UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

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

               For the quarterly period ended September 30, 2004

|_|      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                                      ACT
      For the transition period from _________________ to _________________

                         Commission file number 0-49783

                               TCI Solutions, Inc.
        (Exact name of small business issuer as specified in its charter)

                      Delaware                           33-0537151
               (State of incorporation)        (IRS Employer Identification No.)

                         17752 Skypark Circle, Suite 160
                            Irvine, California 92614
                                 (949) 476-1122
          (Address and telephone number of principal executive offices)


         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 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 |_|

         The number of shares outstanding of the registrant's Common Stock,
$0.001 par value, was 12,825,459 as of October 25, 2004.


                                       1
<PAGE>


PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------------------------------------------------------------------

                               TCI Solutions, Inc.
                            CONDENSED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                         September 30, 2004                    December 31, 2003
                                               ----------------------------------     ----------------------------------
<S>                                                       <C>                                 <C>
ASSETS
Current assets:
   Cash and cash equivalents                              $         1,685,507                 $          3,679,331
   Accounts receivable, net
      of allowances of $235,824
      at 9/30/04 and $630,404 at
      12/31/03                                                      3,989,837                            3,254,155
   Prepaid expenses and
       other current assets                                           242,204                              245,584
                                               ----------------------------------     ----------------------------------

       Total current assets                                         5,917,548                            7,179,070
   Property and equipment, net                                      1,407,705                            1,722,700
   Goodwill                                                           529,031                              529,031
   Other assets                                                        18,164                               19,765
                                               ----------------------------------     ----------------------------------
                 Total assets                             $         7,872,448                 $          9,450,566
                                               ==================================     ==================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                       $         1,069,789                 $          1,244,847
   Accrued expenses                                                 1,033,712                            1,037,585
   Line of credit                                                   1,459,321                            1,604,911
   Current portion of capital
      lease obligations                                                24,270                               24,270
   Deferred revenue                                                 1,887,767                              765,440
                                               ----------------------------------     ----------------------------------
                 Total current liabilities                          5,474,859                            4,677,053
                                               ----------------------------------     ----------------------------------
Capital lease obligation, net
   of current portion                                                  17,580                               34,873
                                               ----------------------------------     ----------------------------------
                 Total liabilities                        $         5,492,439                 $          4,711,926
                                               ----------------------------------     ----------------------------------

Commitments and
   contingencies (Note 4)

Stockholders' equity:
   Convertible preferred stock                            $        17,850,740                 $         17,850,740
   Common stock                                                    37,481,222                           37,479,291
   Warrants to purchase
      common stock                                                    178,129                              178,129
   Accumulated deficit                                            (53,130,082)                         (50,769,520)
                                               ----------------------------------     ----------------------------------
                 Net stockholders' equity                           2,380,009                            4,738,640
                                               ----------------------------------     ----------------------------------
Total liabilities and
   stockholders' equity                                   $         7,872,448                 $          9,450,566
                                               ==================================     ==================================
</TABLE>


            See accompanying notes to condensed financial statements


                                       2
<PAGE>


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

                               TCI Solutions, Inc.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                        Three Months Ended                              Nine Months Ended
                                                           September 30,                                  September 30,

                                           ---------------------------------------        ---------------------------------------
                                                    2004                   2003                  2004                   2003
<S>                                              <C>                     <C>                  <C>                    <C>
Revenues:
   Software licenses                             $1,919,732              $984,854             $4,129,154             $5,618,858
   Services                                       2,585,838             2,435,172              8,003,741              6,682,881
   Maintenance                                    1,255,231               997,585              3,767,823              2,991,274
   Other                                            152,210               478,790                524,172              1,290,986

                                           ---------------------------------------        ---------------------------------------
Total revenues                                    5,913,011             4,896,401             16,424,890             16,583,999
Cost of revenues:
   Software licenses                                 77,644                46,322                412,330                641,444
   Services                                       1,727,264             1,379,025              5,392,921              4,048,819
   Maintenance                                      162,260               232,885                718,125                896,098
   Other                                            173,136               452,024                487,553                971,829

                                           ---------------------------------------        ---------------------------------------
Total cost of revenues                            2,140,304             2,110,256              7,010,929              6,558,190

Gross profit                                      3,772,707             2,786,145              9,413,961             10,025,809

Operating expenses:
   Product development                              743,595               847,330              2,574,755              2,984,813
   Sales and marketing                            1,740,463             1,680,850              5,266,791              5,708,829
   General and administrative                     1,153,136             1,368,102              3,875,661              4,318,710

                                           ---------------------------------------        ---------------------------------------
Total operating expenses                          3,637,194             3,896,282             11,717,207             13,012,352

                                           ---------------------------------------        ---------------------------------------
Income(loss) from operations                        135,513            (1,110,137)            (2,303,246)            (2,986,543)

  Other expense, net                                (19,070)              (46,203)               (57,315)               (71,823)

                                           ---------------------------------------        ---------------------------------------
Income (loss) before income taxes                   116,443            (1,156,340)            (2,360,561)            (3,058,366)
Provision for income taxes                              --                     --                     --                     --

                                           ---------------------------------------        ---------------------------------------
Net income (loss)                                  $116,443           ($1,156,340)           ($2,360,561)           ($3,058,366)
                                           ======================================================================================
Net income (loss) per share
                        - basic                       $0.01                ($0.09)                ($0.18)                ($0.24)
                        - diluted                     $0.00                ($0.09)                ($0.18)                ($0.24)
Weighted average common
  shares outstanding

                        - basic                  12,823,777            12,819,263             12,821,531             12,819,263
                        - diluted                45,385,327            12,819,263             12,821,531             12,819,263
</TABLE>


           See accompanying notes to condensed financial statements.


                                       3
<PAGE>


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

                               TCI Solutions, Inc.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                          Nine Months Ended
                                                            September 30,
                                      ---------------------------   ---------------------------
                                                    2004                         2003
                                      ---------------------------   ---------------------------
<S>                                         <C>                           <C>
Operating activities
Net loss                                    $       (2,360,561)           $       (3,058,368)
Adjustments to reconcile net
   loss to net cash provided
by(used in) operating activities:
Depreciation and amortization                          479,861                       448,848
Provision for doubtful accounts                        (50,000)                      420,000
Changes in operating assets
   and liabilities:
Accounts receivable                                   (685,682)                    2,595,227
Prepaid expenses and other
   current assets                                        3,380                        90,668
Other assets                                             1,601                        (1,740)
Accounts payable                                      (175,058)                     (226,669)
Accrued expenses                                        (3,873)                   (1,232,248)
Deferred revenue                                     1,122,327                     1,163,703

                                      ---------------------------   ---------------------------
Net cash provided by(used in)
   operating activities                             (1,668,005)                      199,421
Investing activities
Purchases of property and
   equipment                                          (164,866)                     (738,053)
Financing activities
Proceeds from line of credit                                 -                       500,000
Repayments on line of credit                          (145,590)                     (191,307)
Principal payments on
   capital lease obligations                           (17,293)                       (4,889)
Proceeds from issuance of
   common stock                                          1,930                             0

                                      ---------------------------   ---------------------------
Net cash provided by(used in)
   financing activities                               (160,953)                      303,804

                                      ---------------------------   ---------------------------
Net decrease in
   cash and cash equivalents                        (1,993,824)                     (234,828)
Cash and cash equivalents at
   beginning of period                               3,679,331                     5,122,913

                                      ---------------------------   ---------------------------
Cash and cash equivalents at
   end of period                            $        1,685,507            $        4,888,085
                                      ===========================   ===========================

</TABLE>


           See accompanying notes to condensed financial statements.

                                       4
<PAGE>


--------------------------------------------------------------------------------
                               TCI Solutions, Inc.
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
                 Nine months Ended September 30, 2004 and 2003

1. Nature of Operations and Summary of Accounting Policies

The accompanying unaudited condensed financial statements included herein have
been prepared by us in conformity with accounting principles generally accepted
in the United States of America and pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) for interim financial information for
reporting on Form 10-QSB. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. Our unaudited
condensed financial statements should be read in conjunction with the financial
statements and notes thereto included in our Form 10-KSB for the year ended
December 31, 2003.

In managements opinion, the accompanying unaudited condensed financial
statements contain all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of our financial position, results of
operations and cash flows.

The results of operations for the three and nine months ended September 30,
2004, are not necessarily indicative of the results of operations that may be
reported for any other interim period or for the entire year ending December 31,
2004. The balance sheet at December 31, 2003 has been derived from the audited
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 of America for complete financial statements, as permitted by SEC rules
and regulations for interim reporting.

Reclassifications

Certain amounts previously reported have been reclassified to conform with the
presentation for the three and nine months ended September 30, 2004.

Revenue Recognition

We license software products under non-cancelable perpetual license agreements
and provide related services, including consulting and customer support. We
recognize revenue in accordance with SOP 97-2, Software Revenue Recognition, as
amended and interpreted by SOP 98-9, Modification of SOP 97-2, Software Revenue
Recognition, with respect to certain transactions, as well as Technical Practice
Aids issued from time to time by the American Institute of Certified Public
Accountants and Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition
in Financial Statements, which provides further interpretive guidance for public
reporting companies on the recognition, presentation and disclosure of revenue
in financial statements.

Software license revenue is recognized when a license agreement has been signed,
the software product has been delivered, there are no uncertainties surrounding
product acceptance, the fees are fixed and determinable and collection is
considered reasonably assured. If a software license contains an undelivered
element, the fair value of the undelivered element is deferred and the revenue
recognized once the element is delivered. Revenues attributable to undelivered
elements, including consulting services and post-contract support, are based on
the average sales price of those elements when sold separately. In addition, if
a software license contains customer acceptance criteria or a cancellation
right, the software revenue is recognized upon the earlier of customer
acceptance or the expiration of the acceptance period or cancellation right. We
do not offer rights of return. In certain cases, we do offer extended payment
terms to customers, which do not exceed one year from shipment.

