BEST SOFTWARE INC, 424B1, 1997-09-30

BEST SOFTWARE INC
424B1, 1997-09-30
PREPACKAGED SOFTWARE

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<PAGE> 1

PROSPECTUS

4,150,000 SHARES

[BEST LOGO]

COMMON STOCK

Of the 4,150,000 shares of Common Stock offered hereby, 2,750,000 shares
are being sold by Best Software, Inc. (the "Company") and 1,400,000 shares are
being sold by the Selling Shareholders. The Company will not receive any of the
proceeds from the sale of shares by the Selling Shareholders. See "Principal and
Selling Shareholders."

Prior to this offering, there has been no public market for the Common
Stock of the Company. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price. The Common Stock
has been approved for quotation on the Nasdaq National Market under the symbol
BEST.

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

THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.......... $13.00 $0.91 $12.09 $12.09
- ------------------------------------------------------------------------------------------------
Total(3)........... $53,950,000 $3,776,500 $33,247,500 $16,926,000
================================================================================================
</TABLE>

(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses payable by the Company estimated at $700,000.

(3) The Selling Shareholders have granted to the Underwriters a 30-day option to
purchase up to 622,500 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Selling Shareholders will
be $62,042,500, $4,342,975 and $24,452,025, respectively. See
"Underwriting."

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

The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about October 3, 1997, at the office of the agent of
Hambrecht & Quist LLC in New York, New York.

HAMBRECHT & QUIST WILLIAM BLAIR & COMPANY

September 30, 1997
<PAGE> 2

[INSIDE FRONT COVER FOR EDGAR FILING]

The graphics in this portion of the inside front cover consist of a
stylized exclamation point. The dot at the bottom of the exclamation point is
rendered as a wheel consisting of a circular hub and six spokes. The words "Core
Accounting Systems" appear inside the hub. Surrounding the hub in the six spaces
between the spokes are the words "Payroll", "Fixed Asset Management", "Asset
Tracking", "Budgeting*", "Recruiting" and "Human Resources". Below the wheel is
the following: "*currently under development."

THE BEST SOLUTION

The company: A leading provider of asset, human resources and payroll management
software solutions for middle market businesses.

The products: FAS(TM) asset management and Abra(TM) human resources and payroll
management product lines. Cost-effective solutions that complement core
accounting systems.

The technology: Scaleable solutions that support Microsoft operating systems,
including Windows 95 and Windows NT.

The services: Annual and periodic updates, technical support, training and
consulting services, which provide significant recurring revenue.

The expertise: More than a decade of in-depth experience in highly specialized
areas that entail complex, frequently changing laws and regulations.

THE BEST PROFILE

- - More than 40,000 customer locations

- - Over 150 certified VARs

- - Used and referred by Big Six accounting firms

- - Marketing alliances with approximately 20 core accounting and other
industry-specific software vendors.

[BEST LOGO]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus. The Common Stock offered hereby involves a high
degree of risk. See "Risk Factors."

THE COMPANY

In order to improve efficiencies and control costs, middle market businesses
are increasingly seeking to automate their asset, human resources and payroll
functions. The Company's suite of software solutions is tailored to meet the
needs of middle market businesses and is designed to increase efficiency by
automating and streamlining the complex processes associated with these
functions. The Company's solutions, which integrate with many core accounting
systems, include its FAS asset management and Abra human resources and payroll
management product lines. The Company's products perform a variety of functions,
including sophisticated depreciation calculations, payroll processing, employee
tracking, employee cost and productivity analyses and tax report and tax form
generation. The Company believes that its solutions provide significant cost
savings opportunities for its customers through improved productivity and
control.

The Company currently derives substantially all of its revenue from its FAS
asset management and Abra human resources and payroll management products lines
and related services and from royalty payments under a certain exclusive
license. In each of fiscal 1995, 1996 and 1997, total revenue attributable to
such sources amounted to approximately $26.2 million, $30.8 million and $38.4
million, respectively. In the three months ended June 30, 1997, total revenue
attributable to such products and related services and license fees amounted to
approximately $10.6 million. As part of the revenues derived from its FAS asset
management and Abra human resources and payroll management product lines, the
Company derives significant recurring revenue from maintenance and support
agreements and other services. In fiscal 1997, approximately 85% of the
Company's customers purchased maintenance and support agreements in connection
with their initial license of the Company's products. The Company achieved
renewal rates of existing maintenance and support agreements of approximately
80% during the same period. Revenue from services, including maintenance and
support agreements, training and consulting services, accounted for
approximately 49% of the Company's total revenue in fiscal 1997. The Company
expects to continue to derive a significant portion of its revenue from
services.

The Company employs a multi-channel sales and marketing strategy, which
includes its network of value-added resellers, accounting firms and consultants,
as well as a direct-response telesales operation, strategic marketing alliances
and its direct sales organization. Numerous accounting firms, including four of
the Big Six, use the Company's solutions internally and the Company regularly
receives customer referrals from offices of the Big Six and other accounting
firms. The Company also has formal and informal marketing alliances with
approximately 20 core accounting and other industry-specific software vendors,
including Great Plains Software, Inc., Platinum Software Corporation, Scala
North America, Inc. and State of the Art, Inc. The Company believes this
diversity of sales and marketing channels permits it to distribute its products
in the most efficient and effective manner, while reducing reliance on any one
channel.

The Company's strategy is to extend its leadership position in the asset,
human resources and payroll management software solutions market and to develop
other specialized and complementary solutions in order to provide its customers
with an integrated suite of products. The Company believes that its large
existing customer base represents a significant potential market for such
products. The Company also intends to continue to make its solutions available
on a variety of platforms, including client/server architecture, in order to
meet its customers' evolving technological needs.

3
<PAGE> 4

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company................... 2,750,000 shares
Common Stock offered by the Selling Shareholders...... 1,400,000 shares(1)
Common Stock to be outstanding after the offering..... 10,896,688 shares(1)(2)(3)
Use of Proceeds....................................... Working capital and other general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol......................... BEST
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED MARCH 31, ENDED JUNE 30,
--------------------------- -----------------
1995 1996 1997 1996 1997
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue(4)................................. $35,023 $39,229 $39,484 $9,499 $10,646
Gross margin..................................... 26,860 29,422 31,558 7,408 8,805
Operating income................................. 2,338 1,997 5,560 114 867
Net income....................................... $ 3,515 $ 3,527 $ 4,436 $ 80 $ 349
Pro forma net income per share(5)................ $ 0.45 $ 0.04
Pro forma weighted average shares
outstanding(5)................................ 9,808 9,883
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(6)
------- ------------ --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 7,429 $ 7,605 $ 40,153
Working capital (deficit).............................. (7,743) (7,567) 24,981
Total assets........................................... 16,815 16,991 49,539
Deferred maintenance and service revenue............... 13,632 13,632 13,632
Redeemable convertible preferred stock................. 500 -- --
Redeemable common stock warrants....................... 792 -- --
Total shareholders' equity (deficit)................... (7,361) (5,893) 26,655
</TABLE>

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

(1) Includes 86,660 shares to be issued upon the Warrant Exercise (as defined
below), which will be sold by a Selling Shareholder in this offering.
Excludes an additional 47,546 shares to be issued upon the exercise of the
underlying warrant if the Underwriters' over-allotment option is exercised
in full.

(2) Excludes 1,294,733 shares of Common Stock issuable pursuant to options and
warrants (after giving effect to the Warrant Exercise) outstanding at June
30, 1997, at a weighted average exercise price of $2.52 per share,
approximately 200,000 shares of Common Stock to be issuable pursuant to
options currently expected to be granted immediately after the effectiveness
of this offering at an exercise price equal to the initial public offering
price in this offering and 1,700,000 additional shares of Common Stock
reserved for issuance under the Company's stock plans. See
"Management -- Stock Plans" and "Description of Capital Stock -- Warrants."

(3) Gives effect to the Warrant Exercise, the Preferred Stock Conversion (as
defined below) and the Put Elimination (as defined below).

(4) Total revenue in fiscal 1995, 1996 and 1997 includes revenue derived from
certain product lines no longer offered by the Company. Currently, the
Company derives substantially all of its revenue from its FAS and Abra
product lines and from royalty payments under a certain exclusive license
agreement (collectively, the "Ongoing Business"). In each of fiscal 1995,
1996 and 1997, total revenue attributable to the Ongoing Business amounted
to approximately $26.2 million, $30.8 million and $38.4 million,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."

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<PAGE> 5

(5) Pro forma to give effect to the Warrant Exercise, the Preferred Stock
Conversion, the Put Elimination and the assumed issuance at the initial
public offering price of $13.00 per share of a sufficient number of shares
to fund the dividends paid in excess of earnings. See Note 1 of Notes to
Consolidated Financial Statements.

(6) Adjusted to reflect the sale of 2,750,000 shares of Common Stock by the
Company at the initial public offering price of $13.00 per share and the
receipt by the Company of the net proceeds therefrom.

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

The Company was incorporated in Virginia in 1982. Unless the context
otherwise requires, the "Company" refers to Best Software, Inc., a Virginia
corporation, and its wholly owned subsidiaries. The Company's principal
executive offices are located at 11413 Isaac Newton Square, Reston, Virginia
20190. The Company's telephone number is (703) 709-5200.

Best Software, FAS, FAS Encore, FASTrack, FAS Report Writer, Abra, Abra
Software, Abra HR, Abra Payroll, Abra Attendance, Abra Applicant, Abra Resume
Scan and Abra People Manager are trademarks, SupportPlus and Abra SupportPlus
are service marks, BEST! (the Best logo) and Abra Train are registered
trademarks, and FAS SupportPlus is a registered service mark of the Company. All
other trademarks and registered trademarks used in this Prospectus are the
property of their respective owners.

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

Unless otherwise indicated, all information in this Prospectus (i) assumes
no exercise of the Underwriters' over-allotment option, (ii) gives effect to a
3-for-2 stock split, to be effected in the form of a stock dividend prior to the
closing of the offering, (iii) has been adjusted to reflect the partial exercise
of a warrant (the "PNC Warrant") to purchase 86,660 shares of Common Stock
immediately prior to the closing of this offering (the "Warrant Exercise"),
which shares will be sold by a Selling Shareholder in this offering, and (iv)
gives effect to the conversion of all outstanding shares of Class A Preferred
Stock into an aggregate of 625,005 shares of Common Stock and the elimination of
the mandatory redemption feature of the PNC Warrant and certain other warrants
to purchase Common Stock, both of which will occur automatically upon the
closing of this offering (the "Preferred Stock Conversion" and the "Put
Elimination," respectively). See "Description of Capital Stock" and "Principal
and Selling Shareholders." References to the Company's "fiscal" year mean the
twelve months ended on March 31 of that calendar year.

5
<PAGE> 6

RISK FACTORS

The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the shares
of Common Stock offered hereby. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those contained in the forward-looking statements.
Factors that may cause such differences include, but are not limited to, those
discussed below as well as those discussed elsewhere in this Prospectus.

Significant Fluctuations in Quarterly Operating Results. The Company has
experienced, and expects to continue to experience, significant fluctuations in
its quarterly operating results. There can be no assurance that the Company will
be profitable in any particular quarter. The Company's future quarterly
operating results will depend upon a number of factors, including the demand for
its products, the type and level of services purchased by its customers, the mix
of sales through direct and indirect sales channels, the level of product and
price competition that it encounters, the length of its sales cycles, the timing
of larger customer implementations, the timing and success of sales and
marketing programs, particularly direct mail campaigns, the timing and
acceptance of new product introductions and product enhancements by the Company
and its competitors, the timing and amount of the Company's product development
programs, the mix of products and services sold, the timing of new hires, market
acceptance of new products, competitive conditions in the industry and general
economic conditions. The Company's expense levels are based, in significant
part, on anticipated revenue trends. Because a high percentage of these expenses
are relatively fixed in the short term, if revenue levels fall below
expectations, the Company's operating results are likely to be materially and
adversely affected. Historically, the Company's revenues and earnings for the
first calendar quarter have been lower than those for the preceding quarter
because a disproportionate number of customers purchase the Company's products
in the fourth calendar quarter in anticipation of the close of their own fiscal
years and the ensuing tax season. In addition, margins in the first calendar
quarter have historically been lower due to the shipment by the Company of large
numbers of annual software updates in that quarter reflecting regulatory
changes. The Company anticipates that the sales cycle for its enhanced
client/server products, upon their introduction, will generally be longer than
that associated with its current products. Any significant lengthening of the
Company's sales cycle could have a material adverse effect on the Company's
business, operating results and financial condition and, in particular, could
contribute to significant fluctuations in operating results on a quarterly
basis. As a result of these and other factors, the Company's quarterly operating
results are subject to variation, and the Company believes that
quarter-to-quarter comparisons of its operating results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
In addition, due to all the foregoing factors, the Company's operating results
in future periods may be below the expectations of securities analysts and
investors. In that event, the market price of the Company's Common Stock would
likely be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Selected Quarterly
Operating Results."

Product Concentration; Discontinued Product Lines. The Company currently
derives substantially all of its revenue from its FAS and Abra product lines and
related services. These product lines are expected to continue to account for a
substantial portion of the Company's revenues for the foreseeable future.
Accordingly, the Company's future operating results will depend, in part, on
maintaining and increasing acceptance of these products and related services.
Any factors adversely affecting the pricing of or demand for these products and
services or an increase in competition for such products and services could have
a material adverse effect on the Company's business, operating results and
financial condition. The Company's historical consolidated financial statements
for the applicable periods include results of operations relating to certain
product lines subsequently sold or licensed by the Company. Accordingly, the
Company's historical consolidated financial statements are not indicative of
operating results attributable to the Ongoing Business. In addition, the Company
derives revenue from the exclusive license of its MYOB product line to a third
party (the "MYOB

6
<PAGE> 7

License"), which will expire in June 2000. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

New Products and Rapid Technological Change. The market for business
application software is characterized by rapid technological advancements,
changes in customer requirements, frequent new product introductions and
enhancements and changing industry standards. The life cycles of the Company's
products are difficult to estimate and the Company's current market position
could be undermined by rapid technological changes and the introduction of new
products and enhancements by new or existing competitors. The Company's growth
and future success will depend, in part, upon its ability to enhance its current
products and introduce new products in order to keep pace with products offered
by the Company's competitors, adapt to technological advancements and changing
industry standards and produce additional functionality to address the
increasingly sophisticated requirements of its customers. The Company currently
has a number of new product development efforts underway, including the
development of enhanced client/server versions of its FAS and Abra products and
the development of a new budgeting software product. The Company's product
development efforts are expected to require substantial additional investment by
the Company. There can be no assurance that the Company will have sufficient
resources to make the necessary investment or that it will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of new products or enhancements. In addition, there
can be no assurance that such products or enhancements will meet the
requirements of the marketplace or achieve market acceptance or that the
Company's customers will migrate to client/server environments at the rate
expected by the Company. If the market for the Company's products shifts rapidly
towards the client/server environment, the absence of enhanced client/server
versions of its FAS and Abra products, or any delay in the commercial
availability or market acceptance of such products, could have a material
adverse effect on the Company's business, operating results and financial
condition. In addition, the Company's enhanced client/server products are being
developed to operate on corporate Intranets, among other applications, and the
success of these products will depend upon growth in the number of middle market
businesses implementing corporate Intranets. If businesses do not adopt and
deploy corporate Intranets at the rate anticipated by the Company, the Company's
business, operating results and financial condition may be materially and
adversely affected. Any failure by the Company to anticipate or respond
adequately to technological advancements, customer requirements and changing
industry standards, or any significant delays in the development, introduction
or availability of new products or enhancements, could have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business -- Product Development."

Product Migration. Prior to fiscal 1994, substantially all of the
Company's revenue from its FAS and Abra products was derived from DOS-based
versions of those products. Since fiscal 1994, when the Company introduced
Windows-based versions of its FAS and Abra products, a significant number of the
Company's DOS installed base of customers for these product lines has migrated
to the Company's Windows-based products. However, there can be no assurance that
in the future a significant percentage of the Company's remaining installed base
of DOS customers will migrate to the Company's Windows-based products. In
particular, the Company believes that smaller customers are less likely to
migrate to the Company's Windows-based products because the cost of migrating is
high relative to their size and because, in many cases, the DOS-based products
adequately meet their needs. If a significant number of the Company's remaining
DOS customers elect not to migrate to the Company's Windows-based products,
purchase competitive products or encounter problems in implementing the
Company's Windows-based products, the Company's business, operating results and
financial condition could be materially and adversely affected.

Risks Associated with Sales Channels. To date, the Company has sold its
products and services primarily through a network of value-added resellers,
accounting firms and consultants (together, "Business Partners"), a
direct-response telesales operation, strategic marketing alliances and a direct
sales force focusing on national accounts. The Company's ability to achieve
significant revenue growth in the future will depend, in large part, upon its
ability to establish and maintain relationships with its

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<PAGE> 8

Business Partners, strategic alliance partners and national accounts and upon
the success of its direct mail campaigns and telesales efforts. The Company's
ability to successfully market its products, including its enhanced
client/server products under development, will depend on its ability to adapt
its sales channels to address the evolving markets for such products. Failure to
do so could have a material and adverse effect on the Company's business,
operating results and financial condition. See "Business -- Strategy" and
"Business -- Sales and Marketing."

The Company's ability to achieve significant revenue growth in the future
will depend, in part, on its success in recruiting and training sufficient
direct sales personnel and expanding its Business Partner network. Although the
Company is currently investing, and plans to continue to invest, significant
resources to develop and expand its direct sales force and Business Partner
network, the Company has at times experienced and may continue to experience
difficulty in recruiting qualified personnel for its direct sales force and
identifying, certifying, and/or maintaining qualified Business Partners. There
can be no assurance that the Company will be able to maintain or successfully
expand its direct sales force or Business Partner network or that any such
expansion will result in an increase in revenue. Further, there can be no
assurance that a sufficient number of direct sales personnel or Business
Partners will be able to successfully address the client/server market. Any
failure by the Company to expand its direct sales force or its Business Partner
network could have a material adverse effect on the Company's business,
operating results and financial condition. In addition, if the Company is
successful in expanding its direct sales force, there can be no assurance that
its direct sales personnel will be successful in increasing the Company's
revenue to a sufficient extent to cover the increased expenses associated with
such expansion. The Company's agreements with its Business Partners generally
are nonexclusive and may be terminated by either party at any time without
cause. The Company's Business Partners are not within the control of the
Company, are not obligated to purchase products from the Company and may also
represent or refer product lines of its competitors. Business Partners' sales
tend to fluctuate based on their implementation schedules and internal
resources, which are beyond the control of the Company. There can be no
assurance that these Business Partners will continue their current relationships
with the Company or that they will not give higher priority to the sale or
referral of other products, which could include products of competitors. A
reduction in sales efforts or discontinuance of sales or referrals of the
Company's products by its Business Partners could lead to reduced sales and
could materially adversely affect the Company's business, operating results and
financial condition. The Company expects that any material increase in the
Company's indirect sales as a percentage of total revenue will materially and
adversely affect the Company's average selling prices and gross margins due to
the lower unit prices that the Company receives through indirect channels.

The Company's strategy of marketing its products directly to end users and
indirectly through its Business Partners may result in distribution channel
conflicts. The Company's direct sales efforts may compete with those of its
indirect channels and, to the extent more than one Business Partner targets the
same customer, such Business Partners may come into conflict with each other.
There can be no assurance that channel conflict will not adversely affect the
Company's relationships with its customers or Business Partners or its ability
to attract other Business Partners. See "Business -- Sales and Marketing."

Competition. The market for the Company's products is intensely
competitive and rapidly changing. The Company faces different competitors for
each of its product lines. The Company's asset management products compete
principally with products offered by the Bureau of National Affairs, Inc. in the
single-user and work group environments, and the Company anticipates that its
enhanced client/server asset management products, when introduced, will compete
with products offered by PeopleSoft, Inc., Oracle Corporation and others. The
Company's human resources and payroll management products compete primarily with
products offered by Spectrum Human Resources Corporation, Human Resources
Microsystems and Ceridian Corporation (FLX) in the single-user and work group
environment, and the Company anticipates that its enhanced client/server human
resources and payroll products, when introduced, will compete with products
offered by PeopleSoft,

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<PAGE> 9

Inc., Ultimate Software Group, Inc. and SAP AG in the client/server environment.
The Company's human resource and payroll management products also compete with
payroll service bureaus, such as ADP, Inc. and PayChex, Inc., and with in-house
management information systems staffs. Some of the Company's existing
competitors, as well as a number of potential new competitors, have larger
technical staffs, more established and larger sales and marketing organizations
and greater financial resources than the Company. There can be no assurance that
the Company will continue to compete successfully with its existing competitors
or will be able to compete successfully with new competitors. In addition, there
can be no assurance that competitors will not develop products that are superior
to the Company's products or achieve greater market acceptance. Competitive
pressures in the form of aggressive price competition could also have a material
adverse effect on the Company's business, operating results and financial
condition. The Company's future success will depend significantly upon its
ability to increase its share of its target markets, to maintain and increase
its renewal revenues from existing customers and to sell additional products,
product enhancements, maintenance and support agreements and training and
consulting services to existing customers and new customers. There can be no
assurance that the Company will continue to compete favorably or that
competition will not have a material adverse effect on the Company's business,
operating results or financial condition.

Timely Release of Periodic Updates to Reflect Tax Law and Other Regulatory
Changes. The Company's asset, human resources and payroll management software
products are affected by changes in laws and regulations and generally must be
updated annually or periodically to maintain their accuracy and competitiveness.
There can be no assurance that the Company will be able to release these annual
or periodic updates on a timely basis in the future. Failure to do so could have
a material adverse effect on market acceptance of the Company's products, which
could have a material adverse effect on the Company's business, operating
results and financial condition. In addition, significant changes in tax laws
and regulations or other regulatory provisions applicable to the Company's
products could require the Company to make a significant investment in product
modifications, which could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business -- Products"
and "Business -- Product Development."

Product Errors; Product Liability. Software products such as those offered
by the Company typically contain undetected errors or failures when first
introduced or as new versions are released. Testing of the Company's products is
particularly challenging because it is difficult to simulate the wide variety of
computing environments in which the Company's customers may deploy these
products. Despite extensive testing, the Company from time to time has
discovered defects or errors in its products. Accordingly, there can be no
assurance that such defects, errors or difficulties will not cause delays in
product introductions and shipments, result in increased costs and diversion of
development resources, require design modifications or decrease market
acceptance or customer satisfaction with the Company's products. In addition,
there can be no assurance that, despite testing by the Company and by current
and potential customers, errors will not be found after commencement of
commercial shipments, resulting in loss of or delay in market acceptance, which
could have a material adverse effect upon the Company's business, operating
results and financial condition.

Although the Company has not experienced any material product liability
claims to date, the sale and support of software products and the performance of
related services by the Company entails the risk of such claims. Many of the
Company's products and services are used by or performed for customers in
connection with the preparation and filing of tax returns and other regulatory
reports. If any of the Company's products contain errors that produce inaccurate
results upon which users rely, or cause users to misfile or fail to file
required information, the Company could be subject to liability claims from
users which could, in turn, materially adversely affect the Company's business,
operating results and financial condition. The Company attempts to limit its
product liability exposure to users through contractual limitations on
liability, including appropriate disclaimers in its "shrink wrap" license
agreement with end users. The Company's software license agreements generally
provide that the software is provided "as is" without warranty of any kind.
There can be no assurance, however, that the contractual limitations used by the
Company will be enforceable or will provide the Company

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<PAGE> 10

with adequate protection against product liability claims. The Company also
maintains errors and omissions insurance. There can be no assurance, however,
that such coverage will be sufficient to cover any claims made in the future,
will continue to be available on reasonable terms, or that the insurer will not
disclaim coverage as to any future claim. A successful claim for product or
service liability brought against the Company could have a material adverse
effect upon the Company's business, operating results and financial condition.

Acquisitions. The Company may, from time to time, pursue acquisitions of
businesses, customer bases, products or technologies that complement or expand
its existing business. The Company evaluates potential acquisition opportunities
from time to time, including those that could be material in size and scope.
Acquisitions involve a number of risks, including the diversion of management's
attention from day-to-day operations to the assimilation of the operations and
personnel of the acquired companies and the incorporation of acquired
operations, customer bases, products or technologies. Such acquisitions could
also have adverse short-term effects on the Company's operating results, and
could result in dilutive issuances of equity securities, the incurrence of debt
and the loss of key employees. In addition, many business acquisitions must be
accounted for as purchases and, because most software-related acquisitions
involve the purchase of significant intangible assets, these acquisitions
typically result in substantial amortization charges and charges for acquired
research and development projects, which could have a material adverse effect on
the Company's operating results. There can be no assurance that any such
acquisitions will occur or that, if such acquisitions do occur, the acquired
businesses, customer bases, products or technologies will generate sufficient
revenue to offset the associated costs or effects.

