SOFTWORKS INC, S-1, 1998-05-29

SOFTWORKS INC
S-1, 1998-05-29

Previous: PACER INTERNATIONAL INC, S-1, 1998-05-29

Next: NEWCO UWS INC, 10-12B, 1998-05-29

<PAGE> 1
Registration No. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

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

<TABLE>
<S> <C> <C>
DELAWARE 7372 52-1092916
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
5845 RICHMOND HIGHWAY. SUITE 400
ALEXANDRIA, VIRGINIA 22303
(703) 317-2424
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------------------
JUDY G. CARTER
CHIEF EXECUTIVE OFFICER
SOFTWORKS, INC.
5845 RICHMOND HIGHWAY. SUITE 400
ALEXANDRIA, VIRGINIA 22303
(703) 317-2424
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------------------
Copies to:
David H. Lieberman, Esq. Ira A. Greenstein, Esq.
Blau, Kramer, Wactlar & Lieberman, P. C. Morrison & Foerster LLP
100 Jericho Quadrangle, Suite 225 1290 Avenue of the Americas
Jericho, New York 11753 New York, New York 10104
Tel: (516) 822-4820 Tel: (212) 468-8000
Fax: (516) 822-4824 Fax: (212) 468-7900

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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, please 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>
======================================================================================
Title of Each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.001
per share $48,250,000 $14,234
- --------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act.

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

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 WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER
<PAGE> 2
BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933
OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
<PAGE> 3
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.

SUBJECT TO COMPLETION, DATED MAY 29, 1998
PROSPECTUS

4,200,000 SHARES

SOFTWORKS, INC.

COMMON STOCK

Of the 4,200,000 shares of Common Stock offered hereby, 1,700,000 are being
sold by SOFTWORKS, Inc. ("SOFTWORKS," or the "Company"), and 2,500,000 are being
sold by the Selling Stockholders (as defined herein). The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.

Prior to this offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price will
be between $ and $ per share. The Company has applied for quotation of
the Common Stock on the Nasdaq National Market under the symbol "SWRX."

SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN COMMON STOCK.

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 Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions (1) Company (2) Stockholders
------ --------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share .............. $ $ $ $
Total (3)............... $ $ $ $
</TABLE>
- ------------

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."

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

(3) One of the Selling Stockholders has granted the Underwriters an option
to purchase up to an additional 625,000 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, Proceeds to Company and Proceeds
to Selling Stockholders will be $ , $ , $ and $ , respectively.
See "Underwriting."

The shares of Common Stock offered hereby are offered, subject to prior
sale, when, as and if accepted by the several Underwriters and subject to
approval of certain legal matters by Morrison & Foerster LLP, counsel for the
Underwriters. It is expected that certificates representing the shares of Common
Stock will be available for delivery in New York, New York, on or about ,
1998.

SoundView Financial Group, Inc. Raymond James & Associates, Inc.

, 1998
<PAGE> 4
[Artwork]

SOFTWORKS and Catalog Solution are registered trademarks of the Company.
This prospectus also includes other registered and unregistered trademarks and
service marks of the Company and other companies. All trademarks and service
marks appearing herein that do not relate to the Company's products and services
are the property of their respective holders.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS WHICH
STABILIZE OR MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
<PAGE> 5
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE> 6
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus does not give effect to the exercise of the over-allotment
option described under "Underwriting" or the exercise of any other options or
warrants. Except where otherwise indicated, this Prospectus gives effect to a
stock dividend and the 5,000-for-1 stock split of the Common Stock, each
effective in May 1998.

THE COMPANY

SOFTWORKS, Inc. ("SOFTWORKS," or the "Company") develops, markets, licenses
and supports a family of enterprise systems management software products for
data and storage management and performance management. The Company provides
automated systems management solutions designed to optimize system and
application performance, reduce hardware expenditures, and enhance the
reliability and availability of the data processing environment for enterprises
that employ primarily mainframe computing environments, and increasingly UNIX
and Microsoft(R) Windows NT(R) ("NT"). The Company believes that it has been a
pioneer in the development of automated systems management solutions and that it
is currently a leading vendor in this market. As of March 31, 1998, the
Company's products were licensed for use by 81 of the Fortune 100 companies.

Gartner Group estimates that in 1997, the net new license revenue for the
storage management and network and systems management markets totaled
approximately $8.2 billion. Within the storage management market, the storage
resource management market, in which the Company competes most directly is
expected to grow at a 44% compounded annual growth rate from $201 million in
1997 to $1.2 billion in 2002. Many IT organizations are now demanding next
generation systems management tools that move beyond simply monitoring and
reporting. Solutions that incorporate platform-specific intelligence and allow
automatic management of storage and performance across heterogeneous
environments address a critical requirement of IT groups today. A comprehensive
automation solution should include proactive alerts, programmed responses and
automated corrective actions enabling effective management of the increasing
volume and complexity of the computing environments with fewer specialized
technicians. These solutions should also provide an efficient and effective
vehicle for instituting "best practices" across the enterprise.

The Company's offerings are grouped into four market segments ("Arenas"):
performance management; data and storage management; Year 2000; and professional
services. Historically, the Company's products addressed only the performance
and data storage requirements of mainframe operating systems. Recently, the
Company's products have been expanded to include UNIX-based storage management
products, and the Company expects to introduce NT-based storage management
products in the near future. In addition, the Company has extended its product
family by launching a suite of products in the Year 2000 Arena. The Company has
also created a professional services organization that provides systems
management services, including training, implementation of software and staff
augmentation.

The Company's products are developed using "SST," its proprietary
combination of a design strategy, a development methodology and a set of core
technologies, which is intended to enable the Company's software products to
provide immediate performance improvement and cost savings. The Company believes
that SST differentiates it from its competition by redefining and extending
traditional monitoring and reporting systems management through the use of
embedded intelligence which provides proactive alerts, programmed responses and
automated corrective actions.

The Company intends to leverage its market position in the mainframe
environment to become a leading provider of data and storage management and
performance management products for multi-platform environments. The Company
also plans to expand its offerings to include additional systems management
products and services for both the mainframe and multi-platform environments.
The Company's strategy is to: (i) enhance and extend product offerings in
current Arenas; (ii) expand domestic and international sales channels; (iii)
leverage its existing customer base; (iv) offer products in new systems
management Arenas; and (v) pursue strategic partnerships, alliances and
acquisitions.

3
<PAGE> 7
The Company has over 5,000 licenses of its products for use at over 1,900
installations. The Company's customers include ADP Financial Information
Services Inc., NationsBanc Services, Inc., Sherwin-Williams Co., Texas
Instruments Incorporated, The Vanguard Group and Wal-Mart Stores, Inc. The
Company sells its products through a global direct sales force and a network of
international distributors and resellers.

The Company was incorporated in Maryland in July 1977 and reincorporated in
Delaware in May 1998. It is a subsidiary of Computer Concepts Corp. ("Computer
Concepts"). The Company maintains its principal offices at 5845 Richmond
Highway, Alexandria, Virginia 22303 and its telephone number is (703) 317-2424.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.......................... 1,700,000 shares
Common Stock offered by the Selling Stockholders............. 2,500,000 shares
Total Common Stock offered............................... 4,200,000 shares
Common Stock to be outstanding after the offering............ 15,390,000 shares
Use of proceeds.............................................. For working capital and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol....................... SWRX
</TABLE>

SUMMARY FINANCIAL INFORMATION

The following summary financial information concerning the Company, other
than the as adjusted balance sheet data, has been derived from the financial
statements included elsewhere in this Prospectus and should be read in
conjunction with such financial statements and the notes thereto.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- -----------------------------
1995 1996 1997 1997 1998
------------ ----------- ----------- ------------ ------------
(unaudited)
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue ..................... $ 11,626 $ 16,525 $ 26,770 $ 4,666 $ 6,596
Gross margin ...................... 7,507 12,437 20,522 3,402 4,286
Net (loss) income ................. (1,711) 792 786 (333) (767)
Basic and diluted net (loss) income
per share (1) .................. $ (0.13) $ 0.06 $ 0.06 $ (0.02) $ (0.06)
Basic and diluted weighted average
shares outstanding (1) ......... 13,500,000 13,500,000 13,500,000 13,500,000 13,500,000
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------------
ACTUAL (1) AS ADJUSTED (2)
------------ -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 909 $
Working capital.................... (869)
Total assets....................... 33,416
Long term debt, net of current
portion......................... 117
Total stockholder's equity......... 5,328
</TABLE>

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

(1) Adjusted to give effect to a stock dividend and the 5,000-for-1 split of
the Company's Common Stock, each effective in May 1998.

(2) Adjusted to reflect the sale of 1,700,000 shares of Common Stock by the
Company at the initial public offering price of $ per share and the receipt
by the Company of the net proceeds therefrom.

4
<PAGE> 8
RISK FACTORS

Prospective investors, prior to making an investment decision, should
carefully read this prospectus and consider, along with other matters referred
to herein, the risk factors below.

Fluctuations in Operating Results. The Company's operating results have
fluctuated in the past, and in the future, are expected to fluctuate
significantly from quarter to quarter and may fluctuate on an annual basis as a
result of a number of factors, including, but not limited to, the size and
timing of customer orders; the timing of renewals or the failure of existing
customers to renew their maintenance agreements with the Company when their
current agreements expire; changes in the Company's sales cycle; the timing of
new product announcements and introductions by the Company and its competitors;
the Company's ability to develop, introduce and market new products and product
enhancements; market acceptance of the Company's products; deferrals of customer
orders in anticipation of new products or product enhancements or service
offerings; changes in contract terms (including terms affecting the timing of
recognition of license and maintenance revenue) and the rate at which such
changes are made; the Company's ability to control costs, including the hiring
of new employees; political instability in, or trade embargoes with respect to,
foreign markets; changes in the Company's management team; and fluctuating
economic conditions. The Company's future operating results may fluctuate as a
result of these and other factors, which could have a material adverse effect on
the Company's business, operating results and financial condition. The Company's
operating results may be above or below the expectations of public market
analysts and investors. In the event that operating results are below
expectations, the price of the Company's Common Stock could be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Management of Growth. In recent periods, the Company has experienced rapid
growth and an increase in responsibilities placed upon the Company's management
which has placed added pressures on the Company's operating and financial
systems. In 1997 and during the quarter ended March 31, 1998, the Company hired
74 and 28 new employees, respectively. In addition, the Company recently hired a
Chairman of the Board and a Chief Financial Officer. The Company plans to expand
the number of sales, marketing and software development personnel in the United
States and elsewhere. The recent pace of growth, and anticipated expansion in
the near future, has placed and will continue to place a significant strain on
the Company's management and other resources. Failure to integrate new personnel
on a timely basis could have an adverse effect on the Company's operations.
Furthermore, the expenses associated with expanding the Company's management
team and hiring new employees may be incurred prior to the generation of any
associated revenue. In addition, the officers of the Company have had no prior
experience managing a public company. The Company's ability to manage future
growth will require it to continue to improve its operational, financial,
accounting and management systems and motivate and effectively manage its
employees. If the Company is unable to manage growth effectively, the quality of
the Company's products, its ability to attract and retain key personnel and
develop and market new products, and its results of operations and financial
condition could be materially adversely affected. See " -- Dependence on Key
Personnel" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Expansion of International Operations. In order to increase sales
opportunities and profitability, the Company believes it will be necessary to
expand its marketing, direct and third-party sales and support channels outside
the United States, particularly in Europe. The Company may consider expanding
direct sales, marketing and support capabilities to countries in which the
Company currently maintains distributor relationships, as well as other
countries, as opportunities arise. The Company has limited experience in
marketing and selling its products outside the United States and there can be no
assurance that the Company will be able to increase sales of its products in
Europe or elsewhere. In addition, as the Company seeks to expand its
international operations, it must recruit, train and manage qualified personnel,
including agents. Failure of the Company to attract and retain qualified
personnel 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" and "Business --
Sales, Distribution and Marketing."

Foreign Exchange. Since the Company intends to continue to pursue growth
opportunities in international markets, a significant change in the value of the
dollar against the currency of one or more countries where the Company
recognizes substantial revenue or earnings may materially adversely affect the
Company's business,

5
<PAGE> 9
operating results and financial condition. The Company has not sustained
material foreign currency exchange losses and presently does not attempt to
hedge its exposure to fluctuations in foreign currency exchange rates.
International revenue generated by the Company contributed approximately 23%,
30% and 18% of total revenue during 1995, 1996 and 1997, respectively. Should
the Company's revenue from international sales increase as intended, and should
such sales be denominated in foreign currencies, the Company may adopt a
hedging strategy to guard against foreign currency fluctuations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Relationship with Computer Concepts. After giving effect to the sale of
Common Stock offered hereby, Computer Concepts will beneficially own 66.7% of
the outstanding Common Stock of the Company. As the controlling stockholder of
the Company, Computer Concepts will have the ability to control certain
fundamental matters affecting the Company and may be able to influence other
decisions of the Company. The ongoing relationship between Computer Concepts
and the Company may result in conflicts of interest between Computer Concepts
and the Company. Computer Concepts has received a going concern opinion with
respect to its audited financial statements for the year ended December 31,
1997. Under certain circumstances, Computer Concepts' financial condition may
influence its decisions as the controlling stockholder of the Company. See
"Certain Transactions."

Ability to Recruit Personnel. The ability to achieve anticipated levels of
revenue is substantially dependent on the ability of the Company to attract and
retain skilled personnel on a timely basis, especially research and development
personnel. The Company believes that its future success will depend in large
part on its ability to attract and retain highly skilled technical, sales,
managerial and professional services personnel to ensure the quality of products
and services provided to its customers. Competition for such personnel, in
particular for product development personnel, is intense, and the Company
competes in the market for such personnel against numerous companies, including
larger, more established companies with significantly greater financial
resources than the Company. There can be no assurance that the Company will be
successful in attracting and retaining skilled personnel. The Company's
inability to attract and retain qualified employees could have a material
adverse effect on the Company's business, operating results and financial
condition. See " -- Dependence on Key Personnel" and " -- Rapid Technological
Change; New Versions and New Products."

Dependence on Key Personnel. The Company's business expansion plans are
dependent in substantial part upon the abilities of James A. Cannavino, its
Chairman of the Board, Judy G. Carter, its President and Chief Executive Officer
and Claude R. Kinsey, III, its Vice President and Chief Technology Officer.
Although each of Mr. Cannavino, Ms. Carter and Mr. Kinsey have entered into
employment agreements with the Company, there can be no assurance that they will
remain in the employ of or continue to provide services to the Company. The loss
of the services of any such persons could likely have a material adverse effect
on the Company. The Company has applied for a $5 million life insurance policy
for each of Mr. Cannavino and Ms. Carter, the proceeds of which will be payable
to the Company. See "Management."

Limited Sales Predictability. Revenue in any quarter is dependent to a
significant degree on orders booked and renewals of maintenance agreements in
that quarter and is not predictable with any degree of certainty. Since the
Company's expense levels are based in part on management's expectations
regarding future revenue, if revenue is below expectations in any quarter, the
adverse effect may be magnified by the Company's inability to adjust spending in
a timely manner to compensate for any revenue shortfall. In addition, because
customers are purchasing larger and more complex software products, as well as
suites of products, the average order value has been increasing and purchases of
the Company's products generally require approval of senior management. For
these and other reasons, sales cycles for the Company's products can be lengthy
and are subject to a number of significant risks over which the Company has
little or no control. As a result of the large dollar amounts which may be
represented by a single order, the timing of the receipt of an order can have a
significant impact on the Company's revenue and earnings for a particular
period. Any significant or ongoing failure to reach definitive agreements with
customers, including renewals of current maintenance agreements upon their
expiration, 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."

6
<PAGE> 10
Dependence on Proprietary Technology. The Company's success is dependent
upon its confidential and proprietary software technology and other proprietary
rights. The Company does not currently have any patents or pending patent
applications and relies principally on a combination of: (i) trade secret,
copyright and trademark laws; (ii) nondisclosure, use restriction and other
contractual restrictions and agreements; and (iii) certain technical measures to
protect its technology, including, without limitation, its SST technology.
Because patent applications in the U.S. are not publicly disclosed until the
relevant patent is issued, applications may have been filed by third parties,
which, if issued as patents, could relate to the Company's services and products
as currently designed or as the Company may modify them in the future to meet
the market's requirements.

The Company's policy is to enter into confidentiality, technology ownership
and/or license agreements, as applicable, with its technical software
programming employees as well as with distributors and customers, and to limit
access to and distribution of its software, documentation and other proprietary
information. In addition, the Company does not license or release its source
code, except in connection with source code escrow arrangements and applicable
source code use restrictions. Trade secret, copyright and trademark laws provide
limited protection. There can be no assurance that these laws, in combination
with the steps taken by the Company to protect its proprietary rights, will be
adequate to prevent misappropriation of its technology or other proprietary
rights. Also, such protections do not preclude competitors from independently
developing products with functionality or features similar, substantially
equivalent or superior to the Company's products and technologies. In addition,
effective protection of copyrights, trade secrets, trademarks, and other
proprietary rights may be unavailable or limited in certain foreign countries.
There can be no assurance that licenses for any intellectual property that might
be required in connection with the Company's development of its services or
products, either to avoid infringement of a third party's product, patent or
other rights or to enhance the Company's product offering, would be available on
commercially reasonable terms, if at all. Any failure by or inability of the
Company to protect its proprietary technology or to obtain appropriate licenses
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Business -- Licensing and Intellectual
Property."

Proprietary Rights and Infringement. There has been substantial litigation
in the software industry involving intellectual property rights and the law is
not settled regarding the protectable aspects of software, its design, interface
and architecture. The Company does not believe its products infringe the
intellectual property or other proprietary rights of any third parties, and it
is not aware of any claims by any third party that the Company is infringing any
such right. Nevertheless, there can be no assurance that infringement claims
will not be asserted against the Company or its customers, or that such claims,
if asserted, would not have a material adverse effect on the Company's business,
operating results, and financial condition. In addition, as the Company acquires
or licenses a portion of the software included in its products from third
parties, the Company's exposure to infringement actions may increase because the
Company must rely upon such third parties for information as to the origin and
ownership of such acquired or licensed software. Although the Company intends to
obtain representations as to the origins and ownership of such acquired or
licensed software, there can be no assurance that such representations are or
will be accurate or that such indemnifications will provide adequate
compensation for any breach of such representations. Furthermore, the Company
may initiate claims or litigation against third parties for infringement of or
otherwise to protect or establish the validity of the Company's proprietary
rights. The Company could incur substantial costs, product shipment delays or
restrictions, and diversion of management resources in defending, pursuing and
resolving any claims, with or without merit, relating to proprietary rights. The
Company might be subject to injunctive or other equitable relief, or might be
required to pay substantial damages awards or enter into licensing or royalty
arrangements to resolve any such claims, or might be prevented from selling or
delivering its products. Any of the foregoing could have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business -- Licensing and Intellectual Property."

Risk of Errors or Failures in Software Products. Products as complex as
those offered by the Company may contain errors, failures or bugs. In
particular, the computer environment is characterized by a wide variety of
standard and non-standard configurations and by errors, failures and bugs in
third party platforms and applications that make pre-release testing for
programming or compatibility errors very difficult, time-consuming and
expensive. Furthermore, there can be no assurance that, despite testing by the
Company and by others, errors, failures or bugs will not be found in new
products or releases after commencement of commercial shipments by the Company.
Errors, failures or bugs in the Company's products could result in adverse
publicity, product returns, loss of or delay in market

7
<PAGE> 11
acceptance of the Company's products or claims by the customer or others against
the Company. Alleviating such problems could require significant expenditures of
capital and resources by the Company and could cause interruptions, delays or
cessation of service to the Company's customers. Errors, failures or bugs in the
Company's products could have a material adverse effect on the Company's
business, operating results and financial condition.