Services are separately priced, are generally available from a number of
suppliers and are not essential to the functionality of our software products.
Services, which include project management, system planning, design and
implementation, customer configurations and training, are billed on an hourly
basis. Services revenue billed on an hourly basis is recognized as the work is
performed. Customer support services


                                       5
<PAGE>


include post-contract support and the rights to unspecified upgrades and
enhancements, when and if available. Maintenance revenues from ongoing customer
support services are billed on an annual basis with the revenue being deferred
and recognized ratably over the maintenance period.

Other revenue consists of the sales of hardware products and is recognized upon
delivery and passage of title.

Basic and Diluted Net Income (Loss) Per Share

Net income (loss) per share is calculated in accordance with SFAS No. 128,
"Earnings Per Share." Under the provisions of SFAS No. 128, basic net income
(loss) per share is computed by dividing the net income (loss) for the period by
the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per share is computed by dividing net income (loss)
for the period by the weighted average number of common and common equivalent
shares outstanding during the period if their effect is dilutive. Common
equivalent shares include convertible preferred stock and common stock options.
For the three months ended September 30, 2004, common equivalent shares of
32,561,550 have been included in diluted weighted average common shares. For the
nine months ended September 30, 2004, common equivalent shares of 32,589,841
have been excluded from diluted weighted average common shares as the effect
would be anti-dilutive. For the three and nine months ended September 30, 2003,
common equivalent shares of 32,524,211 have been excluded from diluted weighted
average common shares as the effect would be anti-dilutive.

Stock-Based Compensation

We account for employee stock-based compensation in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations and have adopted the
disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation.

SFAS No. 123, Accounting for Stock-Based Compensation, requires the disclosure
of pro forma net income (loss) had we adopted the fair value method. Under SFAS
No. 123, the fair value of stock-based awards to employees is calculated through
the use of option-pricing models, even though such models were developed to
estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which significantly differ from our stock option awards.
These models also require subjective assumptions, including expected life, which
greatly affect the calculated values. Our calculations were made using the
Black-Scholes option-pricing model (minimum value method) with the following
weighted-average assumptions: expected life of six years; stock volatility, 1%;
risk-free interest rates, 4.0% for the three and nine months ended September 30,
2004 and 2003, respectively; and no dividends during the expected term. Our
calculations are based on an option valuation approach, and forfeitures are
recognized as they occur. The effects of applying SFAS No. 123 in this pro forma
disclosure are not necessarily indicative of future amounts.

Had compensation costs been determined based on the fair value of the options
and warrants at the grant dates consistent with the minimum value method of SFAS
No. 123, our net income (loss) would have been the following in the three and
nine months ended September 30, 2004 and 2003:


                                       6
<PAGE>


<TABLE>
<CAPTION>

Three months-ended September 30,                                            2004                             2003
--------------------------------                                     --------------------           --------------------
<S>                                                                    <C>                            <C>
Net income(loss):
  As reported                                                          $       116,443                $      (1,156,340)
  Add:  Total stock-based employee compensation expense
        determined under fair value based method for all awards                (30,733)                          (4,269)
                                                                     --------------------           --------------------
  Pro forma                                                            $        85,710                $      (1,160,609)
                                                                     ====================           ====================

Net income(loss) per share--basic:
  As reported                                                                    $0.01                           ($0.09)
  Pro forma                                                                      $0.01                           ($0.09)

Net income(loss) per share--diluted:
  As reported                                                                    $0.00                           ($0.09)
  Pro forma                                                                      $0.00                           ($0.09)


Nine months-ended September 30,                                           2004                             2003
-------------------------------                                      --------------------           --------------------
Net loss:
  As reported                                                          $    (2,360,561)               $      (3,058,366)
  Add:  Total stock-based employee compensation expense
        determined under fair value based method for all awards               (167,085)                          (7,584)
                                                                     --------------------           --------------------
  Pro forma                                                            $    (2,527,646)               $      (3,065,950)
                                                                     ====================           ====================

Net loss per share--basic and diluted:
  As reported                                                                   ($0.18)                          ($0.24)
  Pro forma                                                                     ($0.20)                          ($0.24)
</TABLE>



New Accounting Pronouncements


In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities. In general, a variable interest entity is a corporation, partnership,
trust or any other legal structure used for business purposes that either (a)
does not have equity investors with voting rights or (b) has equity investors
that do not provide sufficient financial resources for the entity to support its
activities. FIN 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. The consolidation requirements of FIN 46
apply immediately to variable interest entities created after January 31, 2003.
With respect to variable interest entities created before January 31, 2003, in
December 2003, the FASB issued FIN 46R, which, among other things, revised the
implementation date to first fiscal years or interim periods ending after March
15, 2004, with the exception of Special Purpose Entities ("SPE"). The
consolidation requirements apply to all SPE's in the first fiscal year or
interim period ending after December 15, 2003. As we have determined that we do
not have any SPE's to which these interpretations apply, the adoption of FIN 46R
did not have a material impact on our financial statements.


In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both debt and equity and requires an issuer to classify the
following instruments as liabilities in it balance sheet:


                                       7
<PAGE>


     o   A financial instrument issued in the form of shares that is mandatorily
         redeemable and embodies an unconditional obligation that requires the
         issuer to redeem it by transferring its assets at a specified or
         determinable date or upon an event that is certain to occur;

     o   A financial instrument, other than an outstanding share, that embodies
         an obligation to repurchase the issuer's equity shares, or is indexed
         to such an obligation, and requires the issuer to settle the obligation
         by transferring assets; and

     o   A financial instrument that embodies an unconditional obligation that
         the issuer must settle by issuing a variable number of its equity
         shares if the monetary value of the obligation is based solely on
         predominantly on (1) a fixed monetary amount, (2) variations in
         something other than the fair value of the issuer's equity shares, or
         (3) variations inversely related to changes in the fair value of the
         issuer's equity shares.


In November 2003, the FASB issued FASB Staff Position (FSB) No. 150-3, which
deferred the effective dates for the applying certain provisions of SFAS No. 150
related to mandatorily redeemable financial instruments of certain nonpublic
entities and certain mandatorily redeemable non-controlling interests for public
and nonpublic entities.

For public entities, SFAS No. 150 is effective for mandatorily redeemable
financial instruments entered into or modified after May 31, 2003 and is
effective for all other financial instruments as of the first interim period
beginning after June 15, 2003.

For mandatorily redeemable non-controlling interests that would not have to be
classified as liabilities by a subsidiary under the exception in paragraph 9 of
SFAS No. 150, but would be classified as liabilities by the parent, the
classification and measurement provisions of SFAS No. 150 are deferred
indefinitely. For other mandatorily redeemable non-controlling interests that
were issued before November 5, 2003, the measurement provisions of SFAS No. 150
are deferred indefinitely. For those instruments, the measurement guidance for
redeemable shares and non-controlling interests in other literature shall apply
during the deferral period.

SFAS No. 150 is to be implemented by reporting the cumulative effect of a change
in accounting principle. We do not believe that the adoption of the deferred
provisions of SFAS No. 150 will have a material impact on our financial
statements.

2. Segment Information and Customer Concentration

Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by our
chief operating decision-maker, or decision-making group, in deciding how to
allocate resources and in assessing performance. Our operating segments are
managed separately because each segment represents a strategic business unit
that offers different products or services.

Our reportable operating segments include software licenses, maintenance,
services, and other. The software licenses operating segment develops and
markets our software products. The maintenance operating segment includes
post-sale support of our software products and the rights to unspecified
upgrades and enhancements, when and if available. The services segment provides
fee-based implementation and training services related to our products. The
other segment represents third party hardware and software products.

We do not separately allocate operating expenses to these segments, nor do we
allocate specific assets to these segments. Therefore, segment information
reported includes only revenues, cost of sales, and gross profit, as this
information is provided to the chief operating decision-maker.

Operating segment data for the three and nine months ended September 30, 2004
and 2003 is as follows:


                                       8
<PAGE>


<TABLE>
<CAPTION>

                                           Software
                                           Licenses      Services    Maintenance      Other          Total
                                         -----------   -----------   -----------   -----------    -----------
Three months-ended September 30, 2004:
--------------------------------------
<S>                                      <C>           <C>           <C>           <C>            <C>
  Revenues                               $ 1,919,732   $ 2,585,838   $ 1,255,231   $   152,210    $ 5,913,011
  Cost of revenues                            77,644     1,727,264       162,260       173,136    $ 2,140,304
                                         -----------   -----------   -----------   -----------    -----------

    Gross profit                         $ 1,842,088   $   858,574   $ 1,092,971   $   (20,926)   $ 3,772,707
                                         ===========   ===========   ===========   ===========    ===========

Three months-ended September 30, 2003:
--------------------------------------
  Revenues                               $   984,854   $ 2,435,172   $   997,585   $   478,790    $ 4,896,401
  Cost of revenues                            46,322     1,379,025       232,885       452,024      2,110,256
                                         -----------   -----------   -----------   -----------    -----------

    Gross profit                         $   938,532   $ 1,056,147   $   764,700   $    26,766    $ 2,786,145
                                         ===========   ===========   ===========   ===========    ===========


Nine months-ended September 30, 2004:
-------------------------------------
  Revenues                               $ 4,129,154   $ 8,003,741   $ 3,767,823   $   524,172    $16,424,890
  Cost of revenues                           412,330     5,392,921       718,125       487,553    $ 7,010,929
                                         -----------   -----------   -----------   -----------    -----------

    Gross profit                         $ 3,716,824   $ 2,610,820   $ 3,049,698   $    36,619    $ 9,413,961
                                         ===========   ===========   ===========   ===========    ===========

Nine months-ended September 30, 2003:
-------------------------------------
  Revenues                               $ 5,618,858   $ 6,682,881   $ 2,991,274   $ 1,290,986    $16,583,999
  Cost of revenues                           641,444     4,048,819       896,098       971,829      6,558,190
                                         -----------   -----------   -----------   -----------    -----------

    Gross profit                         $ 4,977,414   $ 2,634,062   $ 2,095,176   $   319,157    $10,025,809
                                         ===========   ===========   ===========   ===========    ===========
</TABLE>


Two customers accounted for 35.5% and 31.7% of revenues for the three and nine
months ended September 30, 2004. Three customers accounted for 54.3% and 37.1%
of revenues for the three and nine months ended September 30, 2003.
Approximately 37.0% of accounts receivable was due from two customers as of
September 30, 2004. All of our customers are in the retail industry.



