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

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

                                   FORM 10-KSB
 X  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934.

                   For the fiscal year ended December 31, 2004

 _  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934.

              For the transition period from__________ to__________

                           Commission File No: 0-49783

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                               TCI Solutions, Inc.
                 (Name of small business issuer in its charter)

                  Delaware                             33-0537151
      (State or other jurisdiction of     (I.R.S. Employer Identification No.)
       incorporation or organization)

         17752 Skypark Circle, Suite 160
                Irvine, California                        92614
     (Address of principal executive offices)           (Zip Code)

        Registrant's telephone number, including area code (949) 476-1122

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

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


         Securities registered under Section 12(g) of the Exchange Act:
                         Common Stock, $0.001 Par Value
                                (Title of Class)

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

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

   Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or


<PAGE>


information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. X

   State issuer's revenues for its most recent fiscal year:  $21,828,014.

   State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date within the past 60 days. The aggregate market value of the
common equity held by non-affiliates of the Registrant is not ascertainable as
there is not a public marketplace for our securities and there have been no
reported sales or bids of such common stock, to the knowledge of the Registrant
or its management.

   Number of shares of Common Stock ($0.001 par value) outstanding as of the
close of business on March 7, 2005: 12,825,459


                     Transitional Small Business Disclosure
                               Format (Check one)

                                    Yes No X


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<TABLE>
<CAPTION>

                                                        TCI Solutions, Inc.
                                                            Form 10-KSB
                                            For the Fiscal Year Ended December 31, 2004
                                                         Table of Contents


<S>                                                                                                             <C>
PART I...........................................................................................................1
         Item 1.  Business.......................................................................................1
         Item 2.  Properties.....................................................................................7
         Item 3.  Legal Proceedings..............................................................................8
         Item 4.  Submission of Matters to a Vote of Security Holders............................................8
PART II..........................................................................................................8
         Item 5.  Market for Common Equity and Related Stockholder Matters.......................................8
         Item 6.  Management's Discussion and Analysis of Financial Condition and Results of Operations..........9
         Item 7.  Financial Statements..........................................................................27
         Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.........27
PART III........................................................................................................28
         Item 9.  Directors and Executive Officers, Promoters and Control Persons; Compliance with
                   Section 16(a) of the Exchange Act............................................................28
         Item 10.  Executive Compensation.......................................................................31
         Item 11.   Security Ownership of Certain Beneficial Owners and Management..............................34
         Item 12.  Certain Relationships and Related Transactions...............................................36
         Item 13.  Exhibits.....................................................................................36
         Item 14.  Principal Accountant Fees and Services.......................................................38

</TABLE>


<PAGE>


                                     PART I

Item 1.  Business

Overview

    TCI Solutions, Inc., a Delaware corporation, originated in 1982. We provide
retailers with enterprise solutions consisting of mission-critical software
applications and specialized professional services. Our software enables
retailers to quickly and accurately execute strategic business decisions in the
areas of merchandise planning and optimization, merchandise management and store
operations. Our architecture and enterprise data repository provide a powerful
and flexible foundation that can automate and support electronic data exchange
throughout the enterprise and retail supply chain.

    Our principal corporate office is located at 17752 Skypark Circle, Suite
160, Irvine, California 92614 and our principal development and support facility
is located at 5210 E. Williams Circle, Suite 300, Tucson, Arizona 85711. Our
website address is www.tcisolutions.com.

Our Evolution

    From 1982 until 1995, we grew to become a leading provider of store-level
solutions to the grocery industry. In 1996, we expanded our strategy and
extended our solutions offering to include corporate headquarters. Our strategy
was to leverage our 12-year history and retail industry expertise to develop TCI
Retail(TM), a merchandising enterprise product line. TCI Retail enables
retailers to quickly and accurately execute strategic business decisions in the
areas of merchandise planning and optimization, merchandise management and store
operations.

    We dedicated the next five years to creating an architecture and enterprise
data repository providing a powerful and flexible foundation that can automate
and support electronic data exchange throughout the enterprise and supply chain.
Our goal is to become the architectural hub and infrastructure that retailers
utilize to manage their enterprise technology.

    For the past four years, we have continued to broaden and advance TCI Retail
with additional modules and functionality. These efforts were primarily funded
through $13.3 million of capital raised from both new and existing investors
from the sale of Series B Preferred Stock in late 2001 and early 2002.

    Our historical presence has been in grocery retail. Over the next few years,
we plan to continue to extend our presence in other retail segments and solidify
ourselves as one of the top retail solution providers. Our investments will
expand our core mission-critical applications in the areas of execution, demand
intelligence and collaboration.

    On April 1, 2005, Retalix Ltd. through its wholly owned subsidiary Retalix
Holdings Inc. (which we refer to as "Retalix Holdings"), purchased substantially
all of our outstanding Series A Preferred Stock and Series B Preferred Stock for
an aggregate purchase price of $30,035,148, consisting of 715,729 ordinary
shares of Retalix Ltd. valued at $17,177,500 and $12,857,648 in cash which was
paid to certain institutional stockholders pro rata. The acquisition resulted in
Retalix Ltd. beneficially owning in excess of 73% of our outstanding voting
stock (calculated on an as-converted to common stock basis), and specifically,
99.8% of the outstanding Series A Preferred Stock and 95.8% of the outstanding
Series B Preferred Stock. Also on April 1, 2005, we entered into an agreement
and plan of merger with Retalix Ltd., Retalix Holdings and certain subsidiaries
of Retalix Holdings under which we would be merged with and into a subsidiary of
Retalix Holdings and all outstanding common stock and preferred stock of TCI
(other than shares held by Retalix Holdings and shares as to which appraisal
rights have been properly asserted under Delaware law) would be exchanged for
cash. Following the merger, we would cease to exist and all of our assets and
liabilities would be held by a subsidiary of Retalix Holdings. The acquisition
by Retalix described above was disclosed in TCI's a current report on Form 8-K
filed with the Securities and Exchange Commission on April 5, 2005.


Principal Products and Services

     We have gained recognition for providing strategic pricing and inventory
management solutions that enable grocers to increase top and bottom lines by
speeding decisions into action. Since 1998, we have

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developed TCI Retail(TM), our flagship solution, which provides strategic
pricing and inventory management capabilities for headquarters (TCI HQ(TM)) and
stores (TCI Store(TM)). TCI HQ and TCI Store are comprehensive rules-based
solutions built on TCI's Retail Execution System(TM) (RES), a powerful and
flexible foundation. Inventory Management System (IMS), a Direct Store Delivery
(DSD) software package, originally introduced in 1983, is widely utilized by the
grocery industry as back-door-operations software. This application established
us as a leading supplier of retail management software.

     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.

     TCI products are used by more than 400 chains and 15,000 installations
worldwide. TCI Retail is widely utilized for strategic pricing and inventory
management solutions within grocery retail.

Retail Execution System

     RES consists of an enterprise data repository on which all of our
applications reside. RES enables retailers to centrally manage a single source
of operational information, and also provides hosting, integration and
personalization tools. This infrastructure empowers retailers to rapidly respond
to changes in their competitive environments throughout their enterprise. RES
consists of:

    o   Foundation - Enterprise Data Repository for item, store and vendor
        information, and set-up tools.
    o   Extensibility Package - extended feature set, Personalization Workbench
        and Integration Workbench for enhancing and personalizing the solution
        to meet business goals.
    o   Hosting Package - Store Interface Manager and Data Integration Manager
        for internal and external connectivity with stores and third-party
        applications.

     This foundation gives grocers unprecedented business advantages and control
through a flexible development platform and powerful options for integration and
customization.

TCI Retail

     TCI Retail(TM) consists of RES' powerful foundation and solution packages
that can be implemented at headquarters (TCI HQ) or store-level (TCI Store). TCI
Store and HQ both provide full-function solution modules that enable retail
chains to quickly execute strategic business decisions, from headquarters to the
store level. Solution sets can be implemented as packages, individually or as
complements to existing systems.

TCI HQ

     TCI HQ(TM) is a merchandise management system that provides centralized
pricing, promotion and inventory management solution for retail chain
headquarters. It controls data through its single enterprise data repository,
automates business processes through its powerful pricing engine and executes
changes throughout the organization. The system centralizes item/vendor
maintenance for all stores and serves as the collection point for all inventory
and product movement details. It provides capabilities that help grocers to
improve their top and bottom lines through:

    o   Central control of item, vendor, and store information.
    o   Automated price generation to protect costs and improve focus on
        sensitive items.
    o   Management business processes.
    o   Execution of price changes throughout the organization.
    o   Lowering of overhead through automation.

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TCI Store

     TCI Store(TM) is a store operations and merchandising execution system that
provides complete direct store delivery (DSD), price management and inventory
control solution for grocery stores. Its capabilities help improve profitability
through:

    o   Improved price accuracy.
    o   Consistent price image.
    o   Higher margins.
    o   Greater vendor and merchandise delivery control. o Reduced labor needed
        to manage store-level inventory and pricing.

Solution Packages

Pricing Package

     Our Pricing Package is a complete solution for executing and managing
pricing strategies, designed specifically for the grocery retail industry. Its
capabilities help grocers control critical item, vendor and store information,
establish and maintain a consistent price image, automate processes and
execution of price changes to stores, reduce overhead, improve profit margins,
better serve customers and gain a competitive advantage. We offer the following
Pricing Modules:

o    Price Generation module enables grocers to establish and manage pricing
     rules and executes approved pricing changes throughout the enterprise. Its
     powerful rules-based engine automates process, eliminating paperwork and
     manual processes, reducing data errors and lower staff time needed to
     maintain prices.
o    Spread/Parity Pricing module enables grocers to create business
     objective-based rules for aligning the retail prices of like items,
     including generic (store) brands, national brands, competitive brands and
     items available in various units of measure.
o    Competitive Pricing module automates and institutionalizes competitive
     pricing philosophies, including the ability to develop pricing objectives
     by store, region, zone and market. The Competitive Pricing module utilizes
     offline handheld PDA-style units for collecting and downloading a
     competitive item set, including price, location, price levels, comments and
     other data from the competitors' stores.
o    Frequent Shopper module supports a wide variety of consumer offers used by
     customer loyalty and promotional programs. It supports multiple offer
     criteria and sophisticated offer management capabilities.
o    Inventory Sensitive Pricing (ISP) module positively impacts item-level
     profitability and inventory control through lower inventory costs,
     increased product movement and higher revenue by managing product price
     point. This module supports development of store-level item pricing
     strategies based on pre-defined inventory levels (at each store). It
     automatically adjusts item pricing, margins and promotional programs based
     on the inventory quantity on hand. These capabilities remove the barriers
     to getting timely information and reports so that new programs can be
     evaluated and updated quickly.

Inventory Package

     Our Inventory Package is a complete solution for managing inventory - from
back door receiving to front end ordering. Its capabilities help grocers
maintain optimal stock levels, reduce out-of-stocks, speed the replenishment
process, reduce overhead and maximize item-level profitability. We offer the
following Inventory modules:
    o   Receivers, POs, Transfers module allows retailers to create orders,
        receive product to store inventory and transfer product to/from store
        inventory.
    o   Perpetual Inventory module helps grocers gain a competitive advantage
        with balanced inventory costs and movement. It is a complete solution
        for managing inventory, including tracking receipts, sales, and other
        factors that affect the on-hand balance of a store's merchandise.
    o   Computer Assisted Ordering (CAO) module increases sales through
        efficient and effective retail-level replenishment. CAO helps keep
        inventory from falling below user-defined levels by

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        creating vendor- and store-specific purchase orders whenever inventory
        reaches the established reorder point. It automatically generates
        suggested orders based on safety stock levels and expedites orders for
        very low stock levels.
    o   Store Ordering module provides item information and the ability to
        generate vendor orders. It streamlines back door operations and helps
        achieve total store automation through wireless access to real-time
        inventory data.

Promotions Package
     Our Promotions Package is a comprehensive solution for managing, executing
and analyzing promotions. Its capabilities help grocers to develop profitable
promotional programs and quickly and accurately execute promotional prices
throughout the enterprise. We offer the following Promotions modules:
    o   Promotions Management module lets grocers plan and execute promotions on
        a chain-wide basis, by store groups or individual stores.
    o   Electronic Marketing module enables retailers to develop targeted
        promotions for implementing conditional deals for individual customers
        or groups. It supports very powerful, complex promotions that can result
        in increased shopper loyalty.

Store Operations Support Package
     Our Store Operations Support Package manages in-store peripheral systems
and departments. It ensures data consistency and integrity chain wide. Fully
integrated with the enterprise data repository, Store Operations modules allow
grocers to easily manage all item, vendor and store information throughout their
chains, regardless of the number and type of in-store systems in use. We offer
the following Store Operations Support modules:
    o   Scale Management module ensures product and pricing data integrity by
        simplifying the management of scale item data and execution of data
        directly to the scales. It supports a wide variety of scale hardware and
        all data elements including nutritional labeling and safe handling
        messages for weighed items.
    o   Signs and Label Management module is a complete sign and label solution.
        It provides a wide variety of label forms, support custom templates,
        ad-hoc signs and labels.
    o   POS eXchange module delivers unmatched integration and data management
        capabilities, interfacing with virtually any point-of-sale (POS) system
        and application versions available in the market today, as well as POS
        systems that have been around a while. It enables grocers to manage POS
        system data quickly, accurately and easily, ensuring price integrity and
        margin protection.

TCI thinStore(TM)
     TCI thinStore, a recently developed extension of TCI Retail(TM), is an
inventory and price management solution that uses web and wireless technologies
to streamline the execution of critical store-level business operations. It is a
browser-based solution designed to centralize store operations on a single,
integrated database and streamline the execution of mission-critical store
tasks, including: ordering, receiving, shelf price audits and exception-based
price changes.

By removing the burden of information and computer technology from stores and by
simplifying the ways in which tasks are executed, thinStore gives grocery
chains:
    o   greater control over pricing and inventory strategies by centralizing
        data and business processes
    o   reduced overhead by reducing the IT support and training burden at the
        stores
    o   improved focus of store personnel on customer service - a chain's
        competitive advantage - by eliminating paper-work and system operations

TCI Store(TM)
    TCI Store is a packaged pricing and inventory management offering designed
to meet the needs of North America's more than 12,000 small grocery chains and
independents. Packaged versions of TCI Retail, these are scaled-down, bundled
solutions that enable small and medium food retailers to manage and execute
pricing and inventory management programs at headquarters and stores. This
solution is marketed through our reseller channel, and is designed as a Global
Trade Item Number (GTIN) compliant solution that allows retailers to control
operational costs so they can successfully compete with industry giants

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without the high implementation, training and maintenance costs associated with
major system installations and integration efforts. We offer the following TCI
Store packages:

    o   Store Pricing provides basic store-level pricing capabilities, including
        POS connectivity, shelf price audit functionality.
    o   Store Standard offers store-level pricing, Direct Store Delivery (DSD)
        receiving capabilities and wholesaler interface.
    o   Store Plus offers store-level pricing, DSD receiving, a wholesaler
        interface, signs/labels and category analyzer for sales and
        profitability reporting.
    o   Store HQ Standard offers centralized price management, hosting item
        files to stores, reporting capabilities, a wholesaler interface and
        personalization and integration tools.

Services

     Our Professional Services organization deploys a methodology and practice
proven in grocery retail. Our expertise covers both functional needs such as
price strategy, price audit, inventory management and store receiving, as well
as technical needs, specifically the integration of our technology into the
customer's complex IT environment. Our professional services group consists of
business consultants, system analysts and technical personnel with extensive
retail industry, implementation and integration expertise. Our professional
services group assists our customers in all phases of systems implementation,
including assisting customers with business process change, project management,
system planning, design, data conversion, training, education, business
implementation and product support. This variety of implementation services is
designed to maximize our customer's return on software investment along with
educational and training programs for our clients, associates and business
partners. Professional services are billed on an hourly basis. From time to
time, we augment our services with third-party system integrator alliances. The
benefit of our wide-ranging skill sets is assisting our clients in completing a
quality installation within budget and on time.

Customer Support and Maintenance Services

     Our customer support and maintenance services agreement includes telephone
support for problem identification and resolution assistance, email support and
the right to receive unspecified new product releases. The vast majority of our
clients have typically participated in our client support and maintenance
program.

Market Background

     Retail is an industry where chains face constant pressure from demographic,
economic, competitive, regulatory and technology factors. It is a highly
competitive market, particularly for supermarkets, who face increasing
competition from non-traditional retailers, like drug stores, dollar stores,
convenience stores, restaurants, and of course, Wal-Mart. Price pressures and
consumers' heightened demand for value, convenience and services are key
factors.

