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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, 2003

[_] 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

_____________

TCI Solutions, Inc.



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





|1772 Skypark Circle, Suite 160
Irvine, California
(Address of principal executive offices) | 92614
(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 information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year:  $21,213,750

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 5, 2004:  12,819,263

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TCI Solutions, Inc.
Form 10-KSB
For the Fiscal Year Ended December 31, 2003
Table of Contents





PART I

Item 1.  Business

Item 2.  Properties

Item 3.  Legal Proceedings

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

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

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

Item 7.  Financial Statements

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

Item 8A.  Controls and Procedures

PART III

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

Item 10.  Executive Compensation

Item 11.  Security Ownership of Certain Beneficial Owners and Management

Item 12.  Certain Relationships and Related Transactions

Item 13.  Exhibits and Reports on Form 8-K

Item 14.  Principal Accountant Fees & Services

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PART I

Item 1.  Business

Overview

TCI Solutions,  Inc., a Delaware corporation,  originated in 1983. 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 pricing and inventory management.  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  office is  located  at 5210 E.  Williams  Circle,  Suite 300,
Tucson,  Arizona  85711 and our  principal  administrative  office is located at
17752 Skypark Circle,  Suite 160, Irvine,  California 92614. Our website address
is

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 15-year history and retail industry expertise to develop TCI Retail [formerly RetailSuite], a merchandising enterprise product line.  TCI Retail enables retailers to quickly and accurately execute strategic business decisions in the areas of pricing and inventory management.

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 three 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 and will remain in grocery retail for at least the next twelve months.  Over the next few years, we plan to continue to extend our presence in retail 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, analytics and collaboration.

Principal Products and Services

We provide strategic pricing and inventory management solutions that enable grocers to increase top and bottom lines by speeding decisions into action.  Since 1998, we have developed TCI Retailä
, which is currently a market leader for price and inventory management.  TCI Retail, our flagship solution, provides strategic pricing and inventory management capabilities for headquarters (TCI HQä
 [formerly HQPM2]) and stores (TCI Storeä
 [formerly SM2]).  TCI HQ and TCI Store are comprehensive rules-based solutions built on TCI's Retail Execution Systemä
 (RES), a powerful and flexible foundation.  Inventory Management System (IMS), a Direct Store Delivery (DSD) software package, originally introduced in 1983, is universally accepted by the grocery industry as the standard in 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 services more than 400 chains and has over 15,000 installations worldwide.  TCI Retail is a market leader for strategic pricing and inventory management solutions within grocery retail.

Retail Execution System

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:

- Foundation - Enterprise Data Repository for item, store and vendor information, and set-up tools.
- Extensibility Package - extended feature set, Personalization Workbench [formerly Meta Data Editor] and Integration Workbench [formerly Extension Architect Toolkit] for enhancing and personalizing the solution to meet business goals.
- Hosting Package - Store Interface Manager [formerly Host Exchange - POS/Scales/Labels Batching] and Data Integration Manager [formerly HDF Editor or Data Exchange] 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 Retailä 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 compliments to existing systems.

TCI HQ

TCI HQä is a centralized pricing 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:

Central control of item, vendor, and store information.

- Automated price generation to protect costs and improve focus on sensitive items.
- Manage business processes.
- Execute price changes throughout the organization.
- Lower overhead through automation.

TCI Store

TCI Storeä is a complete direct store delivery (DSD), price management and inventory control solution for grocery stores. Its capabilities help improve profitability through:

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

Solution Packages



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:

- Price Generation
- Spread/Parity Pricing
- Competitive Pricing
- Frequent Shopper
- Inventory Sensitive Pricing

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:

- Receivers, POs, Transfers
- Perpetual Inventory
- Computer Assisted Ordering
- Store Ordering

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:

- Promotions Management
- Electronic Marketing

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:

- Scale Management
- Signs and Label Management
- POS eXchange

TCI thinStoreä

TCI thinStore, a recently developed extension of TCI Retailä
, 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:

- greater control over pricing and inventory strategies by centralizing data and business processes
- reduced overhead by reducing the IT support and training burden at the stores
- improved focus of store personnel on customer service - a chain's competitive advantage - by eliminating paper-work and system operations

TCI inStoreä

TCI inStore and TCI inStore Hostä
 are packaged pricing and inventory management offerings 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 without the high implementation, training and maintenance costs associated with major system installations and integration efforts.  We offer the following inStore packages:

- inStore Receiving
- inStore Pricing
- inStore Plus
- inStore Host

Services

Our Professional Services organization employs 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.

Client Support and Maintenance

Our client support and maintenance services include product maintenance, access to our call center, web interfaces and email support services.  Our maintenance services agreement allows clients to receive unspecified new product releases, access to our call center and comprehensive error diagnosis and correction.  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' heighten demand for value, convenience and services are key
pressures facing the retail industry.

Increasing Industry Pressure

As technology usage continues to become pervasive in society, new capabilities and emerging technologies are creating expectations of efficiency for retailers, 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 process 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.: Point-of-Sale (POS), Scales, Labels & 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 organization.  We utilize a phased approach to provide a single, centralized database on which rules-based pricing and inventory management application 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 $3.6 million and $4.0 million, during 2002 and 2003 respectively, on internally sponsored research and development activities.  Since the introduction of TCI Retail in 1996, we have invested approximately $25.8 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.  Domestic  sales  accounted for 93.6% of software
revenue,  with the remaining 6.4% 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 inStore, a packaged solution designed to meet the needs of these retailers.  This solution will be 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,  training, and support services.   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:

- Full-function capabilities that meet the specific pricing and inventory management requirements of the grocery industry.
- Breath of pricing and inventory management functionality as compared to our competitors, many of whom are marketing general merchandise solutions to the grocery industry.
- Industry knowledge, presence and reputation.
- The quality of our customer service.
- 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 and Softechnics.

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 & Touche and IBM Global Services.

Significant Customers

In 2002, two customers accounted for 15.6% and 10.1% of total revenues.  In 2003, one customer accounted for 17.3% of our total revenues.  No other single customer accounted for more than 10% of 2002 or 2003 total revenues.

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, 2003, we have a total of 177 full-time employees primarily based in the United States.  Of the total, 41 were engaged in sales and marketing, 73 were in professional and maintenance services, 44 were in product development and 19 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 office is located in Tucson, Arizona where we lease approximately 28,000 square feet of office space.  This facility is also our principal research and development, marketing and support facility.  We house our finance, accounting, investor relations, core development team, international sales, and human resources in our Irvine, California facility where we lease approximately 10,000 square feet.  On February 29th, 2004 a lease for 2,100 square feet in Oklahoma City, Oklahoma ended.  This facility provided regional office space for components of our customer support and marketing operations that will now be shared between Tucson and the facilities of our integration partner, CGI.

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 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 September 5, 2003 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_______________ | Against_______________
|------------------- | ------------------ | ----------------------
|                    |                    |                       
|Todd G. Gardner     | 12,299,997         | 0                     
|Jay E. Houlihan     | 26,111,560         | 0                     
|Donald L. Jans      | 45,517,410         | 357,258               
|John E. Josephson   | 45,849,668         | 24,130                
|Mark T. Koulogeorge | 26,111,560         | 0                     
|Daniel Raynor       | 12,299,997         | 0                     
|Lance C. Jacobs     | 45,849,668         | 24,130                
|                    |                    |                       

Proposal 2:

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

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

Holders

As of March 5, 2004 there were approximately 1,581 holders 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 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 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  Strategy"  to give the
reader an overview of business goals and the direction in which our business and
products  are moving.  This is followed by a  discussion  of the  "Critical
Accounting  Policies"  that we believe are important to understanding  the
assumptions  and judgments  incorporated  in our 2003,  and for 2003 compared to
2002,  beginning  with an  "Overview".  We then provide an analysis of
changes  in our  balance  sheet  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 2004.

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 29,
2004.

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:

- Operational Efficiency

- New Market Definitions -

- Retailers with greater than or equal to 10 stores.
- Sophisticated functional requirements.
- Sales occur primarily through our direct sales force.
- Implementations range from simplistic to sophisticated and may be supported through strategic implementation partners.

- Retailers with less than 10 stores.
- Minimal functional requirements.
- Dealers are our primary sale and delivery mechanism for product sales.

- Develop and Leverage Strategic Relationships

- Client Satisfaction -

- Product Development Process
- Engagement Management
- Quality and Customer Centricity -

Critical Accounting Policies

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 guidance of Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements, which provides further interpretive guidance for public reporting companies on the recognition, presentation and disclosure of revenue in financial statements.

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

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

Goodwill - Our  business  combinations  have resulted in goodwill.  We
review the  recoverability  of the carrying value of goodwill on an annual basis
or more frequently when an event occurs or circumstances change to indicate that
an impairment of goodwill has possibly occurred.
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.

Stock-Based Compensation - We do not record compensation expense for options granted to our employees as all options granted under our stock option plans have an exercise price equal to the estimated fair market value of the underlying common stock on the date of grant.  As permitted under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"), we have elected to continue to apply the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and provide pro forma disclosure on a quarterly and annual basis of net income (loss) and net income (loss) per common share for employee stock option grants made, and shares issued under our employee stock purchase plan, as if the fair-value method defined in SFAS No. 123 had been applied.

Overview of Significant Trends and Developments in Our Business

Revenue Trends.          In 2003, we experienced growth in Services revenue of 27.9%, Maintenance revenue of 11.4% and Other
revenue of 6.7%.  Our success in these areas is primarily attributable to the size and scope of existing
services engagements, and the overall growth in our licensed customer base.  Software license revenue
declined 40.7% from 2002.  We believe there were three primary factors contributing to the decline in
software license revenue: 1) we lost a "significant customer", The Fleming Companies, from the past 8 (eight)
years to bankruptcy that has historically contributed up to 28.2% of total annual revenue; 2) customers
deferring technology buying decisions, and 3) our heritage product (IMS), which is targeted for the Packaged
Solutions Market, encountered a significant decrease in license revenues as a result of it's lack of market
acceptance.  Our state-of-the-art TCI Retail inStore product was released in early 2004 to specifically
address the replacement of our heritage product, IMS.  Our strategy to organize the company around our two
primary market definitions, Packed Solutions and Enterprise/Maintream, to provide market specific products
and services is expected to increase software license revenue and improve our overall growth rate for total
revenue.

New Products and Distribution to Markets. We invested $4.0 million for the year ended December 31, 2003 and a total $25.8 million since the invention of TCI Retail in 1996 toward new product development efforts.  We have released enhanced versions of our core software products for the past three years and expanded the breadth of our product portfolio.  Our chief accomplishments in 2003 included the development of new TCI Retail products such as TCI thinStore, TCI inStore and TCI inStore Host along with Integration Workbench.  Additional development focused on the release of industry compliant software for the 'GTIN' or Global Trade Item Number data standard.  Our goal in 2004 is to continue aligning our product development with the Packaged and Enterprise/Mainstream marketplaces by specifically developing applications and functionality that serve these retailers needs.  Additionally, we are currently focusing development resources on integration to third party vendors











that can deliver value-added functionality in the form of analytics, movement analysis and computer assisted ordering from our RES information repository.

