UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-106143

GXS CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s Telephone Number, including area code:

(301) 340-4000

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

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 o          No þ

Indicate by a 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 the 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     o

Indicate by a check mark whether the registrant is an accelerated filer (as determined in Exchange Act Rule 12b-2).     Yes o          No þ

As of March 31, 2005, the Registrant had 100 outstanding shares of common stock, significantly all of which was held by affiliates of the Registrant.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

The following annual report contains information about GXS Corporation. You should read this entire report, including the information set forth in the “Factors That Could Affect Future Results” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 34. In this report, “we,” “our” and “us” refers to GXS Corporation and its subsidiaries, unless the context otherwise requires.

While most of the information provided in this annual report is historical, some of the comments made are forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate, along with management’s beliefs and assumptions. They are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are typically identified by words such as “believe,” “anticipate,” “expect,” “plan,” intend,” “estimate,” “may,” “will” and similar expressions. As you read and consider the information in this report, you should understand that these statements may differ materially from actual outcomes and results. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors that Could Affect Future Results — Special Note Regarding Forward-Looking Statements.”

Item 1.     Business

Overview

We are a leading provider of on-demand supply chain management solutions to over 30,000 customers worldwide, including over 50% of the Fortune 500 corporations. We provide mission-critical solutions that connect our customers, large and small, continuously to their supply chain partners around the world. Our solutions perform an extensive range of critical supply chain management functions, including the exchange of information relating to trade orders, invoicing and payment instructions, synchronization of product and price information, optimization of inventory levels and demand forecasting. Our customers use our solutions to automate complex supply chain relationships with their networks of business partners, and to reduce the cost and complexity of supply chain operations. We operate a highly reliable, secure global network services platform that connects trading partners 24 hours a day, 7 days a week in approximately 25 countries around the world. We have been pioneers in on-demand supply chain management solutions for 20 years, and have been a leading provider in the technology industry since the late 1960s.

We were incorporated as a Delaware corporation in 2002 to hold the GXS business in connection with the recapitalization pursuant to which Francisco Partners, L.P. became our majority stockholder.

Recent Acquisitions

G International. On November 1, 2004, our indirect parent, Francisco Partners, through a majority-owned acquisition vehicle, acquired G International Inc., a business established to own and operate International Business Machine Corporation’s Electronic Data Interchange and Business Exchange Services businesses. In January 2005 we entered into a letter agreement to acquire the sole stockholder of G International. The consideration to be paid by us for G International will be adjusted from $135.0 million based on the indebtedness and working capital of G International, as well as the expenses incurred by G International and its affiliates in connection with the transaction. The form of consideration will be mutually agreed upon by the parties.

The acquisition of G International is subject to satisfaction of several conditions, including:

We believe that the acquisition of G International will:

HAHT Commerce. On February 13, 2004, we completed the acquisition of HAHT Commerce, Inc. We acquired all of the capital stock of HAHT Commerce through a merger of an indirect wholly owned subsidiary with HAHT Commerce for consideration of approximately $30.0 million, consisting of $15.0 million in cash plus common and preferred shares of GXS Holdings valued at approximately $15.0 million. HAHT Commerce is a provider of on-demand supply chain management applications that automate, integrate and optimize order management, product information management, channel management, business intelligence and customer services between manufacturers, their channel partners and business customers.

Celarix. On June 3, 2003, we acquired substantially all of the assets of Celarix, Inc. related to its logistics integration and visibility solutions business for an aggregate value of approximately $2.0 million in preferred and common shares of GXS Holdings, Inc. and assumed liabilities. The solutions acquired from Celarix help organizations to connect to logistics trading partners and retrieve, use and share shipment status information throughout their supply chains.

We intend to continue to selectively pursue acquisitions of companies with complementary products and technologies to enhance our ability to provide comprehensive solutions to our customers and to expand our business.

Our Industry

We operate in the on-demand supply chain management services industry. On-demand supply chain management describes the systems used for communicating information related to the exchange of goods and services among trading partners. Electronic data interchange, or EDI, which originated in the 1980s and permits the electronic exchange of documents across disparate computing platforms, applications and communications protocols, is the cornerstone of this industry. As the industry continues to evolve, it is moving from EDI into new integration services technology.

We believe that the industry landscape is rapidly evolving in a way that provides many opportunities for us. Traditional Value-Added Network, or VAN, providers are leveraging their connected communities by injecting new technology to provide a higher level of process automation. Businesses are seeking intermediaries to help streamline business processes dependant on highly automated trading partner relationships, such as inventory management, invoicing and payment, order collaboration, and price and promotion management.

Integration service providers such as our company are developing technology to help customers reduce the complexity of process automation with trading partners. Reducing complexity drives significant customer savings. Today, integration service providers deliver a broad range of capabilities in addition to traditional EDI, including data exchange and communications, trading partner management, and integration and application services that help businesses automate and optimize the sharing of data and business processes with their business partners. Businesses enlist the assistance of an integration service provider to speed the enablement of global trading partners, offload difficult integration functions, reduce overall costs of business to business operations, and gain faster access to new community solutions. Supply chain system management is complex. We estimate that 20% of all orders are filled imperfectly and up to 60% of all invoices have errors. In addition, setting up these systems requires significant initial capital investment as well as annual maintenance and higher labor costs. By outsourcing these functions through an integration service provider, a customer can achieve scale with limited network and technological investment while reducing errors and improving overall data quality.

The evolution and globalization of supply networks places increasing demand on on-demand supply chain management services vendors. Technology vendors increasingly need to have a global presence and must offer high-availability, near real-time trading networks. To assure security and reliability, vendors need to have a credible track record, scale and experience to compete for customer accounts. Those with large installed

trading partner bases and infrastructure will have a natural advantage in assisting customers to evolve their supply network technologies.

Within our industry, we believe that there are five main categories of services, including:

As an industry leader, we believe that we are well-positioned to address each of these areas. Beyond our basic transact services for traditional and Internet-based data exchange, our value-added monitoring, synchronize and collaborate solutions allow customers to effectively optimize and manage critical chain functions, including supply and demand planning, order management, customer service, shipment visibility, electronic invoicing, warranty verification, product management, order collaboration and inventory visibility, in a cost-effective and efficient manner.

Our Business Model

We employ a “hub and spoke” model for our on-demand supply chain management services. This model entails offering on-demand supply chain management solutions to large industry-leading companies, or hubs, and their community of trading partners, or spokes.

Hubs. Companies in this category tend to be global, multi-divisional, decentralized organizations with complex computing environments and sophisticated enterprise applications software. These large companies often recommend or require their trading partners to implement integration services as the primary method of communicating commercial information and business documents. Often these integration service initiatives

coincide with a variety of extended enterprise and industry-specific initiatives to automate electronic trading of partner communications, including quick response, just-in-time manufacturing, vendor-managed inventory and efficient consumer response. Hub companies, as part of their integration service initiatives, will typically recommend a specific integration service provider and software to their trading partners. Hub companies also typically rely on the integration service provider to implement integration services with the hub’s trading partners, creating an opportunity for the integration service provider to establish customer relationships with the hub companies’ trading partners. An example of a hub company would be a large apparel retailer that utilizes some form of integration service to communicate with hundreds of apparel manufacturers.

Spokes. Companies in this category tend to be small to medium-size organizations that often seek to implement integration services in order to conduct business with one or more large trading partners. Many of these customers do not have a significant investment in technology, with some having as little as a personal computer with a dial-up connection. Spoke companies typically seek to implement integration services quickly with minimal effort and expense. An example of a spoke company would be a small consumer products manufacturer that is required to communicate through some type of integration service by a retailer selling the manufacturer’s products. After implementing integration services at the request of a hub, some spokes become hubs by utilizing integration services to communicate with their community of trading partners.

We believe that our ability to automate the exchange of essential business information between trading partners with dissimilar processes and applications adds value at each step of the supply chain. In a typical implementation, we will:

Under our business model, a trading partner is a mailbox on our network infrastructure used to facilitate transactions with other mailboxes on our network infrastructure or with mailboxes on another interconnected network infrastructure. One trading partner does not necessarily equal one customer, as a single customer may have multiple mailboxes. Our 20 largest hubs have between 500 and 4,500 trading partners each. A trading community is a collection of trading partners communicating via their respective mailboxes around a hub.

Our Business Strategy

Our goal is to grow profitably by providing transaction management infrastructure products and services with high returns on investment for our customers while remaining at the forefront of our industry. To achieve this objective, we intend to:

Our Product Solutions

As business-to-business e-commerce becomes increasingly strategic, the complexity of integrating and collaborating with business partners is growing exponentially. Over the past decade, businesses invested heavily in internally focused business systems. Today, businesses are extending their enterprise investments by strategically sharing processes with partners to gain competitive advantage. Through the automation of an

entire value chain, companies are streamlining cross-enterprise processes, such as price and promotions, global shipping, and electronic payments, resulting in greater agility, responsiveness and profitability.

The integration of supply chains across diverse businesses can be very complex. The variety of protocols and standards used to communicate continue to increase. Data structures and data transformation are becoming more sophisticated. Globalization is introducing new trading partners from regions around the world that suffer from a lack of experience and slow adoption of e-commerce processes.

To unlock the potential of business-to-business e-commerce and build a successful global extended enterprise, businesses need a partner with innovative adaptive solutions, broad skills and capabilities, and global reach. Our capabilities, solutions and reach allow businesses to effectively build and manage their extended enterprise and automate their entire supply chains. With over 35 years of experience, we are a proven leader of on-demand business-to-business e-commerce solutions that simplify and enhance business process integration and collaboration.

Fewer and fewer companies manage the entire manufacturing process from raw materials to finished product. Instead, the manufacturing process is distributed across the supply chain with different manufacturers owning the raw materials, component, assembly, and finished product aspects of the process. As a result, an increasing number of business processes are becoming cross-enterprise, including product design, development, manufacturing, and post-sales service and support. Even planning functions such as promotions, forecasting, and marketing are becoming increasingly collaborative. Our on-demand services streamline these cross-enterprise business processes by simplifying the ability to market, plan, order, manufacture, transport, settle and service across corporate boundaries. With on-demand services, businesses get maximum flexibility and economies of scale from a high-performance hosted solution.

We provide a comprehensive suite of offerings for customers seeking high-performance, cost-effective on-demand supply chain management solutions. We deliver our solutions globally on our next-generation integration services platform, the GXS Trading Grid^sm. Through the Trading Grid^sm, we provide an integrated suite of data communications and exchange, trading partner management, integration, data synchronization and application services. Our global solution portfolio for these services consist of our core product solutions, or Transact Solutions, and our value-added Monitor, Synchronize and Collaborate solutions.

Transact Solutions

Our core product solutions, or Transact Solutions, enable businesses to conduct electronic commerce with any supply chain partner in the world by enabling the electronic exchange of a high volume of business documents among our customers’ computer systems and those of their trading partners. Through our Transact Solutions, buyers and suppliers can exchange purchase orders, as well as the associated shipment notices, invoices, and payment instructions. Additionally, sales activity, sales forecasts, and inventory positions can be exchanged electronically. Revenues generated by our Transact Solutions are largely recurring in nature and contribute the majority of our revenues. Revenues from Transact Solutions were 61.0%, 64.0% and 63.6% of our total revenue for the years ended December 31, 2002, 2003 and 2004, respectively.

EDI is the predominant standard by which Transact Solutions are performed. EDI supplements or replaces traditional document transport media, including postal, fax, telephone and email systems. We provide Transact Solutions through our Trading Grid^sm in approximately 25 countries around the world. These Transact Solutions allow a trading partner to use the communications protocol of its choice. We add value by providing protocol conversion, security, authentication, audit and other transaction processing services, allowing customers to implement complex and secure electronic trading systems with little infrastructure or technology investment. The Trading Grid^sm processes both traditional EDI documents and documents developed using newer technologies such as Extensible Mark-up Language (XML). By using the Trading Grid^sm’s messaging services, customers are able to reduce the costs associated with managing business and technology variables associated with the exchange of data among a large number of trading partners that use

disparate applications and communications protocols. Today, we brand our core Transact Solutions within the Trading Grid^sm as follows:

Revenues derived from our Transact Solutions are primarily generated through recurring transaction processing fees. For most transactions, we charge a transaction processing fee to both the sending and the receiving party. During 2003, we initiated a concerted effort to move customers on month-to-month contracts for Transact Solutions toward multi-year contracts in exchange for pricing incentives. As a result of these efforts, approximately 60% of our top 2,000 customers are now committed to contracts with an average term of 31 months.

Our Transact Solutions also include integration software, which enables enterprises and small businesses to access the core messaging services. Our integration software enables customers to self-manage the exchange of information among disparate business systems and applications within and among enterprises by integrating internal applications, translating data to the required format (such as EDI or XML) and transporting that data through the Trading Grid^sm or directly to the receiving trading partner. Our integration software products include:

Monitor Solutions

Once e-commerce transactions are automated, it is critical for businesses to monitor and measure transactions with supply chain partners. Our Monitor Solutions allow for end-to-end visibility of business documents by monitoring supply and demand signals for quick response. Once the day-to-day supply chain process is automated, companies run the risk of not identifying problems with orders or shipments. Our monitor solutions allow businesses to monitor information flows in e-commerce transactions for critical supply (shipment delay) and demand (sales spike) signals. Near real-time monitoring of these events enables supply chain participants to take proactive measures to avoid out-of-stock situations or excess inventory positions.

Our Monitor Solutions include:

In late 2005, we anticipate introducing a third Monitor Solution called Inventory Visibility. This product will facilitate web-based inventory tracking for the exchange of point-of-sale and inventory position data.

Synchronize Solutions

Our Synchronize Solutions help customers accomplish product item validation and synchronization via a comprehensive suite of hosted services and application software. Our Synchronize Solutions enable multiple supply chain partners to exchange information about their products. The inability to effectively manage the growing volume of product data is a challenge for many leading retailers. Product data can include descriptions, dimensions, packaging configuration, and country of origin. Inconsistent and inaccurate product data creates significant disruptions and inefficiencies throughout a retailer’s internal systems and supply chain operations, and can lead to errors with orders, out-of-stock conditions and invoice discrepancies. Accurate product data, however, can significantly reduce inefficiencies and enhance the customer experience. The key for retailers in achieving and maintaining accurate and consistent data is to establish one streamlined process to synchronize product catalog information with their suppliers. As a result, data synchronization solutions can accelerate the introduction of new products; minimize impacts of product discontinuations; and optimize sales of existing products.

