INFINIUM SOFTWARE INC, 10-K405, 1997-12-29

INFINIUM SOFTWARE INC
10-K405, 1997-12-29
COMPUTER INTEGRATED SYSTEMS DESIGN

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-27030

INFINIUM SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C>
MASSACHUSETTS 04-2734036
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
25 COMMUNICATIONS WAY, HYANNIS, MA 02601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 778-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

COMMON STOCK, PAR VALUE $0.01
(TITLE OF CLASS)

------------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].

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

The aggregate market value of voting stock held by non-affiliates of the
registrant based upon the closing price of such stock as reported on the Nasdaq
National Market on November 28, 1997, was $159,127,475.

As of November 28, 1997, 12,240,575 shares of the registrant's Common Stock
were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Specifically identified information in the registrant's definitive proxy
statement for its Annual Meeting of Stockholders which is currently expected to
be held on or about February 6, 1998, to be filed pursuant to Regulation 14A is
incorporated by reference into Part III of this Form 10-K.

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PART I

ITEM 1. BUSINESS.

All statements contained herein that are not historical facts, including
but not limited to, statements regarding anticipated future capital
requirements, the Company's future development plans, the Company's ability to
obtain debt, equity or other financing, and the Company's ability to generate
cash from operations, are based on current expectations. These statements are
forward looking in nature and involve a number of risks and uncertainties, as
more fully described under "Factors Affecting Future Performance." Actual
results may differ materially.

Infinium Software, Inc. (the "Company", "Infinium Software" or "Infinium")
develops, markets and supports enterprise-level business software applications
for mid-sized organizations (typically companies with revenues of $50 million to
$1 billion). The Company has two primary product lines. One product line,
designed for AS/400 computers, automates the financial management, human
resource management and materials management functions of organizations in a
broad range of industries worldwide. The Company also offers a specialized
AS/400 manufacturing system designed to manage process manufacturing operations.
The Company's second product line, released during 1997, is designed for use by
customers using Microsoft Windows NT servers. It is designed to automate the
financial management operations of midsized organizations. Additional NT
applications are under development and expected to be available during 1998. The
Company's more than 1,400 customers include Abbott Laboratories, Circus Circus
Enterprises, Coca-Cola Enterprises, TRW Information Systems & Services and
Warner Bros. Records.

INDUSTRY BACKGROUND

For many years businesses have used packaged software applications to
cost-effectively automate back-office accounting and payroll functions.
Recently, heightened competitive pressures and rapidly changing market
conditions have forced many organizations to reduce costs, increase the
productivity of their personnel and become more responsive to customer
requirements. In addition, many mid-sized companies have expanded their
operations and now require software applications that support more product
lines, more international operations and a larger workforce. They also are
demanding applications that take advantage of the capabilities of the Internet's
world-wide web to connect them with their customers and suppliers. As a result,
businesses are replacing their existing accounting, human resource and payroll
software applications with new, more flexible systems which not only keep track
of accounting records but also help management monitor and measure the
performance of their business operations and make timely access to performance
and record keeping data easy for non-technical business professionals.

In response to this shift, there is a corresponding shift occurring in the
computing platforms that run these business applications. Centralized
host/terminal-type systems ("legacy" systems) with their character-based user
interfaces are being replaced by client/server computing platforms. These
client/server systems provide an intelligent desktop -- typically a personal
computer -- that allows some of the application functionality to be distributed
to the desktop and some to be performed on the server. The client/server
environment also includes a network infrastructure that connects the desktops of
the users and increasingly, also connects the users via the Internet. The
client/server environment facilitates widespread access by non-technical
business professionals to corporate data through easy-to-use graphical user
interfaces, enables integration with desktop productivity tools such as
spreadsheets and allows applications to be more readily customized to meet
changes in business requirements. In addition, there is a preference among users
of these financial management, human resource and similar business systems to
acquire entire suites of integrated applications that are designed to work
together rather than to purchase single components, such as a general ledger or
accounts payable system.

The requirement for more flexible business applications and the resulting
shift to client/server and network-centric computing has created a strong demand
for new software applications for financial management, human resources and
other areas of the business. For example, International Data Corporation (IDC)
estimates that the worldwide market for accounting software across all platforms
is in excess of $5.25 billion in

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1997 and is predicted to grow at a 15.4% compounded annual rate through 2001
with projected spending of approximately $9.2 billion in 2001.

There is an additional factor driving demand for new business application
software packages. Many businesses today use financial, human resources and
other application software systems that were either developed by their own
internal information systems staff or were acquired in the 1970's or 1980's.
Such systems may not be able to process transactions beginning in the year 2000,
since they were programmed to assume that every year begins with '19xx'. These
systems must now be revised or replaced in order to prevent a business
interruption. Many businesses are choosing to replace their older or internally
developed systems with purchased application software that has been designed to
support processing in the year 2000 and beyond.

With over 410,000 systems installed, the IBM AS/400 is one of the world's
most popular business computing systems for mid-size organizations. Shipments of
new AS/400 systems in 1997 are estimated at approximately 55,000 units, partly
as the result of new models introduced by IBM which offer improved price
performance and more industry standard "open" features. These new models include
networking capabilities to facilitate electronic commerce, multi-processor
architectures and expanded interoperability with other systems, all of which
facilitate the use of the AS/400 as a server in a client/server computing
architecture.

The Company believes that the AS/400 is widely used because of the large
number of business application software packages available for it and because
fewer skilled technical professionals are required to implement and maintain it,
resulting in a lower cost of ownership compared to other systems. This is
especially important in the mid-market, where organizations must implement and
support business applications with a fraction of the resources available to
larger companies.

The Microsoft Windows NT server is the fastest growing computing platform
for business applications. The Company believes that NT will become the most
popular application software platform for mid-size organizations. According to
IDC, the market for NT based financial and human resources applications is
expected to grow at an annual rate of 38.3% through the year 2001 and mid-size
companies will have the highest percentage increase in information technology
expenditures. The Company believes that Windows NT is being widely accepted
because of the market dominance of Microsoft, the low cost of ownership of NT
servers, and the benefits of full integration with Microsoft Backoffice
applications.

THE INFINIUM SOFTWARE SOLUTION

Infinium Software is a provider of enterprise-level business software
applications for mid-sized organizations. The Company offers two separate
application product lines. It provides applications for the financial
management, human resource management and materials management functions of
mid-sized organizations and business units of large companies that use IBM
AS/400 computers. The Company also offers a fully integrated process
manufacturing solution for mid-sized process manufacturing operations.
Infinium's AS/400 products run in either a client/server or a traditional
host/terminal configuration.

The Company has recently launched a new product line designed to run on
hardware platforms using the Microsoft Windows NT operating system. Infinium's
application product for the Windows NT environment automates the finance
function of mid-size organizations. In addition, the Company has an NT Human
Resource product line currently under development and plans to introduce that
product line in mid-1998.

The Company's AS/400 products enable businesses to automate their financial
management, human resource management, materials management and process
manufacturing operations with highly functional software products that afford
them the flexibility and ease of use of client/server computing while retaining
the low cost of ownership that the AS/400 has historically provided. The Company
expects that the Microsoft NT platform will deliver low cost of ownership
advantages similar to the AS/400 as the Microsoft NT environment matures.

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Infinium's products are designed based on the following principles:

AS/400 PRODUCT LINE:

- ROBUST FUNCTIONALITY AND SCALABILITY. Infinium's products are designed
to provide high-end features and transaction processing functionality
while providing flexibility and ease of use features that have not been
attainable on mainframe platforms. In addition, the Company's products
operate in integrated suites of applications which provide users with a
consistent user interface and the ability to easily access data and
perform operations that span multiple applications. The Company's
products are scalable to support increasing and changing levels of
operations as customers' businesses expand.

- HIGH DEGREE OF FLEXIBILITY. Infinium's products are designed to function
within a wide range of organizations. Infinium enables individual users
to customize their desktop environments to respond to business changes
and to streamline their daily operations. The Company believes the
flexible chart of accounts scheme within its General Ledger product
differentiates it from its competitors and facilitates the use of General
Ledger for monitoring the performance of a wide range of operating and
financial measurements as well as record keeping for accounting and
financial statement purposes.

- YEAR 2000 SUPPORT. The Company's financial management and human
resources product lines have been designed from the beginning to support
processing in the year 2000 and beyond. The Company's materials
management and process manufacturing product lines have been recently
revised to support year 2000 processing.

- INCREMENTAL MIGRATION TO CLIENT/SERVER. The Company's products are
designed to enable AS/400 customers to migrate to client/server computing
at their own pace. PC-based Infinium software products can be added
rapidly to already installed Infinium Software AS/400 applications
without interruption of normal business processing. Infinium customers
can attach three different types of client software to a single, common
server application at the same time. Data entry workers, for example, can
use their traditional character-based terminals to enter data while
managers with PC's can use a graphical user interface or the full
object-oriented Infinium desktop to perform decision-making analysis and
reporting.

- SUPERIOR DATA ACCESS AND ANALYSIS THROUGH OBJECT-ORIENTED USER
INTERFACE. The Company's Infinium Advanced Desktop product line is
designed to allow non-technical business professionals to "mine" the
information contained in the application databases without knowledge of
the underlying database structure. Infinium's innovative "drag and drop"
object-oriented user interface represents the underlying data in the form
of graphical icons and allows the end user to interactively access data
by manipulating the icons. The Company believes that its object-oriented
user interface represents an advance over standard graphical user
interfaces and a competitive advantage in the application software
market.

- DELIVER INTERNET/INTRANET EXTENSIONS TO CORE APPLICATIONS. The Company's
Infinium:Websight product offerings allow Infinium customers to extend
select application functionality to their customers, suppliers or
employees through the Internet or their internal intranet. For example,
Infinium:Websight for Human Resources enables employees to secure access
to their personnel information via the Internet/Intranet.

- PRODUCTS OPTIMIZED FOR THE AS/400. Infinium Software currently has a
line of products specifically designed for the AS/400 computing
environment. The Company's products take full advantage of the many
unique characteristics of the OS/400 operating system and database to
maximize performance for its customers.

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WINDOWS NT PRODUCT LINE:

The Company's product line for Windows NT servers is the result of a
combination of internal development and acquired technology. In January 1997,
the Company acquired Time (Open Systems), Ltd., a privately-held application
software company based in Chatham, England. The products acquired from Time
(Open Systems) form the foundation for the Company's NT Financials product line.
Subsequent to the acquisition, Infinium enhanced the Time products and
re-launched them as Infinium Financials for NT in September 1997. In addition to
Infinium Financials for NT, the Company is currently developing new Human
Resource systems specifically designed and optimized for Windows NT application
servers. The Company expects to have its Human Resources for NT product line
available in 1998.

The design principals behind the NT applications include:

- ONEBOOK DESIGN. Infinium's Financials for NT applications are designed
to deliver real-time financial management to mid-sized organizations. All
subledgers (such as accounts payable, accounts receivable) immediately
post to the General Ledger system giving operating and financial managers
the ability to always know where the company stands as of the last
transaction without having to go through time consuming batch updates and
adjustments at month end closes. The major advantage of this design is
that time-consuming monthly closing cycles are virtually eliminated. The
Company believes that this capability is unique among major vendors in
the application software market.

- CUSTOMIZABLE BUSINESS RULES. The Company's Financials for NT products
can be tailored to meet the specific needs of an organization quickly
with business rules capabilities that are delivered with the
applications. The applications' business rules can be modified by
customers without modifying the source code of the application, allowing
individual customization of the Infinium NT Financial applications. The
changes can be made without corrupting future enhancements delivered by
the Company. The Company believes that this capability is unique in the
applications market.

- OPTIMIZED FOR MICROSOFT WINDOWS NT. The Company has chosen to design and
optimize its products exclusively on the Microsoft Windows NT operating
system. The applications are built on Microsoft's DNA (Distributed
iNternet Architecture) and take full advantage of Microsoft's Backoffice
suite of products and technologies. The Company believes that optimizing
its application for use solely for NT gives it a competitive advantage
over competitors whose applications are not optimized for any specific
platform.

- YEAR 2000 SUPPORT. The Company's products are designed to support
processing in the year 2000 and beyond.

STRATEGY

Infinium Software's objective is to be a leading provider of client/server
business software applications for midsize organizations. The Company believes
that the Microsoft NT and the IBM AS/400 will be the two most popular
application software platforms for mid-sized organizations because they offer
the lowest cost-of-ownership. These integrated computing platforms shield
customers from significant systems integration work, and so are highly valued by
resource-constrained mid-sized organizations.

The Company's AS/400 products are specifically designed and optimized for
use on the AS/400 operating system and database platforms for enterprise-level
use. Likewise, the Company's NT products are specifically designed and optimized
for the use on the Microsoft Windows NT operating system and accompanying Back
Office components. The Company believes that application software products
deliver the best performance and reliability only when they are designed for
specific target computing platforms, and that products written in a "one size
fits all" manner to run on multiple platforms perform poorly on platforms other
than the one for which they were designed. The Company is committed to enhancing
its core competencies in the areas of financial management, human resource
management, materials management and process

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manufacturing and delivering systems which can interoperate with other
applications within an organization. The key elements of the Company's strategy
are:

- PROVIDE CLIENT/SERVER SOLUTIONS TO THE AS/400 MARKET. The Company
targets mid-size organizations that use the IBM AS/400 computer and are
migrating to client/server. The Company's server products were initially
designed for the AS/400 and the Company has traditionally served the
AS/400 market exclusively. The Company believes that it has established a
strong reputation and a loyal base of more than 1,400 customers within
the AS/400 market, which it intends to continue to leverage with its new
products.

- PROVIDE INDUSTRY-LEADING APPLICATIONS FOR WINDOWS NT SERVERS. The
Company's strategy is to focus its new product development efforts on the
Windows NT server market, similar to the strategy it used to establish
its position in the AS/400 market. The Company introduced its Financials
for NT series of products in 1997, and intends to build as well as
acquire additional applications suites for the NT platform. In addition,
the Company is developing a new version of its human resources management
product line specifically for Windows NT servers, which it intends to
launch in 1998.

- BUILD LONG TERM COMPETITIVE ADVANTAGE FOR ITS NT PRODUCTS THROUGH USE OF
NATIVE MICROSOFT CORE TECHNOLOGIES. The Company believes that as the
Microsoft ("MS") NT environment becomes more mature as an enterprise
application software platform, customers will demand that applications
take maximum advantage of all of NT's system capabilities. To deliver
optimal systems capabilities, Infinium is designing its new applications
to be native to the NT DNA technologies. The Human Resource for NT
application suite is being developed using MS Transaction Server and
ActiveX/DCOM technologies, for example. The Company believes this design
strategy will become an increasingly important purchasing criteria in the
market for NT business applications, and that crossplatform applications
or applications ported from UNIX will be at a disadvantage to
applications designed expressly for the MS DNA environment.

- INVEST TO DELIVER PRODUCT FEATURE/FUNCTION LEADERSHIP. The Company plans
to continuously enhance its products to respond to changes in customer
requirements, improve functionality and performance, and incorporate
relevant new technologies. In particular, the Company plans to add new
features to the client component of its Infinium products, and
incorporate Domino-based workflow and additional Infinium:Websight
capabilities for its AS/400 products.

