Radiant Systems (RADS)

Liquidity and Capital Resources

Prior to January 2008, the Company had a senior secured credit facility with Wells Fargo Foothill, Inc. (the “WFF Credit Agreement”). The WFF Credit Agreement provided for extensions of credit, upon satisfaction of certain conditions, in the form of revolving loans in an aggregate principal amount of up to $15 million and a term loan facility in an aggregate principal amount of up to $31 million. The revolving loan amount available to the Company was derived from a monthly borrowing base calculation using the Company’s various accounts receivable balances. The amount derived from this borrowing base calculation was further reduced by the total amount of letters of credit outstanding. Loans under the WFF Credit Agreement bore interest, at Radiant’s option, at either the London Interbank Offering Rate (“LIBOR”) plus two and one half percent or at the prime rate of Wells Fargo Bank, N.A.

The WFF Credit Agreement was scheduled to expire on March 31, 2010; however, it was refinanced in January 2008 upon the execution of the credit agreement with JPMorgan Chase Bank, N.A., as arranger, and JPMorgan Chase Bank, N.A, SunTrust Bank, Bank of America, Guaranty Bank and Wachovia Bank, N. A., as lenders (the “JPM Credit Agreement”). The JPM Credit Agreement provides for extensions of credit, upon satisfaction of certain conditions, in the form of revolving loans in an aggregate principal amount of up to $80 million and a term loan facility in an aggregate principal amount of up to $30 million. An amendment to the JPM Credit Agreement was signed in July 2008, whereby the Company has the right to increase its revolving credit commitment by up to $25 million, subject to the terms and conditions set forth in the JPM Credit Agreement. As of December 31, 2008, aggregate borrowings under this facility totaled $98.0 million, comprised of $72.0 million in revolving loans and $26.0 million in term loan facility borrowings. As of December 31, 2008, revolving loan borrowings available to the Company were equal to $8.0 million.

The JPM Credit Agreement is guaranteed by the Company and its subsidiaries and is secured by the assets of the Company and its subsidiaries. The maturity date of the JPM Credit Agreement is January 2, 2013. Interest accrues on amounts outstanding under the loan facility, at the Company’s option of either (1) LIBOR plus a margin ranging between 1.25% and 2.00% based upon the Company’s consolidated leverage ratio, as defined, or (2) the higher of the administrative agent’s prime rate or one-half of one percent over the federal funds effective rate plus a margin ranging between 0.25% and 1.00% based on the Company’s consolidated leverage ratio as defined. The JPM Credit Agreement contains certain customary representations and warranties from the Company. In addition, the JPM Credit Agreement contains certain financial and non-financial covenants, with which the Company was in compliance as of December 31, 2008. Further explanation of this agreement is presented in Note 7 to the consolidated financial statements.

The Company’s working capital decreased by approximately $10.1 million, or 19%, to $41.6 million at December 31, 2008 as compared to $51.7 million at December 31, 2007. This decrease was attributable to the fact that working capital was utilized to help finance the acquisitions of Orderman, Quest, Hospitality EPoS and Jadeon, all of which closed during 2008. The Company has historically funded its business through cash generated by operations.

Cash provided by operating activities for 2008 was approximately $17.2 million. Cash from operations in 2008 was mainly generated through income from operations, adjusted to exclude the effect of non-cash charges including depreciation, amortization, stock-based compensation and other income and charges. In addition, the Company received significant amounts of cash for calendar year support and maintenance, which has been deferred. The cash received from support and maintenance was offset by the fact that the Company did not purchase the related receivables of Quest in conjunction with the acquisition completed during the first quarter of 2008 (see Note 3 to the consolidated financial statements). The increase in accounts receivables and inventory balances of approximately $2.3 million during 2008 was due to normal year over year fluctuations and the growth of the business, both organic and acquisition-related, as reflected in the year over year revenue increase. The decrease in accounts payable and accrued expenses was due to normal year over year fluctuations and the timing of payments completed during the fourth quarter to reduce various payables and accruals. If near-term demand for the Company’s products weakens or if significant anticipated sales in any quarter do not close when expected, the availability of funds from operations may be adversely affected.

Cash provided by operating activities for 2007 was approximately $25.2 million. Cash from operations in 2007 was mainly generated through income from operations, adjusted to exclude the effect of non-cash charges including depreciation, amortization and stock-based compensation. These increases in cash were offset by an increase in accounts receivable and inventory balances. The increase in receivables was due to normal year over year fluctuations and the growth of the business, both organic and acquisition-related, as reflected in the year over year revenue increase. The increase in inventory was also due to normal year over year fluctuations and the increase in anticipated hardware shipments in future quarters. There was also an increase in accounts payable and accrued expenses (which have a positive effect on cash flow) that were a direct result of the increase in inventory and the fact that payments to our vendors that supplied the Company with inventory were not due at year end.

