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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

OR

Commission File No. 333-49389

Activant Solutions Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: 512/328-2300

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  x    No  ¨

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

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

No established published trading market exists for the Common Stock, par value $0.01 per share, of Activant Solutions Inc. All of the outstanding shares of Common Stock, par value $0.01 per share, of Activant Solutions Inc., are held by Activant Solutions Holdings Inc.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Index to Financial Statements

FORWARD-LOOKING STATEMENTS

Information set forth in this annual report on form 10-K regarding expected or possible future events, including statements of the plans and objectives of management for future growth, operations, products and services and statements relating to future economic performance, is forward-looking and subject to risks and uncertainties. For those statements, the company claims the protection of the safe harbor for forward-looking statements provided for by section 21E of the securities exchange act of 1934, as amended. such forward-looking statements are based on estimates and assumptions made by management of the company, which, although believed to be reasonable, are inherently uncertain. Therefore, undue reliance should not be placed upon such estimates and statements. No assurance can be given that any of such estimates or statements will be realized and it is likely that actual results will differ materially from those contemplated by such forward-looking statements. Factors that may cause such differences include the following: (1) loss or obsolescence of the proprietary technology in which the Company depends; (2) changes in the markets in which the Company competes including the manner in which autoparts or hardware and lumber are sourced, sold, distributed or inventoried, and changes in economic conditions in these markets generally; (3) claims by third parties that the Company is infringing on their intellectual property rights; (4) loss of the Company’s executive officers and other key personnel; (5) increased competition or failure to effectively compete; (6) loss of key customers or increase in attrition rates with respect to revenue management views as recurring; (7) manufacturing defects or errors in the Company’s software; (8) prolonged unfavorable general economic and market conditions; (9) failure to recoup the cost of investment in new businesses into which the Company may expend and (10) increases in the company’s cost of borrowings or unavailability of additional debt or equity capital. Many of such factors will be beyond the control of the company and its management. In addition, other factors that could affect the future results of the company and could cause those results to differ materially from those expressed in the forward-looking statements are discussed at greater length under item 1. “Business” and item 7. “management’s discussion and analysis of financial condition and results of operations” and appear elsewhere in this annual report. These risks, uncertainties and other factors should not be construed as exhaustive, and the company does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

USE OF TRADEMARKS AND TRADENAMES

Several trademarks and tradenames appear in this Annual Report on Form 10-K. Automotive Aftermarket Information Highway, J-CON, A-DIS, ServiceExpert EZ, Service Estimator II, Series 12, The Paperless Warehouse, InterChange, Telepricing, VISTA, are federally registered trademarks of the Company. Other trademarks of the Company include Activant’s Prism, Activant’s Ultimate, AConneX, Eclipse, Activant’s Eagle, Activant’s Eagle system for Windows, LaborExpert, Service intervals, Tire by size, ePartInsight, ePartExpert, LOADSTAR, Activant’s CSD, Activant’s Falcon, Inet, IDW, IDX, and Activant’s Gemini. Other trademarks and tradenames are used in this Annual Report on Form 10-K that identify other entities claiming the marks and names of their products. The Company disclaims proprietary interest in such marks and names of others. References herein to AutoZone, Discount Auto Parts, O’Reilly, Reynolds and Reynolds, Automatic Data Processing, Universal Computer Systems, Home Depot, Lowe’s, and Sears mean, respectively, AutoZone, Inc., Discount Auto Parts, CSK Auto, O’Reilly Automotive, Inc., Reynolds and Reynolds Company, Automatic Data Processing, Inc., Universal Computer Systems, Inc., The Home Depot, Inc., Lowe’s Home Centers, Inc., and Sears, Roebuck and Co.

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PART I

Item 1. Business.

General

Activant Solutions Inc. (formerly known as Cooperative Computing, Inc.) (the “Company”) is a leading provider of business management solutions designed for companies with complex products in high-service distribution environments (complex distribution environments or “CDE”). The Company’s solutions are designed to improve the operating efficiency and profitability of manufacturers, distributors, retailers and service providers through enhanced business management and information. The Company’s business management solutions include advanced software, professional services, content, supply chain connectivity and analytics. The Company believes that the value added nature of its products and services, its strong customer relationships, its comprehensive solutions and the significant risks and costs associated with switching systems provide it with a stable customer base and a receptive market for new product offerings.

Serving over 18,000 business locations, the Company is a leading provider of business management solutions for the small and medium enterprise (“SME”) market. These specialty manufacturing, wholesale and retail businesses use the Company’s solutions to drive new levels of business performance. Therefore, the Company enjoys strong customer relationships within numerous industry segments, including the automotive aftermarket, hardware, lumber, agribusiness, building and industrial supply. In addition, the Company has a growing customer base in paint, decorating, flooring, lawn, garden, nursery, plumbing supply, HVACR (heating, ventilating, air conditioning and refrigeration) and electrical supply.

The Company began serving the automotive aftermarket in the 1970s. With the success in that market, it expanded into the hardware retail market in the 1980s and then expanded further into lumber and building materials in the 1990s. The Company is increasing its penetration in these core markets and expanding into other large CDE industry segments. These segments tend to be fragmented and consist of a large number of SMEs. The Company believes it is well positioned to leverage its proven technologies and experienced support organization to further penetrate its existing markets and expand into similar CDE segments.

Automotive Group

Group Overview

The Company’s Automotive Group segment develops, implements and supports industry leading technical solutions for automotive manufacturers, wholesalers, retailers, service chains and professional installers in both North America and Europe. This market consists of the manufacturing, distribution, sale and installation of both new and remanufactured parts used in the maintenance and repair of automobiles and light trucks. This market has several characteristics that drive significant inventory management challenges for its participants. The Company provides systems and services that address these challenges and help its customers compete effectively. These tools include four key components:

With over 25 years of experience serving the automotive aftermarket, the Company has gained significant industry-specific knowledge which it leverages through both expanded relationships with leading industry participants and its ability to drive industry-wide inventory initiatives.

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Automotive parts aftermarket industry overview

The automotive parts aftermarket industry consists of the manufacturing, distribution, sale and installation of both new and remanufactured parts used in the maintenance and repair of automobiles and light trucks. This market is the 11th largest industry in the United States, is believed to have generated approximately $185 billion in sales in 2002 and accounted for approximately 3% of all jobs in the United States. The Company believes that growth in the automotive parts aftermarket will continue to be driven by several favorable trends, including:

In addition, this industry faces severe inventory management challenges. These challenges include:

Solving these challenges requires a combination of enterprise management systems, data, supply chain tools and services and connectivity to a critical mass of participants in the industry. The Company believes that its combination of products and services and its large customer base in the automotive parts aftermarket qualify it to provide these solutions.