     As technology usage continues to become pervasive in society, new
capabilities and emerging technologies are creating expectations of efficiency
for retailers and the role of information technology is shifting to that of a
differentiator and profit-enhancer vs. a General and Administrative cost.

     There has historically been no packaged merchandising solution that meets
the specific functional, volume and infrastructure needs of the grocery
industry. Grocers rely on technology infrastructures that consist of many legacy
solutions, silo applications and manual/duplicate processes which require
extensive support, resources and integration. They require applications that
interface not only with wholesalers/suppliers and other corporate systems, but
with a huge number of in-store devices i.e.: such as POS, scales, labels and
signs, etc. Grocers also process, store and communicate tremendous volumes of
data, placing a large burden on these aging and un-integrated systems.

     Our solutions are designed to provide a strong foundation and full retail
pricing and inventory management capabilities to the grocery industry. In the
current environment of multiple un-integrated point solutions, retailers are
trying to manage many silos and versions of information throughout their

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organization. We utilize a phased approach to provide a single, centralized
database on which rules-based pricing and inventory management applications can
operate.

     TCI Retail is a solution that addresses this opportunity and delivers to
the market, an enterprise-wide packaged solution that meets infrastructure,
pricing and inventory requirements. In equipping retailers with quality
solutions, we have spent $4.0 million and $3.5 million, during 2003 and 2004
respectively, on internally sponsored research and development activities. Since
the introduction of TCI Retail in 1996, we have invested approximately $29.3
million in developing our solutions.

Markets

    We market our solutions to retailers both domestically and internationally.
To date, the majority of our sales have occurred domestically in the United
States markets. In 2004, Domestic sales accounted for 87.8% of total revenue,
with the remaining 12.2% from international sales. Our primary domestic market
is within the retail and wholesale grocery industry. Internationally, we service
customers in Canada, Latin and South America.

Distribution

     TCI Retail is marketed to mid-size and large domestic and international
retail chains through our direct sales force. To address the independent /
smaller chains, we have introduced TCI Store, a packaged solution designed to
meet the needs of these retailers. This solution will be primarily distributed
through our reseller network and point-of-sale dealers nationwide.

    Services are usually distributed in conjunction with the delivery of our
software solutions. These services often involve consultation, project
management, implementation and training. From time-to-time, we partner with
third party integration firms to assist in the delivery of our services.

Competition

    The retail technology market is highly competitive. We enjoy a leadership
position with the company's solutions in use by 400+ chains, with more than
15,000 installations worldwide. We believe that our ability to compete depends
on many factors within and beyond our control including:

    o   Full-function capabilities that meet the specific pricing and inventory
        management requirements of the grocery industry
    o   Breadth of pricing and inventory management functionality as compared to
        our competitors, many of whom are marketing general merchandise
        solutions to the grocery industry
    o   Industry knowledge, presence and reputation
    o   The quality of our customer support and implementation services
    o   The effectiveness of our sales and marketing efforts

    We experience competitive pressures from a different set of vendors for
headquarters and store applications. Additionally, there are several consulting
companies offering competing professional services.

    Our headquarters applications compete with internally developed systems and
with other software companies such as JDA Software Group, SAP, Softechnics,
Retek, Lawson and Retalix. Our store solutions compete with internally developed
systems and with software companies such as Retalix, Softechnics, BR Data and
S4.

    In the market for consulting services, we compete with leading systems
integrators that consult with our customers such as Accenture, Cap Gemini Ernst
& Young, Deloitte Consulting and IBM Global Services.

Significant Customers

    In 2003, one customer accounted for 17.3% of total revenues. In 2004, two
customers accounted for 18.0% and 10.6% respectively of our total revenues. No
other single customer accounted for more than 10% of 2003 or 2004 total
revenues.

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Proprietary Rights and Licenses

    Our success and competitive position is dependent in part upon our ability
to develop and maintain the proprietary aspect of our technology. The reverse
engineering, unauthorized copying, or other misappropriation of our technology
could enable third parties to benefit from our technology without paying for it.

    We market our products under the trade name TCI Solutions. We rely on a
combination of trademark, trade secret, copyright law and contractual
restrictions to protect the proprietary aspects of our technology. We seek to
protect the source code to our software, documentation and other written
materials under trade secret and copyright laws. We also employ a variety of
trademarks for our products which are not registered. We rely on common law
rights to such trademarks. We do not hold any patents and rely upon a
combination of copyright and trade secret laws to establish and maintain
proprietary rights in our products. We have entered into agreements with our
employees pursuant to which all rights to software created by those employees
are transferred to us. In addition, we limit access to sensitive information
regarding our business and products. As is customary in the software industry,
we do not sell or transfer title of our software products to customers or
end-users. We provide software products to end-users under non-exclusive license
agreements solely for use in an end-user's internal operations. We rely
primarily on the contractual terms of our license agreements and electronic
software license files for the protection of our intellectual property rights.

    There has been a substantial amount of litigation in the software and
internet industries regarding intellectual property rights. Although, to date,
we have not had to litigate to protect our intellectual property, it is possible
that in the future, third parties may claim that we or our current or potential
future software solutions infringe on their intellectual property. We expect
that software product developers and providers of electronic commerce products
will increasingly be subject to infringement claims as the number of products
and competitors in our industry grows and the functionality of products in
different industry segments overlap and the number of software patents
increases. In addition, we may find it necessary to initiate claims or
litigation against third parties for infringement of our proprietary rights or
to protect our trade secrets. Furthermore, since we resell both software and
hardware, we may become subject to claims from third parties that the software
or hardware, or the combination of hardware and software, infringe their
intellectual property. Although we may disclaim certain intellectual property
representations to our customers, these disclaimers are limited and may not
fully protect us against such claims. We may be more vulnerable to patent claims
since we do not have any patents that we can assert defensively against a patent
infringement claim. Any claims, with or without merit, could be time consuming,
result in costly litigation, cause product shipment delays or require us to
enter into royalty or licensing agreements. Royalty or licensing agreements, if
required, may not be available on terms acceptable to us or at all, which could
seriously harm our business, operating results and financial condition.

Environmental Matters

    We are in compliance with all known federal, state and local provisions
which have been enacted or adopted relating to the protection of the
environment. Compliance with these provisions does not have any material effect
upon our capital expenditures, earnings or competitive position.

Employees

    As of December 31, 2004, we have a total of 133 full-time employees
primarily based in the United States. Of the total, 29 were engaged in sales and
marketing, 58 were in professional and support services, 29 were in product
development and 17 were in administrative functions. We believe that our
relations with our employees are good. We have never had a work stoppage and
none of our employees are subject to a collective bargaining agreement. When
needed, we engage consultants for software development, integration, accountants
and attorneys on a fee basis.


Item 2. Properties

    Our principle administrative office is located in Irvine, California where
we lease approximately 9,500 square feet of office space. Our development and
support facility is located in Tucson, Arizona where we

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lease approximately 28,000 square feet of office space. Additionally, we lease
small regional offices in Irving, Texas and Edmond, Oklahoma to provide customer
training and field staffing, respectively.

    Properties leased by us are leased on terms for durations that are
reflective of commercial standards in the communities where the properties are
located. We believe that our existing facilities are adequate and meet our
current needs. In the event of needed expansion space, we believe that
reasonable amounts of space would be available at favorable lease terms.


Item 3.  Legal Proceedings

     We are involved in legal proceedings and actions arising in the normal
course of business. While the results of such proceedings and actions cannot be
predicted, management believes, based on facts known to management today, that
the ultimate outcome of such proceedings and actions will not likely have a
material adverse effect on our financial position or results of operations.


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

     We held our Annual Meeting of Stockholders on November 12, 2004 at our
Irvine facility at 17752 Skypark Circle, Suite 160, Irvine, California 92614.
Two proposals were voted on at the Annual Meeting and the results of the voting
are as follows:

     Proposal 1: The following directors, constituting all of our directors,
were elected at the meeting to serve until their respective successors are duly
elected and qualified. The directors elected at the Annual Meeting received the
number of votes set forth opposite their respective names, as follows:

                                          For                    Withheld
                                 ----------------------  ----------------------

      Todd G. Gardner                 12,299,997                   0
      James E. Houlihan III           26,111,560                   0
      Mark T. Koulogeorge             26,111,560                   0
      Daniel Raynor                   12,299,997                   0
      David R. Butler                 45,727,562                651,471
      Lance C. Jacobs                 45,727,562                651,471

    Proposal 2: To ratify the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for the year ending December 31,
2004. Proposal No. 2 received the following votes: For - 45,727,562; Against -
651,464; Abstain - 7.


                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

     There presently is no market for our common stock. To our knowledge there
have been no reported sales or bids of such common stock.

Holders

     As of March 14, 2005 there were approximately 1,379 holders of record of
our common stock.

Dividends

     We have not declared or paid any cash dividends on our common stock. The
payment of cash dividends in the future will depend on our earnings, financial
condition, capital needs and other factors deemed pertinent by our board of
directors, including the limitations, if any, on the payment of dividends under
state law and then-existing credit agreements. It is the present policy of our
board of directors to retain

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earnings to finance the operations and expansion of business. Our Loan and
Security Agreement with Comerica Bank--California currently prohibits the
payment of dividends on our capital stock.

Securities Authorized for Issuance under Equity Compensation Plans

     See Item 11 of Part III on page 34 of this Form 10-KSB for information
concerning our equity compensation plans.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

      We begin Management's Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) with our overall strategy to give readers an
overview of the goals of our business and the direction in which our business
and products are moving. The strategy section is followed by a discussion of the
Critical Accounting Estimates that we believe are important to understanding the
assumptions and judgments incorporated in our 2004 and 2003 financial
statements, beginning with an Overview. We then provide an analysis of changes
in our balance sheet, income statements and cash flows, and discuss our
financial commitments in the sections entitled "Financial Condition," "Material
Commitments" and "Off-Balance-Sheet Arrangements." We conclude this MD&A with
our "Business Outlook" section wherein we discuss the outlook for 2005.

Forward Looking Statements

     This MD&A should be read in conjunction with the other sections of this
Annual Report on Form 10-KSB, including "Item 1: Business" and "Item 7:
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 March 31, 2005.
For example, if our merger with Retalix is completed, our outlook, expected
results, future strategy and other forward looking information will change
substantially.


Our Strategy

    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 to add and retain valuable customers. Key elements of our
strategy to fulfill our vision are outlined in the points that follow:

    o   Operational Efficiency - We have clearly defined our business strategy
        and core business activities. As a result, we have developed an
        operating structure designed to 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   Focused Market Approach - We have aligned our operational
                  activities and resources with the delivery of solutions and
                  services for the following market definitions:

                  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

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<PAGE>


                      o   Implementations range from simplistic to sophisticated
                          and may be supported through strategic implementation
                          partners
                  Small to Medium Retail 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 will
                  continue to establish strategic business relationships that
                  enhance the development of our products, the breadth of our
                  product offering and the delivery of services that empower us
                  to deliver a complete customer solution. 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
                  Small to Medium Retail marketplace, software is now primarily
                  sold and serviced through our reseller and point-of-sale
                  dealer networks.

    o   Client Satisfaction - Since 2003, we have renewed our focus to
        continually improve by developing initiatives designed to focus the
        organization on delivering value to both our new and existing customer
        base. These initiatives have resulted in and will continue to improve
        quality, satisfaction and the efficiency of our customers' experience.
        The initiatives we are cultivating for the benefit of our customers are
        as follows:

              o   Product Development Process- We continue to implement new
                  processes for operational improvement around product
                  development. Initially addressing the product management
                  process and market requirements definition, the Product
                  Development Process includes formality around functional and
                  technical specifications. These processes and procedures
                  insure that we remain in touch with delivering high quality
                  solutions and functionality for our customers.

              o   Engagement Management - Engagement Management is a services
                  and support 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 it begins with understanding
                  our customer's expectations. Engagement management transcends
                  the services implementation and improves the depth of our
                  win-win customer relationships.

              o   Fast-Track Implementations - Fast-Track is a packaged
                  implementation program to lower the risks of replacing legacy
                  pricing and hosting systems. Fast-Track is a phased
                  implementation of TCI's core pricing and hosting foundation
                  offering predefined deliverables, installation scope and
                  timeframe. Fast-Track provides grocers with price management,
                  base price generation, hosting and store system interfaces, to
                  systems such as POS, and signs and labels. It also includes
                  development of roles-based menu templates and personalized
                  reports, as well as training, and pilot and go live support.

              o   Quality and Customer Centricity - A critical component to our
                  success as a developer of technology solutions begins 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.

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<PAGE>


Critical Accounting Policies

    The methods, estimates and judgments we use in applying our accounting
policies have an impact on the results we report in our financial statements.
Our discussion and analysis of results of operations and financial condition are
based upon financial statements that we prepared in accordance with generally
accepted accounting principles of 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 which are included elsewhere herein.
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. 104,
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 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 basis
with the revenue being deferred and recognized ratably over the maintenance
period.

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

     Accounts Receivable - We typically extend credit to our customers. Payments
for software licenses generally include payment terms with installments due
within six months from the date of delivery. All significant customers are
reviewed for credit worthiness before we license our software and we do not sell
our software or recognize any license revenue unless we believe that collection
is probable. Billings for

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<PAGE>


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 quarters. 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. We compare the estimated market
value of our segments to book value to determine whether or not any potential
impairment of goodwill exists. Our estimates of market value are based on
average multiples of our public competitors, which are subject to change based
on industry, economic and business conditions. While we have not experienced
impairment of goodwill assets in prior periods, we cannot guarantee that there
will not be impairment in the future.


    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.


Overview of Significant Trends and Developments in Our Business

    The Majority of Our Stock has been Acquired. On April 1, 2005, we entered
into a Stock Purchase Agreement with Retalix, Ltd., an Israeli corporation, and
certain holders of our outstanding Series A Preferred Stock and Series B
Preferred Stock ("Selling Stockholders"), pursuant to which Retalix purchased
substantially all of the our outstanding Series A Preferred Stock and Series B
Preferred Stock (the "Acquisition") for an aggregate purchase price of
$30,035,148, consisting of 715,729 ordinary shares of Retalix valued at
$17,177,500 and $12,857,648 in cash which was paid to the Selling Stockholders
pro rata. We paid to employees and directors who held vested stock options under
our stock option plans and who had tendered options under our option exchange
offer which closed in 2004, an aggregate of $1,744,999 in cash. The Acquisition
resulted in Retalix beneficially owning in excess of 73% of our outstanding
voting stock (calculated on an as-converted to common stock basis), and
specifically, 99.8% of the outstanding Series A Preferred Stock and 95.8% of the
outstanding Series B Preferred Stock. Also on April 1, 2005, we entered into an
agreement and plan of merger with Retalix Ltd., Retalix Holdings and certain
subsidiaries of Retalix Holdings under which we would be merged with and into a
subsidiary of Retalix Holdings and all of our outstanding common stock and
preferred stock (other than shares held by Retalix Holdings and shares as to
which appraisal rights have been properly asserted under Delaware law) would be
exchanged for cash (the "Merger"). Following the Merger, we would cease to exist
and all of our assets and liabilities would be held by a subsidiary of Retalix
Holdings.

     Revenue Trends. In 2004, we experienced growth in Services revenue of 16.1%
and Maintenance revenue of 25.5%. Our success in these areas is primarily
attributable to the overall growth in our licensed customer base and the size
and scope of existing services engagements. Software license revenue increased
9.6% from 2003. We believe the primary factor contributing to the increase in
software license revenue was due to the repositioning of our TCI Retail HQ
solutions and introduction of new merchandising

                                       12


<PAGE>


analytic applications. Early in 2004, we expanded our product offerings by
introducing new applications and integrating other key strategic applications
thereby enabling us to offer a more complete solution. Additionally, our
state-of-the-art TCI Retail Store product was released in the second quarter of
2004 to specifically address the replacement of our heritage product, IMS and
has been gaining market acceptance. Our strategy to organize the company around
our two primary market segments, Small to Medium Retailers (SMR) and
Enterprise/Maintream, and to provide market specific products and services, is
expected to increase software license revenue and increase our overall growth
rate for total revenue.


      We Continue to Expand Our Product Offering. We have sought to expand the
breadth of our product offerings by partnering with solution providers to
enhance the value our solutions deliver to customers and enhance our competitive
positioning. We have recently announced software license and distribution
agreements with FRENDS Technology, Inc., JRS Innovative Software, Inc., and
JustEnough Software, Inc. These products extend TCI Retail by automating
workflow, easing integration, offering category management and bringing demand
forecasting, inventory optimization and planning capabilities to our customers.