Economic Conditions in the Retail Industry. We believe that current improvements in the overall economic conditions and the upswing in the economy are positive overall indicators.  The retail industry typically, is a technology laggard and we believe remains cautiously optimistic with their level of investment in information technology.  As a result it is difficult to predict exactly when specific software licenses will close within a six to nine month time frame.  Uncertainty regarding economic conditions has in the past, and may in the future, negatively impact our revenues, elongate our selling cycles, delay, suspend or reduce the demand for our products and adversely impact our business, operating results and financial condition. In addition, our customers' ability to pay for our products or services could be impaired, and we may experience an increased number of bankruptcy filings in our customer base.  Any of these factors could adversely impact our business, quarterly or annual operating
results and financial condition.

Financial Condition

Comparison of the Year Ended December 31, 2003 to the Year Ended December 31, 2002

Revenues

Total revenues were $22.5 million and $21.2 million in 2002 and 2003, representing a decrease of $1.3 million or 5.7%. Overall, we experienced growth in Services revenue of 27.9%, Maintenance revenue of 11.4% and Other revenue of 6.7%.  Software license revenue declined 40.7% or $3.8 million from 2002.  In 2002, two customers accounted for 15.6% and 10.1% of total revenues.  In 2003, one customer accounted for 17.3% of our total revenues.  No other single customer accounted for more than 10% of 2002 or 2003 total revenues.

Software  Licenses.  License  revenues  were $9.4 million and $5.6 million in
2002 and 2003, representing a decrease of $3.8 million or 40.7%. The decrease in
software  license  revenue  from  2002 to 2003 was due  primarily  to  timing of
software  sales,  the loss of a  significant  reseller  to  bankruptcy,  and the
delayed   introduction  of  the   replacement   product  for  our  Heritage  IMS
product.

Software License Revenue by Product-Line

We classify  our  software  licenses in two product  categories:  TCI Retail and
Heritage  applications.  TCI Retail  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  compliments to existing  systems.
Heritage applications consist primarily of our Inventory Management System (IMS)
family of products that allows  retailers to achieve total  in-store  automation
and to have control over  pricing,  inventory and direct store  delivery  (DSD).
Developed  specifically  for the retail  industry,  IMS offers the  ultimate  in
flexible  information  sharing and  customer  convenience.  Unique to IMS is its
built-in automatic processing capability,  which is a major advantage for smooth
store operations.

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



|                      | 2003       | %      | 2002       | %     
|--------------------- | ---------- | ------ | ---------- | ------
|Revenues:             |            |        |            |       
|TCI Retail            | $4,542,014 | 81.7%  | $6,775,486 | 72.2% 
|Heritage applications | 1,019,792  | 18.3%  | 2,607,085  | 27.8% 
|Total                 | $5,561,806 | 100.0% | $9,382,571 | 100.0%
|                      |            |        |            |       

License revenues from TCI Retail were $6.8 million and $4.5 million in 2002 and 2003 respectively, representing a decrease of $2.2 million or 33.0%.  As a percentage of the total, we expect future software license revenue to increase primarily as a result of increased TCI Retail sales.  The decrease in software license revenue from 2002 to 2003 was due primarily to timing of software sales, the loss of a significant customer to bankruptcy (The Fleming Companies) and the delayed introduction of the replacement product for our Heritage IMS product.  Our replacement product for IMS, TCI inStore was released late in the fourth quarter of 2003 and we anticipate this application to contribute to sales in 2004 and beyond.

Maintenance.  Maintenance  revenues were $3.4 million and $3.8 million
in 2002 and 2003  respectively,  representing  an increase  of $0.4 million or
11.4% from 2002 to 2003.  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 product lines.

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 $7.0 million to $9.0 million in 2002 and 2003 respectively, representing an increase of $2.0 million or 27.9%. The increase in services revenue is directly attributed to increased implementation services associated with our TCI Retail products.  Over $6.2 million or 70.0% of total 2003 services resulted from our top five services customers.

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 $2.7 million and $2.9 million in 2002 and
2003  respectively,  representing  an  increase of $0.2 million or 6.7%.  The
increase  in other  revenues is  attributed  to  increased  sales of third party
software or hardware components.

Gross Profit

Gross Profit.  Gross profit was $15.3 million and $12.0 million in 2002 and 2003 respectively, representing a decrease of 21.2%.  The decrease in gross profit is primarily due to decreases in software license revenues of 41.0%, increased cost of delivering professional services and other revenue in 2003 when compared to 2002.  In 2003 we experienced margin improvements of 6.0% in both software licenses and maintenance combined over 2002.

Software Licenses Margins.  Software license margins were $8.9 million and $5.5 million in 2002 and 2003 respectively, representing a decrease of 38.7%.  The decrease in software license margins resulted from the combined affects of a $3.8 million decrease in software license revenue offset by a reduction of reseller costs from the the bankruptcy of a former reseller, The Fleming Companies.  Software license margins as a percentage of software license revenue were 94.9% and 98.2% in 2002 and 2003 respectively.

Maintenance Margins.

Maintenance  revenue margins were $2.2 million and $2.6 million in 2002 and 2003
respectively,  representing an increase of $0.4 million or 16.1%.  The increase
in maintenance  revenue margins is primarily due to the increases in maintenance
revenue of 11.4%.  Maintenance  revenue  margins as a percentage  of  maintenance
revenue  were 65.1% and 67.8% in 2002 and 2003  respectively.  The  increase  in
maintenance  revenue margins as a percentage of maintenance  revenue of 2.7% was
the result of increased  maintenance revenue and more modest increases in salary
and related operating  expenses related to the delivery of maintenance  services
for the year.

Services Margins.  Services revenue margins were $3.0 million and $3.2
million in 2002 and 2003 respectively, representing an increase of $0.2 million
or  6.5%.  This  increase  from  2002 to 2003  was  primarily  due to  increased
headcount of 13 employees and the increased use of our internal employees versus
the use of third-party consultants. These amounts represented 43.0% and 35.8% of
service  revenues for 2002 and 2003. The decrease in services revenue margins as
a percentage of services revenue from 2002 to 2003 is primarily due to increased
salary  and  related  travel  expenses  which is  directly  attributable  to the
increase in 2003 headcount.

Other  Margins.  Other  revenue  margins  were $1.1  million  and $0.8
million in 2002 and 2003 respectively, representing a decrease of $0.3 million
or 30.1%.  Other revenue margins as a percentage of other revenue were 42.2% and
27.4% for 2002 and 2003 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  software  and  hardware  sales in 2003 when  compared to
2002.

Operating Expenses

Product  Development.  Product development expenses were $3.6 million
and $4.0 million in 2002 and 2003 respectively, representing an increase of $0.4
million or 12.5%.  The increase in product  development  expenses  from 2002 to
2003 was attributable to additional investments in development efforts geared at
long-term  efficiencies within our product development  organizations.  In 2003,
our  development  efforts  were  focused  on the  development  of new TCI Retail
products such as TCI thinStore, TCI inStore and TCI inStore
Host along with Integration  Workbench.  Additional  development  focused on the
release of  industry  compliant  software  for the  'GTIN' or Global  Trade Item
Number data standard.  Product development  expenses represented 16.0% and 19.1%
of total revenues in 2002 and 2003.

We expect product development expenses to decrease slightly or remain constant as a percentage of total revenue in the future as we begin to improve operational efficiencies and increase total revenue.  These capabilities will enable us to develop more code at a lower marginal cost per hour.  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 $8.8 million and $7.4 million in 2002 and 2003 respectively, representing a decrease of $1.4 million or 16.2%. The decrease was primarily due to reduced commission expenses associated with decreased software sales.  Additional focus on more efficiently and effectively marketing TCI Retail enabled us to decreased marketing and advertising expenses for the year ended 2003. Sales and marketing expenses represented 39.1% and 34.8% of total revenues in 2002 and 2003 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.

General and  Administrative.  General and administrative expenses were
$6.8  million and $6.5  million in 2002 and 2003  respectively,  representing  a
decrease of $0.3 million or 4.5%.  The decrease in general and  administrative
expenses was primarily due to focused efforts to decrease operating and overhead
costs. General and administrative  expenses represented 30.2% and 30.6% of total
revenues in 2002 and 2003 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 $3.9 million and $6.0 million for 2002 and 2003 respectively, representing an increase of 53.6%.

We believe that we can achieve profitability in 2004 as a result of our planned revenue growth  and cost cutting measures that occurred in January and February of 2004.  Due to the timing of the cost cutting, the improved operating efficiency and our planned revenue growth, we expect to improve our profitability from operations beginning in the second quarter of 2004.

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 $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  February  27,  2004,  we renewed  our Loan and  Security  Agreement  with
Comerica Bank-California which provides us with a revolving line of credit of up
to $3 million and a separate  line of credit for  equipment  purchases  of up to
$0.5 million. As of December 31, 2003, available borrowings under the revolving
line of credit were approximately  $1,526,431.  As of December 31, 2003, we have
outstanding  borrowings against our credit facility of $1,604,911  consisting of
$131,341 under the equipment  line of credit and $1,473,569  under the revolving
line  of  credit.   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, 2003,  we were in  compliance  with all  covenants  included in the
terms of the credit facility.

We had working  capital of $2.5  million at December 31, 2003  compared  with
$8.6  million at December 31, 2002.  Cash and cash  equivalents  at December 31,
2003 were  $3.7  million,  a  decrease  of $1.4  million  from the $5.1  million
reported  at December  31,  2002.  Cash  balances  decreased  for the year ended
December 31, 2003 primarily as a result of  investments  in product  development
and capital  investments  in computer  equipment of $0.7 million.

Operating activities used cash of $1.0 million and $5.7 million for the years
ended  December  31,  2003 and 2002,  respectively.  Cash  used  in  operating
activities  for the year ended  December 31, 2003 results  primarily  from a net
loss of $6.0 million,  a $1.3 million decrease in accrued expenses,  offset by a
$4.4 million  decrease in accounts  receivable.  We had net  receivables of $3.3
million at December 31, 2003 compared to $8.4 million at December 31, 2002.  The
decrease  is  primarily  due to a  reduction  in  payment  terms  offered to our
customers  combined with increased  collection efforts that decreased days sales
outstanding from 135.7 days in 2002 to 60.1 days in 2003.

Investing activities utilized cash of $0.7 million and $0.8 million for the
years ended December 31, 2003 and 2002, respectively. Cash utilized by investing
activities in both periods resulted primarily from capital expenditures.

Financing  activities  provided cash of $0.3 million and $5.8 million during
the years ended December 31, 2003 and 2002, respectively.  The activity for 2003
relates  primarily  to  changes  in our line of  credit  and in 2002,  financing
activities  primarily  included  proceeds  from the sale of Series B Convertible
Preferred Stock.

Material Commitments

We  have planned for approximately  $0.5 million in capital  expenditures
for 2004. 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  2003  we  had  approximately   $0.7 million  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, 2003, we had $150,000 of letters of credit outstanding.  These amounts are not included in our financial statements.