Rapid Technological Change; New Versions and New Products. The software
markets in which the Company competes are characterized by rapid technological
change, frequent introductions of new products and product enhancements, changes
in customer demands and evolving industry standards. The introduction of
products embodying new technologies and the emergence of new industry standards
and practices can render existing products obsolete and unmarketable. For
example, the Company's customers have adopted a wide variety of hardware,
software, database and networking platforms and applications. As a result, to
gain broad market acceptance, the Company must continue to support and maintain
its products on a variety of such platforms and applications, and extend its
product offerings to new platform, network and application environments. The
development of new versions of existing products that are compatible with
different operating systems and environments, the Internet, different database
systems, and other applications entails significant technical risk. The
Company's future success will depend on its ability to address the increasingly
sophisticated needs of its customers by developing and introducing enhancements
to its products and new products on a timely basis that keep pace with
technological developments, evolving industry standards and practices and
changing customer requirements. The success of the Company's products may also
depend, in part, on the Company's ability to introduce products which are
compatible with the Internet and World Wide Web. There can be no assurance that
the Company will be successful in developing, introducing and marketing the
enhancements to its products and new products, or versions of such products that
work with or on different operating environments, networks, platforms or
applications that respond to technological developments, evolving industry
standards and practices or changing customer requirements, or that the Company
will not experience difficulties that could delay or prevent the successful
development, introduction and sale of such enhancements or new products or that
such enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. If release dates of future
product enhancements or new products are delayed or if these products or
enhancements fail to achieve market acceptance when released, the Company's
business, operating results and financial condition could be materially and
adversely affected. In addition, the introduction or announcement of new product
offerings or enhancements by the Company or the Company's competitors or major
hardware, systems or software vendors may cause customers to defer or forego
purchases of the Company's products, which could have a material adverse effect
on the Company's business, operating results and financial condition. See
"Business -- Industry Background," " -- The SOFTWORKS Solution," " -- Strategy,"
" -- Products and Services," and " -- Research and Development."

Competition. The market in which the Company operates is competitive,
rapidly evolving and subject to continuous technological change. There can be no
assurance that the Company can maintain or enhance its competitive position
against current and future competitors. Significant factors, such as the
emergence of new products, fundamental changes in computing technology and data
storage and manipulation platforms and applications and aggressive pricing and
marketing strategies by the Company's competitors, may affect the Company's
competitive position. Many of the Company's current and potential competitors
have longer operating histories, greater name recognition, larger installed
customer bases and substantially greater financial, technical and marketing
resources than the Company. There can be no assurance that the Company's current
and potential competitors will not develop software products that may be or may
be perceived to be more effective or responsive to technological change than the
Company's current or future products or that the Company's technologies and
products will not be rendered obsolete by such developments. Increased
competition could result in price reductions, reduced margins or loss of market
share, any of which 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 able to compete successfully against current and future
competitors, or that competitive pressures faced by the Company will not have a
material adverse effect on its business, operating results and financial
condition. See "Business -- Competition."

Dependence on Renewals of Maintenance Agreements. The Company derives a
significant portion of its total revenue from the renewal of maintenance
agreements with existing licenses. The Company's planned expense levels are
based in part on management's expectations regarding renewal rates and on future
renewal, license and other

8
<PAGE> 12
revenue. If such renewals and revenue are below expectations in any quarter, the
Company's inability to adjust spending in a timely manner to compensate for the
revenue shortfall could have a material adverse effect on the Company's
business, operating results and financial condition. The Company's ability to
secure renewals may be affected by, among other factors, its ability to deliver
consistent, high-quality and timely product enhancements; ownership or
management changes within customer organizations, including acquisitions of
customers by other companies; customer capital budget constraints; the
introduction or enhancement of competing products and service offerings by third
parties; political and economic instability in customers' markets; and other
factors, many of which may be beyond the control of the Company. There can be no
assurance that the Company will be able to maintain its historical renewal
rates, and any significant or ongoing decline in renewal rates 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."

Risks Associated with Possible Acquisitions. In the normal course of its
business, the Company evaluates potential acquisitions of businesses, products
and technologies that could complement or expand the Company's business. In the
event the Company identifies an appropriate acquisition candidate, there is no
assurance that the Company would be able to successfully negotiate the terms of
any such acquisition, finance such acquisition or integrate such acquired
business, products or technologies into the Company's existing business and
products. Furthermore, the negotiation of potential acquisitions as well as the
integration of an acquired business could cause diversion of management's time
and resources, and require the Company to use proceeds from the offering to
consummate a potential acquisition. There can be no assurance that a given
acquisition, whether or not consummated, would not have a material adverse
effect on the Company's business, operating results and financial condition. If
the Company consummates one or more significant acquisitions in which the
consideration consists of Common Stock, stockholders of the Company could suffer
significant dilution of their interests in the Company.

Discretion In Application of Proceeds. Management of the Company has
certain discretion over the use and expenditure of a significant portion of the
proceeds of this offering. The Company intends to use the funds raised in this
offering primarily for retention of product development personnel, promotion of
its products and for working capital and general corporate purposes. Although
the Company does not contemplate changes in the allocated use of proceeds, to
the extent the Company finds changes are necessary or appropriate in order to
address changed circumstances and/or opportunities, management may find it
necessary to adjust the use of the Company's capital, including the proceeds of
this offering. As a result of the foregoing, the success of the Company may be
substantially dependent upon the discretion and judgment of the management of
the Company with respect to the application and allocation of the net proceeds
hereof.

Year 2000 Risk. Year 2000 compliance is a measure of the ability of
computer hardware and software to differentiate between the years 1900-1999 and
the years 2000-2099. The underlying problem is caused by the fact that computer
programs traditionally have been written using two digits rather than four to
store year information. Failure to address this problem could result in system
failures and the generation of erroneous data. Moreover, there are a number of
software and product design approaches to achieving Year 2000 compliance, and
the Company may incur additional costs in maintaining its products'
compatibility with third-party products and platforms as a result of any Year
2000 compliance modifications that either the Company or a third party makes to
its relevant product offerings.

The Company is reviewing its internal computer programs and systems to
ensure that they will be Year 2000 compliant. The Company presently believes
that its computer systems will be Year 2000 compliant in a timely manner.
However, while the estimated cost of these efforts is not expected to be
material to the Company's financial position or any year's results of
operations, there can be no assurance to this effect. In addition, the Company
cannot predict the effect of the Year 2000 problem on the vendors, customers and
other entities with which the Company transacts business, or with whose products
the Company's products interact and there can be no assurance that the effect of
the Year 2000 problem on such entities will not 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."

9
<PAGE> 13
Immediate and Substantial Dilution. The initial public offering price is
substantially higher than the net tangible book value per share of Common Stock.
Investors purchasing shares of Common Stock in this offering will incur
therefore immediate and substantial dilution in net tangible book value.
Notwithstanding the fact that all options presently outstanding are exercisable
at the offering price, to the extent that options (currently outstanding or
subsequently granted) to purchase the Company's Common Stock are exercised,
there may be further dilution. If the net proceeds of this offering, together
with available funds and cash generated by operations, are insufficient to
satisfy the Company's cash needs, the Company may be required to sell additional
equity or convertible debt securities. The sale of additional equity or
convertible debt securities could result in additional dilution to the Company's
stockholders. See "Dilution" and "Principal and Selling Stockholders."

No Cash Dividends on Common Stock. The Company has never declared or paid
any cash dividends on its shares of Common Stock. The Company intends to utilize
its earnings, if any, to facilitate the expansion of its business. Accordingly,
it has no intention of declaring or paying cash dividends on its Common Stock
for the foreseeable future. See "Dividend Policy."

Absence of Public Market; Negotiated Offering Price. Prior to the offering,
there has been no market for the Common Stock. Although the Company anticipates
that, upon completion of this offering, the Common Stock will be approved for
quotation on the Nasdaq National Market, there can be no assurance that an
active market will develop for the Common Stock or, if developed, that it can be
maintained. The initial public offering price of the Common Stock has been
established by negotiations between the Company and the Underwriter and will not
necessarily bear any relationship to the Company's book value, assets, past
operating results, financial condition, or other established criteria of value.
See "Underwriting."

Shares Eligible for Future Sale. Sales of large amounts of the Company's
Common Stock in the public market could adversely affect the market price of the
Common Stock and could impair the Company's future ability to raise capital
through offerings of its equity securities. A substantial number of outstanding
shares of Common Stock and shares of Common Stock issuable upon the exercise of
outstanding stock options will become available for resale in the public market
at prescribed times. Upon completion of this offering, there will be
approximately 15,390,000 shares of Common Stock of the Company outstanding. The
4,200,000 shares offered hereby will be eligible for immediate sale in the
public market without restriction. No other shares will be immediately eligible
for resale in the public market without restriction under the Securities Act of
1933, as amended (the "Securities Act"), but 10,275,000 shares will be eligible
for resale in the public market pursuant to Rule 144 and Rule 701 of the
Securities Act beginning 90 days after the effective date of this Prospectus.
Computer Concepts, which owns all of these shares, has agreed that it will not,
without the prior written consent of SoundView Financial Group, Inc., sell or
otherwise dispose of any shares of Common Stock beneficially owned by it for a
period of one year after the effective date of this Prospectus. Following
expiration of the lock-up period (or earlier consent of SoundView Financial
Group, Inc.), these shares will be eligible for sale subject to the restrictions
of Rule 144. The Company intends to register approximately 4,310,000 shares
reserved for issuance under its stock option plan. Options and stock issued
under the stock option plan shall be subject to a 180 day lock-up period from
the closing of this offering. Following this offering, the holders of 815,000
shares of the Company's Common Stock (190,000 shares if the Underwriters'
over-allotment option is exercised in full) will have certain rights to register
those shares under the Securities Act. See "Principal and Selling Stockholders"
and "Shares Eligible for Future Sale."

Potential Anti-Takeover Effects of Delaware Law and Certificate of
Incorporation; Possible Issuances of Preferred Stock. Certain provisions of
Delaware law and the Company's Certificate of Incorporation and By-laws could
make more difficult a merger, tender offer or proxy contest involving the
Company, even if such events could be beneficial to the interests of the
stockholders. These provisions include Section 203 of the Delaware General
Corporation Law, the classification of the Company's Board of Directors into
three classes and the requirement that 66-2/3% of the stockholders of the
Company entitled to vote thereon approve certain transactions, including mergers
and sales or transfers of all or substantially all the assets of the Company.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock or preferred stock.
In addition, the Company's Certificate of Incorporation allows for the issuance
of up to two million shares of preferred stock by the Board of Directors without
stockholder approval on such terms as the Board may determine. The rights of the
holders of Common Stock and preferred stock will be subject to, and may be
adversely affected by, the rights

10
<PAGE> 14
of the holders of additional or other classes of preferred stock that may be
issued in the future. Moreover, although the ability to issue preferred stock
may provide flexibility in connection with possible acquisitions and other
corporate purposes, such issuance may make it more difficult for a third party
to acquire, or may discourage a third party from acquiring, a majority of the
voting stock of the Company. The Company has not issued any shares of preferred
stock and has no current plans to issue any shares of any classes of capital
stock other than as described herein. See "Description of Capital Stock."

Limitations on Personal Liability of Directors. The Company's Certificate
of Incorporation and By-laws contain provisions which reduce the potential
personal liability of directors for certain monetary damages and provide for
indemnity of directors and other persons. The Company is unaware of any pending
or threatened litigation against the Company or its directors that would result
in any liability for which such director would seek indemnification or similar
protection. The Company has entered into indemnification agreements with certain
of its officers and directors. The indemnification agreements provide for
reimbursement for all direct and indirect costs of any type or nature whatsoever
(including attorneys' fees and related disbursements) actually and reasonably
incurred in connection with either the investigation, defense or appeal of
certain legal proceedings, (as defined) including amounts paid in settlement by
or on behalf of an indemnitee thereunder. See "Management -- Personal Liability
and Indemnification of Directors."

Forward-Looking Statements. All statements other than statements of
historical fact included in this Prospectus, including without limitation
statements under "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," regarding the
Company's financial position, business strategy and the plans and objectives of
the Company's management for future operations, are forward-looking statements.
When used in this Prospectus, words such as "anticipate," "believe," "estimate,"
"expect," "intend" and similar expressions, as they relate to the Company or its
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of the Company's management, as well as assumptions
made by and information currently available to the Company's management. Actual
results could differ materially from those contemplated by the forward-looking
statements as a result of certain factors, such as those disclosed under "Risk
Factors," including but not limited to, fluctuations in future operating
results, technological changes or difficulties, management of future growth,
expansion of international operations, the risk of errors or failures in the
Company's software products, dependence on proprietary technology, competitive
factors, risks associated with potential acquisitions, the ability to recruit
personnel, the dependence on key personnel, control of the Company by its
present stockholder, absence of a public market and management's discretion in
the application of the offering proceeds. Such statements reflect the current
views of the Company with respect to future events and are subject to these and
other risks, uncertainties and assumptions relating to the operations, results
of operations, growth strategy and liquidity of the Company. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by this
paragraph.

11
<PAGE> 15
USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby (after deducting underwriting discounts and estimated offering
expenses) are estimated to be $_____. The Company will receive no benefit from
the sale of shares by the Selling Stockholders.

The Company intends to use the net proceeds of this offering primarily for
additional working capital, general corporate purposes, including hiring of
additional personnel and international expansion, and possible acquisitions. In
addition, the Company intends to repay the balance advanced to it by its
parent, Computer Concepts (approximately $1.7 million as of May 28, 1998). See
"Certain Transactions."

The amounts actually expended by the Company for working capital purposes
will vary significantly depending upon a number of factors, including any future
revenue growth and the amount of cash generated by the Company's operations.
Hence, the Company's management will retain broad discretion in the allocation
of the net proceeds from this offering. In addition, the Company may make one or
more acquisitions of complementary technologies, products or businesses which
broaden or enhance the Company's current product offerings. However, the Company
has no specific plans, agreements or commitments, oral or written, and is not
currently engaged in any negotiations for any such acquisition. Pending the uses
described above, the net proceeds will be invested in interest-bearing,
investment-grade securities, U.S. Government securities, money market
investments and short-term, interest-bearing deposits in major banks. See "Risk
Factors -- Discretion in Application of Proceeds" and "-- Risks Associated with
Possible Acquisitions." The net proceeds to the Company from this offering are
expected to be adequate to fund the Company's working capital needs for at least
the next twelve months. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

DIVIDEND POLICY

Holders of the Company's Common Stock are entitled to dividends when, as
and if declared by the Board of Directors out of funds legally available
therefor. The Company has never declared or paid any cash dividends and
currently does not intend to pay cash dividends in the foreseeable future on the
shares of Common Stock. The Company intends to retain earnings, if any, to
finance the development and expansion of its business. In addition, the Company
is a party to a voting trust agreement which limits the payment of dividends.
See "Certain Transactions." Payment of future dividends on the Common Stock will
be subject to the discretion of the Board of Directors and will be contingent
upon future earnings, if any, the Company's financial condition, capital
requirements, general business conditions and other factors. Therefore, there
can be no assurance that any dividends on the Common Stock will ever be paid.

12
<PAGE> 16
DILUTION

The deficit in net tangible book value of the Company at March 31, 1998 was
($859,000), or ($0.06) per share of Common Stock. Net tangible book value per
share is equal to the Company's total tangible assets less total liabilities,
divided by the total number of shares of Common Stock outstanding, after giving
effect to the issuance of a stock dividend and the 5,000-for-1 stock split, each
effective in May 1998, and the issuance of 190,000 shares of Common Stock to a
consultant to the Company simultaneously with the closing of this offering.
After giving effect to the sale by the Company of the 1,700,000 shares of Common
Stock offered hereby at the initial public offering price of $ per share,
and after deducting the underwriting discount and estimated offering expenses,
the net tangible book value of the Company as of March 31, 1998 would have been
$ million or $ per share of Common Stock. This represents an immediate
increase in net tangible book value of $ per share to existing stockholders
and an immediate dilution of $ per share to new investors. The following
table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share....................... $
Net tangible book deficit per share before the offering ...... $ (0.06)
Increase per share attributable to new investors .............
--------
Net tangible book value per share after the offering .........
--------
Dilution per share to new investors .......................... $
</TABLE>

The following table summarizes, as of March 31, 1998, the difference
between existing stockholders and the new investors with respect to the number
of shares of Common Stock purchased from the Company, the total consideration
paid and the average price per share paid:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
----------------------- ----------------------- Average Price
Number Percent Amount Percent Per Share
---------- --------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1) 13,690,000 89.0% $ % $
New investors (1) 1,700,000 11.0 $
---------------------------------------------------
Total 15,390,000 100.0% $ %
===================================================
</TABLE>
- --------------

(1) Sales by the Selling Stockholders in this offering will reduce the number
of shares held by existing stockholders to 11,190,000 or 72.7% of the total
number of shares of Common Stock outstanding after this offering
(10,565,000 or 68.6%, if the over-allotment option is exercised in full),
and will increase the number of shares held by new investors to 4,200,000
or 27.3% (4,825,000 or 31.4%, if the over-allotment option is exercised in
full) of the total number of shares of Common Stock outstanding after this
offering.

13
<PAGE> 17
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1998: (i) on an actual basis, giving effect to the issuance of a stock
dividend and the 5,000-for-1 stock split of the Common Stock, each effective in
May 1998; and (ii) as adjusted to give effect to the sale of 1,700,000 shares of
Common Stock offered by the Company hereby at an initial public offering price
of $ per share and after deducting the underwriting discount and estimated
offering expenses payable by the Company. The information should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------
ACTUAL AS ADJUSTED (1)
---------- ---------------
(in thousands)

<S> <C> <C>
Long-term debt, net of current portion .................. $ 117
Preferred stock, $0.001 par value, 2,000,000 shares
authorized; none issued or outstanding................ --
Common stock, $0.001 par value, 150,000,000 shares
authorized; 13,500,000 shares issued and outstanding
(actual) (2); 15,390,000 shares issued and outstanding
(as adjusted)......................................... 14

Additional paid-in capital .............................. 5,549
Retained (deficit) earnings ............................. (189)
Accumulated other comprehensive income .................. (46)
------- -------
Total stockholders' equity ........................... 5,328

------- -------
Total capitalization .................................... $ 5,445
------- -------
</TABLE>

- ------------
(1) As adjusted to reflect the sale by the Company of the 1,700,000 shares of
Common Stock offered hereby at the initial public offering price of $ per
share and the receipt of the estimated net proceeds therefrom. See "Use of
Proceeds."

(2) Reflects the issuance of a stock dividend and the 5,000-for-1 stock split
of the Common Stock, each effective in May 1998.

14
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data for the three fiscal
years ended December 31, 1995, 1996 and 1997 are derived from the Company's
audited financial statements and for the two fiscal years ended December 31,
1994 and December 31, 1993 are derived from the Company's unaudited financial
statements. The financial information as of March 31, 1998 and for the three
months ended March 31, 1997 and 1998 has been derived from unaudited financial
information prepared by the Company, which in the opinion of management,
includes all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of the financial information set forth therein. This
data should be read in conjunction with the consolidated financial statements of
the Company, related notes, and other financial information included elsewhere
in this Prospectus. See "Financial Statements." All numbers are in thousands,
except share and per share amounts.

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1993 (1) 1994 1995 1996 1997
----------- ----------- ------------ ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue:
Software licenses ..................... $ 3,314 $ 4,438 $ 5,718 $ 8,611 $ 16,633
Maintenance ........................... 3,926 5,011 5,908 7,914 9,957
Professional services ................. -- -- -- -- 180
----------- ----------- ------------ ----------- -----------
Total revenue ....................... 7,240 9,449 11,626 16,525 26,770

Cost of revenue:
Software licenses ..................... 740 223 432 424 580
Maintenance ........................... 1,370 1,905 3,687 3,664 5,513
Professional services ................. -- -- -- -- 155
----------- ----------- ------------ ----------- -----------
Total cost of revenue ............... 2,110 2,128 4,119 4,088 6,248
----------- ----------- ------------ ----------- -----------

Gross margin ......................... 5,130 7,321 7,507 12,437 20,522
----------- ----------- ------------ ----------- -----------

Operating expenses:
Sales and marketing ................... 2,314 2,898 4,262 6,161 12,463
General and administrative ............ 1,746 1,970 1,619 2,217 2,791
Amortization and depreciation ......... 268 861 2,088 1,596 1,972
Research and development .............. 500 850 908 967 1,480
Impairment on goodwill ................ -- -- 1,320 -- --
----------- ----------- ------------ ----------- -----------
Total operating expenses ............ 4,828 6,579 10,197 10,941 18,706

Income before provision for
(benefit from) income taxes .......... 302 742 (2,690) 1,496 1,816
Provision for (benefit from)
income taxes ......................... 128 260 (979) 704 1,030
----------- ----------- ------------ ----------- -----------
Net income (loss) ................... $ 174 $ 482 $ (1,711) $ 792 $ 786
=========== =========== ============ =========== ===========

Basic and diluted net income (loss)
per share (2) ........................ $ 0.01 $ 0.04 $ (0.13) $ 0.06 $ 0.06
=========== =========== ============ =========== ===========
Basic and diluted weighted average
shares outstanding (2) ................ 13,500,000 13,500,000 13,500,000 13,500,000 13,500,000
=========== =========== ============ =========== ===========
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1997 1998
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue:
Software licenses ..................... $ 2,295 $ 3,736
Maintenance ........................... 2,371 2,551
Professional services ................. -- 309
------------ ------------
Total revenue ....................... 4,666 6,596

Cost of revenue:
Software licenses ..................... 101 439
Maintenance ........................... 1,163 1,646
Professional services ................. -- 225
------------ ------------
Total cost of revenue ............... 1,264 2,310
------------ ------------

Gross margin ......................... 3,402 4,286
------------ ------------

Operating expenses:
Sales and marketing ................... 2,305 3,395
General and administrative ............ 884 1,102
Amortization and depreciation ......... 436 490
Research and development .............. 273 272
Impairment or goodwill ................ -- --
------------ ------------
Total operating expenses ............ 3,898 5,259

Income before provision for
(benefit from) income taxes .......... (496) (973)
Provision for (benefit from)
income taxes ......................... (163) (206)
------------ ------------
Net income (loss) ................... $ (333) $ (767)
============ ============

Basic and diluted net income (loss)
per share (2) ........................ $ (0.02) $ (0.06)
============ ============
Basic and diluted weighted average
shares outstanding (2) ................ 13,500,000 13,500,000
============ ============
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------- MARCH 31,
1993 1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- --------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents .... $ 1,210 $ 246 $ 167 $ 1,735 $ 360 $ 909
Working capital .............. (810) (2,098) (3,516) (824) 125 (869)
Total assets ................. 9,827 12,633 12,766 22,543 33,629 33,416
Long term debt, net of current
portion ..................... -- 135 465 351 140 117
Total stockholder's equity ... 5,726 6,214 4,563 5,355 6,087 5,328
</TABLE>
- ------------------------

(1) On September 1, 1993, the Company was acquired by Computer Concepts Crop.
and goodwill and software development costs were recorded on the books of
the Company as of the date of acquisition (see Note 8 to the

15
<PAGE> 19
Consolidated Financial Statements). Amortization of the goodwill and
software development costs have been reflected in the selected
consolidated financial data since that time.