    Economic Conditions Continue to Impact Our Operating Results. Our operating
results continue to be impacted by uncertain economic conditions. The grocery
retail industry continues to exercise significant due diligence prior to making
large capital outlays, and the decision-making process for investments in
information technology remains highly susceptible to deferral. As a result, our
sales cycles remain elongated and we continue to experience uncertainty
predicting the size and timing of individual contracts. We believe that delays
in the decision-making process have been, and may continue to be, the most
significant issue affecting our software license revenue results. Delays in the
customer decision-making processes have resulted from a number of factors
including extended due diligence procedures and the appointment of new senior
management. Nonetheless, our competitive losses remain very low.

Results of Operations
      Comparison of the Year Ended December 31, 2004 to the Year Ended December
31, 2003

Revenues

    Total revenues were $21.2 million and $21.8 million in 2003 and 2004
respectively, representing an increase of $614,000 or 2.9%. Overall, we
experienced growth in license revenue of 9.6%, maintenance revenue of 25.5% and
services revenue of 16.1% from 2003. These increases were partially offset by an
81.3% decrease in other revenue. In 2003, one customer accounted for 17.3% of
our total revenues. In 2004, two customers accounted for 18.0% and 10.6% of
total revenues. No other single customer accounted for more than 10% of 2003 or
2004 total revenues.

    Software license revenues were $5.6 million and $6.1 million in 2003 and
2004, representing an increase of $531,000 or 9.6%. We believe the primary
factor contributing to the increase in software license revenue was due to the
repositioning of our HQ solutions and the introduction of new merchandising
analytic applications.

Software License Revenue by Product-Line

    We classify our software licenses in two TCI Retail product categories: TCI
HQ(TM) and TCI Store(TM). TCI Retail consists of Solution Packages that can be
implemented at headquarters (TCI HQ) or store-level (TCI Store). TCI Store and
HQ both provide full-function solution modules that enable retail chains to
quickly execute strategic business decisions, from headquarters to the store
level. Solution sets can be implemented as packages, individually or as
complements to existing systems.

A summary of the software revenue attributable to these product categories is as
follows:

<TABLE>
<CAPTION>

                                       2004           %          2003          %
                                       ----           -          ----          -
       <S>                             <C>            <C>      <C>             <C>
       Revenues:
        TCI HQ.......................  $4,015,112     65.9%    $2,211,052      39.7%

                                       13


<PAGE>


        TCI Store....................  2,077,632     34.1%     3,350,754      60.3%
                                      ----------    ------    ----------     ------
          Total...............        $6,092,744    100.0%    $5,561,806     100.0%
                                      ==========    ======    ==========     ======
</TABLE>

    License revenues from TCI HQ were $2.2 million and $4.0 million in 2003 and
2004 respectively, representing an increase of $1.4 million or 52.0%.
Additionally, license revenue from TCI Store declined $1.2 million or 36%. Total
software license revenue increased by $588 thousand or 10.6% from 2003. We
believe the primary factor contributing to the increase in software license
revenue was due to the repositioning of our HQ solutions and introduction of new
merchandising analytic applications. Early in 2004, we expanded our product
offerings by introducing new applications and integrating other key strategic
applications thereby enabling us to offer a more complete solution.

    Maintenance. Maintenance revenues were $3.8 million and $4.8 million in 2003
and 2004 respectively, representing an increase of $966,000 or 25.5% from 2003
to 2004. The increase in software maintenance revenue was attributable to
renewals of annual support and maintenance agreements from existing customers
and to new sales of support and maintenance services associated with software
sales. We believe that our success with renewals is the result of strong
relationships with existing customers and increased software license revenue
from our TCI Retail product line. We expect future software maintenance revenues
to increase as a result of the quality of our support and maintenance services
and expected increases in software license revenue.

    Services. Services revenue increased from $9.0 million to $10.4 million in
2003 and 2004 respectively, representing an increase of $1.5 million or 16.1%.
The increase in services revenue is directly attributed to increased
implementation services associated with our TCI Retail products. We expect
future services revenue to increase as a result of new software license sales
and expansion of our services capabilities and offerings.

    Other. Other revenues were $2.9 million and $538,000 in 2003 and 2004
respectively, representing a decrease of $2.3 million or 81.3%. The decrease in
other revenues is attributed to decreased sales of third party hardware
components, a line of business terminated in early 2004.


Gross Profit

     Gross Profit. Gross profit was $12.0 million and $12.7 million in 2003 and
2004 respectively, representing an increase of 5.6%. Additionally, the gross
margin was 56.7% and 58.2% for 2003 and 2004 respectively, the increase of 1.5%
was primarily due to increased maintenance revenues of 25.5%, offset by
increased costs associated with our newly integrated software solutions.

    Software Licenses Margins. Software license margins were $5.5 million and
$5.4 million in 2003 and 2004 respectively, representing a decrease of 0.4%.
Software license margins as a percentage of software license revenue were 98.4%
and 89.2% in 2003 and 2004 respectively. The decrease in software license
margins in 2004 is primarily related to increased sales of third party software
licenses.

    Maintenance Margins. Maintenance revenue margins were $2.6 million and $3.8
million in 2003 and 2004 respectively, representing an increase of $1.3 million
or 48.4%. The increase in maintenance revenue margins is primarily due to the
increases in maintenance revenue of 25.5%. Maintenance revenue margins, as a
percentage of maintenance revenues, were 69.1% and 81.7% in 2003 and 2004
respectively. The increase in maintenance revenue margins as a percentage of
maintenance revenue of 12.6% was the result of increased maintenance revenue and
reductions in operating expenses related to the delivery of maintenance services
for the 2004 fiscal year.

    Services Margins. Services revenue margins were $3.2 million and $3.3
million in 2003 and 2004 respectively, representing an increase of $98,000 or
3.1%. This marginal increase from 2003 to 2004 was primarily due increased
demand for our professional services and a reduction in the use of third party
firms. These amounts represented 35.3% and 31.8% of service revenues for 2003
and 2004. The decrease in

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<PAGE>


services revenue margins as a percentage of services revenue from 2003 to 2004
is primarily due to investments in non-billable services activities associated
with the development of new service programs.

    Other Margins. Other revenue margins were $787,000 and $65,000 in 2003 and
2004 respectively, representing a decrease of $722,000 or 91.8%. Other revenue
margins as a percentage of other revenue were 27.4% and 12.0% for 2003 and 2004
respectively. The decrease in other revenue margins as a percentage of other
revenue for the year is primarily due to lower margins earned on third party
hardware sales in 2004 when compared to 2003.

Operating Expenses

    Product Development. Product development expenses were $4.0 million and $3.5
million in 2003 and 2004 respectively, representing a decrease of $525,000 or
13.0%. The decrease in product development expenses from 2003 to 2004 was
attributable to efforts to improve development efficiencies resulting from
automation and process improvements that require fewer development resources. In
2004, our development efforts were focused on the development of new TCI Retail
products such as TCI TCI Store Host, Integration Workbench and Promotion
Planner. Product development expenses represented 19.1% and 16.1% of total
revenues in 2003 and 2004.

    We expect product development expenses to decrease slightly or remain
constant as a percentage of total revenue in the future as we continue to
improve operational efficiencies and revenue. These capabilities will enable us
to develop more code at a lower marginal cost. This efficiency will allow us to
continue to invest in the development of additional TCI Retail modules, analytic
and collaborative applications on behalf of our customers.

    Sales and marketing. Sales and marketing expenses were $7.4 million and $7.1
million in 2003 and 2004 respectively, representing a decrease of $314,000 or
4.3%. The decrease was primarily due to reduced selling resources and related
expenses. Additional focus on more efficiently and effectively marketing TCI
Retail enabled us to decrease marketing and advertising expenses for the year
ended 2004. Sales and marketing expenses represented 34.8% and 32.3% of total
revenues in 2003 and 2004 respectively.

    We expect that our sales and marketing expenses over this next year, will
increase slightly or remain constant in absolute dollars. Management believes
that the planned investments in these organizations will be sufficient to expand
TCI Retail's penetration into grocery retail.

    General and Administrative. General and administrative expenses were $6.5
million and $5.0 million in 2003 and 2004 respectively, representing a decrease
of $1.5 million or 23.3%. The decrease in general and administrative expenses
was primarily due to focused efforts to decrease operating and overhead costs
and a $212,000 reduction in bad debt expense due to the allocation of
receivables which had been reserved for in the prior year. General and
administrative expenses represented 30.6% and 22.8% of total revenues in 2003
and 2004 respectively.

    We expect total general and administrative expenses to decrease in absolute
dollars over the course of the next twelve months. We have reduced operating
expenses and facility requirements. Additionally, we are continuing efforts to
reduce overhead costs and improve operating efficiency within our operations.

Net Loss

    Net loss represents revenues less cost of revenues, operating expenses,
interest income/expense and income taxes. Net losses were $6.0 million and $2.9
million for 2003 and 2004 respectively, representing a decrease of 50.7%.

Liquidity and Capital Resources

    We continue to finance our operations primarily through the private sales of
equity securities that occurred in late 2001 and early 2002. The total Series B
Preferred Stock offering resulted in us raising

                                       15


<PAGE>


$13.3 million in new capital. From this offering, we received $8.6 million prior
to December 31, 2001 and the remaining balance of $4.7 million in installments
in January through April of 2002.

    On November 18, 2004, we renewed our Loan and Security Agreement with
Comerica Bank-California which provides us with a revolving line of credit on
trade receivables of up to $3 million and a separate line of credit for
maintenance receivables that is not to exceed $1.5 million. We borrowed
$2,250,791 against our credit facility as of December 31, 2004 and had $573,584
of credit available. Borrowings under our 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
December 31, 2004, we were in compliance with all covenants included in the
terms of the credit facility. At the maturity of our revolving line, Retalix,
which purchased substantially all of our outstanding Series A Preferred Stock
and Series B Preferred Stock on April 1, 2005, will pay down the line out of
working capital.

    We had working capital of $11,000 at December 31, 2004 compared with $2.5
million at December 31, 2003. Cash and cash equivalents at December 31, 2004
were $3.3 million, a decrease of $334,000 from the $3.7 million reported at
December 31, 2003. Cash balances decreased for the year ended December 31, 2004
primarily as a result of decreased software sales and investments in product
development, sales and capital investments in computer equipment of $182,000.

    Operating activities used cash of $963,000 and $999,000 for the years ended
December 31, 2004 and 2003, respectively. Cash used from operating activities
for the year ended December 31, 2004 results primarily from a net loss of $2.9
million, a $1.4 million increase in deferred revenue and a $467,000 increase in
accrued expenses. We had net receivables of $3.4 million at December 31, 2004
compared to $3.3 million at December 31, 2003. The increase of $159,000 relates
to the timing of sales. The days sales outstanding metric, which is calculated
by dividing quarter-end accounts receivable by average daily sales for the
quarter, was 59 days and 60 days as of December 31, 2004 and 2003 respectively.

    Investing activities utilized cash of $182,000 and $713,000 for the years
ended December 31, 2004 and 2003, respectively. Cash utilized by investing
activities in both periods resulted primarily from capital expenditures.

    Financing activities provided cash of $811,000 and $268,000 during the years
ended December 31, 2004 and 2003, respectively. The activity for 2004 relates
primarily to changes in our line of credit.

Material Commitments

    We have planned for approximately $300,000 in capital expenditures for 2005.
The significant capital items we intend to acquire include hardware and software
solutions necessary to execute our operational plans. We plan to draw upon our
line of credit with Comerica Bank-California for the acquisition of these
assets. In 2004 we had approximately $182,000 in asset additions.

    In connection with our facility lease dated June 20, 2000, we have an
agreement for the issuance of letters of credit up to an aggregate amount not to
exceed $150,000. In connection with the financing agreement with a bank entered
into on June 30, 2000, we have an agreement for the issuance of letters of
credit up to an aggregate amount not to exceed $500,000. At December 31, 2004,
we had $150,000 of letters of credit outstanding. These amounts are not included
in our financial statements.

    On February 27, 2004, we entered into a $3,500,000 credit facility with a
financial institution composed of a $500,000 equipment line of credit and a
$3,000,000 accounts receivable revolving line of credit. Each advance under the
equipment line of credit accrues interest at 0.75% above the prime rate and is
payable monthly. As of November 27, 2004, outstanding borrowings under the
equipment line of credit are payable in 30 equal monthly installments, plus
interest at 0.75% above the prime rate (6.0% at December 31, 2004) through the
maturity date. The equipment line of credit matures in June 2007. The accounts
receivable revolving line of credit bears interest at 0.50% above the prime rate
(5.75% at December 31, 2004).

     On November 18, 2004, we amended the above facility. The amended credit
facility is comprised of a $3,000,000 accounts receivable revolving line of
credit and a $1,000,000 maintenance receivable revolving line of credit. The
maintenance revolving line of credit is not to exceed (i) $1.5 million from
November 18, 2004 through February 28, 2005, (ii) $1 million from March 1, 2005
through March 31, 2005 and (iii)

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<PAGE>


$500,000 from April 1, 2005 through May 31, 2005. The amended facility does not
extend an equipment line of credit. The revolving line of credit bears interest
at 0.50% above the prime rate (5.75% at December 31, 2004) and matures in May
2005. Borrowings are collateralized by substantially all of our assets,
including our intellectual property. At the maturity of revolving line, Retalix,
who purchased substantially all of our outstanding Series A Preferred Stock and
Series B preferred Stock on April 1, 2005, will pay down the line out of working
capital.

    Borrowings under the accounts receivable and maintenance receivable
revolving lines of credit are limited to 80% and 50%, respectively, of eligible
accounts receivable, as defined. As of December 31, 2004, available borrowings
under the revolving line of credit were approximately $573,584. As of December
31, 2004, we have outstanding borrowings against our credit facility of
$2,437,046 consisting of $186,255 under the equipment line of credit and
$2,250,791 under the revolving line of credit.

    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 December 31, 2004, we were
in compliance with all covenants included in the terms of the credit facility.

    In connection with our credit facility, we granted warrants to purchase
115,000 shares of common stock at an exercise price of $0.25 per share to the
financial institution. These warrants will be cancelled if the Merger is
completed.

    As of December 31, 2004, future payments related to contractual obligations
and commercial commitments are as follows:

<TABLE>
<CAPTION>

                                                                       Amounts Due by Period
                                               -----------------------------------------------------------------------
                                                1 year and     2-3 years     4-5 years     Thereafter       Total
                                                   less
                                               -----------------------------------------------------------------------
<S>                                               <C>           <C>            <C>         <C>              <C>
Capital Lease Obligations..................       $25,567       $13,550        $  -             -             $39,117
Operating Lease Obligations................       689,943     1,319,332        48,930           -           2,058,205
Guarantees under Letters of Credit.........       150,000           -             -             -             150,000
                                               -----------------------------------------------------------------------
Total Contractual Obligations and Commercial
  Commitments..............................      $865,510    $1,332,882       $48,930           -          $2,247,322
                                                 ========    ==========       =======           =          ==========


</TABLE>

    We believe that our existing cash balances, annual support and maintenance
collections and available financing will be sufficient to satisfy these
contractual obligations and commercial commitments and to meet operating and
capital requirements for at least the next twelve months.

Off-Balance Sheet Arrangements

     We do not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or
special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. As such, we are not exposed to any financing, liquidity,
market or credit risk that could arise if we had engaged in such relationships.


Business Outlook

     As we look ahead to the rest of 2005, our operating plan will attempt to
deliver higher profitability through both revenue growth and a reduced cost
structure. We expect improvement in the sales of our core product, TCI Retail
primarily from the recent addition to the product of Demand Forecasting and
Replenishment. Improvements in sales will only occur through the execution of
`Our Strategy' discussed earlier in this MD&A.

     Our financial results are substantially dependent upon sales of TCI Retail
software. Revenue is partly a function of the mix of software, services,
maintenance and other sales. Our margins are highest for software and
maintenance and significantly lower for our services and other revenue
categories. Our

                                       17


<PAGE>


margins are also affected by the product mix within the various markets we
serve. Margins are higher in the Enterprise/Mainstream market than in the 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 believe that current improvements in the overall economic conditions and
the upswing in the economy are positive overall indicators. The retail industry,
a common technology laggard, remains cautiously optimistic with their level of
investment in information technology. Compelling events such as Wal-Mart's
growth in the superstore business model and regulatory and technological changes
combined with our ability to leverage the existing customer base will be factors
that contribute to our ability to grow revenues in 2005. We believe that we can
achieve revenue growth and profitability in 2005 as a result of our cost cutting
that occurred in January and February of 2004. Due to the timing of the cost
cutting, the related cost savings and our revenue plan, we expect to improve
bottom line performance in 2005.

    We believe that our existing cash balances, annual support and maintenance
collections and available financing will be sufficient to satisfy operating and
capital requirements for at least the next twelve months.

     We further believe that we have the product offerings, personnel,
competitive and financial resources for continued 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.