Distribution channels

There are three distinct vertical distribution channels through which auto parts distribution occurs:

Additionally, within each of these three channels there are varying levels of distribution. In the wholesale channel there are generally four primary levels of distribution:

Manufacturers supply automotive parts to warehouse distributors, which distribute automotive parts to stores, which stock and sell the automobile parts used by installers and “do-it-yourself” purchasers. The retail channel is similarly structured, but with fewer intermediaries. In the retail channel, parts flow directly from the manufacturer to the retailer. In turn, the retailer sells directly to the “do-it-yourself” market, as well as to many installers. Parts in the new car manufacturer channel are distributed directly from the manufacturer to new car dealers, often through a feeder warehouse. Additionally, new car dealers sell parts to independent installers. In addition to the traditional goods flow from manufacturer through the distribution levels, there is substantial lateral trading between stores and warehouses.

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Drivers of computerization.

There are a variety of factors that drive the need for computerization within the automotive parts aftermarket industry.

Products and services

The Automotive Group’s software and systems, together with its database products, provide comprehensive business solutions targeted to the automotive parts aftermarket. The Automotive Group provides standard application programs that include user options allowing the selective structuring of application files and reports to meet customers’ specific requirements. These software products also allow the Automotive Group’s customers to access the Automotive Group’s proprietary databases. The Automotive Group supplied hardware components include central processing units (“CPUs”), disk drives, video display terminals, DVD-ROM storage devices, point-of-sale terminals, communication devices, printers and other peripherals. The Automotive Group’s systems also have communication capabilities allowing users to exchange purchase orders and pricing and inventory information with suppliers and, in some cases, customers. The Automotive Group also provides software and hardware support services for its management systems.

Automotive parts aftermarket systems

The Automotive Group’s products have been designed to provide interconnectivity to all levels of the wholesale distribution channel. This electronic network enables the automotive parts aftermarket industry to efficiently market parts throughout the distribution channel. The Automotive Group’s principal automotive parts aftermarket industry products, based on the level of the distribution channel for which such products are targeted, are as follows:

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Customer support services

The Automotive Group provides service, training and support to its customers. The Automotive Group’s system owners are principally small business proprietors without the internal staffing or expertise to train users or to maintain computer systems on a consistent basis. These customers generally require a high level of service, training and support.

The Automotive Group sells a variety of post sale support programs through its system support agreements, including on-site preventive and remedial maintenance, hardware engineering modifications, depot repair services and daily system operating support by phone. The Automotive Group’s customers can call the Automotive Group’s advice line service, which gives them access to trained personnel able to perform on-line diagnostics or to field engineers if on-site service is necessary. The Company has developed a Web-based product called EntryPoint that allows customers direct access to a call tracking system, and on-line product training courses, and on-line knowledge base. These features allow customers to request support services, review specific calls or their entire call history, increase employee system knowledge through on-line coursework, or search a knowledge base to obtain immediate answers to questions. Virtually all new system customers enter into system support agreements, and most retain such service agreements as long as they own the system. Monthly fees vary with the system size and configuration. The agreements are generally month-to-month agreements with up to a 90 day cancellation notice period. The Automotive Group offers training for new and existing customers at the facilities of both the Automotive Group and its customers. In addition to training on system operations and software enhancements, the Automotive Group offers seminars and workshops to assist customers in understanding the capabilities of their systems.

Information services

The Automotive Group provides electronic catalogs, bar codes, related repair information and reports based on point-of-sale activity through a variety of data services. These proprietary database products and services generate recurring revenues through monthly subscription fees and differentiate our products from those of our competitors. The Automotive Group offers data services to the automotive parts aftermarket industry customers, including distributors, manufacturers and retail parts and services chains.

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Connectivity Products

The Automotive Group offers a collection of internet and modem-based communication products that connect the automotive aftermarket from manufacturers through distributors to installers. The Automotive Group’s flagship product, AConneX, uses the internet to allow communication between and among both the Company’s software systems and non-Company related software systems. AConneX enables:

With its critical mass of installed bases and ability to connect all levels of the aftermarket, the Company believes that AConneX has the potential to become the communication backbone of the aftermarket industry.

Sales and marketing

The Automotive Group markets its products to the automotive parts aftermarket through a direct sales force and a telesales/telemarketing organization with approximately 40 employees. Incentive pay is a significant portion of the total compensation package for all sales representatives and sales managers. Additionally, the Automotive Group leverages its relationships with large warehouse distributors through its National Account Program (and other VARs), in which these accounts resell store and service dealer systems to either company owned stores or to other customers that are closely associated to the warehouse distributor.

Automotive Group VAR programs include sales of store management systems (J-CON, via the National Account program),and data products and connectivity services (through both distribution and service dealer solution providers).

Internet Autoparts, Inc.

On May 31, 2000, the Company, along with its majority stockholder, Hicks Muse, entered into a joint venture arrangement with certain customers and other investors to form Internet Autoparts, Inc. (“IAP”). IAP will provide the automotive aftermarket with a Web-based parts ordering and communications platform linking automotive service providers with wholesale distributors and other trading partners. The Company granted certain non-exclusive, perpetual, non-transferable licenses to IAP in return for a one-third interest in IAP.

IAP is powered by the Company’s Web-based parts catalog, ePartExpert, and has access to our internet communications gateway, AConneX, which provides seamless communications among the Company’s various business platforms and third-party management systems. AConneX is available for licensing to third-party management systems in addition to IAP. The licenses granted to IAP provide for the payment to the Company of royalties based upon a percentage of net sales made by IAP using the licensed technology.

As part of the Company’s arrangement with IAP, IAP agreed, subject to certain exceptions, not to compete with the Company in the businesses in which the Company is engaged. In addition, the Company agreed, subject to certain exceptions, not to compete with IAP in the business of selling new or rebuilt automotive parts over the Internet to service dealers and consumers. The Company owns, directly or indirectly, approximately 47.5% of the outstanding common stock of IAP.

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Industry Solutions Group

Group Overview

The Company’s Industry Solutions Group provides enterprise management systems and services to hardware, lumber, home improvement, paint, decorating, flooring, lawn, garden, agribusiness, industrial supply, plumbing supply, HVACR and electrical supply retailers and distributors. The hardware and lumber industries generally consist of the sale and distribution of products for a variety of end uses, including residential and commercial building construction, maintenance and repair, lawn and garden and agribusiness. This industry has been driven by several major market participants who have expanded their business throughout the United States by providing products and services using a mass merchandising format. In this environment, the other retailers and wholesalers, which include over 60,000 stores in the Company’s target market, have been required to upgrade or replace their existing management systems in order to reduce costs and improve service levels.

