INFORMATION ADVANTAGE SOFTWARE INC, S-1, 1997-10-10

INFORMATION ADVANTAGE SOFTWARE INC
S-1, 1997-10-10

Previous: HERMES EUROPE RAILTEL B V, S-4, 1997-10-10

Next: KOBRICK HFS INVESTMENT TRUST, N-8A, 1997-10-10

<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 10, 1997.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

FORM S-1
REGISTRATION STATEMENT

UNDER
THE SECURITIES ACT OF 1933
---------------------

INFORMATION ADVANTAGE SOFTWARE, INC.

(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 7372 41-1718445
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction Industrial Identification
of Incorporation or Classification Code Number)
Organization) Number)
</TABLE>

7905 GOLDEN TRIANGLE DRIVE, SUITE 190
EDEN PRAIRIE, MINNESOTA 55344-7227
(612) 833-3700

(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------

DONALD W. ANDERSON
CHIEF FINANCIAL OFFICER
7905 GOLDEN TRIANGLE DRIVE, SUITE 190
EDEN PRAIRIE, MINNESOTA 55344-7227
(612) 833-3700

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

COPIES TO:

<TABLE>
<S> <C> <C>
JAY K. HACHIGIAN BRIAN D. WENGER THOMAS A. BEVILACQUA
RENEE F. LANAM BRETT D. ANDERSON CURTIS L. MO
WILLIAM E. GROWNEY, JR. LORI J. KETOLA ANNA A. RUIZ
Gunderson Dettmer Stough Briggs and Morgan MICHAEL F. CYRAN
Villeneuve Franklin & Professional Association Brobeck, Phleger & Harrison LLP
Hachigian, LLP 2400 IDS Center, Two Embarcadero Place
155 Constitution Drive 80 South Eighth Street 2200 Geng Road
Menlo Park, CA 94025 Minneapolis, MN 55402 Palo Alto, CA 94303-0913
(650) 321-2400 (612) 334-8400 (650) 424-0160
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /______________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /______________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.01 par value $28,750,000 $8,713
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o).
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 10, 1997

[INFORMATION ADVANTAGE LOGO]

COMMON STOCK

All of the shares of Common Stock offered hereby are being sold by
Information Advantage Software, Inc. ("Information Advantage" or the "Company").
Prior to this offering, there has been no public market for the Common Stock of
the Company. It is currently estimated that the initial public offering price
will be between $ and $ per share. See "Underwriting" for information
relating to the method of determining the initial public offering price. The
Company has applied to have the Common Stock approved for quotation on the
Nasdaq National Market System under the symbol "IACO."

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

The Common Stock offered hereby involves 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 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>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO COMPANY
PUBLIC COMMISSIONS (1)
<S> <C> <C> <C>
Per Share............................. $ $ $
Total (2)............................. $ $ $
</TABLE>

(1) Before deducting expenses payable by the Company estimated at $ .

(2) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."

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

The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order in
whole or in part. It is expected that delivery of such shares will be made
through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about , 1997.

BANCAMERICA ROBERTSON STEPHENS

PIPER JAFFRAY INC.

FIRST ALBANY CORPORATION

The date of this Prospectus is , 1997
<PAGE>
[GRAPHIC]

[Narrative description of the "intelligent enterprise" in front of
background with the Company's logo.]

[Graphic depicting the relationship between the Company's DecisionSuite
product and desktop applications, online analytical processing servers and
distributed data warehouses and data marts.]

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 STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING 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 OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary........................................................................................ 4
Risk Factors................................................................................... 6
Use of Proceeds................................................................................ 16
Dividend Policy................................................................................ 16
Capitalization................................................................................. 17
Dilution....................................................................................... 18
Selected Consolidated Financial Data........................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 20
Business....................................................................................... 28
Management..................................................................................... 41
Certain Transactions........................................................................... 50
Principal Stockholders......................................................................... 52
Description of Capital Stock................................................................... 55
Shares Eligible for Future Sale................................................................ 57
Underwriting................................................................................... 59
Legal Matters.................................................................................. 61
Experts........................................................................................ 61
Additional Information......................................................................... 61
Index to Consolidated Financial Statements..................................................... F-1
</TABLE>

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

The Company intends to furnish to its stockholders annual reports containing
audited consolidated financial statements examined by its independent public
accountants and quarterly reports containing unaudited financial statements for
each of the first three quarters of each fiscal year.

As used in this Prospectus, each fiscal year of the Company is identified by
the calendar year in which it ends. Thus, references to "fiscal year 1997" or
"fiscal 1997" shall mean the fiscal year ended January 31, 1997.

DecisionSuite Server-TM- and the Company's logo are trademarks of the
Company and DecisionSuite-Registered Trademark- and Information
Advantage-Registered Trademark- are registered trademarks of the Company. All
other trademarks, service marks or trade names referred to in this Prospectus
are the property of their respective owners.

The address of the Company's principal executive offices is 7905 Golden
Triangle Drive, Suite 190, Eden Prairie, Minnesota 55344-7227 and its telephone
number is (612) 833-3700. Unless otherwise indicated, all references in this
Prospectus to the "Company" or "Information Advantage" refer to Information
Advantage Software, Inc., a Delaware Corporation, and its predecessor
Information Advantage, Inc., a Minnesota Corporation.

3
<PAGE>
SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.

THE COMPANY

Information Advantage Software, Inc. (the "Company") develops, markets and
supports enterprise scalable on-line analytical processing ("OLAP") software
that is designed to allow a large number of users to access and analyze large
amounts of data to make quicker and more informed business decisions. The
Company's server-based solution, DecisionSuite, provides powerful, robust and
flexible analysis processing capabilities that transform raw data into
meaningful information from a wide range of desktop and Internet platforms.
Through the use of an advanced architecture, the Company designed DecisionSuite
to accommodate terabytes of data and thousands of active users. DecisionSuite
enables organizations to push effective decision making to all levels of users
thereby creating an "intelligent enterprise," one capable of quickly identifying
and reacting to market opportunities. DecisionSuite supports many popular UNIX
operating systems and employs relational database technology, allowing it to
access most popular databases, data warehouses and data marts.

In order to compete effectively in today's global environment, businesses
must quickly identify and respond to changing market conditions and are,
therefore, dependent upon their ability to rapidly collect, organize, access and
analyze large amounts of data. Organizations are now collecting not only
internal financial and operational data, but are also collecting large amounts
of historical data on their customers, suppliers and other external sources. At
the same time, to more quickly react to changing business conditions, many
organizations have been flattening their organizational structures and
empowering employees at all levels to make decisions, creating a need by more
people to access the vast amounts of business data collected each day and to
perform complex computational analysis on this data. To meet these challenges,
organizations have implemented a number of technology solutions, including data
warehouses and data marts, query and reporting tools and OLAP applications.
According to an independent industry analyst, the information access segment of
the data warehousing market alone is estimated to be growing from $664 million
in 1996 to $1.4 billion in 2000.

Although many of today's query and reporting tools, desktop OLAP solutions
and non-relational server-based OLAP solutions successfully address some of the
market requirements, these technologies fall short of effectively delivering
enterprise scalable OLAP capabilities. The Company's relational server-based
OLAP solution, DecisionSuite, supports large data sets, thousands of active
users, and simple as well as complex analysis. Moreover, DecisionSuite is
designed for efficient and cost effective deployment and maintenance, and
compliance with industry standards, thereby enabling integration with hardware
and software from a variety of vendors.

The Company licenses DecisionSuite to customers primarily in targeted
industries such as retail, consumer packaged goods, financial services,
insurance, telecommunications and healthcare. The Company sells its products
primarily through direct sales. The Company has direct sales offices in twelve
states, Canada, the United Kingdom and Germany, and has established strategic
relationships in South Africa, the Netherlands and Japan. The Company also
utilizes strategic partners to sell its products, including solution development
partners, such as IBM and DynaMark, sales affiliates, such as EDS and Cambridge
Technology Group, and marketing partners, such as HP and Sun.

To complement its advanced product offerings, the Company offers worldwide
training, consulting and support services to its customers directly through its
customer services group and indirectly through its solution development partners
and sales affiliates. The Company's training and consulting services consist of
technical support, education, implementation, prototyping workshops and other
advanced services. The Company also provides its customers with an extensive
array of ongoing support services, including software updates, documentation
updates, telephone support and product maintenance.

4
<PAGE>
THE OFFERING

<TABLE>
<CAPTION>
Common Stock Offered by the Company.......... shares
<S> <C>
Common Stock to be Outstanding after
the Offering............................... shares(1)
Use of Proceeds.............................. For repayment of bank indebtedness, general
corporate purposes, including working capital
and expansion of the Company's sales,
marketing and customer support
infrastructure, and potential acquisitions.
See "Use of Proceeds."
Proposed Nasdaq National Market Symbol....... IACO
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

<TABLE>
<CAPTION>
SIX MONTHS
PERIOD FROM ENDED
APRIL 14, 1992 YEARS ENDED JANUARY 31, JULY 31,
(INCEPTION) TO ------------------------------------------ --------------------
JANUARY 31, 1993 1994 1995 1996 1997 1996 1997
----------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues............................... $ 1,751 $ 4,348 $ 3,817 $ 5,642 $ 11,746 $ 5,161 $ 10,148
Loss from operations................... (2,326) (1,147) (4,312) (3,795) (8,380) (2,815) (4,609)
Net loss............................... (2,377) (1,201) (4,395) (3,789) (8,476) (2,826) (4,649)

Pro forma net loss per share (2)....... $ (0.76) $ (0.42)
--------- ---------
--------- ---------
Shares used in computing pro forma net
loss per share (2)................... 11,101 11,163
--------- ---------
--------- ---------
</TABLE>

<TABLE>
<CAPTION>
JULY 31, 1997
-------------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
--------- --------------- ---------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital......................................................... $ 64 $ 64 $
Total assets............................................................ 9,159 9,159
Total liabilities....................................................... 8,542 8,542
Convertible redeemable preferred stock.................................. 24,410 --
Stockholders' equity (deficit).......................................... (23,793) 617
</TABLE>

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

(1) Based on the number of shares outstanding as of July 31, 1997. Excludes (i)
2,175,533 shares subject to outstanding options as of July 31, 1997 at a
weighted average exercise price of approximately $1.18 per share, (ii)
warrants to purchase 1,217,149 shares of common stock at an weighted average
exercise price of $1.88 per share, and (iii) 1,532,667 shares reserved for
issuance under the Company's stock plans. See "Management--1997 Equity
Incentive Plan," "-- 1997 Employee Stock Purchase Plan" and Notes 8, 9 and
14 of Notes to Consolidated Financial Statements.

(2) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares used in computing pro
forma net loss per share.

(3) Reflects the conversion of outstanding Preferred Stock into Common Stock
upon completion of the offering.

(4) Adjusted to reflect the sale of shares of Common Stock by the Company at an
assumed initial public offering price of $ per share and the application of
the estimated net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."

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

UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (I) ASSUMES
NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) REFLECTS A
1-FOR-2 1/2 REVERSE STOCK SPLIT, WHICH WILL BE EFFECTIVE PRIOR TO THE CLOSING OF
THIS OFFERING, (III) REFLECTS, EXCEPT IN THE CONSOLIDATED FINANCIAL STATEMENTS,
THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED STOCK INTO COMMON STOCK
UPON COMPLETION OF THE OFFERING, AND (IV) GIVES EFFECT TO THE COMPANY'S
REINCORPORATION IN DELAWARE, WHICH WILL BE CONSUMMATED PRIOR TO THE CLOSING OF
THIS OFFERING.

5
<PAGE>
RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" and elsewhere in this Prospectus.

LIMITED OPERATING HISTORY; LACK OF PROFITABILITY

The Company was formed in 1992. Accordingly, the Company's prospects must be
considered in light of the risks and difficulties frequently encountered by
companies in the early stage of development, particularly companies in new and
rapidly evolving markets. To address these risks, the Company must, among other
things, respond to competitive developments, continue to attract, retain and
motivate qualified personnel, and continue to enhance and improve its products.
The Company has incurred net operating losses in each quarter since inception.
As of July 31, 1997, the Company had an accumulated deficit of $25.1 million.
The Company expects to incur additional net losses. The Company's operating
losses have been due in part to the commitment of significant resources to the
Company's technical support, research and development and sales and marketing
organizations. The Company expects to continue to devote substantial resources
in these areas and as a result will need to recognize significant quarterly
revenues to achieve profitability. In particular, the Company intends to
continue hiring a significant number of sales and research and development
personnel over the balance of fiscal 1998 and beyond. Future operating results
will depend on many factors, including, among others, demand for and acceptance
of the Company's products and services, including ongoing acceptance of
maintenance and other services purchased by existing customers, the level of
product and price competition, the ability of the Company to control costs and
to develop, market and deploy new products, the ability of the Company to expand
its direct sales force and indirect distribution channels both domestically and
internationally, the Company's success in attracting and retaining key
personnel, market acceptance of OLAP products and the ability of the Company to
successfully integrate technologies and businesses it may acquire in the future.
Although the Company's revenues have increased in recent periods, there can be
no assurance that the Company's revenues will grow in future periods or, if they
do grow, that they will grow at past rates, or that the Company will ever become
profitable. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

FLUCTUATIONS IN OPERATING RESULTS

The Company's limited operating history and the susceptibility of the
Company's operating results to significant fluctuations makes the prediction of
future operating results unreliable and the Company believes that
period-to-period comparisons of its operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.
The Company's operating results have in the past, and will in the future, vary
significantly due to factors such as demand for the Company's products, the size
and timing of significant orders and their fulfillment, the number, timing and
significance of product enhancements and new product announcements by the
Company and its competitors, changes in pricing policies by the Company or its
competitors, customer order deferrals in anticipation of enhancements or new
products offered by the Company or its competitors, the ability of the Company
to develop, introduce and market new and enhanced versions of its products on a
timely basis, changes in the Company's level of operating expenses and its
ability to control costs, budgeting cycles of its customers, product life
cycles, software defects and other product quality problems, hiring needs and
personnel changes, changes in the Company's sales incentive plans, changes in
the mix of domestic and international revenues, the level of international
expansion, foreign currency exchange rate fluctuations, performance of indirect
channel partners, changes in the mix of indirect channels through which the
Company's products are offered, the impact of consolidation by competitors and
indirect channel partners and general domestic and international economic and
political conditions. A significant portion of the

6
<PAGE>
Company's revenues have been, and the Company believes will continue to be,
derived from a limited number of orders placed by large organizations. The
timing of such orders and their fulfillment have caused, and are expected to
continue to cause, material fluctuations in the Company's operating results,
particularly on a quarterly basis. A significant portion of the Company's
revenues are derived from existing customers. To the extent that such customers
no longer require new licenses or ongoing support, the Company's business,
financial condition and operating results could be materially adversely
affected. The Company has, from time to time, often recognized a substantial
portion of its revenues in the last month of a quarter, with these revenues
frequently concentrated in the last two weeks of a quarter. In addition, the
Company does not operate with a large order backlog because its software
products are typically shipped shortly after orders are received, which makes
product revenues in any quarter substantially dependent on orders booked and
shipped throughout that quarter. Accordingly, revenues for any future quarter
are difficult to predict. The Company expects that as international sales
increase as a percentage of total sales it will experience weaker demand for
DecisionSuite during the summer months. Product revenues are also difficult to
forecast because the market for OLAP applications is rapidly evolving, and the
Company's sales cycle, which may last from six to twelve months or more, varies
substantially from customer to customer. The Company's expense level and plans
for expansion, including its plan to significantly increase its sales and
marketing and research and development efforts, are based in significant part on
the Company's expectations of future revenues and are relatively fixed in the
short-term. Consequently, if revenue levels are below expectations, operating
results are likely to be adversely and disproportionately affected. In addition,
the Company expects that sales derived through indirect channels, which are more
difficult to forecast and generally have lower gross margins than direct sales,
will increase as a percentage of total revenues. See "--Expansion of Indirect
Channels."

Based upon all of the factors described above, the Company believes that its
quarterly revenues, expenses and operating results are likely to vary
significantly in the future, that period-to-period comparisons of its operating
results are not necessarily meaningful and that, in any event, such comparisons
should not be relied upon as indications of future performance. Accordingly, the
Company has limited ability to forecast future revenues, and it is likely that
in some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In the event that
operating results are below expectations, or in the event that adverse
conditions prevail or are perceived to prevail generally or with respect to the
Company's business, the 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."

LENGTHY SALES AND IMPLEMENTATION CYCLES

The licensing of the Company's products by its customers typically involves
a significant commitment of capital and other resources, and are therefore
subject to delays frequently associated with customers' internal procedures to
approve large capital expenditures and to test and accept new technologies that
affect key operations. For these and other reasons, the sales cycle associated
with the licensing of the Company's products is typically six to twelve months
and subject to a number of significant risks that are beyond the Company's
control, including customers' budgetary constraints and internal acceptance
reviews. Because of the lengthy sales cycle and the large size of customers'
orders, if revenues forecasted from a specific customer for a particular quarter
are not realized in that quarter, the Company's operating results for that
quarter could be materially adversely affected. In addition, the time required
to deploy the Company's products can vary significantly with the needs of each
customer and the complexity of a customer's data processing needs. Accordingly,
deployment of the Company's products is generally a process that extends for
several months and may involve a pilot implementation, successful completion of
which is typically a prerequisite for full-scale deployment. In situations
involving a pilot implementation, revenue recognition is deferred until
execution of a final license and the other prerequisites for revenue recognition
have been fulfilled. The Company has experienced difficulty implementing
DecisionSuite in the past due to the complexity of customer requirements. The
Company generally relies upon internal resources to implement its products.
There can be no assurance that the Company will not experience delays in the
implementation of orders in the future or that third-parties will be able to
successfully install the Company's products. Any delays in the implementation of
DecisionSuite could have a

7
<PAGE>
material adverse effect on the Company's business, operating results and
financial condition. In addition, any significant delay in the implementation of
a DecisionSuite could cause a customer to reject the Company's software, which
could impair the Company's reputation and a material adverse effect on the
Company's business, operating results and financial condition. See
"--Fluctuations in Operating Results," "--Dependence on Service Revenues,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--Sales and Marketing" and "--Customer Support."

COMPETITION

The market in which the Company competes is intensely competitive, highly
fragmented and characterized by rapidly changing technology and evolving
standards. The Company's current and prospective competitors offer a variety of
planning and analysis software solutions and generally fall within three
categories: (i) vendors of desktop OLAP software such as Cognos and Business
Objects; (ii) vendors of multidimensional OLAP software such as Oracle
(Express), Arbor Software, Seagate (Holos) and SAS; and (iii) vendors of
OLAP/relational database software such as MicroStrategy and Platinum Technology
(Prodea). The Company has experienced and expects to continue to experience
increased competition from current and potential competitors, many of whom have
significantly greater financial, technical, marketing and other resources than
the Company. Such competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sales of their products than the
Company. Also, certain current and potential competitors, including companies
such as Microsoft, IBM, Sybase and Informix, may have greater name recognition
or more extensive customer bases that could be leveraged. These companies could
integrate competing OLAP/relational database software with other widely accepted
products resulting in a loss of market share for the Company. The Company
expects additional competition as other established and emerging companies enter
into the OLAP software market and new products and technologies are introduced.
Increased competition could result in price reductions, fewer customer orders,
reduced gross margins, longer sales cycles and loss of market share, any of
which would materially adversely affect the Company's business, operating
results and financial condition.

Current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing their ability to address the needs of the Company's
prospective customers. The Company's current or future indirect channel partners
may establish cooperative relationships with current or potential competitors of
the Company, thereby limiting the Company's ability to sell its products through
particular distribution channels. Accordingly, it is possible that new
competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. Such competition could materially
adversely affect the Company's ability to obtain new and maintenance and support
renewals for existing licenses on terms favorable to the Company. Further,
competitive pressures may require the Company to reduce the price of
DecisionSuite, which would materially adversely affect the Company's business,
operating results and financial condition. There can be no assurance that the
Company will be able to compete successfully against current and future
competitors, and the failure to do so would have a material adverse effect upon
the Company's business, operating results and financial condition.

DEPENDENCE ON GROWTH OF MARKET FOR OLAP APPLICATIONS AND ACCEPTANCE OF THE WEB

Although demand for DecisionSuite has grown in recent years, the market for
OLAP software applications is still emerging and there can be no assurance that
it will continue to grow or that, even if the market does grow, businesses will
adopt the Company's products. Because a significant portion of the Company's
revenues are derived from existing customer upgrades, the failure of such
upgrades to occur due to the lack of continued adoption of OLAP applications by
its installed customer base, would have a material adverse effect on the
Company's business, operating results and financial condition. The Company has
spent, and intends to continue to spend, considerable resources educating
potential customers about DecisionSuite and its functions and on-line analytical
processing generally. However, there can be no assurance that such expenditures
will enable DecisionSuite to achieve any additional degree of market acceptance,
and if the market for DecisionSuite fails to

8
<PAGE>
grow or grows more slowly than the Company currently anticipates, the Company's
business, operating results and financial condition would be materially
adversely affected. Historically, the software industry has experienced
significant periodic downturns, often in connection with, or in anticipation of,
declines in general economic conditions during which management information
systems budgets often decrease. As a result, the Company's business, operating
results and financial condition may in the future reflect substantial
fluctuations from period to period as a consequence of patterns and general
economic conditions in the software industry.

In addition, the success of the Company may be dependent on the acceptance
of the use of the World Wide Web as a means to disseminate information. The
Company has had limited large-scale deployment of its products for use on the
Web. If customers determine that the Company's products are not scalable or are
otherwise inadequate for Web-based use, or do not provide adequate security for
the dissemination of information over the Web, or if for any other reason
customers fail to accept the Company's products for use on the Web, the
Company's business, operating results and financial condition could be
materially adversely affected. See "Business--Industry Background," "--Customers
and Applications," "--Products and Technology" and "--Sales and Marketing."

LIMITED LARGE-SCALE DEPLOYMENT

The Company believes that DecisionSuite can accommodate terabytes of data
and thousands of active users; however, to date, the Company has had only a
limited number of customers who have deployed DecisionSuite in such
environments. If the Company's customers cannot successfully implement
large-scale deployments or determine for any other reason that the Company's
products cannot accommodate large-scale enterprise applications, or that such
products are not required or appropriate for such widespread use, the Company's
reputation and competitive advantage will be materially adversely affected,
which would, in turn, have a material adverse affect on the Company's business,
operating results and financial condition.

RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS

The market for the Company's products is characterized by rapid
technological change, frequent new product introductions and enhancements,
uncertain product life cycles, changing customer demands and evolving industry
standards. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete and
unmarketable. The Company has focused its efforts on products that run on UNIX
operating systems and has not developed a product that runs on Windows NT or any
other operating system. As more of the Company's customers adopt Windows NT for
their businesses, the Company will need to develop a Windows NT version of
DecisionSuite. The development of a Windows NT product would require a
substantial investment of resources by the Company, and there is no assurance
that such a product could be introduced on a timely or cost effective basis or
at all. The Company believes that its future success will depend in large part
on its ability to support popular operating systems and databases, and on its
ability to maintain and improve its current product line and to develop new
products on a timely basis that achieve market acceptance, maintain
technological competitiveness and meet an expanding range of customer
requirements. As a result of the complexities inherent in OLAP, major new
products and product enhancements can require long development and testing
periods. In addition, customers may delay their purchasing decisions in
anticipation of the general availability of new or enhanced versions of the
Company's products. As a result, significant delays in the general availability
of such new releases or significant problems in the installation or
implementation of such new releases could have a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that the Company will be successful in developing and marketing, on a
timely and cost effective basis, product enhancements or new products that
respond to technological change, evolving industry standards or customer
requirements, that the Company will not experience difficulties that could delay
or prevent the successful development, introduction or marketing of these
enhancements or that the Company's new products and product enhancements will
achieve market acceptance. See "Business--Research and Development."

9
<PAGE>
PRODUCT AND CUSTOMER CONCENTRATION

All of the Company's revenues to date have been attributable to the
DecisionSuite line of products and related services and are currently expected
to account for substantially all of the Company's revenues for the foreseeable
future. The Company's future operating results are dependent upon continued
market acceptance of DecisionSuite and enhancements to these products.
Consequently, a decline in the demand for, or market acceptance of,
DecisionSuite as a result of competition, technological change or other factors,
would have a material adverse effect on the Company's business, operating
results and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business-- Products and
Technology."

A relatively small number of customers have accounted for a significant
percentage of the Company's revenues. In fiscal 1996, MasterCard International
Incorporated accounted for 13.6% of total revenues. In fiscal 1997, Tandy
Corporation accounted for 10.3% of total revenues. The Company expects that it
will continue to be dependent upon a limited number of new and existing
customers for a significant portion of its revenues in future periods, and such
customers are expected to vary from period to period. As a result, the failure
by the Company to successfully sell its products or services to one or more
targeted new or existing customers in any particular period, or the deferral or
cancellation of orders by one or more of these customers, could have a material
adverse effect on the Company's business, operating results and financial
condition. The loss of a major customer, or any reduction in orders by such
customer, including reductions due to market or competitive conditions, would
have a material adverse effect on the Company's business, operating results and
financial condition.

