condensed Consolidated Balance Sheets as of June 30, 2006 and March 31, 2006 (Unaudited)                                               |  | 3   
|                                                                                                                                       | 
|Condensed Consolidated Statements of Income for the three months ended June 30, 2006 and 2005 (Unaudited)                              |  | 4   
|                                                                                                                                       | 
|Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2006 and 2005 (Unaudited)                          |  | 5   
|                                                                                                                                       | 
|Condensed Consolidated Statement of Stockholders Equity and Comprehensive Income for the three months ended June 30, 2006 (Unaudited) |  | 6   
|                                                                                                                                       | 
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                       |  | 7   
|                                                                                                                                       | 
|ITEM 2. 
Managements Discussion and Analysis of Financial Condition and Results of Operations                                        |  | 16  
|                                                                                                                                       | 
|ITEM 3. 
Quantitative and Qualitative Disclosures about Market Risk                                                                   |  | 24  
|                                                                                                                                       | 
|ITEM 4. 
Controls and Procedures                                                                                                      |  | 24  
|                                                                                                                                       | 
|PART II  OTHER INFORMATION                                                                                                            |  |     
|                                                                                                                                       | 
|ITEM 1.
Legal Proceedings                                                                                                             |  | 24  
|                                                                                                                                       | 
|ITEM 1A.
Risk Factors                                                                                                                  |  | 24  
|                                                                                                                                       | 
|ITEM 2. 
Unregistered Sales of Equity Securities and Use of Proceeds                                                                  |  | 24  
|                                                                                                                                       | 
|ITEM 3. 
Defaults Upon Senior Securities                                                                                              |  | 25  
|                                                                                                                                       | 
|ITEM 4. 
Submission of Matters to a Vote of Security Holders                                                                          |  | 25  
|                                                                                                                                       | 
|ITEM 5. 
Other Information                                                                                                            |  | 25  
|                                                                                                                                       | 
|ITEM 6. 
EXHIBITS                                                                                                                     |  | 25  
|                                                                                                                                       | 
|SIGNATURE                                                                                                                              |  | 26  
|                                                                                                                                       | 
|EXHIBIT INDEX                                                                                                                          |  | 27  



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##### Table of Contents

PART I  FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

GLOBAL IMAGING SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)



|                                                                                                                                                                                                       |  |               |         |   |               |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                                                                                                                       |  | June 30, 2006 |         |   | March 31,2006 |  
|ASSETS                                                                                                                                                                                                 |  |               |         |   |               |   |         |  
|Current assets:                                                                                                                                                                                        |  |               |         |   |               |   |         |  
|Cash and cash equivalents                                                                                                                                                                              |  | $             | 4,661   |   |               | $ | 51,610  |  
|Accounts receivable, net of allowance for doubtful accounts ($3,210 and$2,942 at June 30, 2006 and March 31, 2006,
respectively)                                                                       |  |               | 135,881 |   |               |   | 131,497 |  
|Inventories, net                                                                                                                                                                                       |  |               | 94,926  |   |               |   | 98,073  |  
|Deferred income taxes                                                                                                                                                                                  |  |               | 8,957   |   |               |   | 8,937   |  
|Prepaid expenses and other current assets                                                                                                                                                              |  |               | 8,244   |   |               |   | 5,820   |  
|                                                                                                                                                                                                       |  |               |         |   |               |   |         |  
|Total current assets                                                                                                                                                                                   |  |               | 252,669 |   |               |   | 295,937 |  
|Rental equipment, net                                                                                                                                                                                  |  |               | 16,128  |   |               |   | 15,687  |  
|Property and equipment, net                                                                                                                                                                            |  |               | 17,937  |   |               |   | 17,810  |  
|Other assets                                                                                                                                                                                           |  |               | 2,100   |   |               |   | 2,034   |  
|Goodwill and other intangible assets, net                                                                                                                                                              |  |               | 562,589 |   |               |   | 553,189 |  
|                                                                                                                                                                                                       |  |               |         |   |               |   |         |  
|Total assets                                                                                                                                                                                           |  | $             | 851,423 |   |               | $ | 884,657 |  
|                                                                                                                                                                                                       |  |               |         |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                   |  |               |         |   |               |   |         |  
|Current liabilities:                                                                                                                                                                                   |  |               |         |   |               |   |         |  
|Accounts payable                                                                                                                                                                                       |  | $             | 53,605  |   |               | $ | 65,890  |  
|Accrued liabilities                                                                                                                                                                                    |  |               | 12,895  |   |               |   | 12,697  |  
|Accrued compensation and benefits                                                                                                                                                                      |  |               | 14,497  |   |               |   | 22,489  |  
|Accrued interest                                                                                                                                                                                       |  |               | 34      |   |               |   | 1,424   |  
|Current maturities of long-term debt                                                                                                                                                                   |  |               | 24      |   |               |   | 2,133   |  
|Deferred revenue                                                                                                                                                                                       |  |               | 27,651  |   |               |   | 27,159  |  
|Income taxes payable                                                                                                                                                                                   |  |               | 7,187   |   |               |   | 7,711   |  
|                                                                                                                                                                                                       |  |               |         |   |               |   |         |  
|Total current liabilities                                                                                                                                                                              |  |               | 115,893 |   |               |   | 139,503 |  
|Deferred income taxes                                                                                                                                                                                  |  |               | 44,172  |   |               |   | 42,247  |  
|Long-term debt, less current maturities                                                                                                                                                                |  |               | 180,009 |   |               |   | 260,713 |  
|Other long-term liabilities                                                                                                                                                                            |  |               |        |   |               |   | 976     |  
|                                                                                                                                                                                                       |  |               |         |   |               |   |         |  
|Total liabilities                                                                                                                                                                                      |  |               | 340,074 |   |               |   | 443,439 |  
|Stockholders equity:                                                                                                                                                                                  |  |               |         |   |               |   |         |  
|Preferred stock, $.01 par value: 20,000,000 shares authorized: no shares issued                                                                                                                        |  |               |        |   |               |   |        |  
|Common stock, $.01 par value: 80,000,000 shares authorized: 26,827,176 and 24,008,934 shares issued and 25,927,138 and 23,420,096 shares
outstanding at June 30, 2006 and March 31, 2006, respectively |  |               | 268     |   |               |   | 240     |  
|Common stock held in treasury, at cost: 900,038 and 588,838 shares at June 30, 2006 and March 31, 2006, respectively                                                                                   |  |               | (31,681 | ) |               |   | (19,133 | )
|Additional paid-in capital                                                                                                                                                                             |  |               | 263,682 |   |               |   | 199,665 |  
|Retained earnings                                                                                                                                                                                      |  |               | 278,178 |   |               |   | 262,569 |  
|Unearned stock-based compensation                                                                                                                                                                      |  |               |        |   |               |   | (2,955  | )
|Accumulated other comprehensive income                                                                                                                                                                 |  |               | 902     |   |               |   | 832     |  
|                                                                                                                                                                                                       |  |               |         |   |               |   |         |  
|Total stockholders equity                                                                                                                                                                             |  |               | 511,349 |   |               |   | 441,218 |  
|                                                                                                                                                                                                       |  |               |         |   |               |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                             |  | $             | 851,423 |   |               | $ | 884,657 |  
|                                                                                                                                                                                                       |  |               |         |   |               |   |         |  

See accompanying notes.



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##### Table of Contents

GLOBAL IMAGING SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



|                                               |  |                            |         |      |   |        
|---------------------------------------------- |  | -------------------------- | ------- | ---- | - | -------
|                                               |  | Three Months EndedJune 30,
|                                               |  | 2006                       |         | 2005
|Revenues:                                      |  |                            |         |      |   |        
|Equipment and supplies sales                   |  | $                          | 195,653 |      | $ | 182,507
|Service and rentals                            |  |                            | 69,276  |      |   | 63,822 
|                                               |  |                            |         |      |   |        
|Total revenues                                 |  |                            | 264,929 |      |   | 246,329
|Costs and operating expenses:                  |  |                            |         |      |   |        
|Cost of equipment and supplies sales           |  |                            | 123,521 |      |   | 115,725
|Service and rental costs                       |  |                            | 35,918  |      |   | 33,349 
|Selling, general and administrative expenses   |  |                            | 75,230  |      |   | 69,860 
|Intangible asset amortization                  |  |                            | 469     |      |   | 453    
|                                               |  |                            |         |      |   |        
|Total costs and operating expenses             |  |                            | 235,138 |      |   | 219,387
|                                               |  |                            |         |      |   |        
|Income from operations                         |  |                            | 29,791  |      |   | 26,942 
|Loss on early extinguishment of debt           |  |                            | 1,045   |      |   |       
|Interest expense                               |  |                            | 3,325   |      |   | 3,326  
|                                               |  |                            |         |      |   |        
|Income before income taxes                     |  |                            | 25,421  |      |   | 23,616 
|Income taxes                                   |  |                            | 9,812   |      |   | 8,974  
|                                               |  |                            |         |      |   |        
|Net income                                     |  | $                          | 15,609  |      | $ | 14,642 
|                                               |  |                            |         |      |   |        
|Earnings per common share:                     |  |                            |         |      |   |        
|Basic                                          |  | $                          | .65     |      | $ | .63    
|                                               |  |                            |         |      |   |        
|Diluted                                        |  | $                          | .61     |      | $ | .58    
|                                               |  |                            |         |      |   |        
|Weighted average number of shares outstanding: |  |                            |         |      |   |        
|Basic                                          |  |                            | 23,945  |      |   | 23,257 
|Diluted                                        |  |                            | 26,144  |      |   | 26,157 

See accompanying notes.