In these segments the Company has generated substantial revenue improvement since 2000. This revenue improvement has been the result of several key initiatives, including:

In addition, the Industry Solutions Group has a growing customer base in paint, decorating, flooring, lawn, nursery, industrial supply, plumbing supply, HVACR and electrical supply segments. These segments represent nearly 300,000 businesses, primarily in the SME market. The Company believes its expertise and solution set focused on the special needs for small and medium sized businesses brings tremendous value to this segment of technologically underserved businesses.

Industry Segment Overviews

The hardware and lumber industry consists of the sale of products for residential and commercial building construction, maintenance and repair, lawn and garden, and agribusiness. The Industry Solutions Group estimates that this industry, comprised primarily of hardware retailers, home centers, lumber and building materials suppliers, agribusiness retailers, lawn and garden retailers and paint retailers, generated approximately $200 billion in revenues in 2002. This market is segmented primarily into three groups:

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The Industry Solutions Group believes that revenue growth in the hardware and lumber industry will continue to be driven by several favorable trends, including:

Other segments served by the Industry Solutions Group (agribusiness, industrial supply, plumbing supply, HVACR and electrical supply) are primarily in the wholesale distribution of durable and non-durable goods. Collectively, these segments generated over $1 trillion of revenue in 2002 and consist of over 300,000 SME’s. These market segments tend to be more fragmented than most other industries and require certain specific technology applications to provide value-added service to their customer base.

Drivers of computerization

Computerization within the hardware and lumber industry has been predominantly driven by the Mass Merchandisers which have expanded their business throughout the United States. As a result of this strategy, hardware and lumber consumers have been able to purchase products and services cheaper from Mass Merchandisers than was traditionally available. This has driven the Lumber and Building Material Dealers and the Cooperative Dealers to computerize or upgrade their existing systems in order to reduce costs and improve service to maintain their market positions.

Products and services

The Industry Solutions Group’s software and systems, together with its full range of support services, provide comprehensive business solutions targeted to the hardware and lumber and related industries. The Industry Solutions Group provides standard application programs that include user options allowing the selective structuring of application files and reports to meet customers’ specific requirements. In addition, the Industry Solutions Group provides point of sale product movement information services to manufacturers.

Principal products

The Industry Solutions Group’s systems automate inventory control, point-of-sale accounting and supplier communications. The Industry Solutions Group’s principal systems products are as follows:

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In addition to the above principal products, the Industry Solutions Group also services and maintains several products. The Industry Solutions Group expects the customers of these products to migrate to Activant’s Eagle or Activant’s Falcon over the next few years.

Customer support services

The Industry Solutions Group’s customer support services organization provides service, training and support to the Industry Solutions Group’s customers. The Industry Solutions Group’s system owners are principally small and medium business proprietors without complete internal staffing or expertise to train users or to maintain computer systems on a consistent basis. These customers require a high level of service, training and support. The Industry Solutions Group typically provides a limited warranty on its systems ranging from 30 to 90 days. The Industry Solutions Group also sells a variety of post-sale support programs through its system support agreements, including on-site maintenance, depot repair services and daily system operating support by phone. The Industry Solutions Group’s customers can call the Industry Solutions Group’s advice line service, which gives them access to trained personnel able to perform on-line diagnostics or to field engineers if on-site service is necessary. Virtually all new system customers enter into system support agreements, and most retain such service agreements as long as they own the system. Monthly fees vary with the system size and configuration and service agreements are generally month-to-month.

The Industry Solutions Group offers training for new and existing customers at both its facilities and the facilities of its customers. In addition to training in system operations and software enhancements, the Industry Solutions Group offers seminars and workshops to assist customers in understanding the capabilities of their systems.

Information services

The Industry Solutions Group markets database services to manufacturers with products called VISTA, IDW and IDX. VISTA information services provide product manufacturers with ongoing measurement of brand and item movement with major product classifications using point-of-sale business analysis data from independent hardware stores, home centers and lumber and building materials outlets. Information provided by VISTA gives manufacturers insight into how a specific product or brand performs against its competitors and the market in general. IDW is an industry warehouse of parts descriptions and prices marketed to electrical parts manufacturers and distributors. IDX is an industry data exchange for purchase order and related documents using EDI and internet technologies or electrical manufacturers and distributors.

Sales and marketing

The Industry Solutions Group markets its products and services to the hardware and lumber industry through a geographically-based direct and telesales/telemarketing sales and sales support force of approximately 75 employees. Incentive pay is a significant portion of the total compensation package for all sales personnel.

The Industry Solutions Group’s marketing approach in the hardware and lumber industry has been to develop close relationships with key market influencers. This strategy includes obtaining endorsements and developing exclusive relationships, distributor partnerships and other alliances. Currently, the Industry Solutions Group enjoys over 30 such relationships in the industry. The goal of this relationship program is to enhance the productivity of the field sales team and create leveraged selling opportunities for system sales, information services and support revenues. The Industry Solutions Group has exclusive agreements to develop, market, and support modified versions of Activant’s Eagle system to two large buying cooperatives in the hardware and lumber industry, representing over 8,000 retail locations. These agreements have allowed a streamlining of the distribution channel and reductions in direct sales costs.

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Corporate services

System integration and distribution

The Company does not manufacture the hardware components of its systems, but the Company does integrate some of its products with hardware components and software products of third party vendors. The Company uses Dell Inc.’s industry standard server and workstation hardware to power most of its software solutions. The Company utilizes a just-in-time inventory system to help ensure that efficient cost controls are in place.

Hardware services and support

The Company provides hardware systems and support through two primary vehicles. The Company’s field service engineering team can be dispatched throughout the United States to diagnose and repair hardware and software on site. In addition, the Company’s depot facility supports remote system and peripheral repair.

Software development and technology

The Company has approximately 200 registered copyrights and approximately 70 registered trademarks. The Company attempts to protect its proprietary information in a number of ways. First, the Company distributes its software through licensing agreements, which require licensees to acknowledge the Company’s ownership of the software and the confidential nature of its proprietary information. Second, all of the Company’s personnel are required to assign all of their rights to inventions, patents and confidential information to the Company and to agree to keep confidential and not disclose to third parties the Company’s proprietary information. Finally, the Company requires that all other third parties producing or receiving any of the Company’s proprietary information execute an assignment, confidentiality and non-disclosure agreement. Product development expense in fiscal 2001, 2002, and 2003 was $17.4 million, $17.4 million, and $17.0 million, respectively.

Customers and Suppliers

No single customer accounted for more than 10% of the Company’s revenues during the years ended September 30, 2001, 2002, and 2003. Dell Inc. accounted for more than 10% of the supplies used in the Company’s systems integration operations.