DEPENDENCE ON SERVICE REVENUES

The Company licenses software and provides related services, which consist
of maintenance, support, training, consulting and implementation. Total license
revenues and service revenues have increased from year to year. Service revenues
represented 52.2%, 52.4% and 44.7% of total revenues for the fiscal years ended
January 31, 1995, 1996 and 1997, respectively, and 42.8% and 50.6% for the
six-month periods ended July 31, 1996 and 1997. The Company anticipates that
service revenues will continue to represent a significant percentage of total
revenues. To a large degree, the level of service revenues is dependent upon the
ongoing acceptance of maintenance contracts by the Company's growing installed
customer base. If service revenues are less than anticipated, the Company's
operating results could be materially adversely affected. The Company's ability
to increase its service revenues will depend in large part on its ability to
increase the scale of its services organization, including its ability to
successfully recruit and train a sufficient number of qualified service
representatives. There can be no assurance that the Company will be able to
successfully expand its service organization. In addition, there can be no
assurance that the Company will be successful in implementing its strategy or
that such products will achieve market acceptance, the failure of which could
have a material adverse effect on its business, operating results and financial
condition. See "--Dependence on Key Personnel" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

EXPANSION OF INDIRECT CHANNELS

The Company intends to expand its relationships with strategic partners and
to increase the proportion of the Company's customers licensed through these
indirect channels. The Company's indirect channels have accounted for less than
25% of total revenues to date. There can be no assurance that the Company will
continue to be represented by any of its indirect channels. The Company is
currently investing, and intends to increasingly invest in the future,
significant resources to develop this channel, which could adversely affect the
Company's operating results if the Company's efforts do not generate significant
license revenues. There can be no assurance that the Company will be able to
attract strategic partners that will be able to market the Company's products
effectively and will be qualified to provide timely and cost-effective customer
support and service. The failure to recruit strategic partners could adversely
affect the Company's results of operations. The Company's ability to achieve
revenue growth in the future will depend in large part on its success in
maintaining

10
<PAGE>
and establishing additional relationships with strategic partners. In addition,
if it is successful in selling products through this channel, the Company's
gross margins will be negatively affected due to the lower unit prices that the
Company expects to receive when selling through indirect channels. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business--Sales and Marketing."

RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS

During fiscal years 1995, 1996 and 1997, the Company derived 24.8%, 10.7%
and 9.5% of its total revenues, respectively, from sales outside the United
States. The Company anticipates that for the foreseeable future a significant
portion of its revenues will be derived from sources outside the United States.
The Company intends to continue to expand its sales and support operations
outside the United States and to enter additional international markets. In
order to successfully expand international sales, the Company must establish
additional foreign operations, expand its international channel management and
support organizations, hire additional personnel, recruit additional
international resellers and increase the productivity of existing international
resellers. To the extent that the Company is unable to do so in a timely and
cost-effective manner, the Company's growth, if any, in international sales will
be limited, and the Company's business, operating results and financial
condition could be materially adversely affected. The Company also expects to
commit additional resources to customizing its products for selected
international markets and developing international channel sales and support
organizations. In addition, even if international operations are successfully
expanded and the Company's products are successfully customized, there can be no
assurance that the Company will be able to maintain or increase international
market demand for its products. See "Business--Sales and Marketing."

The Company's international operations are generally subject to a number of
risks, including costs of customizing products for foreign countries,
protectionist laws and business practices favoring local competition, dependence
on local vendors, compliance with multiple, conflicting and changing government
laws and regulations, longer sales and payment cycles, import and export
restrictions and tariffs, difficulties in staffing and managing foreign
operations, greater difficulty or delay in accounts receivable collection,
foreign currency exchange rate fluctuations, multiple and conflicting tax laws
and regulations and political and economic instability. To date, a majority of
the Company's revenues and costs have been denominated in U.S. dollars. However,
the Company believes that an increasing portion of the Company's revenues and
costs will be denominated in foreign currencies. Although the Company may from
time to time undertake foreign exchange hedging transactions to cover a portion
of its foreign currency transaction exposure, the Company does not currently
attempt to cover any foreign currency exposure. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

MANAGEMENT OF GROWTH; NEED FOR ADDITIONAL QUALIFIED PERSONNEL

The Company has recently experienced a period of significant revenue growth
and an expansion in the number of its employees, the scope of its operating and
financial systems and geographic area of its operations. From January 31, 1995
to September 30, 1997, the Company has increased its headcount from 75 to 217.
Further significant increases in the number of employees are anticipated in
fiscal 1998 and beyond. For example, the Company currently plans to expand its
sales and marketing services and research and development efforts by, among
other things, significantly increasing the number of employees dedicated to
those areas. This growth has resulted, and will continue to result, in new and
increased responsibilities for management personnel and may place a strain upon
the Company's management, operating financial systems and resources. The Company
expects that planned expansion of international operations will lead to
increased financial and administrative demands, such as increased operational
complexity associated with expanded facilities, administrative burdens
associated with managing an increasing number of relationships with foreign
partners and expanded treasury functions to manage foreign currency risks. The
Company's future operating results will also depend on its ability to further
develop indirect channels to penetrate different and broader markets and expand
its support organization to accommodate growth in the Company's installed base.
The failure of the Company to manage its

11
<PAGE>
expansion effectively could have a material adverse effect on the Company's
business, operating results and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business--Sales and Marketing" and "Management."

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant degree upon the efforts of
certain key management, technical support, sales, marketing, customer support
and research and development personnel. The loss of key personnel could
adversely affect the Company. The Company believes that its future success will
depend in large part upon its continuing ability to attract and retain highly
skilled managerial, sales, marketing, customer support and research and
development personnel. Like other software companies, the Company faces intense
competition for such personnel, and the Company has at times experienced and
continues to experience difficulty in recruiting qualified personnel. There can
be no assurance that the Company will be successful in attracting, assimilating
and retaining qualified personnel in the future. The loss of the services of one
or more of the Company's key individuals, or the failure to attract and retain
additional qualified personnel, could have a material and adverse effect on the
Company's business, operating results and financial condition. See
"Business--Employees" and "Management."

RISK OF SOFTWARE DEFECTS

Software products as complex as those offered by the Company may contain
errors or defects, particularly when first introduced, when new versions or
enhancements are released or when configured to individual customer computing
systems. The Company has in the past encountered system configuration problems
at certain customer sites. Although to date, the Company has not experienced
material adverse effects resulting from any such defects or problems, there can
be no assurance that, despite testing by the Company, defects and errors will
not be found in current versions, new versions or enhancements of its products
after commencement of commercial shipments, resulting in loss of revenues or
delay in market acceptance, which could have a material adverse effect on the
Company's business, operating results and financial condition. See "Business--
Research and Development."

LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT; USE OF
LICENSED TECHNOLOGY

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. In addition,
the laws of many countries do not protect the Company's proprietary rights to as
great an extent as do the laws of the United States. There can be no assurance
that the Company's means of protecting its proprietary rights will be adequate
or that the Company's competitors will not independently develop similar
technology.

12
<PAGE>
developers will increasingly be subject to infringement claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all,
which could have a material adverse effect upon the Company's business,
operating results and financial condition.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, in less than three years, computer systems and
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements. Although the Company's products are Year 2000
compliant, the Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues as companies expend
significant resources to correct or patch their current software systems for
Year 2000 compliance. These expenditures may result in reduced funds available
to purchase software products such as those offered by the Company, which could
result in a material adverse effect on the Company's business, operating results
and financial condition.

PRODUCT LIABILITY

Although the Company's license agreements with its customers typically
contain provisions designed to limit the Company's exposure to potential product
liability claims, it is possible that such limitation of liability provisions
may not be effective as a result of existing or future laws or unfavorable
judicial decisions. The Company has not experienced any product liability claims
to date, however the sale and support of the Company's products may entail the
risks of such claims which are likely to be substantial in light of the use of
the Company's products in business-critical applications. A product liability
claim brought against the Company could have a material adverse effect on the
Company's business, operating results and financial condition. See
"Business--Products and Technology" and "--Research and Development."

NO PRIOR TRADING MARKET FOR THE COMMON STOCK; POTENTIAL VOLATILITY OF STOCK
PRICE

Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after this offering. The initial public offering price will be
determined by negotiation among the Company and the representatives of the
Underwriters, and may not be indicative of the price that will prevail in the
open market. See "Underwriting" for a discussion of the factors to be considered
in determining the initial public offering price.

The market 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 copyrights or proprietary rights, conditions and trends in the
software and other technology industries, adoption of new accounting standards
affecting the software industry, changes in financial estimates by securities
analysts, general market conditions and other factors. In addition, the stock
market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for the common
stocks of technology companies. In the past, following periods of volatility in
the market price of a particular company's securities, securities class action
litigation has often been brought against such company. There can be no
assurance that such litigation will not occur in the future with respect to the
Company. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
upon the Company's business, operating results and financial condition. See
"Underwriting."

13
<PAGE>
CONTROL OF COMPANY BY EXECUTIVE OFFICERS, DIRECTORS AND FIVE PERCENT
STOCKHOLDERS

Upon the consummation of this offering, the executive officers, directors,
five percent stockholders and their affiliates in the aggregate will
beneficially own approximately % of the outstanding Common Stock ( % if the
Underwriters' over-allotment option is exercised in full). As a result, these
stockholders will be able to exercise control over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. Such concentration of ownership may have the
effect of delaying or preventing a change in control of the Company. See
"Principal Stockholders."

EFFECT OF CERTAIN CHARTER PROVISIONS; ANTITAKEOVER EFFECTS OF CERTIFICATE OF
INCORPORATION, BYLAWS AND DELAWARE LAW

The Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and Bylaws, as amended ("Bylaws"), contain certain provisions
that may have the effect of discouraging, delaying or preventing a change in
control of the Company or unsolicited acquisition proposals that a stockholder
might consider favorable, including provisions authorizing the issuance of
"blank check" preferred stock, requiring the consent of at least 80% of the
Company's capital stock to amend the Certificate of Incorporation or Bylaws,
eliminating the ability of stockholders to act by written consent or call a
special meeting of stockholders and providing for a Board of Directors with
staggered, three-year terms. In addition, certain provisions of Delaware law and
the Company's 1992 Stock Option Plan (the "1992 Plan") may also have the effect
of discouraging, delaying or preventing a change in control of the Company or
unsolicited acquisition proposals. See "Management" and "Description of Capital
Stock-- Preferred Stock" and "--Antitakeover Effects of Provisions of the
Certificate of Incorporation, Bylaws and Delaware Law."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock after the offering
could adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through the sale of equity securities. Upon
completion of the offering, the Company will have outstanding shares of
Common Stock ( shares if the Underwriters' over-allotment option is exercised
in full), assuming no exercise of options after July 31, 1997. Of these shares,
the shares offered hereby ( shares if the Underwriters' over-allotment
option is exercised in full) will be freely tradable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), unless purchased by "affiliates" of the Company as that term
is defined in Rule 144 under the Securities Act ("Rule 144") described below.
The remaining 10,586,553 shares of Common Stock outstanding upon completion of
the offering will be "restricted securities" as that term is defined in Rule
144.

Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from the registration under Rule 144, 144(k) or or
701 promulgated under the Securities Act. As a result of the contractual
restrictions described below and the provisions of Rules 144, 144(k) and 701,
additional shares will be available for sale in the public market as follows:
(i) 28,770 shares will be eligible for immediate sale on the date of this
Prospectus, (ii) 2,299 shares will be eligible for sale 90 days after the date
of this Prospectus and, (iii) 10,555,484 shares will be eligible for sale upon
expiration of lock-up agreements between certain stockholders of the Company and
the representatives of the Underwriters 180 days after the date of this
Prospectus. In addition to the foregoing, as of July 31, 1997, there were
outstanding under the 1997 Equity Incentive Plan (the "Plan") and its
predecessor plan, options to purchase an aggregate of 2,175,533 shares of Common
Stock. The shares underlying such options will be eligible for sale upon
expiration of the lock-up provisions contained in the Plan and its predecessor
plan the "Plan Stand-off Agreements" beginning 180 days after the date of this
Prospectus, subject in certain cases to such shares underlying outstanding
options becoming eligible for sale more than 180 days after the date of this
Prospectus as such options vest. The Company has agreed not to release shares
from the lock-up provisions of the Plan Stand-Off Agreements without the prior
written consent of BancAmerica Robertson Stephens. In addition, the Company
intends to register, following this offering, approximately 3,708,200 shares of
Common Stock subject to outstanding options

14
<PAGE>
or reserved for issuance under the Company's stock and option plans. Further,
certain stockholders holding approximately 10,685,503 shares of Common Stock
(assuming the exercise of warrants to purchase common stock held by holders of
registration rights) are entitled to demand registration of their shares of
Common Stock. By exercising their demand registration rights, such stockholders
could cause a large number of securities to be registered and sold in the public
market, which could have an adverse effect on the market price of the Common
Stock. See "Description of Capital Stock" and "Shares Eligible for Future Sale."

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price is substantially higher than the book
value per share of the outstanding Common Stock. As a result, investors
purchasing Common Stock in this offering will incur immediate and substantial
dilution. In addition, the Company has issued options to acquire Common Stock at
prices significantly below the initial public offering price. To the extent such
outstanding options are exercised, there will be further dilution. See
"Dilution" and "Shares Eligible for Future Sale."

UNCERTAINTY AS TO USE OF PROCEEDS

The primary purposes of this offering are to increase the Company's equity
capital, to create a public market for the Company's Common Stock and to
facilitate future access to public markets. As of the date of this Prospectus,
the Company has no specific plans to use the net proceeds from this offering
other than for the repayment of indebtedness to a bank, general corporate
purposes, including working capital and expansion of the Company's sales,
marketing and customer support infrastructure, and potential future acquisitions
of businesses, products and technologies that complement the Company's business.
Accordingly, the Company's management will retain broad discretion as to the
allocation of a substantial portion of the net proceeds from this offering.
Pending any such uses, the Company plans to invest the net proceeds in
investment-grade, interest-bearing securities. See "Use of Proceeds."

15
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
to be sold by the Company in this offering are estimated to be $ million ($
million if the Underwriters' over-allotment option is exercised in full),
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company.

The Company intends to use a portion of the net proceeds for repayment of
all amounts outstanding under a $2.0 million revolving line of credit expiring
in September 1998. On October 6, 1997, the Company borrowed $1.0 million under
this revolving line of credit, bearing an annual interest rate of at 1.75% over
the bank's prime lending rate. The Company also expects to use a portion of the
net proceeds for repayment of a term loan, bearing an annual interest rate of
13.5%, undertaken to finance its capital expenditure commitments, which totaled
approximately $400,000 at July 31, 1997.

The Company expects to use the remainder of the net proceeds for general
corporate purposes, including working capital and expansion of the Company's
sales, marketing and customer support infrastructure. Furthermore, from time to
time the Company expects to evaluate the acquisition of businesses, products and
technologies that complement the Company's business, for which a portion of the
net proceeds may be used. Currently, however, the Company does not have any
understandings, commitments or agreements with respect to any such acquisitions.
Pending use of the net proceeds for the above purposes, the Company plans to
invest the net proceeds in short-term, interest-bearing, investment-grade
obligations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock and does not expect to do so in the foreseeable future. The Company
anticipates that all future earnings, if any, generated from operations will be
retained by the Company to develop and expand its business. Any future
determination with respect to the payment of dividends will be at the discretion
of the Board of Directors and will depend upon, among other things, the
Company's operating results, financial condition and capital requirements, the
terms of then-existing indebtedness, general business conditions and such other
factors as the Board of Directors deems relevant. In addition, the terms of the
Company's credit facility prohibit the payment of cash dividends without the
lender's consent.

16
<PAGE>
CAPITALIZATION

The following table sets forth the total capitalization of the Company as of
July 31, 1997, (i) on an actual basis after giving effect to a subsequent
1-for-2 1/2 reverse stock split, (ii) on a pro forma basis to reflect the filing
of a Restated Certificate of Incorporation and the conversion of all outstanding
shares of Preferred Stock into Common Stock upon the closing of this offering
and (iii) on such pro forma basis as adjusted to reflect the sale of the shares
of Common Stock offered hereby (assuming an offering price of $ per share) and
the application of the net proceeds therefrom. See "Use of Proceeds." This table
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 appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JULY 31, 1997
-------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
--------- ------------- -----------
(IN
THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current portion...................................... $ 1,030 $ 1,030 $ 1,030
Convertible redeemable preferred stock; $0.01 par value; 22,066,396 shares
authorized, 9,483,334 shares issued and outstanding actual; no shares
authorized, issued or outstanding pro forma and as adjusted............. 24,410 -- --
Stockholders' equity (deficit):
Preferred stock: $0.01 par value, no shares authorized, issued or
outstanding actual; 5,000,000 shares authorized, no shares issued or
outstanding, pro forma and as adjusted................................ -- -- --
Common stock: $0.01 par value, 60,000,000 shares authorized, 1,103,219
shares issued and outstanding actual; 60,000,000 shares authorized,
10,586,553 shares issued and outstanding pro forma and as adjusted
(1)................................................................... 11 106
Additional paid-in capital.............................................. 1,260 25,575
Accumulated deficit..................................................... (25,075) (25,075) (25,075)
Cumulative translation adjustment....................................... 11 11 11
--------- ------------- -----------
Total stockholders' equity (deficit).................................... (23,793) 617
--------- ------------- -----------
Total capitalization.................................................. $ 1,647 $ 1,647 $
--------- ------------- -----------
--------- ------------- -----------
</TABLE>

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

(1) Excludes approximately 2,175,533 shares subject to outstanding options as of
July 31, 1997 at a weighted average exercise price of approximately $1.18
per share, and warrants to purchase 1,217,149 shares of common stock at a
weighted average exercise price of $1.88 per share. Also excludes 1,532,667
shares reserved for issuance under the Company's stock plans. See
"Management--1997 Equity Incentive Plan," "--1997 Employee Stock Purchase
Plan" and Notes 8, 9 and 14 of Notes to Consolidated Financial Statements.

17
<PAGE>
DILUTION

The pro forma net tangible book value of the Company's Common Stock as of
July 31, 1997, giving effect to the conversion of all outstanding shares of
Preferred Stock into Common Stock upon the closing of this offering, was
$617,000, or approximately $0.06 per share. "Pro forma net tangible book value"
per share represents the amount of total tangible assets of the Company less
total liabilities, divided by the 10,586,553 shares of Common Stock outstanding.
Dilution per share represents the difference between the amount per share paid
by purchasers of shares of Common Stock in the offering made hereby and the pro
forma net tangible book value per share of Common Stock immediately after
completion of the offering. After giving effect to the sale of shares of
Common Stock in this offering at an assumed initial public offering price of
$ per share and the application of the estimated net proceeds therefrom,
the pro forma net tangible book value of the Company as of July 31, 1997 would
have been $ , or $ per share. This represents an immediate
increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to
purchasers of Common Stock in the offering. Investors participating in this
offering will incur immediate, substantial dilution. This is illustrated in the
following table:

<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share.................................................. $
---------
Pro forma net tangible book value per share as of July 31, 1997................................ $ 0.06
Increase per share attributable to new investors...............................................
---------
Adjusted pro forma net tangible book value per share as of July 31, 1997.........................
---------
Dilution per share to new investors.............................................................. $
---------
---------
</TABLE>

The following table summarizes, on a pro forma basis as of July 31, 1997,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors before deducting the estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company at the assumed initial offering price of $ per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............................. 10,586,553 % $ 25,417,315 % $ 2.40
New stockholders(1)................................ 100.0%
------------ ----- ------------- -----
Totals........................................... 100.0% $ 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>

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

(1) As of July 31, 1997, there were 2,175,533 shares subject to outstanding
options at a weighted average exercise price of approximately $1.18 per share
and warrants to purchase 1,217,149 shares of common stock at a weighted average
exercise price of $1.88 per share. Also excludes 1,532,667 shares reserved for
issuance under the Company's stock plans. To the extent outstanding options are
exercised, there will be further dilution to new investors. See
"Management--1997 Equity Incentive Plan," "--1997 Employee Stock Purchase Plan"
and Notes 8, 9 and 14 of Notes to Consolidated Financial Statements.

18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Prospectus. Fiscal 1993 is the
Company's first fiscal year subsequent to its inception and is not a full fiscal
year. The consolidated statement of operations data for the fiscal years ended
January 31, 1993 and 1994 and the consolidated balance sheet data at January 31,
1993, 1994 and 1995 are derived from unaudited consolidated financial statements
not included herein and in the opinion of the Company, include all adjustments,
consisting solely of normal recurring accruals, which are necessary to present
fairly the data for such periods and as of such dates. The consolidated
statement of operations data for the fiscal years ended January 31, 1995, 1996
and 1997, and the consolidated balance sheet data at January 31, 1996 and 1997
are derived from the audited Consolidated Financial Statements included
elsewhere in this Prospectus. The consolidated statement of operations data for
the six months ended July 31, 1996 and 1997 and the consolidated balance sheet
data at July 31, 1997 are derived from unaudited consolidated financial
statements included elsewhere in this Prospectus and in the opinion of the
Company, include all adjustments, consisting solely of normal recurring
accruals, which are necessary to present fairly the data for such periods and as
of such date. The results for interim periods are not necessarily indicative of
results to be expected for the year.
<TABLE>
<CAPTION>
SIX
MONTHS
PERIOD FROM APRIL FISCAL YEAR ENDED ENDED
14, 1992 JANUARY 31, JULY 31,
(INCEPTION) TO ------------------------------------------ ---------
JANUARY 31, 1993 1994 1995 1996 1997 1996
----------------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License.................................... $ 213 $ 2,704 $ 1,826 $ 2,686 $ 6,491 $ 2,952
Service.................................... 1,538 1,644 1,991 2,956 5,255 2,209
------- --------- --------- --------- --------- ---------
Total revenues........................... 1,751 4,348 3,817 5,642 11,746 5,161
------- --------- --------- --------- --------- ---------
Cost of revenues:
License.................................... 16 49 72 118 132 58
Service.................................... 1,103 2,266 1,636 2,129 3,308 1,380
------- --------- --------- --------- --------- ---------
Total cost of revenues................... 1,119 2,315 1,708 2,247 3,440 1,438
------- --------- --------- --------- --------- ---------
Gross margin................................. 632 2,033 2,109 3,395 8,306 3,723
------- --------- --------- --------- --------- ---------
Operating expenses:
Sales and marketing........................ 593 1,431 3,406 3,854 11,350 4,320
Research and development................... 495 1,158 2,162 2,089 3,189 1,265
General and administrative................. 1,870 591 853 1,247 2,147 953
------- --------- --------- --------- --------- ---------
Total operating expenses................. 2,958 3,180 6,421 7,190 16,686 6,538
------- --------- --------- --------- --------- ---------
Loss from operations......................... (2,326) (1,147) (4,312) (3,795) (8,380) (2,815)
Other income (expense), net.................. (51) (54) (83) 6 (96) (11)
------- --------- --------- --------- --------- ---------
Loss before provision for income taxes....... (2,377) (1,201) (4,395) (3,789) (8,476) (2,826)
Provision for income taxes................... 0 0 0 0 0 0
------- --------- --------- --------- --------- ---------
Net loss..................................... $ (2,377) $ (1,201) $ (4,395) $ (3,789) $ (8,476) $ (2,826)
------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- ---------
Pro forma net loss per share(1)............ $ (0.76)
---------
---------
Shares used in computing pro forma net loss
per share(1)............................. 11,101
---------
---------

1997
-------------

<S> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License.................................... $ 5,009
Service.................................... 5,139
-------------
Total revenues........................... 10,148
-------------
Cost of revenues:
License.................................... 77
Service.................................... 3,424
-------------
Total cost of revenues................... 3,501
-------------
Gross margin................................. 6,647
-------------
Operating expenses:
Sales and marketing........................ 7,728
Research and development................... 2,355
General and administrative................. 1,173
-------------
Total operating expenses................. 11,256
-------------
Loss from operations......................... (4,609)
Other income (expense), net.................. (40)
-------------
Loss before provision for income taxes....... (4,649)
Provision for income taxes................... 0
-------------
Net loss..................................... $ (4,649)
-------------
-------------
Pro forma net loss per share(1)............ $ (0.42)
-------------
-------------
Shares used in computing pro forma net loss
per share(1)............................. 11,163
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
JULY 31,
JANUARY 31, 1997
------------------------------------------------------------- ---------
1993 1994 1995 1996 1997 ACTUAL
----------------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit).................. $ (1,020) $ (544) $ (2,071) $ 1,097 $ (2,102) $ 64
Total assets............................... 980 1,839 1,599 4,321 5,918 9,159
Total liabilities.......................... 2,167 2,256 3,428 2,791 7,823 8,542
Convertible redeemable preferred stock..... -- 2,337 5,337 12,487 17,410 24,410
Stockholders' equity (deficit)............. (1,187) (2,755) (7,165) (10,957) (19,315) (23,793)

PRO FORMA(2)
-------------

<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit).................. $ 64
Total assets............................... 9,159
Total liabilities.......................... 8,542
Convertible redeemable preferred stock..... --
Stockholders' equity (deficit)............. 617
</TABLE>

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

(1) Pro forma net loss reflects the conversion of all outstanding Preferred
Stock into Common Stock prior to the closing of this offering. See Note 2 of
Notes to Consolidated Financial Statements for an explanation of the method
used to determine the number of shares used in computing pro forma net loss
per share.

(2) Reflects the assumed conversion of outstanding Preferred Stock into Common
Stock upon completion of the offering.

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following description of the Company's financial condition and results
of operations should be read in conjunction with the information included
elsewhere in this Prospectus. This description contains certain forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ significantly from the results discussed in the forward-looking
statements as a result of certain of the risk factors set forth below and
elsewhere in this Prospectus.

OVERVIEW

Information Advantage Software, Inc. (the "Company") develops, markets and
supports enterprise scalable OLAP software that is designed to allow a large
number of users to access and analyze large amounts of data to make quicker and
more informed business decisions. The Company's server-based solution,
DecisionSuite, provides powerful, robust and flexible analysis processing
capabilities that transform raw data into meaningful information from a wide
range of desktop and Internet platforms. Through the use of an advanced
architecture, the Company designed DecisionSuite to accommodate terabytes of
data and thousands of active users. DecisionSuite enables organizations to push
effective decision making to all levels of users thereby creating an
"intelligent enterprise," one capable of quickly identifying and reacting to
market opportunities. DecisionSuite supports many UNIX operating systems and
employs relational database technology, allowing it to access most popular
databases, data warehouses and data marts.

To date, all of the Company's revenues have been derived from licenses of
DecisionSuite and related services. The Company expects that sales of
DecisionSuite and related services will continue to account for all of the
Company's revenues for the foreseeable future. The Company's license revenues
are derived from one-time licenses for the right to use DecisionSuite in
perpetuity and are determined on a per server, per named user and database size
basis. The Company's service revenues, which have accounted for approximately
one-half of the Company's total revenues for the past three years, include fees
for maintenance, training and consulting services. The Company anticipates that
service revenues will continue to account for a significant portion of the
Company's total revenues.

