AREMISSOFT CORP /DE/, 424B1, 1999-04-23

AREMISSOFT CORP /DE/
424B1, 1999-04-23
PREPACKAGED SOFTWARE

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<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration Statement No. 333-58351

PROSPECTUS
3,300,000 SHARES
LOGO

COMMON STOCK

AremisSoft Corporation ("AremisSoft" or the "Company") hereby offers
3,300,000 shares of its common stock (the "Common Stock"). Prior to this
offering (the "Offering"), there has been no public trading market for the
Common Stock. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The Common Stock has been
approved for quotation on the Nasdaq National Market under the symbol "AREM."
---------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------

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

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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------

Per Share................................. $5.00 $.40 $4.60
- ---------------------------------------------------------------------------------------------------------
Total(3).................................. $16,500,000 $1,320,000 $15,180,000
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(1) Excludes the value of warrants to purchase up to 330,000 shares of Common
Stock at an exercise price of 150% of the public offering price to be issued
to Cruttenden Roth Incorporated (the "Representative"). The Company has
agreed to indemnify the Underwriters against certain liabilities, including
liabilities arising under the Securities Act of 1933, as amended. See
"Underwriting."

(2) Before deducting expenses, including the nonaccountable expense allowance
payable to Cruttenden Roth Incorporated, payable by the Company estimated at
$1,446,175.

(3) The Company has granted the Underwriters a 45-day option to purchase up to
495,000 additional shares of Common Stock on the same terms and conditions
as set forth above, solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to the Company will be $18,975,000, $1,518,000 and $17,457,000,
respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters, when, as
and if delivered to and accepted by the Underwriters and subject to various
prior conditions, including their right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that delivery of share
certificates will be made against payment therefor at the offices of Cruttenden
Roth Incorporated in Newport Beach, California on or about April 27, 1999.

LOGO

The date of this Prospectus is April 22, 1999.
<PAGE> 2

TABLE OF CONTENTS

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PAGE
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Prospectus Summary.................... 1
Risk Factors.......................... 4
Organization of the Company........... 14
Use of Proceeds....................... 14
Dividend Policy....................... 15
Capitalization........................ 15
Dilution.............................. 16
Selected Consolidated Financial
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 29
Management............................ 52
</TABLE>

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PAGE
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Certain Transactions.................. 57
Principal Stockholders................ 58
Description of Capital Stock.......... 58
Shares Eligible for Future Sale....... 61
Underwriting.......................... 63
Legal Matters......................... 65
Experts............................... 65
Change in Accountants................. 65
Additional Information................ 65
Glossary of Terms..................... 67
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. UNDER NO
CIRCUMSTANCES SHALL THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO
THIS PROSPECTUS CREATE ANY IMPLICATION THAT INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

UNTIL MAY 17, 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

THE AREMISSOFT TRADENAME AND LOGO ARE TRADEMARKS OF THE COMPANY AND ARE THE
SUBJECT OF APPLICATIONS FOR FEDERAL REGISTRATION IN THE UNITED STATES PATENT AND
TRADEMARK OFFICE. THIS PROSPECTUS ALSO INCLUDES TRADE NAMES, TRADEMARKS AND
REGISTERED TRADEMARKS OF OTHER COMPANIES.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE> 3

PROSPECTUS SUMMARY

This Prospectus contains forward-looking statements that involve risks and
uncertainties. These statements are based on management's beliefs and
assumptions, and on information currently available to management.
Forward-looking statements include statements in which words such as "expect,"
"anticipate," "intend," "plan," "believe," "estimate," "consider" or similar
expressions are used. Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions, including the
risks discussed under "Risk Factors" and elsewhere in this Prospectus. The
Company's actual results and stockholder values may differ materially from those
anticipated and expressed in these forward-looking statements. Many of the
factors that will determine these results and values are beyond the Company's
ability to control or predict. Investors are cautioned not to put undue reliance
on any forward-looking statements. The following summary is qualified in its
entirety by the more detailed information and the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. Except as
otherwise specifically noted herein, all of the information in this Prospectus
(i) gives effect to a 1.711772-for-one reverse stock split effected in March
1999 and (ii) assumes that the Underwriters' over-allotment option is not
exercised. Except as otherwise specifically noted herein, all references to
"AremisSoft" or the "Company" refer to AremisSoft Corporation, a Delaware
corporation, its consolidated subsidiaries and its predecessors.

THE COMPANY

AremisSoft develops, markets, implements and supports enterprise-wide
applications software targeted at mid-sized organizations in the manufacturing,
healthcare, hospitality and construction industries (the "Targeted Markets").
The Company's software products help streamline and enhance an organization's
ability to manage and execute mission-critical functions such as accounting,
purchasing, manufacturing, customer service, and sales and marketing. In 1986,
the Company established a software development and support facility in New
Delhi, India, which currently has 186 employees. The Company believes that its
India facility provides significant organizational efficiencies and cost
advantages in software development and support. AremisSoft products are designed
to be the primary business software that organizations in the Targeted Markets
use to generate and disseminate information across the enterprise in order to
respond rapidly to changing market environments and customer needs. The Company
has licensed its software products to more than 5,000 customers.

The Company strategically focuses on customers in the Targeted Markets with
annual revenues of less than $200 million. Through its concentrated product
focus, AremisSoft believes that it has developed substantial industry expertise
in the Targeted Markets. In addition, the Company has developed a three-tiered,
object-oriented software architecture (the "Aremis Architecture"), which
achieves economies of scale and cost reductions in the software development
process by capitalizing on the common functional requirements of customers
across a variety of industries. The Company believes that the Aremis
Architecture enables it to produce high quality, scalable products with
substantially reduced software development, implementation and maintenance
costs.

In the past five years, the Company has experienced rapid growth, both
internally and through acquisitions, with revenues increasing from $6.4 million
in 1994 to $52.6 million in 1998. During this period, the Company successfully
acquired and integrated the operations of eleven businesses, which were
principally operating in the United Kingdom. In each acquisition, the Company
sought to reduce expenses, rejuvenate the existing products of the acquired
business and transition the customers to products that utilize the Aremis
Architecture. The Company's software development and support facility in India
provides the Company access to highly-skilled technical personnel who are
responsible for rejuvenating the acquired products and developing new products
in a cost-effective manner.

1
<PAGE> 4

Multifund (healthcare), Birmingham Multifund (healthcare), Telefon AB LM
Ericsson (manufacturing), Nabisco Biscuit Co. (manufacturing), Forte Limited
(hospitality) and London Electricity plc (construction).

The Company's objective is to be a leading provider of enterprise-wide
applications software in the Targeted Markets. The Company's strategy for
achieving this objective includes (i) targeting mid-sized organizations,
including divisions and business units of larger companies, (ii) focusing on
strategic markets, (iii) leveraging the Company's cost-efficient India
operations, (iv) capitalizing on the Company's investment in the Aremis
Architecture, (v) expanding the Company's marketing, sales, support and service
capabilities and (vi) acquiring related software businesses, products or
technologies.

The Company was incorporated in Delaware in June 1998 in connection with a
change of corporate domicile from Nevada to Delaware effective March 5, 1999.
The Company was founded in Cyprus in 1978 as LK Global Information Systems
(Cyprus) Limited. The Company established its New Delhi, India software
development and support facility in 1986 and its operations in the United
Kingdom in 1992. Prior to 1995, the Company operated primarily through LK Global
Information Systems (UK) plc, and several other operating entities, all of which
were wholly owned by the Company's Chairman and Chief Executive Officer, Dr.
Lycourgos K. Kyprianou. By the end of 1996, all entities were consolidated into
LK Global Information Systems, B.V., which was also owned and controlled by Dr.
Kyprianou. In 1997, the Company reorganized as a United States holding company,
changing its corporate domicile from the Netherlands to Nevada. Following the
Offering, Dr. Kyprianou will be a principal stockholder of the Company. See
"Organization of the Company." The Company's principal executive offices are
located at 60 Bishopsgate, London EC2N 4AJ, England, and its telephone number is
011-44-171-309-1555.

THE OFFERING

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Common Stock offered by the Company.......... 3,300,000 shares
Common Stock to be outstanding after
the Offering............................... 13,300,051 shares(1)
Use of proceeds.............................. To repay indebtedness, for working capital
and other general corporate purposes and to
fund potential acquisitions. See "Use of
Proceeds."
Nasdaq National Market symbol................ AREM
</TABLE>

- ---------------
(1) Excludes (i) 1,500,000 shares of Common Stock reserved for issuance under
the Company's 1998 Stock Option Plan, of which the Company intends to grant
options to purchase 860,000 shares in connection with the Offering at an
exercise price per share equal to the initial public offering price, (ii)
330,000 shares of Common Stock issuable upon exercise of warrants to be
issued to the Representative, (iii) approximately 63,084 shares of Common
Stock issuable upon conversion of a convertible promissory note in the
principal amount of $500,000, which bears interest at the rate of 8% per
annum and is due on January 1, 2000 (the "Convertible Promissory Note"), and
(iv) 51,117 shares of Common Stock issuable upon exercise of outstanding
warrants at an exercise price of $8.56 per share. See "Management -- 1998
Stock Option Plan," "Description of Capital Stock -- Warrants" and
"Underwriting."

2
<PAGE> 5

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

The summary consolidated financial data presented below should be read in
conjunction with the more detailed Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus and the information set forth
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

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DECEMBER 31, 1998
---------------------------
ACTUAL AS ADJUSTED(9)
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 149 $ 8,883
Working capital (deficit)(10)............................... (10,516) 3,218
Total assets........................................ 27,952 36,686
Long-term debt.............................................. -- --
Total stockholders' equity (deficit)................ $(7,109) $ 6,625
</TABLE>

- ---------------
(1) Includes the results of operations of businesses acquired in October 1994,
representing approximately $1.9 million in revenues.

(2) Includes a full year of operations of the businesses acquired in 1994 and
the results of operations of businesses acquired between March and October
1995, representing approximately $6.1 million in revenues.

(3) Includes a full year of operations of the businesses acquired in 1994 and
1995 and the results of operations of businesses acquired in March 1996,
representing approximately $750,000 in revenues.

(4) Includes a full year of operations of the businesses acquired in 1994, 1995
and 1996.

(5) Includes the Company's write-off of approximately $1.6 million in Offering
costs incurred in 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

(6) Includes amortization and write-off of capitalized software, software
development costs and intangible assets of approximately $2.9 million, $5.6
million, $8.0 million, $167,000 and $339,000 in 1994, 1995, 1996, 1997 and
1998, respectively.

(7) The basis for the determination of shares used in computing diluted
earnings (loss) per share is described in Note 1 of Notes to Consolidated
Financial Statements.

(8) The 1995 and 1996 financial statements have been restated from previously
reported amounts. See Note 1 of Notes to Consolidated Financial Statements.

(9) Adjusted to give effect to the estimated net proceeds of the Offering to be
received by the Company.

(10) The Company and its lender, Barclays Bank plc ("Barclays"), have agreed
that the Company will repay $5.0 million of its indebtedness to Barclays
from the proceeds of the Offering and to restructure the remaining
indebtedness into long-term loans. Pending completion of the Offering, the
Company has reclassified all of its long-term debt to short-term debt as of
December 31, 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

3
<PAGE> 6

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors in addition to the other information set forth in this Prospectus
prior to making any investment in the Common Stock. This Prospectus contains, in
addition to historical information, forward-looking statements that involve
risks and uncertainties. These statements are based on management's beliefs and
assumptions, and on information currently available to management.
Forward-looking statements include statements in which words such as "expect,"
"anticipate," "intend," "plan," "believe," "estimate," "consider" or similar
expressions are used. Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions, including those
discussed below as well as those discussed elsewhere in this Prospectus. The
Company's actual results and stockholder values may differ materially from those
anticipated and expressed in these forward-looking statements. Many of the
factors that will determine these results and values are beyond the Company's
ability to control or predict. Investors are cautioned not to put undue reliance
on any forward-looking statements.

LOSS HISTORY; VOLATILITY AND SEASONALITY OF QUARTERLY OPERATING RESULTS

The Company incurred net losses through December 31, 1997, including $1.6
million and $15.3 million for the years ended December 31, 1997, and December
31, 1996, respectively. For the year ended December 31, 1998, the Company had
net income of $3.2 million and, as of December 31, 1998, had an accumulated
deficit of $32.2 million. Although the Company achieved profitability during
1998 and the third and fourth quarters of 1997, no assurances can be given that
the Company will sustain profitability on a quarterly or annual basis. See
"Selected Consolidated Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

The Company's quarterly operating results have varied, sometimes
substantially, in the past, and are expected to vary in the future. These
fluctuations may be caused by a variety of factors, many of which are outside of
the Company's control, including the relatively long sales cycles for the
Company's products, the size and timing of individual licensing transactions,
the timing, proper operation and market acceptance of new products or product
enhancements by the Company or its competitors, the potential for delay or
deferral of customer implementations of the Company's products, changes in
customer budget cycles, seasonality of technology purchases, foreign currency
exchange rates and other general industry and economic conditions. In addition,
the timing of revenue recognition can be affected by many factors, including the
timing of contract execution and delivery, customer acceptance and post-delivery
obligations of the Company related to installation and implementation. As a
result, the time between contract execution and the satisfaction of criteria for
revenue recognition can be lengthy and unpredictable and, consequently, affect
revenues and the Company's operating results in any given quarter. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

A significant portion of the Company's accounts receivable are derived from
licensing arrangements to customers with which the Company does not have a
payment history. In addition, the Company's customers may decide not to honor
contractual obligations for license fees for various reasons including, but not
limited to, changes in their business levels or plans or unanticipated
implementation problems associated with the Company's products. Although the
Company provides reserves and allowances for such circumstances, no assurances
can be given that such reserves and allowances will be adequate to cover any
receivables which are later determined to be uncollectible, particularly if such
receivables are large. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." In the event one or more customers fails
to honor its contractual obligations and the Company's reserves and allowances
are inadequate, such failure could have a material adverse effect on the
Company's business, operating results and financial condition.

