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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 DECEMBER 31, 2004



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



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



The registrant had 23,469,717 shares of common stock, $.01 par value, outstanding as of February 7, 2005.



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##### Table of Contents

INDEX



|                                                                                               |  |                                                                                                         |  |     
|---------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                               |  |                                                                                                         |  | Page
|PART I 
FINANCIAL INFORMATION                                                                 |  |                                                                                                        
|                                                                                               | 
|ITEM 1 
Consolidated Financial Statements                                                     |  |                                                                                                        
|                                                                                               |  |                                                                                                        
|                                                                                               |  | Consolidated Balance Sheets as of December 31, 2004 and March 31, 2004 (Unaudited)                      |  | 3   
|                                                                                               |  |                                                                                                        
|                                                                                               |  | Consolidated Statements of Operations for the three months ended December 31, 2004 and 2003 (Unaudited) |  | 4   
|                                                                                               |  |                                                                                                        
|                                                                                               |  | Consolidated Statements of Operations for the nine months ended December 31, 2004 and 2003 (Unaudited)  |  | 5   
|                                                                                               |  |                                                                                                        
|                                                                                               |  | Consolidated Statements of Cash Flows for the nine months ended December 31, 2004 and 2003 (Unaudited)  |  | 6   
|                                                                                               |  |                                                                                                        
|                                                                                               |  | Consolidated Statement of Stockholders Equity for the nine months ended December 31, 2004 (Unaudited)  |  | 7   
|                                                                                               |  |                                                                                                        
|                                                                                               |  | Notes to Consolidated Financial Statements (Unaudited)                                                  |  | 8   
|                                                                                               | 
|ITEM 2 
Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 14                                                                                                     
|                                                                                               | 
|ITEM 3 
Quantitative and Qualitative Disclosures about Market Risk                            |  | 24                                                                                                     
|                                                                                               | 
|ITEM 4 
Controls and Procedures                                                               |  | 25                                                                                                     
|                                                                                               | 
|PART II 
OTHER INFORMATION                                                                    |  |                                                                                                        
|                                                                                               | 
|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.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)



|                                                                                                                                                                                                          |  |                  |         |   |                |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                                                                                                                          |  | December 31,2004 |         |   | March 31, 2004 |  
|ASSETS                                                                                                                                                                                                    |  |                  |         |   |                |   |         |  
|                                                                                                                                                                                                          |  |                 
|Current assets:                                                                                                                                                                                           |  |                  |         |   |                |   |         |  
|Cash and cash equivalents                                                                                                                                                                                 |  | $                | 825     |   |                | $ | 47,266  |  
|Accounts receivable, net of allowance for doubtful accounts ($3,385 and $2,847 at December 31, 2004 and March 31, 2004,
respectively)                                                                     |  |                  | 107,831 |   |                |   | 81,262  |  
|Inventories, net                                                                                                                                                                                          |  |                  | 86,831  |   |                |   | 70,898  |  
|Deferred income taxes                                                                                                                                                                                     |  |                  | 8,727   |   |                |   | 5,849   |  
|Prepaid expenses and other current assets                                                                                                                                                                 |  |                  | 3,990   |   |                |   | 2,927   |  
|                                                                                                                                                                                                          |  |                  |         |   |                |   |         |  
|Total current assets                                                                                                                                                                                      |  |                  | 208,204 |   |                |   | 208,202 |  
|Rental equipment, net                                                                                                                                                                                     |  |                  | 16,390  |   |                |   | 15,416  |  
|Property and equipment, net                                                                                                                                                                               |  |                  | 12,032  |   |                |   | 10,180  |  
|Other assets                                                                                                                                                                                              |  |                  | 2,988   |   |                |   | 1,016   |  
|Related party notes receivable                                                                                                                                                                            |  |                  |        |   |                |   | 400     |  
|Intangible assets, net:                                                                                                                                                                                   |  |                  |         |   |                |   |         |  
|Goodwill                                                                                                                                                                                                  |  |                  | 517,558 |   |                |   | 356,681 |  
|Other intangible assets                                                                                                                                                                                   |  |                  | 13,994  |   |                |   | 639     |  
|Financing fees                                                                                                                                                                                            |  |                  | 4,237   |   |                |   | 5,239   |  
|                                                                                                                                                                                                          |  |                  |         |   |                |   |         |  
|Total assets                                                                                                                                                                                              |  | $                | 775,403 |   |                | $ | 597,773 |  
|                                                                                                                                                                                                          |  |                  |         |   |                |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                      |  |                  |         |   |                |   |         |  
|                                                                                                                                                                                                          |  |                 
|Current liabilities:                                                                                                                                                                                      |  |                  |         |   |                |   |         |  
|Accounts payable                                                                                                                                                                                          |  | $                | 40,888  |   |                | $ | 41,466  |  
|Accrued liabilities                                                                                                                                                                                       |  |                  | 10,527  |   |                |   | 11,266  |  
|Accrued compensation and benefits                                                                                                                                                                         |  |                  | 19,719  |   |                |   | 19,328  |  
|Accrued interest                                                                                                                                                                                          |  |                  | 755     |   |                |   | 1,008   |  
|Current maturities of long-term debt                                                                                                                                                                      |  |                  | 2,216   |   |                |   | 1,479   |  
|Deferred revenue                                                                                                                                                                                          |  |                  | 27,926  |   |                |   | 22,514  |  
|Income taxes payable                                                                                                                                                                                      |  |                  | 7,793   |   |                |   | 4,776   |  
|                                                                                                                                                                                                          |  |                  |         |   |                |   |         |  
|Total current liabilities                                                                                                                                                                                 |  |                  | 109,824 |   |                |   | 101,837 |  
|Deferred income taxes                                                                                                                                                                                     |  |                  | 32,114  |   |                |   | 15,936  |  
|Long-term debt, less current maturities                                                                                                                                                                   |  |                  | 263,390 |   |                |   | 195,184 |  
|                                                                                                                                                                                                          |  |                  |         |   |                |   |         |  
|Total liabilities                                                                                                                                                                                         |  |                  | 405,328 |   |                |   | 312,957 |  
|                                                                                                                                                                                                          |  |                 
|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: 23,427,717 and 22,879,015 shares issued and 23,427,717 and 21,999,396 shares
outstanding at December 31, 2004 and March 31, 2004, respectively |  |                  | 234     |   |                |   | 229     |  
|Common stock held in treasury, at cost: 0 and 879,619 shares at December 31, 2004 and March 31, 2004, respectively                                                                                        |  |                  |        |   |                |   | (7,731  | )
|Additional paid-in capital                                                                                                                                                                                |  |                  | 184,446 |   |                |   | 149,958 |  
|Retained earnings                                                                                                                                                                                         |  |                  | 186,116 |   |                |   | 143,698 |  
|Unearned stock-based compensation                                                                                                                                                                         |  |                  | (746    | ) |                |   | (1,099  | )
|Accumulated other comprehensive income (loss)                                                                                                                                                             |  |                  | 25      |   |                |   | (239    | )
|                                                                                                                                                                                                          |  |                  |         |   |                |   |         |  
|Total stockholders equity                                                                                                                                                                                |  |                  | 370,075 |   |                |   | 284,816 |  
|                                                                                                                                                                                                          |  |                  |         |   |                |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                                |  | $                | 775,403 |   |                | $ | 597,773 |  
|                                                                                                                                                                                                          |  |                  |         |   |                |   |         |  



See accompanying notes.