Revenues derived from software licenses are recognized upon execution of a
license agreement, delivery of the software product and fulfillment of other
delivery requirements. Revenues from software provided for demonstration or
pilot purposes are not recognized until execution of a license agreement and
fulfillment of other delivery requirements. Revenues derived from maintenance
contracts, which are bundled with the initial licenses, and all revenues from
extended maintenance contracts are deferred and recognized ratably over the term
of the maintenance contract. Revenues from maintenance contracts are included in
service revenues. Revenue from training and consulting services are recognized
as the services are performed. The Company's revenue recognition policy is in
compliance with the provisions of the American Institute of Certified Public
Accountants' Statement of Position 91-1, "Software Revenue Recognition."

The Company licenses its software through its direct sales force and
increasingly through or in conjunction with solution development partners, sales
affiliates and marketing partners. Revenues from indirect sales involving
strategic partners accounted for approximately 18.1%, 11.5%, 12.7% and 22.8% of
the Company's license revenues for fiscal 1995, 1996, 1997 and the six months
ended July 31, 1997, respectively. The Company intends to expand its strategic
relationships, thereby increasing the revenues generated from indirect channels
as a percentage of total license revenues. The Company intends to expand its
international operations and has committed, and continues to commit, significant
management time and financial resources to developing direct and indirect
international sales and support channels. See "Risk Factors--Expansion of
Indirect Channels," "--Risks Associated with International Sales and
Operations."

Since inception, the Company has made significant strategic investments in
building an infrastructure to support long-term growth. The Company has nearly
tripled its headcount from 75 at January 31, 1995 to 217 at September 30, 1997,
reflecting personnel increases throughout the Company. As a result, although the

20
<PAGE>
Company's revenues have increased in each of the last six quarters, the Company
has incurred net losses in each quarter since inception, and had an accumulated
deficit of $25.1 million as of July 31, 1997. The Company expects to incur
additional net losses.

The Company's limited operating history makes the prediction of future
operating results difficult and unreliable. In addition, given its limited
operating history and recent rapid growth, historical growth rates in the
Company's revenues should not be considered indicative of future revenue growth
rates or operating results. There can be no assurance that any of the Company's
business strategies will be successful or that the Company will be able to
achieve profitability on a quarterly or annual basis. See "Risk Factors--Limited
Operating History; Lack of Profitability" and "--Fluctuations in Operating
Results."

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY
FISCAL YEAR ENDED JANUARY 31, 31,
----------------------------------- ---------------------
1995 1996 1997 1996 1997
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
License............................... 47.8% 47.6% 55.3% 57.2% 49.4%
Service............................... 52.2 52.4 44.7 42.8 50.6
----------- --------- --------- --------- ---------
Total revenues...................... 100.0 100.0 100.0 100.0 100.0
----------- --------- --------- --------- ---------
Cost of revenues:
License............................... 1.9 2.1 1.1 1.1 0.8
Service............................... 42.9 37.7 28.2 26.8 33.7
----------- --------- --------- --------- ---------
Total cost of revenues.............. 44.8 39.8 29.3 27.9 34.5
----------- --------- --------- --------- ---------
Gross margin............................ 55.2 60.2 70.7 72.1 65.5
----------- --------- --------- --------- ---------
Operating expenses:
Sales and marketing................... 89.2 68.3 96.6 83.7 76.2
Research and development.............. 56.6 37.0 27.2 24.5 23.2
General and administrative............ 22.4 22.1 18.3 18.5 11.5
----------- --------- --------- --------- ---------
Total operating expenses............ 168.2 127.4 142.1 126.7 110.9
----------- --------- --------- --------- ---------
Loss from operations.................... (113.0) (67.2) (71.4) (54.6) (45.4)
Other income (expense), net............. (2.2) 0.0 (0.8) (0.2) (0.4)
----------- --------- --------- --------- ---------
Loss before provision for income
taxes................................. (115.2) (67.2) (72.2) (54.8) (45.8)
Provision for income taxes.............. 0.0 0.0 0.0 0.0 0.0
----------- --------- --------- --------- ---------
Net loss................................ (115.2)% (67.2)% (72.2)% (54.8)% (45.8)%
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
</TABLE>

The following table sets forth, for each component of revenues, the gross
margin associated with such component of revenues for the period indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED JANUARY 31, JULY 31,
------------------------------- --------------------
1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Gross margin:
License.............................................. 96.1% 95.6% 98.0% 98.0% 98.5%
Service.............................................. 17.8 28.0 37.1 37.5 33.4
</TABLE>

21
<PAGE>
REVENUES

LICENSE. License revenues are recognized upon execution of a license
agreement and shipment of the product if no other significant obligations
remain, payments are due within twelve months and collection of the resulting
receivable is probable. License revenues were $1.8 million, $2.7 million and
$6.5 million in fiscal 1995, 1996 and 1997, respectively, representing increases
of 47.1% from fiscal 1995 to fiscal 1996, and 141.7% from fiscal 1996 to fiscal
1997. License revenues were $3.0 million and $5.0 million for the six months
ended July 31, 1996 and 1997, respectively, representing an increase of 69.7%.
The increase in the Company's license revenues in each period was attributable
primarily to increased market acceptance of DecisionSuite, an increase in the
average revenues derived from each license as the average number of seats per
customer has increased, and an increase in sales headcount. The Company does not
believe that the historical percentage growth rates of license revenues will be
sustainable or are indicative of future results.

SERVICE. Service revenues include fees from maintenance contracts, training
and consulting services. Fees for maintenance, training and consulting services
are charged separately from the license of DecisionSuite. Maintenance fees are
for ongoing support and product updates, and are recognized ratably over the
life of the contract. Revenues from training are recognized upon completion of
the related training class. Consulting revenues are recognized when the services
are performed. Service revenues were $2.0 million, $3.0 million and $5.3 million
in fiscal 1995, 1996 and 1997, respectively, representing increases of 48.5%
from fiscal 1995 to fiscal 1996, and 77.8% from fiscal 1996 to fiscal 1997.
Service revenues accounted for 52.2%, 52.4% and 44.7% of the Company's total
revenues in fiscal 1995, 1996 and 1997, respectively. Service revenues were $2.2
million and $5.1 million for the six months ended July 31, 1996 and 1997,
respectively, representing an increase of 132.6%, and accounting for 42.8% and
50.6% of the Company's total revenues for these periods. In particular,
maintenance revenues accounted for 16.3%, 22.6% and 26.6% of service revenues in
fiscal 1995, 1996 and 1997, respectively, and 25.5% and 25.8% of service
revenues for the six months ended July 31, 1996 and 1997, respectively. The
Company anticipates that service revenues will continue to account for a
significant percentage of the Company's total revenues and that revenues from
maintenance will increase as a percentage of service revenues as additional
licenses are sold.

INTERNATIONAL REVENUES. International revenues include all revenues other
than from the United States. International revenues from the Company's direct
sales organizations in Europe and export sales to or through strategic partners
in Europe and other areas outside of the United States accounted for 24.7%,
10.7% and 9.5% of total revenues in fiscal 1995, 1996 and 1997, respectively,
and 2.7% and 9.3% for the six months ended July 31, 1996 and 1997, respectively.
The high percentage of international sales for fiscal 1995 was the result of a
single large consulting contract in the United Kingdom. The Company expects that
international license and related service revenues will continue to account for
a significant portion of its total revenues in the future.

COST OF REVENUES

LICENSE. Cost of license revenues consists primarily of salaries, product
packaging, documentation and production. Cost of license revenues was $72,000,
$118,000 and $132,000 in fiscal 1995, 1996 and 1997, respectively, representing
3.9%, 4.4% and 2.0% of license revenues for these years. Cost of license
revenues was $58,000 and $77,000 for the six months ended July 31, 1996 and
1997, respectively, representing 2.0% and 1.5% of license revenues for these
periods.

SERVICE. Cost of service revenues consists primarily of personnel-related
and facilities costs incurred in providing customer support, training and
consulting services, as well as third-party costs incurred in providing training
and consulting services. Cost of service revenues was $1.6 million, $2.1 million
and $3.3 million in fiscal 1995, 1996 and 1997, respectively, representing
82.2%, 72.0% and 62.9% of service revenues for these years. Cost of service
revenues were $1.4 million and $3.4 million for the six months ended July 31,
1996 and 1997, respectively, representing 62.5% and 66.6% of service revenues
for these periods. The decrease in cost of service revenues as a percentage of
service revenues in fiscal 1996 and 1997 was primarily due to improved economies
of scale of the technical support center and increased productivity from a
significant number of newly hired

22
<PAGE>
training, support and consulting personnel. The increase in cost of service
revenues as a percentage of the related revenues for the six months ended July
31, 1997, resulted from the addition of new training, support and consulting
personnel over this period.

OPERATING EXPENSES

SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel, field
office expenses, travel and entertainment and promotional expenses. Sales and
marketing expenses were $3.4 million, $3.9 million and $11.4 million in fiscal
1995, 1996 and 1997, respectively, and were $4.3 million and $7.7 million for
the six months ended July 31, for these periods, respectively. The increase in
sales and marketing expenses was primarily due to the hiring of additional sales
and marketing personnel, the increase in the number of sales offices and
expanded promotional activities. Sales and marketing expenses represented 89.2%,
68.3% and 96.6% of total revenues for these periods in fiscal 1995, 1996 and
1997, respectively, and 83.7% and 76.2% of total revenues in the six months
ended July 31, 1996 and 1997, respectively. The changes in sales and marketing
expenses as a percentage of total revenues were primarily due to the timing of
hiring additional sales personnel. The Company expects that sales and marketing
expenses will continue to increase in dollar amounts as the Company continues to
hire additional sales and marketing personnel, establish additional sales
offices and increase promotional activities.

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and benefits of software engineering personnel, payments
to contract programmers and expendable equipment purchases. The Company believes
that a significant level of investment for research and development is required
to remain competitive. Research and development expenses were $2.2 million, $2.1
million and $3.2 million in fiscal 1995, 1996 and 1997, respectively, and were
$1.3 million and $2.4 million for the six months ended July 31, 1996 and 1997,
respectively. These increases were primarily attributable to additional hiring
of research and development personnel. Research and development expenses
represented 56.6%, 37.0% and 27.2% of total revenues in fiscal 1995, 1996 and
1997, respectively, and 24.5% and 23.2% of total revenues for the six months
ended July 31, 1996 and 1997, respectively. The Company anticipates that it will
continue to devote substantial resources to research and development and that
these expenses will increase in future periods. Because all costs incurred in
the research and development of software products and enhancements to existing
software products have been expensed as incurred, cost of license revenues
includes no amortization of capitalized software development costs. See Note 2
of Notes to Consolidated Financial Statements.

GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$853,000, $1.2 million and $2.1 million in fiscal 1995, 1996 and 1997,
respectively, and were $953,000 and $1.2 million for the six months ended July
31, 1996 and 1997, respectively. These increases were primarily due to increased
staffing and associated expenses necessary to manage and support the Company's
increased scale of operations. General and administrative expenses represented
22.4%, 22.1% and 18.3% of total revenues in fiscal 1995, 1996 and 1997,
respectively, and 18.5% and 11.5% of total revenues in the six months ended July
31, 1996 and 1997, respectively. The Company believes that its general and
administrative expenses will increase in future periods as a result of an
expansion of the Company's administrative staff to support its growing
operations and as a result of an increase in expenses associated with being a
public company.

OTHER INCOME (EXPENSE), NET. Other income (expense), net, represents
interest earned by the Company on its cash and short-term investments, offset by
interest expense on long-term debt and capitalized leases. See Notes 4 and 5 of
Notes to Consolidated Financial Statements.

PROVISION FOR INCOME TAXES. The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." The Company incurred net losses and consequently paid no
federal or state income taxes in fiscal 1995, 1996 and 1997. At January 31,
1997, the Company had approximately $16.0 million in federal net operating loss
carryforwards. The federal net operating loss carryforwards will begin to expire
in the year 2007 if not utilized. In addition, the Tax Reform Act of 1986
contains certain provisions that may limit the net operating loss carryforwards
available for use in any given

23
<PAGE>
period upon the occurrence of certain events, including a significant change in
ownership interests. Based upon management's estimates, a change in ownership
has not occurred as of July 31, 1997, and the proposed initial public offering
will not result in a change of ownership.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" (SFAS No. 128). SFAS No. 128 applies to entities
with publicly held common stock and is effective for financial statements issued
for periods ending after December 15, 1997. Under SFAS No. 128, the presentation
of primary earnings per share is replaced with a presentation of basic earnings
per share. SFAS No. 128 requires dual presentation of basic and diluted earnings
per share for entities with complex capital structures. Basic earnings per share
includes no dilution and is computed by dividing net income (loss) available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. Management believes the adoption of SFAS No. 128
will not have a material effect on the Company's financial statements.

In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" (SFAS No. 130). SFAS No. 130 is effective
for financial statements for fiscal years beginning after December 15, 1997.
This standard defines comprehensive income as the changes in equity of an
enterprise except those resulting from stockholder transactions. All components
of comprehensive income are required to be reported in a new financial
statement. Management believes the adoption of SFAS No. 130 will not have a
material effect on the Company's financial statements.

In June 1997, the Financial Accounting Standards Board also issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
(SFAS No. 131). SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. SFAS No. 131 establishes standards for
disclosures about operating segments, products and services, geographic areas
and major customers. Management believes the adoption of SFAS No. 131 will not
have a material effect on the Company's financial statements.

The American Institute of Certified Public Accountants' has approved,
pending issuance, a new Statement of Position which will supersede Statement of
Position 91-1, "Software Revenue Recognition." Management has assessed this new
statement and believes that its adoption will not have a material effect on the
timing of the Company's revenue recognition or cause changes to its revenue
recognition policies.

24
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited consolidated statement of
operations data for the six quarters ended July 31, 1997, as well as such data
expressed as a percentage of the Company's total revenues for the periods
indicated. This data has been derived from unaudited consolidated financial
statements that, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information when read in conjunction with the Consolidated
Financial Statements and Notes thereto.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
FISCAL YEAR 1997 FISCAL YEAR 1998
-------------------------------------------------- ------------------------
APR. 30 JULY 31 OCT. 31 JAN. 31 APR. 30 JULY 31
1996 1996 1996 1997 1997 1997
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT AS A PERCENTAGE OF TOTAL REVENUES)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
License................................... $ 1,134 $ 1,819 $ 1,834 $ 1,704 $ 2,138 $ 2,871
Service................................... 1,126 1,083 1,419 1,627 2,207 2,932
----------- ----------- ----------- ----------- ----------- -----------
Total revenues.......................... 2,260 2,902 3,253 3,331 4,345 5,803
----------- ----------- ----------- ----------- ----------- -----------
Cost of revenues:
License................................... 24 34 36 38 36 41
Service................................... 642 735 883 1,048 1,546 1,878
----------- ----------- ----------- ----------- ----------- -----------
Total cost of revenues.................. 666 769 919 1,086 1,582 1,919
----------- ----------- ----------- ----------- ----------- -----------
Gross margin................................ 1,594 2,133 2,334 2,245 2,763 3,884
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing....................... 2,225 2,424 3,252 3,449 3,616 4,112
Research and development.................. 616 651 877 1,045 1,096 1,259
General and administrative................ 439 515 581 612 566 607
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses................ 3,280 3,590 4,710 5,106 5,278 5,978
----------- ----------- ----------- ----------- ----------- -----------
Loss from operations........................ (1,686) (1,457) (2,376) (2,861) (2,515) (2,094)
Other income (expense), net................. 17 (28) (30) (55) (23) (17)
----------- ----------- ----------- ----------- ----------- -----------
Loss before provision for income taxes...... (1,669) (1,485) (2,406) (2,916) (2,538) (2,111)
Provision for income taxes.................. 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
Net loss.................................... $ (1,669) $ (1,485) $ (2,406) $ (2,916) $ (2,538) $ (2,111)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
License................................... 50.2% 62.7% 56.4% 51.2% 49.2% 49.5%
Service................................... 49.8 37.3 43.6 48.8 50.8 50.5
----------- ----------- ----------- ----------- ----------- -----------
Total revenues.......................... 100.0 100.0 100.0 100.0 100.0 100.0
----------- ----------- ----------- ----------- ----------- -----------
Cost of revenues:
License................................... 1.1 1.2 1.1 1.1 0.8 0.7
Service................................... 28.4 25.3 27.2 31.5 35.6 32.4
----------- ----------- ----------- ----------- ----------- -----------
Total cost of revenues.................. 29.5 26.5 28.3 32.6 36.4 33.1
----------- ----------- ----------- ----------- ----------- -----------
Gross margin................................ 70.5 73.5 71.7 67.4 63.6 66.9
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing....................... 98.4 83.5 99.9 103.5 83.2 70.8
Research and development.................. 27.3 22.4 27.0 31.4 25.2 21.7
General and administrative................ 19.4 17.8 17.9 18.4 13.1 10.5
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses................ 145.1 123.7 144.8 153.3 121.5 103.0
----------- ----------- ----------- ----------- ----------- -----------
Loss from operations........................ (74.6) (50.2) (73.1) (85.9) (57.9) (36.1)
Other income (expense), net................. 0.8 (1.0) (0.9) (1.7) (0.5) (0.3)
----------- ----------- ----------- ----------- ----------- -----------
Loss before provision for income taxes...... (73.8) (51.2) (74.0) (87.6) (58.4) (36.4)
Provision for income taxes.................. 0.0 0.0 0.0 0.0 0.0 0.0
----------- ----------- ----------- ----------- ----------- -----------
Net loss.................................... (73.8)% (51.2)% (74.0)% (87.6)% (58.4)% (36.4)%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>

25
<PAGE>
The Company's limited operating history and the susceptibility of the
Company's operating results to significant fluctuations makes the prediction of
future operating results unreliable and the Company believes that
period-to-period comparisons of its operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.
The Company's operating results in any given period can vary due to factors such
as demand for the Company's products, the size and timing of significant orders
and their fulfillment, the number, timing and significance of product
enhancements and new product announcements by the Company and its competitors,
changes in pricing policies by the Company or its competitors, customer order
deferrals in anticipation of enhancements or new products offered by the Company
or its competitors, the ability of the Company to develop, introduce and market
new and enhanced versions of its products on a timely basis, changes in the
Company's level of operating expenses, budgeting cycles of its customers,
product life cycles, software defects and other product quality problems, hiring
needs and personnel changes, changes in the Company's sales incentive plans,
changes in the mix of domestic and international revenues, the level of
international expansion, foreign currency exchange rate fluctuations,
performance of indirect channel partners, changes in the mix of indirect
channels through which the Company's products are offered, the impact of
acquisitions of competitors and indirect channel partners, the Company's ability
to control costs and general domestic and international economic and political
conditions. A significant portion of the Company's revenues have been, and the
Company believes will continue to be, derived from a limited number of orders
placed by large organizations, and the timing of such orders and their
fulfillment has caused and are expected to continue to cause material
fluctuations in the Company's operating results, particularly on a quarterly
basis. A significant portion of the Company's revenues are derived from existing
customers. To the extent that such customers no longer require new licenses, or
ongoing support, the Company's business, financial condition and operating
results could be materially adversely affected. The Company has, from time to
time, often recognized a substantial portion of its revenues in the last month
of a quarter, with these revenues frequently concentrated in the last two weeks
of a quarter. In addition, the Company does not operate with a large order
backlog because its software products are typically shipped shortly after orders
are received, which makes product revenues in any quarter substantially
dependent on orders booked and shipped throughout that quarter. Accordingly,
revenues for any future quarter are difficult to predict. The Company also
expects that as international sales increase as a percentage of sales it will
experience weaker demand for DecisionSuite during the summer months. Product
revenues are also difficult to forecast because the market for OLAP applications
is rapidly evolving, and the Company's sales cycle, which may last from six to
twelve months or more, varies substantially from customer to customer. The
Company's expense level and plans for expansion, including its plan to
significantly increase its research and development efforts, are based in
significant part on the Company's expectations of future revenues and therefore
are relatively fixed in the short term. If revenue levels are below
expectations, operating results are likely to be adversely and
disproportionately affected because only a small portion of the Company's
expenses vary with its revenues. In addition, the Company expects that sales
derived through indirect channels, which are more difficult to forecast and
generally have lower gross margins than direct sales, will increase as a
percentage of total revenues. See "Risk Factors--Management of Growth; Need for
Additional Qualified Personnel" and "--Expansion of Indirect Channels."

Based upon all of the factors described above, the Company believes that its
quarterly revenues, expenses and operating results are likely to vary
significantly in the future, that period-to-period comparisons of its operating
results are not necessarily meaningful and that, in any event, such comparisons
should not be relied upon as indications of future performance. Accordingly, the
Company has limited ability to forecast future revenues, and it is likely that
in some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In the event that
operating results are below expectations, or in the event that adverse
conditions prevail or are perceived to prevail generally or with respect to the
Company's business, the price of the Common Stock would likely be materially
adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations to date primarily through the private
sale of equity securities and the use of long-term debt and equipment leases.
The Company has a revolving credit line of $2.0 million with a

26
<PAGE>
bank and a $1.5 million term loan with an equipment lessor. The Company's
sources of liquidity at July 31, 1997 consisted principally of cash and cash
equivalents of $3.1 million. See Note 4 of Notes to Consolidated Financial
Statements.

Net cash used in operating activities was $3.2 million, $3.6 million and
$6.4 million in fiscal 1995, 1996 and 1997, respectively, and $4.1 million for
the six months ended July 31, 1997. For such periods, net cash used in operating
activities resulted primarily from net operating losses and increases in
accounts receivable associated with increases in revenues, partially offset by
increases in accounts payable, accrued liabilities and deferred revenues.

Since 1995 the Company's investing activities have consisted primarily of
purchases of property and equipment. Capital expenditures, including those under
capital leases, totaled $355,000, $335,000 and $1,078,000 in fiscal 1995, 1996
and 1997, respectively, and $485,000 for the six months ended July 31, 1997.
Capital leases are used to acquire property and equipment, primarily computer
hardware, for the Company's growing employee base. The Company expects that its
capital expenditures will continue to increase as the Company's employee base
grows. At July 31, 1997, the Company had material commitments for capital
expenditures totaling approximately $400,000, which the Company intends to
finance initially through a bank term loan for a period not to exceed three
years. If amounts are outstanding under such term loan as of the date of
completion of this offering, the Company intends to repay such bank loan from
the proceeds of the offering.

The Company's financing activities provided $3.4 million, $5.4 million and
$6.0 million in fiscal 1995, 1996 and 1997, respectively, and $6.5 million for
the six months ended July 31, 1997. In fiscal 1995, the cash provided by
financing activities was comprised primarily of $2.5 million received in
connection with the sale of Series A convertible redeemable preferred stock and
$1.0 million in proceeds from notes payable to certain stockholders, offset
partially by principal payments on long-term debt. In fiscal 1996, the cash
provided by financing activities was comprised primarily of $5.1 million
received in connection with the sale of Series B convertible redeemable
preferred stock and $1.0 million in proceeds from notes issued to shareholders,
offset by repayments of notes payable to a bank of $435,000 and principal
payments on long-term debt of $217,000. In fiscal 1997, the cash provided by
financing activities was comprised primarily of $4.9 million received in
connection with the sale of Series C convertible redeemable preferred stock and
$1.5 million in proceeds from long-term debt, offset by principal payments on
long-term debt of $502,000. For the six month period ended July 31, 1997, cash
provided by financing activities consisted primarily of $6.9 million received in
connection with the sale of Series D convertible redeemable preferred stock,
offset by principal payments on long-term debt of $399,000.

Total borrowings under the revolving credit line are limited generally to
the lesser of 70% of eligible accounts receivable or $2.0 million. On October 6,
1997, the Company borrowed $1.0 million under the revolving line, bearing an
annual interest rate of 1.75% over the bank's prime lending rate. The Company
expects to use proceeds from this offering to repay such indebtedness. The
Company's line of credit contains certain financial covenants and restrictions
as to various matters including the Company's ability to pay cash dividends and
effect mergers or acquisitions without the bank's prior approval. The Company is
currently in compliance with such financial covenants and restrictions. The
Company has granted a first priority security interest in substantially all of
its assets as security for its obligations under its credit line which expires
in September 1998.

On April 12, 1996, the Company issued a subordinated promissory note in
favor of Comdisco, Inc. in the principal amount of $1,500,000, which bears
interest at an annual rate of 13.5% (the "Note"). The Note is due in varying
monthly installments through April 1999. As of September 30, 1997, the
outstanding indebtedness under such note was $1,103,910. The Note will remain
outstanding following the closing of this offering. See Note 5 of Notes to
Consolidated Financial Statements.

The Company believes that the net proceeds from the offering and its
existing cash and cash equivalents will be adequate to meet its cash needs for
at least the next 12 months. Thereafter, the Company may require additional
funds to support its working capital requirements or for other purposes and may
seek to raise such additional funds through public or private equity financing
or from other sources. There can be no assurance that additional financing will
be available at all or that, if available, such financing will be obtainable on
terms favorable to the Company or will not be dilutive.

27
<PAGE>
BUSINESS

The following description of the Company's business should be read in
conjunction with the information included elsewhere in this Prospectus. This
description contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from the
results discussed in the forward-looking statements as a result of certain of
the factors set forth below and elsewhere in this Prospectus.

OVERVIEW

Information Advantage Software, Inc. (the "Company") develops, markets and
supports enterprise scalable OLAP software that is designed to allow a large
number of users to access and analyze large amounts of data to make quicker and
more informed business decisions. The Company's server-based solution,
DecisionSuite, provides powerful, robust and flexible analysis processing
capabilities that transform raw data into meaningful information from a wide
range of desktop and Internet platforms. Through the use of an advanced
architecture, the Company designed DecisionSuite to accomodate terabytes of data
and thousands of active users. DecisionSuite enables organizations to push
effective decision making to all levels of users thereby creating an
"intelligent enterprise," one capable of quickly identifying and reacting to
market opportunities. DecisionSuite supports many UNIX operating systems and
employs relational database technology, allowing it to access most popular
databases, data warehouses and data marts.

INDUSTRY BACKGROUND

In order to compete effectively in today's global environment, businesses
must quickly identify and respond to changing market conditions and are,
therefore, dependent upon their ability to rapidly collect, organize, access and
analyze large amounts of data. Organizations are now collecting not only
internal financial and operational data, but are also collecting large amounts
of historical data on their customers, suppliers and other external affiliates.
At the same time, to more quickly react to changing business conditions, many
organizations have been flattening their organizational structures and
empowering employees at all levels to make decisions. The desire to distribute
decision making throughout all levels of an organization has created a need by
more people to access the vast amounts of business data collected each day. In
addition to data access, organizations also face the challenges of performing
complex computational analysis on the collected data, and disseminating
information broadly to employees, customers, suppliers and others.