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GLOBAL IMAGING SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(IN THOUSANDS)



|                                                                                                        |  |                            |          |   |      |   |         |  
|------------------------------------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ---- | - | ------- | -
|                                                                                                        |  | Three Months EndedJune 30, |         
|                                                                                                        |  | 2006                       |          |   | 2005 |  
|OPERATING ACTIVITIES:                                                                                   |  |                            |          |   |      |   |         |  
|Net income                                                                                              |  | $                          | 15,609   |   |      | $ | 14,642  |  
|Adjustments to reconcile net income to net cash used in operating activities:                           |  |                            |          |   |      |   |         |  
|Depreciation                                                                                            |  |                            | 4,003    |   |      |   | 3,911   |  
|Amortization                                                                                            |  |                            | 469      |   |      |   | 453     |  
|Amortization of financing fees                                                                          |  |                            | 205      |   |      |   | 272     |  
|Non-cash portion of loss on early extinguishment of debt                                                |  |                            | 1,045    |   |      |   |        |  
|Tax benefit of stock option exercises and vested restricted stock                                       |  |                            |         |   |      |   | 252     |  
|Deferred income tax expense                                                                             |  |                            | 2,037    |   |      |   | 1,705   |  
|Stock-based compensation expense                                                                        |  |                            | 744      |   |      |   | 421     |  
|                                                                                                        |  |                           
|Changes in operating assets and liabilities, net of amounts acquired in purchase business combinations: |  |                            |          |   |      |   |         |  
|Accounts receivable                                                                                     |  |                            | (3,103   | ) |      |   | (475    | )
|Inventories                                                                                             |  |                            | 4,611    |   |      |   | (7,913  | )
|Prepaid expenses and other current assets                                                               |  |                            | (2,290   | ) |      |   | (1,795  | )
|Other assets                                                                                            |  |                            | (61      | ) |      |   | 243     |  
|Accounts payable                                                                                        |  |                            | (15,847  | ) |      |   | (11,692 | )
|Accrued liabilities, compensation and benefits and interest                                             |  |                            | (9,698   | ) |      |   | (10,122 | )
|Deferred revenue                                                                                        |  |                            | (28      | ) |      |   | (280    | )
|Income taxes payable                                                                                    |  |                            | (524     | ) |      |   | 4,810   |  
|                                                                                                        |  |                            |          |   |      |   |         |  
|Net cash used in operating activities                                                                   |  |                            | (2,828   | ) |      |   | (5,568  | )
|INVESTING ACTIVITIES:                                                                                   |  |                            |          |   |      |   |         |  
|Purchases of property, equipment and rental equipment                                                   |  |                            | (4,265   | ) |      |   | (4,080  | )
|Purchases of businesses, net of cash acquired                                                           |  |                            | (10,188  | ) |      |   | (875    | )
|                                                                                                        |  |                            |          |   |      |   |         |  
|Net cash used in investing activities                                                                   |  |                            | (14,453  | ) |      |   | (4,955  | )
|FINANCING ACTIVITIES:                                                                                   |  |                            |          |   |      |   |         |  
|Payments on long-term debt                                                                              |  |                            | (217,016 | ) |      |   | (10,591 | )
|Proceeds from issuances of long-term debt                                                               |  |                            | 191,703  |   |      |   | 15,253  |  
|Financing fees paid                                                                                     |  |                            | (1,958   | ) |      |   | 15      |  
|Purchases of treasury stock                                                                             |  |                            | (12,548  | ) |      |   | (19,930 | )
|Stock options exercised                                                                                 |  |                            | 7,484    |   |      |   | 411     |  
|Tax benefit of stock option exercises and vested restricted stock                                       |  |                            | 2,667    |   |      |   |        |  
|                                                                                                        |  |                            |          |   |      |   |         |  
|Net cash used in financing activities                                                                   |  |                            | (29,668  | ) |      |   | (14,842 | )
|                                                                                                        |  |                            |          |   |      |   |         |  
|Net decrease in cash and cash equivalents                                                               |  |                            | (46,949  | ) |      |   | (25,365 | )
|Cash and cash equivalents, beginning of period                                                          |  |                            | 51,610   |   |      |   | 25,365  |  
|                                                                                                        |  |                            |          |   |      |   |         |  
|Cash and cash equivalents, end of period                                                                |  | $                          | 4,661    |   |      | $ |        |  
|                                                                                                        |  |                            |          |   |      |   |         |  
|Non-cash financing activity:                                                                            |  |                            |          |   |      |   |         |  
|Conversion of convertible notes to common stock, net                                                    |  | $                          | 56,105   |   |      | $ |        |  
|                                                                                                        |  |                            |          |   |      |   |         |  

See accompanying notes.



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##### Table of Contents

GLOBAL IMAGING SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

AND COMPREHENSIVE INCOME (Unaudited)

(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)



|                                                                                               |  |                  |   |  |           |     |                          |   |         |                            |  |   |                   |   |                                 |   |         |                                     |   |        |   |  |   |     |  |   |         |  
|---------------------------------------------------------------------------------------------- |  | ---------------- | - |  | --------- | --- | ------------------------ | - | ------- | -------------------------- |  | - | ----------------- | - | ------------------------------- | - | ------- | ----------------------------------- | - | ------ | - |  | - | --- |  | - | ------- | -
|                                                                                               |  | Common Stock     |   |  |           |     |                          |   |         |                            |  |   |                   |   |                                 |  
|                                                                                               |  | Number of Shares |   |  | Par Value |     | Held inTreasury, at Cost |   |         | Additional Paid-in Capital |  |   | Retained Earnings |   | UnearnedStock-basedCompensation |   |         | AccumulatedOtherComprehensiveIncome |   | Total  |  
|Balances at March 31, 2006                                                                     |  | 23,420,096       |   |  | $         | 240 |                          | $ | (19,133 | )                          |  | $ | 199,665           |   |                                 | $ | 262,569 |                                     | $ | (2,955 | ) |  | $ | 832 |  | $ | 441,218 |  
|                                                                                               |  |                  |   |  |           |     |                          |  
|Comprehensive income:                                                                          |  |                  |   |  |           |     |                          |   |         |                            |  |   |                   |   |                                 |   |         |                                     |   |        |   |  |   |     |  |   |         |  
|Net income                                                                                     |  |                 |   |  |           |    |                          |   |        |                            |  |   |                  |   |                                 |   | 15,609  |                                     |   |       |   |  |   |    |  |   | 15,609  |  
|Unrealized gain on derivative instruments                                                      |  |                 |   |  |           |    |                          |   |        |                            |  |   |                  |   |                                 |   |        |                                     |   |       |   |  |   | 70  |  |   | 70      |  
|                                                                                               |  |                  |   |  |           |     |                          |   |         |                            |  |   |                   |   |                                 |   |         |                                     |   |        |   |  |   |     |  |   |         |  
|Total comprehensive income                                                                     |  |                  |   |  |           |     |                          |   |         |                            |  |   |                   |   |                                 |   |         |                                     |   |        |   |  |   |     |  |   | 15,679  |  
|Stock options exercised, including income tax benefit                                          |  | 355,587          |   |  |           | 3   |                          |   |        |                            |  |   | 10,001            |   |                                 |   |        |                                     |   |       |   |  |   |    |  |   | 10,004  |  
|Repurchases of common stock                                                                    |  | (311,200         | ) |  |           |    |                          |   | (12,548 | )                          |  |   |                  |   |                                 |   |        |                                     |   |       |   |  |   |    |  |   | (12,548 | )
|Common stock issued under restricted stock plan, including income tax benefit of vested shares |  | 56,000           |   |  |           | 1   |                          |   |        |                            |  |   | 146               |   |                                 |   |        |                                     |   |       |   |  |   |    |  |   | 147     |  
|Redemption of convertible debt                                                                 |  | 2,406,655        |   |  |           | 24  |                          |   |        |                            |  |   | 56,081            |   |                                 |   |        |                                     |   |       |   |  |   |    |  |   | 56,105  |  
|Stock-based compensation expense                                                               |  |                 |   |  |           |    |                          |   |        |                            |  |   | 744               |   |                                 |   |        |                                     |   |       |   |  |   |    |  |   | 744     |  
|Adoption of SFAS 123(R)- reclassification of unearned stock-based compensation                 |  |                 |   |  |           |    |                          |   |        |                            |  |   | (2,955            | ) |                                 |   |        |                                     |   | 2,955  |   |  |   |    |  |   |        |  
|                                                                                               |  |                  |   |  |           |     |                          |   |         |                            |  |   |                   |   |                                 |   |         |                                     |   |        |   |  |   |     |  |   |         |  
|Balances at June 30, 2006                                                                      |  | 25,927,138       |   |  | $         | 268 |                          | $ | (31,681 | )                          |  | $ | 263,682           |   |                                 | $ | 278,178 |                                     | $ |       |   |  | $ | 902 |  | $ | 511,349 |  
|                                                                                               |  |                  |   |  |           |     |                          |   |         |                            |  |   |                   |   |                                 |   |         |                                     |   |        |   |  |   |     |  |   |         |  

See accompanying notes.