3



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##### Table of Contents

GLOBAL IMAGING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



|                                               |  |                                |         |      |   |        
|---------------------------------------------- |  | ------------------------------ | ------- | ---- | - | -------
|                                               |  | Three Months EndedDecember 31,
|                                               |  | 2004                           |         | 2003
|Revenues:                                      |  |                                |         |      |   |        
|Equipment and supplies sales                   |  | $                              | 173,321 |      | $ | 140,534
|Service and rentals                            |  |                                | 60,201  |      |   | 46,950 
|                                               |  |                                |         |      |   |        
|Total revenues                                 |  |                                | 233,522 |      |   | 187,484
|Costs and operating expenses:                  |  |                                |         |      |   |        
|Cost of equipment and supplies sales           |  |                                | 111,384 |      |   | 91,143 
|Service and rental costs                       |  |                                | 30,676  |      |   | 24,587 
|Selling, general and administrative expenses   |  |                                | 63,952  |      |   | 49,717 
|Intangible asset amortization                  |  |                                | 300     |      |   | 125    
|                                               |  |                                |         |      |   |        
|Total costs and operating expenses             |  |                                | 206,312 |      |   | 165,572
|                                               |  |                                |         |      |   |        
|Income from operations                         |  |                                | 27,210  |      |   | 21,912 
|Interest expense                               |  |                                | 3,129   |      |   | 2,572  
|                                               |  |                                |         |      |   |        
|Income before income taxes                     |  |                                | 24,081  |      |   | 19,340 
|Income taxes                                   |  |                                | 9,151   |      |   | 7,504  
|                                               |  |                                |         |      |   |        
|Net income                                     |  | $                              | 14,930  |      | $ | 11,836 
|                                               |  |                                |         |      |   |        
|Net income per common share:                   |  |                                |         |      |   |        
|Basic                                          |  | $                              | .64     |      | $ | .55    
|                                               |  |                                |         |      |   |        
|Diluted                                        |  | $                              | .59     |      | $ | .50    
|                                               |  |                                |         |      |   |        
|Weighted average number of shares outstanding: |  |                                |         |      |   |        
|Basic                                          |  |                                | 23,168  |      |   | 21,715 
|Diluted                                        |  |                                | 26,187  |      |   | 24,715 



See accompanying notes.



4



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GLOBAL IMAGING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



|                                               |  |                               |         |      |   |        
|---------------------------------------------- |  | ----------------------------- | ------- | ---- | - | -------
|                                               |  | Nine Months EndedDecember 31,
|                                               |  | 2004                          |         | 2003
|Revenues:                                      |  |                               |         |      |   |        
|Equipment and supplies sales                   |  | $                             | 508,731 |      | $ | 419,386
|Service and rentals                            |  |                               | 170,327 |      |   | 137,337
|                                               |  |                               |         |      |   |        
|Total revenues                                 |  |                               | 679,058 |      |   | 556,723
|Costs and operating expenses:                  |  |                               |         |      |   |        
|Cost of equipment and supplies sales           |  |                               | 325,217 |      |   | 274,604
|Service and rental costs                       |  |                               | 87,346  |      |   | 71,125 
|Selling, general and administrative expenses   |  |                               | 186,678 |      |   | 147,556
|Intangible asset amortization                  |  |                               | 1,051   |      |   | 408    
|                                               |  |                               |         |      |   |        
|Total costs and operating expenses             |  |                               | 600,292 |      |   | 493,693
|                                               |  |                               |         |      |   |        
|Income from operations                         |  |                               | 78,766  |      |   | 63,030 
|Loss on early extinguishment of debt           |  |                               | 1,655   |      |   | 8,433  
|Interest expense                               |  |                               | 8,623   |      |   | 9,359  
|                                               |  |                               |         |      |   |        
|Income before income taxes                     |  |                               | 68,488  |      |   | 45,238 
|Income taxes                                   |  |                               | 26,070  |      |   | 17,722 
|                                               |  |                               |         |      |   |        
|Net income                                     |  | $                             | 42,418  |      | $ | 27,516 
|                                               |  |                               |         |      |   |        
|Net income per common share:                   |  |                               |         |      |   |        
|Basic                                          |  | $                             | 1.86    |      | $ | 1.28   
|                                               |  |                               |         |      |   |        
|Diluted                                        |  | $                             | 1.69    |      | $ | 1.19   
|                                               |  |                               |         |      |   |        
|Weighted average number of shares outstanding: |  |                               |         |      |   |        
|Basic                                          |  |                               | 22,851  |      |   | 21,498 
|Diluted                                        |  |                               | 25,878  |      |   | 24,019 



See accompanying notes.



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GLOBAL IMAGING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(IN THOUSANDS)