    We believe that we should be able to withstand the impact of the
bankruptcies of some of our former customers, including Fleming Companies and
Winn-Dixie Stores, Inc. We believe we have valid defenses to any allegations of
preferential payments made prior to these bankruptcies and that our actual
liability from these actions will not materially adversely affect our financial
condition. Nonetheless, we cannot predict with any certainty the outcome of any
preference litigation against us or whether the bankruptcy trustees in these
cases will agree to settle for amounts substantially less than the preference
claim amounts.

New Accounting Pronouncements

         In December 2004, the Financial Accounting Standards Board revised
Statement No. 123 (FAS 123R), "Share-Based Payment," which requires companies to
expense the estimated fair value of employee stock options and similar awards
based on the grant-date fair value of the award. The cost will be recognized
over the period during which an employee is required to provide service in
exchange for the award, usually the vesting period. The accounting provisions of
FAS 123R will be effective as of the beginning of the first interim or annual
reporting period that begins after June 15, 2005. We will adopt the provisions
of FAS 123R on July 1, 2005 using a modified prospective application. Under the
modified prospective application, FAS 123R, will apply to new awards, unvested
awards that are outstanding on the effective date and any awards that are
subsequently modified or cancelled. Compensation expense for outstanding awards
for which the requisite service had not been rendered as of the effective date
will be recognized over the remaining service period using the compensation cost
calculated for pro forma disclosure purposes under FAS 123 Stock-Based
Compensation. We are in the process of determining how the new method of valuing
stock-based compensation as prescribed in FAS 123R will be applied to valuing
stock-based awards granted after the effective date and the impact the
recognition of compensation expense related to such awards will have on our
financial statements.


Certain Risks That May Affect Future Results

    We operate in a dynamic and rapidly changing environment that involves
numerous risks and uncertainties. The following section describes some, but not
all, of these risks and uncertainties that we believe may adversely affect our
business, financial condition or results of operations.

    Investors evaluating our business should carefully consider the factors
described below and all other information contained in this Form 10-KSB.
Additional factors and uncertainties not currently known to us

                                       18


<PAGE>


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 audited Financial Statements and Notes thereto for the
years ended December 31, 2004 and 2003 contained elsewhere in this Form 10-KSB.


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 and our operating results would be adversely affected.


    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 budget and 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 or
            changes in the length and complexity of our sales cycle;

        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   customer order deferrals resulting from the anticipation of new
            products, economic uncertainty, disappointing operating results by
            the customer or customer budgeting and purchasing cycles;

        o   changes in the number, size or timing of new and renewal maintenance
            contracts or cancellations;

        o   competitive price pressures, the success or failure of significant
            transactions and 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; and

        o   changes in our operating expenses.

    Additionally, our market activity in target markets has increased in recent
years and we have made more large sales than in past periods. 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.

                                       19


<PAGE>


We May Be Unable to Satisfy the Requirements of Section 404 of the
Sarbanes-Oxley Act, or We or Our Auditors May Identify Significant Deficiencies
or Material Weaknesses in Our Internal Controls

      Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to
furnish a report of our management's assessment of the effectiveness of our
internal control over financial reporting and our auditors are required to
provide a report on management's assessment and their own audit of our internal
control over financial reporting. We are not required to provide our internal
control report and related audit report until our fiscal year ending December
31, 2006. Compliance with the Sarbanes-Oxley Act regulations is costly, and
requires resources beyond our current capacities. To date, we have not prepared
an internal plan of action for compliance, and we have not begun the process of
assessing our internal controls to provide the basis for our internal control
report. We expect to be able to furnish the internal control report and related
attestation report when due. However, if we are unable to satisfy the
requirements of Section 404 of the Sarbanes-Oxley Act, this could have a
material adverse effect on our business, financial condition, results of
operations and cash flows.


Changes in Market Size and Dynamics Could Have a Material Adverse Effect on Our
Ability to Generate Sales and Our Future Prospects for Growth

    A dynamic U.S. economy, 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.

    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, require increases in our Bad Debt reserves or
reduce the demand for our products which may negatively impact our business,
operating results and financial condition.

Decreases in Demand From Grocery Retailers Will Hurt Our Ability to Generate
Revenues

    Historically, we have derived almost 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 other retail sectors within the 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
macro-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;

                                       20


<PAGE>


        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 Which Could Result
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.

It May Be Difficult to Profitably Identify, Adopt and Develop Product
Architecture That is Compatible With Emerging Industry Standards Which 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.


We May Have Difficulty Implementing Our Products

     Our software products are complex and perform, or directly affect,
mission-critical functions across many functional and geographical areas of an
enterprise. Consequently, implementation of our software

                                       21


<PAGE>


products can be a lengthy process, and commitment of resources by our clients is
subject to a number of significant risks over which we have little or no
control. Although average implementation times have declined, we believe delays
in the implementation of our software may result in client dissatisfaction,
disputes or damage to our reputation. Significant problems implementing our
software therefore, can cause delays or prevent us from collecting license fees
for our software and services and can damage our ability to generate referral
business.


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.


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

                                       22


<PAGE>


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


We May Not Be Able to Reduce Expense Levels If Our Revenues Decline

     Our expense levels are based on our expectations or future revenues. Since
software license sales are typically accompanied by a significant amount of
services and maintenance revenues, the size of our services organization must be
managed to meet our anticipated software license revenues. We have also made a
strategic decision to make a significant investment in new product development.
As a result, we hire and train service personnel and incur research and
development costs in advance of anticipated software license revenues. If
software license revenues fall short of our expectations, or if we are unable to
fully utilize our service personnel, our operating results are likely to decline
because a significant portion of our expenses cannot be quickly reduced to
respond to any unexpected revenue shortfall.

A Loss of Important Customers May Result in a Loss of Revenues

    In 2003, one customer accounted for 17.3% of total revenues. In 2004, two
customers accounted for 18.0% and 10.6% respectively of our total revenues. No
other single customer accounted for more than 10% of 2003 or 2004 total
revenues. 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.

                                       23


<PAGE>


A Loss of Existing Resellers Could Harm Our Financial Position and Results of
Operation

    A portion of our product sales 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 Economic
Conditions and Result in Uncollectible Accounts Receivable Balances

     We have in the past and may in the future be impacted by customer
bankruptcies that occur in periods subsequent to the software license sale or
the delivery of services. During weak economic conditions, such as those being
experienced in some geographic regions we serve, there is an increased risk that
certain of our customers will file for bankruptcy. When our customers file for
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 amounts,
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

    We have experienced net losses and negative cash flows from operating
activities for the last five fiscal years. Although our long-term business
strategy is intended to turn such net losses into net profits, net losses and
negative cash flows are expected to turn around within three months. In the
long-term, 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, particularly the performance and
services of David Butler, President and Chief Executive Officer; Stephen
DeSantis, Executive Vice President, Chief Financial Officer and Corporate
Secretary and Lance Jacobs, our Chief Industry Officer. All of our key personnel
have employment contracts with us. The contracts are generally described in Item
10, Executive Compensation, below. The loss of the services of these executive
officers or other significant employees could negatively impact our business.

                                       24


<PAGE>


    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 Financial Position
and Results of Operations

    Our software 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 ability to
enhance our existing products through internal development and strategic
partnering, internally develop new products which leverage both our existing
customers and sales force, and strategically acquire complementary retail point
and collaborative solutions that add functionality for specific business
purposes to an enterprise-wide system. 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.

                                       25


<PAGE>


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. An inability to obtain 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.


                                       26


<PAGE>



We Are Controlled by Retalix, Who May Not Act in the Best Interests of Our Other
Shareholders, and With Whom we Have Agreed to Merge

Retalix holds 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 Retalix represents approximately 73% of our outstanding capital stock on an
as-converted basis. As a result, Retalix holds a controlling interest in us and
will be able to make decisions in its own interest which may not be in the best
interests of other stockholders. In addition, representatives of Retalix will as
of the close of business on April 15, 2005 hold three of the four filled seats
on our board of directors, which will give Retalix additional influence over our
future operations.

We have entered into a merger agreement with Retalix and certain of its
subsidiaries pursuant to which (other than shares held by Retalix or
stockholders who perfect their appraisal rights) each outstanding share of our
common stock will be converted into the right to receive $0.132 in cash; each
outstanding share of Series A Preferred Stock (on an as-converted to common
stock basis) will be converted into the right to receive $0.8409 in cash; and
each outstanding share of Series B Preferred Stock (on an as-converted to common
stock basis) will be converted into the right to receive $0.7573 in cash. We
will incur costs and charges related to the proposed merger. In addition, though
we believe the merger will close, we must fulfill certain closing conditions and
the uncertainty during the time period until such closing may adversely impact
our operations.


Item 7.  Financial Statements

    Our financial statements required to be included in Item 7 are set forth in
the index to Financial Statements set forth after page 40 of this report.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures

     None.

Item 8A.  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 periods 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-14(c). 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 Control over Financial Reporting

    During the fourth quarter of 2004, there were no significant changes in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect our internal control over financial
reporting.


Item 8B.  Other Information

    None.

                                       27


<PAGE>


                                    PART III

Item 9. Directors and Executive Officers, Promoters and Control Persons;
        Compliance with Section 16(a) of the Exchange Act

<TABLE>
<CAPTION>

         Name                         Age     Position
         ----                         ---     --------

<S>                                   <C>     <C>
Executive Officers:
David R. Butler (3)                   49      Director, President and Chief Executive Officer
Lance C. Jacobs                       48      Chief Industry Officer, Chairman of the Board
Stephen P. DeSantis                   43      Executive  Vice  President, Chief  Financial Officer and
                                              Corporate Secretary

Board of Directors:
Lance C. Jacobs                       48      Chairman of the Board

David R. Butler (3)                   49      Director

James E. Houlihan III  (1)(2)         48      Director

Todd G. Gardner (1)(2)                39      Director

Mark T. Koulogeorge (2)               43      Director

Daniel Raynor (1)                     45      Director

Nominees to the Board (4)
-------------------------

Barry Shaked                          48      Nominee

Danny Moshaioff                       58      Nominee

Eli Spirer                            49      Nominee

</TABLE>

(1)   Member of Audit Committee
(2)   Member of Compensation Committee
(3)   Mr. Butler was appointed our President and Chief Executive Officer
      effective July 1, 2004 by our Board of Directors. He replaced Mr. Jacobs,
      our CEO since 1996 and Chairman of the Board since 1995. Mr. Jacobs'
      position as Chairman of the Board remains unchanged
(4)   At the close of business on April 15, 2005, Mr. Jacobs, Mr. Houlihan, Mr.
      Gardner, Mr. Koulogeorge and Mr. Raynor will resign and Mr. Shaked, Mr.
      Moshaioff and Mr. Spirer will be appointed as directors. See "Change in
      Control."

Executive Officers

    Lance C. Jacobs, Chairman of the Board and Chief Industry Officer. Mr.
Jacobs joined our Board of Directors in December 1995 and has served as Chairman
since 1996. Mr. Jacobs was CEO from 1997 until July 2004. He currently oversees
our corporate strategic direction and is involved in key operational activities.
Mr. Jacobs has over 21 years experience in retail and retail technology. Prior
to joining us, Mr. Jacobs was President of a software and consulting firm
serving the retail industry. Mr. Jacobs started his career with The Kroger Co.,
where he was involved in a variety of disciplines within the Corporate Finance
and Corporate Operations departments.

    Mr. Jacobs earned a BA in Business Administration from the University of
South Florida, and earned a Masters of Business Administration in Finance from
the University of Cincinnati.

                                       28


<PAGE>


    David Butler, President and Chief Executive Officer. Mr. Butler joined the
Board of Directors in 2003 and was appointed CEO in July of 2004. Mr. Butler has
served as vice president of sales for Best Software since 1996, with
responsibility for all corporate sales and marketing programs. In 1998, he was
named Chief Operating Officer, and in 1999 assumed the additional position of
President. Mr. Butler brings 25 years of experience in providing business
solutions to small and mid-sized firms. He was previously director of sales for
Lawson Software, and also held leadership positions with Bachman Information
Services, MAI Basic Four, and Burroughs Corp.

    Mr. Butler received a BS in Finance from California State University,
Fullerton.

    Stephen P. DeSantis, Executive Vice President, Chief Financial Officer and
Corporate Secretary. Mr. DeSantis has over 20 years of financial management
experience in both the private and public sectors. In his role as our Chief
Financial Officer and Corporate Secretary, he is responsible for corporate
governance issues, SEC compliance, business planning, corporate strategic
communications, and securing financing for us. Mr. DeSantis also manages the
investor relations, finance, accounting, IT and human resource departments. He
began his career in 1985 with Coopers & Lybrand, LLP, in Los Angeles. From 1989
to 1993 he held the position of Corporate Controller at Cassette Productions
Unlimited, Inc. From 1993 to 1995 he held the position of Controller for TCI.

    Mr. DeSantis earned a Bachelor of Arts degree from the University of
Southern California and is a certified public accountant. Additionally, Mr.
DeSantis earned a Masters of Business Administration in Finance and Operations
Management from the University of Southern California.


Directors

    James E. Houlihan III, Director. Mr. Houlihan joined the Board of Directors
in 2001. Mr. Houlihan has served as General Partner and Managing Director with
InnoCal Venture Capital since 1994. Mr. Houlihan is an experienced investor and
venture capital manager working with early stage technology companies in the
areas of information technology, Internet applications, and health care
information systems. Mr. Houlihan is currently a Director of LifeMasters
Supported SelfCare, Maret Corporation and Accruent. Prior to joining InnoCal,
Mr. Houlihan spent nine years with Boston Capital Ventures (BCV), an early stage
venture capital partnership based in Boston. At BCV, he served on the Board of
Directors of six portfolio companies in the areas of software, health care and
information technology.

    Mr. Houlihan received a BA in Political Science from Middlebury College and
an MBA from the Boston University School of Management.

    Todd G. Gardner, Director. Mr. Gardner joined the Board of Directors in
2002. Mr. Gardner has served as Director with Blue Chip Venture Company since
1996 where he leads the firm's retail systems investment practice. Prior to
joining Blue Chip, Mr. Gardner spent four years at Deloitte & Touche LLP
Consulting in Chicago, where he focused on deploying information technology
systems and developing performance measurement systems. Prior to Deloitte, Mr.
Gardner spent four years with PNC Bank as a commercial lender. Mr. Gardner is an
experienced investor and venture capital manager working with early stage
technology companies. Mr. Gardner is currently a director of Atomic Dog, Feature
Foods, Jay Industrial Technologies Group, Knowlagent, SimonDelivers and
Spotlight Solutions.

    Mr. Gardner received a BA, Cum Laude, from DePauw University in 1987 and a
MBA, Cum Laude, from Indiana University in 1993.

    Mark T. Koulogeorge, Director. Mr. Koulogeorge has been a member of our
Board of Directors since 1999. He currently serves as a Managing General Partner
of MK Capital investment firm, a position he has held since 2001. Mr.
Koulogeorge is also a General Partner of The Productivity Fund III and The
Productivity Fund IV, which total over $175 million in committed capital. He is
a General Partner of two other funds that are fully invested and represent over
$170 million in committed capital. For eight years, he has served as a managing
director of First Analysis Corporation, responsible for coordinating venture
capital opportunities. Mark's areas of expertise include enterprise software,
outsourcing and marketing services. As an executive officer of Eagle Industries,
a $1.5 billion Sam Zell company, he led the company through several merger and
acquisition transactions valued in excess of $1 billion. Mr. Koulogeorge is also
a director of GreatFood, Inc. Mark was also previously with Booz Allen &
Hamilton.

                                       29


<PAGE>


Mr. Koulogeorge holds an M.B.A. degree from Stanford University and a B.A.
degree in Economics from Dartmouth College.

    Daniel Raynor, Director. Mr. Raynor has been a Director since 2001. Mr.
Raynor is a managing partner of The Argentum Group, a private equity firm, a
position he has held since 1987. Mr. Raynor serves on the Board of Directors of
NuCo2, Inc., and COMFORCE Corporation, all of which are reporting companies
under the Securities Exchange Act of 1934. In addition, Mr. Raynor serves on the
Board of several privately-held technology and business service companies,
including two application software companies.

    Mr. Raynor earned a Bachelors of Science in economics from The Wharton
School, University of Pennsylvania.

Nominees to the Board of Directors

    Barry Shaked, Nominee. Mr. Shaked is a founder of Retalix and has served as
its President, Chief Executive Officer and Chairman of the Board since its
inception in April 1982. From August 1975 to February 1979, Mr. Shaked served as
an officer in the Israeli Defense Forces. He attended the Computer Science
School of Bar-Ilan University from 1980 to 1983.