Data synchronization is quickly gaining acceptance in the consumer products and retail sectors because it allows a company to store, manage and exchange a wide variety of product information. Product information can include marketing descriptions, dimensions, transportation requirements, price or recycling instructions. It can also include other documents such as photographic images of the products or marketing materials. Although our Synchronize Solutions are currently used mainly by the consumer products and retail sectors, these solutions are equally applicable to other industries, including the automotive industry, and we expect the use of data synchronization to become more widespread in the future.

Our current Synchronize Solutions include:

In the near future, we expect our Synchronize Solutions to also permit price and promotion information to be stored, managed and exchanged.

Collaborate Solutions

Our Collaborate Solutions enable supply chain partners to work closely together to improve efficiencies or increase sales through joint forecasting, marketing and product development. Trading partner collaboration can include:

We primarily provide our Collaborate Solutions through strategic and technology partnerships. Our Collaborate Solutions partnerships currently include Tradebeam and iSupply, through which we offer a web-based solution for automotive original equipment manufacturers and their suppliers, and 7th Online, through which we offer a collaborative application used in the apparel and department store sector to perform seasonal assortment planning.

Advantage Services

Our Advantage Services provide a suite of community, professional, and managed services that help our customers maximize the benefits from on-demand supply chain management. These services complement our product solutions with people-based services to support the automation process, from consulting and design to implementation and integration to technical support. These services include business to business community management and outsourcing services. We maintain expertise and skills in the mapping, translation and technical support for communities of all sizes. Education, implementation, testing and ongoing technical support for our customers’ trading communities ensures that our customers’ trading partners can actively communicate and share information with each other. Advantage Services consist of three families of services: Professional Services, Community Link and Business Process Outsourcing.

Professional Services

We provide up-front consultation for our customers on how to design an effective business-to-business supply chain management program. We also advise on technical architecture design, modeling business processes and demonstrating a return on investment for new initiatives. Once the consulting and design process is complete, our professional services group helps to implement the solution on the customer’s premises. As necessary, we can customize the solution to integrate directly with our customer’s front and back office systems.

Community Link Services

After implementation at the hub, we then provide services to enable the trading partner community. These services include trading partner education, implementation and testing, as well as on-going technical support for the entire enabled trading community. Together with our distributors, we offer 24-hour, 7-day-a-week technical support in 20 different languages via the Web and telephone.

Business Process Outsourcing

Customers that prefer not to manage the day-to-day operations of their supply chain management programs can outsource those processes to us. Our Business Process Outsourcing services use our global data center footprint to offer outsourcing for customers of the management, execution and operation activities associated with on-demand electronic supply chain management. By outsourcing to us, customers minimize their up-front investment in software, hardware and other resources necessary to automate their information exchange processes. We provide a comprehensive outsourcing solution that includes data center operations, application hosting, mapping and translation, technical support, and our Community Link services.

Legacy Solutions

Our Legacy Solutions principally consist of applications and products developed for specific customers for use on our computing platforms and telecommunications network. For example, we offer a customized application for cash management systems used by banks that runs on our proprietary Mark III® platform. The application was originally written in the 1980s and continues to be used today. In addition to these customized applications and products, our managed network solutions enable customers to outsource the management and operations of network communications. Our managed network solutions include telecommunications management, monitoring and problem resolution, as well as the provision and installation of modems, routers and software that enable us to manage the customer’s infrastructure remotely. We do not consider our Legacy Solutions to be core to our business. Accordingly, we expect revenues from our Legacy Solutions, including our custom messaging and network solutions, or CMNS, to continue to decline as a percentage of our total revenues as we continue to de-emphasize and discontinue such services and emphasize our Transact, Monitor, Synchronize and Collaborate Solutions. We currently have approximately 4,300 customers for our CMNS, many of which also use our other products and services.

Customers

We serve a community with more than 100,000 trading relationships in a broad range of industries, including automotive, consumer products, high-technology, manufacturing and retail. Our customers currently include over 50% of the Fortune 500 companies and, upon completion of the proposed G International acquisition, we expect to count over 75% of the Fortune 500 companies as customers. This broad base ensures that we are not reliant on any individual customer or industry for a significant portion of our revenues. No one customer represented more than 10% of our revenues in 2002, 2003 or 2004. General Electric and its affiliates accounted for approximately 9.0% of our total revenues in both 2003 and 2004.

In 2004, we retained all of our significant hub customers and we had significant customer wins, including Dillard’s, Rite-Aid and Comcast. Additionally, we have been migrating our customers to multi-year contracts to maintain existing recurring revenue streams. We currently have approximately 60% of our top 2,000 customers committed to contracts with an average term of 31 months.

International Operations

We have a strong global presence across the Americas, Europe, Asia and Australia, including operations in approximately 25 countries. We generated 37.1%, 42.5% and 46.0%, respectively, of our revenues for each year in the three-year period ended December 31, 2004 from customers located outside of the United States, and 12.9%, 11.0% and 10.4%, respectively, of our assets as of December 31, 2002, 2003 and 2004 were located outside of the United States. We generated 11.8%, 14.2% and 15.9%, respectively, of our revenues for each

year in the three-year period ended December 31, 2004 from customers in the United Kingdom. In the future, we may significantly expand our international operations through geographic expansion and acquisitions.

Marketing and Sales

We market our products and services through our global sales force. Our sales efforts are generally aimed at senior purchasing executives, chief information officers and other primary decision makers within a potential customer organization. Our global sales force is organized along three lines: industry, geography and major account coverage. Our direct sales teams concentrate on developing new hub customers within a particular industry, focusing on the retail, consumer products, high-tech and automotive sectors, and region, as well as increasing the utilization and penetration of existing trading communities. Our telephone sales professionals focus primarily on signing up new spoke customers around a particular hub customer. Our sales teams are supported by a team of technical sales and marketing support personnel who assist in the sales process as needed. We have approximately 210 marketing, sales and sales support personnel.

Our direct sales cycle for hub customers typically takes approximately six to nine months from initial contact to contract signing. Approvals by decision makers from various branches of a potential customer’s organization are often required before a purchase can be completed. The sales cycle for telephone sales varies from several days to approximately three months. We believe the ability of our telephone sales team to address a large number of trading partners of our hub customers in a short time period differentiates us in the trading community sales process.

Our marketing activities are designed to enhance our brand name and the market awareness of our products through advertising, press releases and other media. We have product managers dedicated to each of our product lines who, together with our marketing communications group, focus on the development of and increasing awareness of specific products and services that we offer.

Customer Service

We view our relationships with customers as long-term partnerships in which customer satisfaction is crucial. For this reason, we apply an integrated approach to our sales, marketing and customer service functions. Through our customer relationships, we are able to achieve an in-depth understanding of a customer’s evolving transaction management infrastructure requirements and levels of service satisfaction. We believe that we provide superior customer service in terms of timely and accurate responsiveness. Based on these relationships, we are also able to pursue new revenue generating opportunities and provide product and service improvements for both new customers and customers previously overlooked or not adequately addressed.

We maintain a customer service center at our headquarters in Gaithersburg, Maryland and customer service centers and/or customer service representatives in various locations in Europe and Asia to support customers on a regional basis and to provide local technical support as necessary. Our customer service center in Gaithersburg also provides support to our other customer service centers and customer service representatives. Our customer service representatives, in the United States and elsewhere, include both call analysts, who are trained to identify and analyze customer problems, as well as skilled technical support teams trained to resolve complex technical problems.

Competition

We compete with numerous companies both nationally and internationally. Our competitors include large companies with substantially greater resources than us that compete in many market areas and small specialized companies that compete in a particular market niche. We also compete with the internal programming and information technology staffs of some major companies.

Our ability to compete successfully depends on multiple factors, both within and outside of our control. The principal factors are:

We believe that our solutions are generally competitive with regard to each of these factors.

Competition for our services ranges from large corporations to integration suites offered by software vendors and smaller technology consulting firms. We compete with paper-based communications, direct leased-line communications, fax-based solutions, public exchanges and other EDI service providers, including Inovis, Sterling Commerce and other, smaller companies. We also compete with providers of products and services based on alternative technologies to EDI such as IBM and Cyclone Commerce.

Our software products also compete with the products offered by Sterling Commerce, Inovis, IBM, SeeBeyond and Vitria.

Data Processing Infrastructure

We operate three data centers, located in Ohio, Hong Kong and The Netherlands. These data centers service customers on a regional basis and house our data processing infrastructure. Our computing infrastructure primarily operates on one of three systems: IBM z Series OS, UNIX or Mark III®. Mark III® is a legacy operating system we developed that runs on mainframe computers manufactured by Bull, S.A. We are in the process of migrating our EDI operations that currently run on Mark III® to other platforms. We are also in the process of evaluating migration of our customers to other, more open systems, such as Linux. We believe that our data processing infrastructure is sufficient to cost-effectively meet demand for the foreseeable future and to increase capacity as needed.

Our telecommunications infrastructure is a high-speed digital network that connects us to our customers and facilitates the transport of multiple protocols via private lines and the Internet. In the United States, our primary provider is AT&T with Equant serving as a backup provider. In Europe, Equant is our primary provider with AT&T serving as a secondary provider. We also engage additional providers in these and other jurisdictions, mainly in Asia. Our network providers provide us with diversity and enable us to further enhance the reliability and quality of our services for our customers.

In operating our data processing facilities, we have developed both capacity-planning and disaster recovery policies and practices. Our capacity planning operation monitors usage and trends and projects the capital resources needed to satisfy future needs. It performs this role for both our data processing and network communications infrastructure. We are party to disaster recovery agreements that provide alternative off-site computer systems for our UNIX, NT and IBM-based processing operations in the event of a disaster. For our Mark III®-based processing operations, we have a separate disaster recovery site as well as contingency plans which provide for the shifting of our processing operations among different segments of our Ohio data center and our data center in The Netherlands, if necessary. We have also taken precautions to protect ourselves and our customers from events that could interrupt delivery of our transaction processing services. These precautions include, among others, backup power generation equipment, fire protection and physical security systems and an early warning detection and fire extinguishing system.

Product Development

Our product development cycle is driven by technological evolution of new standards for the electronic exchange of information and compatibility with third-party software. To remain competitive, we are required to incorporate advances in technology and standards into our products continually. In addition, we must ensure

that our solutions are able to function with the latest versions of the third-party software that may be used by some of our customers. We schedule development for our products and services on a six to twelve-month cycle from inception to rollout. We have dedicated product development teams for each major product line. However, a common development process, focused on the quality of our products and services, is deployed across all development efforts. Our solutions focus on the reduction of defects, application reliability and on-time delivery. All new solutions are developed on the UNIX platform with development tools using Java and C++ programming languages. A separate, dedicated team of engineers focuses on the study and introduction of new transaction technologies such as XML, and new types of Internet communications protocols, such as SOAP and AS2.

In 2002, 2003 and 2004, we had expenditures of approximately $15.2 million, $9.1 million and $14.4 million, respectively, for research and development activities. In addition, we spent $26.9 million, $19.9 million and $14.7 million during 2002, 2003 and 2004, respectively, on the development of internal use software, which we capitalized. Although most of our products are developed internally, from time to time we have in the past, and may in the future, acquire software from or invest in companies or businesses that offer products or services that are complementary to our offerings.

On November 8, 2004, we announced a strategic partnership with webMethods, Inc. to jointly resell, develop and market end-to-end business integration solutions. The agreement will allow businesses to collaborate more effectively with their global vendors and partners. Central to the strategic relationship will be the use of webMethods Fabric, a leading suite of business integration software, in our Trading Grid^sm.

Alliances and Joint Ventures

Our PartnerGrid Program is designed to extend the value of the solutions we deliver to our global customer base. We partner with the world’s leading technology specialists to help our customers accomplish their business goals more quickly and effectively. Our partners provide software and hardware technology or consulting and implementation services to complement our industry-leading solutions.

We generally enter into partnerships with four types of partners:

In addition to our PartnerGrid Program, we have also partnered with various entities to form joint ventures outside of the United States to assist with the marketing and implementation of our products and services in a particular geographic region. For example, we have a joint venture with ABN AMRO Capital Investment Asia Limited to provide our products and local Transact Services in China. These partnerships are in addition to our foreign subsidiaries that provide marketing and implementation services in many countries.

Intellectual Property

To protect our intellectual property rights, we rely primarily on a combination of copyright, patent and trademark laws, trade secret protection and contractual provisions. We also routinely enter into nondisclosure and confidentiality agreements with our employees, contractors, consultants, vendors and customers to protect our proprietary rights. We have various rights to patents, trademarks, copyrights, trade secrets and other intellectual property directly related to and important to our business. We currently hold four United States Patents:

As part of our recent effort to expand our patent portfolio, we have filed 24 patent applications that improve upon our technology. In addition, as part of our acquisition of HAHT Commerce, in February 2004, we acquired three U.S. patent applications, which are not of material importance to our business and are being allowed to lapse. We hold registrations on trademarks and service marks on 23 separate marks that have been registered in a number of jurisdictions that we owned at the time of the recapitalization. All of these registered marks are related to legacy or discontinued products and services, and are not of material importance to our business. We acquired, as part of our acquisition of HAHT Commerce, 17 separate marks that have been registered in a number of jurisdictions, none of which are of material importance to our business. In addition, we have applied for registration of two additional marks that relate to products we currently market. We also acquired the rights to one additional Canadian and two U.S. registered trademarks as part of our acquisition of the Celarix assets in June 2003, none of which are of material importance to our business. Our policy is to apply for patents with respect to our technology and seek trademark registration of our marks from time to time when management determines that it is competitively advantageous and cost effective to do so. We have also been granted licenses for a number of third-party software products for our own use and for remarketing to our customers. Further, we believe that our unpatented research, development and engineering skills also make an important contribution to our business. We do not believe that any one single patent, patent application or license is material to the success of our business as a whole. However, in the aggregate these patents applications and licenses are material to our business.