To meet these challenges, organizations have implemented a number of
technology solutions, including data warehouses and data marts, query and
reporting tools and OLAP applications. According to an independent industry
analyst, the information access segment of the data warehousing market alone is
estimated to be growing from $664 million in 1996 to $1.4 billion in 2000. Data
warehouses and data marts are repositories of summarized historical data often
extracted from disparate departmental or enterprise databases. Data warehouses
and data marts store data in a format optimized for analysis and are frequently
implemented in conjunction with query and reporting tools designed to provide
end users with a means to retrieve data and perform certain pre-defined queries
and simple calculations. This level of analysis, however, is limited (for
example, query and reporting tools generally are not designed to perform
time-series analysis such as calculations of the weekly changes in market share
by region) and these tools often require users to understand the technical
aspects of data storage and data structures. As a result, the use of data query
and reporting tools is often limited to highly trained technical users.

In recent years, OLAP solutions have emerged to provide a means to analyze
complex data along a more intuitive set of business rules and dimensions (for
example, profitability analysis by product, channel, geography, customer or
fiscal period). In addition, by insulating the user from the technical aspects
of data storage and data structures, OLAP solutions enable less technically
sophisticated users within an organization to perform their own analysis.
Typically, OLAP solutions also provide more complex computational capabilities,
including sophisticated time-series analysis, as well as ad hoc, drill-down and
interactive analysis (for example, a

28
<PAGE>
marketing manager identifying a market share reduction can drill down to isolate
the problem to a specific product at a specific store).

Today, two primary OLAP architectures exist: desktop OLAP and server-based
OLAP. Desktop OLAP provides a quick, low-cost solution for applications that do
not require complex analytical capabilities and involve small data sets that do
not require frequent updates. Desktop OLAP solutions are designed for a limited
number of active users and are typically used for personal analysis.
Server-based OLAP solutions are better suited for larger data sets and more
complex analysis. Because server-based OLAP does not require the movement of
large amounts of data to the desktop, it provides greater security and reduces
network traffic, thereby accommodating a larger number of active users. One
approach to server-based solutions utilizes proprietary, non-relational,
highly-indexed database technology. This approach is best suited for workgroups
and departments requiring fast access to medium-sized data sets (e.g., tens of
gigabytes of data) but often is not scalable to accommodate a large number of
concurrent users, is not capable of loading, storing or analyzing large amounts
of data (e.g., hundreds of gigabytes to terabytes of data) and cannot
efficiently update data sets on a frequent basis. In addition, these solutions
often require the data to be loaded in a pre-defined structure thereby limiting
the ability to perform ad hoc queries. The second approach to server-based OLAP
employs existing relational database technology. This approach allows access to
larger amounts of data and provides greater flexibility in performing ad hoc
queries than non-relational database technologies.

At the same time OLAP has emerged as a means to collect, organize, access
and analyze large amounts of data, the emergence of client/server and Internet
technologies has enabled organizations to create infrastructures through which
they can disseminate information throughout their enterprise as well as to
external sources. Client/server computing has provided many employees in an
organization with desktop access to critical information resources through
easy-to-use graphical user interfaces. The emergence of Internet technologies
has provided organizations with a less expensive means to reach an even larger
audience in real time and to securely disseminate information not only to
employees, but also to external business affiliates, such as customers,
suppliers and others.

Organizations are seeking ways to extend the benefits of OLAP in order to
empower employees and other users at all levels to make better business
decisions and react faster to market opportunities. To effectively deliver OLAP
capabilities throughout the enterprise, the solution must support large data
sets, thousands of active users, and simple as well as complex analysis.
Moreover, organizations require enterprise OLAP solutions with efficient and
cost effective deployment and maintenance, and compliance with industry
standards, thereby enabling integration with hardware and software from a
variety of vendors.

THE INFORMATION ADVANTAGE SOLUTION

Information Advantage develops, markets and supports enterprise scalable
OLAP software that is designed to allow large numbers of users to access and
analyze large data sets. The Company's relational server-based solution,
DecisionSuite, provides powerful, robust and flexible analysis processing
capabilities that transform raw data into meaningful information from a wide
range of desktop and Internet platforms. Through the use of an advanced
architecture, the Company designed DecisionSuite to accommodate terabytes of
data and thousands of active users. DecisionSuite enables organizations to push
effective decision making to all levels of users thereby creating an
"intelligent enterprise," one capable of quickly identifying and reacting to
market opportunities. Key attributes of the DecisionSuite solution include:

LARGE AMOUNTS OF DATA. DecisionSuite employs relational database technology
which the Company believes is the only available database technology suitable
for supporting large databases (e.g., hundreds of gigabytes to terabytes of
data) or databases that require frequent updates and access to terabytes of
centralized or distributed data. DecisionSuite processes data on the server and
disseminates the derived results to the user.

LARGE NUMBER OF USERS. The DecisionSuite architecture uses sophisticated
partitioning technology to balance the data processing between the database and
the application server. Application partitioning is designed to maximize the
performance and analytical capabilities as the database grows and the number of

29
<PAGE>
concurrent users increases. DecisionSuite's calculation processor is designed to
perform sophisticated business calculations on raw data without overburdening
the relational database with the use of inefficient temporary tables, thereby
increasing the number of users who can concurrently access the data.

POWERFUL ANALYTICAL CAPABILITY. DecisionSuite includes a powerful C++ OLAP
calculation processor that provides comprehensive multidimensional, yet
intuitive, analysis capabilities using advanced formula-based business rules. By
avoiding an overreliance on structured query language ("SQL") for business
calculations, DecisionSuite is designed to provide powerful analytical
capabilities in a scalable architecture. DecisionSuite allows users to join data
from multiple distributed relational databases and create agents that
automatically inform them of changes in market data or from user-defined norms.

MASS DEPLOYMENT FOR THE INTELLIGENT ENTERPRISE. The Company provides for
efficient and cost-effective deployment and maintenance of DecisionSuite by
using a thin-client architecture where minimal application code is deployed to,
and maintained on, the user's desktop. As a result, organizations can more
effectively deploy and support DecisionSuite over thousands of networked users.

OPEN ARCHITECTURE. DecisionSuite was designed to integrate with most
popular tools, databases and platforms provided by other vendors. DecisionSuite
runs on the following server operating systems: HP-UX, Sun Solaris, IBM AIX, NCR
SVR4, SGI IRIX, Sequent DYNIX/ptx and Unisys SVR4; and accesses the following
relational database platforms: Oracle, Red Brick Warehouse, HP--Intelligent
Warehouse, IBM DB2 6000, IBM DB2 Parallel Edition, Informix, NCR Teradata DBS,
Sybase, Sybase IQ and Tandem Non-Stop SQL. As a result, organizations
implementing DecisionSuite can leverage their often significant investment in
existing operating systems and database technologies.

To complement its advanced product offerings, the Company has developed a
highly trained customer support staff with technical competencies in a variety
of areas, including UNIX operating systems, database management, distributed
computing and multidimensional analysis. The Company believes that to enable its
customers to effectively develop and deploy OLAP applications, it must provide
training and consulting services in these and other areas. Accordingly, the
Company has established an extensive customer services group consisting of
technical support, education, implementation, prototyping workshops and other
advanced services (including customized enhancements, content development and
performance assessment).

STRATEGY

The Company's strategy is to establish Information Advantage as the leading
provider of enterprise scalable OLAP software solutions. Key elements of the
Company's strategy include:

EXTEND TECHNOLOGY LEADERSHIP. Since inception, the Company has focused its
research and development efforts on developing core technologies that address
the requirements of data warehousing applications involving large amounts of
data, large numbers of concurrent users, complex analysis and heterogeneous
environments. The Company's solution integrates a number of technologies,
including sophisticated agent technology, flexible information sharing and
dissemination, multidimensional analysis, multi-level security and an
architecture that permits a large number of concurrent users. The Company has
leveraged these technologies to develop DecisionSuite, a proven enterprise
scalable OLAP software solution for the intelligent enterprise. DecisionSuite is
designed to access and analyze terabytes of data. Of the Company's customers,
three are in production, and five are currently building, terabyte-sized
applications. The Company intends to extend its technology leadership by
continuing to devote significant resources to research and development efforts,
and by forming strategic relationships that will enable the Company to further
enhance DecisionSuite's functionality and performance.

EXPAND VERTICAL MARKET FOCUS. The Company targets industries that routinely
collect, organize, access and analyze large amounts of business-critical data.
These industries include retail, consumer packaged goods, financial services,
insurance, telecommunications and the healthcare industries. The Company has
developed significant vertical market expertise through the deployment of
software applications for its customers in these

30
<PAGE>
industries. The Company believes that by focusing on the needs of these specific
industries and by continuing to recruit solution development partners in these
industries, it can improve the efficiency and effectiveness of its sales and
marketing efforts in these vertical markets. The Company intends to continue
leveraging its experience to address the specific needs of organizations in
these industries and to expand to other targeted industries.

EXPAND GLOBAL DISTRIBUTION. The Company sells its products primarily
through direct sales. The Company also uses strategic partners to sell its
products in targeted markets. The Company has direct sales offices in twelve
states, Canada, the United Kingdom and Germany, and has established strategic
relationships in South Africa, Netherlands and Japan. The Company is presently
localizing DecisionSuite for the French and German markets. The Company intends
to expand its direct sales and pre-sales support organizations and to develop
additional strategic relationships both in its existing markets and in other
locations worldwide. To facilitate its international expansion, the Company
anticipates localizing DecisionSuite for additional foreign markets in the
future.

EXPAND STRATEGIC RELATIONSHIPS. The Company's strategy is to supplement its
direct sales organization with strategic relationships, including solution
development partners, sales affiliates and marketing partners. The Company's
solution development partners, such as DynaMark, VIPS and IBM, have developed
industry specific software applications in which DecisionSuite is embedded. The
Company sells its products directly to solution development partners who
integrate and sell solutions to customers. The Company also has relationships
with sales affiliates, such as Cambridge Technology Group, EDS, Ernst & Young
and KPMG, who help identify and qualify sales prospects, work closely with the
Company during the sales and implementation cycles and provide after-market
support. In addition, the Company has strategic relationships with marketing
partners, such as HP, Red Brick, Sun, SPSS and Brio, who provide complementary
marketing programs designed to promote product awareness for DecisionSuite.
These relationships provide additional sales and marketing channels, thereby
enhancing the Company's position as the leading provider of enterprise scalable
OLAP software solutions. The Company's objective is to increase license revenues
from strategic relationships as a percentage of total license revenues, by
enhancing its current strategic relationships and adding additional strategic
partners.

FOCUS ON SUCCESSFUL CUSTOMER IMPLEMENTATION. The Company's strategy is to
deliver technology and services that enable its customers to quickly and cost
effectively implement and maintain applications for the intelligent enterprise.
The Company's success is dependent upon its customers' successful
implementations of its products. The Company believes that its comprehensive
consulting, implementation, support and training services enable customers to
successfully implement DecisionSuite and contribute to customer satisfaction,
strong customer references and long-term relationships. The Company offers
worldwide training, consulting and support services for its customers directly
through its customer services group and indirectly through its solution
development partners and sales affiliates. In addition to its advanced training
and consulting services, the Company provides its customers with an extensive
array of ongoing support services, including software updates, documentation
updates, telephone support and product maintenance. A significant portion of the
Company's revenues each period is derived from upgrades and services provided to
its installed customer base. The Company intends to maintain its focus on
customer success and to continue to invest in support services designed to
ensure such success.

31
<PAGE>
CUSTOMERS AND APPLICATIONS

The Company believes that the following is a representative list of the
Company's customers in a variety of industries as of September 30, 1997.

RETAIL
Ahold USA, Inc.
Dayton Hudson Corporation
DFS Group, Ltd.
Fabri-Center of America, Inc.
Longs Drug Stores California, Inc
National Grocers Co., Limited
Neiman-Marcus
J. Sainsbury PLC
Sears Canada, Inc.
Sears Roebuck, & Co.
Shopper's Drug Mart
The Southland Corp.
The Stop & Shop Supermarket Company
Superdrug Stores, PLC
SuperValu
Tandy Corporation
Dayton Hudson Corporation, Target
Stores Division
Gap Inc.
Quill Corporation
Tupperware Corporation
Tyson Foods, Inc.
Wearguard Corporation
The Warehouse Ltd.
Proffitt's Inc.
Fingerhut Corporation

PACKAGED GOODS
Birds Eye Walls, Inc.
ConAgra Frozen Foods
Dominick's Fine Foods
Land O'Lakes, Inc.
Nabisco, Inc.
The Quaker Oats Company
Sara Lee Corporation/Sara Lee Meats
Van Den Bergh Foods
Brunswick Corporation
FINANCIAL SERVICES
Banc One Services Corporation
DynaMark, Inc.
Fidelity Investments
Green Tree Financial Corporation
Honor Technologies, Inc.
MasterCard International Incorporated
NOVUS Services, Inc.
T. Rowe Price Investment
Technologies, Inc.
Strong Capital Management, Inc.
HEALTH CARE
Fairview Health Systems
MCC Behavioral Care
TheraTx, Inc.
United HealthCare Corporation
VIPS (a division of First Data Corp.)
INSURANCE
Medical Service Bureau of Idaho/Blue Shield of
Idaho
Liberty Health
The Northwestern Mutual Life Insurance Company
The Prudential Insurance Company of America
The St. Paul Fire and Marine Insurance Company
Cigna-Intercorp, Inc.
TECHNOLOGY/TELECOMMUNICATIONS
60 DEG. Communications Company
Aerial Communications, Inc.
APAC Teleservices, Inc.
CCC Information Services, Inc.
Pacific Bell Communications
Pacific Bell Video Services
PrimeStar Partners, LP
Silicon Graphics Inc.
GOVERNMENT
Inland Revenue (UK)
State of Washington Department of
Social and Health Services
Utah Courts
United States Customs Service
University of California, Berkeley
MANUFACTURING
Amgen, Inc.
Mattel, Inc.
Minnesota Mining and Manufacturing Company
Polaroid Corporation
Rockwell International Corporation
The Goodyear Tire and Rubber Company
OTHER
Acxiom Corporation
Cargill, Inc.
Electronic Data Systems Corporation
Federal Express Corporation
IBM Consumer Driven Solutions
NTT Data
Perseco
The Reader's Digest Association, Inc.
Regie Media Belge S.A.
KPMG Peat Marwick, LLP
Northwest Airlines, Inc.
Dana Computer Corporation
Excel Corporation
Oshawa Holdings Limited

32
<PAGE>
DecisionSuite can be used across a range of industries and is typically used
in three types of applications: (a) customer analysis, including applications
for analyzing customer buying patterns, database marketing and campaign
management; (b) product analysis, including sales analysis, inventory management
and promotion management; and (c) operational analysis, including financial
analysis, activity-based costing, forecasting and budgeting. The following
illustrates the variety of ways customers have deployed DecisionSuite:

FINANCIAL SERVICES: An international credit card company sought to
differentiate itself from its competitors by offering its 22,000 member
financial institutions the ability to access and analyze credit card transaction
activity and trends online. The goal was to provide member financial
institutions with customer usage data to facilitate and evaluate target
marketing campaigns. This customer's Oracle database contains approximately 1.6
terabytes of data and uses NCR servers. Because of the number of potential
users, the size of the data warehouse and the fact that over 11 million
transactions are added to the database daily, scalability was paramount.
DecisionSuite was selected to provide the OLAP engine necessary to build this
application. The Company believes that DecisionSuite was chosen because of the
expertise of its support personnel and the proven scalability, security and ease
of use of the product for the end-user. The first application of DecisionSuite
was available for deployment to members within six months of the date
DecisionSuite was selected and now allows the customer's clients to track usage
patterns and focus their efforts accordingly.

INSURANCE: A provider of auto insurance claim software, data and services
sought to offer over 350 auto insurance companies the ability to access and
analyze insurance claim data via the Web as an extranet. This customer uses a
Red Brick database and a Sun server. The Company believes that DecisionSuite was
selected primarily for its Web and agent capabilities and its ability to
efficiently manage large amounts of data at a granular level. DecisionSuite
allows the customer's sales associates to analyze the claims data for potential
clients via the Web as a tool in the sales process. Upon complete
implementation, this application will also allow auto insurance companies to
access and analyze the customer's nationwide insurance claim data, including
repair cycle times and amounts paid for vehicle parts, and to compare their
claims resolution performance against industry averages and historical trends.

RETAIL: A multi-billion dollar retailer of electronics with over 6,800
retail stores nationwide sought to deliver online analysis of its consumer and
product data throughout the organization. The customer's warehouse includes
consumer and census data, as well as behavioral and point-of-sale information
from its retail stores. The consumer database alone includes profiles of over
150 million consumers, making the customer's database one of the most
comprehensive marketing databases in the world. This customer uses a Red Brick
database and an HP server. The Company believes that DecisionSuite was selected
for its complex analytical capabilities, its Web accessibility and its ability
to handle terabytes of data. DecisionSuite provides online analysis of the
databases and allows the customer's headquarters to analyze the retail stores'
performance, improve inventory controls and target promotional mailings. In
addition, this customer plans to make this application available to its retail
store managers using a standard Web browser, thereby enabling these teams to
participate in the decision making process to improve the store's performance.

PACKAGED GOODS: A leading packaged food company, with more than 200 brands
and 1,000 products in 85 countries, sought to provide better and faster sales
and product information to its sales representatives. Its application required
not only the ability to access multiple, disparate databases (Red Brick and DB2)
that used IBM servers, but it required the ability to deliver both detailed and
summarized key account information to thousands of users. The client selected
DecisionSuite and has currently deployed the system to approximately 2,500 sales
representatives throughout the organization. Using DecisionSuite, the customer's
sales representatives are now able to access and analyze online product sales
by, among other things, location and season. This enables the customer to
anticipate inventory fluctuations, thereby improving inventory controls, and
provides the sales representatives with timely decision making information, such
as which products are likely to sell and when, that often leads to new business
opportunities.

33
<PAGE>
PRODUCTS AND TECHNOLOGY

The Company's DecisionSuite products are comprised of a server capable of
handling large data sets or large numbers of concurrent users, several desktop
products designed to deliver information to variously skilled end users over
client/server and Internet architectures, and several systems management,
connectivity and database driver modules. The Company also offers an advanced
tool kit for the rapid assembly of custom OLAP applications. The Company's
products are available on most popular UNIX platforms, including HP-UX, Sun
Solaris, IBM AIX, NCR SVR4, SGI IRIX, Sequent DYNIX/ptx and Unisys SVR4, and are
able to access the following databases: Oracle, Red Brick Warehouse,
HP--Intelligent Warehouse, IBM DB2 6000, IBM DB2 Parallel Edition, Informix, NCR
Teradata DBS, Sybase, Sybase IQ and Tandem Non-Stop SQL. The Company designed
DecisionSuite's architecture to be well suited for localization in foreign
markets. The Company licenses its DecisionSuite software for a one-time license
fee determined on a per server, per named user, and database size basis. The
current list price for each named user or each gigabyte of data is $2,400.

[Diagram of product architecture]

34
<PAGE>
DECISIONSUITE SERVER

The DecisionSuite Server is a multi-user product designed to allow large
numbers of users to access and analyze large data sets. The DecisionSuite Server
delivers enhanced OLAP services including: agent and exception reporting
functions to push personalized information directly to users; security based on
individual, workgroup and enterprise level user privileges; and group or
personal query controls to minimize system performance degradation caused by
either individuals or user groups. DecisionSuite Server augments SQL with an
efficient and sophisticated C++ calculation processor that is scalable to
thousands of active users and terabytes of data. The DecisionSuite Server's
CONCURRENT SESSION MANAGER is designed to add, manage and delete concurrent
processes initiated by requests from multiple users or agents, allowing
customers to scale DecisionSuite across the enterprise. The DecisionSuite
Server's METADATA model centralizes maintenance and isolates users from
technical complexities by mapping database structures and business rules with
intuitive business descriptions, thereby simplifying user interactions with the
system.

DECISIONSUITE DB DRIVERS. DecisionSuite DB Drivers are designed to provide
organizations with the option of connecting DecisionSuite to target relational
databases with either native drivers or ODBC drivers. Each DB Driver accounts
for the unique SQL syntax and query optimizer of each target database while
allowing organizations to easily switch database vendors' products independently
of deployed DecisionSuite applications. DecisionSuite provides DB Drivers for
Oracle, Red Brick Warehouse, HP-- Intelligent Warehouse, IBM DB2 6000, IBM DB2
Parallel Edition, Informix, NCR Teradata DBS, Sybase, Sybase IQ, and Tandem
Non-Stop SQL.

DISTRIBUTED OLAP ENGINE. DecisionSuite's OLAP Engine uses distributed
processing technology to maximize user concurrency and analytical functionality.
In particular, the Company's calculation processor performs sophisticated
business analysis on raw data without overburdening the database with use of
inefficient temporary tables. This capability enables intensive application
processing to be off-loaded from the database so that organizations can
effectively scale to large numbers of users. This capability also allows support
of hundreds of business calculations and functions that are not currently
supported in SQL.

ENTERPRISE OLAP SERVICES. DecisionSuite provides essential services
required for enterprise-scale deployments including:

WORKGROUP SECURITY. The partitioned, server software design of
DecisionSuite allows additional levels of security provided by an
application server account. In this manner, users with similar
requirements are easily added to the system without risk of improper
information access. Reports, report components and database views are
secured at personal, workgroup and enterprise levels.

COLLABORATION. The Company's use of object technology enables report
data and logic to be shared among users. Each report contains the data,
assumptions and processing logic so that users can interactively exchange
and build on each other's analysis. This technology facilitates live
information sharing among users of the Company's product.

REPORT CASTING. The Company's use of report template technology allows
power users or information technology personnel to efficiently create a
few report models for thousands of different reports. Each report
template contains the instructions and parameters required to generate a
single request. Upon access, the user profile is used to map the
appropriate parameters into the instruction set at run-time so that each
user receives a personalized report. This capability enables the
administrator to build and maintain a relatively small number of
automatically adapting report templates, rather than tens of thousands of
user specific reports.

AGENTS. The Company's server-centric architecture and multi-user,
multi-tasking server technology allows DecisionSuite users to design
autonomous intelligent agents, the results of which can be shared by
multiple users. These agents are created by users and reside on the
server. The agents also can be

35
<PAGE>
triggered by areas of opportunity or trouble, without affecting desktop
performance. The results of the agents may be delivered in real time to
one or more users via e-mail, pager telephone and the Internet so their
assumptions and results can be explored and challenged, as well as shared
to reduce the use of system resources for repetitive batch processing.

DECISIONSUITE DESKTOPS

DecisionSuite Desktops include an array of products positioned to meet the
varying needs and skill levels of employees in an organization.

WEBOLAP. WebOLAP is intended for all users seeking OLAP capability over the
Internet. This product provides ad hoc reporting and OLAP capability using only
a browser, a DecisionSuite user name and a password. WebOLAP's Universal Access
functionality allows users direct access to the DecisionSuite Server from search
engines for seamless integration into corporate Web sites. WebOLAP's codeless
desktop architecture enables it to be used from any desktop with a Web browser,
without requiring a plug-in or extension, eliminating installation and reducing
administration costs in large user environments. Complete integration with the
DecisionSuite Server also allows WebOLAP users to seamlessly share secure,
interactive reports, and collaborate with co-workers using any DecisionSuite
Desktop.

NEWSLINE. NewsLine is intended for active users to deliver and receive live
information, reports, alerts and intelligent agents. Users of this product can
be alerted to the latest opportunities and problems affecting their business by
software agents that monitor, analyze and filter information 24 hours a day,
seven days a week. For example, users have the ability to drill up, down or
across business dimensions anywhere in the data warehouse then pivot and export
results with a spreadsheet hot-link. NewsLine allows experienced users the
ability to securely view and modify all assumptions underlying the analysis,
including calculations and filters. Users may drag and drop calculations and
filters to review the entire data warehouse. NewsLine has robust business
charting capabilities and can be integrated with external applications,
including operational systems, catalogs and powerful GIS mapping systems.

ANALYSIS. Analysis is intended for power users and provides authoring and
publishing capabilities in addition to all the functionality of NewsLine. This
product allows users to start with a "blank sheet of paper," then point and
click to author and publish filters, calculations, calculation templates,
reports, report templates, distributed intelligent agents, triggers and alerts
as well as navigate throughout the entire data warehouse. Alerts can be directed
and broadcast as "live" interactive reports and as messages via e-mail, pager,
telephone and the Internet. Users are presented information in business terms so
that they can explore gigabytes of information without the technical knowledge
of database structures or SQL.

DECISIONSUITE WORKBENCH

The DecisionSuite Workbench allows database and system administrators to
define, manage and support user profiles, security, and group or personal query
controls, as well as to customize and distribute desktop profiles across the
network. Developers can also use DecisionSuite Workbench to create more
sophisticated intelligent agents, custom applications and add-in functionality,
and to integrate DecisionSuite with operational systems. With DecisionSuite's
thin-client architecture, all applications are centrally managed from the
server, thereby reducing cost of ownership and allowing database and systems
administrators to improve DecisionSuite's efficiency.

DECISIONSUITE CONNECTIONS

DecisionSuite Connections provide connectivity with complementary OLAP and
productivity tools. To date, the Company has developed DecisionSuite Connections
for Microsoft Excel, Lotus 123 and Brio. These connections provide users of
DecisionSuite Desktops with the ability to automatically download data into
desktop tools. For example, Brio Connection provides users with the ability to
generate a small data cube that is automatically downloaded into Brio's OLAP
desktop, enabling the user to perform interactive analysis, formatting and
charting while disconnected from the network.

36
<PAGE>
SALES AND MARKETING

SALES

The Company sells its products in North America and the United Kingdom
primarily through its direct sales and services organizations. The Company
employs highly skilled engineers and technically proficient sales persons
capable of serving the sophisticated needs of its customers' information and
business management staffs. The Company has domestic sales or support staff
located in California, Colorado, Georgia, Illinois, Massachusetts, Michigan,
Minnesota, New Jersey, New York, Ohio, Texas, Virginia, and international
offices in Toronto, Canada; London, England; and Koln, Germany.