- EXPAND INTERNATIONAL DISTRIBUTION AND SUPPORT CAPABILITIES. The Company
is continuing to expand its international sales and customer support
operations, principally through arrangements with independent software
distributors and systems integrators. The Company is also making
investments in product functionality to support the requirements of
additional international markets. The Company has recently entered into
relationships with several international distributors, primarily in the
Asia/Pacific and Latin American markets.

- EXTEND THE CAPABILITIES OF PRODUCTS THROUGH COMPLEMENTARY RELATIONSHIPS
AND ALLIANCES. The Company has developed, and will continue to develop,
relationships with third parties that provide software products which add
value to the solution offered by Infinium Software and with service
providers who can supplement Infinium Software's staff and assist in
installing and customizing the Company's products and addressing
customers' networking needs.

- INCORPORATE INTERNET TECHNOLOGIES. Through its Infinium:Websight
features, the Company has released enhancements to its products that will
enable them to operate over the Internet and within corporate intranets.
The Company is also utilizing World Wide Web technologies to provide its
customers with rapid and low-cost access to customer support and service
applications through its electronic customer support offerings called
Infinium Link and Infinium Weblink.

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PRODUCTS

Infinium Software offers enterprise-level business software applications
designed to automate the back-office operations of mid-sized organizations and
business units of large companies. The Company's products can function as
stand-alone applications or as integrated suites of applications and may be
interfaced with products from other vendors. The Company offers business
applications that automate the financial management, human resources management,
materials management and process manufacturing functions.

AS/400 PRODUCT LINE

The Company's AS/400 series of products are server-based products which can
function in a traditional host/terminal configuration or, with the addition of
the Company's Infinium:Desktop Manager, in a client/server configuration with a
graphical user interface on the users' desktops. The Company's Infinium Advanced
Desktop object-oriented software products can be added to the AS/400-based
Financial Management, Human Resources or Materials Management product lines to
provide a client/server computing architecture. In this configuration, some of
the product functions traditionally provided by the AS/400 host application are
distributed to the users' personal computers, providing more intuitive data
access and analytical capabilities. The Infinium Advanced Desktop and Desktop
Manager products run under the Microsoft Windows 95, and Windows NT operating
systems for personal computers.

The Infinium Advanced Desktop product line is designed to allow
non-technical business professionals to "mine" the information contained in the
application databases without knowledge of the underlying database structure.
The Company believes that Infinium's innovative "drag and drop" object-oriented
user interface is an advance over standard graphical user interfaces because it
represents the underlying data in the form of graphical icons and allows the
user to interactively access data by manipulating the icons. For example, a user
can simply drag the Vendor icon and drop it on an Invoice icon to see the
invoice data for that particular company. Successive drag and drop operations
can take the user to successively lower levels of detail as needed. In addition,
the data in an Infinium application can be easily moved into popular
spreadsheets or word processors for incorporation into reports or presentations.
As a result, users spend less time searching for data and can devote more time
to analysis and decision-making. The Company believes that its object-oriented
user interface represents a competitive advantage in the business application
software market.

The Company believes that the Infinium Advanced Desktop and Desktop Manager
architecture, which allows the Company's AS/400 applications to function as
either traditional host/terminal applications or object-oriented client/server
applications, provides the Company's base of more than 1,400 customers with a
means of migrating to client/server without replacing their existing AS/400
business applications. This also offers a competitive solution to customers
seeking to combine the benefits of client/server computing with the performance,
stability and low cost of ownership of an AS/400 server-based architecture.

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The Company presently offers enterprise-level AS/400 business application
products in the areas of financial management, human resource management,
materials management and process manufacturing. In addition, the Company offers
the Infinium:Desktop Manager product to allow customers of its character-based
AS/400 host/terminal applications to add a graphical user interface. The product
suites and included applications currently offered by Infinium Software are as
follows:

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FINANCIAL MANAGEMENT HUMAN RESOURCES/PAYROLL
Infinium FM Advanced Infinium HR Advanced
General Ledger Payroll
Payables Ledger Personnel
Accounts Receivable Flexible Benefits
Fixed Assets Training Administration
Currency Management Occupational Health
Global Taxation

MATERIALS MANAGEMENT PROCESS MANUFACTURING
Infinium MM Advanced Regulatory Management
Purchase Management Formula Management
Inventory Control Advanced Planning
Order Processing Manufacturing Control
Laboratory Analysis
</TABLE>

FINANCIAL MANAGEMENT. The Company's Financial Management products provide
key financial management and accounting functions for mid-sized organizations
and business units of large companies. Infinium Financial Management provides
these applications with icon-based user access to the underlying accounting,
statistical and performance data through graphical "drag and drop" operations.
The Company's primary Financial Management applications are currently available
in English, French, German, Dutch and Spanish versions for multi-national and
international businesses. The current list license fees for Financial Management
server products range from $8,000 to $250,000 per application. License fees vary
based on a number of factors, including hardware configuration, number of users
and application options licensed.

HUMAN RESOURCES/PAYROLL. The Company's Human Resources/Payroll products
are designed to handle the requirements of mid-sized organizations and business
units of large companies. For example, the Royal Mail Letters division of the
British Post Office produces payroll for more than 160,000 employees weekly
using Infinium Software's Human Resources products. Infinium HR Advanced
provides these applications with icon-based user access to the underlying
accounting, statistical and performance data through graphical "drag and drop"
operations. While the Company offers versions of its Human Resources systems for
use around the world, the Payroll system is localized and currently available
for use in the United States, Canada, United Kingdom, Australia, New Zealand,
Spain, Sweden, Indonesia, Malaysia, Philippines, and Thailand. The current list
license fees for Human Resources/Payroll server products range from $10,000 to
$243,000 per application. License fees vary based on a number of factors,
including hardware configuration, number of users and application options
licensed.

MATERIALS MANAGEMENT. The Company's Materials Management products are
targeted mainly to non-manufacturing businesses, such as hospitals, hotels,
transportation companies, service organizations and utilities. These products
integrate closely with the Financial Management product line, and are often
considered an extension of the core financial applications. The current list
license fees for Materials Management products range from $15,000 to $159,000
per application. License fees vary based on a number of factors, including
hardware configuration, number of users and application options licensed.

PROCESS MANUFACTURING. The Company's Process Manufacturing products cover
a full range of formula-based process manufacturing operations. These products
are fully integrated with the Company's Financial Management product line. The
current list license fees for Process Manufacturing products range from $15,000
to $157,000 per application. License fees vary based on a number of factors,
including hardware configuration, number of users and application options
licensed.

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INFINIUM:DESKTOP MANAGER. Infinium:Desktop Manager is designed to provide
AS/400 customers with a first step toward client/server computing.
Infinium:Desktop Manager provides a graphical user interface (GUI) and PC-based
desktop to any of the Company's AS/400 business applications. An
Infinium:Desktop Manager Extended version is also available which provides the
same GUI interface across non-Infinium Software character-based AS/400
applications, providing businesses with a consistent "look and feel" across all
of their AS/400 applications to simplify training and support.

WINDOWS NT PRODUCT LINE

Infinium Software offers enterprise-level business software applications
for NT servers designed to automate the back-office operations of mid-sized
organizations and business units of large companies. The Company's products can
function as stand-alone applications or as integrated suites of applications and
may be interfaced with products from other vendors. The Company currently offers
NT business applications that automate the financial management function, and is
planning to introduce its human resource management series for NT in 1998.

The Company's NT series of products are designed and built for a
Microsoft-standard architecture. Infinium applications take full advantage of
Microsoft Back Office technologies, including Windows NT, ActiveX, and Microsoft
Transaction Server. The applications operate with the Microsoft SQL Server
database on NT. In addition, the Company's NT applications operate with the
Oracle database on all supported Oracle platforms, including Windows NT.

The Company's Financials for NT applications are designed to give corporate
accounting departments and end users the ability to make better business
decisions and give faster responses, improving an organization's ability to
react quickly to changes in their business. Infinium's OneBook design provides
users with a single unified accounting system that dramatically improves the
efficiency and quality of information while significantly reducing the time and
costs of the monthly accounting closing cycle. All transactions recorded in the
detail ledgers (such as accounts payable, accounts receivable, etc.) are
immediately posted to the summary records in the general ledger. In this way,
the books are always up-to-date. Separate closing and reconciliation steps are
virtually eliminated. Accounting and operating managers can see business
activity and results at any time without needing to wait for a monthly closing
and reporting cycle. The OneBook design turns accounting systems into a real
time financial management system. The Company believes that the OneBook
capabilities are unique and provide competitive advantage both to Infinium and
to its customers.

The Company plans to release its Human Resources for NT applications in
1998. When available, they will allow companies to automate the management of
their entire workforce. The applications have been designed to include features
that support many of the emerging trends in human resource management, including
numerous sophisticated compensation planning and management features, skill and
competency-based tracking and querying, robust performance management and
monitoring features for both individuals and teams, extensive use of
Internet/intranet capabilities, employee and manager self service and numerous
other capabilities.

Infinium believes that there have been dramatic changes in the workforce
over the past few years. Use of thirdparty workers at all levels has risen
dramatically, yet most Human Resource systems are designed for tracking and
managing only employees or potential employees. Likewise, employee compensation
and benefit policies have changed and are no longer driven by longevity of
employment. Many industries are facing a shortage of skilled workers. The
Infinium Human Resources for NT product line was designed to help mid-sized
organizations manage these and many other human resource management issues as we
approach the 21st century.

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<TABLE>
<S> <C>
INFINIUM FINANCIALS FOR NT HUMAN RESOURCES FOR NT (PLANNED 1998)
Infinium Ledger Infinium Personnel
Infinium Payables Infinium Benefits Administration
Infinium Receivables Infinium Skill & Competency Management
Infinium Asset Management Infinium Performance Management
Infinium Job Management Infinium Recruiting
Infinium Cash Book Infinium Compensation Management
</TABLE>

CUSTOMER SUPPORT AND PRODUCT MAINTENANCE

The Company believes that providing a high level of support to its
customers is a critical requirement for customer satisfaction and the long-term
success of the Company. The Company believes that it has established a strong
history of responsiveness to customer requirements and a high level of support,
which has resulted in a loyal customer base. As of September 30, 1997, the
Company had 76 employees in its customer support operations.

The Company provides product updates and enhancements and customer support
services under an annual maintenance agreement. Initial maintenance fees are
based on a percentage of the list price of the licensed software products. The
renewal rate for annual maintenance agreements for the Company's products has
been in excess of 90% for each of the previous three fiscal years. Under the
Company's standard license agreement, customers have the right to modify or
enhance the Company's products; generally, in such event, the Company's
obligation to provide warranty or maintenance service will terminate. Any
modifications or enhancements developed by the customer that do not contain
software code of the Company are owned by the customer.

The Company's primary customer support center is located at the Company's
headquarters in Hyannis, Massachusetts. The Company also maintains support
operations in its United Kingdom and Singapore offices, servicing customers
outside the United States. First-line support services for customers outside
North America and the United Kingdom are typically provided by the Company's
independent distributors for those areas. The Company also offers an electronic
support capability, called "Infinium Link," which is based on IBM/Domino and is
accessible over the Internet. It allows customers to have 24 hour, 7 day per
week access to product release information, product bulletins and updates, and
tip and technique information as well as to pursue ordinary customer support
dialogues.

CONSULTING AND EDUCATION SERVICES

Infinium Software's consulting services organization provides fee-based
services, including implementation assistance, project management, application
extension or customization, integration with existing customer applications and
similar services to the Company's customers. The Company also trains and
certifies third-party organizations, such as consulting firms and system
integrators, to complement the Company's own service operation. The Company had
92 employees in its consulting services organization as of September 30, 1997.

The Company offers a comprehensive series of fee-based training courses to
its customers. Courses can be taken at the Company's headquarters in Hyannis,
Massachusetts, or at regional training centers in the Atlanta, Chicago, Houston,
Los Angeles, London and Toronto metropolitan areas. Course offerings can also be
delivered at a customer's site.

9
<PAGE> 11

CUSTOMERS

The Company's products are used by more than 1,400 customers in a wide
range of industries. No single customer accounted for 10% or more of revenue in
fiscal years 1995, 1996 or 1997. A representative list of current major
customers, segmented by industry concentration, who are currently active on
maintenance with the Company and who have generated at least $100,000 in total
revenue during the last five years, is shown below:

<TABLE>
<S> <C>
AUTOMOTIVE COMMUNICATIONS
Discount Auto Parts Hearst Magazines
Mazda Motor of America MCA/Universal Studios/MCA Records
Porsche Cars North America Newsweek Data Center
Rolls-Royce Motor Cars USA Network
Volvo North America Warner Bros. Records

CONSUMER PRODUCTS DISTRIBUTION AND TRANSPORTATION
Nintendo of America BOC Distribution Services
NordicTrack Burlington Motor Carriers
Playtex Apparel M.S. Carriers
Timberland Roadway Logistic Systems
Lost Arrow Maverick Transportation

FINANCIAL AND INSURANCE SERVICES FOOD AND BEVERAGE PROCESSING
Blue Cross and Blue Shield of Maryland Blue Diamond Growers
Countrywide Credit Industries Coca-Cola Enterprises
The FINOVA Group Sunkist Growers
Texas Workers Insurance Compensation Fund Sysco
TRW Information Systems & Services Universal Foods

HEALTH CARE HOSPITALITY
Tenet Healthcare Circus Circus Enterprises
Catholic Healthcare West Promus Hotels
Landmark Medical Center Harrah's
Optima Health MGM Grand Hotel
York County Hospital Mirage Resorts

MANUFACTURING PHARMACEUTICALS
Alberta-Pacific Forest Industries Abbott Laboratories
Crown Cork & Seal Company Ciba Vision
General Electric Canada Medis Health
Harley-Davidson Pharmavite
Saint Gobain Corporation Novo Nordisk Pharmaceuticals

RESTAURANTS UTILITIES
Arby's Northwestern Public Service Company
Baskin Robbins Southern Union Company
Brinker International Florida Public Utilities Co.
McDonalds Buckeye Pipeline Company
Red Robin Pacific Energy
</TABLE>

SALES AND MARKETING

The Company offers its products and services primarily through a direct
sales force in the United States, Canada and the United Kingdom and through
independent distributors in other geographic locations.

10
<PAGE> 12

The Company's sales efforts in North America and the United Kingdom are
conducted by two separate direct sales forces, one selling AS/400 products and a
second selling NT applications. The sales forces share the same regional
management structure. Regional sales and consulting services offices are located
in the Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, London, Toronto
and Singapore metropolitan areas. Also, the Company has a telesales operation
which markets training and consulting services to the Company's existing
customer base. The Company conducts comprehensive marketing programs which
include advertising, direct mail, telemarketing, seminars, public relations,
trade shows and customer relations from its headquarters in Hyannis,
Massachusetts. The Company's sales and marketing organization consisted of 154
employees as of September 30, 1997.

The Company believes that its continued growth and profitability will
require it to expand its existing domestic and international sales channels. The
Company's strategy is to substantially expand its direct sales operations and
its network of independent distributors to provide a greater worldwide sales and
marketing presence for its products. The Company currently has relationships
with 17 international distributors, primarily in the Asia/Pacific and Latin
America markets. The Company had revenue of $5.5 million, $7.6 million and $9.9
million from sales to customers outside North America for the fiscal years
September 30, 1995, 1996 and 1997, respectively, representing 8.7%, 10.6% and
11.4% of total revenue, respectively.