Cash provided by operating activities for 2006 was approximately $12.0 million. Cash from operations in 2006 was mainly generated through income from operations, adjusted to exclude the effect of non-cash charges including depreciation, amortization, the release of a portion of the valuation allowance related to the Company’s deferred tax assets, and stock-based compensation. This was partially offset by normal fluctuations in accounts receivable, inventories, other assets, accounts payable, accrued liabilities, payables due to BlueCube, customer deposits and deferred revenue and other liabilities.

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Cash used in investing activities during 2008 was approximately $108.9 million. Approximately $97.3 million was used in the acquisitions of Orderman, Quest, Hospitality EPoS and Jadeon, net of cash acquired (see Note 5 to the consolidated financial statements). In addition, the Company recognized cash proceeds during 2008 of approximately $5.5 million from the sale of an undeveloped parcel of land and the execution of forward exchange contracts in conjunction with the Orderman and Quest acquisitions. Approximately $11.0 million was used to invest in property and equipment, including $7.8 million which has been utilized to improve our infrastructure through the implementation of an upgraded ERP system that is expected to be placed in service during 2010. Lastly, the Company continued to increase its investment in future products by investing $4.0 million in internally developed capitalizable software during 2008.

Cash used in investing activities during 2007 was approximately $6.8 million. Approximately $2.6 million of cash was invested in property and equipment, and $1.5 million was spent on the purchase of a license to use patented technology. In addition, the Company continued to increase its investment in future products by investing $2.7 million in internally developed capitalizable software.

Cash used in investing activities during 2006 was approximately $28.3 million. Approximately $19.5 million of the cash was used in the acquisition of Synchronics. In addition, approximately $5.7 million of cash was invested in property and equipment, most of which was a result of renovations in the Company’s manufacturing facility and the build-out of our new satellite office location in Fort Worth, Texas, and expenditures for capitalizable software projects of $3.1 million.

Cash provided by financing activities during 2008 was $78.2 million as compared to cash used in financing activities of $4.2 million in 2007. Financing activities during 2008 included cash received from borrowings under the JPM Credit Agreement equal to $116.2 million, net of financing costs. These borrowings were used to fund the acquisitions of Orderman, Quest, Hospitality EPoS and Jadeon (see Note 5 to the consolidated financial statements), complete scheduled term loan payments under the JPM Credit Agreement of $4.0 million, reduce the outstanding credit revolver balance under the JPM Credit Agreement by $14.9 million, repay the outstanding balance of the term loan under the WFF Credit Agreement equal to $18.2 million, and to pay various fees associated with the termination of the WFF Credit Agreement of $0.3 million. In addition, the Company received cash proceeds from employees for the exercise of stock options of $1.7 million, made scheduled payments under the promissory notes related to the MenuLink acquisition equal to $1.3 million, and repaid the entire balance of the promissory note with the previous shareholders of Aloha Technologies, Inc. equal to $1.0 million.

Cash used in financing activities during 2007 was approximately $4.2 million. In 2007, financing activities mainly consisted of $6.5 million in repayments under borrowings from the WFF Credit Agreement, repayment of $1.3 million of promissory notes related to the MenuLink acquisition, scheduled payments under the WFF Credit Agreement of $5.9 million, and $9.8 million related to cash proceeds and the related tax benefit received from employees for the exercise of stock options.

Cash provided by financing activities during 2006 was approximately $14.6 million, which consisted primarily of $22.5 million in cash received under borrowings from the WFF Credit Agreement previously mentioned, repayment of $1.3 million of promissory notes related to the MenuLink acquisition, repurchases of common stock totaling $5.0 million, scheduled payments under the WFF Credit Agreement of $5.4 million, and $3.7 million of cash proceeds received from employees for the exercise of stock options.

The Company believes that its cash and cash equivalents, funds generated from operations and borrowing capacity, will provide adequate liquidity to meet its normal operating requirements, as well as to fund the above obligations for at least the next twelve months.

The Company believes there are opportunities to grow its business through the acquisition of complementary and synergistic companies, products and technologies. We look for acquisitions that can be readily integrated and accretive to earnings, although we may pursue smaller non-accretive acquisitions that will shorten our time to market with new technologies. The Company expects the general size of cash acquisitions it would currently consider would be in the $5 million to $50 million range. Any material acquisition could result in a decrease in the Company’s working capital depending on the amount, timing and nature of the consideration to be paid. In addition, any material acquisitions of complementary or synergistic companies, products or technologies could require that we obtain additional debt or equity financing. There can be no assurance that such additional financing will be available to us or that, if available, such financing will be obtained on favorable terms and would not result in additional dilution to our stockholders.

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Liquidity and Capital Resources

FACE="Times New Roman" SIZE="2">Prior to January 2008, the Company had a senior secured credit facility with Wells Fargo Foothill, Inc. (the “WFF Credit Agreement”). The WFF Credit Agreement provided for extensions of credit, upon
satisfaction of certain conditions, in the form of revolving loans in an aggregate principal amount of up to $15 million and a term loan facility in an aggregate principal amount of up to $31 million. The revolving loan amount available to the
Company was derived from a monthly borrowing base calculation using the Company’s various accounts receivable balances. The amount derived from this borrowing base calculation was further reduced by the total amount of letters of credit
outstanding. Loans under the WFF Credit Agreement bore interest, at Radiant’s option, at either the London Interbank Offering Rate (“LIBOR”) plus two and one half percent or at the prime rate of Wells Fargo Bank, N.A.