(2) Adjusted to give effect to the issuance of a stock dividend and the
5,000-for-1 stock split of the Common Stock, each effective May 1998.

16
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Selected
Financial Data and the Financial Statements and Notes thereto included elsewhere
in this Prospectus. Quarterly financial data has been derived from information
prepared by the Company. Such data should be read in conjunction with the
consolidated financial statements of the Company, related notes and other
financial information included elsewhere in this prospectus. Certain statements
in this "Management's Discussion and Analysis of Financial Condition and Results
of Operations" are forward-looking statements. The forward-looking statements
contained herein are based on current expectations and entail various risks and
uncertainties that could cause actual results to differ materially from those
expressed in such forward-looking statements. For a more detailed discussion of
these and other business risks, see "Risk Factors."

OVERVIEW

The Company develops, markets, licenses and supports a family of enterprise
systems management software products for data and storage management and
performance management. The Company provides automated systems management
solutions designed to optimize system and application performance, reduce
hardware expenditures, and enhance the reliability and availability of the data
processing environment for enterprises that employ primarily mainframe computing
environments, and increasingly UNIX and Microsoft(R) Windows NT(R) ("NT"). The
Company believes that it has been a pioneer in the development of automated
systems management solutions and that it is currently a leading vendor in this
market. As of March 31, 1998, the Company's products were licensed for use by 81
of the Fortune 100 companies.

The Company's revenue consists of revenue from licensing its software
products, revenue from the maintenance and support of its software products and,
commencing in the third quarter of 1997, revenue from professional services
relating to IT consulting and staff augmentation. Revenue from software licenses
are recognized in accordance with the Statement of Position 97-2 of the American
Institute of Certified Public Accountants, "Software Revenue Recognition."
License revenue is recognized at the time of delivery and acceptance of software
products, where collectibility is deemed probable and no significant obligations
exist. Where the realization of license revenue is not deemed probable, it is
recognized following delivery as the payments are received. Maintenance revenue
is deferred and recognized ratably over the maintenance period. Perpetual
license agreements may be executed under installment payment terms with monthly,
quarterly or annual payment terms for up to five years. Deferred license revenue
resulting from extended payment agreements is included in accounts receivable
due after one year and deferred revenue. Related sales commissions are also
deferred and recognized over the period of the installment payment plan.
Historically, the Company has not experienced any significant bad debts
associated with these long-term arrangements. No single customer accounted for
greater than 3% of the Company's total revenue in 1997. The Company's cost of
license revenue consists primarily of royalties paid to in-house and third-party
software developers and amortization of capitalized research and development
costs. Beginning in 1997 and continuing for four years, the Company is obligated
to pay a minimum annual royalty associated with certain Year 2000 products.

The Company's maintenance revenue has provided a stable and recurring
revenue stream due to relatively high maintenance renewal rates, which have
averaged approximately 95% over the past three years. Maintenance fee revenue
was $5.9 million, $7.9 million and $10.0 million, or 50.8%, 47.9% and 37.2% of
total revenue in 1995, 1996 and 1997, respectively. Revenue related to
professional services and staff augmentation is recognized as the services are
performed.

17
<PAGE> 21
The Company markets and sells its products and services through a direct
sales force in the United States and directly and through distributors in South
America, Europe and Asia. International revenue transactions are denominated in
U.S. dollars and local currencies. Revenue generated by the Company's
international distributors is translated into U.S. dollars at the time the
transaction occurs. The Company has not sustained material foreign currency
exchange losses and presently does not attempt to hedge its exposure to
fluctuations in foreign currency exchange rates. International revenue generated
by the Company contributed approximately 23%, 30% and 18% of total revenue
during 1995, 1996 and 1997, respectively. Should the Company's revenue from
international sales increase as intended, and should such sales be denominated
in foreign currencies, the Company intends to adopt an adequate hedging strategy
to guard against foreign currency fluctuations.

Research and development costs consist principally of salaries and related
payroll for the employees engaged in the development and modification of
software products. For the two years ended December 31, 1996 and 1997, and the
three months ended March 31, 1998, research and development expenses were
$967,000, $1.5 million, and $272,000, respectively. The Company believes that
significant investments in research and development are required in order to
remain competitive.

The Company's operating results have fluctuated in the past and in the
future are expected to fluctuate significantly from quarter to quarter and may
fluctuate on an annual basis as a result of a number of factors. Revenue in any
quarter is dependent to a significant degree on orders booked and renewals of
agreements for maintenance in that quarter and is not predictable with any
degree of certainty. Since the Company's expense levels are based in part on
management's expectations regarding future revenue, if revenue is below
expectations in any quarter, the adverse effect may be magnified by the
Company's inability to adjust spending in a timely manner to compensate for any
revenue shortfall. In addition, because customers are purchasing larger and more
complex software products, as well as suites of products, the average order
value has been increasing and purchases of the Company's products require
approval of higher executive levels. See "Risk Factors -- Fluctuations in
Operating Results" and "Limited Sales Predictability."

SOFTWORKS, Inc. was incorporated in Maryland in 1977 and was acquired by
Computer Concepts in 1993. It has operated as a wholly-owned subsidiary of
Computer Concepts since its acquisition. The Company was reincorporated in
Delaware in May 1998. Pursuant to the terms of a voting trust agreement, as of
the effective date of this offering, the payment of any management fee to
Computer Concepts will terminate and restrictions will be imposed on future
intercompany transactions. See "Certain Transactions."

18
<PAGE> 22
RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain financial
data as a percentage of total revenue.

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
----------------------------------- ---------------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE:
Software license fees ............. 49.2% 52.1% 62.1% 49.2% 56.6%
Maintenance ....................... 50.8 47.9 37.2 50.8 38.7
Professional services ............. -- -- 0.7 -- 4.7
------ ------ ------ ------ ------
Total revenue ................. 100.0 100.0 100.0 100.0 100.0

COST OF REVENUE:
Software license fees ............. 3.7 2.5 2.1 2.2 6.6
Maintenance ....................... 31.7 22.2 20.6 24.9 25.0
Services .......................... -- -- 0.6 -- 3.4
------ ------ ------ ------ ------
Total cost of revenue ......... 35.4 24.7 23.3 27.1 35.0

Gross margin ......................... 64.6 75.3 76.7 72.9 65.0
------ ------ ------ ------ ------

OPERATING EXPENSES:
Sales and marketing ............... 36.7 37.3 46.6 49.4 51.5
General and administrative ........ 13.9 13.4 10.4 18.9 16.7
Amortization and depreciation ..... 18.0 9.6 7.4 9.3 7.4
Research and development .......... 7.8 5.9 5.5 5.9 4.1
Impairment on goodwill ............ 11.3 -- -- -- --
------ ------ ------ ------ ------
Total operating expenses ...... 87.7 66.2 69.9 83.5 79.7
------ ------ ------ ------ ------

(Loss) income before (benefit from)
provision for income taxes ...... (23.1) 9.1 6.8 (10.6) (14.7)
(Benefit from) provision for income
taxes ........................... (8.4) 4.3 3.9 (3.5) (3.1)
------ ------ ------ ------ ------
Net (loss) income .................... (14.7%) 4.8% 2.9% (7.1%) (11.6%)
====== ====== ====== ====== ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 1998
COMPARED TO THREE MONTHS ENDED MARCH 31, 1997

Total Revenue. Total revenue increased 41.4% to $6.6 million for the three
months ended March 31, 1998 from $4.7 million for the three months ended March
31, 1997. The increase was largely the result of sales of product licenses by
the Company's expanded direct sales force. In addition, revenue increased due to
sales of new products and product enhancements, including Year 2000 products.
License revenue increased 62.8% to $3.7 million for the three months ended March
31, 1998 from $2.3 million for the three months ended March 31, 1997.
Maintenance revenue increased 7.6% to $2.6 million for the three months ended
March 31, 1998 from $2.4 million for the three months ended March 31, 1997. This
increase is attributable to overall growth in license revenue and renewals of
maintenance contracts by the installed customer base. Professional services,
which commenced significant operations in the third quarter of 1997, contributed
$309,000 to total revenue for the period ended March 31, 1998.

Cost of Revenue. Included in the cost of revenue are cost of software
license revenue, cost of maintenance revenue, and cost of professional service
revenue. Cost of software license revenue includes royalties paid to its

19
<PAGE> 23
developers and to a third party under a licensing agreement for certain Year
2000 products. Cost of software license revenue increased 334.7% to $439,000, or
6.6% of total revenue, for the three months ended March 31, 1998 from $101,000,
or 2.2% of total revenue, for the three months ended March 31, 1997. This
increase was primarily attributable to the third party agreement that was not in
effect in during the three-month period ended March 31, 1997, as well as an
increase in software license revenue. Cost of maintenance revenue increased
41.5% to $1.6 million, or 25.0% of total revenue, for the three months ended
March 31, 1998 from $1.2 million, or 24.9% of total revenue, for the three
months ended March 31, 1997. This increase is attributable to the increase in
maintenance revenue over the same time period resulting from an increasing
customer base of maintenance contracts. As a percentage of maintenance revenue,
the cost of maintenance was 64.5% for the period ended March 31, 1998 and 49.1%
for the period ended March 31, 1997. This increase is primarily attributable to
staffing of maintenance personnel to support international sales in lieu of
reliance upon distributors, as well as to support the launch of new
multi-platform products. Cost of professional services revenue, which consists
primarily of salaries and expenses, commenced operations in the third quarter of
1997 and was $225,000 for the three months ended March 31, 1998.

Sales and Marketing Expense. Sales and marketing expense includes salaries
and related costs, commissions, travel, facilities and computers, communications
costs and promotional expenses for the Company's direct sales organization and
marketing staff. Sales and marketing expense increased 47.3% to $3.4 million for
the three months ended March 31, 1998 from $2.3 million for the three months
ended March 31, 1997. This increase was attributable to increased numbers of
sales people, as well as the establishment of new offices in Australia, Brazil,
France, Italy, Spain and additional offices in the United States. As a
percentage of revenue, sales and marketing expense increased to 51.5% for the
three months ended March 31, 1998 from 49.4% for the three months ended March
31, 1997. The Company expects to continue hiring additional sales and marketing
personnel.

General and Administrative Expense. General and administrative expense
includes administrative salaries and related benefits, management fees, as well
as legal, accounting and other professional fees. General and administrative
expense increased 24.7% to $1.1 million for the three months ended March 31,
1998 from $884,000 for the three months ended March 31, 1997. The increase in
general and administrative expenses was principally due to an increase in
finance and administrative personnel necessary to support the Company's growth.
As a percentage of revenue, this expense decreased to 16.7% for the three months
ended March 31, 1998 from 18.9% for the three months ended March 31, 1997.

Amortization and Depreciation Expense. Amortization and depreciation
expense increased 12.4% to $490,000 for the three months ended March 31, 1998
from $436,000 for the three months ended March 31, 1997.

Research and Development Expense. Research and development expense includes
salaries and related costs for the personnel involved in the Company's research
and development efforts. Research and development expense was $272,000 for the
three months ended March 31, 1998 and $273,000 for the three months ended March
31, 1997. As a percentage of revenue, this expense decreased to 4.1% for the
three months ended March 31, 1998 from 5.9% for the three months ended March 31,
1997.

Provision for (Benefit from) Income Taxes. The benefit from income taxes
increased 26.4% to $206,000 for the three months ended March 31, 1998 from
$163,000 for the three months ended March 31, 1997. During these periods, the
Company reported its financial results on a consolidated basis with Computer
Concepts and did not file separate tax returns.

YEARS ENDED DECEMBER 31, 1997 AND 1996

Total Revenue. Total revenue increased 62.0% to $26.8 million in 1997 from
$16.5 million in 1996. License revenue increased 93.2% to $16.6 million in 1997
from $8.6 million in 1996. The increase was primarily due to an increase in the
number of licenses of the Company's products in the Performance Arena and
Datastor Arena, the conversion from CPU-based pricing to MIPS-based pricing, as
well as the introduction of its Year 2000 products. Maintenance revenue
increased 25.8% to $10.0 million in 1997 from $7.9 million in 1996. This
increase is attributable to overall growth in license revenue and renewals of
maintenance contracts by the installed customer

20
<PAGE> 24
base. Professional services commenced significant operations in the third
quarter of 1997 and contributed $180,000 to total revenue in 1997.

Cost of Revenue. Cost of software license revenue, including royalties paid
to its developers and to a third party under a licensing agreement for certain
Year 2000 products and the amortization of capitalized software development
costs increased 36.8% to $580,000, or 2.1% of total revenue, in 1997, from
$424,000, or 2.5% of total revenue, in 1996. Cost of maintenance increased 50.5%
to $5.5 million in 1997 from $3.7 million in 1996. As a percentage of
maintenance revenue, cost of maintenance increased to 55.4% in 1997 from 46.3%
in 1996. This increase is primarily attributable to staffing of maintenance
personnel to support international sales in lieu of reliance upon distributors.

Sales and Marketing Expense. Sales and Marketing expense increased 102.3%
to $12.5 million in 1997 from $6.2 million in 1996. Sales and marketing expense
was 46.6% of total revenue in 1997 and 37.3% of total revenue in 1996. The
increase was primarily attributable to the expansion of the direct sales force
both domestically and internationally.

General and Administrative Expense. General and administrative expense
increased 25.9% to $2.8 million in 1997 from $2.2 million in 1996. As a
percentage of total revenue, general and administrative expense declined to
10.4% in 1997 from 13.4% in 1996. General and administrative expenses grew in
absolute dollars as the Company added personnel to all administrative areas, but
declined as a percentage of total revenue principally due to economies of scale
associated with increased revenue.

Amortization and Depreciation Expense. Amortization and depreciation
expense increased 23.6% to $2.0 million in 1997 from $1.6 million in 1996. This
increase was primarily due to the depreciation of additional computer equipment
and software purchased during 1997.

Research and Development Expense. Research and development expense
increased 53.1% to $1.5 million in 1997 from $967,000 in 1996. The increase was
primarily attributable to the Company's accelerated development of
multi-platform and Year 2000 products.

Provision for (Benefit from) Income Taxes. The provision for income taxes
increased 46.3% to $1.0 million in 1997 from $704,000 in 1996. During these
years, the Company was reported on a consolidated basis for Federal income tax
purposes with its parent corporation and did not file a separate Federal tax
return. On a standalone basis, if the Company had filed a separate Federal tax
return, its effective rates for 1997 and 1996 would have been 56.7% and 47.1%,
respectively. These rates differ from the Federal statutory income tax rate
primarily because of the non-deductibility of operating losses incurred by the
recently established foreign subsidiary corporations. During these periods, the
Company reported its financial results on a consolidated basis with Computer
Concepts and did not file separate tax returns.

YEARS ENDED DECEMBER 31, 1996 AND 1995

Total Revenue. Total revenue increased 42.1% to $16.5 million in 1996 from
$11.6 million in 1995. License revenue increased 50.6% to $8.6 million in 1996
from $5.7 million in 1995. The increase was primarily due to an increase in the
number of licenses of the Company's Catalog Solution and Performance Solution
products. Maintenance revenue increased 34.0% to $7.9 million in 1996 from $5.9
million in 1995. This increase is attributable to overall growth in license
revenue and renewals of maintenance contracts by the installed customer base.

Cost of Revenue. Cost of software license revenue was relatively constant
at $424,000, or 2.5% of total revenue, in 1996 as compared to $432,000, or 3.7%
of total revenue, in 1995. Cost of maintenance revenue was $3.7 million in 1996
and 1995.

Sales and Marketing Expense. Sales and marketing expense increased 44.6% to
$6.2 million in 1996 from $4.3 million in 1995. Sales and marketing expense was
37.3% of total revenue in 1996 and 36.7% of total revenue in

21
<PAGE> 25
1995. The increase was primarily attributable to the expansion of the direct
sales force both domestically and internationally.

General and Administrative Expense. General and administrative expense
increased 36.9% to $2.2 million in 1996 from $1.6 million in 1995. As a
percentage of total revenue, general and administrative expense decreased to
13.4% in 1996 from 13.9% in 1995.

Amortization and Depreciation Expense. Amortization and depreciation
expense decreased 23.6% to $1.6 million in 1996 from $2.1 million in 1995.
During 1995, the Company recorded amortization expense related to goodwill
resulting from the acquisition of DBopen, Inc. (see Note 3 to the Consolidated
Financial Statements). The remaining asset was written off during the fourth
quarter of 1995, and as a result, no such amortization was recorded in 1996.

Research and Development Expense. Research and development expense
increased 6.5% to $967,000 in 1996 from $908,000 in 1995. As a percentage of
total revenue, research and development expense decreased to 5.9% in 1996 from
7.8% in 1995.

Provision for (Benefit from) Income Taxes. The provision for income taxes
in 1996 was $704,000 as compared to an income tax benefit of $979,000 in 1995.
During these years, the Company was reported on a consolidated basis for Federal
income tax purposes with its parent corporation and did not file a separate
Federal tax return. On a standalone basis, if the Company had filed a separate
Federal tax return, its effective rates for 1996 and 1995 would have been 47.1%
and (36.4)%, respectively. These rates differ from the Federal statutory income
tax rate primarily because of the non-deductibility of operating losses incurred
by the recently established foreign subsidiary corporations. During these
periods, the Company reported its financial results on a consolidated basis with
Computer Concepts and did not file separate tax returns.