Protection of Intellectual Property; Risks of Infringement. The Company's
success is heavily dependent upon its proprietary technology. The Company
regards its software as proprietary, and relies primarily on a combination of
trade secret, copyright and trademark law, trade secret, confidentiality
agreements and contractual provisions to protect its proprietary rights. The
Company has no patents or patent applications pending, and existing trade secret
and copyright laws afford only limited protection. Despite the Company's efforts
to protect its proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. Policing unauthorized use of the Company's
products is difficult and, while the Company is unable to determine the extent
to which piracy of its software products exists, software piracy can be expected
to be a persistent problem, particularly in international markets and as a
result of the growing use of the Internet. In selling its products, the Company
relies primarily on "shrink wrap" licenses that are not signed by licensees and,
therefore, it is possible that such licenses may be unenforceable under the laws
of certain jurisdictions. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. There can be no assurance that the steps taken by the Company
to protect its proprietary rights will be adequate or that the Company's
competitors will not independently develop products or technologies that are
substantially equivalent or superior to the Company's products or technologies.

The Company is not aware that any of its products, trademarks or other
proprietary rights infringe the proprietary rights of third parties. However,
there can be no assurance that third parties will not assert infringement claims
against the Company in the future with respect to current or future products. As
the number of software products in the industry increases and the functionality
of these products further overlap, the Company believes that software developers
may become increasingly subject to infringement claims. Any such claims, with or
without merit, can be time-consuming and expensive to defend, cause product
shipment delays or require the Company to enter into royalty or licensing
agreements. Such royalty agreements, if required, may not be available on terms
acceptable to the Company, or at all, which could have a material adverse effect
on the Company's business, operating results and financial condition. See
"Business -- Intellectual Property Rights and Licenses."

International Operations. Although the Company's revenue from
international sales has historically been insignificant, the Company recently
opened an office in Canada and intends to increase its

10
<PAGE> 11

sales and marketing efforts in other international markets. The Company
anticipates that its international operations will require the Company to
recruit and hire a number of new consulting, sales and marketing and support
personnel in Canada and other countries in which the Company establishes
operations. In addition, the Company has only limited experience in developing
localized versions of its products and in marketing and distributing its
products internationally. Moreover, the Company does not currently have
relationships with any Business Partners that target international markets. The
Company's international sales and marketing efforts will require significant
investment by the Company in advance of anticipated future revenue. There can be
no assurance that the Company's international sales and marketing efforts will
be successful or will generate significant revenue. There are a number of other
risks inherent in international business activities, including costs and risks
of localizing products for foreign countries, unexpected changes in regulatory
requirements, tariffs and other trade barriers, longer accounts receivable
payment cycles, difficulties in managing international operations, potentially
adverse tax consequences, currency fluctuations, difficulties in the
repatriation of earnings, the burdens of complying with a wide variety of
foreign laws and exposures to gains and losses on foreign currency transactions.
There can be no assurance that such factors will not have a material adverse
effect on the Company's business, operating results or financial condition. See
"Business -- Strategy."

Reliance on Microsoft Technologies. The Company's software products are
designed primarily to operate with Microsoft technologies, including Windows NT,
Windows 95, Windows 3.x, SQL Server, Visual FoxPro and Visual Basic, and the
Company's strategy requires that its products and technology be compatible with
new developments in Microsoft technology. A decreasing portion of the Company's
products are also designed to operate with Microsoft DOS. Although the Company
believes that Microsoft technologies are currently widely utilized by businesses
of all sizes, there can be no assurance that businesses will continue to adopt
such technologies as anticipated, will migrate from older Microsoft technologies
(such as DOS or earlier versions of Windows) to newer Microsoft technologies or
will not adopt alternative technologies that the Company does not support. If
businesses do not migrate from older technologies and adopt the Microsoft
technologies with which the Company's products are compatible, the Company's
business, operating results and financial condition will be materially and
adversely affected.

Dependence on Key Personnel. The Company's success depends, in significant
part, upon the continued services of its key technical, marketing, sales and
management personnel and on its ability to continue to attract, motivate and
retain highly qualified employees. The loss of key personnel could have a
material adverse effect on the Company's business, operating results and
financial conditions. The Company does not maintain key person life insurance on
any of its employees. Although the Company has employment agreements with
certain key employees, these employees, like all other employees, may
voluntarily terminate their employment with the Company at any time. Competition
for technical, marketing, sales and management employees is intense and the
process of locating personnel with the combination of skills and attributes
required to execute the Company's strategy can be difficult, time-consuming and
expensive. There can be no assurance that the Company will be successful in
attracting or retaining highly skilled technical, management, sales and
marketing personnel and the failure to attract, hire, assimilate or retain such
personnel could have a material adverse effect on the Company's business,
operating results and financial condition. See "Management."

Control by Principal Shareholders, Officers and Directors. Upon completion
of this offering, the present directors, executive officers and principal
shareholders of the Company and their affiliates will beneficially own
approximately 54.4% of the outstanding Common Stock (49.0% if the Underwriters'
over-allotment option is exercised in full). As a result, these shareholders
will be able to exercise control over all matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions. This concentration of ownership may have the effect of
delaying or preventing a change in control of the Company. See "Management" and
"Principal and Selling Shareholders."

11
<PAGE> 12

Benefits of the Offering to Current Shareholders. The Selling
Shareholders, including executive officers, directors and significant
shareholders of the Company, will sell an aggregate of 1,400,000 shares of
Common Stock in this offering and will receive an aggregate of approximately
$17.0 million in net proceeds, based upon the initial public offering price of
$13.00 per share and after deducting the underwriting discount. In addition, all
of the current shareholders of the Company will benefit from the creation of a
public market for the Common Stock held by them. Following the offering, the
executive officers and directors of the Company will beneficially own shares of
Common Stock having a market value of $68.2 million, based upon the initial
public offering price of $13.00 per share. The average price per share paid to
the Company upon the issuance of the shares held by the current shareholders was
$0.19. See "Dilution" and "Principal and Selling Shareholders."

Dilution. Purchasers of the Common Stock offered hereby will experience
immediate and significant dilution in the pro forma net tangible book value of
$10.55 per share. To the extent outstanding options or warrants to purchase the
Company's Common Stock are exercised, there will be further dilution to the new
public investors. See "Dilution."

Broad Discretion in Allocation of Net Proceeds. The primary purposes of
this offering are to establish a public market for the Company's Common Stock,
to facilitate the Company's future access to public equity markets and to obtain
additional working capital. The Company intends to use the net proceeds of this
offering for general corporate purposes, including product development and
working capital. The Company may use a portion of the net proceeds of the
offering to acquire or invest in businesses, technologies or products
complementary to the Company's business. There are no current agreements or
negotiations with respect to any acquisitions, investments or other
transactions. As of the date of this Prospectus, the Company has no specific
plans to use the net proceeds of this offering and will have broad discretion in
the application of the proceeds. See "Use of Proceeds."

No Prior Public Market; Possible Volatility of Stock Price. Prior to this
offering, there has been no public market for the Company's Common Stock and
there is no assurance that an active trading market will develop or be sustained
after this offering. The initial public offering price was determined through
negotiations among the Company and the Representatives of the Underwriters and
may not be indicative of the market price of the Common Stock after this
offering. The trading price of the Common Stock is likely to be highly volatile
and may be significantly affected by factors such as actual or anticipated
fluctuations in the Company's operating results, announcements of technological
innovations, new products or new contracts by the Company or its competitors,
developments with respect to patents, copyrights or proprietary rights,
conditions and trends in the software industry, changes in financial estimates
by securities analysts, general market conditions and other factors. In
addition, the public equity markets have from time to time experienced
significant price and volume fluctuations that have particularly affected the
market prices for the stock of technology companies. These broad market
fluctuations, as well as shortfalls in sales or earnings as compared with
securities analysts' expectations, changes in such analysts' recommendations or
projections and general economic and market conditions, may materially and
adversely affect the market price of the Company's Common Stock. See
"Underwriting."

Shares Eligible for Future Sale. Sales of substantial amounts of the
Company's Common Stock in the public market after this offering, or the
perception that such sales might occur, could adversely affect prevailing market
prices for the Common Stock. Upon completion of this offering, the Company will
have outstanding 10,896,688 shares of Common Stock. Of these shares, the
4,150,000 shares offered hereby will be freely tradable without restriction in
the public market. Approximately 793,748 additional shares will be eligible for
immediate sale as of the date of this Prospectus (of which 406,576 will be
subject to 180-day lock-up agreements between certain shareholders and the
Representatives of the Underwriters), and approximately 5,916,308 additional
shares will be eligible for sale beginning 90 days after the date of this
Prospectus (of which 4,091,006 will be subject to 180-day lock-up agreements).
Hambrecht & Quist LLC may, in its sole discretion and at any time without
notice, release all or any portion of the shares subject to such lock-up
agreements. In addition, the Company

12
<PAGE> 13

intends to file registration statements on Form S-8 under the Securities Act of
1933, as amended (the "Securities Act"), on or about the date of this Prospectus
to register all shares of Common Stock issued or reserved for issuance under its
stock plans. In addition, the holders of approximately 6,735,433 shares of
Common Stock are entitled to registration rights with respect to such shares.
See "Management -- Stock Plans," "Description of Capital Stock -- Registration
Rights" and "Shares Eligible for Future Sale."

Anti-takeover Effect of Certain Charter, By-Law and Statutory Provision;
Possible Issuance of Preferred Stock. The Company's Amended and Restated
Articles of Incorporation and Amended and Restated By-Laws, as well as Virginia
corporate law, contain certain provisions that could have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, control of the Company. These provisions could limit
the price that certain investors might be willing to pay in the future for
shares of the Company's Common Stock. Certain of these provisions allow the
Company to issue without shareholder approval preferred stock having rights
senior to those of the Common Stock. Other provisions impose various procedural
and other requirements that could make it more difficult for shareholders to
effect certain corporate actions. In addition, the Company's Board of Directors
is divided into three classes, each of which will serve for a staggered
three-year term, which may make it more difficult for a third party to gain
control of the Company's Board of Directors. See "Description of Capital
Stock -- Virginia Law and Certain Charter and By-Law Provisions."

13
<PAGE> 14

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,750,000 shares of
Common Stock offered by it hereby are estimated to be $32.5 million at the
initial public offering price of $13.00 per share after deducting the
underwriting discount and the estimated expenses of the offering. The Company
will not receive any proceeds from the sale of shares by the Selling
Shareholders.

The principal purposes of this offering are to establish a public market
for the Company's Common Stock, to facilitate future access by the Company to
public equity markets and to obtain additional working capital. The Company
intends to use the net proceeds for general corporate purposes, including
product development and working capital. The Company may also use a portion of
the net proceeds to acquire or invest in businesses, technologies or products
complementary to the Company's business. There are no current agreements or
understandings with respect to any acquisitions, investments or other
transactions, no such acquisitions, investments or transactions are being
planned or negotiated as of the date of this Prospectus, and no portion of the
net proceeds has been allocated for any specific acquisition.

Pending any such uses, the Company intends to invest the net proceeds from
the offering in investment-grade, interest-bearing securities.

DIVIDEND POLICY

The Company paid a dividend of $3,556,264 in the aggregate ($0.455 per
share of Common Stock) to shareholders of record on February 20, 1997 and a
dividend of $7,565,114 in the aggregate ($0.915 per share of Common Stock) to
shareholders of record on June 27, 1997. Other than these dividends, the Company
has never paid cash dividends on its Common Stock. The Company currently intends
to retain any future earnings to fund the development and growth of its
business, and does not anticipate paying any cash dividends for the foreseeable
future.

14
<PAGE> 15

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1997 (i) on an actual basis, (ii) on a pro forma basis giving effect to the
Warrant Exercise, the Preferred Stock Conversion and the Put Elimination and
(iii) as adjusted to give effect to the sale of 2,750,000 shares of Common Stock
offered by the Company hereby at the initial public offering price of $13.00 per
share and after deducting the underwriting discount and estimated offering
expenses payable by the Company. This information should be read in conjunction
with the Consolidated Financial Statements and Notes thereto included elsewhere
is this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable, net of current portion..................... $ 650 $ 650 $ 650
Redeemable convertible preferred stock.................... 500 -- --
Redeemable common stock warrants.......................... 792 -- --
Shareholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares
authorized; none issued or outstanding............. -- -- --
Common stock, no par value; 40,000,000 shares
authorized; 7,435,023 shares issued and
outstanding, actual; 8,146,688 shares issued and
outstanding, pro forma; 10,896,688 shares issued
and outstanding, as adjusted(1).................... 785 1,605 34,153
Additional paid-in capital................................ -- 648 648
Accumulated deficit....................................... (8,146) (8,146) (8,146)
------- ------- -------
Total shareholders' equity (deficit)............ (7,361) (5,893) 26,655
------- ------- -------
Total capitalization....................... $(5,419) $(5,243) $27,305
======= ======= =======
</TABLE>

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

(1) Gives effect to an amendment of the Company's Amended and Restated Articles
of Incorporation, filed subsequent to June 30, 1997, increasing the number
of authorized shares of Common Stock. Excludes 1,294,733 shares of Common
Stock issuable pursuant to options and warrants (after giving effect to the
Warrant Exercise) outstanding at June 30, 1997, at a weighted average
exercise price of $2.52 per share, approximately 200,000 shares of Common
Stock to be issuable pursuant to options currently expected to be granted
immediately after the effectiveness of this offering at an exercise price
equal to the initial public offering price in this offering and 1,700,000
additional shares of Common Stock reserved for issuance under the Company's
stock plans. See "Management -- Stock Plans" and "Description of Capital
Stock -- Warrants."

15
<PAGE> 16

DILUTION

The deficit in pro forma net tangible book value of the Company at June 30,
1997 was $(5.9 million) or $(0.72) per share of Common Stock. Pro forma net
tangible book value per share is equal to the Company's total tangible assets
less total liabilities, divided by the total number of shares of Common Stock
outstanding, after giving effect to the Preferred Stock Conversion, the Warrant
Exercise and the Put Elimination. After giving effect to the sale by the Company
of the 2,750,000 shares of Common Stock offered hereby at the initial public
offering price of $13.00 per share, and after deducting the underwriting
discount and estimated offering expenses, the pro forma net tangible book value
of the Company as of June 30, 1997 would have been $26.7 million or $2.45 per
share of Common Stock. This represents an immediate increase in pro forma net
tangible book value of $3.17 per share to existing shareholders and an immediate
dilution of $10.55 per share to new investors. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $13.00
Pro forma net tangible book deficit per share before the
offering............................................... $(0.72)
Increase per share attributable to new investors.......... 3.17
-----
Pro forma net tangible book value per share after the
offering.................................................. 2.45
------
Dilution per share to new investors......................... $10.55
======
</TABLE>

The following table summarizes on a pro forma basis as of June 30, 1997,
after giving effect to the Preferred Stock Conversion and the Warrant Exercise,
the difference between existing shareholders and the new investors with respect
to the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)............... 8,146,688 74.8% $ 1,522,447 4.1% $ 0.19
New investors(1)....................... 2,750,000 25.2 35,750,000 95.9 13.00
---------- ------ ----------- ------
Total................................ 10,896,688 100.0% $37,272,447 100.0%
========== ====== =========== ======
</TABLE>

The foregoing tables and calculations assume no exercise of outstanding
options or warrants. At June 30, 1997, there were 1,294,733 shares of Common
Stock reserved for issuance upon exercise of outstanding options and warrants
(after giving effect to the Warrant Exercise) at a weighted average exercise
price of $2.52 per share. To the extent that these options or warrants are
exercised, there will be further dilution to new investors. See
"Management -- Stock Plans" and "Description of Capital Stock -- Warrants."
- ---------------

(1) Sales by the Selling Shareholders in this offering will reduce the number of
shares held by existing shareholders to 6,746,688 or 61.9% of the total
number of shares of Common Stock outstanding after this offering (6,124,188
or 56.2%, if the over-allotment option is exercised in full), and will
increase the number of shares held by new investors to 4,150,000 or 38.1%
(4,772,500 or 43.8%, if the over-allotment option is exercised in full) of
the total number of shares of Common Stock outstanding after this offering.
See "Principal and Selling Shareholders."

16
<PAGE> 17

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus. The selected consolidated
statement of operations data set forth below for the fiscal years ended March
31, 1995, 1996 and 1997 and the consolidated balance sheet data as of March 31,
1996 and 1997 are derived from, and are qualified by reference to, the audited
consolidated financial statements included elsewhere in this Prospectus and
should be read in conjunction with those consolidated financial statements and
notes thereto. The selected consolidated statement of operations data presented
below for the fiscal years ended March 31, 1993 and 1994 and the consolidated
balance sheet data as of March 31, 1993, 1994 and 1995 are derived from audited
financial statements not included in this Prospectus. The selected consolidated
financial data for the three-month periods ended June 30, 1996 and 1997 and the
consolidated balance sheet data as of June 30, 1997 are derived from unaudited
financial statements of the Company included elsewhere in this Prospectus which,
in the opinion of management, include all adjustments, consisting solely of
normal recurring adjustments, necessary for a fair presentation of the financial
information set forth therein. The results of operations for the three months
ended June 30, 1997 are not necessarily indicative of the results of operations
to be expected for the full year or for any future period. In addition, the
Company's historical financial statements include results of operations relating
to the Divested Product Lines and the MYOB product line and therefore are not
indicative of the results of operations attributable to the Ongoing Business.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
------------------------------------------------------ -------------------
1993 1994 1995 1996 1997 1996 1997
------- -------- ------- ------- --------- ------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
License fees and royalty...................... $ 9,595 $ 19,339 $20,346 $22,677 $ 20,161 $5,064 $ 5,358
Services...................................... 5,932 8,202 14,677 16,552 19,323 4,435 5,288
------- ------- ------- ------- --------- ------ ---------
Total....................................... 15,527 27,541 35,023 39,229 39,484 9,499 10,646
------- ------- ------- ------- --------- ------ ---------
Cost of revenue:
License fees and royalty...................... 1,150 2,807 3,806 4,501 2,251 577 371
Services...................................... 662 2,355 4,357 5,306 5,675 1,514 1,470
------- ------- ------- ------- --------- ------ ---------
Total....................................... 1,812 5,162 8,163 9,807 7,926 2,091 1,841
------- ------- ------- ------- --------- ------ ---------
Gross margin.................................... 13,715 22,379 26,860 29,422 31,558 7,408 8,805
------- ------- ------- ------- --------- ------ ---------
Operating expenses:
Sales and marketing........................... 5,114 9,482 11,354 12,812 14,355 3,954 4,305
Research and development...................... 1,151 2,173 5,707 7,389 6,089 1,817 2,048
General and administrative.................... 4,416 5,797 4,284 5,789 5,554 1,523 1,585
Amortization of acquired intangibles.......... 2,746 1,984 3,177 1,435 -- -- --
Acquired research and development projects.... 2,500 -- -- -- -- -- --
------- ------- ------- ------- --------- ------ ---------
Total....................................... 15,927 19,436 24,522 27,425 25,998 7,294 7,938
------- ------- ------- ------- --------- ------ ---------
Operating income (loss)......................... (2,212) 2,943 2,338 1,997 5,560 114 867
------- ------- ------- ------- --------- ------ ---------
Other income (expense), net:
Interest income (expense), net................ 78 (424) (176) (145) 351 11 (293)
Gain on sale of product lines................. -- -- -- 750 -- -- --
------- ------- ------- ------- --------- ------ ---------
Total....................................... 78 (424) (176) 605 351 11 (293)
------- ------- ------- ------- --------- ------ ---------
Income (loss) from continuing operations before
income taxes.................................. (2,134) 2,519 2,162 2,602 5,911 125 574
Income tax benefit (provision).................. 615 (400) (550) 925 (1,475) (45) (225)
------- ------- ------- ------- --------- ------ ---------
Income (loss) from continuing operations........ (1,519) 2,119 1,612 3,527 4,436 80 349
Gain on disposal of discontinued business....... -- -- 1,903 -- -- -- --
Loss from operations of discontinued business... (1,563) (8,990) -- -- -- -- --
------- ------- ------- ------- --------- ------ ---------
Net income (loss)............................... $(3,082) $ (6,871) $ 3,515 $ 3,527 $ 4,436 $ 80 $ 349
======= ======= ======= ======= ========= ====== =========
Pro forma net income per share(1)............... $ 0.45 $ 0.04
========= =========
Pro forma weighted average shares
outstanding(1)................................ 9,808 9,883
========= =========

<CAPTION>
MARCH 31, JUNE 30,
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- --------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 1,657 $ 2,070 $ 3,534 $ 8,105 $ 13,365 $ 7,429
Working capital deficit......................... (6,141) (12,888) (5,169) (583) (913) (7,743)
Total assets.................................... 19,544 19,633 13,794 17,625 21,160 16,815
Deferred maintenance and service revenue........ 3,828 7,987 8,814 9,398 12,288 13,632
Long-term debt.................................. 6,309 5,119 2,954 2,133 650 650
Redeemable convertible preferred stock.......... 500 500 500 500 500 500
Redeemable common stock warrants................ 465 206 206 296 642 792
Total shareholders' (deficit)................... (912) (7,763) (4,202) (698) (144) (7,361)
</TABLE>

- ---------------
(1) Pro forma to give effect to the Warrant Exercise and the Put Elimination and
the assumed issuance at the initial public offering price of $13.00 per
share of a sufficient number of shares to fund the dividends paid in excess
of earnings. See Note 1 of Notes to Consolidated Financial Statements.

17
<PAGE> 18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
This discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
contained in the forward-looking statements. Factors that may cause such
differences include, but are not limited to, those discussed in "Risk Factors"
and elsewhere in this Prospectus. References to the Company's "fiscal" year mean
the twelve months ended on March 31 of that calendar year.

OVERVIEW

The Company launched its FAS fixed asset management product line in 1983
and a professional tax preparation software product line in 1985. In 1991, the
Company acquired the Abra human resources and payroll management product line.
Between 1992 and 1994, the Company purchased a write-up product line for
accountants, a small business accounting software product line (the "MYOB
product line") and a service bureau payroll product line for accountants. The
Company thereafter decided to focus primarily on serving middle market
businesses, and sold its professional tax preparation software business in April
1994 and its service bureau payroll and write-up product lines for accountants
in August 1995 (together, the "Divested Product Lines"). In May 1996, the
Company licensed its MYOB product line to a third party. Under such license (the
"MYOB License"), the Company is to receive royalties over the four-year license
term, which ends in June 2000. The royalty rate escalates over each of the four
years in the license period and is based on the total revenue of the licensee
attributable to the MYOB product line.

The Company currently derives substantially all of its revenue from its FAS
and Abra product lines and related services and from the MYOB License
(collectively, the "Ongoing Business"). The Company's historical consolidated
financial statements include results of operations relating to the Divested
Product Lines and the MYOB product line. Accordingly, the Company's historical
consolidated financial statements are not indicative of operating results
attributable to the Ongoing Business. For fiscal 1995, 1996 and 1997,
respectively, total revenue from the Ongoing Business was $26.2 million, $30.8
million and $38.4 million; gross margin for the Ongoing Business was $20.7
million, $23.8 million and $30.9 million; and operating income from the Ongoing
Business was $2.9 million, $2.0 million and $5.6 million. For the three month
periods ended June 30, 1996 and 1997, respectively, total revenue from the
Ongoing Business was $8.5 million and $10.6 million; gross margin for the
Ongoing Business was $6.7 million and $8.8 million; and operating income from
the Ongoing Business was $155,000 and $867,000.

Prior to fiscal 1994, substantially all of the Company's revenues from the
FAS and Abra product lines were derived from licenses of DOS-based versions of
these products. Since fiscal 1994, the Company has introduced Windows versions
of these products and, since fiscal 1995, a significant number of the Company's
DOS customers have migrated to the Company's Windows-based products.
Additionally, since the introduction of multi-user versions of its products in
fiscal 1995 and fiscal 1996, the Company has sold an increased number of
multi-user licenses of its FAS and Abra products. Upon

18
<PAGE> 19

the introduction of a new product or an enhanced version of an existing product,
the Company has typically derived significant license fee revenue from trade-ups
by existing customers. Typically, the license fees paid for trade-ups are lower
than the license fees for an initial license. In addition, the Windows-based
products and the multi-user products generally have higher average license fees
and gross margins than the DOS-based products.