PRODUCT DEVELOPMENT

The Company devotes substantial resources to research and development in
order to enhance and maintain the competitiveness of its products. The Company's
research and development priorities fall into two principal areas: first, the
development of versions of the Company's products that operate on Microsoft
Windows NT, including development of new features and functions for the existing
NT application, development of new NT applications and integration with third
party products running on Windows NT; and second, AS/400 product enhancements,
including the development of new product features and functions, the
incorporation of Internet-related technologies, the further internationalization
of the Company's product lines and integration with third party complementary
products.

The Company maintains multiple research and development operations, located
in Hyannis, Massachusetts, Waltham, Massachusetts, Louisville, Kentucky, London,
England, Chatham, England and Paris, France. In addition, the Company uses
outsourcing relationships to supplement its internal development resources. A
portion of the development activity on the Company's Human Resources for NT
product line is currently being outsourced to NIIT in Delhi, India. As of
September 30, 1997, the Company had 151 employees in its research and
development operations, exclusive of contractors and consultants. The Company's
research and development spending was approximately $16.4 million, $17.3 million
and $20.5 million for the fiscal years ended September 30, 1995, 1996 and 1997,
respectively.

STRATEGIC RELATIONSHIPS

IBM RELATIONSHIP

Infinium Software has maintained a strategic relationship with IBM in a
number of key areas, including sales, marketing and research and development.
The Company participates in several formal and informal programs with IBM which
the Company believes affords it valuable experience with IBM's AS/400 products
and insights into its marketing plans. The Company is one of IBM's designated
"Premier Business Partners" and has, in recent years, received numerous awards
and recognitions from IBM, including IBM's Mark of Quality for its high-quality
management practices and standards, the International Rightsizing Leadership
Award and the IBM National Business Partner of the Year Award.

The Company is a member of IBM's Market Development Program and has
received funding and other assistance from IBM for the purposes of jointly
marketing the Company's products and IBM AS/400 systems. In 1997, the Company
participated in IBM's announcement of its new eSeries AS/400 product line. As a
prime provider of AS/400 business solutions, the Company has served as a test
site for new IBM AS/400 products, obtaining valuable early experience with these
technologies. The Company is a member of IBM's

11
<PAGE> 13

"Partners in Development" program, providing IBM with feedback regarding the
design and development of the database and operating system of the AS/400
Advanced Server.

MICROSOFT RELATIONSHIP

Infinium Software has entered into a relationship with Microsoft
Corporation as part of the Company's overall strategy to provide a line of
application products for the Windows NT server platform. The relationship is
currently centered around the Company's application development activities, and
includes participation in the Windows ISV Advisory Board, Microsoft Solution
Developers Program, Solution Providers program and other less formal programs.
The Company expects that its relationship with Microsoft will become more
strategic as the Company's NT server products gain broader acceptance in the
marketplace.

SALES AND MARKETING RELATIONSHIPS

The Company has entered into arrangements with several third party software
vendors to market their products along with the Infinium client/server product
lines in order to provide a more comprehensive solution to Infinium Software
customers. Those vendors include:

FOR AS/400 PRODUCTS:

- SHOWCASE CORPORATION, for its Strategy Server, Query and Report Writer
products, which provide a client/server, graphical user interface for
AS/400 query and report writing;

- FRX SOFTWARE CORPORATION, a provider of client/server financial report
writing, with remote distribution of reporting datasets via email or
Internet;

- DISTINCTION SOFTWARE, INC., a provider of supply chain operations and
planning software, for its suite of planning and inventory products used
in conjunction with the Infinium Process Manufacturing product suite;

- RIPPE AND KINGSTON SYSTEMS, INC., for its plant and facility
maintenance/management and fleet management applications;

- PREMENOS CORPORATION, for its EDI/400 product line used in conjunction
with the Infinium Software Materials Management and Process Manufacturing
product suites.

- CRITERION INCORPORATED for its Blueprint product, an extension to
Infinium Software Human Resources products for career development and
succession planning;

- COMPUTER COMMUNICATION SPECIALISTS INC., for its Firstline product family
of voice automation products;

- DELTA DATA SOFTWARE INC., who provides its Defined Contributions product
line integrated with Infinium Software Human Resources/Payroll
applications.

FOR NT PRODUCTS:

- COGNOS CORPORATION, for their Impromptu query and reporting product and
PowerPlay data analysis product;

- FRX SOFTWARE CORPORATION, a provider of client/server financial report
writing, with remote distribution of reporting datasets via e-mail or
Internet.

In addition, the Company had a marketing relationship with Marsh Software
Systems from 1992 until December 1997 for a Project Management System.

COMPETITION

12
<PAGE> 14

The Company believes its ability to compete depends upon many factors within and
outside its control, including the timely development and introduction of new
products and product enhancements, product functionality, performance, price,
reliability, customer service and support, sales and marketing efforts and
product distribution. The Company believes that it competes favorably on the
basis of each of these factors.

The Company's primary competitors are presently J.D. Edwards & Company,
Lawson Software, PeopleSoft and SAP AG. The Company believes, however, that
competition in its industry is undergoing rapid change and that the barriers to
competition between market segments that have previously existed are decreasing.
For example, SAP AG and PeopleSoft, which are currently major competitors within
the UNIX and the Microsoft Windows NT client/server market, have entered the
AS/400 market. J.D. Edwards & Company has recently introduced its AS/400
client/server product as well as products for other platforms. Due to the
relatively low barriers to entry in the software market, the Company expects
additional competition from these and other established and emerging companies
as the client/server business application software market continues to develop
and expand. Certain of the Company's existing and potential competitors are
substantially larger than the Company and have significantly greater financial,
technical and marketing resources and other established, extensive direct and
indirect channels of distribution. As a result, they may be able to respond more
quickly to new or emerging technologies and changes in customer requirements, or
to devote greater resources to the development, promotion and sale of their
products than the Company. The Company also expects that competition will
increase as a result of software industry consolidation. In addition, current
and potential competitors have established or may establish cooperative
relationships among themselves or prospective customers. Accordingly, it is
possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share. Increased competition may result in
price reductions, reduced gross margins and loss of market share, any of which
would have a material adverse effect on the Company's business, results of
operations and financial condition. There can be no assurance that the Company
will be able to compete successfully against current or future competitors or
that competitive pressures will not have a material adverse effect on the
Company's business, operating results and financial condition.

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES

The Company regards certain features of its internal operations, software
and documentation as confidential and proprietary, and relies on a combination
of contract, copyright, trademark and trade secret laws and other measures to
protect its proprietary intellectual property. The Company has no patents, and
existing copyright laws afford only limited protection. The Company believes
that, because of the rapid rate of technological change in the computer software
industry, trade secret and copyright protection are less significant than
factors such as the knowledge, ability and experience of the Company's
employees, frequent product enhancements and the timeliness and quality of
support services.

The Company provides its products to customers under non-exclusive,
nontransferable licenses. The Company generally licenses its products solely for
the customer's internal operations and only on designated computers. In certain
circumstances, the Company makes available enterprise-wide licenses. The Company
provides source code to its customers for certain of its products and has
escrowed its source code with a commercial bank for the benefit of all
customers. The provision of source code may increase the likelihood of
misappropriation or other misuse of the Company's intellectual property.

From time to time, the Company licenses software from third parties for use
with its products. The Company believes that no such license agreement to which
it is presently a party is material and that if any such license agreement were
to terminate for any reason, the Company would be able to obtain a license or
otherwise acquire other comparable technology or software on terms that would
not be materially adverse to the Company.

EMPLOYEES

As of September 30, 1997, the Company had 549 full-time equivalent
employees, including 154 in sales and marketing, 151 in product development, 168
in customer support and field services and 76 in

13
<PAGE> 15

administration. The Company's success will depend in large part upon its ability
to continue to attract and retain qualified employees. None of the Company's
employees is represented by a labor union or is subject to a collective
bargaining agreement. The Company believes that its relations with its employees
are good.

ITEM 2. PROPERTIES

The Company is headquartered in Hyannis, Massachusetts, where it leases an
aggregate of 76,800 square feet of space. Administrative, marketing, product
development and customer support operations are located in the Hyannis space.
Currently, 19,000 square feet of this space is under short-term sublease
arrangements. The Company also leases 21,600 additional square feet of space in
Waltham, Massachusetts and 12,000 square feet of space in London, England which
are shared for product development and field operations (sales and consulting
services). Chatham, England, Louisville, Kentucky, and Paris, France are also
used for product development operations where it leases 6,000, 4,800 and 1,233
square feet, respectively. In addition, the Company leases an aggregate of
63,727 additional square feet for its field operations located in Atlanta,
Chicago, Dallas, Houston, Irvine, Toronto and Singapore. Office suites are also
being leased for field representatives throughout various locations in North
America aggregating approximately 12,000 square feet. The Company believes that
its existing facilities are adequate to meet current needs and that suitable
additional space will be available as needed to accommodate any further physical
expansion of corporate operations and for additional sales and service field
offices.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not a party to any legal proceedings, the adverse outcome of which, individually
or in the aggregate, would have a material adverse effect on the Company's
results of operations or financial position.

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

No matters were submitted during the fourth quarter of the fiscal year
ended September 30, 1997 to a vote of security holders of the Company, through
the solicitation of proxies or otherwise.

14
<PAGE> 16

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

STOCK INFORMATION

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "INFM". Public trading of the Common Stock commenced on November 17,
1995 on the Nasdaq National Market under the symbol "SFWR" until February 18,
1997 when the Company changed the corporate name to Infinium Software, Inc.
Prior to that time, there was no public market for the Company's Common Stock.
The following table sets forth the high and low closing prices, as reported by
Nasdaq, for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1997
First Quarter............................................................... $10 $ 6 7/8
Second Quarter.............................................................. 8 3/4 5 1/2
Third Quarter............................................................... 10 1/2 5 1/2
Fourth Quarter.............................................................. 14 13/16 9 5/8
FISCAL 1996
First Quarter (from November 17)............................................ $10 3/4 $ 7 1/8
Second Quarter.............................................................. 17 1/8 7
Third Quarter............................................................... 19 3/8 12 3/4
Fourth Quarter.............................................................. 18 8 1/4
</TABLE>

At November 28, 1997 there were approximately 426 holders of record.

The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings to fund the development and growth
of its business.

15
<PAGE> 17

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data should be read in conjunction
with, and are qualified in their entirety by, the Company's consolidated
financial statements, related notes and other financial information included
herein.

CONSOLIDATED INCOME STATEMENT DATA:
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------
AUGUST 31, SEPTEMBER 30,(1)
----------------- ---------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue:
Software license fees.................................... $20,679 $20,163 $21,080 $24,115 $29,781
Services revenue......................................... 28,366 36,637 42,083 47,693 57,220
------- ------- ------- ------- -------
Total revenue.......................................... 49,045 56,800 63,163 71,808 87,001
Operating costs and expenses:
Cost of software license fees............................ 1,923 2,845 3,829 3,823 5,070
Cost of services......................................... 11,096 13,396 15,333 16,562 22,400
Research and development................................. 8,911 12,980 12,725 13,775 16,614
Sales and marketing...................................... 19,747 20,008 19,651 23,822 30,449
General and administrative............................... 6,524 5,330 6,245 6,616 7,336
Write-off of in-process research and development
acquired(2)............................................ -- -- -- -- 6,846
------- ------- ------- ------- -------
Total operating costs and expenses..................... 48,201 54,559 57,783 64,598 88,715
------- ------- ------- ------- -------
Income (loss) from operations.............................. 844 2,241 5,380 7,210 (1,714)
Other income (expense), net................................ 62 (83) 293 1,526 1,923
------- ------- ------- ------- -------
Income before provision (benefit) for income taxes and
cumulative effect of change in accounting principle...... 906 2,158 5,673 8,736 209
Provision for (benefit from) income taxes.................. 367 916 1,989 3,146 (148)
------- ------- ------- ------- -------
Income before cumulative effect of change in accounting
principle................................................ 539 1,242 3,684 5,590 357
Cumulative effect of change in accounting principle........ -- 260 -- -- --
------- ------- ------- ------- -------
Net income................................................. $ 539 $ 1,502 $ 3,684 $ 5,590 $ 357
======= ======= ======= ======= =======
Net income per share(3).................................... $ 0.05 $ 0.15 $ 0.40 $ 0.49 $ 0.03
======= ======= ======= ======= =======
Weighted average common and common equivalent shares
outstanding(3)........................................... 10,495 10,825 9,401 11,369 12,235
======= ======= ======= ======= =======
</TABLE>

CONSOLIDATED BALANCE SHEET DATA:
(IN THOUSANDS)

<TABLE>
<CAPTION>
AUGUST 31, SEPTEMBER 30,(1)
----------------- ---------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents, and marketable securities.......... $13,581 $15,222 $16,183 $43,337 $48,319
Total assets............................................... 35,380 43,495 44,004 75,704 91,307
Deferred revenue........................................... 17,951 22,531 25,017 24,853 31,990
Long-term obligations under capital lease.................. 849 -- -- -- --
Total liabilities.......................................... 29,159 35,635 39,172 40,054 49,368
Mandatorily redeemable common stock........................ 7,752 7,752 -- -- --
Stockholders' equity (deficit)............................. (1,531) 108 4,832 35,650 41,939
</TABLE>

- ---------------
(1) The Company changed its fiscal year end to September 30, effective with the
fiscal year ended September 30, 1995.

16
<PAGE> 18

(2) In connection with the acquisition of Time (Open Systems) Ltd., $6,846,000
allocated to in-process research and development had not reached
technological feasibility and had no alternative future use and was charged
to operations at the acquisition date. See Note 6 to consolidated financial
statements.

(3) The Company repurchased 1,632,000 shares of common stock from venture
capital investors in September 1994. See Note 9 to consolidated financial
statements.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

Founded in 1981, Infinium Software (formerly known as Software 2000)
develops, markets and provides consulting and support services for a full range
of client/server financial management, human resources management and materials
management business software applications geared to mid-size companies. The
Company also offers a specialized manufacturing system designed to manage
process manufacturing operations. Until the introduction of the Company's
financial management business applications designed for Microsoft(R) Windows
NT(R) Servers during the current fiscal year, all software applications were
developed, marketed and operated predominately on the IBM AS/400 hardware
platform. Accordingly, substantially all revenue recognized to date is
associated with AS/400 platform transactions.

In January 1997, the Company acquired all of the outstanding capital stock
of Time (Open Systems) Ltd. ("Time"), a UK-based privately held software concern
which developed and marketed a suite of client/server financial application
software products (the "Time Products"). Since the acquisition of Time, the
Company has made substantial investment in the development of the Time Products
for the Microsoft NT Server platform. Following the introduction of the beta
versions of these products in North America and international markets, the
Company released for general availability Infinium Financials for Microsoft
Windows NT Servers in September 1997. These products, along with the Microsoft
NT Server-based Human Resources Management product line currently under
development by the Company, form the basis for the Company's expansion into the
emerging market for business applications designed for Windows NT servers.