22
<PAGE> 26
QUARTERLY RESULTS OF OPERATIONS

The following tables present certain unaudited quarterly statements of
operations data for each of the Company's last nine quarters, including the
period ended March 31, 1998, as well as the percentage of the Company's total
revenue represented by each item. The information has been derived from the
Company's audited Financial Statements. The unaudited quarterly Financial
Statements have been prepared on substantially the same basis as the audited
Financial Statements contained herein. In the opinion of management, the
unaudited quarterly Financial Statements include all adjustments, consisting
only of normal recurring adjustments that the Company considers to be necessary
to present fairly this information when read in conjunction with the Company's
Financial Statements and notes thereto appearing elsewhere herein. The results
of the operations for any quarter are not necessarily indicative of the results
to be expected for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1996 1996 1996 1996 1997 1997 1997 1997 1998
-------- ------- --------- -------- -------- -------- --------- -------- ---------
(In thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE:
Software licenses.......... $ 1,406 $ 1,528 $ 2,049 $ 3,628 $ 2,295 $ 3,809 $ 4,281 $ 6,248 $ 3,736
Maintenance................ 1,786 1,886 2,039 2,203 2,371 2,458 2,578 2,550 2,551
Professional services...... -- -- -- -- -- -- 45 135 309
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Revenue............ 3,192 3,414 4,088 5,831 4,666 6,267 6,904 8,933 6,596

COST OF REVENUE:
Software licenses.......... 140 98 124 62 101 114 161 204 439
Maintenance................ 868 829 829 1,138 1,163 1,337 1,355 1,658 1,646
Professional services...... -- -- -- -- -- -- 38 117 225
------- ------- ------- ------- ------- ------- ------- ------- -------
Total cost of Revenue.... 1,008 927 953 1,200 1,264 1,451 1,554 1,979 2,310

Gross margin.................. 2,184 2,487 3,135 4,631 3,402 4,816 5,350 6,954 4,286
------- ------- ------- ------- ------- ------- ------- ------- -------
OPERATING EXPENSES:
Sales and marketing........ 1,220 1,225 1,455 2,261 2,305 3,300 3,247 3,611 3,395
General and Administrative. 503 479 512 723 884 594 586 727 1,102
Amortization and 371 389 399 437 436 445 500 591 490
depreciation.............
Research and development... 247 212 248 260 273 413 683 111 272
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses. 2,341 2,305 2,614 3,681 3,898 4,752 5,016 5,040 5,259
------- ------- ------- ------- ------- ------- ------- ------- -------
(Loss) income before (benefit (157) 182 521 950 (496) 64 334 1,914 (973)
from) provision for income
taxes......................
(Benefit from) provision for (31) 127 224 384 (163) 84 207 902 (206)
income taxes...............
------- ------- ------- ------- ------- ------- ------- ------- -------
Net (loss) income............. $ (126) $ 55 $ 297 $ 566 $ (333) $ (20) $ 127 $ 1,012 $ (767)
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

23
<PAGE> 27
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1996 1996 1996 1996 1997 1997 1997 1997 1998
-------- ------- ------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE:
Software licenses.......... 44.0% 44.8% 50.1% 62.2% 49.2% 60.8% 62.0% 70.0% 56.6%
Maintenance................ 56.0 55.2 49.9 37.8 50.8 39.2 37.3 28.5 38.7
Professional services...... -- -- -- -- -- -- 0.7 1.5 4.7
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Revenue............ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

COST OF REVENUE:
Software licenses.......... 4.4 2.9 3.0 1.1 2.2 1.8 2.3 2.3 6.6
Maintenance................ 27.2 24.3 20.3 19.5 24.9 21.3 19.6 18.6 25.0
Professional services...... -- -- -- -- -- -- 0.6 1.3 3.4
------- ------- ------- ------- ------- ------- ------- ------- -------
Total cost of Revenue.... 31.6 27.2 23.3 20.6 27.1 23.1 22.5 22.2 35.0
Gross Margin.................. 68.4 72.8 76.7 79.4 72.9 76.9 77.5 77.8 65.0
------- ------- ------- ------- ------- ------- ------- ------- -------

OPERATING EXPENSES:
Sales and marketing........ 38.2 35.9 35.6 38.8 49.4 52.7 47.0 40.4 51.5
General and Administrative. 15.8 14.0 12.5 12.4 18.9 9.5 8.5 8.1 16.7
Amortization and
depreciation............. 11.6 11.4 9.8 7.5 9.3 7.1 7.3 6.6 7.4
Research and development... 7.7 6.2 6.1 4.4 5.9 6.6 9.9 1.3 4.2
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses. 73.3 67.5 64.0 63.1 83.5 75.9 72.7 56.4 79.8
------- ------- ------- ------- ------- ------- ------- ------- -------
(Loss) income before (benefit
from) provision for income
taxes...................... (4.9) 5.3 12.7 16.3 (10.6) 1.0 4.8 21.4 (14.8)
(Benefit from) provision for
income taxes............... (1.0) 3.7 5.4 6.6 (3.5) 1.3 3.0 10.1 (3.2)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net (loss) income............. (3.9%) 1.6% 7.3% 9.7% (7.1%) (0.3%) 1.8% 11.3% (11.6%)
======= ======= ======= ======= ======= ======= ======= ======= =======

</TABLE>

Demand for the Company's products is generally higher during the fourth
quarter, primarily due to the capital spending trends of its customers, which
has resulted in higher license revenue in that period and lower license revenue
in the first quarter. The Company anticipates that its business will continue to
be subject to such seasonal variations.

The operating results for any quarter are not necessarily indicative of
results that will be obtained for any future period. Due to the relatively fixed
nature of certain of the Company's costs, including personnel and facilities
costs, a decline in revenue, failure to achieve expected revenue in any fiscal
quarter or unanticipated variations in billing and utilization rates of service
personnel would result in lower profitability in that quarter. The Company's
quarterly results may fluctuate as a result of a variety of factors, many of
which are not within the Company's control, including timing and levels of
software purchases by customers, the timing, size and state of new product
development projects, new product introductions by the Company or its
competitors, levels of market acceptance for the Company's products, or the
hiring of additional personnel. In addition, the Company historically has
recognized a large portion of its revenue from sales in the last month of a
quarter such that the magnitude of quarterly fluctuations may not become evident
until late in, or at the end of, a particular quarter. The Company believes,
therefore, that past operating results and period-on-period comparisons should
not be relied upon as an indication of future performance.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations through cash generated from
operations and advances from Computer Concepts. At March 31, 1998, the balance
owing to Computer Concepts was $1.2 million. The Company anticipates repaying
the balance with the proceeds of this offering.

24
<PAGE> 28
At March 31, 1998 the Company had $909,000 in cash and cash equivalents.
The Company's operating activities provided cash of $1.7 million and used cash
of $162,000 in the three months ended March 31, 1998 and March 31, 1997,
respectively, and provided $213,000, $2.7 million and $564,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.

Cash used in investing activities during the three months ended March 31,
1998 was $795,000, and was $2.6 million, $1.3 million and $1.4 million for years
ended December 31, 1997, 1996, and 1995, respectively. The Company's use of cash
was principally for the purchase of property and equipment, software development
and technologies, and additional contingent consideration to two of the
Company's former stockholders in conjunction with the acquisition of the Company
by Computer Concepts. Through March 31, 1998, the Company paid approximately
$1.6 million of a maximum amount payable to such former stockholders of $2.0
million. (See Note 8 to the Consolidated Financial Statements).

There is no significant long term debt outstanding, but the Company is
currently considering establishing a line of credit facility with a commercial
bank. The Company's principal commitments as of March 31, 1998 consisted
primarily of (i) leases on its corporate headquarters facilities, various sales
offices and operating equipment, (ii) employment agreements and (iii) a software
distribution agreement. (See Note 13 to the Consolidated Financial Statements)
There were no material commitments for capital expenditures. The Company's
current cash balances and cash flow from its operations and the proceeds of this
offering are expected to be sufficient to meet its working capital and capital
expenditure needs for at least the next 12 months. However, there can be no
assurance that the Company will have sufficient capital to finance potential
acquisitions or other growth oriented activities, which could require the
Company to incur additional debt or obtain other financing.

YEAR 2000

The Company is reviewing its internal computer programs and system to
ensure that the programs and systems will be Year 2000 compliant. The Company
presently believes that its computer systems will be Year 2000 compliant in a
timely manner. However, while the estimated cost of these efforts are not
expected to be material to the Company's financial position or any year's
results of operations, there can be no assurance to this effect. In addition,
the Company cannot predict the effect of the Year 2000 problem on the vendors,
customers and other entities with which the Company transacts business, or with
whose products the Company's products interact and there can be no assurance
that the effect of the Year 2000 problem on such entities will not have a
material adverse effect on the Company's business, operating results and
financial condition.

25
<PAGE> 29
BUSINESS

OVERVIEW

The Company has over 5,000 licenses of its products for use at over 1,900
installations. The Company's customers include ADP Financial Information
Services Inc., NationsBanc Services, Inc., Sherwin-Williams Co., Texas
Instruments Incorporated, The Vanguard Group and Wal-Mart. The Company sells its
products through a global direct sales force and a network of international
distributors and resellers.

INDUSTRY BACKGROUND

The information technology ("IT") infrastructure worldwide is growing
rapidly and becoming increasingly complex. Despite the widespread adoption of
distributed platforms, such as UNIX and NT, mainframes continue to serve as the
basis for a majority of corporate applications, especially those that are
mission critical. In particular, mainframe environments remain the preferred
platform for high-volume, transaction-oriented applications as well as
applications that require the storage and rapid retrieval of large amounts of
data. Contrary to earlier predictions, the growing volume of data and increasing
number of functions residing on non-mainframe platforms has not reduced reliance
upon mainframes. While the number of mainframe sites and central processing
units ("CPUs") has increased only slightly, the amount of mainframe processing
power, as measured by the aggregate number of millions of instructions processed
per second ("MIPS") installed globally, has increased substantially in recent
years and is anticipated to continue to grow approximately 25% per year through
2002, according to Gartner Group. The overall complexity of the IT
infrastructure has increased because mainframes, UNIX and NT platforms must
co-exist to satisfy an array of business application requirements across the
enterprise.

In addition to the increasing complexity of the multi-platform IT
environment, there are other trends that are driving the need for software
solutions that address enterprise-wide systems management requirements. The
proliferation of NT and UNIX application servers complicates the task of
effectively managing the IT assets of major corporations, in part because of the
decentralized systems management practices adopted to deal with heterogeneous

26
<PAGE> 30
systems. In addition to the duplication of effort associated with decentralized
systems management, corporations can no longer guarantee compliance with their
"best practices." "Best practices" are a set of standard practices and policies
which evolved in mainframe environments and are designed to ensure the data
integrity and availability required by mission-critical computing systems.
Corporate IT organizations need solutions that enable them to extend these "best
practices" across their multi-platform computing environments to deliver the
data integrity required for mission-critical applications.

Software vendors have responded to the need for UNIX and NT systems
management by developing distinct tools tailored to address the unique data
administration, performance and security functions required for each specific
platform. These platform-specific tools are designed to monitor systems and
provide reports that require systems management personnel with platform-specific
expertise to interpret the reports and identify and correct problems. The result
has been a significant increase in the number of technical personnel required to
effectively manage enterprise systems, and such personnel are in increasingly
short supply. Further, the systems storage and technical personnel demands
created by the Year 2000 compliance requirement has exacerbated the resulting
personnel shortage.

As a result of these industry-wide developments, many IT organizations now
demand next generation tools that move beyond simply monitoring and reporting.
Solutions that incorporate platform-specific intelligence and allow automatic
management of storage and performance across heterogeneous environments address
a critical requirement of IT groups today. A comprehensive automation solution
should include proactive alerts, programmed responses and automated corrective
actions enabling effective management of the increasing volume and complexity of
the computing environments with fewer specialized technicians. These solutions
should also provide an efficient and effective vehicle for instituting "best
practices" across the enterprise.

According to Gartner Group, the net new license revenue for the network and
systems management and storage management markets in 1997 totaled approximately
$8.2 billion. Gartner Group also estimates that the storage management market is
expected to grow at a compound annual rate of approximately 20% through the year
2002. Within the storage management market, the storage resource management
market in which SOFTWORKS competes most directly, is expected to grow at a 44%
compound annual growth rate from $201 million in 1997 to $1.2 billion in 2002.

THE SOFTWORKS SOLUTION

The Company provides automated systems management solutions to help
organizations more efficiently and effectively manage their IT infrastructure.
The Company's software incorporates intelligent agent technology to perform
system and data management and analysis tasks across multi-platform
environments. By using the Company's products, customers are able to maintain
high standards of service delivery and respond more easily to the rapid
introduction of new technologies. The Company's products are designed to enable
its customers to exploit the most application-appropriate processor without
incurring the expense of maintaining multiple teams of technology specialists
for each operating system platform. The Company's products possess the following
key features:

- - INTEGRATED STORAGE AND PERFORMANCE MANAGEMENT SOLUTION. The Company
provides integrated Arenas for both storage and performance management. The
Company believes that many organizations want an integrated suite of
products to address their storage and performance needs, and the Company's
solutions provide the functionality and scalability that is typically
required. The Company's solutions are designed to optimize system and
application performance, and enhance the reliability and availability of
the data processing environment for enterprises that employ mainframe, UNIX
and/or NT computing environments.

- - AUTOMATED RESPONSES TO SYSTEMS MANAGEMENT REQUIREMENTS. In contrast to
conventional systems management solutions which merely provide reporting
and monitoring capabilities, the Company's solutions provide proactive
alerts, programmed responses and automated corrective actions. This use of
automation enables organizations to employ fewer specialized technicians to
manage the increasing volume and complexity

27
<PAGE> 31
within the enterprise computing environment, thereby enabling IT personnel
to focus more of their time on other mission-critical systems management
tasks.

- - APPLICATION OF "BEST PRACTICES" TO A MULTI-PLATFORM ENVIRONMENT. The
Company's solutions are designed to enable the centralized control of
disparate applications and platforms, thereby facilitating the
implementation of an organization's "best practices" across multi-platform
environments. The Company's solutions operate efficiently in multi-platform
environments by using embedded intelligent agents which recognize and
respond to the particular requirements of each specific operating system.

- - REDUCED COST OF SYSTEMS MANAGEMENT. The Company's solutions are designed
to reduce the overall cost of managing an organization's IT infrastructure
through a combination of advanced products and technology with
comprehensive service and support. The Company's SST technology is
specifically designed to enable customers (i) to minimize the amount of
intervention by IT personnel, thereby enabling them to focus on other
mission-critical systems management tasks, and (ii) to facilitate system
availability 24 hours per day, seven days per week. Furthermore, the
Company's solution often reduces hardware expenditures by permitting
organizations to defer purchases of CPU and storage upgrades.

STRATEGY

The Company's objective is to become a leading provider of data and storage
management products, performance management products, and related systems
management software products and services on both mainframe and multi-platform
environments. The primary elements of the Company's strategy to achieve this
objective include the following:

ENHANCE AND EXTEND PRODUCT OFFERINGS IN CURRENT ARENAS. The Company intends
to use its technical expertise to enhance its core product functionality,
as well as add products to existing Arenas. These products will enhance
customers' ability to derive superior performance in mission-critical
systems and applications, facilitate the management of enterprise storage
devices and data and help ensure system and data availability. In addition,
the Company intends to integrate and extend its Year 2000 offerings.

EXPAND DOMESTIC AND INTERNATIONAL SALES CHANNELS. The Company intends to
continue to focus on expanding its sales efforts. SOFTWORKS has increased
its direct sales force from 11 in January 1996 to 83 as of March 31, 1998,
and the Company has added 27 sales engineers to support its direct sales
force. In addition to its 12 sales offices in the United States, the
Company maintains direct sales offices in Australia, Brazil, Canada,
France, Italy, Spain and the United Kingdom. The Company is also continuing
to expand its international distribution channels by adding sales agents
and opening additional direct sales offices.

LEVERAGE EXISTING CUSTOMER BASE. The Company has an extensive customer base
in excess of 1,900 installations. It intends to generate additional revenue
from these customers by cross-selling products in the same and other
product Arenas, as well as providing incentives to upgrade to multi-year
maintenance agreements.

OFFER PRODUCTS IN NEW SYSTEMS MANAGEMENT ARENAS. Although the Company
currently provides products that address performance, data and storage
management processes across the enterprise, there is significant growth
potential in extending the Company's SST technology and product offerings
to additional systems management market segments. The Company intends to
respond to anticipated demand for additional multi-platform systems
management solutions, such as application systems management, performance
management, change management or security management. To facilitate this
expansion, the Company is currently developing the next generation of SST
to permit further integration and web-enablement of the Company's products,
as well as to allow integration and deployment of third party systems
management tools.

PURSUE STRATEGIC PARTNERSHIPS, ALLIANCES AND ACQUISITIONS. In addition to
its internal development efforts, the Company intends to acquire new
products, technologies or the distribution rights to third-party products
that address complementary systems management market segments. The Company
also intends to pursue relationships whereby third parties could distribute
some of the Company's products.

28
<PAGE> 32
PRODUCTS AND SERVICES

Using the Company's proprietary SST development methodologies and core
technologies, the Company has developed offerings grouped into four Arenas --
data and storage management products, performance management products, Year 2000
products and professional services.

PRODUCTS

The following table describes the functionality of the Company's products:

PRODUCT DESCRIPTION

DATASTOR ARENA ENTERPRISE-WIDE TOOLS DESIGNED TO
FACILITATE STORAGE MANAGEMENT AND SYSTEM
AND DATA AVAILABILITY

Catalog Solution-SST - Provides comprehensive OS/390 catalog
maintenance, diagnostics, reporting,
backup, repair and recovery
- Reduces disaster recovery time
- Improves the integrity and availability
of the catalog environment and
mission-critical data resources
distributed across multiple operating
system platforms

CenterStage-SST - Provides centralized control and
A suite of independent and monitoring of storage and data resources
integratable products for distributed across multiple operating
OS/390-MVS, AIX, HP-UX, system platforms
Solaris, DB2 and OpenEdition - Reduces the cost, complexity and skill
requirements for capacity planning,
disaster recovery, and storage resource
management
- Reports storage subsystem information
and provides an assessment of data and
storage problems
- Provides customer-controlled automation
to correct designated storage problems
and minimize the need for storage
administrators to develop
platform-specific solutions

PERFORMANCE ARENA DERIVES SUPERIOR PERFORMANCE FROM
MISSION-CRITICAL SYSTEMS AND
APPLICATIONS

Performance Essential-SST - Designed to optimize and improve system
I/O Plus for VSAM and processing performance
I/O Plus for xSAM - Reduces the requirement for manual
HiperLoad for VSAM tuning efforts
- May defer or eliminate costly processor
upgrades while helping to ensure that
service level requirements are met

TeraSAM-SST - Provides transparent file segmentation
to overcome VSAM's 4GB file size
restriction
- Splits large VSAM files into separate
physical data sets that can be managed
and processed more efficiently
- Enables parallel backup, restore and
reorganization of segments to reduce
batch processing time

VSAM Assist-SST - Provides VSAM backup, recovery, and
migration capabilities to simplify and
improve VSAM file and data maintenance
- Reduces batch processing time while
safeguarding data

VSAM Quick Index-SST - Reduces batch processing time and
processor utilization by building
alternate indices quickly
- Improves data availability by providing
faster access to data

YEAR 2000 ARENA ENTERPRISE-WIDE TOOLS DESIGNED TO
IDENTIFY, ASSESS, DIAGNOSE, SIMULATE,
TEST, AGE AND BRIDGE PROGRAMS AND DATA
TO SOLVE MILLENNIUM ISSUES

HotDate 2000 - Independent and integratable products
which facilitate Year 2000 assessment,
remediation and testing on OS/390 and
MVS

HotDate 2000/MP - Products that perform Year 2000
assessment and remediation for C and
COBOL on UNIX (HP-UX, Solaris, AIX) and
assessment for Powerbuilder on NT

29
<PAGE> 33
PROFESSIONAL SERVICES

The Company's Professional Services organization provides implementation,
training and consulting services for its own software (Product SKILLPACKS) and
the software of third-party vendors (Extended SKILLPACKS). The Company's
Professional Services organization also provides staff augmentation services to
enable each customer to augment its technical staff with the personnel required
to meet specific short-term or long-term project goals.

The Company's SKILLPACKS are strategic IT services offerings that provide
customers with expertise and assistance in installing and implementing certain
software products. Product SKILLPACKS are intended to expedite the effectiveness
of the Company's products, accelerate the customer's staff productivity and
expose the customer to the full capabilities of the Company's products. Extended
SKILLPACKS provide implementation of third-party products, assistance with
product conversions, training in specific areas related to systems management
and address short-term, critical project requirements. SKILLPACKS prices are
dependant upon the complexity of each customer's environment, the expertise
level of each customer's staff, and each customer's goal and time frame.

CUSTOMER SERVICE AND TECHNICAL SUPPORT

The Company maintains an experienced staff of customer service personnel to
provide technical support to its customers. Each member of the customer service
staff is certified through an ongoing in-house training and testing program to
provide support for each individual product. The Company's customer service
staff provides product support via telephone and e-mail 24 hours per day, seven
days per week. The Company generally provides software and documentation
updates, including maintenance releases, operating system upgrades and major
functional upgrades, as part of its customer support services.

CUSTOMERS

As of March 31, 1998, the Company's products were licensed for use by 81 of
the Fortune 100 companies. The Company's target customers are large
organizations with complex information systems. In the past, the Company
targeted multi-platform enterprises that relied on mainframe systems. In the
future, the Company intends also to target organizations that rely on UNIX or
NT-based systems.

The following is a representative list of organizations, each of which
accounted for in excess of $50,000 in revenue to the Company for the fiscal year
ended December 31, 1997:

Acxiom Corporation
ADP Financial Information Services Inc.
American International Group Data Center, Inc.
Gallileo International, LLC
NationsBanc Services, Inc.
Nielsen Media Research
Norfolk Southern Corporation
Sherwin-Williams Co.
State of Tennessee
Texas Instruments Incorporated
The Vanguard Group
Unum Life Insurance Company
Wachovia Operational Services Corporation
Wal-Mart Stores, Inc.