    Danny Moshaioff, Nominee. Mr. Moshaioff has served as an Executive Vice
President and Chief Financial Officer of Retalix since December 1999. From July
1997 to December 1999, Mr. Moshaioff served as Chief Financial Officer of Blue
Square ISR and from September 1995 to June 1997, he served as General Manager of
Mashbir Mazon. Mr. Moshaioff has served as a director of Neviot Ltd. since
January 2004. Mr. Moshaioff received a B.A. in Economics and Statistics from the
Hebrew University in 1970 and an M.B.A. from New York University in 1972.

    Eli Spirer, Nominee. Mr. Spirer is Vice President for Customer Services of
Retalix. He joined Retalix as a programmer when the company was founded in 1982
and was made Manager of Development for the Israeli market in 1987. In 1992 he
was promoted to Vice President for International Development. After transferring
to the United States in 1996 he served for four years as Vice President for
Strategic Development, during which he managed supermarket business and
strategic alliances. In May 2000 he was made Vice President for Customer
Services. Mr. Spirer graduated from Technion, Israel Institute of Technology in
1981 with a degree in Hotel Management after service in the Israeli Defense
Forces from 1974 to 1977.

Board Committees

Our Board of Directors has an Audit Committee and a Compensation Committee.

     The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing (1) the
financial information provided to shareholders and others, (2) systems of
internal controls established by management and the Board of Directors and (3)
the audit process.

     Our Board of Directors has determined that it does not have a member of its
audit committee that qualifies as an "audit committee financial expert" as
defined in Item 401(e) of Regulation S-B, and is "independent" as the term is
used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of
1934, as amended. We believe that the members of our Board of Directors are
collectively capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial reporting. In
addition, we believe that retaining an independent director who would qualify as
an "audit committee "financial expert" is not warranted given the qualifications
of our Board.

     The primary function of the Compensation Committee is to review and
administer our compensation programs and to make recommendations to our Board of
Directors.

Director Who Resigned

    Donald L. Jans resigned from our Board of Directors effective September 1,
2004.

                                       30


<PAGE>


Director Nominations

     There are no established procedures for security holders to recommend
nominees for the board of directors.

Code of Ethics

     We have not adopted a code of ethics; however the our Board of Directors is
in the process of developing a code of ethics and anticipates that it will
complete its efforts and adopt such a code during this fiscal year.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Exchange Act requires our directors and executive
officers and persons who own more than ten percent of a registered class of our
equity securities to file with the SEC initial reports of ownership and reports
of changes in ownership of our common stock and other equity securities and to
report any changes timely. Officers, directors and greater-than-ten-percent
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file.

     To our knowledge, based solely on review of the copies of such reports
furnished to us and written representations that no other reports were required
during our fiscal year ending 2004 or prior fiscal years, our remaining
officers, directors and greater-than-ten-percent beneficial owners complied with
all Section 16(a) filing requirements.


Item 10.  Executive Compensation

     The following table sets forth information concerning the annual and
long-term compensation earned by or paid to executive officers for services
rendered in all capacities during the fiscal years ended December 31, 2004, 2003
and 2002, for those persons who served as chief executive officer and each of
our remaining executive officers. We refer to these individuals as our "named
executive officers."

<TABLE>
<CAPTION>

                                       SUMMARY COMPENSATION TABLE

                                                Salary        Bonus      Securities
                                                                         Underlying       All Other
Name and Principal Position           Year      ($)(1)         ($)       Options (#)    Compensation(2)
----------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>        <C>        <C>                 <C>
Lance C. Jacobs                       2004         243,900          -              -          10,645
----------------------------------------------------------------------------------------------------------
Chairman and                          2003         245,311          -              -          24,514
----------------------------------------------------------------------------------------------------------
   Chief Industry Officer             2002         240,452    100,292              -           4,156
----------------------------------------------------------------------------------------------------------
David R. Butler (3)                   2004         150,000          -              -           2,561

President and Chief Executive         2003               -          -              -               -

  Officer                             2002               -          -              -               -
----------------------------------------------------------------------------------------------------------
Stephen P. DeSantis                   2004         195,000          -              -          18,331
----------------------------------------------------------------------------------------------------------
Executive Vice President, Chief       2003         176,272          -              -          24,587
Financial Officer and
----------------------------------------------------------------------------------------------------------
  Corporate Secretary                 2002         172,114        53,970           -           3,595
----------------------------------------------------------------------------------------------------------
David N. Berg (4)                     2004         180,772             -           -          10,465

Chief Technical Officer and           2003         173,651             -           -          32,967

  Senior Vice President               2002         168,300        53,199           -           3,875
----------------------------------------------------------------------------------------------------------
</TABLE>

                                       31


<PAGE>


    (1) Salaries for the named executive officers have remained constant since
        2002 with the exception of Stephen P. DeSantis who received an increase
        in 2004 from $175,000 to $195,000. Minor year over year salary
        differences relate to the timing of payments.

    (2) Consists of our contributions to each named executive officer's employee
        benefits, 401(k) plan and term-life insurance plan.

    (3) Mr. Butler was appointed President and Chief Executive Officer effective
        July 1, 2004. Mr. Butler's annual base salary is to be $300,000 pursuant
        to his employment agreement dated May 27, 2004.

    (4) Mr. Berg terminated his duties as an officer and employee effective July
        21, 2004. Amounts paid in 2004 include severance payments made pursuant
        to Mr. Berg's employment agreement dated January 1, 2003.


Option Grants

    During 2004, we granted the following options to the named executive officer
pursuant to the 2001 Employee Stock Option Plan and 2001 Non-Employee Stock
Option Plan.

<TABLE>
<CAPTION>

   -------------------------------------------------------------------------------------------------------------
                                       OPTION GRANTS IN LAST FISCAL YEAR
   -------------------------------------------------------------------------------------------------------------
                                               Individual Grants
   -------------------------------------------------------------------------------------------------------------

                                                        Percent of
                                  Number of            total options
                                  securities             granted to
                              underlying options     employee in fiscal     Exercise of base       Expiration
              Name                granted (#)               year              price ($/Sh)            date
              (a)                     (b)                   (c)                   (d)                  (e)
   -------------------------------------------------------------------------------------------------------------
   <S>                             <C>                     <C>                   <C>                 <C>   <C>
   David R. Butler                 5,385,359               100%                  $0.05               10/19/14
   -------------------------------------------------------------------------------------------------------------

</TABLE>


Options Exercised

    Our named executives did not exercise any stock options during the fiscal
year ended December 31, 2004. The following table sets forth the number of and
value of the named executive officers' unexercised options at year-end based
upon an estimated fair market value of $0.05 per share. We determined the
estimated fair market value in good faith as of December 31, 2004. The value of
unexercised in-the-money options at December 31, 2004 represents an amount equal
to the difference between the estimated fair market value of the common stock
and the option exercise price, multiplied by the number of unexercised
in-the-money options. On the date of the Acquisition, all outstanding options
were terminated.

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------
                                  OPTIONS EXERCISED IN LAST FISCAL YEAR

--------------------------------------------------------------------------------------------------------------
                                Number of Securities Underlying         Value of Unexercised in-the-money
                                    Unexercised Options at                         Options at
                                       December 31, 2004                        December 31, 2003
--------------------------------------------------------------------------------------------------------------
Name                             Exercisable       Unexercisable         Exercisable        Unexercisable
--------------------------------------------------------------------------------------------------------------
<S>                                <C>               <C>                 <C>                <C>
David R. Butler                    20,833            5,364,526                -                   -
--------------------------------------------------------------------------------------------------------------
Lance C. Jacobs                   2,350,451           246,793
--------------------------------------------------------------------------------------------------------------
Stephen P. DeSantis               1,134,919           101,115
--------------------------------------------------------------------------------------------------------------
David N. Berg                         -                  -                    -                   -
--------------------------------------------------------------------------------------------------------------

</TABLE>

Employment Agreements

    We have entered into Employment Agreements with Mr. Jacobs, Chairman of the
Board and Chief Industry Officer, Mr. Butler, President and Chief Executive
Officer and Mr. DeSantis, Executive Vice President, Chief Financial Officer and
Corporate Secretary. The agreements for Mr. Jacobs and Mr.

                                       32


<PAGE>


DeSantis took effect on January 1, 2003 and continue indefinitely until
terminated. The agreement for Mr. Butler took effect on July 1, 2004 and
continues indefinitely until terminated. The agreements provide for:

        o   Annual base salaries in the amounts of $300,000 for David R. Butler,
            $243,900 for Lance C. Jacobs and $175,000 for Stephen P. DeSantis.
            Mr. DeSantis' salary was increased to $195,000 during 2004.

        o   Participation in our bonus plan, established each year by our
            Compensation Committee for management employees.

        o   Mr. Jacobs and Mr. DeSantis receive $500,000 in term life insurance.

        o   Fully paid health insurance for the employee and the employee's
            immediate family.

    The agreements also provide for severance benefits upon employee's
termination without cause, or in the event the employee voluntary resigns
following a material negative change in job position, including the following:

        o   Continued payment of employee's base salary for a period of twelve
            (12) months.

        o   Payment of amounts that would otherwise become due under the bonus
            plan for management employees, prorated to the effective date of
            termination.

        o   Continued coverage under our health insurance plans for a period of
            twelve (12) months.

        o   Continued coverage under the life insurance plan for a period of
            twelve (12) months.

        o   The ability of the employee to exercise any vested stock options for
            a period of 270 days following the effective date of termination.

    The agreements also contain customary provisions relating to
confidentiality, noncompetition, proprietary rights and dispute resolution.

Severance Agreement for David N. Berg

    Our former Chief Technology Officer David N. Berg terminated his duties as
an officer and employee of us effective July 21, 2004. In connection with his
termination, we agreed to provide Mr. Berg with severance benefits, including
continued payment of his base salary through July 21, 2005, payment of premiums
of a life insurance policy and other benefits as defined by his employment
agreement. In addition, Mr. Berg has agreed not to engage or become financially
interested in, be employed by, or have any connection with, any competitor of
ours. The agreement also contains customary provisions relating to
confidentiality, proprietary rights and dispute resolution.


Directors' Compensation

    Non-employee directors earn an option to purchase 1,000 shares of our common
stock for each board meeting attended. Directors are also reimbursed for their
reasonable out-of-pocket expenses incurred in connection with business relating
to us. Pursuant to our 1993 Non-Employee Directors' Stock Option Plan and 2001
Non-Employee Directors' Stock Option Plan, (collectively the "Directors' Plans")
each non-employee director receives upon the date of initial election to the
Board of Directors an option to purchase 10,000 shares of our common stock. On
the date immediately following our annual stockholders meeting of each year,
each non-employee director who has been a non-employee director for at least
three months prior to such date, receives an additional option to purchase 5,000
shares of our common stock. All options granted under the Directors' Plans are
100% vested on the date of grant. Exercise prices for each option granted are
equal to the fair market value of our common stock on the date of granted.

    On November 11, 2003, we retained David Butler as a non-employee member of
our Board of Directors. At the approval of our board, the following compensation
terms were granted: In the capacity

                                       33


<PAGE>


of director, he received an annual retainer of $5,000, an additional $1,250 per
Board meeting, paid in cash and a one time stock option grant of 125,000 to be
issued in 2004. In July, 2004, Mr Butler was appointed as our CEO at which point
Mr. Butler became an employee director for which there is no additional
compensation. Through the date of Mr. Butler's appointment as our CEO, Mr.
Butler retained 20,833 options, the vested portion of his one time stock option
grant.


Item 11.   Security Ownership of Certain Beneficial Owners and Management

    The following table sets forth certain information concerning beneficial
ownership of Common Stock as of April 1, 2005, by any person who is known by us
to be the beneficial owner of more than five (5%) percent of our Common Stock,
by each of our directors, each named executive officer, by all current directors
and executive officers as a group and by those persons nominated or who will be
nominated to fill vacancies on our Board of Directors on April 15, 2005.

    We know of no persons other than those identified below who beneficially own
more than 5% of the outstanding shares of Common Stock, Series A Preferred Stock
or Series B Preferred Stock as of April 1, 2005. Unless otherwise indicated in
the footnotes, each person or entity has sole voting and investment power (or
shares such powers with his or her spouse) with respect to the shares shown as
beneficially owned.

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------
                                      Amount and Nature of Beneficial Ownership(1)
------------------------------------------------------------------------------------------------------------------
                                                        Series A                    Series B
Name and Address of      Common        Percentage      Preferred     Percentage    Preferred       Percentage
Beneficial Owner(2)      Stock          of Class         Stock        of Class       Stock          of Class
------------------------------------------------------------------------------------------------------------------
<S>                     <C>            <C>             <C>            <C>          <C>             <C>
David R. Butler            -                -              -              -            -                -
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Lance C. Jacobs         204,000             -              -              -            -                -
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Stephen P. DeSantis       500               -              -              -            -                -
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Daniel Raynor
60 Madison Avenue
Suite 701                  -                -              -              -            -                -
New York, NY 10010
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Todd G. Gardner
1100 Chiquita Center
250 East Fifth Street      -                -              -              -            -                -
Cincinnati, Ohio  45202
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Mark T. Koulogeorge
The Sears Tower,
Suite 9500
233 South Wacker Drive     -                -              -              -            -                -
Chicago, Illinois  60606
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
James E. Houlihan III
600 Anton Blvd,
Suite 1270                 -                -              -              -            -                -
Costa Mesa, CA  92626
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Retalix Ltd. (3)
10 Zarhin Street      38,571,001(4)       73.4%       6,151,914         99.7%       25,528,940        95.8%
Raanana, 43000,
Israel
------------------------------------------------------------------------------------------------------------------

                                       34


<PAGE>


------------------------------------------------------------------------------------------------------------------
                                      Amount and Nature of Beneficial Ownership(1)
------------------------------------------------------------------------------------------------------------------
                                                        Series A                    Series B
Name and Address of      Common        Percentage      Preferred     Percentage    Preferred       Percentage
Beneficial Owner(2)      Stock          of Class         Stock        of Class       Stock          of Class
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Barry Shaked
6100 Tennyson Parkway
Suite 150                   -                             -                            -
Plano, Texas 75024
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Danny Moshaioff
10 Zarhin Street            -                             -                            -
Raanana, 43000,
Israel
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Eli Spirer
6100 Tennyson Parkway
Suite 150                   -                             -                            -
Plano, Texas 75024
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
David N. Berg               -                             -                            -
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
All directors
and executive
officers as a
group (8 people)         204,500           -              -               -            -                -
------------------------------------------------------------------------------------------------------------------

</TABLE>

(1)  Each beneficial owner's percentage ownership is determined by assuming that
     options and other convertible securities that are held by such person and
     that are exercisable and convertible within 60 days have been exercised or
     converted.

(2)  Unless otherwise indicated, the address for each of the indicated owners is
     17752 Skypark Circle, Suite 160, Irvine, CA 92614.

(3)  All shares owned by wholly-owned subsidiaries of Retalix may be deemed to
     be beneficially owned by Retalix.

(4)  Represents shares of Common Stock which may be acquired upon conversion of
     shares of Series A Preferred Stock (including the issuance of additional
     shares of Series A Preferred Stock issuable under the PIK dividend as
     described in the Company's Certificate of Incorporation) and Series B
     Preferred Stock.


Securities Authorized for Issuance under Equity Compensation Plans

     The following table presents summary information about our equity
compensation plans, consisting of our 1993 Equity Incentive Plan, 1993
Non-Employee Directors' Stock Option Plan, 2001 Equity Incentive Plan and 2001
Non-Employee Directors' Stock Option Plan and any individual stock option
arrangements not arising under any plan. We have obtained stockholder approval
for each of our plans. The table presents the following data on our plans, all
as of the close of business on December 31, 2004:

         (a) the aggregate number of shares of our common stock subject to
             outstanding stock options;

         (b) the weighted-average exercise price of those outstanding stock
             options; and

         (c) the number of shares that remain available for future option
             grants.

                                       35


<PAGE>


For additional information regarding our stock option plans and the accounting
effects of our stock-based compensation, please see Notes 1 and 7 of our Notes
to Financial Statements

<TABLE>
<CAPTION>

                                    Equity Compensation Plan Information

                                    Number of common shares to      Weighted-average      Number of common
                                    be issued upon exercise of      exercise price of     shares available
                                           outstanding                 outstanding           for future
      Plan Category                         options(a)                 options(b)          issuance(c)(1)
      -------------                ------------------------------   -----------------     ----------------
<S>                                          <C>                          <C>                <C>
Equity compensation plans                    7,503,565                    $0.27              10,801,866
approved by stockholders

Equity compensation plans not                  None                       None                  None
approved by stockholders

Totals                                       7,503,565                    $0.27              10,801,866

</TABLE>

(1) Excludes shares listed in column (a).