|                                                                                                        |  |                               |          |   |      |   |          |  
|------------------------------------------------------------------------------------------------------- |  | ----------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                                        |  | Nine Months EndedDecember 31, |         
|                                                                                                        |  | 2004                          |          |   | 2003 |  
|OPERATING ACTIVITIES:                                                                                   |  |                               |          |   |      |   |          |  
|Net income                                                                                              |  | $                             | 42,418   |   |      | $ | 27,516   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                       |  |                               |          |   |      |   |          |  
|Depreciation                                                                                            |  |                               | 11,369   |   |      |   | 11,189   |  
|Amortization                                                                                            |  |                               | 1,051    |   |      |   | 408      |  
|Amortization of financing fees                                                                          |  |                               | 766      |   |      |   | 916      |  
|Tax benefit of stock option exercises                                                                   |  |                               | 3,926    |   |      |   |         |  
|Non-cash portion of loss on early extinguishment of debt                                                |  |                               | 1,655    |   |      |   | 3,058    |  
|Deferred income tax expense                                                                             |  |                               | 3,262    |   |      |   | 3,047    |  
|Unearned stock-based compensation expense                                                               |  |                               | 353      |   |      |   | 353      |  
|Changes in operating assets and liabilities, net of amounts acquired in purchase business combinations: |  |                               |          |   |      |   |          |  
|Accounts receivable                                                                                     |  |                               | (8,318   | ) |      |   | (790     | )
|Inventories                                                                                             |  |                               | (3,056   | ) |      |   | 12,632   |  
|Prepaid expenses and other current assets                                                               |  |                               | 14       |   |      |   | (530     | )
|Other assets                                                                                            |  |                               | (959     | ) |      |   | (139     | )
|Accounts payable                                                                                        |  |                               | (10,300  | ) |      |   | (14,282  | )
|Accrued liabilities, compensation and benefits and interest                                             |  |                               | (6,278   | ) |      |   | (1,547   | )
|Deferred revenue                                                                                        |  |                               | (1,574   | ) |      |   | (795     | )
|Income taxes payable                                                                                    |  |                               | 3,494    |   |      |   | 4,929    |  
|                                                                                                        |  |                               |          |   |      |   |          |  
|Net cash provided by operating activities                                                               |  |                               | 37,823   |   |      |   | 45,965   |  
|INVESTING ACTIVITIES:                                                                                   |  |                               |          |   |      |   |          |  
|Proceeds from related party notes receivable                                                            |  |                               | 400      |   |      |   |         |  
|Purchases of property, equipment and rental equipment, net of proceeds from disposals                   |  |                               | (11,486  | ) |      |   | (13,148  | )
|Purchases of businesses, net of cash acquired                                                           |  |                               | (147,591 | ) |      |   | (24,818  | )
|                                                                                                        |  |                               |          |   |      |   |          |  
|Net cash used in investing activities                                                                   |  |                               | (158,677 | ) |      |   | (37,966  | )
|FINANCING ACTIVITIES:                                                                                   |  |                               |          |   |      |   |          |  
|Net payments on revolving line of credit                                                                |  |                               |         |   |      |   | (26,500  | )
|Payments on other long-term debt                                                                        |  |                               | (1,057   | ) |      |   | (68,665  | )
|Proceeds from issuance of long-term debt                                                                |  |                               | 70,000   |   |      |   | 140,000  |  
|Redemption and retirement of notes                                                                      |  |                               |         |   |      |   | (100,000 | )
|Issuance of convertible notes                                                                           |  |                               |         |   |      |   | 57,500   |  
|Financing fees paid                                                                                     |  |                               | (1,419   | ) |      |   | (6,151   | )
|Stock options exercised                                                                                 |  |                               | 6,889    |   |      |   | 5,771    |  
|                                                                                                        |  |                               |          |   |      |   |          |  
|Net cash provided by financing activities                                                               |  |                               | 74,413   |   |      |   | 1,955    |  
|                                                                                                        |  |                               |          |   |      |   |          |  
|Net (decrease) increase in cash and cash equivalents                                                    |  |                               | (46,441  | ) |      |   | 9,954    |  
|Cash and cash equivalents, beginning of period                                                          |  |                               | 47,266   |   |      |   | 11,343   |  
|                                                                                                        |  |                               |          |   |      |   |          |  
|Cash and cash equivalents, end of period                                                                |  | $                             | 825      |   |      | $ | 21,297   |  
|                                                                                                        |  |                               |          |   |      |   |          |  
|Non-cash investing activities:                                                                          |  |                               |          |   |      |   |          |  
|Stock issued for business purchases                                                                     |  | $                             | 31,409   |   |      | $ | 2,614    |  
|                                                                                                        |  |                               |          |   |      |   |          |  



See accompanying notes.



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##### Table of Contents

GLOBAL IMAGING SYSTEMS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (Unaudited)

(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)



|                                                                               |  |                 |  |           |                          |                         |                  |        |                                 |  |   |                                            |  |   |         |  |   |        |   |  |   |      |   |  |   |        
|------------------------------------------------------------------------------ |  | --------------- |  | --------- | ------------------------ | ----------------------- | ---------------- | ------ | ------------------------------- |  | - | ------------------------------------------ |  | - | ------- |  | - | ------ | - |  | - | ---- | - |  | - | -------
|                                                                               |  | Common Stock    |  |           | AdditionalPaid-inCapital |                         | RetainedEarnings |        | UnearnedStock-basedCompensation |  |   | AccumulatedOtherComprehensiveIncome (Loss) |  |   | Total  
|                                                                               |  | Number ofShares |  | Par Value |                          | Held inTreasury,at Cost |                  |        |                                 |  |   |                                           
|Balances at March 31, 2004                                                     |  | 21,999,396      |  | $         | 229                      |                         | $                | (7,731 | )                               |  | $ | 149,958                                    |  | $ | 143,698 |  | $ | (1,099 | ) |  | $ | (239 | ) |  | $ | 284,816
|                                                                               |  |                 |  |           |                          |                         |                  |       
|Comprehensive income:                                                          |  |                 |  |           |                          |                         |                  |        |                                 |  |   |                                            |  |   |         |  |   |        |   |  |   |      |   |  |   |        
|Net income                                                                     |  |                |  |           |                         |                         |                  |       |                                 |  |   |                                           |  |   | 42,418  |  |   |       |   |  |   |     |   |  |   | 42,418 
|Unrealized gain on derivative instrument                                       |  |                |  |           |                         |                         |                  |       |                                 |  |   |                                           |  |   |        |  |   |       |   |  |   | 264  |   |  |   | 264    
|                                                                               |  |                 |  |           |                          |                         |                  |        |                                 |  |   |                                            |  |   |         |  |   |        |   |  |   |      |   |  |   |        
|Total comprehensive income                                                     |  |                 |  |           |                          |                         |                  |        |                                 |  |   |                                            |  |   |         |  |   |        |   |  |   |      |   |  |   | 42,682 
|                                                                               |  |                 |  |           |                          |                         |                  |       
|Stock options exercised, including income tax benefit                          |  | 499,338         |  |           | 5                        |                         |                  |       |                                 |  |   | 10,810                                     |  |   |        |  |   |       |   |  |   |     |   |  |   | 10,815 
|Treasury stock issued in conjunction with acquisitions, net of returned shares |  | 879,619         |  |           |                         |                         |                  | 7,731  |                                 |  |   | 21,921                                     |  |   |        |  |   |       |   |  |   |     |   |  |   | 29,652 
|Common stock issued in conjunction with acquisitions                           |  | 49,364          |  |           |                         |                         |                  |       |                                 |  |   | 1,757                                      |  |   |        |  |   |       |   |  |   |     |   |  |   | 1,757  
|Amortization of unearned stock-based compensation                              |  |                |  |           |                         |                         |                  |       |                                 |  |   |                                           |  |   |        |  |   | 353    |   |  |   |     |   |  |   | 353    
|                                                                               |  |                 |  |           |                          |                         |                  |        |                                 |  |   |                                            |  |   |         |  |   |        |   |  |   |      |   |  |   |        
|Balances at December 31, 2004                                                  |  | 23,427,717      |  | $         | 234                      |                         | $                |       |                                 |  | $ | 184,446                                    |  | $ | 186,116 |  | $ | (746   | ) |  | $ | 25   |   |  | $ | 370,075
|                                                                               |  |                 |  |           |                          |                         |                  |        |                                 |  |   |                                            |  |   |         |  |   |        |   |  |   |      |   |  |   |        



See accompanying notes.



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GLOBAL IMAGING SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)



NOTE 1. BASIS OF PRESENTATION



The accompanying unaudited 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- and nine-month periods ended December 31, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2005.



The consolidated balance sheet at March 31, 2004 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 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, 2004.



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



NOTE 2. STOCK OPTION PLANS



In 1998, the Board of Directors adopted a stock option 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 Global Imaging Systems, Inc. (Global or the
Company). As of December 31, 2004, options to purchase 2,058,591 shares of our common stock were outstanding under the 1998 stock option plan, and 1,139,934 shares of our common stock have been issued under the 1998 plan upon the
exercise of stock options granted under the plan. There were 18,975 shares of our common stock available to be issued under the 1998 plan as of December 31, 2004. Additionally, we have issued 102,500 shares of restricted stock under the 1998 plan,
but did not issue any additional restricted shares during the nine months ended December 31, 2004. During the nine months ended December 31, 2004, options to purchase an aggregate of 273,000 shares were granted under the 1998 stock option plan with
exercise prices ranging from $26.78 to $33.22 per share, the market values at dates of grant.