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##### Table of Contents

GLOBAL IMAGING SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation have been included herein. The results of operations for the three-month period ended June 30, 2006 are not necessarily indicative of the results that may be expected
for the fiscal year ending March 31, 2007.

The condensed consolidated balance sheet as of March 31, 2006 has been derived from
the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included
in Global Imaging Systems, Inc.s Annual Report on Form 10-K for the year ended March 31, 2006.

Certain prior year amounts have
been reclassified to conform to the current year presentation.

NOTE 2. STOCK-BASED COMPENSATION

Effective April 1, 2006 (the Effective Date), the Company adopted the provisions of Statement of Financial Accounting Standards
No. 123(R), Share-Based Payment, and related interpretations, or SFAS No. 123(R). SFAS No. 123(R) requires all share-based payments to employees and non-employee members of the board of directors to be recognized in
the Companys Condensed Consolidated Statement of Income based on their fair values. In March 2005, the Securities and Exchange Commission (the SEC) issued Staff Accounting Bulletin No. 107 (SAB No. 107)
regarding its interpretation of SFAS No. 123(R) and the valuation of share-based payments for public companies. The Company has applied the provisions of SAB No. 107 in its adoption of SFAS No. 123(R).

SFAS No. 123(R) eliminates the ability to account for stock-based compensation transactions using the intrinsic value method prescribed under APB
Opinion No. 25, Accounting for Stock Issued to Employees, and instead, generally requires that such transactions be accounted for using a fair-value based method. Through fiscal year 2006, the Company used the Black-Scholes
option-pricing model to determine the fair value of its stock options under SFAS No. 123, Accounting for Stock-Based Compensation, for the pro-forma disclosures required under this pronouncement.

The Company has elected the modified prospective method as permitted by SFAS No. 123(R), and accordingly, prior periods have not been
restated to reflect the impact of SFAS No. 123(R). The modified prospective method requires compensation expense to be recognized for all share-based awards granted after the Effective Date as well as for all awards granted prior to the
Effective Date that remain unvested on the Effective Date. Stock-based compensation expense for awards granted prior to April 1, 2006 is based on the grant date fair value as previously determined



7



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under the provisions of SFAS No. 123. Effective April 1, 2006, the Company began to recognize compensation expense, reduced for estimated
forfeitures, on a straight-line basis over the requisite service period of the award, which is the vesting term of the outstanding stock awards. The Company estimated the forfeiture rate for the three months ended June 30, 2006 based on its
historical experience.

As a result of adopting SFAS No. 123(R), the impact to the consolidated statement of income for the three months
ended June 30, 2006 on income before income taxes and net income was a reduction of $306 and $188, respectively, from what would have been presented if the Company had continued to account for stock option awards under APB 25. The impact on
basic and diluted earnings per share for the three months ended June 30, 2006 was a reduction of $0.01 per share.

For the three
months ended June 30, 2006, the Company recorded total stock-based compensation expense of $744, which is included in selling, general and administrative expenses in the Condensed Consolidated Statement of Income.

In accordance with SFAS No. 123(R), for the three months ended June 30, 2006, the Company has presented the tax benefits resulting from tax
deductions in excess of compensation cost recognized for those options (excess tax benefits) as a cash flow from financing activities, rather than as a cash flow from operating activities, in the Condensed Consolidated Statement of Cash Flows. Cash
received from stock option exercises during the three months ended June 30, 2006 was $7,484 and the benefit received from the tax deduction from stock option exercises and vested restricted stock was $2,667 for the three months ended
June 30, 2006.

Prior to the adoption of SFAS No. 123(R), the Company measured compensation expense for its stock-based
compensation plans using the intrinsic value method prescribed by APB Opinion No. 25 and related interpretations. Options granted under these plans had an exercise price equal to or greater than the market value of the underlying common stock
on the date of grant. The Company applied the disclosure-only provisions of SFAS No. 148, which amends SFAS No. 123. SFAS No. 148 allowed for the continued use of the recognition and measurement principles of APB Opinion No. 25
and related interpretations in accounting for those plans; however, it required disclosure of compensation expense as if the fair value-based method had been applied.

In connection with the adoption of SFAS No. 123(R), the company has reclassified the April 1, 2006 unearned stock-based compensation balance of $2,955 to additional paid-in capital.

The following table illustrates the pro forma net income and pro forma earnings per share for the three months ended June 30, 2005, reflecting the
compensation cost that the Company would have recorded for its stock option plans had it used the fair value-based method at the date of grant for awards under the plans consistent with the method prescribed by SFAS No. 123.



|                                                                                                                                            |  |                                     |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------ | -
|                                                                                                                                            |  | For Three MonthsEnded June 30, 2005 |       
|Net income, as reported                                                                                                                     |  | $                                   | 14,642 |  
|Add: Stock-based compensation expense included in reported net income, net of related tax                                                   |  |                                     | 421    |  
|Deduct: Total stock-based employee compensation expense determined under fair-value based method for all awards, net of related tax
effects |  |                                     | (1,466 | )
|                                                                                                                                            |  |                                     |        |  
|Pro forma net income                                                                                                                        |  | $                                   | 13,597 |  
|                                                                                                                                            |  |                                     |        |  
|Earnings per share:                                                                                                                         |  |                                     |        |  
|Basic  as reported                                                                                                                         |  | $                                   | .63    |  
|                                                                                                                                            |  |                                     |        |  
|Basic  pro forma                                                                                                                           |  | $                                   | .58    |  
|                                                                                                                                            |  |                                     |        |  
|Diluted  as reported                                                                                                                       |  | $                                   | .58    |  
|                                                                                                                                            |  |                                     |        |  
|Diluted  pro forma                                                                                                                         |  | $                                   | .54    |  
|                                                                                                                                            |  |                                     |        |  



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The Company has elected to use the Black-Scholes option-pricing model to determine the fair value of
share-based awards under SFAS No. 123(R), which is the same valuation technique previously used for pro forma disclosures under SFAS No. 123. The Black-Scholes option-pricing model incorporates various and highly subjective assumptions,
including expected term and expected volatility. The Company estimated the expected term of options granted using historical employee exercise behavior. The Company estimated the expected volatility of our common stock at the date of grant using
historical volatility over the period equal to the expected term. The risk-free interest rate assumption is determined using the Federal Reserve Treasury Constant Maturity (TCM) rates with maturities similar to those of the expected term of the
award being valued. The Company has never paid any cash dividends on our common stock; therefore, the Company assumed an expected dividend yield of zero.

Additionally, SFAS No. 123(R) requires us to estimate pre-vesting option forfeitures at the date of grant and periodically revise those estimates in subsequent periods if actual forfeitures differ from those
estimates. We record stock-based compensation expense only for those awards expected to vest using an estimated forfeiture rate based on our historical pre-vesting forfeiture data. Previously, we accounted for forfeitures as they occurred under the
pro forma disclosure provisions of SFAS No. 123 for periods prior to fiscal year 2006.