Liquidity and Capital Resources

Prior to January 2008, the Company had a senior secured credit facility with Wells Fargo Foothill, Inc. (the “WFF Credit Agreement”). The WFF Credit Agreement provided for extensions of credit, upon satisfaction of certain conditions, in the form of revolving loans in an aggregate principal amount of up to $15 million and a term loan facility in an aggregate principal amount of up to $31 million. The revolving loan amount available to the Company was derived from a monthly borrowing base calculation using the Company’s various accounts receivable balances. The amount derived from this borrowing base calculation was further reduced by the total amount of letters of credit outstanding. Loans under the WFF Credit Agreement bore interest, at Radiant’s option, at either the London Interbank Offering Rate plus two and one half percent or at the prime rate of Wells Fargo Bank, N.A. The WFF Credit Agreement contained certain customary representations and warranties and certain financial and non-financial covenants, with which the Company was in compliance as of December 31, 2007. As of December 31, 2007, the Company had approximately $0.5 million in letters of credit outstanding against the revolving loan facility.

The WFF Credit Agreement was scheduled to expire on March 31, 2010; however, it was refinanced in January 2008 upon the execution of the credit agreement with JPMorgan Chase Bank, N.A. (the “JPM Credit Agreement”), as arranger, and JPMorgan Chase Bank, N.A, SunTrust Bank, Bank of America and Guaranty Bank as initial lenders. The JPM Credit Agreement provides for extensions of credit, upon satisfaction of certain conditions, in the form of revolving loans in an aggregate principal amount of up to $60 million and a term loan facility in an aggregate principal amount of up to $30 million. As of January 2, 2008, aggregate borrowings under this facility totaled $75 million. Further explanation of this agreement is presented in Note 17 of the consolidated financial statements.

The Company’s working capital increased by approximately $22.1 million, or 74%, to $51.7 million at December 31, 2007 as compared to $29.7 million at December 31, 2006. The Company has historically funded its business through cash generated by operations. Cash provided by operating activities for 2007 was $25.2 million as compared to $11.7 million for 2006. Cash from operations in 2007 was mainly generated through income from operations, adjusted to exclude the effect of non-cash charges including depreciation, amortization and stock-based compensation. These increases in cash were offset by an increase in accounts receivable and inventory balances. The increase in receivables is due to normal year over year fluctuations and the growth of the business, both organic and acquisition-related, as reflected in the year over year revenue increase. The increase in inventory is also due to normal year over year fluctuations and the increase in anticipated hardware shipments in future quarters. There were also increases in accounts payable and accrued expenses (which have a positive effect on cash flow) that were a direct result of the increase in inventory and the fact that payments to our vendors that supplied the Company with inventory were not due at year end. If near-term demand for the Company’s products weakens or if significant anticipated sales in any quarter do not close when expected, the availability of funds from operations may be adversely affected.

Cash provided by operating activities for 2006 was $12.0 million. Cash from operations in 2006 was mainly generated through income from operations, adjusted to exclude the effect of non-cash charges including depreciation, amortization, the release of a portion of the valuation allowance related to the Company’s deferred tax assets, and stock-based compensation. This was partially offset by normal fluctuations in accounts receivable, inventories, other assets, accounts payable, accrued liabilities, payables due to BlueCube, client deposits and deferred revenue and other liabilities.

Cash provided by operating activities for 2005 was $15.0 million. Cash from operations in 2005 was mainly generated from net income, the adding back of non-cash items such as depreciation, amortization, lease restructuring charges and the impairment of the HotelTools software, and through the collection of calendar year support and maintenance invoices that were deferred and recognized over the course of the year. This was partially offset by normal fluctuations in accounts receivable, inventories, other assets, accounts payable, accrued liabilities, payables due to BlueCube, client deposits and deferred revenue and other liabilities.

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Cash used in investing activities during 2007 was $6.8 million as compared to $28.3 million during the same period in 2006. Approximately $2.6 million of cash was invested in property and equipment, and $1.5 million was spent on the purchase of a license to use patented technology. In addition, the Company continued to increase its investment in future products by investing $2.7 million in internally developed capitalizable software.

Cash used in investing activities during 2006 was $28.3 million as compared to $12.1 million during the same period in 2005. In 2006, approximately $19.5 million of the cash was used in the acquisition of Synchronics. Approximately $5.7 million of cash was invested in property and equipment, most of which was a result of renovations in the Company’s manufacturing facility and the build-out of our new satellite office location in Fort Worth, Texas, and expenditures for capitalizable software projects of $3.1 million.

Cash used in investing activities in 2005 consisted of additional consideration related to the Breeze acquisition of $1.3 million (see Note 5 of the consolidated financial statements), the purchase of equipment, expenditures for capitalizable software projects of $4.8 million, the MenuLink acquisition totaling $5.0 million, and the continued payout of accrued contractual obligations related to the Enterprise disposition totaling $0.6 million.