SALES, DISTRIBUTION AND MARKETING

SOFTWORKS has over 5,000 licenses of its products for use at over 1,900
installations, including 81 of the Fortune 100 companies. The Company markets
its products and services through its worldwide distribution channels which
include direct sales personnel, agents, and distributors. The Company has
approximately 115 sales and sales

30
<PAGE> 34
support employees engaged in promoting the licensing of the Company's products
and services. In the United States, the Company operates 11 sales offices.
Internationally, the Company has sales offices in Australia, Brazil, Canada,
France, Spain and the United Kingdom. The U.K. office also covers the
Scandinavian and Benelux countries. The Company's international distributors
currently are located in Argentina, Chile, Germany, Hong Kong, Indonesia,
Israel, Japan, Korea, Malaysia, Mexico, Peru, Philippines, Singapore, South
Africa, Thailand, Turkey, Uruguay and Venezuela. All offices are responsible for
specific geographic territories that may extend beyond the state, province, or
country in which the office is located.

The Company's direct sales force is comprised of account managers and sales
engineers who, in addition to the sale of the Company's products, are
responsible for technical demonstrations, product installation and product
implementation. A separate Federal Accounts group specifically targets United
States government clients, including end-users and system integrators. In
addition to the traditional distribution channels, the Company has established a
web-based interface to allow the purchase and download of the Company's
UNIX-based products.

Since 1996, the Company actively has encouraged customers who have only one
or two products installed to license multiple products and to enter into
multi-year maintenance agreements to generate additional revenue and a
significant deferred revenue stream.

The Company maintains vendor relationships with leading organizations such
as IBM, EMC, Hewlett-Packard, Sun and Oracle. These relationships provide the
Company access to pre-release versions of software to help ensure that the
Company's products utilize the latest technology and continue to be competitive
with new operating systems and database releases. These relationships also
provide the Company with insight for strategic planning and product direction.

The Company has implemented marketing initiatives to support the sales and
distribution of its products and services, and communicate corporate direction.
The Company's marketing department is responsible for collateral development,
lead generation and brand awareness of the Company and its products. Marketing
programs include public relations, seminars, industry conferences and trade
shows, advertising and direct mail. The Company's marketing organization also
contributes to both the product direction and strategic planning processes by
providing market research and conducting surveys and focus groups.

LICENSING AND INTELLECTUAL PROPERTY

The Company considers certain features of its software, its internal
operations and development process, and its SST methodology and technology to be
proprietary. The Company relies on a combination of trade secret, copyright and
trademark laws, contractual provisions and certain technology and security
measures to protect its proprietary intellectual property. The Company does not
currently have any patents or pending patent applications. Notwithstanding the
efforts the Company takes to protect its proprietary rights, existing trade
secret, copyright, and trademark laws afford only limited protection. In
addition, effective protection of copyrights, trade secrets, trademarks and
other proprietary rights may be unavailable or limited in certain foreign
countries. The Company believes that, because of the rapid rate of technological
change in the computer software industry, factors such as the knowledge, ability
and experience of the Company's employees, product and service offering
development, and quality of customer support services are more important than
any available trade secret or copyright protection.

The Company does not sell or transfer title of its products to its clients.
The products are licensed generally pursuant to non-exclusive and perpetual
licensing agreements for which extended payment terms of three to five years may
be offered. In the case of extended payment term agreements, the customer is
contractually bound to equal annual fixed payments. The first year of
maintenance is bundled with standard licensing agreements. In the case of
extended payment term agreements, maintenance is bundled for the length of the
payment term. Thereafter, in both instances, the customer may purchase
maintenance annually. Revenue with respect to such extended payment terms is
deferred and recognized over the period of the installment payment plan.

The Company's mainframe products are licensed to end users either on a CPU
basis or a MIPS basis. Under the CPU option, the license fee is based
principally upon the number and size of the central processing units. Under the

31
<PAGE> 35
MIPS option, which the Company is now emphasizing, the license fee is based upon
the amount of the customer's computing power as measured in MIPS. In the last
two fiscal quarters, 40% of the Company's new licenses were priced on a MIPS
basis. The Company's client-server products are licensed to end users on a
per-server or length of service basis.

The Company generates revenue through perpetual product licenses and
maintenance agreements that are renewed annually on the anniversary of the
original purchase date. In 1997, approximately 38% of the Company's revenue was
generated from recurring maintenance agreements. The renewal rate for
maintenance agreements averages approximately 95%. Other revenue is generated
when product licenses are transferred to different or larger CPUs. No single
customer accounted for greater than 3% of the Company's total revenue in 1997.

Currently, the Company licenses certain technology on a perpetual basis
from third parties which is incorporated in some of the Company's products. In
the future, the Company may license additional technology from third parties for
incorporation in some of the Company's products on a perpetual or term basis.

RESEARCH AND DEVELOPMENT

The computer software industry is characterized by rapid technological
change, which requires ongoing development and maintenance of software products.
It is customary for modifications to be made to a software product as experience
with its use grows or changes in manufacturers' hardware and software so
require.

The Company uses a design strategy and development methodology, SST, that
facilitates product development, adherence to market requirements, quality
testing practices, product consistency and ease of integration, and long-term
supportability and maintainability. This methodology has evolved over the life
of the Company to address the changing requirements of product-for-market
development that have come about as a result of client-server technology
advances. The Company is currently expanding the scope of its CenterStage suite
of products to address Oracle and NT, and to enhance and extend the SST
knowledge base. The Company is also finalizing the development of additional
products for its Year 2000 Arena.

The Company believes that its research and development staff, many with
extensive experience in the industry, represents a significant competitive
advantage. As of March 31, 1998, the Company's research and development group
consisted of 31 employees. The Company seeks to recruit highly qualified
employees, and its ability to attract and retain such employees will be a
principal factor in its success in maintaining a leading technological position.
For the two years ended December 31, 1996 and 1997, and the three months ended
March 31, 1998, research and development expenses were $967,000, $1.5 million
and $272,000, respectively. The Company believes that significant investments in
research and development are required in order to remain competitive.

COMPETITION

The market in which the Company operates is highly competitive, rapidly
evolving and subject to continuous technological change. The Company's products
have traditionally addressed niches within the performance and storage
management segments. In conjunction with the Company's SST strategy, the Company
groups its existing products into bundles to compete more effectively and better
address customers' strategic issues. This approach enables the Company to expand
its audience to include systems and applications personnel, as well as a higher
level of management within the customer and prospect base.

Although the Company believes that it maintains a competitive advantage by
bundling its software products to minimize point product competition and by
offering products which the Company believes are unavailable from its
competitors, there are no assurances that the Company can maintain or enhance
its competitive position against current and future competitors. Significant
factors such as the emergence of new products, fundamental changes in computing
technology and data storage and manipulation platforms and applications and
aggressive pricing and marketing strategies by the Company's competitors may
affect the Company's competitive position. Many of the Company's current and
potential competitors have longer operating histories, greater name recognition,
larger installed customer bases and substantially greater financial, technical
and marketing resources than the Company.

<PAGE> 36

There can be no assurance that the Company's current and potential competitors
will not develop software products that may be or may be perceived to be more
effective or responsive to technological change than are the Company's current
or future products or that the Company's technologies and products will not be
rendered obsolete by such developments. Increased competition could result in
price reductions, reduced margins or loss of market share, any of which could
have a material adverse effect on the Company's business, operating results and
financial condition. The Company's primary competitors are Sterling Software,
Inc. and Boole & Babbage, Inc. in the data and storage management market; Boole
& Babbage, Inc. and Computer Associates International, Inc. in the performance
management market; and Compuware, Inc. and Viasoft Inc. in the Year 2000 market.
The Company believes that its products compete effectively on the basis of
quality, functionality, technical support and service, and embedded intelligence
and proactive automation.

EMPLOYEES

As of March 31, 1998, the Company employed 212 full-time employees,
including 113 in marketing, sales and support services, 81 in research and
development, customer support and maintenance, and 18 in finance and
administration. The Company employs 178 people in the United States and 34 in
foreign countries. The future success of the Company will depend in large part
upon its continued ability to attract and retain highly skilled and qualified
personnel in a highly competitive environment. The Company believes that its
employee relations are good.

PROPERTIES

The Company's executive offices, customer support and marketing operations
are currently located in facilities occupying approximately 26,000 sq. ft. in
Alexandria, Virginia pursuant to a lease expiring in August 2001. The annual
rent and maintenance for the facility is approximately $324,000. The lease
provides for a renewal option for five years at an annual rent increase of three
percent during the option period. The Company also leases an aggregate of 36,000
sq. ft. at an aggregate annual rental of $614,600 in 12 locations throughout the
country which are also used for the performance of product development. The
Company maintains foreign sales offices in Australia, Brazil, Canada, France,
Spain and the United Kingdom.

LEGAL PROCEEDINGS

The Company is not a party to any litigation that it believes could have a
material adverse effect on its business, financial condition and results of
operations.

33
<PAGE> 37
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY PERSONNEL

The directors, executive officers and other key personnel of the Company
and their ages are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION

<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
James A. Cannavino................... 54 Chairman of the Board of Directors
Judy G. Carter....................... 46 President, Chief Executive Officer and Director
C.R. Kinsey, III..................... 53 Vice President and Chief Technology Officer
Robert C. McLaughlin................. 52 Treasurer and Chief Financial Officer
Daniel DelGiorno, Jr................. 43 Director
Robert Devine........................ 59 Director

OTHER KEY PERSONNEL
Joseph Miksch........................ 50 Vice President, Global Sales
Lisa Welch........................... 33 Vice President, Technology
</TABLE>

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

DIRECTORS AND EXECUTIVE OFFICERS

James A. Cannavino has been Chairman of the Board of the Company since
April 1998. Mr. Cannavino is President and Chief Executive Officer of CyberSafe,
Inc., a corporation specializing in network security. He was the President and
Chief Executive Officer of Perot Systems Corporation through July 1997, and
prior to that was a Senior Vice President at IBM, responsible for strategy and
development. He also served on the IBM Corporate Executive Committee and
Worldwide Management Council, and on the board of IBM's integrated Services and
Solutions Company. Mr. Cannavino currently is a consultant to Computer Concepts
and serves on the boards of the National Center for Missing and Exploited
Children, 7th Level and Marist College.

Judy G. Carter has been President and Chief Executive Officer and a
Director of the Company since October 1993. Prior thereto, Ms. Carter was the
Chief Operating Officer for the Company from 1991. Ms. Carter started at the
Company as a system software developer and progressed into a number of
supervisory and managerial roles, culminating in her appointment as vice
president of technical services in 1990. Ms. Carter is a director of Fairfax
Opportunities Unlimited, a non-profit organization.

C.R. Kinsey, III, a co-founder of the Company, has been Vice President of
the Company since May 1998 and has been Chief Technology Officer since 1977.
From 1977 until May 1998, Mr. Kinsey was also Secretary and Treasurer of the
Company. In addition, Mr. Kinsey is a primary technical advisor to the Company's
technology division for new product research and development, product
enhancements and service and support.

Robert C. McLaughlin has been Treasurer and Chief Financial Officer since
March 1998. Prior thereto, Mr. McLaughlin was a Department Director with global
responsibilities at Perot Systems Corporation in Dallas, Texas from November
1996 through December 1997. Mr. McLaughlin also served as Senior Vice President
for a real estate investment venture in West Palm Beach, Florida from 1993 to
1996, as a Vice President of First Union National Bank of Florida, N.A. in Fort
Lauderdale from 1991 to 1993 and a Vice President of Southeast Bank, N.A. in
Miami from 1987 to 1991.

Daniel DelGiorno, Jr. has been a Director of the Company since May 1998.
Mr. DelGiorno is the President and Chief Executive Officer, Treasurer and a
director of Computer Concepts for more than the past five years. He is also

34
<PAGE> 38
the President and principal shareholder of Tech Marketing Group Corp., a
privately held corporation which is a stockholder of Computer Concepts.

Robert Devine has been a Director of the Company since May 1998. Mr. Devine
is a director and the Chief Executive Officer of Chemtainer Industries, Inc. and
has held such position with Chemtainer Industries for more than twenty years.
Chemtainer Industries manufactures and distributes a diverse array of commercial
and consumer products nationally and internationally with eleven plants located
in nine states from coast to coast. Mr. Devine is also a director of Rototron
Corp. and Tracey International, and has been a director and vice-president of
the non-profit New York City Mental Health Association for more than ten years.

OTHER KEY PERSONNEL

Joseph Miksch has been Vice President, Global Sales since 1996. Mr. Miksch
is responsible for all of the Company's global direct and indirect sales efforts
in Europe, the Middle East, Africa, Asia-Pacific and North and South America.
Prior to joining the Company, Mr. Miksch was Chief Operating Officer at DBE,
Inc. for two years, where he was responsible for launching new products into the
Oracle and DB2 markets. Prior thereto, for 10 years, Mr. Miksch served in
several senior vice president positions at Computer Associates in its system,
graphics application and database divisions.

Lisa Welch has been Vice President, Technology since 1988. Ms. Welch is
responsible for strategic planning and business development, and direct research
and product development. She is also responsible for customer service and
information delivery activities. Prior to joining the Company, Ms. Welch was
employed with NCR as a systems engineer.

EXECUTIVE COMPENSATION

The following table sets forth the annual and long-term compensation with
respect to the Company's Chief Executive Officer and its other most highly
compensated executive officer other than the Chief Executive Officer ("named
executive officers") whose total annual salary and bonus equaled or exceeded
$100,000 for services rendered for the fiscal year ended December 31, 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------------------

YEAR OTHER ANNUAL
COMPENSATION ($) ALL OTHER
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) (1) COMPENSATION ($)(2)
- --------------------------- ---------- --------- --- -------------------

Judy G. Carter 1997 $155,000 (3) $165,000 (4) -- $ 1,000
President and Chief
Executive Officer

C.R. Kinsey, III 1997 $155,000 (3) $165,000 (4) -- $ 188,000
Vice-President and Chief
Technology Officer
</TABLE>

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

(1) No Other Annual Compensation is shown because the amounts of perquisites
and other non-cash benefits provided by the Company do not exceed the
lesser of $50,000 or 10% of the total annual base salary and bonus
disclosed in this table for the respective officer.

(2) All Other Compensation includes royalties paid in respect of software
products developed by such officers.

(3) Includes $5,000 deferred from 1996.

(4) Includes $77,500 deferred from 1996.

35
<PAGE> 39
STOCK OPTION GRANTS IN LAST FISCAL YEAR

No stock options were granted by the Company to the named executive
officers during the fiscal year ended December 31, 1997.

401(k) SAVINGS PLAN

The Company sponsors a retirement plan (the "401(k) Savings Plan") intended
to be qualified under section 401(k) of the Internal Revenue Code of 1986, as
amended. All employees over age 21 who have completed at least 1,000 hours in
their first year of employment by the Company are eligible to participate in the
401(k) Savings Plan. Employees may contribute to the 401(k) Savings Plan on a
tax deferred basis up to 15% of their total annual salary, but in no event more
than the maximum permitted by the Code ($9,500 in calendar 1997). The Company
matches all employee contributions up to $2,375 per year per employee, and all
Company contributions are fully vested. As of December 31, 1997, 115 employees
had elected to participate in the 401(k) Savings Plan. For the fiscal year ended
December 31, 1997, the Company contribution is an aggregate approximately
$52,000 to the 401(k) Savings Plan, of which an aggregate $4,700 was a
contribution for Judy G. Carter and C.R. Kinsey, III.

1998 LONG TERM INCENTIVE PLAN

In May 1998, the Company adopted the SOFTWORKS, Inc. 1998 Long Term
Incentive Plan (the "1998 Incentive Plan") in order to motivate qualified
employees of the Company, to assist the Company in attracting employees and to
align the interests of such persons with those of the Company's stockholders.

The 1998 Incentive Plan provides for the grant of "incentive stock options"
within the meaning of the Section 422 of the Internal Revenue Code of 1986, as
amended, "non-qualified stock options," restricted stock, performance grants and
other types of awards to officers, key employees, consultants and independent
contractors of the Company and its affiliates.

The 1998 Incentive Plan, which will be administered by the Long Term
Incentive Plan Administrative Committee of the Board of Directors, authorizes
the issuance of a maximum of 4,310,000 shares of Common Stock which may be
either newly issued shares, treasury shares, reacquired shares, shares purchased
in the open market or any combination thereof. If any award under the 1998
Incentive Plan terminates, expires unexercised, or is cancelled, the shares of
Common Stock that would otherwise have been issuable pursuant thereto will be
available for issuance pursuant to the grant of new awards. To date, the Company
has not granted any options to purchase shares of Common Stock under the 1998
Incentive Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company had no Compensation Committee for its fiscal year ended
December 31, 1997.

PERSONAL LIABILITY AND INDEMNIFICATION OF DIRECTORS

The Company's Certificate of Incorporation and By-laws contain provisions
which reduce the potential personal liability of directors for certain monetary
damages and provide for indemnity of directors and other persons. The Company is
unaware of any pending or threatened litigation against the Company or its
directors that would result in any liability for which such director would seek
indemnification or similar protection.

Such indemnification provisions are intended to increase the protection
provided directors and, thus, increase the Company's ability to attract and
retain qualified persons to serve as directors. The Company believes that the
substantial increase in the number of lawsuits being threatened or filed against
corporations and their directors has resulted in a growing reluctance on the
part of capable persons to serve as members of boards of directors of companies,
particularly of companies which intend to become public companies. The Company
also believes that the increased risk of personal liability without adequate
insurance or other indemnity protection for its directors could

36
<PAGE> 40
result in overcautious and less effective direction and management of the
Company. Consequently, the Company has agreed to indemnify its directors and
officers and has applied for directors and officers liability insurance.
However, there can be no assurance that the Company will be able to obtain such
insurance.

The provisions affecting personal liability do not abrogate a director's
fiduciary duty to the Company and its stockholders, but eliminate personal
liability for monetary damages for breach of that duty. The provisions do not,
however, eliminate or limit the liability of a director for failing to act in
good faith, for engaging in intentional misconduct or knowingly violating a law,
for authorizing the illegal payment of a dividend or repurchase of stock, for
obtaining an improper personal benefit, for breaching a director's duty of
loyalty (which is generally described as the duty not to engage in any
transaction which involves a conflict between the interests of the Company and
those of the director) or for violations of the federal securities laws. The
provisions also limit or indemnify against liability resulting from grossly
negligent decisions including grossly negligent business decisions relating to
attempts to change control of the Company.

The provisions regarding indemnification provide, in essence, that the
Company will indemnify its directors against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding arising out of the
director's status as a director of the Company, including actions brought by or
on behalf of the Company (shareholder derivative actions). The provisions do not
require a showing of good faith. Moreover, they do not provide indemnification
for liability arising out of willful misconduct, fraud, or dishonesty, for
"short-swing" profits violations under the federal securities laws, or for the
receipt of illegal remuneration. The provisions also do not provide
indemnification for any liability to the extent such liability is covered by
insurance. One purpose of the provisions is to supplement the coverage provided
by such insurance.

These provisions diminish the potential rights of action which might
otherwise be available to stockholders by limiting the liability of officers and
directors to the maximum extent allowable under Delaware law and by affording
indemnification against most damages and settlement amounts paid by a director
of the Company in connection with any stockholders derivative action. However,
the provisions do not have the effect of limiting the right of a stockholder to
enjoin a director from taking actions in breach of his fiduciary duty, or to
cause the Company to rescind actions already taken, although as a practical
matter courts may be unwilling to grant such equitable remedies in circumstances
in which such actions have already been taken.

The Company has entered into Indemnification Agreements with certain of its
officers and directors. The Indemnification Agreements provide for reimbursement
for all direct and indirect costs of any type or nature whatsoever (including
attorneys' fees and related disbursements) actually and reasonably incurred in
connection with either the investigation, defense or appeal of certain legal
proceedings, including amounts paid in settlement by or on behalf of an
indemnitee thereunder.

37
<PAGE> 41
CERTAIN TRANSACTIONS

In prior fiscal years, Computer Concepts provided certain corporate and
administrative services to the Company including executive management and
professional services (accounting, auditing and legal). These services were
performed for $500,000 in each of 1997 and 1996, and at no charge in 1995. The
Company and Computer Concepts also jointly participated in certain employee
benefit plans (defined contribution and employee health) and the Company was
allocated its applicable share of these costs. Additionally, in prior fiscal
years, certain of the Company's employees received part of their compensation
in the form of Computer Concepts common stock or options. Upon consummation of
this offering, the Company will no longer pay any administrative fees to
Computer Concepts. In addition, following this offering any options granted to
the Company's employees only will be to purchase Common Stock of the Company.