In addition to revenue from product licenses, the Company derives
significant recurring revenue from maintenance and support agreements. In each
of fiscal 1996 and 1997, approximately 85% of the Company's customers purchased
maintenance and support agreements in connection with their initial license of
the Company's products. During each of the last two fiscal years, the Company
has achieved average annual renewal rates for its maintenance and support
agreements of approximately 80%. Under its maintenance and support agreements,
the Company provides technical support and periodic software updates. In late
fiscal 1997, the Company launched its consulting services, which include
installation, set-up and conversion services. Training and consulting revenue
are anticipated to have lower gross margins than revenue from maintenance and
support agreements. In fiscal 1997, approximately 50% of total revenue from the
Ongoing Business was attributable to services, of which a substantial portion
was derived from maintenance and support agreements. Maintenance and support
agreements are generally priced as a percentage of the initial license fee for
the underlying products.

The Company recognizes revenue on license fees upon shipment of the
product, net of provisions for returns and allowances, provided that no
significant Company obligations remain and that collection of the resulting
account receivable is probable. For products with free trial periods, revenue is
recognized upon acceptance of the product by the customer. Revenue from the MYOB
License is recognized ratably within each year of the term of the license
agreement, based on specified annual royalty payments. Revenue from maintenance
and support agreements is recognized pro rata over the term of the agreements,
which is generally one year. Revenue from other services, such as training and
consulting, is recognized as the services are provided.

The Company employs a multi-channel sales and marketing strategy utilizing
four primary channels: Business Partners, a direct-response telesales operation,
strategic marketing alliances and a direct sales organization. In 1995, the
Company began to develop its direct sales organization and has invested and
expects to continue to invest in the development of this channel. The Company
expects that sales through direct channels will generally have higher gross
margins than sales through indirect channels, although these higher margins may
be offset in whole or in part by increased sales and marketing expenses. In
addition, in October 1996, the Company established a wholly owned subsidiary in
Ontario, Canada to localize and market the Company's FAS and Abra products in
the Canadian market.

The Company has made, and intends to continue to make, significant
investments in research and development to develop new products and enhanced
client/server versions of its existing products. In addition, the Company
releases periodic updates of its products to incorporate regulatory changes. As
of June 30, 1997, the Company had 62 full-time software development personnel
with expertise in Windows, Windows NT, client/server and/or Internet
environments. Of these developers, five are Certified Public Accountants and
seven are Certified Payroll Professionals.

The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standard No. 86 "Accounting For The Costs Of
Computer Software To Be Sold, Leased Or Otherwise Marketed." Costs incurred
prior to establishment of technological feasibility are expensed as incurred and
reflected as research and development costs. The Company capitalized software
development costs of $126,000 in fiscal 1995, all of which were fully amortized
by the end of fiscal 1996. There were no software development costs capitalized
in fiscal 1996 or 1997 or in the three-month period ended June 30, 1997. During
these periods, the time between the establishment of technological feasibility
and general release was very short. Costs otherwise capitalizable after
technological feasibility were insignificant and, therefore, were expensed as
incurred.

19
<PAGE> 20

In fiscal 1994, the Company established a valuation allowance for certain
deferred tax assets. The valuation allowance was subsequently reduced as a
result of the Company's analysis of then current levels of earnings and
anticipated operating results. As a result, the Company's effective tax rate has
been significantly lower than the applicable statutory rates. The Company
expects that the effective tax rate in future periods will more closely reflect
statutory rates.

OPERATING RESULTS

The following table sets forth for the periods indicated certain
consolidated statement of operations data expressed as a percentage of total
revenue. The Company's historical financial statements include operating results
relating to the Divested Product Lines and the MYOB product line and, therefore,
are not indicative of the results of operations attributable to the Ongoing
Business.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
MARCH 31, ENDED JUNE 30,
----------------------- --------------
1995 1996 1997 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue:
License fees and royalty.............................. 58.1% 57.8% 51.1% 53.3% 50.3%
Services.............................................. 41.9 42.2 48.9 46.7 49.7
----- ----- ----- ----- -----
Total......................................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenue:
License fees and royalty.............................. 10.9 11.5 5.7 6.1 3.5
Services.............................................. 12.4 13.5 14.4 15.9 13.8
----- ----- ----- ----- -----
Total......................................... 23.3 25.0 20.1 22.0 17.3
----- ----- ----- ----- -----
Gross margin............................................ 76.7 75.0 79.9 78.0 82.7
----- ----- ----- ----- -----
Operating expenses:
Sales and marketing................................... 32.4 32.7 36.4 41.6 40.5
Research and development.............................. 16.3 18.8 15.4 19.1 19.2
General and administrative............................ 12.2 14.7 14.0 16.1 14.9
Amortization of acquired intangibles.................. 9.1 3.7 -- -- --
----- ----- ----- ----- -----
Total......................................... 70.0 69.9 65.8 76.8 74.6
----- ----- ----- ----- -----
Operating income........................................ 6.7 5.1 14.1 1.2 8.1
Other income (expense), net............................. (0.5) 1.5 0.9 0.1 (2.7)
----- ----- ----- ----- -----
Income from continuing operations before income taxes... 6.2 6.6 15.0 1.3 5.4
Income tax benefit (provision).......................... (1.6) 2.4 (3.8) (0.5) (2.1)
----- ----- ----- ----- -----
Income from continuing operations....................... 4.6 9.0 11.2 0.8 3.3
Gain on disposal of discontinued business............... 5.4 -- -- -- --
----- ----- ----- ----- -----
Net income.............................................. 10.0% 9.0% 11.2% 0.8% 3.3%
===== ===== ===== ===== =====
Gross Margins:
Gross margin on license fees and royalty revenue...... 81.3% 80.2% 88.8% 88.6% 93.1%
Gross margin on services revenue...................... 70.3% 67.9% 70.6% 65.9% 72.2%
</TABLE>

THREE MONTHS ENDED JUNE 30, 1996 AND 1997

License Fees and Royalty Revenue. License fees and royalty revenue
consists of fees from software licenses and royalties from the MYOB License.
License fees and royalty revenue increased from $5.1 million for the three
months ended June 30, 1996 to $5.4 million for the three months ended June 30,
1997, representing an increase of 5.8%. As a percentage of total revenue,
license fees and royalty revenue decreased from 53.3% to 50.3% for the
three-month periods ended June 30, 1996 and 1997, respectively. The dollar
increase in license fees and royalty revenue was due to a 23.4% increase

20
<PAGE> 21

in license fee revenue from FAS and Abra products, which resulted primarily from
increased sales of higher priced Windows-based and multi-user products, offset
in part by the elimination of license fees attributable to the MYOB product
line. During the three months ended June 30, 1997, the Company also received
royalty revenue of $221,000 from the MYOB License.

Services Revenue. Services revenue includes revenue from maintenance and
support agreements and training and consulting services. Services revenue
increased from $4.4 million for the three months ended June 30, 1996 to $5.3
million for the three months ended June 30, 1997, representing an increase of
19.3%. As a percentage of total revenue, services revenue increased from 46.7%
to 49.7% for the three months ended June 30, 1996 and 1997, respectively. The
dollar increase in services revenue was primarily due to an increase in the
number of maintenance and support agreements, which resulted from an increased
renewal rate and a larger installed base of customers, and a higher average
contract value resulting from increased sales of higher priced license products.
To a lesser extent, the increase in services revenue was due to the Company's
increased focus on offering training and other consulting services, which
include installation, set-up and data conversion activities. The increase in
services revenue as a percentage of total revenue was primarily attributable to
increased renewal rates and the elimination of revenue attributable to the MYOB
product line, whose customers purchased proportionately fewer services.

Cost of License Fees and Royalty Revenue. Cost of license fees and royalty
revenue consists primarily of the costs of media, product manuals, shipping and
fulfillment, and royalties paid to third parties. Cost of license fees and
royalty revenue decreased from $577,000 for the three months ended June 30, 1996
to $371,000 for the three months ended June 30, 1997, representing a decrease of
35.7%. As a percentage of license fees and royalty revenue, cost of license fees
and royalty revenue decreased from 11.4% to 6.9% for the three-month periods
ended June 30, 1996 and 1997, respectively. The decrease in cost of license fees
and royalty revenue as a percentage of license fees and royalty revenue was
primarily due to increased sales of higher margin Windows-based and multi-user
products and the elimination of license fees attributable to the lower margin
MYOB product line. To a lesser extent, the decrease was due to the $221,000 in
royalty revenue received under the MYOB License for the three months ended June
30, 1997, for which the associated costs were nominal.

Cost of Services Revenue. Cost of services revenue consists primarily of
personnel costs, telephone charges and other costs related to providing
telephone support, training and consulting services. Cost of services revenue
was $1.5 million for both of the three-month periods ended June 30, 1996 and
1997. As a percentage of services revenue, cost of services revenue decreased
from 34.1% to 27.8% for the three-month periods ended June 30, 1996 and 1997,
respectively. The decrease in cost of services revenue as a percentage of
services revenue was primarily due to the elimination of services related to the
MYOB product line, which historically had higher cost of services as a
percentage of services revenue than the Company's FAS and Abra product lines.

Sales and Marketing. Sales and marketing expenses consist primarily of
direct mail programs, advertising, other marketing programs, personnel costs,
commissions, travel and administrative costs. Sales and marketing expenses
increased from $4.0 million for the three months ended June 30, 1996, to $4.3
million for the three months ended June 30, 1997, representing an increase of
8.9%. As a percentage of total revenue, sales and marketing expenses decreased
from 41.6% to 40.5% for the three-month periods ended June 30, 1996 and 1997,
respectively. The dollar increase was primarily due to increased costs
associated with the Company's expanded 1997 Business Partner Conference, the
establishment of the Company's Canadian operations and increased lead
generation, advertising and corporate brand awareness activities. The decrease
in sales and marketing expenses as a percentage of total revenue was primarily
attributable to increased efficiencies in the Company's direct mail program.

Research and Development. Research and development expenses consist
primarily of personnel costs and fees paid to outside consultants. Research and
development expenses increased from $1.8 million for the three months ended June
30, 1996 to $2.0 million for the three months ended

21
<PAGE> 22

June 30, 1997, representing an increase of 12.7%. As a percentage of total
revenue, research and development expenses increased slightly from 19.1% to
19.2% for the three-month periods ended June 30, 1996 and 1997, respectively.
The dollar increase in research and development expenses was primarily the
result of increased expenses relating to the development of a new budgeting
product and, to a lesser extent, the expenses incurred to localize the Company's
FAS and Abra product lines for sale in Canada.

General and Administrative. General and administrative expenses include
the costs of corporate operations, finance and accounting, human resources and
other general operations. General and administrative expenses increased from
$1.5 million for the three months ended June 30, 1996 to $1.6 million for the
three months ended June 30, 1997, representing an increase of 4.0%. As a
percentage of total revenue, general and administrative expenses decreased from
16.1% to 14.9% for the three-month periods ended June 30, 1996 and 1997,
respectively. The dollar increase in general and administrative expenses was
the result of increased staffing and related expenses necessary to manage and
support the expansion of the Company's operations. Since general and
administrative expenses increased at a lower rate than total revenue, such
expenses decreased as a percentage of total revenue.

Other Income (Expense), Net. Other income (expense), net was $11,000 for
the three months ended June 30, 1996 and $(293,000) for the three months ended
June 30, 1997. Interest expense for the three months ended June 30, 1997 was
primarily due to $520,000 of interest expense attributable to a payment of
$432,000 to a warrant holder, and the related reduction in the exercise price of
the warrant, in connection with the June 1997 dividend to shareholders, offset
in part by increased interest income. See "Certain Transactions."

Provision for Income Taxes. The provision for income taxes was $45,000 for
the three months ended June 30, 1996 and $225,000 for the three months ended
June 30, 1997, representing 36.1% and 39.2% of income before taxes,
respectively.

FISCAL 1995, 1996 AND 1997

License Fees and Royalty Revenue. License fees and royalty revenue
increased from $20.3 million in fiscal 1995 to $22.7 million in fiscal 1996, and
decreased to $20.2 million in fiscal 1997, representing an increase of 11.5% and
a decrease of 11.1%, respectively. As a percentage of total revenue, license
fees and royalty revenue decreased from 58.1% to 57.8% and to 51.1% for fiscal
1995, 1996 and 1997, respectively.

The dollar increase from fiscal 1995 to fiscal 1996 was the result of an
increase in license fee revenue from FAS and Abra products, which was partially
offset by the decline in license fee revenue attributable to the Company's
service bureau and write-up product lines, which were sold in August 1995. The
dollar decrease from fiscal 1996 to fiscal 1997 was the result of the
elimination of license fees from the MYOB product line, which more than offset
an increase in license fee revenue for FAS and Abra products. The decrease as a
percentage of total revenue from fiscal 1996 to fiscal 1997 was the result of
the elimination of license fees from the MYOB product line, which generated
higher license fees as a percentage of total revenue than the FAS and Abra
product lines. During fiscal 1997, the Company recorded royalty revenue of
$664,000 from the MYOB License.

Services Revenue. Services revenue increased from $14.7 million in fiscal
1995 to $16.6 million in fiscal 1996 and to $19.3 million in fiscal 1997,
representing increases of 12.8% and 16.7%, respectively. As a percentage of
total revenue, services revenue increased from 41.9% to 42.2% and to 48.9% for
fiscal 1995, 1996 and 1997, respectively. The dollar increases in services
revenue was primarily due to the increase in maintenance and support agreements,
which resulted from an increased renewal rate and a larger installed base of
customers, and higher average contract value. To a lesser extent, the increase
in services revenue was due to the Company's increased focus on providing
training services and, with respect to the increase from fiscal 1996 to fiscal
1997, other consulting services. The increase in services revenue as a
percentage of total revenue from fiscal 1996 to fiscal 1997 was primarily

22
<PAGE> 23

attributable to increased renewal rates and the elimination of revenue
attributable to the MYOB product line, whose customers purchased proportionately
fewer services.

Cost of License Fees and Royalty Revenue. Cost of license fees and royalty
revenue increased from $3.8 million in fiscal 1995 to $4.5 million in fiscal
1996 and decreased to $2.3 million in fiscal 1997, representing an 18.3%
increase and a 50.0% decrease, respectively. As a percentage of license fees and
royalty revenue, cost of license fees and royalty revenue changed from 18.7% to
19.8% and to 11.2% for fiscal 1995, 1996 and 1997, respectively.

The dollar increase from fiscal 1995 to fiscal 1996 was primarily due to an
increase in the number of units shipped in fiscal 1996. The increase as a
percentage of license fees and royalty revenue from fiscal 1995 to fiscal 1996
was primarily attributable to royalties paid by the Company to a third-party
developer with respect to license fees received by the Company for its FASTrack
product, offset in part by the elimination of license fees from the write-up
product line, which had higher packaging and shipping costs than the FAS and
Abra products lines.

The decrease in cost of license fees and royalty revenue from fiscal 1996
to fiscal 1997 was primarily due to the elimination of costs associated with the
MYOB product line, the elimination of $1.2 million of amortization of
capitalized software development costs recorded in each of fiscal 1995 and
fiscal 1996 and, to a lesser extent, a change in the media on which the
Company's products were delivered from diskettes to lower cost CD-ROMs. The
decrease as a percentage of license fees and royalty revenue from fiscal 1996 to
fiscal 1997 was primarily due to the elimination of the MYOB product line, which
had a lower margin than the Company's FAS and Abra products, to $664,000 of
royalty revenue from the MYOB License in fiscal 1997, for which the associated
costs are nominal, and to the change to CD-ROM media.

Cost of Services Revenue. Cost of services revenue increased from $4.4
million in fiscal 1995 to $5.3 million in fiscal 1996 and to $5.7 million in
fiscal 1997, representing increases of 21.8% and 7.0%, respectively. As a
percentage of services revenue, cost of services revenue changed from 29.7% to
32.1% and to 29.4% for fiscal 1995, 1996 and 1997, respectively. The dollar
increases in cost of services revenue were attributable primarily to costs
associated with additional personnel to meet the demands of the increased number
of maintenance and support customers and, to a lesser extent, to costs
associated with enhancing customer support systems, offset in part in fiscal
1997 by the elimination of costs associated with providing services for the MYOB
product line. The decrease in cost of services revenue as a percentage of
services revenue in fiscal 1997 was due to the elimination of services related
to the MYOB product line, which historically had higher cost of services as a
percentage of services revenue than the Company's FAS and Abra product lines.

Sales and Marketing. Sales and marketing expense increased from $11.4
million in fiscal 1995 to $12.8 million in fiscal 1996 and to $14.4 million in
fiscal 1997, representing increases of 12.8% and 12.0%, respectively. As a
percentage of total revenue, sales and marketing expenses increased from 32.4%
to 32.7% and to 36.4% for fiscal 1995, 1996 and 1997, respectively. The
increases in sales and marketing expenses in each period were primarily due to
the hiring of additional sales and marketing personnel and, to a lesser extent,
increased lead generation, advertising and corporate brand awareness activities.

Research and Development. Research and development expenses increased from
$5.7 million in fiscal 1995 to $7.4 million in fiscal 1996 and decreased to $6.1
million in fiscal 1997, representing an increase of 29.5% and a decrease of
17.6%, respectively. As a percentage of total revenue, research and development
expenses changed from 16.3% to 18.8% and to 15.4% for fiscal 1995, 1996 and
1997, respectively. The increase in research and development expenses from
fiscal 1995 to fiscal 1996, and the decrease from fiscal 1996 to fiscal 1997,
were primarily due to expenses in fiscal 1996 relating to the updating of
product lines to include Windows-based versions and enhanced multi-user versions
and nonrecurring development expenses associated with the MYOB product line.

General and Administrative. General and administrative expenses increased
from $4.3 million in fiscal 1995 to $5.8 million in fiscal 1996 and decreased to
$5.6 million in fiscal 1997, representing an

23
<PAGE> 24

increase of 35.1% and a decrease of 4.1%, respectively. As a percentage of total
revenue, general and administrative expenses changed from 12.2% to 14.7% and to
14.0% for fiscal 1995, 1996 and 1997, respectively. The increase in general and
administrative expenses in fiscal 1996 related to the Company's continued
development of its management infrastructure, including the addition of
personnel to support growth in the Company's operations and the hiring of its
current Chief Executive Officer. The decrease in general and administrative
expenses for fiscal 1997 was due primarily to the reduction in general and
administrative expenses associated with the MYOB product line.

Amortization of Acquired Intangibles. Amortization of acquired intangibles
relates to costs capitalized as a result of various acquisitions. Amortization
of acquired intangibles was $3.2 million in fiscal 1995 and $1.4 million in
fiscal 1996. Capitalized costs for intellectual property rights and other
intangibles were fully amortized as of the end of fiscal 1996.

Other Income (Expense), Net. Other income (expense), net was $(176,000)
for fiscal 1995, $605,000 for fiscal 1996 and $351,000 for fiscal 1997. Interest
expense for fiscal 1997 was primarily due to $215,000 of interest expense
attributable to a reduction in the exercise price of a warrant in connection
with the February 1997 dividend to shareholders, offset in part by increased
interest income. See "Certain Transactions."

(Provision) Benefit for Income Taxes: The (provision) benefit for income
taxes was $(550,000), $925,000 and $(1.5 million) for fiscal 1995, 1996 and
1997, representing (25.0)%, 35.5% and (25.0)% of income before taxes,
respectively. For fiscal 1995, the difference between the expected tax provision
based on Federal statutory rates and the effective tax rate resulted principally
from the utilization of a net operating loss carryforward. For fiscal 1996 and
1997, the difference between the expected tax provision based on Federal
statutory rates and the effective tax rate resulted principally from tax
benefits relating to a reduction of the valuation allowance against the
Company's deferred tax asset of $2.0 million and $1.2 million in 1996 and 1997,
respectively, based on management's analysis of current levels of earnings and
anticipated operating results. The Company expects that the income tax provision
in future periods will more closely reflect the statutory tax rates. See Note 6
of Notes to Consolidated Financial Statements.

SELECTED QUARTERLY OPERATING RESULTS

The following tables set forth for the last nine quarters (i) certain
consolidated statement of operations data and (ii) certain consolidated
statement of operations data expressed as a percentage of total revenue. In
management's opinion, the unaudited quarterly consolidated statement of
operations data has been prepared on the same basis as the audited consolidated
financial statements and includes all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the information for
the quarters presented, when read in conjunction with the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. The Company
believes that quarter-to-quarter comparisons of its operating results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.

24
<PAGE> 25
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1996 1996 1996 1996 1997 1997
--------- --------- -------- ---------- --------- --------- -------- --------- --------
(IN THOUSANDS)

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
License fees and
royalty.............. $ 4,381 $ 4,720 $ 6,230 $ 7,346 $ 5,064 $ 4,603 $ 5,504 $ 4,990 $ 5,358
Services............... 3,922 3,835 4,383 4,412 4,435 4,688 5,024 5,176 5,288
------- ------- ------- -------- ------- ------- ------- ------- -------
Total............ 8,303 8,555 10,613 11,758 9,499 9,291 10,528 10,166 10,646
------- ------- ------- -------- ------- ------- ------- ------- -------
Cost of revenue:
License fees and
royalty.............. 675 735 1,267 1,824 577 362 509 803 371
Services............... 1,255 1,171 1,397 1,483 1,514 1,241 1,355 1,565 1,470
------- ------- ------- -------- ------- ------- ------- ------- -------
Total............ 1,930 1,906 2,664 3,307 2,091 1,603 1,864 2,368 1,841
------- ------- ------- -------- ------- ------- ------- ------- -------
Gross margin............ 6,373 6,649 7,949 8,451 7,408 7,688 8,664 7,798 8,805
Operating expenses:
Sales and marketing.... 3,035 3,054 3,455 3,268 3,954 2,999 3,858 3,544 4,305
Research and
development.......... 1,817 2,036 1,964 1,572 1,817 1,464 1,470 1,338 2,048
General and
administrative....... 1,473 1,465 1,436 1,415 1,523 1,250 1,389 1,392 1,585
Amortization of
acquired
intangibles.......... 345 328 289 473 -- -- -- -- --
------- ------- ------- -------- ------- ------- ------- ------- -------
Total............ 6,670 6,883 7,144 6,728 7,294 5,713 6,717 6,274 7,938
------- ------- ------- -------- ------- ------- ------- ------- -------
Operating income
(loss)................. (297) (234) 805 1,723 114 1,975 1,947 1,524 867
Other income (expense),
net.................... (65) 619 52 (1) 11 87 128 125 (293)
------- ------- ------- -------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... (362) 385 857 1,722 125 2,062 2,075 1,649 574
Income tax benefit
(provision)............ 145 (155) (345) 1,280 (45) (940) (945) 455 (225)
------- ------- ------- -------- ------- ------- ------- ------- -------
Net income (loss)....... $ (217) $ 230 $ 512 $ 3,002 $ 80 $ 1,122 $ 1,130 $ 2,104 $ 349
======= ======= ======= ======== ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1996 1996 1996 1996 1997 1997
--------- --------- -------- ---------- --------- --------- -------- --------- --------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
License fees and
royalty.............. 52.8% 55.2% 58.7% 62.5% 53.3% 49.5% 52.3% 49.1% 50.3%
Services............... 47.2 44.8 41.3 37.5 46.7 50.5 47.7 50.9 49.7
------- ------- ------- -------- ------- ------- ------- ------- -------
Total............ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------- ------- ------- -------- ------- ------- ------- ------- -------
Cost of revenue:
License fees and
royalty.............. 8.1 8.6 11.9 15.5 6.1 3.9 4.8 7.9 3.5
Services............... 15.1 13.7 13.2 12.6 15.9 13.4 12.9 15.4 13.8
------- ------- ------- -------- ------- ------- ------- ------- -------
Total............ 23.2 22.3 25.1 28.1 22.0 17.3 17.7 23.3 17.3
------- ------- ------- -------- ------- ------- ------- ------- -------
Gross margin............ 76.8 77.7 74.9 71.9 78.0 82.7 82.3 76.7 82.7
------- ------- ------- -------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing.... 36.6 35.7 32.6 27.8 41.6 32.3 36.7 34.9 40.5
Research and
development.......... 21.9 23.8 18.5 13.4 19.1 15.8 14.0 13.2 19.2
General and
administrative....... 17.7 17.1 13.5 12.0 16.1 13.3 13.1 13.6 14.9
Amortization of
acquired
intangibles.......... 4.2 3.8 2.7 4.0 -- -- -- -- --
------- ------- ------- -------- ------- ------- ------- ------- -------
Total............ 80.4 80.4 67.3 57.2 76.8 61.4 63.8 61.7 74.6
------- ------- ------- -------- ------- ------- ------- ------- -------
Operating income
(loss)................. (3.6) (2.7) 7.6 14.7 1.2 21.3 18.5 15.0 8.1
Other income (expense),
net.................... (0.8) 7.2 0.5 0.0 0.1 0.9 1.2 1.2 (2.7)
------- ------- ------- -------- ------- ------- ------- ------- -------
Income (loss) from
continuing operations
before income taxes.... (4.4) 4.5 8.1 14.7 1.3 22.2 19.7 16.2 5.4
Income tax benefit
(provision)............ 1.8 (1.8) (3.3) 10.8 (0.5) (10.1) (9.0) 4.5 (2.1)
------- ------- ------- -------- ------- ------- ------- ------- -------
Net income (loss)....... (2.6)% 2.7% 4.8% 25.5% 0.8% 12.1% 10.7% 20.7% 3.3%
======= ======= ======= ======== ======= ======= ======= ======= =======
</TABLE>

25
<PAGE> 26

The Company has experienced, and expects to continue to experience,
significant fluctuations in its quarterly operating results. There can be no
assurance that the Company will be profitable in any particular quarter. The
Company's future quarterly operating results will depend upon a number of
factors, including the demand for its products, the type and level of services
purchased by its customers, the mix of sales through direct and indirect sales
channels, the level of product and price competition that it encounters, the
length of its sales cycles, the timing of larger customer implementations, the
timing and success of sales and marketing programs, particularly direct mail
campaigns, the timing and acceptance of new product introductions and product
enhancements by the Company and its competitors, the timing and amount of the
Company's product development programs, the mix of products and services sold,
the timing of new hires, market acceptance of new products, competitive
conditions in the industry and general economic conditions. The Company's
expense levels are based, in significant part, on anticipated revenue trends.
Because a high percentage of these expenses are relatively fixed in the short
term, if revenue levels fall below expectations, the Company's operating results
are likely to be materially and adversely affected. Historically, the Company's
revenues and earnings for the first calendar quarter have been lower than those
for the preceding quarter because a disproportionate number of customers
purchase the Company's products in the fourth calendar quarter in anticipation
of the close of their own fiscal years and the ensuing tax season. In addition,
margins in the first calendar quarter have historically been lower due to the
shipment by the Company of large numbers of annual software updates in that
quarter, reflecting regulatory changes. The Company anticipates that the sales
cycle for its enhanced client/server products, upon their introduction, will
generally be longer than that associated with its current products. Any
lengthening of the Company's sales cycle could have a material adverse effect on
the Company's business, operating results and financial condition and, in
particular, could contribute to significant fluctuations in operating results on
a quarterly basis. As a result of these and other factors, the Company's
quarterly operating results in future quarters are subject to variation, and the
Company believes that quarter-to-quarter comparisons of its operating results
are not necessarily meaningful and should not be relied upon as an indication of
future performance. In addition, due to all the foregoing factors, the Company's
operating results in future periods may be below the expectations of securities
analysts and investors. In that event, the market price of the Company's Common
Stock would likely be materially adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

The Company funds its operations through cash provided by operations. The
Company had cash and cash equivalents of $7.4 million at June 30, 1997.