On  February  27,  2004,  we renewed  our Loan and  Security  Agreement  with
Comerica  Bank-California,  which provided us with a revolving line of credit of
up to $3.0 million and a separate line of credit for  equipment  purchases of up
to $500 thousand.  Borrowings are  collateralized  by  substantially  all of our
assets, including our intellectual property. Borrowings under the revolving line
bear interest at 0.50% above  Comerica's  prime rate  (approximately  4.0% as of
December  31,  2003) and  borrowings  under the  equipment  line are 0.75% above
Comerica's prime rate. As of December 31, 2003, we have  outstanding  borrowings
of $1.6 million against our credit facility.  In conjunction with the renewal of
our Loan and Security  Agreement  with  Comerica  Bank - California  on February 27,
2004, we issued an  additional  warrant for the purchase of 35,000 shares of our
common stock at an exercise price of $0.25 per share. The warrant is exercisable
through  February 27, 2011. The warrants provide that the exercise price will be
adjusted to account for certain  dilutive  events and  provides  the holder with
"piggyback"  registration rights granted to our preferred stockholders
under our Second Amended and Restated  Registration Rights Agreement dated April
10, 2002.

As of December 31, 2003,  future payments related to contractual  obligations
and commercial commitments are as follows:

|                                                         | Amounts Due by Period_________________________________
|-------------------------------------------------------- | ------------------------------------------------------
|                                                         | 1 year and less_________                              
|                                                         |                                                       
|Capital Lease Obligations                                | $28,358                                               
|Operating Lease Obligations                              | 811,461                                               
|Guarantees under Letters of Credit                       | 150,000                                               
|Total Contractual Obligations and Commercial Commitments | $989,819                                              
|                                                         |                                                       

We believe that our existing cash balances, annual 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 2004, we are planning for growth in annual revenue, improvement in gross margin and overall profitability.  We expect improvement in the sales of our core product, TCI Retail.  Improvements in sales will only occur through the execution of 'Our Strategy' discussed earlier in this Management's Discussion and Analysis.

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 third party hardware and software sales.  Our margins are highest for software and maintenance and significantly lower for our services and other revenue categories.  Our margins are also affected by the product mix within the various markets we serve.  Margins are higher in the Enterprise/Mainstream market than in Packaged 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, 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 2004.  We believe that we can achieve revenue growth and profitability in 2004 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 beginning the second quarter of 2004.

We believe that our existing cash balances, annual 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' herein for a more detailed discussion of the risks that may affect our business.

New Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS No. 146), which addresses financial accounting and reporting for costs associated with exit or disposal activities.  SFAS No. 146 supersedes EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).  SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  Under EITF Issue No. 94-3, a liability for an exit cost as defined in EITF Issue No. 94-3 was recognized at the date of an entity's commitment to an exit plan.  SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value.  We adopted the provisions of SFAS No. 14
































6 effective January 1, 2003 and such adoption did not have a material impact on our financial statements.

In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued.  It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  We adopted the disclosure provisions of FIN 45 during the fourth quarter of fiscal 2002 and the recognition provisions of FIN 45 effective January 1, 2003.  Such adoption did not have a material impact on our financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure.  SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods for voluntary transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation.  SFAS No. 148 also requires disclosure of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income (loss) and earnings (loss) per share in annual and interim financial statements.  We adopted the provisions of SFAS No. 148 effective January 1, 2003 and such adoption did not have a material impact on our financial statements.

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
































 after March 15, 2004, with the exception of Special Purpose Entities ("SPE").  The consolidation requirements apply to all SPE's in the first fiscal year or interim period ending after December 15, 2003.  As we have determined that we do not have any SPE's to which these interpretations apply, we will adopt FIN 46R in the first quarter of 2004.  We do not believe that the adoption of FIN 46R will have a material impact on our financial statements.

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

- A financial instrument issued in the form of shares that is mandatorily redeemable and embodies an unconditional obligation that requires the issuer to redeem it by transferring its assets at a specified or determinable date or upon an event that is certain to occur;
- A financial instrument, other than an outstanding share, that embodies an obligation to repurchase the issuer's equity shares, or is indexed to such an obligation, and requires the issuer to settle the obligation by transferring assets; and
- A financial instrument that embodies an unconditional obligation that the issuer must settle by issuing a variable number of its equity shares if the monetary value of the obligation is based solely on predominantly on (1) a fixed monetary amount, (2) variations in something other than the fair value of the issuer's equity shares, or (3) variations inversely related to changes in the fair value of the issuer's equity shares.

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

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

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

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

Certain Risks That May Affect Future Results

Investors evaluating our business should carefully consider the factors described below and all other information contained in this Form 10-KSB.  While management is optimistic about our long-term prospects, we do operate in a dynamic and rapidly changing environment that involves numerous risks and uncertainties that we believe may adversely affect our business, operating results and financial condition.  Additional factors and uncertainties not currently known to us or that we currently consider immaterial could also harm our business, operating results and financial condition.  Investors could lose all or part of their investment as a result of these factors.  This section should be read in conjunction with the audited Financial Statements and Notes thereto for the years ended December 31, 2003 and 2002 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 Market 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:

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

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

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
sluggish 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, reduce the demand for our products and 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 retail industry.  The success of our customers is directly linked to economic conditions in the retail industry, which in turn are subject to intense competitive pressures and are affected by overall economic conditions.  In addition, we believe that the license of our software products generally involves a large capital expenditure, which is often accompanied by large-scale hardware purchases or commitments.  As a result, demand for our products and services could decline in the event of instability or downturns.  Such downturns may cause customers to exit the industry or delay, cancel or red





uce 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:

- fail to respond to technological changes in a timely or cost-effective manner;
- 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;
- experience difficulties that could delay or prevent the successful development, introduction and marketing of these new products and services; or
- fail to achieve market acceptance of our products and services.

We May Introduce New Lines of Business and Channel Distribution Strategies Where We are Less Experienced and Unable to Successfully Sell That Could 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, operat





ing 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 That Could Negatively Impact Our Ability to Generate Future Revenues.  The markets for our software products are characterized by rapid technological change, evolving industry standards, changes in customer requirements and frequent new product introductions and enhancements.  If we fail in our product development efforts to accurately address evolving industry standards or important third-party interfaces or product architectures, sales of our products and services will suffer.

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

Changes in Technology Could Render Our Products Obsolete and Negatively Impact Our Results of Operations.  Technological changes in computer operating systems and hardware could render our products obsolete or unmarketable and may require us to modify existing applications to be marketable or develop new applications to be competitive with products from competitors.  These changes may cause us to have to make changes to existing applications or to create new applications, resulting in additional development and other costs beyond those currently anticipated.  We can provide no assurances that our software applications will be compatible with new or modified operating systems or hardware, or that we will be able to modify its applications or create new applications to keep pace with new or changed operating systems or hardware that may be purchased by our customers.  In addition, if we are unable to modify existing applications or develop new applications on a timely and cost





effective basis, or if new applications or enhancements do not achieve market acceptance, our sales may decline.

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





d 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.

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

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





our consulting service revenue would be adversely impacted.

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





 other resources, and greater name recognition than us.  Our competitors may also be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements.  Our current and potential competitors may:

- Develop and market new technologies that render our existing or future products obsolete, unmarketable or less competitive;
- 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
- 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.

A Loss of Important  Customers  May Result in a Loss of Revenues.
In 2002, two customers accounted for 15.6% and 10.1% of total revenues. In 2003,
one customer accounted for 17.3% of our total revenues. No other single customer
accounted  for  more  than  10% of 2002 or 2003  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.

A Loss of Existing Resellers Could Harm Our Financial Position and Results
of  Operations.  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 Regional 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.  During weak economic conditions, such as those being experienced in some geographic regions we serve, there is an increased risk that certain of our customer will file bankruptcy.  When our customers file bankruptcy, we may be required to forego collection of pre-petition amounts owed and to repay amounts remitted to us during the 90-day preference period preceding the filing.  Accounts receivable balances related to pre-petition amounts may in certain of these instances be large due to extended payment terms for software license fees, and significant billings for professional services on large projects.  The bankruptcy laws, as well as the specific circumstances of each bankruptcy, may severely limit our abili
































ty to collect pre-petition amount, and may force us to disgorge payments made during the preference period.  We also face risk from international customers that file for bankruptcy protection in foreign jurisdictions, in that the application of foreign bankruptcy laws may be less certain or harder to predict.  Although we believe that we have sufficient reserves to cover anticipated customer bankruptcies, there can be no assurance that such reserves will be adequate, and if they are not adequate, our business, operating results and financial condition would be adversely affected.

We May Not Be Able to Generate  Positive Cash Flows or Profits  Sufficient
to Sustain Our Operations. We have experienced net losses and negative cash
flows from  operating  activities  for the last four 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 occur for at least
the six 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 Lance Jacobs, Chief Executive Officer; Stephen DeSantis, Chief Financial Officer and David Berg, our Chief Technology Officer.  We currently only maintain key-man term life insurance on the life of Mr. Jacobs.  All of our key personnel have employment contracts with us.  The contracts are generally described in Item 6, Executive Compensation, below.  The loss of the services of these executive officers or other significant employees could negatively impact our business.

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

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

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

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

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

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

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

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, co





uld 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 truste





e 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 privilege





s 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.

We Are Controlled by Institutional Investors Who May Not Act in the Best Interests of Our Other Shareholders.  Institutional investors hold 99.8% of our outstanding Series A Preferred Stock and in excess of 95.8% of our outstanding Series B Preferred Stock.  The preferred stock votes on an as-converted to common stock basis and the preferred stock and common stock vote together as a single class.  Currently, the outstanding preferred stock held by institutional investors represents approximately 73% of our outstanding capital stock on an as-converted basis.  As a result, the institutional investors, as a group, hold controlling interests in us and will be able to make decisions in their own interest which may not be in the best interests of other stockholders.  This would include decisions to sell some or all of our assets, merge with another entity, commence an initial public offering or dissolve.  Our institutional investors have certain anti-dilutive and preemptive ri





ghts, as more particularly described in Item 8, "Description of Securities."  Our institutional investors also have senior rights in the event of our liquidation.  In the event a liquidation were to occur, common stockholders would not be entitled to any proceeds of such liquidation until the liquidation rights of our institutional investors were fully satisfied.  As a result, we can provide no assurances that common stockholders will receive any proceeds in the event of our liquidation or sale to the extent that the liquidation rights of our institutional investors are not fully paid.  Please see Item 7, Certain Relationships.

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  within Item 13 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.



PART III

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

|Name                        | Age | Position                                                    
|--------------------------- | --- | ------------------------------------------------------------
|Executive Officers:         |     |                                                             
|Lance C. Jacobs             | 47  | Chairman of the Board, President and Chief Executive Officer
|David Berg                  | 44  | Chief Technical Officer and Senior Vice President           
|John Burwick (3)            | 56  | Corporate Development Officer                               
|Stephen P. DeSantis         | 42  | Chief Financial Officer and Corporate Secretary             
|                            |     |                                                             
|Board of Directors:         |     |                                                             
|David Butler (2)            |     | Director                                                    
|Jay Houlihan (1)(2)         | 47  | Director                                                    
|Todd G. Gardner (1)         | 38  | Director                                                    
|Donald L. Jans              | 69  | Director                                                    
|John E. Josephson (1)(2)(4) | 56  | Director                                                    
|Mark T. Koulogeorge (2)     | 40  | Director                                                    
|Daniel Raynor (1)           | 44  | Director                                                    

(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Mr. Burwick no longer assumes active duties as an officer and employee as a result of an indefinite leave of absence.  The leave of absence was effective January 1, 2004.
(4) Mr. Josephson resigned from our Board of Directors effective November 11, 2003.