To date, a majority of the Company's sales have been generated from its
direct sales force. The Company intends to supplement its sales efforts by
implementing and supporting its products through a network of solution
development partners, sales affiliates and marketing partners. The Company's
strategic partners are independent organizations that perform some or all of the
following functions: sales and marketing; systems implementation and
integration; software development and customization; and ongoing consulting,
training, service and technical support.

The Company has an ongoing program to recruit major systems integrators and
to train and support them in identifying sales opportunities and implementing
the Company's products. The Company is working with several of these affiliates
to develop additional applications for targeted markets, such as finance and
banking, insurance, telecommunications and retail. The Company offers such sales
affiliates discounts on products and training, a cooperative marketing program,
and field level assistance from the Company's direct sales force. The Company
currently has such a relationship with Cambridge Technology Group, EDS, Ernst &
Young, and KPMG.

The Company believes that its strategic partners have significant influence
over product choices by customers and that its relationships with these partners
are an essential element in its marketing, sales and implementation efforts.
Through its partner network, the Company is able to obtain leads and provide
customers with trained and knowledgeable software professionals who are
available locally to implement its systems as well as provide ongoing service
and support. Some of the Company's strategic partners customize the Company's
solutions to fit individual business needs and develop industry-specific
software applications that integrate with and extend the functionality of the
Company's products. The Company currently has solution development partnerships
with DynaMark, VIPS and IBM.

MARKETING

The Company is focused on building market awareness and acceptance of the
Company and its products as well as on developing strategic partnerships. The
Company has a comprehensive marketing strategy with several key components:
image and awareness building, direct marketing to both prospective and existing
customers, a strong Web presence, broad-scale events with strategic partners and
local marketing with partners. The Company's corporate image strategy includes
trade shows, as well as analyst and press tours. The Company's direct marketing
includes ongoing direct mail efforts to existing and prospective customers. For
prospective customers, the Company also offers seminars to assist them in
selecting enterprise scalable OLAP solutions. Seminars are offered in
conjunction with strategic partners in their local or industry-specific markets.
The Company's Web-based marketing is designed to generate new leads for the
Company. The Company increases product awareness by sponsoring large scale
events and seminars for prospective customers with key industry partners.
Finally, the Company's marketing strategy is designed to take advantage of the
Company's partnership network by including cooperative marketing programs
designed for partners' local markets. The Company's marketing partners include
HP, Red Brick, Sun, SPSS and Brio.

As of September 30, 1997, the Company's sales and marketing organization
consisted of 79 employees compared to 18, 28 and 70 employees at January 31,
1995, 1996 and 1997, respectively.

CUSTOMER SUPPORT

The Company believes that providing superior customer service is critical
for customer success. The Company's strategy is to deliver technology and
services that enable its customers to implement OLAP

37
<PAGE>
applications quickly. Its focused experience in designing and implementing
decision support applications is a significant factor in enabling the Company to
implement this strategy. The Company intends to continue to invest in
specialized training of its personnel to provide superior customer service. Most
of the Company's customers currently have maintenance agreements that entitle
them to technical support and periodic upgrades. The Company also offers
additional training and consulting services on a fee basis.

MAINTENANCE AND TECHNICAL SUPPORT. The Company has established a
centralized corporate maintenance and technical service group that is supported
by the consulting and research and development groups. The Company provides
customers with a comprehensive array of services, including software updates,
documentation updates, telephone support, product maintenance and emergency
response. The annual fee for such services is typically 18% of the list price of
the software products licensed and supported.

EDUCATION. The Company offers a series of business and technical courses to
meet the education and training requirements of all levels of professionals
associated with data warehousing and decision support. These courses are
designed to provide the knowledge, skills and confidence to implement
enterprise-wide decision support and enhance the use of DecisionSuite. The
Company offers several modular courses that can be tailored to specific customer
needs. Education specialists meet with customers to design an education plan to
meet organizational goals. Regularly scheduled courses are offered at the
Company's training facility located in Eden Prairie, Minnesota. End user
customer courses are provided at customers' facilities.

IMPLEMENTATION SERVICES. The Company offers a wide range of customer
services to support the implementation requirements of the DecisionSuite line of
products and promote customer self-sufficiency. The Company utilizes a
proprietary methodology for implementation support, called DecisionPath.
DecisionPath was developed internally and incorporates the Company's extensive
implementation experience. Because of the varying needs of its customers, the
Company offers modular services in the following areas: business application
design; data warehouse architecture design; DecisionSuite implementation;
end-user content and delivery; and DecisionSuite optimization.

DECISIONCENTER. The Company offers a series of prototyping workshops in its
DecisionCenter facility. DecisionCenter is a fully equipped prototyping
environment, staffed with knowledgeable business and technical personnel. Each
workshop utilizes the customer's own data, making the prototyping experience as
realistic as possible. The Company believes that a successful implementation of
new technology can be traced to a successful prototype. These prototype systems
use actual company data to assist the business users in identifying the
questions they need to ask but have been unable to visualize. The time and
effort to set up an evaluation environment can be expensive and fraught with
technical infrastructure complexities. The Company provides its customers with
the training benefits of prototyping but shields them from such complexities.

ADVANCED SERVICES. The advanced services group assists in the initial
development of specific solutions for OLAP applications, including
activity-based costing, forecasting, health care analysis and customer
segmentation. This group often provides consultation in the early stages of
modeling and solution-design, combining their strong, technical OLAP expertise,
their in-depth hands-on experience with APIs, and their proven creativity in
architecture and functionality design. Their solutions address the more complex
needs of enterprise OLAP while also focusing on usability and performance for
the end users. Their extensive experience with the APIs have led to the
development of a series of DecisionSuite extensions. These extensions are
optional programs that offer functionality not otherwise available within the
core DecisionSuite product. Extensions consist of either tools for the system
administrator or for the end user.

As of September 30, 1997, the Company's services organization consisted of
64 employees compared to 23, 26 and 41 employees at January 31, 1995, 1996 and
1997, respectively.

RESEARCH AND DEVELOPMENT

Research and development has provided the foundation for the Company's
success in the marketplace, and the Company intends to continue to make
substantial investments in research and development and related activities to
maintain and enhance its product lines. The Company believes that its future
success will, in large part, depend on its ability to maintain and improve
current products, and to develop new products that meet

38
<PAGE>
emerging decision support needs. Research is focused in three areas: identifying
market needs, designing applications for these needs and implementing such
solutions in a reliable and easy-to-use fashion. Current development activities
are focused on product enhancements in several key areas: OLAP engine, Windows
client delivery systems, Internet delivery systems, agent technology and
forecasting. The development group infrastructure provides a full suite of
documentation, quality assurance, delivery and support capabilities (in addition
to its design and implementation functions) for the Company's products.

As of September 30, 1997, the Company's research and development
organization consisted of 58 employees compared to 26, 32 and 48 employees at
January 31, 1995, 1996 and 1997, respectively. From inception through July 31,
1997 the Company has spent $11.4 million on research and development. Most of
the senior members of the Company's research and development organization have
been employed by the Company since its inception.

COMPETITION

The market in which the Company competes is intensely competitive, highly
fragmented and characterized by rapidly changing technology and evolving
standards. The Company's current and prospective competitors offer a variety of
planning and analysis software solutions and generally fall within three
categories: (i) vendors of desktop OLAP software such as Cognos and Business
Objects; (ii) vendors of multidimensional OLAP software such as Oracle
(Express), Arbor Software, Seagate (Holos) and SAS; and (iii) vendors of
OLAP/relational database software such as MicroStrategy and Platinum Technology
(Prodea). The Company has experienced and expects to continue to experience
increased competition from current and potential competitors, many of whom have
significantly greater financial, technical, marketing and other resources than
the Company. Such competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sales of their products than the
Company. Also, certain current and potential competitors, including companies
such as Microsoft, IBM, Sybase and Informix may have greater name recognition or
more extensive customer bases that could be leveraged. These companies could
integrate competing OLAP/relational database software with other widely accepted
products resulting in a loss of market share for the Company. The Company
expects additional competition as other established and emerging companies enter
into the OLAP software market and new products and technologies are introduced.
Increased competition could result in price reductions, fewer customer orders,
reduced gross margins, longer sales cycles and loss of market share, any of
which would materially adversely affect the Company's business, operating
results and financial condition.

Current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing the ability of their products to address the needs of the
Company's prospective customers. The Company's current or future indirect
channel partners may establish cooperative relationships with current or
potential competitors of the Company, thereby limiting the Company's ability to
sell its products through particular distribution channels. Accordingly, it is
possible that new competitors or alliances among current and new competitors may
emerge and rapidly gain significant market share. Such competition could
materially adversely affect the Company's ability to obtain new contracts and
maintenance and support renewals for existing contracts on terms favorable to
the Company. Further, competitive pressures may require the Company to reduce
the price of DecisionSuite, which would materially adversely affect the
Company's business, operating results and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
and future competitors, and the failure to do so would have a material adverse
effect upon the Company's business, operating results and financial condition.

The Company competes on the basis of certain factors, including data
scalability, user scalability, open architecture, analytical capabilities,
product features, product performance, product quality, time to market, ease of
use, customer support and price. The Company believes it presently competes
favorably with respect to each of these factors. However, the Company's market
is still evolving and there can be no assurance that the Company will be able to
compete successfully against current and future competitors, and the failure to
do so successfully will have a material adverse effect upon the Company's
business, operating results and financial condition.

39
<PAGE>
INTELLECTUAL PROPERTY RIGHTS

The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary technology. For example, the Company licenses its
software pursuant to signed license agreements, which impose certain
restrictions on licensees' ability to utilize the software. In addition, the
Company seeks to avoid disclosure of its trade secrets, including requiring
those persons with access to the Company's proprietary information to execute
confidentiality agreements with the Company and restricting access to the
Company's source code. The Company seeks to protect its software, documentation
and other written materials under trade secret and copyright laws, which 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. In addition, the laws of many countries do not protect the Company's
proprietary rights to as great an extent as do the laws of the United States.
There can be no assurance that the Company's means of protecting its proprietary
rights will be adequate or that the Company's competitors will not independently
develop similar technology.

To date, the Company has not been notified that the Company's products
infringe the proprietary rights of third parties, but there can be no assurance
that third parties will not claim infringement by the Company with respect to
current or future products. The Company expects that data warehouse and data
mart software product developers will increasingly be subject to infringement
claims as the number of products and competitors in the Company's industry
segment grows and the functionality of products in different industry segments
overlaps. Any such claims, with or without merit, could be time-consuming,
result in costly litigation, cause product shipment delays or require the
Company to enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the Company
or at all, which could have a material adverse effect upon the Company's
business, operating results and financial condition.

The Company provides its products to end users under non-exclusive licenses,
which generally are non-transferable and have a perpetual term. The Company
generally licenses its products solely for the customer's internal operations.
The Company also licenses its software on an enterprise-wide basis. The Company
has entered into source code escrow agreements for its products. Generally,
customers are required to obtain separate licenses for the database management
systems they select directly from the RDBMS vendors. Furthermore, customers must
obtain separate licenses for any spreadsheets or other PC tools they use
directly from such other vendors.

EMPLOYEES

As of September 30, 1997, the Company had a total of 217 employees, of which
193 were based in the United States, 18 were based in the United Kingdom, 3 were
based in Canada and 3 in Germany. Of the total, 79 were engaged in sales and
marketing, 58 were in research and development, 64 were in services, and 16 were
in finance, administration and operations. The Company's future performance
depends in significant part upon the continued service of its key technical,
sales and senior management personnel, 6 of whom are bound by employment
agreements. None of the Company's employees is represented by a labor union. The
Company has not experienced any work stoppages and considers its relations with
its employees to be good.

FACILITIES

The Company's principal administrative, sales, marketing, support, and
research and development facility is located in approximately 36,500 square feet
of space in Eden Prairie, Minnesota. The lease on this office space expires on
June 30, 2002. The Company also leases other domestic sales offices throughout
the United States, as well as international offices in Canada, the United
Kingdom and Germany. The Company believes that suitable additional or
alternative space will be available in the future on commercially reasonable
terms as needed.

LITIGATION

The Company is not currently subject to any material legal proceeding.

40
<PAGE>
MANAGEMENT

BOARD MEMBERS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ----------------------------------------------------------------------
<S> <C> <C>
Larry J. Ford....................... 56 President, Chief Executive Officer and Director
Richard L. Tanler................... 47 Chairman of the Board, Senior Vice President, Strategic Planning
and Marketing
Donald W. Anderson.................. 44 Vice President and Chief Financial Officer
Mark Furtney........................ 51 Vice President, Engineering
Richard S. Parker................... 41 Vice President, Marketing
Robin L. Pederson................... 38 Vice President, Worldwide Sales
Rory C. (Butch) Terrien............. 37 Senior Vice President, Research and Development
Mary K. Trick....................... 42 Vice President, Customer Services
Fredric R. (Rick) Boswell(1)........ 53 Director
Ronald E.F. Codd(2)................. 42 Director
Promod Haque(1)..................... 49 Director
Donald R. Hollis(1)................. 61 Director
Jay H. Wein(2)...................... 65 Director
William H. Younger, Jr.(2).......... 47 Director
</TABLE>

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

(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

LARRY J. FORD has been President, Chief Executive Officer and Director since
May 1995. From August 1991 to November 1994, Mr. Ford served as Chairman and
Chief Executive Officer of Systems Software Associates, a Chicago-based,
enterprise-wide, vertically integrated applications software company
specifically targeting the manufacturing sector. Prior to August 1991, Mr. Ford
held several executive positions at IBM including President of the Latin America
Division, Vice President of Marketing for mid-range computing, and Vice
President of Information and Telecommunications Systems. Mr. Ford serves as a
director of Telular Corporation, where he serves on the Compensation and Audit
Committees. Mr. Ford holds a B.S. in Mathematics and Economics from Claremont
Men's College.

RICHARD L. TANLER has been Chairman of the Board of Directors and Senior
Vice President, Strategic Planning and Marketing since May 1995. Mr. Tanler is a
founder of the Company and served as President and Chief Executive Officer from
June 1992 through May 1995. Prior to this position, Mr. Tanler served as
Director of Services, Business Unit at Metaphor Computer Systems, Inc., a
software company ("Metaphor"). Mr. Tanler holds a B.S. in Business Quantitative
Systems from Arizona State University.

DONALD W. ANDERSON has been Vice President and Chief Financial Officer since
November 1996. From May 1996 to November 1996, Mr. Anderson served as Vice
President, Finance for the School Product Unit of The Learning Company, Inc., an
educational software company that merged with his previous employer, the
Minnesota Educational Computing Corporation ("MECC"). Mr. Anderson served as
Senior Vice President, Finance and Chief Financial Officer of MECC from August
1988 to May 1996 and held various positions at MECC since he joined MECC in
1980, including Vice President, Operations. Mr. Anderson holds a B.A. in
Accounting from Metropolitan State University.

MARK FURTNEY has been Vice President, Engineering since July 1997. From 1988
to July 1997, Dr. Furtney worked for Cray Research, Inc., a superconductor
supplier, in a variety of positions, including Senior Director of Technology.
Dr. Furtney holds a Ph.D. in Computer Science from the University of Virginia,
an M.S. in Nuclear

41
<PAGE>
Engineering from the Massachusetts Institute of Technology and a B.S. in
Mechanical Engineering from Clarkson University.

RICHARD S. PARKER has been Vice President of Marketing since January 1994.
He is a founder of the Company and served as Director of Marketing from April
1990 through December 1993. From September 1984 to April 1990, Mr. Parker was
employed with Metaphor in a variety of positions, including Director of Data
Management, Marketing Manager and Manager of Business Development for the
Metaphor Consulting Group. Mr. Parker attended the University of Minnesota,
majoring in Business Administration.

ROBIN L. PEDERSON has been Vice President, Worldwide Sales for the Company
since April 1996. From June 1995 to April 1996, Mr. Pederson was Senior Vice
President, Worldwide Sales, Marketing and Support for Great Plains Software,
Inc., a financial applications software company. From October 1990 to June 1995,
Mr. Pederson worked for Banyan Systems, Inc., a network software provider, in a
variety of positions including Vice President, Americas. Mr. Pederson holds a
B.S. in Business Administration from the University of North Dakota.

RORY C. (BUTCH) TERRIEN has been Senior Vice President, Research and
Development since June 1992. Prior to joining the Company, Mr. Terrien was
employed with Metaphor as the Development Manager for the Metaphor Consulting
Group. Mr. Terrien holds a B.S. in both Mechanical Engineering and Computer
Science from Northwestern University and an M.S. in Mechanical Engineering from
the University of Minnesota.

MARY K. TRICK has been Vice President, Customer Services since June 1995.
From November 1992 to July 1995, Ms. Trick was employed by Keane, Inc., a
technical consulting firm, in a variety of positions including Branch Manager
for the Minneapolis Branch. From October 1980 to November 1992, Ms. Trick was
employed by Wang Industries, a hardware and software firm, in a variety of
positions including business consultant, presales, Practice Manager and Services
Director for various regions. Ms. Trick attended the University of Minnesota.

FREDRIC R. (RICK) BOSWELL has been a director of the Company since March
1993. Since April 1989 Dr. Boswell has served as the Executive Vice President of
St. Paul Venture Capital, Inc., a venture capital firm. From September 1985 to
May 1989, Dr. Boswell served as President and Chief Operating Officer of ADC
Telecommunications, Inc., a manufacturer of telecommunications equipment and
systems. Prior to September 1985, Dr. Boswell served as President and Chief
Executive Officer of the E.F. Johnson Company, a manufacturer of components,
equipment and systems for wireless communications. Dr. Boswell has served as a
director of the Telecommunications Industry Association and the Minnesota High
Technology Council and as a member of the Executive Advisory Board of the
National Communications Forum. Dr. Boswell holds a B.S. in electrical
engineering and an M.S. and a Ph.D. in computer engineering from Case Western
Reserve University as well as an M.B.A. from the Harvard Business School.

RONALD E.F. CODD has been a director of the Company since August 1997. Mr.
Codd has worked at PeopleSoft, Inc. since 1991, and has served as the Senior
Vice President of Finance and Administration and Chief Financial Officer. From
March 1989 to August 1991, Mr. Codd served as Corporate Controller of MIPS
Computer Systems, Inc. Mr. Codd holds a B.S. in Accounting from the University
of California, Berkeley and an M.M. from the J.L. Kellogg Graduate School of
Management, Northwestern University.

PROMOD HAQUE has been a director of the Company since March 1993. Dr. Haque
joined Norwest Venture Capital Management, Inc., a venture capital firm, in
November 1990 and is currently a General Partner of Norwest Equity Partners V,
L.P. and a General Partner of Norwest Equity Partners IV, L.P. Dr. Haque
currently serves as a director of Optical Sensors, Inc., Prism Solutions, Raster
Graphics, Inc., Connect, Inc., Transaction Systems Architects, Inc. and several
privately held companies. Dr. Haque holds a B.S.E.E. from the University of
Delhi, India, an M.S.E.E. and a Ph.D.E.E. from Northwestern University, and an
M.M. from the J.L. Kellogg Graduate School of Management, Northwestern
University.

DONALD R. HOLLIS has been a director of the Company since August 1996. Mr.
Hollis is President of DRH Strategic Consulting, Inc., a consulting firm, where
he has been employed since March 1996. Prior to

42
<PAGE>
January 1996, Mr. Hollis served as an Executive Vice President of First Chicago
Corporation/First National Bank of Chicago. Mr. Hollis serves as a director of
Deluxe Corporation, Teltrend, Inc., Open Port Technology and the Cambridge
Assessment Center. Mr. Hollis holds a B.B.A. from Kent State University.

JAY H. WEIN has been a director of the Company since June 1992. Mr. Wein has
worked as an independent investor and business consultant since August 1989.
From June 1992 to May 1995, Mr. Wein served as Chairman of the Board of the
Company. Between July 1974 and August 1989 Mr. Wein worked at Arthur Andersen &
Co., where he served in a variety of positions, including Managing Partner of
the Minneapolis/St. Paul office. Mr. Wein serves as a director of Great Hall
Investment Funds, Inc. and of several private companies and non-profit
organizations. Mr. Wein holds a B.S.B.A. from the University of South Dakota.

WILLIAM H. YOUNGER, JR. has been a director of the Company since July 1995.
Since 1992, Mr. Younger has been a general partner of Sutter Hill Ventures, a
California Limited Partnership which is a venture capital management firm. Mr.
Younger currently serves as a director of COR Therapeutics, Inc., Celeritek,
Inc., Oacis Healthcare Systems, Inc. and Forte Software, Inc. Mr. Younger holds
a B.S.E.E. from the University of Michigan and an M.B.A. from Stanford
University.

COMMITTEES

The Audit Committee consists of Messrs. Codd, Wein and Younger. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent accountants, reviews the results and scope of audit and
other services provided by the Company's independent accountants and reviews and
evaluates the Company's audit and control functions.

The Compensation Committee consists of Drs. Boswell and Haque and Mr.
Hollis. The Compensation Committee makes recommendations regarding the Company's
1997 Equity Incentive Plan and makes decisions concerning salaries and incentive
compensation for employees and consultants of the Company.

DIRECTOR COMPENSATION

Directors currently do not receive any cash compensation from the Company
for their services as members of the Board of Directors, although members are
reimbursed for certain expenses in connection with attendance at Board of
Directors and Committee meetings. Messrs. Hollis and Wein also serve as
part-time consultants to the Company for which they have been compensated
separately. Non-employer directors will also receive periodic option grants
under the Company's 1997 Equity Incentive Plan. See "Management--1997 Equity
Incentive Plan."

43
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth information with respect to compensation for
the fiscal year ended January 31, 1997 paid by the Company for services to the
Company by the Company's Chief Executive Officer and the Company's four other
highest-paid executive officers whose total salary and bonus for such fiscal
year exceeded $100,000 (collectively, the "Named Executive Officers"):

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------
LONG-TERM
COMPENSATION
-------------------
AWARDS
ANNUAL -------------------
COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
---------- --------- ------------------- -----------------
<S> <C> <C> <C> <C>
Larry J. Ford ................................... $ 175,000 $ 74,100 0 $ 25,000
President and Chief Executive Officer
Richard L. Tanler ............................... 150,000 42,400 0 0
Chairman and Senior Vice President, Strategic
Planning and Marketing
Robin L. Pederson(2) ............................ 119,423 56,250 172,000 15,612
Vice President, Worldwide Sales
Mary K. Trick ................................... 120,000 29,375 38,000 0
Vice President, Customer Services
Rory C. (Butch) Terrien ......................... 110,000 33,500 28,000 0
Senior Vice President, Research and Development
</TABLE>

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

(1) Consists of moving expenses.

(2) Mr. Pederson's employment started on April 18, 1996 at an annual base salary
of $150,000.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth each grant of stock options during the fiscal
year ended January 31, 1997 to each of the Named Executive Officers. No stock
appreciation rights were granted during such fiscal year.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM($)(4)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL 1997(2) ($/SHARE)(3) DATE 5% 10%
- -------------------------------- ------------- ----------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Larry J. Ford................... 0 -- -- -- -- --
Richard L. Tanler............... 0 -- -- -- -- --
Robin L. Pederson............... 172,000 23.3% $ 1.125 4/19/06 $ 121,691 $ 308,389
Mary K. Trick................... 12,000 1.6 1.125 7/23/06 8,490 21,516
26,000 3.5 1.125 7/26/06 18,395 46,617
Rory C. (Butch) Terrien......... 28,000 3.8 1.125 8/15/06 19,810 50,203
</TABLE>

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

(1) Generally, 20% of these options vest on each of the next five anniversaries
of the date of grant. These options have a ten year term, subject to earlier
termination in the event of the optionee's cessation of service with the
Company.

(2) Based on an aggregate of 736,120 shares subject to options granted to
employees of the Company under the 1992 Stock Option Plan.

44
<PAGE>
(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or any other method
approved by the Board.

(4) The potential realizable value is calculated based on the term of the option
at the time of grant (ten years). Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the Securities and Exchange
Commission and does not represent the Company's prediction of its stock
price performance. The potential realizable values at 5% and 10%
appreciation are calculated by assuming that the exercise price on the date
of grant appreciates at the indicated rate for the entire term of the option
and that the option is exercised at the exercise price and sold on the last
day of its term at the appreciated price.

OPTION VALUES

The following table sets forth information concerning the unexercised
options that are held by the Named Executive Officers as of the end of fiscal
year 1997. No options were exercised by the Named Executive Officers in fiscal
year 1997. No stock appreciation rights were exercised by the Named Executive
Officers in fiscal year 1997 or were outstanding at the end of that year.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END(#) FY- END($)(1)
-------------------------- ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------- ----------- ------------- ------------- -------------------
<S> <C> <C> <C> <C>
Larry J. Ford.............................................. 147,295 343,687 0 0
Richard L. Tanler.......................................... 93,738 151,752 2,700 0
Robin L. Pederson.......................................... 0 172,000 0 0
Mary K. Trick.............................................. 6,000 62,000 0 0
Rory C. (Butch) Terrien.................................... 39,600 60,400 1,500 0
</TABLE>

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

(1) Based on the fair market value of the Company's Common Stock at fiscal
year-end (January 31, 1997) ($1.13 per share), as determined by the
Company's Board of Directors, less the exercise price payable for such
shares.

STOCK PLANS

1997 EQUITY INCENTIVE PLAN

The Company's 1997 Equity Incentive Plan (the "Plan") was adopted by the
Board on September 23, 1997, subject to stockholder approval. The number of
shares of Common Stock reserved for issuance under the Plan is equal to (i)
1,000,000 plus (ii) 332,667 the aggregate number of shares remaining available
for grants under the Company's 1992 Stock Option Plan (the "Predecessor Plan")
on July 31, 1997. As of February 1 of each year, commencing with the year 1999,
the number of shares reserved for issuance under the Plan will be increased
automatically by the lesser of (i) 3.5% of the total number of shares of Common
Stock then outstanding or (ii) 400,000 shares. As of September 24, 1997, no
options had been granted under the Plan. Under the Plan, employees, non-employee
members of the Board ("Outside Directors") and consultants may be awarded
options to purchase shares of Common Stock, stock appreciation rights ("SARs"),
restricted shares or stock units (collectively, the "Awards"). Options may be
incentive stock options designed to satisfy Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") or nonstatutory stock options not designed
to meet such requirements. If restricted shares or shares issued upon the
exercise of options granted under this Plan or the Predecessor Plan are
forfeited, then such shares will again become available for awards under the
Plan. If stock units, options or SARs granted under this Plan or the Predecessor
Plan are forfeited or terminate for any other reason before being exercised,
then the corresponding shares will again become available for awards under the
Plan.