For fiscal 1997 and the three months ended June 30, 1997, net cash provided
by operating activities was $12.3 million and $2.3 million, respectively. In
fiscal 1997, net cash provided by operating activities consisted primarily of
net income, deferred maintenance and services revenue and increased collections
of accounts receivable. In the three months ended June 30, 1997, cash provided
by operating activities consisted primarily of net income, deferred maintenance
and services revenue, offset by an increased accounts receivable balance and by
an increase in prepaid expenses. As a result of the licensing of the Company's
MYOB product line in May 1996, the Company's inventory and accounts receivable
have generally decreased in relation to total revenue. The MYOB product line was
typically sold through a retail distribution channel that necessitated higher
levels of inventory to support a lower revenue base and generally had longer
payment terms than are typically extended to customers for the Company's other
product lines. Consequently, accounts receivable and inventory decreased from
fiscal 1996 to fiscal 1997, notwithstanding the increase in the Company's
revenue. The Company's accounts receivable increased from March 31, 1997 to June
30, 1997, principally due to increased revenues in the month of June.

The Company, on a monthly basis, makes an overall assessment of the
required allowance for uncollectible accounts, product returns and credits.
Historically, additions to the allowance have primarily been made for estimated
product returns and credits, which are recorded as a reduction of

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<PAGE> 27

revenue. The allowance for uncollectible accounts increased at the end of fiscal
1996 as a result of the release of a new MYOB product version late in that
fiscal year. The MYOB product line was subsequently licensed in fiscal 1997 and
actual related returns and credits were charged against the previously
established allowance. For the three months ended June 30, 1997, the Company's
allowance for uncollectible accounts was increased principally as a result of
the approximate $1.8 million increase in accounts receivable from the end of the
previous quarter. The Company's allowance for uncollectible accounts as a
percentage of gross accounts receivable was 27.2%, 28.2% and 28.3% as of the end
of fiscal 1996, fiscal 1997 and June 30, 1997, respectively.

Net cash used in investing activities for fiscal 1997 and for the three
months ended June 30, 1997 was $1.1 million and $150,000, respectively. In both
periods, net cash used in investing activities was used primarily for the
purchase of property and equipment. Although the Company does not currently have
any material identifiable commitments for capital expenditures, the Company
expects to continue to invest in the acquisition of property and equipment in
the ordinary course of its business. The Company does not have any material
commitments related to its royalty obligations arising from licenses of certain
products and technologies used in the Company's products.

Net cash used in financing activities for fiscal 1997 and the three months
ended June 30, 1997 was $5.9 million and $8.1 million, respectively. During
fiscal 1997, the principal use of cash was the payment of a dividend and the
repayment of a note. During the three months ended June 30, 1997, the principal
use of cash was the payment of dividends totaling $7.6 million.

The Company believes that the net proceeds from this offering and cash
generated from operations will be sufficient to fund its operations for at least
the next 12 months.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The American Institute of Certified Public Accountants approved for
exposure a draft Statement of Position that would supersede Statement of
Position 91-1, Software Revenue Recognition. If approved, the new Statement of
Position would have to be implemented for fiscal years beginning after December
15, 1997. The Company believes that the proposed changes would not have a
material financial impact on the Company.

In March 1997, the Financial Accounting Board issued Statement No. 128,
"Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 is effective for financial
statements issued after December 15, 1997. Under SFAS No. 128, the presentation
of primary earnings per share is replaced with basic earnings per share. See
Note 1 of Notes to Consolidated Financial Statements.

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<PAGE> 28

BUSINESS

The Company is a leading provider of asset, human resources and payroll
management software solutions for middle market businesses. The Company's
feature-rich, cost-effective solutions are easy to implement and enhance
productivity by automating management, compliance and reporting functions in
areas of specialized expertise that entail complex and frequently changing laws
and regulations. The Company's solutions have been designed to complement core
accounting systems and are scaleable from stand-alone desktop applications
running on personal computers to multi-user work group and client/server
programs designed for use on personal computer local area networks. As of June
30, 1997, the Company had over 40,000 licensed customer locations, representing
approximately 115,000 licensed seats. In addition to revenue from product
licenses, the Company derives significant recurring revenue from maintenance and
support agreements. The Company reaches its large customer base and target
market through a multi-channel sales and marketing strategy that includes its
network of value-added resellers, accounting firms and consultants ("Business
Partners"), a direct-response telesales operation, strategic marketing alliances
and a direct sales organization.

INDUSTRY BACKGROUND

Increased competitive pressures and rapidly changing market conditions are
continually challenging businesses of all sizes to enhance profitability by
improving operating efficiencies and implementing better cost controls.
Businesses are increasingly relying on technological advancements to achieve
these goals. In particular, businesses are utilizing the wide availability of
affordable computing solutions to automate many of their core accounting and
operational functions. As a result, many businesses are dedicating substantial
resources to automating and streamlining the processes associated with several
key functions, including asset, human resources and payroll management.
Automating and streamlining these functions results in improved efficiencies
from better utilization of assets, a reduction in associated losses and expenses
(including insurance and taxes) and more precise accounting and reporting. In
the human resources area, businesses can achieve efficiencies by streamlining
the input and management of personnel and payroll information and by providing
improved access to such information across the organization.

Effective management of asset, human resources and payroll functions
requires highly specialized expertise and the ability to remain abreast of
frequently changing regulatory requirements. In the asset management area, these
include complex tax and accounting regulations governing the application of
numerous depreciation calculations, as well as a variety of regulatory
requirements that affect many aspects of a business' asset management function.
Compliance with these regulations requires comprehensive tracking of fixed
assets, compilation of detailed historical data and accurate, timely reporting.
Similarly, the efficient utilization of human resources information and
compliance with various laws and regulations, such as equal employment
opportunity laws and the Americans with Disabilities Act, requires human
resources managers to accurately compile, retain and report large amounts of
personnel data and statistics. These include information on hiring and
recruitment, training, evaluation and promotion of employees. In addition, under
Federal and state tax regulations employers must implement frequently changing
withholding taxes and other payroll taxes for employees and must accurately
report such payments to tax authorities.

Core accounting software generally does not provide adequate management,
compliance and reporting functions in areas of specialized expertise, such as
asset, human resources and payroll management. As a result, many businesses are
relegated to the use of less than optimal solutions such as spreadsheet-based
techniques and manual processes, which can be time-consuming and inaccurate,
mainframe or minicomputer-based solutions or in-house software development,
which are often expensive and can be difficult to implement, or third-party
outsourcing, which can be inflexible and expensive and over which the customer
has limited control.

The Company believes that the need for asset, human resources and payroll
management software solutions is particularly acute in the middle market, which
generally consists of businesses with

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<PAGE> 29

$1 million to $250 million in revenues and ten to 2,500 employees. Although many
middle market businesses have formal information technology ("IT") departments,
such businesses generally have fewer IT resources than larger companies. Middle
market businesses are also less likely to have dedicated, in-house personnel
with specialized substantive expertise in asset, human resources and payroll
management. In addition, the middle market is characterized by changing software
technologies as businesses take advantage of developments in technology to
increase competitiveness. While many middle market businesses perform accounting
and other financial management functions on stand-alone personal computers or
multi-user networks that support Windows NT and/or Novell environments,
increasingly these businesses have begun to adopt client/server architectures,
such as those based on Microsoft SQL Server. For all of these reasons, middle
market businesses require highly functional, cost-effective software solutions
that can be easily and rapidly implemented, are easy to learn and use, can scale
to accommodate evolving software technology preferences and are reinforced by an
extensive support capability.

THE BEST SOLUTION

The Company is a leading provider of asset, human resources and payroll
management software solutions. The Company's FAS and Abra product lines provide
comprehensive functionality in a cost-effective and easy-to-implement manner and
integrate with many leading core accounting systems. Numerous accounting firms,
including four of the Big Six, use the Company's solutions internally and the
Company regularly receives customer referrals from offices of the Big Six and
other accounting firms. The Company has formal and informal marketing alliances
with approximately 20 core accounting and other industry-specific software
vendors, including Great Plains Software, Inc., Platinum Software Corporation,
Scala North America, Inc. and State of the Art, Inc.

The Company's solutions are designed to offer the following benefits to its
customers:

Comprehensive Functionality. The Company's software solutions are designed
to provide comprehensive functionality for asset, human resources and payroll
management and are tailored to the needs of middle market businesses. Specific
features of the Company's products include sophisticated depreciation
calculations, extensive management capabilities, tax reporting, tax form
preparation, payroll processing, employee tracking and employee cost and
productivity analyses. As a result, the Company's customers are able to manage
assets, human resources and payroll more efficiently across their organizations.

Cost-Effective and Easy to Implement and Use. The Company designs its
products to provide, at prices affordable to middle market businesses, a feature
set competitive with much higher priced software solutions. The Company believes
its solutions offer performance features more typical of those provided by
higher-priced mainframe and minicomputer systems or third-party service
providers. Because middle market businesses typically have limited IT resources,
the Company also designs its products, which are based on the Windows interface
standard, to be easy to install, implement and use. Typically, the Company's
solutions can be installed in a matter of hours.

Highly Specialized Expertise. The Company employs 12 Certified Public
Accountants and 12 Certified Payroll Professionals in the sales and marketing,
research and development and technical support and services functions and has
gained significant expertise over more than a decade in the development of
asset, human resources and payroll management solutions. The Company believes
this highly specialized expertise gives it the ability to assess and anticipate
customer needs and to develop the functionalities required by its customers.
This expertise allows the Company to update program content regularly as
required to accommodate legislative and regulatory developments.

Improved Efficiency and Reduced Costs. The Company believes that its
solutions provide significant cost savings opportunities for its customers
through improved productivity and control. By facilitating asset management, the
Company's FAS product line permits customers to improve the efficiency of asset
tracking and control, depreciation calculation, report generation and tax return
preparation to reduce losses and expenses (such as insurance and taxes) and to
ensure precise

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<PAGE> 30

accounting and reporting of fixed assets. The Company's Abra product line
automates the tracking of employee and benefit information, recruiting and
training, thereby significantly reducing the time required to complete these
functions. In addition, by allowing its customers to bring their payroll
functions in-house, the Company's Abra Payroll for Windows product reduces or
eliminates reliance on expensive third-party service providers, thereby
increasing the customer's control of the payroll process.

Extensive Service and Support. Due to the sophisticated tax, accounting
and regulatory content of its products, the Company offers extensive substantive
technical support and training to its customers. The Company supports its FAS
and Abra product lines through its SupportPlus program which provides customers
with software updates and unlimited telephone support by the Company's technical
support staff. The Company fielded over 270,000 telephone technical support
inquiries in fiscal 1997, many of which involved questions concerning asset,
human resources or payroll management, and provides frequent seminars on topics
ranging from basic operation to advanced technical subjects. The Company also
provides systems integration and implementation support both directly and
through its Business Partners and uses its Web sites for dissemination of
product information, technical support and feedback from customers and Business
Partners.

Compatibility with Leading Technologies and Leading Core Accounting
Solutions. The Company has focused on maintaining the compatibility of its
products with leading technologies. In particular, the Company's products are
optimized to operate with Microsoft technologies. The Company's products support
Microsoft operating systems, including Windows 95 and Windows NT. New products
are presently being developed to utilize many of the technologies found in the
Microsoft BackOffice suite, including SQL Server, Internet Information Server,
Active Server, Front Page and Visual Basic 5.0. The Company believes that the
use of these industry-standard development tools and technologies reflects the
current market preferences of its customers. The Company intends to continue to
develop solutions that will be compatible with future developments in Microsoft
technology. The Company also designs its products to integrate with many leading
third-party core accounting software solutions.

STRATEGY

The Company's objective is to extend its leadership position in the asset,
human resources and payroll management software solutions market and to develop
a range of other specialized and complementary solutions in order to provide its
customers with an integrated suite of products. The Company believes that by
supplying such solutions, it can serve as a single vendor offering customers
benefits such as bundled price incentives and comprehensive support, while
increasing its per customer average sales prices. The Company's strategy
incorporates the following key elements:

Offer Wide Range of Solutions. The Company seeks to position itself with
senior middle market decision makers as a "one stop" provider of software
solutions that complement its customers' core accounting systems. To further
this strategy, the Company intends not only to provide additional products in
the asset, human resources and payroll areas for existing or developing
technology platforms, but also to expand its product offerings by developing,
sublicensing and/or acquiring new products. For example, the Company is
currently developing a new software product designed to automate the corporate
budgeting process and a recruiting tool enabling customers to place help-wanted
advertisements on most major Web employment bulletin boards.

Leverage Specialized Expertise. The Company intends to continue to
leverage its specialized expertise in the asset, human resources and payroll
management areas to provide comprehensive software solutions to its customers.
The Company believes its in-depth understanding of complex and frequently
changing regulatory requirements and its knowledge of specialized customer
requirements differentiate it from competitors and provide a significant
advantage as it competes for middle market customers. The Company has formal and
informal marketing alliances with approximately 20 core accounting and other
industry-specific software vendors who, in order to enhance the versatility of

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<PAGE> 31

their own systems, offer one or more of the Company's products as an integrated
application or add- on module for their own products. A number of these vendors
have elected to discontinue their own development of competing products and to
rely instead on the Company's specialized expertise as a developer of asset,
human resources and payroll management solutions.

Leverage Large Existing Customer Base. The Company believes that its large
existing customer base of over 40,000 licensed customer locations represents a
significant potential market for future sales of its products. The Company seeks
to leverage its strong market position by selling its new products to existing
customers and cross-selling its products to multiple offices, divisions and
departments of a customer's organization. The Company's customer base represents
a growth opportunity as those customers who are currently using the Company's
desktop and work group solutions migrate from DOS to Windows environments and
from individual or networked personal computers to client/server environments.

Employ Multi-Channel Sales and Marketing. The Company intends to continue
to employ a variety of sales and marketing channels, including its network of
Business Partners, a direct-response telesales operation, strategic marketing
alliances and its direct sales organization. The Company believes this diversity
of sales and marketing channels permits it to distribute its products to target
markets in the most efficient and effective manner, while reducing reliance on
any single channel. The Company has begun marketing certain of its products in
Canada and intends to expand international distribution of its products as they
are adapted for local requirements in other countries.

Provide Comprehensive Customer Service and Support. The Company intends to
continue to place emphasis on providing quality service and technical support to
its customers. The Company believes that offering comprehensive service and
support is important to customer satisfaction and provides a significant
opportunity for the Company to differentiate itself from competitors. The
Company expects to continue to derive a significant portion of its revenue from
technical support and from training and consulting services. The Company has
recently established a consulting services team to perform installation and
customization services for large national customers.

Extend Solutions to Emerging Technology Platforms. The Company's design
strategy is to make its solutions available on a variety of platforms to meet
its customers' evolving needs as they adopt new technologies. For example, in
response to customers' migration to 32-bit client/server architectures, the
Company has begun development of enhanced client/server versions of its
products. Employing technologies found in Microsoft BackOffice, including SQL
Server, Internet Information Server, Active Server, Front Page and Visual Basic
5.0, as well as ActiveX development tools, the Company believes the introduction
of its enhanced client/server products will enable it to address the growing
demand for the extension of its applications throughout the enterprise.

The Company believes that its large existing customer base of over 40,000
licensed customer locations represents a significant potential market for such
products. The Company seeks to leverage its strong market position by selling
these new products to existing customers.

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PRODUCTS

The Company's FAS and Abra product lines consist of a suite of desktop and
work group solutions that provide middle market customers with cost-effective
and feature-rich tools that comprehensively address their asset, human resources
and payroll management needs. The Company's products operate on the Microsoft
Windows operating system and employ an easy-to-use graphical user interface. The
Company's products are designed to be easy to implement and typically can be
installed in a matter of hours. The following table provides selected
information relating to the Company's FAS and Abra product lines:

<TABLE>
<CAPTION>
FAS ASSET MANAGEMENT SOLUTIONS

CURRENT VERSION CURRENT LIST
PRODUCT RELEASE DATE PRICE(1) PRODUCT DESCRIPTION
<S> <C> <C> <C>
FAS for Windows April 1997 $2,795 Fixed asset management and
depreciation
FAS Encore April 1997 $3,995 Fixed asset management and
depreciation with enhanced
functionality
FASTrack February 1997 $3,795 Asset tracking and management
for use with bar code readers
<CAPTION>
ABRA HUMAN RESOURCES AND PAYROLL MANAGEMENT SOLUTIONS

CURRENT VERSION CURRENT LIST
PRODUCT RELEASE DATE PRICE(1) PRODUCT DESCRIPTION
<S> <C> <C> <C>
Abra HR for Windows April 1997 $4,690 Human resources management and
employee data tracking
Abra Payroll for Windows April 1997 $5,490 In-house payroll processing
Abra Attendance for Windows November 1996 $2,490 Employee attendance tracking
Abra Applicant for Windows April 1997 $3,890 Job applicant tracking
Abra Recruiting Solution April 1997 $7,590 Employee recruiting and
applicant resume management
Abra Train for Windows April 1997 $2,790 Employee training management
Abra People Manager August 1996 $495 Human resources management for
smaller businesses
</TABLE>

(1) Prices shown are based on typical configurations (three network seats for
the FAS products; five seats for all Abra products except Abra People
Manager; one user for Abra People Manager).

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<PAGE> 33

FAS ASSET MANAGEMENT PRODUCTS

The Company's FAS asset management products automate and streamline the
complex and tedious processes necessary to accurately and reliably track and
account for assets, including sophisticated depreciation calculations;
maintaining detailed historical data on, as well as tracking the location of,
assets across the enterprise; maintaining accurate audit trails; and preparing
management and tax reports and forms on demand. The Company's FAS products are
highly versatile and are designed to meet the customer's specific asset
management needs. These products can be integrated with many core accounting
systems and are offered separately or in integrated suites. The Company supports
its FAS products through the FAS SupportPlus membership program, which provides
customers with all software updates and unlimited telephone support by the
Company's technical support staff.

In fiscal 1997, the Company derived approximately 57% of its total revenue
from its FAS product line, including software licenses and related maintenance
and support agreements and training services, for both the current Windows
products and the previous generation of DOS products. As of June 30, 1997, the
Company had over 28,000 licensed FAS customer locations, and had approximately
23,000 active FAS SupportPlus maintenance and support agreements.

FAS for Windows and FAS Encore extend the functionality of core accounting
systems by enabling managers to monitor, in real-time, the acquisition,
transfer, depreciation and retirement of fixed assets, calculate depreciation
for book and tax purposes, and track assets for maintenance and insurance
purposes. FAS for Windows maintains a database of extensive information on each
asset and prepares comprehensive management reports and tax reports and forms.
FAS for Windows is designed to calculate asset depreciation using seven standard
depreciation methods without any customization and may easily be customized for
additional methodologies. FAS Encore is designed for businesses that require
more rigorous asset management. FAS Encore extends the functionality of FAS for
Windows with additional features such as automatic transfers and partial
disposals of assets; batch reporting of asset status and activity; password
security; and a built-in Crystal Reports-based report writer for creating
customized reports and presentation graphics. Certain of the features included
in FAS Encore are also available as add-on options for FAS for Windows.

FASTrack is a comprehensive asset tracking solution which utilizes
third-party bar code scanning and imaging technologies that enable the Company's
customers to maintain complete and accurate physical inventories of assets
across the enterprise and to track the location of mobile assets, conduct and
reconcile physical inventories and automatically update all asset records
quickly and easily in order to prevent loss of assets and the inefficiencies
associated with inaccurate depreciation calculations based on obsolete
inventories. FASTrack can be used on a stand-alone basis or can be seamlessly
integrated with both FAS for Windows and FAS Encore.

The Company's current FAS products are 16-bit Windows programs written in
C++ that are compatible with the Windows 3.x, Windows 95 and Windows NT
environments. These products operate with an SQL-standard database. FASTrack
supports multiple bar code readers, including those from Intermec Corporation
and Symbol Technologies, Inc., along with a wide range of bar code labels.

ABRA HUMAN RESOURCES AND PAYROLL MANAGEMENT PRODUCTS

The Company's Abra human resources and payroll management products provide
a comprehensive solution for the management of the human resources functions.
The Company's Abra human resources products integrate human resource, payroll,
recruitment and training data into a single database. As a result, the Company's
Abra products enable businesses to more quickly and easily access and update
employee data, current job and pay information, job and pay history, salary and
performance reviews, employee benefits data, workers' compensation information,
and education and training data. These products can be integrated with many core
accounting systems and are offered separately or in integrated suites. The
Company supports its Abra products through the Abra

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<PAGE> 34

SupportPlus membership program, which provides customers with all software
updates and unlimited telephone support by the Company's technical support
staff.

In fiscal 1997, the Company derived approximately 38% of its total revenue
from its Abra product line, including software products, maintenance and support
agreements, and training and consulting services, for both Windows and DOS
customers. As of June 30, 1997, the Company had over 12,000 licensed Abra
customer locations. In addition, the Company had approximately 24,000 active
Abra SupportPlus maintenance and support agreements, which in certain cases
reflect the purchase of multiple maintenance and support agreements by single
Abra customers.

Abra HR for Windows automates the human resources function, enabling
businesses to more quickly and easily maintain and update employee and benefit
information, including employee profiles, current and historic compensation
information, education and employment history, skill set records, medical
benefits and savings plan enrollment eligibility data, and performance reviews.
Utilizing a variety of built-in reports, Abra HR for Windows also enables
businesses to instantaneously prepare cost analyses, summaries of employee
productivity and regulatory reports, including reports under affirmative action,
health and safety, workers' compensation and immigration regulations. In
addition, Abra HR for Windows can be easily customized to meet other unique
reporting requirements of a business.