Change in Control

        On April 1, 2005, Retalix Ltd. through Retalix Holdings purchased
substantially all of our outstanding Series A Preferred Stock and Series B
Preferred Stock. The acquisition resulted in Retalix Ltd. beneficially owning in
excess of 73% of our outstanding voting stock (calculated on an as-converted to
common stock basis). We also entered into a merger agreement whereby we will,
subject to certain conditions, merge with a subsidiary of Retalix. For more
information see "Item 1. Business--Our Evolution."

        On March 31, 2005, our Board of Directors adopted a resolution where
five of the six directors would resign from the Board effective on the 10th day
following the filing with the Securities and Exchange Commission and the mailing
to stockholders of an Information Statement on Schedule 14f-1. The resigning
directors will be Lance C. Jacobs, Todd G. Gardner, Mark T. Koulogeorge, Daniel
Raynor and James E. Houlihan III. David R. Butler will remain as a director
following the Merger. The Board also resolved to appoint three new directors
nominated by Retalix, effective as of the Resignation Date. These new directors
will be Barry Shaked, Danny Moshaioff and Eli Spirer. Thus, at the Resignation
Date, the Board will consist of four directors, three of whom are to be
appointed by Retalix and the fourth of whom will be David Butler.

Item 12.  Certain Relationships and Related Transactions

    As of April 1, 2005, Retalix beneficially owns, directly or indirectly,
99.8% of our Series A Preferred Stock, 95.8% of our Series B Preferred Stock and
73.4% of our Common Stock of the Company on an as-converted to Common Stock
basis.

    Mr. Houlihan is the managing director of InnoCal Management, L.P., the
general partner of InnoCal II, L.P., a Selling Stockholder in the Acquisition.
Because of these relationships Mr. Houlihan may be deemed to have had an
indirect material interest in the Acquisition.

    Mr. Raynor was a Selling Shareholder in the Acquisition and is the managing
member of Argentum Investments, L.L.C., which is the general partner of TCI ACP
II Limited Partners, L.P. and the managing member of Argentum Partners II,
L.L.C. The latter is the general partner of Argentum Capital Partners II, L.P.,
which along with TCI ACP II Limited Partners L.P. and Argentum Partners II,
L.L.C. was a Selling Stockholder in the Acquisition. Because of these
relationships Mr. Raynor may be deemed to have had direct and indirect material
interests in the Acquisition.

                                       36


<PAGE>


    Mr. Gardner is a director of Blue Chip Venture Company, Ltd., the general
partner of Blue Chip Capital Fund IV, L.P., a Selling Stockholder in the
Acquisition. Because of these relationships Mr. Gardner may be deemed to have
had an indirect material interest in the Acquisition.

    Mr. Koulogeorge was a Selling Stockholder in the Acquisition and is a
general partner of The Productivity Fund IV, L.P., also a Selling Shareholder in
the Acquisition. Because of these relationships, Mr. Koulogeorge may be deemed
to have had direct and indirect material interests in the Acquisition.

    Mr. Shaked, whom we expect to be appointed as a director of the Company on
the Resignation Date, is the President, Chief Executive Officer and Chairman of
the Board and a 6.4% stockholder of Retalix. Because of these relationships, Mr.
Shaked may be deemed to have an indirect material interest in the Merger.

    David N. Berg, our former Chief Technology Officer was paid $75,010 for
consulting services and related expenses in addition to severance payments made
pursuant to his Employment Agreement.


Item 13.  Exhibits

                                       37


<PAGE>

<TABLE>
<CAPTION>

                                                   Exhibit Index
-------------------------------------------------------------------------------------------------------------------
 Exhibit No.                                             Description
-------------------------------------------------------------------------------------------------------------------
<S>            <C>
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           Fourth Amendment to Loan and Security Agreement dated November 18, 2004 between TCI Solutions, Inc.
               and Comerica Bank-California
-------------------------------------------------------------------------------------------------------------------
10.6           Warrant to Purchase 35,000 shares of Common Stock of TCI Solutions, Inc. in favor of Comerica
               Bank-California dated February 27, 2004
-------------------------------------------------------------------------------------------------------------------
10.7***        Warrant to Purchase 80,000 shares of Common Stock of TCI Solutions, Inc. in favor of Comerica
               Bank-California dated November 18, 2004
-------------------------------------------------------------------------------------------------------------------
10.8***        Employment Agreement dated January 1, 2003 between TCI Solutions, Inc. and Lance Jacobs
-------------------------------------------------------------------------------------------------------------------
10.9***        Employment Agreement dated January 1, 2003 between TCI Solutions, Inc. and Stephen DeSantis
-------------------------------------------------------------------------------------------------------------------
10.10***       Employment Agreement dated January 1, 2003 between TCI Solutions, Inc. and David Berg
-------------------------------------------------------------------------------------------------------------------
10.11*         2001 Equity Incentive Plan of TCI Solutions, Inc. and Amendments thereto
-------------------------------------------------------------------------------------------------------------------
10.12*         2001 Non-Employee Directors' Stock Option Plan of TCI Solutions, Inc.
-------------------------------------------------------------------------------------------------------------------
10.13*         1993 Equity Incentive Plan of TCI Management, Inc. (now TCI Solutions, Inc.)
-------------------------------------------------------------------------------------------------------------------
10.14*         1993 Non-Employee Directors' Stock Option Plan of TCI Management, Inc. (now TCI Solutions, Inc.)
-------------------------------------------------------------------------------------------------------------------
10.15****      Employment Agreement dated May 27, 2004 between TCI Solutions, Inc. and David R. Butler
-------------------------------------------------------------------------------------------------------------------
23.1           Consent of Deloitte & Touche, LLP
-------------------------------------------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       38


<PAGE>


* 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.

*** 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.


Reports on Form 8-K

     None.

Item 14.  Principal Accountant Fees and Services

     The Audit Committee regularly reviews and determines whether specific
projects or expenditures with our independent registered public accounting firm,
Deloitte & Touche LLP and their affiliates ("Deloitte & Touche"), potentially
affect their independence. The Audit Committee's policy is to pre-approve all
audit and permissible non-audit services provided by Deloitte & Touche.
Pre-approval is generally provided by the Audit Committee for up to one year, is
detailed as to the particular service or category of services to be rendered,
and is generally subject to a specific budget. The Audit Committee may also
pre-approve additional services or specific engagements on a case-by-case basis.
Management is required to provide quarterly updates to the Audit Committee
regarding the extent of any services provided in accordance with this
pre-approval, as well as the cumulative fees for all non-audit services incurred
to date.

     The following table sets forth the aggregate fees billed to us by Deloitte
& Touche for the fiscal year ended December 31, 2004 and December 31, 2003.

<TABLE>
<CAPTION>

        ---------------------------------------- ------------------ ---- ------------------ ----
                                                        2004                    2003
        ---------------------------------------- ------------------ ---- ------------------ ----
        <S>                                              <C>        <C>           <C>        <C>
        Audit fees                                       $100,800   (1)           $77,300    (1)
        ---------------------------------------- ------------------ ---- ------------------ ----
        Audit-related fees                                 31,800   (1)            35,285    (1)
        ---------------------------------------- ------------------ ---- ------------------ ----
        Tax fees                                           33,006   (2)            48,953    (2)
        ---------------------------------------- ------------------ ---- ------------------ ----
             Total audit and non audit fees              $165,606                $161,538
        ---------------------------------------- ------------------ ---- ------------------ ----

</TABLE>

(1) Includes fees for professional services rendered for the audit of our annual
financial statements and review of our annual report on Form 10-KSB for the
fiscal years 2004 and 2003 and for reviews of the financial statements included
in our quarterly reports on Form 10-QSB for the first three quarters of fiscal
2004 and 2003.

(2) Includes fees for professional services rendered in fiscal 2004 and 2003, in
connection with tax compliance.

                                       39


<PAGE>


                                    SIGNATURE

              In accordance with Section 13 or 15(d) of the Securities Exchange
         Act of 1934, the registrant caused this report to be signed on its
         behalf by the undersigned, thereunto duly authorized.



                                                   TCI SOLUTIONS, INC.


         Dated: April 15, 2005                     By: /s/ David R. Butler
                                                      -----------------------
                                                       David R. Butler
                                                       President and
                                                       Chief Executive Officer

         Dated: April 15, 2005                     By: /s/ Stephen P. DeSantis
                                                   ----------------------------
                                                       Stephen P. DeSantis
                                                       Executive Vice President,
                                                       Chief Financial Officer
                                                       and Corporate Secretary

                                       40


<PAGE>


                                POWER OF ATTORNEY

           KNOW ALL MEN BY THESE PRESENTS, that such person whose signature
      appears below constitutes and appoints Barry Shaked, David R. Butler and
      Stephen P. DeSantis, and each of them his true and lawful
      attorneys-in-fact and agents, with full power of substitution and
      resubstitution, for him and in his name, place and stead, in any and all
      capacities, to sign any and all amendments to this Form 10-KSB and to file
      the same, with all exhibits thereto, and other documents in connection
      therewith, with the U.S. Securities and Exchange Commission, granting unto
      said attorneys-in-fact and agents, and each of them, full power and
      authority to do and perform each and every act and thing requisite and
      necessary to be done in and about the premises, as fully to all intents
      and purposes as he might or could do in person, hereby ratifying and
      confirming all that said attorneys-in-fact and agents, or any of them, or
      their or his substitute or substitutes, may lawfully do or cause to be
      done by virtue hereof.

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

       Name                            Capacity                      Date
       ----                            --------                      ----

/s/ David R. Butler          President and Chief Executive      April 15, 2005
-------------------------    Officer (Principal Executive
David R. Butler              Officer)

/s/ Stephen P. DeSantis      Executive Vice President,          April 15, 2005
-------------------------    Chief Financial Officer
Stephen P. DeSantis          and Corporate Secretary
                             (Principal Financial and
                             Accounting Officer)

/s/ Lance C. Jacobs          Chief Industry Officer and         April 15, 2005
-------------------------    Chairman of the Board
Lance C. Jacobs

/s/ James E. Houlihan III    Director                           April 15, 2005
-------------------------
James E. Houlihan III

/s/ Todd G. Gardner          Director                           April 15, 2005
-------------------------
Todd G. Gardner

/s/ Mark T. Koulogeorge      Director                           April 15, 2005
-------------------------
Mark T. Koulogeorge

/s/ Daniel Raynor            Director                           April 15, 2005
-------------------------
Daniel Raynor

                                       41


<PAGE>


Index to Financial Statements

                                                                          Page
                                                                          ----

Report of Independent Registered Public Accounting Firm                    F-1
Balance Sheet as of December 31, 2004                                      F-2
Statements of Operations for the Years ended December 31,
  2004 and 2003                                                            F-4
Statements of Shareholders' Equity for the Years ended
  December 31, 2004 and 2003                                               F-5
Statements of Cash Flows for the Years ended December 31,
  2004 and 2003                                                            F-6
Notes to Financial Statements for the Years ended December 31,
  2004 and 2003                                                            F-8



                                       42


<PAGE>



       TCI Solutions, Inc.

       Financial Statements as of December 31,
       2004 and for the Years Ended December 31,
       2004 and 2003 and Report of Independent
       Registered Public Accounting Firm



<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
TCI Solutions, Inc.
Irvine, CA

We have audited the accompanying balance sheet of TCI Solutions, Inc. (the
"Company") as of December 31, 2004, and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 2004. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of TCI Solutions, Inc. at December 31, 2004,
and the results of its operations and its cash flows for each of the two years
in the period ended December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.

/s/ Deloitte & Touche LLP
----------------------------

Costa Mesa, CA
April 15, 2005


<PAGE>

--------------------------------------------------------------------------------
TCI SOLUTIONS, INC.

BALANCE SHEET
DECEMBER 31, 2004
--------------------------------------------------------------------------------
ASSETS

CURRENT ASSETS:
 Cash and cash equivalents                                         $ 3,344,919
 Accounts receivable, net of allowance
  for doubtful accounts of $127,798                                  3,355,635
 Prepaid expenses and other current assets                             212,217
                                                                    ----------

        Total current assets                                         6,912,771
                                                                    ----------
PROPERTY AND EQUIPMENT:
 Computer equipment                                                  4,536,282
 Furniture and fixtures                                                796,011
 Leasehold improvements                                                190,227
                                                                    ----------

                                                                     5,522,520
 Less accumulated depreciation and amortization                     (4,248,192)
                                                                    ----------

        Property and equipment--net                                  1,274,328

GOODWILL                                                               529,031

OTHER ASSETS                                                            23,232
                                                                    ----------
TOTAL                                                              $ 8,739,362
                                                                   ===========

See notes to financial statements.                                  (Continued)
--------------------------------------------------------------------------------
                                      -2-


<PAGE>


--------------------------------------------------------------------------------
TCI SOLUTIONS, INC.

BALANCE SHEET
DECEMBER 31, 2004
--------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Accounts payable                                                  $   825,873
 Accrued expenses                                                    1,504,869
 Line of credit                                                      2,437,046
 Current portion of capital lease obligation                            24,270
 Deferred revenue                                                    2,131,372
                                                                   -----------

        Total current liabilities                                    6,923,430
                                                                   -----------

CAPITAL LEASE OBLIGATION--Net of current portion                        11,603

COMMITMENTS AND CONTINGENCIES (Note 6)

STOCKHOLDERS' EQUITY:
 Series A convertible preferred stock, no par value--6,146,227       5,509,993
  shares authorized; 5,816,037 shares issued and outstanding;
  liquidation preference of $6,165,000
 Series B convertible preferred stock, no par value--26,653,094     12,340,746
  shares authorized; 26,653,094 shares issued and outstanding;
  liquidation preference of $13,327,000
 Common stock, $0,001 par value--72,000,000 shares authorized;      37,481,222
  12,825,459 shares issued and outstanding
 Warrants to purchase common stock                                     178,129
 Accumulated deficit                                               (53,705,761)
                                                                   -----------
        Net stockholders' equity                                     1,804,329
                                                                   -----------
TOTAL                                                              $ 8,739,362
                                                                   ===========

See notes to financial statements.                                 (Concluded)
--------------------------------------------------------------------------------

                                      -3-


<PAGE>


--------------------------------------------------------------------------------
TCI SOLUTIONS, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------

                                                   2004            2003

REVENUES:
 Software licenses                            $  6,092,744    $  5,561,806
 Maintenance                                     4,754,043       3,787,985
 Services                                       10,443,718       8,993,278
 Other                                             537,509       2,870,681
                                              ------------    ------------

        Total revenues                          21,828,014      21,213,750

COST OF REVENUES:
 Software licenses                                 657,541         102,646
 Maintenance                                       868,622       1,220,271
 Services                                        7,123,382       5,771,337
 Other                                             472,777       2,083,939
                                              ------------    ------------

        Total cost of revenues                   9,122,322       9,178,193
                                              ------------    ------------

GROSS PROFIT                                    12,705,692      12,035,557
                                              ------------    ------------
OPERATING EXPENSES:
 Product development                             3,519,073       4,044,544
 Sales and marketing                             7,061,998       7,376,018
 General and administrative                      4,970,786       6,476,473
                                              ------------    ------------

        Total operating expenses                15,551,857      17,897,035
                                              ------------    ------------

OPERATING LOSS                                  (2,846,165)     (5,861,478)

OTHER EXPENSE                                      (85,076)        (88,936)
                                              ------------    ------------

LOSS BEFORE PROVISION FOR INCOME TAXES          (2,931,241)     (5,950,414)

PROVISION FOR INCOME TAXES                           5,000           9,600
                                              ------------    ------------

NET LOSS                                      $ (2,936,241)   $ (5,960,014)
                                              ============    ============
--------------------------------------------------------------------------------

Net loss per share--basic and diluted         $      (0.23)   $      (0.46)
Weighted-average common shares
 outstanding--basic and diluted                 12,822,521      12,819,263

See notes to financial statements.
--------------------------------------------------------------------------------

                                      -4-


<PAGE>

<TABLE>
<CAPTION>


------------------------------------------------------------------------------------------------------------------------------------
TCI SOLUTIONS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2004 AND 2003
------------------------------------------------------------------------------------------------------------------------------------

                          Series A                Series B                                    Warrants
                        Convertible             Convertible                                 to Purchase
                      Preferred Stock         Preferred Stock           Common Stock           Common     Accumulated
                   ---------------------   ---------------------   ----------------------      Stock        Deficit        Net
                    Shares      Amount      Shares      Amount       Shares      Amount

<S>              <C>         <C>          <C>         <C>          <C>         <C>            <C>        <C>            <C>
BALANCE--
 January 1,
 2003            5,816,037   $5,509,993   26,653,094  $12,340,746  12,819,263  $37,479,292    $178,129   $(44,809,506)  $10,698,654

  Net loss                                                                                                 (5,960,014)   (5,960,014)
                 ---------   ----------   ----------  -----------  ----------  -----------    --------   -------------  -----------
BALANCE--
 December 31,
 2003            5,816,037   $5,509,993   26,653,094  $12,340,746  12,819,263  $37,479,292    $178,129    (50,769,520)    4,738,640

Exercise of
 stock options                                                          6,196        1,930                                    1,930

  Net loss                                                                                                 (2,936,241)   (2,936,241)
                 ---------   ----------   ----------  -----------  ----------  -----------    --------   -------------  -----------

BALANCE--
 December 31,
 2004            5,816,037   $5,509,993   26,653,094  $12,340,746  12,819,263  $37,479,292    $178,129    (53,705,761)    1,804,329
                 =========   ==========   ==========  ===========  ==========  ===========    ========   =============  ===========
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -5-


<PAGE>


--------------------------------------------------------------------------------
TCI SOLUTIONS, INC.