Cash used in financing activities during 2007 was $4.2 million as compared to cash provided by financing activities of $14.6 million in 2006. In 2007, financing activities mainly consisted of $6.5 million in repayments under borrowings from the WFF Credit Agreement, repayment of $1.3 million of promissory notes related to the MenuLink acquisition, scheduled payments under the WFF Credit Agreement of $5.9 million, and $9.8 million related to cash proceeds and the related tax benefit received from employees for the exercise of stock options.

Cash provided by financing activities in 2006 consisted primarily of $22.5 million in cash received under borrowings from the WFF Credit Agreement previously mentioned , repayment of $1.3 million of promissory notes related to the MenuLink acquisition, repurchases of common stock totaling $5.0 million, scheduled payments under the WFF Credit Agreement of $5.4 million, and $3.7 million of cash proceeds received from employees for the exercise of stock options.

Cash used in financing activities during 2005 consisted primarily of the repayment of $17.7 million of promissory notes related to the Aloha acquisition, proceeds totaling $15.0 million generated from the WFF Credit Agreement previously mentioned, payments of $0.3 million made in connection with loan fees to enter into the WFF Credit Agreement, the repurchase of common stock from previous Breeze shareholders of $1.0 million, and cash generated from the issuance of shares under the Company’s employee stock purchase plan and the exercise of employee stock options equal to $4.7 million.

The Company believes that its cash and cash equivalents, funds generated from operations and borrowing capacity will provide adequate liquidity to meet its normal operating requirements, as well as to fund the above obligations for at least the next twelve months.

The Company believes there are opportunities to grow its business through the acquisition of complementary and synergistic companies, products and technologies. We look for acquisitions that can be readily integrated and accretive to earnings, although we may pursue smaller non-accretive acquisitions that will shorten our time to market with new technologies. The Company expects the general size of cash acquisitions it would currently consider would be in the $5 million to $50 million range. Any material acquisition could result in a decrease in the Company’s working capital depending on the amount, timing and nature of the consideration to be paid. In addition, any material acquisitions of complementary or synergistic companies, products or technologies could require that we obtain additional debt or equity financing. There can be no assurance that such additional financing will be available to us or that, if available, such financing will be obtained on favorable terms and would not result in additional dilution to our stockholders.

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Liquidity and Capital Resources

FACE="Times New Roman" SIZE="2">Prior to January 2008, the Company had a senior secured credit facility with Wells Fargo Foothill, Inc. (the “WFF Credit Agreement”). The WFF Credit Agreement provided for extensions of credit, upon
satisfaction of certain conditions, in the form of revolving loans in an aggregate principal amount of up to $15 million and a term loan facility in an aggregate principal amount of up to $31 million. The revolving loan amount available to the
Company was derived from a monthly borrowing base calculation using the Company’s various accounts receivable balances. The amount derived from this borrowing base calculation was further reduced by the total amount of letters of credit
outstanding. Loans under the WFF Credit Agreement bore interest, at Radiant’s option, at either the London Interbank Offering Rate plus two and one half percent or at the prime rate of Wells Fargo Bank, N.A. The WFF Credit Agreement contained
certain customary representations and warranties and certain financial and non-financial covenants, with which the Company was in compliance as of December 31, 2007. As of December 31, 2007, the Company had approximately $0.5 million in
letters of credit outstanding against the revolving loan facility.

The WFF Credit Agreement was scheduled to expire on March 31, 2010; however, it
was refinanced in January 2008 upon the execution of the credit agreement with JPMorgan Chase Bank, N.A. (the “JPM Credit Agreement”), as arranger, and JPMorgan Chase Bank, N.A, SunTrust Bank, Bank of America and Guaranty Bank as initial
lenders. The JPM Credit Agreement provides for extensions of credit, upon satisfaction of certain conditions, in the form of revolving loans in an aggregate principal amount of up to $60 million and a term loan facility in an aggregate principal
amount of up to $30 million. As of January 2, 2008, aggregate borrowings under this facility totaled $75 million. Further explanation of this agreement is presented in Note 17 of the consolidated financial statements.

Liquidity and Capital Resources

On March 31, 2005, the Company entered into a senior secured credit facility (the “Credit Agreement”) with Wells Fargo Foothill, Inc., as the arranger, administrative agent and initial lender. The Credit Agreement, which was amended on January 3, 2006, provides for extensions of credit, upon satisfaction of certain conditions, in the form of revolving loans in an aggregate principal amount of up to $15 million and a term loan facility in an aggregate principal amount of up to $31 million. The expiration date of the Credit Agreement is March 31, 2010. The revolving loan amount available to the Company is derived from a monthly borrowing base calculation using the Company’s various accounts receivable balances. The amount derived from this borrowing base calculation is further reduced by the total amount of letters of credit outstanding. Loans under the Credit Agreement will bear interest, at Radiant’s option, at either the London Interbank Offering Rate plus two and one half percent or at the rate that Wells Fargo Bank, N.A. announces as its prime rate then in effect. Fees associated with the Credit Agreement are typical for transactions of this type. The Credit Agreement contains certain customary representations and warranties from Radiant. In addition, the Credit Agreement contains certain financial and non-financial covenants, with which the Company was in compliance as of December 31, 2006. As of December 31, 2006, the Company had approximately $0.6 million in letters of credit against its available borrowing base of approximately $10.6 million, and $6.5 million was outstanding against the revolving loan facility.