Executive Officers

Lance C. Jacobs, Chairman of the Board, President and Chief Executive Officer.  Mr. Jacobs joined our Board of Directors in December 1995 and has served as Chairman since 1996 and CEO since 1997.  He oversees our corporate strategic direction and is involved in key operational activities.  Mr. Jacobs has over 20 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.

David Berg, Chief Technical Officer and Senior Vice President.  Mr. Berg joined us in 1996.  He is responsible for overseeing TCI's Strategic Development department, managing the execution of technology initiatives and providing product life-cycle management.  Mr. Berg is responsible for ensuring TCI's products are in compliance with relevant industry standards, and is also the corporate subject-matter expert on trends and developments in IT. Previously, Berg held senior technical positions at Borland International, founded a software development, consulting and training firm, and worked for Lucky Stores and Santa Fe Pacific Pipelines.

Mr. Berg earned a Bachelor of Science degree in Information and Computer Science from the University of California, Irvine.

John Burwick, Corporate Development Officer.  Mr. Burwick joined us in 1998. He directs the company's long-range planning process and product requirements, provides cross-departmental leadership on business development projects, evaluates partnership opportunities, and assists in major account sales. Throughout his career, Mr. Burwick has held leadership positions in retail companies or companies that support retailers, successfully building organizations that provide technology for driving merchandising and business-development programs. His 20+-year career with The Kroger Co. gave him a solid background in the unique business issues of the retail grocery industry. Before joining TCI, he was senior vice president of business development for efficient market services, inc., a leading e-business provider of technology solutions for the retail and CPG industries. He served with Proctor & Gamble's Logistics Group and on RJR Nabisco's Retail Advisory Council and currently participated on the
advisory board for AdPilot, a software provider that produces one-to-one statistics to increase the effectiveness of retail marketing initiatives.

Mr. Burwick holds a BS in Education from Miami University, Oxford, Ohio.

Mr. Burwick no longer assumes active duties as an officer and employee as a result of an indefinite leave of absence.  The leave of absence was effective January 1, 2004.

Stephen P. DeSantis, Chief Financial Officer and Corporate Secretary.  Mr. DeSantis has over 19 years of financial management experience in both the private and public sectors.  In his role as our Chief Financial Officer/Corporate Secretary, he is responsible for corporate governance issues, SEC compliance, business planning, corporate strategic communications, and securing financing for the Company. 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

David Butler, Director.  Mr. Butler joined the Board of Directors in 2003.  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 24 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.

Jay Houlihan, 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.

Donald L. Jans, Director.  Mr. Jans joined the Board of Directors in 1995.  Mr. Jans is currently the President of Customer Focus Consulting, Inc.  Mr. Jans held the position of Senior Vice President and General Manager of Relay Divisions Asea-Brown Boveri Power T&D Co., Inc. and Westinghouse Electric Corporation from 1986 to 1993.  He had full strategic and operations responsibility for the divisions' various locations and was involved in strategies and sales in markets throughout the world.  From 1974 to 1986, he held top-level marketing and general management positions within various divisions of Westinghouse.

Mr. Jans earned a Bachelor of Science Degree, Electrical Engineering, from Gonzaga University and completed the Advanced Management Program at the Harvard University Graduate School of Business Administration, has a certificate in Business Management from the University of Utah.

John E. Josephson, Director.  Mr. Josephson joined the Board of Directors in 1996.  Mr. Josephson is an independent business consultant.  He has considerable senior executive experience in the retail grocery industry.  From 1989 to 1995, he was President and Chief Executive Officer of Big Bear Stores/Penn Traffic Company.  From 1983 to 1989, he served as Senior Vice President of Finance & Chief Financial Officer of P&C Foods/Penn Traffic Company.  From 1964 to 1983, he was with The Kroger Company, where he rose to division Controller.

Mr. Josephson earned a Bachelor of Business Administration from Ohio University.

Mr. Josephson resigned from our Board of Directors effective November 11, 2003.

Mark T. Koulogeorge, Director. Mr. Koulogeorge has been a member of our
Board of Directors since 1999. He has served as a Managing General Partner of MK
Capital  investment  firm  since  2001,  a  venture  capital  firm  focusing  on
application  software  and  outsourced  business  services.  Prior to joining MK
Capital,  Mr. Koulogeorge  was an executive  officer and Vice  President of Eagle
Industries,   Inc.,  a   diversified   manufacturer   from  1991  through  1994.
From 1994 till 2001, Mr. Koulogeorge served as
managing director of First Analysis Venture Capital.Mr. Koulogeorge  is  a  director  of  numerous   application  software  companies
including Aprimo, Knowlagent and Extraprise.

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.

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.

Directors Who Resigned

John J. Josephson resigned from our Board of Directors on October 23, 2003.

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.

David Butler did not file a Form 3 within the ten day period following November 11, 2003 when he became a Director on our Board.  The form was filed on March 18, 2004.  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 2003 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, 2003, 2002 and 2001, for those persons who served as (i) chief executive officer and each of our remaining executive officers.  We refer to these individuals as our "named executive officers."

|SUMMARY COMPENSATION TABLE 
|---------------------------
|Name and Principal Position
|($)(1)                     
|Lance C. Jacobs            
|Chairman, President and    
|Chief Executive Officer    
|David N. Berg              
|Chief Technical Officer and
|Senior Vice President      
|Stephen P. DeSantis        
|Chief Financial Officer and
|Corporate Secretary        
|John Burwick               
|Corporate Development      
|Officer                    

(1) Salaries for the named executives remained constant since 2002.  Changes between 2002 and 2003 relate solely to the timing of salary increases earned in 2002.
(2) Consists of our contributions to each named executive officer's employee benefits, 401(k) plan and term-life insurance plan.



Options Exercised

Our named executives did not exercise any stock options during the fiscal year ended December 31, 2003.  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 $0.25 per share.  We determined the estimated fair market value in good faith as of December 31, 2003.  The value of unexercised in-the-money options at December 31, 2003 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.

|                    | Number of Securities Underlying Unexercised Options
at December 31, 2003 | Value of Unexercised in-the-money Options at December 31, 2003
|------------------- | ------------------------------------------------------------------------ | --------------------------------------------------------------
|                   
|Name                | Exercisable                                                              | Unexercisable                                                 
|Lance C. Jacobs     | 496,900                                                                  | -                                                             
|Stephen P. DeSantis | 301,000                                                                  | -                                                             
|John Burwick        | 392,649                                                                  | 250,162                                                       
|David N. Berg       | 321,700                                                                  | -                                                             
|                    |                                                                          |                                                               

Employment Agreements

We have entered into Employment Agreements with Lance C. Jacobs, Chief Executive Officer, Stephen P. DeSantis, Chief Financial Officer and David N. Berg, our Chief Technical Officer.  All agreements are identical except for dollar amounts, which are determined by our Compensation Committee.  The agreements took affect on January 1, 2003 and continue indefinitely until terminated.  The agreements provide for:

- Annual base salaries in the amounts of $243,900 for Lance C. Jacobs, $175,000 for Stephen D. DeSantis and $172,500 for David N. Berg.
- Participation in our bonus plan, established each year by our Compensation Committee for management employees.
- $500,000 in term life insurance.
- Fully paid health insurance for the employee and the employee's immediate family.

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

- Continued payment of employee's base salary for a period of twelve (12) months.
- Payment of amounts that would otherwise become due under the bonus plan for management employees, prorated to the effective date of termination.
- Continued coverage under the Company's health insurance plans for a period of twelve (12) months.
- Continued coverage under the life insurance plan for a period of twelve (12) months.
- The ability of the employee to exercise their vested stock options for a period of 270 days following the effective date of termination.

In the event the employee is terminated by TCI within twelve (12) months following a change of control (other than a termination for cause) one-half of an employee's unvested options shall immediately vest and the employee shall be entitled to exercise all vested stock options.

The agreements further contain confidentiality, noncompetition, proprietary rights and dispute resolutions provisions.

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.  Mr. Butler's specialized experience within the software industry, at the approval of our board, permitted the following terms:  In the capacity of director, he will receive 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.  The option grant is fully vested with an exercise price equal to the estimated fair market value of our common stock.  Mr. Butler will also be reimbursed for reasonable out-of-pocket expenses incurred in connection with business relating to us.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

The  following  table sets forth  information  regarding  the  beneficial
ownership of our capital stock (including shares subject to unexercised options)
as of March 5, 2004 by  (i) each of the persons who hold in excess of 5% of
our outstanding  voting  securities  (namely,  common stock,  Series A Preferred
Stock and  Series B  Preferred  Stock),  (ii) each  of our named  executive
officers  and  directors,   and  (iii) our  named  executive  officers  and
directors,  as a group. The number of shares beneficially owned is determined in
accordance with  Rule 13d-3 of the Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under such
rule,  beneficial  ownership  includes:  (1) any  shares  as to  which  the
individual  or entity has voting power or  investment  power,  and  (2) any
shares which the individual or entity has the right to acquire within 60 days of
March 5, 2004through the exercise of any stock option,  warrant or other
right.  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.

|                                                                 | Amount and Nature of Beneficial Ownership (1)
|---------------------------------------------------------------- | ---------------------------------------------
|Beneficial Owner (2)                                             | Common Stock                                 
|                                                                 |                                              
|First Analysis Venture Capital(3)                                | 13,179,609                                   
|The Sears Tower, Suite 9500                                      |                                              
|233 South Wacker Drive                                           |                                              
|Chicago, Il 60606                                                |                                              
|                                                                 |                                              
|InnoCal II, L.P. (4)                                             | 7,000,000                                    
|600 Anton Blvd, Suite 1270                                       |                                              
|Costa Mesa, CA 92626                                             |                                              
|                                                                 |                                              
|The Argentum Group (5)                                           | 9,944,952                                    
|60 Madison Avenue, Suite 701                                     |                                              
|New York, NY 10010                                               |                                              
|                                                                 |                                              
|Blue Chip Capital Fund IV  Limited Partnership(6)                | 6,000,000                                    
|1100 Chiquita Center                                             |                                              
|250 East Fifth Street                                            |                                              
|Cincinnati, Ohio  45202                                          |                                              
|                                                                 |                                              
|Lance C. Jacobs (7)                                              | 726,900                                      
|                                                                 |                                              
|Stephen P. DeSantis (8)                                          | 301,500                                      
|                                                                 |                                              
|Dave Berg (9)                                                    | 321,800                                      
|                                                                 |                                              
|John Burwick (10)                                                | 392,649                                      
|                                                                 |                                              
|John E. Josephson (11)                                           | 64,156                                       
|8770 Springflower Drive NW                                       |                                              
|Pickerington, OH  43147                                          |                                              
|                                                                 |                                              
|Donald L. Jans (12)                                              | 73,980                                       
|10297 Copper Cloud Drive                                         |                                              
|Reno, NV  89511                                                  |                                              
|                                                                 |                                              
|Daniel Raynor (13)                                               | 10,069,126                                   
|60 Madison Avenue, Suite 701                                     |                                              
|New York, NY 10010                                               |                                              
|                                                                 |                                              
|Todd G. Gardner (14)                                             | 6,002,000                                    
|1100 Chiquita Center                                             |                                              
|250 East Fifth Street                                            |                                              
|Cincinnati, Ohio  45202                                          |                                              
|                                                                 |                                              
|Mark T. Koulogeorge (15)                                         | 14,793,820                                   
|The Sears Tower, Suite 9500                                      |                                              
|233 South Wacker Drive                                           |                                              
|Chicago, Il 60606                                                |                                              
|                                                                 |                                              
|James (Jay) E. Houlihan III (16)                                 | 7,002,000                                    
|600 Anton Blvd, Suite 1270                                       |                                              
|Costa Mesa, CA 92626                                             |                                              
|                                                                 |                                              
|All directors and executive officers as a group (10 people) (17) | 38,313,925                                   