The following table shows our assumptions used
to compute the stock-based compensation expense and pro forma information for stock option grants issued during the three months ended June 30, 2006 and 2005.



|                             |  |                             |   |  |      |  
|---------------------------- |  | --------------------------- | - |  | ---- | -
|                             |  | Three Months Ended June 30, |  
|                             |  | 2006                        |   |  | 2005 |  
|Expected option term (years) |  | 5.1                         |   |  | 5.0  |  
|Expected volatility          |  | 46.6                        | % |  | 62.2 | %
|Expected dividend rate       |  |                            |   |  |     |  
|Risk-free interest rate      |  | 5.0                         | % |  | 4.0  | %

Equity Incentive Plans

In 1998, the Board of Directors adopted a stock option plan (the 1998 Plan) under which, as amended to date, 3,320,000 shares of our common stock may be issued pursuant to stock options granted or sold as
restricted stock to directors, officers, and employees of and consultants to the Company. As of June 30, 2006, options to purchase 1,370,040 shares of our common stock were outstanding under the 1998 Plan, and 1,801,555 shares of our common
stock have been issued under the 1998 Plan upon the exercise of stock options granted. There were 30,905 shares of our common stock available to be issued under the 1998 Plan as of June 30, 2006. During the three months ended June 30,
2006, 10,000 options were granted under the 1998 Plan with an exercise price of $39.52, the market value at the date of grant. In addition, we have also issued 117,500 shares of restricted stock under the 1998 Plan.

In 2001, the Board of Directors adopted the Global Imaging Systems, Inc. 2001 Stock Option Plan (the 2001 Plan) under which we may grant
options to purchase up to 300,000 shares of our common stock to employees of and service providers to Global, except for our executive officers and directors. Stock options granted under the 2001 Plan have the same terms as those granted under the
1998



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##### Table of Contents

Plan. As of June 30, 2006, options to purchase 66,635 shares were outstanding under the 2001 Plan, and 219,765 shares of our common stock have been
issued under the 2001 Plan upon the exercise of stock options granted. There were 13,600 shares of our common stock available to be issued under the 2001 Plan as of June 30, 2006. During the three months ended June 30, 2006, no options
were granted under the 2001 Plan.

On August 16, 2004, our shareholders approved the Global Imaging Systems, Inc. 2004 Omnibus Long
Term Incentive Plan (the 2004 Plan) under which we may grant options to purchase up to 600,000 shares of our common stock to directors, officers, and employees of Global. On August 8, 2005, our shareholders approved an amendment to
the 2004 Plan to increase the total shares available for grant to 1,450,000. As of June 30, 2006, options to purchase 786,537 shares were outstanding under the 2004 Plan, and 59,713 shares of our common stock have been issued under the 2004
Plan upon the exercise of stock options granted under the plan. There were 445,750 shares of our common stock available to be issued under the 2004 Plan as of June 30, 2006. In addition, we have also issued 158,000 shares of restricted stock
under the 2004 plan. During the three months ended June 30, 2006, 393,500 options were granted under the 2004 Plan with exercise prices ranging from $36.36 to $39.58 per share, the market values at the dates of grant.

In addition to options outstanding under our stock option plans, we have also issued 10,000 options to purchase our common stock at a price of $12.00 per
share which may be exercised until July 31, 2008.

The weighted average fair value of options granted during the quarter was $18.54.

The following table summarizes the stock option activity for the three months ended June 30, 2006:



|                                     |  |                  |   |  |                                 |       |                                                      |     |                          |   |       
|------------------------------------ |  | ---------------- | - |  | ------------------------------- | ----- | ---------------------------------------------------- | --- | ------------------------ | - | ------
|                                     |  | Number of Shares |   |  | Weighted-Average Exercise Price |       | Weighted-AverageRemaining Contractualterm (in years) |     | AggregateIntrinsic Value
|Outstanding at March 31, 2006        |  | 2,194,999        |   |  | $                               | 25.04 |                                                      |     |                          |   |       
|                                     |  |                  |   | 
|Granted                              |  | 403,500          |   |  | $                               | 39.01 |                                                      |     |                          |   |       
|Exercised                            |  | (355,587         | ) |  | $                               | 21.05 |                                                      |     |                          |   |       
|Canceled                             |  | (9,700           | ) |  | $                               | 31.94 |                                                      |     |                          |   |       
|                                     |  |                  |   |  |                                 |       |                                                      |     |                          |   |       
|Outstanding at June 30, 2006         |  | 2,233,212        |   |  | $                               | 28.17 |                                                      | 7.1 |                          | $ | 29,286
|                                     |  |                  |   |  |                                 |       |                                                      |     |                          |   |       
|Options exercisable at June 30, 2006 |  | 1,748,312        |   |  | $                               | 25.73 |                                                      | 7.1 |                          | $ | 27,173
|                                     |  |                  |   |  |                                 |       |                                                      |     |                          |   |       
|Available for grant at June 30, 2006 |  | 490,255          |   |  |                                 |       |                                                      |     |                          |   |       
|                                     |  |                  |   |  |                                 |       |                                                      |     |                          |   |       

The aggregate intrinsic value in the table above represents the difference between the Companys closing
price on June 30, 2006 and the option exercise price, multiplied by the number of in-the-money options at June 30, 2006. This amount changes based on the fair market value of the Companys common stock. The total intrinsic value of
stock options exercised during the quarter ended June 30, 2006 was approximately $6,600. As of June 30, 2006, there was $7,775 of total unrecognized stock-based compensation cost related to stock options. That cost is expected to be
recognized over a weighted-average period of 4.6 years. The total fair value of equity-based awards vested during the three months ended June 30, 2006 was $108.



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The following table summarizes the restricted stock activity for the three months ended June 30, 2006:



|                            |  |                 |   |  |                                       |      
|--------------------------- |  | --------------- | - |  | ------------------------------------- | -----
|                            |  | Number ofShares |   |  | Weighted AverageGrant Date Fair Value
|Nonvested at March 31, 2006 |  | 199,000         |   |  | $                                     | 27.97
|Granted                     |  | 56,000          |   |  | $                                     | 38.22
|Exercised/Vested            |  | (27,500         | ) |  | $                                     | 24.09
|Canceled                    |  |                |   |  |                                       | N/A  
|                            |  |                 |   |  |                                       |      
|Nonvested, June 30, 2006    |  | 227,500         |   |  | $                                     | 30.96
|                            |  |                 |   |  |                                       |      

Total fair value of shares of restricted stock that vested during the three months ended
June 30, 2006 was $662. As of June 30, 2006, there was $4,656 of unrecognized stock-based compensation expense related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted average period of 2.1
years.

On March 31, 2006, we accelerated the vesting of 1,431,852 stock options previously issued to officers and employees under the
Companys stock-based compensation plans. Options held by non-employee directors were not accelerated. Shares received upon the exercise of accelerated options held by executive officers and other key members of senior management may not be
sold prior to the earlier of the original vesting dates or their termination of employment or service. The vesting acceleration resulted in additional compensation expense to the Company of $488 for fiscal year 2006. The primary purpose of the
accelerated vesting was to eliminate future compensation expense the Company would otherwise recognize in its statement of income with respect to these accelerated options upon the adoption of SFAS No. 123(R).

NOTE 3. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding for the period. Diluted earnings per share reflects the potential dilution from the exercise of stock options and restricted
stock, as well as the conversion of convertible notes into common stock.

The following table reconciles the numerators and denominators of
the basic and diluted earnings per share computations (shares in thousands):



|                                            |  |                            |        |      |   |       
|------------------------------------------- |  | -------------------------- | ------ | ---- | - | ------
|                                            |  | Three Months EndedJune 30,
|                                            |  | 2006                       |        | 2005
|Numerator:                                  |  |                            |        |      |   |       
|Numerator for basic earnings per share      |  | $                          | 15,609 |      | $ | 14,642
|Effect of dilutive securities:              |  |                            |        |      |   |       
|4% convertible notes                        |  |                            | 219    |      |   | 443   
|                                            |  |                            |        |      |   |       
|Numerator for diluted earnings per share    |  | $                          | 15,828 |      | $ | 15,085
|                                            |  |                            |        |      |   |       
|Denominator:                                |  |                            |        |      |   |       
|Denominator for basic earnings per share    |  |                            | 23,945 |      |   | 23,257
|Effect of dilutive securities:              |  |                            |        |      |   |       
|4% convertible notes                        |  |                            | 1,729  |      |   | 2,407 
|Employee stock options and restricted stock |  |                            | 470    |      |   | 493   
|                                            |  |                            |        |      |   |       
|Denominator for diluted earnings per share  |  |                            | 26,144 |      |   | 26,157
|                                            |  |                            |        |      |   |       



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As further described in Note 8, during the three-month period ended June 30, 2006, all of the
outstanding convertible subordinated notes due 2008 (Notes) were converted into shares of our common stock. The above effects of 4% convertible notes only include the impact of the Notes prior to the conversion. Upon conversion, the
outstanding shares issued as a result of the conversion of the Notes are treated consistent with other issued shares.