STATEMNETS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------

                                                         2004           2003

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                            $(2,936,241)   $(5,960,014)
 Adjustments to reconcile net loss to
  net cash used in operating activities:
  Depreciation and amortization                          630,750        609,017
  Provision for doubtful accounts                       (212,000)       750,000
  Changes in operating assets and liabilities:
    Accounts receivable--net                             110,520      4,378,259
    Prepaid expenses and other current assets             33,367        398,902
    Other assets                                          (3,467)        (1,740)
    Accounts payable                                    (418,975)       (16,547)
    Accrued expenses                                     467,285     (1,287,239)
    Deferred revenue                                   1,365,932        130,740
                                                     -----------    -----------

        Net cash used in operating activities           (962,829)      (998,622)

CASH FLOWS FROM INVESTING ACTIVITIES--Acquisition
 of property, plant and equipment                       (182,378)      (712,894)
                                                     -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Principal payments on capital lease obligation          (23,270)       (22,848)
 Proceeds from line of credit                          1,000,000        500,000
 Repayments on line of credit                           (167,865)      (209,218)
 Proceeds from exercise of stock options                   1,930

        Net cash provided by financing activities        810,795        267,934
                                                     -----------    -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS               (334,412)    (1,443,582)

CASH AND CASH EQUIVALENTS--Beginning of year           3,679,331      5,122,913
                                                     -----------    -----------

CASH AND CASH EQUIVALENTS--End of year               $ 3,344,919    $ 3,679,331
                                                     ===========    ===========

                                                                    (Continued)
--------------------------------------------------------------------------------

                                      -6-


<PAGE>


--------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------

                                                         2004           2003

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION--Cash paid during the
 period for:
 Interest                                            $    95,693    $   132,303
                                                     -----------    -----------

Income taxes                                         $     7,238    $     9,600
                                                     ===========    ===========
--------------------------------------------------------------------------------

NONCASH INVESTING AND FINANCING ACTIVITIES:
 During 2003, we entered into the following noncash investing and financing
  activities:
   Acquired $46,284 of equipment under capital lease arrangements.

See notes to financial statements.                                 (Concluded)

                                      -7-


<PAGE>


TCI SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------


1.    NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Nature of Business--We provide retailers with enterprise solutions
      consisting of mission-critical software applications and specialized
      professional services. Our software enables retailers to quickly and
      accurately execute strategic business decisions in the areas of
      merchandise planning and optimization, merchandise management and store
      operations. Our architecture and enterprise data repository provide a
      powerful and flexible foundation that can automate and support electronic
      data exchange throughout the enterprise and retail supply chain.

      Basis of Presentation--The accompanying financial statements have been
      prepared in accordance with accounting principles generally accepted in
      the United States of America.

      Use of Estimates--The preparation of financial statements in accordance
      with accounting principles generally accepted in the United States of
      America requires the management to make estimates and assumptions that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent liabilities at the date of the financial statements and the
      reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates. Estimates are used for,
      but not limited to, the allowance for doubtful accounts, contingencies and
      income taxes.

      Cash and Cash Equivalents--We consider all highly liquid investments with
      an original maturity of three months or less to be cash equivalents. We
      maintain our cash balances with one financial institution. These balances
      are insured by the Federal Deposit Insurance Corporation for up to
      $100,000. At December 31, 2004, uninsured amounts held at this financial
      institution total $3,244,919. We have not experienced any losses in such
      accounts and believe we are not exposed to any significant credit risk on
      cash.

      Accounts Receivable--We perform ongoing credit evaluations of our
      customers and generally do not require collateral. We maintain allowances
      for estimated credit losses, and such losses have been within management's
      expectations.

      Inventory--Inventory consists primarily of computer hardware and software,
      manual inserts and binders and is stated at the lower of first-in,
      first-out cost or market. Inventory of approximately $64,000 has been
      included in prepaid expenses and other current assets in the accompanying
      balance sheet.

      Property and Equipment--Property and equipment are stated at cost and
      depreciated on a straight-line basis over their estimated useful life of
      five years. Leasehold improvements are amortized over the shorter of the
      remaining life of the respective leases or the useful life of the
      improvements. Depreciation and amortization expense was $630,750 and
      $609,017 for the years ended December 31, 2004 and 2003, respectively.

      Goodwill--SFAS No. 142, Goodwill and Other Intangible Assets, requires
      that goodwill and other intangible assets with indefinite useful lives be
      tested for impairment annually or when events or changes in circumstances
      indicate that the carrying amount of these assets may not be recoverable.
      In accordance with SFAS No. 142, we do not amortize goodwill, but perform
      the required two-step


                                      -8-
<PAGE>


      impairment review each year. Step one of this review determines whether
      the fair value of each reporting unit is less than its carrying amount as
      of the measurement date. In the event that the fair value of each
      reporting unit was less than the carrying amount, step two of the test
      would be required to determine if the carrying value of goodwill exceeded
      the implied fair value. We performed an impairment analysis as of June 30,
      2004 in accordance with SFAS No. 142. The analysis indicated there was no
      impairment of goodwill in Software, the only segment to which goodwill is
      allocated. As of December 31, 2004, no impairment of goodwill has been
      recognized. If estimates change, a materially different impairment
      conclusion could result.

      Long-Lived Assets--SFAS No. 144, Accounting for the Impairment or Disposal
      of Long-Lived Assets requires long-lived assets to be reviewed for events
      or changes in circumstances which indicate that their carrying value may
      not be recoverable from future cash flows. Based on our analysis, there is
      no impairment of long-lived assets at December 31, 2004.

      Revenue Recognition--We license software products under noncancelable
      perpetual license agreements and provide related services, including
      consulting and customer support. We recognize revenue in accordance with
      Statement of Position ("SOP") 97-2, Software Revenue Recognition, as
      amended and interpreted by SOP 98-9, Modification of SOP 97-2, Software
      Revenue Recognition, with respect to certain transactions, as well as
      Technical Practice Aids issued from time to time by the American Institute
      of Certified Public Accountants and Staff Accounting Bulletin No. 104,
      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 reasonably ensured. If a software license
      contains an undelivered element, the fair value of the undelivered element
      is deferred and the related revenue recognized once the element is
      delivered. Revenues attributable to undelivered elements, including
      consulting services and post-contract support, are based on the sales
      price of those elements when sold separately. If vendor specific objective
      evidence of the far value of an undelivered element is not available, all
      revenue is deferred. 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 typically billed on an annual basis, with
      the revenue being deferred and recognized ratably over the maintenance
      period.

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

      Basic and Diluted Net Loss per Share--Net loss per share is calculated in
      accordance with SFAS No. 128, Earnings per Share. Under the provisions of
      SFAS No. 128, basic net loss per share is computed by dividing the net
      loss for the period by the weighted-average number of common shares
      outstanding during the period. Diluted net loss per share is computed by
      dividing net loss for the period by the weighted-average number of common
      and common equivalent shares outstanding during the

                                      -9-


<PAGE>


      period if their effect is dilutive. Common equivalent shares include the
      conversion of preferred stock and the impact of stock option plans
      calculated using the treasury stock method. Common equivalent shares for
      the years ended December 31, 2004 and 2003, totaling 49,647,081 and
      45,343,474, respectively, have been excluded from diluted weighted-average
      common shares, as the effect would be antidilutive.

      Income Taxes--We account for income taxes in accordance with SFAS No. 109,
      Accounting for Income Taxes, which requires the use of the liability
      method in accounting for income taxes. SFAS No. 109 requires the
      recognition of deferred tax assets and liabilities for the future tax
      consequences attributable to differences between the financial statement
      carrying amount of existing assets and liabilities and their respective
      tax bases. A valuation allowance is provided when it is more likely than
      not that deferred tax assets will not be realized.

      Stock-Based Compensation--We account for employee stock-based compensation
      using the intrinsic value method 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 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 with
      the following weighted-average assumptions: expected life of six years;
      stock volatility of 1%; risk-free interest rates of 4.0% in the years
      ended December 31, 2004 and 2003; 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 for the plan been determined based on the fair
      value of the options and warrants at the grant dates consistent with the
      method of SFAS No. 123, our net loss would have been the following in the
      years ended December 31, 2004 and 2003:

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

Net loss
 As reported                                         $(2,936,241)   $(5,960,014)
 Add:  Total stock-based employee compensation
  expense determined under fair-value-based
  method for all awards--net of tax                     (188,913)       (68,939)
                                                     -----------    -----------

Pro forma                                            $ (3,125,154)  $(6,028,953)
                                                     ============   ===========
Net loss per share--basic and diluted:
 As reported                                         $      (0.23)  $     (0.46)
 Pro forma                                           $      (0.24)  $     (0.47)
--------------------------------------------------------------------------------

      Comprehensive Income--SFAS No. 130, Reporting Comprehensive Income,
      established standards for the reporting of comprehensive income (loss) and
      its components. Comprehensive income (loss), as defined, includes all
      changes in equity (net assets) during a period from transactions and other
      events and circumstances from nonowner sources. There is no difference
      between net loss and comprehensive loss in our financial statements for
      the years ended December 31, 2004 and 2003.

                                      -10-


<PAGE>


      New Accounting Pronouncements--

         In December 2004, the Financial Accounting Standards Board revised
      Statement No. 123 ("FAS 123R"), "Share-Based Payment," which requires
      companies to expense the estimated fair value of employee stock options
      and similar awards based on the grant-date fair value of the award. The
      cost will be recognized over the period during which an employee is
      required to provide service in exchange for the award, usually the vesting
      period. The accounting provisions of FAS 123R will be effective as of the
      beginning of the first interim or annual reporting period that begins
      after June 15, 2005. We will adopt the provisions of FAS 123R on July 1,
      2005 using a modified prospective application. Under the modified
      prospective application, FAS 123R, will apply to new awards, unvested
      awards that are outstanding on the effective date and any awards that are
      subsequently modified or cancelled. Compensation expense for outstanding
      awards for which the requisite service had not been rendered as of the
      effective date will be recognized over the remaining service period using
      the compensation cost calculated for pro forma disclosure purposes under
      FAS 123 (Note 2 Stock-Based Compensation). We are in the process of
      determining how the new method of valuing stock-based compensation as
      prescribed in FAS 123R will be applied to valuing stock-based awards
      granted after the effective date and the impact the recognition of
      compensation expense related to such awards will have on our financial
      statements.

      Research & Development--We expense research and development costs as
      incurred. We do not consider new products or new versions to be
      technologically feasible until all design specifications for
      functionality, features and technical performance are completed and all
      uncertainties related to identified high-risk development issues are
      resolved. Once all high-risk development issues are resolved and the
      program design is finalized, the products have historically been
      considered ready for general release. As a result, no amounts are required
      to be capitalized in accordance with SFAS No. 86, "Accounting for the
      Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,"
      because no significant costs are incurred subsequent to the establishment
      of technological feasibility.

      Customer Concentrations--We provide credit in the normal course of
      business to customers throughout the United States. All of our customers
      are in the retail industry. Two customers accounted for 18% and 11% of
      revenue for the year ended December 31, 2004 and one customer accounted
      for 17% of revenue for the year ended December 31, 2003. Approximately 57%
      of accounts receivable was due from three customers as of December 31,
      2004. A significant decrease in sales to, or inability to collect accounts
      receivable from, any significant customer could have a material adverse
      impact on us.

                                      -11-


<PAGE>


2.    ACCRUED EXPENSES

      Accrued expenses consist of the following at December 31, 2004:

--------------------------------------------------------------------------------
        Accrued vacation                                        $  529,050
        Accrued commissions                                        356,474
        Customer deposits                                          334,653
        Accrued sales and use tax                                  111,881
        Accrued Severance                                           95,998
        Accrued other                                               76,823
                                                                ----------

        Total accrued expenses                                  $1,504,869
                                                                ==========
--------------------------------------------------------------------------------

3.    INCOME TAXES

      Our provision for income taxes consists of the following at December 31:

--------------------------------------------------------------------------------
                                                        2004            2003
--------------------------------------------------------------------------------
        Current:
         Federal                                     $     -        $      -
         State                                            5,000           9,600

        Deferred:
         Federal                                       (935,222)     (1,840,757)
         State                                          (66,618)       (473,329)
         Change in valuation allowance                1,001,840       2,314,086
                                                     ----------     -----------

                                                     $    5,000     $     9,600
                                                     ==========     ===========
--------------------------------------------------------------------------------

      Our reconciliation of income tax expense computed at the federal statutory
      rate of 34% to income tax expense is as follows:

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

        Tax at federal statutory rates               $ (996,622)    $(2,026,404)
        State income taxes--net                         (35,793)       (309,534)
        Other                                            35,575          31,452
        Change in valuation allowance                 1,001,840       2,314,086
                                                     ----------     -----------

                                                     $    5,000     $     9,600
                                                     ==========     ===========
--------------------------------------------------------------------------------

                                      -12-


<PAGE>


      Deferred income taxes arise from the impact of temporary differences
      between the amounts of assets and liabilities recorded for tax and
      financial reporting purposes. The primary differences giving rise to our
      deferred tax assets and liabilities are as follows at December 31:

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

        Deferred tax assets (liabilities):
         Allowance for doubtful accounts            $    54,749     $   270,065
         Accrued compensation                           283,870         247,588
         State taxes                                      1,700           3,264
         Net operating loss carryforwards            11,426,405      10,283,017
         Depreciation and amortization                 (121,011)       (160,061)
         Software development costs                      19,375          19,375
                                                    -----------     -----------

                                                     11,665,088      10,663,248
        Valuation allowance                         (11,665,088)    (10,663,248)
                                                    -----------     -----------

        Total deferred tax assets                   $      -        $      -
                                                    ===========     ===========
--------------------------------------------------------------------------------

      At December 31, 2004, we had federal and state net operating loss
      carryforwards of approximately $30,758,000 and $16,650,000, respectively,
      which begin to expire in 2007 and 2005, respectively. We may have
      experienced a greater than 50% change in ownership as defined under
      Internal Revenue Code Section 382, in which case our ability to utilize
      the net operating loss carryforwards may be limited.

4.    LINE OF CREDIT

      On February 27, 2004, we entered into a $3,500,000 credit facility with a
      financial institution composed of a $500,000 equipment line of credit and
      a $3,000,000 accounts receivable revolving line of credit. Each advance
      under the equipment line of credit shall accrue interest at 0.75% above
      the prime rate is payable monthly. Beginning 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 (6.0% at December 31, 2004) through the maturity date. The equipment
      line of credit matures in June 2007. The accounts receivable revolving
      line of credit bears interest at 0.50% above the prime rate (5.75% at
      December 31, 2004).

      On November 18, 2004, we amended the above facility. The amended credit
      facility is comprised of a $3,000,000 accounts receivable revolving line
      of credit and a $1,000,000 maintenance receivable revolving line of
      credit. The maintenance revolving line of credit is not to exceed (i) $1.5
      million from November 18, 2004 through February 28, 2005, (ii) $1 million
      from March 1, 2005 through March 31, 2005 and (iii) $500,000 from April 1,
      2005 through May 31, 2005. The amended facility does not extend an
      equipment line of credit. The revolving line of credit bears interest at
      0.50% above the prime rate (5.75% at December 31, 2004) and matures in May
      2005. Borrowings are collateralized by substantially all of our assets,
      including our intellectual property. At the maturity of revolving line,
      Retalix, who purchased substantially all of our outstanding Series A
      Preferred Stock and Series B Preferred Stock on April 1, 2005, will pay
      down the line out of working capital.

      Borrowings under the accounts receivable and maintenance receivable
      revolving lines of credit are limited to 80% and 50%, respectively, of
      eligible accounts receivable, as defined. As of December 31, 2004,
      available borrowings under the revolving line of credit were approximately
      $574,000. As of December 31, 2004, we have outstanding borrowings against
      our credit facility of $2,437,046 consisting of $186,255 under the
      equipment line of credit and $2,250,791 under the revolving line of
      credit.