The Plan is administered by the Company's Compensation Committee (the
"Committee"). The Committee has the complete discretion to determine which
eligible individuals are to receive any award, determine the

45
<PAGE>
type, number, vesting requirements and other features and conditions of such
award, interpret the Plan and make all other decisions relating to the operation
of the Plan.

The exercise price for non-qualified and incentive stock options granted
under the Plan may not be less than 85% or 100%, respectively, of the fair
market value of the Common Stock on the option grant date and may be paid in
cash or in outstanding shares of Common Stock. Options may also be exercised by
using a cashless exercise method, a pledge of shares to a broker or promissory
note. The payment for the award of newly issued restricted shares will be made
in cash, by promissory note or the rendering of past or future services.

The Committee has the authority to modify, extend or assume outstanding
options and SARs or may accept the cancellation of outstanding options or SARs
in return for the grant of new options or SARs for the same or a different
number of shares and at the same or a different exercise price.

Each Outside Director who first becomes a member of the Board after the date
of the offering will receive a one-time option grant for 8,000 shares of Common
Stock upon taking office. This option grant for 8,000 shares will become
exercisable with respect to 20% of the shares upon the completion of twelve
months of Board service and with respect to the balance of the shares in equal
installments on a monthly basis thereafter for the next four years of service.
Upon the conclusion of each regular annual meeting of the Company's stockholders
held in the 1998 calendar year and thereafter, each Outside Director who will
continue to serve as a Board member will receive an option for 1,600 shares of
Common Stock, except that an Outside Director will not receive an annual grant
for 1,600 shares in the same year he or she received the one-time option grant
for 8,000 shares. The option for 1,600 shares will become exercisable upon the
completion of sixty months of Board service. The exercisability of each
8,000-share or 1,600-share option granted to an Outside Director will accelerate
in the event of the optionee's death, disability or retirement at age 65 and may
accelerate in the event of a Change in Control (as defined below).

The Board may decide to implement a program that allows an Outside Director
to elect to receive his or her annual retainer payments and meeting fees from
the Company in the form of cash, options, restricted shares, stock units or a
combination thereof. The number and terms of such options, restricted shares or
stock units to be granted to Outside Directors in lieu of annual retainers and
meeting fees will be calculated in a manner determined by the Board.

Upon a Change in Control, an Award will become fully exercisable as to all
shares subject to such Award if such Award is not assumed by the surviving
corporation or its parent and the surviving corporation or its parent does not
substitute such Award with another award of substantially the same terms. In the
event of an involuntary termination within 12 months following a Change in
Control, the vesting of an Award will accelerate, as if the holder of the Award
performed services for the Company for one additional year.

A Change in Control includes (i) a merger or consolidation of the Company
after which the Company's then current stockholders own less than 50% of the
surviving corporation, (ii) sale of all or substantially all of the assets of
the Company, (iii) a proxy contest that results in replacement of more than
one-third of the directors over a 24-month period or (iv) acquisition of 50% or
more of the Company's outstanding stock by a person other than a trustee of any
of the Company's employee benefit plans or a corporation owned by the
stockholders of the Company in substantially the same proportions as their stock
ownership in the Company. In the event of a merger or other reorganization,
outstanding options, SARs, restricted shares and stock units will be subject to
the agreement of merger or reorganization, which may provide for the assumption
of outstanding Awards by the surviving corporation or its parent, for their
continuation by the Company (if the Company is a surviving corporation), for
accelerated vesting and accelerated expiration, for settlement in cash or for
cancellation of the outstanding Awards.

The Board may amend or terminate the Plan at any time. Amendments may be
subject to stockholder approval to the extent required by applicable laws.

46
<PAGE>
1997 EMPLOYEE STOCK PURCHASE PLAN

The Board adopted the Company's 1997 Employee Stock Purchase Plan (the
"Purchase Plan") on September 23, 1997, subject to stockholder approval. A total
of 200,000 shares of Common Stock have been reserved for issuance under the
Purchase Plan. The Purchase Plan is intended to qualify under Section 423 of the
Code. Each calendar year, two overlapping offering periods each with a duration
of 18 months will commence on and (except that the first offering
period will commence on the effective date of the offering and end on July 31,
1999). Each offering period contains three six-month accumulation periods, with
purchases occurring at the end of each six-month accumulation period. However,
the initial accumulation period will begin on the effective date of the offering
and end on 1998. The Purchase Plan will be administered by the Committee.
Each employee will be eligible to participate if he or she is (i) employed by
the Company for at least 20 hours per week for more than five months per year
and (ii) is an employee on the effective date of the offering or has been
employed by the Company for at least three consecutive months. The Purchase Plan
permits each eligible employee to purchase Common Stock through payroll
deductions, which may not exceed 15% of an employee's compensation, nor more
than 500 shares on any purchase date. The price of each share of Common Stock
purchased under the Purchase Plan will be 85% of the lower of (i) the fair
market value per share of Common Stock on the date immediately prior to the
first date of the applicable offering period (except that in the case of the
first offering period, the price per share will be the price offered to the
public in the offering) or (ii) the date at the end of the applicable
accumulation period. Employees may end their participation in the Purchase Plan
at any time during the accumulation period, and participation ends automatically
upon termination of employment with the Company.

In the event of a Change in Control, all offering periods and accumulation
periods will terminate and each outstanding purchase right will be exercised.
The Board may amend or terminate the Purchase Plan at any time. However, the
Board may not, without stockholder approval, increase the number of shares of
Common Stock reserved for issuance under the Purchase Plan.

401(K) PLAN

The Company has adopted a 401(k) retirement savings plan referred to as the
"Information Advantage, Inc. Employees 401(k) Plan." This plan is available to
all employees who have attained age 21 and have completed six months of service.
An employee may contribute, on a pre-tax basis, up to 20% of the employee's
wages from the Company to limitations specified under the Internal Revenue Code.
Under the terms of the Information Advantage, Inc. Employees 401(k) Plan, the
Company may match employee contributions up to six percent of the employee's
compensation and may make discretionary profit sharing contributions, but has
not elected to do either. Contributions are allocated to each employee's
individual account and are, at the employee's election, invested in one, all, or
some combination of the investment funds available under this 401(k) plan.
Employee contributions are fully vested and non-forfeitable. Employees will vest
in any Company contributions at the rate of 20% for each year of service.

EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS

The Company does not currently have any employment contracts in effect with
any Named Executive Officers other than Richard L. Tanler, Chairman of the Board
and Senior Vice President, Strategic Planning and Marketing; Larry J. Ford,
President and Chief Executive Officer; Robin L. Pederson, Vice President,
Worldwide Sales; and Rory C. (Butch) Terrien, Vice President, Product
Development.

The Company and Mr. Tanler are parties to an employment agreement and an
amendment thereto dated June 11, 1992 and April 27, 1995, respectively,
governing his employment with the Company. The agreement sets forth Mr. Tanler's
compensation level and eligibility for salary increases, bonuses, benefits and
option grants under the 1992 Stock Option Plan. Pursuant to the agreement, Mr.
Tanler's employment is voluntary and may be terminated by the Company or Mr.
Tanler at any time with 30 days prior written notice, provided however, that if
the Company terminates Mr. Tanler's employment without cause, Mr. Tanler shall
receive an amount equal to

47
<PAGE>
his base salary per month at the end of each of the six months immediately
following the date of termination but in no event shall he receive any such
payments after he gains employment elsewhere. The Company may immediately
terminate Mr. Tanler's employment for cause upon written notice with no further
obligation to Mr. Tanler.

The Company and Mr. Ford are parties to an employment agreement and an
amendment thereto dated April 19, 1995 and May 23, 1995, respectively, governing
his employment with the Company. The agreement sets forth Mr. Ford's
compensation level and eligibility for salary increases, bonuses, benefits and
option grants under the 1992 Stock Option Plan. Mr. Ford's employment with the
Company under the agreement is voluntary and may be terminated by the Company or
Mr. Ford at any time with 30 days prior written notice, provided that if the
Company terminates Mr. Ford's employment for reasons other than cause, Company
shall pay to Mr. Ford a sum equal to his current base salary for a period of six
months following such termination. Notwithstanding the foregoing, if Mr. Ford's
employment is terminated (for reasons other than cause) due to a "change in
control of the Company" (defined to mean the acquisition by a person not
currently a stockholder of the Company of shares of Company stock representing
more than 50% of the voting power of the outstanding shares), Mr. Ford shall
receive a sum equal to his then current base salary for an additional 12 month
period. The Company may terminate Mr. Ford's employment for cause without notice
and without any further obligation to Mr. Ford. The agreement also provides for
full acceleration of vesting of his unvested stock options or shares if one of
the following events shall occur: (i) the sale by the Company of all or
substantially all of its assets and the discontinuance of its business; or (ii)
a change in control of the Company (as previously defined) resulting in the
termination of Mr. Ford's employment with the Company, a substantial change in
the scope of Mr. Ford's employment responsibilities, or job relocation.

The Company and Mr. Anderson are parties to a letter agreement executed on
November 4, 1996 governing his employment with the Company. The agreement sets
forth Mr. Anderson's compensation level and eligibility for salary increases,
bonuses, benefits and option grants under the 1992 Stock Option Plan. Pursuant
to the agreement, Mr. Anderson is entitled to receive, in the event of
termination of employment for reasons other than cause or if Mr. Anderson is not
employed in a capacity comparable to his then current position due to a change
of ownership of the Company, a sum equal to 12 months of base compensation. The
agreement also provides for accelerated vesting of unvested stock options if a
change of ownership of the Company occurs. If the change of ownership occurs
within the first two years of Mr. Anderson's first day of employment with the
Company and the Company is still privately owned, 75% of the unvested options or
shares shall vest, up to a maximum gain to Mr. Anderson of $1.2 million.
Conversely, if the change of ownership occurs after an initial public offering
of Company shares, all his unvested options shall immediately vest.

The Company and Mr. Parker are parties to an employment agreement dated June
11, 1992 governing his employment with the Company. The agreement sets forth Mr.
Parker's compensation level and eligibility for salary increases, bonuses,
benefits and option grants under the 1992 Stock Option Plan. Pursuant to the
agreement, Mr. Parker's employment is voluntary and may be terminated by the
Company or Mr. Parker at any time with 30 days prior written notice, provided
however, that if the Company terminates Mr. Parker's employment without cause,
Mr. Parker shall receive an amount equal to his base salary per month at the end
of each of the six months immediately following the date of termination but in
no event shall he receive any such payments after he gains employment elsewhere.
The Company may immediately terminate Mr. Parker's employment for cause upon
written notice with no further obligation to Mr. Parker.

The Company and Mr. Pederson are parties to a letter agreement dated March
6, 1996 governing his employment with the Company. The agreement sets forth Mr.
Pederson's compensation level and eligibility for salary increases, bonuses,
benefits and option grants under the 1992 Stock Option Plan. Pursuant to the
agreement, Mr. Pederson is entitled to receive, in the event of termination of
Mr. Pederson's employment with the Company (for reasons other than cause) or if
Mr. Pederson is not employed in a capacity comparable to his then current
position due to a change in ownership of the Company, a sum equal to 12 months
of base compensation. The agreement also provides for accelerated vesting of any
unvested stock options or shares in the event of a change in ownership of the
Company. If Mr. Pederson is employed by the acquiring or surviving

48
<PAGE>
entity in a capacity comparable to his then current position, 50% of his
unvested stock options or shares shall immediately vest; the remaining 50% shall
vest over the subsequent 24 months at a rate of 50% per year. Conversely, if Mr.
Pederson's employment with the acquiring or surviving entity is terminated (for
reasons other than cause) or if Mr. Pederson is not retained by such acquiring
or surviving entity in a capacity comparable to his then current position with
the Company, all his unvested stock options shall immediately vest, up to a
maximum gain to Mr. Pederson of $4.0 million.

The Company and Mr. Terrien are parties to an employment agreement dated
June 11, 1992 governing his employment with the Company. The agreement sets
forth Mr. Terrien's compensation level and eligibility for salary increases,
bonuses, benefits and option grants under the 1992 Stock Option Plan. Pursuant
to the agreement, Mr. Terrien's employment is voluntary and may be terminated by
the Company or Mr. Terrien at any time with 30 days prior written notice,
provided however, that if the Company terminates Mr. Terrien's employment
without cause, Mr. Terrien shall receive an amount equal to his base salary per
month at the end of each of the six months immediately following the date of
termination but in no event shall he receive any such payments after he gains
employment elsewhere. The Company may immediately terminate Mr. Terrien's
employment for cause upon written notice to Mr. Terrien.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Company's Board was formed in 1993, and
the members of the Compensation Committee are Drs. Boswell and Haque and Mr.
Hollis. None of these individuals was at any time during the year ended January
31, 1997, or at any other time, an officer or employee of the Company. No member
of the Compensation Committee of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board or Compensation Committee.

49
<PAGE>
CERTAIN TRANSACTIONS

TRANSACTIONS WITH DIRECTORS AND OFFICERS AND 5% STOCKHOLDERS

Since the Company's inception, the Company has raised capital primarily
through the sale of its Preferred Stock. In June 1995 the Company sold 3,010,515
shares of Series B Convertible Redeemable Preferred Stock at a price of $2.38
per share. In March 1996, the Company sold 1,514,837 shares of Series C
Convertible Redeemable Preferred Stock at a price of $3.25 per share. In
February 1997 the Company sold 1,399,992 shares of Series D Convertible
Redeemable Preferred Stock at a price of $5.00 per share. The following table
summarizes the shares of Preferred Stock purchased by executive officers,
directors and 5% stockholders of the Company and persons associated with them
since September 1994.

<TABLE>
<CAPTION>
SERIES B SERIES C SERIES D
PREFERRED PREFERRED PREFERRED
INVESTOR STOCK STOCK STOCK
- --------------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Entities affiliated with Norwest Equity Partners(1).............................. 519,665 461,538 501,123
Entities affiliated with St. Paul Venture Capital, Inc.(2)....................... 519,665 183,579 200,000
Pathfinder Venture Capital Fund III.............................................. 223,827 61,538 50,000
Entities affiliated with Sutter Hill Ventures(3)................................. 863,469 99,147 197,568
Entities affiliated with Menlo Ventures(4)....................................... 842,105 93,651 100,000
Entities affiliated with Weiss, Peck & Greer(5).................................. -- 615,384 121,049
Donald R. Hollis................................................................. -- -- 40,000
William H. Younger, Jr.(6)....................................................... 59,497 6,621 12,784
Donald W. Anderson............................................................... -- -- 20,000
</TABLE>

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

(1) Includes shares purchased by Norwest Equity Partners IV, a Minnesota Limited
Partnership and Norwest Equity Partners V, a Minnesota Limited Partnership.
Dr. Haque is a partner of Itasca Partners and Itasca Partners V, which are
the General Partners of Norwest Equity Partners IV and Norwest Equity
Partners V, respectively.

(2) Includes shares purchased by The St. Paul Fire and Marine Insurance Company
and St. Paul Venture Capital IV, L.L.C. Dr. Boswell is the Executive Vice
President of St. Paul Venture Capital, Inc., which is an affiliate of The
St. Paul Fire and Marine Company and the managing member of St. Paul Venture
Capital IV, L.L.C.

(3) Includes shares purchased by Sutter Hill Ventures, a California Limited
Partnership, William H. Younger, Jr. and 15 other individuals and entities
associated with Sutter Hill Ventures. Mr. Younger is a General Partner of
Sutter Hill Ventures.

(4) Includes shares purchased by Menlo Ventures VI, L.P. and Menlo Entrepeneur
Fund VI, L.P.

(5) Includes shares purchased by WPG Enterprise Fund II, L.P. and Weiss, Peck &
Greer Venture Associates III, L.P.

(6) Includes shares purchased by Mr. Younger as Trustee of a living trust.

In April 1996, the Company loaned $70,000 to Richard L. Tanler, the
Company's Chairman of the Board and Senior Vice President of Strategic Planning
and Marketing. In conjunction with the loan, Mr. Tanler issued a promissory note
to the Company for $70,000, bearing interest at the rate of 5.33% per annum,
which note is payable 60 days after demand by the Company. As of October 9,
1997, there had been no payments on the loan and the aggregate indebtedness
under the loan was $75,581.

In August 1996, Donald R. Hollis, a director of the Company, was granted an
option to purchase 8,000 shares of Common Stock at an exercise price of $1.13
per share in conjunction with becoming a director. Also in

50
<PAGE>
August 1996, Mr. Hollis received an option to purchase 2,000 shares of Common
Stock at an exercise price of $1.13 per share in conjunction with entering into
a consulting agreement with the Company.

In July 1997, in connection with the acceptance of an employment offer, Mark
Furtney, the Company's Vice President, Engineering, was granted an option to
purchase 40,000 shares of the Company's Common Stock at an exercise price of
$2.13 per share.

In August 1997, the Company granted Ronald E.F. Codd an option to purchase
8,000 shares of Common Stock at an exercise price of $3.75 per share in
conjunction with becoming a director.

The Company also has granted additional options to certain of its executive
officers. Such options are described further in the Management Section under
"Executive Compensation" and "Option Grants in Last Fiscal Year."

The Company believes that all of the transactions set forth herein were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans (if any),
between the Company and its officers, directors, and principal stockholders and
their affiliates will be approved by a majority of the Board of Directors,
including a majority of the independent and disinterested outside directors of
the Board of Directors, and will be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.

The Company has entered into employment agreements with Messrs. Ford,
Tanler, Anderson, Parker, Pederson and Terrien. See "Management--Employment
Agreements and Change in Control Arrangements."

INDEMNIFICATION

The Company's Restated Certificate of Incorporation limits the liability of
its directors for monetary damages arising from a breach of their fiduciary duty
as directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.

The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under Delaware
law. The Company has entered into indemnification agreements with its officers
and directors containing provisions that may require the Company, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as directors or officers
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms.

51
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of its Common Stock as of July 31, 1997, and as
adjusted to reflect the sale of shares offered hereby and the conversion of all
outstanding shares by Preferred Stock into shares of Common Stock, by (i) each
person who is known by the Company to own beneficially more than five percent of
the Company's Common Stock, (ii) each of the Company's directors, (iii) each of
the Named Executive Officers and (iv) all current executive officers and
directors as a group.

<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
NUMBER OF OWNED(1)(2)(3)
SHARES --------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(1)(2) OFFERING OFFERING
- ------------------------------------------------------------------------------- ------------ --------- ---------
<S> <C> <C> <C>
Entities affiliated with Norwest Equity Partners(4)............................ 3,048,700 27.86%
2800 Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402
Entities affiliated with St. Paul Venture Capital, Inc.(5)..................... 2,469,618 22.57
8500 Normandale Lake Blvd.
Suite 1940
Bloomington, MN 55437
Pathfinder Venture Capital Fund III(6)......................................... 1,253,445 11.57
Suite 585, One Corporate Center
7300 Metro Blvd.
Edina, MN 55439
Entities affiliated with Sutter Hill Ventures(7)............................... 1,201,968 11.35
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Entities affiliated with Menlo Ventures(8)..................................... 1,035,756 9.78
3000 Sand Hill Road
Bldg. 4, Suite 100
Menlo Park, CA 94025
Entities affiliated with Weiss, Peck & Greer(9)................................ 736,433 6.96
555 California Street
Suite 3130
San Francisco, CA 94104
Larry J. Ford(10).............................................................. 196,392 1.82
Robin L. Pederson.............................................................. 34,400 *
Richard L. Tanler(11).......................................................... 157,247 1.47
Mary K. Trick(12).............................................................. 19,600 *
Rory C. (Butch) Terrien(13).................................................... 50,000 *
Ronald E.F. Codd............................................................... 0 *
Fredric R. (Rick) Boswell(5)................................................... 2,469,618 22.57
Promod Haque(4)................................................................ 3,048,700 27.86
Donald R. Hollis(14)........................................................... 42,000 *
Jay H. Wein(15)................................................................ 333,359 3.14
William H. Younger, Jr.(7)..................................................... 1,201,968 11.35
All directors and executive officers as a group (13 persons)(16)............... 7,588,484 68.80
</TABLE>

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

* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.

52
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to securities. Unless otherwise indicated, the address for
each listed stockholder is c/o Information Advantage Software, Inc., 7905
Golden Triangle Drive, Eden Prairie, Minnesota 55344-7227. To the Company's
knowledge, except as indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock. The number of shares of Common Stock beneficially owned includes
shares issuable pursuant to warrants and stock options that are exercisable
within 60 days of July 31, 1997.

(2) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."

(3) Percentage of beneficial ownership is based on 10,586,553 shares of Common
Stock outstanding as of July 31, 1997 and shares of Common Stock to
be outstanding after the closing of this offering. Shares issuable pursuant
to warrants and stock options are deemed outstanding for computing the
percentage of the person holding such warrants or options but are not
deemed outstanding for computing the percentage of any other person.

(4) Includes 1,575,799 shares held by Norwest Equity Partners IV, a Minnesota
Limited Partnership, 1,117,908 shares held by Norwest Equity Partners V, a
Minnesota Limited Partnership and 354,993 shares of Common Stock issuable
pursuant to warrants held by Norwest Equity Partners IV, a Minnesota
Limited Partnership which may be exercised within 60 days after July 31,
1997. Dr. Haque is a partner of Itasca Partners and Itasca Partners V,
which are the General Partners of Norwest Equity Partners IV, a Minnesota
Limited Partnership and Norwest Equity Partners V, a Minnesota Limited
Partnership, respectively. Dr. Haque disclaims beneficial ownership of the
shares held by Norwest Equity Partners IV, a Minnesota Limited Partnership
and Norwest Equity Partners V, a Minnesota Limited Partnership, except to
the extent of his pecuniary interest therein arising from his partnership
interests in Itasca Partners and Itasca Partners V.

(5) Includes 1,914,625 shares held by The St. Paul Fire and Marine Insurance
Company, 200,000 shares held by St. Paul Venture Capital IV, L.L.C. and
354,993 shares of Common Stock issuable pursuant to warrants held by The
St. Paul Fire and Marine Insurance Company which may be exercised within 60
days after July 31, 1997. Dr. Boswell is the Executive Vice President of
St. Paul Venture Capital, Inc., which is an affiliate of The St. Paul Fire
and Marine Insurance Company and a managing member of St. Paul Venture
Capital IV, L.L.C. Dr. Boswell disclaims beneficial ownership of the shares
held by The St. Paul Fire and Marine Insurance Company and St. Paul Venture
Capital IV, L.L.C.

(6) Includes 251,414 shares of Common Stock issuable pursuant to a warrant
which may be exercised within 60 days after July 31, 1997.

(7) Includes 716,632 shares of Common Stock held by Sutter Hill Ventures, a
California Limited Partnership ("Sutter Hill"), 78,902 shares held by Mr.
William H. Younger, Jr. as Trustee of a living trust and 406,434 shares
held of record for 15 other individuals and entities associated with Sutter
Hill. Mr. Younger is a General Partner of Sutter Hill and shares voting and
investment power with respect to the shares held by Sutter Hill. Mr.
Younger disclaims beneficial ownership of the shares held by Sutter Hill
and the individuals and entities associated with Sutter Hill, except as to
the shares held of record in his name and as to his partnership interest in
Sutter Hill.

(8) Includes 1,020,449 shares held by Menlo Ventures VI, L.P. and 15,307 shares
held by Menlo Entrepreneur Fund VI, L.P.

(9) Includes 334,340 shares of Common Stock shares held by Weiss, Peck & Greer
Venture Associates III, L.P., and 402,093 shares of Common Stock shares
held by WPG Enterprise Fund II, L.P.

(10) Includes 196,392 shares of Common Stock issuable pursuant to stock options
which may be exercised within 60 days after July 31, 1997.

53
<PAGE>
(11) Includes 128,676 shares of Common Stock issuable pursuant to stock options
which may be exercised within 60 days after July 31, 1997.

(12) Includes 19,600 shares of Common Stock issuable pursuant to stock options
which may be exercised within 60 days after July 31, 1997.

(13) Includes 50,000 shares of Common Stock issuable pursuant to stock options
which may be exercised within 60 days after July 31, 1997.

(14) Includes 2,000 shares of Common Stock issuable pursuant to stock options
which may be exercised within 60 days after July 31, 1997.

(15) Includes 18,000 shares of Common Stock held in the aggregate by Douglas C.
Wein, Steven L. Wein and Patricia J. Bazany, children of Mr. Wein, over
which Mr. Wein retains voting power. Also includes 12,000 shares of Common
Stock issuable pursuant to stock options and 16,666 shares of Common Stock
issuable pursuant to warrants, all of which may be exercised within 60
days after July 31, 1997.

(16) Includes 443,868 shares of Common Stock issuable pursuant to stock
options, and 978,066 shares of Common Stock issuable pursuant to warrants,
all of which may be exercised within 60 days after July 31, 1997. If the
over-allotment option is exercised in full, the number and percentage of
shares beneficially owned will be and %, respectively.

54
<PAGE>
DESCRIPTION OF CAPITAL STOCK

Upon the closing of this offering, the authorized capital stock of the
Company will consist of 60,000,000 shares of Common Stock, $0.01 par value, and
5,000,000 shares of Preferred Stock, $0.01 par value.

COMMON STOCK

As of July 31, 1997, there were 10,586,553 shares of Common Stock
outstanding that were held of record by approximately 72 stockholders. There
will be shares of Common Stock outstanding (assuming no exercise of the
Underwriters' over-allotment option and assuming no exercise after July 31,
1997, of outstanding options) after giving effect to the sale of the shares of
Common Stock to the public offered hereby and the conversion of the Company's
Preferred Stock into Common Stock at a one-to-one ratio.

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of the liquidation, dissolution, or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and nonassessable, and the
shares of Common Stock to be issued upon completion of this offering will be
fully paid and nonassessable.