3. Credit Facility

We have an existing credit facility, which as amended, provides for a $3,000,000
revolving line of credit and a $500,000 equipment line of credit. Borrowings
under the revolving line of credit are limited to 80% of eligible accounts
receivable, as defined, and bear interest at 0.50% above the prime rate (4.00%
at September 30, 2004). The revolving line of credit matures in February 2005.

The equipment line of credit bears interest at 0.75% above the prime rate and is
payable monthly. On November 27, 2004, outstanding borrowings under the
equipment line of credit shall be payable in 30 equal monthly installments, plus
interest at 0.75% above the prime rate through the maturity date in June 2007.
At the time of maturity, all outstanding borrowings shall be immediately due and
payable.

As of September 30, 2004, we have outstanding borrowings against the credit
facility of $1,459,321, consisting of $208,529 under the equipment line of
credit and $1,250,791 under the revolving line of credit. As of September 30,
2004, available unused borrowings under the revolving line of credit were
$422,179.

Borrowings under the credit facility are secured by substantially all of our
assets and we are required to comply with certain financial covenants and
conditions, including quick ratio percentages. As of September 30, 2004, we were
in compliance with all financial covenants under our credit facility.


                                       9
<PAGE>


4.  Commitments and Contingencies

We lease certain facilities and equipment under non-cancelable agreements that
expire at various times through October 2007, which are accounted for as
operating leases.

Future minimum lease payments under non-cancelable operating leases consist of
the following

      Year ending December 31:
         2004 (Oct 1 through December 31)                 $158,422
         2005                                              641,514
         2006                                              603,941
         2007                                              596,294
                                                      ------------
      Future minimum lease payments                     $2,000,171
                                                      ============

Guarantees and Indemnifications - During our normal course of business,  we have
made  certain  indemnities,  commitments  and  guarantees  under which it may be
required to make payments in relation to certain transactions. These indemnities
include  intellectual  property  indemnities to our customers in connection with
the sales of our products,  indemnities  to various  lessors in connection  with
facility  leases for certain  claims  arising from such  facility or lease,  and
indemnities  to our directors and officers.  The duration of these  indemnities,
commitments  and  guarantees  varies and, in certain cases,  is indefinite.  The
majority of these indemnities, commitments and guarantees do not provide for any
limitation  of the maximum  potential  future  payments we could be obligated to
make.  Generally,  a maximum obligation arising out of these types of agreements
is not explicitly  stated,  and therefore,  the overall  maximum amount of these
obligations  cannot  be  reasonably  estimated.  Historically,  we have not been
obligated to make  significant  payments for these  obligations.  No liabilities
have been recorded for these  obligations  on our balance sheet at September 30,
2004.


                                       10
<PAGE>


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation.

We begin Management's Discussion and Analysis of Financial Condition and Results
of Operations (MD&A) with "Our Strategy" to give the reader an overview of
business goals and the direction in which our business and products are moving.
This is followed by a discussion of the "Critical Accounting Estimates" that we
believe are important to understanding the assumptions and judgments
incorporated in our reported financial results. We then discuss our "Results of
Operations," beginning with an Overview, followed by an analysis of changes in
our balance sheet and cash flows. We conclude this MD&A with our "Business
Outlook" section wherein we discuss the outlook for the remainder of 2004.


Forward Looking Statements


This MD&A should be read in conjunction with the other sections of this
Quarterly Report on Form 10-QSB, including "Item 1: Financial Statements". The
various sections of this MD&A contain a number of forward-looking statements,
all of which are based on our current expectations and could be affected by
uncertainties and risk factors described throughout this filing and particularly
in the "Business Outlook" section. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "plan," "seek," or "believe". We
believe that the expectations reflected in such forward-looking statements are
accurate. However, we can not assure you that such expectations will occur. Our
actual results may differ materially, and you should not unduly rely on these
forward-looking statements, which speak only as of the date of this report.
These forward-looking statements do not reflect the potential impact of any
business activities not completed as of November 12, 2004.


Our Strategy


We provide strategic pricing and inventory management solutions that enable
grocers to increase top and bottom lines by speeding decisions into action. By
helping grocers to automate complex pricing strategies, streamline inventory
management processes, and execute consistently across the retail enterprise -
from Headquarters to the Store - we empower grocery retailers and wholesalers to
connect with their customers, respond rapidly to market changes and dramatically
improve customer image. Our customers gain competitive advantage in their
markets using our strategic pricing and inventory management solutions, while
growing top-line revenues and improving chain and store profits. We service more
than 400 chains and have over 15,000 installations worldwide. TCI is a market
leader for strategic pricing and inventory management solutions within grocery
retail.

We intend to solidify our presence in grocery retail and wholesale, broaden our
product offering with new and complimentary products developed internally and
through partnerships, and focus on the critical elements of operational
execution. Our goal is to enhance retail operations and execution with high
quality solutions that retain and add valuable customers. Key elements of our
strategy to fulfill our vision are outlined in the points that follow:

     o   Operational Efficiency - Subsequent to a strategic review launched
         earlier this year by management, we reorganized in order to increase
         the allocation of resources to critical markets and products.
         Additionally, we more clearly defined our business strategy and core
         business activities. As a result, we have developed a new operating
         structure designed to help boost software license revenues and shrink
         operating costs in order to improve operational efficiency and enhance
         customer satisfaction. The actions we have taken include:

             o  New Market Definitions - Our focus began with clearly defining
                our targeted customer base within grocery retail and the related
                alignment of resources with the following market definitions:


                                       11
<PAGE>


             o  Mainstream & Enterprise Marketplace - For this marketplace, we
                focus on delivering high quality, strategic pricing and
                inventory management solutions that deliver rich and flexible
                functionality. This marketplace also has the following
                attributes:

                o  Retailers with greater than or equal to 10 stores.

                o  Sophisticated functional requirements.

                o  Sales occur primarily through our direct sales force.

                o  Implementations range from simplistic to sophisticated and
                   may be supported through strategic implementation partners.

             o  Small to Medium Retail (SMR) Marketplace - Within this
                marketplace we offer a competitively priced solution with the
                benefits of pre-defined functionality, rapid implementation and
                minimal support requirements. Additionally, this marketplace has
                the following characteristics:

                o  Retailers with less than 10 stores.

                o  Minimal functional requirements.

                o  Dealers are our primary sale and delivery mechanism for
                   product sales.

         o   Develop and Leverage Strategic Relationships - We continue to
             establish strategic business relationships that enhance the
             delivery of our products, professional services and the development
             of our products that complement our current software solutions. We
             believe these relationships can provide greater market presence,
             greater opportunity to increase sales, improve operational
             efficiencies and provide greater access to other retail sectors and
             international markets. Additionally, within our packaged
             marketplace, software is now primarily going to be sold and
             serviced through our reseller network.

      o  Customer Satisfaction - We are continuing to further develop
         initiatives designed to focus our organization on delivering more value
         to new and existing customers by improving quality, satisfaction and
         the efficiency of our customers' experience with us. The initiatives we
         are cultivating for the benefit of our customers are as follows:

         o   Product Delivery Process - We continue to implement new processes
             for operational improvement around product development. Initially
             addressing market requirements, the Product Delivery Process
             includes formality around functional and technical specifications.
             These processes and procedures insure that we remain in touch with
             delivering high quality solutions that meet the functional needs of
             our customers.
         o   Engagement Management - Engagement Management is an initiative
             complete with governances and processes that have aided in the
             creation of great customer experiences both during and beyond our
             software implementations. Our goal is to optimize the project and
             satisfy our customer. It begins with understanding our customer's
             expectations. Engagement management transcends the implementation
             and improves the depth of our win-win customer relationships
             throughout our organization.
         o   Quality and Customer Centricity - A critical component to our
             success as a developer of technology products starts with listening
             to user concerns and understanding their requirements from the
             beginning. We put the customer at the center of our organizational
             structure and it is very important to us that the customer always
             has a single integrated view of our company. Our quality and
             customer centricity initiatives are focused on continuously
             improving in these areas.


Critical Accounting Estimates


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<PAGE>


Our discussion and analysis of results of operations and financial condition are
based upon financial statements that we prepared in accordance with accounting
principles generally accepted in the United States of America.


We have identified the following policies as critical to the understanding of
our financial statements and results of operations. The impact and any
associated risks related to these policies on our business operations is
discussed throughout our Management's Discussion and Analysis where such
policies affect our reported and expected financial results. For a detailed
discussion on the application of these and other accounting policies, see Note 1
in the Notes to our Financial Statements included in our annual Form 10-KSB
filed on March 30th, 2004.


The preparation of our financial statements requires us to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of our financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. The
significant accounting policies which we believe are the most critical to aid in
fully understanding and evaluating our reported financial results include the
following:


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


We license software products under non-cancelable perpetual license agreements
and provide related services, including consulting and customer support. We
recognize revenue in accordance with SOP 97-2, Software Revenue Recognition, as
amended and interpreted by SOP 98-9, Modification of SOP 97-2, Software Revenue
Recognition, with respect to certain transactions, as well as Technical Practice
Aids issued from time to time by the American Institute of Certified Public
Accountants and Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition
in Financial Statements, which provides further interpretive guidance for public
reporting companies on the recognition, presentation and disclosure of revenue
in financial statements.


Software license revenue is recognized when a license agreement has been signed,
the software product has been delivered, there are no uncertainties surrounding
product acceptance, the fees are fixed and determinable and collection is
considered reasonably assured. If a software license contains an undelivered
element, the fair value of the undelivered element is deferred and that revenue
is recognized once the element is delivered. Revenues attributable to
undelivered elements, including services and post-contract support, are based on
the average sales price of those elements when sold separately. In addition, if
a software license contains customer acceptance criteria or a cancellation
right, the software revenue is recognized upon the earlier of customer
acceptance or the expiration of the acceptance period or cancellation right. We
do not offer rights of return.


Services are separately priced, are generally available from a number of
suppliers and are not essential to the functionality of our software products.
Services, which include project management, system planning, design and
implementation, customer configurations and training, are billed on an hourly
basis. Services revenue billed on an hourly basis is recognized as the work is
performed.