*  Less than 1% beneficially owned.



|(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)  | Includes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(4)  | Includes 7,000,000 shares of common stock, which may be acquired by InnoCal
        II, L.P. upon the conversion of Series B Preferred Stock.  InnoCal
        Management II, L.P. is the general partner of InnoCal II, L.P. and
        Mr. Houlihan is the managing director of InnoCal Management II, L.P.
        Because of these relationships, InnoCal Management II, L.P. and
        Mr. Houlihan may be deemed beneficial owners of the shares held by InnoCal
        II, L.P.  Mr. Houlihan disclaims beneficial ownership to these shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(5)  | Includes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(6)  | Includes 6,000,000 shares of common stock, which may be acquired by Blue
        Chip Capital Fund IV L.P. upon the conversion of Series B Preferred Stock.
        Blue Chip Venture Company, Ltd. is the general partner of Blue Chip Capital
        Fund IV, L.P. and Mr. Gardner is a director of Blue Chip Venture Company,
        Ltd.  Because of these relationships, Blue Chip Venture Company, Ltd. and
        Mr. Gardner may be deemed beneficial owners of the shares held by Blue Chip
        Capital Fund IV, L.P.  Mr. Gardner disclaims beneficial ownership to these
        shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(7)  | Represents 204,000 shares of common stock and 522,900 shares of common
        stock, which may be acquired upon exercise of options, which may be
        exercised within 60 days of March 5, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(8)  | Represents 500 shares of common stock and 301,000 shares of common stock,
        which may be acquired upon the exercise of options, which may be exercised
        within 60 days of March 5, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(9)  | Represents 100 shares of common stock and 321,700 shares of common stock,
        which may be acquired upon the exercise of options, which may be exercised
        within 60 days of March 5, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(10) | Represents 392,649 shares of common stock, which may be acquired upon the
        exercise of options, which may be exercised within 60 days of March 5, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(11) | Represents 64,156 shares of common stock, which may be acquired upon the
        exercise of options, which may be exercised within 60 days of March 5, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(12) | Represents 73,980 shares of common stock, which may be acquired upon the
        exercise of options, which may be exercised within 60 days of March 5, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(13) | Includes shares described in Note (5) above and 8,000 shares of common
        stock, which may be acquired upon the exercise of options, which may be
        exercised within 60 days of March 5, 2004. Mr. Raynor is (i) the managing
        member of Argentum Investments, L.L.C., which is the managing member of
        Argentum Partners II, L.L.C., which is the general partner of Argentum
        Capital Partners II, L.P., (ii) the chairman of B.R. Associates, Inc.,
        which is the general partner of Argentum Capital Partners, L.P., and
        (iii) the managing member of Argentum Investments, L.L.C., which is the
        general partner of TCI ACPII Limited Partners, L.P.  As a result of these
        relationships Mr. Raynor may be deemed to have beneficial ownership over
        the shares held by these entities.  Mr. Raynor disclaims such beneficial
        ownership. Includes 124,174 shares of common stock, which may be acquired
        by Guarantee & Trust Co., TTEE Daniel Raynor GTC IRA upon the conversion of
        Series A and Series B Preferred Stock.  In addition, Mr. Raynor is a
        managing member of a minority member of a limited liability company that
        serves as the general partner of Infrastructure & Environmental Private
        Equity Fund, III L.P., and a partner in Environmental & Information
        Technology Private Equity Fund III.  Shares held by these entities are not
        included and Mr. Raynor disclaims beneficial ownership over the shares held
        by these entities.
|(14) | Includes shares described in Note (6) above and 2,000 shares of common
        stock, which may be acquired upon the exercise of options, which may be
        exercised within 60 days of March 5, 2004.  Mr. Gardner, is a director of
        Blue Chip Capital Venture Company Ltd., the general partner of Blue Chip
        Capital Fund, IV L.P.  As a result of his position, Mr. Gardner may be
        deemed to have beneficial ownership over the shares held by Blue Chip
        Capital Fund IV L.P.  Mr. Gardner disclaims such beneficial ownership.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(15) | Includes shares described in Note (3) above and 26,006 shares of common
        stock, which may be acquired upon the exercise of options, which may be
        exercised within 60 days of March 5, 2004.  Mr. Koulogeorge, is (i) the
        managing director of First Analysis Corporation, which is a member of First
        Analysis IEPEF Management Company, III, L.L.C., which is a member of
        Infrastructure and Environmental Private Equity Management, L.L.C., which is
        the general partner of Infrastructure and Environmental Private Equity Fund
        III, L.P. and Environmental & Information Technology Private Equity Fund
        III; and (ii) the managing director of First Analysis Venture Operations
        and Research L.L.C., which is the managing member of First Analysis
        Management Company IV L.L.C., which is the general partner of Productivity
        Fund IV, L.P. and Productivity Fund IV Advisors Fund, L.P.  As a result of
        these relationships, Mr. Koulogeorge may be deemed to have beneficial
        ownership over the shares held by these entities.  Mr. Koulogeorge
        disclaims such beneficial ownership.  Includes 1,614,211shares, which may
        be acquired directly by Mr. Koulogeorge upon the conversion of Series A and
        Series B Preferred Stock.                                                                                                                                                                                                                                   
|(16) | Includes shares described in Note (4) above and 2,000 shares of common
        stock, which may be acquired upon the exercise of options, which may be
        exercised within 60 days of March 5, 2004.  Mr. Houlihan is a managing
        director of InnoCal Management II, L.P., the general partner of InnoCal II,
        L.P.  As a result of his position, Mr. Houlihan may be deemed to have
        beneficial ownership of the shares held by InnoCal II, L.P.  Mr. Houlihan
        disclaims such beneficial ownership.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(17) | Includes 1,680,385 shares of common stock, which may be acquired upon the
        exercise of options exercisable within 60 days of March 5, 2004 and
        38,313,925 shares of common stock, which may be acquired upon the
        conversion of Series A 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, 2003:

| | (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.                    

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.

|Equity Compensation Plan Information                  
|------------------------------------------------------
|Plan Category                                         
|Equity compensation plans approved by stockholders    
|Equity compensation plans not approved by stockholders
|Totals                                                
|                                                      

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

Item 12.  Certain Relationships and Related Transactions

Series A Preferred Stock

In connection with our private placement financing in 1999 with certain institutional investors, we sold shares of Series A Preferred Stock to the following members of our Board of Directors and beneficial owners at $1.06 per share in the amounts stated:

|5% Stockholders                                                                            | Shares (1)
|------------------------------------------------------------------------------------------ | ----------
|Argentum Capital Partners II L.P.                                                          | 5,000,000 
|Argentum Capital Partners L.P.                                                             | 1,000,000 
|TCI ACPII Limited Partners L.P.                                                            | 1,400,000 
|Infrastructure & Environmental Private
Equity Fund, III L.P.                               | 3,200,000 
|Environmental & Information Technology
Private Equity Fund III, a German civil
Partnership | 800,000   
|                                                                                           |           
|Directors                                                                                  |           
|Mark T. Koulogeorge                                                                        | 800,000   
|Guarantee & Trust Co., TTEE Daniel Raynor
GTC IRA                                          | 100,000   
|                                                                                           |           

(1)     Share figures represent shares of common stock issuable upon conversion of the shares of Series A Preferred Stock pursuant to the Series A Preferred Stock's anti-dilutive rights.  Each share of outstanding Series A Preferred Stock is convertible into 2.12 shares of common stock.
Series B Preferred Stock
In connection with the private placement of Series B Preferred Stock that occurred in stages from December 2001 through April 2002, we sold shares of Series B Preferred Stock to the following members of our Board of Directors and beneficial owners at $0.50 per share in the amounts stated:

|5% Stockholders                                                                            | Shares   
|------------------------------------------------------------------------------------------ | ---------
|InnoCal II, L.P.                                                                           | 7,000,000
|Argentum Capital Partners II L.P.                                                          | 2,015,498
|Argentum Capital Partners L.P.                                                             | 303,030  
|TCI ACPII Limited Partners L.P.                                                            | 226,424  
|Productivity Fund IV, L.P.                                                                 | 7,444,150
|Productivity Fund IV Advisors Fund, L.P.                                                   | 286,154  
|Infrastructure & Environmental Private
Equity Fund, III L.P.                               | 1,142,108
|Environmental & Information Technology
Private Equity Fund III, a German civil
Partnership | 285,527  
|Blue Chip Capital Fund IV Limited Partnership                                              | 6,000,000
|                                                                                           |          
|Directors                                                                                  |          
|Mark T. Koulogeorge                                                                        | 809,875  
|Guarantee & Trust Co., TTEE Daniel
Raynor GTC IRA                                          | 16,174   
|                                                                                           |          

Other Related Parties

John E. Josephson, a former member of our Board of Directors also serves our customers as an independent consultant for our services department.  For the year ended December 31, 2002 we paid him $1,185 for services he provided as a consultant for our organization.
There were no related party transactions for the year ended December 31, 2003.