The Company's business has experienced and is expected to continue to
experience seasonality due in large part to the buying cycles of its customers.
In recent years, the Company has generally had stronger demand for its products
during the second half of the calendar year. This seasonality is not uncommon in
the computer software industry and typically results in revenues for the first
half of the calendar year being lower

4
<PAGE> 7

than revenues in the second half of the immediately preceding calendar year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

ASSIMILATION OF ACQUISITIONS

As part of its business strategy to increase its presence in certain
Targeted Markets and complement and expand its existing business and product
offerings, the Company expects to continue to pursue acquisitions of other
businesses, products and technologies that are complementary to those of the
Company. Although the Company currently has no agreement, understanding or
arrangement with respect to any future acquisitions, the Company evaluates
potential strategic business opportunities, some of which may be material in
size and scope on an ongoing basis. No assurances can be given that any
acquisition by the Company will occur or that any acquisition will not have a
material adverse effect on the Company's business, operating results and
financial condition.

Acquisitions, including those consummated by the Company to date, involve a
number of risks and difficulties, including technology acceptance, expansion
into new geographic markets and business areas, the diversion of management's
attention, the assimilation of the operations and personnel of acquired
businesses and the integration of acquired operations and financial reporting
systems with those of the Company. No assurances can be given that the Company
will successfully integrate the operations of acquired businesses, which could
have a material adverse effect on the Company's business, operating results and
financial condition. Further, possible future acquisitions by the Company could
result in dilutive issuances of debt or equity securities, the incurrence of
additional debt and contingent liabilities, potential reductions in income due
to losses incurred by the acquired business, additional amortization expenses
related to goodwill and other intangible assets, and post-acquisition
restructuring charges, any of which could have a material adverse effect on the
Company's business, operating results and financial condition. To finance
acquisitions, the Company has in the past and may in the future incur
significant indebtedness, with associated interest costs, repayment terms and
restrictive covenants. See "Business -- Acquisition Strategy."

MANAGEMENT OF GROWTH

The Company's business has grown rapidly in the last five years, with total
revenues increasing from $6.4 million in 1994 to $52.6 million in 1998. The
growth in the Company's business and expansion of the Company's customer base
has placed a significant strain on the Company's management, operations and
financial resources. The Company's recent expansion has resulted in substantial
growth in the number of its employees, the scope of its operating and financial
reporting systems and the geographic area of its operations, creating increased
responsibility for both existing and new management personnel. The Company's
ability to support the growth of its business will be substantially dependent
upon the ability to attract and retain highly skilled personnel. Accordingly,
the Company's future operating results will depend on the ability of its
officers and other key employees to continue to implement and improve its
operational and customer support systems and to expand, train and manage its
employee base. No assurances can be given that the Company will be able to
manage its recent or any future expansion successfully, and any inability to do
so would have a material adverse effect on the Company's business, operating
results and financial condition. See "-- Dependence on Key Personnel; Need for
Additional Qualified Personnel."

To manage its operations, the Company must continuously evaluate the
adequacy of its management structure and its existing procedures including,
among others, its financial and internal controls. No assurances can be given
that the Company's management will adequately anticipate all of the changing
demands that growth may impose on the Company's procedures and structure. Any
failure to adequately anticipate and respond to such changing demands could have
a material adverse effect on the Company's business, operating results and
financial condition.

RAPID TECHNOLOGICAL CHANGE; NEW VERSIONS AND PRODUCTS; RISK OF DEFECTIVE
PRODUCTS

The market for the Company's software products is characterized by rapid
technological changes, evolving industry standards in computer hardware and
software technology, changes in customer requirements

5
<PAGE> 8

and frequent new product introductions and enhancements. The Company's future
success will depend upon its ability to continue to enhance its current product
line and to develop and introduce new products that keep pace with technological
developments, satisfy increasingly sophisticated customer requirements and
achieve market acceptance. The Company's customers utilize a wide variety of
hardware, software, database and networking platforms and, as a result, the
Company must continue to support and maintain its products on a variety of such
platforms. In particular, the Company must continue to anticipate and respond
adequately to advances in other software and desktop computer operating systems
such as Microsoft Windows and its successors. The Company's future success will
depend upon its ability to address the increasingly sophisticated needs of its
customers by supporting existing and emerging hardware, software, database and
networking platforms and by developing and introducing enhancements to its
products and new products on a timely basis to keep pace with technological
developments, evolving industry standards and changing customer requirements. No
assurances can be given that the Company will be successful in developing and
marketing, on a timely and cost-effective basis, fully functional product
enhancements or new products that respond to technological advances by others,
or that its new or enhanced products will achieve market acceptance.

The Company has, on occasion, experienced delays in the scheduled
introduction of new versions and new products. In addition, enterprise-wide
applications software products as complex as those offered by the Company may
contain undetected errors or "bugs" when first introduced or as new versions are
released that, despite testing by the Company, are discovered only after a
product has been installed and used by customers. No assurances can be given
that the Company's most current releases or future releases of its products will
not contain significant software errors that could impair the market acceptance
of these products and have a material adverse effect on the Company's business,
operating results and financial condition. The Company currently maintains
errors and omissions and public/product liability insurance in the amount of
$6.0 million with respect to damages as a result of product defects or errors
and limits its liability for such damages in its agreements with customers.
Although the Company believes that its insurance coverage and the provisions in
its customer agreements limiting the Company's liability for, among other
things, negligence or other wrongful acts, provide the Company with adequate
protection against liability for product defects or errors, no assurances can be
given that the Company's insurance coverage will be sufficient to cover all
losses resulting from product defects or errors or that the provisions in its
customer agreements limiting the Company's liability would be enforceable in all
cases. In addition, the announcement and introduction of new products may
depress sales of existing products. Further, problems can be encountered by
customers in installing and implementing new releases or with the performance of
the Company's products. Delays in the introduction of new and enhanced products,
or significant problems with the implementation and installation of new releases
could have a material adverse effect on the Company's business, operating
results and financial condition.

EXPOSURE TO REGULATORY AND GENERAL ECONOMIC CONDITIONS IN INDIA

A significant element of the Company's business strategy is to continue to
develop its offshore software development and support facility in New Delhi,
India. As of April 2, 1999, the Company had approximately 36% of its workforce
in India. The Indian government, as a means of encouraging foreign investment,
provides significant tax incentives and exemptions to regulatory restrictions.
Certain of these benefits that directly affect the Company include, among
others, tax holidays (temporary exemptions from taxation on operating income)
and liberalized import and export duties. The current tax holiday to which the
Company is subject expires in 2001. To be eligible for certain of these tax
benefits, the Company must continue to meet certain conditions such as continued
operation in a qualifying software technology park and export sales of at least
75% of inventory turnover. A failure to meet such conditions could result in
cancellation of the benefits or a requirement to pay damages in an amount to be
determined by the Indian Government and customs duty on plant, machinery,
equipment, raw materials, components and consumables. With respect to duties,
subject to certain conditions, goods, raw materials and components for
production imported by the Company's offices in India are exempt from the levy
of a customs duty. No assurances can be given that such tax benefits will be
continued in the future or at their current levels.

Although wage costs in India are significantly lower than in the United
States, United Kingdom and similar markets for comparably skilled software
engineering and other technical personnel, wages in India are

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<PAGE> 9

increasing at a faster rate than in the United States and United Kingdom. In the
past, India has experienced significant inflation and shortages of foreign
exchange, and has been subject to civil unrest and acts of terrorism. Although
the inflation rate for the periods discussed in this Prospectus has been
insignificant, increases in inflation in the future could have a material
adverse effect on the Company's business, operating results and financial
condition. In addition, changes in interest rates, taxation or other social,
political, economic or diplomatic developments affecting India in the future
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Business -- The AremisSoft Strategy."

On May 13, 1998, the United States imposed immediate economic sanctions
against India, as required under Section 102 of the Arms Export Control Act, in
response to the detonation by India of nuclear devices. Japan and certain other
nations also announced sanctions against India. Although most of the current
sanctions imposed by the United States restrict the United States from providing
assistance to India and do not directly limit the activities of United States
businesses, the precise ramifications of the sanctions are not expected to be
known for some time. Further, although the current sanctions do not directly
affect United States businesses, additional sanctions could be imposed which
could have a material adverse effect on United States businesses with
operations, sales or suppliers in India. In addition, one of the sanctions
prohibits the export to India of specific goods and technology, which includes
certain dual-use technologies and equipment such as computers and certain
software products originating from the United States and controlled for nuclear
or missile nonproliferation reasons. The United States Department of Commerce
may also grant licenses exempting certain goods and common use items from the
export prohibition on a case-by-case basis. Although the Company's operations
have not been substantially affected by the sanctions to date and it does not
believe its activities will be affected by the current sanctions, no assurances
can be given that the Company's technologies will not, in the future, be
included in the specific technologies subject to sanctions or affected by the
prohibition on items exported by third parties.

COMPETITION

The market for enterprise-wide applications software is intensely
competitive, fragmented, subject to rapid changes and significantly affected by
new product introductions and other market activities of industry participants.
The Company's products are primarily designed for and marketed to mid-sized
organizations in the Targeted Markets. A number of companies offer competitive
products to organizations in the Targeted Markets. In addition, the Company
faces indirect competition from suppliers of customized enterprise-wide
applications software primarily designed for proprietary mainframe and
minicomputer-based systems with highly customized software and the internal MIS
departments of large organizations who develop their own systems. Many of the
Company's present or potential competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
greater name recognition and a larger installed base of customers than the
Company. As a result, they may be able to respond more quickly than the Company
to new or emerging technologies and to changes in customer requirements, or they
may be able to devote greater resources to the development, promotion and sale
of their products.

The Company's products are currently marketed and sold primarily in the
United Kingdom. The Company's principal competitors in the manufacturing
industry include QAD Inc., FOURTH SHIFT Corporation ("Fourth Shift"), Symix
Systems, Inc. ("Symix"), DataWorks Corporation ("DataWorks") and MDIS Group plc
("MDIS"). Principal competitors in the healthcare industry in the United Kingdom
include Egton Medical Information Services ("EMIS"), Reuters Group plc
("Reuters"), AAH Meditel, GPASS, HCSL, Exeter Systems, Medical Care Systems,
Microtest Europe Limited, PCTI Solutions Ltd. and Seetec Medical Systems. The
Company's principal competitor in the United Kingdom in the hospitality industry
is Innsite Hotel Services Ltd. and in Europe is MICROS-Fidelio International. In
the construction industry, the Company's principal competitors include FCG
Computer Systems/Red Sky Software Ltd., Misys plc, The Database Ltd.,
Engineering Technology Ltd. and Estimation Inc. The Company also believes that
large enterprise software vendors, such as Oracle Corporation ("Oracle"), SAP AG
("SAP"), Baan Company N.V. ("Baan") and PeopleSoft, Inc. ("PeopleSoft") are
increasing their marketing efforts to mid-sized organizations in the
manufacturing sector, one of the Targeted Markets in which the Company competes.
See

7
<PAGE> 10

"Business -- Targeted Markets." No assurances can be given that the Company will
be able to compete successfully against any of these competitors.

In addition, because the barriers to entry in the enterprise-wide
applications software market are relatively low, additional competitors may
emerge as the market continues to develop and expand. Because the
enterprise-wide applications software market is fragmented, the Company also
anticipates that acquisitions of competitors by large software companies or
strategic alliances will occur and that significant consolidation in the
Company's industry will occur over the next few years. Increased competition
from new entrants to the industry or through strategic acquisitions or alliances
could lead to price erosion, 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. Further, the Company's growth strategy has been
and is expected to remain dependent to a significant extent on the Company's
ability to acquire complementary businesses, products or technologies in the
future. Increasing consolidation in the Company's industries will require the
Company to compete with other software companies and alliances for strategic
acquisition opportunities. No assurances can be given that the Company will be
able to successfully identify acquisition opportunities, that any acquisitions
will be successfully consummated and integrated into the Company's operations or
that the Company will be successful in competing for acquisition opportunities.
See "-- Assimilation of Acquisitions" and "Business -- Acquisition Strategy."

GOVERNMENT REGULATION OF HEALTHCARE PRODUCT SPECIFICATIONS

The Company's healthcare products sold in the United Kingdom are regulated
by the National Health Service (the "NHS"), a government agency, through a
product accreditation procedure. While the Company's healthcare products
currently meet NHS specifications for information systems, the requirements are
expected to be updated pursuant to the NHS' new Information Management and
Technology Strategy, which is expected to be published in April 1999. The new
mandatory specifications are expected to be introduced to conform all
information technology systems in the United Kingdom's healthcare marketplace.
See "Business -- Targeted Markets -- Healthcare." Although the Company is
currently modifying its healthcare industry products in anticipation of the
proposed product specifications, no assurances can be given that the Company
will be able to meet all such specifications or, if met, that the related costs
will not be substantial or make the cost of the Company's healthcare products
prohibitive for potential customers. In addition, the Company has experienced
and expects to continue to experience a decrease in the number of purchases of
its existing healthcare products as businesses in the healthcare industry in the
United Kingdom postpone purchases pending release of the final new regulations
and related product specifications. Such regulations and related product
specifications, as well as future changes to NHS specifications for information
systems, could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Targeted
Markets -- Healthcare."

LENGTHY SALES AND IMPLEMENTATION CYCLES

The Company's products are generally used for division-wide or
enterprise-wide purposes and involve significant capital outlays by customers
and relatively complex installations. Potential customers generally commit
significant resources to an evaluation of available enterprise-wide applications
software and require the Company to provide a significant level of education
about the use and benefits of the Company's products. Sales of the Company's
software products require an extensive marketing effort because decisions to
license such software generally involve the evaluation of the software by a
significant number of a potential customer's personnel in various functional and
geographic areas, many of which may have specific and conflicting requirements.
A variety of factors over which the Company has little or no control may cause
potential customers to favor a particular supplier or to delay or forego a
purchase. As a result of these or other factors, the sales cycles for the
Company's products can be lengthy and vary among customers and across the
Targeted Markets. See "Business -- Targeted Markets." The Company's typical
sales cycle (i.e., the period from the initial contact with a customer to
execution of a product license agreement) ranges from three to 12 months. As a
result of the length of the sales cycle for its products, the Company's ability
to forecast the timing and amount of specific sales is limited, and the delay or
failure to complete one or more large license transactions

8
<PAGE> 11

could have a material adverse effect on the Company's business, operating
results and financial condition and cause the Company's operating results to
vary significantly from quarter to quarter. See "-- Loss History; Volatility and
Seasonality of Quarterly Operating Results" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

The Company's products are designed to perform or directly affect
business-critical functions across many different functional and geographic
areas of a customer's organization. Consequently, implementation of the
Company's software is subject to delays over which the Company has little or no
control. Delays in the completion of implementation of any of the applications
of its products by the Company can result in delay in revenue recognition and
may result in customer dissatisfaction or damage to the Company's reputation and
could have a material adverse effect on the Company's business, operating
results and financial condition. See "-- Loss History; Volatility and
Seasonality of Quarterly Operating Results."

INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS

The Company currently has operations in the United Kingdom, United States,
Argentina, Mexico, India, Ireland and Cyprus and independent distributors in 14
additional countries. A significant portion of the Company's revenues are
received in currencies other than the United States dollar (the currency into
which the Company's historical financial statements have been translated),
primarily British pounds. In the past, the Company has not engaged in hedging
transactions designed to manage currency fluctuation risks but may implement
programs to mitigate foreign currency risk exposure in the future as the
Company's management deems appropriate. Foreign currency transaction gains and
losses arising from normal business operations are credited to, or charged
against, earnings in the period realized. As a result, fluctuations in the value
of the currencies in which the Company conducts its business relative to British
pounds have caused and will continue to cause foreign currency transaction gains
and losses. Because of the number of currencies involved, the constantly
changing currency exposures and the substantial volatility of currency exchange
rates, no assurances can be given that the Company will not experience currency
losses in the future, nor can there be any assurances that foreign exchange rate
fluctuations will not have a material adverse effect on the Company's business,
operating results and financial condition. Further, because the Company's
functional currency is the British pound and its financial statements are
reported in United States dollars, fluctuations of the British pound against the
United States dollar will impact the Company's reported financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

The Company's international operations are subject to other risks inherent
in international business activities, such as the imposition of governmental
controls, export license requirements, restrictions on the export of certain
technology, cultural and language difficulties associated with servicing
customers, the impact of a recessionary environment in economies outside the
United States, reduced protection for intellectual property rights in some
countries, the potential exchange and repatriation of foreign earnings,
political instability, sanctions imposed as a result of violations of
international law or other governmental action, trade restrictions, tariff
changes, localization and translation of products for foreign countries,
difficulties in staffing and managing international operations, difficulties in
collecting accounts receivable and longer collection periods and the impact of
local economic conditions and practices. See "-- Exposure to Regulatory and
General Economic Conditions in India." The Company's success in expanding its
international business will be dependent, in part, on its ability to anticipate
and effectively manage these and other risks. No assurances can be given that
these and other factors will not have a material adverse effect on the Company's
business, operating results and financial condition.

ENFORCEABILITY OF CIVIL LIABILITIES UNDER THE UNITED STATES SECURITIES LAWS

A majority of the Company's directors, all of its executive officers and
certain of the experts named in this Prospectus are nonresidents of the United
States. A substantial portion of the assets of the Company and all or a
substantial portion of the assets of such persons are located outside the United
States. As a result, it may not be possible to effect service of process within
the United States upon such persons with respect to matters arising under the
United States securities laws or to enforce against the Company or such persons
in United
9
<PAGE> 12

States courts judgments of United States courts predicated upon civil liability
under such securities laws. Further, there is doubt as to the enforceability in
the United Kingdom, in original actions or in actions for enforcement of
judgment of United States courts, of civil liabilities predicated upon United
States securities laws.

DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL QUALIFIED PERSONNEL

The Company's success depends, to a significant extent, upon a limited
number of members of senior management of the Company and other key employees.
The loss of the services of the Company's Chairman of the Board and Chief
Executive Officer, Dr. Lycourgos K. Kyprianou, or other key personnel could have
a material adverse effect on the Company's business, operating results and
financial condition. The Company maintains and is the beneficiary under a key
man life insurance policy in the amount of $3.0 million on the life of Dr.
Kyprianou and maintains such insurance for certain other key personnel in
amounts ranging from $150,000 to $500,000.

The Company believes that its future operating results will also depend in
significant part on its ability to attract and retain highly skilled technical,
managerial, sales, marketing, service and support personnel. Competition for
such personnel within the software industry is intense. Although the Company has
increased the number of its technical, sales, services and support personnel in
recent years, the Company could experience difficulty in recruiting such
personnel in the future. The Company anticipates that it will need to continue
to increase the size of its direct sales, services and support personnel in
future periods. No assurances can be given that the Company will be successful
in attracting and recruiting qualified personnel. An inability to hire qualified
personnel on a timely basis could have a material adverse effect on the
Company's business, operating results and financial condition. See
"-- Management of Growth."

YEAR 2000

Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, the computer systems or software used by the
Company and its customers and vendors may need to be upgraded to comply with
Year 2000 requirements. The Company has developed a program and appointed a
committee of senior executives to design and test its internal systems and
products, as well as verify internal systems and products of its significant
suppliers to ensure that such products are Year 2000 compliant. Although the
Company believes all of the Company's internal systems and the software products
currently marketed by the Company are Year 2000 compliant and the Company has
developed many upgrades for its products for purchase by customers to provide
Year 2000 compliance, no assurances can be given that the Company's internal
systems and software products contain all necessary date code or other
applicable modifications. Failure of the Company or its significant suppliers to
remedy Year 2000 problems could have a material adverse effect on the Company's
business and results of operations. As of December 31, 1998, the Company has
incurred approximately $732,000 in Year 2000 related costs in the aggregate and
expects to incur an additional $80,000. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Impact of the Year
2000."

The purchasing patterns of customers and potential customers may be
affected by Year 2000 issues in a variety of ways. Many companies are expending
significant resources to correct or patch their current software systems for
Year 2000. Even though the Company believes that Year 2000 compliance could
create a marketing opportunity for the Company, the expenditures that potential
customers are making may result in reduced funds available to purchase software
products such as those offered by the Company. Many potential customers may also
choose to defer purchasing Year 2000 compliant products until they believe it is
absolutely necessary, thus resulting in potentially stalled sales within the
industry. Conversely, Year 2000 compliance may cause other companies to
accelerate purchases, thereby causing an increase in short-term demand and a
consequent decrease in long-term demand for software products. Additionally,
Year 2000 compliance could cause a significant number of companies, including
current Company customers, to reevaluate their current enterprise software needs
and, as a result, consider switching to products offered by other software
vendors. Moreover, the Company believes that some customers may be purchasing
the Company's products as an
10
<PAGE> 13

interim solution for Year 2000 compliance until their current software vendors
reach compliance. No assurances can be given that such customers will purchase
support services from the Company or that they will upgrade beyond their current
version of the Company's software once their current software suppliers reach
compliance. Any of the foregoing could have a material adverse effect on the
Company's business, operating results and financial condition. For a discussion
of the effects of Year 2000 compliance on the Company's internal information
technology systems, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Impact of the Year 2000."

INTELLECTUAL PROPERTY RIGHTS

The Company relies on the protection provided by applicable copyright,
trademark and trade secret laws, confidentiality procedures and licensing
arrangements to establish and protect its proprietary rights. The Company holds
no patents or registered copyrights. Despite the Company's efforts, which afford
only limited protection, it may be possible for unauthorized third parties to
copy certain portions of the Company's products or to reverse engineer or obtain
and use information that the Company regards as proprietary. Policing
unauthorized use of the Company's software is difficult and, while the Company
is unable to determine the extent to which piracy of its products exists,
software piracy can be expected to be a problem. In addition, the laws of
certain countries, such as India and the United Kingdom, do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. Accordingly, no assurances can be given that the Company will be able to
protect its proprietary rights against unauthorized third-party copying or use,
which could adversely affect the Company's business operating results and
financial condition. Further, litigation may be necessary in the future to
enforce the Company's intellectual property rights, to protect the Company's
trade secrets or to determine the validity and scope of the proprietary rights
of others. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
operating results and financial condition.

The Company expects that enterprise-wide applications software products
will increasingly be subject to claims of infringement relating to software
codes as the number of products and competitors in the Company's industry
segment grows and the functionality of products overlaps. No assurances can be
given that legal actions claiming copyright or other intellectual property
infringement will not be commenced against the Company, or that the Company
would necessarily prevail in such litigation given the complex technical issues
and inherent uncertainties in intellectual property litigation. Any such claim,
with or without merit, could be time-consuming, result in costly litigation and
require the Company to enter into royalty and licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all. A successful claim against the Company and the failure
of the Company to develop or license a substitute technology could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business -- Proprietary Rights and Licensing."

FIXED-PRICE SERVICE CONTRACTS

The Company offers a combination of enterprise-wide applications software,
implementation and support services to its customers. Certain customers have
asked for, and the Company has from time to time entered into, fixed-price
service contracts. These contracts require the Company to provide support
services for a fixed price regardless of actual costs incurred by the Company in
fulfilling its support service obligations. Revenues attributable to fixed-price
service contracts were approximately 7%, 11% and 11% of total revenues for 1996,
1997 and 1998, respectively. The Company may enter into additional fixed-price
service contracts in the future. No assurances can be given that the Company
will be able to successfully complete these contracts within budget and the
Company's inability to do so could have a material adverse effect on its
business, operating results and financial condition.

CONTROL BY EXISTING STOCKHOLDERS

Upon the completion of the Offering, Dr. Kyprianou and other members of
management will beneficially own approximately 40% of the outstanding Common
Stock (38% if the Underwriters' over-allotment option is exercised in full) and
will have the ability to influence the control of all matters submitted for a
stockholder
11
<PAGE> 14

vote, including the election of directors and the approval of significant
corporate transactions, such as mergers, consolidations, sales of all or
substantially all of the assets of the Company and other change in control
transactions. Management's significant equity interest in the Company also may
have the effect of making certain transactions more difficult without their
support and may have the effect of delaying, deferring or preventing a change in
control of the Company. See "Principal Stockholders" and "Description of Capital
Stock."

BENEFITS OF THE OFFERING TO THE COMPANY'S PRINCIPAL STOCKHOLDERS

The Offering is expected to create a public market for the Common Stock
which may result in a substantial increase in the market value of the initial
investments of the Company's principal stockholder, Dr. Lycourgos K. Kyprianou.
As of April 2, 1999, Dr. Kyprianou beneficially owned 4,693,630 shares of Common
Stock. Based upon the initial public offering price, the value of the shares
held by Dr. Kyprianou following the Offering will be approximately $23.5
million, representing an aggregate increase of approximately $12.2 million over
the amount of consideration paid by Dr. Kyprianou at various times since 1994.
See "-- Dilution; Dividends" and "Principal Stockholders."

ANTI-TAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW

Certain provisions of the Company's Certificate of Incorporation, Bylaws
and Delaware law could delay, defer or prevent a change in control of the
Company. The Board of Directors has the authority to issue up to 15,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions of those shares, including voting rights, without any further vote
or action by the stockholders. The rights of the holders of the Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of the preferred stock that may be issued in the future. The Company's
Certificate of Incorporation and bylaws also include provisions limiting the
right of stockholders to take action by written consent. The Company's Bylaws
contain advance notice requirements for stockholder nominations for election to
the Board of Directors or for stockholder proposals of business to be considered
at stockholder meetings. In addition, the Company is subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law
("DGCL"), which will prohibit the Company from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner
under the DGCL. The ability of the Board of Directors to issue shares of
preferred stock without further stockholder approval, as well as the
aforementioned provisions of the Company's Certificate of Incorporation and
Bylaws and of Delaware law, could have the effect of delaying, deferring or
preventing a change in control of the Company. See "Description of Capital
Stock."

ABSENCE OF ESTABLISHED PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no established public market for the
Common Stock. Substantially all of the Company's Common Stock issued prior to
the Offering is subject to certain trading restrictions and the Company's
predecessor had only limited trades. No assurances can be given that an active
public market for the Common Stock will develop or be sustained after the
Offering. The initial public offering price was determined by negotiations
between the Company and the representatives of the Underwriters based on several
factors and may not be indicative of the future market price of the Common
Stock. The market price of the Common Stock is likely to be highly volatile and
may be subject to significant fluctuations in response to actual or anticipated
variations in quarterly operating results and other factors, such as
announcements of technological innovations, new products or new contracts by the
Company or its competitors, conditions and trends in the software and other
technology industries, adoption of new accounting standards affecting the
software industry, changes in earning estimates or recommendations by securities
analysts, general market conditions or other events. In addition, equity markets
have experienced extreme volatility that has particularly affected the market
prices of equity securities of many high technology companies and that has been
unrelated or disproportionate to the operating performance of such companies.
Broad market fluctuations, as well as economic conditions generally and in the
software industry specifically, may result in material

12
<PAGE> 15

adverse effects on the market price of the Common Stock. No assurances can be
given that the market price of the Common Stock will not decline below the
initial public offering price. In the past, following periods of volatility in
the market price of a particular company's securities, securities class action
litigation has often been brought against that company. No assurances can be
given that such litigation will not occur in the future with respect to the
Company. Such litigation could result in substantial costs and diversion of
management's attention and resources, which could have a material adverse effect
upon the Company's business, operating results and financial condition. See
"Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Sales of a substantial number of shares of Common Stock in the public
market following the Offering, or the perception that such sales could occur,
could adversely affect the market price of the Common Stock. The shares of
Common Stock outstanding prior to the Offering will be eligible for sale in the
public market at various times in the future. Upon the completion of the
Offering, the Company will have issued and outstanding 13,300,051 shares of
Common Stock (13,795,051 shares if the Underwriters' over-allotment option is
exercised in full). The Company, all of the Company's executive officers and
directors who own Common Stock, and certain other stockholders of the Company
have agreed that, without the prior written consent of Cruttenden Roth
Incorporated, on behalf of the Underwriters, and subject to certain limited
exceptions, they will not sell any shares of Common Stock for a period of 180
days after the date of this Prospectus. See "Underwriting." Approximately
8,133,635 of the shares to be outstanding upon the completion of the Offering,
other than the shares being offered hereby, will be subject to the lock-up
agreements described above or are "restricted securities" within the meaning of
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"),
and are subject to certain restrictions on resale or transfer under the
Securities Act. Upon expiration of the lock-up period described above,
approximately 1,561,232 additional shares will be eligible for sale in the
public market without restriction and 6,572,403 shares will become eligible for
sale, subject to certain restrictions under Rule 144. See "Shares Eligible for
Future Sale." In addition, certain stockholders of the Company have certain
registration rights with respect to shares of Common Stock beneficially owned by
such stockholders. See "Shares Eligible for Future Sale -- Registration Rights."