The Company’s working capital increased by approximately $6.8 million, or 30%, to $29.7 million at December 31, 2006 as compared to $22.8 million at December 31, 2005. The Company has historically funded its business through cash generated by operations. Cash provided by operating activities from continuing operations for 2006 was $12.0 million as compared to $15.0 million for 2005. Cash from operations in 2006 was mainly generated through income from operations, adjusted to exclude the effect of non-cash charges including depreciation, amortization, the release of a portion of the valuation allowance related to the Company’s deferred tax assets, and stock-based compensation. The increase in receivables is due to normal year over year fluctuations and due to growth of the business, both organic and acquisition related, as reflected in the year over year revenue increase. The increase in inventory is also due to normal year over year fluctuations, the increase in current and anticipated hardware shipments in future quarters. The increase in accounts payable (which has a positive effect on cash flow) is a direct result of the increase in inventory and the fact that payments to our vendors that supplied the Company with inventory were not due at year end. If near-term demand for the Company’s products weakens or if significant anticipated sales in any quarter do not close when expected, the availability of funds from operations may be adversely affected.

Cash provided by operating activities from continuing operations for 2005 was $15.0 million as compared to $10.9 million for 2004. Cash from operations in 2005 was mainly generated from net income, the adding back of non-cash items such as depreciation, amortization, lease restructuring charges and the impairment of the HotelTools software, and through the collection of calendar year support and maintenance invoices that are deferred and recognized over the course of the year. This was partially offset by normal fluctuations in accounts receivable, inventories, other assets, accounts payable, accrued liabilities, payables due to BlueCube, client deposits and deferred revenue and other liabilities.

Due to the increased growth in the business and the acquisition of Aloha, increases in accounts receivable, inventories, accounts payable, accrued liabilities and deferred revenues occurred in 2004. The net effect of these increases resulted in positive cash flows from operations of approximately $0.8 million.

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Cash used in investing activities during 2006 was $28.5 million as compared to $12.1 million during the same period in 2005. In 2006, approximately $19.5 million of the cash was used in the acquisition of Synchronics. Approximately $5.7 million of cash was invested in property and equipment, most of which was a result of renovations in the Company’s manufacturing facility and the build-out of our new satellite office location in Fort Worth, Texas. The Company continued to increase its investment in future products by investing $3.1 million in internally developed capitalizable software during 2006.

Cash used in investing activities during 2005 was $12.1 million as compared to $27.7 million during the same period in 2004. In 2005, investing activities mainly consisted of additional consideration related to the Breeze acquisition of $1.3 million (see Note 5 of the consolidated financial statement footnotes), the purchase of equipment of $4.8 million, expenditures for capitalizable software projects of $0.6 million, the MenuLink acquisition totaling $5.0 million, and the continued payout of accrued contractual obligations related to the Enterprise disposition totaling $0.6 million.

Cash used in investing activities in 2004 consisted primarily of cash payments of approximately $12.0 million associated with the disposition of the Enterprise business, payment of $11.2 million made in connection with the acquisition of Aloha, purchases of property and equipment of $2.2 million, capitalized software costs of $1.9 million, and payment of $0.3 million in connection with the acquisition of E-Needs.

Cash provided by financing activities during 2006 was $14.6 million as compared to cash used in financing activities of $0.3 million in 2005. In 2006, financing activities mainly consisted of $22.0 million in cash received under borrowings from the Credit Agreement, as amended (see Note 7 to the consolidated financial statements), repayment of $1.3 million of promissory notes related to the MenuLink acquisition, repurchases of common stock totaling $5.0 million, scheduled payments under the credit agreement of $5.4 million, and $3.7 million of cash proceeds received from employees for the exercise of stock options.

Cash used in financing activities during 2005 consisted primarily of the repayment of $17.7 million of promissory notes related to the Aloha acquisition, proceeds totaling $15.0 million generated from the Credit Agreement previously mentioned, payments of $0.3 million made in connection with loan fees to enter into the Credit Agreement, the repurchase of common stock from previous Breeze shareholders of $1.0 million, and cash generated from the issuance of shares under the Company’s employee stock purchase plan and the exercise of employee stock options of $4.7 million.

Cash used in financing activities in 2004 consisted primarily of the payment of notes in the amount of $3.2 million in connection with the acquisition of Aloha, the Company’s purchase of common stock issued to the previous owners of Breeze Limited for approximately $1.0 million, and principal payments under capital lease obligations of approximately $0.6 million. These cash outflows were offset by cash received from the exercise of stock options of approximately $1.2 million and approximately $1.7 million of cash received for the purchase of stock issued under the Company’s employee stock purchase plan.