Item 13.  Exhibits and Reports on Form 8-K

Index to Financial Statements

|                                                                                  | Page
|--------------------------------------------------------------------------------- | ----
|                                                                                  |     
|Report of Independent Certified Public Accountants                                | F-1 
|Balance Sheets as of December 31, 2003                                            | F-2 
|Statements of Operations for the Years ended December 31, 2003
and 2002           | F-4 
|Statements of Shareholders' Equity for the Years ended December
31, 2003 and 2002 | F-5 
|Statements of Cash Flows for the Years ended December 31, 2003
and 2002           | F-6 
|Notes to Financial Statements for the Years ended December 31,
2003 and 2002      | F-8 
|                                                                                  |     

Index to Exhibits

|Exhibit No. | Description                                                                                                                                                                                             
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         | Certificate of Amendment of the Fourth Amended and Restated Certificate of Incorporation of TCI Solutions, Inc.                                                                                         
|3.2*        | Fourth Amended and Restated Certificate of Incorporation of TCI Solutions, Inc.                                                                                                                         
|3.3*        | Bylaws of TCI Solutions, Inc. and Amendments thereto                                                                                                                                                    
|4.1*        | Amended and Restated Stockholders Agreement dated December 21, 2001 among TCI Solutions, Inc. and the Stockholders listed on Schedule I thereto                                                         
|4.2*        | First Amendment to Amended and Restated Stockholders Agreement dated April 10, 2002 among TCI Solutions, Inc. and the Stockholders listed on Schedule I thereto                                         
|4.3*        | Second Amendment to Amended and Restated Stockholders Agreement dated April 2002, among TCI Solutions, Inc. and the Stockholders listed on Schedule I thereto.                                          
|4.4*        | Second Amended and Restated Registration Rights Agreement dated April 10, 2002 among TCI Solutions, Inc. and the persons identified on Schedule I thereto                                               
|4.5*        | Management Rights Letter in favor of InnoCal II, L.P. dated December 21, 2001                                                                                                                           
|4.6*        | Management Rights Letter in favor of Productivity Fund IV dated December 21, 2001                                                                                                                       
|4.7**       | Warrant to Purchase a 125,000 shares of Common Stock of TCI Solutions, Inc. in favor of Comerica Bank-California dated August 6, 2002                                                                   
|10.1**      | Loan and Security Agreement dated August 6, 2002 between TCI Solutions, Inc. and Comerica Bank, N.A.                                                                                                    
|10.2        | First Amendment to Loan and Security Agreement dated August 5, 2003 between TCI Solutions, Inc. and Comerica Bank, N.A.                                                                                 
|10.3        | Second Amendment to Loan and Security Agreement dated January 28, 2004 between TCI Solutions, Inc. and Comerica Bank, N.A.                                                                              
|10.4        | Third Amendment to Loan and Security Agreement dated February 28, 2004 between TCI Solutions, Inc. and Comerica Bank-California                                                                         
|10.5        | Warrant to Purchase 35,000 shares of Common Stock of TCI Solutions, Inc. in favor of Comerica Bank-California dated February 27, 2004                                                                   
|10.6        | Employment Agreement dated January 1, 2003 between TCI Solutions, Inc. and Lance Jacobs                                                                                                                 
|10.7        | Employment Agreement dated January 1, 2003 between TCI Solutions, Inc. and Stephen DeSantis                                                                                                             
|10.8        | Employment Agreement dated January 1, 2003 between TCI Solutions, Inc. and David Berg                                                                                                                   
|10.9*       | 2001 Equity Incentive Plan of TCI Solutions, Inc. and Amendments thereto                                                                                                                                
|10.10*      | 2001 Non-Employee Directors' Stock Option Plan of TCI Solutions, Inc.                                                                                                                                   
|10.11*      | 1993 Equity Incentive Plan of TCI Management, Inc. (now TCI Solutions, Inc.)                                                                                                                            
|10.12*      | 1993 Non-Employee Directors' Stock Option Plan of TCI Management, Inc. (now TCI Solutions, Inc.)                                                                                                        
|23.1        | Consent of Independent Auditors                                                                                                                                                                         
|24.1        | Power of Attorney (included on signature page)                                                                                                                                                          
|31.1        | Section 302 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-a4(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|31.2        | Section 302 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-a4(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|32.1***     | Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                              
|32.2***     | Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                              

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

**  Incorporated by reference to the registrant's Quarterly Report on Form 10-QSB filed on November 14, 2003.

*** Pursuant to Commission Release No. 33-8238, this certification will be treated as 'accompanying' this Annual Report on Form 10-KSB and not 'filed' as part of such report for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates by reference.

Reports on Form 8-K

None

Item 14.  Principal Accountant Fees & Services

The Audit Committee regularly reviews and determines whether specific projects or expenditures with our independent auditors, 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, 2003 and December 31, 2002.

|                               | 2003________ |     | 2002________ |    
|------------------------------ | ------------ | --- | ------------ | ---
|Audit fees                     | $77,300      | (1) | $59,752      | (1)
|Audit-related fees             | 35,285       | (1) | 30,000       | (1)
|Tax fees                       | 48,953       | (2) | 39,918       | (2)
|Total audit and non audit fees | $161,538     |     | $129,670     |    
|                               |              |     |              |    

(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 2003 and 2002 and for reviews of the financial statements included in our quarterly reports on Form 10-QSB for the first three quarters of fiscal 2003 and 2002.
(2)     Includes fees for professional services rendered in fiscal 2003 and 2002, in connection with tax compliance.







SIGNATURE

In accordance with Section 13 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: March 26, 2004 | By:  /s/ Lance C. Jacobs                  
|                      | Lance C. JacobsChief Executive Officer    
|                      |                                           
|Dated: March 26, 2004 | By:  /s/ Stephen P. DeSantis              
|                      | Stephen P. DeSantisChief Financial Officer





POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that such person whose signature appears below constitutes and appoints Lance C. Jacobs 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/ Lance C. JacobsLance C. Jacobs         | President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)   | March 26, 2004
|                                           |                                                                                              |               
|/s/ Stephen P. DeSantisStephen P. DeSantis | Chief Financial Officer and Corporate Secretary
(Principal Financial and Accounting Officer) | March 26, 2004
|                                           |                                                                                              |               
|/s/ David ButlerDavid Butler               | Director                                                                                     | March 26, 2004
|                                           |                                                                                              |               
|/s/ Jay E. Houlihan IIIJay E. Houlihan III | Director                                                                                     | March 26, 2004
|                                           |                                                                                              |               
|/s/ Todd G. GardnerTodd G. Gardner         | Director                                                                                     | March 26, 2004
|                                           |                                                                                              |               
|/s/ Donald L. JansDonald L. Jans           | Director                                                                                     | March 26, 2004
|                                           |                                                                                              |               
|/s/ Mark T. KoulogeorgeMark T. Koulogeorge | Director                                                                                     | March 26, 2004
|                                           |                                                                                              |               
|/s/ Daniel RaynorDaniel Raynor             | Director                                                                                     | March 26, 2004
|                                           |                                                                                              |               
|                                           |                                                                                              |               



---

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders 
TCI Solutions, Inc. 
Irvine, California

We have audited the accompanying balance sheet of TCI Solutions,
Inc.(the "Company") as of December 31,  2003 and the related
statements of  operations,  stockholders'  equity and cash flows for each of the
two years in the period ended December 31, 2003. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all
material respects, the financial position of TCI Solutions,  Inc.
as of December 31,  2003 and the results of their operations and their cash
flows for each of the two years in the period  ended  December 31,  2003 in
conformity with accounting principles generally accepted in the United States of
America.

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for goodwill and other intangible assets during 2002 in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.



/s/ Deloitte & Touche LLP



Costa Mesa, California
March 26, 2004

---

TCI SOLUTIONS, INC.

BALANCE SHEET
DECEMBER 31, 2003

---

|ASSETS                                                                  | 
|----------------------------------------------------------------------- | 
|CURRENT ASSETS:                                                         | 
|Cash and cash equivalents                                               | 
|Accounts receivable, net of allowance for doubtful accounts of $630,404 | 
|Prepaid expenses and other current assets                               | 
|                                                                        | 
|Total current assets                                                    | 
|                                                                        | 
|PROPERTY, PLANT AND EQUIPMENT:                                          | 
|Computer equipment                                                      | 
|Furniture and fixtures                                                  | 
|Leasehold improvements                                                  | 
|                                                                        | 
|                                                                        | 
|Less accumulated depreciation and amortization                          | 
|                                                                        | 
|Property, plant and equipment - net                                     | 
|                                                                        | 
|GOODWILL                                                                | 
|                                                                        | 
|OTHER ASSETS                                                            | 
|                                                                        | 
|TOTAL                                                                   | 
|                                                                        | 



|LIABILITIES AND STOCKHOLDERS' EQUITY                            | 
|--------------------------------------------------------------- | 
|CURRENT LIABILITIES:                                            | 
|Accounts payable                                                | 
|Accrued expenses                                                | 
|Line of credit                                                  | 
|Current portion of capital lease obligation                     | 
|Deferred revenue                                                | 
|                                                                | 
|Total current liabilities                                       | 
|                                                                | 
|CAPITAL LEASE OBLIGATION - Net of current portion               | 
|                                                                | 
|COMMITMENTS AND CONTINGENCIES (Note 6)                          | 
|                                                                | 
|STOCKHOLDERS' EQUITY:                                           | 
|Series A convertible preferred stock, no par value - 6,146,227  | 
|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 | 
|shares authorized; 26,653,094 shares issued and outstanding;    | 
|liquidation preference of $13,327,000                           | 
|Common stock, $0.001 par value - 65,000,000 shares authorized;  | 
|12,819,263 shares issued and outstanding                        | 
|Warrants to purchase common stock                               | 
|Accumulated deficit                                             | 
|                                                                | 
|Net stockholders' equity                                        | 
|                                                                | 
|TOTAL                                                           | 
|See notes to financial statements                               | 



---

TCI SOLUTIONS, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2003 AND 2002

---

|                                                               | 2003 | 2002         
|-------------------------------------------------------------- | ---- | -------------
|REVENUES:                                                      |      |              
|Software licenses                                              |      | $   5,561,806
|Maintenance                                                    |      | 3,787,985    
|Services                                                       |      | 8,993,278    
|Other                                                          |      | 2,870,681    
|Total revenues                                                 |      | 21,213,750   
|COST OF REVENUES:                                              |     
|Software licenses                                              |      | 102,646      
|Maintenance                                                    |      | 1,220,271    
|Services                                                       |      | 5,771,337    
|Other                                                          |      | 2,083,939    
|Total cost of revenues                                         |      | 9,178,193    
|GROSS PROFIT                                                   |      | 12,035,557   
|OPERATING EXPENSES:                                            |     
|Product development                                            |      | 4,044,544    
|Sales and marketing                                            |      | 7,376,018    
|General and administrative                                     |      | 6,476,473    
|Total operating expenses                                       |      | 17,897,035   
|OPERATING LOSS                                                 |      | (5,861,478   
|OTHER INCOME (EXPENSE) - Net                                   |      | (88,936      
|LOSS BEFORE INCOME TAXES                                       |      | (5,950,414   
|PROVISION FOR INCOME TAXES                                     |      | 9,600        
|NET LOSS                                                       |      | $ (5,960,014 
|Net loss per share - basic and diluted                         |      | $      (0.46 
|Weighted-average common shares outstanding - basic and diluted |      | 12,819,263   
|See notes to financial statements                              |     