DISCRETION OVER USE OF PROCEEDS

The principal purposes of the Offering are to repay indebtedness and to
increase the Company's capital base and financial flexibility. After the
repayment of $5.0 million of indebtedness under bank credit facilities, the
Company expects to use the remaining net proceeds from the Offering for general
corporate purposes, including working capital and to fund potential
acquisitions. However, after the repayment of indebtedness, the Company has no
current specific plans for use of the net proceeds of the Offering. As a result,
the Company's management will have broad discretion over the use of the net
proceeds to the Company from the Offering. An inability to effectively apply the
net proceeds could have a material adverse effect on the Company's business,
operating results and financial condition. See "Use of Proceeds."

DILUTION; DIVIDENDS

The initial public offering price is greater than the net tangible book
value per outstanding share of Common Stock as of December 31, 1998.
Accordingly, purchasers in the Offering will suffer immediate and substantial
dilution of $4.62 in the net tangible book value per share of the Common Stock
from the initial public offering price. See "Dilution."

The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future. See "Dividend Policy."

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<PAGE> 16

ORGANIZATION OF THE COMPANY

The Company was incorporated in Delaware on June 1, 1998, in connection
with a change of corporate domicile from Nevada to Delaware effective March 5,
1999. Immediately prior to its reincorporation in Delaware, the Company effected
a 1.711772-for-one reverse stock split. Before the reincorporation, the Delaware
corporation had no operations, assets or liabilities, contingent or otherwise.
The Company, through predecessor entities, established software development
activities in New Delhi, India in 1986 and commenced operations in the United
Kingdom in 1992. The Company's predecessor, LK Global Information Systems, B.V.,
a Netherlands corporation, was incorporated on November 30, 1995, as part of a
Dutch holding company reorganization and change in corporate domicile from the
United Kingdom to the Netherlands, which coincided with the Company's expansion
into the manufacturing, healthcare and construction markets. Prior to 1995, the
Company operated primarily through LK Global Information Systems (UK) plc, which
was incorporated in England and Wales on October 16, 1994, and several other
operating entities, all of which were wholly owned by the Company's Chairman and
Chief Executive Officer, Dr. Lycourgos K. Kyprianou. By December 31, 1996, all
operating entities under the common control of Dr. Kyprianou had been
consolidated into LK Global Information Systems, B.V. On October 30, 1997, the
Company reorganized as a United States holding company, changing its corporate
domicile from the Netherlands to the State of Nevada by acquiring Juno
Acquisitions, Inc., a Nevada corporation ("Juno"), which was incorporated on
November 16, 1992. As of October 30, 1997, Juno had not yet commenced material
business operations. The Company's change in corporate domicile from the
Netherlands to Nevada was structured as a share exchange and, in connection
therewith, the name of the Nevada corporation was changed to AremisSoft
Corporation. Although Juno issued new shares in the share exchange and became
the ultimate parent in the Company's corporate structure, the transaction was
accounted for as a "reverse acquisition" and, as a result, the historical
financial statements and descriptions of the Company's business and other
matters contained in this Prospectus relate to LK Global Information Systems,
B.V., and its subsidiaries, rather than the prior operations of Juno.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the shares
of Common Stock offered hereby are estimated to be approximately $13.7 million
($16.0 million if the Underwriters' over-allotment option, granted to the
Underwriters by the Company is exercised in full), after deducting the
underwriting discount and estimated offering expenses payable by the Company.

The principal purposes of the Offering are to provide increased visibility
of the Company in a marketplace where many of its competitors are publicly held
companies, to create a public market for the Common Stock, to increase the
Company's equity capital, to facilitate future access by the Company to the
public equity markets, to repay indebtedness and to fund potential acquisitions.

The Company currently intends to use the net proceeds of the Offering to
repay $5.0 million of borrowings outstanding under the Company's bank credit
facilities, which totaled approximately $15.5 million as of December 31, 1998,
and for working capital and other corporate purposes. The indebtedness to be
repaid upon the completion of the Offering is due on demand and the weighted
average interest rate of such indebtedness was 13% per annum for the year ended
December 31, 1998. The Company may also apply a portion of the net proceeds of
the Offering to acquire or invest in businesses, products or technologies that
are complementary to those of the Company. Although the Company has not
identified any specific businesses, products or technologies that it may
acquire, nor are there any current agreements or negotiations with respect to
any such transactions, the Company from time to time evaluates such
opportunities. Pending such uses, the net proceeds will be invested in
government securities and other short-term, investment-grade, interest-bearing
instruments. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

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<PAGE> 17

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock. Following the Offering, the Company does not intend to pay cash dividends
because it intends to retain all earnings to support its planned growth. Any
future dividends will be at the discretion of the Board of Directors, subject to
a number of factors, including the Company's results of operations, general
business conditions, capital requirements, general financial condition and other
factors deemed relevant by the Board of Directors. The Company expects that any
future credit facilities will restrict the payment of dividends. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of December 31, 1998, on an actual basis and on an as adjusted basis
to give effect to the Offering and the application of the estimated net proceeds
therefrom.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt(1).......................................... $ 15,530 $ 10,530
Stockholders' equity (deficit):
Preferred stock, par value $.001 per share; 15,000,000
shares authorized; no shares issued and outstanding.... -- --
Common stock, $.001 par value per share, 75,000,000 shares
authorized; 10,000,051 shares issued and outstanding,
actual; and 13,300,051 shares issued and outstanding,
as adjusted(2)......................................... 10 13
Additional paid-in capital................................ 27,107 40,838
Accumulated deficit....................................... (32,201) (32,201)
Accumulated other comprehensive income (loss)(3).......... (2,025) (2,025)
Total stockholders' equity (deficit).............. (7,109) 6,625
Total capitalization.............................. $ (7,109) $ 6,625
</TABLE>

- ---------------
(1) See Notes 5 and 6 of Notes to Consolidated Financial Statements.

(2) Excludes (i) 1,500,000 shares of Common Stock reserved for issuance under
the Company's 1998 Stock Option Plan, of which the Company intends to grant
options to purchase 860,000 shares in connection with the Offering at an
exercise price per share equal to the initial public offering price, (ii)
330,000 shares of Common Stock issuable upon exercise of warrants to be
issued to the Representative, (iii) approximately 63,084 shares of Common
Stock issuable upon conversion of the Convertible Promissory Note and (iv)
51,117 shares of Common Stock issuable upon exercise of outstanding warrants
at an exercise price of $8.56 per share. See "Management -- 1998 Stock
Option Plan," "Description of Capital Stock -- Warrants" and "Underwriting."

(3) See Note 1 of Notes to Consolidated Financial Statements.

15
<PAGE> 18

DILUTION

The net tangible book value (deficit) of the Company as of December 31,
1998, was $(8.7) million or $(0.87) per share. Net tangible book value (deficit)
per share represents the Company's total tangible assets less total liabilities,
divided by the number of shares of Common Stock outstanding. Dilution per share
represents the difference between the amount per share paid by investors in the
Offering and the net tangible book value per share immediately after the
completion of the Offering. After giving effect to the sale by the Company of
3,300,000 shares of Common Stock offered hereby, and after deducting the
estimated underwriting discount and Offering expenses payable by the Company,
the net tangible book value (deficit) as of December 31, 1998, as adjusted,
would have been $5.0 million or $0.38 per share. This represents an immediate
increase in net tangible book value of $1.25 per share to existing stockholders
and an immediate dilution in net tangible book value of $4.62 per share to new
investors. The following table illustrates this dilution per share:

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $5.00
Net tangible book value (deficit) per share as of December
31, 1998............................................... $(0.87)
Increase in net tangible book value per share attributable
to new investors....................................... 1.25
------
Net tangible book value per share after the Offering(1)..... 0.38
-----
Dilution per share to new investors......................... $4.62
=====
</TABLE>

The following table summarizes the total consideration paid and the average
price per share paid by the existing stockholders and new investors, after
giving effect to the sale by the Company of 3,300,000 shares of Common Stock
offered hereby:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)......... 10,000,051 75.2% $27,117 62.2% $2.71
New investors.................... 3,300,000 24.8 16,500 37.8 5.00
---------- ----- ------- ------
Total.................. 13,300,051 100.0% $43,617 100.0%
========== ===== ======= ======
</TABLE>

- ---------------
(1) Excludes (i) 1,500,000 shares of Common Stock reserved for issuance under
the Company's 1998 Stock Option Plan, of which the Company intends to grant
options to purchase 860,000 shares in connection with the Offering at an
exercise price per share equal to the initial public offering price, (ii)
330,000 shares of Common Stock issuable upon exercise of warrants to be
issued to the Representative, (iii) approximately 63,084 shares of Common
Stock issuable upon conversion of the Convertible Promissory Note and (iv)
51,117 shares of Common Stock issuable upon exercise of outstanding warrants
at an exercise price of $8.56 per share. See "Management -- 1998 Stock
Option Plan," "Description of Capital Stock -- Warrants" and "Underwriting."

16
<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below as of December 31,
1998 and 1997 and for each of the three years in the period ended December 31,
1998, have been derived from the Company's Consolidated Financial Statements,
which have been audited by independent auditors whose report is included
elsewhere in this Prospectus. The selected consolidated financial data set forth
below as of December 31, 1996, 1995 and 1994 and for each of the two years in
the period ended December 31, 1995, have been derived from the Company's
historical financial statements not included in this Prospectus. The selected
consolidated financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1994(1) 1995(2)(8) 1996(3)(8) 1997(4) 1998(5)
------- ------------- ------------- ------- -------
(AS RESTATED) (AS RESTATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses.......................................... $2,039 $ 6,641 $ 12,052 $17,024 $26,416
Maintenance and services................................... 2,822 9,426 15,839 18,990 21,680
Hardware and other......................................... 1,588 5,355 6,541 6,360 4,525
------- -------- -------- ------- -------
Total revenues....................................... 6,449 21,422 34,432 42,374 52,621
------- -------- -------- ------- -------
Cost of revenues:
Software licenses.......................................... 281 875 1,555 2,079 2,654
Maintenance and services................................... 842 2,735 5,393 5,377 5,319
Hardware and other......................................... 1,323 4,829 5,760 5,147 2,817
Amortization of purchased software and capitalized software
development costs........................................ 331 1,986 2,327 70 265
Write-off of purchased software costs...................... -- 388 -- -- --
------- -------- -------- ------- -------
Total cost of revenues............................... 2,777 10,813 15,035 12,673 11,055
------- -------- -------- ------- -------
Gross profit................................................ 3,672 10,609 19,397 29,701 41,566
Operating expenses:
Sales and marketing........................................ 2,133 10,811 15,182 17,834 21,594
Research and development................................... 521 6,428 6,409 6,233 6,207
General and administrative................................. 1,282 3,442 5,605 5,227 4,868
Write-off of offering costs................................ -- -- -- -- 1,592
Amortization of intangible assets.......................... 2,550 3,176 5,144 97 74
Write-off of intangible assets............................. -- -- 505 -- --
------- -------- -------- ------- -------
Total operating expenses............................. 6,486 23,857 32,845 29,391 34,335
------- -------- -------- ------- -------
Profit (loss) from operations(6)............................ (2,814) (13,248) (13,448) 310 7,231
Interest expense, net....................................... (207) (1,284) (1,906) (1,895) (2,030)
------- -------- -------- ------- -------
Income (loss) before income taxes........................... (3,021) (14,532) (15,354) (1,585) 5,201
Income tax expense (benefit)................................ (54) 37 (50) 35 2,026
------- -------- -------- ------- -------
Net income (loss)........................................... $(2,967) $(14,569) $(15,304) $(1,620) $ 3,175
======= ======== ======== ======= =======
Basic earnings (loss) per share............................. $(0.39) $ (1.94) $ (2.04) $(0.21) $ 0.35
======= ======== ======== ======= =======
Diluted earnings (loss) per share........................... $(0.39) $ (1.94) $ (2.04) $(0.21) $ 0.35
======= ======== ======== ======= =======
Weighted average number of shares used in computing:
Basic earnings (loss) per share(7)......................... 7,504 7,504 7,504 7,518 9,120
======= ======== ======== ======= =======
Diluted earnings (loss) per share(7)....................... 7,504 7,504 7,504 7,518 9,135
======= ======== ======== ======= =======
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------
1994 1995(8) 1996(8) 1997 1998
------- ------------- ------------- ------- -------
(AS RESTATED) (AS RESTATED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 120 $ 255 $ 867 $ 239 $ 149
Working capital (deficit)(9)................................ 863 (8,244) (15,438) (12,971) (10,516)
Total assets......................................... 10,012 22,729 18,449 17,242 27,952
Long-term debt.............................................. 679 12,453 13,388 10,096 --
Total stockholders' equity (deficit)................. 2,219 (12,365) (25,103) (19,534) (7,109)
</TABLE>

- ---------------
(1) Includes the results of operations of businesses acquired in October 1994,
representing approximately $1.9 million in revenues.

(3) Includes a full year of operations of the businesses acquired in 1994 and
1995 and the results of operations of businesses acquired in March 1996,
representing approximately $750,000 in revenues.

(4) Includes a full year of operations of the businesses acquired in 1994, 1995
and 1996.

(5) Includes the Company's write-off of approximately $1.6 million in Offering
costs incurred in 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

(7) The basis for the determination of shares used in computing basic earnings
(loss) per share is described in Note 1 of Notes to Consolidated Financial
Statements.

(8) The 1995 and 1996 financial statements have been restated from previously
reported amounts. See Note 1 of Notes to Consolidated Financial Statements.

(9) The Company and Barclays have agreed that the Company will repay $5.0
million of its indebtedness to Barclays from the proceeds of the Offering
and to restructure the remaining indebtedness into long-term loans. Pending
completion of the Offering, the Company has reclassified all of its
long-term debt to short-term debt as of December 31, 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

17
<PAGE> 20

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

The following discussion should be read in conjunction with information
contained in "Selected Consolidated Financial Data" and the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
All statements other than statements of historical fact included in the
following discussion regarding the Company's financial position, business
strategy and plans of management for future operations are forward-looking
statements. These statements are based on management's beliefs and assumptions,
and on information currently available to management. Forward-looking statements
include statements in which words such as "expect," "anticipate," "intend,"
"plan," "believe," "estimate," "consider" or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions, including the risks discussed
under "Risk Factors" and elsewhere in this Prospectus. The Company's actual
results and stockholder values may differ materially from those anticipated and
expressed in these forward-looking statements. Many of the factors that will
determine these results and values are beyond the Company's ability to control
or predict. Investors are cautioned not to put undue reliance on any
forward-looking statements.