Employees

As of September 30, 2003, the Company had approximately 1,300 employees, none of whom were represented by unions. The Company has not experienced any labor problems resulting in a work stoppage and believes it has good relations with its employees.

Segment Reporting

See Note 14 of Notes to Consolidated Financial Statements.

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Item 2. Properties.

The Company’s properties are leased, and include integration and distribution, software development and data entry facilities and administrative, executive, sales, and customer support offices. The Company’s principal executive offices are located at 804 Las Cimas Parkway, Austin, Texas 78746. The Company considers its properties to be suitable for their present and intended purposes and adequate for the Company’s current level of operations.

Listed below are the principal properties leased by the Company as of December 17, 2003.

In addition, the Company has short-term leases on over 40 offices and field service locations in the United States, Canada, the United Kingdom, and France.

Item 3. Legal Proceedings.

The Company is a party to various legal proceedings and administrative actions, all of which are of an ordinary or routine nature incidental to the operation of the Company. In the opinion of the Company’s management, such proceedings and actions should not, individually or in the aggregate, have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

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

The stockholders of Activant Solutions Inc. unanimously consented on August 14, 2003 in lieu of an annual meeting to the appointment or continuation (as applicable) of the following directors: Michael A. Aviles, Peter Brodsky, Jack D. Furst, A. Laurence Jones and James R. Porter. On September 24, 2003, the stockholders of Activant Solutions Inc. unanimously consented in lieu of a special meeting to change the Company’s corporate name and to the execution of a Certificate of Amendment to the Articles of Incorporation effectuating such change.

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PART II

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

There is no established public trading market for any class of the Company’s common stock. All of the Company’s common stock is held by Activant Solutions Holdings Inc., a Delaware corporation (“Holding”). The Company paid Holding a $30.0 million dividend in fiscal 2003. The Company’s ability to pay any dividends in the future is limited by the terms of the Company’s Amended and Restated Credit Agreement (as herein defined). See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 6. Selected Financial Data.

The following table sets forth selected financial data of the Company for the years ended September 30, 1999, 2000, 2001, 2002 and 2003. The balance sheet data as of September 30, 2002 and 2003, and the statement of operations data for the years ended September 30, 2001, 2002, and 2003 set forth below are derived from the audited consolidated financial statements of the Company included elsewhere herein. The balance sheet data as of September 30, 1999, 2000 and 2001 and the statement of operations data for the years ended September 30, 1999 and 2000 set forth below are derived from the audited consolidated financial statements of the Company that are not included herein. The selected financial data below should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the audited consolidated financial statements of the Company included elsewhere herein.

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

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the audited historical consolidated financial statements and notes thereto, which are included elsewhere herein.

General

The Company is a leading designer and provider of business management solutions designed for companies with complex products in high-service distribution environments. The Company’s system offerings are enhanced by extensive information and professional services featuring database products, customer support and maintenance services. The revenues associated with software support, databases and maintenance services are generally recurring in nature and represented approximately 66% of total revenues in fiscal 2003.

Revenues. The Company derives revenue primarily from two sources: systems revenue; and services and finance revenue. Systems revenue includes the sale of the Company’s computer hardware equipment and associated peripherals and related software license fees and systems training and installation. Services and finance revenue generally consists of revenue associated with the maintenance, service and finance of such systems and revenue from the sale of information databases and system connectivity services.

Cost of revenues. Cost of system revenue primarily includes computer hardware and peripherals purchased from third parties, the labor and overhead associated with assembling, installing and training customers on the Company’s systems and the amortization of capitalized software costs. Cost of services revenue primarily includes personnel costs associated with the maintenance and service of systems, personnel costs associated with data entry into the Company’s information databases, bad debt expense, the amortization of capitalized databases and telecommunication and facility costs.

Sales and marketing expense. Sales and marketing expense primarily consists of personnel costs associated with the Company’s sales and marketing efforts, bad debt expense related to the Company’s accounts and lease receivables and telecommunication and facility costs.

Product development expense. Product development expense primarily consists of personnel costs and contract services associated with the development and maintenance of the Company’s software and databases in addition to telecommunication and facility expenses.

General and administrative expense. These costs include departmental costs for executive, legal, administrative services, finance, telecommunications, facilities and information technology.

Amortization of goodwill. Goodwill represents the excess of cost over the fair value of assets acquired. The Company adopted SFAS 142 as of October 1, 2001 and no longer amortizes goodwill.

Other income (expense). Other income (expense) includes income from partnerships and 401(e) deferred compensation plan.

Historical Results of Operations

Year Ended September 30, 2003 Compared to Year Ended September 30, 2002

Revenues for the year ended September 30, 2003 were $221.5 million compared to $218.7 million for the year ended September 30, 2002, an increase of $2.8 million or 1%. For the year ended September 30, 2003, revenues for the Automotive Group decreased $3.3 million, or 3%, to $116.1 million as compared to the year ended September 30, 2002. For the year ended September 30, 2003, revenues for the Industry Solutions Group increased $6.1 million, or 6%, to $105.4 million as compared to the year ended September 30, 2002.

Systems revenues for the year ended September 30, 2003 were $67.4 million compared to $59.2 million for the year ended September 30, 2002, an increase of $8.2 million or 14%. Systems revenues for the Automotive Group for the year ended September 30, 2003 decreased $1.8 million to $19.0 million as compared to $20.8 million for the year ended September 30, 2002. The decrease in Automotive Group Systems revenue was due primarily to higher sales of jobber systems in the previous year as the result of special promotions. Systems revenues for the Industry Solutions Group for the year ended September 30, 2003 increased $10.0 million to $48.5 million as compared to the year ended September 30, 2002. The increase in Industry Solutions Group systems revenue was due to increased sales of add-on products to the current customer base and increased sales of new software solutions to new customers.

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Services and finance revenues were $154.1 million for the year ended September 30, 2003 compared to $159.5 million for the year ended September 30, 2002, a decrease of $5.4 million or 3%. Services and finance revenues for the Automotive Group for the year ended September 30, 2002 decreased $1.5 million to $97.1 million as compared to the year ended September 30, 2002. The decrease in the Automotive Group’s revenues resulted primarily from decreased customer support revenues due to customer attrition on certain legacy platforms and the loss of a major catalog customer who discontinued operations. Services and finance revenues for the Industry Solutions Group for the year ended September 30, 2003 decreased $3.9 million to $57.0 million as compared to the year ended September 30, 2002. The decrease in the Industry Solutions Group’s revenues was largely due to lower information product sales to manufacturers as a result of terminations of certain primary sources of point of sale data. We do not expect to be able to replace this point of sale data.