Mr. Cannavino, Chairman of the Board of the Company, remains a consultant
to Computer Concepts and is expected to receive from Computer Concepts prior to
the closing of this offering 100,000 shares of the Company's Common Stock. The
100,000 shares of Common Stock are to be transferred in consideration for
services rendered to Computer Concepts. It is not anticipated that Mr. Cannavino
will receive significant additional compensation from Computer Concepts for
future consulting services.

VOTING TRUST AGREEMENT

Prior to the completion of the offering, the Company, Computer Concepts,
James Cannavino, Daniel DelGiorno, Jr. and Robert Devine, each of whom are
members of the Company's Board of Directors, intend to enter into a Voting Trust
Agreement (the "Voting Trust Agreement"). Pursuant to the Voting Trust
Agreement, Computer Concepts will deposit its shares of the Common Stock in a
voting trust, together with certain shares of the Common Stock that may be
acquired by its affiliates. The Voting Trust Agreement provides, among other
things, that the Trustees will have the right to vote the deposited shares in
connection with certain specified major transactions (the "Approval Actions")
and that Computer Concepts and its affiliates will have the right to vote for
the election of directors, except that if an "independent" Trustee (as defined
below) ceases to be a director for any reason or is required to resign as a
director of the Company for failure to remain independent, the remaining
independent Trustee(s) will have the right to vote for a successor director,
which Trustee(s) will take direction from the holders of a majority of the
shares of Common Stock not held by Computer Concepts and its affiliates. The
Voting Trust Agreement requires that each Trustee must be a Director of the
Company, that two of the three Trustees must be "independent" and that a Trustee
required to be independent who ceases to be so will resign as Trustee and as a
Director of the Company. The Voting Trust Agreement does not prevent the pledge
of any of the deposited shares. As used in the Voting Trust Agreement, the term
"independent" means any director of the Company who does not derive in excess of
$60,000 of compensation from Computer Concepts or its affiliates (other than the
Company).

Pursuant to the Agreement, the Company agrees that the following Approval
Actions will not be taken without the approval of the Trustees: (i) the sale,
lease, encumbrance, assignment, transfer or conveyance of all or substantially
all of the assets or capital stock of the Company to an acquiring party, or the
merger or consolidation of the Company into or with another corporation, if
Computer Concepts or one of its affiliates is a party to such transaction; (ii)
any filing by the Company or a subsidiary for relief as a debtor under any
bankruptcy or similar law, any application by the Company or a subsidiary for
the appointment of a receiver, trustee, custodian or similar fiduciary for a
substantial portion of the consolidated assets of the Company and its
subsidiaries, or the consent by the Company or a subsidiary to any petition or
application seeking similar relief which is filed against the Company or the
subsidiary, or the voluntary liquidation, dissolution or winding up of the
Company; (iii) the declaration or payment of any dividends on any capital stock
of the Company; (iv) the incurrence of certain liens upon any significant
portion of the property of the Company; (v) the acquisition of any equity
security, or any right to acquire any equity security, of any other corporation,
other than the Company's formation of one or more wholly-owned subsidiaries (or
subsidiaries in which a de minimis number of shares are held by a third party in
order to comply with local law), if such other corporation is Computer Concepts
or one of its affiliates; (vi) the acquisition of assets outside the ordinary
course of business from Computer Concepts or one of its affiliates; (vii) except
as set forth in the Voting Trust Agreement, any transaction or proposed
transaction between the Company and any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, or any corporation owned directly or

38
<PAGE> 42
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company), pursuant to which such
person becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company's then outstanding
securities; (viii) any transaction or proposed transaction between the Company
and an affiliate or any transaction or proposed transaction between the Company
and Computer Concepts for an aggregate consideration in excess of $1 million
unless a fairness opinion is obtained from SoundView Financial Group, Inc. or
any other independent investment banking institution of national standing
appointed by the Company; or (ix) any other transaction which requires
stockholder approval under Delaware law to the extent that any of the parties to
the Voting Trust Agreement have been advised in writing by counsel that the
transaction presents an actual conflict of interest between Computer Concepts
and its affiliates and the other holders of the Common Stock.

The Voting Trust Agreement will remain in effect until the earliest of: (i)
Computer Concepts and its affiliates collectively ceasing to own 25% or more of
the Company's Common Stock, (ii) the acquisition by a person other than
Computer Concepts and its affiliates of a greater percentage of the Common Stock
than that then owned by Computer Concepts and its affiliates or (iii) 10 years
from the date of the Voting Trust Agreement.

39
<PAGE> 43
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth the beneficial ownership of the Company's
Common Stock as of May 27, 1998 (taking into effect the stock dividend and the
5,000-for-1 stock split on the Common Stock effective in May 1998) of (i) each
person known by the Company to beneficially own 5% or more of the Company's
outstanding Common Stock, (ii) each of the Company's executive officers,
directors and director nominees, and (iii) all of the Company's executive
officers and directors as a group. Except as otherwise indicated, all shares of
Common Stock are beneficially owned, and investment and voting power is held, by
the persons named as owners.

<TABLE>
<CAPTION>
Shares Beneficially Owned* Percentage Ownership (1)
---------------------------------- --------------------------------
Before Offering After Before After
Offering Offering Offering
<S> <C> <C> <C> <C>
Name of Beneficial Owner

Computer Concepts Corp.(1)............... 13,500,000 10,900,000 100% 100%
James A. Cannavino.......................
Judy G. Carter...........................
Claude R. Kinsey III.....................
Robert C. McLaughlin.....................
Daniel DelGiorno, Jr.....................
Robert Devine............................
All officers and directors as a group
(7 persons)...........................
</TABLE>

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

* Less than one percent (1%) unless otherwise indicated.

(1) Assumes no exercise of the Underwriters' over-allotment option.

(2) The address is 80 Orville Drive, Bohemia, New York 11716.

40
<PAGE> 44
DESCRIPTION OF CAPITAL STOCK

Effective in May 1998, there was a stock dividend and a 5,000-for-1 stock
split of the Company's Common Stock. As a result, the Company's authorized
capital stock consists of 150,000,000 shares of Common Stock, $.001 par value
per share and 2,000,000 shares of Preferred Stock, $.001 par value per share.

COMMON STOCK

General. The Company has 150,000,000 authorized shares of Common Stock,
13,690,000 of which were issued and outstanding prior to the offering. All
shares of Common Stock currently outstanding are validly issued, fully paid and
non-assessable, and all shares which are the subject of this Prospectus, when
issued and paid for pursuant to this offering, will be validly issued, fully
paid and non-assessable.

Voting Rights. Each share of Common Stock entitles the holder thereof to
one vote, either in person or by proxy, at meetings of stockholders. The
Company's Board consists of three classes each of which serves for a term of
three years. At each annual meeting of the stockholders the Directors in only
one class will be elected. The holders are not permitted to vote their shares
cumulatively. Accordingly, the holders of more than fifty percent (50%) of the
issued and outstanding shares of Common Stock can elect all of the Directors of
the Company. See "Principal Stockholders."

Dividend Policy. All shares of Common Stock are entitled to participate
ratably in dividends when and as declared by the Company's Board of Directors
out of the funds legally available therefor. Any such dividends may be paid in
cash, property or additional shares of Common Stock. The Company has not paid
any cash dividends since its inception and presently anticipates that all
earnings, if any, will be retained for development of the Company's business and
that no dividends on the shares of Common Stock will be declared in the
foreseeable future. Payment of future dividends will be subject to the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, the operating and financial condition of the Company,
its capital requirements, general business conditions and other pertinent facts.
Therefore there can be no assurance that any dividends on the Common Stock will
be paid in the future. See "Dividend Policy."

Miscellaneous Rights and Provisions. Holders of Common Stock have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of the liquidation or dissolution, whether
voluntary or involuntary, of the Company, each share of Common Stock is entitled
to share ratably in any assets available for distribution to holders of the
equity of the Company after satisfaction of all liabilities, subject to the
rights of holders of Preferred Stock.

PREFERRED STOCK

The Company's Certificate of Incorporation authorizes the issuance of up to
2,000,000 shares of preferred stock, par value $.001 per share. Currently there
are no shares of preferred stock issued or outstanding.

The issuance of preferred stock by the Board of Directors could adversely
affect the rights of holders of shares of Common Stock by, among other things,
establishing preferential dividends, liquidation rights or voting power. The
issuance of preferred stock could be used to discourage or prevent efforts to
acquire control of the Company through the acquisition of shares of Common
Stock.

CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS

The Company's Certificate of Incorporation contains certain provisions
which may be deemed to be "anti-takeover" in nature in that such provisions may
deter, discourage or make more difficult the assumption of control of the
Company by another entity or person. In addition to the ability to issue
preferred stock, these provisions are as follows:

41
<PAGE> 45
A vote of 66-2/3% of the stockholders is required by the Certificate of
Incorporation in order to approve certain transactions including mergers and
sales or transfers of all or substantially all of the assets of the Company.

The Company's By-laws provide that the members of the Board of Directors of
the Company be classified into three classes: Class I (which consists of Robert
Devine) will serve until the Company's 1999 Annual Meeting of Stockholders.
Class II (which consists of James A. Cannavino and Judy G. Carter) will serve
until the Company's 2000 Annual Meeting of Stockholders. Class III (which
consists of Daniel DelGiorno, Jr.) will serve until the Company's 2001 Annual
Meeting of Stockholders. After their initial staggered terms, the term of each
class will run for three years and expire at successive annual meetings of
stockholders. Accordingly, it is expected that it would take a minimum of two
annual meetings of stockholders to change a majority of the Board of Directors.
Further, directors may only be removed for cause prior to the expiration of
their term of office.

DELAWARE GENERAL CORPORATION LAW

The Delaware General Corporation Law further contains certain anti-takeover
provisions. Section 203 of the Delaware General Corporation Law provides, with
certain exceptions, that a Delaware corporation may not engage in any of a broad
range of business combinations with a person who owns 15% or more of the
corporation's outstanding voting stock (an "interested stockholder") for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination, is approved by the board of
directors of the corporation before the person becomes an interested
stockholder, (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation (excluding shares owned by persons
who are both officers and directors of the corporation and shares held by
certain employee stock ownership plans), or (iii) the business combination is
approved by the corporation's board of directors and by the holders of at least
66-2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder.

TRANSFER AGENT, REGISTRAR AND WARRANT AGENT

The transfer agent and registrar for the Common Stock is Manhattan Transfer
Registrar Co.

42
<PAGE> 46
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 15,390,000 shares
of Common Stock outstanding. Of these shares, the 4,200,000 shares of Common
Stock sold in this offering (4,825,000 shares if the Underwriters'
over-allotment option is exercised in full) will be freely tradeable without
restriction or further registration under the Securities Act, except for any
shares purchased by an "affiliate" of the Company (in general, a person who has
a control relationship with the Company), which will be subject to the
limitations of Rule 144 adopted under the Securities Act. All of the remaining
shares are deemed to be "restricted securities," as that term is defined under
Rule 144 promulgated under the Securities Act.

In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, commencing ninety (90) days after the
effective date of the registration statement of which this prospectus is a part,
a person, including an affiliate of the Company (or persons whose shares are
aggregated), who has owned restricted shares of Common Stock beneficially for at
least one year is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the total number of outstanding
shares of the same class or the average weekly trading volume of the Company's
Common Stock on all exchanges and/or reported through the automated quotation
system of a registered securities association during the four calendar weeks
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. A person who has not been an affiliate of the Company for at least the
three months immediately preceding the sale and who has beneficially owned
shares of Common Stock for at least two years is entitled to sell such shares
under Rule 144 without regard to any of the limitations described above.

10,275,000 of the shares of restricted stock presently outstanding have
been held for more than one year. Computer Concepts, which owns all of these
shares, has agreed that it will not, without the prior written consent of
SoundView Financial Group, Inc., sell or otherwise dispose of any shares of
Common Stock beneficially owned by it for a period of one year after the
effective date of this Prospectus. Following expiration of the lock-up period
(or earlier consent of SoundView Financial Group, Inc.), these shares will be
eligible for sale subject to the restrictions of Rule 144. The Company intends
to register approximately 4,310,000 shares reserved for issuance under its stock
option plan. Options and stock issued under the stock option plan shall be
subject to a 180 day lock-up period from the closing of this offering. Following
this offering, the holders of 815,000 shares of the Company's Common Stock
(190,000 shares if the Underwriters' over-allotment option is exercised in full)
will have certain rights to register those shares under the Securities Act. The
sale of any substantial number of these shares in the public market could
adversely affect prevailing market prices following the offering.

No predictions can be made as to the effect, if any, that sales of shares
under Rule 144 or otherwise or the availability of shares for sale will have on
the market, if any, prevailing from time to time. Sales of substantial amounts
of the Common Stock pursuant to Rule 144 or otherwise may adversely affect the
market price of the Common Stock offered hereby.

43
<PAGE> 47
UNDERWRITING

Upon the terms and subject to the conditions set forth in an underwriting
agreement (the "Underwriting Agreement"), the Underwriters named below, for whom
SoundView Financial Group, Inc. and Raymond James & Associates, Inc. are acting
as representatives (the "Representatives"), have severally agreed to purchase
from the Company and the Selling Stockholders an aggregate of 4,200,000 shares
of Common Stock. The number of shares of Common Stock that each Underwriter has
agreed to purchase is set forth opposite its name below:

<TABLE>
Underwriters Number
of Shares
---------
<S> <C>
SoundView Financial Group, Inc. ............................
Raymond James & Associates, Inc. ...........................

---------
Total................................................ 4,200,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of the
shares of Common Stock are purchased by the Underwriters pursuant to the
Underwriting Agreement, all such shares of Common Stock (other than the shares
of Common Stock covered by the over-allotment option described below) must be so
purchased.

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

The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers (who may include the Underwriters) at
such price less a concession not to exceed $ per share. The Underwriters
may allow, and such dealers may reallow, a concession not to exceed $ per
share to any other Underwriter and certain other dealers. After the initial
public offering of the shares offered hereby, the offering price and other
selling terms may be changed by the Representatives. The Representatives have
advised the Company that the Underwriters do not intend to confirm any shares to
any accounts over which they exercise discretionary control.

The Selling Stockholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
aggregate of 625,000 additional shares of Common Stock at the initial public
offering price less underwriting discounts and commissions. Such option may be
exercised solely for the purpose of covering over-allotments, if any, in
connection with the offering of the shares offered hereby. To the extent that
the Underwriters exercise such option, each of the Underwriters will be
committed, subject to certain conditions, to purchase a number of additional
shares proportionate to such Underwriter's initial commitment as indicated in
the preceding table.

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

The Company, all directors and executive officers of the Company and
certain other persons have agreed that, for a period of 180 days, and Computer
Concepts has agreed that, for a period of 12 months after the date of this
Prospectus, without the prior written consent of SoundView Financial Group,
Inc., they will not, with certain limited exceptions, directly or indirectly,
offer, sell, contract to sell, grant any option to purchase or otherwise dispose
of any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock or, in any manner, transfer all or a portion of
the economic consequences associated with the

44
<PAGE> 48
ownership of the Common Stock, other than the shares of Common Stock offered
hereby.

In connection with this offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), pursuant to which such persons may bid for or
purchase shares of Common Stock for the purpose of stabilizing the market price
for shares of Common Stock. The Underwriters also may create a short position
for the account of the Underwriters by selling more shares of Common Stock in
connection with this offering than they are committed to purchase from the
Company and the Selling Stockholders, and in such case may purchase shares of
Common Stock in the open market following the completion of this offering to
cover all or a portion of the shares of Common Stock or by exercising the
Underwriters' over-allotment option referred to above. In addition, SoundView
Financial Group, Inc., on behalf of the Underwriters, may impose "penalty bids"
under contractual arrangements with the other Underwriters whereby it may
reclaim for an Underwriter (or a dealer participating in this offering) for the
account of the other Underwriters, the selling concession with respect to shares
of Common Stock that are distributed in this offering but subsequently purchased
for the account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Common Stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph are required, and,
if they are undertaken, may be discontinued at any time.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock offered hereby
will be determined by negotiation among the Company, the Selling Stockholders
and the Representatives. Among the factors to be considered in determining the
initial public offering price are prevailing market conditions, revenue and
earnings of the Company, market valuations of other companies engaged in
activities similar to the Company, estimates of the business potential and
prospects of the Company, the present state of the Company's business
operations, the history of and prospects for the Company's business and the
industry in which it competes, the Company's management and other factors deemed
relevant. The estimated initial public offering price range set forth on the
cover of this preliminary prospectus is subject to change as a result of market
conditions and other
factors.

LEGAL MATTERS

The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by the law firm of Blau, Kramer, Wactlar &
Lieberman, P.C., Jericho, New York. Certain matters will be passed upon for the
Underwriters by Morrison & Foerster LLP, New York, New York.

EXPERTS

The audited financial statements of the Company as of December 31, 1996 and
1997, and for each of the three years in the period ended December 31, 1997,
included in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (the "Registration
Statement"), pursuant to the Securities Act, with respect to the Common Stock.
This Prospectus does not contain all of the information set forth in the
Registration Statement, and the exhibits thereto. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement and its exhibits. As of the date of this Prospectus, the
Company will be subject to the informational requirements of the Exchange Act,
and in accordance therewith shall file reports, proxy and information
statements, and other information with the Commission. The Registration
Statement and such reports,

45
<PAGE> 49
proxy and information statements, and other information can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional offices at Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the Commission's Web site located at
http://www.sec.gov.

<PAGE> 50
SOFTWORKS, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
TABLE OF CONTENTS

<S> <C>
Report of Independent Public Accountants............................................................. F-2

Consolidated Balance Sheets As of December 31, 1996 and 1997 and As of March 31, 1998
(unaudited) (in thousands, except share and per share data)................................. F-3

Consolidated Statements of Operations For the Years Ended December 31, 1995,
1996 and 1997 and For the Three Months Ended March 31, 1997 (unaudited)
and March 31, 1998 (unaudited) (in thousands, except share and per
share data)................................................................................. F-4

Consolidated Statements of Stockholder's Equity For the Years Ended December 31, 1995, 1996 and
1997 and For the Three Months Ended March 31, 1998 (unaudited) (in thousands, except
share data)................................................................................. F-5

Consolidated Statements of Cash Flows For the Years Ended December 31, 1995, 1996 and 1997 and
For the Three Months Ended March 31, 1997 (unaudited) and March 31, 1998 (unaudited)
(in thousands).............................................................................. F-6

Notes to Consolidated Financial Statements As of December 31, 1995, 1996 and 1997 and As of
March 31, 1998 (unaudited).................................................................. F-7
</TABLE>

F - 1
<PAGE> 51
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SOFTWORKS, Inc.:

We have audited the accompanying consolidated balance sheets of SOFTWORKS,
Inc., a Delaware corporation, and subsidiaries (the "Company") as of December
31, 1996 and 1997, and the related consolidated statements of operations,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

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

Washington, D.C.
May 28, 1998
ARTHUR ANDERSEN LLP

F-2
<PAGE> 52
SOFTWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------ ---------
1996 1997 1998
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 1,735 $ 360 $ 909
Accounts receivable, net of allowance for doubtful accounts of 5,962 10,652 6,885
$249, $206, and $185 in 1996, 1997, and 1998, respectively..........
Installment receivables............................................... 2,697 6,148 7,686
Prepaid expenses and other current assets............................. 423 984 1,344
Deferred tax assets................................................... 472 138 240
--------- --------- ---------
Total current assets............................................ 11,289 18,282 17,064
--------- --------- ---------
Installment receivables, noncurrent................................... 3,714 6,480 7,173
Property and equipment, net........................................... 1,223 1,523 1,481
Software development costs, net....................................... 948 1,303 1,521
Goodwill, net of accumulated amortization of $1,728, $2,477, and 4,683 4,611 4,666
$2,684 in 1996, 1997, and 1998, respectively........................
Other assets.......................................................... 357 734 686
Deferred tax assets, noncurrent....................................... 329 696 825
--------- --------- ---------
Total assets.................................................... $ 22,543 $ 33,629 $ 33,416
========= ========= =========

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses................................. $ 2,022 $ 4,689 $ 3,745
Current portion of long-term debt..................................... 225 183 137
Deferred maintenance revenue.......................................... 6,258 6,225 5,848
Deferred installment revenue.......................................... 2,461 5,506 6,985
Due to Parent......................................................... 1,147 1,554 1,218
--------- --------- ---------
Total current liabilities....................................... 12,113 18,157 17,933
--------- --------- ---------
Deferred maintenance revenue, noncurrent.............................. 249 740 783
Deferred installment revenue, noncurrent.............................. 3,950 7,122 7,872
Long-term debt........................................................ 351 140 117
Payable to Parent for federal income taxes............................ 525 1,383 1,383
--------- --------- ---------
Total liabilities............................................... 17,188 27,542 28,088
--------- --------- ---------

COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Preferred stock, $.001 par value, 2,000,000 shares authorized, -- -- --
none issued or outstanding........................................
Common stock, $.001 par value; 150,000,000 shares authorized; 14 14 14
13,500,000 shares issued and outstanding..........................
Additional paid-in capital.......................................... 5,549 5,549 5,549
Retained (deficit) earnings......................................... (208) 578 (189)
Accumulated other comprehensive income (loss)....................... -- (54) (46)
--------- --------- ---------
Total stockholder's equity...................................... 5,355 6,087 5,328
--------- --------- ---------
Total liabilities and stockholder's equity...................... $ 22,543 $ 33,629 $ 33,416
========= ========= =========
</TABLE>

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

F-3
<PAGE> 53
SOFTWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- ---------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Software licenses ...................... $ 5,718 $ 8,611 $ 16,633 $ 2,295 $ 3,736
Maintenance ............................ 5,908 7,914 9,957 2,371 2,551
Professional services .................. -- -- 180 -- 309
------------ ------------ ------------ ------------ ------------
Total revenue ...................... 11,626 16,525 26,770 4,666 6,596
------------ ------------ ------------ ------------ ------------

COST OF REVENUE:
Software licenses ...................... 432 424 580 101 439
Maintenance ............................ 3,687 3,664 5,513 1,163 1,646
Professional services .................. -- -- 155 -- 225
------------ ------------ ------------ ------------ ------------
Total cost of revenue .............. 4,119 4,088 6,248 1,264 2,310
------------ ------------ ------------ ------------ ------------
Gross Margin ........................... 7,507 12,437 20,522 3,402 4,286
------------ ------------ ------------ ------------ ------------

OPERATING EXPENSES:
Sales and marketing .................... 4,262 6,161 12,463 2,305 3,395
General and administrative ............. 1,619 2,217 2,791 884 1,102
Amortization and depreciation .......... 2,088 1,596 1,972 436 490
Research and development ............... 908 967 1,480 273 272
Impairment on goodwill ................. 1,320 -- -- -- --
------------ ------------ ------------ ------------ ------------
Total operating expenses ........... 10,197 10,941 18,706 3,898 5,259
------------ ------------ ------------ ------------ ------------

(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR
INCOME TAXES.............................. (2,690) 1,496 1,816 (496) (973)

(BENEFIT) PROVISION FOR INCOME TAXES ........ (979) 704 1,030 (163) (206)
------------ ------------ ------------ ------------ ------------

NET (LOSS) INCOME ........................... $ (1,711) $ 792 $ 786 $ (333) $ (767)
============ ============ ============ ============ ============
BASIC AND DILUTED NET (LOSS) INCOME PER SHARE $ (0.13) $ 0.06 $ 0.06 $ (0.02) $ (0.06)
============ ============ ============ ============ ============
BASIC AND DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING .............................. 13,500,000 13,500,000 13,500,000 13,500,000 13,500,000
============ ============ ============ ============ ============

</TABLE>

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

F-4
<PAGE> 54
SOFTWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(in thousands, except share data)

<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL RETAINED OTHER
COMMON STOCK PAID-IN (DEFICIT) COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS)
------ ------ ------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1995......................... 13,500,000 $ 14 $ 5,489 $ 711 $ --
Contribution to capital..................... -- -- 60 -- --
Net loss and comprehensive loss............. -- -- -- (1,711) --
---------- ---------- ---------- ---------- ---------
BALANCE, December 31, 1995....................... 13,500,000 14 5,549 (1,000) --
Net income and comprehensive income......... -- -- -- 792 --
---------- ---------- ---------- ---------- ---------
BALANCE, December 31, 1996....................... 13,500,000 14 5,549 (208) --
Foreign currency translation adjustment..... -- -- -- -- (54)

Net income.................................. -- -- -- 786 --
---------- ---------- ---------- ---------- ---------
Total comprehensive income............

BALANCE, December 31, 1997....................... 13,500,000 14 5,549 578 (54)

Foreign currency translation adjustment
(unaudited)............................... -- -- -- -- 8
Net loss (unaudited)........................ -- -- -- (767) --
---------- ---------- ---------- ---------- ---------
Total comprehensive (loss)
(unaudited)........................
BALANCE, March 31, 1998 (unaudited).............. 13,500,000 $ 14 $ 5,549 $ (189) $ (46)
========== ========== ========== ========== =========
</TABLE>

TOTAL
STOCKHOLDER'S COMPREHENSIVE
EQUITY INCOME (LOSS)
------ -------------
<S> <C> <C>
BALANCE, January 1, 1995......................... $ 6,214
Contribution to capital..................... 60
Net loss and comprehensive loss............. (1,711) $ (1,711)
---------- =========
BALANCE, December 31, 1995....................... 4,563
Net income and comprehensive loss........... 792 $ 792
---------- =========
BALANCE, December 31, 1996....................... 5,355
Foreign currency translation adjustment..... (54) $ (54)

Net income.................................. 786 786
---------- ---------
Total comprehensive income............ $ 732
=========
BALANCE, December 31, 1997....................... 6,087
Foreign currency translation adjustment
(unaudited)............................... 8 $ 8
Net loss (unaudited)........................ (767) (767)
---------- ---------
Total comprehensive (loss)
(unaudited)........................ $ (759)
---------
BALANCE, March 31, 1998 (unaudited).............. $ 5,328
==========
</TABLE>

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

F - 5
<PAGE> 55
SOFTWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ---------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ..................................... $ (1,711) $ 792 $ 786 $ (333) $ (767)

Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities -
Amortization and depreciation:
Property and equipment ....................... 432 505 697 147 180
Software development costs ................... 509 543 689 149 170
Goodwill ..................................... 1,238 659 749 177 207
Provision for doubtful accounts ................... 5 50 75 75 55
Loss on disposal of property and equipment ........ 22 2 -- -- --
Impairment on goodwill ............................ 1,320 -- -- -- --
Deferred tax (benefit) provision .................. (1,070) 569 (33) (184) (231)
Changes in operating assets and liabilities -
Accounts receivable and installment receivables ... (1,260) (8,598) (11,002) (343) 1,480
Inventories ....................................... 2 -- -- -- --
Prepaid expenses and other current assets ......... 63 (314) (561) (151) (360)
Other assets ...................................... 39 (306) (377) 10 48
Accounts payable and accrued expenses ............. (42) 761 2,515 (195) (936)
Deferred revenue .................................. 1,017 8,071 6,675 486 1,895
-------- -------- -------- -------- --------
Net cash provided by (used in) operating
activities ............................. 564 2,734 213 (162) 1,741
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................... (515) (445) (990) (258) (138)
Software development and technology purchases ......... (546) (359) (1,044) (96) (388)
Additional consideration for SOFTWORKS, Inc.
acquisition ......................................... (327) (478) (522) (224) (269)
-------- -------- -------- -------- --------
Net cash used in investing activities .... (1,388) (1,282) (2,556) (578) (795)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from (advances to) Parent .............. 728 145 407 15 (336)
Change in amount payable to Parent for federal
income taxes ........................................ -- -- 858 -- --
Repayments of long-term debt .......................... (94) (190) (253) (61) (69)
Proceeds from long-term debt .......................... 111 161 -- -- --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities ............................. 745 116 1,012 (46) (405)
-------- -------- -------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS -- -- (44) -- 8
-------- -------- -------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ....... (79) 1,568 (1,375) (786) 549
CASH AND CASH EQUIVALENTS, beginning of period ............. 246 167 1,735 1,735 360
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, end of period ................... $ 167 $ 1,735 $ 360 $ 949 $ 909
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ......................................... $ 45 $ 46 $ 44 $ 13 $ 10
-------- -------- -------- -------- --------

Income tax paid (refunded) ............................ $ 91 $ 40 $ (96) $ -- $ 14
======== ======== ======== ======== ========
</TABLE>

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

F - 6

<PAGE> 56
SOFTWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995, 1996, AND 1997 AND AS OF MARCH 31, 1998 (UNAUDITED)

1. ORGANIZATION AND NATURE OF OPERATIONS:

THE COMPANY

SOFTWORKS, Inc. ("SOFTWORKS") designs, develops, markets and supports systems
management software products for enterprise computing environments primarily in
the United States. SOFTWORKS wholly-owns subsidiaries in the United Kingdom,
France, Brazil, Australia, Italy and Spain which operate primarily as sales
offices. SOFTWORKS was incorporated in 1977 under the state laws of Maryland and
reincorporated in 1998 under the state laws of Delaware. In 1993, SOFTWORKS was
acquired by Computer Concepts Corp. (the "Parent"), which is a publicly traded
company listed on the Nasdaq SmallCap Exchange under the symbol "CCEE."

PUBLIC OFFERING

On May 28, 1998, the Board of Directors of SOFTWORKS, in conjunction with the
Parent, authorized management of SOFTWORKS to file a registration statement with
the Securities and Exchange Commission permitting the Company to sell 1,700,000
shares of common stock to the public as well as 2,500,000 shares of SOFTWORKS'
common stock owned by the existing Stockholder (the "Offering").

INCREASE IN AUTHORIZED SHARES AND STOCK SPLIT

SOFTWORKS has restated its articles of incorporation to increase the number of
authorized shares to 2,000,000 of preferred shares and 150,000,000 of common
shares. Additionally, on May 28, 1998, the Board of Directors of SOFTWORKS
effected a 5,000-for-1 stock split. The effects of the stock split have been
given retroactive application in the consolidated financial statements for all
periods presented.

VOTING TRUST AGREEMENT

In conjunction with the Offering, shares owned by the Parent will be placed
in a voting trust. The voting power of the trust will be held by three trustees
who will be members of the Board of Directors of SOFTWORKS. One trustee will be
the Chairman of the Parent and the remaining two trustees will be directors who
do not have a significant financial interest in the Parent, of which one is the
Chairman of the Company. The agreement provides that upon a change in either of
the remaining two trustees, the non-Parent stockholders have control of the
selection of the successor director/trustee. This agreement remains in effect
until the Parent reduces its ownership to 25% of the Company.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of SOFTWORKS and its
wholly-owned subsidiaries (the "Company"). All significant intercompany
transactions and balances have been eliminated in consolidation.

RISKS AND OTHER FACTORS

As a Company that develops, markets, licenses and supports a family of
enterprise systems management software products for data and storage management
and performance management, it faces certain risks. These include dependence on
proprietary technology, rapid technological change, errors or failures in its
products, dependence on key personnel, challenges in recruiting personnel and a
highly competitive marketplace.

F-7
<PAGE> 57
After the Offering, the Parent will continue to own more than 50% of the
outstanding shares of the Company. The Parent received a going concern opinion
with respect to its audited financial statements for the year ended December 31,
1997. Under certain circumstances, the Parent's financial condition may
influence its decisions as the controlling stockholder of the Company. The
voting trust agreement noted above gives the majority of trustees control over
significant corporate actions including certain disposition or encumbrance of
assets and the payment of dividends.

2. SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL INFORMATION

The unaudited consolidated balance sheet as of March 31, 1998, and the unaudited
consolidated statements of operations and cash flows for the three months ended
March 31, 1997 and 1998, have been prepared by the Company and in the opinion of
management include all adjustments, consisting only of normal recurring
accruals, which management considers necessary for fair presentation of the
financial statements for such periods. The Company's results of operations for
the three months ended March 31, 1998, are not necessarily indicative of results
that may be expected for any other future interim periods or for the year ending
December 31, 1998. Demand for the Company's products has historically been
higher during the fourth quarter, primarily due to the capital spending trends
of its customers, which has resulted in higher software license revenue in that
period and lower software license revenue in the first quarter.

REVENUE RECOGNITION

Revenue from the sale of perpetual and term software licenses are recognized at
the time of delivery and acceptance of software products by the customer, when
collectibility is probable. The Company provides customers with the option to
pay for license fees over extended periods of time, generally three to five
years. In such instances, the Company does not consider sales contracts with
amounts due for periods greater than one year from delivery, fixed and
determinable, and accordingly recognizes such amounts as revenue when they
become due. Maintenance revenue is deferred and recognized ratably over the
maintenance period, generally one year. Revenue from professional services, such
as training and staff augmentation, is recognized as the services are performed.

The American Institute of Certified Public Accountants issued Statement of
Position 97-2 "Software Revenue Recognition" ("SOP 97-2"), which superceded
Statement of Position 91-1 "Software Revenue Recognition." SOP 97-2 provides
additional guidance with respect to multiple element arrangements; returns,
exchanges, and platform transfer rights; resellers; services; funded software
development arrangements; and contract accounting. The Company implemented SOP
97-2 for the year ended December 31, 1997. The adoption of SOP 97-2 was not
material to the Company's revenue recognition policy for software transactions.

CASH EQUIVALENTS

The Company considers all highly liquid instruments with an original maturity of
three months or less at the time of purchase to be cash equivalents.

INSTALLMENT RECEIVABLES

Perpetual license agreements may be executed under installment payment plans
generally with annual payment terms for three to five years. Revenue and related
sales commissions are deferred and recognized over the period of the installment
payment plan.

F-8
<PAGE> 58
PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated on a straight-line
basis over the estimated useful lives of the related assets. Leasehold
improvements are amortized over the shorter of the useful life of the asset or
the lease term. Capitalized lease assets are amortized over the shorter of the
lease term or the service life of the related assets.

SOFTWARE DEVELOPMENT COSTS

Costs associated with the development of software products are generally
capitalized once technological feasibility is established. Purchased software
technologies are recorded at cost and software technologies acquired in purchase
business transactions are recorded at their estimated fair value. Software costs
associated with technology development and purchased software technologies are
amortized on a straight-line basis over the estimated economic lives of the
products (generally, two to five years). Amortization of software costs begin
when products become available for general customer release. Costs incurred
prior to establishment of technological feasibility are expensed as incurred and
reflected as research and development costs in the accompanying consolidated
statements of operations.

GOODWILL

In connection with its acquisition by the Parent in 1993 under which there was a
change in 100 percent of the Company's equity interests, the excess of the
acquisition cost of the Company over the then fair value of its tangible and
intangible net assets (or goodwill) has been recorded on the books of the
Company, using "push-down" accounting. The goodwill is being amortized over a
ten year period.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews its long-lived assets, including goodwill resulting from
business acquisitions, capitalized software development costs, and property and
equipment, for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be fully recoverable. To
determine recoverability of its long-lived assets, the Company evaluates the
probability that future undiscounted net cash flows, without interest charges,
will be less than the carrying amount of the assets. The Company has determined
that as of December 31, 1997, there has been no impairment in the carrying value
of long-lived assets.

INCOME TAXES

The Company's results are included in the consolidated Federal income tax
returns of the Parent. Income taxes are calculated as if the Company filed on a
separate return basis and the amount of current income tax expense or benefit is
either owed to or due from the Parent. Separate provisions for income taxes have
been determined for wholly-owned foreign subsidiaries which are consolidated for
SOFTWORKS' financial reporting, but not eligible to be included in the Parent's
consolidated U.S. Federal income tax return. Withholding taxes payable to
various other foreign countries are also included in the current foreign tax
provision.

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." ("SFAS No. 109"). SFAS No. 109
requires the determination of deferred tax assets and liabilities based on the
differences between the financial statement and income tax bases of assets and
liabilities, using enacted tax rates. SFAS No. 109 requires that the net
deferred tax asset is adjusted by a valuation allowance, if, based on the weight
of available evidence, it is more likely than not that some portion or all of
the net deferred tax asset will not be realized.

BASIC AND DILUTED NET (LOSS) INCOME PER SHARE

In March 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 is
effective for financial statements issued for periods ending after

F-9
<PAGE> 59
December 15, 1997 and has been implemented for all periods presented. SFAS No.
128 requires dual presentation of basic and diluted earnings per share. 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 includes the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. For all periods
presented the Company had no potentially dilutive securities, as a result the
basic and diluted earnings per share amounts are identical.

Basic and diluted net earnings per share is also computed pursuant to SEC Staff
Accounting Bulletin No. 98 ("SAB 98"). SAB 98 requires that all equity
instruments issued at nominal prices, prior to the effective date of an initial
public offering, be included in the calculation of basic and diluted net income
(loss) per share as if they were outstanding for all periods presented. To date
the Company has not had any nominal issuances or grants at nominal prices.

FOREIGN CURRENCY

The functional currency for all of the Company's foreign operations is the
subsidiary's local currency. Assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at year-end exchange rates and revenue and expense
accounts and cash flows are translated at average exchange rates during the
period. Gains and losses resulting from translation are recorded as accumulated
other comprehensive income in stockholder's equity. Transaction gains and losses
are recognized in the consolidated statements of operations as incurred.

Included in cash and cash equivalents at December 31, 1996, December 31, 1997
and March 31, 1998 (unaudited) is approximately $619,000, $278,000 and $337,000,
respectively, of cash denominated in various foreign currencies.

CONCENTRATIONS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash equivalents and trade accounts
receivables. At December 31, 1997, the Company's cash investments are held at
various financial institutions, which limits the amount of credit exposure to
any one financial institution. Concentrations of credit risk with respect to
trade accounts receivables are limited due to the large number of customers
comprising the Company's revenue base and their dispersion across different
industries and geographic areas. The Company performs ongoing credit evaluations
of its customers' financial condition and, generally, requires no collateral
from its customers. Unless otherwise disclosed, the fair value of financial
instruments approximates their recorded values.

USE OF ESTIMATES

In preparing consolidated financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the consolidated financial
statements, as well as the reported amounts of revenue and expenses, during the
reporting period. Actual results could differ from those estimates.

3. ACQUISITION OF DBOPEN, INC.:

In October 1994, the Company entered into an agreement to acquire DBopen, Inc.
("DBopen"), a provider of personal computer database administration tools
employing client/server technology. In connection with the acquisition, the
Parent issued $939,000 of restricted common stock and assumed long-term debt of
approximately $423,000. The acquisition was accounted for as a purchase and,
accordingly, DBopen's assets and liabilities were recorded at their fair values
as of December 31, 1994 and the operations of DBopen were included in the
Company's operations as of that date. The cost of the acquisition exceeded the
fair value of net assets acquired by $1,916,000, and was recorded as goodwill.

F-10
<PAGE> 60
As a result of limited sales and changing market conditions during late 1995, it
became apparent that significant additional expenditures would have to be
incurred in order to modify the DBopen products to meet such changing market
conditions. In the opinion of management, such additional costs would exceed the
projected benefits and the decision was made to discontinue the products.
Consistent with this business decision, the Company wrote-off the remaining
carrying value of its investment in DBopen of $1,320,000 in the fourth quarter
of 1995.

4. INSTALLMENT RECEIVABLES AND DEFERRED INSTALLMENT REVENUE:

During 1996, the Company began offering customers extended payment terms to
purchase software. The payment schedule for installment receivables, noncurrent,
at December 31, 1997 is as follows (in thousands):

Deferred installment revenue which relates to the installment receivables is
scheduled to be earned as follows (in thousands):

<TABLE>
<CAPTION>
SOFTWARE
LICENSES MAINTENANCE TOTAL

<S> <C> <C> <C>
Earned in 1998 $ 5,059 $ 447 $ 5,506
========= ========= =========

Earned in 1999 $ 3,506 $ 1,043 $ 4,549
Earned in 2000 1,181 428 1,609
Earned in 2001 745 171 916
Earned in 2002 -- 48 48
--------- --------- ---------
$ 5,432 $ 1,690 $ 7,122
========= ========= =========

</TABLE>

5. PREPAID EXPENSES AND OTHER ASSETS:

Included in prepaid expenses and other current assets are prepaid commissions of
$211,000, $511,000 and $1,006,000 at December 31, 1996, December 31, 1997 and
March 31, 1998 (unaudited), respectively. Also included in other assets are
noncurrent prepaid commissions of $289,000, $538,000 and $585,000 at December
31, 1996, December 31, 1997 and March 31, 1998 (unaudited), respectively.