Customer support services include post-contract support and the rights to
unspecified upgrades and enhancements, when and if available. Maintenance
revenues from ongoing customer support services are billed on an annual or
quarterly basis with the revenue being deferred and recognized ratably over the
maintenance period.


Other revenue is recognized when the third-party hardware products have been
shipped and title has passed.


                                       13
<PAGE>


Accounts Receivable - We typically extend credit to our customers. Payments for
software licenses generally include payment terms with installments due within
one year of the date of shipment. Billings for customer support and professional
services performed on a time and material basis are due on net 30-day terms. We
review past due accounts and provide specific reserves based upon the
information we gather from sources including customers, subsequent cash
receipts, professional services, and credit rating services such as Dunn &
Bradstreet. We estimate the probability of collection of the receivable balances
and provide an allowance for doubtful accounts based upon an evaluation of our
customers' ability to pay and general economic conditions. While our losses have
historically been within our estimates, we cannot guarantee that we will
continue to experience the same collection experience. A loss of any significant
customer could have a material adverse effect on our operations. We expect that
revenues from a limited number of new customers will continue to account for a
large percentage of total revenues in future periods. If actual bad debts are
greater than the reserves calculated based on historical trends and known
customer issues, we may be required to record additional bad debt expense which
could have a material adverse impact on our results of operations and financial
position for the periods in which such additional expense occurs.


Goodwill - Our business combinations have resulted in goodwill. We review the
recoverability of the carrying value of goodwill on an annual basis or more
frequently when an event occurs or circumstances change to indicate that an
impairment of goodwill has possibly occurred. The determination of whether any
potential impairment of goodwill exists is based upon fair value of our
reporting units, estimated using a discounted cash flow analysis (income
approach) and a public comparable company fair value (market approach) analysis.
If the fair value of a reporting unit is determined to be less than its carrying
value, goodwill allocated to that unit may be impaired and an impairment loss
would be recorded to the extent that the carrying value of goodwill is less than
the difference between the fair value of the reporting unit and the fair value
of all its underlying identifiable assets and liabilities. While we do not
believe that any portion of our recorded goodwill is presently impaired, a
future impairment of our goodwill could have a material adverse affect on our
financial position and results of operations.


Income Taxes - We recognize deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. We regularly review our deferred tax assets for
recoverability and establish a valuation allowance based on historical taxable
income, projected future taxable income and the expected timing of the reversals
of existing temporary differences. If we operate at a profit in the future and
generate sufficient future taxable income, we could be required to reverse the
current valuation allowance against the deferred tax assets which would result
in a substantial income tax benefit.


Stock-Based Compensation - We do not record compensation expense for options
granted to our employees as all options granted under our stock option plans
have an exercise price equal to the estimated fair market value of the
underlying common stock on the date of grant. As permitted under Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("SFAS No. 123"), we have elected to continue to apply the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and provide pro forma disclosure on a quarterly and annual basis of
net income (loss) and net income (loss) per common share for employee stock
option grants made, and shares issued under our employee stock purchase plan, as
if the fair-value method defined in SFAS No. 123 had been applied. If proposals
currently under consideration by various accounting standard organizations are
adopted, such as the Financial Accounting Standards Board Proposed Statement of
Financial Accounting Standard, "Share-Based Payment, an amendment of FASB
Statements No. 123 and 95", we may be required to treat the value of stock-based
awards granted to employees as compensation expense in the future, which could
have a material adverse effect on our reported operating results.

Three and Nine Months Ended September 30, 2004 Compared to Three and Nine Months
Ended September 30, 2003.


                                       14
<PAGE>


Revenues

Revenues consist of software license revenues, services, maintenance and other
revenues, which represents 32.5%, 43.7%, 21.2% and 2.6%, respectively, of total
revenues for the three months ended September 30, 2004 compared to 20.1%, 49.7%,
20.4% and 9.8%, respectively, for the three months ended September 30, 2003.
Additionally, revenues from these sources represented 25.1%, 48.7%, 22.9% and
3.2%, respectively, of total revenues for the nine months ended September 30,
2004 compared to 33.9%, 40.3%, 18.0% and 7.8%, respectively, for the nine months
ended September 30, 2003. Total revenues for the three months ended September
30, 2004 were $5.9 million, an increase of $1.0 million, or 20.8%, from the $4.9
million reported for the three months ended September 30, 2003. Additionally,
total revenues for the nine months ended September 30, 2004 were $16.4 million,
a decrease of $0.2 thousand or 1.0% from the $16.6 million reported for the nine
months ended September 30, 2003.

Software Licenses. Software license revenue for the three months ended September
30, 2004, as compared to the same period in the prior year, increased 94.9% to
$1.9 million from $1.0 million. Software license revenue for the nine months
ended September 30, 2004, as compared to the same period in the prior year,
decreased 26.5% to $4.1 million from $5.6 million. The increase in software
license revenues for the three months ended September 30, 2004 relates primarily
to a single large license agreement that contributed $1.3 million. The decrease
in software license revenue for the nine month period, results from deferred
customer purchase decisions. Software license revenue represented 32.5% of total
revenues, for the three months ended September 30, 2004 compared to 20.1% for
the three months ended September 30, 2003. Software license revenue represented
25.1% of total revenues, for the nine months ended September 30, 2004 compared
to 33.9% for the nine months ended September 30, 2003.

Services. Services revenue for the three and nine months ended September 30,
2004, as compared to the same periods in the prior year, increased 6.2% and
19.8% respectively, to $2.6 million and $8.0 million from $2.4 million and $6.7
million. The increase in services revenue is directly attributed to increased
demand for implementation services associated with the sale of our TCI Retail
products. Services revenue represented 43.7% and 48.7% of total revenues, for
the three and nine months ended September 30, 2004 compared to 49.7% and 40.3%
for the three and nine months ended September 30, 2003.

Maintenance. Maintenance revenue for the three and nine months ended September
30, 2004, as compared to the same periods in the prior year, increased 25.8% and
26.0%, respectively, to $1.3 million and $3.8 million from $1.0 million and $3.0
million, respectively. The increase in maintenance revenue primarily results
from $6.2 million in new software licenses sold for the fifteen-month period
ended September 30, 2004, resulting in an increase in the number of customers
under maintenance contracts. Maintenance revenue represented 21.2% and 22.9% of
total revenues, for the three and nine months ended September 30, 2004 compared
to 20.4% and 18.0% for the three and nine months ended September 30, 2003.

Other. Other revenue for the three and nine months ended September 30, 2004, as
compared to the same periods in the prior year, decreased 68.2% and 59.4%
respectively, to $0.2 thousand and $0.5 thousand from $0.5 thousand and $1.3
million. The decrease in other revenue results from our efforts to stop the sale
of third party hardware. Alternatively, we have developed a referral program
with a limited number of hardware vendors that have the ability to deliver top
quality sales, service and support for our customers, filling our customer's
needs for hardware solutions. The referral program will allow us to direct our
customers to trusted resellers who work closely with TCI to ensure that they
receive quality products at competitive prices. We believe that this program
will allow us to focus sales and product management efforts on improving the
quality of our core software products. Other revenue represented 2.6% and 3.2%
of total revenues for the three and nine months ended September 30, 2004
compared to 9.8% and 7.8% for the three and nine months ended September 30,
2003.


Gross Profit


                                       15
<PAGE>


Gross profit dollars for the three months ended September 30, 2004, as compared
to the same period in the prior year, increased 35.4% to $3.8 million from $2.8
million. Gross profit dollars for the nine months ended September 30, 2004, as
compared to the same period in the prior year, decreased 6.1% to $9.4 million
from $10.0 million. The increase in gross profit dollars is primarily
attributable to the increase in software revenue of $1.0 million for the three
months ended September 30, 2004. The decrease in Gross Profit for the nine
months ended September 30, 2004 is primarily attributable to less software
license revenue. Gross profit percent for the three months ended September 30,
2004, as compared to the same period in the prior year, increased 6.9% to 63.8%
from 56.9%. Gross profit percent for the nine months ended September 30, 2004,
as compared to the same period in the prior year, decreased 3.1% to 57.3% from
60.5%. The fluctuation in gross profit percentages for the three and nine months
ended September 30, 2004 is primarily due to fluctuations in software license
revenues.

Software License Margins. Software license margins for the three months ended
September 30, 2004, as compared to the same period in the prior year, increased
94.9% to $1.9 million from $1.0 million. Software license margins for the nine
months ended September 30, 2004, as compared to the same period in the prior
year, decreased 25.3% to $3.7 million from $5.0 million. The fluctuation in
software license margins for the three and nine months ended September 30, 2004
is primarily due to fluctuations in software sales when compared to the same
period in the prior year. Software license margins as a percentage of software
license revenue were 96.0% and 90.0 % for the three and nine months ended
September 30, 2004, compared to 95.3% and 88.6 % for the three and nine months
ended September 30, 2003.

Services Margins. Services revenue margins for the three and nine months ended
September 30, 2004, as compared to the same period in the prior year, decreased
18.7% and 1.0% respectively, to $0.9 million and $2.6 million from $1.1 million
and $2.6 million, respectively. The decrease in services revenue margins for the
three and nine months ended September 30, 2004, as compared to the same period
in the prior year, is primarily due to the increases in services revenues of
6.2% and 19.8% respectively, being offset by increased staffing and decreased
billable utilization. Services revenue margins as a percentage of services
revenue were 33.2% and 32.6% for the three and nine months ended September 30,
2004, compared to 43.4% and 39.4% for the three and nine months ended September
30, 2003.


Maintenance Margins. Maintenance revenue margins for the three and nine months
ended September 30, 2004, as compared to the same period in the prior year,
increased 42.9% and 45.6% respectively, to $1.1 million and $3.0 million from
$0.8 million and $2.1 million for the three and nine months ended September 30,
2003. Maintenance revenue margins as a percentage of maintenance revenue were
87.1% and 80.9% for the three and nine months ended September 30, 2004, compared
to 76.7% and 70.0% for the three and nine months ended September 30, 2003. The
increase in maintenance revenue margins as a percentage of maintenance revenue
for the three and nine months ended September 30, 2004 is primarily due to an
increase in maintenance revenue of 25.8% and 26.0%, resulting from $6.2 million
in new software licenses sold and an increase in the number of customers under
maintenance contracts for the 15 month period ended September 30, 2004.
Maintenance costs decreased for the three and nine months ended September 30,
2004 due to the closure of a regional office used for customer support that will
now be housed within our Tucson facility.