On January 25, 2001, the Board of Directors adopted the Global Imaging Systems, Inc. 2001 Stock Option 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 stock option plan have the same terms as those granted under the 1998 plan. As of December 31, 2004, options to purchase 148,655
shares were outstanding under the 2001 stock option plan, and 122,345 shares of our common stock have been issued under the 2001 plan upon the exercise of stock options granted under the plan. There were 29,000 shares of our common stock available
to be issued under the 2001 stock option plan as of December 31, 2004. During the nine months ended December 31, 2004, no options were granted under the 2001 stock option plan.



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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. As of December 31, 2004, options to purchase 10,000 shares were
outstanding under the 2004 Plan, and no shares of our common stock have been issued under the 2004 Plan upon the exercise of stock options granted under the plan. There were 590,000 shares of our common stock available to be issued under the 2004
Plan as of December 31, 2004. During the nine months ended December 31, 2004, 10,000 options were granted under the 2004 Plan with an exercise price of $36.95, the market value at date of grant.



In addition to options outstanding under our stock option plans, 10,000
shares of our common stock are issuable upon the exercise of an option granted outside of our 1998, 2001 and 2004 stock option plans. This option is exercisable at a price of $12.00 per share.



We have adopted the disclosure provisions of Statement of Financial
Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure  an amendment of FASB Statement No. 123. SFAS No. 148 allows for continued use of recognition and measurement principles of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for grants to directors, officers and employees under plans. We apply the intrinsic value recognition and
measurement principles of APB Opinion No. 25 and related interpretations in accounting for those grants. No stock-based employee compensation expense is reflected in net income related to our stock option grants as all options granted under those
plans had an exercise price equal to the market value of the underlying common stock on the date of grant.



The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions to stock-based
employee compensation. Such disclosure is not necessarily indicative of the fair value of stock options that could be granted by us in future fiscal years or of the value of all options currently outstanding.



|                                                                                                                                            |  |                                    |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ------ | - | --------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                            |  | For Three Months EndedDecember 31, |        |   | For Nine Months EndedDecember 31, |  
|                                                                                                                                            |  | 2004                               |        |   | 2003                              |   |        | 2004 |  |   | 2003   |  
|Net income, as reported                                                                                                                     |  | $                                  | 14,930 |   |                                   | $ | 11,836 |      |  | $ | 42,418 |   |  | $ | 27,516 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                    | (890   | ) |                                   |   | (651   | )    |  |   | (2,699 | ) |  |   | (1,987 | )
|                                                                                                                                            |  |                                    |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Pro forma net income                                                                                                                        |  | $                                  | 14,040 |   |                                   | $ | 11,185 |      |  | $ | 39,719 |   |  | $ | 25,529 |  
|                                                                                                                                            |  |                                    |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Earnings per share:                                                                                                                         |  |                                    |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Basic  as reported                                                                                                                         |  | $                                  | .64    |   |                                   | $ | .55    |      |  | $ | 1.86   |   |  | $ | 1.28   |  
|                                                                                                                                            |  |                                    |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Basic  pro forma                                                                                                                           |  | $                                  | .61    |   |                                   | $ | .52    |      |  | $ | 1.74   |   |  | $ | 1.19   |  
|                                                                                                                                            |  |                                    |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Diluted  as reported                                                                                                                       |  | $                                  | .59    |   |                                   | $ | .50    |      |  | $ | 1.69   |   |  | $ | 1.19   |  
|                                                                                                                                            |  |                                    |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  
|Diluted  pro forma                                                                                                                         |  | $                                  | .55    |   |                                   | $ | .47    |      |  | $ | 1.59   |   |  | $ | 1.11   |  
|                                                                                                                                            |  |                                    |        |   |                                   |   |        |      |  |   |        |   |  |   |        |  



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, as well as the conversion of convertible notes into common stock.



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



|                                            |  |                                |        |                               |   |        |  |      |        |  |   |       
|------------------------------------------- |  | ------------------------------ | ------ | ----------------------------- | - | ------ |  | ---- | ------ |  | - | ------
|                                            |  | Three Months EndedDecember 31, |        | Nine Months EndedDecember 31,
|                                            |  | 2004                           |        | 2003                          |   | 2004   |  | 2003
|Numerator:                                  |  |                                |        |                               |   |        |  |      |        |  |   |       
|Numerator for basic earnings per share      |  | $                              | 14,930 |                               | $ | 11,836 |  | $    | 42,418 |  | $ | 27,516
|Effect of dilutive securities:              |  |                                |        |                               |   |        |  |      |        |  |   |       
|4% convertible notes                        |  |                                | 442    |                               |   | 439    |  |      | 1,328  |  |   | 1,085 
|                                            |  |                                |        |                               |   |        |  |      |        |  |   |       
|Numerator for diluted earnings per share    |  | $                              | 15,372 |                               | $ | 12,275 |  | $    | 43,746 |  | $ | 28,601
|                                            |  |                                |        |                               |   |        |  |      |        |  |   |       
|Denominator:                                |  |                                |        |                               |   |        |  |      |        |  |   |       
|Denominator for basic earnings per share    |  |                                | 23,168 |                               |   | 21,715 |  |      | 22,851 |  |   | 21,498
|Effect of dilutive securities:              |  |                                |        |                               |   |        |  |      |        |  |   |       
|4% convertible notes                        |  |                                | 2,407  |                               |   | 2,407  |  |      | 2,407  |  |   | 2,004 
|Employee stock options and restricted stock |  |                                | 612    |                               |   | 593    |  |      | 620    |  |   | 517   
|                                            |  |                                |        |                               |   |        |  |      |        |  |   |       
|Denominator for diluted earnings per share  |  |                                | 26,187 |                               |   | 24,715 |  |      | 25,878 |  |   | 24,019
|                                            |  |                                |        |                               |   |        |  |      |        |  |   |       



NOTE
4. ACQUISITIONS



Effective May 1, 2004, we acquired all the
issued and outstanding stock of Imagine Technology Group, Inc. (ITG) pursuant to a Stock Purchase Agreement dated April 5, 2004, by and among Global, ITG Acquisition I Corporation, ITG and Imagine Technology Group, LLC and its members.



As consideration for the ITG stock, we paid ITGs
shareholder and its creditors approximately $104,800 in cash, $4,000 of which was placed in escrow and is subject to post-closing adjustments, plus 813,464 shares of Globals common stock, par value $.01 per share, that were previously held in
treasury. The common stock issued to ITGs shareholder was registered for resale with the Securities and Exchange Commission using a registration statement on Form S-3.