In connection with the recapitalization, General Electric assigned, licensed or sublicensed, as the case may be, to us all intellectual property rights owned by General Electric that were used by us to operate our business. We also entered into a separate agreement under which General Electric granted us a license to use the GE monogram trademark on a non-exclusive, royalty-free basis. We have ceased using this trademark and the license has terminated.

Employees

As of March 1, 2005, we had approximately 1,360 full-time employees worldwide, including approximately 970 technical personnel engaged in maintaining or developing our products or performing related services, approximately 210 marketing, sales and sales support personnel and approximately 180 administrative, finance and management personnel. We also have approximately 90 call analysts and customer service support technicians worldwide. To attract and retain desired personnel, we offer competitive compensation and benefits packages and strive to maintain excellent employee relations. None of our U.S. employees are represented by a labor union. We have not experienced any work stoppages and consider our employee relations to be good.

In connection with our proposed acquisition of G International, all of the employees of G International in the United States will become our employees as of April 1, 2005 and we will enter into an agreement with G International pursuant to which G International will compensate us for the services provided to it by these employees.

Item 2.     Properties

We lease approximately 342,000 square feet of office space for our corporate headquarters located in Gaithersburg, Maryland. This lease expires in April 2014. However, we have the option to renew this lease for an additional 10 years, through April 2024, followed by two five-year renewal options. General Electric has guaranteed all of our obligations under this lease. In connection with the 2002 recapitalization, our indirect parent, Global Acquisition Company, was required to either replace General Electric as the guarantor or to indemnify General Electric for any obligations it may have under its guarantee. In place of such a guarantee or indemnity, we provided a letter of credit for General Electric’s benefit, in the amount of $7.5 million, under our revolving credit facility. As of December 31, 2004, approximately 60% of our office space is vacant and we are actively seeking to sublease some or all of this space.

Our main data center is a 104,000 square-foot facility located in Cleveland, Ohio. We also operate a 54,000 square-foot data center in Amsterdam, The Netherlands, and a 12,000 square-foot data center in Hong Kong, China. Other than our Ohio data center, which we own, our data centers are leased. These leases expire at various times between 2007 and 2013.

In addition, as of December 31, 2004, we had six sales offices in the United States and 14 sales offices in 11 foreign countries. We also maintain a customer service center at our headquarters in Gaithersburg, Maryland to support our customers in the Americas, and customer service centers and/or customer service representatives in various locations in Europe and Asia to support customers on a regional basis. We currently have sufficient space to meet our needs.

Item 3.     Legal and Other Proceedings

We are and may from time to time in the future become subject to legal proceedings and claims which arise in the normal course of our business. These routine litigation matters are usually settled or defended, depending on the circumstances of each claim. While any legal proceeding has elements of uncertainty, we do not believe, based on historical experience, that the amount of any liability incurred in connection with these types of claims would have a material effect on our financial condition or on the results of our operations.

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

Not applicable.

PART II

Not applicable.

Item 6.     Selected Financial Data

The following table presents our selected historical consolidated financial information. The historical consolidated financial information as of December 31, 2003 and 2004 and for each of the fiscal years ended December 31, 2002, 2003 and 2004 has been derived from, and should be read together with, our audited consolidated financial statements and the accompanying notes included elsewhere in this annual report. The selected financial data as of December 31, 2000, 2001 and 2002 and for the years ended December 31, 2000, 2001 and 2002 have been derived from our audited consolidated financial statements, not included in this annual report.

The financial data set forth below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the accompanying notes, which are included as an integral part of this report.

The following discussion and analysis may contain forward-looking statements, which reflect the expectations, beliefs, plans and objectives of management about future financial performance and/or assumptions underlying our judgments concerning matters discussed below. These statements, accordingly, involve estimates, assumptions, judgments and uncertainties. In particular, this pertains to management’s comments on financial resources, capital spending and the outlook for our business. Actual results or outcomes may differ materially from those in such forward-looking statements. See “— Factors That Could Affect Future Results — Special Note Regarding Forward-Looking Statements.”

Overview

We are a leading provider of on-demand supply chain management solutions to over 30,000 customers worldwide, including over 50% of the Fortune 500 corporations. We provide mission-critical solutions that connect our customers, large and small, continuously to their supply chain partners around the world. Our solutions perform an extensive range of critical supply chain management functions, including the exchange of information relating to trade orders, invoicing and payment instructions, synchronization of product and price information, optimization of inventory levels and demand forecasting. Our customers use our solutions to establish complex supply chain relationships with their networks of business partners, and to reduce the cost and complexity of supply chain operations. We operate a highly reliable, secure global network services platform that connects trading partners 24 hours a day, 7 days a week in approximately 25 countries around the world. We have been pioneers in on-demand supply chain management solutions for 20 years, and have been a leading provider in the technology industry since the late 1960s.

In general, we derive our revenue from:

In 2002, 2003 and 2004, we derived approximately 62.3%, 67.0% and 70.6% of our revenues from recurring transaction processing and related fees, as well as software maintenance fees, generated by our core Transact Solutions, as well as our value-added Monitor, Synchronize and Collaborate Solutions. For most transactions, we charge a transaction-processing fee to both the sending and the receiving party. Because the transactions we process, such as the exchange of invoices and purchase orders, are routine and essential to the day-to-day operations of our customers, the revenues generated from these fees tend to be highly recurring in nature. We have increasingly focused since late 2003 on negotiating multi-year contracts with customers. Approximately 60% of our largest 2,000 customers are now committed to contracts for transaction processing solutions with an average term of 31 months. Those larger customers who are not committed to multi-year contracts and most of our smaller customers generally are under contracts for transaction processing solutions that

automatically renew every month. Transaction processing revenues are recognized on a per transaction basis in the period the related transaction is processed. Revenues on contracts with monthly, quarterly or annual minimum transaction levels are recognized based on the greater of actual transactions processed or the specified contract minimums. Revenues from software maintenance fees are recognized as described in the next paragraph.

We also license our software either for perpetual use or for a fixed term. Licensing revenues are generated by both our Transact Solutions, as well as our value-added Monitor, Synchronize and Collaborate Solutions. Licensing revenues are generally recognized when the license agreement is signed, the license fee is fixed and determinable, delivery has occurred and collection is probable. In connection with the licensing of our software products, we provide software maintenance services that also generate recurring revenues. We typically charge between 15% and 20% of the initial license fee on an annual basis for these maintenance services. We recognize software maintenance revenues over the life of the related maintenance contracts, which is typically one year. We currently have more than 5,700 software maintenance contracts. In 2002, 2003 and 2004, we derived approximately $12.9 million, $12.6 million and $15.7 million in revenues from fees relating to these contracts.

We provide professional services in connection with our entire range of products and services. These services are typically provided under time and material contracts and revenue is recognized as the related services are provided. Additionally, a portion of our professional services are performed in implementing our product solutions associated with multi-year contracts and revenues derived from those services are recognized over the life of the contract.

We also derive a portion of our revenues from transaction processing and software maintenance fees, software licensing and providing professional services relating to our Legacy Solutions (22.4% of our total revenues in 2004). However, we do not consider our Legacy Solutions to be core to our business. Accordingly, we expect revenues from our Legacy Solutions, which include our Custom Messaging and Network Solutions, or CMNS, and other product offerings that we are in the process of phasing out, to continue to decline as a percentage of our total revenues as we continue to de-emphasize and discontinue such services and emphasize our core Transact Solutions and our value-added Monitor, Synchronize and Collaborate Solutions.

In Item 1 — Business, we categorize and discuss our products and services, and lines of business, in a different way than we have previously. The new presentation better reflects how management views and operates our business and better explains the products and services that we offer. The following table reconciles revenues reported by business line for the years ended December 31, 2002, 2003 and 2004 to the new revenue source-based categories:

Recent Trends and Cost-Reduction Initiatives

A number of trends over the past several years have caused us to re-evaluate our strategic focus, our mix of products and services and our corporate cost structure. For most of the 1990’s, we focused on providing customized information technology solutions to our customers, while also providing standard EDI services and a variety of other transaction-based business to business solutions. In 2000, 50.8% of our revenues were generated by our Legacy Solutions, as currently defined, while 49.2% were generated by our Transact and Value-added Solutions. In 2004, 22.4% of our revenues were generated by our Legacy Solutions, as currently defined, while 77.6% were generated by our Transact and Value-added Solutions.

Along with general economic conditions, the proliferation of the Internet and other technological advances in computing and telecommunications continues to transform the transaction management industry. Our business has been impacted in several ways, including a decline in revenue in each of our four product categories. Our Legacy Solutions declined rapidly as customers moved to less customized, open systems based solutions. This decline was exacerbated by the loss of a key customer and migration by some of our customers to more standardized year 2000 compliant systems during this time period. From 2000 to 2004, revenues from our custom messaging and network solutions, the largest part of our Legacy Solutions declined from $183.7 million to $52.3 million. These trends not only affected revenues in dollar terms, but also our mix of revenues.

In addition, competitive pricing dynamics across the industry adversely impacted our core EDI services revenues. These revenues were also negatively impacted by our strategy, beginning in late 2003, to offer many of our largest 2,000 customers lower pricing in exchange for their commitment to multi-year contracts for our core Transact Solutions. From 2000 to 2002, revenues generated by our Transaction Processing and Maintenance grew from $224.8 million to $255.4 million as more companies implemented our systems to enhance their productivity. By 2004, revenue from Transaction Processing and Maintenance had declined to $231.8 million. Revenue generated by our Software Licensing, which are largely driven by discretionary corporate information technology spending, peaked in 2000, at $21.5 million, or 3.8% of our total revenues and declined to $9.0 million, approximately 2.7% of our total revenues, in 2004.

Beginning in 2001, to respond to these market conditions, and beginning in late 2003, to compensate for the pricing concessions we were making on our core EDI services, we implemented a number of cost-savings measures, including:

Beginning in 2004, we also began to package the pricing incentives offered on our core EDI services not only with multi-year contracts but also with contracts for our value-added Monitor, Synchronize and Collaborate Solutions.

During 2004, we also entered into new agreements to provide Synchronize Solutions, including Data Pool services, to the member organizations in several countries in Europe and Asia that participate in an organization called the Global Data Synchronization Network, or GDSN. Data Pools provide a mechanism for trading partners, primarily in the retail supply chain, to share and synchronize product data for greater efficiencies and increased profitability across global supply chains. However, revenues derived from our relationship with these Data Pools is not expected to significantly impact our revenues or results of operations until 2006 and later years, as each country data pool increases its member participation.

During the fourth quarter of 2003, we entered into a restructuring plan to terminate approximately 80 employees and ceased to use approximately 30% of our Gaithersburg facility and we are actively seeking to sublease this space. During the second quarter of 2004, we announced our Business Transformation plan, a restructuring program which includes not only cost-cutting measures such as consolidating development and operations functions, streamlining business processes, and vacating additional facilities, but also measures such as making technology investments to lower our worldwide service delivery costs and the development of our new value-added solutions. We reduced our global employee workforce by approximately 200 positions, by the end of calendar year 2004 from the level existing as of June 8, 2004. As a result, we incurred approximately $26.4 million in restructuring costs, the majority of which we expect to disburse by the end of 2005 with the balance being disbursed in somewhat equal amounts through 2014. The amount recorded is net of amounts we expect to receive from subleasing vacated space at our headquarters and other facilities locations. As of December 31, 2004, these measures resulted in reduced costs of approximately $48.0 million annually, as well as the introduction of several new products. We continue to focus on maintaining a cost structure that is appropriate for our existing revenue base and revenue expectations.

General Electric, together with its affiliates, historically has been among our largest five customers and is currently our largest customer. For the year ended December 31, 2004, General Electric and its affiliates generated approximately 9.0% of our total revenues. For the two years following our 2002 recapitalization, General Electric was required to maintain its and its affiliates’ respective business arrangements with us on terms and conditions substantially similar to those in effect at the time of the recapitalization and to purchase products and services from us at a specified level. General Electric’s obligation to purchase such product and services ended in September 2004. We expect revenue from General Electric and its affiliates to decrease by more than 50% in 2005 compared to 2004 levels. While we expect General Electric to continue to be a very important and significant customer, General Electric and its affiliates may not continue their customer relationships with us at the expected levels or at all.

Impact of Acquisitions

G International. On November 1, 2004, our indirect parent, Francisco Partners, through a majority-owned acquisition vehicle, acquired G International Inc., a business established to own and operate International Business Machine Corporation’s Electronic Data Interchange and Business Exchange Services businesses. By virtue of the ownership of Francisco Partners, we are under common control with G International. In January 2005, we entered into a letter agreement to acquire the sole stockholder of G International. The consideration to be paid by us for G International will be adjusted from $135.0 million based on the indebtedness and working capital of G International, as well as the expenses incurred by G International and its affiliates in connection with the transaction. The form of consideration will be mutually agreed upon by the parties.

The acquisition of G International is subject to satisfaction of several conditions, including:

We believe that the acquisition of G International will:

In connection with our proposed acquisition of G International, all of the employees of G International in the United States will become our employees as of April 1, 2005 and we will enter into an agreement with G International pursuant to which G International will compensate us for the services provided to it by these employees.