GENERAL

AremisSoft develops, markets, implements and supports enterprise-wide
applications software targeted to mid-sized organizations in the Targeted
Markets. Its software products provide an array of functions that address the
mission-critical information requirements of customers in the Targeted Markets.
The Company was founded in Cyprus in 1978 as LK Global Information Systems
(Cyprus) Limited and originally focused on developing customized enterprise-wide
applications software for international organizations located in the Middle/Near
East. In 1986, the Company established its New Delhi, India software development
and support facility to access the skilled Indian labor force and capture cost
efficiencies. The Company established operations in the United Kingdom in 1992.
From 1993 to 1996, the Company successfully completed eleven acquisitions and
established operations in the United States, Mexico, Argentina and Ireland. By
the end of 1996, all operating entities were consolidated into LK Global
Information Systems, B.V. In 1997, the Company reorganized as a United States
holding company, changing its domicile from the Netherlands to Nevada. The
Company reincorporated to Delaware in 1999. As of April 2, 1999, the Company had
520 full time employees and operations in seven countries.

Revenues

The Company derives its revenues primarily from software licenses,
maintenance and service contracts and hardware sales. Software license revenues
are mainly derived from the licensing and service of industry-specific software
applications, primarily the sale of upgrades to existing customers. Maintenance
and service contract revenues are primarily derived from the ongoing support of
installed software and training, consulting and implementation services.
Occasionally, the Company may discount its fees on relatively large service
contracts to remain competitive. Hardware sales revenues are primarily derived
from the sale of third-party hardware to customers requiring turnkey solutions.

For the year ended December 31, 1998, 32%, 30%, 26% and 8% of the Company's
revenues were derived from customers in the manufacturing, healthcare,
hospitality and construction markets, respectively. The remaining 4% of the
Company's revenues for the year ended December 31, 1998, was derived from sales
to approximately 1,000 relatively small customers in various industries. For the
year ended December 31, 1998, 60% of the Company's revenues were derived from
customers located in the United Kingdom, and 25% from customers located in the
rest of Europe. Customers located in the United States, Asia and the rest of the
world accounted for approximately 3%, 3% and 9% of revenues for the year ended
December 31, 1998, respectively.

The Company recognizes software license revenue upon execution of a
contract and delivery of software, provided that the license fees are fixed and
determinable, no significant obligations remain, collection of the resulting
receivable is deemed probable, and no substantial customization or modification
to core software is required. The Company recognizes software license and
service revenues on a percentage to completion basis

18
<PAGE> 21

when, among other things, customer contracts require substantial customization
or modification to the Company's core software in order to meet the customer's
specifications. Maintenance contract revenues are recognized ratably over the
life of the contract, service contract revenues are recognized in accordance
with the terms of the contract and add-on hardware sales revenues are recognized
when the hardware is shipped to the customer. The Company believes that its
accounting policies are consistent with the guidance provided by the American
Institute of Certified Public Accountants' Statement of Position (97-2),
Software Revenue Recognition.

The sales cycles for the Company's products can vary significantly among
customers and across the Targeted Markets. Historically, the Company's sales
cycles have ranged from three to 12 months. Similar to other enterprise-wide
applications software companies, the Company has experienced and expects to
continue to experience seasonal fluctuations in its operating results. See "Risk
Factors -- Loss History; Volatility and Seasonality of Quarterly Operating
Results." The Company has generally realized lower revenues in its first and
second fiscal quarters and higher revenues in its third and fourth fiscal
quarters. This is due, in part, to the March 31 fiscal year-end of many of the
Company's customers. During the Company's first fiscal quarter, many customers
have already expended their information technology budgets. As a result, the
Company's third and fourth fiscal quarters generally reflect greater revenue
recognition because of a higher concentration of software system installations.

Cost of Revenues

The cost of software license revenues consists primarily of personnel costs
as well as the costs of third-party software, media and freight. The cost of
maintenance and service contract revenues consists primarily of salary, travel
and other personnel costs. In addition, cost of service revenues may include the
cost of outsourcing services when relatively large service contracts require
resources in excess of the Company's resources. In general, the Company's costs
are higher when services are outsourced. Costs incurred as a result of
outsourcing were approximately $940,000, $320,000 and $1.8 million for the years
ended December 31, 1996, 1997 and 1998, respectively. The increase in
outsourcing in 1998 was primarily due to the Company's expansion in other
European regions, and the need to use the services of outside sales agents and
other personnel until the Company's operations in these regions are firmly
established. The cost of hardware revenues consists primarily of the cost of
hardware purchased from third parties.

Gross Profit

The Company generally experiences significant differences in profit margins
from software licenses, maintenance and services, and hardware. For example, for
1996, 1997 and 1998, gross profit margins for software licenses were 87%, 88%
and 90%, respectively; for maintenance and services 66%, 72% and 76%,
respectively; and for hardware 12%, 19% and 38%, respectively. The significant
increase in profit margins for hardware was the result of sales of higher margin
hardware products in 1998. The Company's overall gross profit margin is affected
by the relative mix of its products and services having different profit
margins.

Expenses

Sales and marketing expenses consist primarily of sales personnel costs,
advertising and other public relations expenses. Research and development
expenses consist primarily of personnel costs, facility overhead and other
expenses associated with the development of new and enhanced products and
technologies. General and administrative expenses include salaries and benefits
for administrative, executive, finance, legal, human resources, data center,
distribution and internal systems personnel and associated overhead costs, as
well as bad debt, accounting and legal expenses. General and administrative
expenses also include depreciation, which represents the write down of the cost
of tangible fixed assets over their expected useful lives. Amortization of
intangible assets consists of the amortization of customer lists and management
contracts of acquired businesses.

The Company continues to make substantial investments and operational cost
improvements in its sales and marketing, research and development and
administrative infrastructure. From 1996 through 1998 the Company increased its
sales, and marketing staff from 85 employees to 270 employees. During the same
period, the Company reduced its total research and development and
administrative staff from 331 employees

19
<PAGE> 22

to 250 employees. The major impetus behind this transition is the continuous
shift of the research and development and, to a lesser degree, administrative
functions from the United Kingdom to India, where the relative cost of
operations is lower. During this period, the Company's research and development
and administrative personnel in India increased from 115 to 186, while research
and development and administrative personnel in the United Kingdom and other
countries decreased from 216 to 64.

Research and Development; Purchased Software

The Company has several software products which are under development or
were recently released. The Company expects a number of customers currently
using rejuvenated or legacy products to transition to the Company's new
products, which would likely reduce the number of installed customers of the
rejuvenated or legacy products. The ViXEN Windows product is expected to be
released in the second quarter of 1999. In the fourth quarter of 1998, the
Company released the Aremis 4.0 PMS, GCS for Windows and MTMS Windows products.
The Company incurred development expenses of approximately $1.0 million,
$700,000, $595,000 and $460,000 and expects to incur additional expenses of
approximately $125,000, $295,000, $85,000 and $20,000 in connection with the
development of Aremis 4.0 PMS, ViXEN Windows, MTMS Windows and GCS for Windows
products, respectively.

The Company capitalizes the qualifying costs of developing its software
products. Capitalization of such costs requires that technological feasibility
has been established. The Company defines the establishment of technological
feasibility as the completion of all planning, designing, coding and testing
activities that are necessary to establish products that meet design
specifications, including functions, features and technical performance
requirements. Under the Company's definition, establishing technological
feasibility is considered complete only after the majority of customer testing
and customer feedback has been incorporated into product functionality.
Development costs incurred prior to the establishment of technological
feasibility are expensed as incurred. When the software is fully documented and
available for unrestricted sale, capitalization of development costs ceases, and
amortization commences and is computed on a product-by-product basis, based on
either a straight-line basis over the economic life of the product or the ratio
of current gross revenues to the total of current and anticipated future gross
revenues, whichever is greater.

The Company capitalizes as purchased software the costs associated with
software products either purchased from other companies for resale or developed
by other companies under contract with the Company. The cost of the software is
amortized on the same basis as capitalized software development costs. The
amortization period is re-evaluated quarterly with respect to certain external
factors including, but not limited to, technological feasibility, anticipated
future gross revenues, estimated economic life and changes in software and
hardware technologies.

Currency Translation and Transactions

A significant portion of the Company's business is conducted in currencies
other than United States dollars (the currency into which the Company's
historical financial statements have been translated). Historically, the Company
has recorded a majority of its operating expenses in British pounds, and a
substantial portion of its research and development costs in Indian rupees. The
Company's consolidated balance sheets are translated into United States dollars
at the exchange rate prevailing at the balance sheet dates, and the statements
of operations and cash flows are translated into United States dollars at the
average exchange rates for the relevant periods. Gains and losses resulting from
translation are accumulated as a separate component of stockholders' equity.
Increases in the exchange rate from British pounds to United States dollars used
from one year to the next negatively impact stockholders' equity and decreases
in the exchange rate positively impact stockholders' equity. For example,
because the exchange rate used to translate the Company's balance sheet for the
year ended December 31, 1998, was 1.1% higher than the rate used for the year
ended December 31, 1997, the translation adjustment resulted in a decrease in
stockholders' equity of $91,000 for 1998.

Net gains and losses resulting from currency exchange transactions are
included in the Company's Statement of Operations. The Company did not incur
material net foreign exchange transaction losses in 1996, 1997 or 1998. Because
of the number of currencies involved, the constant currency exposures and the
substantial volatility of

20
<PAGE> 23

exchange rates, no assurances can be given that the Company will not experience
currency losses in the future. The Company cannot predict the effect of exchange
rate fluctuations on the Company's future operating results. The Company has not
previously undertaken hedging transactions to cover its currency exposure, but
may implement programs to mitigate foreign currency risk exposure in the future
as management deems appropriate. See "Risk Factors -- International Operations
and Currency Fluctuations."

In connection with the preparation of the Company's consolidated financial
statements related to its change in corporate domicile from the Netherlands to
the United States in 1997, management was required to prepare its financial
statements to conform with United States generally accepted accounting
principals and to adopt accounting policies commonly followed for publicly held
United States software companies. Subsequent to the issuance of the 1996
financial statements, the Company determined that adjustments would be required
to such financial statements relative to the accounting for revenue recognition,
software development costs, amortization of intangible assets and recognition of
expenses in the proper period because (i) revenues had been recorded on the sale
of certain products and maintenance contracts at the end of 1996 before the
earnings process was completed, (ii) the establishment of technological
feasibility and the related capitalized software development costs were not
being accounted for, in some instances, in accordance with SFAS No. 86
"Accounting for Costs of Computer Software to be Sold, Marketed or Leased,"
(iii) certain intangible assets were being written off over a period in excess
of their estimated useful life and (iv) certain general and administrative costs
were not accrued for at year's end.

Management has restated its 1996 financial statements as follows: (In
thousands, except per share amounts)

<TABLE>
<CAPTION>
AS PREVIOUSLY AS
REPORTED RESTATED
------------- --------
<S> <C> <C>
Revenues.................................................... $ 35,016 $ 34,432

Cost of revenues............................................ 13,077 15,035

Other operating expenses.................................... 24,375 27,196

Amortization and write-off of intangible assets............. 4,809 5,649

Net loss.................................................... (9,101) (15,304)

Basic and diluted loss per share............................ (1.21) (2.04)

Opening accumulated (deficit)............................... $(16,025) $(18,452)
</TABLE>

As a result of the restatement, the Company reassessed its internal
accounting procedures and its accounting department personnel and reporting
procedures. As part of this effort, a new Chief Financial Officer was named.
Currently, financial reports are generated monthly by the controller of each
division and reviewed by the Company's Chief Financial Officer and Chief
Executive Officer.

21
<PAGE> 24

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
of revenues represented by each item in the Company's Consolidated Statements of
Operations:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1994 1995(1) 1996(1) 1997 1998
---- ------------- ------------- ---- ----
(AS RESTATED) (AS RESTATED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses.......................... 32% 31% 35% 40% 50%
Maintenance and services................... 44 44 46 45 41
Hardware and other......................... 24 25 19 15 9
--- --- --- --- ---
Total revenues...................... 100 100 100 100 100
--- --- --- --- ---
Cost of revenues:
Software licenses.......................... 4 4 5 5 5
Maintenance and services................... 13 13 16 13 10
Hardware and other......................... 21 22 16 12 5
Amortization of purchased software and
capitalized software development costs... 5 9 7 -- 1
Write-off of purchased software costs...... -- 2 -- -- --
--- --- --- --- ---
Total cost of revenues.............. 43 50 44 30 21
--- --- --- --- ---
Gross profit............................... 57 50 56 70 79
--- --- --- --- ---
Operating expenses:
Sales and marketing........................ 33 51 44 42 41
Research and development................... 8 30 19 15 12
General and administrative................. 20 16 16 12 9
Write-off of offering costs................ -- -- -- -- 3
Amortization of intangible assets.......... 40 15 15 -- --
Write-off of intangible assets............. -- -- 1 -- --
--- --- --- --- ---
Total operating expenses............ 101 112 95 69 65
--- --- --- --- ---
Profit (loss) from operations................ (44) (62) (39) 1 14
Interest expense, net........................ 3 6 6 5 4
--- --- --- --- ---
Income (loss) before income taxes............ (47) (68) (45) (4) 10
Income tax (expense) benefit................. 1 -- -- -- (4)
--- --- --- --- ---
Net income (loss)............................ (46)% (68)% (45)% (4)% 6%
=== === === === ===
</TABLE>

- ---------------
(1) The 1995 and 1996 financial statements have been restated from previously
reported amounts. See Note 1 of Notes to Consolidated Financial Statements.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Revenues

Total revenues increased 24% to $52.6 million for 1998 from $42.4 million
for 1997. This increase was due primarily to higher software license revenues as
a result of an increase in the sale of higher margin licenses, and associated
maintenance and service contract revenues, principally generated by the
manufacturing and hospitality divisions, which were partially offset by a slight
decrease in revenues from the healthcare division. The Company believes the
decrease in healthcare related revenues is attributable to delayed purchasing
decisions by existing and potential customers pending release of new regulations
in the United Kingdom healthcare industry.

Software license revenues increased 55% to $26.4 million for 1998 from
$17.0 million for 1997. This increase is primarily due to the growth in the
number of installed customers, increased sales of licenses for the Company's
Aremis 4.0 products, and price increases. As a percentage of total revenues,
license revenues

22
<PAGE> 25

increased to 50% for 1998 from 40% for 1997, reflecting the Company's strategy
to increase its higher margin software license revenues as a percentage of total
revenues.