Cost of revenues remained at $111.8 million for the year ended September 30, 2003. For the year ended September 30, 2003, cost of revenues for the Automotive Group decreased $4.6 million or 8%, to $55.4 million as compared to the year ended September 30, 2002. For the year ended September 30, 2003, cost of revenues for the Industry Solutions Group increased $4.6 million, or 9%, to $56.4 million as compared to the year ended September 30, 2002.

Cost of systems revenues was $40.2 million for the year ended September 30, 2003 compared to $38.0 million for the year ended September 30, 2002, an increase of $2.1 million or 6%. Cost of systems revenues for the Automotive Group for the year ended September 30, 2003 decreased $0.2 million to $15.3 million as compared to the year ended September 30, 2002, predominately due to the lower system sales. Cost of systems revenues for the Industry Solutions Group for the year ended September 30, 2003 increased $2.3 million to $24.9 million compared to the year ended September 30, 2002. The increase in the Industry Solutions Group’s systems cost of sales is principally due to the increased system sales. Cost of systems revenues as a percentage of system revenues for the Automotive Group was 80% and 74% for the year ended September 30, 2003 and 2002, respectively. Cost of systems revenues as a percentage of systems revenues for the Industry Solutions Group was 51% and 59% for the years ended September 30, 2003 and 2002, respectively. The percentage fluctuations were primarily due to the price and volume mix of products sold.

Cost of revenues for services and finance was $71.6 million for the year ended September 30, 2003 compared to $73.7 million for the year ended September 30, 2002, a decrease of $2.1 million or 3%. Cost of revenues for services and finance for the Automotive Group for the year ended September 30, 2003 decreased $4.4 million to $40.1 million compared to the year ended September 30, 2002, chiefly due to lower database amortization expense and lower bad debt expense. Cost of revenues for services and finance for the Industry Solutions Group for the year ended September 30, 2003 increased $2.3 million to $31.5 million compared to the year ended September 30, 2002, largely due to higher database amortization. As a percentage of services and finance revenues, cost of revenues for services and finance for the Automotive Group was 41% and 45% for the year ended September 30, 2003 and 2002, respectively, due to the factors mentioned above. As a percentage of service and finance revenues, cost of revenues for services and finance for the Industry Solutions Group was 55% and 48% for the year ended September 30, 2003 and 2002, respectively. The change in cost of services and finance revenues as a percentage of revenue for the Industry Solutions Group was primarily due to higher database amortization and lower revenue for information product sales to manufacturers.

Sales and marketing expense for the year ended September 30, 2003 decreased $1.9 million to $32.0 million as compared to the year ended September 30, 2002. Sales and marketing expense for the Automotive Group for the year ended September 30, 2003 decreased $2.0 million to $13.7 million as compared to the year ended September 30, 2002. Sales and marketing expense for the Industry Solutions Group for the year ended September 30, 2003 increased $0.1 million to $18.3 million as compared to the year ended September 30, 2002. The decrease in the Automotive Group’s sales and marketing expense was predominately due to reduced lease bad debt expense resulting from the outsourcing of leasing activity and the performance of the legacy lease portfolio. The increase in Industry Solutions Group sales and marketing expense was principally due to higher sales personnel costs from the increased systems sales offset by reduced lease bad debt expense as noted above. As a percentage of revenue, sales and marketing expense for the Automotive Group was 12% and 13% for the years ended September 2003 and 2002, respectively. As a percentage of revenue, sales and marketing expense for the Industry Solutions Group was 17% and 18% for the years ended September 2003 and 2002, respectively.

Product development expenses for the year ended September 30, 2003 decreased $0.4 million to $17.0 million from $17.4 million for the year ended September 30, 2002. Product development expenses for the Automotive Group decreased $1.0 million to $12.7 million as compared to the year ended September 30, 2002. Product development expenses for the Industry Solutions Group increased $0.6 million to $4.3 million for the year ended September 30, 2003. As a percentage of revenue, product development expenses for the Automotive Group were 11% and 12% for the years ended September 30, 2003 and 2002, respectively. As a percentage of revenue, product development expenses for the Industry Solutions Group remained constant at 4% for the years ended September 30, 2003 and 2002.

15

Index to Financial Statements

General and administrative expenses for the year ended September 30, 2003 were $27.4 million compared to $26.4 million for the year ended September 30, 2002, an increase of $1.0 million or 4%. The increase was largely due to increased expense related to an ERP implementation and our corporate name change. As a percentage of revenues, general and administrative expense was 12% for the years ended September 30, 2003 and 2002.

Interest expense for the year ended September 30, 2003 was $14.8 million compared to $14.1 million, an increase of $0.7 million or 5%. Over the year ended September 30, 2002, the increase in interest expense was chiefly due to the June 2003 issuance of the 10.5% Senior Notes. (See “Liquidity and Capital Resources”.) Other income (expense), net for the year ended September 30, 2003 decreased $0.3 million to ($0.1) million, largely due to last year’s gain on sale of a building.

The Company recorded income tax expense attributable to continuing operations of $4.4 million for the year ended September 30, 2003 and $5.9 million for the year ended September 30, 2002, a decrease of $1.5 million. The decrease in income tax expense is due to the decrease in pretax profit associated with the issuance of the 10.5% Senior Notes, the increase in general and administrative expenses, and the impact of a change in estimate of certain deferred tax liabilities.

As a result of the above factors, the Company recorded net income of $7.8 million for the year ended September 30, 2003, compared to net income of $9.4 million for the year ended September 30, 2002, a decrease of $1.6 million or 17%.

Year Ended September 30, 2002 Compared to Year Ended September 30, 2001

Revenues for the year ended September 30, 2002 were $218.7 million compared to $211.0 million for the year ended September 30, 2001, an increase of $7.7 million or 4%. For the year ended September 30, 2002, revenues for the Automotive Group increased $0.1 million, or less than 1%, to $119.4 million as compared to the year ended September 30, 2001. For the year ended September 30, 2002, revenues for the Industry Solutions Group increased $7.6 million, or 8%, to $99.3 million as compared to the year ended September 30, 2001.

Systems revenues for the year ended September 30, 2002 were $59.2 million compared to $52.7 million for the year ended September 30, 2001, an increase of $6.5 million or 12%. Systems revenues for the Automotive Group for the year ended September 30, 2002 increased $0.6 million to $20.8 million as compared to the year ended September 30, 2001. Systems revenues for the Industry Solutions Group for the year ended September 30, 2002 increased $5.9 million to $38.4 million as compared to the year ended September 30, 2001. The increase in systems revenue was primarily due to additional systems and products sold to the current customer base.

Services and finance revenues were $159.5 million for the year ended September 30, 2002 compared to $158.3 million for the year ended September 30, 2001, an increase of $1.2 million or 1%. Services and finance revenues for the Automotive Group for the year ended September 30, 2002 decreased $0.5 million to $98.6 million as compared to the year ended September 30, 2001. Services and finance revenues for the Industry Solutions Group for the year ended September 30, 2002 increased $1.7 million to $60.9 million as compared to the year ended September 30, 2001. The increase in the Industry Solutions Group’s revenues was largely due to increased advice line customers and new information products.