Abra Payroll for Windows is an in-house payroll solution that enables
businesses to meet their payroll needs more cost-effectively than by utilizing
third-party service providers. Abra Payroll also provides secure, real-time
access to payroll data and enables users to comply with Federal and state tax
and withholding requirements more easily and efficiently, including preparation
of Forms W-2, 1099 and 941. The product also includes direct deposit
capabilities and electronic tax filing capabilities and interfaces with many
popular general ledger programs.

Abra Attendance for Windows tracks employee absences and leave accruals
with built-in features that enable businesses to define absence codes, handle
Family and Medical Leave Act compliance, and manage accruals and carryovers.
Abra Attendance for Windows enables businesses to create an array of attendance
plans for any employee using different seniority, accrual and carryover rules.
Abra Attendance for Windows integrates with Abra Payroll for Windows to provide
updates of vacation and other balances on employee pay stubs.

Abra Recruiting Solution is an integrated resume scanning and applicant
tracking software product, consisting of Abra Resume Scan and Abra Applicant.
Using the Abra Recruiting Solution, businesses can easily scan, organize and
evaluate incoming resumes, as well as search and review stored resumes
electronically to find appropriate job candidates. Abra Applicant automates the
labor-intensive process of sorting resumes and selecting candidates and enables
businesses to more easily and efficiently match job applicants' key skills,
experience and educational background with their specific needs. In addition,
Abra Applicant maintains easy-to-access information relating to candidate
interview status and the interviewers' comments and includes numerous
easy-to-use forms of correspondence, including acknowledgment, invitation, offer
and rejection letters.

Abra Train for Windows is a skill-based training management solution that
allows businesses to automate the tracking of employee training requirements and
history, the scheduling and management of courses and certifications and the
evaluation of the effectiveness of such initiatives.

Abra People Manager is designed specifically for smaller organizations that
do not have a dedicated human resources staff. The program consolidates critical
personnel information into one database on a personal computer and offers the
option to review and generate reports on such information. Abra People Manager
utilizes a Microsoft Access database, giving it a high degree of integration
with the Microsoft Office suite of products.

The Company's Abra products are 16-bit Windows programs and are compatible
with the Windows 3.x and Windows 95 environments. With the exception of Abra
People Manager, which is

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<PAGE> 35

written using Microsoft Visual Basic, all of the Abra products are written using
Microsoft Visual FoxPro, an object-oriented environment and data management
tool.

PRODUCT DEVELOPMENT

The Company intends to continue to develop its products to meet identified
market needs for applications that complement core accounting software systems
and to address the evolving technology needs of its customers. The Company's
current product development efforts are focused primarily on (i) developing
enhanced client/server versions of its existing products, (ii) completing
development of a number of new products and (iii) creating links for certain of
the Company's products with additional third-party core accounting systems and
with other industry-specific applications.

In order to strengthen its role as a leading provider of specialized
software solutions as its customers move from work group to client/server
environments, the Company is developing enhanced client/server versions of its
primary existing asset, human resources and payroll management products. These
products will employ technologies such as Microsoft Windows NT and Microsoft
BackOffice, as well as ActiveX development tools. The Company believes that
enhanced client/server technology will allow wider use of the Company's products
throughout a customer's enterprise. For example, enhanced client/server versions
of the Company's human resources and payroll management products are being
designed to facilitate employee self service, in which the employee will have
access to his or her own human resources data, with additional levels of access
for the employee's manager, the human resources manager and the payroll
administrator, all through a corporate Intranet. While traditional human
resources and payroll management systems require that record modifications be
initiated by the human resources and payroll staffs, this new workforce
management system will be designed to permit data to be captured and records to
be modified at various sources. The Company believes that this will improve the
efficiency and lower the costs related to its customers' human resources
function, particularly in larger organizations.

The Company intends to continue to identify market opportunities for new
product offerings that will complement its customers' core accounting systems.
For example, the Company is currently developing a software product designed to
automate the corporate budgeting process. Like the Company's current products,
this new budgeting product will be designed to function as a stand-alone system
or to integrate with core accounting systems. The Company is also developing a
recruiting tool that will enable customers to place help-wanted advertisements
on most major Web employment bulletin boards.

The Company is also focusing product development efforts on creating links
to allow for integration of its products with third-party core accounting and
reporting applications that are not currently compatible with the Company's
solutions. In addition, the Company is working to develop solutions that will
integrate and link its asset management products with complementary third-party
asset management products in industry-specific areas, such as sales tax,
property tax and inventory management.

TECHNICAL SUPPORT AND SERVICES

The Company believes that offering quality service and support is strategic
to its overall business objectives and provides the Company with a significant
opportunity to differentiate itself from competitors. The Company offers its
customers maintenance and technical support through its SupportPlus membership
programs, and also offers training and consulting services. The Company derives
a significant portion of it revenue from maintenance and support services. As of
June 30, 1997, the Company employed 66 persons in technical support and services
functions.

The Company's SupportPlus membership program provides customers expert
telephone support for FAS and Abra products, software updates to reflect tax law
and government regulatory changes, feature enhancements, newsletter
subscriptions, unlimited access to the Company's support center on

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<PAGE> 36

the Web and special discounts on new products and services. In each of fiscal
1996 and 1997, approximately 85% of the Company's customers purchased
maintenance and support agreements in connection with their initial licenses of
Company products. During each of these fiscal years, the Company achieved annual
renewal rates for its maintenance and support agreements, which typically have a
one-year term, of approximately 80%. The Company's telephone support
organization provides extensive product support to customers, including
assistance in connection with implementation, systems operation and regulatory
compliance. The Company's telephone support organization fielded over 270,000
calls in fiscal 1997.

In addition to technical support, the Company offers its customers the
option to attend training seminars covering the use of the Company's solutions
as well as a comprehensive nationwide seminar series featuring basic through
advanced interactive product training. Many of these seminars offer professional
education credits. The Company also offers on-site training at client
facilities. In certain circumstances, the Company's Business Partners provide
training and implementation services directly to their customers.

The Company is in the process of expanding its consulting services
operation, which provides installation, training, data conversion,
implementation and other consulting services. The Company believes this
consulting services operation will become increasingly important as it
introduces its enhanced client/server products in the future.

SALES AND MARKETING

The Company employs a multi-channel sales and marketing strategy utilizing
four primary channels: Business Partners, a direct-response telesales operation,
strategic marketing alliances and its direct sales organization. The Company
believes that this diverse sales and marketing strategy allows it to reach its
target markets in the most efficient and effective manner and reduces reliance
on any single distribution channel. The Company supports its multi-channel sales
and marketing strategy through national advertising in key financial and
business publications, sponsorship of promotional events for customers and
Business Partners and participation in trade shows and conferences. The Company
also uses its Web sites to provide information about Company products and to
reinforce the Company's brand image, as well as to support its sales channels.
As of June 30, 1997, the Company employed 99 persons in sales and marketing.

Business Partners. The Business Partner channel consists of (i) Big Six
and other accounting firms and accounting, human resources and payroll
management consultants and professionals ("professional referral partners") and
(ii) value-added resellers of core accounting and other business software
solutions ("VARs"). The Company believes that its Business Partners have
significant influence over product choices by customers and that its
relationships with its Business Partners are an essential element in its sales
and marketing efforts.

The Company's professional referral partners recommend the Company's
solutions to assist their clients in addressing asset, human resources and
payroll management needs. Because they typically are closely involved with
middle market businesses on a day-to-day basis, the Company's professional
referral partners are well-positioned to understand customer requirements and
make appropriate product recommendations. The Company believes that product
recommendations from accounting firms that have licensed the Company's solutions
for their internal use are particularly effective. The Company has entered into
national licensing relationships with four of the Big Six accounting firms and
has sold local licenses to approximately 3,000 national, regional and local
accounting firm locations. Use of the Company's solutions by clients of these
firms creates efficiencies for both the clients and the accounting firms in the
transmission and processing of asset, human resources and payroll data and frees
the accounting firm to focus more on providing business management and other
higher value services.

VARs are independent sales organizations that market and resell the
Company's products and often offer training and local installation,
implementation and customization services. VARs typically

36
<PAGE> 37

have specialized experience in financial or human resources areas, and in many
cases focus on selling to middle market businesses. VARs market the Company's
solutions through their own contacts and to sales leads supplied by the Company.
The Company requires VARs to undergo prescribed training and certification
procedures before being authorized to sell and implement certain of the
Company's software solutions. As of June 30, 1997, the Company was affiliated
with over 150 certified VARs.

Direct-Response Telesales. The Company solicits new customers for its
products through periodic targeted mailings to its prospects. Utilizing its
proprietary database of more than 300,000 potential new customer business names
and other available mailing lists, the Company distributed over 2.8 million
pieces of direct mail relating to its product lines in fiscal 1997. Such
mailings, as well as targeted advertising, generate interest from potential
customers by stressing the cost-effectiveness and functionality of the Company's
products, ongoing changes in government regulations and the support and service
provided by the Company. Responses from potential customers are entered into the
Company's automated lead-tracking system. Once the information or a trial
product has been delivered to the potential customer, follow-up calls are made
until the customer decides whether or not to purchase the product.

Strategic Marketing Alliances. The Company currently has formal and
informal strategic marketing alliances with over 20 leading core accounting and
other industry-specific software vendors. These alliances permit these software
vendors to incorporate the Company's products as specialized integrated
applications or add-on modules to enhance their product offerings. These
alliances benefit the Company by creating an additional sales channel and by
providing a strong recommendation of its products by leading software vendors.
The Company's strategic marketing alliance partners currently include Great
Plains Software, Inc., Platinum Software Corporation, Scala North America, Inc.
and State of the Art, Inc.

Direct Sales. The Company has a direct sales force that currently markets
the Company's products to larger middle market customers and national accounts.
As of June 30, 1997, the Company's direct sales force consisted of seven
persons, located at the Company's offices in Reston, Virginia and St.
Petersburg, Florida and other locations. In addition to marketing the Company's
products to new customers, this channel leverages the Company's broad installed
customer base to sell additional products to divisions or branches of existing
customers.

CUSTOMERS

The Company's FAS asset management products are targeted primarily to the
asset manager, tax accountant, corporate controller and chief financial officer
of middle market businesses and to accounting firms that typically use the
software to perform fixed asset management services for their customers. The
Company's Abra human resources and payroll management products are targeted
primarily to the human resources manager, corporate controller and chief
financial officer of middle market businesses.

The Company has licensed its products to over 40,000 customer locations in
a wide variety of industries and organizations. No one customer accounted for
more than 1% of the Company's total revenue in fiscal 1997.

RESEARCH AND DEVELOPMENT

The Company's research and development staff combines tax, accounting and
asset, and human resources management expertise with programming skills. As of
June 30, 1997, the Company had 62 full-time software development personnel (or
22% of the total employee base) with expertise in Windows, Windows NT,
client/server and/or Internet environments. Of these developers, five are
Certified Public Accountants and seven are Certified Payroll Professionals. In
fiscal 1995, 1996 and 1997 and the three months ended June 30, 1997, the Company
incurred approximately $5.7 million, $7.4 million, $6.1 million and $2.0
million, respectively, in research and development expenses.

37
<PAGE> 38

The development and updating of asset, human resources and payroll
management software that incorporates complex regulations demands a rigorous
development cycle that is mandated by the ongoing adoption of new laws,
regulations and forms by Federal, state and local governments and other
regulatory agencies, as well as the uncertain timing of these changes and
releases. The Company has a team of software developers who are experienced in
this development and updating process and the Company has created a set of
proprietary development tools that simplify the process of producing updates and
annual versions of the Company's products within required time frames.

INTELLECTUAL PROPERTY RIGHTS AND LICENSES

The Company generally does not execute licenses with its customers but
instead seeks to protect its software and other intellectual property through a
combination of trade secret, copyright and trademark law, confidentiality
agreements and contractual restrictions on copying and disclosure contained in
its "shrink wrap" licenses and nondisclosure agreements with its employees and
contractors. The Company provides its products to customers on a "right-to-use"
basis under non-exclusive shrink wrap licenses, which generally are
nontransferable and have a perpetual term. The license agreements generally
provide that the software is provided "as is" without warranty of any kind.

Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. Policing
unauthorized use of the Company's products is difficult and, while the Company
is unable to determine the extent to which piracy of its software products
exists, software piracy can be expected to be a persistent problem, particularly
in international markets and as a result of the growing use of the Internet. The
Company's shrink wrap licenses are not signed by licensees and, therefore, it is
possible that such licenses may be unenforceable under the laws of certain
jurisdictions. In addition, the laws of some foreign countries do not protect
the Company's proprietary rights to the same extent as do the laws of the United
States. There can be no assurance that the steps taken by the Company to protect
its proprietary rights will be adequate or that the Company's competitors will
not independently develop technologies that are substantially equivalent or
superior to the Company's products and technologies.

COMPETITION

The market for the Company's products is highly competitive. Although the
Company is not aware of any competitor which competes with it across all of its
product lines, a variety of companies currently offer products that compete with
one or more of the Company's product lines. In addition, as the Company targets
new markets and introduces new product lines, it expects to encounter
competition from additional competitors. The Company's products compete
primarily on the basis of product features and functions, product quality and
reliability, timeliness of product release and updating, ease of use, brand
recognition, quality of customer support, price and product line breadth. The
Company believes that its products generally compete effectively with respect to
these factors.

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<PAGE> 39

The Company faces different competitors for each of its product lines. The
Company's asset management products compete principally with products offered by
the Bureau of National Affairs, Inc. in the single-user and work group
environments, and the Company anticipates that its enhanced client/server
products, when introduced, will compete with products offered by PeopleSoft,
Inc., Oracle Corporation and others. The Company's human resources and payroll
management products compete primarily with Spectrum Human Resources Corporation,
Human Resources Microsystems and Ceridian Corporation (FLX) in the single-user
and work group environment, and the Company anticipates that its enhanced
client/server human resources and payroll products, when introduced, will
compete with products offered by PeopleSoft, Inc., Ultimate Software Group, Inc.
and SAP AG in the client/server environment. The Company's human resources and
payroll management products also compete with payroll service bureaus, such as
ADP, Inc. and Paychex, Inc., and with in-house management information systems
staffs. Several of the Company's competitors or potential competitors have
significantly greater financial, technical and marketing resources than the
Company. See "Risk Factors -- Compensation."

FACILITIES

The Company's corporate headquarters, including its principal
administrative, product development, product management, technical support, and
sales and marketing operations, are located in 39,000 square feet of office
space in a building located in Reston, Virginia. The Company occupies the space
under leases expiring on February 28, 2002, subject to the Company's right to
extend the term by two years for part of the space, and by two or five years for
the remainder of the space. The Company's Abra Software, Inc. subsidiary leases
26,000 square feet of office space in St. Petersburg, Florida, under a lease
that expires in December 1997. The Company also leases space in Palo Alto,
California, McLean, Virginia and Burlington, Ontario, Canada. Total lease
payments for the Company's facilities were approximately $1.0 million in fiscal
1997. The Company believes that its existing facilities are suitable and
adequate for its present needs and that suitable additional space will be
available as needed to accommodate any expansion of operations.

EMPLOYEES

As of June 30, 1997, the Company had 283 full-time employees, including 62
employees primarily engaged in research and development, 66 in technical support
and services, 99 in sales and marketing, and 56 in operations, finance and
administration.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operation in the normal course of business. The Company is
not currently a party to any legal proceedings.

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<PAGE> 40

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Executive officers and directors of the Company, and their ages as of June
30, 1997, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ------------------------------------------------
<S> <C> <C>
James F. Petersen (1)................ 53 Chairman of the Board of Directors
Timothy A. Davenport (1)............. 41 President, Chief Executive Officer and Director
David N. Bosserman................... 40 Executive Vice President, Chief Financial
Officer and Treasurer
David L.G. Horn...................... 40 Vice President, FAS Products Group
James F. Foster...................... 44 President, Abra Software, Inc.
Robert H. Skinner.................... 45 Senior Vice President, Sales
Elaine Kelly......................... 33 Vice President, Marketing
Herbert R. Brinberg (1)(2)(3)........ 71 Director
Richard A. Lefebvre (2).............. 50 Director
John H. Martinson (1)(2)(3).......... 49 Director
</TABLE>

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

(1) Member of the Compensation and Finance Committee

(2) Member of the Option Committee

(3) Member of the Audit Committee

James F. Petersen co-founded the Company in 1982 and has served as the
Company's Chairman of the Board since its inception. He served as President and
Chief Executive Officer of the Company from 1982 to June 1995. Before founding
the Company, Mr. Petersen was Vice President and Treasurer of Aspen Systems
Corporation, an electronic information and publishing company.

Timothy A. Davenport was appointed President, Chief Executive Officer and a
director of the Company in June 1995. From March 1987 to June 1995, Mr.
Davenport served as Vice President, Developer Tools Group, and Vice President,
Graphics Division, for Lotus Development Corporation ("Lotus"), a computer
software company that markets and develops productivity and work group
applications. Prior to joining Lotus, Mr. Davenport was employed from March 1985
to March 1987 as Vice President of Product Marketing for Decision Resources, a
division of Ashton-Tate Corporation, a company that developed business graphics
applications.

David N. Bosserman has served as the Company's Executive Vice President,
Chief Financial Officer and Treasurer since October 1996. Previously, he served
as the Company's Vice President, Corporate Finance from June 1993 to September
1996, and Director, Finance and Operations from May 1992 to May 1993. From
January 1985 to May 1992, Mr. Bosserman served in various positions, leading to
Senior Manager, at Deloitte & Touche.

David L.G. Horn has served as the Company's Vice President, FAS Products
Group since February 1996. He joined the Company in October 1995 as the
Company's Vice President, FAS Product Management. From February 1984 to October
1995, Mr. Horn was employed by Hewlett-Packard Co., a manufacturer of electronic
products, in various capacities, most recently as Future Products Manager for
its office products division.

James F. Foster became President of Abra Software, Inc., a wholly owned
subsidiary of the Company ("Abra Software"), in April 1993. From September 1992
until April 1993, Mr. Foster served as Chief Operating Officer of Abra Software.
Prior to joining Abra Software, Mr. Foster was employed from July 1984 to
September 1992 by Dun & Bradstreet Software Services, Inc., a business
application software provider, where he held a number of positions in the human
resources software area, most recently as Director of Sales and Marketing for
the personal computer human resources division.

Robert H. Skinner has served as Senior Vice President, Sales since April
1996. Previously, he served as the Company's Vice President of Sales and
Marketing for FAS from April 1995 to April 1996, and as

40
<PAGE> 41

Director of Sales from June 1992 to April 1995. From December 1982 to June 1992,
Mr. Skinner served as Vice President of Sales and Marketing for Trinet, Inc., a
business information marketing company.

Elaine Kelly has served as Vice President, Marketing since September 1996.
From October 1993 to September 1996, Ms. Kelly served as a Director of
Marketing. From October 1990 until October 1993, Ms. Kelley served as Marketing
Manager of the Company. From July 1988 to September 1990, Ms. Kelly served as
manager of Marketing Services for Netron Inc., a Canadian software company.

Herbert R. Brinberg has served as a director of the Company since 1990.
Since 1990, Dr. Brinberg has served as the President of Parnassus Associates
International, a company that assists organizations with information and
technology management. From 1978 to 1990, Dr. Brinberg was President and Chief
Executive Officer of Wolters Kluwer U.S. Corporation, an international
publishing company. Dr. Brinberg also serves as a director of K&F Industries,
Inc., a manufacturer of airplane parts and supplies.

Richard A. Lefebvre became a director of the Company in February 1996. He
currently serves as Chairman of Axent Technologies, Inc. ("Axent"), a provider
of enterprise-wide information security solutions, a position he has held since
January 1989. From January 1989 through July 1997, he also served as President
and Chief Executive Officer of Axent. Prior to joining Axent, Mr. Lefebvre was
Chief Operating Officer at Sage Software, Inc. (now InterSolv Inc.), a computer
software company, from May 1987 to December 1988. He currently serves on the
boards of Axent and Sylvon Software, Inc., a software, consulting and training
firm.

John H. Martinson has served as a director of the Company since 1988. Since
1986, Mr. Martinson has been a general partner of Edison Partners, L.P., which
is the general partner of Edison Venture Fund, L.P. ("Edison"), a venture
capital partnership and a shareholder of the Company. Mr. Martinson is a
director of Dendrite International Inc. and Nobel Education Dynamics, Inc. He is
a director of the National Venture Capital Association and Chairman of the New
Jersey Technology Council.

Officers of the Company serve at the pleasure of the Board of Directors.
See "-- Employment Agreements."

COMPOSITION OF THE BOARD OF DIRECTORS

The Board of Directors is divided into three classes, each of whose members
serve for a staggered three-year term. The Board consists of two Class I
Directors (Messrs. Petersen and Martinson), three Class II Directors (Dr.
Brinberg, Mr. Davenport and a vacancy) and two Class III Directors (Mr. Lefebvre
and a vacancy). At each annual meeting of shareholders, the number of directors
in the applicable class are elected for a three-year term to succeed the
directors of the same class whose terms are then expiring. The terms of the
Class I Directors, Class II Directors and Class III Directors will expire upon
the election and qualification of successor directors at the annual meeting of
shareholders held in calendar years 1999, 1997 and 1998, respectively. Dr.
Brinberg and Messrs. Del Presto and Davenport have been nominated by the Board
of Directors for re-election at the 1997 annual shareholders meeting scheduled
for September 1997.

Pursuant to a 1995 shareholders voting agreement (the "Voting Agreement")
between Mr. Petersen and Edison, Edison agreed to vote its shares in favor of
Mr. Petersen's election as a director as well as for the election of a nominee
put forward by Mr. Petersen. The Voting Agreement will terminate upon the
closing of this offering.

Mr. Davenport was appointed to the Board as a condition of his employment.
See "-- Employment Agreements."

BOARD COMMITTEES

The Board of Directors has appointed a Compensation and Finance Committee,
consisting of Messrs. Petersen, Davenport and Martinson and Dr. Brinberg, which
establishes the compensation of

41
<PAGE> 42

officers of the Company. The Company also has an Option Committee, consisting of
Messrs. Martinson and Lefebvre and Dr. Brinberg, which administers the Company's
stock plans. The Board of Directors has also appointed an Audit Committee,
consisting of Mr. Martinson and Dr. Brinberg, which reviews the results and
scope of the audit and other services provided by the Company's independent
certified public accountants.

DIRECTOR COMPENSATION

As compensation for serving on the Board of Directors, each director who is
not employed by the Company or serving on the Board as a representative of an
institutional investor (an "outside director") receives an annual retainer of
$6,000, plus a fee of $2,000 for attendance at each meeting of the full Board
and $500 for each committee meeting. In April 1997, the current outside
directors, Dr. Brinberg and Mr. Lefebvre, received options under the 1992 Stock
Option Plan to purchase 4,375 and 5,755 shares of Common Stock, respectively, at
an exercise price of $3.83 per share, which options vest annually over the
remainder of their terms in office. In addition, each outside director elected
or reelected after August 1997 will receive stock options under the Company's
1997 Director Stock Option Plan. See "-- Stock Plans."

Remuneration of directors who represent institutional investors is governed
by the terms of the original agreement between the Company and such
institutional investor. In the case of Edison, Mr. Martinson receives no
retainer or fees for attendance at Board meetings. All directors are reimbursed
for reasonable expenses incurred by them in connection with their attendance at
Board or committee meetings.

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<PAGE> 43

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or accrued by the
Company with respect to services rendered during fiscal 1997 to the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION(1)
- ------------------------------------------- -------- ------- ------------ ----------------
<S> <C> <C> <C> <C>
James F. Petersen.......................... $178,864 $31,706 -- $5,162
Chairman of the Board

Timothy A. Davenport....................... 206,345 37,763 -- 5,682
President and Chief Executive Officer

David L.G. Horn............................ 132,750 30,628 11,250 4,226
Vice President, FAS Products Group

James F. Foster............................ 154,560 21,011 45,000 1,876
President, Abra Software

Robert H. Skinner.......................... 164,024(2) 25,782 52,500 5,058
Senior Vice President, Sales
</TABLE>

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

(1) Represents matching contributions to the Company's 401(k) Plan made by the
Company on behalf of each of the Named Executive Officers and an additional
profit sharing contribution of $1,876 for each.

(2) Includes $55,501 in sales commissions.