PREFERRED STOCK

The Company's Certificate of Incorporation authorizes 5,000,000 shares of
Preferred Stock. The Board of Directors has the authority to issue the Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders. The issuance
of Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders and
may adversely affect the voting and other rights of the holders of Common Stock.
The issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. At present, the Company has no plans to issue any of
the Preferred Stock.

ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW

CERTIFICATE OF INCORPORATION AND BYLAWS

The Company's Certificate of Incorporation provides that, upon the closing
of this offering, the Board of Directors will be divided into three classes of
directors, with each class serving a staggered three-year term. The
classification system of electing directors may tend to discourage a third party
from making a tender offer or otherwise attempting to obtain control of the
Company and may maintain the incumbency of the Board of Directors, as the
classification of the Board of Directors generally increases the difficulty of
replacing a majority of the directors. The Certificate of Incorporation also
provides that, effective upon the closing of this offering, all stockholder
actions must be effected at a duly called meeting and not by a consent in
writing. The Company's Bylaws, effective upon the closing of this offering, will
not permit stockholders of the Company to call a special meeting of
stockholders. Further, provisions of the Bylaws and the Certificate of
Incorporation provide that the stockholders may amend the Bylaws or certain
provisions of the Certificate of Incorporation only with the affirmative vote of
80% of the Company's capital stock. These provisions of the Certificate of
Incorporation and Bylaws could discourage potential acquisition proposals and
could delay or prevent a change in control of the Company. These provisions are
intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and in the policies formulated by the
Board of Directors and to discourage certain types of transactions that may
involve an actual or threatened change of control of the Company. These

55
<PAGE>
provisions are designed to reduce the vulnerability of the Company to an
unsolicited acquisition proposal. The provisions also are intended to discourage
certain tactics that may be used in proxy fights. However, such provisions could
have the effect of discouraging others from making tender offers for the
Company's shares and as a consequence, they also may inhibit fluctuations in the
market price of the Company's shares that could result from actual or rumored
takeover attempts. Such provisions also may have the effect of preventing
changes in the management of the Company. See "Risk Factors--Effect of Certain
Charter Provisions; Antitakeover Effects of Certificate of Incorporation,
Bylaws, and Delaware Law."

DELAWARE TAKEOVER STATUTE

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder;
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

REGISTRATION RIGHTS

After this offering, the holders of approximately 10,685,503 shares of
Common Stock (assuming the exercise of all warrants to purchase Common Stock
held by holders of registration rights) will be entitled to certain rights with
respect to the registration of such shares under the Securities Act. Under the
terms of the agreement between the Company and the holders of such registrable
securities, if the company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of other security
holders exercising registration rights, such holders are entitled to notice of
such registration and are entitled to include share of such Common Stock
therein. Additionally, such holders are also entitled to certain demand
registration rights pursuant to which they may require the Company to file a
registration statement under the Securities Act at its expense with respect to
their shares of Common Stock, and the Company is required to use its best
efforts to effect such registration. Further, holders may require the Company to
file additional registration statements on Form S-3 at the Company's expense.
All of these registration rights are subject to certain conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares included in such registration.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is Norwest Bank
Minnesota, National Association, and its telephone number is (612) 450-4064.

56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have shares of Common
Stock outstanding. Of this amount, the shares offered hereby will be
available for immediate sale in the public market as of the date of this
Prospectus. Approximately additional shares will be available for sale in
the public market following the expiration of 180-day lockup agreements with the
Representatives of the Underwriters or the Company, subject in some cases to
compliance with the volume and other limitations of Rule 144.

<TABLE>
<CAPTION>
APPROXIMATE SHARES
DAYS AFTER DATE OF ELIGIBLE FOR FUTURE
THIS PROSPECTUS SALE COMMENT
- -------------------------------------------- ---------------------- --------------------------------------------
<S> <C> <C>
Upon Effectiveness.......................... Freely tradable shares sold in offering and
shares salable under Rule 144(k) that are
not subject to 180-day lockup
90 days..................................... 2,299 Shares salable under Rule 144, 144(k) or 701
that are not subject to 180-day lockup.
180 days.................................... 10,555,484 Lockup released; shares salable under Rule
144, 144(k) or 701
</TABLE>

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year is entitled to sell within any three-month period commencing 90 days after
the date of this Prospectus a number of shares that does not exceed the greater
of (i) 1% of the then outstanding shares of Common Stock (approximately
shares immediately after the offering) or (ii) the average weekly trading volume
during the four calendar weeks preceding such sale, subject to the filing of a
Form 144 with respect to such sale. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days immediately preceding the sale who has beneficially
owned his or her shares for at least two years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
Persons deemed to be affiliates must always sell pursuant to Rule 144, even
after the applicable holding periods have been satisfied.

The Company is unable to estimate the number of shares that will be sold
under Rule 144, since this will depend on the market price for the Common Stock
of the Company, the personal circumstances of the sellers and other factors.
Prior to this offering, there has been no public market for the Common Stock,
and there can be no assurance that a significant public market for the Common
Stock will develop or be sustained after the offering. Any future sale of
substantial amounts of the Common Stock in the open market may adversely affect
the market price of the Common Stock offered hereby.

The Company, its directors, executive officers, stockholders with
registration rights and certain other stockholders and optionholders have agreed
pursuant to the Underwriting Agreement and other agreements that they will not
sell any Common Stock without the prior consent of BancAmerica Robertson
Stephens for a period of 180 days from the date of this Prospectus (the "180-day
Lockup Period"), except that the Company may, without such consent, grant
options and sell shares pursuant to the Company's stock plans.

Any employee of or consultant to the Company who purchased his or her shares
under the 1992 plan or pursuant to a written compensatory plan or contract is
entitled to rely on the resale provisions of Rule 701, which permits
nonaffiliates 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 the Rule 144 holding period restrictions, in each case commencing 90
days after the date of this Prospectus. As of July 31, 1997, the holders of
options exercisable into approximately 2,175,553 shares of Common Stock will be
eligible to sell their shares upon the expiration of the 180-day Lockup Period,
subject in certain cases to vesting of such options.

The Company intends to file a registration statement on Form S-8 under the
Securities Act to register 1,200,000 shares of Common Stock subject to
outstanding stock options or reserved for issuance under the 1997 Plan and the
Purchase Plan within 180 days after the date of this Prospectus, and thereafter
up to 2,508,200

57
<PAGE>
Shares of Common Stock subject to outstanding stock options or reserved for
issuance under the 1992 Stock Option Plan thus permitting the resale of such
shares by nonaffiliates in the public market without restriction under the
Securities Act.

In addition, after this offering, the holders of approximately 10,685,483
shares of Common Stock will be entitled to certain rights with respect to
registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradable without restriction under the Securities Act (except for shares
purchased by affiliates of the Company) immediately upon the effectiveness of
such registration. See "Description of Capital Stock--Registration Rights."

58
<PAGE>
UNDERWRITING

The Underwriters named below, acting through their representatives,
BancAmerica Robertson Stephens, Piper Jaffray Inc. and First Albany Corporation
(the "Representatives"), have severally agreed with the Company, subject to the
terms and conditions of the Underwriting Agreement, to purchase the number of
shares of Common Stock set forth opposite their respective names below. The
Underwriters are committed to purchase and pay for all shares if any are
purchased. In the event of default by an Underwriter, the Underwriting Agreement
provides that, in certain circumstances, purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------------------- ----------
<S> <C>
BancAmerica Robertson Stephens....................................................
Piper Jaffray Inc.................................................................
First Albany Corporation..........................................................
----------
Total...........................................................................
----------
----------
</TABLE>

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock 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 of not in excess of $ per share, of which
$ may be reallowed to other dealers. After the initial public offering, the
public offering price, concession, and reallowance to dealers may be reduced by
the Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.

The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the same price per share as will be
paid for the shares that the Underwriters have agreed to purchase. To the
extent that the Underwriters exercise such option, each of the Underwriters will
have a firm commitment, subject to certain conditions, to purchase approximately
the same percentage of such additional shares that the number of shares of
Common Stock to be purchased by it shown in the above table represents as a
percentage of the shares offered hereby. If purchased, such additional
shares will be sold by the Underwriters on the same terms as those on which the
shares are being sold.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the Underwriting Agreement.

Each officer and director who holds shares of the Company, each holder
(including such officers and directors) of shares of Common Stock and all
warrantholders of the Company and optionholders of the Company holding options
exercisable within the 180-day Lockup Period have agreed, for the 180 day Lockup
Period, subject to certain exceptions, not to offer to sell, contract to sell,
or otherwise sell (including without limitation in a short sale), dispose of,
loan, pledge or grant any rights with respect to any shares of Common Stock, any
options or warrants to purchase any shares of Common Stock, or any securities
convertible into, exercisable for or exchangeable for shares of Common Stock
owned as of the date of this Prospectus directly by such holders or with respect
to which they have the power of disposition, without the prior written consent
of BancAmerica Robertson Stephens. However, BancAmerica Robertson Stephens may,
in its sole discretion and at any time or from time to time without notice,
release all or any portion of the securities subject to lock-up agreements.

There are no agreements between the Representatives and any of the Company's
stockholders providing consent by the Representatives to the sale of shares
prior to the expiration of the 180-day Lockup Period.

In addition, the Company has agreed that during the 180-day Lockup Period,
the Company will not, without the prior written consent of BancAmerica Robertson
Stephens, subject to certain exceptions, issue, offer

59
<PAGE>
to sell, sell, contract to sell (including without limitation in a short sale),
dispose of, loan, pledge or grant any rights with respect to any shares of
Common Stock, any options or warrants to purchase any shares of Common Stock or
any securities convertible into, exercisable for or exchangeable for shares of
Common Stock other than the Company's sale of shares in this offering, the
issuance of Common Stock upon the exercise of outstanding options, and the
Company's issuance of options and shares under existing employee stock option
and stock purchase plans. See "Shares Eligible For Future Sale."

The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock offered hereby will be determined through negotiations among the Company
and the Representatives. Among the factors to be considered in such negotiations
are prevailing market conditions, certain financial information of the Company,
market valuations of other companies that the Company and the Representatives
believe to be comparable to the Company, estimates of the business potential of
the Company and the industry in which it competes, an assessment of the
Company's management, its past and present operations, the prospects for, and
timing of, future revenues of the Company, the present state of the Company's
development and other factors deemed relevant. There can be no assurance that an
active trading market will develop for the Common Stock or that the Common Stock
will trade in the public market subsequent to the offering at or above the
initial offering price.

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the Offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the Offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with the Offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Representatives in a syndicate covering transaction and has
therefore not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and if commenced, may be
discontinued at any time.

The Underwriters have reserved for sale, at the initial public offering
price, up to 5% of the Common Stock offered hereby for certain individuals
designated by the Company who have expressed an interest in purchasing such
shares of Common Stock in the offering. The number of shares available for sale
to the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
Underwriters to the general public on the same basis as other shares offered
hereby.

60
<PAGE>
LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo
Park, California. Certain legal matters in connection with the offering will be
passed upon for the Company by Briggs and Morgan, Professional Association,
Minneapolis, Minnesota. Certain legal matters in connection with the offering
will be passed upon for the Underwriters by Brobeck, Phleger & Harrison LLP,
Palo Alto, California.

EXPERTS

The consolidated financial statements as of January 31, 1996 and 1997 and
for each of the three years in the period ended January 31, 1997 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules to the Registration Statement. For
further information with respect to the Company and such Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules filed as a part of the Registration Statement. Statements contained in
this Prospectus concerning the contents of any contract or any other document
referred to are not necessarily complete; reference is made in each instance to
the copy of such contract or document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference to
such exhibit. The Registration Statement, including exhibits and schedules
thereto, may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from
such office after payment of fees prescribed by the Commission. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission at http://www.sec.gov.

61
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
Report of Independent Accountants..................................................... F-2
<S> <C>
Consolidated Financial Statements:
Consolidated Balance Sheet as of January 31, 1996 and 1997 and July 31, 1997
(Unaudited)....................................................................... F-3
Consolidated Statement of Operations for the Years Ended January 311995, 1996 and
1997 and for the Six Months Ended July 31, 1996 and 1997 (Unaudited).............. F-4
Consolidated Statement of Stockholders' Equity (Deficit) for the Years Ended January
31, 1995, 1996 and 1997 and for the Six Months Ended July 31, 1997 (Unaudited).... F-5
Consolidated Statement of Cash Flows for the Years Ended January 31, 1995, 1996 and
1997 and for the Six Months Ended July 31, 1996 and 1997 (Unaudited).............. F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Information Advantage Software, Inc.

The stock split and reincorporation described in Note 14 to the consolidated
financial statements have not been consummated at October 8, 1997. When they
have been consummated, we will be in a position to furnish the following report:

"In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' deficit and of cash
flows present fairly, in all material respects, the financial position of
Information Advantage Software, Inc. and its subsidiary at January 31, 1997
and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended January 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above."

/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP

Minneapolis, Minnesota
March 25, 1997, except as to
Note 14, which is as of
October 8, 1997

F-2
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1996 1997
--------- --------- JULY 31, 1997
------------------------
ACTUAL PRO FORMA
----------- -----------
(UNAUDITED) (UNAUDITED)
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 1,939 $ 874 $ 3,100 $ 3,100
Accounts receivable............................................... 1,562 3,215 3,796 3,796
Receivable from officer........................................... -- 70 72 72
Prepaid expenses and other current assets......................... 112 318 608 608
--------- --------- ----------- -----------
Total current assets............................................ 3,613 4,477 7,576 7,576
--------- --------- ----------- -----------
Furniture and equipment............................................. 611 1,294 1,460 1,460
Other assets........................................................ 97 147 123 123
--------- --------- ----------- -----------
$ 4,321 $ 5,918 $ 9,159 $ 9,159
--------- --------- ----------- -----------
--------- --------- ----------- -----------

LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Current portion--long-term debt................................... $ 275 $ 790 $ 868 $ 868
Accounts payable.................................................. 419 580 627 627
Accrued expenses.................................................. 552 1,838 2,305 2,305
Deferred revenue.................................................. 1,270 3,371 3,712 3,712
--------- --------- ----------- -----------
Total current liabilities....................................... 2,516 6,579 7,512 7,512
--------- --------- ----------- -----------
Long-term debt, less current portion................................ 275 1,244 1,030 1,030
--------- --------- ----------- -----------
Total liabilities............................................... 2,791 7,823 8,542 8,542
--------- --------- ----------- -----------

COMMITMENTS AND CONTINGENCIES (NOTES 6 and 8)
Series A convertible redeemable preferred stock, $0.01 par value.... 5,337 5,337 5,337 --
Series B convertible redeemable preferred stock, $0.01 par value.... 7,150 7,150 7,150 --
Series C convertible redeemable preferred stock, $0.01 par value.... -- 4,923 4,923 --
Series D convertible redeemable preferred stock, $0.01 par value.... -- -- 7,000 --
Stockholders' equity (deficit):
Common stock, $0.01 par value; 60,000,000 shares authorized;
979,268, 1,059,148, 1,103,219 and 10,586,553 shares issued and
outstanding, respectively....................................... 10 11 11 106
Additional paid-in-capital........................................ 847 1007 1260 25,575
Cumulative translation adjustments................................ 19 19 11 11
Accumulated deficit............................................... (11,833) (20,352) (25,075) (25,075)
--------- --------- ----------- -----------
Total stockholders' equity (deficit)................................ (10,957) (19,315) (23,793) 617
--------- --------- ----------- -----------
$ 4,321 $ 5,918 $ 9,159 $ 9,159
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>

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

F-3
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JANUARY 31, JULY 31,
-------------------------------- ---------------------
1995 1996 1997 1996 1997
--------- --------- ---------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License..................................................... $ 1,826 $ 2,686 $ 6,491 $ 2,952 $ 5,009
Service..................................................... 1,991 2,956 5,255 2,209 5,139
--------- --------- ---------- --------- ----------
Total revenues........................................ 3,817 5,642 11,746 5,161 10,148
--------- --------- ---------- --------- ----------
Cost of revenues:
License..................................................... 72 118 132 58 77
Service..................................................... 1,636 2,129 3,308 1,380 3,424
--------- --------- ---------- --------- ----------
Total cost of revenues................................ 1,708 2,247 3,440 1,438 3,501
--------- --------- ---------- --------- ----------

Gross margin.................................................. 2,109 3,395 8,306 3,723 6,647
--------- --------- ---------- --------- ----------

Operating expenses:
Sales and marketing......................................... 3,406 3,854 11,350 4,320 7,728
Research and development.................................... 2,162 2,089 3,189 1,265 2,355
General and administrative.................................. 853 1,247 2,147 953 1173
--------- --------- ---------- --------- ----------
Total operating expenses.............................. 6,421 7,190 16,686 6,538 11,256
--------- --------- ---------- --------- ----------
Loss from operations.......................................... (4,312) (3,795) (8,380) (2,815) (4,609)

Other income (expense):
Interest expense............................................ (102) (110) (244) (114) (122)
Interest income............................................. 19 116 148 103 82
--------- --------- ---------- --------- ----------
Total other income (expense).......................... (83) 6 (96) (11) (40)
--------- --------- ---------- --------- ----------
Net loss...................................................... $ (4,395) $ (3,789) $ (8,476) $ (2,826) $ (4,649)
--------- --------- ---------- --------- ----------
--------- --------- ---------- --------- ----------
Unaudited pro forma net loss per share........................ $ (0.76) $ (0.42)
---------- ----------
---------- ----------
Shares used in computing unaudited pro forma net loss per
share....................................................... 11,100,635 11,162,615
---------- ----------
---------- ----------
</TABLE>

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

F-4
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
---------------------- PAID-IN TRANSLATION ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL ADJUSTMENTS DEFICIT DEFICIT
--------- ----------- ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1994............... 973,659 $ 10 $ 841 $ -- $ (3,606) $ (2,755)
Preferred stock issuance costs........ -- -- -- -- (17) (17)
Stock options......................... 2,000 -- 2 -- -- 2
Translation adjustments............... -- -- -- -- -- --
Net loss.............................. -- -- -- -- (4,395) (4,395)
--
--------- ----------- --- ------------- -------------
Balance, January 31, 1995............... 975,659 10 843 -- (8,018) (7,165)
Preferred stock issuance costs........ -- -- -- -- (26) (26)
Stock options......................... 3,600 -- 4 -- -- 4
Translation adjustments............... -- -- -- 19 -- 19
Net loss.............................. -- -- -- -- (3,789) (3,789)
--
--------- ----------- --- ------------- -------------
Balance, January 31, 1996............... 979,259 10 847 19 (11,833) (10,957)
Preferred stock issuance costs........ -- -- -- -- (43) (43)
Stock options......................... 79,880 1 160 -- -- 161
Translation adjustments............... -- -- -- -- -- --
Net loss.............................. -- -- -- -- (8,476) (8,476)
--
--------- ----------- --- ------------- -------------
Balance, January 31, 1997............... 1,059,139 11 1,007 19 (20,352) (19,315)
Preferred stock issuance costs
(unaudited)......................... -- -- -- -- (74) (74)
Stock options (unaudited)............. 44,080 -- 253 -- -- 253
Translation adjustments (unaudited)... -- -- -- (8) -- (8)
Net loss (unaudited).................. -- -- -- -- (4,649) (4,649)
--
--------- ----------- --- ------------- -------------
Balance, July 31, 1997 (unaudited)...... 1,103,219 $ 11 $ 1,260 $ 11 $ (25,075) $ (23,793)
--
--
--------- ----------- --- ------------- -------------
--------- ----------- --- ------------- -------------
</TABLE>

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

F-5
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JANUARY 31, JULY 31,
------------------------------- --------------------
1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................ $ (4,395) $ (3,789) $ (8,476) $ (2,826) $ (4,649)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization..................................... 242 193 470 123 523
Interest expense converted to preferred stock..................... -- 58 -- -- --
Changes in operating assets and liabilities:
Accounts receivable............................................. 256 (801) (1,653) (188) (581)
Prepaid expenses and other current assets....................... (111) (1) (276) (170) (291)
Accounts payable................................................ 53 15 162 97 46
Accrued expenses................................................ 267 27 1,286 229 467
Deferred revenue................................................ 431 670 2,101 609 342
Other........................................................... 71 (18) (50) (14) 15
--------- --------- --------- --------- ---------
Net cash used by operating activities......................... (3,186) (3,646) (6,436) (2,140) (4,128)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to furniture and equipment................................ (231) (32) (592) (231) (222)
--------- --------- --------- --------- ---------
Net cash used by investing activities............................... (231) (32) (592) (231) (222)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options............................. 2 4 86 20 49
Proceeds from sale of convertible redeemable preferred stock, net
of expenses....................................................... 2,483 5,067 4,880 4,880 6,926
Proceeds from issuance of notes payable-stockholders................ 1,000 1,000 -- -- --
Borrowings of note payable--bank.................................... 90 -- -- -- --
Repayments of note payable--bank.................................... -- (435) -- -- --
Proceeds from long-term debt........................................ -- -- 1,500 1,500 --
Principal payments on long-term debt................................ (170) (217) (502) (209) (399)
--------- --------- --------- --------- ---------
Net cash provided by financing activities........................... 3,405 5,419 5,964 6,191 6,576
--------- --------- --------- --------- ---------
Net (decrease) increase in cash and cash equivalents.................. (12) 1,741 (1,064) 3,820 2,226
Cash and cash equivalents, beginning of period........................ 210 198 1,939 1,939 874
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of period.............................. $ 198 $ 1,939 $ 874 $ 5,759 $ 3,100
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest.............................. $ 105 $ 132 $ 234 $ 103 $ 111
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

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

F-6
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1--ORGANIZATION

Information Advantage develops, markets and supports enterprise scalable
on-line analytical processing software that is designed to allow large numbers
of users to access and analyze large amounts of data to make quick and more
informed business decisions. The Company's relational server-based solution,
DecisionSuite, provides powerful, robust and flexible analysis processing
capabilities that transform raw data into meaningful information from a wide
range of desktop and Internet platforms. The Company also provides a
comprehensive range of related training, consulting and customer support
services.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated financial statements include accounts of the Company and
Information Advantage International, Ltd., a wholly owned subsidiary operating
in the United Kingdom. All significant intercompany accounts and transactions
have been eliminated.

Information as of July 31, 1997 and for the six months ended July 31, 1996
and 1997 is unaudited. The information furnished in the unaudited July 31, 1996
and 1997 financial statements includes all adjustments, consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of such financial statements.

PRO FORMA BALANCE SHEET (UNAUDITED)

If the offering contemplated by this Prospectus is consummated, all of the
convertible redeemable preferred stock outstanding at the closing date will be
converted share for share into shares of common stock. The unaudited pro forma
balance sheet as of July 31, 1997, reflects the conversion of outstanding
convertible redeemable preferred stock at July 31, 1997 into 9,483,334 shares of
common stock.

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.

FOREIGN CURRENCY TRANSLATION

All assets and liabilities of the Company's foreign subsidiary are
translated from foreign currencies to U.S. dollars at period end rates of
exchange, while the consolidated statement of operations is translated at the
average exchange rates during the period. Translation adjustments arising from
the translation of net assets located outside of the United States into U.S.
dollars are recorded as a separate component of stockholders' equity.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.

F-7
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash and cash equivalents are valued at amounts which approximate fair
value. The fair value of all other financial instruments approximates cost as
stated.

REVENUE RECOGNITION AND SIGNIFICANT CUSTOMERS

Revenues derived from software licenses are recognized upon execution of a
license agreement, delivery of the software product and fulfillment of other
revenue recognition requirements. For software provided for demonstration or
pilot purposes, or where significant post-delivery obligations exist, revenues
are not recognized until execution of a license agreement and fulfillment of all
revenue recognition requirements. Revenues derived from maintenance contracts
which are bundled with the initial licenses and all revenues from extended
maintenance contracts are deferred and recognized ratably over the term of the
maintenance contract. Revenues from maintenance contracts are included in
services revenues. Revenue from training and consulting services are recognized
as the services are performed. The Company's policy is in compliance with the
provisions of the American Institute of Certified Public Accountants' Statement
of Position 91-1, "Software Revenue Recognition."

Financial instruments which potentially subject the Company to credit risk
consist primarily of accounts receivable. The Company grants credit to customers
in the ordinary course of business. Three different customers accounted for
approximately 49% of total revenues during 1995. Different individual customers
accounted for approximately 14% and 10% of revenues during 1996 and 1997,
respectively. Receivables from the individual significant customer in 1996
represented approximately 9% of total receivables at January 31, 1996. There are
no other significant concentrations of receivables.

Accounts receivable are stated net of the related allowance for doubtful
accounts of $21 and $101 as of January 31, 1996 and 1997, respectively.

RESEARCH AND DEVELOPMENT

Expenditures for research and software development are expensed as incurred.
Such costs are required to be expensed until the point that technological
feasibility of the product is established and the realizability of any
capitalized costs is determined. The period between achieving technological
feasibility and the general availability to the public of such software has been
short. Consequently, costs otherwise capitalizable after technological
feasibility is achieved have been expensed because they have been insignificant
to both total assets and net loss.

FURNITURE AND EQUIPMENT

Furniture and equipment, including those assets acquired under capital
leases, consists of computers and office equipment, and is depreciated using the
straight-line method over the estimated useful lives of the assets, which
generally range from 3 to 5 years. Significant additions or improvements
extending asset lives are

F-8
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
capitalized, while repairs and maintenance are charged to expense as incurred.
Amortization of assets under capital leases is included in depreciation expense.
The amount of leased equipment consists of the following:

<TABLE>
<CAPTION>
JANUARY 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Equipment cost....................................................... $ 441 $ 927
Less: Accumulated amortization....................................... (130) (336)
---------- ----------
$ 311 $ 591
---------- ----------
---------- ----------
</TABLE>

INCOME TAXES

Income taxes are accounted for on the liability method in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under the liability method, deferred tax assets and liabilities
are determined based on the difference between the financial statement and tax
bases of assets and liabilities reduced by a valuation allowance, as necessary.