Other Margins. Other revenue margins for the three and nine months ended
September 30, 2004, as compared to the same period in the prior year, decreased
178.2% and 88.5% to $(0.02) thousand and $0.04 thousand from $0.03 thousand and
$0.3 thousand. Other revenue margins as a percentage of other revenue were
(13.7)% and 7.0% for the three and nine months ended September 30, 2004 compared
to 5.6% and 24.7% for the three and nine months ended September 30, 2003. The
decreases and losses in other revenue margins as a percentage of other revenue
for the three and nine months ended September 30, 2004 was primarily related to
our planned decrease in sales of third party hardware and the costs of
transitioning this business to an outsourced solutions partner.

Operating Expenses


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<PAGE>


Operating expenses for the three and nine months ended September 30, 2004 and
2003 decreased $0.3 thousand and $1.3 million to $3.6 million and $11.7 million
from $3.9 million and $13.0 million, respectively. Operating expenses
represented 61.5% and 71.3% of total revenues for the three and nine months
ended September 30, 2004 compared to 79.6% and 78.5% for the three and nine
months ended September 30, 2003.

Product Development. Product development expenses for the three and nine months
ended September 30, 2004, as compared to the same period in the prior year,
decreased 12.2% and 13.7% respectively, to $0.7 million and $2.6 million from
$0.8 million and $3.0 million. The decrease in product development expense
primarily results from efforts to improve development efficiencies resulting
from automation and process improvements that require fewer development
resources. Product development expenses represented 12.6% and 15.7% of total
revenues for the three and nine months ended September 30, 2004 compared to
17.3% and 18.0% for the three and nine months ended September 30, 2003.

Sales and Marketing. Sales and marketing expenses for the three months ended
September 30, 2004, as compared to the same period in the prior year, increased
3.5% to $1.7 million. Sales and Marketing expenses for the nine months ended
September 30, 2004, as compared to the same period in the prior year, decreased
7.7% to $5.3 million from $5.7 million. The increase in sales and marketing
expenses for the three months ended September 30, 2004 resulted from the
expenses associated with our customer event, Retail Leadership Conference. The
overall decrease in sales and marketing expenses for the nine months ended
September 30, 2004 is primarily due to the reorganization of our sales force
that occurred during the last half of 2003 and focused cost control efforts that
have reduced salary and operating expenses. Sales and marketing expenses
represented 29.4% and 32.1% of total revenues for the three and nine months
ended September 30, 2004 compared to 34.3% and 34.4 % for the three and nine
months ended September 30, 2003.

General and Administrative. General and administrative expenses for the three
and nine months ended September 30, 2004, as compared to the same period in the
prior year, decreased 15.7% and 10.3% respectively, to $1.2 million and $3.9
million from $1.4 million and $4.3 million. The decrease in general and
administrative expenses during the three and nine months ended September 30,
2004 is due to reduced bad debt expense and focused cost control efforts to
lower rates with telephone and related service providers. General and
administrative expenses represented 19.5% and 23.6% of total revenues for the
three and nine months ended September 30, 2004 compared to 27.9% and 26.0% for
the three and nine months ended September 30, 2003.


Liquidity and Capital Resources

Historically, we have financed our operations primarily through private sales of
equity securities, cash generated from operations and working capital provided
by our credit facility. We expect to finance future operations through existing
cash, working capital and private sales of equity securities. We had working
capital of $0.4 million at September 30, 2004 compared with $2.5 million at
December 31, 2003. Cash and cash equivalents at September 30, 2004 were $1.7
million, a decrease of $2.0 million from the $3.7 million reported at December
31, 2003. Cash balances decreased in the nine months ended September 30, 2004
primarily as a result of a net loss and an increase in accounts receivable,
offset by the increase in deferred revenue attributed to our annual support and
maintenance billing recorded for the nine months ended September 30, 2004.

Operating activities used cash of $1.7 million in the nine months ended
September 30, 2004. Cash used by operating activities in the nine months ended
September 30, 2004 results primarily from a net loss of $2.4 million, a $0.7
million increase in accounts receivable and a $1.1 million increase in deferred
revenue relating to our annual maintenance billing. We had net receivables of
$4.0 million at September 30, 2004 compared to $3.3 million at December 31,
2003.

Investing activities used cash of $0.2 thousand in the nine months ended
September 30, 2004. Cash used by investing activities in the nine months ended
September 30, 2004 results from the purchase of computer


                                       17
<PAGE>


equipment and office furnishings. Although we don't anticipate any significant
capital expenditures for the remainder of 2004, any such acquisition of
equipment will be paid using existing cash and cash equivalents and our
equipment line of credit.

Financing activities used cash of $0.2 thousand during the nine months ended
September 30, 2004. Cash provided by financing activities for the period ending
September 30, 2004 results from repayment of our line of credit.

We believe that our cash and cash equivalents, collections of annual maintenance
billings, cash generated from operations and availability under our credit
facility, will provide adequate liquidity to meet our anticipated operating
requirements for at least the next twelve months.

Business Outlook


As we look ahead to the rest of 2004, we are planning for continued growth. Our
financial results however, are substantially dependent upon sales of TCI Retail
software. Revenue is partly a function of the mix of software, services,
maintenance and other third party hardware and software sales. Our margins are
highest for software and maintenance and significantly lower for our services
and other revenue categories. Our margins are also affected by the product mix
within the various markets we serve. Margins are higher in the
Enterprise/Mainstream market than in our Small to Medium Retail market due to
the fact that the overall sale in the Enterprise/Mainstream market is weighted
towards our higher margin offerings of software and maintenance. Our gross
margin as a result, varies with revenue levels from the various markets and the
revenue mix.


We further believe that we have the product offerings, personnel, competitive
and financial resources for business success. Future revenues, gross margins and
profits however, are all influenced by a number of factors, including those
discussed above, all of which are inherently difficult to forecast. As a result,
there are no assurances that we will achieve these objectives. See 'Certain
Risks that May Affect Future Results' herein for a more detailed discussion of
the risks that may affect our business.


New Accounting Pronouncements


In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities. In general, a variable interest entity is a corporation, partnership,
trust or any other legal structure used for business purposes that either (a)
does not have equity investors with voting rights or (b) has equity investors
that do not provide sufficient financial resources for the entity to support its
activities. FIN 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. The consolidation requirements of FIN 46
apply immediately to variable interest entities created after January 31, 2003.
With respect to variable interest entities created before January 31, 2003, in
December 2003, the FASB issued FIN 46R, which, among other things, revised the
implementation date to first fiscal years or interim period ending after March
15, 2004, with the exception of Special Purpose Entities ("SPE"). The
consolidation requirements apply to all SPE's in the first fiscal year or
interim period ending after December 15, 2003. As we have determined that we do
not have any SPE's to which these interpretations apply, the adoption of FIN 46R
did not have a material impact on our financial statements.


In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both debt and equity and requires an issuer to classify the
following instruments as liabilities in it balance sheet:


                                       18
<PAGE>


      o  A financial instrument issued in the form of shares that is mandatorily
         redeemable and embodies an unconditional obligation that requires the
         issuer to redeem it by transferring its assets at a specified or
         determinable date or upon an event that is certain to occur;

      o  A financial instrument, other than an outstanding share, that embodies
         an obligation to repurchase the issuer's equity shares, or is indexed
         to such an obligation, and requires the issuer to settle the obligation
         by transferring assets; and

      o  A financial instrument that embodies an unconditional obligation that
         the issuer must settle by issuing a variable number of its equity
         shares if the monetary value of the obligation is based solely on
         predominantly on (1) a fixed monetary amount, (2) variations in
         something other than the fair value of the issuer's equity shares, or
         (3) variations inversely related to changes in the fair value of the
         issuer's equity shares.


In November 2003, the FASB issued FASB Staff Position (FSB) No. 150-3, which
deferred the effective dates for the applying certain provisions of SFAS No. 150
related to mandatorily redeemable financial instruments of certain nonpublic
entities and certain mandatorily redeemable non-controlling interests for public
and nonpublic entities.


For public entities, SFAS No. 150 is effective for mandatorily redeemable
financial instruments entered into or modified after May 31, 2003 and is
effective for all other financial instruments as of the first interim period
beginning after June 15, 2003.


For mandatorily redeemable non-controlling interests that would not have to be
classified as liabilities by a subsidiary under the exception in paragraph 9 of
SFAS No. 150, but would be classified as liabilities by the parent, the
classification and measurement provisions of SFAS No. 150 are deferred
indefinitely. For other mandatorily redeemable non-controlling interests that
were issued before November 5, 2003, the measurement provisions of SFAS No. 150
are deferred indefinitely. For those instruments, the measurement guidance for
redeemable shares and non-controlling interests in other literature shall apply
during the deferral period.

SFAS No. 150 is to be implemented by reporting the cumulative effect of a change
in accounting principle. We do not believe that the adoption of the deferred
provisions of SFAS No. 150 will have a material impact on our financial
statements.


Certain Risks That May Affect Future Results


Investors evaluating our business should carefully consider the factors
described below and all other information contained in this Form 10-QSB. While
management is optimistic about our long-term prospects, we do operate in a
dynamic and rapidly changing environment that involves numerous risks and
uncertainties that we believe may adversely affect our business, operating
results and financial condition. Additional factors and uncertainties not
currently known to us or that we currently consider immaterial could also harm
our business, operating results and financial condition. Investors could lose
all or part of their investment as a result of these factors. This section
should be read in conjunction with the unaudited Financial Statements and Notes
thereto for the period ended September 30, 2004 and 2003 contained elsewhere in
this Form 10-QSB.


Changes in Economic, Political and Market Conditions Could Cause Decreases in
Demand for Our Software and Related Services Which Could Negatively Affect Our
Revenue and Operating Results and The Price of Our Stock. Our revenue and
profitability depend on the overall demand for our software and related
services. A regional and/or global change in the economy and financial markets
could result in delay or cancellation of customer purchases. If demand for our
software and related services decrease, our revenues would decrease our
operating results would be adversely affected and the fair market value of our
stock could also decrease.