Maintenance and service contract revenues increased 14% to $21.7 million
for 1998 from $19 million for 1997, as a result of the increase in the number of
installed customers and the growth in software license revenues. As a percentage
of total revenues, maintenance and service contract revenues declined to 41% for
1998 from 45% for 1997, primarily as a result of the Company's increased sales
of higher margin software licenses.

Hardware and other revenues decreased 29% to $4.5 million for 1998 from
$6.4 million for 1997. As a percentage of total revenues, hardware and other
revenues decreased to 9% for 1998 from 15% for 1997, reflecting the Company's
strategy to reduce the sale and installation of lower margin third-party
hardware.

Cost of Revenues

Total cost of revenues decreased 13% to $11.1 million for 1998 from $12.7
million for 1997. As a percentage of total revenues, total cost of revenues
decreased to 21% for 1998 from 30% for 1997. This decrease was primarily the
result of an increase in sales of higher margin products.

The cost of software license revenues increased 28% to $2.7 million for
1998 from $2.1 million for 1997. As a percentage of total revenues, the cost of
software license revenues was 5% for both 1998 and 1997. The increase in cost of
revenues from 1997 to 1998 was primarily the result of increased software
license revenues in 1998. Although the cost of software license revenues
increased from 1997 to 1998, the significant increase in software license
revenues for 1998 resulted in a 2.2% increase in gross profit on software
license revenues for 1998.

The cost of maintenance and service revenues decreased 1% to $5.3 million
for 1998 from $5.3 million for 1997. As a percentage of total revenues, the cost
of maintenance and service revenues decreased to 10% for 1998 from 13% for 1997.
This decrease was primarily due to increased efficiencies in the delivery of
maintenance and other services. The decrease in the cost of maintenance and
service revenues from 1997 to 1998 resulted in a 3.5% increase in gross profit
on maintenance and service revenues for 1998.

The cost of hardware and other revenues decreased 45% to $2.8 million for
1998 from $5.1 million for 1997. As a percentage of total revenues, the cost of
hardware and other revenues decreased to 5% for 1998 from 12% for 1997. This
decrease was primarily attributable to a decrease in hardware sales generally,
which was partially offset by the sale of higher margin hardware. The decrease
in cost of hardware and other revenues from 1997 to 1998 resulted in a 19%
increase in gross profit on hardware and other revenues for 1998.

Sales and Marketing

The Company's sales and marketing expenses increased 21% to $21.6 million
for 1998 from $17.8 million for 1997, primarily due to the expansion of sales
and marketing activities principally in the United States and Europe. As a
percentage of total revenues, sales and marketing expenses decreased to 41% for
1998, from 42% for 1997, primarily due to increased efficiencies in the
Company's sales and marketing operations.

Research and Development

Research and development expenses were $6.2 million for both 1998 and 1997.
As a percentage of total revenues, research and development expenses decreased
to 12% for 1998 from 15% of revenues for 1997. The decrease was primarily due to
(i) cost savings resulting from the shifting of research and development
functions from the United Kingdom to India and (ii) a significant portion of the
planned expenditures relating to the Company's new generation of software
products having been incurred in prior accounting periods.

General and Administrative

General and administrative expenses decreased 6% to $4.9 million for 1998
from $5.2 million for 1997. As a percentage of total revenues, general and
administrative expenses decreased to 9% for 1998 from 12% for 1997. This
decrease reflects the effect of the Company's cost-cutting and cost control
measures, including the

23
<PAGE> 26

closure of the Company's office at Dukes Court, Central Woking, England, during
the fourth quarter of 1997. The decrease was partially offset by a one time
charge in 1998 reflecting severance payments to four individuals in the
aggregate amount of approximately $500,000.

Write-off of Offering Costs

In July 1998, the Company filed a registration statement in connection with
the Offering. Securities and Exchange Commission Staff Accounting Bulletin,
Topic 5:A (Expenses of Offering), deems that a postponement of the offering
process for greater than 90 days be treated as an aborted offering and that all
related costs be expensed. Accordingly, the Company wrote-off approximately $1.6
million in Offering costs in 1998.

Net Interest Expense

Net interest expense reflects interest on the Company's credit facilities,
as reduced by interest income on cash balances. Net interest expense increased
5% to $2.0 million for 1998 from $1.9 million for 1997, primarily due to a
slight increase in amounts outstanding under the Company's credit facilities.

Income Taxes

There was a provision for income taxes recorded for 1998 of $2.0 million.
The Company recorded a provision for income taxes of $35,000 for 1997. The
increase in income taxes resulted from the increase in the Company's
profitability in 1998.

Recoverability of the deferred tax asset has been reviewed at December 31,
1998, and although certain subsidiaries generated taxable income in the year
ending December 31, 1998, no assurances can be given that the level of taxable
income will be sustained at an adequate level in the appropriate subsidiaries.
It must therefore be considered more likely than not that the deferred tax
benefit will not be recognized at this stage.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Revenues

Total revenues increased 23% to $42.4 million for 1997 from $34.4 million
for 1996, primarily due to increased software license revenues and associated
maintenance contract revenues for 1997. This increase was partially offset by a
decrease in hardware and other and service contract revenues. Total revenues in
1996 included $750,000 attributable to acquisitions consummated in 1996, which
represented 2% of total revenues. See "Selected Consolidated Financial Data" and
"Business -- Acquisition Strategy."

Software license revenues increased 40% to $17.0 million for 1997 from
$12.1 million for 1996, primarily due to an increase in the number of software
licenses sold. This increase in software licenses sold consisted principally of
upgrades of the Company's MTMS, GCS and IGS products to existing customers and
an increase in the average price of individual software licenses. As a
percentage of total revenues, software license revenues increased to 40% for
1997 from 35% for 1996, reflecting the increase in the number of software
licenses sold and a decline in service contract and hardware and other revenues.

Maintenance and service contract revenues increased 20% to $19.0 million
for 1997 from $15.8 million for 1996. As a percentage of total revenues,
maintenance and service contract revenues declined to 45% for 1997 from 46% for
1996, primarily as a result of the completion of certain large contracts in
1996.

Hardware and other revenues decreased 2% to $6.4 million for 1997 from $6.5
million for 1996. As a percentage of total revenues, hardware and other revenues
decreased to 15% for 1997 from 19% for 1996, primarily as a result of the
Company's efforts to reduce the sale of lower margin third-party hardware.

Cost of Revenues

Cost of revenues decreased 15% to $12.7 million for 1997 from $15.0 million
for 1996. As a percentage of total revenues, cost of revenues decreased to 30%
for 1997 from 44% for 1996. This decrease was primarily due to (i) the reduction
of amortization charges relating to purchased and capitalized software, which
totaled $70,000 for 1997 compared with $2.3 million for 1996. The decrease in
amortization expense from 1996 to

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<PAGE> 27

1997 was attributable to a majority of the purchased software costs acquired
between 1993 and 1995 being fully amortized at December 31, 1996, (ii) reduced
costs for services as a result of the decreased use of outside consultants,
which totaled $1.3 million for 1997 and $2.4 million for 1996, and (iii) lower
hardware costs as a result of the Company's efforts to reduce its sales of lower
margin third-party hardware. The cost of hardware and other revenues totaled
$5.1 million, or 12% of total revenues, for 1997 and $5.8 million, or 16% of
total revenues, for 1996.

Sales and Marketing

Sales and marketing expenses increased 17% to $17.8 million for 1997 from
$15.2 million for 1996, primarily due to an increase in marketing activity as
well as costs associated with the Company's expansion in the United States,
Mexico and Argentina. As a percentage of total revenues, sales and marketing
expenses decreased to 42% for 1997 from 44% for 1996, primarily as a result of
the realization of operating efficiencies in the United Kingdom in connection
with the integration of acquired businesses.

Research and Development

Research and development expenses decreased 3% to $6.2 million for 1997
from $6.4 million for 1996. As a percentage of total revenues, research and
development expenses decreased to 15% for 1997 from 19% for 1996, primarily due
to the cost savings resulting from the shifting of research and development
functions from the United Kingdom to India. In addition, a significant portion
of the planned expenditures relating to the Company's new generation of software
products were incurred in prior accounting periods.

General and Administrative

General and administrative expenses decreased 7% to $5.2 million for 1997
from $5.6 million for 1996. As a percentage of total revenues, general and
administrative expenses decreased to 12% for 1997 from 16% for 1996. This
decrease reflects the effect of the Company's cost-cutting and cost control
measures in 1997, including the closure of the Company's office at Dukes Court,
Central Woking, England, during the fourth quarter of 1997.

Amortization of Intangible Assets

Amortization of intangible assets decreased to $97,000 for 1997 from $5.1
million for 1996, primarily due to the accelerated expiration of amortization
periods as a result of the termination of certain management employment
agreements in 1996.

Net Interest Expense

The net interest expense was $1.9 million for each of 1997 and 1996.
Although the Company's outstanding indebtedness was higher in 1997, net interest
expense remained constant as a result of an overall decrease in the Company's
cost of borrowings.

Income Taxes

The Company recorded a provision for income taxes of $35,000 for 1997
compared to a benefit of $50,000 for 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations since inception primarily through
borrowings under bank credit facilities, private placements of equity securities
and equity contributions by its principal stockholder. As of December 31, 1998,
the Company had $149,000 of cash and cash equivalents and $15.5 million in
short-term borrowings. The Company had a working capital deficit of $10.5
million as of December 31, 1998.

The Company believes that the net proceeds from the Offering, together with
existing cash and cash equivalents, will be sufficient to meet the Company's
working capital and currently planned expenditure requirements for the next 12
months. The Company may, from time to time, consider acquisitions of
complementary businesses, products or technologies, which may require additional
financing. In addition, continued growth in the Company's business may, from
time to time, require additional capital. No assurances can be given that
additional capital will be available to the Company at such time or times as
such capital may

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be required or, if available, that it will be on commercially acceptable terms
or would not result in additional dilution to the Company's stockholders.

The Company had an operating cash flow deficit of $6.7 million for 1998.
This deficit was primarily due to increases in receivables and a reduction in
accrued expenses. The Company had operating cash flow deficits of $4.0 million
and $1.3 million for 1997 and 1996, respectively. Operating cash flow is
affected by seasonality, among other factors, and is often disproportionately
higher in the Company's third and fourth quarters than in the first two quarters
of the year.

Accounts receivable increased to $16.2 million for 1998 from $9.5 million
for 1997. The increase in accounts receivable in 1998 was primarily the result
of a greater number of significant contracts in 1998. These more significant
contracts have, by their terms, a longer period for payment, which is customary
in the industry. As of December 31, 1998, the average days sales outstanding was
112 compared to 81 for 1997. Accounts receivable declined to $9.5 million as of
December 31, 1997, from $11.0 million as of December 31, 1996. During 1998, the
Company funded $2.5 million of prepaid expenses from cash flows from operating
activities.

The allowance for doubtful accounts decreased 34% to $639,000 for 1998 from
$971,000 for 1997, primarily as a result of collection of certain receivables
which had previously been included in the allowance. The Company had $188,000
and $57,000 of write-offs in 1998 and 1997, respectively. The increase in the
balance in the allowance for doubtful accounts, as compared to historical
write-offs, was primarily the result of the overall growth of the Company's
customer base and receivables, the Company's release of new and rejuvenated
products for which the Company traditionally provides an allowance in the event
the customers of those products are dissatisfied, and uncertainty in the
healthcare market in the United Kingdom in anticipation of the government's
issuance of new regulations concerning their information technology systems. Due
to its growth, the Company does not believe that historical write-offs are
necessarily indicative of future write-offs. The Company reviews the adequacy of
the allowance for doubtful accounts based primarily on a review of aged
receivables, with special attention paid to amounts over 90 days old. At
December 31, 1998, the allowance for doubtful accounts was $639,000, which
management believes is adequate to cover the Company's receivable balance at
December 31, 1998.

Accrued payroll taxes decreased from $3.2 million for 1997 to approximately
$600,000 for 1998. The decrease was due to payments in 1998 of approximately
eight months of accrued and unpaid payroll taxes for 1997.

The Company utilized cash for investing activities of $2.6 million, $1.0
million and $4.1 million for 1998, 1997 and 1996, respectively. During these
periods, the Company experienced significant growth and invested in property and
equipment.

Cash provided by financing activities was $9.1 million, $4.5 million and
$6.5 million for 1998, 1997 and 1996, respectively. Financing activities for
1998 primarily consisted of a private placement in February 1998 of
approximately 1,294,500 shares of Common Stock, the net proceeds of which were
$9.3 million. The Company used $2.9 million of the proceeds for payment of
long-term borrowings. Financing activities for 1997 primarily consisted of a
private placement of equity securities in the aggregate amount of $6.4 million,
of which approximately $2.0 million was used to repay bank indebtedness. In
1996, financing activities primarily consisted of a stockholder contribution of
$5.3 million, long-term borrowings under the Company's bank credit facilities
with Barclays of $1.9 million and an increase of $1.3 million in the Company's
short-term demand facility. The Company repaid approximately $1.7 million of
bank indebtedness in 1996.

During the third and fourth quarters of 1998, Roys Poyiadjis, the Company's
President and Chief Financial Officer, made loans to the Company in the
aggregate principal amount of approximately $1.7 million. The purpose of the
loans made by Mr. Poyiadjis was to provide the Company with additional working
capital. In May, 1998 the Company loaned $2.6 million to Dr. Kyprianou, its
Chief Executive Officer. The loan was made to provide temporary liquidity to Dr.
Kyprianou. See "Management -- Certain Transactions."

As of December 31, 1998, the Company had outstanding indebtedness under its
bank credit facilities of $15.5 million, all of which has been classified as a
current liability. Interest rates on these loans range from either Sterling
LIBOR plus 3% to Sterling LIBOR plus 4% or the lending bank's base rate plus the
applicable margin.

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<PAGE> 29

In the past, the Company was unable to comply with certain financial
covenants in the agreements relating to its long-term debt and obtained waivers
from Barclays. The Company intends to repay $5.0 million of its indebtedness to
Barclays from the proceeds of the Offering. With respect to the remaining
indebtedness of approximately $9.6 million, Barclays has agreed to restructure
approximately $2.5 million to be payable in quarterly interest and annual
principal payments and to mature in February 2002. The balance of approximately
$7.1 million will be converted into a new three year term loan payable in
quarterly installments of interest only until March 31, 2000, and quarterly
installments of principal and interest thereafter. Pending completion of the
Offering, the Company has reclassified all of its long-term debt to short-term
debt as of December 31, 1998.