---

STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2003 AND 2002

---

|                                  | Series A        |              | Series B        |            |                 |  |            | Warrants      | 
|--------------------------------- | --------------- | ------------ | --------------- | ---------- | --------------- |  | ---------- | ------------- | 
|                                  | Convertible     |              | Convertible     |            |                 |  |            | to Purchase   | 
|                                  | Preferred Stock |              | Preferred Stock |            | Common Stock    |  | Common     | Accumulated   | 
|                                  | Shares          | Amount       |                 | Shares     | Amount          |  | Shares     | Amount        | 
|                                  |                 |              |                 |            |                 |  |            |               | 
|                                  |                 |              |                 |            |                 |  |            |               | 
|BALANCE - January 1, 2002         | 5,816,037       | $  5,224,128 |                 | 17,200,000 | $     7,980,963 |  | 12,817,163 | $  37,478,686 | 
|                                  |                 |              |                 |            |                 |  |            |               | 
|Preferred stock issuance          |                 |              |                 | 9,388,154  | 4,694,077       |  |            |               | 
|Offering costs                    |                 |              |                 |            | (217,873)       |  |            |               | 
|Cancelation of warrants           |                 | 285,865      |                 |            |                 |  |            |               | 
|Issuance of warrants              |                 |              |                 |            | (148,891)       |  |            |               | 
|Conversion of accrued             |                 |              |                 |            |                 |  |            |               | 
|interest on bridge loans          |                 |              |                 |            |                 |  |            |               | 
|into preferred stock              |                 |              |                 | 64,940     | 32,470          |  |            |               | 
|Exercise of stock options         |                 |              |                 |            |                 |  | 2,100      | 606           | 
|Net loss                          |                 |              |                 |            |                 |  |            |               | 
|                                  |                 |              |                 |            |                 |  |            |               | 
|                                  |                 |              |                 |            |                 |  |            |               | 
|BALANCE - December 31, 2002       | 5,816,037       | 5,509,993    |                 | 26,653,094 | 12,340,746      |  | 12,819,263 | 37,479,292    | 
|                                  |                 |              |                 |            |                 |  |            |               | 
|Net loss                          |                 |              |                 |            |                 |  |            |               | 
|                                  |                 |              |                 |            |                 |  |            |               | 
|                                  |                 |              |                 |            |                 |  |            |               | 
|BALANCE - December 31, 2003       | 5,816,037       | $  5,509,993 |                 | 26,653,094 | $   12,340,746  |  | 12,819,263 | $  37,479,292 | 
|See notes to financial statements |                



---

TCI SOLUTIONS, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003 AND 2002

---

|                                                      | 2003 | 2002       
|----------------------------------------------------- | ---- | -----------
|CASH FLOWS FROM OPERATING ACTIVITIES:                 |      |            
|Net loss                                              |      | $(5,960,014
|Adjustments to reconcile net loss to net cash used in |     
|operating activities:                                 |     
|Depreciation and amortization                         |      | 609,017    
|Provision for doubtful accounts                       |      | 750,000    
|Changes in operating assets and liabilities:          |     
|Accounts receivable                                   |      | 4,378,259  
|Prepaid expenses and other current assets             |      | 398,902    
|Other assets                                          |      | (1,740     
|Accounts payable                                      |      | (16,547    
|Accrued expenses                                      |      | (1,287,239 
|Deferred revenue                                      |      | 130,740    
|                                                      |      |            
|Net cash used in operating activities                 |      | (998,622   
|                                                      |      |            
|CASH FLOWS FROM INVESTING ACTIVITIES - Acquisition of |     
|property, plant and equipment                         |      | (712,894   
|                                                      |      |            
|CASH FLOWS FROM FINANCING ACTIVITIES:                 |     
|Principal payments on capital lease obligations       |      | (22,848    
|Proceeds from line of credit                          |      | 500,000    
|Repayments on line of credit                          |      | (209,218   
|Proceeds from exercise of stock options               |      |            
|Net proceeds from the issuance of preferred stock     |      |            
|                                                      |      |            
|Net cash provided by financing activities             |      | 267,934    
|                                                      |      |            
|NET DECREASE IN CASH AND CASH EQUIVALENTS             |      | (1,443,582 
|                                                      |      |            
|CASH AND CASH EQUIVALENTS - Beginning of year         |      | 5,122,913  
|                                                      |      |            
|CASH AND CASH EQUIVALENTS - End of year               |      | $ 3,679,331



|                                               |  |           
|---------------------------------------------- |  | ----------
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW          |  |           
|INFORMATION - Cash paid during the period for: | 
|Interest                                       |  | $ 132,303 
|Income taxes                                   |  | $    9,600
|See notes to financial statements              |  |           



NONCASH INVESTING AND FINANCING ACTIVITIES:

During 2003, we entered into the following noncash investing and financing activities:Obtained $46,284 of equipment under capital lease arrangements.

During 2002, we entered into the following noncash investing and financing activities:
    Obtained $40,560 of equipment under capital lease arrangements.
   Converted $32,470 of accrued interest related to bridge loans to 64,940 shares of Series B preferred stock.
    Canceled warrants to purchase common stock with a recorded value of $285,865, resulting in an increase
   in preferred stock.
    Issued warrants to purchase common stock with a recorded value of $148,891 and $29,238.


See notes to financial statements.TCI SOLUTIONS, INC.NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

---

1.          NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business  -
We provide retailers 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 pricing and inventory management.  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.

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, 2003, uninsured amounts held at this financial institution total $3,579,331. 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 reserves 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 $68,000 has been included in prepaid expenses and other current assets in the accompanying balance sheet.

Property and Equipment - Property, plant 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 expense was $609,017 and $414,665 for the years ended December 31, 2003 and 2002, respectively.

Goodwill   -  Effective   January  1,  2002,  we  adopted  SFAS
No. 142,  Goodwill and Other Intangible  Assets,which  addresses the
financial accounting and reporting  requirements for acquired goodwill and other
intangible  assets.  Under  SFAS  No. 142,  we are no  longer  required  to
amortize goodwill and other intangible  assets with indefinite  lives.  Instead,
SFAS No. 142 requires  that  goodwill and  intangible  assets  deemed to have an
indefinite  useful  life  be  reviewed  for  impairment  upon  adoption  of SFAS
No. 142 and at least annually thereafter.

In accordance with SFAS No. 142, we were required to perform a two-step transitional impairment test. The first step of this test was completed by June 30, 2002 with the determination of the fair value of our reporting units in order to identify whether the fair value of each reporting unit is less than its carrying amount. Our reporting units are the same as the operating segments defined in Note 10. In the event that the fair value of the reporting unit is less than the carrying amount, the second step of the test would be required to determine if the carrying value of goodwill exceeds the implied fair value. We determined that there was no impairment of goodwill upon transition, as well as, for the years ended December 31, 2003 and 2002.

Long-Lived Assets - Effective January 1, 2002, we adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. In accordance wit SFAS No. 144, long-lived assets to be held are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. There was no impairment of long-lived assets for the years ended December 31, 2003 and 2002.

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 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 guidance of Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements, which provides further interpretive guidance for public reporting companies on the recognition, presentation and disclosure of revenue in financial statements.

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

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  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 income (loss) per share is
computed   by   dividing   the  net   income   (loss)  for  the  period  by  the
weighted-average  number of common shares outstanding during the period. Diluted
net income  (loss) per share is computed by dividing  net income  (loss) for the
period by the  weighted-average  number of common and common  equivalent  shares
outstanding  during the period if their  effect is dilutive.  Common  equivalent
shares  for  the  years  ended   December 31,   2003  and  2002,   totaling
55,080 and 55,380,  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 considered more likely than
not that deferred tax assets will not be realized.

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

SFAS No. 123  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, 1%; risk-free interest rates of 4.0% in the
years ended  December 31,  2003 and 2002,  respectively;  and no  dividends
during the expected  term.  Our  calculations  are based on an option  valuation
approach,  and forfeitures are recognized as they occur. The effects of applying
SFAS No. 123 in this pro forma disclosure are not necessarily indicative of
future amounts.

Had compensation costs 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, 2003 and 2002:



|                                                      |  |                
|----------------------------------------------------- |  | ---------------
|Net loss:                                             |  |                
|As reported                                           |  | $(5,960,014    
|Add:  Total stock-based employee compensation expense | 
|determined under fair value based method for all      | 
|awards - net of tax                                   |  | (68,939        
|Pro forma                                             |  | $(6,028,953    
|Net loss per share - basic and diluted:               | 
|As reported                                           |  | $         (0.46
|Pro forma                                             |  | $         (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, 2003 and 2002.

New Accounting Pronouncements - In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS No. 146), which addresses financial accounting and reporting for costs associated with exit or disposal activities. SFAS No. 146 supersedes EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF Issue No. 94-3, a liability for an exit cost as defined in EITF Issue No. 94-3 was recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measu

red and recorded at fair value. We adopted the provisions of SFAS No. 146 effective January 1, 2003 and such adoption did not have a material impact on our financial statements.

In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. We adopted the disclosure provisions of FIN 45 during the fourth quarter of fiscal 2002 and the recognition provisions of FIN 45 effective January 1, 2003. Such adoption did not have a material impact on our financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods for voluntary transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation. SFAS No. 148 also requires disclosure of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income (loss) and earnings (loss) per share in annual and interim financial statements. We adopted the provisions of SFAS No. 148 effective January 1, 2003 and such adoption did not have a material impact on our financial statements.

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

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

- A financial instrument issued in the form of shares that is mandatorily redeemable and embodies an unconditional obligation that requires the issuer to redeem it by transferring its assets at a specified or determinable date or upon an event that is certain to occur;
- A financial instrument, other than an outstanding share, that embodies an obligation to repurchase the issuer's equity shares, or is indexed to such an obligation, and requires the issuer to settle the obligation by transferring assets; and
- A financial instrument that embodies an unconditional obligation that the issuer must settle by issuing a variable number of its equity shares if the monetary value of the obligation is based solely on predominantly on (1) a fixed monetary amount, (2) variations in something other than the fair value of the issuer's equity shares, or (3) variations inversely related to changes in the fair value of the issuer's equity shares.

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

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

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

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

Use of Estimates - In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and 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.

Customer Concentrations - We provide credit in the normal course of business to customers throughout the United States. One customer accounted for 17% of revenue for the year ended December 31, 2003 and two customers accounted for 16% and 10% of revenue for the year ended December 31, 2002.

Approximately 56% of accounts receivable was due from three customers as of December 31, 2003. All of our customers are in the retail industry.

Reclassifications - Certain reclassifications have been made to conform the 2002 financial statements to the 2003 presentation.

2.          ACCRUED EXPENSES

Accrued expenses consist of the following at December 31, 2003:

|Accrued vacation          |  | $   577,545 | 
|------------------------- |  | ----------- | 
|Accrued commissions       |  | 137,785     | 
|Deferred rent             |  | 106,678     | 
|Accrued management salary |  | 58,917      | 
|Accrued sales and use tax |  | 51,603      | 
|Accrued other             |  | 105,057     | 
|Total accrued expenses    |  | $1,037,585  | 
|                          | 

3.          INCOME TAXES

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

|                              | 2003 | 2002               
|----------------------------- | ---- | -------------------
|Current:                      |      |                    
|Federal                       |      | $
                -
|State                         |      | 9,600              
|                              |      |                    
|                              |      | 9,600              
|                              |      |                    
|Deferred:                     |     
|Federal                       |      | (1,840,757         
|State                         |      | (473,329           
|Change in valuation allowance |      | 2,314,086          
|                              |      |                    
|                              |      | $        9,600     

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

|                               | 2003 | 2002          
|------------------------------ | ---- | --------------
|Tax at federal statutory rates |      | $(2,026,404   
|State income taxes - net       |      | (309,534      
|Other                          |      | 31,452        
|Change in valuation allowance  |      | 2,314,086     
|                               |      | $        9,600

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:

|                                        | 2003 | 2002              
|--------------------------------------- | ---- | ------------------
|Deferred tax assets (liabilities):      |      |                   
|Allowance for doubtful accounts         |      | $      270,065    
|Accrued compensation                    |      | 247,588           
|State taxes                             |      | 3,264             
|Net operating loss carryforwards        |      | 10,283,017        
|Depreciation and amortization           |      | (160,061          
|Software development costs              |      | 19,375            
|                                        |      |                   
|                                        |      | 10,663,248        
|Valuation allowance                     |      | (10,663,248       
|                                        |      |                   
|Total deferred tax assets (liabilities) |      | $               --

At December 31, 2003, we had federal and state net operating loss carryforwards of approximately $27,617,451 and $15,577,202, respectively, which begin to expire in 2007 and 2004, 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 August 6, 2002, we entered into a $4,000,000 credit facility with a financial institution comprised of a $1,000,000 equipment line of credit and a $3,000,000 revolving line of credit. Each advance under the equipment line of credit is payable in 36 equal monthly installments, plus interest at 1.0% above the prime rate (4.0% at December 31, 2003).  The revolving line of credit bears interest at 0.50% above the prime rate (3.5% at December 31, 2003).