NOTE 4. ACQUISITIONS

During the three months ended June 30, 2006, we acquired two businesses that provide office-imaging
solutions and related services. Aggregate consideration, net of cash acquired, for these acquisitions was approximately $10,071, consisting of cash paid to the sellers and acquisition related expenses. Liabilities assumed in connection with these
acquisitions totaled approximately $3,650. The fair value of total assets acquired in these acquisitions consisted of approximately $3,078 of tangible assets, net of cash acquired, and approximately $10,643 of intangible assets. We are in the
process of completing valuations of certain assets. When our valuation is completed and the purchase price allocation is finalized, there may be additional adjustments to the intangible assets (some of which may be amortizable) and hence there may
also be additional adjustments to amortization expense and deferred income taxes. During the three months ended June 30, 2006, we paid $117 of additional acquisition related expenses related to fiscal year 2006 acquisitions.

During the three months ended June 30, 2005, we acquired one business that provides office-imaging solutions and related services. Aggregate
consideration, net of cash acquired, for this acquisition was approximately $811, consisting of cash and acquisition related expenses. Liabilities assumed in connection with this acquisition totaled approximately $208. The fair value of total assets
acquired in the acquisition consisted of approximately $315 of tangible assets, net of cash acquired, and approximately $704 of intangible assets.

All acquisitions have been accounted for using the purchase method of accounting and, accordingly, are included in our results of operations from the effective date of acquisition.

The excess purchase price over the estimated fair values of the underlying assets acquired, including identifiable intangible assets, and liabilities
assumed are allocated to goodwill. The primary factors contributing to the recognition of goodwill include the expected synergies to be derived from the business combination, purchasing leverage from increased economies of scale, enhancement or
growth of market territories, an industry-seasoned workforce and the reputation of the company being acquired.

The unaudited pro forma
results presented below include the effects of the acquisitions as if they had been consummated at the beginning of the year prior to acquisition. The unaudited pro forma financial information below is not necessarily indicative of either future
results of operations or results that might have been achieved had the acquisitions been consummated at the beginning of the year prior to acquisition.



|                           |  |                                                 |         |      |   |        
|-------------------------- |  | ----------------------------------------------- | ------- | ---- | - | -------
|                           |  | Unaudited Pro Forma Three Months Ended June 30,
|                           |  | 2006                                            |         | 2005
|Revenues                   |  | $                                               | 265,400 |      | $ | 256,998
|Net income                 |  | $                                               | 15,628  |      | $ | 15,202 
|                           |  |                                                 |         |      |   |        
|Earnings per common share: |  |                                                 |         |      |   |        
|Basic                      |  | $                                               | .65     |      | $ | .65    
|Diluted                    |  | $                                               | .61     |      | $ | .60    



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NOTE 5. COMPREHENSIVE INCOME

The following table presents a reconciliation of comprehensive income, comprised of net income and the unrealized gain (loss) on cash flow hedges.



|                                                       |  |                            |        |      |   |        |  
|------------------------------------------------------ |  | -------------------------- | ------ | ---- | - | ------ | -
|                                                       |  | Three Months EndedJune 30, |       
|                                                       |  | 2006                       |        | 2005 |  
|Net income                                             |  | $                          | 15,609 |      | $ | 14,642 |  
|Unrealized gain (loss) on cash flow hedges, net of tax |  |                            | 70     |      |   | (262   | )
|                                                       |  |                            |        |      |   |        |  
|Total comprehensive income                             |  | $                          | 15,679 |      | $ | 14,380 |  
|                                                       |  |                            |        |      |   |        |  

NOTE 6. DERIVATIVES

We enter into swap and interest rate cap agreements to hedge the fluctuations in variable interest rates and do not use derivative instruments for
speculative purposes.

In December 2004, we entered into two forward swap agreements which we accounted for as cash flow hedges. The
agreements effectively convert $40,000 of our variable rate debt to fixed-rate debt, reducing the exposure to changes in interest rates. Under the first swap agreement, we received an average LIBOR variable rate of 4.98% and paid an average LIBOR
fixed rate of 3.85% for the period from April 1, 2006 to June 30, 2006. Under the second swap agreement, we received an average LIBOR variable rate of 4.98% and paid an average LIBOR fixed rate of 3.87% for the period from April 1,
2006 to June 30, 2006. Both agreements are effective for a period of two years, beginning December 2005.

In May 2005, we entered into
a forward swap agreement which we accounted for as a cash flow hedge. The agreement effectively converts $30,000 of our variable-rate debt to fixed-rate debt, reducing our exposure to changes in interest rates. Under the agreement, we received an
average LIBOR variable rate of 4.97% and paid a LIBOR fixed rate of 4.05% for the period from April 1, 2006 to June 30, 2006. The agreement is effective for a period of two years, beginning September 2005.

The LIBOR interest rates in the preceding paragraphs exclude our applicable interest rate spreads under our credit facilities.

We have recognized a gain, net of tax, of approximately $70 and a loss of approximately $262 for the three-month periods ended June 30, 2006 and
2005, respectively, related to our interest rate swap agreements. These amounts have been recorded in comprehensive income.

In September
2003, we entered into three two-year interest rate cap agreements in notional amounts of $20,000 each. These three cap agreements expired in September 2005. In July 2004, we entered into a two-year interest rate cap agreement in the notional amount
of $25,000. In May 2005, we also entered into a two-year forward interest rate cap agreement in the notional amount of $30,000, effective September 2005 (collectively, the Caps). These Caps are not designated as hedging instruments and as such are
recorded on the consolidated balance sheet at their estimated fair value, with changes in the fair value being recorded in the consolidated statement of income as an increase or decrease to interest expense during the period of change. The change in
the Caps fair value resulted in additional interest expense of $25 and $74, before tax, for the three-month periods ended June 30, 2006 and 2005, respectively. The July 2004 cap limits our interest rate risk exposure for the related



13



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##### Table of Contents

notional amounts to a 4.00% LIBOR rate plus the applicable margin. The September 2005 cap limits our interest rate risk exposure for the related notional
amount to a 5.50% LIBOR rate plus the applicable margin. We have received $40 under the July 2004 Cap agreement.

NOTE 7.
STOCK REPURCHASE PROGRAM

On May 9, 2006, our Board of Directors approved a stock repurchase program authorizing the Company to
repurchase up to $150,000 of Global common stock over a three-year period. During the three months ended June 30, 2006, we repurchased a total of 311,200 shares of common stock for an aggregate purchase price of $12,537, excluding commissions.

NOTE 8. LONG-TERM DEBT

Our long term debt consisted of the following as of June 30, 2006 and March 31, 2006:



|                                                       |  |              |         |   |               |   |         |  
|------------------------------------------------------ |  | ------------ | ------- | - | ------------- | - | ------- | -
|                                                       |  | June 30,2006 |         |   | March 31,2006 |  
|Senior Credit Facility:                                |  |              |         |   |               |   |         |  
|Term Loan                                              |  | $            | 150,000 |   |               | $ | 205,293 |  
|Revolving Line of Credit                               |  |              | 30,000  |   |               |   |        |  
|Convertible Senior Subordinated Notes, 4% due May 2008 |  |              |        |   |               |   | 57,500  |  
|Various notes payable                                  |  |              | 33      |   |               |   | 53      |  
|                                                       |  |              |         |   |               |   |         |  
|Total long-term debt                                   |  |              | 180,033 |   |               |   | 262,846 |  
|Less: Current Maturities                               |  |              | (24     | ) |               |   | (2,133  | )
|                                                       |  |              |         |   |               |   |         |  
|Long-term debt, less current maturities                |  | $            | 180,009 |   |               | $ | 260,713 |  
|                                                       |  |              |         |   |               |   |         |  

Effective June 29, 2006, we refinanced our prior senior credit facility and entered into a
new senior credit agreement. As part of the refinancing, we also reduced our outstanding borrowings by $25,293. Our new senior credit facility is with a syndicate of banks and financial institutions, with Wachovia National Association serving as
administrative agent. Our new senior credit facility is comprised of a $200,000 five-year revolving credit line and a $150,000 five-year no amortization term loan. Both the new revolving credit line and the new term loan bear interest, based on the
Companys current leverage ratios, at 1.25% over LIBOR or 100% of a base rate related to the prime rate. The new senior credit facility provides for an unused commitment fee payable to the lenders and certain other fees payable by us and our
material subsidiaries. The commitment fee rates range from .225% to .275% of the unused balance. Amounts borrowed under the revolving credit line of the new senior credit facility may be repaid and borrowed over the life of the new senior credit
facility, with a final maturity date of June 29, 2011. The terms of the new senior credit facility require compliance with various affirmative, negative, and financial covenants. Amounts borrowed under the senior credit facility may be used to
fund working capital, share repurchases and other general corporate purposes, including acquisitions. We are only required to obtain written consent prior to an acquisition if our leverage ratio is greater than 2.75 and there is less than $40
million available under the revolving credit facility. We are permitted to pay cash dividends as long as the Company is in compliance with its covenants.

During the three months ended June 30, 2006, we incurred a loss on early extinguishment of debt in the amount of $1,045 related to the refinancing of our prior senior credit facility.