IMPACT OF THE YEAR 2000

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
or its suppliers' and customers' computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. The issue has grown in importance as the use of computers and microchips
has become more pervasive and interdependence between computer systems has
increased. The Company could be materially and adversely affected either
directly or indirectly by the Year 2000 issue. This could occur if any of its
critical computer systems or equipment containing embedded logic fails, if the
local infrastructure (electric power, phone systems, or water system) fails, or
if its significant suppliers or customers are adversely impacted. This could
result in system failures or miscalculations causing disruptions of operations
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.

Failure of the Company to complete testing and renovation of its critical
systems on a timely basis could have a material adverse effect on the Company's
financial condition and operating results, as could Year 2000 compliance
problems experienced by others with whom the Company does business. Because of
the range of possible issues and the large number of variables involved, it is
impossible to quantify the potential cost of problems should the Company's
remediation efforts or the efforts of those with whom it does business not be
successful.

The Company's internal information system is a client/server environment
and the Company believes its internal information system is Year 2000 compliant.
The Company initiated a program and established a committee comprised of senior
executive representatives from its subsidiaries in each of the Targeted Markets
to assess the Year 2000 readiness of its products and operations including its
noninformation technology systems. All of the products currently being marketed
by the Company have been assessed and the Company believes they are all Year
2000 compliant. The Company has also developed upgrades for its noncompliant
rejuvenated and legacy products which are no longer marketed by the Company. The
upgrades developed for such products are being sold to existing customers that
use those products. The Company's IGS Hotel (Version 2) and Hotel Master
products are not, and will not be Year 2000 compliant. The users of these
products have been informed that the products will not be Year 2000 compliant
and the Company does not expect that such noncompliance will have a material
adverse effect on its business or results of operations.

The Company has assessed all of its internal systems including hardware,
software, operating systems, development tools and languages as well as its
facilities and equipment including, among other things, its security devices and
telephone switchboards for Year 2000 compliance. The Company has not identified
any material Year 2000 compliance problems, but will continue to monitor its
information systems. However, no assurances can be given that Year 2000
compliance problems will not eventually occur with respect to the Company's
information systems which, depending on the nature and scope of the problem,
could have a material adverse effect on its business, operating results and
financial condition.

The Company has also begun formal communications with critical suppliers to
determine the extent to which their failure to remedy their own Year 2000
compliance problems would materially affect the Company. Based on
representations received from the Company's critical suppliers and testing
results as of December 31, 1998, the Company believes that its business will not
be materially adversely affected by any Year 2000 noncompliance of its critical
suppliers. The Company has also developed contingency arrangements, which
include identifying possible third party suppliers in the event any of its
suppliers, including critical

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<PAGE> 30

suppliers, are unable to provide the necessary products or services to the
Company as a result of Year 2000 compliance problems not detected or corrected
prior to their occurrence. No assurances can be given that alternative
third-party suppliers will be successful in meeting the Company's requirements
or, if met, that the terms of the arrangement will be as favorable as those of
the Company's current suppliers, which could increase the Company's expenses and
have a material adverse effect on the Company's business, operating results or
financial condition.

The aggregate costs incurred by the Company as of December 31, 1998, in
connection with Year 2000 compliance were approximately $732,000, of which
approximately $123,000, $186,000 and $126,000 was incurred in 1996, 1997 and
1998, respectively. Of these amounts, approximately $25,800, $28,100 and $24,200
were incurred for Year 2000 compliance related to the Company's internal
information systems. These costs have been expensed by the Company as incurred
in compliance with EITF 96-14, have been funded from the continuing operations
of the Company and constituted approximately 15% of the Company's information
systems budget for 1998. The Company estimates that it will incur an additional
$80,000 in costs to complete its Year 2000 compliance efforts.

EURO CONVERSION

In January 1999, the Euro was introduced as the currency of a number of
participating nations in the European Union. Although the United Kingdom is not
currently a participating nation, the introduction of the Euro raises conversion
issues for business transacted with entities in participating nations. The
Company's products either include or have been upgraded to include the Euro and
the Company does not believe that the Euro conversion has had or will have a
material adverse effect on its business. Because the Company's critical internal
systems have been modified to accommodate a conversion to the Euro, the Company
believes it is adequately prepared in the event the United Kingdom converts to
the Euro in the future.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Rates

A significant portion of the Company's business is conducted in currencies
other than the United States dollar. As a result, the Company is subject to
exposure from movements in foreign currency exchange rates. The Company does not
currently engage in hedging transactions designed to manage currency fluctuation
risks. See "-- General -- Currency Translation and Transactions."

Interest Rate Sensitivity

The Company's exposure related to adverse movements in interest rates is
primarily derived from the variable rate on the Company's credit facilities.
Interest rates on the Company's credit facilities range from either Sterling
LIBOR plus 3% to Sterling LIBOR plus 4% or the lending bank's base rate plus the
applicable margin. Increases in Sterling LIBOR result in increases in the
Company's interest expense. However, at December 31, 1998, an increase of 10% in
Sterling LIBOR would not have a material adverse effect on the Company. The
Company does not currently engage in hedging transactions designed to manage
interest rate fluctuation risks.

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BUSINESS

THE COMPANY

AremisSoft develops, markets, implements and supports enterprise-wide
applications software targeted at mid-sized organizations in the manufacturing,
healthcare, hospitality and construction industries (the "Targeted Markets").
The Company's software products help streamline and enhance an organization's
ability to manage and execute mission-critical functions such as accounting,
purchasing, manufacturing, customer service, and sales and marketing. In 1986,
the Company established a software development and support facility in New
Delhi, India, which currently has 186 employees. The Company believes that its
India facility provides significant organizational efficiencies and cost
advantages in software development and support process. AremisSoft products are
designed to be the primary business software that organizations in the Targeted
Markets use to generate and disseminate information across the enterprise in
order to respond rapidly to changing market environments and customer needs. The
Company has licensed its software products to more than 5,000 customers.

The Company markets its software products primarily through its own sales
force and provides product support worldwide through 14 offices in seven
countries. To date, the majority of the Company's revenues have been generated
from customers located in the United Kingdom. Such customers comprised
approximately 60% of total revenues for 1998. Customers using the Company's
software products include Southampton Multifund (healthcare), Birmingham
Multifund (healthcare), Telefon AB LM Ericsson (manufacturing), Nabisco Biscuit
Co. (manufacturing), Forte Limited (hospitality) and London Electricity plc
(construction).

INDUSTRY BACKGROUND

Enterprise-wide applications software is designed to help streamline and
enhance an organization's ability to manage and execute mission-critical
operations, such as accounting, payroll, purchasing, manufacturing, human
resources, customer service and sales and marketing. Enterprise-wide
applications software that is capable of generating and disseminating critical
information across a business organization and its extended enterprise provide a
strategic resource that enables an organization to respond rapidly to changing
market environments and customer needs.

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<PAGE> 32

With the growth of computer networks across local and remote parts of an
enterprise and the sharing of information between departments, the demand for
flexible solutions that address continually changing business requirements is
rapidly increasing. In the past, host-centric systems operating on mainframes or
mid-range computers and offering high levels of performance, scalability and
data security achieved broad market acceptance. Although these systems served
the near-term needs of customers, they lacked the flexibility necessary to
operate in today's marketplace. As a result, open architecture, client/server
based computing systems were developed and offer the following advantages: (i)
easier access to corporate data, (ii) improved reporting and analysis, (iii)
flexibility in decision-making, (iv) quicker time to market and (v) a more
strategic computing model. Along with the growth in demand for these systems, an
increasing demand for a new generation of enterprise-wide applications software
has emerged to address various business requirements.

In addition, object-oriented technology is rapidly emerging as a desired
feature of enterprise-wide, client/server-based applications software.
Object-oriented technology consists of component objects that are essentially
building blocks of small, discrete pieces of functionality. These component
objects can be configured to create complete applications and enable software
developers to rapidly create and modify systems to provide the desired functions
for specific markets or individual customers. Object-oriented technology also
allows for the creation of systems that are scalable, flexible and capable of
accommodating variations in business requirements and technology infrastructure.

According to International Data Corporation, growth in the enterprise-wide
applications software market has been strong in recent years and is expected to
continue. This growth may be attributed to a variety of factors, including a
shift among organizations away from developing enterprise-wide applications
software in-house to purchasing enterprise-wide applications software from
outside sources. The Company believes this trend is principally fueled by the
growing complexity of new technology and the increasing failure rate of in-
house enterprise-wide applications software development projects. By outsourcing
their enterprise-wide applications software needs, organizations reduce the risk
of in-house development failures and ensure quicker time to market with new and
increased functionality, creating a competitive advantage.

The Company believes that a significant portion of the future growth in the
enterprise-wide applications software industry will be generated from purchases
by mid-sized organizations, including divisions and business units of larger
companies, with annual revenues less than $1 billion. Within this market,
organizations with annual revenues between $150 million and $1 billion are
generally referred to as "Tier II" organizations and organizations with annual
revenues less than $150 million are generally referred to as "Tier III"
organizations. "Tier I" organizations typically have annual revenues in excess
of $1 billion. The number of organizations in Tier II and Tier III is
substantially greater than that of Tier I. Tier III and certain Tier II
organizations have attractive characteristics for enterprise-wide applications
software providers. Enterprise software marketed to Tier II and Tier III
organizations is generally less expensive and has significantly shorter sales
and implementation cycles than software designed for Tier I organizations. In
addition, the Tier II and Tier III markets for enterprise-wide applications
software are not dominated by a small number of vendors as is generally the case
in Tier I markets.

The Company believes there is a substantial market opportunity for
enterprise-wide applications software that offers ease of integration, faster
implementation, reduced risks associated with business and technological
changes, lower overall cost of ownership and industry-specific and customized
functionality. At the same time, these applications should attempt to mask the
complexities of the underlying hardware, software or network technologies.

THE AREMIS ARCHITECTURE

The Company believes that the Aremis Architecture enables it to produce
high quality, scalable enterprise-wide applications software with substantially
reduced software development, implementation and

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<PAGE> 33

maintenance costs. The Aremis Architecture incorporates a three-tiered,
object-oriented approach to its enterprise-wide applications software, which is
depicted below:
LOGO

The three tiers of the Aremis Architecture consist of presentation, logic
and database. The presentation tier relates to what the end user sees on the
screen when using the software. The logic tier consists of the actual
applications in the system and interacts with the database tier which stores
mission-critical enterprise-wide data. A primary advantage of this three-tier
structure is that it allows software programmers to make changes and
enhancements to one of the tiers without disrupting the logic of the other
tiers.

A central feature of the Aremis Architecture's logic tier is its object
orientation. The Company has devoted significant resources to developing an
extensive proprietary software library of well-defined, re-usable business
objects. These objects link business rules and policies to applications written
in C++ and Java languages. This object orientation enables customers or the
Company's developers to easily create additional modules or to rapidly adapt
existing software to changing business conditions or requirements. It also
facilitates the re-use of functional applications which are similar across
products and industries. The Aremis Architecture has 70% commonality of objects
across the Targeted Markets, which means that the same objects can be used in
applications across various industries without substantial modification. The
Company believes that the Aremis Architecture's object orientation provides it
with a significant competitive advantage.

The object orientation of the Aremis Architecture also helps to minimize
training costs since the Company's software developers who are already trained
in its development methods and language can be assigned to new markets with
little training. In a similar manner, customers with multiple AremisSoft
products can minimize their training and implementation costs as each of the
products operates in a similar manner. The Aremis Architecture utilizes
graphical user interface ("GUI"), which uses icons and other graphical methods
to guide a user through the software.

The Aremis Architecture encompasses industry standard database technologies
and is designed to be compatible with Oracle, Sybase, SQL Server, Informix and
other open database connectivity ("ODBC") compliant databases. This industry
standard database tier provides AremisSoft customers with the flexibility to
utilize high quality data warehouse and data-mining applications.

The Aremis Architecture is based on open, client/server computing
technology. This open environment provides compatibility with other software
applications, even among multiple revision levels of the same or different
products. Components of the Aremis Architecture have been implemented on
numerous hardware platforms and operating systems, including Windows NT, Windows
95, UNIX, Novell and multitasking DOS environments and some components have a
virtually seamless interface with Internet and intranet technologies.

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THE AREMISSOFT SOLUTION

The Company's enterprise-wide applications software products address the
mission-critical, business information requirements of organizations in the
Targeted Markets. AremisSoft's products are designed to provide the following
benefits:

Enhanced Functions. The Company's visual development environment allows
customers to focus on incorporating business logic into a solution. With the
Company's visual, object-oriented development environment, developers can
rapidly build applications that automate and integrate business processes such
as credit checking, order handling and inventory management. From its history of
working closely with its customers, the Company believes that it has gained a
high level of expertise in industry-specific, complex business processes. The
close mapping between a business process and the Aremis Architecture enables
developers to more easily design, maintain and re-use applications. This also
enables end users to be an integral part of the development of business
solutions and results in more successful implementations.

Ease of Integration. AremisSoft's software products operate in Windows NT,
Windows 95, UNIX, AS/400, Novell and multitasking DOS environments on numerous
hardware platforms and are compatible with Oracle, Sybase, SQL Server, Informix
and other ODBC compliant databases. Because of the flexible 32-bit open
architecture and open approach to development, the Company's products can also
be integrated with technologies such as Java, Visual Basic, Visual Basic for
Applications and C++. Ease of integration with existing technologies allows
customers to accommodate and modify their business practices without regard to
underlying hardware, software and network technologies.

Industry-Specific Applications. The Company offers enterprise-wide
applications software for mid-sized organizations in the manufacturing,
healthcare, hospitality and construction industries. Through its concentrated
product focus, the Company believes it has developed substantial industry
expertise in the Targeted Markets that has enabled the Company to develop
software applications that address customers' specific needs.

Rapid Implementation. The modular product design of AremisSoft's software
combined with the Company's focus and expertise in the Targeted Markets permits
rapid product implementation. Product applications are designed to address the
specific needs of customers in the Targeted Markets, limiting the need for
extensive customizing after installation of the product. In addition, customers
are able to purchase only those applications with the functions appropriate for
their needs, eliminating implementation and training time for unnecessary
features. The Company also provides all of the system implementation and
training services for its customers using AremisSoft field engineers. By
providing implementation services in-house, the Company believes that its
customers benefit from more efficient implementation by having only one vendor
accountable for system performance.

Protection of Investment in Legacy Systems. AremisSoft's open architecture,
client/server-computing technology allows customers to transition their existing
mission-critical business software to an open platform, thereby protecting their
legacy systems and reducing the costs and business interruptions associated with
system upgrades.