                                       19
<PAGE>


The Value of Our Stock Will Fluctuate From Time to Time. Although there is no
trading market for our common stock, the fair market value of our stock is
determined by our Board of Directors in good faith from time to time and
therefore is subject to fluctuations. Examples of factors that we believe have
caused fluctuations in our stock price in the past include those listed below.
During our Board of Directors meeting on August 6th, 2004, the Board of
Directors determined the fair market value of our common stock to be $0.05 per
share during their valuation review of the Company.

         o   Delayed purchasing decisions and/or elongated sales cycles;
         o   Increased competition;
         o   A limited number of reference accounts with implementations in the
             early years of product release; and
         o   Lack of desired product features or functionality;
         o   Fluctuations in financial performance.


Our Quarterly Operating Results May Fluctuate Significantly and Economic
Conditions Could Impair Our Ability to Execute Our Business Plan and Thereby,
Negatively Impact Our Financial Condition. Our quarterly operating results have
varied in the past and are expected to continue to vary in the future.
Significant fluctuations in our quarterly operating results may harm our
business operations by making it difficult to implement our business plan.
Factors, many of which are outside of our control, which could cause our
operating results to fluctuate include:

         o   the demand for and market acceptance of our software solutions;
         o   changes in the length of our sales cycle;
         o   the size and timing of customer orders, which can be affected by
             customer budgeting and purchasing cycles;
         o   lower than anticipated consumption and/or utilization of our
             professional services group as a result of reduced levels of
             software sales, reduced implementation times for our products,
             changes in the mix of demand for our software products;
         o   competitors' announcements or introductions of new software
             solutions, services or technological innovations;
         o   our ability to develop, introduce and market new products on a
             timely basis;
         o   customer deferral of material contracts in anticipation of new
             releases or new product introductions;
         o   our success in expanding our sales and marketing programs;
         o   technological changes or problems in computer systems; and
         o   general economic conditions which may affect our customers' capital
             investment levels.


Additionally, our market activity in target markets has increased in recent
years and we have made more large sales than in past period. Because of this,
sales we expect to make in a particular period, that do not occur, or sales made
in a particular period that were not expected, can affect our results of
operations in a given period more so now than in the past when the size of the
average order was smaller. As a result of these and other factors,
period-to-period comparisons of financial results may not be meaningful.
Historical results of operations are not necessarily indicative of future
results, and interim results are not necessarily indicative of future annual
results. Although our primary market of grocery and drug store retailers may be
less susceptible to cyclical shifts in the economy, this segment of the retail
industry may experience downturns due to macroeconomic pressures that could, in
turn, have a material adverse effect on our business, results of operations or
financial condition.


Changes in Market Size and Dynamics Could Have a Material Adverse Effect on Our
Ability to Generate Sales and Our Future Prospects for Growth. Consolidations
and the entry of large mass merchants such as Wal-Mart may have a long-lasting,
detrimental effect on the market for our products as retailers scale back on
their expenditures or are forced to go out of business. In addition, reductions
or allocations of retail information technology budgets, due to economic
conditions could affect retailers' demand for our products. A significant
reduction in the number of customers or purchases made by customers as a result
of these conditions could have a material adverse effect on our sales and
prospects for growth.


                                       20
<PAGE>


We also believe that the retail industry may be consolidating and that the
industry is, from time to time, subject to increased competition and weakening
economic conditions that could negatively impact the industry and our customers'
ability to pay for our products and services which have and could potentially
lead to an increased number of bankruptcy filings. Such consolidation and
weakening economic conditions have in the past, and may in the future,
negatively impact our revenues, reduce the demand for our products and may
negatively impact our business, operating results and financial condition.


Decreases in Demand From Grocery Retailers Could Hurt Our Ability to Generate
Revenues. Historically, we have derived nearly 100% of our revenues from the
licensing of software products and the performance of related services to the
grocery retail industry. Our future growth is critically dependent on increased
sales to grocery and similar retail sectors within the retail industry. The
success of our customers is directly linked to economic conditions in the retail
industry, which in turn are subject to intense competitive pressures and are
affected by overall economic conditions. In addition, we believe that the
license of our software products generally involves a large capital expenditure,
which is often accompanied by large-scale hardware purchases or commitments. As
a result, demand for our products and services could decline in the event of
instability or downturns. Such downturns may cause customers to exit the
industry or delay, cancel or reduce any planned expenditure for information
management systems and software products.


The Industries Rapid Pace of Change Could Render our Technology Unmarketable and
Result in a Decrease in Revenue. If we are unable to develop new software
solutions or enhancements to our existing products on a timely and
cost-effective basis, or if new products or enhancements do not achieve market
acceptance, our sales may decline. The life cycles of our products are difficult
to predict because the market for our products is characterized by rapid
technological change and changing customer needs. The introduction of products
employing new technologies could render our existing products or services
obsolete and unmarketable. In developing new products and services, we may:

         o   fail to respond to technological changes in a timely or
             cost-effective manner;
         o   encounter products, capabilities or technologies developed by
             others that render our products and services obsolete or
             noncompetitive or that shorten the life cycles of our existing
             products and services;
         o   experience difficulties that could delay or prevent the successful
             development, introduction and marketing of these new products and
             services; or
         o   fail to achieve market acceptance of our products and services.


We May Introduce New Lines of Business and Channel Distribution Strategies Where
We are Less Experienced and Unable to Successfully Sell That Could Negatively
Impact Revenues and Our Results of Operations. We may introduce new lines of
business and channel sale/distribution strategies that are outside our
traditional focus on software licenses, related maintenance and professional
services. Introducing new lines of business involves a number of uncertainties,
including a lack of internal resources and expertise to operate and grow new
lines of business, manage new distribution systems, immature internal processes
and controls, predicting revenues and expenses for the new lines of business,
and the possibility that such new lines of business will divert management
attention and resources from our traditional business. The inability of
management to effectively develop and operate these new lines of business could
have a material adverse effect on our business, operating results and financial
condition. Moreover, we may not be able to gain acceptance of any new lines of
business in our markets or channel strategies or obtain the anticipated or
desired benefits of such new lines or channel sale/distribution strategies.


We Have Only Deployed Certain of Our Software Products On a Limited Basis, And
We Have Not Yet Deployed Some Software Products That Are Important To Our
Growth. Certain of our software products, including Store Host and ThinStore are
still either under development, in beta or have been recently commercially
released. The markets for these products are new and evolving, and we believe
that retailers may be cautious in adopting web-based and other new technologies.
Consequently, we can not predict the growth rate, if any, and size of the
markets of our new products or that these markets will continue to develop.
Potential and existing customers may find it difficult, or be unable, to
successfully implement our


                                       21
<PAGE>


products, or may not purchase our products for a variety of reasons, including
their inability or unwillingness to deploy sufficient internal personnel and
computing resources for a successful implementation. If the markets of our newer
products fail to develop, develop more slowly or differently than expected, or
become saturated with competitors, or if our products are not accepted in the
marketplace or are technically flawed, our business, operating results and
financial condition will decline.


It May Be Difficult to Profitably Identify, Adopt and Develop Product
Architecture That is Compatible With Emerging Industry Standards That Could
Negatively Impact Our Ability to Generate Future Revenues. The markets for our
software products are characterized by rapid technological change, evolving
industry standards, changes in customer requirements and frequent new product
introductions and enhancements. If we fail in our product development efforts to
accurately address evolving industry standards or important third-party
interfaces or product architectures, sales of our products and services will
suffer.


Our software products can be licenses with a variety of popular industry
standard platforms, and are authored in various development environments using
different programming languages and underlying architectures. There may be
future or existing platforms that achieve popularity in the marketplace that may
not be compatible with our software product design. Developing and maintaining
consistent software product performance across various technology platforms
could place a significant strain on our resources and product release schedules,
which could adversely affect our results of operations.


Changes in Technology Could Render Our Products Obsolete and Negatively Impact
Our Results of Operations. Technological changes in computer operating systems
and hardware could render our products obsolete or unmarketable and may require
us to modify existing applications to be marketable or develop new applications
to be competitive with products from competitors. These changes may cause us to
have to make changes to existing applications or to create new applications,
resulting in additional development and other costs beyond those currently
anticipated. We can provide no assurances that our software applications will be
compatible with new or modified operating systems or hardware, or that we will
be able to modify its applications or create new applications to keep pace with
new or changed operating systems or hardware that may be purchased by our
customers. In addition, if we are unable to modify existing applications or
develop new applications on a timely and cost effective basis, or if new
applications or enhancements do not achieve market acceptance, our sales may
decline.


An Inability to Build Relationships with Systems Integrators Could Result in a
Damaged Reputation That Could Negatively Impact Our Ability to Generate Future
Revenues. Systems integrators assist our customers with the installation and
deployment of our products, in addition to those of our competitors, and perform
custom integration of computer systems and software. In the future, we intend to
increase our reliance on system integrators to help customers with the
implementation of our products. If we are unable to develop and maintain
relationships with systems integrators, we would be required to hire additional
personnel to install and maintain products, which would result in lower margins
due to the higher expenses associated with systems integrators. Additionally, in
the event that system's integrators are not able to provide an adequate level of
services, we may be required to deploy unexpected resources to provide
integration services and avoid potential damage to our reputation.


The Sales Cycle for Our TCI Retail Products is Long and Costly and May Not
Result in Revenues. The licensing of our products is often an enterprise-wide
decision by our customers that involves a significant commitment of resources by
the customer and us. Prospective customers generally consider a wide range of
issues and competitive products before committing to purchase our products.
These issues may include product benefits, cost, time of implementation, ability
to operate with existing and future computer systems, ability to accommodate
increased transaction volume and product reliability. The period between initial
contact with a prospective customer and sale of our products and services
varies, but typically ranges from three months to twenty-four months. As part of
the sales process, we spend a significant amount of resources informing
prospective customers about the use and benefits of our products and these sales
efforts may not result in a sale.


