RADIANT SYSTEMS INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

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Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2001

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Commission File No. 0-22065

RADIANT SYSTEMS, INC.

A Georgia Corporation
(IRS Employer Identification No. 11-2749765)
3925 Brookside Parkway
Alpharetta, Georgia 30022
(770) 576-6000

Securities Registered Pursuant to Section 12(b)
of the Securities Exchange Act of 1934:

None

Securities Registered Pursuant to Section 12(g)
of the Securities Exchange Act of 1934:

Common Stock, no par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

The aggregate market value of the common stock of the registrant held by
nonaffiliates of the registrant (17,374,329 shares) on March 19, 2002 was
approximately $158,106,394 based on the closing price of the registrant's common
stock as reported on The NASDAQ Stock Market on that date. For the purposes of
this response, officers, directors and holders of 10% or more of the
registrant's common stock are considered to be affiliates of the registrant at
that date.

The number of shares outstanding of the registrant's common stock, as of March
19, 2002: 27,576,263 shares of no par value common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive proxy statement to be delivered to
the shareholders in connection with the Annual Meeting of the Shareholders to be
held on May 22, 2002 are incorporated by reference in response to Part III of
this Report.

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PART I

Item 1. Business.
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General

Radiant Systems, Inc. (the "Company" or "Radiant") provides enterprise-wide
technology solutions to businesses that serve the consumer. The Company offers
fully integrated retail automation solutions including point of sale systems;
consumer-activated ordering systems; and Web-based and client server-back
office, headquarters-based management and decision support systems. In addition
to its technology, the Company offers professional services focusing on
technical implementation and process improvement, as well as hardware
maintenance services and 24-hour help desk support. The Company's products
provide integrated, end-to-end solutions that span from the consumer to the
supply chain to help improve product profitability, employee productivity and
client service through use of innovative technology. Radiant's mission is to
enable businesses to achieve operational excellence through intelligent
technology. To accomplish this mission, Radiant combines powerful technology
platforms, extensive industry knowledge and strategic partnerships to deliver
positive returns on systems investments for companies ranging in size from
single site operators to multinational corporations.

Certain retail markets require many of the same product features and
functionality. As a result, the Company believes it can continue to leverage its
existing technology across various retail markets with limited incremental
product development efforts. Moreover, management believes the Internet provides
an important opportunity for the Company to better serve its clients and offer
increased functionality at a lower total cost. In 1999, the Company began
developing its new generation of management systems products--Enterprise
Productivity Software, formerly WAVE(TM). This product architecture is designed
to combine and expand the functionality of its Site Management Systems and
Headquarters-Based Management Systems. The Company's architecture and platforms
for these products are entirely web-based, which the Company believes will
enable it to increase the functionality while decreasing the costs of
implementing and maintaining technology solutions for retailers. Management
believes that these products will strengthen its offerings by providing
integrated, end-to-end solutions that span from the consumer to the supply
chain.

The Enterprise Productivity Software was generally released during the first
quarter of 2002. The Company intends to offer its Enterprise Productivity
Software both through the application service provider, or "ASP," delivery model
as well as through installations directly in client locations as "client-hosted"
systems. In instances where clients select the ASP delivery model, the Company
will remotely host applications from an off-site central server that users can
access over dedicated lines, virtual private networks or the Internet. The
Company is continuing to develop its Enterprise Productivity Software solution
and to establish strategic relationships to facilitate these product offerings.

In connection with its strategy to develop ASP-delivered products, in April 2000
the Company began offering certain new and existing products on a
subscription-based pricing model. Under this subscription-pricing model, clients
pay a fixed, monthly fee for use of the Enterprise Productivity Software and the
necessary hosting services to utilize those applications and solutions. This
offering represents a change in the Company's historical pricing model in which
clients were charged an initial licensing fee for use of the Company's products
and continuing maintenance and support during the license period. To date, the
Company continues to derive a majority of its revenue from these legacy products
under its traditional sales model of one-time software license revenues,
hardware sales and software maintenance and support fees. Based on this
historical trend, the Company anticipates that clients who elect to purchase the
Company's legacy products will continue to favor the one-time software license
and hardware purchases over the subscription-based pricing model for the
foreseeable future.

Although the Company's subscription-based revenues to date have been immaterial
to total revenues, the Company expects that the general release of the
Enterprise Productivity Software will lead to an increase in the percentage of
recurring revenues coming from subscription-based offerings. As a result of
offering clients a subscription-pricing model and the decline of revenues from
legacy site management and headquarters solutions, the Company may see a decline
in the one-time revenues from software license fees, replaced over time by
monthly subscription fees. In addition, the Company expects revenue from
maintenance and support from existing clients to decline and to be replaced by
subscription fees should existing clients convert to the subscription-pricing
model.

To date, the Company's primary source of revenues has been large client rollouts
of the Company's products, which are typically characterized by the use of
fewer, larger contracts. These contracts typically involve longer negotiating
cycles, require the dedication of substantial amounts of working capital and
other resources, and in general require costs that may substantially precede
recognition of associated revenues. During the third quarter ended September 30,
2001, the Company

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began to experience declines in revenues and negative operating results. The
Company attributes these declines primarily to the current global economic
environment and the product transition the Company is currently undertaking in
advance of the general release of the Enterprise Productivity Software. In
response to these circumstances, during the latter part of the third quarter and
throughout the fourth quarter of 2001, the Company downsized its personnel by
7.3% in order to contain its operating costs. If the Company's product
transition or industry acceptance of the Enterprise Software Product progresses
slower than currently anticipated or if the economic downturn continues or
worsens the Company believes it could continue to experience a decline in
revenues and negative operating results.

On June 30, 2001 the Company and Tricon Restaurant Services Group, Inc.
("Tricon") signed a contract evidencing a multi-year arrangement to implement
the Enterprise Productivity Software exclusively in Tricon's company-owned
restaurants around the world. Tricon's franchisees will also be able to
subscribe to the software under the same terms as the company-owned restaurants.
As part of this agreement, the Company agreed to purchase from Tricon its source
code and object code for certain back office software previously developed by
Tricon for $20.0 million, $16.5 million of which is payable in specified annual
installments through December 31, 2003. The remaining $3.5 million is payable on
a pro rata basis based upon Tricon's acceptance and rollout of the Enterprise
Productivity Software and fulfillment of its total target client store
commitment beginning in 2002 and ending in 2004 (See Note 9 of the consolidated
financial statements). Costs associated with the purchase of this asset, costs
of professional services work performed, as well as cash received by the
Company, will be deferred and recognized over the five-year subscription term of
the contract beginning upon installation of the Enterprise Productivity Software
at each site. During 2001, the Company paid Tricon $2.8 million as its initial
payment for the purchase of the Tricon back office software, and capitalized
approximately $540,000 in personnel costs associated with professional services
for which associated revenues of approximately $1.5 million were deferred.

Industry Background

Successful retailers increasingly require information systems that capture
detailed information of consumer activity at the point of sale and store that
data in an easy to access fashion. Early technology innovators in the retail
industry deployed robust, integrated information systems at the point of sale
and used the information to react rapidly to changing consumer preferences,
ultimately gaining market share in the process. In addition, these integrated
information systems helped retailers achieve operational efficiencies. Many
large national retailers have followed suit by investing in proprietary
information systems.

For many types of retailers, however, this type of information system did not
make economic or business sense. In particular, merchants with a large number of
relatively small sites, such as convenience stores, petroleum retailers,
convenient automotive service centers, food service and entertainment venues,
generally have not been able to cost-effectively develop and deploy
sophisticated, enterprise-wide information systems. Economic and standardization
problems for these markets are exacerbated by the fact that many sites operate
as franchises, dealerships or other decentralized ownership and control
structures. Without an investment in technology, these retailers continue to
depend on labor and paper to process transactions. Management believes that high
labor costs, lack of centralized management control of remote sites and
inadequate informational reporting, together with emerging technology trends,
have caused many of these retailers to reexamine how technology solutions can
benefit their operations.

At the end of 2001, there were more than 120,000 convenience stores nationwide
and the cinema industry had approximately 36,000 screens within approximately
6,500 sites nationwide. As of January 2002, the food service industry had over
844,000 domestic units, of which approximately 240,000 were classified as quick
service restaurants. Typically, the existing information systems in these
industries consist of stand-alone devices such as cash registers or other point
of sale systems with little or no integration with either the back office of the
site or an enterprise-wide information system. Implementation of information
systems providing this functionality typically involves multiple vendors and an
independent systems integration firm. The resulting proprietary solutions are
often difficult to support and have inherently high risks associated with
implementation. Management believes that technology solutions which are highly
functional and scalable, relatively inexpensive and easy to deploy are critical
for successful penetration in these retail markets.

In the absence of an integrated solution, retailers in these markets typically
rely on manual reporting to capture data on site activity and disseminate it to
different levels of management at the regional and national headquarters. Basic
information on consumers (i.e., who they are, when they visit and what they buy)
is not captured in sufficient detail, at the right time or in a manner that can
be communicated easily to others in the organization. Similarly, information
such as price changes does not flow from headquarters to individual sites in a
timely manner. In addition, communications with vendors often remain manual,
involving paperwork, delays and related problems.

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Recent trends in the retail industry have accelerated the need for
enterprise-wide information and have heightened demand for integrated retailing
systems. Based in part upon industry association reports and other studies, as
well as the Company's experience in marketing its products, the Company believes
consumer preferences have shifted away from retailer loyalty toward value and
convenience, creating a greater need for timely data concerning consumer buying
patterns and preferences. Management also believes that convenient
consumer-activated ordering and payment systems, such as ATMs, voice response
units and "pay at the pump" systems have become important to retailers who wish
to retain and build a client base. Additionally, through the use of integrated
systems, retailers can improve operational and logistical efficiencies through
better management of inventory, purchasing, merchandising, pricing, promotions
and shrinkage control. Management believes that the constant flow of information
among the point of sale, the back office, headquarters and the supply chain has
become a key competitive advantage in the retail industry, resulting in
retailers demanding more sophisticated, integrated solutions from their systems
vendors. In a parallel development, technological advances have improved the
capability of information systems that are available to retailers. With the
price of computing power declining, technology investments have become
economically feasible for many retailers. Further, computing power has become
increasingly flexible and distributable, facilitating data capture and
processing by applications located at the point of sale. Also, new front-end
graphical user interfaces are making systems easier to use, which reduces
training time and transaction costs and facilitates more types of
consumer-activated applications.

To meet increasing system demands from retailers, providers of hardware and
software point of sale solutions are attempting to integrate existing products.
This process often requires independent systems integrators to provide
enterprise-wide data communications. These systems often are based on
proprietary, closed protocols and technology platforms from several different
vendors. As a result, the effort required to implement and maintain these
systems can be difficult, time consuming and expensive.

Most recently, the advent of centrally hosted, Internet-enabled management
software has opened new possibilities for businesses that want to deploy
standardized software applications over geographically dispersed areas. By
allowing management personnel from a retail site to access software over the
Internet using a standard Web browser, retail chains are able to have consistent
business applications and centrally consolidated data while avoiding the need to
download large software programs to individual site-based PC workstations.

The Radiant Solution

The Company offers fully integrated technology solutions that enable retailers
to improve site operations, serve consumers better and route information
throughout their organization and supply chains. The Company believes its core
technology and solutions are applicable to a variety of retail markets. The
Company's suite of products links store level point of sale information with
centralized merchandising and financial functions that ultimately drive
replenishment communications with suppliers and vendors. The Company believes
that its site solutions are easy to implement, typically requiring less than a
week to install and a few hours to train individual users. The following
summarizes the solutions provided by the Company:

LEGACY BACK OFFICE AND
CONSUMER SELF SERVICE ENTERPRISE PRODUCTIVITY HEADQUARTERS SYSTEMS
Touch Screen Interactive Workforce Management Inventory Control
Video, Graphics, Audio Supply Chain Management Vendor Management
Credit/Cash Payment Operations Management Purchasing/Receiving
Compact, Enclosed Terminals Customer Management Employee Management
Suggestive Selling Recipe Management
Menu Management
Executive Information
Electronic Price Book
POINT OF SALE SERVICES Vendor EDI
Touch Screen Interactive Consulting Centralized Menu Management
Transaction Auditing Training Decision Support Systems
Electronic Payment Processing Maintenance
Data Capture Technical Support
Peripheral Integration Integration
Loyalty Programs Installation
Table Management

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The Company's technology solutions allow retailers to enable consumers to place
their own orders for items such as food, movie tickets and concessions through
graphical touch screen interfaces; capture transaction information and
communicate with credit card networks; manage and analyze in-store inventory
movement, including electronic ordering; schedule and manage staffing; and
connect headquarters to each of the retailer's local sites and vendors, enabling
management to quickly change pricing and review operating performance in a
timely and efficient manner.

Retailers derive the following benefits from Radiant's solutions:

Integrated information flows. The Company's technology solutions provide
retailers with tools for monitoring and analyzing sales data, stock status,
vendor relationships, merchandising and other important activities, both at
their site and headquarter levels. These products further enable retailers
to communicate electronically with their suppliers in order to exchange
purchase orders, invoices and payments.

Centralized management of highly decentralized operations. Information
provided by the Company's solutions allows headquarters management to
monitor site performance in a consistent manner on a near-real time basis,
implement price changes simultaneously throughout the enterprise and
rapidly initiate targeted marketing programs.

Tighter on-site control over operations. The Company's back office systems
enable site managers to closely manage inventory, reconcile accounts and
control issues such as shift scheduling and hourly wage calculations. The
Company's solutions incorporate sophisticated inventory management
techniques to help a retailer optimize its merchandising strategy.

Improved labor productivity. The Company incorporates user friendly
graphics within its technology solutions, reducing employee training and
order processing times which are important benefits in retail environments
due to high employee turnover. The Company's back office solutions can
alleviate extensive paperwork required of site managers, allowing them more
time to focus on operations.

Improved client service. The Company's consumer-activated ordering systems
permit clients to place their own orders, answer surveys and electronically
communicate with the retailer. These systems can improve client service,
reduce site labor costs and, through automating suggestive selling
concepts, help the retailer implement revenue enhancement opportunities.

Company Strategy

The Company's objective is to be the leading worldwide provider of
enterprise-wide technology solutions to the retail markets it serves. The
Company is pursuing the following strategies to achieve this objective:

Introduce new products to current markets. The Company has introduced a
variety of new products and services. During 1998, the Company began
developing Radiant POS (formerly Lighthouse), its next generation software
technology. Throughout 2000, the Company enhanced the Radiant POS product
and successfully introduced this technology into the convenience store,
food service and entertainment markets. Management believes its Radiant POS
generation of software products, which utilizes both Microsoft Windows CE
and NT operating systems, represent an innovative platform based on open,
modular software and hardware architecture and offer increased
functionality and stability compared to other open systems in the
marketplace at a lower total cost of ownership. The Company continues to
introduce incremental new devices and software modules to complete its
existing suite of products for the retail markets.

In 1999, the Company began developing its new generation of management
systems products--Radiant Enterprise Productivity Software. The Enterprise
Productivity Software is being designed to combine and expand the
functionality of its Site Management Systems and Headquarter-Based
Management Systems. Further, the architecture and platforms for these
products are entirely web-based, which the Company believes will enable it
to increase the functionality while decreasing the costs of implementing
and maintaining technology solutions for retailers. Enterprise Productivity
Software was generally released during the first quarter of 2002.

Management believes that these new web-based product offerings along with
the Radiant POS will open up significant opportunities for future new
business.

5

Expand markets for the Company's solutions. The Company believes that its
core technology and solutions are applicable to a variety of retail
markets. The Company has made seven acquisitions in the petroleum
convenience store, food service, lodging, and entertainment markets, which
combined with its existing systems and technology, has enabled it to enter
and/or broaden its presence in these markets. Although the Company's
traditional markets have been the convenience store, food service,
entertainment and convenient automotive service center markets, management
believes it can continue to leverage its existing technology across other
retail markets with limited incremental product development efforts. During
2001 as evidence of this market expansion, the Company made sales in the
grocery, telecom, lodging and specialty retail markets. Furthermore, the
Company believes it Enterprise Productivity Software will provide the
Company accesses to a wider array of clients.

Better Serve the Smaller Retailer. A large portion of the food service and
convenience store market is comprised of small businesses. Historically, a
disproportionately small percentage of the Company's business has been
derived from this small business segment of the market. Management believes
that along with its Web-enabled management software offering and utilizing
distribution partners, the Company can grow this segment in the future at a
faster rate than in the past. At the end of 2001, the Company had
agreements with seven distribution partners throughout the United States.

Make strategic acquisitions. The Company has accelerated its entry into new
vertical markets through acquisitions and joint venture arrangements.
During 2001 the Company purchased certain assets from HotelTools, Inc.
("HotelTools"), an emerging provider of enterprise software solutions for
the hospitality industry including solutions to centralize all aspects of
multi-property hotel operations, including hotel management, rate
management, reservations and procurement. Additionally in 2001, the Company
purchased Breeze Software Proprietary Limited ("Breeze"), a leading
provider of software applications for retailers in the Australian and
Asia-Pacific marketplaces. To the extent the Company believes acquisitions
or joint ventures can better position it to serve its current markets or
penetrate others, it will pursue such opportunities.

Increase sales and marketing efforts outside the United States.
Historically, the Company has not derived a significant portion of its
revenues from clients outside the United States. However, during 2001, the
Company's international revenues grew to $13.4 million, or 10.2% of total
revenues, from $2.7 million, or 2.1% of total revenues in 2000. Management
believes that the growing number of large, multi-national companies who are
among the Company's major domestic clients together with its successful
record of implementing solutions with retailers in Western Europe, Eastern
Europe and Asia will allow it to make additional progress internationally
in the future. Additionally, with the Company's acquisition of Breeze in
2001, the Company has increased its international presence and sales
capabilities. The Company has previously executed international projects in
Canada, Spain, the Czech Republic, Hong Kong, Japan, Malaysia, Poland,
Sweden, Switzerland, Thailand, and the U.K. The Company currently has sales
offices in Geelong, Australia, Prague, Czech Republic and Singapore.

Expand existing position in selected markets. The Company believes that it
is in a strong position to expand its current market share in the
convenience store, food service, entertainment, lodging and convenient
automotive service center markets due to its highly functional technology
solutions and its practical experience in deploying and implementing retail
solutions. The Company has experience integrating all aspects of its
technology solutions into existing retail technology infrastructures.

Attract and retain outstanding personnel. The Company believes its
strongest asset is its people. To attract and retain top talent, the
Company intends to maintain its entrepreneurial culture and to continue
offering competitive benefit programs. The Company has granted stock
options to a majority of its employees and will strive to continue to align
employee interests with those of the Company's shareholders.

Retail Markets

To date, the Company's product applications have been focused toward the
convenience store, food service, entertainment and convenient automotive service
center markets, as these markets require many of the same product features and
functionality. The Company believes it can continue to leverage its existing
technology across these and other retail markets with limited incremental
product development efforts.

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Convenience Store Market

In the United States, there currently are approximately 120,000 convenience
stores, which derive a significant portion of revenues from selling products
other than gasoline. Additionally, the Company believes that the international
convenience store market represents a substantial opportunity for its technology
solutions. Management believes that the industry is currently under-invested in
technology. Only 42% of the industry's retail sites use scanning equipment,
compared to grocery stores, which have implemented scanning at approximately 90%
of their locations.

The Company believes that the demand for the Company's technology solutions in
the convenience store market for the foreseeable future will remain strong. This
demand exists because many convenience store operators are finding that their
consumers prefer "pay at the pump" systems, and many operators are upgrading
their point of sale systems to interface with these consumer-activated systems.
Approximately 67% of convenience stores currently utilize pay at the pump
technology. Implementing this technology requires a site to upgrade its system
for controlling and managing fuel sales. Management believes that installation
of pay at the pump systems will remain strong for the foreseeable future,
encouraging additional investment in store automation. Management also believes
that based on the success of technology in recent years, and the positive return
on investment associated with the Company's solutions, demand for new technology
will remain from both new and existing clients.

Food Service Market

The domestic food service market includes approximately 844,000 sites as of the
beginning of 2002. Restaurants increasingly require sophisticated technology
systems which integrate with evolving headquarters information systems and
enable more timely and accurate management of site operations. At the site,
managers seek real-time information access and management systems that permit
employees to increase the speed and accuracy with which they take an order,
prepare the food, and fill the order, often accommodating numerous concurrent
orders at multiple table-top, counter-top and drive-through locations. Managers
at all levels are seeking solutions to better manage menu and pricing functions,
optimizing profitability and inventory management. The market for automated
information and transaction systems for restaurants is typically more advanced
than in the convenience store, convenient automotive service center and
entertainment markets but is highly fragmented and includes a large number of
proprietary, closed systems.