The following table summarizes the estimated fair value of the ITG assets acquired and liabilities assumed at the
acquisition date. During the three months ended December 31, 2004, we obtained final third-party valuations of the intangible assets acquired and have, accordingly, adjusted the fair values of customer relationships, non-compete agreements, and
goodwill as shown below. During the nine months ended December 31, 2004, we recorded amortization expense of $661 associated with the allocation of the purchase price to customer relationships and non-compete agreements.



|                                                    |  |   |        
|--------------------------------------------------- |  | - | -------
|Current assets                                      |  | $ | 29,716 
|Equipment                                           |  |   | 2,357  
|Deferred tax assets                                 |  |   | 840    
|Other assets                                        |  |   | 737    
|Customer relationships (estimated life  15 years)  |  |   | 13,344 
|Non  compete agreements (estimated life  5 years) |  |   | 511    
|Goodwill                                            |  |   | 116,332
|                                                    |  |   |        
|Total assets acquired                               |  |   | 163,837
|                                                    |  |   |        
|Current liabilities                                 |  |   | 20,151 
|Deferred tax liabilities                            |  |   | 10,753 
|                                                    |  |   |        
|Total liabilities assumed                           |  |   | 30,904 
|                                                    |  |   |        
|Net assets acquired                                 |  | $ | 132,933
|                                                    |  |   |        



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During the nine months ended December 31, 2004, we also acquired four businesses that provide
office-imaging solutions and related services. Aggregate consideration, net of cash acquired, for these acquisitions was approximately $47,352, consisting of cash paid to the sellers, acquisition related expenses, and 118,043 shares of Globals
common stock (valued at $4,200, based on the fair value of the stock). The preliminary value of liabilities assumed in connection with these acquisitions totaled approximately $3,171. The preliminary fair value of total assets acquired in these
acquisitions consisted of approximately $6,606 of tangible assets and approximately $44,783 of goodwill and other intangible assets. We expect to finalize the estimated fair values and purchase price allocations prior to the end of our fiscal year.
As a result, there may be material adjustments to the intangible assets (some of which may be amortizable) and hence there may also be material adjustments to amortization expense and deferred income taxes.



All of the above acquisitions were accounted for using the purchase method of
accounting and, accordingly, are included in the results of operations from the date of acquisition.



The unaudited pro forma results presented below include the effects of all of our acquisitions to date in fiscal years 2005 and 2004 as if they had been
consummated as of April 1, 2003. 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 Nine Months Ended December 31,
|                             |  | 2004                                               |         | 2003
|Revenues                     |  | $                                                  | 709,566 |      | $ | 688,404
|Net income                   |  | $                                                  | 43,562  |      | $ | 32,607 
|                             |  |                                                    |         |      |   |        
|Net income per common share: |  |                                                    |         |      |   |        
|Basic                        |  | $                                                  | 1.89    |      | $ | 1.42   
|Diluted                      |  | $                                                  | 1.72    |      | $ | 1.32   



NOTE
5. COMPREHENSIVE INCOME



The following table presents a
reconciliation of net income to comprehensive income:



|                                                |  |                                |        |                               |   |        |  |      |        |  |   |       
|----------------------------------------------- |  | ------------------------------ | ------ | ----------------------------- | - | ------ |  | ---- | ------ |  | - | ------
|                                                |  | Three Months EndedDecember 31, |        | Nine Months EndedDecember 31,
|                                                |  | 2004                           |        | 2003                          |   | 2004   |  | 2003
|Net income                                      |  | $                              | 14,930 |                               | $ | 11,836 |  | $    | 42,418 |  | $ | 27,516
|Unrealized gain on cash flow hedges, net of tax |  |                                | 76     |                               |   | 88     |  |      | 264    |  |   | 45    
|                                                |  |                                |        |                               |   |        |  |      |        |  |   |       
|Total comprehensive income                      |  | $                              | 15,006 |                               | $ | 11,924 |  | $    | 42,682 |  | $ | 27,561
|                                                |  |                                |        |                               |   |        |  |      |        |  |   |       



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. Effective November 12, 2002, we entered into a three-year swap agreement. This agreement effectively converts $20,000 of
our variable-rate debt to fixed-rate debt, reducing the exposure to changes in interest rates. Under this swap agreement, we received an average variable LIBOR rate of 1.6% and paid an average LIBOR fixed rate of 2.7% for the period from April 1,
2004 to December 31, 2004.



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During December 2004, we entered into two one-year 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 will pay an average LIBOR fixed rate of 3.8% and under the
second swap agreement, we will pay an average LIBOR fixed rate of 3.9%. Both agreements are effective for a period of two years, beginning December 2005.



We have recognized a gain, net of tax, of approximately $264 for the nine month period ended December 31, 2004, related to the change in the fair value of
the interest rate swaps, which has been recorded in comprehensive income.



Effective July 6, 2004, we entered into a two-year interest rate cap agreement in notional amount of $25,000. We also entered into three two-year interest rate cap agreements in notional amounts of $20,000 each,
effective September 11, 2003 (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 operations as interest expense during the period of change. The change in the Caps fair value resulted in additional interest expense of $112, before tax, for the nine month period ended December 31, 2004. The
Caps limit our interest rate risk exposure for the related notional amounts to a 4% LIBOR rate plus the applicable margin. No payments have been received under the Caps.



NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS



On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004),
Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No.
95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.



Statement 123(R) must be adopted no later than July 1, 2005. Early adoption will be permitted in periods in which financial statements have not yet been
issued. We expect to adopt Statement 123(R) on July 1, 2005.



As permitted by Statement 123, the company currently accounts for share-based payments to employees using Opinion 25s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options.
Accordingly, the adoption of Statement 123(R)s fair value method will have a significant impact on our results of operations, although it will have no impact on our overall financial position. The impact of adoption of Statement 123(R) cannot
be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact of Statement 123 as
described in the disclosure of pro forma net income and earnings per share in Note 2 to our consolidated financial statements. Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as
a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While the company cannot
estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized for such excess tax deductions was $3,996 for fiscal year 2004 and
$3,926 for the nine month period ended December 31, 2004.



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NOTE 8. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION



We have issued $57,500 of 4% convertible senior subordinated notes that are
fully and unconditionally guaranteed on a joint and several basis by all our existing subsidiaries (the Guarantors), each of which we wholly own, directly or indirectly. We are a holding company and all of our operations are conducted by the
Guarantors; we have no operations or assets separate from our investment in our subsidiaries.



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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 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, 2004. 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 affect on our cash flow if downturns in economic and business conditions hinder our ability to adjust to rapidly changing
market conditions.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | covenants in our new 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 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to timely 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, 2004. 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 contract
services for automated office equipment, including copiers, facsimile machines and printers, network integration solutions and electronic presentation systems. Network integration solutions and electronic presentation systems are sometimes known as
the technology side of our business. 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 Konica Minolta, Canon, Ricoh, Sharp, Hewlett-Packard, IBM, Microsoft, NEC, InFocus and other leading companies, we offer solutions for our customers from a network of 180 locations in 30 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 60 businesses, all within the United States, which we have organized as a network of 18 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 served by us; and the mix of revenues of the businesses we acquire. As we acquire businesses, the percentage of our revenues that come from sales of
equipment and supplies, as opposed to service and rentals, fluctuates depending on whether the businesses acquired are primarily automated office equipment dealers or are network integrators or electronic presentation systems dealers. 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. To the extent the network integration or electronic presentation systems markets grow faster than the automated office equipment market, over time a larger percentage of our revenues
and gross profits may be derived from sales that have lower gross profit margins than our current gross profit margins.