                                       22
<PAGE>


In instances where the terms of delivery for our software does not conform to
revenue recognition criteria, we record as deferred revenues, advance payments
from our customers. Since only a portion of our revenue each quarter is
recognized from deferred revenues, our quarterly results will depend primarily
upon entering into new contracts that generate revenues for that quarter. New
contracts may not result in revenues in the quarter in which the contract is
signed, and we may not be able to predict accurately when revenues from these
contracts will be recognized.


Generating the Appropriate Mix of Revenues from Software and Services is
Critical to Generating Acceptable Profit Margins and Operating Results. Because
our gross margins on product revenues (software licenses and maintenance
services) are significantly greater than our gross margins on services and
hardware, our combined gross margin has fluctuated from quarter to quarter, and
it may continue to fluctuate significantly based on revenue mix and service
utilization rates. Services revenues are to a significant extent dependent upon
new software license sales and effective utilization of professional service
resources. Although there can be no assurance, we expect that our utilization
rates and service margins will gradually improve if we experience a substantial
increase in demand for our software products. However, in the event that
software license revenues fail to meet our expectations or there is a decline in
demand for our software or services, our consulting service revenue would be
adversely impacted.


Competition Could Seriously Impede Our Ability to Profitably Sell Our Solutions.
The markets for our software products are highly competitive. We believe the
principal competitive factors in our markets are feature and functionality,
product reputation and reference accounts, grocery retail expertise, total
solution cost and quality of customer support. We believe that pricing pressure
has increased in response to market and macroeconomic factors, which could cause
us to offer more significant discounts, or in some cases to lose potential
business to competitors willing to offer what we believe to be overly aggressive
discounts. Competition could seriously impede our ability to sell additional
products and services on favorable terms. Competitive pressures could reduce our
market share or require us to reduce prices, which could reduce our revenues
and/or operating margins. Many of our competitors have substantially greater
financial, marketing or other resources, and greater name recognition than us.
Our competitors may also be able to respond more quickly than we can to new or
emerging technologies and changes in customer requirements. Our current and
potential competitors may:

         o   Develop and market new technologies that render our existing or
             future products obsolete, unmarketable or less competitive;
         o   Make strategic acquisitions or establish cooperative relationships
             among themselves or with other solution providers, which could
             increase the ability of their products to address the needs of our
             customers; and
         o   Establish or strengthen cooperative relationships with our current
             or future strategic partners, which could limit our ability to sell
             products through these channels.


It is Difficult for Us to Accurately Predict the Timing of Software Licenses
Revenue and Our Results of Operations Could be Negatively Impacted. Software
license revenues in any quarter depend substantially upon contracts signed and
the related shipment and transfer of title of software in that quarter. It is
therefore difficult for us to accurately predict software license revenues.
Because of the timing of our sales, we typically recognize the substantial
majority of our software license revenues in the last weeks or days of the
quarter, and we may derive a significant portion of our quarterly software
license revenues from a small number of relatively larger sales. In addition, it
is difficult to forecast the timing of large individual software license sales
with a high degree of certainty due to the extended length of the sales cycle
and generally more complex contractual terms that may be associated with such
licenses that could result in the deferral of some or all of the revenue to
future period. Accordingly, large individual sales have sometimes occurred in
quarters subsequent to when we anticipate. We expect these aspects of our
business to continue. If we receive any significant cancellation or deferral of
customer contracts, or we are unable to continue license negotiations by the end
of a fiscal quarter, our operating results may be lower than planned. In
addition, any weakening or uncertainty in the economy may make it more difficult
for us to predict


                                       23
<PAGE>


quarterly results in the future, and could negatively impact our business,
operating results and financial condition for an indefinite period.

A Loss of Important Customers May Result in a Loss of Revenues. Two customers
accounted for 35.5% and 31.7% of revenues for the three and nine months ended
September 30, 2004. Three customers accounted for 54.3% and 37.1% of revenues
for the three and nine months ended September 30, 2003. Approximately 37.0% of
accounts receivable was due from two customers as of September 30, 2004. All of
our customers are in the retail industry. A loss of any significant customer
could have a material adverse effect on our operations. We expect that revenues
from a limited number of new customers will continue to account for a large
percentage of total revenues in future quarters. Our ability to attract new
customers will depend on a variety of factors, including the performance,
quality, features and price of our current and future products. A failure to add
new customers that make significant purchases of our products and services could
impair future revenues.


A Loss of Existing Resellers Could Harm Our Financial Position and Results of
Operations. A portion of our product sales and recurring maintenance contracts
are driven or influenced by the recommendation of marketing partners, consulting
firms and other third parties. Our inability to obtain the support of these
third parties may limit our ability to penetrate existing and targeted markets.
These third parties are under no obligation to recommend or support our products
and could recommend or give higher priority to the products and services of
other companies or to their own products. A decision by these companies to favor
competing products could negatively affect our software and service revenues.


If we are unable to establish relationships with marketing partners, we will
have to devote substantially more resources to the sales and marketing of our
products. In many cases, these parties have extensive relationships with our
existing and potential customers and influence the decisions of these customers.
A number of our competitors have long and established relationships with these
same systems integrators, and as a result, these marketing partners may be more
likely to recommend competitors' products and services.


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


We May Not Be Able to Generate Positive Cash Flows or Profits Sufficient to
Sustain Our Operations. Although we are optimistic about recent profits, we have
experienced net losses and negative cash flows from operating activities in
prior periods. Our long-term business strategy is to generate profits. If we are
unable to generate positive cash flows and net income, we may be required to
change our business plan and/or seek additional financing. If unsuccessful in
either case, we may be required to sell our assets, discontinue operations or
dissolve.


If We Lose Key Personnel or are Unable to Attract and Retain Additional
Personnel, Our Ability to Grow Our Business Could be Harmed. Our performance
depends in large part on the continued performance of our executive officers and
other key employees. All of our key personnel have employment contracts with


                                       24
<PAGE>


us. The contracts are generally described in Item 6, Executive Compensation,
within our annual Form 10-KSB. The loss of the services of these executive
officers or other significant employees could negatively impact our business.
Please refer to Part II, Item 5 titled "Other Information" within our Form
10-QSB for the quarter ended June 30, 2004 filed on August 13, 2004 for
information regarding the July 21, 2004 dismissal of our Chief Technology
Officer, David Berg.


We must also attract, integrate and retain skilled sales, research and
development, marketing and management personnel. Competition for these types of
employees is intense, particularly in our industry. Failure to hire and retain
qualified personnel would harm our ability to grow the business.


An Inability for Us to Protect Our Intellectual Property Rights Could Negatively
Impact Our Business and Operating Results. We depend on our ability to develop
and maintain the proprietary aspects of our technology. To protect proprietary
technology, we rely on a combination of copyright, trade secret, patent and
trademark laws, common law rights and license agreements. We also seek to
protect our software documentation and other written materials under trade
secret and copyright laws, which afford only limited protection.


Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or obtain and use information that we
regard as proprietary. Policing unauthorized use of our products is difficult
and expensive. There can be no assurance that the steps taken by us to protect
our proprietary technology will be adequate to prevent misappropriation of our
technology or to provide an adequate remedy in the event of a breach by others.
In addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States. We intend to
vigorously protect intellectual property rights through litigation and other
means. However, such litigation can be costly to prosecute and we cannot be
certain that we will be able to enforce our rights or prevent other parties from
developing similar technology, duplicating our products or designing around our
intellectual property.


We May Face Liability If Our Products Are Defective Or If We Make Errors
Implementing Our Products That Could Negatively Impact Our Ability to Meet Our
Customers Needs and Thereby, Negatively Impact Our Financial Position and
Results of Operations. Our products are highly complex and sophisticated. As a
result, they may occasionally contain design defects or software errors that
could be difficult to detect and correct. This may result in loss of, or delay
in, market acceptance of our products and could cause us to incur significant
costs to correct errors or failures or to pay damages suffered by customers as a
result of such errors or failures. In the past, we have discovered software
errors in new releases and new products after their introduction. We have
incurred costs during the period required to correct these errors, although to
date such costs, including costs incurred on specific contracts, have not been
material. We may in the future discover errors in new releases or new products
after the commencement of commercial shipping.


In addition, implementation of our products may involve customer-specific
configuration by third parties, or us and my involve integration with systems
developed by third parties. Errors in the product or integration process may not
be discovered until the implementation is complete.

Errors in our products may be caused by defects in third-party software
incorporated into our products. If so, we may not be able to fix these defects
without the cooperation of these software providers. Since these defects may not
be as significant to the software provider as they are to us, we may not receive
the rapid cooperation that it requires. We may not have the contractual right to
access the source code of third-party software and, even if we have the right to
access the source code, we may not be able to fix the defect. Our customers
could seek significant compensation from us for their losses resulting from
defects in our products. Even if unsuccessful, a product liability claim brought
against us could be time consuming and costly.


We believe that significant investments in research and development are required
to remain competitive, and that speed to market is critical to our success. Our
future performance will depend in large part on our


                                       25
<PAGE>


ability to produce and enhance quality products through internal development ,
strategic partnerships and internal develop to leverage new and existing
customers. If clients experience significant problems with implementation of our
products or are otherwise dissatisfied with their functionality or performance
or if they fail to achieve market acceptance for any reason, our business,
operating results and financial condition would suffer.


Infringement Claims May Allow Competitors to Gain Access To Our Technology and
We May Lose Customers. We do not have any knowledge that our products infringe
on the proprietary rights of any other parties. However, there can be no
assurance that other parties will not assert infringement claims against us in
the future with respect to current or future products. Assertion of an
infringement claim may result in costly litigation or may require us to obtain
license or royalty agreements to use another party's intellectual property.
There can be no assurance that any such license or royalty agreement would be
available on reasonable terms, if available at all. As the number of our
software products in our segment of the software industry increases and the
functionality of these products increasingly overlaps, we believe that software
developers may become increasingly subject to infringement claims. Any such
claims, with or without merit, could be time-consuming and expensive to defend.