Entertainment Market

The domestic cinema industry is concentrated, with the top six chains operating
approximately 44% of the cinema screens. In addition to increasing the number of
screens per site, "megaplexes" have evolved, which combine restaurants, movies
and other forms of entertainment in one facility. There are approximately 36,000
cinema screens in the United States. These screens are operated at approximately
6,500 sites, with recent trends emphasizing more screens per site. While cinema
sites typically are operated in a decentralized manner, the Company believes
cinema operators are focused on implementing cost controls from headquarters.
Due to economic conditions during 2000 and 2001, the cinemamarket suffered
significant financial losses including bankruptcies and site closings. As more
fully detailed in Note 13 of the consolidated financial statements, the
Company's revenues from this industry while increasing from 2000 to 2001, have
declined significantly over those in 1999 due to this market downturn. - See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Convenient Automotive Service Center Market

The convenient automotive service center market includes quick oil change
centers, full service car washes and various repair centers. In the United
States, there currently are approximately 15,000 quick oil change centers and
approximately 7,000 full service car washes. The Company believes that the
international automotive service center market also represents a substantial
opportunity for its solutions, as well as various repair centers such as
transmission and clutch specialty shops and tire stores.

Lodging Market

There are approximately 53,500 hotel properties with approximately 4.1 million
hotel rooms in the United States in hotels/motels containing twenty or more
rooms. Furthermore, multi-branded hotel companies increasingly characterize the
lodging industry. The Company believes that its internet-based property
management system will help property owners and franchisees maximize
profitability and compete more effectively by managing their rooms inventory,
rates and reservations. The Internet-based management console provides a
powerful tool for management personnel to access all critical business metrics,
via a simple web browser, for an individual property or a chain wide enterprise.
Due to the economic conditions during the latter part of 2001, driven primarily
by decreased travel after the September 11, 2001 terrorist attacks in the United

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States, the lodging industry has suffered financial losses resulting in
cost-cutting measures, including delays in capital expenditures.

Retail Products

While the Company believes that its core technology may be adapted to provide
solutions to a variety of markets, it has concentrated its efforts to date in
the convenience store, food service, entertainment and convenient automotive
service center markets. The Company's principal products, sales and marketing
efforts, clients and competitors are discussed below for these markets. The
Company markets a variety of products and services as part of its strategy to
serve as an integrated solutions provider. From consumer-activated ordering
solutions to feature-rich, highly functional point of sale and back office
systems tied into headquarters through advanced client/server software, the
Company's enterprise-wide solutions interact with the consumer, site employees
and management and the senior management of a retailer's operations. To help
retailers optimize the impact these systems have on their operations, the
Company also offers a wide array of consulting, training and support services
provided by experienced professionals. The Company further provides "ruggedized"
hardware systems designed to cope with harsh retailing environments.

Point of Sale Systems

The Company offers a variety of point of sale products which can be licensed as
modules or as a complete system. These point of sales products are comprehensive
solutions that allow retailers to process transactions and capture data, as well
as manage other front office operations. The products feature a touch screen
interface, user-friendly applications and flexibility in set-up and
configuration to accommodate operational variables at each site. They are based
on an open architecture and run on either the Windows NT or Windows CE platform
and other operating systems. The applications support multiple point of sale
terminals and a separate back office system and are upgradable so that clients
can phase in their investment with additional hardware and software modules. The
products offer clients scalability, such that the same application can be run in
chains with widely varying numbers and sizes of sites; yet the enterprise
solution remains consistent and supportive of each site.

Consumer Self Service

Within each of the markets the Company serves, the trend towards more focused
client service and less favorable labor demographics has created a demand for
consumer-activated ordering systems. In response, the Company has developed an
easy to use, consumer-activated system which allows a consumer to preview movies
and purchase tickets or place a food order, pay with a credit card and make
inquiries and view promotions through the use of a touch screen application. The
software development environment and authoring tools allow various media, such
as video clips, logos, pictures and recordings, to be quickly integrated into a
consumer-friendly application.

Management believes consumer-activated technology allows a retailer to increase
labor productivity, increase revenues through suggestive selling, increase
consumer ordering speed and accuracy, capture consumer information at the point
of sale and respond quickly to changing consumer preferences.

Site Management Systems - Legacy

Site management systems, or back office software, provide various types of
retail operators with the capabilities to manage employees and inventory,
schedule labor, automate daily reports, analyze costs and forecast results.
Additionally, these systems provide the means for retailers to easily gather
point of sale and management information including real-time sales monitoring.
The Company's back office management systems were developed with a user
friendly, graphical interface and are based on open architecture.

Headquarters-Based Management Systems - Legacy

Headquarters-based management systems permit retailers to manage individual
sites from headquarters. This client/server based software application allows
retailers to better manage multiple sites. The following is a summary of the
features and functionality of the Company's headquarters application:

. Price book - allows retailers to set prices for products in a timely
manner on a site-by-site, zone-by-zone or system wide basis. Price
book also allows retailers to target prices based on a variety of
different factors, including markups based on cost, gross margins, and
target margins.

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. Site configuration and management - allows retailers to define and
control the parameters of site operations, such as prohibiting clerks
from authorizing fuel dispensing without prepayment.

. Fuel management - allows retailers to manage fuel inventory movement
and pricing. Such features allow management to define and regulate
site pricing and strategies, including responding to price changes at
competitors' sites.

. Decision Support System ("DSS") - supports headquarters analysis of
site operations, such as sales vs. cost analysis, sales vs. budget
analysis, labor productivity analysis and category management
analysis. DSS also facilitates "what if" analyses, allowing retailers
to incorporate and ascertain the sensitivities of operational
variables such as price, cost and volume.

. Electronic Data Interchange - supports the routing and analysis of
purchase orders and vendor invoices.

The Company believes that its headquarters-based product is one of the most
functional and comprehensive headquarters management applications widely
marketed to various retail chains. The product is flexible and expandable based
on application architecture and database structure. The application is written
in PowerBuilder, and the database, Microsoft SQL Server, is highly scalable. The
user interface is intuitive and easy to use.

To provide food service, entertainment and convenient automotive service center
operators with additional information and functionality at headquarters, the
Company, through its Radiant POS suite of products, plans to combine certain
features and functions of its convenience store headquarters-based product with
the food service, entertainment and convenient automotive service center product
lines. See "-- Product Development."

Workforce Management Software - Legacy

As part of its acquisition of TimeCorp, Inc. in 2000, the Company acquired the
Workforce Management Software. This software provide retailers the ability to
ensure compliance with corporate hiring policies, create and manage labor
schedules, provide timeclock interface for ease in monitoring hours worked, job
costing and exception reporting, as well as management reporting functionality.
The Company's workforce management systems were developed with a user friendly,
graphical interface and are based on open architecture and have been installed
in various supermarket, retail, food service and hospitality chains.

Radiant 6e

In 1999, the Company began developing its next generation of management systems
products--Enterprise Productivity Software. These products are designed to
combine and expand the functionality of its Site Management Systems and
Headquarter-Based Management Systems. Further, the Company's architecture and
platforms for these products are entirely web-based, which the Company believes
will enable it to increase the functionality while decreasing the costs of
implementing and maintaining technology solutions for retailers. The Enterprise
Productivity Software was generally released in the first quarter of 2002.

In early 2002, the Company announced Radiant 6e(TM), an enterprise platform
enabling intelligent technology through:

. open architecture allowing integration with other products;
. a development environment which enables organizations to customize
applications to meet their specific needs;
. web-based architecture enabling rapid deployment;
. a corporate data management framework which enables the system to be
easily adapted to a client's existing organizational hierarchy and
business unit groupings; and
. a global platform which enables multi-national deployments through
language translation and fiscalization modules.

Radiant 6e encompasses all of the web-based Enterprise Productivity Suite
applications as well as the Radiant POS platform and includes the following
suite, solutions and applications:

9

Enterprise Productivity Suite:
. Workforce Management Solutions
. Supply Chain Management Solutions
. Operations Management Solutions
. Order Entry/ Customer Management Solutions

Radiant POS Suite:
. POS Management Solutions
. Customer Self Service Solutions
. Property Management Solutions
. Loyalty Programs Solutions
. Electronic Payment Processing Solutions

Each of these solutions contains multiple applications. For instance, the supply
chain solutions include inventory management applications; the workforce
management solutions contain time and attendance applications.

The Radiant 6e platform is designed to enable increased productivity throughout
the enterprise by supporting operational excellence through:

. ease-of-use end-user applications designed to require minimal
training;
. fast transaction speed;
. best practice enforcement, through programmable workflows and alerts;
. "One Version of the Truth" which enables individuals throughout the
organization to see the same data and react in real time;
. an action-oriented vs. analysis-oriented approach; alerts tell users
not only what the problem is, but provide guidance on how to fix it
and/or take them directly to the appropriate screen to correct the
problem; and
. customized menus, alerts and reports that are designed around an
individual's role and the position within the enterprise's hierarchy
of his/her business unit.

Lodging Management Solution

As part of its acquisition of certain assets from HotelTools, the Company
acquired the HotelTools property management software. The internet-based
property management software focuses on improving operational performance and
guest service, and is part of the Radiant 6e POS Suite and the Radiant 6e
Enterprise Productivity Suite. The solution includes the Radiant 6e Lodging
Management Solution (including management console and customer relationship
management), and the Radiant 6e Workforce Management Solution (including
automatic labor scheduling, labor forecasting, time and attendance tracking, and
Internet based time clocks). The Radiant 6e Lodging Management Solution manages
guest reservations, guest accounting, accounts receivable, revenue management,
travel agent accounting, group management, and provides for a single guest
record and single image inventory across an enterprise. The Internet-based
management console provides a powerful tool for management personnel to access
all critical business metrics, via a simple web browser, for an individual
property or a chain wide enterprise. The Radiant 6e Workforce Management
Solution can be integrated to sales and catering systems to automatically
generate labor schedules based on actual banquet and meeting room schedules and
layouts. Radiant provides implementation, consulting and support services for
systems it markets to the lodging industry.

Sales and Marketing

Through a dedicated sales effort designed to address the requirements of
different retail operators, the Company believes its sales force is positioned
to understand its clients' businesses, trends in the marketplace, competitive
products and opportunities for new product development. This allows the Company
to take a consultative approach to working with clients.

The Company's sales personnel focus on selling its technology solutions to major
clients, both domestically and internationally. All sales personnel are
compensated with a base salary and commission based on revenue quotas, gross
margins and other profitability measures.

To date, the Company's primary marketing objective has been to increase
awareness of all of the Company's technology solutions. To this end, the Company
has attended industry trade shows and selectively advertised in industry
publications. The

10

Company intends to increase its sales and marketing activities both domestically
and internationally, and to expand its advertising in relevant industry
publications. Additionally, the Company intends to continue developing an
independent distribution network to sell and service its products to certain
segments of the domestic and international markets.

Clients

Clients who have selected the Company as their technology solutions provider
operate over 138,000 sites. As of December 31, 2001, the Company has installed
its technology solutions in over 55,000 of these sites. In 2001 and 2000, one
client, Speedway SuperAmerica, LLC accounted for 10.2% of the Company's total
revenues, while in 1999, one client, American Multi-Cinema, Inc., accounted for
13.3% of the Company's total revenues.

The following is a partial list of major clients who have licensed or purchased
the Company's products and services:

ALLTEL Corporation Marriott International, Inc.
American Multi-Cinema, Inc. Maverick Country Stores
AmeriKing Corporation Meijer Stores
Boston Chicken, Inc. National Amusements, Inc.
BP Amoco, p.l.c. Phillips Petroleum
Chick-fil-A, Inc. Regal Cinemas, Inc.
Compass Group USA, Inc. Repsol YPF
Conoco, Inc. Sheetz, Inc.
Crown Central Petroleum Corporation Souper Salad, Inc.
Edwards Theatres Speedway SuperAmerica, LLC
Einstein/Noah Bagel Corporation Suburban Lodges of America, Inc.
Holiday Stationstores The Krystal Company
JC Penney Tricon Restaurant Services Group, Inc.
Krispy Kreme Doughnut Corp. Ultramar Diamond Shamrock Corporation
Kroger Corporation United Artists Theatre Circuit, Inc.
Lenscrafters Wawa, Inc.
Loews Cineplex Entertainment Corporation Westwind, Inc.

Competition

In marketing its technology solutions, the Company faces intense competition,
including internal efforts by some potential clients. The Company believes the
principal competitive factors are product quality, reliability, performance,
price, vendor and product reputation, financial stability, features and
functions, ease of use, quality of support and degree of integration effort
required with other systems. The Internet has presented new competition to the
Company. These companies often offer new business models which may force the
Company to change its terms of business to continue to maintain its market
position.

Within the markets it serves, the Company believes it is the only integrated
technology solution provider of point of sale, back office and
headquarters-based management systems. Within these product lines, the Company
faces intense levels of competition from a variety of competitors. International
Business Machines, Inc., NCR Corporation, VeriFone, Inc. (held by Gores
Technology Group, an international acquisition and management company), Dresser
Wayne, Marconi Plc., Retalix, Ltd., Retek Inc., Ariba, Inc., Stores Automated
Software, Inc., Pacer/CATS, a subsidiary of USA Networks, Inc., AOL MovieFone,
Inc., Micros Systems, Inc., Par Technology Corp., Aloha Technologies, Compris
Technologies, Gilbarco Inc., Panasonic, The Pinnacle Corporation and others
provide point of sale systems with varying degrees of functionality. Back office
and headquarters client/server software providers include The Software Works!,
Professional Datasolutions Inc., SAP AG, Oracle Corporation, MenuLink Computer
Solutions, Inc., Performance Retail Inc., PeopleSoft, Inc., Kronos Incorporated,
Retalix Ltd. and JDA Software Group, Inc. In addition, the Company faces
additional competition from systems integrators who offer an integrated
technology solutions approach by integrating other third party products.

The Company believes there are barriers to entry in the market for convenience
store automation solutions. The Company has invested a significant amount of
time and effort to create the functionality of its consumer-activated point of
sale and back

11

office headquarters-based management systems. The Company believes that the time
required for a competitor to duplicate the functionality of these products is
substantial and would require detailed knowledge of a retailer's operations at
local sites and headquarters. Also, developing a credit card network interface
often can take an additional six to nine months, as the certification process
can be time consuming. Moreover, the major petroleum companies are extremely
selective about which automation system providers are permitted to interface to
their credit networks. As of March 15, 2002, the Company is certified with 14
networks and continues to explore opportunities for certifications with networks
servicing all of its core industries.

Professional Services

The integration, design, implementation, application and installation of
technology solutions are critical to the Company's ability to effectively market
its solutions. The following is a summary of some of the professional services
the Company provides:

Consulting. Business consultants, systems analysts and technical personnel
assist retailers in all phases of systems development, including systems
planning and design, client-specific configuration of application modules
and on-site implementation or conversion from existing systems. Directors
in the Company's consulting organization typically have significant
consulting or retail technology experience. The Company's consulting
personnel undergo extensive training in retail operations and the Company's
products. Consulting services typically are billed on a per diem basis.

Customization. The Company provides custom application development work for
clients billed on a project or per diem basis. All customization remains
the property of the Company.

Training. The Company has a formal training program available to its
clients, which is provided on a per diem rate at the Company's offices or
at the client's site.

Integration. Typically, as part of its site solution, the Company
integrates standard PC components for its clients. This is done as part of
the overall technology solution to maximize the quality of the overall site
solution and to provide the clients with a system that is easy to support
over the long term.

The market for the Company's professional services is intensively competitive.
The Company believes the principal competitive factors are the professional
qualifications, expertise and experience of individual consultants. In the
market for professional services, the Company competes with the consulting
divisions of the big five accounting firms, Electronic Data Systems, Inc.,
International Business Machines and other systems integrators.

Maintenance and Client Support

The Company offers client support on a 24-hour basis, a service that
historically has been purchased by a majority of its clients and also entitles
the client to product upgrades. In some cases, hardware support is provided by
third parties. The Company can remotely access its clients' systems in order to
perform quick diagnostics and provide on-line assistance. The annual support
option is typically priced at a percentage of the software and hardware cost.

Product Development

The Company's product development strategy is focused on creating common
technology elements that can be leveraged in applications across various
vertical retail markets. The Company's software architecture is based on open
platforms and is modular thereby allowing it to be phased into a retailer's
operations. The Company has developed numerous applications running on a Windows
NT platform. The software architecture incorporates Microsoft's Component Object
Model, providing an efficient environment for application development.

During 1998 the Company's management determined that significant internal cost
efficiencies and increased market appeal could be obtained through the
consolidation of its legacy products into a single family of products, Radiant
POS. This consolidation effort integrated the best business and technical
knowledge from multiple markets. Throughout 1999, the Company enhanced its
Radiant POS product, and successfully introduced this replacement technology
into the convenience

12

store, food service and entertainment markets. By the end of 2000, Radiant POS
had been released in all of the markets the Company serves.

In 1999, the Company began developing its new generation of management systems
products--Enterprise Productivity Software. This product architecture is
designed to combine and expand the functionality of its Site Management Systems
and Headquarter-Based Management Systems. The Company's architecture and
platforms for these products are entirely web-based, which the Company believes
will enable it to increase the functionality while decreasing the costs of
implementing and maintaining technology solutions for retailers. Additionally,
the Company has extended its Enterprise Productivity Software technology to
include web-enabled, centrally hosted management software and integrated
purchasing software built around industry-specific marketplaces. Management
believes that these products will strengthen its product offerings by providing
integrated, end-to-end solutions that span from the consumer to the supply
chain. The Enterprise Productivity Software was generally released during the
first quarter of 2002.

Throughout the course of 2000 and 2001, Radiant Systems entered additional
retail markets facilitated primarily through the acquisition of several
companies and product offerings. Combined with its existing products, the
Company began developing, marketing, deploying and supporting these new
products.

In early 2002, the Company announced Radiant 6e(TM), an enterprise platform.
This platform encompasses all of the web-based Enterprise Productivity Suite
applications as well as the Radiant POS platform. Management believes the
Radiant 6e(TM) suite of products uniquely positions the Company to serve the
needs of retailers while further differentiating the Company's systems from
those of its competitors and allowing the Company to reduce significantly future
development and support costs.

Proprietary Rights

The Company's success and ability to compete is dependent in part upon its
proprietary technology, including its software source code. To protect its
proprietary technology, the Company relies on a combination of trade secret,
nondisclosure, copyright and patent law, which may afford only limited
protection. In addition, effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries. Although the Company relies
on the limited protection afforded by such intellectual property laws, it also
believes that factors such as the technological and creative skills of its
personnel, new product developments, frequent product enhancements, name
recognition and reliable maintenance are essential to establishing and
maintaining a technology leadership position. The Company presently has six
patents and nineteen patents pending. The source code for the Company's various
proprietary software products are protected both as a trade secret and as a
copyrighted work. The Company generally enters into confidentiality or license
agreements with its employees, consultants and clients and generally controls
access to and distribution of its software, documentation and other proprietary
information. Although the Company restricts client's use of the Company's
software and does not permit the resale, sublicense or other transfer of such
software, there can be no assurance that unauthorized use of the Company's
technology will not occur.

Despite the measures taken by the Company to protect its proprietary rights,
unauthorized parties may attempt to reverse engineer or copy aspects of the
Company's products or to obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's products is difficult.
In addition, litigation may be necessary in the future to enforce the Company's
intellectual property rights, such as to protect the Company's trade secrets, to
determine the validity and scope of the Company's and or others proprietary
rights, or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results and financial condition.

Certain technology used in conjunction with the Company's products is licensed
from third parties, generally on a non-exclusive basis. These licenses usually
require the Company to pay royalties and fulfill confidentiality obligations.
The Company believes that there are alternative sources for each of the material
components of technology licensed by the Company from third parties. However,
the termination of any of these licenses, or the failure of the third-party
licensors to adequately maintain or update their products, could result in delay
in the Company's ability to ship certain of its products while it seeks to
implement technology offered by alternative sources. Any required alternative
licenses could prove costly. Also, any such delay, to the extent it becomes
extended or occurs at or near the end of a fiscal quarter, could result in a
material adverse effect on the Company's business, operating results and
financial condition. While it may be necessary or desirable in the future to
obtain other licenses relating to one or more of the Company's products or
relating to current or future technologies, there can be no assurance that the
Company will be able to do so on commercially reasonable terms or at all.

