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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2004

For the transition period from             to             

Commission file number 0-21958

QRS Corporation

(Exact name of registrant as specified in its charter)

1400 Marina Way South, Richmond, CA 94804

(Address of principal executive offices, including zip code)

(510) 215-5000

(Registrant’s phone number, including area code)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

As of November 2, 2004, 15,970,721 shares of the issuer’s common stock, par value $.001 per share, were outstanding.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to a number of risks and uncertainties. All statements that are not historical facts are forward-looking statements, including statements regarding our business strategy, future operations, future financial position, estimated revenues or earnings (losses), projected costs, prospects, plans and objectives. These statements appear in a number of places and can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy.

Actual results may vary materially from those in the forward-looking statements as a result of various factors that are identified in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document. These factors include: general economic and business conditions; specific conditions in the retail industry; competition; changes in senior management; rapid technological change in our industry; dependence upon key customers and their trading partners; ability to introduce and market acceptance of new products and services; the ability to successfully integrate and manage acquired businesses and technologies; customers’ willingness to purchase products or services offered through or in conjunction with third parties; customers’ reluctance to purchase products or services due to the announcement of the signing of the merger agreement with Inovis International, Inc. (“Inovis”); diversion of management’s attention to completing the merger with Inovis and planning the integration of QRS’ business with Inovis; loss of or harm to the Company’s relationships with employees due to the Company’s pending merger with Inovis; costs related to the merger and the integration of acquired products, technologies and employees into Inovis’ business and product offerings; dependence upon IBM for electronic commerce service; dependence on third parties for licenses to technology that is integrated into certain products and services offered by us; and the ability to protect our proprietary technology and information.

No assurance can be given that the factors described above and contained elsewhere in this Quarterly Report on Form 10-Q are all of the factors that could cause actual results to vary materially from the forward-looking statements. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance. We assume no obligation to update any forward-looking statements.

CAUTION REQUIRED BY CERTAIN SEC RULES

In connection with the merger of Inovis and QRS Corporation (“QRS”), QRS has filed a proxy statement for QRS’ special stockholder meeting with the Securities and Exchange Commission (“SEC”). Investors and security holders are advised to read the proxy statement because it contains important information about the proposed merger. Investors and security holders may obtain a free copy of the proxy statement and other documents filed by QRS with the SEC at the SEC’s web site at http://www.sec.gov. Free copies of the proxy statement and other documents filed by QRS with the SEC may also be obtained from QRS by directing a request to QRS, Attention: Stacey Giamalis, Secretary, 510.215.5000.

QRS and its directors and its executive officers may be deemed, under SEC rules, to be soliciting proxies from QRS’ stockholders in favor of the proposed merger. Information regarding the identity of these persons, and their interests in the solicitation, are set forth in a Schedule 14A filed with the SEC, and is available free of charge at the SEC website and public reference rooms, and from the QRS corporate secretary.

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QRS CORPORATION

FORM 10-Q

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

QRS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003

(In thousands, except share and per share amounts)

(Unaudited)

See Notes to Condensed Consolidated Financial Statements

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QRS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

(In thousands, except per share amounts)

(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

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QRS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

(In thousands)

(Unaudited)

See Notes to Condensed Consolidated Financial Statements

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QRS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. GENERAL

QRS Corporation (“QRS,” the “Company,” “we” or “us”) is a technology company that serves the global retail trading community with collaborative commerce solutions. We manage the flow of critical commerce information and leverage our retail technology expertise to address fundamental industry challenges such as global data synchronization, compliance mandates, transaction management and global trade management. Our solutions help customers expand into new markets and channels, improve operational efficiency and differentiate their brand. Currently we have approximately 9,800 customers, as measured by the number of total, unique corporate customers that purchased or licensed our products and services between July 1, 2003 and June 30, 2004.

We have prepared the Condensed Consolidated Balance Sheet as of September 30, 2004, the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2004 and 2003, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003, without audit. In the opinion and to the knowledge of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at September 30, 2004 and for all periods presented have been made in accordance with generally accepted accounting principles. The Condensed Consolidated Balance Sheet as of December 31, 2003 is derived from our audited consolidated financial statements as of that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as permitted by regulations of the Securities and Exchange Commission. These interim Condensed Consolidated Financial Statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on March 15, 2004.

The preparation of our Condensed Consolidated Financial Statements in conformity with generally accepted accounting principles necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses for the periods presented. Actual amounts may differ from such estimates.

Operating results for the three and nine months ended September 30, 2004 are not necessarily indicative of the operating results anticipated for any other interim period or for the full year.