The Company believes that its cash and cash equivalents, funds generated from operations and borrowing capacity will provide adequate liquidity to meet its normal operating requirements, as well as to fund the above obligations for at least the next twelve months.

The Company believes there are opportunities to grow its business through the acquisition of complementary and synergistic companies, products and technologies. We look for acquisitions that can be readily integrated and accretive to earnings, although we may pursue smaller non-accretive acquisitions that will shorten our time to market with new technologies. The Company expects the general size of cash acquisitions it would currently consider would be in the $5 million to $30 million range. Any material acquisition could result in a decrease to the Company’s working capital depending on the amount, timing and nature of the consideration to be paid. In addition, any material acquisitions of complementary or synergistic companies, products or technologies could require that we obtain additional debt or equity financing. There can be no assurance that such additional financing will be available or that, if available, such financing will be obtained on terms favorable to us and would not result in additional dilution to our stockholders.

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Liquidity and Capital Resources

On March 31, 2005, the Company entered into a senior secured credit facility (the “Credit Agreement”) with Wells Fargo Foothill, Inc., as the arranger, administrative agent and initial lender. Other lenders may participate in the Credit Agreement from time to time. The Credit Agreement provides for extensions of credit in the form of revolving loans in an aggregate principal amount of up to $15 million and a term loan facility in an aggregate principal amount of up to $15 million. Loans under the Credit Agreement will bear interest, at Radiant’s option, at either the London Interbank Offering Rate plus two and one half percent or at the rate that Wells Fargo Bank, N.A. announces as its prime rate then in effect. Fees associated with the Credit Agreement are typical for transactions of this type. As of December 31, 2005, the Company has approximately $3.3 million in letters of credit against its available balance of approximately $8.4 million and no outstanding balance against the revolver. On January 1, 2006, approximately $2.7 million in letters of credit expired and were not renewed.

The Credit Agreement contains certain customary representations and warranties from Radiant. In addition, the Credit Agreement contains certain financial and non-financial covenants, with which the Company was in compliance as of December 31, 2005.

During the second quarter of 2005, the Company received $15 million in proceeds from the term loan facility in its Credit Agreement. The principal on this note will be paid at $250,000 per month with all unpaid principal being due upon termination/expiration of the Credit Agreement. The majority of these funds were used to pay off a significant portion of the promissory notes held by the previous shareholders of Aloha. In connection with this payoff, the Company entered into an amended and restated promissory note in the amount of $1.5 million with the previous shareholders of Aloha. During the fourth quarter of 2005, the Company modified the amended promissory note by reducing the $1.5 million principal amount to $1.0 million. This decrease was due to agreed upon purchase price adjustments. The principal on this note will be paid over the course of the third and fourth quarters of 2008 and the first quarter of 2009.

On January 3, 2006, the Company entered into an amendment to its Credit Agreement with Wells Fargo Foothill, Inc. The amendment increased the aggregate term loan facility available under this agreement from $15 million to $31 million and extended the expiration date of the Credit Agreement from March 31, 2008 to March 31, 2010. Certain of the financial and other covenants were also modified as a result of the amendment. As of January 3, 2006, aggregate borrowings under this facility totaled approximately $29.3 million.

The Company’s working capital increased by approximately $3.6 million, or 19%, to $22.8 million at December 31, 2005 as compared to $19.2 million at December 31, 2004. The Company has historically funded its business through cash generated by operations. Cash provided by operating activities from continuing operations for 2005 was $15.0 million as compared to $10.9 million for 2004. Cash from operations in 2005 was mainly generated from net income, the adding back of non-cash items such as depreciation, amortization, lease restructuring charges and the impairment of the HotelTools software, and through the collection of calendar year support and maintenance invoices that are deferred and recognized over the course of the year. This was partially offset by normal fluctuations in accounts receivable, inventories, other assets, accounts payable, accrued liabilities, payables due to BlueCube, client deposits and deferred revenue and other liabilities. If near-term demand for the Company’s products weakens or if significant anticipated sales in any quarter do not close when expected, the availability of funds from operations may be adversely affected.

In 2004, the Company generated net income of approximately $4.2 million, which included a $3.6 million non-cash gain on the sale of the Company’s Enterprise segment. The remaining net income of approximately $0.6 million was primarily due to additional software license sales associated with Radiant’s acquisition of Aloha, use of the hospitality reseller channel for additional sales, the continued success of selling our new hardware products into our current direct and reseller markets and improved product demand throughout the hospitality and petroleum and convenience retail industries both domestically and internationally. In addition, approximately $9.4 million of depreciation and amortization expense was recorded in 2004, of which approximately $4.9 million was directly associated with the amortization of intangibles associated with the Company’s acquisitions. Due to the increased growth in the business and the acquisition of Aloha, increases in accounts receivable, inventories, accounts payable, accrued liabilities and deferred revenues occurred during 2004. The net effect of these increases resulted in positive cash flows from operations of approximately $0.8 million.