13

There can be no assurance that the Company will not become the subject of
infringement claims or legal proceedings by third parties with respect to
current or future products. In addition, the Company may initiate claims or
litigation against third parties for infringement of the Company's proprietary
rights or to establish the validity of the Company's proprietary rights.
Defending against any such claim could be time-consuming, result in costly
litigation, cause product shipment delays or force the Company to enter into
royalty or license agreements rather than dispute the merits of such claims.
Moreover, an adverse outcome in litigation or similar adversarial proceedings
could subject the Company to significant liabilities to third parties, require
the expenditure of significant resources to develop non-infringing technology,
require disputed rights to be licensed from others or require the Company to
cease the marketing or use of certain products, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition. To the extent the Company desires or is required to obtain
licenses to patents or proprietary rights of others, there can be no assurance
that any such licenses will be made available on terms acceptable to the
Company, if at all. As the number of software products in the industry increases
and the functionality of these products further overlaps, the Company believes
that software developers may become increasingly subject to infringement claims.
Any such claims against the Company, with or without merit, as well as claims
initiated by the Company against third parties, can be time consuming and
expensive to defend, prosecute or resolve.

Employees

As of December 31, 2001 the Company employed 950 persons. None of the Company's
employees is represented by a collective bargaining agreement nor has the
Company experienced any work stoppage. The Company considers its relations with
its employees to be good.

The Company's future operating results depend in significant part upon the
continued service of its key technical, consulting and senior management
personnel and its continuing ability to attract and retain highly qualified
technical and managerial personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will retain its key managerial or
technical personnel or attract such personnel in the future. The Company has at
times experienced and continues to experience difficulty recruiting qualified
personnel, and there can be no assurance that the Company will not experience
such difficulties in the future. The Company, either directly or through
personnel search firms, actively recruits qualified product development,
consulting and sales and marketing personnel. If the Company is unable to hire
and retain qualified personnel in the future, such inability could have a
material adverse effect on the Company's business, operating results and
financial condition.

Forward-Looking Statements

Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as statements relating to financial results and plans for future business
development activities, and are thus prospective. These statements appear in a
number of places in this Annual Report and include all statements that are not
statements of historical fact regarding intent, belief or current expectations
of the Company, its directors or its officers with respect to, among other
things: (i) the Company's financing plans; (ii) trends affecting the Company's
financial condition or results of operations; (iii) the Company's growth
strategy and operating strategy; (iv) the Company's new or future product
offerings, and (v) the declaration and payment of dividends. The words "may,"
"would," "could," "will," "expect," "estimate," "anticipate," "believe,"
"intend," "plans," and similar expressions and variations thereof are intended
to identify forward-looking statements. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, many of which are beyond the Company's ability to
control. Actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. Among the key risks,
assumptions and factors that may affect operating results, performance and
financial condition are the Company's reliance on a small number of clients for
a larger portion of its revenues, fluctuations in its quarterly results, ability
to continue and manage its growth, liquidity and other capital resources issues,
competition and the other factors discussed in detail in the Company's filings
with the Securities and Exchange Commission, as well as the "Risk Factors"
section below and other places in this Report.

Risk Factors

In addition to the other information contained in this Report, the following
risks should be considered carefully in evaluating the Company and its business.

14

History of Operating Losses. The Company reported a net loss of $428,000 in
2001. Although the Company reported net income in 1999 and 2000, the Company
incurred net losses in 1998 and 1997, respectively. As a result, there can be no
assurance that the Company will be able to continue to achieve and maintain
profitability for 2002 and beyond. The Company anticipates that completing its
products under development, and marketing existing products and new releases
will require substantial expenditures. Accordingly, an investment in the
Company's common stock is extremely speculative in nature and involves a high
degree of risk.

Impact of the Internet. The Company is embracing the Internet as part of its
product development and sales and marketing strategy. To that extent, it is
making significant investment in new products and business models. There can be
no guarantee that these efforts will be successful, or, if successful, to what
extent. Further, these investments could result in a material and adverse effect
to the Company's financial results.

The Internet has created new competitors and creative business models with which
the Company must contend. These competitive forces could result in the Company
losing market share, reducing margins or increasing investments. As a result,
the Company's business, operating results and financial condition could be
materially and adversely effected.

Potential Revenue Deferrals. The Company may be required to defer recognition of
revenues for a significant period of time after entering into a license
agreement for a variety of reasons, including:

. transactions that include both currently deliverable software products and
software products that are under development or other undeliverable
elements;
. transactions where the client demands services that include significant
modifications, customizations or complex interfaces that could delay
product delivery or acceptance;
. transactions that involve acceptance criteria that may preclude revenue
recognition or if there are identified product-related issues, such as
performance issues; and
. transactions that involve payment terms or fees that depend upon
contingencies.

Because of the factors listed above and other specific requirements under
generally accepted accounting principles ("GAAP") for software revenue
recognition, the Company must have very precise terms in its license agreements
in order to recognize revenue when it initially delivers software or performs
services. Although the Company has a standard form of license agreement that
meets the criteria under GAAP for current revenue recognition on delivered
elements, it negotiates and revises these terms and conditions in some
transactions. Negotiation of mutually acceptable terms and conditions can extend
the sales cycle, and sometimes result in deferred revenue recognition well after
the time of delivery or project completion.

Changes in Accounting Interpretations Relating to Revenue Recognition. Over the
past several years, the American Institute of Certified Public Accountants
issued Statement of Position, or SOP 97-2, "Software Revenue Recognition," and
SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With Respect
to Certain Transactions." These standards address software revenue recognition
matters primarily from a conceptual level and do not include specific
implementation guidance. The Company believes that it is currently in compliance
with both SOP 97-2 and SOP 98-9. In addition, in December 1999, the Securities
and Exchange Commission staff issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements", or SAB 101, which explains how the SEC
staff believes existing revenue recognition rules should be applied or
analogized to for transactions not addressed by existing rules. The accounting
profession continues to discuss certain provisions of SOP 97-2 and SAB 101 with
the objective of providing additional guidance on potential interpretations.
These discussions and the issuance of interpretations, once finalized, could
lead to unanticipated changes in the Company's current revenue accounting
practices, which could cause the Company to alter its current revenue
recognition practices. Accordingly, the Company could decide to change its
business practices significantly. These changes may extend sales cycles,
increase administrative costs and otherwise adversely affect the Company's
business.

Management of Growth. The growth in the size and complexity of the Company's
business and the expansion of its product lines and its client base may place a
significant strain on the Company's management and operations. An increase in
the demand for the Company's products could strain the Company's resources or
result in delivery problems, delayed software releases, slow response time, or
insufficient resources for assisting clients with implementation of the
Company's products and services, which could have a material adverse effect on
the Company's business, operating results and financial condition. The Company
anticipates that continued growth, if any, will require it to recruit, hire and
assimilate a substantial number of new employees, including consulting, product
development, sales and marketing personnel.

15

The Company's ability to compete effectively and to manage future growth, if
any, also will depend on its ability to continue to implement and improve
operational, financial and management information systems on a timely basis and
to expand, train, motivate and manage its work force, particularly its direct
sales force and consulting services organization. There can be no assurance that
the Company will be able to manage any future growth, and any failure to do so
could have a material adverse effect on the Company's business, operating
results and financial condition.

Growth Through Acquisition. As part of its operating history and growth
strategy, the Company has acquired other businesses. In the future, the Company
may continue to seek acquisition candidates in selected markets and from time to
time it engages in exploratory discussions with suitable candidates. There can
be no assurance, however, that the Company will be able to identify and acquire
targeted businesses or obtain financing for such acquisitions on satisfactory
terms. The process of integrating acquired businesses into the Company's
operations may result in unforeseen difficulties and may require a
disproportionate amount of resources and management attention. In particular,
the integration of acquired technologies with the Company's existing products
could cause delays in the introduction of new products. In connection with
future acquisitions, the Company may incur significant charges to earnings as a
result of, among other things, the write-off of purchased research and
development. For instance, in the second quarter of 1997, the Company recorded
one-time accounting charges of approximately $30.1 million for the write-off of
purchased research and development and compensation expense in connection with
its 1997 acquisitions. Future acquisitions may be financed through the issuance
of common stock, which may dilute the ownership of the Company's shareholders,
or through the incurrence of additional indebtedness. Furthermore, there can be
no assurance that competition for acquisition candidates will not escalate,
thereby increasing the costs of making acquisitions or making suitable
acquisitions unattainable.

Fluctuations in Quarterly Operating Results. The Company's revenues and results
of operations are difficult to predict and may fluctuate substantially from
quarter to quarter. These fluctuations can adversely affect the Company's
business and the market price of its stock. License revenues in any quarter
depend substantially upon the Company's total contracting activity and its
ability to recognize revenues in that quarter in accordance with its revenue
recognition policies. The Company's contracting activity is difficult to
forecast for a variety of reasons, including the following:

. a significant portion of the Company's license agreements are typically
completed within the last few weeks of the quarter;
. the Company's sales cycle is relatively long and varies as a result of the
Company's expanding its product line and broadening its software product
applications to cover a client's overall business;
. the size of license transactions can vary significantly;
. the possibility that economic downturns are characterized by decreased
product demand, price erosion, technological shifts, work slowdowns and
layoffs may substantially reduce contracting activity;
. clients may unexpectedly postpone or cancel anticipated system replacement
or new system evaluations due to changes in their strategic priorities,
project objectives, budgetary constraints or company management;
. client evaluations and purchasing processes vary significantly from company
to company, and a client's internal approval and expenditure authorization
process can be difficult and time consuming, even after selection of a
vendor;
. changes in the Company's pricing policies and discount plans may affect
client purchasing patterns;
. the number, timing and significance of the Company's and its competitors'
software product enhancements and new software product announcements may
affect purchase decisions; and
. the introduction of new research and development projects requires the
Company to increase significantly its operating expenses to fund greater
levels of product development and to develop and commercialize additional
products and services. To the extent that such expenses precede or are not
subsequently followed by increased revenues, the Company's business,
results of operations and financial condition may be materially and
adversely affected.

In addition, the Company's expense levels, operating costs and hiring plans are
based on projections of future revenues and are relatively fixed. If the
Company's actual revenues fall below expectations, its net income is likely to
be disproportionately adversely affected.

Due to all of the foregoing factors, in some future quarters the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Company's common stock would
likely be materially and adversely affected.

Industry Concentration and Cyclicality. Approximately 53% of the Company's total
revenue in both 2001 and 2000 was related to the convenience store market, which
is dependent on the domestic and international economy. The convenience store
market is affected by a variety of factors, including global and regional
instability, governmental policy and regulation, natural disasters, consumer
buying habits, consolidation in the petroleum industry, war and general economic
conditions. Adverse developments in the convenience store market could
materially and adversely affect the Company's business, operating results

16

and financial condition. In addition, the Company believes the purchase of its
products is relatively discretionary and generally involves a significant
commitment of capital, because purchases of the Company's products are often
accompanied by large scale hardware purchases. As a result, although the Company
believes its products can assist convenience stores in a competitive
environment, demand for the Company's products and services could be
disproportionately affected by instability or downturns in the convenience store
market which may cause clients to exit the industry or delay, cancel or reduce
planned expenditures for information management systems and software products.

Concentration of Clients. The Company sells systems and services to a limited
number of large clients. During 2001, approximately 32.3% of the Company's
revenues were derived from five clients. During 2000, approximately 38.0% of the
Company's revenue were derived from five clients. During 1999, approximately
40.9% of the Company's revenue were derived from five clients. There can be no
assurance that the loss of one or more of these clients will not have a material
adverse effect on the Company's business, operating results and financial
condition.

The Company has traditionally depended on its installed client base for
additional future revenue from services and licenses of other products. As such,
if clients fail to renew their maintenance agreements, the Company's revenue
could decrease. The maintenance agreements are generally renewable annually at
the option of the clients and there are no mandatory payment obligations or
obligations to license additional software. Therefore, current clients may not
necessarily generate significant maintenance revenue in future periods. In
addition, clients may not necessarily purchase additional products or services.
Any downturn in software license revenue could result in lower services revenue
in future quarters.

New Product Development and Rapid Technological Change. The Company has a
substantial ongoing commitment to research and development. In this regard, the
Company is currently designing, coding and testing a number of new products and
developing expanded functionality of its current products that will be important
for the Company to remain competitive. The types of products sold by the Company
are subject to rapid and continual technological change. Products available from
the Company, as well as from its competitors, have increasingly offered a wider
range of features and capabilities. The Company believes that in order to
compete effectively in selected vertical markets, it must provide compatible
systems incorporating new technologies at competitive prices. There can be no
assurance that the Company will be able to continue funding research and
development at levels sufficient to enhance its current product offerings or
will be able to develop and introduce on a timely basis new products that keep
pace with technological developments and emerging industry standards and address
the evolving needs of clients. There can also be no assurance that the Company
will not experience difficulties that will result in delaying or preventing the
successful development, introduction and marketing of new products in its
existing markets or that its new products and product enhancements will
adequately meet the requirements of the marketplace or achieve any significant
degree of market acceptance. Likewise, there can be no assurance as to the
acceptance of Company products in new markets, nor can there be any assurance as
to the success of the Company's penetration of these markets, or to the revenue
or profit margins with respect to these products. The inability of the Company,
for any reason, to develop and introduce new products and product enhancements
in a timely manner in response to changing market conditions or client
requirements could materially adversely affect the Company's business, operating
results and financial condition.

In addition, the Company strives to achieve compatibility between the Company's
products and retail systems the Company believes are or will become popular and
widely adopted. The Company invests substantial resources in development efforts
aimed at achieving such compatibility. Any failure by the Company to anticipate
or respond adequately to technology or market developments could materially
adversely affect the Company's business, operating results and financial
condition.

Competition. The market for retail information systems is intensely competitive.
The Company believes the principal competitive factors in such market are
product quality, reliability, performance and price, vendor and product
reputation, financial stability, features and functions, ease of use and quality
of support and degree of integration effort required with other systems. A
number of companies offer competitive products addressing certain of the
Company's target markets. See "-Competition." In addition, the Company believes
that new market entrants may attempt to develop fully integrated systems
targeting the retail industry. In the market for consulting services, the
Company competes with the consulting divisions of the big five accounting firms,
Electronic Data Systems, Inc., independent consultant firms and other systems
integrators. Many of the Company's existing competitors, as well as a number of
potential new competitors, have significantly greater financial, technical and
marketing resources than the Company. There can be no assurance that the Company
will be able to compete successfully against its current or future competitors
or that competition will not have a material adverse effect on the Company's
business, operating results and financial condition.

Additionally, the Company competes with a variety of hardware and software
vendors. Some of the Company's competitors may have advantages over the Company
due to their significant worldwide presence, longer operating and product

17

development history, and substantially greater financial, technical and
marketing resources. If competitors offer more favorable payment terms and/or
more favorable contractual implementation terms or guarantees, the Company may
need to lower prices or offer other favorable terms in order to compete
successfully. Any such changes would be likely to reduce margins.

Growth of the Company's International Segment. As more fully described in Note
13 to the consolidated financial statements, the Company's international
revenues grew to $13.4 million in 2001 from $2.7 million in 2000, as the Company
continues to invest in an effort to enhance its international operations. The
global reach of the Company's business could cause it to be subject to
unexpected, uncontrollable and rapidly changing events and circumstances in
addition to those experienced in United States locations. The following factors,
among others, present risks that could have an adverse impact on the Company's
business operating results and financial condition:

. conducting business in currencies other than United States dollars subjects
the Company to currency controls and fluctuations in currency exchange
rates;
. the Company may be unable to hedge the currency risk in some transactions
because of uncertainty or the inability to reasonably estimate its foreign
exchange exposure;
. increased cost and development time required to adapt the Company products
to local markets;
. lack of experience in a particular geographic market;
. legal, regulatory, social, political, labor or economic conditions in a
specific country or region, including loss or modification of exemptions
for taxes and tariffs, and import and export license requirements; and
. operating costs in many countries are higher than in the United States.

Dependence on Key Personnel; Ability to Attract and Retain Technical Personnel.
The Company's future success depends in part on the performance of its executive
officers and key employees. The Company does not have in place employment
agreements with any of its executive officers. The Company maintains a $1.0
million "key person" life insurance policy on each of Erez Goren and Alon Goren,
the Co-Chief Executive Officer and Chief Technology Officer, respectively, of
the Company. The loss of the services of any of its executive officers or other
key employees could have a material adverse effect on the business, operating
results and financial condition of the Company. The Company is heavily dependent
upon its ability to attract, retain and motivate skilled technical and
managerial personnel, especially highly skilled engineers involved in ongoing
product development and consulting personnel who assist in the development and
implementation of the Company's total business solutions. The market for such
individuals is intensely competitive. Due to the critical role of the Company's
product development and consulting staffs, the inability to recruit successfully
or the loss of a significant part of its product development or consulting
staffs would have a material adverse effect on the Company. The software
industry is characterized by a high level of employee mobility and aggressive
recruiting of skilled personnel. There can be no assurance that the Company will
be able to retain its current personnel, or that it will be able to attract,
assimilate or retain other highly qualified technical and managerial personnel
in the future. The inability to attract, hire or retain the necessary technical
and managerial personnel could have a material adverse effect upon the Company's
business, operating results and financial condition.

Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon its ability to protect its proprietary
technology. The Company relies on a combination of patent, copyright and trade
secret laws and non-disclosure agreements to protect this proprietary
technology. The Company enters into confidentiality and non-compete agreements
with its employees and license agreements with its clients and potential
clients, which limits access to and distribution of its software, documentation
and other proprietary information. There can be no assurance that the steps
taken by the Company to protect its proprietary rights will be adequate to
prevent misappropriation of its technology or that the Company's competitors
will not independently develop technologies that are substantially equivalent or
superior to the Company's technology. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the United States.

Certain technology used in conjunction with the Company's products is licensed
from third parties, generally on a non-exclusive basis. The termination of any
such licenses, or the failure of the third-party licensors to adequately
maintain or update their products, could result in delay in the Company's
ability to ship certain of its products while it seeks to implement technology
offered by alternative sources, and any required replacement licenses could
prove costly. While it may be necessary or desirable in the future to obtain
other licenses relating to one or more of the Company's products or relating to
current or future technologies, there can be no assurance that the Company will
be able to do so on commercially reasonable terms or at all.

Ownership by Management. The Company's executive officers collectively own
approximately 37.2% of the Company's outstanding common stock. Consequently,
together they continue to be able to exert significant influence over the
election of the Company's directors, the outcome of most corporate actions
requiring shareholder approval and the business of the Company.

18

Volatility of Market Price for Common Stock; Absence of Dividends. The market
price for the Company's common stock has experienced substantial price
volatility since its initial public offering in February 1997 and such
volatility may continue in the future. Quarterly operating results of the
Company or of other companies participating in the computer-based products and
services industry, changes in conditions in the economy, the financial markets
of the computer products and services industries, natural disasters or other
developments affecting the Company or its competitors could cause the market
price of the common stock to fluctuate substantially. In addition, the stock
market has experienced extreme price and volume fluctuations that have affected
the market price of many technology stocks in particular and that have often
been unrelated or disproportionate to the operating performance of these
companies. For the foreseeable future, it is expected that earnings, if any,
generated from the Company's operations will be used to finance the growth of
its business, and that no dividends will be paid to holders of the common stock.

Anti-Takeover Provisions. The Company's Amended and Restated Articles of
Incorporation authorize the Board of Directors to issue up to 5,000,000 shares
of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of the preferred stock without further
vote or action by the Company's shareholders. The rights of the holders of
common stock will be subject to, and may be adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future. While the
Company has no present intention to issue additional shares of preferred stock,
such issuance, while providing desired flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. In addition, certain provisions of the Company's Articles
of Incorporation and Bylaws may discourage proposals or bids to acquire the
Company. This could limit the price that certain investors might be willing to
pay in the future for shares of Common Stock. The Company's Articles of
Incorporation divide the Board of Directors into three classes, as nearly equal
in size as possible, with staggered three-year terms. One class will be elected
each year. The classification of the Board of Directors could have the effect of
making it more difficult for a third party to acquire control of the Company.
The Company is also subject to certain provisions of the Georgia Business
Corporation Code which relate to business combinations with interested
shareholders.