Other Acquisitions. On June 3, 2003, we acquired substantially all of the assets of Celarix related to its logistics integration and visibility solutions business for an aggregate value of approximately $2.0 million in preferred and common stock and assumed liabilities. On February 13, 2004, we acquired all of the capital stock of HAHT Commerce through a merger of a wholly owned subsidiary with HAHT Commerce for consideration of approximately $30.0 million, consisting of $15.0 million in cash plus common and preferred shares of GXS Holdings, Inc. valued at approximately $15.0 million. HAHT Commerce is a provider of demand chain management applications that automate, integrate and optimize order management, product information management, channel management, business intelligence and customer services between manufacturers, their channel partners and business customers. Our results of operations for 2003 and 2004 were accordingly impacted by these acquisitions. We intend to continue to selectively pursue acquisitions of companies with complementary products and technologies to enhance our ability to provide comprehensive solutions to our customers and to expand our business. Any such acquisition can affect our results of operations for the period in which the acquisition is completed and future periods and, depending on the size of the acquisition, can affect the comparability of period to period results.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States. Some accounting policies require us to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and the accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates,

and any differences may be material to our consolidated financial statements. A description of all of our significant accounting policies used is described in Note 2 to our audited consolidated financial statements, included herein. Some of these policies involve a higher degree of judgment and complexity in their application and represent the critical accounting policies used in the preparation of our financial statements. These critical accounting policies, in management’s judgment, are those described below. If different assumptions or conditions were to prevail or if our estimates and assumptions prove to be incorrect, actual results could be materially different from those reported.

Revenue Recognition. Most of our revenue is recognized in the month service is performed, but in many cases, our recognition of revenue from the licensing of our software products requires judgment. When our software requires significant customization and modification, we estimate the total cost of the contract and recognize revenue based on actual costs incurred in relation to the total estimated cost. If we made different judgments or utilized different estimates of the total amount of work we expect to be required to customize or modify the software, the timing of our revenue recognition and our margins from period to period may have differed materially from that reported. In situations where we host software, we estimate the feasibility of the customer either running the software on its own systems or contracting with another party to host the software. If neither is feasible, license revenue is recognized over the term of the hosting contract. If either is feasible, license revenue is recognized when the software is delivered, and hosting revenue is recognized over the life of the hosting contract. If our assessment of this feasibility, including any penalties under the customer contracts, were different, the timing of our revenue recognition could differ materially.

In many cases, we deliver multiple products and services to the same customer. In these cases, we allocate revenue to each component of the arrangement using the residual value method. This means that we defer revenue from the total fees associated with the arrangement in an amount equal to the fair value of the elements of the arrangements that have not been delivered. The fair value of any undelivered element is established by using historical evidence specific to us. If we were to allocate the respective fair values of the elements differently, the timing of our revenue recognition could differ materially.

Valuation of Accounts Receivable. We must make estimates of potential sales returns, allowances and bad debts in valuing our accounts receivable. We analyze historical returns, current economic trends and changes in customer demand and acceptance of our products and services when evaluating the adequacy of the provision for sales returns and allowances. We analyze historical bad debts, customer concentrations, customer credit-worthiness, and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. However, if the financial condition of our customers were to deteriorate, their ability to make required payments may become impaired, and increases in these allowances may be required. As of December 31, 2003 and 2004, we had allowances for doubtful accounts and sales allowances of $11.3 million and $10.7 million, respectively.

Capitalization of Software. We capitalize software development costs in accordance with AICPA Statement Of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. We begin to capitalize costs for software to be used internally when we enter the application development stage. This occurs when we have completed the preliminary project stage, our management authorizes and commits to funding the project and we believe it is feasible that the project will be completed and the software will perform the intended function. We stop capitalizing costs related to a software project when we believe we have entered the post implementation and operation stage. We capitalized approximately $26.9 million in software development costs during 2002, $19.9 million during 2003 and $14.7 million during 2004. If we were to make different determinations with respect to the state of development that a software project had achieved, then the amount we capitalize and the amount we charge to expense for that project could differ materially.

The costs we capitalize during the application development stage consists of payroll and related costs for our employees who are directly associated with and who devote time directly to a project to develop software for internal use. We also capitalize the direct costs of materials and services, which generally includes outside contractors. We do not capitalize any general and administrative or overhead costs or costs incurred during the application development stage related to training or data conversion costs. We capitalize costs related to upgrades and enhancements to internal-use software if those upgrades and enhancements result in additional

functionality. If upgrades and enhancements do not result in additional functionality we expense those costs as incurred. If we were to make different determinations with respect to whether upgrades or enhancements to software projects would result in additional functionality, then the amount we capitalize and the amount we charge to expense for that project could differ materially.

We begin to amortize capitalized costs with respect to development projects for software for internal use when the software is ready for use. We generally amortize the capitalized software development costs using the straight-line method over a five-year period. In determining and reassessing the estimated useful life over which the cost incurred for the software should be amortized, we consider the effects of obsolescence, technology, competition and other economic factors. Amortization expense related to software for internal use was $18.4 million during 2002, $23.7 million during 2003 and $26.1 million during 2004. If we were to make different determinations with respect to the estimated useful lives of the software, then the amount of amortization we charge in a particular period could differ materially.

In accordance with Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, we expense as incurred costs associated with software developed for license to customers because we apply the working model method and, as such, the costs incurred from the date of working model to commercial release to customers have not been material.

Valuation of Long-lived Assets. Long-lived assets, which consist primarily of property and equipment, including capitalized costs for software developed for internal use, and acquired intangible assets totaled $133.9 million as of December 31, 2003 and $113.1 million as of December 31, 2004. We periodically evaluate the estimated useful life of property and equipment and, when appropriate, adjust the useful life thereby increasing or decreasing the depreciation expense recorded in the current and in future reporting periods. We also assess the impairment of long-lived assets on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

When we determine that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our business. This process is inherently subjective, as it requires management to make estimates and assumptions about future cash flows. We recorded impairment charges of $6.5 million during each of the years ended December 31, 2003 and 2004, related to certain internally developed software for which management has estimated that future cash flows will be less than the carrying value of the software.

Restructuring. We calculated the facility charge included in the restructuring costs by discounting the net future cash obligation of the existing lease less anticipated rental receipts to be received from existing and potential subleases. This requires significant judgments about the length of time the space will remain vacant, anticipated cost escalators and operating costs associated with the leases, the market rate at which the space will be subleases, and broker fees or other costs necessary to market the space. These judgments were based upon independent market analysis and assessment from experienced real estate brokers. If we were to make different determinations with respect to these factors the amounts of our restructuring charges could differ materially.

Deferred Tax Assets. As of December 31, 2003 and 2004, we had net deferred tax assets of approximately $4.8 million and $1.1 million, respectively. Such amounts are net of valuation allowances of $272.0 million and $313.4 million, respectively. We consider the scheduled reversal of deferred tax liabilities, projected future income and tax planning strategies in assessing the realizability of deferred tax assets. Management believes

we will achieve profitable operations in future years that will enable us to recover the benefit of our deferred tax asset. However, in accordance with applicable accounting literature, we presently do not have sufficient objective evidence that it is more likely than not that we will realize the benefits from the deferred tax assets and, accordingly, have established a full valuation allowance for our U.S. and selected foreign net deferred tax assets as required by generally accepted accounting principles.

Contingencies. We periodically record the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. These events are called contingencies and our accounting for these events is prescribed by SFAS No. 5, Accounting for Contingencies. SFAS No. 5 defines a contingency as “an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.” Contingent losses must be accrued if:

The accrual of a contingency involves considerable judgment on the part of management. Legal proceedings have elements of uncertainty, and in order to determine the amount of reserves required, if any, we assess the likelihood of any adverse judgments or outcomes to pending and threatened legal matters, as well as potential ranges of probable losses. We use internal expertise and outside experts, as necessary, to help estimate the probability that a loss has been incurred and the amount or range of the loss. A determination of the amount of reserves required for these contingencies is made after 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 the event that we incur a loss in the future with respect to a contingency for which General Electric has indemnified us, as part of the recapitalization, the resulting loss will be recorded in our net income for that period along with a corresponding capital contribution from General Electric.

Results of Operations

A summary of our revenue for 2002, 2003 and 2004 by category follows:

A summary of our costs and operating expenses for 2002, 2003 and 2004 follows:

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Revenues. Revenues decreased by $34.9 million, or 9.6%, to $328.6 million for the year ended December 31, 2004 from $363.5 million for the year ended December 31, 2003, principally as a result of market conditions, pricing concessions on our EDI services and the continued de-emphasis of our legacy solutions that we are phasing out. The negative impact on revenues of these factors was partially offset by the addition of approximately $8.9 million of revenues from the acquisition of HAHT Commerce and the relative strength of foreign currencies, which increased by approximately $13.6 million, for 2004 compared to 2003.

Transaction Processing and Maintenance revenue, our main grouping comprised of recurring revenues, decreased by $11.8 million, or 4.8%, to $231.8 million for the year ended December 31, 2004 from $243.6 million for the year ended December 31, 2003. We have continued to pursue our strategy of offering customers more attractively priced packages of services in exchange for multi-year commitments. While we expect this to result in increased customer loyalty and revenue stability over the longer term, we are experiencing reduced realized price levels and revenues, predominantly in the United States, as we implement this strategy as well as experience aggressive reactive competition in the marketplace. We have also experienced a contraction in our overall customer base as smaller customers cancel their service. The declines have been partially offset by growth in our European operations and by the strength of the Euro and British pound relative to the U.S. dollar.

Software Licensing revenue declined by $0.3 million, or 3.2%, to $9.0 million for the year ended December 31, 2004 from $9.3 million for the year ended December 31, 2003. We continue to experience longer customer decision cycles to commit to major new systems implementations. However, revenues during the last six months of 2004 revenues were $2.5 million higher as compared to the first six months of 2004 principally attributable to increases in data synchronization software sales primarily as a result of the HAHT Commerce acquisition.

Professional Services revenue declined by $0.2 million, or 1.4%, to $14.1 million for the year ended December 31, 2004 from $14.3 million for the year ended December 31, 2003. The decline in professional services revenues is consistent with the reduction in new software licensing sales on which professional services are highly dependent.

Legacy Solutions revenue declined by $22.5 million, or 23.4%, to $73.7 million for the year ended December 31, 2004 from $96.2 million for the year ended December 31, 2003, as customers continue to migrate away from hosted legacy applications and computer systems to either in-house implementations or alternate solutions. These declines, which are in line with our expectations, will continue and perhaps begin to accelerate as we reallocate resources towards a consolidated computing infrastructure and focus resources on newer service offerings. In addition, our online marketplaces implemented during the past several years are yielding lower monthly revenues as they mature in terms of usage and number of participants. Year-over-year

declines in these offerings were mitigated somewhat by favorable impact of foreign currency exchange of $3.2 million.

Cost of revenues. Cost of revenues decreased by $8.9 million, or 4.3%, to $198.2 million for the year ended December 31, 2004 from $207.1 million for the year ended December 31, 2003. The year-over-year decrease in cost of revenues is primarily driven by declines in compensation and related employee expenses as we continue to move forward with our transformation plan (including utilizing employees in lower cost locations), and by lower royalty payments to software licensors as a result of lower software sales. Also contributing to the decrease is a decline in professional services expense as we have started to utilize contractors in lower cost locations.

Sales and marketing. Sales and marketing expense decreased by $1.9 million, or 2.9%, to $63.3 million for the year ended December 31, 2004 from $65.2 million for the year ended December 31, 2003. The year-over-year decrease is primarily due to lower compensation and related employee expenses as a result of restructuring actions that took place during 2003 and 2004, the most significant of which are described above under “— Recent Trends and Cost-Reduction Initiatives,” and lower commission expense in line with decreased revenues. These decreases are somewhat offset by increases in advertising and sales promotion activities as we strive to enhance our brand awareness in the marketplace, as well as expenses associated with operating the acquired HAHT Commerce business.

General and administrative. General and administrative expenses increased by $0.1 million, or 0.2%, to $47.4 million for the year ended December 31, 2004 from $47.3 million for the year ended December 31, 2003. The year-over-year increase is primarily driven by an increase in consulting expenses and professional fees during the first six months of 2004. Consulting expenses and professional fees included $2.7 million of fees paid to management consultants engaged in December 2003 to work together with our management team to solidify our business strategy and lay a foundation for our cost transformation actions. These engagements were substantially completed by the end of the second quarter of 2004 and, as a result, general and administrative expenses decreased during the second half of 2004.

The weakening dollar caused cost of revenues, sales and marketing and general and administrative expenses to be approximately $11.5 million higher in 2004 compared to 2003.

Restructuring and related charges. Restructuring and related charges were $26.4 million for the year ended December 31, 2004 and included severance of $20.3 million and facility charges of $6.1 million. The majority of the 2004 charges relate to a restructuring program announced on June 8, 2004 which includes facility exit costs, consolidating development and operations functions, streamlining business processes and making technology investments to lower our worldwide service delivery costs. We reduced our global workforce by approximately 200 positions from the level that existed as of June 8, 2004. We also expect to shift additional employment to lower cost countries, particularly India and the Philippines. We paid $23.6 million of severance costs in 2004. The balance of the cash expenditures of these severance costs will be paid by the end of 2005 and the balance of these costs related to facilities will be paid in somewhat equal amounts through 2014.

Restructuring and related charges were $26.7 million for the year ended December 31, 2003. The 2003 charges related to facility and equipment lease buy-outs, facility exit costs, and severance for approximately 80 employees primarily in our factory, engineering, and services organizations.

Asset impairment charges. For the years ended December 31, 2004 and 2003, we recorded impairment charges of $6.5 million and $6.5 million, respectively. The impairment charges in both years related to internally developed software providing specific customer functionality. Future cash flows were estimated by management to be less than the current net book value of the software and, as a result, an impairment charges were recorded.

Proportionate share of losses in investee companies and investment write-downs. During the year ended December 31, 2004, we recorded our proportionate share of the losses of our equity method investments of $1.2 million. During the year ended December 31, 2003, we recorded our proportionate share of the losses of our equity method investments of $0.7 million. As of December 31, 2003 and 2004, we held four cost method

investments and one equity method investment where the carrying value of the investment had not been completely written-off.

Write-off of deferred financing costs. Deferred financing costs of $5.5 million were written off during the year ended December 31, 2003. The write-off was related to the refinancing of a senior term loan entered into in late 2002 and refinancing during the first half of 2003.

Interest expense. Interest expense of $59.1 million for the year ended December 31, 2004, and $51.0 million for the year ended December 31, 2003, was primarily driven by interest on our long-term debt. The increase over the prior year relates to an increase in the interest rate being accrued on our $235.0 million senior subordinated reset notes from 12% to 15% as described in the following paragraph, and increased interest and higher amortization of deferred financing costs related to the March 2003 issuance of our $105.0 million of senior secured floating rate notes and our new credit facility.