The Company's revenue is derived from two sources: software license fees
and service revenue. Software license fees include revenue from non-cancellable
software license agreements entered into between the Company and its customers
with respect to both the Company's products and third party products marketed
and/or distributed by the Company. Software license fee revenue is recognized
upon delivery of the software, when all significant contractual obligations have
been satisfied and collection is probable. Revenue from software license
agreements sold by international distributors is recorded net of distributor
commission. The Company's service revenue is comprised of software maintenance
fees and fees for consulting services. Maintenance fees are billed separately
and are recognized ratably over the period of the maintenance agreement. The
Company's growing customer base has led to continued growth in maintenance fees.
For each of the years ended September 30, 1995, 1996 and 1997, the Company
experienced a maintenance renewal rate in excess of 90%. Gross margins for the
Company's maintenance revenue are typically higher than gross margins for the
Company's other sources of revenue. In addition to maintenance services, the
Company offers consulting services consisting of project management,
implementation, consulting and training services for the Company's products.
Consulting services revenue is recognized as the services are performed.

17
<PAGE> 19

fiscal years. The Company will adopt this SOP in its fiscal year beginning
October 1, 1997. The application of the SOP would not have had a material effect
on the Company's results of operations as reported herein as the revenue
recognition rules utilized by the Company are substantially consistent with the
provisions of the SOP. Accordingly, adoption of this SOP will not have a
material effect on future results of operations.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the Company's
consolidated income statement data expressed as a percentage of total revenues.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Revenue:
Software license fees............................................. 33.4% 33.6% 34.2%
Service revenue................................................... 66.6 66.4 65.8
----- ----- -----
Total revenue.................................................. 100.0 100.0 100.0
----- ----- -----
Operating costs and expenses:
Cost of software license fees..................................... 6.1 5.3 5.8
Cost of services.................................................. 24.3 23.1 25.8
Research and development.......................................... 20.1 19.2 19.1
Sales and marketing............................................... 31.1 33.2 35.0
General and administrative........................................ 9.9 9.2 8.4
Write-off of in-process research and development acquired......... -- -- 7.9
----- ----- -----
Total operating costs and expenses............................. 91.5 90.0 102.0
----- ----- -----
Income (loss) from operations....................................... 8.5 10.0 (2.0)
Other income, net................................................... 0.5 2.1 2.2
----- ----- -----
Income before provision (benefit) for income taxes............. 9.0 12.1 0.2
Provision (benefit) for income taxes................................ 3.2 4.4 (0.2)
----- ----- -----
Net income..................................................... 5.8% 7.7% 0.4%
===== ===== =====
</TABLE>

Included in operating costs and expenses above, and further discussed in
Note 6 to consolidated financial statements, is a charge of $6.8 million (7.9%
of total revenue) in fiscal 1997 as a result of the write-off of in-process
research and development acquired in connection with the acquisition of Time.

YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO YEAR ENDED SEPTEMBER 30, 1996

REVENUE. Total revenue increased 21.2%, from $71.8 million for the year
ended September 30, 1996 to $87.0 million for the year ended September 30, 1997.
The increase was primarily due to the increase in the licensing of the Company's
products due to greater market acceptance. Generally, in addition to software
license fees attained with each license agreement entered into, consulting
services and maintenance commitments are commonly contracted, realizing an
increase to service revenue when these services are delivered.

Revenue in North America (United States and Canada) increased 20.1%, from
$64.2 million for the year ended September 30, 1996 to $77.1 million for the
year ended September 30, 1997. This is representative of 89.4% of total revenues
for fiscal 1996 and 88.6% for fiscal 1997. EMEA (Europe, Middle East and Africa)
revenue grew 7.9%, from $7.6 million for the year ended September 30, 1996 to
$8.2 million for the year ended September 30, 1997 predominately due to greater
market penetration within the region. Other international regions, including
Asia Pacific and Latin America, contributed 3.1% of total revenues for fiscal
1996 compared to 1.9% for fiscal 1997.

18
<PAGE> 20

Software license fee revenue increased 23.5%, from $24.1 million for the
year ended September 30, 1996 to $29.8 million for the year ended September 30,
1997. The growth was due primarily to continued acceptance of the Company's
Infinium client/server products. For fiscal 1997, software license fee revenue
derived from Windows NT products was less than $1.0 million with all other
software license fee revenue derived from IBM AS/400 hardware platform
transactions.

Service revenue increased 20.0%, from $47.7 million for the year ended
September 30, 1996 to $57.2 million for the year ended September 30, 1997. The
increase was primarily attributable to an increase in the installed base of
customers resulting in an increase in both maintenance and consulting services
revenue. Also attributing to the increase in consulting services revenue was an
increase in larger consulting service engagements as well as increased service
offerings including greater project management and custom programming demand.
The table below summarizes the composition and growth in the Company's service
revenue.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Software maintenance revenue.......................... $25,952 $30,300 $33,886
Consulting services revenue........................... 16,131 17,393 23,334
------- ------- -------
Total service revenue............................ $42,083 $47,693 $57,220
======= ======= =======
</TABLE>

COST OF SOFTWARE LICENSE FEES. Cost of software license fees consists
primarily of amortization expense related to capitalized software development
costs, royalties on the sale of third party products and the cost of product
media, manuals and shipping. Cost of software license fees increased 32.6% from
$3.8 million for the year ended September 30, 1996 to $5.1 million for the year
ended September 30, 1997. Cost of software license fees as a percentage of
software license fee revenue increased from 15.9% for the year ended September
30, 1996 to 17.0% for the year ended September 30, 1997. The increase in the
dollar amount of such costs resulted primarily from an increase in third party
royalty expense and an increase in amortization of capitalized software
development costs. The increase in the cost of software license fees as a
percentage of software license fee revenue was primarily due to an increase in
third party royalty expense offset in part by a decrease in amortization of
capitalized software development costs.

COST OF SERVICES. Cost of services consists of costs to provide support,
implementation, consulting and training services to licensees. Cost of services
increased 35.2% from $16.6 million for the year ended September 30, 1996 to
$22.4 million for the year ended September 30, 1997. Cost of services as a
percentage of service revenue increased from 34.7% for the year ended September
30, 1996 to 39.1% for the year ended September 30, 1997. The increase in the
cost of services as a percentage of service revenue is attributed to a
relatively greater increase in the amount of consulting services versus
maintenance which carries a lower gross margin than maintenance revenue. The
increase in dollar amount of such costs resulted primarily from increased
staffing in the consulting and support organizations in response to increased
demand for consulting services, a continued growth in the customer base and an
increase in payments to third party contractors.

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of engineering personnel and contractor costs reduced by capitalized
software development costs and, when applicable, research funding. The Company
continues to make significant investments in research and development. Research
and development spending, as defined by the Company as research and development
expenses as reflected in the consolidated statement of income plus capitalized
software development costs and funded research, increased 18.2% from $17.3
million for the year ended September 30, 1996 to $20.5 million for the year
ended September 30, 1997. The Company believes that this significant level of
research and development spending is critical to building long-term product and
technology advantages in the market. It is expected that the relatively constant
rate of investment planned should cause research and development expenses as a
percentage of revenue to decline.

19
<PAGE> 21

The following table sets forth for the periods indicated the relationship
between the Company's research and development expenses as recorded on its
consolidated statements of income and its total research and development
spending.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Research and development expenses..................... $12,725 $13,775 $16,614
Capitalized software development costs................ 2,542 3,543 3,595
Funded research....................................... 1,131 -- 255
------- ------- -------
Research and development spending..................... $16,398 $17,318 $20,464
======= ======= =======
Research and development spending as a percentage of
revenue............................................. 26.0% 24.1% 23.5%
======= ======= =======
</TABLE>

Research and development expenses increased 20.6% from $13.8 million for
the year ended September 30, 1996 to $16.6 million for the year ended September
30, 1997. Research and development expenses as a percentage of total revenue was
19.2% for the year ended September 30, 1996 and 19.1% for the year ended
September 30, 1997. The Company capitalized $3.5 million of software development
costs for the year ended September 30, 1996 and $3.6 million for the year ended
September 30, 1997.

In October, 1996, the Company entered into a research funding agreement
with a business partner to fund development activities for enabling Chinese and
Japanese double byte character set capabilities of the Company's Human Resource
product, as defined. The agreement could provide up to $490,000 of assistance
towards this initiative. During fiscal 1997, $255,000 of this amount was used as
an offset to research and development expenses.

SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses, travel, promotional expenses, facilities and
computers and communications costs. Sales and marketing expenses increased 27.8%
from $23.8 million for the year ended September 30, 1996 to $30.4 million for
the year ended September 30, 1997. Sales and marketing expenses as a percentage
of total revenue increased from 33.2% for the year ended September 30, 1996 to
35.0% for the year ended September 30, 1997. The increase in dollar amount as
well as the percentage of total revenue was attributable to an increase in
staffing as well as an increase in commission expense due to increased software
license fees. In connection with the roll-out of the Microsoft Windows NT
product lines, additional direct sales personnel were added during fiscal 1997
and the Company incurred various incremental promotional costs. The Company is
continuing to add additional sales personnel to market both its AS/400 and NT
products. The Company is also continuing to expand its indirect distribution
channels, both domestically and internationally, with an emphasis on the
domestic channel partnering, South Africa, Asia/Pacific, Western Europe and
Latin America markets. Accordingly, sales and marketing expenses are expected to
continue to increase in the future.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation expenses of executive, administrative, financial and
legal personnel, as well as provisions for doubtful accounts, amortization of
intangible assets, insurance and outside professional fees. General and
administrative expenses increased 10.9%, from $6.6 million for the year ended
September 30, 1996 to $7.3 million for the year ended September 30, 1997.
General and administrative expenses as a percentage of total revenue decreased
from 9.2% for the year ended September 30, 1996 to 8.4% for the year ended
September 30, 1997. The increase in dollar amount of general and administrative
expenses was primarily attributed to incremental costs associated with the
acquisition of Time including the amortization of intangible assets.

WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT ACQUIRED. As discussed in
Note 6 to the consolidated financial statements, the Company recorded a charge
to operations of $6.8 million for the write-off of in-process research and
development acquired in connection with the acquisition of Time during the year
ended September 30, 1997.

20
<PAGE> 22

OTHER INCOME, NET. Other income, net consists of interest income, interest
expense and foreign exchange loss. Other income, net increased 26% from $1.5
million for the year ended September 30, 1996 to $1.9 million for the year ended
September 30, 1997. The increase is primarily attributed to interest income
earned from invested funds attained in connection with the Company's public
stock offerings during fiscal 1996 which were available to earn income
throughout the full year during fiscal 1997.

PROVISION (BENEFIT) FOR INCOME TAXES. The provision (benefit) for federal,
state and foreign income taxes was $3.1 million and ($148,000) for the years
ended September 30, 1996 and 1997, respectively. The effective tax rate was
36.0% for the year ended September 30, 1996. The tax benefit realized during
fiscal 1997 was attributed to the charge to operations of $6.8 million for the
write-off of in-process research and development acquired which, when combined
with the benefit of research and development credits, resulted in an overall tax
benefit. See Note 7 to the consolidated financial statements.

YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO YEAR ENDED SEPTEMBER 30, 1995

REVENUE. Total revenue increased 13.7%, from $63.2 million for the year
ended September 30, 1995 to $71.8 million for the year ended September 30, 1996.
The increase was primarily due to growth in maintenance fees, and to a lesser
extent, software license fees and consulting services revenue.

Revenue in North America increased 11.3%, from $57.7 million for the year
ended September 30, 1995 to $64.2 million for the year ended September 30, 1996.
Europe and other international revenue grew 38.2%, from $5.5 million for the
year ended September 30, 1995 to $7.6 million for the year ended September 30,
1996 due to greater market penetration in Europe and the Asia/Pacific regions.

License fee revenue increased 14.4%, from $21.1 million for the year ended
September 30, 1995 to $24.1 million for the year ended September 30, 1996. The
growth was due primarily to continued market acceptance of the Company's
Infinium client/server products and continued growth in international revenue,
primarily in the Asia Pacific Region.

Service revenue increased 13.3%, from $42.1 million for the year ended
September 30, 1995 to $47.7 million for the year ended September 30, 1996. The
increase was primarily attributable to an increase in the installed base of
customers resulting in an increase in both maintenance and consulting services
revenue.

COST OF SOFTWARE LICENSE FEES. Cost of software license fees remained
unchanged at $3.8 million for fiscal years ended September 30, 1995 and 1996.
Cost of software license fees as a percentage of software license fee revenue
decreased from 18.2% for the year ended September 30, 1995 to 15.9% for the year
ended September 30, 1996. The decrease in the cost of software license fees as a
percentage of software license fee revenue was primarily due to a $160,000
write-off of certain capitalized software development costs in the first fiscal
quarter of 1995 offset by increased capitalized software amortization in fiscal
1996.

COST OF SERVICES. Cost of services increased from $15.3 million for the
year ended September 30, 1995 to $16.6 million for the year ended September 30,
1996. Cost of services as a percentage of service revenue declined from 36.4%
for the year ended September 30, 1995 to 34.7% for the year ended September 30,
1996. The decrease in the cost of services as a percentage of service revenue is
primarily attributed to software maintenance revenue increasing at a higher rate
than that of the associated expense of delivering such services. The increase in
dollar amount of such costs resulted primarily from increased staffing in the
consulting and support organizations in response to increased demand for
consulting services, continued growth in the customer base and the resulting
increase in customer support call volume.

RESEARCH AND DEVELOPMENT. Research and development expenses increased from
$12.7 million for the year ended September 30, 1995 to $13.8 million for the
year ended September 30, 1996. Research and development expenses as a percentage
of total revenue was 20.1% for the year ended September 30, 1995 and 19.2% for
the year ended September 30, 1996. Research and development spending increased
5.6%, from $16.4 million for the year ended September 30, 1995 to $17.3 million
for the year ended September 30, 1996. The Company capitalized $2.5 million of
software development costs for the year ended September 30, 1995 and $3.5
million for the year ended September 30, 1996. Additionally, in August, 1994,
the Company and a business partner entered into an agreement under which the
business partner has partially funded certain of

21
<PAGE> 23

the Company's client/server development activities. Of the funding received
under this agreement, $1.1 million has been reflected as a reduction of research
and development expenses for the year ended September 30, 1995.

SALES AND MARKETING. Sales and marketing expenses increased 21.2 % from
$19.7 million for the year ended September 30, 1995 to $23.8 million for the
year ended September 30, 1996. Sales and marketing expenses as a percentage of
total revenue increased from 31.1% for the year ended September 30, 1995 to
33.2% for the year ended September 30, 1996. The increase in dollar amount as
well as the percentage of total revenue for the year was attributable to an
increase in commission expense due to increased software license fees. The
Company is in the process of expanding its distribution channels, both
domestically and internationally, with an emphasis on the Asia/Pacific, Western
Europe and Latin America markets. Accordingly, sales and marketing expenses may
continue to increase in the future.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
5.9%, from $6.2 million for the year ended September 30, 1995 to $6.6 million
for the year ended September 30, 1996. General and administrative expenses as a
percentage of total revenue decreased from 9.9% for the year ended September 30,
1995 to 9.2% for the year ended September 30, 1996. The increase in dollar
amount of general and administrative expenses was related to an increase in
additional costs, such as Directors and Officers liability insurance costs, and
professional fees related to operating a public company.