Item 2. Properties.
- -------------------

Domestic offices
The Company currently has leases for space in three principal facilities
occupying approximately 230,000 square feet in Alpharetta, Georgia, under
ten-year lease agreements. The lease agreements expire in 2010 and 2013.

In November 1997, the Company signed a five-year lease to house its Integration
and Client Support Operations in a building, also in Alpharetta, Georgia, with
approximately 102,000 square feet. As of December 31, 2000, the Company also had
regional offices in Pleasanton, California and Hillsboro, Oregon. However, as
more fully described in Note 4 of the consolidated financial statements, in
January 2001, the Company announced the closing of these offices and recorded a
one-time charge related to this action.

International offices
The Company currently has leases for space in six principal facilities occupying
approximately 18,000 square feet in Geelong, Australia. Five lease agreements
expire in 2002 and the remaining lease expires in 2003. Additionally, to satisfy
other sales, service and support and product development needs, the Company
leases space in Singapore and Prague, Czech Republic.

The Company believes its facilities are adequate for its current needs and does
not anticipate any material difficulty in securing facilities for new space, if
needed.

Item 3. Legal Proceedings.
- --------------------------

There are no material pending legal proceedings to which the Company is a party
or of which any of its properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority. There are no material proceedings known to the Company, pending or
contemplated, in which any director, officer or affiliate or any principal
security holder of the Company, or any associate of any of the foregoing is a
party or has an interest adverse to the Company.

19

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

No matter was submitted during the fourth quarter ended December 31, 2001 to a
vote of security holders of the Company.

20

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- ------------------------------------------------------------------------------

The Company's Common Stock has traded on The Nasdaq Stock Market under the
symbol "RADS" since the Company's initial public offering on February 13, 1997.
Prior to that time, there was no public market for the Common Stock. The
following table sets forth the high and low sale prices per share for the Common
Stock for the periods indicated as reported by The Nasdaq Stock Market.

Year ended December 31, 2001 High Low
- ------------------------------------------- -------- ---------
First Quarter $ 23.250 $ 11.688
Second Quarter 18.900 10.563
Third Quarter 16.180 7.750
Fourth Quarter 10.010 5.050

Year ended December 31, 2000 High Low
- ------------------------------------------- -------- ---------
First Quarter $ 79.500 $ 21.583
Second Quarter 42.000 12.625
Third Quarter 25.000 16.250
Fourth Quarter 29.125 17.000

Year ended December 31, 1999 High Low
- ------------------------------------------- -------- ---------
First Quarter $ 8.333 $ 4.250
Second Quarter 9.667 6.208
Third Quarter 15.167 8.667
Fourth Quarter 31.333 9.333

As of April 1, 2000, the Company effected a 3-for-2 stock split. The applicable
share prices above have been restated to account for the split.

As of March 19, 2002, there were 155 holders of record of the Common Stock.
Management of the Company believes that these are in excess of 6,500
beneficial holders of its Common Stock.

The Company currently anticipates that all of its earnings will be retained for
development of the Company's business and does not anticipate paying any cash
dividends in the foreseeable future. Future cash dividends, if any, will be at
the discretion of the Company's Board of Directors and will depend upon, among
other things, the Company's future earnings, operations, capital requirements
and surplus, general financial condition, contractual restrictions and such
other factors as the Board of Directors may deem relevant.

21

Item 6. Selected Consolidated Financial Data
- --------------------------------------------

The following table sets forth selected consolidated financial data of the
Company for the periods indicated, which data has been derived from the
consolidated financial statements of the Company. The consolidated financial
statements of the Company as of, and for each of the years in the five-year
period ended December 31, 2001, have been audited by Arthur Andersen LLP,
independent public accountants. This selected consolidated financial data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of the Company and the notes thereto included elsewhere herein.

Year Ended December 31,
------------------------------------------------------
(in thousands, except per share data) 2001 2000 1999 1998 1997
------------------------------------------------------

Statement of Operations Data:
Revenues:
System sales $ 71,268 $ 79,987 $ 91,946 $59,400 $ 66,798
Client support, maintenance and other services 60,711 48,057 37,720 23,535 11,205
------------------------------------------------------
Total revenues 131,979 128,044 129,666 82,935 78,003
Cost of revenues:
System sales 38,799 39,620 46,001 28,877 34,019
Client support, maintenance and other services 38,043 37,356 29,989 20,288 10,298
------------------------------------------------------
Total cost of revenues 76,842 76,976 75,990 49,165 44,317
------------------------------------------------------
Gross profit 55,137 51,068 53,676 33,770 33,686
Operating expenses:
Product development 11,234 11,030 11,125 11,199 6,897
Sales and marketing 19,718 12,720 12,302 11,730 5,819
Depreciation and amortization 9,643 7,706 6,057 4,665 2,384
Non-recurring charges 1,244 -- -- 1,276 30,086
General and administrative 15,056 15,818 13,204 12,360 9,059
------------------------------------------------------
(Loss) income from operations (1,758) 3,794 10,988 (7,460) (20,559)
Interest income, net 1,513 3,240 1,613 1,800 989
------------------------------------------------------
(Loss) income before income taxes and extraordinary items (245) 7,034 12,601 (5,660) (19,570)
Income tax provision (benefit)(1) 183 1,773 4,992 (2,265) (212)
Extraordinary items, net of taxes(2)(3) -- (1,520) -- -- 131
------------------------------------------------------
Net (loss) income $ (428) $ 6,781 $ 7,609 $(3,395) $(19,489)
======================================================
Basic (loss) income per share:
(Loss) income before extraordinary items $ (0.02) $ 0.19 $ 0.31 $ (0.14) $ (0.99)
Extraordinary gain (loss) on early extinguishment of debt -- 0.05 -- -- (0.01)
------------------------------------------------------
Total basic (loss) income per share (4)(5) $ (0.02) $ 0.24 $ 0.31 $ (0.14) $ (1.00)
======================================================
Diluted (loss) income per share:
(Loss) income before extraordinary item $ (0.02) $ 0.18 $ 0.28 $ (0.14) $ (0.99)
Extraordinary gain (loss) on early extinguishment of debt -- 0.05 -- -- (0.01)
------------------------------------------------------
Total diluted (loss) income per share (4)(5) $ (0.02) $ 0.23 $ 0.28 $ (0.14) $ (1.00)
======================================================

Weighted average shares outstanding:
Basic (4)(5) 27,726 27,294 24,630 23,985 19,536
======================================================
Diluted (4)(5) 27,726 29,791 27,519 23,985 19,536
======================================================

December 31,
------------------------------------------------------
2001 2000 1999 1998 1997
------------------------------------------------------

Balance Sheet Data:
Working capital $ 55,205 $ 70,882 $ 65,947 $47,329 $ 57,259
Total assets 125,162 131,261 111,999 84,166 93,515
Long-term debt and shareholder loan,
including current portion 1,610 -- 4,355 4,267 4,728
Shareholders' equity 103,614 108,387 85,935 69,245 71,021

22

(1) As a result of its election to be treated as an S Corporation for
income tax purposes, prior to completion of its initial public
offering in February 1997, the Company was not subject to federal or
state income taxes. For periods prior to the termination of the S
Corporation status, pro forma net income amounts include additional
income tax benefits determined by applying the Company's anticipated
statutory tax rate to pretax income (loss), adjusted for permanent tax
differences. From February (C Corporation inception) until December
31, 1997, the Company did not record a tax benefit, primarily due to
nondeductible purchased research and development costs. A tax benefit
was recorded in 1998 due to the net operating loss for the year. See
Note 8 to the consolidated financial statements.
(2) During 1997, the Company recorded a loss from early extinguishment of
debt of $131,000, net of income tax.
(3) During 2000, the Company recorded a gain on early extinguishment of
debt of approximately $1.5 million, net of income tax.
(4) In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"), effective for fiscal years ending after December 15, 1997. The
Company adopted the new guidelines for the calculation and
presentation of earnings per share, and all prior periods have been
restated.
(5) On April 1, 2000 the Company effected a 3-for-2 stock split. All
historical shares and weighted average shares have been restated to
account for this split.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations.
--------------

The following discussion should be read in conjunction with the consolidated
financial statements of the Company (including the notes thereto) contained
elsewhere in this Report.

Overview

The Company derives its revenues primarily from the sale of integrated systems,
including software, hardware and related support and professional services. In
addition, the Company offers implementation and integration services which are
typically billed on a per diem basis. The Company's revenues from its various
technology solutions are, for the most part, dependent on the number of
installed sites for a client. Accordingly, while the typical sale is the result
of a long, complex process, the Company's clients usually continue installing
additional sites over an extended period of time. Revenues from software and
systems sales are recognized as products are shipped, provided that collection
is probable and no significant post shipment vendor obligations remain. Revenues
from client support, maintenance and other services are generally recognized as
the service is performed.

In 1999, the Company began developing its new generation of management systems
products--Enterprise Productivity Software, formerly WAVE(TM). This product
architecture is designed to combine and expand the functionality of its Site
Management Systems and Headquarters-Based Management Systems. The Company's
architecture and platforms for these products are entirely web-based, which the
Company believes will enable it to increase the functionality while decreasing
the costs of implementing and maintaining technology solutions for retailers.
Management believes that these products will strengthen its offerings by
providing integrated, end-to-end solutions that span from the consumer to the
supply chain.

The Enterprise Productivity Software was generally released during the first
quarter of 2002. The Company intends to offer its Enterprise Productivity
Software both through the application service provider, or "ASP," delivery model
as well as through installations directly in client locations as "client-hosted"
systems. In instances where clients select the ASP delivery model, the Company
will remotely host applications from an off-site central server that users can
access over dedicated lines, virtual private networks or the Internet. The
Company is continuing to establish strategic relationships to facilitate the
release of the Enterprise Productivity Software.

In connection with its strategy to develop ASP-delivered products, in April 2000
the Company began offering certain new and existing products on a
subscription-based pricing model. Under this subscription-pricing model, clients
pay a fixed, monthly fee for use of the Enterprise Productivity Software and the
necessary hosting services to utilize those applications and solutions. This
offering represents a change in the Company's historical pricing model in which
clients were charged an initial licensing fee for use of the Company's products
and continuing maintenance and support during the license period. To date, the
Company continues to derive a majority of its revenue from these legacy products
under its traditional sales model

23

of one-time software license revenues, hardware sales and software maintenance
and support fees. Based on this historical trend, the Company anticipates that
clients purchasing the Company's legacy products will continue to favor the
one-time software license and hardware purchases over the subscription-based
pricing model for the foreseeable future.

Although the Company's subscription-based revenues to date have been immaterial
to total revenues, the Company expects that the general release of the
Enterprise Productivity Software will lead to an increase in the percentage of
recurring revenues coming from subscription-based offerings. As a result of
offering clients a subscription-pricing model and the decline of revenues from
legacy site management and headquarters solutions, the Company expects to see a
decline in the one-time revenues from legacy software license fees, replaced
over time by monthly subscription fees. In addition, the Company expects revenue
from maintenance and support from existing clients to decline and to be replaced
by subscription fees should existing clients convert to the subscription-pricing
model.

This change in the Company's product strategy to develop and offer ASP-delivered
and Internet solutions and the transition to a subscription-pricing model
involve certain risks and assumptions. There can be no assurance that the
Company will successfully implement these changes in its organization, product
strategy or pricing model or that the changes will not have a material adverse
effect on the Company's business, financial condition or results of operations.

To date, the Company's primary source of revenues has been large client rollouts
of the Company's products, which are typically characterized by the use of
fewer, larger contracts. These contracts typically involve longer negotiating
cycles, require the dedication of substantial amounts of working capital and
other resources, and in general require costs that may substantially precede
recognition of associated revenues. During the third quarter ended September 30,
2001, the Company began to experience a decline in revenues and negative
operating results. The Company attributes this decline primarily to the current
global economic environment and the product transition the Company is currently
undertaking in advance of the general release of the Enterprise Productivity
Software. In response to these circumstances, during the latter part of the
third quarter and throughout the fourth quarter of 2001, the Company downsized
its personnel by 7.3% in order to contain its operating costs. If the Company's
product transition or industry acceptance of the Enterprise Software Product
progresses slower than currently anticipated or if the economic downturn
continues or worsens the Company believes it could continue to experience a
decline in revenues and negative operating results.

On April 1, 2000 the Company effected a 3-for-2 stock split. All historical
share data and weighted average shares have been restated to account for this
split.

Results of Operations

The following table sets forth, for the periods indicated, the percentage
relationship of certain statement of operation items to total revenues:

Year ended December 31,
2001 2000 1999
--------------------------

Revenues:
System sales 54.0% 62.5% 70.9%
Client support, maintenance and other services 46.0 37.5 29.1
--------------------------
Total revenues 100.0 100.0 100.0
Cost of revenues:
System sales 29.4 30.9 35.5
Client support, maintenance and other services 28.8 29.2 23.1
--------------------------
Total cost of revenues 58.2 60.1 58.6
--------------------------
Gross profit 41.8 39.9 41.4
Operating expenses:
Product development 8.5 8.6 8.6
Sales and marketing 14.9 9.9 9.5
Depreciation and amortization 7.3 6.0 4.7
Non-recurring charges 1.0 -- --
General and administrative 11.4 12.4 10.2
--------------------------
(Loss) income from operations (1.3) 3.0 8.4
Interest income, net 1.1 2.5 1.2

24

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

(Loss) income before income taxes and extraordinary item (0.2) 5.5 9.6
Income tax provision 0.1 1.4 3.8
Extraordinary item, net of taxes -- 1.2 --
--------------------------
Net (loss) income (0.3)% 5.3% 5.8%
==========================

Year ended December 31, 2001 compared to year ended December 31, 2000

System Sales. The Company derives the majority of its revenues from sales and
licensing fees of its headquarters-based, back office management, and point of
sale solutions. System sales decreased 10.9% to $71.3 million for the year ended
December 31, 2001 ("2001") from $80.0 million for the year ended December 31,
2000 ("2000"). This decrease was primarily the result of the current global
economic environment and the product transition the Company is currently
undertaking.

Client Support, Maintenance and Other Services. The Company also derives
revenues from client support, maintenance and other services, which increased
26.3% to $60.7 million in 2001 from $48.1 million in 2000. The increases were
due to increased client demand for professional services such as training,
custom software development, project management and implementation services and
from increased support and maintenance as a result of a larger installed base
within new and existing markets.

Cost of System Sales. Cost of system sales consists primarily of hardware and
peripherals for site-based systems and labor. These costs are expensed as
products are shipped. Cost of system sales decreased 2.1% during 2001 to $38.8
million compared to $39.6 million for 2000. This decrease was directly
attributable to reduced system sales in 2001 over 2000. Cost of system sales as
a percentage of system revenues increased to 54.4% in 2001 from 49.5% in 2000.
This increase was due primarily to increased hardware sales as a percentage of
total system revenues as well as increased amortization of capitalized software.
Amortization of capitalized software development costs increased 20.5% to $2.4
million for 2001, compared to $2.0 million for 2000 as products previously
capitalized were generally released during 2001.

Cost of Client Support, Maintenance and Other Services. Cost of client support,
maintenance and other services consists primarily of personnel and other costs
associated with the Company's services operations. Cost of client support,
maintenance and other services increased 1.8% to $38.0 million for 2001 from
$37.4 million for 2000. The increase was due primarily to increases in personnel
associated with the effort of supporting higher revenues in this area. Cost of
client support, maintenance and other services as a percentage of client
support, maintenance and other services revenues decreased to 62.7% for 2001
from 77.7% in 2000, as a result of increased efficiencies and staff utilization
as well as the formation of the Client Management Services group on January 1,
2001. In order to provide improved service as well as provide more leverage to
its sales people, certain resources previously included in costs of client
support, maintenance and other services were reallocated to a new account
management and client logistics function within the sales and marketing group.

Product Development Expenses. Product development expenses consist primarily of
wages and materials expended on product development efforts. During 2001,
product development expenses increased 1.8% to $11.2 million from $11.0 million
for 2000 due primarily to increased development personnel and related costs
associated with the Breeze and HotelTools acquisitions. As more fully described
in Note 3 to the consolidated financial statements, during 2001 the Company
recorded capitalized software development costs of $8.0 million, or 41.7% of its
total product development costs, as compared to approximately $5.9 million, or
35.0% of its total product development costs for 2000. This increase was due to
the Company's increased development efforts for Enterprise Productivity
Software. Product development expenses as a percentage of total revenues
decreased to 8.5% in 2001 compared to 8.6% in 2000. Furthermore, management
expects that after the Enterprise Software Product is generally released in the
first quarter of 2002, the Company's product development expense will increase
as its capitalized software costs decline.

Sales and Marketing Expenses. Sales and marketing expenses increased 55.0% to
$19.7 million during 2001 from $12.7 million in 2000, due primarily to the
creation of the Client Management Services group and associated costs previously
included in cost of client support, maintenance and other services as noted
above. Additionally, the Company's continued expansion of its sales activities,
including new hires and increased commission expense, attributed to these
increases. Sales and marketing expenses as a percentage of total revenues
increased to 14.9% for 2001 from 9.9% for 2000, as sales and marketing costs
increased at a pace higher than revenues.

Depreciation and Amortization. Depreciation and amortization expenses increased
25.1% to $9.6 million during 2001 compared to $7.7 million during 2000. The
increase resulted from an increase in computer equipment, leasehold improvements
and other assets required to support an increased number of employees and
locations as well as the amortization

25

of intangible assets associated with the Company's acquisition of Breeze, the
lodging software purchased from HotelTools, Inc. and a full year of intangible
amortization relating to the TimeCorp acquisition (see Note 5 of the
consolidated financial statements). Depreciation and amortization as a
percentage of total revenues increased to 7.3% for 2001 from 6.0% in 2000.

Non-recurring Charges. The Company recorded $1.2 million of non-recurring
charges during 2001. There were no such charges in 2000. As more fully described
in Note 4 of the consolidated financial statements, the non-recurring charges
related to the permanent closing of the facilities in Hillsboro, Oregon and
Pleasanton, California in January 2001 as well as severance and termination
costs of certain other personnel in the fourth quarter of 2001 as the Company
downsized to adjust to unfavorable economic conditions.

General and Administrative Expenses. General and administrative expenses
decreased 4.8% during 2001 to $15.1 million from $15.8 million during 2000. The
decrease was due primarily to increased efficiencies, reduction of certain
support personnel and other cost cutting measures. General and administrative
expenses as a percentage of total revenues were 11.4% and 12.4% for 2001 and
2000, respectively.

Interest Income, Net. Net interest income decreased 53.3% to $1.5 million during
2001, compared to net interest income of $3.2 million for 2000. The Company's
interest income is derived from the investment of its cash and cash equivalents.
The decrease in net interest income resulted primarily from a decrease in cash
and cash equivalents from an average cash balance of $51.5 million during 2000
to an average cash balance of $38.0 million during 2001, as well as lower
interest rates earned on cash investments. See "--Liquidity and Capital
Resources."

Income Tax Provision. The Company recorded a tax provision of $183,000, or an
effective tax rate of 74.3% in 2001 compared to a tax provision of $1.8 million,
or an effective tax rate of 29.1% in 2000. As more fully explained in Note 8 of
the consolidated financial statements, the tax rate increase in 2001 was
primarily due to $221,000 in foreign taxes the Company was required to record
despite its pretax loss of $245,000.

Extraordinary Item. During 2000, the Company and the former sole shareholder of
RapidFire reached an agreement whereby the Company paid the former shareholder
$200,000 and forgave a $1.5 million note receivable, and in return, was relieved
in full of its indebtedness to the shareholder. This indebtedness consisted of a
noninterest-bearing note with a lump-sum payment of $6.0 million due October 31,
2005 ($4.3 million at December 31, 2000) and was issued October 31, 1997 as part
of the Company's acquisition of RapidFire. As a result of this early
extinguishment of debt, the Company recorded an extraordinary gain of
approximately $2.5 million, net of taxes of $1.0 million, during the first
quarter of 2000. No such item was recorded in 2001.

Net (Loss) Income. Net loss for 2001 was $428,000 or $0.02 per diluted share, a
decrease of $5.7 million, or $0.20 per diluted share, compared to net income,
before extraordinary item, of $5.3 million, or $0.18 per diluted share, for
2000.