Cost of revenues was $111.8 million for the year ended September 30, 2002 compared to $113.7 million for the year ended September 30, 2001, a decrease of $1.9 million or 2%. For the year ended September 30, 2002, cost of revenues for the Automotive Group decreased $4.4 million or 7%, to $59.9 million as compared to the year ended September 30, 2001. For the year ended September 30, 2002, cost of revenues for the Industry Solutions Group increased $2.5 million, or 5%, to $51.9 million as compared to the year ended September 30, 2001.

Cost of systems revenues was $38.0 million for the year ended September 30, 2002 compared to $33.8 million for the year ended September 30, 2001, an increase of $4.2 million or 12%. Cost of systems revenues for the Automotive Group for the year ended September 30, 2002 increased $0.4 million to $15.4 million as compared to the year ended September 30, 2001, predominately due to increased system sales. Cost of systems revenues for the Industry Solutions Group for the year ended September 30, 2002 increased $3.8 million to $22.6 million compared to the year ended September 30, 2001. The increase in the Industry Solutions Group’s systems cost of sales is principally due to increased system sales. Cost of systems revenues as a percentage of system revenues for the Automotive Group was 74% for the years ended September 30, 2002 and 2001. Cost of systems revenues as a percentage of systems revenues for the Industry Solutions Group was 59% and 58% for the years ended September 30, 2002 and 2001, respectively. The percentage fluctuations were primarily due to the mix of products sold.

Cost of revenues for services and finance was $73.8 million for the year ended September 30, 2002 compared to $79.9 million for the year ended September 30, 2001, a decrease of $6.1 million or 8%. Cost of revenues for services and finance for the Automotive Group for the year ended September 30, 2002 decreased $4.8 million to $44.5 million compared to the year ended September 30, 2001, chiefly due to more efficient use of the Company’s hardware support services and to lower amortization and freight expense.

16

Index to Financial Statements

Cost of revenues for services and finance for the Industry Solutions Group for the year ended September 30, 2002 decreased $1.3 million to $29.3 million compared to the year ended September 30, 2001. Cost of revenues for services and finance for the Industry Solutions Group is down from 2001 largely due to more efficient use of the Company’s hardware support services. As a percentage of services and finance revenues, cost of revenues for services and finance for the Automotive Group was 45% and 50% for the year ended September 30, 2002 and 2001, respectively. As a percentage of service and finance revenues, cost of revenues for services and finance for the Industry Solutions Group was 48% and 52% for the year ended September 30, 2002 and 2001, respectively. The change in cost of services and finance revenues as a percentage of revenue for both the Automotive and Industry Solutions Group was primarily due to the factors mentioned above.

Sales and marketing expense for the year ended September 30, 2002 decreased $5.6 million to $33.9 million as compared to the year ended September 30, 2001. Sales and marketing expense for the Automotive Group for the year ended September 30, 2002 decreased $6.3 million to $15.7 million as compared to the year ended September 30, 2001. Sales and marketing expense for the Industry Solutions Group for the year ended September 30, 2002 increased $0.7 million to $18.2 million as compared to the year ended September 30, 2001. The decrease in the Automotive Group’s sales and marketing expense was predominately due to lower bad debt expense and reduced personnel and travel costs. The increase in Industry Solutions Group sales and marketing expense was principally due to higher personnel costs, driven by its higher systems revenue. As a percentage of revenue, sales and marketing expense for the Automotive Group was 13% and 18% for the years ended September 2002 and 2001, respectively. As a percentage of revenue, sales and marketing expense for the Industry Solutions Group was 18% and 19% for the year ended September 2002 and 2001, respectively.

Product development expenses remained steady at $17.4 million for the years ended September 30, 2002 and September 31, 2001. Product development expenses for the Automotive Group for both years were $13.7 million. Product development expenses for the Industry Solutions Group for both years remained at $3.7 million. As a percentage of revenue, product development expenses for the Automotive Group were 12% for the years ended September 30, 2002 and 2001, respectively. As a percentage of revenue, product development expenses for the Industry Solutions Group remained constant at 4% for the years ended September 30, 2002 and 2001.

General and administrative expenses for the year ended September 30, 2002 were $26.4 million compared to $26.2 million, an increase of $0.2 million or 1% from the year ended September 30, 2001. As a percentage of revenues, general and administrative expense was 12% for the years ended September 30, 2002 and 2001.

On October 1, 2001, the Company adopted the new accounting guidance regarding amortization of goodwill. This adoption caused goodwill amortization to cease being recorded and resulted in a $10.6 million decrease in expense from 2001 to 2002.

Interest expense for the year ended September 30, 2002 was $14.1 million compared to $17.8 million, a decrease of $3.7 million or 21%. The decrease in interest expense was chiefly due to a decrease in the base rates, Bank Prime and LIBOR, used in computing the interest charged to the Company, and to a lower principal balance. See “Liquidity and Capital Resources.” Other income (loss) for the year ended September 30, 2002 increased $0.8 million to $0.1 million, largely due to the gain on the sale of its facility in Newton, N.J.

The Company recorded income tax expense attributable to continuing operations of $5.9 million for the year ended September 30, 2002 and an income tax benefit attributable to continuing operations of $1.9 million for the year ended September 30, 2001. The decrease in income tax benefit is due to improved profitability.

As a result of the above factors, the Company experienced net income of $9.4 million for the year ended September 30, 2002, compared to a net loss of $12.9 million for the year ended September 30, 2001, an improvement of $22.3 million or 172%.

Liquidity and Capital Resources

In June 2003, the Company issued $157.0 million in Senior Notes, at a discount of $2.0 million, which bear interest at 10.5% per annum, payable semiannually in June and December, and mature in June 2011. With the proceeds from the Senior Notes, the Company repurchased $82.5 million of its Senior Subordinated Notes due 2008, repaid its outstanding term loan facility of $33.0 million, issued a $30.0 million dividend to Holding, and purchased $1.8 million of outstanding common stock in Internet Autoparts, Inc. (“IAP”) that was held by the Company’s majority shareholder. The Company now owns 47.5% of outstanding common stock in IAP. Additionally, the Company replaced its revolving credit facility with a new revolving credit facility (the “Amended and Restated Credit Agreement”) that provides for maximum borrowings of $15.0 million (including letters of credit up to a maximum of $5.0 million) and matures in June 2006.