OTHER INCOME, NET. Other income, net increased from $293,000 for the year
ended September 30, 1995 to $1.5 million for the year ended September 30, 1996.
The increase is primarily attributed to interest income earned from invested
funds attained in connection with the Company's public stock offerings. See Note
5 to consolidated financial statements.

PROVISION FOR INCOME TAXES. The provisions for federal, state and foreign
income taxes were $2.0 million and $3.1 million for the years ended September
30, 1995 and 1996, respectively. The effective tax rates were 35.1% for the year
ended September 30, 1995 and 36.0% for the year ended September 30, 1996. The
increase in the effective tax rate was primarily due to an increase in the
provision for state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1997, the Company had cash, cash equivalents and
marketable securities of $48.3 million. This was an increase of $5.0 million
from the $43.3 million in cash, cash equivalents and marketable securities on
hand at September 30, 1996. Operating activities provided the principal source
of cash, cash equivalents and marketable securities during the year. The
principal uses of cash, cash equivalents and marketable securities during the
year were expenditures to fund software development, purchases of property and
equipment, and cash paid in connection with the acquisition of Time.

The Company's accounts receivable balances net of the allowance for
doubtful accounts were $12.4 million at September 30, 1996 and $18.9 million at
September 30, 1997. Days sales outstanding ("DSO") increased 10 days from 54
days at September 30, 1996 to 64 days at September 30, 1997. The Company
calculates DSO by dividing the ending accounts receivable balance, net of
allowance for doubtful accounts, by the annualized revenue for the quarter,
multiplied by 360. The company believes that this method of deriving DSO is
indicative of actual results due to the cyclical nature of software license and
service transactions, which are often consummated nearer the end of the quarter,
as well as the fluctuation of transactions from one quarter to next. The
increase in DSO from fiscal 1996 to fiscal 1997 was primarily attributed to the
increase in accounts receivable from software license and service transactions
occurring near the end of the quarter in which initial cash receipts were
subsequently received after the balance sheet date.

Deferred revenue increased $7.1 million, from $24.9 million at September
30, 1996 to $32.0 at September 30, 1997. Because the Company typically sells
prepaid consulting services and maintenance with each software license
agreement, the increase in software license fees has resulted in an increase in
the corresponding backlog of consulting services. Additionally, as a result of
the increase in the installed base of customers, a corresponding increase of
deferred maintenance revenue resulted.

22
<PAGE> 24

The Company's $5.0 million working capital revolving line of credit with a
bank expired October 1, 1996. The Company had no borrowings under this facility
and thus no amounts were outstanding at September 30, 1996. The Company did not
renew this credit line or enter into any others during the year ended September
30, 1997.

The Company believes that cash, cash equivalents and marketable securities
as well as cash flow from operations will be sufficient to fund its operations
at least through fiscal 1998.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the FASB issued SFAS 128, "Earnings per Share." SFAS 128
specifies modifications to the calculation of earnings per share from the method
currently used by the Company as prescribed by APB Opinion Number 15. SFAS 128
will be effective for the Company's interim and annual periods ending after
December 15, 1997. The Company expects that basic earnings per share amounts
will be higher when compared to the primary earnings per share amounts, and
diluted earnings per share amounts will not be materially different from primary
earnings per share amounts.

In July 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
and SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information." These statements are effective for fiscal years beginning after
December 15, 1997. The Company will implement these statements as required. The
future adoption of SFAS 130 and SFAS 131 is not expected to have a material
effect on the Company's consolidated financial position or results of
operations.

FACTORS AFFECTING FUTURE PERFORMANCE

The Company's quarterly revenue and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Such fluctuations may result in volatility in the price
of the Company's common stock. Quarterly revenue and operating results may
fluctuate as a result of a variety of factors, including the Company's lengthy
sales cycle, the proportion of revenue attributable to license fees versus
service revenue, changes in the level of operating expenses, demand for the
Company's products, the introduction of new products and product enhancements by
the Company or its competitors, changes in customer budgets, competitive
conditions in the industry and general economic conditions. Further, the
purchase of the Company's products often involves a significant commitment of
capital by its customers with the attendant delays frequently associated with
large capital expenditures and authorization procedures within an organization.
For these and other reasons, the sales cycles for the Company's products are
typically lengthy and subject to a number of significant risks over which the
Company has little or no control. The Company historically has operated with
little software license backlog because its software products are generally
shipped as orders are received. The Company has often recognized a substantial
portion of its revenue in the last month of the quarter and often in the last
week of that month. As a result, license fees in any quarter are substantially
dependent on orders booked and shipped in the last month or last week of that
quarter. Accordingly, a small variation in the timing of recognition of revenue
for specific transactions is likely to adversely and disproportionately affect
the Company's operating results for a quarter because the Company establishes
its expenditure levels on the basis of its expected future revenue and only a
small portion of the Company's expenses vary with its revenue. Accordingly, the
Company believes that period to period comparisons of results of operations are
not necessarily meaningful and should not be relied upon as indicative of future
performance. Although the Company has been profitable in recent quarterly
periods, there can be no assurance that the Company will remain profitable on a
quarterly basis, if at all.

The Company's business has experienced and is expected to continue to
experience significant seasonality. In recent years, the Company has had greater
demand for its products in its fourth fiscal quarter and has experienced lower
revenue in its succeeding first and second fiscal quarters. The fluctuations are
caused primarily by customer purchasing patterns and the Company's sales
recognition programs which reward and recognize sales personnel on the basis of
achievement of annual performance quotas. Due to the foregoing factors and the
factors set forth under "Overview" and "Results of Operations" above, it is
likely that in some future quarter the Company's operating results will be below
the expectations of the Company and public

23
<PAGE> 25

market analysts and investors. In such event, the price of the Company's common
stock would likely be materially adversely affected.

The business applications software market is characterized by rapid
technological change, frequent new product introductions, evolving industry
standards and changes in customer demands. The introduction of products
embodying new technologies and the emergence of new industry standards can
render existing products obsolete and unmarketable. The Company's future success
will depend in part on its ability to enhance products and services and to
develop and introduce new products and services to meet changing client
requirements. There can be no assurance that the Company will be successful in
developing and marketing product enhancements or new products that respond to
technological change or evolving industry standards, that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of these products and enhancements, or that any new
products and product enhancements it may introduce will achieve market
acceptance. In addition, there can be no assurance that the Company will not
encounter product development delays in the future or that, despite testing by
the Company, errors will not be found in new products or product enhancements
after commencement of commercial shipments, resulting in loss of market share,
delay in market acceptance, or warranty claims which could have a material
adverse effect upon the Company's business, operating results and financial
condition.

As the Company's primary current source of revenue comes from customers
using IBM mid-range computers, future revenue from licenses of present products
and sales of services and recurring maintenance revenue are therefore dependent
on continued widespread use of the AS/400 and the continued support of such
computers by IBM. In addition, because the Company's current AS/400 product line
requires the use of IBM's OS/400 operating system, the Company may be required
to adapt its products to any changes made in such operating system in the
future. The Company's inability to adapt to future changes in the OS/400
operating system, or delays in doing so, could have a material adverse effect on
the Company's business, operating results and financial condition.

Although the Company has recently introduced and is continuing to develop
software applications to operate on the Microsoft Windows NT operating system,
as well as to operate over the Internet and within corporate intranets, there
can be no assurance that the Company will be successful in marketing and
developing these new products. The Company's development and implementation of
versions of its business software applications to run on Microsoft Windows NT
servers involve more intense competition from a larger number of competitors.
There can be no assurance that the Company will be successful in developing
additional products for NT and marketing these products or will be able to
compete successfully against current or future competitors.

The business applications software market is highly competitive and rapidly
changing. A number of companies offer products similar to the Company's products
and target the same customers as the Company. The Company believes its ability
to compete depends upon many factors within and outside its control, including
the timely development and introduction of new products and product
enhancements, product functionality, performance, price, reliability, customer
service and support, sales and marketing efforts and product distribution. The
Company believes that competition in its industry is undergoing rapid change and
that the barriers to competition between market segments that have previously
existed are decreasing. Due to the relatively low barriers to entry in the
software market, the Company expects additional competition from other
established and emerging companies as the client/server business applications
software market continues to develop and expand. Increased competition may
result in price reductions, reduced gross margins and loss of market share, any
of which would have a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that the
Company will be able to compete successfully against current or future
competitors or that competitive pressures will not have a material adverse
effect on the Company's business, operating results and financial condition.

Revenue from customers outside North America represented 8.7%, 10.6% and
11.4% of the Company's total revenue in fiscal 1995, 1996 and 1997,
respectively. The Company believes that its revenue and future operating results
will depend, in part, on its ability to increase sales in international markets.
There can be no assurance that the Company will be able to maintain or increase
its current level of international revenue. An

24
<PAGE> 26

important part of the Company's strategy is to expand its indirect distribution
channels in international markets. There can be no assurance that the Company
will be able to attract and retain international distributors and resellers that
will be able to market the Company's products effectively and will be qualified
to provide timely and cost-effective customer support and service. The inability
to attract and retain important resellers could materially and adversely affect
the Company's business, operating results and financial condition. Other risks
inherent in the Company's international business activities generally include
unexpected changes in regulatory requirements, tariffs and other trade barriers,
costs and difficulties of localizing products for foreign countries, lack of
acceptance of localized products in foreign countries, longer accounts
receivable payments cycles, difficulties in managing international operations,
potentially adverse tax consequences including restrictions on the repatriation
of earnings, the burdens of complying with a wide variety of foreign laws and
economic instability. There can be no assurance that such factors would not have
a material adverse effect on the Company's future international revenue and,
consequently, on the Company's business, operating results and financial
condition.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item and as listed in Item 14(a)(1) and
(2) of this report is included in this report beginning on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item with respect to the directors of the
Company is hereby incorporated by reference from the information contained under
the heading "Election of Directors" in the Company's definitive proxy statement
of the Company's 1997 Annual Meeting of Stockholders which will be filed with
the Securities and Exchange Commission within 120 days after the close of the
fiscal year (the "Definitive Proxy Statement").

Certain information concerning directors and executive officers is hereby
incorporated by reference to the information contained under the headings
"Occupations of Directors and Executive Officers" and "Section 16(a) Beneficial
Ownership Compliance" in the Definitive Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is hereby incorporated by reference
to the information contained under the heading "Compensation and Other
Information Concerning Directors and Officers" in the Definitive Proxy
Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is hereby incorporated by reference
to the information contained under the heading "Management and Principal Holders
of Voting Securities" in the Definitive Proxy Statement.

25
<PAGE> 27

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is hereby incorporated by reference
to the information contained under the heading "Certain Relationships and
Related Transactions" in the Definitive Proxy Statement.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

(A)(1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The following Consolidated Financial Statements of the Company are filed as
part of this Report:

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent accountants............................................. F-1
Consolidated balance sheet at September 30, 1996 and 1997..................... F-2
Consolidated statement of income for the years ended September 30, 1995, 1996
and 1997.................................................................... F-3
Consolidated statement of stockholders' equity (deficit) for the years ended
September 30, 1995, 1996 and 1997........................................... F-4
Consolidated statement of cash flows for the years ended September 30, 1995,
1996 and 1997............................................................... F-5
Notes to consolidated financial statements.................................... F-6
</TABLE>

(A)(2) INDEX TO FINANCIAL STATEMENT SCHEDULES

The following Financial Statement Schedule of the Company is filed as part
of this Report:

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts.............................. S-1
</TABLE>

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
accompanying Consolidated Financial Statements or notes thereto.

(A)(3) INDEX TO EXHIBITS

See attached Index to Exhibits on pages X-1 through X-2 of this 10-K.

(B) REPORTS ON FORM 8-K

No reports on Form 8-K have been filed during the last quarter of fiscal
1997.

26
<PAGE> 28

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, this 29th day of
December 1997.

INFINIUM SOFTWARE, INC.

By: /s/ DANIEL J. KOSSMANN
------------------------------------
Daniel J. Kossmann
Vice President and Chief Financial
Officer

We the undersigned officers and directors of Infinium Software, Inc.,
hereby severally constitute and appoint Frederick J. Lizza and Daniel J.
Kossmann, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the
capacities to do all things in our names and on behalf in such capacities to
enable Infinium Software, Inc. to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all requirements of the Securities
Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------------ ------------------
<S> <C> <C>

/s/ ROBERT A. PEMBERTON Chairman of the Board and Director December 29, 1997
- -----------------------------------
Robert A. Pemberton

/s/ FREDERICK J. LIZZA President, Chief Executive Officer December 29, 1997
- ----------------------------------- and Director
Frederick J. Lizza (Principal Executive Officer)

/s/ DANIEL J. KOSSMANN Chief Financial Officer, December 29, 1997
- ----------------------------------- (Principal Financial and Accounting
Daniel J. Kossmann Officer)

/s/ R. STEPHEN CHEHEYL Director December 29, 1997
- -----------------------------------
R. Stephen Cheheyl

/s/ MANUEL CORREIA Director December 29, 1997
- -----------------------------------
Manual Correia

/s/ ROLAND D. PAMPEL Director December 29, 1997
- -----------------------------------
Roland D. Pampel

/s/ ROBERT P. SCHECHTER Director December 29, 1997
- -----------------------------------
Robert P. Schechter
</TABLE>

27
<PAGE> 29

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Infinium Software, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) in this Annual Report on Form 10-K present
fairly, in all material respects, the financial position of
Infinium Software, Inc. and its subsidiaries at September 30, 1996 and 1997, and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Boston, Massachusetts
October 20, 1997

F-1
<PAGE> 30

INFINIUM SOFTWARE, INC.

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1996 1997
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 7,817 $ 9,779
Marketable securities at fair market value............................. 35,520 38,540
Accounts receivable, less allowance for doubtful accounts of $1,250 and
$1,569 at September 30, 1996 and 1997, respectively................. 12,354 18,930
Deferred income taxes.................................................. 2,427 1,167
Prepaid expenses and other current assets.............................. 3,569 4,946
------- -------
Total current assets................................................ 61,687 73,362
Property and equipment, net.............................................. 6,047 6,901
Capitalized software development costs, net.............................. 6,171 6,767
Goodwill and other intangible assets, net................................ -- 1,835
Deferred income taxes.................................................... -- 471
Other assets............................................................. 1,799 1,971
------- -------
Total assets........................................................ $75,704 $91,307
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 4,495 $ 5,221
Accrued expenses....................................................... 7,300 9,763
Income taxes payable................................................... 1,368 2,394
Deferred revenue....................................................... 24,853 31,990
------- -------
Total current liabilities........................................... 38,016 49,368
------- -------
Deferred income taxes.................................................... 2,038 --
------- -------
Commitments (Note 14)....................................................
Common stock, $.01 par value; authorized 40,000 shares, issued and
outstanding 11,114 and 12,162 shares at September 30, 1996 and 1997,
respectively........................................................... 111 122
Additional paid-in capital............................................... 27,394 33,325
Retained earnings........................................................ 8,145 8,502
Cumulative translation adjustment........................................ -- (10)
------- -------
Total stockholders' equity.......................................... 35,650 41,939
------- -------
Total liabilities and stockholders' equity.......................... $75,704 $91,307
======= =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-2
<PAGE> 31

INFINIUM SOFTWARE, INC.

CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER
30,
-------------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Revenue:
Software license fees....................................... $21,080 $24,115 $29,781
Service revenue............................................. 42,083 47,693 57,220
------- ------- -------
Total revenue............................................ 63,163 71,808 87,001
------- ------- -------
Operating costs and expenses:
Cost of software license fees............................... 3,829 3,823 5,070
Cost of services............................................ 15,333 16,562 22,400
Research and development.................................... 12,725 13,775 16,614
Sales and marketing......................................... 19,651 23,822 30,449
General and administrative.................................. 6,245 6,616 7,336
Write-off of in-process research and development acquired
(Note 6)................................................. -- -- 6,846
------- ------- -------
Total operating costs and expenses....................... 57,783 64,598 88,715
------- ------- -------
Income (loss) from operations................................. 5,380 7,210 (1,714)
Other income, net............................................. 293 1,526 1,923
------- ------- -------
Income before provision (benefit) for income taxes............ 5,673 8,736 209
Provision for (benefit from) income taxes..................... 1,989 3,146 (148)
------- ------- -------
Net income.................................................... $ 3,684 $ 5,590 $ 357
======= ======= =======
Per share data:
Net income per share........................................ $ 0.40 $ 0.49 $ 0.03
======= ======= =======
Weighted average common and common equivalent shares
outstanding.............................................. 9,401 11,369 12,235
======= ======= =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-3
<PAGE> 32

INFINIUM SOFTWARE, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
RETAINED TOTAL
COMMON ADDITIONAL EARNINGS NOTES CUMULATIVE STOCKHOLDERS'
SHARES COMMON PAID-IN (ACCUMULATED RECEIVABLE- TRANSLATION EQUITY
ISSUED STOCK CAPITAL DEFICIT) STOCKHOLDERS ADJUSTMENT (DEFICIT)
------ ------ ---------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1994..................... 8,246 $ 82 $ 1,266 $ (1,129) $ (457) -- $ (238)
Stock issued upon exercise
of stock options......... 12 1 32 33
Repayments of notes
receivable-stockholders... 78 78
Capital contributions from
stockholders (Note 11)... 1,275 1,275
Net income for the year.... 3,684 3,684
------ ---- ------- ------ ---- ---- -------
Balance at September 30,
1995..................... 8,258 83 2,573 2,555 (379) -- 4,832
Stock issued in connection
with initial public stock
offering, net of offering
expenses................. 1,334 13 12,814 12,827
Stock issued in connection
with follow-on public
stock offering, net of
offering expenses........ 500 5 6,558 6,563
Stock issued upon exercise
of stock options and
warrants................. 974 10 3,052 3,062
Stock issued in connection
with employee stock
purchase plan............ 48 -- 447 447
Income tax benefit from
exercise of stock
options.................. 1,950 1,950
Repayments of notes
receivable-stockholders... 379 379
Net income for the year.... 5,590 5,590
------ ---- ------- ------ ---- ---- -------
Balance at September 30,
1996..................... 11,114 111 27,394 8,145 -- -- 35,650
Stock issued in connection
with acquisition......... 770 8 4,506 4,514
Stock issued upon exercise
of stock options......... 205 2 748 750
Stock issued in connection
with employee stock
purchase plan............ 73 1 528 529
Income tax benefit from
exercise of stock
options.................. 149 149
Cumulative translation
adjustment............... (10) (10)
Net income for the year.... 357 357
------ ---- ------- ------ ---- ---- -------
Balance at September 30,
1997..................... 12,162 $122 $ 33,325 $ 8,502 $ -- $(10) $41,939
====== ==== ======= ====== ==== ==== =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE> 33

INFINIUM SOFTWARE, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 3,684 $ 5,590 $ 357
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 4,641 4,801 5,939
Allowance for doubtful accounts....................... 770 662 397
Deferred income taxes................................. (620) 737 (1,249)
Write-off of in-process research & development
acquired............................................ -- -- 6,846
Changes in operating assets and liabilities, net of
effect from the acquisition of Time Open Systems Ltd.:
Accounts receivable................................... (2,455) (1,180) (6,427)
Prepaid expenses and other current assets............. (266) (1,125) (1,345)
Other assets.......................................... (259) (265) (172)
Accounts payable...................................... 1,301 1,320 453
Accrued expenses...................................... 1,843 236 1,860
Income taxes payable.................................. 1,601 943 1,172
Deferred revenue...................................... 4,590 (164) 6,159
-------- -------- --------
Net cash provided by operating activities........ 14,830 11,555 13,990
-------- -------- --------
Cash flows from investing activities:
Purchase of marketable securities........................ (15,939) (82,815) (78,185)
Sale of marketable securities............................ 10,461 55,317 75,165
Purchase of property and equipment....................... (1,358) (4,051) (3,240)
Capitalization of software development costs............. (2,542) (3,544) (3,594)
Acquisition of Time (Note 6)............................. -- -- (3,443)
-------- -------- --------
Net cash used in investing activities............ (9,378) (35,093) (13,297)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from public stock offerings................. -- 19,390 --
Proceeds from the exercise of stock options, warrants,
and employee stock purchase plan...................... 33 3,509 1,279
Principal payments under capital lease obligations....... (672) (84) --
Proceeds from repayments of notes
receivable -- stockholders............................ 78 379 --
-------- -------- --------
Net cash (used in) provided by financing
activities..................................... (561) 23,194 1,279
-------- -------- --------
Effect of foreign exchange rate on cash.................... -- -- (10)
Net increase (decrease) in cash and cash equivalents....... 4,891 (344) 1,962
Cash and cash equivalents, beginning of year............... 3,270 8,161 7,817
-------- -------- --------
Cash and cash equivalents, end of year..................... $ 8,161 $ 7,817 $ 9,779
======== ======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-5
<PAGE> 34

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

1. THE COMPANY

Infinium Software, Inc. (the "Company") was incorporated in 1981. The
Company develops, markets and provides consulting and support services for a
full range of client/server financial management, human resources management,
materials management and process manufacturing business software applications
geared to mid-size companies.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned domestic and foreign subsidiaries. All significant
intercompany transactions and balances have been eliminated.

RECLASSIFICATION

Certain amounts in the notes to the consolidated financial statements have
been reclassified to conform with the current year presentation.

REVENUE RECOGNITION

Revenue from software license fees are recognized when a contract has been
executed, the product has been delivered, all significant contractual
obligations have been satisfied and collection of the related receivable is
probable. Revenue from sales through international distributors is recorded net
of distributor commissions. Maintenance revenue, including those bundled with
the initial license fee, are deferred and recognized ratably over the service
period. Consulting and training service revenues are recognized as the services
are performed.

In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-2 "Software Revenue Recognition," (the "SOP").
This SOP is effective for transactions entered into in fiscal years beginning
after December 15, 1997; however, earlier application is permitted as of the
beginning of fiscal years. The Company will adopt this SOP in its fiscal year
beginning October 1, 1997. The application of the SOP would not have had a
material effect on the Company's results of operations as reported herein as the
revenue recognition rules utilized by the Company are substantially consistent
with the provisions of the SOP. Accordingly, adoption of this SOP will not have
a material effect on future results of operations.

CASH EQUIVALENTS AND MARKETABLE SECURITIES

The Company invests its excess cash primarily in securities of government
agencies, high-grade commercial paper and mutual funds that invest primarily in
the securities of government agencies. These investments are subject to minimal
credit and market risk. For purposes of the consolidated statement of cash
flows, the Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Marketable
securities include securities purchased with an original maturity of greater
than three months.

Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("FAS 115"), "Accounting for Certain Investments in
Debt and Equity Securities," on a prospective basis. Under this standard, the
Company is required to classify its marketable securities into one or more of
the following categories: held-to-maturity, trading or available-for-sale. FAS
115 requires that, except for debt securities classified as held-to-maturity,
investments in debt and equity securities should be reported at fair value. The
adoption of FAS 115 did not have a material effect on the Company's financial
condition or results

F-6
<PAGE> 35

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

of operations. At September 30, 1996 and 1997, all of the Company's investments
are classified as available-for-sale.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the depreciable
assets. Repair and maintenance costs are expensed as incurred.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially expose the Company to concentrations
of credit risk include accounts receivable. To minimize this risk, the Company
generally requires a cash deposit upon contract signing. In addition, the
Company maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management expectations.

RESEARCH AND DEVELOPMENT AND CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Research and development expenses, other than certain software development
costs, are charged to expense as incurred. In accordance with the provisions of
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed," the Company
capitalizes certain software development costs upon technological feasibility.
Amortization of capitalized software development costs is provided upon
commercial release of the products at the greater of the ratio of current
product revenue to the total of current and anticipated product revenue or on a
straight-line basis over the estimated economic life of the software, which the
Company has determined is not more than three years.

Amortization expense of capitalized software development costs for the
years ended September 30, 1995, 1996 and 1997 amounted to $2,485, $2,744 and
$2,998, respectively. Included in amortization expense in fiscal 1995 are $160
of certain capitalized software development costs relating to a foreign language
version of the Company's financial management products which were determined not
to be realizable, and accordingly, all associated capitalized software
development costs were written off.

Accumulated amortization of capitalized software development costs was
$8,981 and $11,979 at September 30, 1996 and 1997, respectively. Included in
capitalized software development costs at September 30, 1996 and 1997 are $1,801
and $1,892, respectively, related to products which have not yet been
commercially released. Accordingly, amortization of these costs had not
commenced.

FOREIGN CURRENCY TRANSLATION

Effective for fiscal year 1997, the Company changed the functional currency
of the UK subsidiary to that of the local currency. Accordingly, assets and
liabilities are translated at current exchange rates. Income and expense items
are translated using average rates during the year. Translation adjustments are
not included in determining consolidated net income but rather are accumulated
and reported as a separate component of stockholders' equity.

The functional currency of the Company's other foreign subsidiaries is the
U.S. dollar. Monetary assets and liabilities of the subsidiaries are translated
into U.S. dollars at the exchange rate in effect at period end and nonmonetary
assets and liabilities are remeasured at historic exchange rates. Income and
expenses are remeasured at the average exchange rate for the period. Translation
gains and losses are reflected in the consolidated statement of income.

F-7
<PAGE> 36

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME TAXES

Income taxes are calculated using Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes". SFAS 109 is an
asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, SFAS 109 generally considers all expected
future events other than enactments of changes in the tax law or rates. Prior to
the adoption of SFAS 109, income tax expense was determined using the deferred
method. Deferred tax expense was based on items of income and expenses that were
reported in different years in the financial statements and tax returns and were
measured at the tax rate in effect in the year the difference originated.

NET INCOME PER SHARE

Net income per share is determined by dividing net income applicable to
common stock by the weighted average number of common shares and common
equivalent shares outstanding during the period. Common share equivalents are
computed using the treasury stock method and consist of common stock which may
be issuable upon exercise of outstanding common stock options and warrants to
purchase common stock, when dilutive.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock options granted by the Company during the twelve months
preceding the offering date have been included in the calculation of common and
common equivalent shares outstanding as if they were outstanding for all periods
presented.

STOCK COMPENSATION

The Company's employee stock option plans are accounted for in accordance
with Accounting Principle Board Opinion No. 25, "Accounting for Stock Issued to
Employees." In October 1996, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." (See Note 9.)

RECENTLY ISSUED ACCOUNTING STANDARDS

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the

F-8
<PAGE> 37

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.

3. CASH EQUIVALENTS AND MARKETABLE SECURITIES

Following is a summary of the fair market value of available-for-sale
securities, by balance sheet classification, as of September 30, 1996 and 1997:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1996 1997
------- -------
<S> <C> <C>
Cash equivalents:
State Government obligations........................... $ 1,000 $ 6,500
Corporate debt obligations............................. 997 --
Money market fund...................................... 2,077 2,292
Marketable securities:
U.S. Government obligations............................ 14,571 5,428
State Government obligations........................... 6,601 27,201
Corporate debt obligations............................. 14,248 5,122
Foreign debt obligations............................... -- 789
Other.................................................. 100 --
------- -------
$39,594 $47,332
======= =======
</TABLE>

Marketable securities are carried at fair market value, which approximates
amortized cost. The contractual maturities of all available-for-sale securities
classified as cash equivalents are less than three months. Available-for-sale
securities classified as marketable securities with fair market values of
$19,553, $8,191, $1,250 and $9,546 have contractual maturities of less than one,
one to five, five to ten, and greater than ten years, respectively. All of the
Company's marketable securities are classified as current at September 30, 1996
and 1997 as these funds are highly liquid and are available to meet working
capital needs and to fund current operations. Gross unrealized gains and losses
as of September 30, 1996 and 1997 and realized gains and losses on sales of
securities for the years ended September 30, 1996 and 1997 were not significant.

4. BALANCE SHEET COMPONENTS

Property and equipment, net consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
USEFUL LIFE 1996 1997
------------- ------- -------
<S> <C> <C> <C>
Computer equipment................................. 2 to 5 years $ 8,961 $14,204
Furniture and fixtures............................. 5 years 3,479 1,960
Leasehold improvements............................. Lease term 1,351 1,097
Land............................................... 287 287
------- -------
14,078 17,548
Less-accumulated depreciation and amortization..... 8,031 10,647
------- -------
$ 6,047 $ 6,901
======= =======
</TABLE>

F-9
<PAGE> 38

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Goodwill and other intangible assets, net consists of the following at
September 30, 1997:

<TABLE>
<S> <C>
Goodwill, net of $62 tax benefit.................................... $1,415
Workforce in place.................................................. 468
Software............................................................ 312
------
2,195
Less -- accumulated amortization.................................... 360
------
$1,835
======
</TABLE>

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1996 1997
------ ------
<S> <C> <C>
Employee compensation and benefits......................... $4,716 $5,596
Accrued royalties.......................................... 883 1,283
Accrued professional fees.................................. 329 324
Other...................................................... 1,372 2,560
------ ------
$7,300 $9,763
====== ======
</TABLE>

5. OTHER INCOME, NET

Other income, net consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------
1995 1996 1997
----- ------ ------
<S> <C> <C> <C>
Interest income................................... $ 456 $1,620 $2,035
Interest expense.................................. (42) (4) (2)
Foreign exchange loss............................. (121) (90) (110)
----- ------ ------
$ 293 $1,526 $1,923
===== ====== ======
</TABLE>

Cash paid for interest totaled $46, $4 and $1 for the years ended September
30, 1995, 1996 and 1997, respectively.

6. ACQUISITION

On January 6, 1997, the Company acquired all of the outstanding stock of
Time (Open Systems) Limited ("Time"), a UK-based privately held software concern
which developed and marketed a suite of client/server financial applications.
The transaction was consummated for $2,793 in cash, approximately 770 shares of
the Company's common stock which was issued at the closing of the acquisition
and is being held pursuant to an escrow agreement under which the shares will be
released ratably over a three year period and $650 of related acquisition costs.
The value ascribed to the shares issued was $4,514.