Year ended December 31, 2000 compared to year ended December 31, 1999

System Sales. System sales decreased 13.0% to $80.0 million for the year ended
December 31, 2000 ("2000") from $91.9 million for the year ended December 31,
1999 ("1999"). This decrease was primarily the result of the Company's strategy
to convert certain new and existing products and clients to the
subscription-pricing model, as well as declining sales to entertainment industry
clients as a result of financial difficulties being experienced by these
clients.

Client Support, Maintenance and Other Services. Revenues from client support,
maintenance and other services increased 27.4% to $48.1 million in 2000 from
$37.7 million in 1999. These increases were due to increased support,
maintenance and services revenues within existing markets, resulting from an
increased installed base. Additionally, increased clients demand for
professional services such as training, custom software development, project
management and implementation services contributed to these increases.

Cost of System Sales. Cost of system sales decreased 13.9% during 2000 to $39.6
million compared to $46.0 million for 1999. This decrease was directly
attributable to reduced system sales in 2000 over 1999 due to the implementation
of the subscription-pricing model. Cost of system sales as a percentage of
system revenues decreased to 49.5% in 2000 from 50.0% in 1999. This decrease was
due primarily to increased software sales as a percentage of total system
revenues as well as increased efficiencies associated with the manufacture of
site-based systems. Amortization of capitalized software development costs
increased 73.9% to $2.0 million for 2000, compared to $1.1 million for 1999 as
products previously capitalized were generally released during 2000.

26

Cost of Client Support, Maintenance and Other Services. Cost of client support,
maintenance and other services increased 24.6% to $37.4 million for 2000 from
$30.0 million for 1999. The increases were due primarily to increases in
personnel associated with the effort of supporting higher revenues in this area.
Cost of client support, maintenance and other services as a percentage of client
support, maintenance and other services revenues decreased to 77.7% for 2000
from 79.5% in 1999, as a result of increased efficiencies and staff utilization.

Product Development Expenses. During 2000, product development expenses
decreased 0.9% to $11.0 million from $11.1 million for 1999 due primarily to
higher capitalization of software costs associated with the Company's
development of its Enterprise Productivity Software generation of products and
increased custom software development projects during the year which were billed
to clients whose related costs are included in costs of client support,
maintenance and other services noted above. In 2000, software development costs
of $5.9 million, or 35.0% of its total product development costs, were
capitalized by the Company, as compared to approximately $2.8 million, or 20.1%
of its total product development costs for 1999. Product development expenses as
a percentage of total revenues remained constant at 8.6% in both 2000 and 1999.

Sales and Marketing Expenses. Sales and marketing expenses increased 3.4% to
$12.7 million during 2000 from $12.3 million in 1999, due primarily to increased
personnel costs and sales activities during 2000. Sales and marketing expenses
as a percentage of total revenues increased to 9.9% for 2000 from 9.5% for 1999,
as sales and marketing costs increased at a pace higher than revenues.

Depreciation and Amortization. Depreciation and amortization expenses increased
27.2% to $7.7 million during 2000 compared to $6.1 million during 1999. The
increase resulted from an increase in computer equipment, leasehold improvements
and other assets required to support an increased number of employees and
locations as well as the amortization of intangible assets associated with the
Company's acquisition of TimeCorp (see Note 5 of the consolidated financial
statements). Depreciation and amortization as a percentage of total revenues
increased to 6.0% for 2000 from 4.7% in 1999.

General and Administrative Expenses. General and administrative expenses
increased 19.8% during 2000 to $15.8 million from $13.2 million during 1999. The
increase was due primarily to personnel increases needed to support current
revenues as well as to support the Company's move to the subscription-pricing
model. General and administrative expenses as a percentage of total revenues
were 12.4% and 10.2% for 2000 and 1999, respectively, as general and
administrative expenses grew at a pace faster than associated total revenues.

Interest Income, Net. Net interest income increased 100.9% to $3.2 million
during 2000, compared to net interest income of $1.6 million for 1999. The
Company's interest income is derived from the investment of its cash and cash
equivalents. The increases in net interest income resulted primarily from an
increase in cash and cash equivalents from an average cash balance of $39.5
million during 1999 to an average cash balance of $51.5 million during 2000 as
well as higher interest rates earned on cash investments. See "--Liquidity and
Capital Resources."

Income Tax Provision (Benefit). The Company recorded a tax provision of $1.8
million, or 29.1% of pre-tax income in 2000 compared to a tax provision of $5.0
million, or 39.6% of pre-tax income, in 1999. During 2000, the Company performed
a research and development tax study, which resulted in the Company recording a
deferred tax asset of $2.4 million, net of a valuation reserve of $1.4 million.

Extraordinary Item. During 2000, the Company and the former sole shareholder of
RapidFire reached an agreement whereby the Company paid the former shareholder
$200,000 and forgave a $1.5 million note receivable, and in return, was relieved
in full of its indebtedness to the shareholder. This indebtedness consisted of a
noninterest-bearing note with a lump-sum payment of $6.0 million due October 31,
2005 ($4.3 million at December 31, 1999) and was issued October 31, 1997 as part
of the Company's acquisition of RapidFire. As a result of this early
extinguishment of debt, the Company recorded an extraordinary gain of
approximately $2.5 million, net of taxes of $1.0 million, during the first
quarter of 2000. No such item was recorded in 1999.

Net Income. Net income for 2000, before extraordinary item, was $5.3 million, or
$0.18 per diluted share, a decrease of $2.3 million, or $0.10 per diluted share,
compared to net income of $7.6 million, or $0.28 per diluted share, for 1999.

27

Liquidity and Capital Resources

As of December 31, 2001, the Company had $33.9 million in cash and cash
equivalents and working capital of $55.2 million. The Company has sufficient
cash and short term funding available to meet its liquidity needs for the next
twelve months.

Cash from operating activities in 2001 was $10.9 million compared to cash from
operating activities of $8.4 million in 2000 and cash from operating activities
of $29.5 million in 1999. In 2001, cash provided from operating activities
consisted primarily of net loss of $428,000 during the period as well as an
increase in accounts payable and accrued liabilities, offset by $12.6 million in
depreciation and amortization and decreased accounts receivable. Additionally,
client deposits and unearned revenues increased $3.1 million during fiscal
period 2001 as the Company received cash from clients in advance of delivered
products and/or services. In 2000, cash provided from operating activities was
primarily due to net income before extraordinary item of $5.3 million, as well
as increased accounts payable due to timing of certain vendor payments,
partially offset by increases in accounts receivable and inventory and a
decrease in client deposits and unearned revenues. The income tax benefit from
the exercise of disqualified and non-qualified stock options provided $3.3
million of cash in 2000.

Cash used in investing activities was $21.0 million and $24.3 million for 2001
and 2000, respectively. The uses of cash in investing activities during 2001
consisted primarily of the of the acquisition of Breeze Software Pty Ltd and
certain assets from HotelTools, Inc. for a total of $4.5 million, as more fully
described in Note 5 of the consolidated financial statements, as well as
purchases of property and equipment of $5.1 million and capitalized software
costs of $8.0 million. Additionally, as more fully described in Notes 6 and 9
of the consolidated financial statements, the Company paid Tricon $2.8 million
as its initial payment for the source code and object code for certain back
office software previously developed by Tricon and capitalized approximately
$540,000 in professional services costs associated with this transaction. The
uses of cash in investing activities for 2000 consisted of the purchases of
property and equipment of $12.4 million, purchase of TimeCorp for $6.0 million
(see Note 5 of consolidated financial statements) and capitalized software costs
of $5.9 million. The uses of cash in investing activities during 1999 consisted
primarily of the purchases of property and equipment of $4.2 million and
capitalized software costs of $2.8 million.

Cash of $5.5 million was used in financing activities during fiscal period 2001.
Primary uses of cash were the Company's purchase of common stock pursuant to its
stock repurchase program for approximately $6.0 million, as well as payments
under capital lease and long-term debt obligations and issuance of shareholder
notes. These uses of cash were offset by cash received from the exercise of
employee stock options of $1.6 million, as well as approximately $604,000
received from stock issued under the Company's employee stock purchase plan.
Cash of $12.1 million was provided by financing activities during 2000 due
primarily to cash received from AOL's purchase in March 2000 of $10.0 million of
the Company's stock at a price of $10 per share, as more fully described in Note
10 of the consolidated financial statements. Additionally, cash was provided by
financing activities from the exercise of employee stock options of $2.6 million
and stock issued under the employee stock purchase plan of $1.5 million
partially offset by the Company's purchase of common stock pursuant to its stock
repurchase program for approximately $1.8 million.

As more fully described in Note 7 to the consolidated financial statements,
during 2000, the Company and the former sole shareholder of RapidFire Software,
Inc. ("RapidFire") reached an agreement whereby the Company paid the former
shareholder $200,000 and forgave a $1.5 million note receivable, and in return,
was relieved in full of its indebtedness to the shareholder. This indebtedness
consisted of a noninterest-bearing note with a lump-sum payment of $6.0 million
due October 31, 2005 ($4.3 million at December 31, 1999) and was issued October
31, 1997 as part of the Company's acquisition of RapidFire. The Company had no
debt at December 31, 2001.

As more fully detailed in Note 9 of the consolidated financial statements, the
Company leases office space, equipment and certain vehicles under noncancellable
operating lease agreements expiring on various dates through 2013. Additionally,
the Company leases various equipment and furniture under a four-year capital
lease agreement. The capital lease runs until April 30, 2005. Aggregate future
minimum lease payments under the capital lease and noncancellable operating
leases as of December 31, 2001 are as follows (in thousands):

28

Payments Due by Period
-------------------------------------------------------------------
Contractual Obligations: Less than
Total 1 Year 1 - 3 Years 4 - 5 Years After 5 Years
-------------------------------------------------------------------

Capital Lease Obligations $ 1,837 $ 551 $ 1,286 -- --
Operating Leases 41,827 6,495 11,215 $ 8,075 $ 16,042
Other Long-Term Obligations (1) 13,776 9,750 4,026 -- --
----------------------------------------------------------------
Total Contractual Cash Obligations $ 57,440 $ 16,796 $ 16,527 $ 8,075 $ 16,042
================================================================

(1) As more fully described in Notes 6 and 9 of the consolidated financial
statements, on June 30, 2001 the Company and Tricon signed a contract
evidencing a multi-year arrangement to implement Radiant Enterprise
Productivity Software exclusively in Tricon's company-owned restaurants
around the world. Tricon's franchisees will also be able to subscribe to
the Enterprise Productivity Software under the same terms as the
company-owned restaurants. As part of this agreement, the Company agreed to
purchase from Tricon its source code and object code for certain back
office software previously developed by Tricon for $20.0 million, $16.5
million of which is payable in specified annual installments through
December 31, 2003. The remaining $3.5 million is payable on a pro rata
basis based upon Tricon's acceptance and rollout of the Enterprise
Productivity Software and fulfillment of its total target client store
commitment beginning in 2002 and ending in 2004. Costs associated with the
purchase of this asset, costs of professional services work performed, as
well as cash received by the Company, will be deferred and recognized over
the five-year subscription term of the contract beginning upon installation
of the Enterprise Productivity Software at each site. During 2001, the
Company paid Tricon $2.8 million as its initial payment for the purchase of
the Tricon back office software, and capitalized approximately $540,000 in
personnel costs associated with professional services for which associated
revenues of approximately $1.5 million were deferred.

Critical Accounting Policies and Procedures

General

The Company's discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the
Company's management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to client programs and incentives,
product returns, bad debts, inventories, intangible assets, income taxes, and
commitments and contingencies. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Management believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.

Revenue Recognition

The Company recognizes revenue using the guidance from SEC Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" and the AICPA
Statement of Position (SOP) 97-2, "Software Revenue Recognition," as amended by
SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, with Respect
to Certain Transactions." Under these guidelines, the Company recognizes revenue
when the following criteria are met: (1) persuasive evidence of an agreement
exists; (2) delivery of the product has occurred; (3) the fee is fixed and
determinable; (4) collectibility is probable; and (5) remaining obligations
under the agreement are insignificant. For those agreements that contain
significant future obligations, revenue is recognized under the percentage of
completion method. The Company's services revenue consists of fees generated
from consulting, custom development, installation, support, maintenance and
training. Revenue related to professional services performed by the Company is
generally recognized on a time and materials basis as the services are
performed. The

29

Company also offers fixed fee services arrangements that are recognized under
the percentage of completion method. Revenue from support and maintenance is
generally recognized as the service is performed.

In addition, the Company estimates what future warranty claims may occur based
upon historical rates and defers revenues based on these estimated claims. If
the historical data used to calculate these estimates does not properly reflect
future claims, these estimates could be revised. See "--Risk Factors."

Allowance for doubtful accounts

The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of clients to make required payments. Estimates are
developed by using standard quantitative measures based on historical losses,
adjusting for current economic conditions and, in some cases, evaluating
specific client accounts for risk of loss. The establishment of reserves
requires the use of judgment and assumptions regarding the potential for losses
on receivable balances. Though the Company considers these balances adequate and
proper, if the financial condition of its clients or channel partners were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

Inventories

Inventories are stated at the lower of cost or market value. Cost is principally
determined by the first-in, first-out method. The Company records adjustments to
the value of inventory based upon its forecasted plans to sell its inventories.
The physical condition (e.g., age and quality) of the inventories is also
considered in establishing its valuation. These adjustments are estimates, which
could vary significantly, either favorably or unfavorably, from actual
requirements if future economic conditions, client inventory levels or
competitive conditions differ from expectations.

Intangible Assets

The Company has significant intangible assets related to goodwill and other
acquired intangibles as well as capitalized software costs. The determination of
related estimated useful lives and whether or not these assets are impaired
involves significant judgments. Changes in strategy and/or market conditions
could significantly impact these judgments and require adjustments to recorded
asset balances.

The Company's policy on capitalized software costs determines the timing of
recognition of certain development costs. In addition, this policy determines
whether the cost is classified as development expense or cost of license fees.
Management is required to use its judgment in determining whether development
costs meet the criteria for immediate expense or capitalization.

Income Taxes

The Company has significant amounts of deferred tax assets that are reviewed for
recoverability and valued accordingly. These assets are evaluated by using
estimates of future taxable income streams and the impact of tax planning
strategies. Valuations related to tax accruals and assets can be impacted by
changes to tax codes, changes in statutory tax rates and the Company's future
taxable income levels.

Contingencies

The Company is subject to legal proceedings and other claims related to product,
labor and other matters. The Company is required to assess the likelihood of any
adverse judgments or outcomes to these matters as well as potential ranges of
probable losses. A determination of the amount of reserves required, if any, for
these contingencies are made after careful analysis of each individual issue.
The required reserves may change in the future due to new developments in each
matter or changes in approach such as a change in settlement strategy in dealing
with these matters.

Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144 supersedes
Financial Accounting Standards Board Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS No. 121"), and the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business", and
"Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
(Opinion 30) for the disposal of a segment of a business (as previously defined
in Opinion 30). The Financial Accounting Standards Board issued SFAS No. 144 to
establish a single accounting model, based on the framework established in SFAS
No. 121, for long-lived assets to be disposed of by sale. SFAS No. 144 broadens
the presentation of discontinued operations in the income statement to include a
component of an

30

entity (rather than a segment of a business). A component of an entity comprises
operations and cash flows that can be clearly distinguished, operationally and
for financial reporting purposes, from the rest of the entity. SFAS No. 144 also
requires that discontinued operations be measured at the lower of the carrying
amount for fair value less cost to sell. SFAS No. 144 is effective for fiscal
years beginning after December 1, 2001 and should be applied prospectively.
Management is evaluating the effect of this statement on the Company's results
of operations and financial position.

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. When the liability is initially recorded, the entity capitalizes
the cost by incurring the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, the entity either settles the obligation for the
amount recorded or incurs a gain or loss. SFAS No. 143 is effective for fiscal
years beginning after June 15, 2002. Management does not believe the adoption of
this statement will have a material impact on the Company's results of
operations and financial position.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 141, "Business Combinations" ("SFAS No.141"),
and Statement of Financial Accounting Standard No. 142, "Goodwill and Other
Intangible Assets" ("SFAS No. 142"). SFAS No. 141 supercedes APB No. 16, and
SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises". SFAS No. 141 prescribes the accounting principles for business
combinations and requires that all business combinations be accounted for using
the purchase method of accounting. SFAS No. 141 is effective for all business
combinations after June 30, 2001.

SFAS No. 142 supercedes APB Opinion No. 17, "Intangible Assets." SFAS No. 142
prescribes the accounting practices for acquired goodwill and other intangible
assets. Under SFAS No. 142, goodwill will no longer be amortized to earnings,
but instead will be reviewed periodically (at least annually) for impairment.
The Company adopted SFAS No. 142 on January 1, 2002. Goodwill and certain other
intangible assets, determined by management to have an indefinite life and
relating to acquisitions subsequent to June 30, 2001, will not be amortized. As
of December 31, 2001 the Company had approximately $10.5 million of recorded net
goodwill and $2.2 million in intangible assets, which will be subject to the
provisions of SFAS No. 142. The Company is amortizing its intangible assets
resulting from acquisitions after June 30, 2001 over a period of no greater than
five years. During 2001, the Company recorded approximately $2.3 million of
goodwill amortization expense, net of taxes. Although the Company is currently
evaluating this new pronouncement and has not yet determined the full impact on
its financial statements, on January 1, 2002 the Company ceased amortization of
goodwill on all its acquisitions made prior to June 30, 2001, the effective date
of this pronouncement. Management expects to complete its evaluation of the
impact of this statement by June 30, 2002.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
adopted SFAS 133 effective January 1, 2001. The adoption did not have a material
impact on the Company's results of operations.

31

Item 7 A. Quantitative and Qualitative Disclosures About Market Risk.
- ---------------------------------------------------------------------

Interest Rates

The Company's financial instruments that are subject to market risks are its
cash and cash equivalents. During 2001, the weighted average interest rate on
its cash balances was approximately 4.1%. A 10.0% decrease in this rate would
impact interest income by approximately $157,000.

Foreign Exchange

As more fully explained in Note 13 of the consolidated financial statements, the
Company's international revenues were $13.4 million, $2.7 million and $3.7
million for the years ended December 31, 2001, 2000 and 1999, respectively. The
Company's international business is subject to risks typical of an international
business, including, but not limited to: differing economic conditions, changes
in political climate, differing tax structures, other regulations and
restrictions and foreign exchange rate volatility. Accordingly, the Company's
future results could be materially adversely impacted by changes in these or
other factors. The effect of foreign exchange rate fluctuations on the Company
in 2001, 2000 and 1999 were not material.

Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------

The following consolidated financial statements are filed with this Report:

Report of Independent Public Accountants

Consolidated Balance Sheets at December 31, 2001 and 2000

Consolidated Statements of Operations for the years ended December 31,
2001, 2000 and 1999

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2001, 2000 and 1999

Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2000 and 1999

Notes to Consolidated Financial Statements

32

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Radiant Systems, Inc.:

We have audited the accompanying consolidated balance sheets of RADIANT SYSTEMS,
INC. (a Georgia corporation) AND SUBSIDIARIES as of December 31, 2001 and 2000,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 2001.
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. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Radiant Systems, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.

/s/ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 8, 2002

33

RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(IN THOUSANDS, EXCEPT SHARE DATA)

2001 2000
----------------------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 33,924 $ 49,560
Accounts receivable, net of allowances for doubtful accounts of $2,227 and
$2,000 in 2001 and 2000, respectively 20,988 22,302
Inventories 17,290 17,172
Deferred tax assets 1,917 1,451
Other 1,484 3,271
----------------------
Total current assets 75,603 93,756

PROPERTY AND EQUIPMENT, net 14,590 14,092
SOFTWARE DEVELOPMENT COSTS, net 15,229 9,358
INTANGIBLES, net 12,707 9,924
DEFERRED TAXES, long-term 3,618 3,882
OTHER ASSETS 3,415 249
----------------------
$ 125,162 $ 131,261
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,403 $ 13,611
Accrued liabilities 3,773 2,875
Client deposits and deferred revenue 9,762 6,388
Current portion of capital lease obligation 460 --
----------------------
Total current liabilities 20,398 22,874

Long-term portion of capital lease obligation 1,150 --
----------------------
Total liabilities 21,548 22,874

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Preferred stock, no par value; 5,000,000 shares authorized, no shares issued -- --
Common stock, par value $0.00001, 100,000,000 shares authorized, 27,511,793
and 27,647,830 shares issued and outstanding at December 31, 2001 and 2000,
respectively 0 0
Additional paid-in capital 113,057 116,623
Deferred compensation and employee loans (818) (80)
Accumulated other comprehensive loss (41) --
Accumulated deficit (8,584) (8,156)
----------------------
Total shareholders' equity 103,614 108,387
----------------------
$ 125,162 $ 131,261
======================

The accompanying notes are an integral part of these consolidated balance
sheets.