UNAUDITED PRO FORMA NET LOSS PER SHARE

Unaudited pro forma net loss per share is based on the unaudited pro forma
weighted average number of shares of common stock and common equivalent shares
outstanding for the period. The unaudited pro forma weighted average number of
shares assumes the conversion of the Company's convertible redeemable preferred
stock into 9,483,334 shares of common stock which will occur upon completion of
the offering. Because of the significant impact of the assumed conversion on the
Company's capital structure and earnings per share, historical earnings per
share have been excluded from the financial statements. Pursuant to certain
Securities and Exchange Commission (SEC) Staff Accounting Bulletins, all common
stock, warrants and options issued by the Company with exercise prices below the
initial public offering (IPO) price during the 12-month period preceding the
date of the initial filing of the Registration Statement have been included in
the calculation of net loss per share, using the treasury stock method based on
the assumed IPO price, as if they were outstanding for all prior periods
presented.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" (SFAS No. 128). SFAS No. 128 applies to entities
with publicly held common stock and is effective for financial statements issued
for periods ending after December 15, 1997. Under SFAS No. 128 the presentation
of primary earnings per share is replaced with a presentation of basic earnings
per share. SFAS No. 128 requires dual presentation of basic and diluted earnings
per share for entities with complex capital structures. Basic earnings per share
includes no dilution and is computed by dividing net income (loss) available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. Management believes the adoption of SFAS No. 128
will not have a material effect on the financial statements.

F-9
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 3--FINANCIAL STATEMENT COMPONENTS

Furniture and equipment consists of the following:

<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Computer equipment......................................................... $ 785 $ 1,615
Furniture and office equipment............................................. 474 722
Less: Accumulated depreciation............................................. (648) (1,043)
--------- ---------
$ 611 $ 1,294
--------- ---------
--------- ---------
</TABLE>

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Accrued wages and benefits................................................. $ 365 $ 1,294
Other accrued expenses..................................................... 187 544
--------- ---------
$ 552 $ 1,838
--------- ---------
--------- ---------
</TABLE>

NOTE 4--LINE OF CREDIT

The Company has a $2.0 million working capital line of credit with a bank.
Borrowings are limited to the lesser of $2.0 million or 70% of eligible accounts
receivable. Borrowings bear interest at an annual rate of 1.75% above the bank's
prime rate (8.25% at January 31, 1997). The agreement expires on September 3,
1997 and is collateralized by all of the Company's assets. No borrowings were
outstanding under this line at January 31, 1996 and 1997, respectively. The line
of credit agreement contains certain covenants pertaining to operating results
and certain other financial ratios. At January 31, 1996 and 1997, the Company
was in compliance with these covenants or had obtained the necessary waivers.
See Note 14.

F-10
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 5--LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Subordinated note payable; bears interest at 13.5% per annum; due in varying
monthly installments through April 1999; secured by certain Company
assets.................................................................... $ -- $ 1,397
Capital lease obligations; bears interest at 8.0% to 13.5% per annum; due in
varying monthly installments through November 1999........................ 382 581
Notes payable; bears interest at 10% per annum; due in quarterly
installments of $28, plus accrued interest, through June 1997............. 168 56
--------- ---------
550 2,034
Current portion--long-term debt............................................. (275) (790)
--------- ---------
$ 275 $ 1,244
--------- ---------
--------- ---------
</TABLE>

Future payments of long-term debt are as follows:

<TABLE>
<CAPTION>
YEARS ENDING JANUARY 31,
- -------------------------------------------------------------------------------------
<S> <C>
1998................................................................................. $ 992
1999................................................................................. 861
2000................................................................................. 503
---------
2,356
Less: Amount representing interest................................................... (322)
---------
$ 2,034
---------
---------
</TABLE>

NOTE 6--OPERATING LEASES

The Company leases equipment and office space in several facilities under
non-cancelable operating leases which expire on various dates through January
2002. Rental expense under such leases were $571, $547 and $721, for the years
ended January 31, 1995, 1996 and 1997, respectively. Future minimum payments
under the lease agreements are as follows:

<TABLE>
<CAPTION>
YEARS ENDING JANUARY 31,
- ---------------------------------------------------------------------------------------
<S> <C>
1998................................................................................... $ 440
1999................................................................................... 104
2000................................................................................... 67
2001................................................................................... 60
2002................................................................................... 64
---
$ 735
---
---
</TABLE>

F-11
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 7--INCOME TAXES

At January 31, 1997, the Company had net operating loss carryforwards of
approximately $16 million for income tax purposes. The net operating loss
carryforwards will begin to expire in 2007. Utilization of these net operating
loss carryforwards in the future by the Company may be limited or deferred
subject to Section 382 of the Internal Revenue Code. No future tax benefit for
such carryforwards or other temporary differences has been recognized since
utilization of such benefits is not presently deemed by management to be more
likely than not based on the weight of available evidence.

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of financial reporting....................... $ 36 $ 37
--------- ---------
Deferred tax assets:
Accounts receivable allowance........................................... 8 33
Amortization............................................................ 168 49
Net operating loss carryforward......................................... 3,638 6,284
Research and development credit carryforward............................ -- 48
Vacation and other accruals............................................. 313 851
--------- ---------
Total deferred tax assets............................................. 4,127 7,265
--------- ---------
Valuation allowance....................................................... (4,091) (7,228)
--------- ---------
Total net deferred income taxes......................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>

NOTE 8--CAPITAL STRUCTURE

The Company has the following authorized capital stock: 60,000,000 common
shares, 4,000,000 Series A convertible redeemable preferred shares, 4,000,000
Series B convertible redeemable preferred shares, 1,633,198 Series C convertible
redeemable preferred shares, 1,400,000 Series D convertible redeemable preferred
shares, 4,000,000 Series E convertible redeemable preferred shares, 4,000,000
Series F convertible redeemable preferred shares, 1,633,198 Series G convertible
redeemable preferred shares, and 1,400,000 Series H convertible redeemable
preferred shares (collectively, the Preferred Shares), all of which have $0.01
par value. The Preferred Shares are convertible, at the option of the holder,
into common stock on a share for share basis, have certain voting rights and
provide for certain liquidation preferences. The conversion feature is automatic
upon the closing of an initial public offering of the Company's common stock in
which the sales price to the public is at least $12.50 per share (for Series A,
B, D, E, F and H) or at least $6.50 per share (for Series C and G) and the gross
proceeds from such offering is at least $15.0 million.

One-fourth of the Series A and E convertible redeemable preferred shares are
subject to redemption during each of the fiscal years from 1998 through 2000,
with the balance to be redeemed during fiscal year 2001. One-fourth of the
Series B and F convertible redeemable preferred shares are subject to redemption
during each of the fiscal years from 2000 through 2002, with the balance to be
redeemed during fiscal year 2003. One-

F-12
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 8--CAPITAL STRUCTURE (CONTINUED)
fourth of the Series C and G convertible redeemable preferred shares are subject
to redemption during each of the fiscal years from 2001 through 2003, with the
balance to be redeemed during fiscal year 2004. One-fourth of the Series D and H
convertible redeemable preferred shares are subject to redemption during each of
the fiscal years from 2002 through 2004, with the balance to be redeemed during
fiscal year 2005. The redemption price shall equal the per share issuance price
plus any unpaid and accumulated or accrued dividends on the preferred stock. The
Preferred Shares are recorded at redemption value. In the event any dividend or
distribution is declared or made with respect to the common stock, a comparable
dividend or distribution must be simultaneously declared or made with respect to
the Preferred Shares. There have been no dividends declared or paid through
January 31, 1997.

Future redemptions of the Series A, B and C convertible redeemable preferred
shares outstanding as of January 31, 1997 are as follows:

<TABLE>
<CAPTION>
YEARS ENDING JANUARY 31,
- ---------------------------------------------------------------
<S> <C>
1998........................................................... $ 1,334
1999........................................................... 1,334
2000........................................................... 3,122
2001........................................................... 4,353
2002........................................................... 3,018
Thereafter..................................................... 4,249
---------
$ 17,410
---------
---------
</TABLE>

SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK

During March 1993, the Company issued 1,558,000 shares of Series A
convertible redeemable preferred stock for $1.50 per share. Total proceeds were
$2,310, net of expenses. As part of this sale, preferred stockholders were
issued warrants to purchase 779,000 shares of common stock at $1.50 per share.
These warrants expire on March 10, 1998. Using an option-pricing model the fair
value of the warrants was immaterial.

During February 1994, the Company completed the sale of an additional
1,999,990 shares of Series A convertible redeemable preferred stock at $1.50 per
share. In anticipation of this sale, certain preferred stockholders had, as of
January 31, 1994, advanced $500 to the Company. In February 1994, these advances
were applied to the purchase price of the shares acquired. Total proceeds from
the sale, including the initial stockholder advances, were $2,983, net of
expenses. Total proceeds from the sales of all shares of Series A convertible
redeemable preferred stock were $5,293, net of expenses, with 3,558,000 shares
outstanding.

SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK

During June 1995, the Company completed the sale of 3,010,515 shares of
Series B convertible redeemable preferred stock at $2.375 per share to
substantially all of the preferred stockholders who purchased preferred stock in
February 1994 and several new investors. In anticipation of this sale, certain
preferred stockholders had, as of January 31, 1995, advanced $1,000 to the
Company. Such advances were reflected as notes payable-- stockholders in the
balance sheet at January 31, 1995. Additionally during February 1995, the
Company obtained an additional $1,000 of advances from the preferred
stockholders. As a condition of the advances, such stockholders received
warrants to purchase 294,734 common shares at $2.375 per share for a period of
four years

F-13
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 8--CAPITAL STRUCTURE (CONTINUED)
from the date of issuance. Using the fair value method prescribed in SFAS No.
123, the fair value of the warrants was immaterial. In June 1995, these advances
were applied to the purchase price of the shares acquired. Total proceeds from
the sale were $7,124, net of expenses.

SERIES C CONVERTIBLE REDEEMABLE PREFERRED STOCK

During March 1996, the Company sold 1,514,837 shares of Series C convertible
redeemable preferred stock at $3.25 per share to substantially all existing
preferred stockholders and several new investors. Total proceeds from the sale
were $4,880, net of expenses.

OTHER WARRANTS

In conjunction with certain bank financing activities, the Company issued a
warrant in March 1995 to its bank to purchase 15,000 common shares at $2.00 per
share. The warrant expires on March 30, 2000. In conjunction with certain other
financings in fiscal 1996 and 1997, the Company issued warrants to a different
lender to purchase 33,683 Series B convertible redeemable preferred shares at
$2.375 per share. The warrants expire on September 29, 1999 (13,473 shares) and
November 20, 2000 (20,210 shares). In addition, the Company issued an additional
warrant to this lender in fiscal 1997 to purchase 94,736 Series C convertible
redeemable preferred shares at $3.25 per share, which expires on April 12, 2003.
Using the fair value method prescribed in SFAS No. 123, the fair value of the
warrants was immaterial.

Warrants to purchase convertible redeemable preferred shares will convert to
warrants to purchase common shares on a one-for-one basis upon the successful
completion of an initial public offering.

NOTE 9--STOCK OPTION PLAN

The Company has a stock incentive plan that reserves a total of 2,000,000
shares of common stock for issuance of stock options to employees, officers and
directors. The option price for stock options granted is determined by the
Company's Board of Directors on the date of grant. Canceled options are
available for future grant and unvested options issued to employees are canceled
when their employment with the Company terminates. Generally, options granted to
employees vest over a five-year period and expire ten years after the date of
grant.

The Company records compensation related to stock options using the
intrinsic value method of APB No. 25. Compensation related to stock options
granted below fair market value through July 31, 1997 approximates $1.1 million.
Such compensation is considered deferred compensation and amortized over the
vesting period of the related options.

The Company has adopted the disclosure-only provisions of SFAS No. 123. For
purposes of the pro forma disclosures below, the estimated fair value of the
options is amortized to expense over the options' vesting period. Had
compensation cost for the Company's stock plan been determined based on the
minimum value at the grant date for awards during fiscal 1996 and 1997
consistent with the provisions of SFAS No. 123, the Company's net losses would
have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Net loss--as reported............................................ $ (3,789) $ (8,476)
Net loss--pro forma.............................................. (3,830) (8,595)
</TABLE>

F-14
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 9--STOCK OPTION PLAN (CONTINUED)
The minimum value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal 1996 and 1997, respectively; dividend
yield of 0%; risk-free interest rates of 6.7% and 6.4%; and expected lives of
8.5 years. Volatility factors are not applicable to non-public companies.

A summary of the stock option activity is as follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
EXERCISE PRICE EXERCISE
OPTIONS PER SHARE PRICE
---------- ----------------- -----------
<S> <C> <C> <C>
Outstanding at January 31, 1994.................... 257,600 $0.875 - $1.125 $ 1.05

Granted............................................ 340,640 $1.125 $ 1.13
Exercised.......................................... (2,000) $0.875 - $1.125 $ 1.10
Canceled........................................... (26,600) $0.875 - $1.125 $ 1.13
----------

Outstanding at January 31, 1995.................... 569,640 $0.875 - $1.125 $ 1.10

Granted............................................ 767,634 $1.125 $ 1.13
Exercised.......................................... (3,600) $0.875 - $1.125 $ 1.03
Canceled........................................... (60,040) $0.875 - $1.125 $ 1.13
----------

Outstanding at January 31, 1996.................... 1,273,634 $0.875 - $1.125 $ 1.10

Granted............................................ 736,120 $1.125 $ 1.13
Exercised.......................................... (79,880) $0.875 - $1.125 $ 1.08
Canceled........................................... (153,220) $0.875 - $1.125 $ 1.13
----------
Outstanding at January 31, 1997.................... 1,776,654 $0.875 - $1.125 $ 1.13
----------
----------
</TABLE>

Subsequent to year-end, the Company has granted 704,300 options at exercise
prices ranging from $1.125 to $7.50 per share.

Stock options exercisable at January 31, 1995, 1996 and 1997 were 112,120,
220,040 and 409,986, respectively. The weighted-average fair value of options
granted during fiscal 1996 and 1997 using the Black-Scholes option-pricing model
was $0.22 and $0.46 per share, respectively.

The following table summarizes information about fixed-price stock options
outstanding at January 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------- OPTIONS EXERCISABLE
WEIGHTED- ------------------------
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED-
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
AT JANUARY CONTRACTURAL EXERCISE AT JANUARY EXERCISE
RANGE OF EXERCISE PRICES 31, 1997 LIFE PRICE 31, 1997 PRICE
- ------------------------------ ----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$0.875 - $1.125 1,776,654 8.45 $ 1.125 409,986 $ 1.10
</TABLE>

F-15
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 10--RELATED PARTY TRANSACTION

At January 31, 1997, the Company has a $70 receivable from an officer. The
receivable bears interest at 5.3%, is secured by 28,572 shares of Company common
stock and is due sixty days after demand by the Company.

NOTE 11--BENEFIT PLAN

The Company offers its employees a 401(k) savings plan. Eligible employees
may elect to contribute a portion of their salaries up to limits defined by the
Internal Revenue Code. The Company may, at its sole discretion, match up to 6%
of employee contributions. There have been no employer contributions to date.
The Company also offers employees of its subsidiary in the United Kingdom a
defined contribution plan. The Company does not offer other post-retirement or
post-employment benefits.

NOTE 12--SEGMENT AND GEOGRAPHIC AREAS

The Company operates in one industry segment, the development and marketing
of business analysis software products for data warehouse applications and
related services. International operations include operations in the United
Kingdom by the Company's wholly-owned subsidiary, Information Advantage
International, Ltd. (IAI, Ltd). IAI, Ltd. sells the Company's software products
and services in Europe. The following table presents a summary of operating
information and certain year-end balance sheet information by geographic region:

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Domestic operations......................................... $ 2,872 $ 5,037 $ 10,629
International operations.................................... 945 605 1,117
--------- --------- ---------
Consolidated.................................................. $ 3,817 $ 5,642 $ 11,746
--------- --------- ---------
--------- --------- ---------
Net income (loss):
Domestic operations......................................... $ (4,404) $ (3,437) $ (7,495)
International operations.................................... 9 (352) (981)
--------- --------- ---------
Consolidated.................................................. $ (4,395) $ (3,789) $ (8,476)
--------- --------- ---------
--------- --------- ---------
Identifiable assets:
Domestic operations......................................... $ 1,200 $ 3,809 $ 4,942
International operations.................................... 399 512 976
--------- --------- ---------
Consolidated.................................................. $ 1,599 $ 4,321 $ 5,918
--------- --------- ---------
--------- --------- ---------
</TABLE>

NOTE 13--NON-CASH TRANSACTIONS

During 1995, 1996, 1997, and during the six months ended July 31, 1996 and
1997, the Company acquired $124, $303, $486, $280 and $263, respectively, of
fixed assets through capital leases.

During 1996, $2 million of notes payable--stockholders was converted to
Series B convertible redeemable preferred stock at $0.95 per share.

F-16
<PAGE>
INFORMATION ADVANTAGE SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 13--NON-CASH TRANSACTIONS (CONTINUED)
During 1995, $500 of notes payable--stockholders was converted to Series A
convertible redeemable preferred stock at $0.60 per share.

NOTE 14--SUBSEQUENT EVENTS

During February 1997, the Company sold 1,399,992 shares of Series D
convertible redeemable preferred stock at $5.00 per share to both existing and
several new investors. Total proceeds from the sale were $6,926, net of
expenses.

Effective September 3, 1997, the Company's revolving line of credit
agreement was extended through September 2, 1998 under terms substantially the
same as the Company's previous agreement.

In September 1997, the Company's Board of Directors adopted, subject to
stockholder approval, the 1997 Equity Incentive Plan (the "Plan"). The number of
shares of common stock reserved for issuance under the Plan is equal to
1,000,000, plus the number of remaining shares available for grant under the
Company's 1992 Stock Option Plan (See Note 9) at the effective date of the
offering. Beginning February 1, 1999 and each year thereafter, the number of
shares reserved for issuance will automatically increase by the lesser of
400,000 shares or 3.5% of the total number of shares of common stock then
outstanding.

In September 1997, the Board of Directors adopted, subject to stockholder
approval, the Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan").
Under the Purchase Plan, eligible employees may purchase on each purchase date,
as defined, shares of common stock at 85% of its fair market value, up to the
lesser of 500 shares or 15% of the employee's compensation. In addition, 200,000
shares of common stock have been reserved for issuance under the Purchase Plan.

In September 1997, subject to certain conditions, the Board of Directors
authorized the reincorporation of the Company in Delware, increased the
authorized shares of the Company and designated a par value of $0.01 for common
and convertible, redeemable preferred shares. All applicable share data included
in the financial statements has been adjusted to give retroactive effect to such
action. In addition, the Company authorized 5,000,000, $.01 par value preferred
shares to be effective subsequent to the closing of an initial public offering.

On October 8, 1997, the Company's Board of Directors approved a reverse
1-for-2 1/2 stock split effective upon filing of an amended Certificate of
Incorporation. The effect of the reverse stock split has been reflected for all
periods presented in the accompanying financial statements.

On October 8, 1997, the Company's Board of Directors increased, subject to
stockholder approval, the number of options which may be granted under the
Company's stock option plan to 2,640,000.

F-17
<PAGE>
[INFORMATION ADVANTAGE SOFTWARE , INC. LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fees.

<TABLE>
<S> <C>
SEC Registration fee.............................................. $ *
NASD fee.......................................................... *
Nasdaq National Market listing fee................................ *
Printing and engraving expenses................................... *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Blue sky fees and expenses........................................ *
Transfer agent fees............................................... *
Miscellaneous fees and expenses................................... *
---------
Total........................................................... $ *
---------
---------
</TABLE>

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

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VII, Section 6, of the Registrant's
Bylaws provides for mandatory indemnification of its directors and officers and
permissible indemnification of employees and other agents to the maximum extent
permitted by the Delaware General Corporation Law. The Registrant's Restated
Certificate of Incorporation provides that, pursuant to Delaware law, its
directors shall not be liable for monetary damages for breach of the directors'
fiduciary duty as directors to the Company and its stockholders. This provision
in the Restated Certificate of Incorporation does not eliminate the directors'
fiduciary duty, and in appropriate circumstances equitable remedies such as
injunctive or other forms of non-monetary relief will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. The Registrant has
entered into Indemnification Agreements with its officers and directors, a form
of which is attached as Exhibit 10.1 hereto and incorporated herein by
reference. The Indemnification Agreements provide the Registrant's officers and
directors with further indemnification to the maximum extent permitted by the
Delaware General Corporation Law." The Registrant maintains directors and
officers liabilities insurance. Reference is made to Section 8(b) of the
Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers
and directors of the Registrant against certain liabilities.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The following transactions reflect the issuance during the previous three
years of securities not registered under the Securities Act:

1. As of July 31, 1997, the Company had issued and sold 129,560 shares of
its Common Stock to employees and consultants at a price of $.875 or $1.125 per
share pursuant to exercises of options under its 1992 Stock Option Plan.

2. On June 2, 1995, the Company issued 3,010,515 shares of Series B
Preferred Stock for an aggregate purchase price of approximately $7,150,000 to a
group of 27 investors.

3. On March 13, 1996, the Company issued 1,514,837 shares of Series C
Preferred Stock for an aggregate purchase price of approximately $4,925,000 to a
group of 22 investors.

4. On February 28, 1997, the Company issued 1,399,992 shares of Series D
Preferred Stock for an aggregate purchase price of $7,000,000 to a group of 29
investors.

5. On October 20, 1994 and February 28, 1995, the Company issued warrants
to purchase a total of 294,734 shares of Common Stock to a group of three
investors in conjunction with loans made by such investors to the Company with
an aggregate exercise price of approximately $700,000.

6. On March 31, 1995, the Company issued a warrant to purchase 15,000
shares of Common Stock to a lender of the Company with an aggregate exercise
price of $30,000.

7. On September 29, 1995, the Company issued a warrant to purchase 13,473
shares of Series B Preferred Stock with an aggregate exercise price of
approximately $32,000 to a lender.

8. On April 12, 1996, the Company issued a warrant to purchase 94,736
shares of Series C Preferred Stock of the Company with an aggregate exercise
price of approximately $308,000 to a lender.

9. On November 20, 1996, the Company issued a warrant to purchase 20,210
shares of Series B Preferred Stock with an aggregate exercise price of
approximately $48,000 to a lender.

The issuances described in Items 15(1) - (9) were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act or Section 4(2) of the Securities Act. The issuances of
the securities described in Items 15(1) - (9) were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such Act as
transactions by an issuer not involving any public offering. In addition, the
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were affixed
to the share certificates issued in such transactions. All recipients had
adequate access, through their relationships with the Registrant, to information
about the Registrant.

II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------ ------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.

3.1* Certificate of Incorporation of the Registrant, as amended to date.

3.2* Form of Certificate of Incorporation to be filed upon the closing of the offering made hereby.

3.3 Bylaws of the Registrant.

3.4* Form of Bylaws to be filed upon the closing of the offering made hereby.

4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.

4.2* Specimen Common Stock certificate.

4.3 1993 Stock Purchase Agreement.

5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP.

10.1 Form of Indemnification Agreement.

10.2 1992 Stock Option Plan.

10.3 1997 Equity Incentive Plan.

10.4 1997 Employee Stock Purchase Plan

10.5 Employment Agreement between the Company and Larry J. Ford, dated April 19, 1995 ("Ford Agreement").

10.6 Amendment to the Ford Agreement, dated May 23, 1995.

Amended and Restated Employment Agreement between the Company and Richard L. Tanler, dated June 11,
10.7 1992.

10.8 Promissory Note between the Company and Richard Tanler, dated April 11, 1996.

10.9 Employment Agreement between the Company and Richard S. Parker, dated June 11, 1992.

10.10 Employment Agreement between the Company and Rory Torrien, dated June 11, 1992

10.11 Offer Letter to Robin L. Pederson, dated March 6, 1996.

10.12 Offer Letter to Donald W. Anderson, executed November 4, 1996.

Amended and Restated Business Loan Agreement between the Company and Silicon Valley Bank, dated
10.13 September 3, 1997.

10.14 Subordinated Loan and Security Agreement between the Company and Comdisco, Inc., dated April 12, 1996.

11.1 Pro forma Net Loss Per Share.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Price Waterhouse LLP.

Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP. Reference is made to Exhibit
23.2* 5.1.

24.1 Power of Attorney (see page II-5).

27.1 Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

II-3
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES

Schedules have been omitted because the information required to be set forth
therein is not applicable or is readily available in the financial statements or
notes thereto.

ITEM 17. UNDERTAKINGS

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Restated
Certificate of Incorporation or the Bylaws of the Registrant, the Underwriting
Agreement, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered hereunder,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Eden
Prairie, State of Minnesota, on this 10th day of October, 1997.

<TABLE>
<S> <C> <C>
INFORMATION ADVANTAGE SOFTWARE, INC.

By: /s/ LARRY J. FORD
-----------------------------------------
Larry J. Ford
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Larry J. Ford and Donald W. Anderson, and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to sign any registration statement for the
same offering covered by this Registration Statement that is to be effective
upon filing pursuant to Rule 462(b) promulgated under the Securities Act of
1933, and all post-effective amendments thereto, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:

<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------

<S> <C> <C>
/s/ LARRY J. FORD
- ------------------------------ October 10, 1997
Larry J. Ford President, Chief Executive
Officer and Director
(Principal Executive
Officer)

/s/ DONALD W. ANDERSON
- ------------------------------ October 10, 1997
Donald W. Anderson Chief Financial Officer,
Vice President (Principal
Financial and Accounting
Officer)

/s/ RICHARD L. TANLER
- ------------------------------ October 10, 1997
Richard L. Tanler Chairman of the Board of
Directors and Senior Vice
President, Strategic
Planning and Marketing
</TABLE>

II-5
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------

<S> <C> <C>
/s/ PROMOD HAQUE
- ------------------------------ October 10, 1997
Promod Haque Director

/s/ FREDRIC R. BOSWELL
- ------------------------------ October 10, 1997
Fredric R. Boswell Director

- ------------------------------
Donald R. Hollis Director

/s/ JAY H. WEIN
- ------------------------------ October 10, 1997
Jay H. Wein Director

/s/ WILLIAM H. YOUNGER
- ------------------------------ October 10, 1997
William H. Younger, Jr. Director

/s/ RONALD E.F. CODD
- ------------------------------ October 10, 1997
Ronald E.F. Codd Director
</TABLE>

II-6
<PAGE>
EXHIBIT INDEX