The following table sets forth information with respect to grants of
options to purchase shares of Common Stock made during fiscal 1997 to the Named
Executive Officers.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------------
NAME GRANTED(2) FISCAL YEAR PER SHARE DATE 5% 10%
- ------------------------- ----------- --------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Timothy A. Davenport..... -- -- -- -- -- --
James F. Petersen........ -- -- -- -- -- --
David L.G. Horn.......... 3,750 3.7% $3.50 5/30/05 $ 7,236 $ 17,823
7,500 3.83 10/10/05 15,851 39,041
James F. Foster.......... 45,000 14.9 3.50 5/30/05 86,834 213,877
Robert H. Skinner........ 37,500 17.4 3.50 5/30/05 72,362 178,231
15,000 3.83 10/10/05 31,701 78,082
</TABLE>

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

(1) The amounts shown as potential realizable values on the options are based on
assumed annualized rates of appreciation in the price of the Common Stock of
5% and 10% over the term of the options, as required by the rules of the
Securities and Exchange Commission. Actual gains, if any, on stock option
exercises are dependent on future performance of the Common Stock. There can
be no assurance that the potential realizable values reflected in this table
will be achieved.

(2) All options vest 20% per year beginning on the first anniversary of the date
of grant.

43
<PAGE> 44

The following table sets forth information regarding the exercise of stock
options during fiscal 1997 and the value of options held as of the end of fiscal
1997 by the Named Executive Officers.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SHARES SUBJECT VALUE OF UNEXERCISED
SHARES TO UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
UPON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- --------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James F. Petersen........ 450,000(2) $1,692,000 -- -- -- --
Timothy A. Davenport..... 60,000 69,600 -- 315,000 -- $ 365,400
David L.G. Horn.......... -- -- 2,250 20,250 $ 1,868 8,708
James F. Foster.......... -- -- 34,500 63,000 74,010 42,990
Robert H. Skinner........ -- -- 9,000 66,000 13,485 32,603
</TABLE>

- ---------------
(1) The dollar values have been calculated by determining the difference between
(i) the fair market value of the securities underlying the options at the
exercise date, in the case of "value realized," or the fiscal year end, in
the case of "value of unexercised in-the-money options" and (ii) the
aggregate exercise price of the options. Solely for purposes of determining
these values, the Company has assumed that the fair market value of the
Common Stock on all applicable dates was the fair market value as determined
by the Board of Directors on such date, since the Common Stock was not
traded on an established market prior to this offering.

(2) In connection with his option exercise, Mr. Petersen secured a short-term
loan from the Company to pay the withholding taxes in the amount of $763,890
due as a result of such exercise, based on a per share exercise price of
$0.07 and a fair market value on the date of exercise of $3.83. The note
bore interest at the rate of 5.66%. In connection with the option exercise,
Mr. Petersen delivered to the Company 199,429 shares of Common Stock to pay
off the principal and interest on this loan.

EMPLOYMENT AGREEMENTS

Pursuant to an Employment Agreement between James F. Petersen and the
Company dated May 17, 1995, the Company agreed to employ Mr. Petersen as
Chairman of the Company until March 30, 2000, with a salary of $170,280, subject
to adjustment. Mr. Petersen is entitled to payment of his salary through March
30, 2000 should his employment be terminated by the Board other than for cause.
Mr. Petersen has agreed not to compete against the Company during his employment
and for one year thereafter.

In connection with the May 1995 hiring of Timothy A. Davenport, President
and Chief Executive Officer of the Company, the Company agreed to pay Mr.
Davenport an annual base salary of $200,000. In addition, the Company issued to
Mr. Davenport, pursuant to its 1992 Stock Option Plan, options to purchase
375,000 shares of Common Stock at an exercise price of $2.67 per share, 300,000
of which will vest equally over a five-year period and 75,000 of which will vest
in full immediately upon the closing of this offering. Mr. Davenport is entitled
to six months of base salary as severance pay should his employment be
terminated other than for cause, except in the case of constructive termination
due to a change in control, in which case he will continue to receive his salary
for 12 months and his stock option vesting will be accelerated by 24 months. The
Company also reimbursed Mr. Davenport for certain relocation expenses and agreed
to appoint him to the Board of Directors.

BONUS PLAN

The Company has a bonus program for certain designated key employees of the
Company, including all executive officers, pursuant to which such employees are
paid cash bonuses based upon the attainment of certain specified corporate,
divisional and individual goals for the year. The amount of the bonus to which
each such employee is entitled is finally determined by the Board of Directors.

STOCK PLANS

Under the Company's Employee Incentive Stock Option Plan adopted in 1988
(the "1988 Option Plan"), there were outstanding options to purchase 145,500
shares of Common Stock as of June 30, 1997. No further options may be granted
under the 1988 Option Plan.

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<PAGE> 45

The Company's Amended and Restated 1992 Stock Option Plan (the "1992 Option
Plan") covers 1,875,000 shares of Common Stock, after giving effect to an
amendment to the 1992 Option Plan approved by the Board of Directors and
submitted to, but not yet approved by, the Company's shareholders. As of June
30, 1997, options to purchase 759,703 shares of Common Stock were outstanding
under the 1992 Option Plan. In connection with the adoption of the 1997
Incentive Plan (as defined below), the Board has provided that no further
options may be granted under the 1992 Option Plan. The 1992 Option Plan provides
for the grant, as of April 24, 1997, to each outside director who was serving on
the Board of Directors as of such date, of a non-statutory option to purchase a
pro rata portion of 22,500 shares of Common Stock reflecting the remainder of
the three-year term of such director. Such options vest over the remainder of
such term. In April 1997, Dr. Brinberg and Mr. Lefebvre were each granted a
non-statutory option under the 1992 Option Plan to purchase 4,375 shares and
5,755 shares, respectively, of Common Stock at an exercise price of $3.83 per
share.

In August 1997, the Board of Directors adopted the Company's 1997 Stock
Incentive Plan (the "1997 Incentive Plan"). The Company has reserved 1,500,000
shares of Common Stock for issuance under the 1997 Incentive Plan. The 1997
Incentive Plan provides that a variety of awards, including stock options, stock
appreciation rights and restricted and unrestricted stock grants, may be made to
the Company's employees, officers, consultants and advisors who are expected to
contribute to the Company's future growth and success. The Option Committee will
administer the 1997 Incentive Plan and determine the price and other terms upon
which awards shall be made. Stock options may be granted either in the form of
incentive stock options or non-statutory stock options. The option exercise
price of incentive stock options may not be less than the fair market value of
the Common Stock on the date of grant. While the Company currently anticipates
that most grants under the 1997 Incentive Plan will consist of stock options,
the Company may grant stock appreciation rights, which represent rights to
receive any excess in value of shares of Common Stock over the exercise price;
restricted stock awards, which entitle recipients to acquire shares of Common
Stock, subject to the right of the Company to repurchase all or part of such
shares at their purchase price in the event that the conditions specified in the
award are not satisfied; or unrestricted stock awards, which represent grants of
shares to participants free of any restrictions under the 1997 Incentive Plan.
Options or other awards that are granted under the 1997 Incentive Plan but
expire unexercised are available for future grants. As of the date of this
Prospectus, no awards have been granted under the 1997 Incentive Plan. It is
currently expected, however, that options to purchase an aggregate of
approximately 200,000 shares of Common Stock, at an exercise price equal to the
initial public offering price per share in this offering, will be granted under
the 1997 Incentive Plan immediately after the effectiveness of this offering.

In August 1997, the Board of Directors adopted the Company's 1997 Director
Stock Option Plan (the "Director Plan") to provide for the grant of
non-statutory stock options to outside directors. The Company has reserved
150,000 shares for issuance under the Director Plan. The Director Plan provides
(i) in the case of an outside director elected at the commencement of a
three-year term, for the grant to such director as of the date of election of an
option exercisable to purchase 22,500 shares of Common Stock and (ii) in the
case of an outside director elected in the course of a three-year term (for
example, to fill a vacancy), for the grant to such director of an option to
purchase 22,500 shares of Common Stock multiplied by a fraction, the numerator
of which is 36 minus the number of whole calendar months which have elapsed
since the commencement of the term and the denominator of which is 36. All
options granted under the Director Plan will have an exercise price equal to the
fair market value of the Common Stock on the date of grant and will vest in
equal annual installments over the remainder of such director's three-year term,
on the date of the annual meeting of shareholders. No options have been granted
under the Director Plan to date.

The Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Company's Board of Directors in August 1997. A total of 250,000
shares of Common Stock are reserved for issuance under the Purchase Plan. The
Purchase Plan, which is intended to qualify under Section 423 of the Code, will
be administered by the Board of Directors or a committee thereof.

45
<PAGE> 46

Employees (including officers and employee directors of the Company) are
eligible to participate in the Purchase Plan if they are customarily employed
for more than 20 hours per week five months per year. The Company has not yet
offered or sold shares of Common Stock to employees pursuant to the Purchase
Plan, but the first offering under the Purchase Plan will commence on the
effective date of this offering and will end on December 31, 1997. Thereafter,
the Purchase Plan will be implemented in sequential six-month offering periods.
The Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed an aggregate value of $25,000 (measured
at the beginning of each offering period) in any calendar year. The price at
which stock may be purchased under the Purchase Plan is equal to 85% of the
lower of the fair market value of the Common Stock on the first day of the
offering period (the initial public offering price in the case of the first
offering) or the last day of the offering period. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of a participant's employment
with the Company.

401(K) PLAN

In January 1991, the Company adopted a tax-qualified profit sharing plan
(the "401(k) Plan") covering all of the Company's full- and part-time employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the lower of 15% of their eligible compensation or the
statutorily prescribed annual limit, and have the amount of such reduction
contributed to their retirement accounts. Also, the Company may, at the
discretion of the Board of Directors, make periodic "profit sharing"
contributions to the employees' accounts. The 401(k) Plan is intended to qualify
under Section 401 of the Code so that contributions by employees or by the
Company to the 401(k) Plan, and income earned on 401(k) Plan contributions, are
not taxable to employees until withdrawn from the 401(k) Plan, and so that
contributions by the Company will be deductible by the Company when made. The
Trustee under the 401(k) Plan, at the direction of each participant, invests the
assets of the 401(k) Plan in any of eight investment options. The Company will
make a matching contribution in an amount equal to $0.50 for each $1.00
contributed by an employee up to a maximum of 2% of the participant's
compensation, as defined in the 401(k) Plan. Employer matching contributions and
profit sharing contributions vest to each employee at 50% after two years of
employment, 75% after three years and 100% after four years. In calendar years
1993 through 1995, the participation of highly compensated employees was limited
to 5.5% of eligible compensation. The Company made profit sharing contributions
during calendar year 1997 in the aggregate amount of approximately $220,000.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Petersen, Chairman of the Board, and Mr. Davenport, President and Chief
Executive Officer, serve on the Compensation and Finance Committee. For
information regarding certain transactions and relationships between the Company
and Mr. Petersen and Mr. Davenport, see "-- Employment Agreements" and "Certain
Transactions."

46
<PAGE> 47

CERTAIN TRANSACTIONS

The Company paid a dividend of $0.455 per share of Common Stock to
shareholders of record on February 20, 1997 and a dividend of $0.915 per share
of Common Stock to shareholders of record on June 27, 1997. All of the Board
members (or their affiliates) except for Mr. Lefebvre were shareholders as of
the record date for payment of the first dividend and all of the Board members
(or their affiliates) were shareholders as of the record date for payment of the
second dividend. In connection with the two dividends, Mr. Petersen received
$2,876,903; Mr. Davenport received $137,100; Edison, an affiliate of Mr.
Martinson, received $5,527,292; Dorothy T. Webb, who was then a director of the
Company, received $1,027,586; Dr. Brinberg received $20,550; Mr. Lefebvre
received $3,294; and PNC Capital Corp. ("PNC"), a shareholder of the Company and
an affiliate of Peter V. Del Presto, who was then a director of the Company,
received the payments described in the following paragraph.

The Loan and Warrant Purchase Agreement by and between PNC and the Company
dated as of March 2, 1993, prohibits the Company from issuing cash dividends to
its shareholders until the closing of an initial public offering. In
consideration for PNC's waiver of this restriction in connection with the two
dividend issuances described above, the Company agreed, with regard to the first
dividend, to reduce the per share exercise price of the PNC Warrant by the
dividend amount (i.e., from $2.667 to $2.213 per share), and, with regard to the
second dividend, to pay PNC a dividend equivalent payment of $432,338 ($0.915
multiplied by the 472,500 shares underlying the PNC Warrant) and to amend the
PNC Warrant to reduce the then current per share exercise price thereunder by
20% of the dividend value (i.e., from $2.213 to $2.029 per share). PNC is a
beneficial shareholder of the Company and Mr. Del Presto, a former director of
the Company, is a Vice President of PNC. See "Description of Capital
Stock -- Warrants."

In connection with the above described dividends, all employees holding
nonstatutory stock options were given the opportunity to elect to pay some or
all of their withholding tax obligations resulting from exercise of their
options in the form of a secured promissory note, bearing interest at the rate
of 5.66% and 6.06% per annum for the first and second dividend, respectively,
and due and payable to the Company, in cash or stock of the Company (valued at
the then current fair market value), no later than ten business days after the
date upon which the cash dividend was paid. The Company received a number of
such promissory notes from employees, including a note in the amount of $763,890
from Mr. Petersen, Chairman of the Board and a director, and a note in the
amount of $702,578 from Ms. Webb, a former director. Both Mr. Petersen and Ms.
Webb delivered Common Stock to the Company to pay off the loan (199,429 and
183,282 shares, respectively).

The Company has adopted a policy that any future transactions between the
Company and its executive officers, directors and affiliates must (i) be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties and (ii) be approved by a majority of the members of the Company's
Board of Directors and by a majority of the disinterested members of the
Company's Board of Directors.

47
<PAGE> 48

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of the Common Stock as of June 30, 1997, after
giving effect to the Preferred Stock Conversion and the Warrant Exercise, and as
adjusted to reflect the sale of shares offered hereby, (i) by each person who is
known by the Company to own beneficially more than 5% of the outstanding shares
of the Common Stock, (ii) by each of the Named Executive Officers, (iii) by each
director of the Company, (iv) by all directors and executive officers of the
Company as a group and (v) by each Selling Shareholder.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR NUMBER OF OWNED AFTER
TO THE OFFERING(1) SHARES THE OFFERING(1)(2)
----------------------- BEING -------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED(2) NUMBER PERCENT
- -------------------------------------------- ------------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
James F. Petersen........................... 2,033,695 (3) 25.0% 372,820 1,660,875 15.2%
Timothy A. Davenport........................ 195,000 (4) 2.4 -- 195,000 1.8
David L.G. Horn............................. 3,000 (5) * -- 3,000 *
James F. Foster............................. 48,000 (6) * -- 48,000 *
Robert H. Skinner........................... 17,250 (7) * -- 17,250 *
John H. Martinson........................... 4,034,520 (8) 49.5 739,760 3,294,760 30.2
Herbert R. Brinberg......................... 15,000 * -- 15,000 *
Richard A. Lefebvre......................... 3,600 * -- 3,600 *
All directors and executive officers as a
group (10 persons)........................ 6,362,515 (9) 76.7 1,112,580 5,249,935 47.5

OTHER 5% SHAREHOLDERS:
Edison Venture Fund, L.P. .................. 4,034,520 (10) 49.5 739,760 3,294,760 30.2
997 Lenox Drive, #3
Lawrenceville, NJ 08648
James F. Petersen Trust U/A 12/31/93........ 1,043,806 (11) 12.8 191,380 852,426 7.8
8034 Galla Knoll Drive
Springfield, VA 22153
Dorothy T. Webb Family Trust................ 714,501 (12) 8.8 131,040 583,461 5.4
c/o Dorothy T. Webb
Abra Software, Inc.
888 Executive Center Drive West
St. Petersburg, FL 33702
PNC Capital Corp. .......................... 472,500 (13) 5.5 86,660 385,840 3.4
Pittsburgh National Bank
Fifth Avenue and Wood St.
Pittsburgh, PA 15222

OTHER SELLING SHAREHOLDERS:
Irrevocable Trust for James Mitchell
Petersen.................................. 300,000 3.7 55,020 244,980 2.3
Petersen Trust for Nieces and Nephews....... 75,000 * 13,720 61,280 *
William H. Woywood Irrevocable Trust, Dated
10/17/96.................................. 5,217 * 980 4,237 *
</TABLE>

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

* Less than 1%.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by that person
that are exercisable, or will become exercisable within 60 days after June
30, 1997, are deemed outstanding. Such shares, however, are not deemed
outstanding for purposes of computing the percentage ownership of any other
person, except that the Warrant Exercise is assumed in all calculations.
Unless otherwise indicated in the footnotes to this table, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property
laws where applicable. Unless otherwise indicated, the address of each of
the individuals listed in the table is: c/o Best Software, Inc., 11413
Isaac Newton Square, Reston, VA 20190.

48
<PAGE> 49

(2) Assumes no exercise of the Underwriters' over-allotment option. If the
over-allotment option is exercised in full, the following Selling
Shareholders will sell the following numbers of additional shares: Edison,
260,240; James F. Petersen, 99,560; James F. Petersen Trust, 105,010;
Dorothy T. Webb Family Trust, 71,894; PNC, 47,546; Irrevocable Trust for
James Mitchell Petersen, 30,187; Petersen Trust for Nieces and Nephews,
7,531; and William H. Woywood Irrevocable Trust, 532.

(3) Excludes 375,000 shares held by two irrevocable trusts established by Mr.
Petersen for the benefit of members of his family. Mr. Petersen is not a
trustee or beneficiary of either trust and disclaims beneficial ownership
of these shares. Includes 1,043,806 shares held by a trust established by
Mr. Petersen for the benefit of Nancy Petersen, of which Mr. Petersen is a
trustee and over which he has voting control. See Note (11).

(4) Includes 75,000 shares issuable upon exercise of stock options which will
become exercisable on the effective date of this offering.

(5) Consists of 3,000 shares issuable upon exercise of stock options which are
exercisable within 60 days of June 30, 1997.

(6) Consists of 48,000 shares issuable upon exercise of stock options which are
exercisable within 60 days of June 30, 1997.

(7) Consists of 17,250 shares issuable upon exercise of stock options which are
exercisable within 60 days of June 30, 1997.

(8) These shares are held by Edison. Mr. Martinson is a general partner of
Edison Partners, L.P., the general partner of Edison. Mr. Martinson,
together with the other general partners of Edison Partners, L.P., shares
voting and investment power with respect to the shares held by Edison. Mr.
Martinson does not own any shares in his individual capacity.

(9) Includes 535,540 shares issuable upon exercise of the PNC Warrant and stock
options which are exercisable within 60 days of June 30, 1997, or, in the
case of Mr. Davenport's 75,000 option shares, will become exercisable upon
the closing of this offering.

(10) Includes 625,005 shares of Common Stock into which 41,667 shares of Series
A Preferred Stock will automatically convert upon the closing of this
offering.

(11) Mr. Petersen is a trustee of this trust and exercises voting control of
these shares.

(12) Dorothy T. Webb, an employee of the Company and formerly a director and
executive officer of the Company, is a trustee of this trust, which is for
the benefit of members of Ms. Webb's family. Excludes 5,217 shares held by
an irrevocable trust established by Ms. Webb for the benefit of a member of
her family. Ms. Webb is not a trustee or beneficiary of such irrevocable
trust and disclaims beneficial ownership of these shares.

(13) Consists of 472,500 shares of Common Stock issuable upon the exercise of
the PNC Warrant. PNC has indicated its intention to exercise the PNC
Warrant to purchase 86,660 shares of Common Stock and to sell such shares
in this offering. Peter V. Del Presto, a former director of the Company, is
a Vice President of PNC. See Note (2).

49
<PAGE> 50

DESCRIPTION OF CAPITAL STOCK

Following the closing of this offering, the authorized capital stock of the
Company will consist of 40,000,000 shares of Common Stock, no par value per
share, and 1,000,000 authorized shares of preferred stock, $.01 par value per
share (the "Preferred Stock").

COMMON STOCK

As of June 30, 1997, there were 8,146,688 shares of Common Stock
outstanding and held of record by 84 shareholders, after giving effect to the
Preferred Stock Conversion and the Warrant Exercise. Based upon the number of
shares outstanding as of that date and after giving effect to the issuance of
the 2,750,000 shares of Common Stock to be sold by the Company in this offering,
there will be 10,896,688 shares of Common Stock outstanding upon the closing of
this offering.

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding Preferred Stock. Upon the liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to receive ratably the net
assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company in this offering will be, when issued and paid for, fully
paid and non-assessable. The rights, preferences and privileges of holders of
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of Preferred Stock which the Company may designate and issue
in the future.

PREFERRED STOCK

As of June 30, 1997, there were outstanding 41,667 shares of Class A
Preferred Stock held of record by one shareholder. Upon the closing of this
offering, all outstanding shares of Class A Preferred Stock will be converted
automatically into an aggregate of 625,005 shares of Common Stock. Immediately
after the closing of this offering, the Company intends to file an amendment to
its Amended and Restated Articles of Incorporation to eliminate the Class A
Preferred Stock.

The Board of Directors will have the authority, without further action of
the shareholders of the Company, to issue up to an aggregate of 1,000,000 shares
of Preferred Stock in one or more series and to fix or alter the designations,
preferences, rights and qualifications, limitations or restrictions of the
shares of each such series thereof, including the dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption (including sinking
fund provisions), redemption price or prices, liquidation preferences and the
number of shares constituting any series or designations of such series.

The Board of Directors, without shareholder approval, can issue Preferred
Stock with voting and conversion rights that could adversely affect the voting
power of holders of Common Stock. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, may have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plans
to issue any shares of Preferred Stock.

WARRANTS

Following this offering and the Warrant Exercise, the PNC Warrant will be
exercisable to purchase 385,840 shares of Common Stock (338,294 shares if the
Underwriters over-allotment option is

50
<PAGE> 51

exercised in full) at an exercise price of $2.029 per share until March 2, 2003.
See "Certain Transactions."

In addition, there are outstanding warrants to purchase a total of 3,690
shares of Common Stock at an exercise price of $3.08, held by eight shareholders
exercisable until December 23, 1997.

VIRGINIA LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

The Company will be subject to the affiliated transaction provisions of
Sections 13.1-725 through 13.1-728 of the Virginia Stock Corporation Act (the
"VSCA"). These affiliated transaction provisions prohibit a Virginia corporation
with more than 300 shareholders from engaging in an "affiliated transaction"
with an "interested shareholder" for a period of three years after the date of
the transaction in which the person became an interested shareholder, unless the
affiliated transaction is approved in a prescribed manner. "Affiliated
transactions" include mergers, asset sales and certain other transactions
between or among the corporation and an interested shareholder. Subject to
certain exceptions, an "interested shareholder" is a person who, together with
affiliates and associates, owns, or within the preceding three years did own,
10% or more of any class of the corporation's voting stock.

The Company will also be subject to the control share acquisition
provisions of Sections 13.1-728.1 through 13.1-728.9 of the VSCA. Pursuant to
these control share acquisition provisions, shares of a corporation with more
than 300 shareholders acquired in a "control share acquisition" generally have
no voting rights unless such rights are conferred to the acquiror by a vote of
non-interested shareholders. A "control share acquisition" is defined,
generally, as the direct or indirect acquisition of beneficial ownership of
voting shares which would cause the acquiror to have the power to vote or direct
the voting shares having the voting power within the following ranges in an
election of directors: (i) one-fifth or more but less than one-third, (ii)
one-third or more but less than a majority, or (iii) a majority or more, of such
votes. If voting rights are conferred to the acquiror by the shareholders of the
target corporation, the acquisition of additional voting shares by the acquiror
is not an additional control share acquisition unless such acquisition gives the
acquiror voting rights in excess of the range in which voting rights had
previously been granted.

The Board of Directors is divided into three classes, each of whose members
serve for a staggered three-year term. At each annual meeting of shareholders,
the number of directors in the applicable class are elected for a three-year
term to succeed the directors of the same class whose terms are then expiring.
The terms of the Class I Directors, Class II Directors and Class III Directors
will expire upon the election and qualification of successor directors at the
annual meeting of shareholders held in calendar years 1999, 1997 and 1998,
respectively. These staggered three-year terms may make it more difficult for a
third party to gain control of the Company's Board of Directors.

As allowed by Article 9 of the VSCA, the Company's Amended and Restated
Articles of Incorporation eliminate the liability of the officers and directors
of the Company for monetary damages in any proceeding brought by or in the right
of the Company or brought by or on behalf of shareholders of the Company except
in cases of willful misconduct or a knowing violation of criminal law or any
federal or state securities law. As allowed by Article 10 of the VSCA, the
Company's Amended and Restated Articles of Incorporation also provide for
mandatory indemnification of any director or officer of the Company who is, was,
or is threatened to be made a party to a proceeding (including a proceeding by
or in the right of the Company) because (i) he or she is or was a director or
officer of the Company or (ii) he or she is or was serving the Company or other
legal entity in any capacity at the request of the Company while a director or
officer of the Company, against all liabilities and expenses incurred in
connection with such proceeding, except such liabilities as are incurred because
of such individual's willful misconduct or knowing violation of the criminal
law. In addition, the Company's Amended and Restated Articles of Incorporation
expressly authorize the Company to enter into agreements to indemnify its
officers and directors to the fullest extent permitted by the Amended and
Restated Articles of Incorporation and to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified.