Recent Accounting Pronouncements

In March 2004, the Emerging Issues Task Force (EITF) reached a final consensus on Issue 03-06. Issue 03-06 addressed a number of questions regarding the computation of earnings (loss) per share (EPS) by companies that have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings of such companies when, and if, it declares dividends on its common stock. The issue also provides further guidance in applying the two-class method of calculating EPS. It clarifies what constitutes a participating security and how to apply the two-class method of computing EPS once it is determined that a security is participating, including how to allocate undistributed earnings to such a security. Issue 03-06 is effective for the first fiscal period beginning after its issuance. During the quarter ended June 30, 2004, we adopted Issue 03-06 and the adoption did not have any material effect on our calculation of EPS.

On March 31, 2004, the Financial Accounting Standards Board (FASB) issued an exposure draft entitled “Share-Based Payment” to amend Financial Accounting Standard (FAS) 123, “Accounting for Stock-Based Compensation” and FAS 95, “Statement of Cash Flows.” The proposed standard’s effective date will apply to awards that are granted, modified, or settled in cash in interim or annual periods beginning after June 15, 2005. This proposed standard would eliminate the ability to account for share-based compensation using the intrinsic value-based method under APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This exposure draft would require us to calculate equity-based compensation expense for stock options and employee stock purchase plan rights granted to employees based on the fair value of the equity instrument at the time of grant. The equity-based compensation expense is recognized ratably over the vesting period beginning with the grant date. Currently, we disclose the pro forma net income (loss) and related pro forma earnings (loss) per share information in accordance with FAS 123 and FAS 148, “Accounting for Stock-Based Compensation Costs-Transition and Disclosure.” We continue to evaluate the impact that the exposure draft will have on our financial position and results of operations.

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The following table illustrates the effect on our net income (loss) and net income (loss) per share if we would have applied the fair value recognition provisions of FAS 123 to stock-based compensation (in thousands, except per share amounts):

The weighted-average fair value of options granted were estimated on the date of grant using the multiple options method of the Black-Scholes pricing model with the following weighted-average assumptions used for grants made for the three and nine months ended September 30, 2004 and 2003:

The expected life of options granted in 2004 and 2003 is 12 to 18 months beyond each incremental vesting period (total life of 2 to 5.5 years, depending on each grant’s individual vesting schedule). No dividends are assumed for any plan in any year.

The fair value of the stock purchased under the employee stock purchase program was determined using the Black-Scholes pricing model with the following weighted-average assumptions as of March 31, 2004: risk-free interest rate is 2.61%; expected volatility is 109%; expected life is 6 months. No dividends are assumed.

2. OTHER INTANGIBLE ASSETS

Other intangible assets include acquired technology with an estimated useful life of 6 years; customer lists with useful lives of 3.5 to 5 years and a weighted-average estimated useful life of 4.8 years; customer contracts with useful lives of 5 to 7 years and a weighted-average estimated useful life of 6.4 years; and non-compete agreements entered into in connection with the acquisitions of businesses with estimated useful lives of 3 years. These intangible assets continue to be amortized on a straight-line basis over their useful lives.

As of September 30, 2004, other intangible assets consisted of the following (in thousands):

The estimated future amortization expense of other intangible assets as of September 30, 2004 is as follows (in thousands):

3. RESTRUCTURING EXPENSES

As part of our 2001 restructuring activities, we made certain estimates of sublease income on the vacated facility adjacent to our corporate headquarters in Richmond, California; however, due to a prolonged difficult real estate market in the Bay Area, those original estimates proved optimistic. As a result, during 2003 we began reevaluating our assumptions surrounding our sublease loss

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accrual, including discussions with our landlord to renegotiate the terms of our lease. We recorded a $3.7 million restructuring expense for the year ended December 31, 2003 based on the terms of a non-binding Letter of Intent with the landlord to reduce the term of the lease and our total cash commitments over the remaining life of the lease. During January 2004, we finalized agreements with our landlord to sublet the facility to an affiliate of our landlord and reduce our total cash commitments over the remaining life of the lease by $6.4 million. The sublease agreement for full contract rent and operating expenses from October 1, 2008 through the lease termination on June 30, 2011 is collateralized by a $4.0 million Deed of Trust. The agreements with our landlord required us in the first quarter 2004 to deposit $3.6 million of base rent for the period October 1, 2006 through September 30, 2008 in an escrow account for disbursement over the related rental period. The funds held in escrow are classified as restricted cash in the Condensed Consolidated Balance Sheets as of September 30, 2004. Under the terms of the agreements with our landlord, we also settled a $0.8 million common area maintenance obligation related to our headquarters facility for $0.2 million that we paid during the first quarter of 2004. The remaining $0.6 million liability was allocated between our headquarters facility and the vacated adjacent facility based on square footage. As a result, $0.3 million will be recognized ratably as a reduction in operating expenses over the remaining headquarters lease term and $0.3 million was reclassified from deferred rent and other liabilities to the sublease loss accrual for our vacant Richmond, California facility. We believe that the sublease loss accrual related to this facility as of September 30, 2004, assuming certain amounts of sublease income, will cover all of our revised obligations under the final agreements.