Borrowings under the revolving line of credit are limited to 80% of eligible accounts receivable, as defined. As of December 31, 2003, available borrowings under the revolving line of credit were approximately $1,526,431. As of December 31, 2003, we have outstanding borrowings against our credit facility of $1,604,910 consisting of $131,341 under the equipment line of credit and $1,473,569 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, 2003, 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 125,000 shares of common stock at an exercise price of $0.25 per share to the financial institution (see Note 5).

On February 27, 2004, we amended the above credit facility. All terms and
conditions related to the line of credit remained unchanged and the line of
credit matures in February 2005. The equipment line of credit was renewed at
$500,000. Each advance under the equipment line of credit shall accrue interest
at 0.75% above the prime rate and is payable monthly. On November 27, 2004,
outstanding borrowings under the equipment line of credit shall be payable in 30
equal monthly installments, plus interest at 0.75% above the prime rate through
the maturity date. At the time of maturity, all outstanding borrowings shall be
immediately due and payable. The equipment line of credit matures in June 2007.

In connection with this amendment, we granted warrants to purchase 35,000
shares of our common stock at an exercise price of $0.25 per share to the
financial institution.

5.          STOCKHOLDERS' EQUITY

Convertible Preferred Stock - During the year ended December 31, 2002, we raised $4,694,077 from the sale of 9,388,154 shares of Series B convertible preferred stock (Series B) at $0.50 per share, net of offering costs of $217,873.

In connection with the issuance of the Series B, we granted warrants to purchase 675,757 shares of common stock at an exercise price of $0.25 per share to a third party in consideration for investment banking services (see discussion below).

Our calculation of the estimated fair value of these warrants using the Black-Scholes pricing model used the following assumptions:  expected life equal to contractual life of the warrants or five years, 135% volatility, risk-free interest rate of 4% and no dividends during the expected term.

Our Series A convertible preferred stock (Series A) and Series B convertible preferred stock originally contained a redemption feature that was subsequently deleted. 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.

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 preferred stock 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.

A Liquidation Event is defined as our (i) 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.

Holders of preferred stock may under certain circumstances cause the occurrence of a Liquidation Event.

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.

Antidilution Rights - Both holders of designated preferred stock are entitled to "full-ratchet" anti-dilutions 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. Holders of designated preferred stock are convertible at the holder's option into shares of common stock, on a share-for-share basis. Conversion is automatic in the event of a public offering of our common stock, meeting certain specified criteria.

Warrants - During the year ended December 31, 2002, we agreed to cancel warrants to purchase 397,783 shares of common stock originally valued at $285,865. The cancellation was recorded as an increase in preferred stock.

As  discussed  in Note 4, in August  2002,  we granted  warrants  to purchase
125,000  shares of  common  stock at an  exercise  price of $0.25 per share to a
financial institution.  These warrants were immediately exercisable and expire on
August  6,  2009.   The  estimated  fair  value  of  these  warrants  using  the
Black-Scholes  pricing  model of $29,238  was  recorded  as a prepaid  financing
charge  and an  increase  in  warrants  to  purchase  common  stock and is being
amortized by charges to interest expense over a two-year period. Our calculation
using the  Black-Scholes  pricing  model used the  following  weighted-  average
assumptions:  expected  life equal to the  contractual  life of the  warrants or
seven years,  135%  volatility,  risk-free  interest rate of 4% and no dividends
during  the  expected  term.  All  of  these  warrants  remain  outstanding  and
exercisable as of December 31, 2003.

As discussed above, in October 2002, we granted warrants to purchase 675,757 shares of common stock at an exercise price of $0.25 per share to a third party in consideration for investment banking services. These warrants are immediately exercisable and expire on October 30, 2007. The estimated fair value of these warrants using the Black-Scholes pricing model of $148,891 was recorded as a decrease to Series B and an increase in warrants to purchase common stock. Our calculation using the Black-Scholes pricing model used the following weighted-average assumptions: expected life equal to the contractual life of the warrants or five years, 135% volatility, risk-free interest rate of 4% and no dividends during the expected term. All of these warrants remain outstanding and exercisable as of December 31, 2003

In June 2000, we granted warrants to purchase 15,000 shares of common stock at an exercise price of $2.00 per share to a financial institution. These warrants are immediately exercisable and expire on June 30, 2005. The fair value attributable to these warrants was determined to be deminimus, and no value for these warrants has been recorded in the financial statements. All of these warrants remain outstanding and exercisable as of December 31, 2003.

6.          COMMITMENTS AND CONTINGENCIES

We lease certain facilities and equipment under agreements that expire at various times through 2007, which are accounted for as operating leases. Total rental expense for noncancelable operating leases was approximately $1,124,337 and $1,299,773 for the years ended December 31, 2003 and 2002, 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 $106,678 of deferred rent at December 31, 2003.

We leased equipment with a net book value of $83,649, net of related accumulated depreciation of $651,311 at December 31, 2003, under capital lease agreements.

At December 31, 2003, future minimum lease payments, under operating and capital leases, consist of the following:

|Year EndingDecember 31                         | CapitalLeases | OperatingLeases
|---------------------------------------------- | ------------- | ---------------
|2004                                           |               | $  28,358      
|2005                                           |               | 26,963         
|2006                                           |               | 11,614         
|2007                                           |               | 1,929          
|                                               |               |                
|Future minimum lease payments                  |               | 68,864         
|Less amount representing interest              |               | (9,721         
|                                               |               |                
|Present value of future minimum lease payments |               | 59,143         
|Less current portion                           |               | (24,270        
|                                               |               |                
|                                               |               | $  34,873      

In connection with our facility lease, we have an agreement for the issuance of letters of credit up to an aggregate amount not to exceed $150,000. In connection with an agreement with a financial institution, we have an agreement for the issuance of letters of credit up to an aggregate amount not to exceed $500,000. At December 31, 2003, we had $150,000 of letters of credit outstanding. These amounts are not included in our financial statements.

During our normal course of business, we have made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include intellectual property indemnities to our customers in connection with the sales of our products, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, and indemnities to our directors and officers. The duration of these indemnities, commitments and guarantees varies and, in certain cases, is indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. We have not recorded any liability for these indemnities, commitments and guarantees in the accompanying balance sheets.

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 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, 2003, there were 549,188 options outstanding and 22,500 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 12,287,402 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, 2003, there were 8,128,888 options outstanding and 4,158,515 options available for future grant under the 2001 Option Plan.

Each director receives 10,000 fully vested options to purchase common stock upon his/her initial election to the Board of Directors and 5,000 fully vested options to purchase common stock at time of reelection, which occurs annually.

On November 12, 2001, we presented an offer to exchange outstanding options ("Exchange Offer") under our 1993 Option Plan to our employees and directors. On December 10, 2001, we cancelled an aggregate of 3,126,877 shares of our common stock pursuant to the Exchange Offer. On June 28, 2002, we reissued 3,092,677 replacement options under our 2001 Option Plan to our employees and directors with an exercise price of $0.25 per share, which represented the then-current estimated fair value of our common stock determined by our Board of Directors and based on an independent valuation.

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 2001 and 2003 Option Plans is as follows:

|                                | NumberofOptions |           | Weighted-AverageExercisePrice |         | NumberofOptionsExercisable |           | Weighted-AverageExercisePrice |        
|------------------------------- | --------------- | --------- | ----------------------------- | ------- | -------------------------- | --------- | ----------------------------- | -------
|Outstanding - January 1, 2002   |                 | 591,591   |                               | $     0 | .66                        | 463,658   |                               | $     0
|Granted (weighted-average fair  |                
|value of $0.05 per share)       |                 | 3,153,477 |                               | $     0 | .25                       
|Exercised                       |                 | (2,100    | )                             | $     0 | .29                       
|Canceled                        |                 | (86,300   | )                             | $     0 | .48                       
|Outstanding - December 31, 2002 |                 | 3,656,668 |                               | $     0 | .33                        | 3,221,918 |                               | $     0
|Granted (weighted-average fair  |                 | 5,219,608 |                               | $     0 | .25                       
|value of $0.05 per share)       |                
|Canceled                        |                 | (198,200  | )                             | $     0 | .29                       
|                                |                 |           |                               |        
|Outstanding - December 31, 2003 |                 | 8,678,076 |                               | $     0 | .27                        | 4,692,595 |                               | $     0

Additional information regarding options outstanding is as follows as of December 31, 2003:

|               | Options Outstanding
________________________________ | Options Exercisable
___________________         
|-------------- | ---------------------------------------------------- | ------------------------------------------------
|ExercisePrices | NumberOutstanding                                    | Weighted-AverageRemainingContractualLife (Years)
|$0             | .20                                                  | 275,400                                         
|$0             | .25                                                  | 8,128,888                                       
|$0             | .53                                                  | 112,200                                         
|$1             | .06                                                  | 19,500                                          
|$1             | .29                                                  | 2,000                                           
|$1             | .50                                                  | 132,088                                         
|$2             | .00                                                  | 8,000                                           
|               |                                                      | 8,678,076                                       

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.

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 a year. For the years ended December 31, 2003 and 2002, our total contributions were $169,782 and $134,084, respectively.

9.          RELATED PARTY TRANSACTION

A member of our Board of Directors also serves our customers as an independent consultant in our services department. During the year ended December 31, 2002, we paid him $1,185, for services he provided as a consultant for our organization. We had no related party transactions during the year ended December 31, 2003.

10.        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 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, 2003 and 2002:

|                               |  | Licenses   |  | Maintenance |  | Services   |  | Other         |  | Total       | 
|------------------------------ |  | ---------- |  | ----------- |  | ---------- |  | ------------- |  | ----------- | 
|Year ended  December 31, 2002: | 
|Revenues                       |  | $9,382,571 |  | $3,400,138  |  | $7,031,817 |  | $2,691,463    |  | $22,505,989 | 
|Cost of revenues               |  | 479,879    |  | 1,188,290   |  | 4,006,606  |  | 1,555,721     |  | 7,230,496   | 
|Gross profit                   |  | $8,902,692 |  | $2,211,848  |  | $3,025,211 |  | $1,135,742    |  | $15,275,493 | 
|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 | 

******