51
<PAGE> 52

The Company's Amended and Restated By-Laws provide that special meetings of
shareholders may be called in accordance with the VSCA, which provides that,
with respect to a Virginia corporation with over 35 shareholders, such meetings
may be called only by the Chairman of the Board of Directors, the President or
the Board of Directors of the Company. The Company's Amended and Restated
By-Laws also provide that the only business that may be brought before a meeting
of shareholders is limited to that described in the notice prepared by officers
of the Company. These provisions could have the effect of delaying shareholder
actions which are favored by the holders of a majority of the outstanding voting
securities of the Company, would be unable to call a special meeting of
shareholders to take action as a shareholder (such as electing new directors or
approving a merger).

The Company's Amended and Restated Articles of Incorporation and Amended
and Restated By-Laws require the affirmative vote of the holders of over
two-thirds of the outstanding voting stock of the Company to amend or repeal any
of the foregoing provisions. Such shareholder vote would be in addition to any
separate class vote that might in the future be required by the Board of
Directors pursuant to the terms of any Preferred Stock that might be outstanding
at the time any such changes are submitted to shareholders.

REGISTRATION RIGHTS

In the event the Company proposes to register any of its securities under
the Securities Act, for its own account or otherwise at any time or times, the
holders of approximately 6,735,433 shares (the "Registrable Shares") of Common
Stock (or shares issuable upon the exercise of warrants) or certain of their
permitted transferees are entitled to notice of such registration and to include
shares of such Common Stock therein, subject to certain conditions and
limitations. The Company is generally required to bear the expenses of all such
registrations (except underwriting discounts and commissions). The Company is
required to use its good faith efforts to effect such registrations, subject to
certain conditions and limitations.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is Boston
EquiServe.

52
<PAGE> 53

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 10,896,688 shares
of Common Stock outstanding (assuming no exercise of outstanding options) see
"Description of Capital Stock -- Common Stock." Of these shares, the 4,150,000
shares of Common Stock sold in this offering (assuming no exercise of the
Underwriters' over-allotment option) will be freely tradable in the public
market without restriction under the Securities Act, except that any shares
purchased by "affiliates" of the Company, as that term is defined in Rule 144
adopted under the Securities Act ("Affiliates"), may generally only be sold in
compliance with the applicable provisions of Rule 144.

The remaining shares are deemed "Restricted Securities" under Rule 144 in
that they were originally issued and sold by the Company in private transactions
in reliance upon exemptions from the Securities Act. Of the Restricted
Securities, approximately 793,748 shares may be eligible for sale in the public
market immediately after this offering pursuant to Rule 144(k) under the
Securities Act; of these, 406,576 are subject to 180-day Lock-up Agreements as
described below. Approximately 5,916,308 additional Restricted Securities will
become eligible for sale in the public market pursuant to Rule 144 or Rule 701
under the Securities Act beginning 90 days after the date of this Prospectus; of
these, 4,091,006 are subject to Lock-up Agreements. The additional 5,666
Restricted Securities will become eligible for sale in the public market from
time to time; of these, 4,253 are subject to Lock-up Agreements.

The Company, its officers, and directors, the Selling Shareholders and
certain other shareholders of the Company, who in the aggregate will hold
4,501,835 shares of Common Stock upon completion of this offering, have agreed
pursuant to certain agreements (the "Lock-up Agreements") that they will not,
without the prior written consent of Hambrecht & Quist LLC, offer, sell or
otherwise dispose of any of their shares for a period of 180 days from the date
of this Prospectus. The shares subject to the Lock-up Agreements include 406,576
and 4,091,006 shares, respectively, that would otherwise have been immediately
eligible or eligible within 90 days from the date of this Prospectus, for resale
in the public market without restriction upon completion of this offering
(subject to compliance with Rule 144 by Affiliates).

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Securities for at least one year from the later of the date such
restricted securities were acquired from the Company or the date they were
acquired from an Affiliate, is entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of the Common Stock (approximately 109,000 shares immediately after this
offering) or the average weekly trading volume in the Common Stock in the
over-the-counter market during the four calendar weeks preceding the date on
which notice of such sale was filed under Rule 144. Sales under Rule 144 are
also subject to certain provisions relating to the manner and notice of sale and
availability of current public information about the Company. Affiliates may
sell shares not constituting Restricted Securities in accordance with the
foregoing volume limitations and other restrictions, but without regard to the
one-year holding period.

Further, under Rule 144(k), after two years have elapsed from the later of
the date Restricted Securities were acquired from the Company and the date they
were acquired from an Affiliate, a holder of such Restricted Securities who is
not an Affiliate at the time of the sale and has not been an Affiliate for at
least three months prior to the sale would be entitled to sell the shares
immediately without regard to the volume limitations and other conditions
described above.

Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701 under the Securities
Act, which permits non-Affiliates to sell their Rule 701 shares without having
to comply with the public information, holding period, volume limitation or
notice provisions of Rule 144 and permits Affiliates to sell their Rule 701
shares without having to comply with Rule 144's holding period restrictions, in
each case commencing 90 days after the date of this Prospectus.

53
<PAGE> 54

The Company intends to file S-8 registration statements under the
Securities Act to register all shares of Common Stock subject to the Company's
1988 Option Plan, 1992 Option Plan, 1997 Incentive Plan, Director Plan and
Purchase Plan, which do not qualify for exemption from the registration
requirements of the Securities Act. The Company expects to file these
registration statements as soon as practicable after the closing of this
offering and such registration statements are expected to become effective upon
filing. Shares covered by these registration statements will be eligible for
sale in the public market after the effective dates of such registration
statements, subject to the Lock-up Agreements, if applicable.

Prior to this offering, there has been no public market for the Common
Stock of the Company, and no precise prediction can be made as to the effect, if
any, that market sales of shares of Common Stock or the availability of shares
of Common Stock for sale will have on the market price of the Common Stock
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock of the Company in the public market could adversely affect
prevailing market prices and could impair the Company's future ability to raise
capital through the sale of its equity securities.

The Company has granted registration rights to certain of its shareholders.
See "Description of Capital Stock -- Registration Rights."

54
<PAGE> 55

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC
and William Blair & Company, L.L.C., have severally agreed to purchase from the
Company and the Selling Shareholders the following respective number of shares
of Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
----------------------------------------------------------------- ---------
<S> <C>
Hambrecht & Quist LLC............................................ 1,490,000
William Blair & Company, L.L.C. ................................. 1,490,000
BT Alex. Brown Incorporated...................................... 90,000
Cowen & Company.................................................. 90,000
Donaldson, Lufkin & Jenrette Securities Corporation.............. 90,000
Lehman Brothers Inc. ............................................ 90,000
Montgomery Securities............................................ 90,000
Oppenheimer & Co., Inc. ......................................... 90,000
Salomon Brothers Inc ............................................ 90,000
Charles Schwab & Co., Inc. ...................................... 90,000
Smith Barney Inc. ............................................... 90,000
First Albany Corporation......................................... 45,000
First Southwest Company.......................................... 45,000
Friedman, Billings, Ramsey & Co., Inc. .......................... 45,000
Hanifen, Imhoff Inc. ............................................ 45,000
Parker/Hunter Incorporated....................................... 45,000
Piper Jaffray Inc. .............................................. 45,000
Sutro & Co. Incorporated......................................... 45,000
Waldron & Co., Inc. ............................................. 45,000
---------
Total.................................................. 4,150,000
========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligations is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $0.52 per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $0.10 per share to certain other dealers.
After the initial public offering of the shares, the offering price and other
selling terms may be changed by the Representatives of the Underwriters. The
Representatives have informed the Company that the Underwriters do not intend to
confirm sales to accounts over which they exercise discretionary authority.

The Selling Shareholders have granted to the Underwriters an option,
exercisable no later than 30 days after the date of this Prospectus, to purchase
up to 622,500 additional shares of Common Stock at the initial public offering
price, less the underwriting discount, set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise this option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof which the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total number of shares of Common Stock
offered hereby. The Selling Shareholders will be obligated, pursuant to the

55
<PAGE> 56

option, to sell shares to the Underwriters to the extent the option is
exercised. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of shares of Common Stock
offered hereby.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.

The Selling Shareholders, and certain other shareholders of the Company,
including the officers and directors, who will own in aggregate 4,501,835 shares
of Common Stock after the offering, have agreed that they will not, without the
prior written consent of Hambrecht & Quist LLC, offer, sell, or otherwise
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock or securities exchangeable for or convertible into shares of Common
Stock owned by them during the 180-day period following the date of this
Prospectus. The Company has agreed that it will not, without the prior written
consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares
of Common Stock, options or warrants to acquire shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock during
the 180-day period following the date of this Prospectus, except that the
Company may issue shares upon the exercise of options granted prior to the date
hereof, and may grant additional options under its stock option plans, provided
that, without the prior written consent of Hambrecht & Quist LLC, such
additional options shall not be exercisable during such period.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock was determined by
negotiation among the Company and the Representatives. Among the factors
considered in determining the initial public offering price were prevailing
market and economic conditions, revenue and earnings of the Company, market
valuations of other companies engaged in activities similar to the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, the Company's management and other
factors deemed relevant.

Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock of the Company at levels above those which might otherwise
prevail in the open market, including by entering stabilizing bids, effecting
syndicate covering transactions or imposing penalty bids. A stabilizing bid
means the placing of any bid or effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of the Common Stock of the Company. A
syndicate covering transaction means the placing of any bid on behalf of the
underwriting syndicate or the effecting of any purchase to reduce a short
position created in connection with the offering. A penalty bid means an
arrangement that permits the Underwriters to reclaim a selling concession from a
syndicate member in connection with the offering when the Common Stock of the
Company sold by the syndicate member is purchased in syndicate covering
transactions. Such transactions may be effected on the Nasdaq National Market,
in the over-the-counter market, or otherwise. Such stabilizing, if commenced,
may be discontinued at any time.

LEGAL MATTERS

The validity of the shares of the Common Stock offered hereby will be
passed upon for the Company by Hale and Dorr LLP, Washington, D.C. Certain legal
matters relating to the sale of the Common Stock offered hereby will be passed
upon for the Underwriters by Brobeck, Phleger & Harrison LLP, New York, New
York.

56
<PAGE> 57

EXPERTS

The audited financial statements and schedule of the Company included in
this Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

ADDITIONAL INFORMATION

The Company intends to furnish its shareholders with annual reports
containing financial statements audited by an independent accounting firm and
will make available copies of quarterly reports containing unaudited financial
information for the first three quarters of each fiscal year.

The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 (including all amendments
thereto, the "Registration Statement") under the Securities Act with respect to
the Common Stock offered hereby. As permitted by the rules and regulations of
the Commission, this Prospectus omits certain information contained in the
Registration Statement. For further information with respect to the Company and
the Common Stock offered hereby, reference is hereby made to the Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any agreement or other
document filed as an exhibit to the Registration Statement are not necessarily
complete, and in each instance reference is made to the copy of such agreement
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. The Registration Statement,
including the exhibits and schedules thereto, may be inspected at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part thereof may be obtained
from such office upon payment of the prescribed fees. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov.

57
<PAGE> 58

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Balance Sheets
As of March 31, 1996 and 1997 and as of June 30, 1997 (Unaudited)................... F-3
Consolidated Statements of Operations
For the Years Ended March 31, 1995, 1996 and 1997 and for the Three Months Ended
June 30, 1996 and 1997 (Unaudited)............................................... F-4
Consolidated Statements of Shareholders' Deficit
For the Years Ended March 31, 1995, 1996 and 1997 and for the Three Months Ended
June 30, 1997 (Unaudited)........................................................ F-5
Consolidated Statements of Cash Flows
For the Years Ended March 31, 1995, 1996 and 1997 and for the Three Months Ended
June 30, 1996 and 1997 (Unaudited)............................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 59

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Best Software, Inc.:

We have audited the accompanying consolidated balance sheets of Best
Software, Inc., a Virginia corporation, and subsidiaries as of March 31, 1996
and 1997, and the related consolidated statements of operations, shareholders'
deficit and cash flows for each of the three years in the period ended March 31,
1997. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Best Software, Inc. and
subsidiaries as of March 31, 1996 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1997, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP
Washington, D.C.
August 6, 1997 (except with
respect to the increase in
authorized shares discussed in
Note 1, as to which the date is
September 11, 1997)

F-2
<PAGE> 60

BEST SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, PRO FORMA
------------------------- JUNE 30, JUNE 30,
1996 1997 1997 1997
----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 8,105,231 $13,364,929 $7,428,808
Accounts receivable, net of allowance ($1,506,951,
$832,059, and $1,345,766, respectively).......... 4,035,502 2,123,716 3,401,903
Inventory.......................................... 564,025 182,795 221,010
Prepaid expenses and other current assets.......... 622,099 895,295 1,373,549
Deferred tax asset................................. 500,000 350,000 350,000
----------- ----------- -----------
Total............................................ 13,826,857 16,916,735 12,775,270
----------- ----------- -----------
Property and equipment, net.......................... 1,951,520 1,774,051 1,557,408
Deferred tax asset................................... 1,800,000 2,450,000 2,450,000
Other assets......................................... 47,009 18,978 32,487
----------- ----------- -----------
Total............................................ $17,625,386 $21,159,764 $16,815,165
============ ============ ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................... $ 1,811,961 $1,949,012 $2,286,313
Accrued expenses................................... 3,378,684 4,570,914 5,634,107
Notes payable...................................... 666,667 650,000 650,000
Deferred maintenance and service revenue........... 8,412,635 10,605,545 11,915,891
Obligations under capital leases................... 139,612 54,321 31,472
----------- ----------- -----------
Total............................................ 14,409,559 17,829,792 20,517,783
----------- ----------- -----------
Notes payable, net of current portion................ 2,133,333 650,000 650,000
Deferred maintenance and service revenue............. 984,960 1,682,704 1,716,025
----------- ----------- -----------
Total liabilities........................... 17,527,852 20,162,496 22,883,808
----------- ----------- -----------
Commitments and contingencies (Notes 5, 7, 8 and 9)

Redeemable convertible preferred stock:
Class A preferred stock, $0.01 par value; 41,667
shares authorized, issued and outstanding at
March 31, 1996 and 1997 and June 30, 1997,
convertible into 625,005 shares of common stock
upon the closing of an initial public offering
(at liquidation value)........................... 500,000 500,000 500,000 $ --
Redeemable common stock warrants..................... 295,529 641,627 792,033 --
Shareholders' deficit:
Preferred stock, $0.01 par value; 1,000,000 shares
authorized, none issued.......................... -- -- -- --
Common stock, no par value; 40,000,000 shares
authorized; 6,529,579, 6,979,483, 7,435,023 and
8,146,688 issued and outstanding, respectively... 199,984 454,622 785,332 1,605,021
Additional paid-in capital......................... 749,321 227,676 -- 648,177
Deferred compensation.............................. (77,000) -- -- --
Accumulated deficit................................ (1,570,300) (826,657) (8,146,008) (8,146,008)
----------- ----------- ----------- ------------
Total shareholders' deficit................. (697,995) (144,359) (7,360,676) $(5,892,810)
----------- ----------- ----------- ============
Total................................... $17,625,386 $21,159,764 $16,815,165
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-3
<PAGE> 61

BEST SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED MARCH 31, JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees and royalty....... $20,346,229 $22,677,174 $20,161,436 $5,064,440 $ 5,357,634
Services....................... 14,676,917 16,552,398 19,322,987 4,434,515 5,288,451
----------- ----------- ----------- ---------- -----------
Total....................... 35,023,146 39,229,572 39,484,423 9,498,955 10,646,085
----------- ----------- ----------- ---------- -----------
Cost of revenue:
License fees and royalty....... 3,805,771 4,501,351 2,251,124 577,128 371,139
Services....................... 4,356,988 5,305,877 5,675,381 1,513,987 1,470,336
----------- ----------- ----------- ---------- -----------
Total....................... 8,162,759 9,807,228 7,926,505 2,091,115 1,841,475
----------- ----------- ----------- ---------- -----------
Gross margin..................... 26,860,387 29,422,344 31,557,918 7,407,840 8,804,610
----------- ----------- ----------- ---------- -----------
Operating expenses:
Sales and marketing............ 11,353,573 12,811,982 14,355,197 3,953,911 4,304,933
Research and development....... 5,707,290 7,388,807 6,088,730 1,816,864 2,048,326
General and administrative..... 4,284,967 5,789,546 5,553,895 1,523,445 1,584,686
Amortization of acquired
intangibles................. 3,176,901 1,434,861 -- -- --
----------- ----------- ----------- ---------- -----------
Total....................... 24,522,731 27,425,196 25,997,822 7,294,220 7,937,945
----------- ----------- ----------- ---------- -----------
Operating income............... 2,337,656 1,997,148 5,560,096 113,620 866,665
Other income (expense):
Interest income (expense),
net......................... (175,806) (145,082) 351,311 10,994 (293,067)
Gain on sale of product
lines....................... -- 750,000 -- -- --
----------- ----------- ----------- ---------- -----------
Total....................... (175,806) 604,918 351,311 10,994 (293,067)
Income from continuing
operations before income
taxes.......................... 2,161,850 2,602,066 5,911,407 124,614 573,598
Income tax benefit (provision)... (550,000) 925,000 (1,475,000) (45,000) (225,000)
----------- ----------- ----------- ---------- -----------
Income from continuing
operations..................... 1,611,850 3,527,066 4,436,407 79,614 348,598
Gain on disposal of discontinued
business, net of income tax
provision of $625,000.......... 1,902,965 -- -- -- --
----------- ----------- ----------- ---------- -----------
Net income....................... 3,514,815 3,527,066 4,436,407 79,614 348,598
Less accretion (Note 8).......... (31,500) (89,250) (136,500) (22,313) (68,250)
----------- ----------- ----------- ---------- -----------
Net income available to common
shareholders................... $ 3,483,315 $ 3,437,816 $ 4,299,907 $ 57,301 $ 280,348
=========== =========== =========== ========== ===========
Pro forma net income per share
(unaudited).................... $ 0.45 $ 0.04
=========== ===========
Pro forma weighted average
shares outstanding
(unaudited).................... 9,807,702 9,883,386
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-4
<PAGE> 62

BEST SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT

<TABLE>
<CAPTION>
REDEEMABLE SHAREHOLDERS' DEFICIT
COMMON -----------------------------------------------------------------
REDEEMABLE STOCK NUMBER OF ADDITIONAL
PREFERRED PURCHASE COMMON COMMON PAID-IN DEFERRED ACCUMULATED
STOCK WARRANTS SHARES STOCK CAPITAL COMPENSATION DEFICIT
----------- ---------- --------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1994......... $ 500,000 $ 206,279 6,496,279 $ 177,214 $ 750,091 $ (167,457) $(8,522,931)
Exercise of stock options
including tax benefit of
$1,290...................... -- -- 7,050 6,290 1,290 -- --
Compensation expense
associated with stock
options..................... -- -- -- -- -- 39,000 --
Cancellation of stock
options..................... -- -- -- -- (11,457) 11,457 --
Net income.............. -- -- -- -- -- -- 3,514,815
----------- ---------- --------- ---------- ----------- ------------ -----------
Balance, March 31, 1995......... 500,000 206,279 6,503,329 183,504 739,924 (117,000) (5,008,116)
Exercise of stock options
including tax benefit of
$10,605..................... -- -- 26,250 16,480 10,605 -- --
Compensation associated with
stock options............... -- -- -- -- -- 38,792 --
Cancellation of stock
options..................... -- -- -- -- (1,208) 1,208 --
Redemption value of warrants
in excess of carrying
value....................... -- 89,250 -- -- -- -- (89,250)
Net income.............. -- -- -- -- -- -- 3,527,066
----------- ---------- --------- ---------- ----------- ------------ -----------
Balance, March 31, 1996......... 500,000 295,529 6,529,579 199,984 749,321 (77,000) (1,570,300)
Exercise of stock options
including tax benefit of
$560,389.................... -- -- 758,071 511,435 560,389 -- --
Compensation associated with
stock options............... -- -- -- -- -- 6,416 --
Purchase and retirement of
treasury stock.............. -- -- (310,792) (270,272) (1,011,450) -- --
Exercise of common stock
purchase warrants........... -- (5,390) 2,625 13,475 -- -- --
Cancellation of stock
options..................... -- -- -- -- (70,584) 70,584 --
Payment of dividend........... -- -- -- -- -- -- (3,556,264)
Redemption value of warrants
in excess of carrying
value....................... 136,500 -- -- -- -- (136,500)
Modification of warrant....... -- 214,988 -- -- -- -- --
Net income.............. -- -- -- -- -- -- 4,436,407
----------- ---------- --------- ---------- ----------- ------------ -----------
Balance, March 31, 1997......... 500,000 641,627 6,979,483 454,622 227,676 -- (826,657)
Exercise of stock options
including tax benefit of
$538,405 (unaudited)........ -- -- 670,491 351,284 538,405 -- --
Purchase and retirement of
treasury stock
(unaudited)................. -- -- (217,051) (31,354) (766,081) -- (34,585)
Exercise of common stock
purchase warrants
(unaudited)................. -- (4,312) 2,100 10,780 -- -- --
Payment of dividend
(unaudited)................. -- -- -- -- -- -- (7,565,114)
Redemption value of warrants
in excess of carrying value
(unaudited)................. -- 68,250 -- -- -- -- (68,250)
Modification of warrant
(unaudited)................. -- 86,468 -- -- -- -- --
Net income (unaudited).. -- -- -- -- -- -- 348,598
----------- ---------- --------- ---------- ----------- ------------ -----------
Balance, June 30, 1997
(unaudited)................... 500,000 792,033 7,435,023 785,332 -- -- (8,146,008)
----------- ---------- --------- ---------- ----------- ------------ -----------
Pro forma adjustments (Note 1)
(unaudited)................... (500,000) (792,033) 711,665 819,689 648,177 -- --
----------- ---------- --------- ---------- ----------- ------------ -----------
Pro forma balance, June 30, 1997
(unaudited)................... $ -- $ -- 8,146,688 $1,605,021 $ 648,177 $ -- $(8,146,008)
=========== ========== ========= ========== =========== ============ ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-5
<PAGE> 63

BEST SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED MARCH 31, JUNE 30,
--------------------------------------- ---------------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income........................................ $ 3,514,815 $ 3,527,066 $ 4,436,407 $ 79,614 $ 348,598
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on disposal of discontinued tax business... (1,902,965) -- -- -- --
Gain on sale of product lines................... -- (750,000) -- -- --
Depreciation and amortization................... 5,476,358 3,779,557 1,288,138 326,349 365,875
Compensation associated with stock options...... 39,000 38,792 6,416 6,416 --
Modification of warrants and amortization of
debt discount................................. 131,244 -- 214,988 -- 86,468
Tax benefit from option exercises............... 1,290 10,605 560,389 -- 538,405
Deferred tax asset.............................. -- (2,300,000) (500,000) 500,000 --
(Increase) decrease in assets:
Accounts receivable............................. (1,283,425) 95,563 1,911,786 397,190 (1,278,187)
Inventory....................................... (150,473) (42,963) 381,230 313,495 (38,215)
Prepaid expenses and other assets............... 1,505,085 (359,287) (245,165) (1,241,599) (491,767)
Increase (decrease) in liabilities:
Accounts payable................................ (264,203) 89,335 137,051 499,958 337,301
Accrued expenses................................ (3,247,753) 247,212 1,192,230 (700,984) 1,063,193
Deferred maintenance and service revenue........ 826,977 583,959 2,890,654 1,387,167 1,343,666
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities.............................. 4,645,950 4,919,839 12,274,124 1,567,606 2,275,337
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Net proceeds from disposal of discontinued
business...................................... 4,684,385 -- -- -- --
Net proceeds from sale of product lines......... -- 1,609,000 -- -- --
Net proceeds from sale of property and
equipment..................................... -- -- 185,000 -- --
Purchases of property and equipment............. (465,565) (793,105) (1,295,667) (317,691) (149,231)
Investment in software development costs........ (126,054) -- -- -- --
Buyout of product rights........................ (577,000) (429,586) -- -- --
Acquisitions.................................... (3,289,608) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) investing
activities.............................. 226,158 386,309 (1,110,667) (317,691) (149,231)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from note payable...................... 2,000,000 -- -- -- --
Repayment of notes payable...................... (3,538,071) (675,000) (1,500,000) (166,666) --
Payments on line of credit...................... (1,500,000) -- -- -- --
Cash dividends paid to shareholders............. -- -- (3,556,264) -- (7,565,114)
Proceeds from exercise of stock options and
warrants...................................... 6,290 16,480 519,518 -- 357,757
Purchase and retirement of treasury stock....... -- -- (1,281,722) -- (832,021)
Principal payments under capital lease
obligations................................... (68,246) (76,293) (85,291) (20,440) (22,849)
Redemption of warrants.......................... (307,700) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used in financing activities..... (3,407,727) (734,813) (5,903,759) (187,106) (8,062,227)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents..................................... 1,464,381 4,571,335 5,259,698 1,062,809 (5,936,121)
Cash and cash equivalents, beginning of period.... 2,069,515 3,533,896 8,105,231 8,105,231 13,364,929
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of period.......... $ 3,533,896 $ 8,105,231 $13,364,929 $ 9,168,040 $ 7,428,808
========== ========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-6
<PAGE> 64

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Best Software, Inc., is a provider of asset, human resources and payroll
management software solutions for middle market businesses.