17

Index to Financial Statements

As of September 30, 2003, the Company had $173.3 million in outstanding indebtedness, an increase of $35.3 million from September 30, 2002. The $173.3 million of indebtedness was comprised of $155.0 million in Senior Notes, net of the $2.0 million discount, $17.5 million of Senior Subordinated Notes due 2008 and $0.8 million of debt related to lease financing that matures in varying amounts over the next five years. As of September 30, 2003, there were no borrowings under the Amended and Restated Credit Agreement. Total annual interest expense, based on current debt levels and interest rates is estimated to be $18.5 million in fiscal year 2004. The Amended and Restated Credit Agreement bears interest at floating rates; therefore, the Company’s financial condition is and will be affected by changes in prevailing rates.

The Company’s Amended and Restated Credit Agreement imposes certain restrictions on the Company, the most significant of which include limitations on additional indebtedness, liens, guarantees, payment or declaration of dividends, sale of assets, investments, capital expenditures, and transactions with affiliates. Under the Amended and Restated Credit Agreement, the Company is obligated to meet certain tests relating to certain financial amounts and ratios as defined in the Amended and Restated Credit Agreement. At September 30, 2003, the Company was in compliance with these covenants.

On October 1, 2003, the Company sold the assets of its Automotive Recycling Division (“ARD”) to Car-Part.com. The agreement included the sale of ARD’s software, systems, Hollander Interchange License and other assets and the assumption of certain liabilities of ARD. The ARD group had more than 1,200 customers in the United States and Canada, using three products: Orion, Checkmate and Compass. The total purchase price was $6.7 million plus net working capital. The total revenue generated by those assets for the fiscal year ended September 30, 2003 was $8.2 million.

In addition to servicing its debt obligations, the Company requires substantial liquidity for capital expenditures and working capital needs. At September 30, 2003, working capital was $ 21.2 million compared to $(8.9) million at September 30, 2002. The increase in working capital is principally composed of increases in accounts receivable and cash. For the year ended September 30, 2003, the Company’s capital expenditures were $12.5 million compared to $13.2 million for the year ended September 30, 2002, which included $7.1 million in 2003 and 2002 for capitalized computer software costs and databases.

From time to time, we intend to pursue acquisition candidates, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted. We expect to fund future cash acquisitions primarily with cash flow from operations and borrowing, including the unborrowed portion of the credit facility or new debt issuances, but may also issue additional equity either directly or in connection with acquisitions. There can be no assurance that acquisition funds will be available at terms acceptable to us.

The Company believes that cash flows from operations, together with the amounts available under its Amended and Restated Credit Agreement, will be sufficient to fund its working capital and debt service requirements. The Company’s ability to meet its working capital and debt service requirements, however, is subject to future economic conditions and to financial, business and other factors, many of which are beyond the Company’s control. If the Company is not able to meet such requirements, it may be required to seek additional financing. There can be no assurance that the Company will be able to obtain financing from other sources on terms acceptable to the Company, if at all.

Contractual Obligations and Commercial Commitments

The following table summarizes the Company’s contractual obligations and payments due by fiscal period following September 30, 2003 (in thousands):

18

Index to Financial Statements

The Company’s sources of short-term funding are its operating cash flows and its existing revolving credit arrangement. The revolving credit agreement contains terms and conditions customary for such agreements including minimum levels of debt and interest coverage and limitations on leverage. At September 30, 2003, the Company complied with all the terms and conditions of its credit agreements.

The following table summarizes the Company’s commercial commitments at September 30, 2003 (in thousands):

Off-Balance Sheet Arrangements

The Company’s wholly owned subsidiary CCI/TRIAD Financial Holding Corporation (“Financial Holding”) maintains lease receivables sold via short-term lease financing arrangements along with their corresponding notes payable. Due to the bankruptcy remote nature of Financial Holding, it is excluded from the consolidated financial statements of the Company.

Prior to March 2001, the Company sold lease receivables via short term lending agreements to banks and other financial institutions. At the time of sale, the Company recorded the newly-created servicing liabilities (lease servicing obligation and recourse obligation) at their estimated fair value and Financial Holding recorded the lease receivables from the lessees and the corresponding notes payable to the lenders. On September 30, 2003, Financial Holding held $6.5 million in leases and $6.3 million in related notes payable.

The short-term lease financing agreements contain restrictive covenants which allow the Company to sell new leases and service existing leases only while in compliance with such covenants. In the event of non-compliance, the banks and lending institutions could assume administrative control of the lease portfolio and could prohibit further sales under the short-term lease financing arrangements. During the period ended September 30, 2003, the Company was in compliance with the covenants.

Subsequent to March 2001, Financial Holding has not entered into any new lending arrangements. Furthermore, the Company does not anticipate that Financial Holding will enter any new lending arrangements. The remaining lease assets and associated short-term lease financing arrangements amortize through December 2005.

19

Index to Financial Statements

Summarized financial information of Financial Holding as of September 30, 2002 and 2003 and for the fiscal years ended September 30, 2001, 2002, and 2003 is as follows (in thousands):

A proposed accounting interpretation is being deliberated by the Financial Accounting Standards Board (“FASB”) which may result in the Company including the assets and liabilities (or some portion thereof) of Financial Holding in its financial statements.

Critical Accounting Policies and Estimates

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates estimates, including those discussed below. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Software and Database Development Costs

Costs incurred internally in creating computer software products are expensed until technological feasibility has been established, which is typically evidenced by a completed program design. Thereafter, applicable software development costs are capitalized and subsequently reported at the lower of amortized cost or net realizable value. Costs incurred related to the accumulation of data for the development of databases are capitalized and subsequently reported at the lower of amortized cost or net realizable value. Capitalized costs are amortized using the straight-line method over the estimated economic life of the product not to exceed five years. The Company is required to (i) use professional judgment in determining whether software development costs meet the criteria for immediate expense or capitalization using the criteria described above and (ii) evaluate software and database development costs for impairment at each balance sheet date by comparing the unamortized capitalized costs to the net realizable value. The amount by which unamortized capitalized costs exceed the net realizable value of the asset is written off and recorded in results of operations during the period of such impairment. The net realizable value is the estimated future gross revenue from that product reduced by the estimated future costs of completing, maintaining, and disposing of the product.

20

Index to Financial Statements

Revenue Recognition

The Company derives revenue from software license fees and the sale of computer hardware, maintenance, and services. The Company utilizes written contracts as the means to establish the terms and conditions by which the Company’s licenses, products, maintenance and services are sold to its customers. Revenue from software license fees and from the sale of hardware products is recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, no significant obligations remain, the fee is fixed and determinable and collection is probable. When several elements, including software, maintenance and services, are bundled and sold as a system to a customer the Company has established vendor-specific objective evidence of fair value for maintenance and services and has determined that such services are not essential to the functionality of the delivered software, the revenues from such multiple-element arrangements are allocated to each element based upon the residual method, whereby the fair value of the undelivered element of the contract is deferred. In those instances that include significant customization or modification of the software, contract accounting is applied to both the software and services elements of the arrangement. Where estimates of costs to complete and extent of progress are reasonably dependable, systems revenue from these software arrangements is recognized on a percentage-of-completion method with progress-to-completion measured based upon installation hours incurred. In other instances where costs or estimates are not dependable, systems revenue from these software arrangements is recognized at completion based upon the completed contract method.