F-11
<PAGE> 61
6. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
USEFUL LIFE DECEMBER 31, MARCH 31,
IN YEARS 1996 1997 1998
-------- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Computer equipment and software 3 to 7 $1,636 $2,565 $2,698
Furniture and fixtures 5 to 7 163 204 209
Leasehold improvements 7 473 500 500
------- ------ ------
2,272 3,269 3,407
------- ------ ------
Less accumulated depreciation
and amortization (1,049) (1,746) (1,926)
Property and equipment, net $1,223 $1,523 $1,481
======= ====== ======
</TABLE>

F-12
<PAGE> 62
7. SOFTWARE DEVELOPMENT COSTS:

Software development costs consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997 1998
---- ---- ----
(Unaudited)

<S> <C> <C> <C>
Capitalized software development costs $ 478 $ 1,242 $ 1,617
Purchased and acquired software technologies
for resale 1,894 2,174 2,187
-------- ----- ---------
2,372 3,416 3,804
Less accumulated depreciation (1,424) (2,113) (2,283)
-------- ----- ---------
Software development costs, net $ 948 $ 1,303 $ 1,521
======== ======== =========
</TABLE>

8. ACQUISITION BY COMPUTER CONCEPTS CORP. (THE "PARENT"):

In September 1993, the Company was acquired by the Parent and the acquisition
was accounted for using the purchase method of accounting. Accordingly, assets
and liabilities were recorded at their fair values as of the effective date of
the acquisition, and the operations of the Company have been included in the
Parent's consolidated statements of operations since that date. The purchase
price approximated $5,700,000 (payable in cash and restricted common stock of
the Parent) and originally resulted in $5,484,000 of goodwill related to the
excess of cost over the fair value of net assets acquired. The acquisition
agreement also requires the Company to make additional contingent purchase
consideration payments to two of the Company's former stockholders based upon
certain product revenue for the three-year period ending September 1998, up to a
maximum of $1,000,000 each, for an aggregate maximum of $2,000,000. Through
March 31, 1998 (unaudited), the Company has incurred a liability of $1,864,000
($1,596,000 of which has been paid) to the non-employee former stockholders,
which has been treated as additional consideration in connection with the
acquisition and, accordingly, added to the goodwill related to the acquisition.

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

Accounts payable and accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997 1998
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Trade accounts payable $ 515 $1,834 $1,613
Accrued payroll and benefits 643 579 528
Commissions payable 556 1,368 669
Other accrued expenses 308 908 935
------- ------ ------
$ 2,022 $4,689 $3,745
======= ====== ======
</TABLE>

10. TRANSACTIONS WITH THE PARENT:

The Parent provides certain corporate and administrative services to the Company
including executive management and professional services (accounting, auditing
and legal). These services were performed for no charge in 1995, $500,000 in the
years ended December 31, 1996 and 1997, and $125,000 for the three months ended
March 31, 1997 (unaudited) and 1998 (unaudited). The Company and its Parent also
jointly participate in certain employee benefit plans (defined contribution and
employee health) and the Company is allocated a portion of these costs.

F-13
<PAGE> 63
Management believes that the intercompany charges and cost allocations are
reasonable; however, the costs of these services charged to the Company are not
necessarily indicative of the costs that would have been incurred if the Company
were operating as a stand-alone entity. Subsequent to the Offering contemplated
by this prospectus, the Company will perform the corporate and administrative
functions directly, using its own resources or purchased services, and will be
responsible for the costs and expenses associated with the management of a
public corporation. At March 31, 1998, the Company owed the Parent $1,218,000
which will be repaid with proceeds from the Offering.

Additionally, certain Company employees receive part of their compensation in
the form of the Parent's common stock or options. Included in the Company's
consolidated statements of operations are non-cash compensation charges related
to the fair value of the Parent's common stock issued and non-cash compensation
charges related to the intrinsic value of stock options granted pursuant to APB
Opinion No. 25, "Accounting for Stock Issued to Employees". Charges for both
stock and options totaled $0, $187,000, and $18,000 for the years ended December
31, 1995, 1996, and 1997, respectively.

If the Company had elected to recognize compensation expense based upon the fair
value of the options at the date of the grant consistent with the methodology
prescribed by FASB Statement No. 123, "Accounting For Stock-Based Compensation
Issued To Employees," the effect on the Company's net (loss) income would be as
follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
NET (LOSS) INCOME:
As reported $(1,711) $792 $786
Pro Forma (1,752) 672 598

BASIC AND DILUTED (LOSS) INCOME PER SHARE:
As reported $(0.13) $0.06 $0.06
Pro Forma $(0.13) $0.05 $0.04
</TABLE>

The fair value of options granted during 1995, 1996, and 1997, respectively, are
estimated on the date of grant using the Black-Scholes option-pricing model with
the following assumptions: (1) expected volatility ranging from 79% to 130%, (2)
risk-free interest rates ranging from 5.4% to 6.25% and (3) expected lives
ranging from 1.1 to 3.9 years.

F-14
<PAGE> 64
11. INCOME TAXES:

The following table summarizes components of income (loss) before income taxes
and the (benefit from) provision for both current and deferred income taxes.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
(LOSS) INCOME BEFORE (BENEFIT FROM) PROVISION
FOR INCOME TAXES:
United States $ (2,602) $1,471 $2,579
Foreign (88) 25 (763)
-------- ------ ------
Total $ (2,690) $1,496 $1,816
======== ====== ======

(BENEFIT FROM) PROVISION FOR INCOME TAXES:
Current -
United States $ -- $ -- $ 858

Foreign 91 135 55
State and other -- -- 150
-------- ------ ------
91 135 1,063
-------- ------ ------
Deferred -
United States (926) 505 (27)
Foreign 16 (16) --
State and other (160) 80 (6)
-------- ------ ------
(1,070) 569 (33)
-------- ------ ------
Total $ (979) $ 704 $1,030
======= ===== ======
</TABLE>

F-15
<PAGE> 65
The following table summarizes the significant differences between the U.S.
Federal statutory tax rate and the Company's effective tax rate for financial
statement purposes:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory tax rate.................. (34.0)% 34.0% 34.0%
State and local taxes, net of U.S. federal tax
effect........................................ (5.7) 6.8 3.5
Non-U.S. taxes................................... 2.2 5.9 2.0
Foreign operating loss (income).................. 1.1 (0.6) 14.3
Other............................................ -- 1.0 2.9
----- ---- ----
Effective tax rate............................... (36.4)% 47.1% 56.7%
===== ==== ====
</TABLE>

The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1997
---- ----
<S> <C> <C>
CURRENT:
Net operating loss carryforwards - U.S. $414 $ --
Accruals and reserves 58 138
---- -----
472 138
---- -----

LONG-TERM:
Fixed and intangible assets 190 347
Capitalized software 139 349
Net operating loss carryforward - foreign -- 229
Valuation allowance on foreign net operating loss
carryforwards -- (229)
---- -----
329 696
---- -----
Net deferred tax assets $801 $834
==== =====
</TABLE>

The Company utilized in 1997 federal net operating losses generated in 1995 and
1996, aggregating $1,000,000. Included in the deferred tax assets as of December
31, 1997 are net operating losses from foreign subsidiaries in the amount of
$763,000, resulting in a deferred tax benefit of $229,000. Most of the net
operating loss carryforwards have no expiration date. The Company has provided
for full valuation allowances of these foreign net operating losses due to the
uncertainty of future income estimates.

12. STOCKHOLDER'S EQUITY:

STOCK OPTION PLAN

In May 1998, the Company adopted the SOFTWORKS, Inc. 1998 Long Term Incentive
Plan (the "1998 Incentive Plan") which authorizes the issuance of a maximum of
4,310,000 shares of Common Stock. The 1998 Incentive Plan provides for grants of
options to officers, key employees, consultants and independent contractors of
the Company and its affiliates. The 1998 Incentive Plan provides for the
granting of incentive stock options, non-qualified stock options, performance
grants and other types of awards. This plan is administered by the Long Term
Incentive Plan Administrative Committee of the Board of Directors, which has
sole discretion and authority, consistent with the provisions of the 1998
Incentive Plan, to determine which eligible participants will receive options,
the time when options will be granted and the terms of options granted. As of
May 28, 1998, the Company has not granted any options to purchase shares of
Common Stock under the 1998 Incentive Plan.

F-16
<PAGE> 66
STOCK SPLIT

In May 1998, the Company declared and issued a stock dividend, to its sole
Stockholder of 2,640 shares (pre-split) of Common Stock. This dividend brought
the total outstanding shares at the time of the stock dividend to 2,700
(pre-split). On a post 5,000-for-1 split basis (see Note 1) the Common Stock
outstanding is 13,500,000. Because of its magnitude, the stock dividend has been
treated as a stock split. The effects of the stock dividend and the 5,000-for-1
stock split have been given retroactive application in the consolidated
financial statements for all periods presented.

13. COMMITMENTS AND CONTINGENCIES:

ROYALTY COMMITMENTS

The Company has entered into royalty agreements with several employees of the
Company. These agreements call for royalties ranging from 1% to 10% on various
product revenue. The royalty agreements may be amended in conjunction with the
stock option plan (Note 12). One agreement is with an officer of the Company and
has resulted in royalty expense of $64,000, $98,000, and $188,000 for the years
ended December 31, 1995, 1996 and 1997, respectively.

LEASES

The Company leases certain computer equipment under long-term non-cancelable
leases which are classified as capital leases and are included as part of
property and equipment. Operating leases are primarily for office space,
equipment and automobiles.

At December 31, 1997, the future minimum lease payments under operating and
capital leases are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDING OPERATING CAPITAL
DECEMBER 31, LEASES LEASES
------------ ------ ------
<S> <C> <C>
1998 $ 647 $63
1999 559 --
2000 494 --
2001 347 --
2002 101 --
------ ---
Total 2,148 63
Amounts representing interest -- (2)
------ ---
Net $2,148 $61
====== ===
</TABLE>

Rent expense approximated $391,000, $522,000, $896,000, $193,000 and $292,000
for the years ended December 31, 1995, 1996, and 1997, and for the three months
ended March 31, 1997 (unaudited) and March 31, 1998 (unaudited), respectively.

EMPLOYEE 401(K) SAVINGS PLAN

The Company provides pension benefits to eligible employees through a 401(k)
plan sponsored jointly by the Company and the Parent. The Company's allocable
share of employer matching contributions to this 401(k) plan approximated
$26,000, $36,000, $52,000, $15,000 and $19,000 for the years ended December 31,
1995, 1996, and 1997, and for the three months ended March 31, 1997 (unaudited)
and March 31, 1998 (unaudited), respectively.

F-17
<PAGE> 67
SOFTWARE DISTRIBUTION AGREEMENT

In July 1997, the Company acquired from Cognizant Technology Solutions
Corporation ("CTS") the rights to technology (the "Technology") that complements
the Company's existing Year 2000 product solutions. Pursuant to the software
distribution agreement, in exchange for the Technology rights, the Company is
required to pay CTS a royalty on sales of the Technology at defined rates
subject to minimum annual royalties as follows: $100,000 in 1997, $900,000 in
1998, $1,400,000 in 1999 and $400,000 in 2000.

EMPLOYMENT AGREEMENTS

The Company is in the process of negotiating employment agreements in an effort
to retain several key employees. The employment agreements are expected to have
terms in excess of one year and will include provisions typically found in such
agreement with respect to confidentiality, severance and incentives.

14. GEOGRAPHIC INFORMATION:

The Company is primarily engaged in a single line of business. Geographic data
is summarized between the United States and Foreign. Foreign consists of
operations through the Company's foreign subsidiaries in the United Kingdom,
France, Brazil, Australia, Spain and Italy, as well as sales generated through
foreign distributors primarily in Europe and Asia. Geographic data is presented
in accordance with FASB Statement No. 131, "Disclosure about Segments of an
Enterprise and Related Information" for all periods presented as follows (in
thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- ---------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE:
United States $ 8,894 $ 11,643 $ 22,038 $ 3,647 $ 5,290
Foreign 2,732 4,882 4,732 1,019 1,306
-------- --------- -------- --------- ----------
Total $ 11,626 $ 16,525 $ 26,770 $ 4,666 $ 6,596
======== ========== ======== ========= ==========

OPERATING (LOSS) INCOME:
United States $ (2,843) $ 590 $ 2,356 $ (263) $ (384)
Foreign 153 906 (540) (233) (589)
-------- --------- -------- --------- ----------
Total $ (2,690) $ 1,496 $ 1,816 $ (496) $ (973)
======== ========= ======== ========= ==========

IDENTIFIABLE ASSETS:
United States $ 12,348 $ 21,272 $ 30,961 $ 21,240 $ 29,951
Foreign 418 1,271 2,668 1,152 3,465
-------- --------- -------- --------- ----------
Total $ 12,766 $ 22,543 $ 33,629 $ 22,392 $ 33,416
======== ========= ======== ========= ==========
</TABLE>

F-18
<PAGE> 68

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THIS OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

TABLE OF CONTENTS

Page
Prospectus Summary...................................
Risk Factors.........................................
Use of Proceeds......................................
Dividend Policy......................................
Dilution.............................................
Capitalization.......................................
Selected Financial Data..............................
Management's Discussion and Analysis of Financial
Condition and Results of Operations...............
Business.............................................
Management...........................................
Certain Transactions.................................
Principal and Selling Stockholders...................
Description of Capital Stock.........................
Shares Eligible for Future Sale......................
Underwriting.........................................
Legal Matters........................................
Experts..............................................
Available Information................................
Index to Financial Statements........................ F-1

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS 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.

4,200,000 SHARES

SOFTWORKS, INC.

COMMON STOCK

PROSPECTUS

SOUNDVIEW FINANCIAL GROUP, INC.
RAYMOND JAMES & ASSOCIATES, INC.

, 1998
<PAGE> 69
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses of the distribution, all of which shall be borne by
the Company, are as follows:

ITEM AMOUNT
---- ------
SEC registration fee..................................... $14,234
NASD filing fee.......................................... 5,325
NASDAQ Application....................................... *
Blue Sky fees and expenses (including legal fees)........ *
Transfer Agent fees...................................... *
Accounting fees and expenses............................. *
Legal fees and expenses.................................. *
Blue sky fees and expense................................ *
Printing and Engraving fees ............................. *
Miscellaneous............................................ *
---------
Total........................................... $ *
=========

* To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company, a Delaware corporation, is empowered by Section 145 of the
Delaware General Corporation Law (the "Delaware Act"), subject to the procedures
and limitations stated therein, to indemnify certain parties. Section 145 of the
Delaware Act provides in part that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding had no reasonable cause to believe his
conduct was unlawful. Similar indemnity is authorized for such persons against
expenses (including attorneys' fees) actually and reasonably incurred in defense
or settlement of any threatened, pending or completed action or suit by or in
the right of the corporation, if such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and provided further that (unless a court of competent jurisdiction
otherwise provides) such person shall not have been adjudged liable to the
corporation. Any such indemnification may be made only as authorized in each
specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct. Where an officer or a director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually or reasonably incurred. Section 145 provides further that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any law, agreement, vote
of stockholders or disinterested directors or otherwise.

The Company's Certificate of Incorporation and By-laws contain provisions
that limit the potential personal liability of directors for certain monetary
damages and provide for indemnity of directors and other persons. The Company
has applied for officers and directors liability insurance. The Company is
unaware of any pending or

II-1
<PAGE> 70
threatened litigation against the Company or its directors that would result in
any liability for which such director would seek indemnification or similar
protection.

The provisions affecting personal liability do not abrogate a director's
fiduciary duty to the Company and its stockholders, but eliminate personal
liability for monetary damages for breach of that duty. The provisions do not,
however, eliminate or limit the liability of a director for failing to act in
good faith, for engaging in intentional misconduct or knowingly violating a law,
for authorizing the illegal payment of a dividend or repurchase of stock, for
obtaining an improper personal benefit, for breaching a director's duty of
loyalty (which is generally described as the duty not to engage in any
transaction that involves a conflict between the interests of the Company and
those of the director) or for violations of the federal securities laws. The
provisions also limit or indemnify against liability resulting from grossly
negligent decisions, including grossly negligent business decisions relating to
attempts to change control of the Company.

The provisions regarding indemnification provide, in essence, that the
Company will indemnify its directors against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding arising out of the
director's status as a director of the Company, including actions brought by or
on behalf of the Company (stockholder derivative actions). The provisions do not
require a showing of good faith. Moreover, they do not provide indemnification
for liability arising out of willful misconduct, fraud, or dishonesty, for
"short-swing" profits violations under the federal securities laws, or for the
receipt of illegal remuneration. The provisions also do not provide
indemnification for any liability to the extent such liability is covered by
insurance. One purpose of the provisions is to supplement the coverage provided
by such insurance.

These provisions diminish the potential rights of action that might
otherwise be available to stockholders by limiting the liability of officers and
directors to the maximum extent allowable under Delaware law and by affording
indemnification against most damages and settlement amounts paid by a director
of the Company in connection with any stockholders derivative action. However,
the provisions do not have the effect of limiting the right of a stockholder to
enjoin a director from taking actions in breach of the director's fiduciary
duty, or to cause the Company to rescind actions already taken, although as a
practical matter courts may be unwilling to grant such equitable remedies in
circumstances in which such actions have already been taken.

The Company has entered into indemnification agreements with certain of its
officers. The indemnification agreements provide for reimbursement for all
direct and indirect costs of any type or nature whatsoever (including attorneys'
fees and related disbursements) actually and reasonably incurred in connection
with either the investigation, defense or appeal of a legal proceeding,
including amounts paid in settlement by or on behalf of an indemnitee
thereunder.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Immediately prior to the offering, the Company will effect a
reincorporation into the State of Delaware pursuant to an agreement and plan of
merger by and between the Company and SOFTWORKS, Inc., a Maryland corporation
(the "Merger"). The issuance of shares by the Company in connection with the
Merger will be exempt from registration under the Securities Act pursuant to
Section 3(a)(9) thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Exhibits

1.1 Form of Underwriting Agreement*
1.2 Form of Agreement Among Underwriters*
1.3 Form of Selling Agreement*
3.1 Certificate of Incorporation of the Registrant*
3.2 By-laws of the Registrant*
4.1 Specimen Common Stock Certificate*
5.1 Form of Opinion and Consent of Blau, Kramer, Wactlar & Lieberman, P.C.
regarding the legality of the securities being registered*
9 Voting Trust Agreement*

II-2

<PAGE> 71
10.1 Lease Agreement dated June 14, 1994 between the Registrant and WHT
Real Estate Limited Partnership*
10.2 Amendment No. 1 to Lease Agreement*
10.3 Amendment No. 2 to Lease Agreement*
10.4 1998 Long Term Incentive Plan*
10.5 Employment Agreement between the Registrant and James Cannavino*
10.6 Employment Agreement between the Registrant and C. R. Kinsey, III*
10.7 Employment Agreement between the Registrant and Judy G. Carter, as
amended*
10.8 Employment Agreement between the Registrant and Lisa Welch*
10.9 Employment Agreement between the Registrant and Joseph Miksch*
10.10 Employment Agreement between the Registrant and Robert McLaughlin*
10.11 Form of Indemnification Agreement between the Company and its officers
and directors*
10.12 Distribution Agreement dated July 8, 1997 between the Registrant and
Cognizant Technology Solutions Corporation*
11 Computation of Earnings Per Share*
21 The following lists the Company's subsidiaries, all of which are
wholly-owned by the Company.

NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
---- -- ---------- ------------ -- -------------
SOFTWORKS International, Ltd. United Kingdom
SST Technology International, S.A. Spain
SOFTWORKS International, LTD, Pty Australia
SST Technology do Brazil Ltda Brazil
SST Technology, S.A. France
SOFTWORKS Italia S.r.l. Italy
SOFTWORKS Services Corp. Texas

23.1 Consent of Arthur Andersen LLP
23.2 Consent of Blau, Kramer, Wactlar & Lieberman, P.C. (included in
Exhibit 5)*
24 Power of Attorney (included in signature page)
27.1 Financial Data Schedule*

- ------------------------
* To be filed by amendment

Financial Statement Schedules
Not applicable.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

For purposes of determining any liability under the Securities Act of 1933
(the "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 Company pursuant to Rule 424(b)(1) and (4) and
Rule 497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

II-3
<PAGE> 72
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the issuer
pursuant to the foregoing provisions, or otherwise, the issuer 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 issuer of expenses
incurred or paid by a director, officer or controlling person of the issuer 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, the issuer 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 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.

II-4
<PAGE> 73
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York on the 26th day of May, 1998.

SOFTWORKS, Inc.

By: /s/_______________________________
Judy G. Carter
President
(Chief Executive Officer)

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on May 26, 1998, by the following
persons in the capacities indicated. Each person whose signature appears below
also constitutes and appoints James Cannavino and Judy G. Carter, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, 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 file the same, with all
exhibits thereto and all other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/__________________________________________________ Chairman of the Board and Director
James A. Cannavino
/s/__________________________________________________ President, Chief Executive Officer and a Director
Judy G. Carter
/s/__________________________________________________ Vice President and Secretary
C. R. Kinsey, III
/s/__________________________________________________ Treasurer and Chief Financial Officer
Robert C. McLaughlin
/s/__________________________________________________ Director
Daniel DelGiorno, Jr.
/s/__________________________________________________ Director
Robert Devine
</TABLE>

II-5