Our senior subordinated reset notes accrued interest at 12% per annum before September 27, 2003. After September 27, 2003, the senior subordinated reset notes accrue interest at a reset rate between 8% and 17%. The reset rate is to be determined by negotiations between General Electric Capital Corporation, or GECC, and us. These negotiations began in July 2003 and are continuing. The parties have not reached an agreement on the reset rate and have each engaged investment bankers to determine the reset rate. For the period from September 27, 2003 to December 31, 2004, the Company accrued interest at a rate of 15%, the rate which management believes to be the best estimate of where the negotiations will conclude. To the extent the reset rate exceeds 15%, we will have the option to pay cash interest of 15% and add the additional interest to the balance of the reset notes. A 1% change in the reset rate upon final negotiations will change interest expense by $2.4 million annually.

Other income (expense), net. Other income of $1.3 million for the year ended December 31, 2004, was primarily driven by net gains on foreign currency transactions of $1.5 million. Other income also included $0.5 million of minority interest income, offset by $0.8 million in fees relating to interest rate determination for our senior subordinated reset notes.

Other income was $1.2 million for the year ended December 31, 2003 and consisted primarily of net gains on foreign currency transactions of $0.5 million and minority interest income of $0.5 million.

Management fee from G International. On November 1, 2004, we entered into an employee services agreement with G International. The agreement provides that prior to completion of our acquisition of G International, certain of our executive officers will provide management services and other personnel will provide support services with respect to the business and operations of G International. Fees earned for these services were $0.3 million for the last two months of 2004.

Provision for income taxes. Income tax expense was $10.7 million for the year ended December 31, 2004 compared to $259.6 million for the year ended December 31, 2003. The income tax provision for 2003 includes the impact of a $259.8 million increase in the valuation allowance against our net deferred tax assets. Our tax rates for both periods differed from the federal statutory rate of 35% principally as result of state income taxes and the effect of losses in the U.S. and foreign jurisdictions for which no income tax benefits have been recognized. Our income tax expense for the year ended December 31, 2004 relates primarily to taxes for foreign jurisdictions in which we have income.

Net income (loss). Net loss decreased by $218.4 million to a net loss of $84.9 million for the year ended December 31, 2004 compared to a net loss of $303.3 million for the year ended December 31, 2003. The decrease of $218.4 million was primarily driven by the decreases in income tax expense of $248.9 million. We increased the valuation allowance recorded against our net deferred tax assets during the quarter ended December 31, 2003 by $259.8 million.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Revenues decreased by $46.0 million, or 11.2%, to $363.5 million for the year ended December 31, 2003 from $409.5 million for the year ended December 31, 2002. The relative strength of foreign currencies caused an increase in revenues of approximately $15.0 million for 2003 compared to 2002.

Transaction Processing and Maintenance revenue decreased by $11.8 million, or 4.6%, to $243.6 million for the year ended December 31, 2003 from $255.4 for the year ended December 31, 2002. The decrease in Transaction Processing and Maintenance revenue was comprised of a $25.0 million revenue decline in the Americas resulting from lower EDI*Express volume and pricing offset by increases in revenue resulting from the favorable impact of foreign currency exchange of $9.4 million, Celarix revenue of $1.5 million, customer surcharges of $3.0 million and core revenue growth in Europe of $3.4 million. The impact on revenues of customer cancellations during the year ended December 31, 2003 was somewhat offset by price increases implemented in the fourth quarter of 2002.

Key factors contributing to the lower EDI*Express volume include cyclical economic pressure on our clients, volume impact of two clients, Kmart Corporation, who filed for bankruptcy during the first quarter of 2002, and Fleming Cos. Inc., who filed for bankruptcy during the second quarter of 2003 and a significant client whose volumes with us were negatively impacted by the consolidation of ordering activity from individual stores to regional distribution centers.

Software Licensing revenue decreased by $2.4 million, or 20.5%, to $9.3 million for the year ended December 31, 2003 from $11.7 million for the year ended December 31, 2002. The $2.4 million revenue decrease is primarily the result of fewer license sales of our traditional software offerings offset by a favorable impact of foreign currency exchange of $0.3 million.

Professional Services revenue decreased by $4.5 million, or 23.9%, to $14.3 million for the year ended December 31, 2003 from $18.8 million for the year ended December 31, 2002. The decline in professional services revenues is consistent with the reduction in new software licensing sales as well as the conclusion of a significant project in 2002.

Legacy Solutions revenue decreased $27.4 million, or 22.2%, to $96.2 million for the year ended December 31, 2003 from $123.6 million for the year ended December 31, 2002. The decrease in revenue is in line with expectations as customers continue to migrate away from legacy applications to open systems based solutions. Decreased business volume was offset by a favorable impact of foreign currency exchange of $3.7 million.

Cost of revenues. Cost of revenues decreased by $37.1 million, or 15.2%, to $207.1 million for the year ended December 31, 2003 from $244.2 million for the year ended December 31, 2002. The decrease in cost of revenues is driven by the impact of restructuring actions taken during 2002 as well as actions taken in 2003 to align our cost structure with our revenue. As demand for our products and services declined, we curtailed a number of product development programs. The impact of the actions contributed to a decline of $23.9 million in network equipment expense and a $21.8 million decline in compensation, contractors and related expenses for the year ended December 31, 2003.

Sales and marketing. Sales and marketing expense decreased by $2.1 million, or 3.1%, to $65.2 million for the year ended December 31, 2003 from $67.3 million for the year ended December 31, 2002. The year-over-year decrease is primarily attributable to the consolidation of marketing and development programs and our efforts to reduce our cost structure by reorganizing our sales force more broadly across all product lines and closing various sales offices. This decrease is offset by an increase in expenses related to the upgrade of our sales force. These actions resulted in an increase of $3.6 million in compensation, contractors and related costs, and a decrease of $3.1 million related to the closing and consolidation of various facilities.

General and administrative. General and administrative expenses decreased by $1.0 million, or 2.1%, to $47.3 million for the year ended December 31, 2003 from $48.3 million for the year ended December 31, 2002. The decrease for the year ended December 31, 2003 was primarily driven by a decrease in compensation and benefits as a result of actions taken to align our cost structure with our revenue.

The weakening dollar caused cost of revenues, sales and marketing and general and administrative expenses to be approximately $10.0 million higher in 2003 compared to 2002.

Restructuring and related charges. Restructuring and related charges increased by $8.3 million, or 45.1%, to $26.7 million for the year ended December 31, 2003 from $18.4 million for the year ended December 31, 2002. The 2003 charges related to facility and equipment lease buy-outs, facility exit costs including a restoration obligation, and severance for approximately 80 employees primarily in our factory, engineering, and services organizations. The 2002 activities resulted in the termination of approximately 300 people resulting in a restructuring and related charge of $18.4 million, principally related to severance and related termination costs, costs associated with the closings of sales, services and engineering facilities and buy-out of certain equipment operating leases. A portion of these costs were reimbursed by General Electric as part of the September 2002 recapitalization agreement. The reimbursements are reflected as contributions to additional paid-in capital.

Asset impairment charges. For the year ended December 31, 2003, we recorded an impairment charge of $6.5 million related to internally developed software providing specific customer functionality. Future cash flows were estimated by management to be less than the current net book value of the software and, as a result, an impairment charge was recorded. For the year ended December 31, 2002, we recorded an impairment charge of $5.4 million primarily related to certain software under development for which the plans to deploy were curtailed.

Corporate charges from General Electric. The corporate charges from General Electric were $7.3 million for the year ended December 31, 2002. Each year, General Electric charged us a fixed percentage of our budgeted total costs for that year as a corporate charge, which covered various centralized services that General Electric provided to us as needed, such as compensation and benefit plan design, tax planning, marketing support, treasury, auditing, public company reporting and various other corporate expenses. Following the recapitalization, we no longer pay a corporate charge to General Electric. As a stand-alone entity, the replacement costs of these General Electric services are now recognized in the respective functions where incurred.

Proportionate share of losses in investee companies and investment write-downs. During year ended December 31, 2003, we recorded our proportionate share of the losses of our equity method investments of $0.7 million. During the year ended December 31, 2002, we recognized losses on our various cost and equity method investments of $4.7 million. Of this amount $1.3 million related to our proportionate share of losses of one equity method investment and $3.4 million related to write-down of several cost method investments where we determined the decline in value was other than temporary.

Write-off of deferred financing costs. Deferred financing costs of $5.5 million were written off during the year ended December 31, 2003. The write-off was related to the refinancing of our original senior term loan.

Interest expense. Interest expense of $51.0 million for the year ended December 31, 2003, and $14.5 million for the year ended December 31, 2002, was primarily driven by interest on our long-term debt issued in connection with the recapitalization.

Provision for income taxes. Income tax expense was $259.6 million for the year ended December 31, 2003 compared to $9.9 million for the year ended December 31, 2002. The income tax provision for 2003 includes the impact of a $259.8 million increase in the valuation allowance against our net deferred tax assets during the quarter ended December 31, 2003. Our income tax provision for 2002 includes $8.3 million of income taxes we incurred upon the repatriation of foreign earnings, which previously had not been taxable in the United States, and a $0.9 million charge to reflect changes in our net deferred tax assets resulting from the change in control effected by the recapitalization. Our tax rates for both periods differed from the federal statutory rate of 35% principally as result of state income taxes and the effect of losses in foreign jurisdictions for which no income tax benefits have been recognized.

Net income (loss). Net loss increased by $263.8 million to a net loss of $303.3 million for the year ended December 31, 2003 compared to a net loss of $39.5 million for the year ended December 31, 2002. The increase of $263.8 million was primarily driven by the increase in the valuation allowance recorded against our net deferred tax assets.

Liquidity and Capital Resources

Sources and Uses of Cash

The following table is a summary of our sources and uses of cash during 2002, 2003 and 2004:

2004 Compared to 2003

Net cash provided by operating activities was $8.0 million in 2004 compared to $38.8 million in 2003. The decrease in net cash provided by operating activities from 2003 to 2004 of $30.8 million was mainly attributable to lower operating income before depreciation and amortization of $19.6 million together with higher cash interest payments, which increased by $6.8 million, higher income tax payments, which increased by $3.3 million, and increases in deferred income and accrued expenses.

Net cash used in investing activities was $37.6 million in 2004 compared to $28.8 million in 2003. Net cash used in investing activities in 2004 included $15.0 million for the acquisition of HAHT Commerce, net of $4.5 million of cash acquired. Net cash used in investing activities for 2004 also included capital expenditures of $27.9 million for property, software and equipment. Net cash used in investing activities in 2003 included capital expenditures of $29.4 million for property, software and equipment, offset by proceeds of $0.6 million from the sale of software and assets related to our I400 software product. Capital expenditures for 2003 and 2004 include $19.9 million and $14.7 million, respectively, of costs capitalized for the development of software for internal use. The lower capital expenditures in 2004 resulted from decreasing our investment in products and services with lower revenue expectations, while directing investments in new products and services and those with greater growth expectations based upon then-existing market conditions and outlook.

Net cash provided by financing activities was $6.0 million in 2004 compared to net cash used in financing activities of $4.9 million for 2003. Cash provided by financing activities for 2004 consisted primarily of a $6.2 million reimbursement by General Electric pursuant to the agreements entered into in connection with our recapitalization in 2002, as discussed in note 1 of our consolidated financial statements included herein. Cash used in financing activities in 2003 was driven by $12.6 million of professional and underwriting fees related to our debt refinancing, and cash of $174.0 million used to retire borrowings under our previous term loan, offset by $169.8 million from the refinancing and a $12.5 million reimbursement by General Electric pursuant to the recapitalization agreement.

2003 Compared to 2002

Net cash provided by operating activities was $38.8 million in 2003 compared to $9.2 million in 2002. The increase in net cash provided by operating activities from 2002 to 2003 of $29.6 million was mainly attributable to changes in operating assets and liabilities including $26.7 million in restructuring charges relating to severance and related termination costs and costs associated with the closing of facility space, which will be funded in future years.

Net cash used in investing activities was $28.8 million in 2003 compared to $43.8 million in 2002. Net cash used in investing activities in 2003 included capital expenditures of $29.4 million for property, software and equipment, offset by proceeds of $0.6 million from the sale of software and assets related to our I400 software

product. Net cash used in investing activities in 2002 consisted primarily of capital expenditures for property, software and equipment of approximately $37.8 million and acquisitions of minority interests in affiliates of approximately $6.0 million. Capital expenditures for 2002 and 2003 include $26.9 million and $19.9 million, respectively, of costs capitalized for the development of software for internal use. The lower capital expenditures in 2003 resulted from our efforts to invest in line with lower revenue expectations for certain products and services.

Net cash used for financing activities was $4.9 million in 2003 compared to net cash provided by financing activities of $56.5 million for 2002. Cash used in financing activities in 2003 was driven by $12.6 million of professional and underwriting fees related to our debt refinancing, and cash of $174.6 million used to retire borrowings under our previous term loan, offset by $169.8 million from the refinancing and a $12.5 million reimbursement by General Electric pursuant to the recapitalization agreement. Cash provided by financing activities for 2002 consisted primarily of repayments by our foreign subsidiaries of borrowings under third-party lines of credit, partially offset by repayments of loans we had made to General Electric and its affiliates in connection with tax planning and cash management. Cash provided by financing activities during 2002 also reflects the impact of the recapitalization which resulted in the borrowing of $410.0 million, the payment of financing costs of $11.6 million and the cash distribution to General Electric of $350.0 million. In connection with the recapitalization, all intercompany balances that existed between us and General Electric and its affiliates, including any remaining balances on intercompany loans, were eliminated.

Liquidity

Our principal sources of liquidity have been available cash and cash flows from operations. We expect our principal uses of cash to be working capital, capital expenditures and debt service. As of December 31, 2004, we had outstanding debt of approximately $406.5 million, which consisted of $235.0 million of outstanding senior subordinated reset notes, $101.5 million of outstanding senior secured floating rate notes and a $70.0 million senior term loan. The senior secured floating rate notes are net of a debt discount of $3.5 million.