During 2003, we also completed a review of our overall cost structure with the goals of creating better alignment with our growth strategy and finding additional efficiencies. As a result, we centralized substantially all of our development team to our Richmond, California headquarters and streamlined other parts of our operations, primarily general and administrative services. These actions resulted in a restructuring charge of $1.9 million in the year ended December 31, 2003, consisting of $1.2 million related to the closure of our Wakefield, Massachusetts facility, $0.1 million related to the write-off of certain equipment and leasehold improvements and $0.7 million related to the severance of 43 employees located in Wakefield, Massachusetts; Richmond, California and New York, New York. During the third quarter 2004, we finalized an agreement with a third party to sublease our Wakefield, Massachusetts facility from October 1, 2004 through the term of the lease in June 2007. We recorded an additional restructuring charge of $0.2 million for the nine months ended September 30, 2004 to increase the sublease loss accrual to cover our revised obligations related to this facility.

During 2004, management reevaluated our strategy in Europe, primarily the cost of operating a facility in the U.K. Revenue generated from Europe fell below expectations and was insufficient to offset current operating expenses. As a result, we vacated the facility in August 2004 and settled the outstanding lease obligation with our landlord for $0.1 million. In addition, we incurred a restructuring charge during the third quarter 2004 of $0.2 million related to the abandonment and write-off of certain equipment and leasehold improvements. In October 2004, we terminated employment for four of the six remaining employees in Europe and expect to incur severance-related restructuring expenses during the fourth quarter 2004 of approximately $0.2 million.

The following is a summary of the restructuring liabilities from December 31, 2003 to September 30, 2004 (in thousands):

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Based on the terms of the agreements with our landlord described above and actual subleases in effect on other properties, $2.7 million of the total facilities closure liability of $9.1 million has been classified as a current liability and the remaining $6.4 million has been classified as non-current with payments through 2008.

4. EARNINGS (LOSS) PER SHARE

We calculate basic earnings (loss) per share (EPS) and diluted EPS in accordance with FAS 128, “Earnings Per Share.” Basic EPS is calculated by dividing net earnings (loss) for the period by the weighted-average common shares outstanding for that period, excluding unvested restricted share rights. Diluted EPS takes into account the effect of dilutive instruments, such as stock options and restricted share rights, and uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding pursuant to the treasury stock method.

The following is a summary of the calculation of the number of shares used in calculating basic and diluted earnings (loss) per share:

Potentially dilutive shares for the three months ended September 30, 2004 and 2003 were 3,488,196 and 3,359,100 shares, respectively, with weighted-average exercise prices of $10.97 and $12.62, respectively. Potentially dilutive shares for the nine months ended September 30, 2004 and 2003 were 2,935,083 and 3,349,832 shares, respectively, with weighted-average exercise prices of $11.02 and $12.10, respectively. These potentially dilutive shares have been excluded from the shares used in calculating diluted net income (loss) per share since their inclusion in the calculation would have been anti-dilutive either due to the loss for the period or because the options’ and warrants’ exercise prices exceed the average fair market value of the Company’s common stock during the period.

5. INCOME TAXES

We recorded $72,000 of income tax expense for the nine months ended September 30, 2004 and $98,000 for the nine months ended September 30, 2003. Income tax expense for all quarters in 2004 represents various state and foreign tax obligations. We did not incur any current federal tax expense during the first nine months of 2004 or 2003 primarily because of the effect of temporary differences arising from the deduction of capitalized service and product development costs for tax purposes, which resulted in a deferred tax liability. The deferred tax liability is offset by our unrecognized deferred tax asset. A valuation allowance has been placed against the remainder of our deferred tax asset.

6. COMMON STOCK, RESTRICTED SHARE RIGHTS, TREASURY STOCK AND STOCK OPTIONS

At September 30, 2004, there were 16,190,432 shares of our common stock issued of which 15,956,701 were outstanding. Employee and director stock-based compensation expense and non-employee stock-based compensation expense for the three and nine months ended September 30, 2004 and 2003 were as follows (in thousands):

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Restricted Share Rights

The following table shows the common stock restricted share rights granted under the provisions of the 1993 Stock Option/Stock Issuance Plan:

These common stock restricted share rights will vest and become issuable as long as the grantee remains employed by or a director of the Company through the vesting date, or upon a change in control of the Company. The fair value of all common stock restricted share rights is included in the financial statements as deferred compensation and is being amortized ratably over the vesting period. During the nine months ended September 30, 2004, we issued 10,416 shares of common stock, of which 3,723 shares were surrendered to the Company as payment of minimum payroll tax withholding.