Shareholders Cannot Expect to Be Able to Liquidate Any or All of Their
Investment. No public market exists for our common stock. Common shareholders
must be prepared to hold their investment indefinitely and cannot expect to be
able to liquidate any or all of their investment even in case of an emergency.
All of our outstanding shares of common stock are subject to rights of first
refusal in our favor, pursuant to our bylaws. The right of first refusal is
triggered in the event a stockholder desires to sell or otherwise transfer any
shares of our stock to a third party upon which we will have 30 days from
receipt of the notice of the proposed transaction to purchase all of the shares
proposed to be sold at the price and upon the terms proposed to be sold. Certain
exceptions exist to this right of first refusal including the transfer of shares
to members of a stockholder's immediate family or to a trustee for the account
of a stockholder or such stockholder's immediate family.


Fluctuations in Our Operating Results Could Cause Investors to Lose All of Their
Investment and We Provide No Assurance of Future Share Values. We provide no
assurances regarding the value of our outstanding capital stock. Investors in
our capital stock may lose all or part of their investment in our capital stock.


If We Fail to Obtain Additional Capital, Should the Need Arise, Our Business
Could be Harmed. We have expended and will continue to expend substantial funds
on the development of our products and services. Consequently, we may require
additional funds to finance our operations. The precise amount and timing of our
funding needs cannot be determined at this time, and will depend upon a number
of factors, including the market demand for our products and services, the
progress of our development efforts and our management of cash, accounts payable
and other working capital items. There can be no assurance that if required by
us, funds will be available on terms satisfactory to us, if at all. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of our existing stockholders will be
reduced, the existing stockholders may experience additional dilution and such
securities may have rights, preferences or privileges senior to those of the
holders of our common stock. Although we believe that our cash and cash
equivalents, collections of annual maintenance billings, cash generated from
operations and availability under our credit facility, will provide adequate
liquidity to meet our anticipated operating requirements for at least the next
twelve months, should we require additional capital, an inability to obtain the
needed funding on satisfactory terms may require us to terminate our operations
and sell our assets and dissolve. No assurances can be made that we will be able
to obtain financing for our future operations.


We Are Controlled by Institutional Investors Who May Not Act in the Best
Interests of Our Other Shareholders. Institutional investors hold 99.8% of our
outstanding Series A Preferred Stock and in excess of 95.8% of our outstanding
Series B Preferred Stock. The preferred stock votes on an as-converted to common
stock basis and the preferred stock and common stock vote together as a single
class. Currently, the outstanding preferred stock held by institutional
investors represents approximately 73% of our


                                       26
<PAGE>


outstanding capital stock on an as-converted basis. As a result, the
institutional investors, as a group, hold controlling interests in us and will
be able to make decisions in their own interest which may not be in the best
interests of other stockholders. This would include decisions to sell some or
all of our assets, merge with another entity, commence an initial public
offering or dissolve. Our institutional investors have certain anti-dilutive and
preemptive rights, as more particularly described in Part I, Item 8,
"Description of Securities" Registration Statement on our Form 10-SB as amended.
Our institutional investors also have senior rights in the event of our
liquidation. In the event a liquidation were to occur, common stockholders would
not be entitled to any proceeds of such liquidation until the liquidation rights
of our institutional investors were fully satisfied. As a result, we can provide
no assurances that common stockholders will receive any proceeds in the event of
our liquidation or sale to the extent that the liquidation rights of our
institutional investors are not fully paid.

Item 3. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures - We maintain a system of
disclosure controls and procedures that are designed for the purposes of
ensuring that information required to be disclosed in our SEC reports is
recorded, processed, summarized and reported within the time period specified in
the SEC's rules and forms, and that such information is accumulated and
communicated to our Chief Executive Officer (CEO) and Chief Financial Officer
(CFO) as appropriate to allow timely decisions regarding required disclosures.


As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our CEO and CFO,
of the effectiveness of our disclosure controls and procedures as defined in
Exchange Act Rule 13a-15(e). Based on that evaluation, our CEO and CFO concluded
that our disclosure controls and procedures are effective and timely in alerting
them to material information related to us that is required to be included in
our annual and periodic SEC filings.


Changes in Internal Controls - There have been no significant changes in our
internal controls, or in other factors that could significantly affect our
internal controls subsequent to the date of our CEO and CFO completing their
evaluation.




                          PART II -- OTHER INFORMATION

Item 5. Other Information

Effective September 30, 2004, John Burwick was removed from his position as
Corporate Development Officer of the Company. Since January 1, 2004, Mr. Burwick
has not assumed active duties as an officer and employee as a result of his
indefinite leave of absence. Mr. Burwick joined TCI in 1998 and will remain an
employee of the Company.

Item 6. Exhibits


                                       27
<PAGE>


                                  Exhibit Index
--------------------------------------------------------------------------------
 Exhibit No.                      Description
--------------------------------------------------------------------------------
3.1***       Certificate of Amendment of the Fourth Amended and Restated
             Certificate of Incorporation of TCI Solutions, Inc.
--------------------------------------------------------------------------------
3.2*         Fourth Amended and Restated Certificate of Incorporation of TCI
             Solutions, Inc.
--------------------------------------------------------------------------------
3.3*         Bylaws of TCI Solutions, Inc. and Amendments thereto
--------------------------------------------------------------------------------
4.1*         Amended and Restated Stockholders Agreement dated December 21, 2001
             among TCI Solutions, Inc. and the Stockholders listed on Schedule I
             thereto
--------------------------------------------------------------------------------
4.2*         First Amendment to Amended and Restated Stockholders Agreement
             dated April 10, 2002 among TCI Solutions, Inc. and the Stockholders
             listed on Schedule I thereto
--------------------------------------------------------------------------------
4.3*         Second Amendment to Amended and Restated Stockholders Agreement
             dated April 2002, among TCI Solutions, Inc. and the Stockholders
             listed on Schedule I thereto.
--------------------------------------------------------------------------------
4.4*         Second Amended and Restated Registration Rights Agreement dated
             April 10, 2002 among TCI Solutions, Inc. and the persons identified
             on Schedule I thereto
--------------------------------------------------------------------------------
4.5*         Management Rights Letter in favor of InnoCal II, L.P. dated
             December 21, 2001
--------------------------------------------------------------------------------
4.6*         Management Rights Letter in favor of Productivity Fund IV dated
             December 21, 2001
--------------------------------------------------------------------------------
4.7**        Warrant to Purchase a 125,000 shares of Common Stock of TCI
             Solutions, Inc. in favor of Comerica Bank-California dated August
             6, 2002
--------------------------------------------------------------------------------
10.1**       Loan and Security Agreement dated August 6, 2002 between TCI
             Solutions, Inc. and Comerica Bank, N.A.
--------------------------------------------------------------------------------
10.2***      First Amendment to Loan and Security Agreement dated August 5, 2003
             between TCI Solutions, Inc. and Comerica Bank, N.A.
--------------------------------------------------------------------------------
10.3***      Second Amendment to Loan and Security Agreement dated January 28,
             2004 between TCI Solutions, Inc. and Comerica Bank, N.A.
--------------------------------------------------------------------------------
10.4***      Third Amendment to Loan and Security Agreement dated February 28,
             2004 between TCI Solutions, Inc. and Comerica Bank-California
--------------------------------------------------------------------------------
10.5***      Warrant to Purchase 35,000 shares of Common Stock of TCI Solutions,
             Inc. in favor of Comerica Bank-California dated February 27, 2004
--------------------------------------------------------------------------------
10.6***      Employment Agreement dated January 1, 2003 between TCI Solutions,
             Inc. and Lance Jacobs
--------------------------------------------------------------------------------
10.7***      Employment Agreement dated January 1, 2003 between TCI Solutions,
             Inc. and Stephen DeSantis
--------------------------------------------------------------------------------
10.8***      Employment Agreement dated January 1, 2003 between TCI Solutions,
             Inc. and David Berg
--------------------------------------------------------------------------------
10.9*        2001 Equity Incentive Plan of TCI Solutions, Inc. and Amendments
             thereto
--------------------------------------------------------------------------------
10.10*       2001 Non-Employee Directors' Stock Option Plan of TCI Solutions,
             Inc.
--------------------------------------------------------------------------------
10.11*       1993 Equity Incentive Plan of TCI Management, Inc. (now TCI
             Solutions, Inc.)
--------------------------------------------------------------------------------
10.12*       1993 Non-Employee Directors' Stock Option Plan of TCI Management,
             Inc. (now TCI Solutions, Inc.)
--------------------------------------------------------------------------------
10.13****    Employment Agreement dated May 27, 2004 between TCI Solutions, Inc.
             and David R. Butler
--------------------------------------------------------------------------------
31.1         Section 302 Certification of Chief Executive Officer Pursuant to
             Rule 13a-14(a)/15d-a4(a) under the Securities Exchange Act of 1934
             as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
             2002
--------------------------------------------------------------------------------
31.2         Section 302 Certification of Chief Financial Officer Pursuant to
             Rule 13a-14(a)/15d-a4(a) under the Securities Exchange Act of 1934
             as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
             2002
--------------------------------------------------------------------------------
32.1         Certification of Chief Executive Officer Pursuant to 18 U.S.C.
             1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
             of 2002.
--------------------------------------------------------------------------------
32.2         Certification of Chief Financial Officer Pursuant to 18 U.S.C.
             1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
             of 2002.
--------------------------------------------------------------------------------


* Incorporated by reference to the registrant's Form 10-SB filed with the
Commission on April 30, 2002.


** Incorporated by reference to the registrant's Quarterly Report for the
quarter ended September 30, 2004 on Form 10-QSB filed on November 14, 2003.


                                       28
<PAGE>


*** Incorporated by reference to the registrant's Annual Report for the year
ended December 31, 2003 filed on Form 10-KSB on March 30, 2004.


**** Incorporated by reference to the registrant's Quarterly Report for the
quarter ended June 30, 2004 filed on Form 10-QSB on August 13, 2004.


                                       29
<PAGE>


                                   SIGNATURES

               In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.




                                                     TCI SOLUTIONS, INC.


Dated: November 12, 2004                       By:   /s/ David R. Butler
                                                     -------------------
                                                     David R. Butler
                                                     Chief Executive Officer

Dated: November 12, 2004                       By:   /s/ Stephen P. DeSantis
                                                     -----------------------
                                                     Stephen P. DeSantis
                                                     Chief Financial Officer


                                       30