F-10
<PAGE> 39

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The acquisition was accounted for as a purchase. Accordingly, the results
of the operations of Time and the fair market values of the acquired assets and
assumed liabilities were included in the Company's financial statements as of
the date of the acquisition. The purchase price was allocated to the acquired
assets and liabilities as follows:

<TABLE>
<S> <C>
Accounts receivable................................................ $ 546
Other current assets............................................... 32
Property and equipment............................................. 132
In-process research and development................................ 6,846
Acquired software.................................................. 312
Assembled workforce................................................ 468
Goodwill........................................................... 1,477
Current liabilities................................................ (1,856)
-------
$ 7,957
=======
</TABLE>

The amount allocated to in-process research and development was determined
by an independent appraiser and represented technology which had not reached
technological feasibility and had no alternative future use. Accordingly, this
amount of $6,846 was charged to operations at the acquisition date. The amounts
allocated to intangible assets are being amortized on a straight line basis over
their expected useful lives of 2-7 years.

Pro-forma statements of operations are not shown as they would not differ
materially from reported results.

7. INCOME TAXES

The components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Current:
Federal............................................... $2,339 $2,496 $ 1,193
State................................................. 230 143 77
Foreign............................................... 40 59 154
------ ------ -------
Total current...................................... 2,609 2,698 1,424
------ ------ -------
Deferred:
Federal............................................... (496) 382 (1,464)
State................................................. (124) 66 (108)
------ ------ -------
Total deferred..................................... (620) 448 (1,572)
------ ------ -------
$1,989 $3,146 $ (148)
====== ====== =======
</TABLE>

F-11
<PAGE> 40

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The income tax provision differs from an amount computed by applying the
U.S. statutory federal income tax rate to pretax income as follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------
1995 1996 1997
------ ------ -----
<S> <C> <C> <C>
Statutory federal income tax.............................. $1,929 $2,971 $ 71
State income taxes........................................ 70 138 (22)
Research and development credits.......................... (444) (139) (429)
Foreign tax rate differential............................. 35 (90) 28
Other..................................................... 399 266 204
------ ------ -----
$1,989 $3,146 $(148)
====== ====== =====
</TABLE>

Deferred tax assets and liabilities are comprised of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1996 1997
------ ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................................. $ 144 $ 108
Intangible assets................................................ -- 2,396
Deferred revenues................................................ 2,372 1,817
Accrued expenses and reserves not currently deductible........... 804 468
Other............................................................ 246 71
------ ------
Total deferred tax assets..................................... 3,566 4,860
------ ------
Deferred tax liabilities:
Prepaid expenses deducted currently.............................. 496 925
Capitalized software development costs........................... 2,288 2,290
Foreign translation losses....................................... 279 --
Other............................................................ 115 7
------ ------
Total deferred tax liabilities................................ 3,178 3,222
------ ------
$ 388 $1,638
====== ======
</TABLE>

As of September 30, 1997, the Company had federal net operating loss
carryforwards of $317 which expire at various dates through 2010.

Ownership changes, as defined in the Internal Revenue Code, may limit the
amount of net operating loss and tax credit carryforwards that can be utilized
to offset future taxable income or tax liability. The amount of the annual
limitation is determined in accordance with Section 382 of the Internal Revenue
Code.

Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries because those earnings are
intended to be permanently reinvested. Such earnings would become taxable upon
the sale or liquidation of these foreign subsidiaries or upon the remittance of
dividends. It is not practicable to estimate the amount of additional tax that
might be payable on the foreign earnings. Upon remittance, certain foreign
countries impose withholding taxes that are then available, subject to certain
limitations, for use against the Company's U.S. tax liability. The amount of
withholding tax that would be payable upon remittance of the entire amount of
undistributed earnings would not be material.

Cash paid for income taxes, net of refunds received, totaled $1,013, $1,707
and $9 for the years ended September 30, 1995, 1996 and 1997, respectively.

F-12
<PAGE> 41

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

8. REVOLVING LINE OF CREDIT

The Company had a revolving line of credit agreement with a bank under
which it could borrow up to $5,000 for working capital. Borrowings under the
credit line were subject to a borrowing base, as defined in the agreement, and
were collateralized by the Company's accounts receivable. Outstanding borrowings
bore interest at the bank's prime rate (8.25% at September 30, 1996) plus 2.0%
(subject to adjustment under the terms of the agreement), payable monthly. Under
the terms of the agreement, the Company was required to comply with certain
covenants, including maintaining minimum amounts of working capital. Other
restrictive covenants limit indebtedness, liens, mergers and acquisitions and
additional stock issuances. The Company was in compliance with those covenants
at September 30, 1996. The line of credit expired in October 1996. The Company
had no borrowings under this facility and thus no amounts were outstanding at
September 30, 1996. The Company did not renew this credit line or enter into any
others during the year ended September 30, 1997.

9. STOCKHOLDERS' EQUITY

RECAPITALIZATION

On October 2, 1995, the Company's Board of Directors authorized 1,000
shares of $0.01 par value preferred stock. Preferred stock may be issued at the
discretion of the Board of Directors of the Company (without stockholder
approval) with such designations, rights and preferences as the Board of
Directors may determine from time to time. The preferred stock may have
dividend, liquidation, redemption, conversion, voting or other rights which may
be more expansive than the rights of the holders of the common stock.

The Company's Board of Directors declared a 2-for-1 stock split, effected
in the form of a stock dividend, paid in August 1995 to stockholders of record
on August 14, 1995. On October 2, 1995, the Company's Board of Directors
approved an increase in the authorized number of shares of common stock from
10,000 shares to 40,000 shares. The Company's Board of Directors also declared a
1.4-for-1 stock split, effected in the form of a stock dividend paid to
stockholders of record on November 13, 1995. All shares and per share amounts
included in the consolidated financial statements have been adjusted to give
retroactive effect to the stock splits for all periods presented.

PUBLIC OFFERINGS

The Company completed an initial public offering of Common Stock on
November 17, 1995. A total of 2,300 shares were sold at $11.00 per share, of
which 1,334 were sold by the Company and 966 by selling stockholders. Proceeds
to the Company were $12,827, net of underwriting discounts and offering
expenses. Additionally, the Company completed a follow-on public offering of
Common Stock on May 9, 1996. A total of 2,870 shares were sold at $14.75 per
share, of which 500 were sold by the Company and 2,370 by selling stockholders.
Proceeds to the Company were $6,563, net of underwriting discounts and offering
expenses.

STOCK OPTIONS

In October 1995, the Board of Directors approved the 1995 Stock Plan (the
"1995 Plan") which provides for the issuance of up to 3,500 shares of common
stock pursuant to the grant of qualified and non-qualified stock options, stock
awards or purchase rights to employees, consultants, directors and officers of
the Company. The options are generally exercisable over three to five year
periods, as determined by the Compensation Committee. The Compensation Committee
is comprised of members of the Company's Board of Directors. The option price is
set at the fair market value of the Company's stock on the date of the option
grant, as determined by the Compensation Committee.

F-13
<PAGE> 42

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The Company also has a 1989 Incentive Stock Option Plan (the "1989 Plan")
and a 1984 Incentive Stock Option Plan (the "1984 Plan"), with authorized
options for 2,800 and 1,400 shares of common stock, respectively, under terms
similar to those described in the preceding paragraph. In conjunction with the
approval of the 1995 Plan, the Board of Directors formally terminated the 1989
Plan and as such no future grants will be made under this plan. Authority to
grant additional options under the 1984 Plan has expired.

In October 1995, the Board of Directors approved the 1995 Non-Employee
Director Stock Option Plan (the "Director Plan") under which options to purchase
a maximum of 210 shares of the Company's common stock may be granted to
non-employee directors. Under the Director Plan, each non-employee director will
be granted an option to purchase 28 shares of common stock upon first joining
the Board of Directors and 4 shares at each successive annual meeting of
stockholders, beginning at the Company's annual meeting of stockholders for the
fiscal year ended September 30, 1996, at an exercise price per share equal to
the then fair market value per common share. Options granted under the Director
Plan become exercisable in four equal annual installments commencing one year
after the date of grant provided that the optionee then remains a director or
consultant. The term of each option granted under the Director Plan will be for
a period of ten years from the date of the grant.

At September 30, 1997, the Company had 1,711 shares of its common stock
available for future grant and had reserved 3,036 shares of its common stock for
issuance upon exercise of outstanding stock options and warrants under the
Plans.

Transactions under the 1984, 1989, 1995 and the Director Plans during the
years ended September 30, 1996 and 1997 are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------
1996 1997
------------------------- -------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period....... 2,397 $ 3.69 1,927 $ 5.74
Granted................................ 721 10.43 1,467 6.70
Exercised.............................. (974) 3.35 (206) 3.66
Cancelled.............................. (217) 8.23 (152) 5.83
----- -----
Outstanding at end of period............. 1,927 3,036
===== =====
Options exercisable at end of period..... 539 800
===== =====
Weighted average fair value of options
granted during the period.............. $ 5.96 $ 4.08
</TABLE>

F-14
<PAGE> 43

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following tables summarize the employee and director stock options
outstanding at September 30, 1996 and 1997:

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
--------------------------------------------------------------------------------------
OPTIONS OUTSTANDING
--------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
2.85 -- 4.10............... 1,164 7.2 $ 3.71 500 $ 3.51
5.17 -- 5.35............... 155 8.7 5.19 39 5.19
8.25 -- 11.38............... 601 9.4 9.70 -- --
13.25 -- 16.25............... 7 9.4 15.25 -- --
----- ---
1,927 539
===== ===
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------------------------------------------------------------------
OPTIONS OUTSTANDING
--------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
2.85 -- 4.10............... 899 6.3 $ 3.73 586 $ 3.61
5.17 -- 7.63............... 1,390 9.1 6.24 69 5.19
8.00 -- 12.00............... 723 8.6 9.56 143 9.75
12.13 -- 16.25............... 24 9.4 13.27 2 15.25
----- ---
3,036 800
===== ===
</TABLE>

FAIR VALUE DISCLOSURES

Had compensation cost for the Company's option plans and employee stock
purchase plan been determined based on the fair value at the grant dates, as
prescribed in SFAS 123, the Company's net income and net income per share would
have been as follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
30,
---------------------
1996 1997
------ ------
<S> <C> <C>
Net income:
As reported.......................................... $5,590 $ 357
Pro-forma............................................ 5,237 (931)
Net income per share:
As reported.......................................... $ 0.49 $ 0.03
Pro-forma............................................ 0.46 (0.08)
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black Scholes method with the following assumptions used for grants during
the applicable period: dividend yield of 0.0% for both periods; risk-free
interest rates of 5.36% to 6.39% for options granted during the year ended
September 30, 1996 and 5.51% to 6.76% for options granted during the year ended
September 30, 1997; weighted average expected option term of 5 years for both
periods; and volatilities of 68.06% for the year ended September 30, 1996 and
65.67% for the year ended September 30, 1997.

F-15
<PAGE> 44

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

1995 EMPLOYEE STOCK PURCHASE PLAN

On October 2, 1995, the Board of Directors approved the 1995 Employee Stock
Purchase Plan (the "Purchase Plan") which enables eligible employees to purchase
shares of the Company's common stock. The Purchase Plan is administered by the
Compensation Committee of the Board of Directors. Under the Purchase Plan,
eligible employees may purchase common shares during six-month payment periods.
The exercise price per share is 85% of the lesser of the market price per share
on the first or last business day of the six-month period. The maximum number of
shares of common stock that an employee may purchase in any six-month period is
five hundred shares. An employee's rights under the Purchase Plan terminate upon
voluntary withdrawal from the plan at any time or upon termination of
employment. The Company has reserved 1,400 shares of common stock for issuance
under the Purchase Plan.

The first period commenced on November 17, 1995 (the effective date of the
Company's initial public offering) and ended on June 30, 1996. Employees
purchased 48 shares of stock at $9.35 per share. In subsequent six-month
periods, employees purchased 40 shares of stock at $7.12 per share and 33 shares
of stock at $7.44 per share.

COMMON STOCK WARRANTS

In connection with the revolving line of credit agreement discussed in Note
8, warrants were issued for the purchase of 49 shares of the Company's common
stock. The warrants are exercisable at an initial per share price of $6.07,
subject to adjustment under the terms of the agreement, and expire on June 10,
1999. The value of the warrants at the issuance date was immaterial. On July 17,
1996, the warrants were exercised in full and 31 shares were issued.

10. RETIREMENT SAVINGS PLAN

The Company has a savings and profit-sharing plan covering all eligible
employees which is qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended. The Company may, at its option, provide matching
contributions up to 50% of each participating employee's contributions to the
plan, subject to a maximum of 2 1/2% of compensation. Total contributions by the
Company to the plan for the years ended September 30, 1995, 1996 and 1997 were
$261, $283 and $553, respectively.

In June 1996, a Group Personal Pension Plan was established for eligible
employees in the United Kingdom allowing employees to contribute a percentage of
their salary into a personal retirement savings plan. For those employees
electing to contribute more than 3% of their salary into their plan, the Company
contributes a fixed 3% on their behalf. Company contributions to individual
plans aggregated $32 and $83 for the years ended September 30, 1996 and 1997,
respectively.

A Registered Retirement Savings Plan was established in August 1997
allowing eligible employees in Canada to contribute a percentage of their
compensation into a retirement savings plan. For the year ended September 30,
1997, the Company contributed $11 under this plan.

11. INDUSTRY SEGMENT, GEOGRAPHIC INFORMATION AND CUSTOMER INFORMATION

The Company operates in a single industry segment: the design, development,
sale, service and support of proprietary software products.

F-16
<PAGE> 45

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The Company operates in diverse geographic areas. Income (loss) from
operations by geographic area is as follows:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
North America (principally the United States)........... $5,726 $7,197 $ (485)
Europe (principally the United Kingdom)................. (864) (272) (1,292)
Other international..................................... 518 285 63
------ ------ ------
$5,380 $7,210 $(1,714)
====== ====== ======
</TABLE>

No geographic area outside North America accounted for more than 10% of the
Company's consolidated revenues or identifiable assets for the years ended
September 30, 1995, 1996 and 1997.

No single customer accounted for more than 10% of the Company's
consolidated revenues for the years ended September 30, 1995, 1996 and 1997.

12. RELATED PARTY TRANSACTIONS

NOTES RECEIVABLE -- STOCKHOLDERS

In connection with a business combination in September 1991, which was
accounted for as a purchase, the Company loaned an aggregate of $500 to two
owners of the acquired company. Such owners became stockholders of the Company
in connection with the business combination. The notes, which bore interest at
9.0%, were payable in minimum semi-monthly installments. In addition, any
bonuses and severance pay earned by the holders and any proceeds to the holders
from the sale of common stock of the Company were offset against the notes until
the entire principal and interest due on the notes were paid. The notes were
collateralized by, among other things, any proceeds from the sale of common
stock by the holders and, accordingly, are included as a reduction of
stockholders' equity in the consolidated balance sheets. The notes were repaid
in full on November 24, 1995.