                                      -13-


<PAGE>


      We are required to comply with certain financial covenants and conditions,
      including quick ratio percentages. As of December 31, 2004, we were in
      compliance with all covenants included in the terms of the credit
      facility.

      In connection with our credit facility, we granted warrants to purchase
      115,000 shares of common stock at an exercise price of $0.25 per share to
      the financial institution (see Note 5). As the warrants were substantially
      out of the money, the fair value of the warrants, which was estimated
      using the Black-Scholes model, was nominal.

5.    STOCKHOLDERS' EQUITY

      Convertible Preferred Stock--The significant terms of our preferred stock
      are described below:

         Voting Rights--Holders of the preferred stock have the same voting
         rights as the common stockholders and are entitled to vote on an
         as-converted to common stock basis. Both Series A and B preferred
         stockholders have the right to elect two directors.

         Dividends--The Series B, together with the Series A, are entitled to
         receive cumulative cash dividends at a rate of 8% of the original
         issuance price per year, prior to the declaration of any dividend of
         the common stock or upon a Liquidation Event (the "Preferred
         Dividend"). In addition to the cumulative dividends, holders of the
         Series A are entitled to receive an additional dividend of $0.06033 per
         share, payable in authorized but unissued shares of Series A valued at
         the original issuance price (the "Series A PIK Dividend"). As a result,
         we have reserved a total of 330,189 shares of Series A to be issued
         upon payment of the Series A PIK Dividend. The Preferred Dividend and
         the Series A PIK Dividend shall be payable, whether or not declared by
         the Board of Directors, upon the effective date of a Liquidation Event.
         The Series A PIK Dividend is also payable on the mandatory or voluntary
         conversion of all outstanding shares of Series A and Series B to common
         stock.

          Conversion Rights--The conversion price of Series A and B is $0.50 per
          share. This conversion price is subject to adjustment for certain
          events, as defined. Series A and B are convertible automatically at
          the time of a qualified public offering, as defined, or any time at
          the option of the holder. Conversion is automatic in the event of a
          public offering of our common stock, meeting certain specified
          criteria.

          Liquidation Rights--Holders of the preferred stock are entitled to a
          preferential distribution of assets in the event of liquidation. Upon
          the occurrence of any Liquidation Event, as defined below, our assets
          available for distribution to stockholders, whether from capital,
          surplus, earnings or otherwise, shall be distributed in the following
          order of priority:

             The holders of the Series A and B are currently entitled to
             receive, prior to and in preference to any distribution of any of
             our assets or surplus funds to the holders of the common stock, an
             amount equal to the stated value of $1.06 per share and $0.50 per
             share, respectively. The holders of Series B are entitled to
             receive, in preference to holders of Series A and the common stock,
             all accrued but unpaid dividends on Series B. The holders of Series
             A are entitled to receive, prior and in preference to any
             distribution to the holders of common stock, an amount equal to all
             accrued but unpaid preferred dividends and the Series A PIK
             Dividend on each share of Series A preferred stock. Our remaining
             assets available for distribution shall be distributed ratably to
             the holders of the outstanding shares of our common stock and of
             our convertible preferred stock as if converted to common stock
             immediately prior to liquidation.


                                      -14-


<PAGE>


             A Liquidation Event is defined as (i) our voluntary or involuntary
             liquidation, dissolution or winding-up; (ii) a merger,
             consolidation or sale of voting control in which our stockholders,
             immediately prior to the merger, consolidation or sale, do not own
             a majority of the outstanding shares of the surviving corporation,
             or (iii) the sale or lease of substantially all of our assets,
             technology or intellectual property.

          Antidilution Rights--Both holders of designated preferred stock are
          entitled to "full-ratchet" antidilution rights. Under full-ratchet
          antidilution, the conversion price of the preferred stock is reduced
          to the price at which the dilutive securities are issued. A reduction
          in the conversion price will result in an increase in the number of
          shares of common stock that can be issued upon conversion. The
          issuance of Series B, at $0.50 per share, triggered the full-ratchet
          antidilution rights afforded to Series A. As a result, the number of
          shares of common stock into which Series A are convertible increased
          from 5,816,037 to 12,330,000 shares.

      Warrants--In February and November 2004, we granted warrants to purchase
      35,000 and 80,000 shares of common stock, respectively, at an exercise
      price of $0.25 per share to a financial institution. These warrants are
      immediately exercisable and expire on February 27, 2011 and November 18,
      2011, respectively. The estimated fair value of these warrants using the
      Black-Scholes model was nominal. All warrants remain outstanding and
      exercisable as of December 31, 2004.

      As of December 31, 2004, a total of 930,757 warrants to purchase shares of
      common stock are outstanding, which are fully exercisable at $0.25 per
      warrant through 2011.

6.    COMMITMENTS AND CONTINGENCIES

      We are involved in a dispute related to alleged preference payments to TCI
      from a customer who subsequently declared bankruptcy. We have provided a
      written response to the claimant regarding the our defenses to the claims
      made. As it is not possible to estimate the outcome of this issue, no
      accrual has been recorded in the financial statements. We believe that the
      possible liability could reasonably range in amount from zero to
      approximately $364,000.

      Additionally, we lease certain facilities and equipment under agreements
      that expire at various times through 2008, which are accounted for as
      operating leases. Total rental expense for noncancelable operating leases
      was approximately $722,000 and $1,124,000 for the years ended December 31,
      2004 and 2003, respectively. For those noncancelable leases with scheduled
      rental increases, rent expense is recorded on a straight-line basis over
      the lease term. Included in accrued liabilities is $28,377 of deferred
      rent at December 31, 2004.

      We leased equipment with a net book value of $54,670, net of
      related accumulated depreciation and amortization of $680,290 at December
      31, 2004, under capital lease agreements.

      At December 31, 2004, future minimum lease payments, under operating and
      capital leases, consist of the following:

        ------------------------------------------------------------------------
        Year Ending                                     Capital      Operating
        December 31                                     Leases         Leases
        ------------------------------------------------------------------------

        2005                                          $  25,567    $  689,943
        2006                                             11,614       662,539
        2007                                              1,936       656,793
        2008                                                           48,930
                                                      ---------    ----------

        Future minimum lease payments                    39,117    $2,058,205
                                                                   ----------
        Less amount representing interest                (3,244)
                                                      ---------
        Present value of future minimum
         lease payments                                  35,873
        Less current portion                            (24,270)
                                                      ---------

                                                      $  11,603
                                                      =========
        ------------------------------------------------------------------------

                                      -15-


<PAGE>


      We have an agreement with a financial institution for the issuance of
      letters of credit up to an aggregate amount not to exceed $500,000. At
      December 31, 2004, we had $150,000 of letters of credit outstanding for
      our facility lease. These amounts are not included in our financial
      statements.

      During the normal course of business, we have made certain indemnities,
      commitments and guarantees under which we 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. We have not recorded any liability for
      these indemnities, commitments and guarantees in the accompanying balance
      sheets as the fair value is insignificant. We have never had to make any
      payments in the past and do not expect to in the future.

      Litigation--In the normal course of business, we are subject to various
      legal matters. In the opinion of management, the resolution of these
      matters will not likely have a material adverse effect on our operations,
      cash flows and financial position.

7.    STOCK OPTIONS

      We maintain two stock option plans for our employees, directors and
      consultants. The purpose of the plans is to provide employees, directors
      and consultants an opportunity to participate in our ownership.

      Our 1993 stock option plan consists of: (1) the 1993 Equity Incentive Plan
      and (2) the 1993 Nonemployee/Directors Stock Option Plan (together, "1993
      Option Plan"). The 1993 Option Plan provides for the issuance of up to
      571,688 shares of common stock to employees, directors and consultants
      under incentive and nonstatutory stock option grants. Options granted
      under the 1993 Equity Incentive Plan have a term of 10 years when issued
      and vest over a five-year period. Options granted under the 1993
      Nonemployee/Directors Stock Option Plan have a term of 10 years and vest
      immediately. Incentive and nonstatutory stock options may be granted at an
      exercise price equal to the fair market value of our common stock at the
      date of the grant. At December 31, 2004, there were 14,100 options
      outstanding and 557,588 options available for future grant under the 1993
      Option Plan.

      Our 2001 stock option plan consists of: (1) the 2001 Equity Incentive Plan
      and (2) the 2001 Nonemployee/Directors Stock Option Plan (together, "2001
      Option Plan"). The 2001 Option Plan provides for the issuance of up to
      17,733,763 shares of common stock to employees, directors and consultants
      under incentive and nonstatutory stock option grants. Options granted
      under the 2001 Equity Incentive Plan have a term of 10 years when issued
      and vest over a five-year period. Options granted under the 2001
      Nonemployee/Directors Stock Option Plan have a term of 10 years and vest
      immediately. Incentive and nonstatutory stock options may be granted at an
      exercise price equal to the fair market value of our common stock at the
      date of the grant. At December 31, 2004, there were 7,489,465 options
      outstanding and 10,244,298 options available for future grant under the
      2001 Option Plan.

      On October 27, 2004, we presented an offer to exchange outstanding options
      (the "Exchange Offer") under our 1993 and 2001 Option Plans to our
      employees and directors. On November 25, 2004, we canceled an aggregate of
      9,278,200 shares of our common stock pursuant to the Exchange Offer. We
      planned on issuing to our employees and directors which tendered their
      options and still remain with us, replacement options under our 2001
      Option Plan, with an exercise price that would reflect the then-current
      estimated fair value of our common stock determined by our Board of
      Directors and based on an

                                      -16-


<PAGE>


      independent valuation on or about May 27, 2005. None of the employees or
      directors participating in the Exchange Offer were granted any options
      during the six month period prior to the exchange, or during the period
      from the exchange date to year end. See Note 11, `Subsequent Events'.

      On June 25, 1995, we issued an employee an option to purchase 51,156
      shares of common stock at $0.20 a share. This issuance was not under the
      1993 Option Plan. All options vested on the issuance date and shall expire
      on June 21, 2005.

      Option activity for the 1993 and 2001 Option Plans is as follows:

--------------------------------------------------------------------------------
                                              Weighted      Number     Weighted
                                  Number      Average         of       Average
                                    of        Exercise     Options     Exercise
                                 Options       Price     Exercisable    Price
--------------------------------------------------------------------------------

        Outstanding--January
         1, 2003                3,656,669     $0.33       3,221,918     $0.31

        Granted (weighted-
         average fair value
         of $0.05 per share)    5,219,608     $0.25
        Canceled                 (198,200)    $0.29
                                ---------
        Outstanding--December
         31, 2003               8,678,076     $0.27       4,692,595     $0.29

        Granted (weighted-      9,989,801     $0.13
         average fair value
         of $0.05 per share)
        Exercised                  (6,196)    $0.31
        Canceled              (11,158,116)    $0.27
                              -----------
        Outstanding--December
         31, 2004               7,503,565     $0.08       1,650,485     $0.21
                              ===========
--------------------------------------------------------------------------------

      Additional information regarding options outstanding is as follows as of
      December 31, 2004:

--------------------------------------------------------------------------------
                        Options Outstanding                 Options Exercisable
             -------------------------------------------------------------------
                             Weighted-
                             Average           Weighted-               Weighted-
                             Remaining         Average                 Average
Exercise        Number      Contractual        Exercise    Number      Exercise
 Prices      Outstanding    Life (Years)        Price    Exercisable    Price
--------------------------------------------------------------------------------

$0.05        6,170,191        9.69             $0.05      351,171       $0.05
$0.25        1,319,274        5.10             $0.25    1,286,854       $0.25
$0.53           11,100        6.65             $0.53        9,460       $0.53
$1.06            1,500        4.91             $1.06        1,500       $1.06
$1.50            1,500        2.28             $1.50        1,500       $1.50
             ---------                                  ---------

             7,503,565                                  1,650,485
             =========                                  =========
--------------------------------------------------------------------------------

      As discussed in Note 1, we continue to account for our stock-based awards
      using the intrinsic value method in accordance with APB Opinion No. 25 and
      related interpretations. No compensation expense has been recognized in
      the financial statements for employee stock arrangements.

                                      -17-


<PAGE>


8.    401(k) RETIREMENT PLAN

      We provide a 401(k) retirement plan (the "401(k) Plan") for our employees.
      Under the terms of the 401(k) Plan, we match dollar for dollar up to the
      first $250 contributed. For every dollar contributed over $250, we match
      $0.25 for each dollar contributed up to 6% of employee's compensation, not
      to exceed a maximum contribution of $2,500 per year. For the years ended
      December 31, 2004 and 2003, our total contributions were $119,427 and
      $169,782, respectively.

9.    OPERATING SEGMENTS

      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 segment provides
      after-sales support for software products. The services segment provides
      fee-based training and implementation 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 revenues and gross
      profit, as this information is the only segment information provided to
      the chief operating decision-maker.

      Operating segment data is as follows for the years ended December 31, 2004
      and 2003:

<TABLE>
<CAPTION>

        ----------------------------------------------------------------------------------------------------------------------------
                                    Software
                                    Licenses           Maintenance         Services          Other           Total
        ----------------------------------------------------------------------------------------------------------------------------
        <S>                         <C>                <C>                <C>              <C>             <C>
        Year ended
         December 31, 2003:
         Revenues                   $5,561,806         $3,787,985         $ 8,993,278      $2,870,681      $21,213,750
         Cost of revenues              102,646          1,220,271           5,771,337       2,083,939        9,178,193
                                    ----------         ----------         -----------      ----------      -----------

        Gross profit                $5,459,160         $2,567,714         $ 3,221,941      $  786,742      $12,035,557
                                    ==========         ==========         ===========      ==========      ===========
        Year ended
         December 31, 2004:
         Revenues                   $6,092,744         $4,754,043         $10,443,718      $  537,509      $21,828,014
         Cost of revenues              657,541            868,622           7,123,382         472,777        9,122,322
                                    ----------         ----------         -----------      ----------      -----------

        Gross profit                $5,435,203         $3,885,421         $ 3,320,336      $   64,732      $12,705,692
                                    ==========         ==========         ===========      ==========      ===========
        ----------------------------------------------------------------------------------------------------------------------------
</TABLE>


10.      Subsequent Events

      The majority of our stock has been acquired. On April 1, 2005, we entered
      into a Stock Purchase Agreement with Retalix Ltd., an Israeli corporation,
      and certain holders of our outstanding Series A Preferred Stock and Series
      B Preferred Stock (the "Selling Stockholders"), pursuant to which Retalix
      purchased substantially all of our outstanding Series A Preferred Stock
      and Series B Preferred Stock (the "Acquisition") for an aggregate purchase
      price of $30,035,148, consisting of 715,729 ordinary shares of Retalix
      valued at $17,177,500 and $12,857,648 in cash which was paid to the

                                      -18-


<PAGE>


      Selling Stockholders pro rata. As part of the transaction, we paid a bonus
      to certain employees and directors for the cancellation of their vested
      stock options under our 1993 and 2001 Option Plans and for stock options
      that had been tendered under the Exchange Offer described in Note 7,
      above, of an aggregate of $1,744,999 in cash. This amount was subtracted
      from Acquisition proceeds otherwise payable to the Selling Stockholders.
      The acquisition resulted in Retalix beneficially owning, in excess of 73%
      of our outstanding voting stock (calculated on an as-converted to common
      stock basis), and specifically, 99.8% of the outstanding Series A
      Preferred Stock and 95.8% of the outstanding Series B Preferred Stock. In
      connection with the Acquisition, on April 1, 2005, we entered into an
      agreement and plan of merger with Retalix Ltd., Retalix Holdings, Inc.
      ("Retalix Holdings") and certain subsidiaries of Retalix Holdings under
      which we would be merged with and into a subsidiary of Retalix Holdings
      and all of our outstanding common stock and preferred stock, other than
      shares held by Retalix Holdings and shares as to which appraisal rights
      have been properly asserted under Delaware law, would be exchanged for
      cash (the "Merger"). As a result of the Merger, other than shares held by
      Retalix Holdings and shares as to which appraisal rights have been
      properly asserted under Delaware law, each outstanding share of our common
      stock will be converted into the right to receive $0.132 in cash; each
      outstanding share of Series A Preferred Stock (on an as-converted to
      common stock basis) will be converted into the right to receive $0.8409 in
      cash; and each outstanding share of Series B Preferred Stock (on an
      as-converted to common stock basis) will be converted into the right to
      receive $0.7573 in cash. Following the Merger, we would cease to exist and
      all of our assets and liabilities would be held by a subsidiary of Retalix
      Holdings. The Merger would constitute a Liquidation Event as defined in
      Note 5, above.




                                     ******

                                      -19-