34

RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)

2001 2000 1999
--------------------------------

REVENUES:
System sales $ 71,268 $ 79,987 $ 91,946
Client support, maintenance, and other services 60,711 48,057 37,720
--------------------------------
Total revenues 131,979 128,044 129,666
--------------------------------

COST OF REVENUES:
System sales 38,799 39,620 46,001
Client support, maintenance, and other services 38,043 37,356 29,989
--------------------------------
Total cost of revenues 76,842 76,976 75,990
--------------------------------
GROSS PROFIT 55,137 51,068 53,676
OPERATING EXPENSES:
Product development 11,234 11,030 11,125
Sales and marketing 19,718 12,720 12,302
Depreciation and amortization 9,643 7,706 6,057
Non-recurring charges 1,244 -- --
General and administrative 15,056 15,818 13,204
--------------------------------
(LOSS) INCOME FROM OPERATIONS (1,758) 3,794 10,988

INTEREST INCOME, NET 1,513 3,240 1,613
--------------------------------

(LOSS) INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (245) 7,034 12,601

INCOME TAX PROVISION 183 1,773 4,992
--------------------------------

(LOSS) INCOME BEFORE EXTRAORDINARY ITEM (428) 5,261 7,609

EXTRAORDINARY ITEM:
Gain from early extinguishment of debt, net of taxes -- 1,520 --
--------------------------------
NET (LOSS) INCOME $ (428) $ 6,781 $ 7,609
================================

BASIC (LOSS) INCOME PER SHARE:
(Loss) income before extraordinary item $ (0.02) $ 0.19 $ 0.31
Extraordinary gain on early extinguishment of debt -- 0.05 --
--------------------------------
Total basic (loss) income per share $ (0.02) $ 0.24 $ 0.31
================================

DILUTED (LOSS) INCOME PER SHARE:
(Loss) income before extraordinary item $ (0.02) $ 0.18 $ 0.28
Extraordinary gain on early extinguishment of debt -- 0.05 --
--------------------------------
Total diluted (loss) income per share $ (0.02) $ 0.23 $ 0.28
================================

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 27,726 27,294 24,630
========= ======== ========
Diluted 27,726 29,791 27,519
========= ======== ========

The accompanying notes are an integral part of these consolidated statements.

35

RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)

Accumulated
Common Stock Other
--------------- Deferred Accumulated Comprehensive
Shares Amount APIC Compensation Deficit Loss Total
--------------------------------------------------------------------------------

BALANCE, December 31, 1998: 15,506 $ -- $ 92,144 $(353) $(22,546) -- $ 69,245

Treasury stock purchase and retirement (73) -- (514) -- -- -- (514)
Exercise of employee stock options 1,356 -- 4,425 -- -- -- 4,425
Stock issued under employee stock purchase plan 195 -- 1,722 -- -- -- 1,722
Income tax benefit of stock options exercised -- -- 3,226 -- -- -- 3,226
Amortization of deferred compensation -- -- -- 222 -- -- 222
Net income -- -- -- -- 7,609 -- 7,609
--------------------------------------------------------------------------------
BALANCE, December 31, 1999 16,984 -- 101,003 (131) (14,937) -- 85,935

Three-for-two stock split effected
in the form of a stock dividend 8,463 -- -- -- -- -- --
Issuance of common stock 1,000 -- 10,000 -- -- -- 10,000
Treasury stock purchase and retirement (90) -- (1,754) -- -- -- (1,754)
Exercise of employee stock options 1,210 -- 2,566 -- -- -- 2,566
Stock issued under employee stock purchase plan 81 -- 1,545 -- -- -- 1,545
Income tax benefit of stock options exercised -- -- 3,263 -- -- -- 3,263
Amortization of deferred compensation -- -- -- 51 -- -- 51
Net income -- -- -- -- 6,781 -- 6,781
--------------------------------------------------------------------------------
BALANCE, December 31, 2000 27,648 -- 116,623 (80) (8,156) -- 108,387

Comprehensive loss:
Net loss -- -- -- -- (428) -- (428)
Foreign currency translation adjustment -- -- -- -- -- (41) (41)
--------------------------------------------------------------------------------
Comprehensive loss: -- -- -- -- (428) (41) (469)
Issuance of common stock 25 -- 287 -- -- -- 287
Treasury stock purchase and retirement (725) -- (6,028) -- -- -- (6,028)
Exercise of employee stock options 506 -- 1,608 -- -- -- 1,608
Stock issued under employee stock purchase plan 58 -- 604 -- -- -- 604
Issuance of employee loans -- -- -- (818) -- -- (818)
Amortization of deferred compensation -- -- -- 43 -- -- 43
Cancellation of employee stock options -- -- (37) 37 -- -- --

--------------------------------------------------------------------------------
BALANCE, December 31, 2001 27,512 $ -- $ 113,057 $(818) $ (8,584) (41) $103,614
================================================================================

The accompanying notes are an integral part of these consolidated statements.

36

RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)

2001 2000 1999
--------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (428) $ 6,781 $ 7,609
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Gain on early extinguishment of debt before taxes -- (2,529) --
Deferred income taxes 38 (44) 1,078
Accretion of note payable interest -- 56 226
Depreciation and amortization 12,639 9,671 7,187
Amortization of deferred compensation 43 51 222
Income tax benefit of stock options exercised -- 3,263 3,226
Changes in assets and liabilities, net of acquired entities:
Accounts receivable 1,657 (3,362) (284)
Inventories 37 (4,031) (1,176)
Other assets 2,577 (1,244) 334
Accounts payable (8,628) 3,958 4,720
Accrued liabilities (212) (2,171) 1,691
Client deposits and deferred revenue 3,144 (2,039) 4,643
--------------------------------
Net cash provided by operating activities 10,867 8,360 29,476

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,138) (12,359) (4,243)
Purchases of acquired entities, net of cash acquired (4,525) (6,000) --
Purchase of software asset and capitalized professional
services costs (3,338) -- --
Capitalized software development costs (8,025) (5,929) (2,807)
--------------------------------
Net cash used in investing activities (21,026) (24,288) (7,050)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock, net of issuance costs -- 10,000 --
Repurchase of common stock (6,028) (1,754) (514)
Exercise of employee stock options 1,608 2,566 4,425
Stock issued under employee stock purchase plan 604 1,545 1,722
Repayment of capital lease obligations and other long-term debt (802) (304) (138)
Issuance of shareholder loans, net (818) -- --
Other (41) -- (23)
--------------------------------
Net cash (used in) provided by financing activities (5,477) 12,053 5,472
--------------------------------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (15,636) (3,875) 27,898

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 49,560 53,435 25,537
--------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 33,924 $ 49,560 $ 53,435
================================

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Issuance of common stock in connection with acquisition
of Breeze $ 288 $ -- $ --
================================
Assets acquired under capital lease $ 1,956 $ -- $ --
================================
Cash paid for income taxes $ 69 $ 120 $ 100
================================
Cash paid for interest $ 92 $ 3 $ 31
================================

The accompanying notes are an integral part of these consolidated statements.

37

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

1. ORGANIZATION AND BACKGROUND

Radiant Systems, Inc. and its subsidiaries (collectively, the "Company")
provides enterprise-wide technology solutions to businesses that serve the
consumer. The Company offers fully integrated retail automation solutions,
including point of sale systems, consumer-activated order systems, back office
management systems, headquarters-based management systems and web-enabled
decision support systems. The Company's products provide integrated, end-to-end
solutions that span from the consumer to the supply chain. The Company's
products enable retailers to interact electronically with consumers, capture
data at the point of sale, manage site operations, communicate electronically
with their sites, and interact with vendors through electronic data interchange
and web-based marketplaces. The Company also develops and markets a variety of
intelligent, Windows CE based devices that are specific to the retail industry.
In addition, the Company offers professional services focusing on technical
implementation, process improvement and change management as well as hardware
maintenance services and a 24-hour help desk support.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
Radiant Systems, Inc. and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.

Foreign Currency Translation

The financial statements of the Company's non-U.S. subsidiaries are translated
into U.S. dollars in accordance with Statement of Financial Accounting Standards
("SFAS") No. 52, "Foreign Currency Translation." Net assets of the non-U.S.
subsidiaries are translated at current rates of exchange. Income and expense
items are translated at the average exchange rate for the year. The resulting
translation adjustments are recorded in shareholders' equity. Certain other
translation adjustments and transaction gains and losses continue to be reported
in net income and were not material in any year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues, and expenses and disclosure of contingent assets and liabilities. The
estimates and assumptions used in the accompanying consolidated financial
statements are based upon management's evaluation of the relevant facts and
circumstances as of the date of the financial statements. Actual results could
differ from those estimates.

Revenue Recognition

The Company's revenue is generated primarily through software and system sales,
support and maintenance, and other services:

System Sales

The Company generally sells its products, which include both software
licenses and hardware, directly to end-users. Revenue from software
licenses and system sales is generally recognized as products are shipped,
provided that no significant vendor obligations remain and that the
collection of the related receivable is probable. If significant services
are included in the license agreement, the software license and contracted
services are recognized under the percentage of completion method.

Subscription-based revenues

In April 2000, the Company began offering its customers subscription
pricing and hosting services for some of its products. Contracts are
generally for a period of three to five years with revenue being recognized
ratably over the contract period commencing, generally, when the product
has been installed and training has been completed.

38

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

Support and Maintenance

The Company offers its clients postcontract support in the form of
maintenance, telephone support and unspecified software enhancements.
Revenue from support and maintenance is generally recognized as the service
is performed.

Other Services

The Company offers consulting, custom development, installation and
training services to its clients. Revenue from these services is generally
recognized on a time and material basis as the service is performed. The
Company also offers services under a fixed fee arrangement. Revenue from
fixed fee arrangements is recognized using the percentage of completion
method.

Deferred Revenue

Deferred revenue represents amounts collected prior to complete performance of
professional services, customer support services, software enhancements, and
significant obligations under license agreements. The Company expects to
complete such services or obligations within the next twelve months.
Additionally, estimated product warranty claims at the time of sale are included
in deferred revenue.

Inventories

Inventories consist principally of computer hardware and software media and are
stated at the lower of cost (first-in, first-out method) or market.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and
amortization. Depreciation of property and equipment is provided using the
straight-line method over estimated useful lives of one to five years. Leasehold
improvements are amortized over the terms of the respective leases or useful
lives of the improvements, whichever is shorter.

Property and equipment at December 31, 2001 and 2000 are summarized as
follows (in thousands):

2001 2000
----------------------
Computers and office equipment $ 18,906 $ 15,081
Leasehold improvements 5,341 4,536
Purchased software 6,744 4,128
Furniture and fixtures 5,638 3,599
Land 2,517 2,517
----------------------
39,146 29,861
Less accumulated depreciation and amortization (24,556) (15,769)
----------------------
$ 14,590 $ 14,092
======================

Depreciation expense for 2001, 2000 and 1999 was approximately $7.6 million,
$6.1 million, and $4.8 million, respectively. In conjunction with the closing of
its Hillsboro, Oregon and Pleasanton, California offices, in January 2001 (See
Note 4), the Company wrote off approximately $1.2 million of fixed assets with a
net book value of approximately $200,000.

Intangible Assets

Intangible assets consisting of goodwill, product licenses and patents are
amortized using the straight-line method over four to ten years. Goodwill
represents the excess of purchase price over the estimated fair value of assets
acquired. Amortization of intangibles was $2.7 million, $1.6 million and $1.3
million in 2001, 2000 and 1999, respectively. Accumulated amortization was $7.1
million and $4.4 million at December 31, 2001 and 2000, respectively. See
"Recent Accounting Pronouncements".

39

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

Long-Lived Assets

The Company records impairment losses on long-lived assets used in operations
when events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets.

Software Development Costs

Capitalized software development costs consist principally of salaries and
certain other expenses directly related to the development and modification of
software products. Capitalization of such costs begins when a detail program or
a working model has been produced as evidenced by the completion of design,
planning, coding and testing, such that the product meets its design
specifications and has thereby established technological feasibility.
Capitalization of such costs ends when the resulting product is available for
general release to the public. Amortization of capitalized software development
costs is provided at the greater of the ratio of current product revenue to the
total of current and anticipated product revenue or on a straight-line basis
over the estimated economic life of the software, which the Company has
determined is not more than three years. At December 31, 2001 and 2000,
accumulated amortization of capitalized software development costs was $6.8
million and $4.4 million, respectively.

Internally Developed Software Costs

The Company applies the provisions of the AICPA Statement of Position 98-1 (SOP
98-1), "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 requires all costs related to the development of
internal use software other than those incurred during the application
development stage to be expensed as incurred. Costs incurred during the
application development stage are required to be capitalized and amortized over
the estimated useful life of the software.

Common Stock

On February 9, 2000, the Company's Board of Directors approved a three-for-two
split to be effected in the form of a stock dividend payable to shareholders of
record as of March 1, 2000. On April 1, 2000, the Company effected the
three-for-two stock split. Shares presented in the consolidated statements of
shareholders' equity reflect the actual shares outstanding for each period
presented. All share, per share, common stock and stock option amounts contained
elsewhere in the consolidated financial statements and related notes for all
periods presented have been restated to reflect the effect of this split.

Stock-based Compensation

Employee stock awards under the Company's compensation plans are accounted for
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25). In January 1996, the Company adopted the
disclosure requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123).

Net (Loss) Income Per Share

Basic net (loss) income per common share is computed by dividing net (loss)
income by the weighted-average number of shares outstanding. Diluted net (loss)
income per share includes the dilutive effect of stock options.

A reconciliation of the weighted average number of common shares outstanding
assuming dilution is as follows (in thousands):

2001 2000 1999
------------------------

Average common shares outstanding 27,726 27,294 24,630

Dilutive effect of outstanding stock options -- 2,497 2,889
------ ------ ------

Average common shares outstanding assuming dilution 27,726 29,791 27,519
====== ====== ======

40

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

For the years ended December 31, 2001, 2000 and 1999, options with an
antidilutive impact of approximately 1,460,000, 530,000 and 270,000 shares of
common stock, respectively, were excluded from the above reconciliation.

Fair Value of Financial Instruments

The book values of cash, trade accounts receivable, trade accounts payable and
other financial instruments approximate their fair values principally because of
the short-term maturities of these instruments. The fair value of the Company's
long-term debt is estimated based on the current rates offered to the Company
for debt of similar terms and maturities. Under this method, the Company's fair
value of long-term debt was not significantly different than the stated value at
December 31, 2001.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash.

Concentration of Business and Credit Risk

Financial instruments, which potentially subject the Company to credit risk,
consist principally of trade receivables and interest bearing investments. The
Company performs on-going credit evaluations of its clients and generally does
not require collateral. The Company maintains adequate reserves for potential
losses and such losses, which have historically been minimal, have been included
in management's estimates.

The Company's revenues are derived from a limited number of clients. During
2001, approximately 32.3% of the Company's revenue were derived from five
clients. During 2000, approximately 38.0% of the Company's revenue were derived
from five clients. During 1999, approximately 40.9% of the Company's revenue
were derived from five clients. During the years ended December 31, 2001, 2000
and 1999, the following clients individually accounted for more than 10.0% of
the Company's revenue:

December 31,
2001 2000 1999
--------------- ---------------- ------------------
Client A 10.2% 10.2% *
Client B * * 13.3%

*Accounted for less than 10.0% of total revenues for the period indicated.

At December 31, 2001, approximately 12.5% of the Company's accounts receivable
related to Client A.

Comprehensive (Loss) Income

In fiscal 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes the rules for the reporting of comprehensive
income and its components. The Company's comprehensive income includes net
income and foreign currency translation adjustments. Total comprehensive loss
for the year ended December 31, 2001 was $469,000, while total comprehensive
income for the years ended December 31, 2000 and 1999 was $6.8 million and $7.6
million, respectively. Accumulated other comprehensive loss at December 31, 2001
and 2000 consisted of foreign currency translation adjustments of $41,000 and
$0, respectively.

Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144 supersedes
Financial Accounting Standards Board Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS No. 121"), and the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business", and
"Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
(Opinion 30) for the disposal of a segment of a business (as previously defined
in Opinion 30). The Financial Accounting Standards Board issued SFAS No. 144 to
establish a single accounting model, based on the framework established in SFAS
No. 121, for long-lived assets to be disposed of by sale.

41

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

SFAS No. 144 broadens the presentation of discontinued operations in the income
statement to include a component of an entity (rather than a segment of a
business). A component of an entity comprises operations and cash flows that can
be clearly distinguished, operationally and for financial reporting purposes,
from the rest of the entity. SFAS No. 144 also requires that discontinued
operations be measured at the lower of the carrying amount for fair value less
cost to sell. SFAS No. 144 is effective for fiscal years beginning after
December 1, 2001 and should be applied prospectively. Management is evaluating
the effect of this statement on the Company's results of operations and
financial position.

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. When the liability is initially recorded, the entity capitalizes
the cost by incurring the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, the entity either settles the obligation for the
amount recorded or incurs a gain or loss. SFAS No. 143 is effective for fiscal
years beginning after June 15, 2002. Management is evaluating the effect of this
statement on the Company's results of operations and financial position.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 141, "Business Combinations" ("SFAS No.141"),
and Statement of Financial Accounting Standard No. 142, "Goodwill and Other
Intangible Assets" ("SFAS No. 142"). SFAS No. 141 supercedes APB No. 16, and
SFAS No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises". SFAS No. 141 prescribes the accounting principles for business
combinations and requires that all business combinations be accounted for using
the purchase method of accounting. SFAS No. 141 is effective for all business
combinations after June 30, 2001.

SFAS No. 142 supercedes APB Opinion No. 17, "Intangible Assets." SFAS No. 142
prescribes the accounting practices for acquired goodwill and other intangible
assets. Under SFAS No. 142, goodwill will no longer be amortized to earnings,
but instead will be reviewed periodically (at least annually) for impairment.
The Company adopted SFAS No. 142 on January 1, 2002. Goodwill and certain other
intangible assets, determined by management to have an indefinite life and
relating to acquisitions subsequent to June 30, 2001, will not be amortized. As
of December 31, 2001 the Company had approximately $10.5 million of recorded net
goodwill and $2.2 million in intangible assets, which will be subject to the
provisions of SFAS No. 142. The Company is amortizing its intangible assets
resulting from acquisitions after June 30, 2001over a period of no greater than
five years. During 2001, the Company recorded approximately $2.3 million of
goodwill amortization expense, net of taxes. Although the Company is currently
evaluating this new pronouncement and has not yet determined the full impact on
its financial statements, on January 1, 2002 the Company ceased amortization of
goodwill on all its acquisitions made prior to June 30, 2001, the effective date
of this pronouncement. Management expects to complete its evaluation of the
impact of this statement by June 30, 2002.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
was required to adopt SFAS 133 effective January 1, 2001. The adoption did not
have a material impact on the Company's results of operations.

Reclassifications

Certain reclassifications have been made to prior year financial statements to
conform to the current year presentation.

42

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

3. PRODUCT DEVELOPMENT EXPENDITURES

Product development expenditures, excluding purchased research and development
costs for the years ended December 31, 2001, 2000 and 1999 are summarized as
follows (in thousands):

2001 2000 1999
------- ------- -------

Total development expenditures $19,259 $16,959 $13,932
Less additions to capitalized software development costs prior to amortization 8,025 5,929 2,807
------- ------- -------

Product development expense $11,234 $11,030 $11,125
======= ======= =======

The activity in the capitalized software development account during 2001, 2000
and 1999 is summarized as follows (in thousands):

December 31,
2001 2000 1999
-------- ------- -------

Balance at beginning of period, net $ 9,358 $ 5,394 $ 3,718
Capitalized software development costs 8,025 5,929 2,807
Capitalized software costs from acquisitions (Note 5) 213 -- --
Amortization expense (2,367) (1,965) (1,131)
-------- ------- -------
Balance at end of period, net $ 15,229 $ 9,358 $ 5,394
======== ======= =======

Amortization of capitalized software costs is included in system costs of
revenues in the accompanying statements of operations.

4. NON-RECURRING CHARGES

During 2001, the Company recorded two separate non-recurring charges; a charge
of $1.0 million relating to office closures and a charge of approximately
$200,000 relating to costs of terminating employees. No such charges were
incurred in 2000 and 1999.