LIFE INSURANCE TRUSTS

Three principal stockholders of the Company have split-dollar life
insurance policies (the "Policies"). The Policies are owned by various trusts.
The trusts have executed Collateral Assignment Agreements for the benefit of the
Company. Under the Collateral Assignment Agreements, the Company pays the annual
premiums of the Policies, which approximated $263 for each of the years ended
September 30, 1995 and 1996, respectively and $143 for the year ended September
30, 1997. The premium payments made under the Policies are recorded as advances
to the trusts and are secured by the cash surrender value of related insurance
policies. Cash advances in excess of the cash surrender value of the related
insurance policies are expensed when advanced. Total advances to the trusts of
$1,799 and $1,971 at September 30, 1996 and 1997, respectively, are included in
other assets in the consolidated balance sheet. Each Collateral Assignment
Agreement can be terminated at any time on thirty days' notice by either the
Company or the related trust. Upon termination, (i) the Company and the trust
can agree on disposition of the policy, or (ii) the trust can repay the advances
to the Company or (iii) the net cash surrender value would be distributed to the
Company to the extent of the advances with the balance of the net cash surrender
value being paid to the trust. If a Collateral Assignment Agreement is not
terminated and the principal stockholder dies, the death benefits will be paid
first to the Company to the extent of the advances. There is no agreement
between the Company and any of the principal stockholders as to whether the
Collateral Assignment Agreement would be terminated on the disassociation of the
stockholder from the Company.

F-17
<PAGE> 46

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

In October 1994, the three principal stockholders of the Company waived
their right to the cash surrender value of the Policies through that date.
Advances to the trusts equal to the cash surrender value at October 1, 1994 of
$1,275, were recorded as other assets in the consolidated balance sheet as a
noncash capital contribution.

During 1995, the trusts borrowed $875 of the cash surrender value of the
Policies. The trusts' obligations to repay those funds have been secured by a
pledge of an aggregate of 330 shares of the Company's common stock owned by the
principal stockholders. The trusts have assigned the stock pledges to the
Company as replacement collateral. During fiscal 1996, the trust repaid a net of
$565 of those borrowings, and released 232 shares of the Company's common stock
from the pledge. During fiscal 1997, the trust borrowed an additional $47.
Subsequent to year end, all loans were repaid in full.

CONSULTING ARRANGEMENT

The Company has engaged a principal stockholder of the Company, for
consulting services provided to the Company under various agreements since July
1, 1984. The current agreement was amended on September 13, 1995 to provide that
the principal stockholder will be paid for such consulting services in the
future at a daily rate plus reimbursement for expenses. For fiscal years 1995,
1996 and 1997 the Company paid this principal stockholder a total of $144, $24
and $0 respectively, for consulting services rendered to the Company. There were
no significant amounts owed to the principal stockholder at September 30, 1996
or 1997. The consulting agreement was terminated on November 10, 1997.

13. RESEARCH AND DEVELOPMENT AGREEMENT

In August 1994, the Company entered into an arrangement whereby a third
party agreed to fund certain research and development activities of the Company.
Product development fees received under the agreement for research and
development activities were recorded as a reduction of research and development
expenses on a percentage-of-completion basis. Payments received for previously
developed products were recorded as liabilities in light of the Company's future
royalty obligations. Through September 30, 1995, the Company received cumulative
product development fees of $1,911, of which $1,318 was recorded as a reduction
of research and development expenses and $593 was recorded as a liability. There
was no external funding in fiscal 1996 or 1997 under this agreement.

The agreement provides for future royalty payments based on revenues
generated by products resulting from the funded activities. Total payments,
which are based on a percentage of the related product revenues, are limited to
130% of the funds received by the Company under the agreement. Royalties of $36,
$242 and $296 were incurred during the year ended September 30, 1995, 1996 and
1997, respectively.

In October, 1996, the Company entered into a research funding agreement
with a business partner to fund development activities for enabling double byte
character set capabilities of the Company's Human Resource product, as defined.
The agreement provided $490 of assistance towards this initiative of which $255
was recorded as a reduction of research and development expenses and $235 was
recorded as a liability during fiscal 1997.

14. COMMITMENTS AND CONTINGENCIES

LEASES

The Company has several operating lease agreements primarily involving real
estate and computers and equipment. These leases are noncancelable and expire on
various dates through 2001 except for the Company's Paris, France facility lease
which expires in 2004, its Hyannis, Massachusetts facility lease which

F-18
<PAGE> 47

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

expires in 2005, its London, England facility lease which expires in 2015 and
its Chatham, England facility lease which expires in 2019.

Future minimum lease payments under operating leases with initial or
remaining terms of one year or more are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------------------------
<S> <C>
1998............................................... $ 3,793
1999............................................... 2,429
2000............................................... 1,619
2001............................................... 1,158
2002............................................... 1,135
Thereafter......................................... 8,905
-------
Total future minimum lease payments................ $19,039
=======
</TABLE>

Total rent expense for operating leases was $4,594 and $4,515 and $4,764
for the years ended September 30, 1995, 1996 and 1997, respectively.

LEGAL MATTERS

F-19
<PAGE> 48

SCHEDULE II

INFINIUM SOFTWARE, INC.

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

ALLOWANCE FOR DOUBTFUL ACCOUNTS:

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO
YEAR ENDED BEGINNING COSTS AND OTHER DEDUCTIONS BALANCE AT
SEPTEMBER 30, OF PERIOD EXPENSES ACCOUNTS AND WRITE-OFFS OTHER END OF PERIOD
- ------------- ---------- ---------- ---------- -------------- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
1995....... $1,300 $770 -- $ (925) -- $ 1,145
1996....... 1,145 662 -- (557) -- 1,250
1997....... 1,250 397 -- (243) $ 165 1,569
</TABLE>

S-1
<PAGE> 49

INFINIUM SOFTWARE, INC.

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Intentionally omitted.
3.2 -- Second Restated Articles of Organization of the Registrant (incorporated by
reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
3.3 -- Intentionally omitted.
3.4 -- Articles of Amendment of the Company (incorporated by reference to Exhibit 3(I) to
the Company's Form 10-Q for the quarterly period ended March 31, 1997).
3.5 -- Third Amended and Restated By-Laws of the Company (incorporated by reference to
Exhibit 3(I) to the Company's Form 10-Q for the quarterly period ended March 31,
1997).
4.1 -- Specimen certificate representing the Common Stock (incorporated by reference to
Exhibit 4 to the Company's Form 10-Q for the quarterly period ended March 31, 1997)
4.2 -- Intentionally omitted.
10.1* -- 1984 Incentive Stock Option Plan, as amended as of August 23, 1988 (incorporated by
reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
10.2* -- 1989 Stock Option Plan, as amended as of October 1, 1994 (incorporated by reference
to Exhibit 10.2 to the Registrant's Registration Statement on Form S-1,
Registration No. 33-97866).
10.3* -- 1995 Stock Plan (incorporated by reference to Exhibit 10.3 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-97866).
10.4* -- 1995 Employee Stock Purchase Plan, (incorporated by reference to Exhibit 10.4 to
the Registrant's Registration Statement on From S-1, Registration No. 33-97866).
10.5* -- 1995 Non-Employee Director Stock Option Plan (incorporated by reference to Exhibit
10.5 to the Registrant's Registration Statement on Form S-1, Registration No.
33-97866).
10.6 -- Lease dated March 31, 1995 between the Registrant and Independence Park Associates
Realty Trust as of August 1995 (incorporated by reference to Exhibit 10.6 to the
Registrant's Registration Statement on Form S-1, Registration No. 33-97866).
10.7* -- Form of Executive Compensation Plan (incorporated by reference to Exhibit 10.9 to
the Registrant's Registration Statement on Form S-1, Registration No. 33-97866).
10.8* -- IBM Assistance Agreement, as amended as of June 30, 1995, between the Registrant
and International Business Machines Corporation (incorporated by reference to
Exhibit 10.10 to the Registrant's Registration Statement on Form S-1, Registration
No. 33-97866).
10.9 -- Intentionally omitted.
10.10 -- Intentionally omitted.
10.11 -- Intentionally omitted.
10.12 -- Intentionally omitted.
10.13 -- Intentionally omitted.
10.14* -- Form of 1995 Stock Plan Option Agreement (incorporated by reference to Exhibit
10.16 to the Registrant's Registration Statement on Form S-1, Registration No.
33-97866).
10.15* -- Register of Amendments, Subsections 3.1 and 7.3.4, 1989 Stock Option Plan
(incorporated by reference to Exhibit 10.17 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-97866).
10.16* -- Register of Amendments, Article 5, 1995 Employee Stock Purchase Plan (incorporated
by reference to Exhibit 10.18 to the Registrant's Registration Statement on Form
S-1, Registration No. 33-97866).
11.1 -- Statement regarding Computation of Per Share Earnings.
21.1 -- Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the
Registrant's Registration Statement on Form S-1, Registration No. 33-97866).
23.1 -- Consent of Price Waterhouse LLP.
</TABLE>

X-1
<PAGE> 50

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<S> <C> <C>
24.1 -- Power of Attorney (included on page 27).
27 -- Financial Data Schedule
99 -- Infinium Software, Inc. Corporate Information
</TABLE>

- ---------------
* Indicates a management contract or any compensatory plan, contract or
arrangement required to be filed as an exhibit to Item 14(c).

X-2
<PAGE> 51

SKU 1452-AR-98

<PAGE> 1

EXHIBIT 11.1

INFINIUM SOFTWARE, INC.

COMPUTATION OF NET INCOME PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1995 1996 1997
------ ------- -------
<S> <C> <C> <C>
Net income......................................................... $3,684 $ 5,590 $ 357
Net interest income pursuant to APB 15, paragraph 38(b)............ 88 -- --
------ ------- -------
Net income attributable to common shares........................... $3,772 $ 5,590 $ 357
====== ======= =======
Weighted average common and common equivalent shares outstanding:
a. Shares attributable to common stock outstanding............... 8,251 10,070 11,531
b. Shares attributable to common stock options and warrants
pursuant to APB 15, paragraph 38(a)........................... 820 1,299 704
c. Shares attributable to common stock options pursuant to SAB
83............................................................ 330 -- --
------ ------- -------
Weighted average common and common equivalent shares outstanding... 9,401 11,369 12,235
====== ======= =======
Net income per share............................................... $ 0.40 $ 0.49 $ 0.03
====== ======= =======
</TABLE>

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-05439) of Infinium Software, Inc. of our report
dated October 20, 1997 appearing on page F-1 in this Annual Report on Form 10-K.

PRICE WATERHOUSE LLP

Boston, Massachusetts
December 26, 1997

<PAGE> 1

EXHIBIT 99

INFINIUM SOFTWARE, INC. CORPORATE INFORMATION

EXECUTIVE OFFICERS

ROBERT A. PEMBERTON
Chairman of the Board

FREDERICK J. LIZZA
President and Chief Executive Officer

JOHN W. BAUMSTARK
Senior Vice President, Field Operations

DANIEL J. KOSSMANN
Chief Financial Officer, Vice President and Treasurer

ANNE MARIE MONK
General Counsel, Vice President, Secretary and Clerk

FRANCIS J. TORBEY
Senior Vice President, Application Development

STOCK LISTING
- --------------
Nasdaq National Market Trading Symbol: INFM

INTERNET
- --------
Additional corporate information is available on World Wide Web
http://www.infinium.com

ANNUAL MEETING
- -----------------
The Annual Meeting of Stockholders of the Company will be held on Friday,
February 6, 1998 at 4:00 p.m., local time, at the Tara Hyannis Hotel & Resort
located at the West End Circle, Hyannis, Massachusetts

TRANSFER AGENT
- ----------------
BankBoston, N.A. c/o Boston EquiServe, LP
Post Office Box 8040
Boston, Massachusetts 02266-8040

INDEPENDENT AUDITORS
- ----------------------
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110

DIRECTORS

ROBERT A. PEMBERTON
Chairman of the Board,
Infinium Software, Inc.

FREDERICK J. LIZZA
President and Chief Executive Officer,
Infinium Software, Inc.

R. STEPHEN CHEHEYL
Director,
Auspex Systems, Inc., ON Technology Corporation and Sapient Corporation

MANUEL CORREIA
Executive Vice President and Chief Operating Officer,
CoWare, Inc.;
Director,
C.ATS Software Inc.

ROLAND D. PAMPEL
Director,
Peritus Software, Inc.;
Director,
Cayenne Software, Inc.

ROBERT P. SCHECHTER
President, Chief Executive Officer and Director,
Natural MicroSystems Corporation;
Director,
MRS Technology, Inc. and Raptor Systems, Inc.

COUNSEL
- --------
Hill & Barlow
100 Oliver Street
One International Place
Boston, Massachusetts 02110
<PAGE> 2

INFINIUM SOFTWARE, INC. OFFICES

CORPORATE HEADQUARTERS
- -------------------------
Infinium Software, Inc.
25 Communications Way
Hyannis, MA 02601
Telephone: (508) 778-2000

REGIONAL OFFICES
- -----------------
ATLANTA
Two Ravinia Drive
Suite 800
Atlanta, GA 30346
Telephone: (770) 392-6090

BOSTON
1000 Winter Street
Suite 4200
Waltham, MA 02154
Telephone: (781) 684-4545

CHICAGO
One Tower Lane
25th Floor, Suite 2500
Oakbrook Terrace, IL 60181
Telephone: (708) 573-0711

DALLAS
The Infomart
1950 Stemmons Freeway
Suite 5001
Dallas, TX 75207
Telephone: (214) 800-8855

HOUSTON
Coastal Tower
9 Greenway Plaza
Houston, TX 77046
Telephone: (713) 621-6060

LOS ANGELES
2010 Main Street, Suite 300
Irvine, CA 92614
Telephone: (714) 851-0490

LOUISVILLE
The Summit
4350 Brownsboro Road
Suite 200
Louisville, KY 40207
Telephone: (502) 893-8833

FOREIGN OFFICES
- ----------------
CHATHAM MARITIME
Infinium Open Systems Limited
Montague Place
Quayside
Chatham Maritime
Kent, ME4 4QU
Telephone: 44 634 895 000

LONDON
Infinium Software Limited
Crosby House
Unit A Meadowbank
74 Furlong Road, Bourne End
Buckinghamshire SL8 5AJ
Telephone: 44 628 850 850

PARIS
Infinium Software France
Tour Arago
5 Rue Bellini 92806
Puteaux Cedex
Telephone: 33 46 96 07 55

SINGAPORE
Infinium Software Asia/Pacific
10 Science Park Road,
#02-01, The Alpha
Singapore Science Park II
Singapore 117684
Telephone: 65 778 7337

TORONTO
Infinium Software Canada
90 Allstate Parkway
Markham, Ontario L3R 6H3
Telephone: (905) 940-3665

<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 9,779
<SECURITIES> 38,540
<RECEIVABLES> 20,499
<ALLOWANCES> 1,569
<INVENTORY> 0
<CURRENT-ASSETS> 73,362
<PP&E> 17,548
<DEPRECIATION> 10,647
<TOTAL-ASSETS> 91,307
<CURRENT-LIABILITIES> 49,368
<BONDS> 0
122
0
<COMMON> 0
<OTHER-SE> 41,817
<TOTAL-LIABILITY-AND-EQUITY> 91,307
<SALES> 29,781
<TOTAL-REVENUES> 87,001
<CGS> 5,070
<TOTAL-COSTS> 27,470
<OTHER-EXPENSES> 60,848
<LOSS-PROVISION> 397
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 209
<INCOME-TAX> (148)
<INCOME-CONTINUING> 357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 357
<EPS-PRIMARY> .03
<EPS-DILUTED> .03

</TABLE>