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 generally depreciate our rental equipment primarily over a three-year period on a straight-line basis.



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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 estimates and judgments 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 estimates and judgments are based on currently available 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 appraisal 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 is based either on 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 could have an adverse effect on our financial results.



Vendor Incentives



We receive incentives from some of our vendors related to volume rebates, cooperative advertising allowances and other programs or agreements. These
incentive programs are generally for quarterly periods and do not vary significantly from quarter to quarter. There are a limited number of annual volume rebate programs offered periodically by some of our vendors. The potential rebate amounts
offered by these annual programs is significantly less than the quarterly rebate programs. 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



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##### Table of Contents

deferred in the consolidated balance sheets. 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 have recorded 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, and other intangible assets. We examine the carrying value of our goodwill and our other intangible assets as current events and circumstances warrant determining whether there are any impairment
losses. For goodwill, we test the recorded amount for impairment as of the first day of the fourth quarter of our fiscal year, or more frequently if conditions change, by comparing the recorded value to 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. Other intangible assets are amortized over their estimated lives.



Contingencies



We accrue amounts for losses arising from contingent obligations, including estimated legal costs, 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 and the entire corresponding period in the prior year
to the total revenues earned by those same businesses during the corresponding period in the prior year. The internal 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 EndedDecember 31, |         |   | Nine Months EndedDecember 31, |  
|                                             |  | 2004                           |         |   | 2003                          |   |         | 2004 |  |   | 2003    |  
|Revenues:                                    |  |                                |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Equipment revenues                           |  | $                              | 139,156 |   |                               | $ | 117,562 |      |  | $ | 411,737 |   |  | $ | 350,875 |  
|Supplies revenues                            |  |                                | 34,165  |   |                               |   | 22,972  |      |  |   | 96,994  |   |  |   | 68,511  |  
|                                             |  |                                |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Equipment and supplies revenues              |  |                                | 173,321 |   |                               |   | 140,534 |      |  |   | 508,731 |   |  |   | 419,386 |  
|                                             |  |                                |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Service revenues                             |  |                                | 56,027  |   |                               |   | 43,073  |      |  |   | 158,847 |   |  |   | 126,118 |  
|Rental revenues                              |  |                                | 4,174   |   |                               |   | 3,877   |      |  |   | 11,480  |   |  |   | 11,219  |  
|                                             |  |                                |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Service and rental revenues                  |  |                                | 60,201  |   |                               |   | 46,950  |      |  |   | 170,327 |   |  |   | 137,337 |  
|                                             |  |                                |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Total revenues                               |  | $                              | 233,522 |   |                               | $ | 187,484 |      |  | $ | 679,058 |   |  | $ | 556,723 |  
|                                             |  |                                |         |   |                               |   |         |      |  |   |         |   |  |   |         |  
|Estimated internal growth rates for revenues |  |                                | 4.9     | % |                               |   | 7.5     | %    |  |   | 3.8     | % |  |   | 7.5     | %



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 EndedDecember 31, |        |   | Nine Months EndedDecember 31, |  
|                                                         |  | 2004                           |        |   | 2003                          |   |        | 2004 |  |   | 2003    |  
|Gross profit by revenue type:                            |  |                                |        |   |                               |   |        |      |  |   |         |   |  |   |         |  
|Equipment                                                |  | $                              | 45,865 |   |                               | $ | 37,693 |      |  | $ | 137,376 |   |  | $ | 110,219 |  
|Supplies                                                 |  |                                | 16,072 |   |                               |   | 11,698 |      |  |   | 46,138  |   |  |   | 34,563  |  
|Service                                                  |  |                                | 27,947 |   |                               |   | 20,991 |      |  |   | 78,936  |   |  |   | 62,433  |  
|Rental                                                   |  |                                | 1,578  |   |                               |   | 1,372  |      |  |   | 4,045   |   |  |   | 3,779   |  
|                                                         |  |                                |        |   |                               |   |        |      |  |   |         |   |  |   |         |  
|Total gross profit                                       |  | $                              | 91,462 |   |                               | $ | 71,754 |      |  | $ | 266,495 |   |  | $ | 210,994 |  
|                                                         |  |                                |        |   |                               |   |        |      |  |   |         |   |  |   |         |  
|Gross profit by revenue type as a percentage of revenue: |  |                                |        |   |                               |   |        |      |  |   |         |   |  |   |         |  
|Equipment                                                |  |                                | 33.0   | % |                               |   | 32.1   | %    |  |   | 33.4    | % |  |   | 31.4    | %
|Supplies                                                 |  |                                | 47.0   | % |                               |   | 50.9   | %    |  |   | 47.6    | % |  |   | 50.4    | %
|Service                                                  |  |                                | 49.9   | % |                               |   | 48.7   | %    |  |   | 49.7    | % |  |   | 49.5    | %
|Rental                                                   |  |                                | 37.8   | % |                               |   | 35.4   | %    |  |   | 35.2    | % |  |   | 33.7    | %
|                                                         |  |                                |        |   |                               |   |        |      |  |   |         |   |  |   |         |  
|Total gross profit as a percentage of revenue            |  |                                | 39.2   | % |                               |   | 38.3   | %    |  |   | 39.2    | % |  |   | 37.9    | %
|                                                         |  |                                |        |   |                               |   |        |      |  |   |         |   |  |   |         |  



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THREE MONTHS ENDED DECEMBER 31, 2004 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2003



Revenues



Total revenues for the three months ended December 31, 2004 were $233,522,
which represents an increase of 24.6% over the same period in fiscal year 2004. The majority of the revenue growth was attributable to revenues from five businesses acquired during the nine months ended December 31, 2004 and two businesses acquired
during the fiscal year ended March 31, 2004 that were not a part of our business for the full quarter last year. The balance of the increase in revenues was due to growth from our existing companies. Our estimated combined internal revenue growth
rate for the three months ended December 31, 2004 was 4.9%. Our estimated internal growth rate for automated office equipment was 7.1%, and the technology side of our business showed a 1.2% decline. Our technology business faced a very strong prior
year internal growth rate comparison of 23%.



Equipment and
supplies revenues for the three months ended December 31, 2004 were $173,321, which represents an increase of 23.3% over the same period in fiscal year 2004. Equipment revenues increased 18.4% and supplies revenues increased 48.7%, with the majority
of the revenue growth due to the businesses acquired during the nine months ended December 31, 2004 and fiscal year 2004.



Service and rental revenues for the three months ended December 31, 2004 were $60,201, which represents an increase of 28.2% over the same period in
fiscal year 2004. Service revenues increased 30.1% and rental revenues increased 7.7%, with the majority of the revenue growth due to the businesses acquired during the nine months ended December 31, 2004 and fiscal year 2004.



Gross Profit



Gross profit for the three months ended December 31, 2004 totaled $91,462, a
27.5% increase over the same period in fiscal year 2004. This gross profit increase is primarily due to the acquisition of automated office equipment dealers during the nine months ended December 31, 2004 and fiscal year 2004.