Borrowings under our revolving credit facility bear interest, at our option, at either a floating base rate plus 2.00% per annum or floating LIBOR plus 4.25% per annum. Borrowings under our senior term loans bear interest, at our option, at either the base rate plus 4.00% per annum or LIBOR plus 6.00% per annum. The base rate and LIBOR rate used to calculate the applicable interest rates on revolving credit loans and senior term loans may not be less than 4.25% and 2.25%, respectively. Interest is payable monthly in arrears for base rate loans and on the last day of selected interest periods, but no later than every three months for LIBOR rate loans. The maturity date of the revolving credit facility and the senior term loan are March 21, 2007, at which time all principal is due and payable.

At December 31, 2004, we had $70.0 million outstanding under the senior term loan facility. Borrowings outstanding under the facility at December 31, 2004 bear interest at 8.25%. In addition, as of the date of this report, we have approximately $8.9 million of letters of credit outstanding under our revolving credit facility. The amount that can be borrowed under the revolving credit facility is limited to a percentage of EDI revenues as defined in the agreement governing the credit facility, and is subject to our compliance with financial covenants and other customary conditions, including that no event of default under the facility has occurred and is continuing. Available borrowings under our revolving credit facility were $21.1 million at December 31, 2004. In January 2005, we borrowed $5.0 million under our revolving credit facility for general corporate purposes, all of which has been repaid.

Our obligations under our credit facility are guaranteed by all of our existing and future U.S. subsidiaries and are also secured by first-priority liens on substantially all of our and the guarantors’ assets and property, including a pledge of 100% of the capital stock or other equity interests of our existing and future U.S. subsidiaries and 66% of the capital stock or other equity interests of our material first-tier foreign subsidiaries. We are also subject to a negative pledge on all of our assets and the assets of our subsidiaries.

The agreements governing our outstanding debt impose limitations on our ability to, among other things, incur additional indebtedness including capital leases, incur liens, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, issue preferred stock,

merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. The indentures governing our outstanding reset and floating rate notes contain similar limitations. In addition, the indenture governing our outstanding floating rate notes limits our ability to maintain secured indebtedness in excess of certain limits related to our EDI services revenue. Our credit facility, as amended, also requires that we meet and maintain certain financial ratios and tests, including an annual capital expenditures limitation, minimum consolidated trailing twelve month Earnings before Interest, Taxes, Depreciation and Amortization, (EBITDA), as defined in our credit facility, and a maximum consolidated leverage ratio (total senior debt to EBITDA). Our ability to comply with these covenants and to meet and maintain such financial ratios and tests is material to the success of our business and may be affected by events beyond our control. Our failure to comply with these covenants could create a default under the credit facility, the indenture governing the senior secured floating rate notes, and the indenture governing the senior subordinated reset notes. In March and June 2004, we negotiated amended covenants under our credit facility for 2004 and 2005. The amended EBITDA covenant has a requirement of $62.5 million for 2004, $75.0 million for the twelve-month period ended March 31, 2005 and $85.0 million for the twelve-month periods ending June 30, September 30 and December 31, 2005, a minimum consolidated leverage ratio requirement of 3.30 to 1.0 for 2004, 2.80 to 1.0 for the twelve-month period ended March 31, 2005 and 2.40 to 1.0 for the twelve-month periods ending June 30, September 30 and December 31, 2005. Our ability to comply with each of the EBITDA and consolidated leverage ratio covenants will primarily depend on the performance of our business in future periods and, specifically, our ability to generate revenues and control operating costs. Under our credit facility, EBITDA is calculated each quarter for the latest twelve-month period and is adjusted to exclude specific costs and expenses. We expect that we will be able to comply with these covenants in future periods. However, if the compliance is not achieved, we may need to seek waivers or additional covenant amendments from the lender or additional sources of funding. There can be no assurance that such waivers, covenant amendments or funding will be available, if required.

The excluded costs and expenses include fees related to the 2002 recapitalization, non-cash charges, restructuring charges, costs reimbursed by General Electric, and other adjustments. As defined under our credit facility, EBITDA for the twelve-months period ended December 31, 2004 is equal to $73.5 million. For the twelve-month period ended December 31, 2004, our consolidated leverage ratio was equal to 2.5 to 1.0, based on senior debt of $183.9 million and EBITDA of $73.5 million. While EBITDA as defined in our credit facility is a measure used therein, EBITDA is not a financial measure calculated in accordance with accounting principles generally accepted in the United States. Accordingly, EBITDA is not intended to be used as an alternative to net income or any other measure of performance in accordance with accounting principles generally accepted in the United States, and EBITDA is not necessarily an indication of whether we will be able to fund our cash requirements. The credit facility also requires that we limit our capital expenditures to $49.5 million during each fiscal year. For the year ended December 31, 2004, our capital expenditures totaled $27.9 million.

The senior secured floating rate notes are scheduled to mature on July 15, 2008 and accrue interest at a floating rate based on six-month LIBOR plus 9%, but never less than 12%. The interest rate at December 31, 2004 was 12%. The senior secured floating rate notes are secured by second-priority security interests in substantially all of our assets and our domestic subsidiaries’ and 66% of the stock of our material foreign subsidiaries. In addition, the senior secured floating rate notes are guaranteed fully and unconditionally by our domestic subsidiaries. Interest is payable semi-annually in arrears on January 15 and July 15 of each year commencing on July 15, 2003.

The senior secured floating rate notes are redeemable at our option any time, in whole or in part, at a redemption price equal to par plus accrued and unpaid interest, plus a redemption premium. The premium is 3% for the twelve months ending October 1, 2005 and 1.5% for the twelve months ending October 1, 2006. After October 1, 2006, the senior secured floating rate notes can be redeemed at par plus accrued and unpaid interest. Upon the occurrence of a change of control, as defined in the indenture governing the senior secured floating rate notes, each holder of the senior secured floating rate notes will have the right to require us to repurchase such holder’s notes at an offer price in cash equal to 101% of the aggregate principle amount thereof plus accrued and unpaid interest and liquidated damages, if any, thereon to the date of purchase.

Our senior subordinated reset notes are scheduled to mature on September 27, 2009 and accrued interest at 12% per annum before September 27, 2003. After September 27, 2003, the senior subordinated reset notes accrue interest at a reset rate between 8% and 17%. The reset rate is to be determined by negotiations between GECC and us. These negotiations began in July 2003 and are continuing. The parties have not reached a definitive agreement on the reset rate and have each engaged investment bankers to determine the reset rate. For the period from September 27, 2003 to December 31, 2004, the Company accrued interest at a rate of 15%, the rate which management believes to be the best estimate of where the negotiations will conclude. To the extent the reset rate exceeds 15%, we will have the option to pay cash interest of 15% and add the additional interest to the balance of the reset notes. Interest is payable semi-annually on April 15 and October 15 of each year commencing April 15, 2003. The senior subordinated reset notes are general unsecured obligations and are guaranteed by all of our domestic subsidiaries. The senior subordinated reset notes are redeemable at our option, in whole or in part, at any time on or after September 27, 2006 at a redemption price equal to par plus accrued and unpaid interest, plus a declining redemption premium. In addition, prior to September 27, 2005, we may, on any one or more occasions, redeem up to 35% of the aggregate principal amount of the senior subordinated reset notes with the net cash proceeds of one or more equity offerings at a redemption price of 100% of the principal amount plus a premium equal to the reset rate and accrued and unpaid interest, provided that the redemption occurs within 90 days of the date of the closing of such equity offering and at least 65% of the senior subordinated reset notes issued remain outstanding immediately after the occurrence of such redemption. Upon the occurrence of a change of control, as defined in the Indenture governing the senior subordinated reset notes, each holder of the senior subordinated reset notes will have the right to require us to repurchase such holder’s notes at an offer price in cash equal to 101% of the aggregate principle amount thereof plus accrued and unpaid interest and liquidated damages, if any, thereon to the date of purchase.

Our debt service requirements consist primarily of interest expense on the term loan portion of our credit facility, the senior secured floating notes and the senior subordinated reset notes and on any future borrowings under the revolving credit portion of our credit facility. Our short-term cash requirements are expected to consist mainly of cash to fund our operations, interest payments on our debt and cash payments for various operating leases and capital expenditures.

Although we do not have an extensive history of acquisitions, we intend to continue to pursue selective acquisition opportunities. We expect to finance any future acquisitions using cash, capital stock, notes and/or assumption of indebtedness. However, the restrictions imposed on us by the agreements governing our debt outstanding at the time may affect this strategy. In addition, to fully implement our growth strategy and meet the resulting capital requirements, we may be required to request increases in amounts available under our revolving credit facility, enter into new credit facilities, issue new debt securities or raise additional capital through equity financing. We may not be able to obtain an increase in the amounts available under our credit facility, if requested, on satisfactory terms and we may not be able to successfully complete any future bank financing or other debt or equity financing on satisfactory terms, if at all. As a result, our ability to make future acquisitions is uncertain. As discussed previously, we have recently completed the acquisitions of Celarix and HAHT Commerce and have announced our intention to acquire G International.

Based upon our current operations and historical results, we believe that our cash flow from operations, together with available cash and borrowings under our revolving credit facility, will be adequate to meet our anticipated requirements for working capital, capital expenditures, lease payments and scheduled interest payments for the next twelve months. To the extent additional funding is required, we expect to seek additional financing in the public or private debt or equity capital markets. We cannot be certain that we will be successful in obtaining additional financing, if needed, or that, if available, any additional financing will be on terms favorable to us. Neither Francisco Partners nor General Electric is obligated to provide financing to us as General Electric and its affiliates have in the past. If we are unable to obtain the capital we require to implement our business strategy, or to obtain the capital we will require on acceptable terms or in a timely manner, we would attempt to take appropriate responsive actions to tailor our activities to our available financing, including revising our business strategy and future growth plans to accommodate the amount of financing available to us.

Contractual Obligations and Other Commitments

Our principal contractual obligations and commercial commitments include our existing senior term loan and revolving credit facility, the senior subordinated reset notes, the senior secured floating rate notes, operating leases and other commitments principally relating to multi-year software maintenance agreements. The following tables summarize these obligations at December 31, 2004 and their expected effect on our liquidity and cash flows in future periods.

Minority shareholders in one of our consolidated subsidiaries have rights, in certain circumstances, to require us to purchase some or all of their interests in this subsidiary at a specified price. Management estimates that this price generally equates to the fair market value of the holders’ interests and that the potential obligation as of December 31, 2004 was approximately $0.5 million in the aggregate.

Off-Balance Sheet Arrangements

We did not enter into any off-balance sheet arrangements during 2003 or 2004, nor did we have any off-balance sheet arrangements outstanding at December 31, 2003 or 2004.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, Share-Based Payment, which replaces SFAS No. 123 and supercedes APB No. 25. This statement requires compensation costs relating to share-based payment transactions to be recognized in financial statements based upon the fair value of the award. SFAS No. 123R eliminates the option to account for the cost of stock-based compensation using the intrinsic value method as allowed under APB 25 and the minimum value method allowed under SFAS No. 123 for equity investments not traded on public markets. SFAS No. 123R is effective for nonpublic entities for fiscal years beginning after December 15, 2005. Therefore, we expect to adopt SFAS No. 123R as of the beginning of our fiscal year ending December 31, 2006. We are currently evaluating the impact the adoption of SFAS No. 123R will have on our consolidated financial statements.

Factors That Could Affect Future Results

We depend on General Electric and its affiliates as customers.

General Electric, together with its affiliates, historically has been among our largest five customers and is currently our largest customer. For the year ended December 31, 2004, General Electric and its affiliates generated approximately 9.0% of our total revenues. In addition, General Electric and its affiliates have also acted as trial customers for some of our new products and services. As a result of the recapitalization in 2002, General Electric retained only 10.0% of the common stock of our parent, GXS Holdings, Inc., and an equivalent interest in GXS Holdings’ preferred stock. Because we are no longer a wholly owned subsidiary of General Electric, we may not be able to benefit from our relationship with them as we have in the past. For example, for the two years following our 2002 recapitalization, General Electric was required to maintain its and its affiliates’ respective business arrangements with us on terms and conditions substantially similar to those in effect at the time of the recapitalization and to purchase products and services from us at a specified level. General Electric’s obligation to purchase such product and services ended in September 2004. We cannot provide any assurances that General Electric and its affiliates will continue their customer relationships with us, and expect purchases from General Electric and its affiliates to decrease by more than 50% in 2005 over 2004 levels. In addition, our profitability could be adversely affected if General Electric and its affiliates were to purchase lower margin products and services than they have historically purchased. If General Electric or any of its affiliates were to terminate or materially alter their customer relationships with us, our business, financial position and results of operations could be adversely affected.

Because much of our operations are conducted, and most of our assets are held, by our subsidiaries, we will depend on our subsidiaries for cash and to service our debt.

Substantially all of our operations are conducted through subsidiaries. Consequently, our cash flow and ability to service our debt obligations are dependent upon the earnings of our operating subsidiaries and the distribution of those earnings to us, or upon loans, advances or other payments made by our subsidiaries to us. The ability of our subsidiaries to pay dividends or make other payments or advances to us will depend upon their operating results and will be subject to applicable laws and contractual restrictions contained in the instruments governing their debt, including our credit facility and the indentures governing our senior secured floating rate notes and our senior subordinated reset notes. Although the agreements governing our outstanding debt limit the ability of these subsidiaries to enter into consensual restrictions on their ability to pay dividends and make other payments to us, these limitations are subject to a number of significant qualifications. We cannot assure that the earnings of our operating subsidiaries will be adequate for us to service our debt obligations or meet our other obligations as they become due.

We engage in significant transactions with our affiliates.