On January 23 and 26, 2001, respectively, the Company announced the permanent
closure of its facilities in Hillsboro, Oregon and Pleasanton, California. The
decision was made to reduce costs and consolidate operations at the Company's
headquarters in Alpharetta, Georgia. The Hillsboro office had served primarily
as a sales office for the Company's small business food products, while the
Pleasanton office had served primarily as a sales office for hospitality and
food service products. The office closure costs related to these two offices are
comprised primarily of severance benefits and lease reserves. As part of the
closings, the Company terminated 25 of the 34 employees. As a result, the
Company recorded a non-recurring charge of approximately $1.0 million associated
with this action during its first quarter of 2001. During 2001, the Company paid
or incurred approximately $845,000 in severance, lease payments and other exit
costs related to this action. Furthermore, at December 31, 2001, the Company had
approximately $155,000 remaining in accrued liabilities related to the remaining
exit costs, which the Company expects to be paid by the end of the first quarter
of 2002.

43

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

During the third quarter ended September 30, 2001, the Company experienced
declines in revenues and negative operating results which the Company attributes
primarily to the current global economic environment and the product transition
the Company is currently undertaking. As a result, the Company terminated
approximately 90 employees and in accordance with U.S. labor law and practice,
the Company paid one-time severance benefits to all terminated employees in the
aggregate amount of approximately $200,000. At December 31, 2001, the Company
had no further obligations surrounding this action.

5. ACQUISITIONS

HotelTools, Inc.

On July 26, 2001, the Company purchased certain assets from HotelTools,
Inc. ("HotelTools"), an emerging provider of enterprise software solutions for
the hospitality industry including solutions to centralize all aspects of
multi-property hotel operations, including hotel management, rate management,
reservations and procurement. The transaction included the purchase of certain
intellectual property rights, fixed assets and patents pending. The purchase
price consisted of $1.8 million in cash and assumption of net liabilities of
approximately $1.0. Total consideration, including approximately $100,000 in
transaction costs, was $2.9 million. Intangibles of approximately $2.4 million
were recorded, which are being amortized over two to five years (See Note 2). In
addition, the Company hired approximately 30 former employees of HotelTools. Pro
forma results of operations for the year ended December 31, 2001 are not
included, as this acquisition was not material.

Breeze Software Proprietary Limited

On May 9, 2001, the Company acquired all the common stock of Breeze Software
Proprietary Limited ("Breeze"), a leading provider of software applications for
retailers in the Australian and Asia-Pacific marketplaces. The purchase price
consisted of $1.7 million in cash and assumption of net liabilities of
approximately $700,000. Total consideration, including approximately $400,000 in
transaction costs, was $2.8 million. Intangibles of approximately $2.8 million
were recorded, which are being amortized over four to ten years (See Note 2).
The Company may pay additional consideration of cash and stock if certain
earnings milestones are obtained. During the fourth quarter of 2001, specified
earnings milestones were obtained for the period from the purchase date through
December 31, 2001. As such, the Company paid additional consideration of 25,000
shares of common stock for a total additional consideration of $287,500, which
was allocated to goodwill. Pro forma results of operations for the year ended
December 31, 2001 are not included, as this acquisition was not material.

TimeCorp

On June 22, 2000, the Company consummated the acquisition of TimeCorp
("TimeCorp"), a workforce management and planning software business operation
owned by VeriFone, Inc., a former subsidiary of Hewlett-Packard, Inc. The
purchase price consisted of $6.0 million in cash and assumption of $400,000 in
liabilities and included substantially all the assets of TimeCorp, including
software products, intellectual property and client contracts and was accounted
for under the purchase method of accounting. Intangibles of approximately $6.4
million were recorded, which are being amortized over four to ten years. Pro
forma results of operations for the year ended December 31, 2001 are not
included, as this acquisition was not material.

1997 Acquisitions

During fiscal 1997, the Company acquired four businesses, all of which were
accounted for under the purchase method of accounting. These businesses were
acquired for a combination of cash, notes payable and shares of the Company's
common stock. On May 23, 1997, the Company purchased all of the outstanding
common stock of Restaurant Management and Control Systems, Inc. ("ReMACS"), a
provider of back office management systems for clients in the food service
industry. On May 30, 1997, the Company purchased all of the outstanding common
stock of RSI Merger Corporation (d.b.a. Twenty/20 Visual Systems) ("Twenty/20"),
a provider of point of sale and table management systems for full service
restaurants. On October 31, 1997, the Company purchased all of the outstanding
common stock of RapidFire Software, Inc. ("RapidFire Software") and EquiLease
Financial Services, Inc. ("EquiLease"), (collectively "RapidFire"), a leading
provider of point of sale systems to the pizza industry and other delivery
restaurants. On November 18, 1997, the Company purchased all of the outstanding
common stock of Logic Shop, Inc. ("Logic Shop"), a provider of point of sale and
back office management software to the convenient automotive service center
market.

44

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

6. PURCHASED SOFTWARE

On June 30, 2001 the Company and Tricon Restaurant Services Group, Inc.
("Tricon") signed a contract evidencing a multi-year arrangement to implement
Radiant Enterprise Productivity Software (the "Software") exclusively in
Tricon's company-owned restaurants around the world. Tricon's franchisees will
also be able to subscribe to the Software under the same terms as the
company-owned restaurants. As part of this agreement, the Company agreed to
purchase from Tricon its source code and object code for certain back office
software previously developed by Tricon for $20.0 million, $16.5 million of
which is payable in specified annual installments through December 31, 2003. The
remaining $3.5 million is payable on a pro rata basis based upon Tricon's
acceptance and rollout of the Software and fulfillment of its total target
client store commitment beginning in 2002 and ending in 2004 (See Note 9). Costs
associated with the purchase of this asset, costs of professional services work
performed, as well as cash received by the Company, will be deferred and
recognized over the five-year subscription term of the contract beginning upon
installation of the Software at each site. During 2001, the Company paid Tricon
$2.8 million as its initial payment for the purchase of the Tricon back office
software, and capitalized approximately $540,000 in personnel costs associated
with professional services for which associated revenues of approximately $1.5
million were deferred.

7. LONG-TERM DEBT

On March 30, 2000 the Company and the former sole shareholder of RapidFire
reached an agreement whereby the Company paid the former shareholder $200,000
and forgave a $1.5 million note receivable, and in return, was relieved in full
of its indebtedness to the shareholder. This indebtedness consisted of a
noninterest-bearing note with a lump-sum payment of $6.0 million due October 31,
2005 ($4.3 million at December 31, 1999) and was issued October 31, 1997 as part
of the Company's acquisition of RapidFire. As a result of this early
extinguishment of debt, the Company recorded an extraordinary gain of
approximately $2.5 million, net of taxes of $1.0 million, during 2000.

8. INCOME TAXES

The following summarizes the components of the income tax provision (benefit)
(in thousands):

2001 2000 1999
----- ------ -------
Current taxes:
Federal -- $1,513 $ 5,311
State -- 216 759
Foreign $ 221 -- --
Deferred taxes (38) 44 (1,078)
----- ------ -------
Income tax provision (benefit) $ 183 $1,773 $ 4,992
===== ====== =======

In addition to the above, the Company recorded tax expense of $1.0 million in
2000 related to the extraordinary gain from early extinguishment of debt.

The total tax provision is different from the amount that would have been
recorded by applying the U.S. statutory federal income tax rate to income before
taxes. Reconciliation of these differences is as follows:

45

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

2001 2000 1999
----- ----- ----

Statutory federal tax rate (35.0)% 35.0% 35.0%
State income taxes, net of federal tax benefit (5.0) 5.0 5.0
Foreign taxes 90.0 -- --
Meals and Entertainment 23.6 1.1 0.3
Research and development tax credit -- (10.5) --
Other 0.7 (1.5) (0.7)
----- ----- ----
74.3% 29.1% 39.6%
===== ===== ====

The components of the net deferred tax asset as of December 31, 2001 and 2000
are as follows (in thousands):

2001 2000
-------- --------

Deferred tax assets:
Net operating loss carryforward $ 5,117 $ 3,058
Research tax credit 2,447 2,400
Inventory reserve 916 697
Depreciation 2,091 1,091
Allowance for doubtful accounts 1,289 1,107
Intangibles 3,745 2,982
-------- --------
15,605 11,335
Valuation allowance (3,690) (1,907)
-------- --------
Total deferred tax assets 11,915 9,428
-------- --------

Deferred tax liabilities:
Capitalized software (6,091) (3,743)
Other (289) (352)
-------- --------
Total deferred tax liabilities (6,380) (4,095)
-------- --------
Net deferred tax asset $ 5,535 $ 5,333
======== ========

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 2001 and
2000, the Company had potential tax benefits of $7.6 million and $5.5 million,
respectively, related to research and development tax credits and net operating
loss carryforwards for income tax purposes.

The net operating loss carryforwards are primarily attributable to tax
deductions related to the exercise of stock options. At December 31, 2000, the
tax benefit related to the stock options exercised totaled approximately $3.3
million. Because stock option deductions are not recognized as an expense for
financial purposes, the tax benefit for stock option deductions must be credited
to additional paid-in capital. In 2001, the Company recorded a valuation
allowance against the tax benefit for stock options exercised due to uncertainty
surrounding the realization of the benefit.

The tax losses and tax credit carryforwards (if not utilized against taxable
income) expire from 2012 to 2021. A valuation allowance of $3.7 and $1.9 million
has been provided at December 31, 2001 and 2000, respectively, to offset the
related deferred tax assets due to uncertainty of realizing the benefit of the
loss carryforwards and tax credits.

46

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

As of December 31, 2001, the Company has recorded a net deferred tax asset of
$5.5 million. Realization is dependent upon generating sufficient taxable income
in future periods. Although realization is not assured, management believes it
is more likely than not that the deferred tax asset will be realized.

9. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space, equipment and certain vehicles under
noncancelable operating lease agreements expiring on various dates through 2013.
Total rent expense under operating leases was approximately $4.9 million, $3.2
million and $4.2 million for the years ended December 31, 2001, 2000 and 1999,
respectively. In January 2002, the Company extended two of the office leases
through 2013 with an aggregate increase to the future minimum lease payments of
$6.5 million. The Company leases various equipment and furniture under a
four-year capital lease agreement. The capital lease runs until April 30, 2005.
Aggregate future minimum lease payments under the capital lease and
noncancellable operating leases as of December 31, 2001 are as follows (in
thousands):

Capital Operating
Leases Leases
------- ---------
2002 $ 551 $ 6,495
2003 551 6,102
2004 551 5,112
2005 184 4,191
2006 -- 3,885
Thereafter -- 16,042
------ -------

Total: 1,837 $41,827
=======
Less: Amount representing interest 227
------
Net present value of minimum lease payments 1,610

Less: Current portion of capital lease 460
------
Long-term portion of capital lease obligation $1,150
======

Purchased Software Payments

As more fully described in Note 6, during 2001 the Company agreed to purchase
from Tricon its source code and object code for certain back office software
previously developed by Tricon for $20.0 million, $16.5 million of which is
payable in specified annual installments through December 31, 2003. The
remaining $3.5 million is payable on a pro rata basis based upon Tricon's
acceptance and rollout of the Software and fulfillment of its total target
client store commitment beginning in 2002 and ending in 2004. The remaining
specified annual installment payments due are as follows (in thousands):

December 31,
- ---------------------------
2001 $5,250
2002 4,500
2003 4,026
-------
Total $13,776
=======

The December 31, 2001 payment of $5.3 million was made in January 2002. All
penalties and additional interest expense were waived by Tricon. The annual
installment payments are partially secured by an irrevocable letter of credit
secured by the Company's accounts receivable.

47

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

Employment Agreements

As of December 31, 1997 the Company had entered into employment agreements with
eight employees. During 1998 and 1999, five of the employees under employment
agreements terminated their employment with the Company, including the former
sole shareholder of RapidFire, and the primary shareholders of ReMACS and
PrysmTech. During 2001, one employee under employment agreement terminated his
employment with the Company. As of December 31, 2001, the Company has no further
obligation under the terminated agreements.

Under each of the remaining two employment agreements, in the event employment
is terminated (other than voluntarily by the employee or by the Company for
cause or upon the death of the employee), the Company is committed to pay
certain benefits, including specified monthly severance of not more than $13,000
per month. The benefits are to be paid from the date of termination to June
2002.

As part of the acquisition of Breeze, the Company entered into employment
agreements with three employees. Under one of these agreements, in the event the
employment is terminated (other than by the employee without just cause), the
Company would be obligated to pay the employee severance at a rate equal to his
base salary at the date of termination. This obligation would continue for two
months (but not past December 31, 2003) in the event the Company terminates the
employment with cause. This obligation would continue until December 31, 2003,
if the Company terminates the employment without cause or based on the illness,
injury, incapacity or death of the employee, or if the employee terminates the
employment with just cause.

Under each of the remaining two employment agreements, in the event the
employment is terminated (other than by the employee without just cause or by
the Company upon the death of the employee), the Company would be obligated to
pay the employee severance at a rate equal to his base salary at the date of
termination for two months in the event the Company terminates the employment
with cause, and for six months in the event the Company terminates the
employment without cause or on the illness, injury or incapacity of the
employee, or if employee terminates the employment with just cause. The term of
these latter two agreements is indefinite.

10. SHAREHOLDERS' EQUITY

Stock

Stock Offerings

On March 3, 2000, the Company entered into an agreement with America Online,
Inc. ("AOL") and MovieFone, Inc., a subsidiary of AOL ("MF" or collectively, AOL
Moviefone), to form a strategic relationship in the retail point of sale
business. This relationship, among other aspects, entails a ten-year marketing
and development agreement whereby the Company agreed to develop and manufacture
point of sale systems and services for sale to the entertainment industry
pursuant to MF's specifications, which would make such point of sale systems
interoperable with MF's remote entertainment and event ticketing services. The
relationship also contemplated future collaborative efforts between the
companies. As part of this relationship, AOL purchased $10.0 million of the
Company's common stock at a price of $10 per share. In addition, AOL agreed to
invest $25.0 million in a to-be-formed subsidiary of the Company to engage in
consumer interactive businesses other than in the entertainment industry (e.g.,
interactive fuel and dispenser business and interactive restaurant self-ordering
business). In return for its investment, AOL would receive a 15% equity interest
in the form of preferred stock of this subsidiary. To the extent AOL did not
invest $25.0 million in the to-be-formed subsidiary, AOL agreed to invest the
balance in another to be formed subsidiary of the Company or purchase common
stock of the Company at the then current market price.

On March 19, 2001, the Company and AOL amended this strategic relationship.
Based on the new agreement, the Company's theater exhibition point-of-sale and
management systems solution became AOL Moviefone's preferred offering in the
cinema and entertainment industry. In addition, the Company agreed to support
AOL Moviefone clients operating the MARS point of sale product. Additionally,
both companies agreed not to pursue forming a subsidiary to address potential
business-to-consumer applications over the Internet. Alternatively, AOL, as part
of the amended agreement, has agreed to fund an

48

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

undisclosed amount of money to enable current MARS clients to upgrade to the
Company's systems and for the Company to perform certain professional services
for AOL and certain MARS' clients.

Stock Repurchase Program

On September 18, 1998, the Company's Board of Directors authorized the Company
to repurchase up to 3.0 million shares of its common stock from time to time in
the open market, negotiated or block transactions. During 1998 and 1999, the
Company repurchased and subsequently retired approximately 680,000 shares at
prices ranging from $6 3/8 to $8 per share, for total consideration of
approximately $4.5 million.

In May 2000, the Board of Directors of the Company authorized a stock repurchase
program pursuant to which the Company was authorized to repurchase up to 1.0
million shares of common stock of the Company over the next twelve months.
During 2000, the Company repurchased and subsequently retired approximately
90,000 shares at prices ranging from $18.25 to $19.94 per share, for total
consideration of approximately $1.8 million. In May 2001, the Board of Directors
of the Company renewed this stock repurchase program whereby the Company is
authorized to repurchase up to 1.0 million shares of common stock of the Company
through May 2002. During 2001, the Company repurchased and subsequently retired
approximately 725,000 shares at prices ranging from $5.27 to $18.67 per share,
for total consideration of approximately $6.0 million. As of December 31, 2001,
the Company has repurchased and subsequently retired approximately 815,000
shares of its common stock, for total consideration of approximately $7.8
million under these repurchase plans.

Preferred Stock

In January 1997, the Company authorized 5,000,000 shares of preferred stock with
no par value. The Company's Board of Directors has the authority to issue these
shares and to fix dividends, voting and conversion rights, redemption
provisions, liquidation preferences and other rights and restrictions.

Deferred Compensation

As part of the acquisition of Twenty/20, the Company granted two employees
options to purchase 140,000 shares of the Company's common stock at an exercise
price less than the fair market value of the Company's common stock on the date
of such grant. In connection with the issuance of 100,000 options, which vested
immediately, the Company recorded a nonrecurring compensation charge of $1.2
million. Additionally, the Company recorded $303,500 as deferred compensation
for the remaining 40,000 options that vested over four years, for the excess of
the fair market value of the Company's common stock on the date of grant over
the aggregate exercise price of such options. The deferred compensation is being
amortized ratably over the four-year vesting period. During 2001, approximately
19,000 of these options were cancelled due to the voluntary termination of the
employee. Also during 1997, the Company issued certain employees options to
purchase 26,500 of shares of the Company's common stock at a price less than
fair market value on the date of grant. Deferred compensation of $323,375 was
recorded and is being amortized ratably over a four-year vesting period. At
December 31, 2001 the Company has no further obligation under these option
agreements.

11. EMPLOYEE BENEFITS

Stock-Based Compensations Plans

Employee Stock Purchase Plan

In April 1998, the Company's Board of Directors adopted the 1998 Employee Stock
Purchase Plan (the "ESPP"). Under the ESPP, an aggregate of 1,500,000 shares of
common stock is reserved for purchase by qualified employees, at 85.0% of the
appropriate market price. The ESPP provides that qualified employees may
purchase shares at the lower of the market price in effect on the day the
offering starts or the day the offering terminates. In 2001, 2000 and 1999, the
Company issued approximately 58,000, 81,000 and 195,000 shares under the ESPP at
an average price of $11.82, $19.00 and $8.82 per share, respectively.

49

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

Directors Stock Option Plan

During 1997, the Company's Board of Directors adopted the Non-Management
Directors' Stock Option Plan (the "Directors' Plan") for non-management
directors of the Company, under which the Company may grant up to 150,000
options to nonemployee directors of the Company to purchase shares of the
Company's common stock. Options are granted at an exercise price, which is not
less than fair value as referenced to quoted market prices. Initial grants to
new directors are exercisable over three years, while annual grants are
exercisable six months after the grant date. Options granted under the Plan
expire ten years from the date of grant. During 2001, the Company granted 30,000
options under the Directors' Plan. At December 31, 2001 the Company has granted
130,000 options under the Directors' Plan, of which 7,500 have been exercised
and none have been cancelled.

1995 Stock Option Plan

The Company's 1995 Stock Option Plan (the "Plan"), as amended, provides for the
issuance of up to 13,000,000 incentive and nonqualified stock options to key
employees. Options are granted at an exercise price which is not less than fair
value as referenced to quoted market prices and become exercisable as
determined by the Board of Directors, generally over a period of four to five
years. Options granted under the Plan expire ten years from the date of grant.
At December 31, 2001, options to purchase 3,011,189 shares of common stock were
available for future grant under the Plan. From 1995 through 2001, the Company
has granted a cumulative 811,035 nonqualified stock options outside the Plan, of
which, 539,235 have been cancelled and 279,300 have been exercised.

On October 24, 2001, the Company announced a voluntary stock option exchange
program for the benefit of its employees. Under the program, employees were
offered the opportunity, if they elected to cancel certain outstanding stock
options previously granted to them for new stock options to be granted no
earlier than May 29, 2002. On November 23, 2001, 772,810 options at an average
exercise price of $21.80 were cancelled. The new options will be granted with a
strike price to be set at the fair market value of our stock at the date of
grant. Employees will receive one new stock option for each stock option
cancelled. The exchange program was organized to comply with applicable
accounting standards and, accordingly, no compensation charges related to this
program are expected to result. Members of the Company's Board of Directors,
executive officers, and certain other members of the senior management team were
not eligible to participate in this program.