The gross profit margin for equipment revenues for the three months ended
December 31, 2004 increased 0.9 percentage points from the same period one year ago. The gross profit margin primarily increased due to internal growth of automated office equipment revenues, which historically have higher gross profit margins than
network integration solutions revenues and electronic presentation systems revenues.



Supplies gross profit margin for the three months ended December 31, 2004 decreased 3.9 percentage points as compared to the same period one year ago. The decrease is primarily the result of the lower supplies gross
profit margins of businesses acquired during the nine months ended December 31, 2004. One of the acquired businesses includes a wholesale division which generally has lower gross profit margins.



Service gross profit margin for the three months ended December 31, 2004
increased 1.2 percentage points from the same period one year ago. The gross profit margin primarily increased due to internal growth of automated office equipment service revenues, which historically have higher gross profit margins than network
integration solutions revenues and electronic presentation systems revenues.



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Rental gross profit margin for the three months ended December 31, 2004 increased 2.4 percentage points
from the same period last year, primarily due to an increase in automated office equipment rental revenues, which is slightly offset by an increase in rental depreciation expense as a result of new equipment rental replacements in our equipment mix
versus older fully depreciated equipment.



Selling, General
and Administrative Expenses



Selling, general and
administrative (SG&A) expenses totaled $63,952 representing an increase of 28.6% over the prior year quarter. SG&A expenses were 27.4% of total revenues for the three months ended December 31, 2004 as compared to 26.5% of total
revenues for the same period a year ago. These expenses increased in total principally due to acquisitions. Increased integration costs associated with acquisitions, increased payroll expense, and increased health and other insurance expense
primarily attributed to the current quarter increase as a percentage of revenues.



Intangible Asset Amortization



Intangible asset amortization was $300 for the three months ended December 31, 2004 compared to $125 for the same period in fiscal year 2004. The increase for the current quarter is principally due to the amortization of non-compete
agreements and amounts allocated to customer relationships resulting from the ITG acquisition.



Income From Operations



Income from operations was $27,210, or 11.7% of total revenues, for the three months ended December 31, 2004 compared to $21,912, or 11.7% of total revenues, for the same period in fiscal year 2004. Income from operations was positively
impacted by the increase in combined revenues and gross profit as discussed above, which was offset by the increase in SG&A expenses.



Interest Expense



Interest expense increased 21.7% to $3,129 for the three months ended December 31, 2004 compared to $2,572 for the same period in fiscal year 2004. The
increase in interest expense was due to a higher average level of borrowings offset slightly by lower interest rates. Interest expense includes the amortization of financing fees incurred in connection with our new senior credit facility and the 4%
convertible senior subordinated notes due 2008 for the three months ended December 31, 2004 and our prior senior credit facilities and the 4% convertible senior subordinated notes due 2008 for the prior year period.



Income Taxes



The provision for income taxes was $9,151 for the three months ended
December 31, 2004 compared to $7,504 for the same period in fiscal year 2004. The increase in income taxes was primarily due to increased pre-tax income for the three months ended December 31, 2004, slightly offset by a reduction in the effective
income tax rate. The effective income tax rate was 38.0% for the three months ended December 31, 2004 and 38.8% for the same period in fiscal year 2004. The decline in the effective income tax rate is due to a lower combined state income tax rate.



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NINE MONTHS ENDED DECEMBER 31, 2004 COMPARED TO NINE MONTHS ENDED DECEMBER 31, 2003



Revenues



Total revenues for the nine months ended December 31, 2004 were $679,058,
which represents an increase of 22.0% over the same period in fiscal year 2004. The majority of the revenue growth was attributable to revenues from five businesses acquired during the nine months ended December 31, 2004 and five businesses acquired
during the fiscal year ended March 31, 2004 that were not a part of our business for the full nine months last year. The balance of the increase in revenues was due to growth shown from our existing companies. Our estimated combined internal growth
rate for the nine months ended December 31, 2004 was 3.8%. Our estimated internal growth rate for automated office equipment was 3.3%, and the technology side of our business grew at 5.2%.



Equipment and supplies revenues for the nine months ended December 31, 2004
were $508,731, which represents an increase of 21.3% over the same period in fiscal year 2004. Equipment revenues increased 17.3% and supplies revenues increased 41.6%, with the majority of the revenue growth due to the businesses acquired during
the nine months ended December 31, 2004 and fiscal year 2004.



Service and rental revenues for the nine months ended December 31, 2004 were $170,327, which represents an increase of 24.0% over the same period in fiscal year 2004. Service revenues increased 26.0% and rental revenues increased 2.3%, with
the majority of the service revenue growth due to the businesses acquired during the nine months ended December 31, 2004 and fiscal year 2004.



Gross Profit



Gross profit for the nine months ended December 31, 2004 totaled $266,495, a 26.3% increase over the same period in fiscal year 2004. This gross profit
increase is primarily due to the acquisition of automated office equipment dealers during the nine months ended December 31, 2004 and fiscal year 2004.



The gross profit margin for equipment revenues for the nine months ended December 31, 2004 increased 2.0 percentage points from the same period one year
ago. This is primarily due to an increase in gross profit margins of automated office equipment.



Supplies gross profit margin for the nine months ended December 31, 2004 decreased 2.8 percentage points as compared to the same period one year ago. The
decrease is primarily the result of the lower supplies gross profit margins of businesses acquired during the nine months ended December 31, 2004. One of the acquired businesses includes a wholesale division which generally has lower gross profit
margins.



Service gross profit margin for the nine months ended
December 31, 2004 increased 0.2 percentage points from the same period one year ago. Gross profit primarily increased due to internal growth of automated office equipment service revenues, which historically have higher gross profit margins than
network integration solutions revenues and electronic presentation systems revenues.



Rental gross profit margin for the nine months ended December 31, 2004 increased 1.5 percentage points from the same period last year, primarily due to an increase in automated office equipment rental revenues, which
is slightly offset by an increase in rental depreciation expense as a result of new equipment rental replacements in our equipment mix versus older fully depreciated equipment.



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Selling, General and Administrative Expenses



Selling, general and administrative (SG&A) expenses totaled
$186,678 representing an increase of 26.5% over the prior year period. SG&A expenses were 27.5% of total revenues compared to 26.5% of total revenues for the nine months ended December 31, 2003. These expenses increased in total principally due
to acquisitions. As a percentage of revenues, the increase for the current period was the result of integration costs associated with acquisitions, increased payroll expense, increased health and other insurance expense, and sales training expense.



Intangible Asset Amortization



Intangible asset amortization was $1,051 for the nine months ended December
31, 2004 compared to $408 for the same period in fiscal year 2004. This amortization relates to non-compete agreements and customer relationships. The increase is principally due to amortization of amounts allocated to customer relationships
resulting from the ITG acquisition.



Income From Operations



Income from operations was $78,766, or 11.6% of total
revenues, for the nine months ended December 31, 2004 compared to $63,030, or 11.3% of total revenues, for the same period in fiscal year 2004. Income from operations was positively impacted by the increase in combined revenues and gross profit as
discussed above.