Historically, we have engaged in a variety of transactions with our affiliates, including significant business with General Electric and its affiliates. In addition, in connection with the 2002 recapitalization, we entered into a number of agreements with General Electric, its affiliates and Francisco Partners. We have also entered into an agreement with Francisco Partners with respect to our proposed acquisition of G International from Francisco Partners. Although we believe that our agreements with General Electric, its affiliates and Francisco Partners are and will be fair to us in all material respects, the terms of the agreements are not necessarily the same terms that we would have received in arms’ length transactions with third parties. We expect that, in the future, we will continue to enter into a variety of transactions with our affiliates, some of which may be significant. Although the agreements governing our outstanding debt require that these types of transactions be on terms no less favorable to us or the applicable subsidiary than those which could be obtained on an arms’ length basis from third parties, this limitation is subject to a number of important qualifications and exceptions and we cannot be certain that these types of transactions will not adversely affect our business, financial condition or results of operations.

In addition, conflicts of interest may arise with General Electric or Francisco Partners in a number of areas relating to our past and ongoing relationships, including potential competitive business activities, tax and

employee benefit matters, and indemnity arrangements related to the 2002 recapitalization and our proposed acquisition of G International.

Francisco Partners indirectly controls approximately 90% of our capital stock, and there may be situations in which the interests of Francisco Partners and the interests of holders of our outstanding debt will not be aligned.

Francisco Partners indirectly controls approximately 90% of our capital stock. As a result, Francisco Partners is able to:

As a result, circumstances may occur in which the interests of Francisco Partners could be in conflict with the interests of the holders of our outstanding debt. In addition, Francisco Partners may have interests in pursuing acquisitions, divestitures or other transactions that, in their judgment could enhance their equity investment, even though the transactions might involve risks to the holders of our outstanding debt.

A significant portion of our services is delivered using a proprietary operating system and loss or disruption of this operating system could adversely affect our ability to service customers.

We utilize a proprietary operating system, known as Mark III®, on mainframe computers manufactured by Bull, S.A. to deliver approximately 41% of our Transaction Processing and Maintenance and almost all of our Custom Messaging and Network Solutions for the year ended December 31, 2004. Revenues derived from products and services using this operating system represented approximately 35% of our total revenues for the year ended December 31, 2004. Currently, we have approximately eight full-time equivalent engineers who are qualified to maintain this operating system. We believe this number of engineers is adequate to maintain the Mark III® systems we currently use. We are, however, in the process of migrating all EDI services currently provided using this operating system to processors utilizing newer technologies. We expect this migration to take several years. While we are completing the migration, there is a risk that the unavailability of these engineering personnel could disrupt the delivery to our customers of services utilizing the Mark III® operating system.

Our inability to adapt to rapid technological change could impair our ability to remain competitive.

The industry in which we compete is characterized by rapid technological change, frequent new product and service introductions and evolving industry standards. Our future success will depend in significant part on our ability to anticipate industry standards and to continue to enhance existing products and services and introduce and acquire new products and services on a timely basis to keep pace with technological developments. We expect that we will continue to incur significant expenses in the design, development and marketing of new products and services. Our competitors may implement new technologies before we are able to implement them, allowing our competitors to provide more effective products and services at lower prices.

We cannot assure that we will be successful in developing, acquiring or marketing new or enhanced products or services that respond to technological change or evolving industry standards, that we will not experience difficulties that could delay or prevent the successful development, acquisition or marketing of such products or services or that our new or enhanced products and services will adequately meet the requirements of the marketplace and achieve market acceptance. Any delay or failure in the introduction of new or enhanced products or services, or the failure of such products or services to achieve market acceptance, could have a material adverse effect on our business, results of operations and financial condition.

Short product life cycles make it difficult to recover the cost of development and force us to continually qualify new products with our customers.

Over the last several years, the rate at which new technological developments have been introduced into the market has grown at a much more rapid pace than it had previously. Continually updated standards for the electronic exchange of information, such as those issued by the American National Standards Institute have required us to produce successive generations of our Transact Solutions and some of value-added solutions and related software with additional functionality. Because we are required to implement these frequently issued standards, the life cycles of our products have shortened. We typically release new versions of our products every six to twelve months. Short product cycles make it more difficult for us to recover the costs associated with product development because those costs must be recovered over increasingly shorter periods of time. We expect this trend to continue, and it may even accelerate. As a result, we may not be able to recover all of our product development costs, which could affect our profitability. For our products to be competitive, we must be among the first to market with next-generation products. Any failure or delay in the product development or quality assurance process can result in our losing sales until we are able to introduce the new product.

We may experience product failures or other problems with existing or new products, all of which could adversely impact our business.

Software products as complex as those we offer may contain undetected errors or failures when first introduced or when new versions are released. If software errors are discovered after introduction, we could experience delays or lost revenues during the period required to correct the errors. We cannot be certain that errors will not be found in new products or services after commencement of commercial operations, resulting in loss of, or delay in, market acceptance, which could have a material adverse effect on our business, results of operations and financial condition.

Our operations are dependent on our ability to protect our data centers against damage.

Our operations are dependent upon our ability to protect our computer equipment and the information stored in our data centers against damage that may be caused by fire, power loss, telecommunications failures, unauthorized intrusion, computer viruses and disabling devices, natural disasters and other similar events. We cannot assure that a fire or other natural disaster, including national, regional or local telecommunications disruptions, would not result in a prolonged disruption of our network services or permanently impair some of our operations. A prolonged service disruption or other impairment of operations could damage our reputation with customers, expose us to liability, cause us to lose existing customers or increase our difficulty in attracting new ones. We may also incur significant costs for using alternative off-site equipment or taking other actions in preparation for, or in reaction to events that damage our data centers.

We maintain business interruption insurance. However, even if we recovered under such an insurance policy, the lost revenues or increased costs that we experience during the disruption of our network services business, and longer term revenue losses, which may not be recoverable under the policy, could result from possible losses of customers. If this were to occur, our business, results of operations and financial condition could be materially adversely affected.

Security breaches could harm our business.

A significant component of electronic data interchange and marketplaces is the secure transmission of confidential information over telecommunications networks. In facilitating data exchange between our customers and their trading partners, we rely on encryption and authentication technology licensed from third parties and intrusion detection technologies to protect the confidentiality of our customers’ information. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in a compromise or breach of the technology used by us to protect customer transaction data. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. Our security measures may not prevent security breaches. Our failure to

prevent security breaches could harm our business, damage our reputation and expose us to a risk of loss or litigation and possible liability.

Risks associated with the Internet, changing standards, alternate technologies and competition may adversely impact our business.

The use of the Internet as a vehicle for electronic data interchange and marketplaces raises numerous issues, including reliability, data security, data integrity and rapidly evolving standards. We cannot be certain that any products and services that we introduce will adequately meet the requirements of the marketplace or achieve market acceptance. Moreover, new competitors, which may include media, software vendors and telecommunications companies, offer services that utilize the Internet in competition with our products and services. Although we believe that the Internet will provide opportunities to expand the use of our products and services, we cannot ensure that our efforts to exploit these opportunities will be successful or that increased usage of the Internet for transaction management infrastructure products and services or increased competition will not adversely affect our business, results of operations and financial condition.

A failure to attract or retain qualified personnel or highly skilled employees could adversely affect our business.

Given the complex nature of the technology on which our business is based and the speed with which such technology advances, our future success is dependent, in large part, upon our ability to attract and retain highly qualified managerial, technical and sales personnel. Competition for talented personnel is intense, and we cannot be certain that we can retain our managerial, technical and sales personnel or that we can attract, assimilate or retain such personnel in the future. Our inability to attract and retain such personnel could have a material adverse effect on our business, results of operations and financial condition.

We rely on intellectual property and proprietary rights to maintain our competitive position and, therefore, our failure to protect adequately our intellectual property and proprietary rights could adversely affect our business.

We believe that proprietary products and technology are essential to establishing and maintaining our technology leadership position. We seek to protect our intellectual property through patents, trademarks, service marks, domain names, trade secrets, copyrights, confidentiality, non-compete and nondisclosure agreements and other measures, some of which afford only limited protection. We currently have four United States patents; however, as a part of our recent effort to expand our patent portfolio, we have filed 24 patent applications that improve upon our technology. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary through reverse engineering or otherwise. We cannot assure that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar or superior technology or design around our intellectual property. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States. Our failure to protect adequately our intellectual property and proprietary rights could have a material adverse effect on our business, financial condition, and results of operations. Intellectual property protections may also be unavailable, limited or difficult to enforce in some countries, which could make it easier for competitors to capture market share.

We use, and intend to use in the future, new technology in our products and services. While we do not believe that any of our products or services infringe the valid proprietary rights of third parties in any material respect, we cannot be certain that our products do not and will not be alleged to infringe upon issued patents or other intellectual property rights of others. Any claims from third parties, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available, if at all, on terms acceptable to us and will likely be an increase in our product costs in the way of additional royalty payments or other fees, which could have a material adverse effect on our business, results of operations and financial condition. In addition, to the extent that we indemnify our customers for infringement claims brought as a

result of their use of our products, we could incur significant expenses in defending such claims and for any resulting judgments.

We may make investments in entities that we do not control.

We currently have established joint ventures with several entities to provide increased customer service and enhance our marketing presence in non-U.S. markets. These joint ventures have been entered into to distribute our products and services in the local country, to provide domestic Transact Solutions in the country using software licensed by us to the joint venture, or to develop new products or services. These existing investments are not individually or collectively material to our business.

We anticipate continuing these strategic relationships and entering into future joint ventures with other entities, including third-party software vendors, consulting companies, systems integrators, Internet service providers and other information technology companies. We have in the past made, and may in the future make, investments in joint ventures without controlling their operations. Our current and any future investments in joint ventures may involve risks such as:

Our inability to control entities in which we invest may have consequences for our ability to receive distributions from those entities or to implement our business plan. Debt or other agreements, if entered into by an entity not under our control, may restrict or prohibit that entity from paying distributions to us. Applicable state or local law may also limit the amount that a non-controlled entity is permitted to pay as a distribution on its equity interest, and we may not be able to influence the payment of dividends even if the payment was not otherwise restricted. If any of the other investors in a non-controlled entity fail to observe their commitments, that entity may not be able to operate according to its business plan or we may be required to increase our level of commitment.

We may selectively seek acquisitions in the future, which could expose us to significant business risks.

We may expand our operations through future acquisitions of companies with complementary products and technologies. Our ability to consummate and to integrate effectively any future acquisitions on terms that are favorable to us may be limited by the number of attractive acquisition targets, internal demands on our resources and our ability to obtain financing on satisfactory terms, if at all. In addition, acquisitions may expose us to certain risks including:

In addition, future acquisitions could result in the incurrence of additional debt, costs, contingent liabilities and amortization expenses related to intangible assets, all of which could have a material adverse effect on our business, financial condition or results of operations. We may also incur costs and divert management attention for acquisitions which are never consummated. Integration of acquired operations may also take longer, or be more costly or disruptive to our management and business, than originally anticipated. It is also possible that expected synergies from future acquisitions may not materialize. Our ability to implement and realize the benefits of our strategy may also be affected by a number of factors beyond our control, such as operating difficulties, increased operating costs, regulatory developments, general economic conditions, increased competition or the inability to obtain adequate financing for our operations on suitable terms. Our failure to effectively address any of these issues could adversely affect our results of operations, financial condition and ability to service debt.

Although we anticipate that we would perform a due diligence investigation of each business that we acquire, there may be liabilities of the acquired companies that we fail or are unable to discover during our due diligence investigation and for which we, as a successor owner, may be responsible. In connection with acquisitions, we anticipate that we would seek to minimize the impact of these types of potential liabilities by obtaining indemnities and warranties from the seller, which may in some instances be supported by deferring payment of a portion of the purchase price. However, these indemnities and warranties, if obtained, may not fully cover the liabilities because of their limited scope, amount or duration, the financial resources of the indemnitor or warrantor or other reasons.

Delays and inaccuracies in our billing and information systems may have an adverse effect on our operations.

Sophisticated information and billing systems are vital to our growth and ability to monitor costs, bill customers, provide services to customers and achieve operating efficiencies. As we begin to offer new products and services, we may be required to install new billing systems or upgrade existing ones. Delays or inaccuracies in billing, our inability to implement solutions in a timely manner or our failure to implement and maintain sophisticated information and billing systems may have an adverse effect on our business and results of operations.

The markets in which we compete are highly competitive.

The markets for our products and services are increasingly competitive and global. As a result, we encounter intense competition in all parts of our business. Moreover, we have seen a trend among many of our customers to reduce their ongoing investments in expensive software systems. We expect competition to increase in the future both from existing competitors and new companies that may enter our markets. To remain competitive, we will need to invest continuously in product development, marketing, customer service and support and service delivery infrastructure. However, we cannot assure that new or established competitors will not offer products and services that are superior to or lower in price than ours. We may not have sufficient resources to continue the investments in all areas of product development and marketing needed to maintain our competitive position. In addition, most of our agreements with our customers are short-term.

We may require additional capital in the future, and additional funds may not be available on terms acceptable to us.

It is possible that we may need to raise additional capital to fund our future activities, to maintain spending on new product development in order to stay competitive in our markets or to acquire other businesses, products or technologies. Subject to the restrictions contained in our credit facility and the indentures governing our senior secured floating rate notes and our senior subordinated reset notes, we may be able to raise these funds by selling securities to the public or selected investors or by borrowing money. However, we may not be able to obtain these additional funds on favorable terms, or at all. None of Francisco Partners, its co-investors or General Electric is obligated to provide additional funding. If adequate funds are not available, we may be required to curtail our operations significantly, reduce planned capital expenditures and research and development, make selective dispositions of our assets or obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to technologies or potential markets, or otherwise impair our ability to remain competitive.

We are exposed to general economic conditions, which could have a material adverse impact on our business, operating results and financial condition.

The United States and other world markets appear to be emerging from a severe economic downturn. Many of our markets have been affected by this downturn, resulting in negative impacts on our financial performance. Lagging impacts from this downturn could cause additional adverse impacts on our financial performance. In addition, uncertainty relating to recent events in the Middle East, including the potential for continued armed conflict, could further increase the financial and economic instability we have been facing. While the precise

effects of such instability on our industry and our business are difficult to determine, they may have an adverse impact on our business, profitability and financial condition.