On May 9, 2006, our Board of Directors authorized the redemption of our 4% convertible senior subordinated notes due 2008, with a principal balance
of $57,500. Prior to the June 9, 2006 redemption date, 100 percent of the Notes were converted into 2,406,655 shares of our common stock. The conversion price was $23.892 per share in accordance with the terms of the indenture agreement
governing the Notes.



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NOTE 9. RECENT ACCOUNTNG PRONOUNCEMENTS

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 48, Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109, Accounting for Income Taxes, which clarifies the accounting for uncertainty in income taxes. FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation requires that the Company recognize in the financial statements, the impact of a tax position, if that position
is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. The provisions
of FIN 48 are effective for fiscal years beginning after December 15, 2006 with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact
of adopting FIN 48 on its financial statements.

NOTE 10. SUBSEQUENT EVENT

On July 18, 2006, the Companys Board of Directors approved a two-for-one stock split of the Companys common stock. The split will take
the form of a 100% stock dividend, payable August 15, 2006 to stockholders of record on August 1, 2006. Our shares will begin trading on a split-adjusted basis on August 16, 2006. Once the split becomes effective, future presentation
of earnings per share will be retroactively restated for all prior periods. Basic and diluted earnings per share, taking into account the effect of the split, for the three months ended June 30, 2006 would have been $0.33 and 0.30,
respectively. Basic and diluted earnings per share, taking into account the effect of the split, for the three months ended June 30, 2005 would have been $0.31 and $0.29, respectively.



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)

The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated
financial statements and related notes included elsewhere in this Report on Form 10-Q and our Annual Report on Form 10-K for the year ended March 31, 2006. The discussion in this section contains forward-looking statements, including statements
relating to the pace of our future acquisitions and overall growth, the benefits that will be realized by businesses we have acquired or may acquire, our future product and service offerings, pace of borrowings and future cash flows. These
forward-looking statements are based largely on managements current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to risks,
uncertainties and assumptions, which could cause our actual results to differ materially from the results suggested by these forward-looking statements. Some factors that may cause our results to differ materially from these statements are:



| |  |  | the departure of one or more of our senior executives or a substantial number of our core company presidents could disrupt our operations, divert the attention of our management, or
otherwise adversely affect our revenues;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the highly competitive nature of the markets we serve may result in changes in our competitive climate, which could require us to lower prices and therefore would reduce our
revenues, as well as, lower gross margins;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our significant debt service obligations may exacerbate the effect on our cash flow if downturns in economic and business conditions hinder our ability to adjust to rapidly changing
market conditions;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | covenants in our senior credit facility impose operating and financial restrictions that limit our discretion on some business matters, which may affect our future financing plans
or our ability to enter into certain types of strategic transactions;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our dependence on our vendor relationships, the availability of products and our lease financing partners;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | some or all of our substantial amount of goodwill and other intangible assets may become impaired, which would adversely affect our operating results;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | fewer than expected acquisition opportunities could slow our growth;
| | - |  | --------------------------------------------------------------------



| |  |  | recognition of unanticipated costs and delays associated with ongoing integration efforts;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | increases in borrowing rates and costs which could limit our acquisitions, cause us to reduce our pace of acquisitions or growth, or accelerate the time in which we need to obtain
new financing;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | technological developments that may reduce demand for the products and services we sell or result in us facing increased competition to sell those products and services; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to continue to comply with the provisions of the Sarbanes-Oxley Act of 2002.
| | - |  | ----------------------------------------------------------------------------------------

Information regarding many of these factors and other factors that may cause our actual results to differ materially from those contained in the forward-looking statements is presented in the Risk Factors
section of our Annual Report on Form 10-K for the year ended March 31, 2006. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



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Overview

We are one of the leading providers of office technology solutions to middle-market businesses in the United States, selling and providing primarily contract services for automated office equipment, including copiers, multi-function
products (MFPs), facsimile machines and printers, network integration solutions and electronic presentation systems. We believe that the markets for our products and services are converging as technology advancements and innovation produce increases
in automated office equipment functionality and networking capabilities. Incorporating products from the Ricoh family of products, Konica Minolta, Sharp, Canon, Toshiba, Hewlett-Packard, IBM, Microsoft, NEC, Hitachi, InFocus and other leading
companies, we offer solutions for our customers from a network of more than 180 locations in 32 states and the District of Columbia. The contractual nature of our service and supply business, tailored lease financing programs, high level of repeat
equipment purchases and our emphasis on superior customer service generate stable and recurring revenue streams. Since our founding in June 1994, we have acquired more than 80 businesses, all within the United States, which we have organized as a
network of 19 core companies with corresponding satellite businesses. We believe the businesses we have acquired and the businesses we acquire in the future will benefit from our various programs and operating strategies. These benefits include
increased operating efficiencies, the support of experienced and professional senior management, expansion of the types of office imaging products and services offered, increased access to capital and enhanced financial management.

Our revenues primarily come from two sources: sales of equipment and related supplies; and sales of complementary services and equipment rentals. The
growth of our revenues depends on the demand for the equipment we offer, our reputation for providing timely and reliable service, our competitors actions in the marketplace and general economic conditions. Sales of complementary supplies,
parts and services are affected by equipment sales and rental volumes. Most of our service revenue is generated by contractual arrangements to service automated office equipment.

Our gross profit as a percentage of revenues varies from period to period depending on a number of variables including the mix of revenues from
equipment, supplies, service and rentals; the mix of revenues among the markets we serve; and the mix of revenues of the businesses we have acquired. Automated office equipment dealers typically derive a higher percentage of their revenues from
service and rentals and a lower percentage from sales of equipment and supplies than do network integrators or electronic presentation systems dealers. Generally, sales of equipment and supplies have lower gross profit margins than revenues from
service and rentals. In addition, equipment sales in the automated office equipment market generally have higher gross profit margins than equipment sales in the network integration or electronic presentation systems markets.

Cost of goods sold consists primarily of the cost of new equipment, cost of supplies and parts, labor costs to provide services, rental equipment
depreciation and other direct operating costs. We depreciate our rental equipment primarily over a three-year period on a straight-line basis.

Critical
Accounting Policies and Estimates

Managements discussion and analysis of our 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. The preparation of these consolidated financial statements requires us to make judgments and
estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates, including those related to accounts receivable, inventories, vendor incentives,
intangible assets and contingencies. Our judgments and estimates are based on currently available



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information, historical results and other assumptions we believe to be reasonable. Actual results could differ materially from these estimates. We believe
the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Accounts Receivable

We maintain allowances for doubtful accounts for estimated losses arising from the inability of our
customers to make required payments. We evaluate the need for adjustments to our allowance for doubtful accounts at least quarterly. Our estimate of losses is based upon prior collection experience, a review of specific customers and their ability
to pay, and an overall consideration of current economic conditions. If the financial condition of our customers were to deteriorate, resulting in a reduced ability to make payments, additional allowances may be required which would reduce net
income.

Inventories

Inventories are
valued at the lower of cost or market value. For equipment, cost equals either the average cost of inventory or, in the case of some specifically identified equipment inventory, the actual cost of that equipment inventory. For parts and supplies,
cost equals the average cost of inventory. We evaluate the need for adjustments to our reserve for excess and slow-moving inventory at least quarterly. We write-down our inventories for estimated obsolescence by an amount equal to the difference
between the cost of the inventories and their estimated market values based upon an aging analysis of the inventories on hand, specifically known inventory-related risks and assumptions about future demand and market conditions. These write-downs
are reflected in our cost of sales. If actual market conditions are less favorable than those projected by management, additional write-downs may be required which would reduce net income.

Vendor Incentives

We receive incentives from some of
our vendors related to volume rebates, cooperative advertising allowances and other programs or agreements. Certain incentive programs are generally for quarterly periods and historically have not varied significantly from quarter to quarter. There
are also certain annual volume rebate programs offered by some of our vendors. We do not record any volume rebate until it is probable that it will be earned and the amount can be reasonably estimated. We record unrestricted volume rebates received
as a reduction of inventories and recognize the incentives as a reduction to cost of sales when the related inventories are sold. Cooperative advertising allowances are generally required by the vendor to be used by us exclusively for advertising or
other marketing programs. These restricted cooperative advertising allowances are recognized as a reduction to selling, general and administrative expenses as the related marketing expenses are incurred. Amounts received or receivable from vendors
that are not yet earned are deferred. In addition, we receive early payment discounts from certain vendors. We record early payment discounts received as a reduction of inventories and recognize the discount as a reduction to cost of sales when the
related inventories are sold.