Loss on early extinguishment of debt



During the nine months ended December 31, 2004, we
incurred a loss on early extinguishment of debt in the amount of $1,655 related to the amendment of our prior credit facility.



During the nine months ended December 31, 2003, we incurred a loss on early extinguishment of debt in the amount of $8,433 related to the refinancing of
our prior senior credit facility and the redemption of our 103/4% senior subordinated notes due 2007. The loss
is made up of a prepayment premium of $5,375 for the early redemption of our 103/4% notes and a $3,058 non-cash
charge for the write-off of the unamortized portion of financing fees related to those notes and the prior senior credit facility.



Interest Expense



Interest expense decreased 7.9% to $8,623 for the nine months ended December 31, 2004 compared to $9,359 for the same period in fiscal year 2004. The
decrease in interest expense was due to lower interest rates offset by a slightly higher average level of borrowings. Interest expense includes the amortization of financing fees incurred in connection with our new senior credit facility, our prior
senior credit facility and the 4% convertible senior subordinated notes due 2008 for the nine months ended December 31, 2004 and our prior senior credit facilities, the 103/4% senior subordinated notes due 2007 and the 4% convertible senior subordinated notes due 2008 for the prior year period.



Income Taxes



The provision for income taxes was $26,070 for the nine months ended
December 31, 2004 compared to $17,722 for the same period in fiscal year 2004. The increase in income taxes was primarily due to increased pre-tax income for the nine months ended December 31, 2004, slightly offset by a reduction in the effective
income tax rate. The effective income tax rate was 38.1% for the nine months ended December 31, 2004 and 39.2% for the same period in fiscal year 2004. The decline in the effective income tax rate is due to a lower 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.



On May 16, 2003, we issued $57,500 of 4% convertible senior subordinated notes in a private placement to institutional investors. We used the net proceeds
of approximately $55,500 from the offering to repay a portion of the amount outstanding under our prior senior credit facility. The convertible notes bear interest at 4%, payable semi-annually, and are convertible into our common stock at any time
at the conversion rate of approximately 41.8550 shares per one thousand principal amount of the convertible notes. This is equivalent to a conversion price of $23.892 per share. The convertible notes may be redeemed on or after May 20, 2006, in
whole or in part, at the following redemption prices expressed as percentages of the principal amount:



|                                  |  |            |  
|--------------------------------- |  | ---------- | -
|Redemption Period                 |  | Percentage |  
|May 20, 2006 through May 14, 2007 |  | 101.6      | %
|May 15, 2007 through May 14, 2008 |  | 100.8      | %
|May 15, 2008 and thereafter       |  | 100.0      | %



The convertible notes
are jointly and severally guaranteed by our current and certain of our future subsidiaries on a senior subordinated basis.



On May 10, 2004, in conjunction with our purchase of ITG, we entered into the second amendment of our senior credit facility. We refer to the second
amendment of our senior credit facility as our new senior credit facility. Our new senior credit facility is with a group of banks and financial institutions, with Wachovia Bank, National Association serving as administrative agent. Our new senior
credit facility is comprised of a $70,000 five-year revolving credit line and a $208,950 six-year term loan. The revolving credit line of the new senior credit facility bears interest at rates ranging from 1.50% to 2.00% over LIBOR or from .50% to
1.00% over a base rate related to the prime rate, and varies according to our ratio of total funded debt to earnings before interest, taxes, depreciation and amortization. The term loan bears interest at a rate of 2.00% over LIBOR or .75% over 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 rate is .50% of the unused
balance. We paid commitment fees of $300 and $461 for the nine months ended December 31, 2004 and 2003, respectively, in connection with unused balances under both our prior and new senior credit facility. 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 May 10, 2009. The terms of the new senior credit facility require strict compliance with numerous
affirmative, negative, and financial covenants. Amounts borrowed under the senior credit facility may be used to fund working capital and general corporate purposes, including acquisitions, subject to the lenders approval in the case of
acquisitions with a cash purchase price of over $50,000 or an aggregate purchase price (cash, stock or other consideration) of over $75,000. As of December 31, 2004, we had $69,500 of additional borrowing availability under the revolving credit
portion of our new senior credit facility. This amount has been reduced by $500 to reflect the



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aggregate amount of an outstanding standby letter of credit issued under the new senior credit facility to support our obligations incurred in the ordinary
course of business. As of December 31, 2004, no amounts had been paid under this letter of credit.



Net cash provided by operating activities totaled $37,823 for the nine months ended December 31, 2004 as compared to $45,965 in the prior year period. The
decrease was primarily attributable to increases in accounts receivable and inventory, partially offset by an increase in net income. Net cash used in investing activities of $158,677 during the nine months ended December 31, 2004 was primarily for
the acquisition of ITG and other businesses, as well as purchases of property, equipment and rental equipment. Net cash provided by financing activities of $74,413 during the nine months ended December 31, 2004 was primarily for financing associated
with the ITG acquisition.



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, other than those described below, to
the information in the Item 7A disclosure made in our Annual Report on Form 10-K for the fiscal year ended March 31, 2004.



Effective July 6, 2004, we entered into an interest rate cap agreement (cap) in the notional amount of $25,000. This cap is not designated as a hedging
instrument and as such, is recorded on the consolidated balance sheet at fair value, with changes in the fair value of the cap being recorded in the consolidated statement of operations during the period of change. The cap limits our interest rate
risk exposure for the related notional amount to a 4% LIBOR rate plus the applicable margin.



During December 2004, we entered into two one-year 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 will pay an average LIBOR fixed rate of 3.8% and under the second swap agreement, we will pay an average LIBOR fixed rate of 3.9%. Both agreements are effective for a
period of two years, beginning December 2005.



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##### Table of Contents

ITEM 4. CONTROLS AND PROCEDURES



(a)
Disclosure controls and procedures. We maintain disclosure controls and procedures designed to ensure that we are able to collect and record the information we are required to disclose in the reports we file with the Securities and Exchange
Commission (SEC), and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on their evaluation of our disclosure controls and procedures, the chief executive officer and
chief financial officer believe that these controls and procedures were effective, as of the end of the period covered by this report, to ensure that we are able to collect, process and disclose the information we are required to disclose in the
reports we file with the SEC within the required time periods.



(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.



PART II - OTHER INFORMATION



ITEM 6. EXHIBITS



The Exhibit Index
filed herewith is incorporated herein by reference.



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##### Table of Contents

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)                                                                                                                             
|                 |  | 
|February 8, 2005 |  |  |  | /s/ Raymond Schilling                                                                                                                    
|Date             |  |  |  | Raymond Schilling                                                                                                                        
|                 |  |  |  | On behalf of Global Imaging Systems and as Senior Vice President and Chief Financial Officer (Principal Financial and Accounting
Officer)



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##### Table of Contents

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   |  | Employment Agreement, dated as of January 26, 2005, by and between Global and Michael E. Shea* (4)                                                       
|       | 
|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.

---

|* | Management or compensatory contract.
|- | ------------------------------------

|(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.
|--- | --------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to Exhibit 10 to Globals Current Report on Form 8-K, as filed with the SEC on January 28, 2005.
|--- | --------------------------------------------------------------------------------------------------------------------------



27