The market for business application software is competitive and
characterized by ongoing technological advances. The success of the Company's
future results of operations is dependent upon, among other things, its ability
to adapt to technological developments and changing industry 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of Best Software, Inc. and
its wholly owned subsidiaries. Best Software, Inc. and its wholly owned
subsidiaries are referred to as the "Company." Intercompany accounts and
transactions have been eliminated in consolidation.

REVENUE RECOGNITION

Revenue from software product licenses is recognized upon shipment of the
product, net of provisions for returns and allowances, provided that no
significant vendor obligations remain and that collection of the resulting
account receivable is probable.

For products with free trial periods, revenue is recognized upon acceptance
of the product by the customer. Revenue from software support agreements is
recognized pro rata over the term of the agreement, which is generally one year.
Revenue from services, such as training and consulting, is recognized as the
services are provided. Revenue from the Company's royalty license is recognized
ratably within each year of the term of the license agreement, based on
specified annual royalty payments.

The American Institute of Certified Public Accountants (the "AICPA")
approved for exposure a draft Statement of Position (the "SOP") that would
supersede SOP 91-1, "Software Revenue Recognition." If approved, the SOP would
need to be implemented for years beginning after December 15, 1997. The Company
believes that the proposed changes would not have a material financial impact on
the Company.

COST OF REVENUE

Direct product costs, royalties paid by the Company based on contractual
agreements, and amortization of capitalized software development costs
($1,218,020 and $1,161,361 for the years ended March 31, 1995 and 1996) are
included in cost of license fees and royalty revenue. Cost of services revenue
includes employee compensation and benefits, telephone charges and other costs
related to providing such services.

F-7
<PAGE> 65

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid investments with original
maturity dates of three months or less at the date of purchase.

INVENTORY

Inventory, consisting of software media, manuals and related packaging
materials, is stated at the lower of cost, determined on the first-in, first-out
("FIFO") basis, or market.

PROPERTY AND EQUIPMENT

Property and equipment are depreciated using the straight-line method over
the estimated useful lives of the assets, which range from three to five years.
Leasehold improvements are amortized over the shorter of the useful life of the
asset or the lease term.

INTELLECTUAL PROPERTY RIGHTS AND INTANGIBLES

For the years ended March 31, 1995 and 1996, amortization of intellectual
property rights and intangibles was $3,176,901 and $1,434,861. Intellectual
property rights and intangibles were fully amortized as of March 31, 1996.

SOFTWARE DEVELOPMENT COSTS

The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Costs
incurred prior to establishment of technological feasibility are expensed as
incurred and reflected as research and development costs in the accompanying
statements of operations. All capitalized software development costs were fully
amortized as of March 31, 1996.

The Company capitalized software development costs of $126,000 in the
fiscal year ended March 31, 1995. There were no software development costs
capitalized in the fiscal years ended March 31, 1996 or 1997, or in the three
month period ended June 30, 1997. During these periods the time between the
establishment of technological feasibility and general release was very short.
Consequently, costs otherwise capitalizable after technological feasibility were
expensed as they were insignificant.

INCOME TAXES

The Company accounts for income taxes using the liability method as
prescribed by SFAS No. 109, "Accounting for Income Taxes."

CREDIT RISK

Accounts receivable consist of geographically dispersed customers and
include allowances to record receivables at their estimated net realizable
value. The Company maintains its cash and cash equivalents with high credit
quality financial institutions. Cash equivalents consist principally of U.S.
government agency securities and money market funds which invest in government
agency securities.

F-8
<PAGE> 66

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SUPPLEMENTAL CASH FLOW DISCLOSURE

Cash paid for income taxes and interest was:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
---------------------------------- ---------------------------
1995 1996 1997 1996 1997
-------- ---------- ---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income taxes................ $700,000 $1,250,000 $1,800,000 $650,000 $145,000
Interest.................... 575,000 250,000 160,000 80,000 460,000
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES

During the three month period ended June 30, 1996, the Company sold certain
furniture and equipment in exchange for a $185,000 note receivable. The note was
paid during fiscal year 1997.

UNAUDITED PRO FORMA INFORMATION

The unaudited pro forma information is being presented to show the
mandatory conversion of the redeemable convertible preferred stock into common
stock upon a qualified initial public offering. If the initial public offering
is consummated under terms presently anticipated, all of the Company's preferred
stock outstanding will automatically convert into shares of its common stock.
The pro forma information also reflects the expiration of warrant redemption
rights and the partial exercise of a warrant that will occur immediately prior
to the closing of this offering. The holder of the warrant to purchase 472,500
shares of common stock has elected to partially exercise the warrant to purchase
86,660 shares of common stock. The Company will receive proceeds of $175,833
from the warrant exercise.

PRO FORMA NET INCOME PER SHARE

Pro forma net income per share has been computed based on the weighted
average number of common shares and common equivalent shares outstanding during
each period. Common equivalent shares outstanding include preferred stock, as
if-converted, and the common equivalent shares calculated for the stock options
and warrants using the treasury stock method for all periods presented.

Pursuant to accounting practices prescribed by the Securities and Exchange
Commission, common stock and common stock options issued within the twelve month
period prior to the initial public offering at a price less than the proposed
public offering price have been included in the calculation of earnings per
share as if they were outstanding for all periods presented. The calculation
used the treasury stock method and the offering price of $13.00 per share. Pro
forma net income per share reflects the expiration of the warrant redemption
rights and the partial exercise of the common stock warrant and the assumed
issuance at an offering price of $13.00 per share of a sufficient number of
shares of common stock to fund the dividends paid as of June 30, 1997 in excess
of earnings.

Primary earnings per share are not presented because the difference between
these amounts and the amounts presented is not material.

In March 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 is effective for
financial statements issued after December 15, 1997. SFAS No. 128 requires dual
presentation of basic and diluted earnings per share. The Company believes the
presentation of diluted earnings per share will not materially differ from
earnings per

F-9
<PAGE> 67

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

share as presently presented. Basic earnings per share includes no dilution and
is computed by dividing net income available to common shareholders by the
weighted average number of common shares outstanding for the period. The
Company's basic net income per share for the year ended March 31, 1997 and the
three months ended June 30, 1997 was $0.61 and $0.05, respectively, on a pro
forma basis.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company complies with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company
reviews its long-lived assets, which consist primarily of property and
equipment, for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be fully recoverable. To
determine recoverability of its long-lived assets, the Company evaluates the
probability that future undiscounted net cash flows, without interest charges,
will be less than the carrying amount of the assets. Impairment is measured at
fair value.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of current assets, current liabilities and notes
payable in the accompanying financial statements approximate fair value.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The accompanying consolidated balance sheet as of June 30, 1997 and the
accompanying consolidated statements of operations and cash flows for the three
months ended June 30, 1996 and 1997 included herein have been prepared by the
Company and are unaudited. The information furnished in the unaudited financial
statements referred to above includes all adjustments which are, in the opinion
of management, necessary for a fair presentation of such financial statements.
The results of operations for the three months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the entire fiscal year.

INCREASE IN AUTHORIZED SHARES AND STOCK SPLIT

In August 1997, the Board of Directors approved a three-for-two stock split
and, subject to shareholders' approval, increased the authorized capital stock
of the Company to consist of 40,000,000 shares of common stock, no par value,
and 1,000,000 shares of preferred stock, $0.01 par value per share. All share
and per-share amounts in the accompanying financial statements have been
restated to reflect the stock split and increase in authorized shares.

On September 11, 1997, the shareholders approved the increase in authorized
shares.

RECLASSIFICATIONS

Certain reclassifications of prior year amounts have been made to conform
to the March 31, 1997 presentation.

2. SALE OF BUSINESS AND ASSETS

On April 6, 1994, in accordance with a plan established during fiscal 1993,
the Company sold its tax preparation software business for a cash payment of
$6.5 million. The Company recorded a pre-tax gain of approximately $2.5 million
after transaction expenses, or approximately $1.9 million after tax, in the year
ended March 31, 1995.

F-10
<PAGE> 68

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

2. SALE OF BUSINESS AND ASSETS (CONTINUED)

In August 1995, the Company sold substantially all the assets related to
its service bureau payroll and write-up product lines for $1,609,000. A pre-tax
gain of $750,000 was recorded on this transaction.

Effective May 29, 1996, the Company licensed its small business accounting
product line in return for royalties, payable over a four-year license period.
Royalty income of $663,750 and $221,250 was recognized from this agreement and
is reflected as license fees and royalty in the accompanying statement of
operations during the year ended March 31, 1997 and the three months ended June
30, 1997, respectively. The Company does not anticipate generating any
additional revenue from this product line upon termination of the license
agreement in June 2000. The royalty is based on the total revenue of the
licensee attributable to this product line, with the royalty rate escalating
over each of the four years in the license period.

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
MARCH 31,
------------------------- JUNE 30,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Equipment and computer software................. $ 4,466,177 $ 5,059,248 $ 5,205,403
Furniture and fixtures.......................... 1,235,947 1,221,845 1,224,917
Leasehold improvements.......................... 537,058 520,552 520,557
Accumulated depreciation and amortization....... (4,287,662) (5,027,594) (5,393,469)
----------- ----------- -----------
Total................................. $ 1,951,520 $ 1,774,051 $ 1,557,408
========== ========== ==========
</TABLE>

4. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
MARCH 31,
----------------------- JUNE 30,
1996 1997 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Compensation and benefits.......................... $1,513,783 $3,130,874 $4,166,406
Taxes, other than income........................... 582,314 313,685 301,120
Income taxes payable............................... 250,000 -- --
Royalties payable.................................. 193,469 156,109 110,336
Other.............................................. 839,118 970,246 1,056,245
---------- ---------- -----------
$3,378,684 $4,570,914 $5,634,107
========= ========= =========
</TABLE>

5. NOTES PAYABLE

The Company had a term loan outstanding of $1.5 million with interest of
9.25% at March 31, 1996. The note was paid in full and canceled in July 1996.

In connection with an acquisition in 1992, the Company issued an unsecured
subordinated promissory note for $1,300,000. The note requires principal
payments of $650,000 on July 1, 1997 and 1998. Interest accrues at 6.5% per
annum and is payable quarterly.

F-11
<PAGE> 69

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

6. INCOME TAXES

The provision (benefit) for income taxes is summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------
1995 1996 1997
-------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal....................................... $440,000 $ 1,225,000 $ 1,745,000
State......................................... 110,000 150,000 230,000
-------- ----------- -----------
550,000 1,375,000 1,975,000
-------- ----------- -----------
Deferred:
Federal....................................... -- (305,000) 620,000
State......................................... -- (40,000) 80,000
-------- ----------- -----------
-- (345,000) 700,000
-------- ----------- -----------
Decrease in valuation allowance................. -- (1,955,000) (1,200,000)
-------- ----------- -----------
$550,000 $ (925,000) $ 1,475,000
======== ========== ==========
</TABLE>

Significant components of the Company's deferred tax assets consist of the
following:

<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Tax credit carryovers...................................... $ 1,320,000 $ 175,000
Foreign net operating loss carryforwards................... -- 280,000
Intangible assets.......................................... 2,830,000 2,600,000
Depreciable assets......................................... 220,000 300,000
Other...................................................... 330,000 645,000
----------- -----------
Total deferred tax assets............................. 4,700,000 4,000,000
Valuation allowance................................... (2,400,000) (1,200,000)
----------- -----------
Net deferred tax asset........................... $ 2,300,000 $ 2,800,000
========== ==========
</TABLE>

The Company's tax credit carryforwards expire through 2009.

During fiscal 1996 and 1997, the valuation allowance for deferred tax
assets decreased by approximately $2.0 million and $1.2 million, respectively.
This was the result of the Company's reevaluation of its future forecasted
taxable income, and certain tax planning strategies. The remaining valuation
allowance relates to reversals of temporary differences, primarily relating to
the Company's intangible assets, expected to reverse in future years as to which
the Company is unable to make a judgement about the likelihood of realization
and the realization of foreign net operating loss carryforwards. The Company
believes it is more likely than not that all of the recorded net deferred tax
asset will be realized.

F-12
<PAGE> 70

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

6. INCOME TAXES (CONTINUED)

The differences between the expected tax provision based on the federal
income statutory rate and the actual provision for the years ended March 31,
1995, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate...................................... 34.0% 34.0% 34.0%
State income taxes.......................................... 4.6 6.4 5.0
Change in valuation allowance............................... -- (80.1) (22.9)
Foreign operating losses not deductible in U.S.............. -- -- 5.0
Utilization of NOL carryforwards............................ (14.6) -- --
Other nondeductible items................................... 1.0 4.2 3.9
----- ----- -----
25.0% (35.5)% 25.0%
===== ===== =====
</TABLE>

7. SHAREHOLDERS' DEFICIT

EMPLOYEE STOCK OPTION PLAN

The Company has a nonqualified stock option plan for key employees. As of
March 31, 1997 and June 30, 1997, a total of 725,338 and 145,500 shares of
common stock, respectively, have been reserved for issuance under this plan.
Options are exercisable for a period of one to ten years from the date of grant.

In November 1992, the Company adopted a second stock option plan. A maximum
of 1,875,000 shares of common stock may be granted as either incentive stock
options or nonqualified options. The options are exercisable for a maximum of
ten years from the date of grant.

Any difference between the fair market value of the stock and the option
price at the date of grant is recorded as compensation expense over the vesting
period, which is generally 60 months. For options granted in fiscal 1997 and the
three months ended June 30, 1997, fair value was determined by independent
appraisal. As of March 31, 1997 and June 30, 1997, aggregate options available
for future

F-13
<PAGE> 71

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

7. SHAREHOLDERS' DEFICIT (CONTINUED)

grant under the combined plans were 907,440 and 864,384, respectively. Option
activity is summarized as follows:

<TABLE>
<CAPTION>
WEIGHTED
OPTION EXPIRATION AVERAGE
PRICE PER DATE EXERCISE
OPTIONS SHARE (FISCAL YEAR) PRICE
--------- ----------- ------------- --------
<S> <C> <C> <C> <C>
Options outstanding at April 1, 1994..... 1,684,500 $0.07-$3.00 1998-2003 $ 0.61
Granted................................ 97,650 2.00-3.33 2.78
Canceled............................... (138,450) 0.33-3.33 1.59
Exercised.............................. (7,050) 0.57-1.13 0.89
---------
Options outstanding at March 31, 1995.... 1,636,650 0.07-3.33 1998-2004 0.65
Granted................................ 541,500 2.67-3.33 2.71
Canceled............................... (31,725) 1.13-3.33 2.30
Exercised.............................. (26,250) 0.57-3.33 0.63
---------
Options outstanding at March 31, 1996.... 2,120,175 0.07-3.33 1999-2005 1.15
Granted................................ 301,425 3.50-3.83 3.67
Canceled............................... (130,890) 2.00-3.83 2.91
Exercised.............................. (758,072) 0.07-3.33 0.67
---------
Options outstanding at March 31, 1997.... 1,532,638 0.07-3.83 1999-2006 1.73
Granted................................ 51,756 3.83 3.83
Canceled............................... (8,700) 3.50-3.83 3.56
Exercised.............................. (670,491) 0.07-3.50 0.53
---------
Options outstanding at June 30, 1997
(Unaudited)............................ 905,203 $0.33-$3.83 2000-2007 $ 2.74
========
</TABLE>

As of March 31, 1997 and June 30, 1997, options to purchase 788,563 and
228,742 shares of common stock were exercisable with a weighted average exercise
of $0.52 and $1.68, respectively. The weighted-average remaining contractual
life of options outstanding at March 31, 1997 and June 30, 1997 was 4.76 and
6.43 years, respectively.

In July 1997, the Company granted options to purchase 114,150 shares of
common stock at an exercise price of $8.00 per share. In connection with these
grants, the Company will record deferred compensation of approximately $135,000
in the quarter ended September 30, 1997, which will be amortized ratably over
the option vesting period of five years.

In August 1997, the Board of Directors adopted the 1997 Stock Incentive
Plan (the "1997 Incentive Plan"). The Company has reserved 1,500,000 shares of
common stock for issuance under the 1997 Incentive Plan. The 1997 Incentive Plan
provides that a variety of awards, including stock options, stock appreciation
rights and restricted and unrestricted stock grants, may be made to the
Company's employees, officers, consultants and advisors who are expected to
contribute to the Company's future growth and success.

In August 1997, the Board of Directors adopted the Company's 1997 Director
Stock Option Plan (the "Director Plan") to provide for the grant of
non-statutory stock options to outside directors. All options granted under the
Director Plan will have an exercise price equal to the fair market value of the
common stock on the date of grant. The Company has reserved 150,000 shares for
issuance under the Director Plan. No options have been granted under the
Director Plan to date.

F-14
<PAGE> 72

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

7. SHAREHOLDERS' DEFICIT (CONTINUED)

The Company adopted the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation", effective for the Company's March 31,
1997 financial statements. The Company applies Accounting Principles Boards
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its plans. Accordingly, compensation cost has
been recognized for its stock plans based on the intrinsic value of the stock
option at the date of the grant (i.e. the difference between the exercise price
and the fair value of the Company's stock). Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for awards under those plans consistent with the method of
SFAS No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Net income as reported....................................... $3,527,066 $4,436,407
Pro forma.................................................... 3,454,066 4,304,407
Earnings per share as reported............................... -- 0.45
Pro forma.................................................... -- 0.44
</TABLE>

The fair value of each option is estimated on the date of grant using the
minimum value method with the following assumptions used for grants in fiscal
1996 and 1997: no dividend yield, expected volatility of zero, risk-free
interest rates of approximately 6%, and expected lives of five years.

Because SFAS No. 123's method of accounting has not been applied to options
granted prior to April 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.

8. REDEEMABLE SECURITIES

REDEEMABLE CONVERTIBLE CLASS A PREFERRED STOCK

Each share of Class A preferred stock has voting privileges equal to the
number of shares of common stock into which such preferred stock is convertible.
Each share is convertible, at the option of the holder at any time, into fifteen
shares of common stock, subject to the adjustment for certain dilutive effects.
In the event of liquidation, dissolution or winding up of the Company, Class A
preferred shareholders would be entitled to receive $12.00 per share in
preference to the common shareholders. The difference between the redemption
price and the initially recorded amount has been accreted. Upon the consummation
of a qualifying initial public offering of common stock, the preferred stock
will automatically be converted to common stock. The Class A preferred stock is
redeemable, at the option of the holder, for $12.00 per share on September 1 of
each calendar year, from 1993 to and including September 1, 2000, subject to
certain limitations as outlined in the articles of incorporation, including
restrictions on the number of shares which may be redeemed in any year.

REDEEMABLE COMMON STOCK PURCHASE WARRANTS

In connection with a subordinated debt financing, the Company issued a
warrant to purchase 472,500 common shares at $2.67 per share. The warrant
provides for adjustment of the warrant exercise price and/or the number of
shares issuable upon the exercise of the warrant in the event of dilutive
issuances of equity securities and have certain registration rights with respect
to shares issued in connection with the exercise or conversion of the warrants.
The warrant holder also has the right to require the Company to purchase all or
a portion of the common stock issuable upon the exercise of

F-15
<PAGE> 73

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

8. REDEEMABLE SECURITIES (CONTINUED)

the warrant or actually issued pursuant to the warrant at any time after March
1998, or upon a merger or sale of a substantial portion of the Company's assets.
The purchase price, or put value, will be the value of the common stock at the
time of redemption or, in the case of a redemption of the warrant, the value of
the common stock less the warrant exercise price. The put right expires upon the
consummation of a qualifying public offering. The estimated redemption value of
the warrant is being accreted over the period to the redemption date (March
1998). During the year ended March 31, 1997 and three months ended June 30,
1997, the exercise price of the warrant was reduced to $2.21 and $2.03,
respectively, in exchange for the waiver of certain compliance provisions. The
value of the reduction in the exercise of the warrant price of $215,000 in the
year ended March 31, 1997, and $86,000 during the three months ended June 30,
1997, was recorded as interest expense.

During 1994, the Company issued warrants to purchase 8,415 shares of common
stock at $0.07 per share. The warrants are redeemable at $2.05 per warrant and
have been recorded at their redemption price. During the fiscal year ended March
31, 1997 and the three months ended June 30, 1997, 2,625 and 2,100 warrants were
redeemed, respectively. The put right expires in the event of an initial public
offering declared effective by December 23, 1997.

DIVIDENDS

The Company paid dividends of $3,556,264 and $7,565,114 ($0.455 and $0.915
per share) on February 28, 1997 and June 27, 1997, for shareholders of record as
of February 20, 1997 and June 27, 1997, respectively.

9. COMMITMENTS

The Company leases office space and office equipment under noncancelable
operating leases expiring through February 2002. Total rent expense for the
years ending March 31, 1995, 1996 and 1997 was approximately $1,120,000,
$1,310,000 and $1,290,000, respectively.

The Company also leases office equipment under capital leases with interest
rates ranging from 10.9% to 15.0% and terms expiring through October 1997. The
equipment has been capitalized at $369,000 with related accumulated amortization
on these assets of $352,000 and $279,000 as of March 31, 1997 and 1996,
respectively, and is included in property and equipment in the accompanying
consolidated financial statements.

Future minimum lease payments as of March 31, due under these leases are as
follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ----------
<S> <C> <C>
1998......................................................... $ 56,000 $ 969,000
1999......................................................... -- 607,000
2000......................................................... -- 617,000
2001......................................................... -- 627,000
2002......................................................... -- 577,000
-------- ----------
56,000 $3,397,000
=========
Interest element of lease payment............................ (2,000)
--------
Present value of future lease payments....................... 54,000
Current portion.............................................. (54,000)
--------
Long-term portion............................................ $ --
========
</TABLE>

F-16
<PAGE> 74

BEST SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1997 AND AS OF JUNE 30, 1997 (UNAUDITED) -- (CONTINUED)

9. COMMITMENTS (CONTINUED)

The Company does not have any material commitments related to its royalty
obligations.

10. EMPLOYEE BENEFIT PLAN

The Company has a 401(k) Retirement Savings Plan (the "Plan") for the
benefit of all employees who meet certain eligibility requirements. The Company
will make a matching contribution in an amount equal to $0.50 for each $1.00
contributed by an employee up to a maximum of 2% of the participant's
compensation as defined in the Plan. Company contributions made to the Plan for
the years ended March 31, 1995, 1996 and 1997 were approximately $178,000,
$141,000 and $159,000, respectively.

The Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Company's Board of Directors in August 1997. A total of 250,000
shares of common stock have been reserved for issuance under the Purchase Plan.
The Purchase Plan permits eligible employees to purchase common stock through
payroll deductions at a price equal to 85% of the lower of the fair market value
of the common stock on the first day of the offering period or the last day of
the offering period.

F-17
<PAGE> 75

[INSIDE BACK COVER FOR EDGAR FILING]

THE BEST SOLUTION

[A PHOTOGRAPH OF THE COMPANY'S PRODUCTS]
<PAGE> 76
================================================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
SHAREHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 14
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Consolidated Financial
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 28
Management............................ 40
Certain Transactions.................. 47
Principal and Selling Shareholders.... 48
Description of Capital Stock.......... 50
Shares Eligible for Future Sale....... 53
Underwriting.......................... 55
Legal Matters......................... 56
Experts............................... 57
Additional Information................ 57
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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

UNTIL OCTOBER 25, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

================================================================================
================================================================================

4,150,000 SHARES

[BEST! LOGO]

COMMON STOCK

----------
PROSPECTUS
----------

HAMBRECHT & QUIST

WILLIAM BLAIR & COMPANY

SEPTEMBER 30, 1997

================================================================================