As a result of unfavorable general economic conditions and reduced capital spending by customers, our revenues have continued to decline in recent quarters. However, if the economic conditions in the United States and the other markets we serve continue or worsen, we may experience a material adverse impact on our business, operating results and financial condition.

We may experience fluctuations in our quarterly operating results because of factors over which we have little or no control.

Our future quarterly operating results may vary, and we may experience reduced levels of earnings or losses in one or more quarters. Fluctuations in our quarterly operating results could be the product of a variety of factors, including:

We operate with no material product order backlog because our products and services generally are delivered shortly after orders are received. As a result, licensing revenues in any quarter are substantially dependent on the quantity of such products licensed in that quarter. Our expense levels are based, in part, on our expectations as to future revenues. A large portion of our cost structure, however, is relatively fixed in nature and cannot be adjusted immediately in response to market conditions. If revenue levels are below expectations, our operating results are likely to be adversely affected unless we are willing and able to reduce our expenses proportionally. As a result of the foregoing factors, comparisons of results of operations between particular periods are not necessarily meaningful and historical results of operations are not necessarily indicative of future performance.

We operate internationally, which exposes us to risks that are difficult to quantify.

Historically, sales of our products and services outside the United States have been significant. For the year ended December 31, 2004, we derived approximately 46% of our total revenues from customers outside of the United States. The acquisition of G International would increase our presence abroad and our non-U.S. generated revenues (although on a percentage basis the split between U.S. and non-U.S. revenues is expected to remain comparable). Our ability to operate our business internationally in the future will depend upon, among other things, our ability to attract and retain talented and qualified managerial, technical and sales personnel and network services customers outside of the United States and our ability to continue to manage our international operations.

International operations are subject to the risks of doing business abroad, including:

Increased United States or foreign government regulation of our industry could restrict our business operations, and compliance with this regulation may be costly.

The United States does not generally regulate providers of electronic transaction processing products and services at this time. However, the governments of some foreign countries do regulate electronic commerce in their countries. The instability and restructuring of the telecommunications industry in some foreign countries may result in a complicated international regulatory framework that may require additional licensing or action on our part to remain in compliance with local laws and could materially affect our ability to do business in those countries. Other than these foreign government regulations and certain regulations requiring the protection of certain information about our customers, there are no regulations pertaining to the price determinations, geographic distribution, quality control or service capabilities of our products. We cannot be certain, however, that we will continue to comply as the rapidly changing laws in the Internet and telecommunications fields continue to be shaped in the United States and abroad. New laws or regulations could impose significant restrictions on our business operations, and compliance with these laws and regulations may be costly.

Our earnings will be adversely affected once we change our accounting policies with respect to the expensing of stock options.

We historically have not been required to deduct the expense of employee stock option grants from our income based on the fair value method. Recently, the Financial Accounting Standards Board issued FASB Statement No. 123 (revised 2004), Share-Based Payment, or SFAS 123R, requiring companies to change their accounting policies to record the fair value of stock options issued to employees as an expense. We are required to adopt SFAS 123R from July 1, 2005. As a result, our earnings will be reduced in future periods by an amount equal to the fair value of stock options issued to employees during these periods.

Filing reports with the Securities and Exchange Commission may strain our resources and distract management.

We file reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934, or the Exchange Act, and are subject to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. Under the Exchange Act, we file annual, quarterly and current reports with respect to our business and financial condition. Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and

internal controls over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, significant resources and management oversight will be required. These requirements may place a strain on our people, systems and resources and may divert management’s attention from other business concerns.

Factors Relating to Our Indebtedness

The significant amount of debt that we have could adversely affect our financial health and prevent us from fulfilling our obligations under our credit facility, our senior secured floating rate notes and our senior subordinated notes.

As of December 31, 2004, we had $406.5 million of indebtedness outstanding and our percentage of total debt to capitalization was 344.4%. Our interest expense for the year ended December 31, 2004 was approximately $59.1 million and our earnings for the year ended December 31, 2004 were insufficient to cover our fixed charges by $73.5 million.

Our level of indebtedness could have important consequences. For example, it could:

We may incur more debt, which could exacerbate the risks described above.

We and our subsidiaries are able to incur additional indebtedness in the future subject to the limitations contained in the agreements governing our outstanding debt. Although these agreements restrict us and our restricted subsidiaries from incurring additional indebtedness, these restrictions are subject to important exceptions and qualifications. If we or our subsidiaries incur additional debt, the risks that we and they now face as a result of our high leverage could intensify.

Restrictions contained in the agreements governing our outstanding debt could limit our operating activities.

Our credit facility and the indentures governing our senior secured floating rate notes and our senior subordinated reset notes contain covenants that restrict our ability, and the ability of our restricted subsidiaries, to:

Our credit facility also contains other and more restrictive covenants, including financial covenants that require us to achieve certain financial and operating results and maintain compliance with specified financial

ratios. Our ability to meet these covenants and requirements may be affected by events beyond our control and we may have to curtail some of our operations and growth plans to maintain compliance. Further, because of the restrictions on our ability to grant or assume liens, we may have difficulty securing additional debt financing were we to need additional capital in the future.

Our failure to comply with the covenants contained in the agreements governing our debt, including as a result of events beyond our control, could result in an event of default which could materially and adversely affect our operating results and our financial condition.

If we are not able to comply with the covenants and requirements contained in the agreements governing our debt, an event of default under the relevant debt instrument could occur. If an event of default does occur, it could trigger a default under our other debt instruments, we could be prohibited from accessing additional borrowings and the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be declared to be immediately due and payable. We cannot be certain that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments or that we would be able to refinance or restructure the payments on those debt securities. Even if we were able to secure additional financing, it may not be available on favorable terms.

We may not be able to generate sufficient cash flow to meet our debt service obligations.

Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control. If we do not generate sufficient cash flow from operations to satisfy our debt obligations, including interest payments and the payment of principal at maturity , we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure that any refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms, would have an adverse effect on our business, financial condition and results of operations.

Risks Relating to the Proposed G International Acquisition

We may be unable to integrate the operations of Global eXchange Services and G International successfully and may not achieve the cost savings and increased revenues anticipated for the combined company.

Achieving the anticipated benefits of the proposed G International acquisition will depend in part upon our ability to integrate the two companies’ businesses in an efficient and effective manner. Our attempt to integrate the two companies may result in significant challenges, and we may be unable to accomplish the integration smoothly or successfully. In particular, the necessity of coordinating geographically dispersed organizations and addressing possible differences in corporate cultures and management philosophies may increase the difficulties of integration. The integration will require the dedication of significant management resources, which may temporarily distract management’s attention from the day-to-day operations of the businesses of the combined company. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of the combined company’s businesses and the loss of key personnel. Employee uncertainty and lack of focus during the integration process may also disrupt the businesses of the combined company. Any inability of management to integrate the operations of Global eXchange Services and G International successfully could have a material adverse effect on the business and financial condition of the combined company.

Our rationale for the G International acquisition is, in part, predicated on our ability to realize cost savings and to increase revenues through the combination of two companies. Achieving these cost savings and revenue increases is dependent upon a number of factors, many of which are beyond our control. We may not be able

to achieve the anticipated enhancement of our capabilities in other industries, such as automotive, consumer products, financial services and retail, cross-selling opportunities, the development and marketing of more comprehensive product offerings and solutions, cost savings and revenue growth. An inability to realize the full extent of, or any of, the anticipated benefits of the transaction, as well as any delays encountered in the transition process, could have an adverse effect upon the revenues, level of expenses, operating results and financial condition of the combined company.

Our acquisition of G International is subject to a number of conditions which can affect consummation of the acquisition.

Our acquisition of G International is subject to a number of conditions, including:

If these and other conditions are not satisfied or waived, we may not be able to complete the acquisition as currently planned. In addition, the U.K. competition commission is reviewing the acquisition of G International by Francisco Partners for competition concerns in the U.K. market. As a result of that review, we may be forced to divest certain assets of G International’s U.K. business that we intend to acquire. The U.K. business of G International generated less than 5% of G International’s total revenues in 2004, and on a pro forma basis after giving effect to our acquisition of G International, less than 2% of our total pro forma revenues in 2004.

We will incur significant combination-related and restructuring costs in connection with the proposed G International acquisition.

We expect to incur significant costs associated with combining the operations of the two companies. However, it is difficult to predict the specific size of those charges. The combined company may incur additional unanticipated costs as a consequence of difficulties arising from our efforts to integrate the operations of the two companies.

Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, can offset incremental transaction, combination-related and restructuring costs over time, we cannot give any assurance that this net benefit will be achieved in the near future, or at all.

We may lose employees due to uncertainties associated with the proposed G International acquisition.

The success of the combined company after our acquisition of G International will depend in part upon our ability to retain key employees of both companies. Competition for qualified personnel can be very intense. In addition, key employees may depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company. Accordingly, no assurance can be given that we will be able to retain key employees to the same extent that we have been able to do so in the past.

Special Note Regarding Forward-Looking Statements

Forward Looking Statements — Our forward looking statements are subject to a variety of factors that could cause actual results to differ materially from current beliefs.

This report contains forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate, as well as management’s beliefs and assumptions. They are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Forward-looking statements include information concerning possible or assumed future results of operations, capital expenditures, the outcome of pending legal proceedings and claims, the terms of our new revolving credit facility, goals and objectives for future

operations, including descriptions of our business strategies and purchase commitments from customers, among other things. These statements are typically identified by words such as “believe,” “anticipate,” “expect,” “plan,” “intend,” “estimate,” “may,” “will” and similar expressions. We base these statements on particular assumptions that we have made in light of our industry experience, as well as our perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. As you read and consider the information in this report, you should understand that these statements may differ materially from actual outcomes and results.

These forward-looking statements are affected by risks, uncertainties and assumptions that we make and actual results or outcomes may differ materially from those expressed in the forward-looking statements. These risks, uncertainties and assumptions include, among other things, the factors discussed above under the caption “Factors That Can Affect Future Results,” and:

In addition, new risks and uncertainties could arise from time to time that could cause actual results or outcomes to differ from those expressed in the forward-looking statements, and it is impossible to predict these events or how they may affect us.

Item 7a.     Quantitative and Qualitative Disclosures Regarding Market Risk

We are exposed to certain market risks as part of our ongoing business operations, including risks from changes in interest rates and foreign currency exchange rates that could impact our financial condition, results of operations and cash flows. Since the recapitalization, we have managed our exposure to these and other market risks through regular operating and financing activities. We may use derivative financial instruments on a limited basis as additional risk management tools and not for speculative investment purposes.

Interest Rate Risk. We are exposed to interest rate risk as a result of our outstanding debt obligations. Our interest rate risk profile changed substantially as a result of changes in the nature and amount of our indebtedness incurred in connection with the recapitalization. We plan to manage this risk through the use of a combination of fixed and variable rate debt. As of December 31, 2004, $171.5 million of our debt bears interest at variable rates. The interest rate on our $235.0 million reset notes was to be reset on September 27, 2003 for the balance of their six-year term. We are currently in discussions with General Electric Capital Corporation, the holder of the senior subordinated reset notes, concerning the interest rate on the senior subordinated reset notes. The maximum rate to which the interest rate may be reset is 17%, with amounts above 15% payable in kind at our option. A one-point change in the interest rates on our variable-rate long-term debt would affect interest expense by approximately $4.1 million on an annual basis. We believe the interest rates on our variable-rate long-term debt reflect market rates and, therefore, we believe the carrying value of our variable-rate long-term debt approximates fair value. Management believes that the carrying value of our outstanding debt approximates its market value.

Foreign Currency Risk. We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of our foreign subsidiaries, intercompany loans with foreign subsidiaries and transactions denominated in foreign currencies. Our objective is to minimize our exposure to these risks through our normal operating activities and, where appropriate, through foreign currency forward contracts. For the year ended December 31, 2004, approximately 46% of our total revenues were derived from customers outside of the United States, with approximately 43% of our total revenues denominated in currencies other than the United States dollar. We estimate that revenue and expenses for the year ended December 31, 2004 were higher by $13.6 million and $11.5 million, respectively, as a result of changes in exchange rates as compared to the year ended December 31, 2003. At December 31, 2004 we had $31.5 million of working capital (current assets minus current liabilities) denominated in foreign currencies. At December 31, 2004, we had no outstanding foreign currency forward contracts. The following table shows the approximate split of these foreign currency exposures by principal currency:

A hypothetical 10% strengthening of the dollar during 2004 versus the foreign currencies in which we have exposure would have reduced revenue by approximately $13.3 million and reduced operating expenses by approximately $11.2 million, resulting in operating income of $2.1 million less than actually reported. Working capital at December 31, 2004 would have been approximately $3.1 million lower than actually reported if we had used this hypothetical stronger dollar. These numbers were estimated using the different hypothetical rate for the entire year and applying it evenly to all non United States dollar transactions.

Inflation. We believe that inflation has not had a material impact on our results of operations for the year ended December 31, 2004. However, we cannot assure you that future inflation would not have an adverse impact on our operating results and financial condition.

Item 8.     Financial Statements and Supplementary Data

The report of Independent Registered Public Accounting Firm and financial statements are set forth below (see Item 15(a) for list of financial statements and financial statement schedules):

Report of Independent Registered Public Accounting Firm

The Board of Directors

GXS Corporation:

We have audited the accompanying consolidated balance sheets of GXS Corporation and subsidiaries as of December 31, 2003 and 2004 and the related consolidated statements of operations, comprehensive loss, stockholder’s equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 2004. In connection with our audits of the consolidated financial statements, we have also audited the related financial statement schedule listed under Item 15(a) 2. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of GXS Corporation and subsidiaries as of December 31, 2003 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

Baltimore, Maryland

March 30, 2005

GXS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2003 and 2004

See accompanying notes to consolidated financial statements

GXS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 2002, 2003 and 2004

See accompanying notes to consolidated financial statements

GXS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

Years ended December 31, 2002, 2003 and 2004

See accompanying notes to consolidated financial statements

GXS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholder’s Equity (Deficit)

Years ended December 31, 2002, 2003 and 2004

See accompanying notes to consolidated financial statement

GXS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2002, 2003 and 2004