These policies require management, at the time of the transaction, to assess whether the amounts due are fixed or determinable, collection is reasonably assured, and if future performance obligations exist. These assessments are based on the terms of the agreement with the customer, past history, and credit worthiness of the customer. If management determines that collection is not reasonably assured or future performance obligations exist, revenue recognition is deferred until these conditions are satisfied.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate due to industry factors, general economic factors or otherwise, resulting in an impairment of their ability to make payments, additional allowances may be required.

Allowance for Lease Losses

The allowance for lease losses provides coverage for probable and estimable losses in the Company’s lease portfolios. The allowance recorded is based on a review of all leases outstanding and transactions in process. The determination of the appropriate amount of any provision is based on management’s judgment at that time and takes into consideration all known relevant internal and external factors that may affect the lease portfolio, including levels of non-performing leases, lessees’ financial condition, leased values as well as general economic conditions and credit quality indicators. The Company’s allowance includes an estimate of reserves needed to cover specifically identified lease losses and certain unidentified but inherent risks in the portfolio. If the financial condition of the Company’s leasing customers were to deteriorate due to industry factors, general economic factors or otherwise, resulting in an impairment of their ability to make payments, additional allowances may be required.

Valuation of Goodwill and Other Intangibles

Business acquisitions typically result in goodwill and other intangible assets, and the recorded values of those assets may become impaired in the future. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect the Company’s consolidated financial statements. The Company assesses potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The Company’s judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of the acquired businesses, market conditions and other factors. Future events could cause the Company to conclude that impairment indicators exist and that goodwill associated with the acquired businesses is impaired. Any resulting impairment loss could have an adverse impact on the Company’s results of operations.

Recently Issued Accounting Standards

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, effective for financial instruments entered into or modified after May 31, 2003. This statement sets standards for classification and measurement of certain financial instruments. There was no material impact from the adoption of this statement on the Company’s financial position or results of operations.

21

Index to Financial Statements

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, effective for contracts and hedging relationships entered into or modified after June 30, 2003. This statement clarifies when a contract meets the characteristic of a derivative. It will result in more consistent reporting of certain contracts as either derivatives or hybrid instruments. There was no material impact from the adoption of this statement on the Company’s financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”), which clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46 requires variable interest entities (VIE) to be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE activities or entitled to receive a majority of the entity’s residual returns or both. A company that consolidates a VIE is called the primary beneficiary of that entity. FIN 46 also requires disclosures about VIE that a company is not required to consolidate but in which it has a significant variable interest. The provisions of this interpretation apply immediately to VIE created after January 31, 2003 and apply to existing VIE in the first fiscal year or interim period ending after December 15, 2003. The Company is currently assessing the application of FIN 46 as it relates to certain variable interests acquired before January 31, 2003, and any accounting impact will be reported in the fiscal 2004 financial statements. We are continuing to review our variable interest entities and the outcome of this review will determine whether there is a need to consolidate additional entities.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, effective for fiscal years ending after December 15, 2002. This statement amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The statement also requires prominent disclosures about the method of accounting for stock-based employee compensation and its effect on reported results. There was no material impact from the adoption of this statement on the Company’s financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45 (“FIN 45”) “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. FIN 45 requires that the Company recognize the fair value for certain guarantee and indemnification arrangements issued or modified by the Company after December 31, 2002. When the Company determines that a loss is probable, the estimable loss must be recognized as it relates to applicable guarantees and indemnifications. Some of the software licenses granted by the Company contain provisions that indemnify customers of the Company’s software from certain damages and costs resulting from claims alleging that the Company’s software infringes the intellectual property rights of a third party. The Company records resulting costs as incurred and historically, such costs have not been material. Accordingly, the Company has not recorded a liability related to these indemnification provisions.

In November 2002, the EITF reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. There was no material effect from the provisions of Issue No. 00-21 on the Company’s consolidated results of operations, financial condition or cash flows.

22

Index to Financial Statements

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

Interest Rate Risk

At September 30, 2003, the Company had outstanding $157.0 million, including discount of $2.0 million, of Senior Notes, $17.5 million of Senior Subordinated Notes and no borrowings under the Amended and Restated Credit Agreement. The Senior Notes bear interest at a fixed rate of 10.5% and the Senior Subordinated Notes bear interest at a fixed rate of 9%. The Senior Notes and the Senior Subordinated Notes are not subject to changes in interest rates. The Amended and Restated Credit Agreement bears interest at floating rates.

Foreign Currency Risk

The majority of the Company’s operations are based in the U.S. and, accordingly, the majority of its transactions are denominated in U.S. dollars. However, the Company does have foreign based operations where transactions are denominated in foreign currencies and are subject to market risk with respect to fluctuations in the relative value of currencies. Currently, the Company has operations in Canada, the United Kingdom and Ireland and conducts transactions in the local currency of each location.

The Company monitors its foreign currency exposure and, from time to time, may attempt to reduce its exposure through hedging. At September 30, 2003, the Company had no foreign currency contracts outstanding.

23

Index to Financial Statements

Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements

Activant Solutions Inc.

Audited Consolidated Financial Statements

24

Index to Financial Statements

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors

Activant Solutions Inc.

We have audited the accompanying consolidated balance sheets of Activant Solutions Inc. as of September 30, 2002 and 2003, and the related consolidated statements of operations and comprehensive income (loss), stockholder’s equity (deficit), and cash flows for each of the three years in the period ended September 30, 2003. Our audits also include the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Activant Solutions Inc. at September 30, 2002 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/    ERNST & YOUNG LLP

Austin, Texas

December 3, 2003

25

Index to Financial Statements

ACTIVANT SOLUTIONS INC.

Consolidated Balance Sheets

(In thousands, except share data)

See accompanying notes.

26

Index to Financial Statements

ACTIVANT SOLUTIONS INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands)

See accompanying notes.

27

Index to Financial Statements

ACTIVANT SOLUTIONS INC.

Consolidated Statements of Stockholder’s Equity (Deficit)

(In thousands)

See accompanying notes.

28

Index to Financial Statements

ACTIVANT SOLUTIONS INC.

Consolidated Statements of Cash Flows

(In thousands)