Intangible Assets

As a result of our acquisition activity, we carry a substantial amount of goodwill, which is the excess of the cost of our acquired businesses over the fair value of the acquired net assets. We examine the carrying
value of our goodwill and our other intangible assets as current events and circumstances warrant to determine whether there are any impairment losses. For goodwill, we test the recorded amount for impairment on the first day of the fourth quarter
of our fiscal year, or more



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frequently if conditions change, by comparing the recorded value to the estimated fair value. If indicators of impairment were present relating to our other
intangible assets and future cash flows were not expected to be sufficient to recover the assets carrying amount, an impairment loss would be charged to expense in the period identified. To date, we have not identified any event that would
indicate an impairment of the value of goodwill or other intangible assets recorded in our consolidated financial statements.

Contingencies

We accrue amounts for losses arising from contingent obligations when the obligations are probable and the amounts are reasonably
estimable. As facts concerning contingencies become known, we reassess our position and make appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future charges include tax, legal and other
regulatory matters which are subject to change as events evolve and as additional information becomes available during the administrative and litigation process.



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RESULTS OF OPERATIONS

The following table sets forth our total revenues, revenues by type and our estimated internal growth rates for all revenues during the periods indicated.
We calculate the internal growth rate for each period by comparing total revenues earned by businesses that were part of our company during the entire subject period to the total revenues earned by those same businesses during the corresponding
period in the prior year. The growth rates provided are our best estimates of changes in total revenues that are not the result of business acquisitions during a particular period.



|                                             |  |                            |         |   |      |   |         |  
|-------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                             |  | Three Months EndedJune 30, |        
|                                             |  | 2006                       |         |   | 2005 |  
|Revenues:                                    |  |                            |         |   |      |   |         |  
|Equipment revenues                           |  | $                          | 155,310 |   |      | $ | 145,455 |  
|Supplies revenues                            |  |                            | 40,343  |   |      |   | 37,052  |  
|                                             |  |                            |         |   |      |   |         |  
|Equipment and supplies revenues              |  |                            | 195,653 |   |      |   | 182,507 |  
|                                             |  |                            |         |   |      |   |         |  
|Service revenues                             |  |                            | 65,505  |   |      |   | 59,952  |  
|Rental revenues                              |  |                            | 3,771   |   |      |   | 3,870   |  
|                                             |  |                            |         |   |      |   |         |  
|Service and rental revenues                  |  |                            | 69,276  |   |      |   | 63,822  |  
|                                             |  |                            |         |   |      |   |         |  
|Total revenues                               |  | $                          | 264,929 |   |      | $ | 246,329 |  
|                                             |  |                            |         |   |      |   |         |  
|Estimated internal growth rates for revenues |  |                            | 3.2     | % |      |   | 5.5     | %

The following table sets forth our gross profit by revenue type and gross profit by revenue type
as a percentage of revenue during the periods indicated:



|                                                         |  |                            |         |   |      |   |        |  
|-------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------ | -
|                                                         |  | Three Months EndedJune 30, |        
|                                                         |  | 2006                       |         |   | 2005 |  
|Gross profit by revenue type:                            |  |                            |         |   |      |   |        |  
|Equipment                                                |  | $                          | 53,957  |   |      | $ | 49,697 |  
|Supplies                                                 |  |                            | 18,175  |   |      |   | 17,085 |  
|Service                                                  |  |                            | 32,126  |   |      |   | 29,173 |  
|Rental                                                   |  |                            | 1,232   |   |      |   | 1,300  |  
|                                                         |  |                            |         |   |      |   |        |  
|Total gross profit                                       |  | $                          | 105,490 |   |      | $ | 97,255 |  
|                                                         |  |                            |         |   |      |   |        |  
|Gross profit by revenue type as a percentage of revenue: |  |                            |         |   |      |   |        |  
|Equipment                                                |  |                            | 34.7    | % |      |   | 34.2   | %
|Supplies                                                 |  |                            | 45.1    | % |      |   | 46.1   | %
|Service                                                  |  |                            | 49.0    | % |      |   | 48.7   | %
|Rental                                                   |  |                            | 32.7    | % |      |   | 33.6   | %
|                                                         |  |                            |         |   |      |   |        |  
|Total gross profit as a percentage of revenue            |  |                            | 39.8    | % |      |   | 39.5   | %
|                                                         |  |                            |         |   |      |   |        |  



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THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THREE MONTHS ENDED JUNE 30, 2005

Revenues

Total revenues for the three
months ended June 30, 2006 were $264,929, which represents an increase of 7.6% over the same period in fiscal year 2006. The increase in revenues was due in part to growth from our existing companies. Our estimated combined internal growth rate
for the three months ended June 30, 2006 was 3.2%. The balance of the increase in revenues was due to revenues from two businesses acquired during the three months ended June 30, 2006 and six businesses acquired in fiscal year 2006 that
were not a part of our business for the full quarter last year.

Equipment and supplies revenues for the three months ended June 30,
2006 were $195,653, which represents an increase of 7.2% over the same period in fiscal year 2006. Equipment revenues increased 6.8% and supplies revenues increased 8.9%, with the growth due to a combination of revenues from the businesses acquired
and internal revenue growth.

Service and rental revenues for the three months ended June 30, 2006 were $69,276, which represents an
increase of 8.5% over the same period in fiscal year 2006. Service revenues increased 9.3%, with the growth due to a combination of revenues from the businesses acquired and internal revenue growth. Rental revenues decreased 2.6%. Rentals primarily
result from customer preference, as opposed to a significant targeted marketing program. Accordingly, the revenue changes from period to period may not follow overall revenue trends.

As indicated above, our combined internal revenue growth for the three month periods ended June 30, 2006 and 2005 was 3.2% and 5.5%, respectively.
We only provide forward guidance for the internal revenue growth for the next quarter of results. We expect the internal revenue growth for the three months ended September 30, 2006 to be in the range of 4% to 6%.

Gross Profit

Gross profit for the
three months ended June 30, 2006 totaled $105,490, reflecting an 8.5% increase over the same period in fiscal year 2006. The gross profit increase is due to the new business acquisitions and the growth in revenues from our existing companies.

The gross profit margin for equipment revenues for the three months ended June 30, 2006 increased 0.5 percentage points from the same
period one year ago, which is primarily due to an increase in equipment gross profit margins of automated office equipment.

The supplies
gross profit margin for the three months ended June 30, 2006 decreased one percentage point as compared to the same period one year ago, primarily due to an decrease in automated office equipment supply gross profit margins.

The service gross profit margin for the three months ended June 30, 2006 increased 0.3 percentage points from the same period one year ago,
primarily due to an increase in the gross profit margins in automated office equipment.

Selling, General and Administrative Expenses

Selling, general and administrative expenses, or SG&A expenses, increased 7.7% to $75,230 for the three months ended June 30,
2006. As a percentage of revenues, SG&A expenses were 28.4% for



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both the three months ended June 30, 2006 and 2005. The overall increase in SG&A expenses for the three months ended June 30, 2006 was
primarily due to increased payroll costs resulting from increased revenues and gross profit from our existing companies and SG&A expenses related to newly acquired businesses.

Intangible Asset Amortization

Intangible asset amortization was $469 for the three months ended June 30, 2006 compared to $453 for the same period in fiscal year 2006. This amortization relates to non-compete agreements and customer relationships. The increase
primarily relates to amortization resulting from newly acquired businesses.

Income From Operations

Income from operations was $29,791, or 11.2% of total revenues, for the three months ended June 30, 2006 compared to $26,942 or 10.9% of total
revenues, for the same period in fiscal year 2006. The increase in the percentage of total revenues is primarily due to the factors discussed above.

Loss on Early Extinguishment of Debt

During the three months ended June 30, 2006, we incurred a
loss on early extinguishment of debt in the amount of $1,045 related to the write off of selected financing cost of our debt refinancing.

Interest Expense

Interest expense was essentially flat quarter over quarter, totaling $3,325 for the three months ended
June 30, 2006 and $3,326 for the year ago period. The increase in the overall interest rates for the three months ended June 30, 2006 was offset by lower overall borrowings. Interest expense includes the amortization of financing fees
incurred in connection with our senior credit facilities and the 4% convertible senior subordinated notes due 2008 prior to their redemption during the three months ended June 30, 2006.

Income Taxes

The provision for
income taxes was $9,812 for the three months ended June 30, 2006 compared to $8,974 for the same period in fiscal year 2006. The effective income tax rate was 38.6% for the three months ended June 30, 2006 and 38.0% for the same period in
fiscal year 2006. The increase in the effective tax rate is primarily due to a higher combined state income tax rate.



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LIQUIDITY AND CAPITAL RESOURCES

Historically, we have financed our operations primarily through internal cash flow, sales of equity and debt securities and bank financing, including the
financing facility described below. These sources of funds have been used to fund our growth both internally and through acquisitions. We are pursuing an acquisition strategy and expect to acquire more businesses. As we continue to acquire more
businesses, we may incur additional debt and seek additional equity capital.