In 2003, the reconciliation of cash provided by operating activities to net loss included $17.7 million non-cash charge for the impairment of capitalized software and acquired technology, $10.6 million for the impairment of the TriYumf Asset and $6.2 million for the impairment of goodwill. These impairments are included in the Enterprise discontinued operations which are more fully described in Note 4 of the consolidated financial statements. In addition, cash provided by operating activities included a decrease in accounts receivable of $12.6 million as cash collections exceeded revenues during 2003, a decrease in inventories of $0.4 million, an increase in client deposits and deferred revenue of $2.5 million as client payments were received in advance of delivered goods and services and depreciation and amortization of $8.0 million. These amounts were offset by a decrease in accounts payable and accrued liabilities, net, of $3.5 million and an increase in other assets of $1.5 million. The changes in accounts payable and accrued liabilities were due to the timing of certain vendor payments.

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Cash used in investing activities during 2005 was $12.1 million as compared to $27.7 million during the same period in 2004. In 2005, investing activities mainly consisted of additional consideration related to the Breeze acquisition (see Note 2 of the consolidated financial statement footnotes), the purchase of equipment, expenditures for capitalizable software projects, the MenuLink acquisition, and the continued payout of accrued contractual obligations related to the Enterprise disposition.

The uses of cash in investing activities in 2004 consisted primarily of cash payments of approximately $12.0 million associated with the disposition of the Enterprise business, payment of $11.2 million made in connection with the acquisition of Aloha, purchases of property and equipment of $2.2 million, capitalized software costs of $1.9 million, and payment of $0.3 million in connection with the acquisition of E-Needs.

The uses of cash in investing activities during 2003 consisted primarily of purchases of property and equipment of $3.9 million, capitalized software costs of $5.5 million and the purchase of the TriYumf Asset and capitalized professional services costs of $5.5 million. During the fiscal period 2003, the Company paid $4.4 million as the third installment for the source code and object code for certain back office software and capitalized approximately $0.6 million in professional services costs.

Cash used in financing activities during 2005 was $0.3 million as compared to cash being used in financing activities of $1.9 million in 2004. In 2005, financing activities mainly consisted of the repayment of promissory notes related to the Aloha acquisition, proceeds generated from the Credit Agreement previously mentioned, payments made in connection with loan fees to enter into the Credit Agreement, the repurchase of common stock from previous Breeze shareholders, and cash generated from the issuance of shares from the Company’s Employee Stock Purchase Plan and the exercise of employee stock options.

The uses of cash in financing activities in 2004 consisted primarily of the payment of notes in the amount of $3.2 million in connection with the acquisition of Aloha, the Company’s purchase of common stock issued to the previous owners of Breeze Limited for approximately $1.0 million, and principal payments under capital lease obligations of approximately $0.6 million. These cash outflows were offset by cash received from the exercise of stock options of approximately $1.2 million and approximately $1.7 million of cash received for the purchase of stock issued under the Company’s employee stock purchase plan.

Cash of approximately $0.3 million was used in financing activities during 2003 due primarily to fund the Company’s purchase of common stock pursuant to its stock repurchase program for approximately $2.0 million and principal payments under capital lease obligations of approximately $0.5 million, offset by cash received from the exercise of stock options of approximately $0.8 million and approximately $1.1 million of cash received from stock issued under the Company’s employee stock purchase plan.

On January 13, 2004, the Company acquired substantially all of the assets of Aloha, a leading provider of point of sale systems for the hospitality industry. Aloha was acquired to further develop the Company’s hospitality division. Total consideration of approximately $49.4 million consisted of an $11.0 million cash payment, a five-year note in the principal amount of $19.7 million at an interest rate of prime plus one percent, a one-year note in the principal amount of $1.7 million at an interest rate of prime plus one percent, the issuance of 2.4 million shares of restricted common stock with a fair value of $6.50 per share on the date of announcement (December 15, 2003), and $0.9 million of direct expenses Radiant incurred related to the acquisition and the assumption of certain liabilities. See Note 4 of the consolidated financial statements for additional information.

On January 31, 2004, the Company completed a tax free split-off of the Company’s Enterprise business now known as BlueCube Software, to Erez Goren, the Company’s former Co-Chairman and Co-Chief Executive Officer. Pursuant to the terms of the Share Exchange Agreement under which the split-off was effected, Radiant contributed specified assets and liabilities of the Enterprise business, together with $4.0 million in cash, to the newly formed subsidiary, and then transferred all of the shares of the new company to Erez Goren in exchange for the redemption of 2.0 million shares of common stock of the Company, valued at $16.3 million based upon the quoted price of the Company’s stock (January 31, 2004). The shares redeemed represented approximately 7% of the Company’s outstanding shares at the time. See Note 4 of the consolidated financial statements for additional information.