The following table shows the activity under the common stock restricted share rights program:

Treasury Stock

During the nine months ended September 30, 2004, we did not repurchase any shares of our common stock.

Stock Option Plans

The following table shows the activity under our stock option plans:

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7. COMMITMENTS AND CONTINGENCIES

We use IBM Information Exchange as the Value Added Network (VAN) over which we provide customers with some of our QRS Exchange^™ products and services, such as Data Exchange, QRS Catalogue^™, QRS Web Forms^™ and QRS Managed EC^™. We depend on IBM Information Exchange for a substantial part of our revenue. In July 2002, we entered into a three-year agreement with IBM effective July 1, 2002 and ending June 30, 2005. Pursuant to the agreement, we pay fees to IBM based on our usage of its network and other specified services, subject to minimum payments set forth in the agreement. During April 2004, we modified our agreement with IBM to eliminate our obligation to purchase specified minimum annual amounts of IBM’s Business Exchange Services – Internet Transfer (BES-IT), formerly Internet Data and Document Exchange (IDDX).

We have established two irrevocable letters of credit with Wells Fargo Bank, N.A. as security for real property leases; one in the amount of $0.4 million and one in the amount of $0.2 million. These letters of credit remained outstanding as of September 30, 2004 and are collateralized by two certificates of deposit, which are classified as other assets in the Condensed Consolidated Balance Sheets. In the first quarter 2004, $3.6 million of cash was placed in escrow to fund various future lease payments for the period October 1, 2006 through September 30, 2008 as discussed in Note 3 above. The funds held in escrow are classified as restricted cash in the Condensed Consolidated Balance Sheets as of September 30, 2004.

We have made guarantees and indemnities, under which we may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions. In connection with some of our facility leases, we have indemnified the lessors for certain claims that could arise from our use of the facility. In connection with some of our vendor and partner agreements, we have indemnified the vendors and partners for certain claims that could arise from these agreements. Typically, these guarantees and indemnities do not provide for any limitation of the maximum potential future payments we could be obligated to make. We believe the estimated fair value of these indemnification agreements is minimal. No liability associated with this indemnification has been recorded.

Pursuant to our bylaws and indemnification agreements with each of our directors and executive officers, we are obligated to indemnify each of them against expenses and losses incurred for claims brought against them by reason of being a director or executive officer of the Company. The term of the indemnification period is for the director’s or officer’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have a directors and officers liability insurance policy that may be called upon to contribute to the satisfaction of any liability. We believe the estimated fair value of these indemnification agreements is minimal. No liability associated with this indemnification has been recorded.

Under the terms of our enterprise software applications license agreements and certain other sales agreements with our customers, in the event the software, products or services sold infringe upon any patent, copyright, trademark or any other proprietary right of a third party, we must indemnify our customer and licensees against any loss, expense or liability from any damages that may be awarded against its customer. In the event our customer cannot use the software or service due to infringement and we cannot obtain the right to use, replace or modify the license, product or service in a commercially feasible manner so that it no longer infringes, we may terminate the license and agreement and provide our customer a pro-rata refund of the fees paid by our customer for the infringing license, product or service. The agreements typically do not stipulate a maximum liability that can be incurred under the indemnification. We believe the estimated fair value of these indemnification agreements is minimal. No liability associated with this indemnification has been recorded.

In connection with the merger agreement relating to our 2000 acquisition of Image Info, we would have been required to pay the former shareholders of Image Info an additional $2.5 million in 2002 if revenue attributable to the acquired business for 2001 met the minimum amount described in the merger agreement. The deferred acquisition payment was accounted for in the acquisition cost for the original transaction and included as a liability in our Condensed Consolidated Balance Sheets. We determined that the revenue attributable to the acquired business did not reach the minimum amount required for 2001. On October 8, 2002, Craig Schlossberg, purporting to act on behalf of the former shareholders of Image Info, Inc. filed a lawsuit against the Company and WS Acquisition Corp., one of our wholly-owned subsidiaries (which was renamed Image Info, Inc.), in the Superior Court of California for the City and County of San Francisco, alleging claims for breach of contract and seeking to recover $2.5 million, plus interest, under a provision of the merger agreement. We vigorously defended the lawsuit, which we believed was without merit. To avoid further litigation, in April 2004, we reached a mutually satisfactory settlement agreement with the former shareholders of Image Info that resolves the lawsuit and terminates all claims against the Company. The action has been dismissed. Under the terms of the settlement agreement, we paid $1.9 million during the second quarter 2004, which was less than the $2.5 million liability classified as deferred acquisition payment in our Condensed Consolidated Balance Sheets as of December 31, 2003. The effect of this settlement on our liability was recorded in the first quarter 2004 operating results as a benefit of $0.6 million.