In conjunction with the Company's efforts to reduce its operating costs, in the
fourth quarter of 2001 the Company initiated a change in compensation to its
senior management team. Under this plan, each individual was granted a certain
number of stock options in return for a specified reduction in salary
compensation. As part of this plan, the Company issued approximately 880,000
options at an exercise price of $5.63. The options vest in various increments
over 18 months.

Stock option activity for all plans for each of the three years ended December
31, 2001 is as follows (in thousands, except weighted average exercise price):

50

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

2001 2000 1999
---------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ --------------

Outstanding at beginning of year 4,811 $13.36 5,216 $ 7.91 5,806 $ 3.01
Granted 2,591 10.49 1,257 25.16 2,124 14.71
Canceled (1,491) 19.48 (452) 13.84 (680) 4.36
Exercised (506) 3.34 (1,210) 2.14 (2,034) 2.24
------ ------ ----- ------ ------- ------
Outstanding at end of year 5,405 $11.26 4,811 $13.36 5,216 $ 7.91
====== ====== ===== ====== ======= ======
Options exercisable at end of year 1,721 $10.17 1,394 $ 7.65 815 $ 4.40
====== ====== ===== ====== ======= ======

The following table sets forth the range of exercise prices, number of shares,
weighted average exercise price and remaining contractual lives by groups of
similar price and grant date (in thousands, except weighted average price and
remaining contractual life):

Options Outstanding Options Exercisable
--------------------------------------------------------------
Weighted
Average
Weighted Remaining Weighted
Range of Number of Average Contractual Number Average
Exercise Price Shares Price Life (Years) of Shares Price
- -------------- --------- --------- ------------ --------- --------
$ 0.67-$4.92 1,280 $ 3.91 5.58 895 $ 3.66
$ 5.63-$7.00 1,309 5.86 9.61 30 6.77
$ 7.29-$12.00 779 8.75 7.77 292 8.75
$13.20-$19.75 897 15.98 9.15 33 17.66
$20.06-$45.58 1,140 23.74 8.10 471 23.12
----- -----
Total 5,405 $11.26 1,721 $10.17
----- -----

Fair Value Disclosure

The Company has elected to account for its stock-based compensation plan under
APB 25; however, the Company has computed for pro forma disclosure purposes the
value of all options granted during 2001, 2000 and 1999 using the Black-Scholes
option pricing model as prescribed by SFAS 123 using the following weighted
average assumptions used for grants in 2001, 2000 and 1999:

2001 2000 1999
----------- ---------- ----------
Risk free interest rate 4.50% 5.75% 5.75%
Expected dividend yield 0.0% 0.0% 0.0%
Expected lives 4.0 years 4.0 years 4.0 years
Expected volatility 93% 90% 81%

The total value of the options granted during the years ended December 31, 2001,
2000 and 1999 were computed as approximately $16.5 million, $21.3 million and
$18.8 million, respectively, which would be amortized over the vesting period of
the options. If the Company had accounted for these plans in accordance with
SFAS 123, the Company's reported pro forma net (loss) income and pro forma net
(loss) income per share for the years ended December 31, 2001, 2000 and 1999
would have resulted in the following pro forma amounts (in thousands, except per
share data):

51

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

2001 2000 1999
------- ------- -------

Net (loss) income:
As reported $ (428) $ 6,781 $7,609
Pro forma (4,598) (2,644) 4,509
Basic:
As reported $ (0.02) $ 0.24 $ 0.31
Pro forma (0.17) (0.10) 0.18
Diluted:
As reported $ (0.02) $ 0.23 $ 0.28
Pro forma (0.17) (0.09) 0.16

Employee Benefit Plan

The Company has a 401(k) profit-sharing plan (the "401(k) Plan") available to
all employees of the Company who have attained age 21. The 401(k) Plan includes
a salary deferral arrangement pursuant to which employees may contribute a
minimum of 1.0% and a maximum of 15.0% of their salary on a pretax basis. The
Company may make both matching and additional contributions at the discretion of
the Company's Board of Directors. The Company made contributions of $598,000,
$372,000 and $0 during 2001, 2000 and 1999, respectively.

12. RELATED-PARTY TRANSACTIONS

As part of the acquisition of RapidFire, the Company agreed to loan the former
sole shareholder of RapidFire $1.5 million. During 1998, the Company advanced
$1.5 million under the loan agreement. As more fully described in Note 7, an
agreement was reached between the Company and the former sole shareholder and
this note was repaid in full. Interest income recorded during 2000 and 1999
related to this note was approximately $19,000 and $75,000, respectively.

During 1998 and 1999, a shareholder received two loans from the Company in the
aggregate amount outstanding of $181,750 at December 31, 1999 which were paid in
full during 2001. During 2001, five shareholders, comprised of four non-officer
employees and one officer, received loans in the aggregate amount of $1.2
million. The loans bear interest at 5.5% and are payable in certain specified
increments with final payment due April 2002. Two of these loans totaling
$370,000, along with accrued interest, were paid in full during 2001. Interest
income recorded during 2001, 2000 and 1999 related to the notes was
approximately $31,000, $11,000 and $8,000, respectively.

13. SEGMENT REPORTING DATA

Prior to January 1, 2000 the Company operated through two primary reportable
segments (i) Global Solutions and (ii) Regional Solutions. Effective January 1,
2000, the Company restructured its business units and as a result, currently
operates under one business unit, providing enterprise technology solutions to
businesses that serve the consumer. To date, the Company's product applications
have been focused on the petroleum/convenience store, hospitality and food
service, and entertainment markets, as these markets require many of the same
product features and functionality.

The accounting policies of the segments are substantially the same as those
described in the summary of significant accounting policies. The Company's
management evaluates the performance of the segments based on an internal
measure of contribution margin, or income and loss from operations, before
certain allocated costs of development and corporate overhead. The Company
accounts for intersegment sales and transfers as if the sales or transfers were
to third parties, that is, at current market prices.

52

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

The Other nonreportable segment includes sales to other industries the Company
serves, such as speciality retail, certain unallocated corporate operating
expenses and the elimination of intersegment sales.

The summary of the Company's operating segments is as follows (in thousands):

For the year ended December 31, 2001
----------------------------------------------------------------------
Petroleum/ Hospitality
Convenience And Food
Store Service Entertainment Other Consolidation
----------------------------------------------------------------------

Revenues $70,341 $32,452 $24,585 $ 4,601 $131,979
Contribution margin 19,519 (32) 8,185 (2,805) $ 24,867
Non-recurring charges -- 1,023 -- 221 1,244
Operating income (loss) 5,913 (6,556) 3,278 (4,393) (1,758)
Identifiable assets (1) $18,667 $19,752 $ 4,169 $83,392 $125,980

For the year ended December 31, 2000
----------------------------------------------------------------------
Petroleum/ Hospitality
Convenience And Food
Store Service Entertainment Other Consolidation
----------------------------------------------------------------------

Revenues $68,882 $32,318 $22,994 $ 3,850 $128,044
Contribution margin 21,858 738 6,400 (751) $ 28,245
Operating income (loss) 7,879 (5,743) 2,681 (1,123) 3,794
Identifiable assets (1) $11,821 $18,875 $ 3,879 $96,686 $131,261

For the year ended December 31, 1999
----------------------------------------------------------------------
Petroleum/ Hospitality
Convenience And Food
Store Service Entertainment Other Consolidation
----------------------------------------------------------------------

Revenues $61,240 $29,827 $38,599 -- $129,666
Contribution margin 15,940 3,071 15,589 $(1,461) 33,139
Operating income (loss) 7,202 (3,483) 8,730 (1,461) 10,988
Identifiable assets (1) $8,105 $13,466 $ 8,769 $ 81,659 $111,999

(1) Identifiable assets allocated between the segments are comprised
primarily of accounts receivable and intangible assets. All assets
included in the Other segment are shared among all segments.

The Company distributes its technology both within the United States and
internationally. For the years ended December 31, 2001, 2000 and 1999 revenues
derived from international sources were $13.4 million, $2.7 million and $3.7
million, respectively.

53

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

14. SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (unaudited)

The following tables set forth certain unaudited financial data for each of the
Company's last eight calendar quarters. The information has been derived from
unaudited consolidated financial statements that, in the opinion of management,
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such quarterly information. The operating
results for any quarter are not necessarily indicative of the results to be
expected for any future period.

Quarter ended
Mar.31, June 30, Sept.30, Dec.31,
2001 2001 2001 2001
--------------------------------------
(In thousands, except per share data)

Revenues:
System sales $20,499 $19,496 $13,862 $17,411
Client support, maintenance and other services 13,498 16,953 15,268 14,992
--------------------------------------
Total revenues 33,997 36,449 29,130 32,403
Cost of revenues:
System sales 10,496 10,797 8,272 9,234
Client support, maintenance and other services 8,983 9,585 10,387 9,088
--------------------------------------
Total cost of revenues 19,479 20,382 18,659 18,322
--------------------------------------
Gross profit 14,518 16,067 10,471 14,081
Operating expenses:
Product development 2,454 2,791 2,781 3,208
Sales and marketing 4,715 5,322 5,268 4,413
Depreciation and amortization 2,324 2,456 2,457 2,406
Acquisition and other non-recurring charges 1,023 -- -- 221
General and administrative 3,998 4,289 3,746 3,023
--------------------------------------

Income (loss) from operations 4 1,209 (3,781) 810
Interest income, net 573 435 289 216
--------------------------------------

Income (loss) before income taxes 577 1,644 (3,492) 1,026
Income tax provision (benefit) 202 658 (1,222) 546
--------------------------------------

Net income (loss) $ 375 $ 986 $(2,270) $ 480
======================================

Basic income per share:
Income before extraordinary item $ 0.01 $ 0.04 $(0.08) $ 0.02
Extraordinary gain on early extinguishment of debt -- -- -- --
--------------------------------------
Total basic income per share $ 0.01 $ 0.04 $(0.08) $ 0.02
======================================

Diluted income (loss) per share:
Income (loss) before extraordinary item $ 0.01 $ 0.03 $(0.08) $ 0.02
Extraordinary gain on early extinguishment of debt -- -- -- --
--------------------------------------
Total diluted income (loss) per share $ 0.01 $ 0.03 $(0.08) $ 0.02
======================================

Weighted average shares outstanding:
Basic 27,674 27,747 27,785 27,535
======================================
Diluted 29,442 29,697 27,785 28,645
======================================

54

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

Quarter ended
Mar.31, June 30, Sept.30, Dec.31,
2000 2000 2000 2000
----------------------------------------
(In thousands, except per share data)

Revenues:
System sales $21,130 $18,956 $18,862 $21,039
Client support, maintenance and other services 11,286 11,321 12,384 13,066
----------------------------------------
Total revenues 32,416 30,277 31,246 34,105
Cost of revenues:
System sales 9,989 8,596 9,477 11,558
Client support, maintenance and other services 8,712 9,458 9,678 9,508
----------------------------------------
Total cost of revenues 18,701 18,054 19,155 21,066
----------------------------------------
Gross profit 13,715 12,223 12,091 13,039
Operating expenses:
Product development 2,191 2,963 3,059 2,817
Sales and marketing 2,901 3,280 3,062 3,477
Depreciation and amortization 1,605 1,802 2,090 2,209
General and administrative 3,379 4,049 3,854 4,536
-----------------------------------------

Income from operations 3,639 129 26 --
----------------------------------------

Interest income, net 707 885 792 856
----------------------------------------
Income before income tax and extraordinary item 4,346 1,014 818 856

Income tax provision (benefit) 1,734 406 328 (695)
----------------------------------------
Income before extraordinary item 2,612 608 490 1,551

Gain on early extinguishment of debt, net of taxes 1,520 -- -- --
----------------------------------------
Net income $ 4,132 $ 608 $ 490 $ 1,551
========================================

Basic income per share:
Income before extraordinary item $ 0.10 $ 0.02 $ 0.02 $ 0.06
Extraordinary gain on early extinguishment of debt 0.05 -- -- --
----------------------------------------
Total basic income per share $ 0.15 $ 0.02 $ 0.02 $ 0.06
========================================

Diluted income per share:
Income before extraordinary item $ 0.09 $ 0.02 $ 0.02 $ 0.05
Extraordinary gain on early extinguishment of debt 0.05 -- -- --
----------------------------------------
Total diluted income per share $ 0.14 $ 0.02 $ 0.02 $ 0.05
========================================

Weighted average shares outstanding:
Basic 26,438 27,410 27,571 27,645
========================================
Diluted 29,711 29,803 29,727 29,719
========================================

55

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

Net income per share is computed independently for each of the quarters
presented. As such, the summation of the quarterly amounts may not equal the
total net income per share reported for the year.

56

Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure.
---------------------

There has been no occurrence requiring a response to this Item.

1.

PART III

Items 10, 11, 12 and 13 will be furnished by amendment hereto on or prior to
April 30, 2002 or the Company will otherwise have filed a definitive proxy
statement involving election of directors pursuant to Regulation 14A which will
contain such information

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)

1. Financial Statements. The following consolidated financial statements,
together with the applicable report of independent public accountants, have been
filed as Item 8 in Part II of this Report:

Report of Independent Public Accountants

Consolidated Balance Sheets at December 31, 2001 and 2000

Consolidated Statements of Operations for the years ended December 31,
2001, 2000 and 1999

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2001, 2000 and 1999

Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2000 and 1999

Notes to Consolidated Financial Statements

2. The Report of Independent Public Accountants as to Schedule II and the
following financial statement schedule are filed as part of the report:

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or the required
information is included elsewhere in the financial statements.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

To Radiant Systems, Inc:

We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of Radiant Systems, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
February 8, 2002 Our audits were made for the purpose of forming an opinion on
those statements taken as a whole. The forgoing schedule is the responsibility
of the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

/s/ Arthur Andersen LLP
- -----------------------

Atlanta, Georgia
February 8, 2002

SCHEDULE II

RADIANT SYSTEMS, INC AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS

-------------------------------------------------------------
Allowance for doubtful accounts Balance At Additions Balance
for the year ended (in thousands): Beginning Charged To Other At End
Of Period Operations Deductions Additions Of Period
-------------------------------------------------------------

December 31, 1999 $ 750 $ 909 $ 284 -- $1,375
December 31, 2000 1,375 752 327 $200 2,000
December 31, 2001 2,000 408 253 72 2,227

3. Exhibits.

The following exhibits are filed with or incorporated by reference into
this report. The exhibits which are denominated by an asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from (i)
a Registration Statement on Form S-1 for the Registrant, Registration No.
333-17723, as amended (referred to herein as "2/97 S-1"), (ii) a Registration
Statement on Form S-1 for the Registrant, Registration No. 333-30289 (referred
to herein as "6/97 S-1"), (iii) a Registration Statement on Form S-8 for the
Registrant, Registration No. 333-41291 (referred to herein as "1997 S-8"), (iv)
a Registration Statement on Form S-8 for the Registrant, Registration No.
333-62157 (referred to herein as "1998 S-8"), (v) a Registration Statement on
Form S-8 for the Registrant, Registration No. 333-62151 (referred to herein as
"ESPP S-8"), (vi) the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998, Commission File No. 0-22065 (referred to herein as "1998
10-K"), (vii) the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000 (the "March 2000 10-Q") (viii) the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000 (the "June 2000 10-Q"),
(ix) the Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 2001 (the "March 2001 10-Q"), and (x) the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2001 (the "June 2001 10-Q"). Except as
otherwise indicated, the exhibit number corresponds to the exhibit number in the
referenced document.

57

Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------------------------------------------------

*3. (i) Amended and Restated Articles of Incorporation (2/97 S-1)

*3. (ii) Amended and Restated Bylaws (2/97 S-1)

*4.1 Specimen Certificate of Common Stock (2/97 S-1)

*10.1 Form of License, Support and Equipment Purchase Agreement (2/97 S-1)

*10.2 Employee Stock Purchase Plan (ESPP S-8, Exhibit 10.1)

*10.3 Amended and Restated 1995 Stock Option Plan (2/97 S-1)

*10.3. Amendment No. 1 to Amended and Restated 1995 Stock Option Plan (1997 S-8)

*10.3.2 Amendment No. 2 to Amended and Restated 1995 Stock Option Plan (1998 S-8)

*10.4 Lease Agreement dated October 7, 1997, by and between Weeks Realty, L.P. and the Registrant for
lease of office space in Alpharetta, Georgia (Brookside Parkway) (1998 10-K)

*10.4.1 Amendment No. 1 to Lease Agreement dated October 7, 1997, by and between Weeks Realty, L.P. and the
Registrant for lease of office space in Alpharetta, Georgia (Brookside Parkway) (1998 10-K)

*10.4.2 Amendment No. 2 to Lease Agreement dated October 7, 1997, by and between Weeks Realty, L.P. and the
Registrant for lease of office space in Alpharetta, Georgia (Brookside Parkway) (1998 10-K)

*10.5 Lease Agreement dated November 12, 1997 by and between Meadows Industrial, LLC and the Registrant
for lease of office space in Alpharetta, Georgia (Shiloh Road) (1998 10-K)

*10.5.1 Amendment No. 1 to Lease Agreement dated November 12, 1997 by and between Meadows Industrial,
LLC and the Registrant for lease of office space in Alpharetta, Georgia (Shiloh Road) (1998 10-K)

*10.10 Software License, Support and Equipment Purchase Agreement dated May 27, 1994, as amended, by and
between the Registrant and Emro Marketing Company (2/97 S-1)

*10.13 Non-Management Directors' Stock Option Plan (6/97 S-1)

*10.14 Securities Purchase Agreement dated as of March 3, 2000 by and between Radiant Systems, Inc. and
America Online, Inc. (March 2000 10-Q)

*10.15 Marketing and Development Agreement dated as of March 3, 2000 by and among Radiant Systems, Inc.
America Online, Inc. and AOL Moviefone, Inc. (March 2000 10-Q)**

*10.16 Asset Purchase Agreement dated June 14, 2000 by and between Radiant Systems, Inc. and Hewlett-
Packard Company and Verifone, Inc. (June 2000 10-Q)

*10.17 Amendment No. 1 to Asset Purchase Agreement dated as of June 22, 2000 by and among Radiant.
Systems, Inc., Hewlett-Packard Company and Verifone, Inc. (June 2000 10-Q)

*10.18 Services Agreement dated March 19, 2001 by and between Radiant Systems, Inc., America Online,Inc.
and Moviefone, Inc. (March 2001 10-Q)**

58

*10.19 Amendment to Marketing and Development Agreement and Stock Purchase Agreement dated as of March 19, 2001
by and among Radiant Systems, Inc., America Online, Inc. and Moviefone, Inc. (March 2001 10-Q)

*10.20 Asset Purchase and License Agreement dated June 30, 2001 by and between Radiant Systems, Inc.
and Tricon Restaurant Services Group. (June 2001 10-Q)**

*21.1 Subsidiaries of the Registrant (1998 10-K)

23.1 Consent of Arthur Andersen LLP

99.1 Letter to the Securities and Exchange Commission pursuant to Temporary Note 3T

**Confidential treatment has been granted for certain confidential portions
of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended. In accordance with this rule, these confidential
portions have been omitted from this exhibit and filed separately with the
Securities and Exchange Commission.

59

SIGNATURES

In accordance with the requirements of Section 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, in the City of Alpharetta, State of Georgia on March
28, 2002.

RADIANT SYSTEMS, INC.

/s/ Erez Goren
----------------------------
By: Erez Goren
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.

Signature Title Date
- -------------------------------------------------------------------------------------------

/s/ Erez Goren Co-Chairman of the Board and March 28, 2002
- -------------------------------- Co-Chief Executive Officer
Erez Goren (principal executive officer)

/s/ Alon Goren Co-Chairman of the Board and March 28, 2002
- -------------------------------- Chief Technology Officer
Alon Goren

/s/ John H. Heyman Co-Chief Executive Officer March 28, 2002
- -------------------------------- Chief Financial Officer and
John H. Heyman Director (principal financial officer)

/s/ Paul J. Ilse Vice President, Finance March 28, 2002
- -------------------------------- (principal accounting officer)
Paul J. Ilse

/s/ James S. Balloun Director March 28, 2002
- --------------------------------
James S. Balloun

/s/ J. Alexander Douglas, Jr. Director March 28, 2002
- --------------------------------
J. Alexander Douglas, Jr.

60

EXHIBIT INDEX

Exhibit
Number Description of Exhibit

23.1 Consent of Arthur Andersen LLP

99.1 Letter to the Securities and Exchange Commission pursuant to
Temporary Note 3T

61