On October 6, 2005, the Company acquired the shares of MenuLink Computer Solutions, Inc. (“MenuLink”). MenuLink is a leading supplier of back-office software for the hospitality industry. The purchase of MenuLink provides the Company with a fully integrated solution for the hospitality industry. Total consideration was approximately $12.8 million and consisted of $6.3 million in cash, three-year notes in the principal amount of $4.1 million, and 217,884 shares of restricted common stock with a value of $10.97 per share on the date of announcement (September 19, 2005). The notes have an interest rate equivalent to the prime rate. The cash of $6.3 million was paid on the date of closing. Debt will be paid in equal monthly installments (principal and interest) over the next three years. MenuLink has been included in the Company’s consolidated results of operations and financial position from the acquisition date through December 31, 2005.

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On January 3, 2006, the Company acquired substantially all of the assets of Synchronics, Inc. (“Synchronics”), a supplier of business management and point-of-sale software for the specialty retail industry. Total consideration was approximately $27.0 million and consisted of approximately $19.5 million in cash (subject to a post-closing adjustment) and 592,347 shares of restricted common stock with a value of $12.66 per share based on the average closing price of the stock for the 20 days prior to the acquisition. The cash portion of the purchase price was paid on the date of closing.

The Company believes that its cash and cash equivalents, funds generated from operations and borrowing capacity will provide adequate liquidity to meet its normal operating requirements, as well as to fund the above obligations for at least the next twelve months.

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Liquidity and Capital Resources

On March 31, 2005, the Company entered into a senior secured credit facility (the “Credit Agreement”) with Wells Fargo Foothill, Inc., as the arranger, administrative agent and initial lender. Other lenders may participate in the Credit Agreement from time to time. Unless extended, the Credit Agreement expires on March 31, 2008. The Credit Agreement provides for extensions of credit in the form of revolving loans in an aggregate principal amount of up to $15 million and a term loan facility in an aggregate principal amount of up to $15 million. Loans under the Credit Agreement will bear interest, at Radiant’s option, at either the London Interbank Offering Rate plus two and one half percent or at the rate that Wells Fargo Bank, N.A. announces as its prime rate then in effect. Fees associated with the Credit Agreement are typical for transactions of this type.

The Credit Agreement contains certain customary representations and warranties from Radiant. In addition the Credit Agreement contains certain financial and non-financial covenants, which the Company was in compliance with as of March 31, 2005. As of March 31, 2005, the Company has no outstanding balance related to its Credit Agreement.

The Company’s working capital has increased approximately $0.9 million to $20.1 million at March 31, 2005 as compared to $19.2 million at December 31, 2004. The Company has historically funded its business through cash generated by operations. Cash provided by operating activities from continuing operations during the first quarter of 2005 was $6.0 million as compared to $7.2 million during the same period in 2004. Cash from operations, in 2005, was mainly generated from income from operations, the adding back of non-cash items such as depreciation and amortization and through the collection of calendar year support and maintenance invoices that are deferred and recognized over the course of the year. This was partially offset by normal fluctuations in receivables and payables and by the payment of accrued 2004 year end bonuses. If near-term demand for the Company’s products weakens or if significant anticipated sales in any quarter do not close when expected, the availability of funds from operations may be adversely affected. Cash used in investing activities during the first quarter of 2005 was $2.3 million as compared to $21.6 million during the same period in 2004. In 2005, investing activities mainly consisted of additional consideration related to the Breeze acquisition (see Note 2 in the condensed consolidated financial statement footnotes), the purchase of equipment and the continued payout of accrued contract obligations related to the BlueCube disposition. Cash used in financing activities during the first quarter of 2005 was $3.7 million as compared to cash provided by financing activities of $0.2 million during the same period in 2004. In 2005, financing activities mainly consisted of the pay off and pay down of notes payable related to the Aloha acquisition and payments made in connection with loan fees to enter into the Credit Agreement previously mentioned.

The Company leases office space, equipment and certain vehicles under non-cancelable operating lease agreements expiring on various dates through 2013. Additionally, the Company leases various equipment and furniture under four-year capital lease agreements. The capital leases run until November 2007 and June, 2005, respectively. Aggregate future minimum lease payments under the capital lease and non-cancelable operating leases as of March 31, 2005, and contractual obligations including the purchase of Aloha Technologies are as follows (in thousands):

The Company believes there are opportunities to grow the business through the acquisition of complementary and synergistic companies, products, and technologies. The Company looks for acquisitions that can be readily integrated and accretive to earnings, although it may pursue smaller non-accretive acquisitions that will shorten its time to market with new technologies. Management believes the general size of cash acquisitions the Company would currently consider would be in the $1 million to $15 million range. Any material acquisition could result in a decrease to the Company’s working capital depending on the amount, timing and nature of the consideration to be paid. In addition, any material acquisitions of complementary or synergistic companies, products or technologies could require that it obtain additional debt or equity financing. There can be no assurance that such additional financing will be available or that, if available, such financing will be obtained on terms favorable to the Company and would not result in additional dilution to its stockholders.

The Company believes that its cash and cash equivalents and funds generated from operations will provide adequate liquidity to meet its normal operating requirements, as well as fund the above obligations for the foreseeable future.

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