Our long term debt consisted of the following as of
June 30, 2006 and March 31, 2006:



|                                                       |  |              |         |   |               |   |         |  
|------------------------------------------------------ |  | ------------ | ------- | - | ------------- | - | ------- | -
|                                                       |  | June 30,2006 |         |   | March 31,2006 |  
|Senior Credit Facility:                                |  |              |         |   |               |   |         |  
|Term Loan                                              |  | $            | 150,000 |   |               | $ | 205,293 |  
|Revolving Line of Credit                               |  |              | 30,000  |   |               |   |        |  
|Convertible Senior Subordinated Notes, 4% due May 2008 |  |              |        |   |               |   | 57,500  |  
|Various notes payable                                  |  |              | 33      |   |               |   | 53      |  
|                                                       |  |              |         |   |               |   |         |  
|Total long-term debt                                   |  |              | 180,033 |   |               |   | 262,846 |  
|Less: Current Maturities                               |  |              | (24     | ) |               |   | (2,133  | )
|                                                       |  |              |         |   |               |   |         |  
|Long-term debt, less current maturities                |  | $            | 180,009 |   |               | $ | 260,713 |  
|                                                       |  |              |         |   |               |   |         |  

Effective June 29, 2006, we refinanced our prior senior credit facility and entered into a
new senior credit agreement. As part of the refinancing, we also reduced our outstanding borrowings by $25,293. Our new senior credit facility is with a syndicate of banks and financial institutions, with Wachovia National Association serving as
administrative agent. Our new senior credit facility is comprised of a $200,000 five-year revolving credit line and a $150,000 five-year no amortization term loan. Both the new revolving credit line and the new term loan bear interest, based on the
Companys current leverage ratios, at 1.25% over LIBOR or 100% of a base rate related to the prime rate. The new senior credit facility provides for an unused commitment fee payable to the lenders and certain other fees payable by us and our
material subsidiaries. The commitment fee rates range from .225% to .275% of the unused balance. Amounts borrowed under the revolving credit line of the new senior credit facility may be repaid and borrowed over the life of the new senior credit
facility, with a final maturity date of June 29, 2011. The terms of the new senior credit facility require compliance with various affirmative, negative, and financial covenants. Amounts borrowed under the senior credit facility may be used to
fund working capital, share repurchases and other general corporate purposes, including acquisitions. We are only required to obtain written consent prior to an acquisition if our leverage ratio is greater than 2.75 and there is less than $40
million available under the revolving credit facility. We are permitted to pay cash dividends as long as the Company is in compliance with its covenants.

On May 9, 2006, our Board of Directors authorized the redemption of our 4% convertible senior subordinated notes due 2008, with a principal balance of $57,500. Prior to the June 9, 2006 redemption date, 100
percent of the Notes were converted into 2,406,655 shares of our common stock. The conversion price was $23.892 per share in accordance with the terms of the indenture agreement governing the Notes.

On July 18, 2006, the Companys Board of Directors approved a two-for-one stock split of the Companys common stock. The split will take
the form of a 100% stock dividend, payable August 15, 2006 to stockholders of record on August 1, 2006.

Net cash used in
operating activities totaled $2,828 for the three months ended June 30, 2006 as compared to net cash used in operating activities of $5,568 for the prior year period. The primary



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components of the change was an increase in current year net income and better management of overall inventory levels. Net cash used in investing activities
of $14,453 during the three months ended June 30, 2006 was primarily for purchases of property, equipment and rental equipment, as well as two acquisitions. Net cash used in financing activities of $29,668 during the three months ended
June 30, 2006 was primarily for the purchase of common stock pursuant to the Companys stock repurchase program and repayment of long term debt as part of the Companys debt refinancing.

We believe that cash flows from future operations, together with funds available under our new senior credit facility, will be sufficient to fund our
operational needs and acquisition growth strategy for at least the next twelve months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk is primarily limited to
fluctuations in interest rates as it pertains to our borrowings under our new senior credit facility. There have been no material changes to the information in the Item 7A disclosure made in our Annual Report on Form 10-K for the fiscal year
ended March 31, 2006.

ITEM 4. CONTROLS AND PROCEDURES

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our Chief
Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as
amended (the Exchange Act) as of June 30, 2006. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2006, our disclosure controls and procedures are effective in
bringing to their attention on a timely basis material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys periodic filings under the Exchange Act.

(b) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. There have been no changes in our internal controls over financial reporting during the
period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

See Part 1, Item 2  Contingencies

ITEM 1A.  Risk Factors

There has been no material change to the risk factors as set forth in our Annual Report on Form
10-K for the fiscal year ended March 31, 2006.

ITEM 2.  Unregistered Sales of Equity Securities and Use Of Proceeds

In May 2006, our Board of Directors authorized a
share repurchase program of up to $150 million of the Companys common stock over a three-year period. The share repurchases are made on the open market, through block trades or otherwise. The number of shares purchased and the timing of the
purchases is based on working capital requirements, general business conditions and other factors, including alternative investment opportunities. Shares repurchased by the Company are held in treasury for general corporate purposes, including
issuances under employee equity incentive plans and acquisitions.



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The following table presents information with respect to purchases of common stock by the Company under the share
repurchase program during the quarter ended June 30, 2006:



|                         |  |                                       |  |                                 |       |                                                                                |         |                                                                                  |   |            
|------------------------ |  | ------------------------------------- |  | ------------------------------- | ----- | ------------------------------------------------------------------------------ | ------- | -------------------------------------------------------------------------------- | - | -----------
|                         |  | Issuer Purchases of Equity Securities
|Period                   |  | Totalnumber ofsharespurchased         |  | Average price paidper share (1) |       | Total number of shares purchased as part of publicly
announcedplan or programs |         | Maximum dollar value ofshares that may yet bepurchased under theplan or
programs
|April 1  April 30, 2006 |  |                                      |  | $                               |      |                                                                                |        |                                                                                  |   |            
|May 1  May 31, 2006     |  | 138,700                               |  |                                 | 39.73 |                                                                                | 138,700 |                                                                                  |   |            
|June 1  June 30, 2006   |  | 172,500                               |  |                                 | 40.74 |                                                                                | 172,500 |                                                                                  |   |            
|                         |  |                                       |  |                                 |       |                                                                                |         |                                                                                  |   |            
|Total                    |  | 311,200                               |  | $                               | 40.29 |                                                                                | 311,200 |                                                                                  | $ | 137,462,854
|                         |  |                                       |  |                                 |       |                                                                                |         |                                                                                  |   |            

---

|(1) | Excludes commissions.
|--- | ---------------------

ITEM 3. Defaults upon Senior Securities

None

ITEM 4. Submission of Matters and a Vote of Security Holders

None

ITEM 5. Other Information

None

ITEM 6. Exhibits

The Exhibit Index filed herewith is incorporated herein by reference.



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SIGNATURE

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



|               |  |                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|               |  | Global Imaging Systems, Inc.                                                                                                                
|               |  | (Registrant)                                                                                                                                
|               | 
|August 8, 2006 |  | /s/ Raymond Schilling                                                                                                                       
|Date           |  | Raymond Schilling                                                                                                                           
|               |  | On behalf of Global Imaging Systems and as Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)



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EXHIBIT INDEX

(Pursuant to Item 601 of Regulation S-K)



|       |  |                                                                                                                                                          
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Exhibit                                                                                                                                                  
|       | 
|3i.1   |  | Amended and Restated Certificate of Incorporation of Global Imaging Systems, Inc. (1)                                                                    
|       | 
|3i.2   |  | Certificate of Amendment of Certificate of Incorporation of Global Imaging Systems, Inc. (3)                                                             
|       | 
|3ii.1  |  | Amended and Restated Bylaws of Global Imaging Systems, Inc. (1)                                                                                          
|       | 
|3ii.2  |  | Amendment to Amended and Restated Bylaws of Global Imaging Systems, Inc. (2)                                                                             
|       | 
|4.1    |  | Form of 4% Convertible Senior Subordinated Notes Due 2008. (2)                                                                                           
|       | 
|*10.1  |  | Form of Agreement restricting the sale of shares of Common Stock acquired by Company executives upon the Exercise of accelerated options                 
|       | 
|*31.1  |  | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                  
|       | 
|*31.2  |  | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                  
|       | 
|*32.1  |  | Written Statement of Chief Executive Officer and Chief Financial Officer furnished (not filed) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---

|* | Filed herewith.
|- | ---------------

|(1) | Incorporated by reference to Globals Registration Statement on Form S-1, No. 333-48103, as filed with the SEC on May 8, 1998.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Globals Registration Statement on Form S-3/A, No. 333-107948, as filed with the SEC on October 7, 2003.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to Globals Proxy Statement on Form DEF 14A, as filed with the SEC on July 19, 2004.
|--- | --------------------------------------------------------------------------------------------------------------



27