In the second and fourth quarters of 2004, respectively, we were notified by two customers of contract disputes that could potentially result in litigation. We have not yet been able to estimate our potential exposure, nor do we know the probability of an unfavorable outcome; therefore, no liability has been recorded. However, settlement of the contract disputes could have a material impact on our results of operations and financial position

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8. MERGERS & ACQUISITIONS

After entering into a merger agreement with JDA Software Group, Inc. (JDA) on June 17, 2004, we received unsolicited proposals from five bidders to acquire all of the outstanding shares of QRS. After receipt of each of these acquisition proposals, the QRS Board of Directors determined that QRS could engage in discussions with and furnish information to each potential acquirer in compliance with the JDA merger agreement. Thereafter, we engaged in extensive negotiations and due diligence with each potential acquirer prior to determining that the proposed merger with Inovis International, Inc. (Inovis) was more favorable to QRS’ stockholders than the proposed merger with JDA from a financial point of view, taking into account all of the terms and conditions of the proposed merger with Inovis, the likelihood of completion of the proposed Inovis merger, and the financial, regulatory, legal and other aspects of the proposed Inovis merger.

On September 2, 2004, we entered into a merger agreement with privately-held Inovis, pursuant to which a wholly-owned subsidiary of Inovis will merge with and into QRS. Under the terms of the agreement, QRS stockholders will receive $7.00 in cash for each share of QRS common stock. Completion of the merger is subject to the approval of QRS stockholders and other conditions. A definitive proxy statement was mailed to stockholders and the Company has set the date for a special stockholders meeting on November 12, 2004. In September 2004, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to our proposed merger with Inovis. Upon completion of the merger, we will be required to pay $16 to $17 million comprised of executive compensation, employee termination costs, stock compensation, legal and other professional fees and other contingent liabilities. Additionally, under the terms of the agreement, we are required to maintain a balance of $15 million in cash and marketable securities as of the closing of the merger. There can be no assurance that the merger will be consummated. In the event that the merger agreement is terminated, under certain circumstances, we will be required to pay Inovis a termination fee of $3.75 million.

Included in non-operating activities during the third quarter 2004 is a $3.75 million termination fee paid to JDA related to QRS’ termination of the merger agreement entered into on June 17, 2004 with JDA. In addition, general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) included $0.7 million and $1.7 million of merger-related costs for the three and nine months ended September 30, 2004, respectively.

On November 4, 2004, due to the proposed merger with Inovis, QRS provided notification of termination to more than 100 employees, contingent upon the completion of the merger with Inovis. With respect to the affected employees, we are taking actions in compliance with the provisions of the federal Workers Adjustment and Retraining Notification (WARN) Act. Severance and benefit costs and obligations under the WARN Act, are expected to total between $9 and $10 million which we expect to pay by the third quarter of 2005.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Our actual results could differ materially from those indicated by forward-looking statements as a result of various factors, including but not limited to those set forth under this Item, as well as those discussed elsewhere in this report and those that may be identified from time to time in our reports and registration statements filed with the Securities and Exchange Commission.

This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes included in Item 1 of this quarterly report and the Consolidated Financial Statements and related Notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our annual report on Form 10-K as filed with the Securities and Exchange Commission on March 15, 2004.

Overview

We are a technology company that serves the global retail trading community with collaborative commerce solutions. We manage the flow of critical commerce information and leverage our retail technology expertise to address fundamental industry challenges such as global data synchronization, compliance mandates, transaction management and global trade management. Our solutions help customers expand into new markets and channels, improve operational efficiency and differentiate their brand.

Our products and services help thousands of retailers, vendors, suppliers and brand manufacturers from a variety of retail segments, including general merchandise and apparel, consumer packaged goods, health and beauty, consumer electronics, hardlines, do-it-yourself, sporting goods and grocery. Our products and services are typically used with our customers’ enterprise information technology systems in order to deliver greater benefits and efficiencies to these customers.

We market our products and services in three Solutions Groups: Software Applications, Trading Community Management and Global Services. The following chart shows our current product set within each Solutions Group: