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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

or

FOR THE TRANSITION PERIOD FROM              TO             

Commission File Number: 000-24373

GLOBAL IMAGING SYSTEMS, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

REGISTRANT’S TELEPONE NUMBER, INCLUDING AREA CODE: 813-960-5508

(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

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 Exchange Act).    Yes  x    No  ¨

The registrant had 23,170,241 shares of common stock, $.01 par value, outstanding as of November 5, 2004.

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INDEX

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PART I – FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

GLOBAL IMAGING SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

See accompanying notes.

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GLOBAL IMAGING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See accompanying notes.

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GLOBAL IMAGING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See accompanying notes.

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GLOBAL IMAGING SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(IN THOUSANDS)

See accompanying notes.

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GLOBAL IMAGING SYSTEMS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)

See accompanying notes.

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GLOBAL IMAGING SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principals for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included herein. The results of operations for the three- and six-month periods ended September 30, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2005.

The consolidated balance sheet at March 31, 2004 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Global Imaging Systems, Inc.’s Annual Report on Form 10-K for the year ended March 31, 2004.

NOTE 2. STOCK OPTION PLANS

In 1998, the Board of Directors adopted a stock option plan under which, as amended to date, 3,320,000 shares of our common stock may be issued pursuant to stock options granted or sold as restricted stock to directors, officers, and employees of and consultants to Global Imaging Systems, Inc (“Global” or the “Company”). As of September 30, 2004, options to purchase 2,241,474 shares of our common stock were outstanding under the 1998 stock option plan, and 957,651 shares of our common stock have been issued under the 1998 plan upon the exercise of stock options granted under the plan. There were 18,375 shares of our common stock available to be issued under the 1998 plan as of September 30, 2004. Additionally, we have issued 102,500 shares of restricted stock under the 1998 plan, but did not issue any additional restricted shares during the six months ended September 30, 2004. During the six months ended September 30, 2004, options to purchase an aggregate of 273,000 shares were granted under the 1998 stock option plan with exercise prices ranging from $26.78 to $33.22 per share, the market values at date of grant.

On January 25, 2001, the Board of Directors adopted the Global Imaging Systems, Inc. 2001 Stock Option Plan under which we may grant options to purchase up to 300,000 shares of our common stock to employees of and service providers to Global, except for our executive officers and directors. Stock options granted under the 2001 stock option plan have the same terms as those granted under the 1998 plan. As of September 30, 2004, options to purchase 164,435 shares were outstanding under the 2001 stock option plan, and 106,565 shares of our common stock have been issued under the 2001 plan upon the exercise of stock options granted under the plan. There were 29,000 shares of our common stock available to be issued under the 2001 stock option plan as of September 30, 2004. During the six months ended September 30, 2004, no options were granted under the 2001 stock option plan.

On August 16, 2004, our shareholders’ approved the Global Imaging Systems, Inc. 2004 Omnibus Long Term Incentive Plan (the “2004 Plan”) under which we may grant options to purchase up to 600,000 shares of our common stock to directors, officers, and employees of Global. As of September 30, 2004, no options had been issued under the 2004 Plan.

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In addition to options outstanding under our stock option plans, 10,000 shares of our common stock are issuable upon the exercise of an option granted outside of our 1998, 2001 and 2004 stock option plans. This option is exercisable at a price of $12.00 per share.

We have adopted the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123. SFAS No. 148 allows for continued use of recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25 and related interpretations in accounting for grants to directors, officers and employees under plans. We apply the intrinsic value recognition and measurement principles of APB Opinion No. 25 and related interpretations in accounting for those grants. No stock-based employee compensation expense is reflected in net income related to our stock option grants as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions to stock-based employee compensation. Such disclosure is not necessarily indicative of the fair value of stock options that could be granted by us in future fiscal years or of the value of all options currently outstanding.

NOTE 3. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding for the period. Diluted earnings per share reflects the potential dilution from the exercise of stock options, as well as the conversion of convertible notes into common stock.

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The following table reconciles the numerators and denominators of the basic and diluted earnings per share computations (shares in thousands):

NOTE 4. ACQUISITIONS

Effective May 1, 2004, we acquired all the issued and outstanding stock of Imagine Technology Group, Inc. (“ITG”) pursuant to a Stock Purchase Agreement dated April 5, 2004, by and among Global, ITG Acquisition I Corporation, ITG and Imagine Technology Group, LLC and its members.

As consideration for the ITG stock, we paid ITG’s shareholder and its creditors approximately $104,800 in cash, $4,000 of which was placed in escrow and is subject to post-closing adjustments, plus 813,464 shares of Global’s common stock, par value $.01 per share, that were previously held in treasury. The common stock issued to ITG’s shareholder is registered for resale with the Securities and Exchange Commission using a registration statement on Form S-3.

The following table summarizes the preliminary estimated fair value of the ITG net assets acquired and liabilities assumed at the acquisition date. We are in the process of finalizing third-party valuations of the intangible assets acquired. When the report of the third-party appraiser is completed and the purchase price allocation is finalized, there may be further adjustments to the intangible assets (some of which may be amortizable) and hence there may also be further adjustments to amortization expense and deferred income taxes. During the three months ended September 30, 2004, we recorded amortization expense of $500 associated with the preliminary allocation of purchase price to customer relationships and non-compete agreements. Based on the preliminary allocations annual amortization expense for each of the next five years is expected to total approximately $1,033.

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We also acquired a business during the quarter ended September 30, 2004 that provides office-imaging solutions and related services. Aggregate consideration, net of cash acquired, for this acquisition was approximately $4,712, consisting of cash paid to the seller and acquisition related expenses. The preliminary value of liabilities assumed in connection with this acquisition totaled approximately $723. The preliminary fair value of total assets acquired in this acquisition consisted of approximately $1,088 of tangible assets and approximately $4,416 of goodwill and other intangible assets. We expect to finalize the estimated fair values and purchase price allocations prior to the end of our fiscal year.

These acquisitions were accounted for using the purchase method of accounting and, accordingly, are included in the results of operations from the date of acquisition.

The unaudited pro forma results presented below include the effects of all of our acquisitions to date in fiscal years 2005 and 2004 as if they had been consummated as of April 1, 2003. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated at the beginning of the year prior to acquisition.

NOTE 5. COMPREHENSIVE INCOME

The following table presents a reconciliation of comprehensive income:

NOTE 6. DERIVATIVES

We enter into swap and interest rate cap agreements to hedge the fluctuations in variable interest rates and do not use derivative instruments for speculative purposes. Effective November 12, 2002, we entered into a three-year swap agreement. This agreement effectively converts $20,000 of our variable-rate debt to fixed-rate debt, reducing the exposure to changes in interest rates. Under this swap agreement, we received an average variable LIBOR rate of 1.3% and paid an average LIBOR fixed rate of 2.7% for the period from April 1, 2004 to September 30, 2004. We have recognized a gain, net of tax, of approximately $188 for the six month period ended September 30, 2004 related to the change in the fair value of the interest rate swap, which has been recorded in comprehensive income.

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Effective July 6, 2004, we entered into a two-year interest rate cap agreement in notional amount of $25,000. We also entered into three two-year interest rate cap agreements in notional amounts of $20,000 each, effective September 11, 2003 (collectively, the Caps). These Caps are not designated as hedging instruments and as such are recorded on the consolidated balance sheet at their estimated fair value, with changes in the fair value being recorded in the consolidated statement of operations as interest expense during the period of change. The change in the Caps’ fair value resulted in additional interest expense of $106, before tax, for the six month period ended September 30, 2004. The Caps limit our interest rate risk exposure for the related notional amounts to a 4% LIBOR rate plus the applicable margin. No payments have been received under the Caps.

NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standard Board (“FASB”) issued an exposure draft entitled Share-Based Payment, an Amendment of FASB Statements No. 123 and 95. This exposure draft would require stock-based compensation to employees to be recognized as a cost in the financial statements and that such cost be measured according to the fair value of the stock options. In the absence of an observable market price for the stock awards, the fair value of the stock options would be based upon a valuation methodology that takes into consideration various factors, including the exercise price of the option, the expected term of the option, the current price of the underlying shares, the expected volatility of the underlying share price, the expected dividends on the underlying shares and the risk-free interest rate. The proposed requirements in the exposure draft would be effective for the interim or annual periods beginning after June 15, 2005. The FASB intends to issue a final Statement in late 2004. We will continue to monitor communications on this subject from the FASB in order to determine the impact on our consolidated financial statements.

NOTE 8. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

We have issued $57,500 of 4% convertible senior subordinated notes that are fully and unconditionally guaranteed on a joint and several basis by all our existing subsidiaries (the Guarantors), each of which we wholly own, directly or indirectly. We are a holding company and all of our operations are conducted by the Guarantors; we have no operations or assets separate from our investment in our subsidiaries.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and related notes included elsewhere in this Report on Form 10-Q and our Annual Report on Form 10-K for the year ended March 31, 2004. The discussion in this section contains forward-looking statements, including statements relating to the pace of our future acquisitions and overall growth, the benefits that will be realized by businesses we have acquired or may acquire, our future product and service offerings, pace of borrowings and future cash flows. These forward-looking statements are based largely on management’s current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to risks, uncertainties and assumptions, which could cause our actual results to differ materially from the results suggested by these forward-looking statements. Some factors that may cause our results to differ materially from these statements are:

Information regarding many of these factors and other factors that may cause our actual results to differ materially from those contained in the forward-looking statements is presented in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended March 31, 2004. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Overview

We are one of the leading providers of office technology solutions to middle-market businesses in the United States, selling and providing contract services for automated office equipment, including copiers, facsimile machines and printers, network integration solutions and electronic presentation systems. Network integration solutions and electronic presentation systems are sometimes known as the technology side of our business. We believe that the markets for our products and services are converging as technology advancements and innovation produce increases in automated office equipment functionality and networking capabilities. Incorporating products from Konica Minolta, Canon, Ricoh, Sharp, Hewlett-Packard, IBM, Microsoft, NEC, InFocus and other leading companies, we offer solutions for our customers from a network of 174 locations in 30 states and the District of Columbia. The contractual nature of our service and supply business, tailored lease financing programs, high level of repeat equipment purchases and our emphasis on superior customer service generate stable and recurring revenue streams. Since our founding in June 1994, we have acquired more than 60 businesses, all within the United States, which we have organized as a network of 17 core companies with corresponding satellite businesses. We believe the businesses we have acquired and the businesses we acquire in the future will benefit from our various programs and operating strategies. These benefits include increased operating efficiencies, the support of experienced and professional senior management, expansion of the types of office imaging products and services offered, increased access to capital and enhanced financial management.

Our revenues primarily come from two sources: sales of equipment and related supplies; and sales of complementary services and equipment rentals. The growth of our revenues depends on the demand for the equipment we offer, our reputation for providing timely and reliable service, our competitors’ actions in the marketplace, and general economic conditions. Sales of complementary supplies, parts and services are affected by equipment sales and rental volumes. Most of our service revenue is generated by contractual arrangements to service automated office equipment.

Our gross profit as a percentage of revenues varies from period to period depending on a number of variables including the mix of revenues from equipment, supplies, service and rentals; the mix of revenues among the markets served by us; and the mix of revenues of the businesses we acquire. As we acquire businesses, the percentage of our revenues that come from sales of equipment and supplies, as opposed to service and rentals, fluctuates depending on whether the businesses acquired are primarily automated office equipment dealers or are network integrators or electronic presentation systems dealers. Automated office equipment dealers typically derive a higher percentage of their revenues from service and rentals and a lower percentage from sales of equipment and supplies than do network integrators or electronic presentation systems dealers. Generally, sales of equipment and supplies have lower gross profit margins than revenues from service and rentals. In addition, equipment sales in the automated office equipment market generally have higher gross profit margins than equipment sales in the network integration or electronic presentation systems markets. To the extent these markets grow faster than the automated office equipment market, over time a larger percentage of our revenues and gross profits may be derived from sales that have lower gross profit margins than our current gross profit margins.

Cost of goods sold consists primarily of the cost of new equipment, cost of supplies and parts, labor costs to provide services, rental equipment depreciation and other direct operating costs. We depreciate our rental equipment primarily over a three-year period on a straight-line basis.

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Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates, including those related to accounts receivable, inventories, vendor incentives, intangible assets and contingencies. Our estimates and judgments are based on currently available information, historical results and other assumptions we believe to be reasonable. Actual results could differ materially from these estimates. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Accounts Receivable

We maintain allowances for doubtful accounts for estimated losses arising from the inability of our customers to make required payments. We evaluate the need for adjustments to our allowance for doubtful accounts at least quarterly. Our estimate of losses is based upon prior collection experience, a review of specific customers and their ability to pay and an overall appraisal of current economic conditions. If the financial condition of our customers were to deteriorate, resulting in a reduced ability to make payments, additional allowances may be required which would reduce net income.

Inventories

Inventories are valued at the lower of cost or market value. For equipment, cost equals either the average cost of inventory or, in the case of some specifically identified equipment inventory, the actual cost of that equipment inventory. For parts and supplies, cost equals the average cost of inventory. We evaluate the need for adjustments to our reserve for excess and slow-moving inventory at least quarterly. We write-down our inventories for estimated obsolescence by an amount equal to the difference between the cost of the inventories and their estimated market values based upon an aging analysis of the inventories on hand, specifically known inventory-related risks and assumptions about future demand and market conditions. These write-downs are reflected in our cost of sales. If actual market conditions are less favorable than those projected by management, additional write-downs may be required which could have an adverse effect on our financial results.

Vendor Incentives

We receive incentives from some of our vendors related to volume rebates, cooperative advertising allowances and other programs or agreements. These incentive programs are generally for quarterly periods and do not vary significantly from quarter to quarter. There are a limited number of annual volume rebate programs offered periodically by some of our vendors. The potential rebate amounts offered by these annual programs is significantly less than the quarterly rebate programs. We do not record any volume rebate until it is probable that it will be earned and the amount can be reasonably estimated. We record unrestricted volume rebates received as a reduction of inventories and recognize the incentives as a reduction to cost of sales when the related inventories are sold. Cooperative advertising allowances are generally required by the vendor to be used by us exclusively for advertising or other marketing programs. These restricted cooperative advertising allowances are recognized as a reduction to selling, general and administrative expenses as the related marketing expenses are incurred. Amounts received or receivable from vendors that are not yet earned are deferred in the consolidated balance sheets. In addition, we receive early payment discounts from certain vendors. We record early payment discounts received as a reduction of inventories and recognize the discount as a reduction to cost of sales when the related inventories are sold.

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Intangible Assets

As a result of our acquisition activity, we have recorded a substantial amount of goodwill, which is the excess of the cost of our acquired businesses over the fair value of the acquired net assets, and other intangible assets. We examine the carrying value of our goodwill and our other intangible assets as current events and circumstances warrant determining whether there are any impairment losses. For goodwill, we test the recorded amount for impairment on the first day of the fourth quarter of our fiscal year, or more frequently if conditions change, by comparing the recorded value to estimated fair value. If indicators of impairment were present relating to our other intangible assets and future cash flows were not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period identified. To date, we have not identified any event that would indicate an impairment of the value of goodwill or other intangible assets recorded in our consolidated financial statements. Other intangible assets are amortized over their estimated lives.

Contingencies

We accrue amounts for losses arising from contingent obligations, including estimated legal costs, when the obligations are probable and the amounts are reasonably estimable. As facts concerning contingencies become known, we reassess our position and make appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future charges include tax, legal and other regulatory matters which are subject to change as events evolve and as additional information becomes available during the administrative and litigation process.

RESULTS OF OPERATIONS

The following table sets forth our total revenues, revenues by type and our estimated internal growth rates for all revenues during the periods indicated. We calculate the internal growth rate for each period by comparing total revenues earned by businesses that were part of our company during the entire subject period and the entire corresponding period in the prior year to the total revenues earned by those same businesses during the corresponding period in the prior year. The internal growth rates provided are our best estimates of changes in total revenues that are not the result of business acquisitions during a particular period.

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The following table sets forth our gross profit by revenue type and gross profit by revenue type as a percentage of revenue during the periods indicated:

THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2003

Revenues

Total revenues for the three months ended September 30, 2004 were $233,518, which represents an increase of 23.5% over the same period in fiscal year 2004. The majority of the revenue growth was attributable to revenues from two businesses acquired during the six months ended September 30, 2004 and three businesses acquired during the fiscal year ended March 31, 2004 that were not a part of our business for the full quarter last year. The balance of the increase in revenues was due to growth from our existing companies. Our estimated combined internal growth rate for the three months ended September 30, 2004 was 3.6%. Our estimated internal growth rate for automated office equipment was 1.1%, and the technology side of our business grew at 10.2%

Equipment and supplies revenues for the three months ended September 30, 2004 were $177,539, which represents an increase of 23.3% over the same period in fiscal year 2004. Equipment revenues increased 19.1% and supplies revenues increased 45.5%, with the majority of the revenue growth due to the businesses acquired during the six months ended September 30, 2004 and fiscal year 2004.

Service and rental revenues for the three months ended September 30, 2004 were $55,979, which represents an increase of 24.3% over the same period in fiscal year 2004. Service revenues increased 26.6% and rental revenues decreased 1.8%, with the majority of the service revenue growth due to the businesses acquired during the six months ended September 30, 2004 and fiscal year 2004.

Gross Profit

Gross profit for the three months ended September 30, 2004 totaled $90,936, a 28.5% increase over the same period in fiscal year 2004. This gross profit increase is primarily due to the acquisition of automated office equipment dealers during the six months ended September 30, 2004 and fiscal year 2004.

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The gross profit margin for equipment revenues for the three months ended September 30, 2004 increased 2.6 percentage points from the same period one year ago. This is primarily due to increases in gross profit margins of automated office equipment and electronic presentation systems that were slightly offset by a decrease in gross profit margins of network integration solutions.

Supplies gross profit margin for the three months ended September 30, 2004 decreased 2.2 percentage points as compared to the same period one year ago, which is primarily due to a decrease in automated office equipment supply gross profit margins.

Service gross profit margin for the three months ended September 30, 2004 decreased 1.2 percentage points from the same period one year ago, which is primarily due to a decrease in automated office equipment service and electronic presentation systems gross profit margins, which is offset slightly by an increase in network integration solutions gross profit margins.

Rental gross profit margin for the three months ended September 30, 2004 decreased 1.5 percentage points from the same period last year, primarily due to a slight increased rental depreciation expense as a result of new equipment rental replacements in our equipment mix versus older fully depreciated equipment and a slight decline in revenues.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses totaled $63,748 representing an increase of 29.6% over the prior year quarter. SG&A expenses were 27.3% of total revenues compared to 26.0% of total revenues for the three months ended September 30, 2003. These expenses increased in total principally due to acquisitions. As a percentage of revenues, the increase for the current quarter was the result of integration costs associated with acquisitions, higher payroll and commissions and higher health insurance expense.

Intangible Asset Amortization

Intangible asset amortization was $626 for the three months ended September 30, 2004 compared to $137 for the same period in fiscal year 2004. This amortization relates to non-compete agreements and customer relationships. The increase is principally due to amortization of amounts allocated to customer relationships resulting from the ITG acquisition.

Income From Operations

Income from operations was $26,562, or 11.4% of total revenues, for the three months ended September 30, 2004 compared to $21,437, or 11.3% of total revenues, for the same period in fiscal year 2004. Income from operations was positively impacted by the increase in combined revenues and gross profit as discussed above.

Interest Expense

Interest expense increased 11.1% to $2,938 for the three months ended September 30, 2004 compared to $2,645 for the same period in fiscal year 2004. The increase in interest expense was due to a higher average level of borrowings offset slightly by lower interest rates. Interest expense includes the amortization of financing fees incurred in connection with our new senior credit facility and the 4% convertible senior subordinated notes due 2008 for the three months ended September 30, 2004 and our prior senior credit facilities and the 4% convertible senior subordinated notes due 2008 for the prior year period.

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Income Taxes

The provision for income taxes was $9,001 for the three months ended September 30, 2004 compared to $7,404 for the same period in fiscal year 2004. The increase in income taxes was primarily due to increased pre-tax income for the three months ended September 30, 2004, slightly offset by a reduction in the effective income tax rate. The effective income tax rate was 38.1% for the three months ended September 30, 2004 and 39.4% for the same period in fiscal year 2004. The decline in the effective income tax rate is due to a lower combined state tax rate. The effective income tax rate was higher than the federal statutory rate of 35% due to state and local taxes.

SIX MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30, 2003

Revenues

Total revenues for the six months ended September 30, 2004 were $445,536, which represents an increase of 20.7% over the same period in fiscal year 2004. The majority of the revenue growth was attributable to revenues from two businesses acquired during the six months ended September 30, 2004 and five businesses acquired during the fiscal year ended March 31, 2004 that were not a part of our business for the full six months last year. The balance of the increase in revenues was due to growth shown from our existing companies. Our estimated combined internal growth rate for the six months ended September 30, 2004 was 3.3%. Our estimated internal growth rate for automated office equipment was 1.4%, and the technology side of our business grew at 8.4%

Equipment and supplies revenues for the six months ended September 30, 2004 were $335,410, which represents an increase of 20.3% over the same period in fiscal year 2004. Equipment revenues increased 16.8% and supplies revenues increased 38.0%, with the majority of the revenue growth due to the businesses acquired during the six months ended September 30, 2004 and fiscal year 2004.

Service and rental revenues for the six months ended September 30, 2004 were $110,126, which represents an increase of 21.8% over the same period in fiscal year 2004. Service revenues increased 23.8% and rental revenues decreased 0.5%, with the majority of the service revenue growth due to the businesses acquired during the six months ended September 30, 2004 and fiscal year 2004.

Gross Profit

Gross profit for the six months ended September 30, 2004 totaled $175,033, a 25.7% increase over the same period in fiscal year 2004. This gross profit increase is primarily due to the acquisition of automated office equipment dealers during the six months ended September 30, 2004 and fiscal year 2004.

The gross profit margin for equipment revenues for the six months ended September 30, 2004 increased 2.5 percentage points from the same period one year ago. This is primarily due to increases in gross profit margins of automated office equipment that was slightly offset by a decrease in gross profit margins of network integration solutions.

Supplies gross profit margin for the six months ended September 30, 2004 decreased 2.3 percentage points as compared to the same period one year ago, which is primarily due to a decrease in automated office equipment supply gross profit margins.

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Service gross profit margin for the six months ended September 30, 2004 decreased 0.3 percentage point from the same period one year ago, which is primarily due to a decrease in automated office equipment service gross profit margins partially offset by an increase in network integration solutions and electronic presentation systems gross profit margins.

Rental gross profit margin for the six months ended September 30, 2004 increased 1.0 percentage point from the same period last year, primarily due to decreased rental depreciation expense as a result of an increase in older fully depreciated equipment in our equipment mix versus new equipment.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses totaled $122,726 representing an increase of 25.4% over the prior year period. SG&A expenses were 27.5% of total revenues compared to 26.5% of total revenues for the six months ended September 30, 2003. These expenses increased in total principally due to acquisitions. As a percentage of revenues, the increase for the current period was the result of integration costs associated with acquisitions, higher payroll and commissions and higher health insurance expense.

Intangible Asset Amortization

Intangible asset amortization was $751 for the six months ended September 30, 2004 compared to $283 for the same period in fiscal year 2004. This amortization relates to non-compete agreements and customer relationships. The increase is principally due to amortization of amounts allocated to customer relationships resulting from the ITG acquisition.

Income From Operations

Income from operations was $51,556, or 11.6% of total revenues, for the six months ended September 30, 2004 compared to $41,118, or 11.1% of total revenues, for the same period in fiscal year 2004. Income from operations was positively impacted by the increase in combined revenues and gross profit as discussed above.

Loss on early extinguishment of debt

During the six months ended September 30, 2004, we incurred a loss on early extinguishment of debt in the amount of $1,655 related to the amendment of our prior credit facility.

During the six months ended September 30, 2003, we incurred a loss on early extinguishment of debt in the amount of $8,433 related to the refinancing of our prior senior credit facility and the redemption of our 10 ³/4% senior subordinated notes due 2007. The loss is made up of a prepayment premium of $5,375 for the early redemption of our 10 ³/4% notes and a $3,058 non-cash charge for the write-off of the unamortized portion of financing fees related to those notes and the prior senior credit facility.

Interest Expense

Interest expense decreased 19.1% to $5,494 for the six months ended September 30, 2004 compared to $6,787 for the same period in fiscal year 2004. The decrease in interest expense was due to lower interest rates offset by a slightly higher average level of borrowings. Interest expense includes the amortization of financing fees incurred in connection with our new senior credit facility, our prior senior credit facility and the 4% convertible senior subordinated notes due 2008 for the six months ended September 30, 2004 and our prior senior credit facilities, the 10 ³/4% senior subordinated notes due 2007 and the 4% convertible senior subordinated notes due 2008 for the prior year period.

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Income Taxes

The provision for income taxes was $16,919 for the six months ended September 30, 2004 compared to $10,218 for the same period in fiscal year 2004. The increase in income taxes was primarily due to increased pre-tax income for the six months ended September 30, 2004, slightly offset by a reduction in the effective income tax rate. The effective income tax rate was 38.1% for the six months ended September 30, 2004 and 39.5% for the same period in fiscal year 2004. The decline in the effective income tax rate is due to a lower combined state tax rate. The effective income tax rate was higher than the federal statutory rate of 35% due to state and local taxes.

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have financed our operations primarily through internal cash flow, sales of equity and debt securities and bank financing, including the financing facility described below. These sources of funds have been used to fund our growth both internally and through acquisitions. We are pursuing an acquisition strategy and expect to acquire more businesses. As we continue to acquire more businesses, we may incur additional debt and seek additional equity capital.

On May 16, 2003, we issued $57,500 of 4% convertible senior subordinated notes in a private placement to institutional investors. We used the net proceeds of approximately $55,500 from the offering to repay a portion of the amount outstanding under our prior senior credit facility. The convertible notes bear interest at 4%, payable semi-annually, and are convertible into our common stock at any time at the conversion rate of approximately 41.8550 shares per one thousand principal amount of the convertible notes. This is equivalent to a conversion price of $23.892 per share. The convertible notes may be redeemed on or after May 20, 2006, in whole or in part, at the following redemption prices expressed as percentages of the principal amount:

The convertible notes are jointly and severally guaranteed by our current and certain of our future subsidiaries on a senior subordinated basis.

On May 10, 2004, in conjunction with our purchase of ITG, we entered into the second amendment of our senior credit facility. We refer to the second amendment of our senior credit facility as our new senior credit facility. Our new senior credit facility is with a group of banks and financial institutions, with Wachovia Bank, National Association serving as administrative agent. Our new senior credit facility is comprised of a $70,000 five-year revolving credit line and a $208,950 six-year term loan. The revolving credit line of the new senior credit facility bears interest at rates ranging from 1.50% to 2.00% over LIBOR or from .50% to 1.00% over a base rate related to the prime rate, and varies according to our ratio of total funded debt to earnings before interest, taxes, depreciation and amortization. The term loan bears interest at a rate of 2.00% over LIBOR or .75% over a base rate related to the prime rate. The new senior credit facility provides for an unused commitment fee payable to the lenders and certain other fees payable by us and our material subsidiaries. The commitment fee rate is .50% of the unused balance. We paid commitment fees of $212 and $290 for the six months ended September 30, 2004 and 2003, respectively, in connection with unused balances under both our

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prior and new senior credit facility. Amounts borrowed under the revolving credit line of the new senior credit facility may be repaid and borrowed over the life of the new senior credit facility, with a final maturity date of May 10, 2009. The terms of the new senior credit facility require strict compliance with numerous affirmative, negative, and financial covenants. Amounts borrowed under the senior credit facility may be used to fund working capital and general corporate purposes, including acquisitions, subject to the lenders’ approval in the case of acquisitions with a cash purchase price of over $50,000 or an aggregate purchase price (cash, stock or other consideration) of over $75,000. As of September 30, 2004, we had $69,500 of additional borrowing availability under the revolving credit portion of our new senior credit facility. This amount has been reduced by $500 to reflect the aggregate amount of an outstanding standby letter of credit issued under the new senior credit facility to support our obligations incurred in the ordinary course of business. As of September 30, 2004, no amounts had been paid under this letter of credit.

Under the terms of one of our acquisition agreements, we may be required to make an additional payment of up to $500 in cash, on or before February 28, 2005, to the former owners of the acquired business based on the profitability of that business since we acquired it.

Net cash provided by operating activities totaled $22,054 for the six months ended September 30, 2004 as compared to $18,897 in the prior year period. The increase was primarily attributable to an increase in net income partially offset by increases in inventory and accounts receivable. Net cash used in investing activities of $116,668 during the six months ended September 30, 2004 was primarily for the acquisition of ITG as well as purchases of property, equipment and rental equipment. Net cash provided by financing activities of $71,970 during the six months ended September 30, 2004 was primarily for financing associated with the ITG acquisition.

We believe that cash flows from future operations, together with funds available under our new senior credit facility, will be sufficient to fund our operational needs and acquisition growth strategy for at least the next twelve months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk is primarily limited to fluctuations in interest rates as it pertains to our borrowings under our new senior credit facility. There have been no material changes, other than those described below, to the information in the Item 7A disclosure made in our Annual Report on Form 10-K for the fiscal year ended March 31, 2004.

Effective July 6, 2004, we entered into an interest rate cap agreement (cap) in the notional amount of $25,000. This cap is not designated as a hedging instrument and as such, is recorded on the consolidated balance sheet at fair value, with changes in the fair value of the cap being recorded in the consolidated statement of operations during the period of change. The cap limits our interest rate risk exposure for the related notional amount to a 4% LIBOR rate plus the applicable margin.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure controls and procedures. We maintain disclosure controls and procedures designed to ensure that we are able to collect and record the information we are required to disclose in the reports we file with the Securities and Exchange Commission (“SEC”), and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on their evaluation of our disclosure controls and procedures, the chief executive officer and chief financial officer believe that these controls and procedures were effective, as of the end of the period covered by this report, to ensure that we are able to collect, process and disclose the information we are required to disclose in the reports we file with the SEC within the required time periods.

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(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At Global’s 2004 Annual Meeting of Stockholders held August 16, 2004, our stockholders approved the following items:

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ITEM 6. EXHIBITS

The Exhibit Index filed herewith is incorporated herein by reference.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.