Global Service and Support. The Company provides a high level of global
service and support as a critical component of its enterprise-wide applications
software. The Company offers product service and support by highly trained and
dedicated personnel through its software development and support facility in
India in addition to local support. The Company believes its investment in
worldwide customer support services and user groups improves customer
communication and feedback, enhancing customer satisfaction and cultivating
long-term customer relationships.

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THE AREMISSOFT STRATEGY

The Company's primary business objective is to strengthen its position in
each of the Targeted Markets as a leading provider of enterprise-wide
applications software. The key elements of the Company's business strategy
include the following:

Target Tier II and Tier III Organizations. The number of organizations in
the Tier II and Tier III markets is significantly larger than Tier I, which
affords the Company opportunities to expand its customer base. In addition, the
Company's software products are suited to the needs of Tier II and Tier III
organizations because they are generally less expensive and have significantly
shorter sales cycles and implementation periods than products marketed to Tier I
organizations, which typically require implementation periods in excess of one
year. Moreover, unlike the Tier I market, the Tier II and Tier III markets are
not easily penetrated by large software vendors who face difficulty in tailoring
their applications to address the needs of Tier II and Tier III organizations.
The Tier II and Tier III markets are also not dominated by a small number of
vendors of enterprise-wide applications software, providing the Company with
significantly greater internal growth and acquisition opportunities.

Focus on Strategic Targeted Markets. The Company believes there are
significant opportunities to increase its presence and expand its customer base
within the manufacturing, healthcare, hospitality and construction industries.
The Company has targeted these markets because they (i) leverage the Company's
expertise in each market, (ii) provide international marketing opportunities
which increase the potential for global growth and (iii) have common software
application functional requirements which enable the Company to leverage the use
of the Aremis Architecture.

Shift Operations To Low Cost Environments Utilizing Communication
Technology. AremisSoft believes it has a significant competitive advantage in
its ability to use its software development and support facility in India for
product development, product rejuvenation and administrative functions. The
Company intends to increase the use of its India operations to achieve further
cost efficiencies without sacrificing quality. In 1997, the Company also
established a satellite wide area network ("WAN") link between the Company's
India operations and each of its other offices to increase operating efficiency
and enhance communications throughout the Company's operations.

Leverage the Company's Investment in the Aremis Architecture. As an
integral part of its business strategy, the Company intends to continue to
invest in the development of new technologies and products to address the
evolving needs of its customers. The Company believes that the Aremis
Architecture enables it to respond to and incorporate new technologies. In
addition, the Company's technology strategy is focused on transitioning its
legacy products to an object-oriented architecture to enable customers to
improve compatibility with existing software applications and to deploy and
integrate new software applications across their businesses.

Expand Marketing, Sales, Support and Service. The Company believes there
are significant opportunities to expand its market position in existing markets
by further developing its sales, marketing and support infrastructure. The
Company primarily sells its software products through an overall sales and
marketing force of 270 employees in the United Kingdom, United States, Ireland,
India, Cyprus, Mexico and Argentina, and indirectly in 12 additional countries.
The Company plans to continue to invest significantly in expanding its
marketing, sales, support and service in such geographic regions. The Company
also believes that prompt and effective service and technical support are
essential elements of enterprise-wide applications software. The Company has
established a customer support hotline for each operating division.

Acquire Related Software Products and Companies. A significant aspect of
the Company's growth strategy has been the acquisition of complementary
businesses in order to achieve market presence and increase its customer base
within the Targeted Markets. The Company's strategy is to rejuvenate the
products of acquired businesses utilizing the Aremis Architecture and gradually
transition the customers of acquired businesses to such products. The Company
expects that it will continue to rely on acquisitions as a significant part of
its growth strategy.

33
<PAGE> 36

ACQUISITION STRATEGY

From January 1993 to March 1996, the Company acquired eleven businesses
with operations in the Targeted Markets. The aggregate net sales of the acquired
businesses totaled approximately $24.2 million (based on net sales for each
business during the last completed fiscal year immediately preceding the
acquisition translated to United States dollars based on the applicable exchange
rate in effect on the date the acquisition was consummated.)

The following table sets forth certain information concerning the
businesses that have been acquired by the Company since January 1993 exclusive
of an acquisition in 1996 of an entity wholly owned by the Company's principal
stockholder, Dr. Lycourgos K. Kyprianou:

<TABLE>
<CAPTION>
CONSIDERATION(1)
TARGETED MARKET NAME OF ACQUIRED BUSINESS PRINCIPAL LOCATION DATE ACQUIRED (IN MILLIONS)
--------------- ------------------------- ------------------ ------------- ----------------
<S> <C> <C> <C> <C>
MANUFACTURING BEC Group Limited United Kingdom March 1995 $3.10
Online Systems Inc. United States October 1996 0.60

HEALTHCARE Genisyst Limited United Kingdom October 1994 5.00
Timemaster Systems Limited United Kingdom September 1995 0.90
Advanced Medical Systems United Kingdom October 1995 1.90

HOSPITALITY HotelMaster Limited United Kingdom January 1993 0.30
IGS Leisure Technology Limited United Kingdom March 1993 1.00
Hotelier Limited United Kingdom June 1993 0.03
Sennen Computers Limited United Kingdom September 1993 0.40
Infoplan Computers Limited Cyprus June 1993 0.50

CONSTRUCTION Briter Computer Systems
Limited United Kingdom October 1995 3.10
</TABLE>

- ---------------
(1) For acquisitions of businesses outside of the United States, consideration
figures have been translated to United States dollars based on the
applicable exchange rate in effect on the date the acquisition was
consummated. In each case, all consideration was paid in cash.

Although the Company currently has no agreements, understandings or
arrangements with respect to any future acquisitions, the Company intends to
expand its activities in each Targeted Market on a global basis, including the
United States, and may do so through the acquisition of existing businesses,
products or technologies.

The Company's acquisition strategy focuses on the corporate, financial and
operational characteristics of both the Company and the acquired business. The
Company's acquisition strategy generally involves three phases: Phase I (the
pre-acquisition process), during which the Company identifies and analyzes
acquisition opportunities, Phase II (the post-acquisition assimilation process),
during which the acquired business is integrated into the Company's operations,
and Phase III (the post-acquisition product rejuvenation process), during which
the acquired business' products are rejuvenated and eventually transitioned to
the Aremis Architecture.

Phase I -- Pre-Acquisition

During Phase I, the Company identifies potential acquisition candidates and
analyzes and evaluates various factors to determine the appropriateness of the
acquisition. The Company extensively considers the candidate's products and
their applications, application environment and operating platform to assess the
potential for rejuvenation of the products utilizing the Aremis Architecture. At
the same time, the Company reviews the financial condition of the candidate's
business, its market share and competitors as well as its current customers and
customer support to evaluate various issues, including (i) whether the candidate
can be acquired at an attractive price, (ii) the desirability of the candidate's
customers and markets and (iii) the potential for utilizing the Company's
existing product development and support functions following the acquisition.
These and other factors are then considered by the Company in making its
decision whether to complete the acquisition process.

34
<PAGE> 37

Phase II -- Post-Acquisition Assimilation

During Phase II, the acquired business is integrated into the Company's
operations. The first step in Phase II of the acquisition process is to
establish a satellite WAN link between the Company's software development and
support facility in India and the acquired business. A team within the India
facility immediately assumes responsibility within the acquired business for
product development, finance and administration through the WAN link. As part of
this process, the Company reduces staff in development and administrative
functions previously performed by the acquired business. The team in India is
primarily responsible for research and development and shares responsibilities
for design and specification with technical personnel in the United Kingdom.

Phase III -- Post-Acquisition Product Rejuvenation

During Phase III, the Company begins the process of rejuvenating the
acquired businesses' products and transitioning them to the Aremis Architecture.
A customer of the acquired business may elect to (i) transition to an AremisSoft
product, (ii) upgrade to a rejuvenated legacy product or (iii) continue to
utilize its existing legacy product. The Company is sensitive to the acquired
business' investment in legacy systems and does not require customers of the
acquired business to transition to the rejuvenated products. The Company also
continues to support the acquired businesses' legacy products until all
customers are transitioned to a rejuvenated or new AremisSoft product. Because
the transition process is gradual and, to a large extent, is controlled by the
customer, disruption to the customer's operations is minimized.

The following table illustrates the product rejuvenation process:
LOGO

TARGETED MARKETS

The Company currently provides customized enterprise-wide applications
software for mid-sized organizations in the Targeted Markets. In the United
Kingdom, the Company is one of the leading suppliers of enterprise-wide
applications software to the healthcare and hospitality industries. As of April
2, 1999, the Company had over 5,000 customers across the Targeted Markets. The
Company's customer base is comprised of approximately 450 manufacturing, 2,000
healthcare, 1,200 hospitality and 350 construction customers. The Company also
continues to service approximately 1,000 customers across a variety of
industries in other

35
<PAGE> 38

countries, primarily in Cyprus and India. For the years ended December 31, 1996,
1997 and 1998, no customer accounted for more than 10% of the Company's total
revenues.

As a result of the acquisitions completed by the Company from January 1993
to March 1996, the Company's customer base in each Targeted Market is in various
stages of the transition process to products utilizing the Aremis Architecture.
Each of the Company's legacy products was originally acquired as part of an
acquisition and subsequently rejuvenated. In the rejuvenation process, a legacy
product is enhanced by incorporating the then current features of the Aremis
Architecture appropriate for that product. New customers in each of the Targeted
Markets have been sold rejuvenated products and updated versions of such
products, while existing customers of the acquired businesses have been
permitted to transition to the rejuvenated product line at their own pace. As a
result, the Company's product line in each of the Targeted Markets consists of
(i) legacy products of acquired businesses that have not been rejuvenated, (ii)
legacy products of acquired businesses that have been rejuvenated and
incorporate certain features of the Aremis Architecture and (iii) new products,
including those under development, that incorporate all or a substantial portion
of the features of the Aremis Architecture. In each of the Targeted Markets, the
Company markets rejuvenated and new products and also provides service and
support for new products and for legacy products that have not been rejuvenated.

The Company's new product offerings in each of the Targeted Markets consist
of products that incorporate all or substantially all of the benefits of the
Aremis Architecture, which include object-oriented technology, a virtually
seamless interface with Internet and intranet technologies, full Windows
compatibility, ODBC compliance, access from both character user interface
("CUI") and GUI terminals and Year 2000 and Euro compliance.

Within each of the Targeted Markets, the Company has adopted a tailored
sales and marketing strategy. This strategy includes advertisements in leading
trade publications, participation in trade shows and sponsorship of user groups.
In addition, the Company has developed corporate sales and marketing materials
as well as general financial and technical materials that are distributed to
each of the Company's subsidiaries for inclusion in their sales materials,
thereby promoting a consistent portrayal of the Company's image and products.

The Company markets its products primarily through a direct sales force in
each of the Targeted Markets. In the manufacturing and hospitality industries,
the Company also relies, to a limited extent, on distributors to sell the
Company's products. The amount of revenue attributable to sales by distributors
was approximately $2.8 million, $3.1 million and $500,000 for 1996, 1997 and
1998, respectively. The Company's senior management is typically involved in the
marketing process on contracts with a potential value of $500,000 or more. The
sales cycles for the Company's products vary across each Targeted Market
depending on many factors, including the size of the customer's organization,
the number of individuals within the organization who are involved in the
purchasing decision, whether the potential customer has retained a consultant to
assist in the purchasing decision, the status of the customer's implementation
of a hardware system and the degree of implementation, consulting and training
required. Contracts of $500,000 or more tend to have a longer sales cycle than
those under $500,000. The average sales cycle of contracts of $500,000 or
greater is approximately nine months.

The enterprise-wide applications software market, including the market for
client/server-based systems, is intensely competitive and rapidly changing. The
competition that the Company encounters varies across and within each market
depending upon, among other things, the customer's size and specific system
requirements. The principal competitive factors affecting the market for the
Company's software products include responsiveness to customer needs, product
architecture, functionality, speed of implementation, ease of integration,
performance, features, quality, reliability, breadth of distribution, vendor and
product reputation, quality of customer support and price. The Company believes
that it has competed effectively to date on the basis of these factors,
particularly on its reputation for high quality service and support and its
ability to provide its products and services at a lower cost.

36
<PAGE> 39

For each of the last three years, revenues in each of the Targeted Markets
as a percentage of the Company's total revenues were as follows:

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Manufacturing............................................ 18% 22% 32%
Healthcare............................................... 47 45 30
Hospitality.............................................. 22 24 26
Construction............................................. 10 8 8
Other.................................................... 3 1 4
--- --- ---
Total.......................................... 100% 100% 100%
=== === ===
</TABLE>

MANUFACTURING

With the globalization of markets and increased competitive pressures for
lower production costs, improved product quality and performance, shortened
product development and delivery cycles, manufacturers around the world have
become increasingly dependent on enterprise resource planning ("ERP") systems.
ERP systems permit enterprise-wide management of material and human resources
and the integration of sales, forecasting, component procurement, inventory
management, manufacturing control, project management, distribution,
transportation, finance and other functions across a manufacturing organization.
These systems manage and store large amounts of diverse business information,
providing continuous and simultaneous availability of information to
geographically dispersed employees, customers and suppliers. The shortening of
product life and demand cycles creates significant risks to manufacturers who
need to make quick, accurate decisions with respect to demand, purchases and
production volumes in order to maximize production and minimize any materials or
product obsolescence. These challenges require highly efficient processes and
smooth integration of the enterprise from supply chain to sales and marketing
channels. As a result, many manufacturers have begun to restructure their
critical business processes and their organizational structures to be able to
accommodate rapid changes in the marketplace.

In recent years, ERP systems have been developed with client/server
architectures. These systems generally offer users easier access to information,
as well as multi-site processing capabilities. In addition, as compared to
host-centric systems, client/server environments are better able to accommodate
diverse hardware, software and network technology changes that can result from
rapid organizational growth, acquisitions and consolidations. However, such
systems are inherently complex and generally require lengthy and costly
implementation efforts, extensive user training and substantial ongoing support.
Accordingly, the Company believes there is a substantial market opportunity for
ERP applications that offer quick and measurable results, reduce risks
associated with implementation and modification and lower overall cost of
ownership. These solutions should consist of an integrated suite of ERP
applications and services that offer the reliable performance, ease of
implementation and ease of management available in host-centric systems as well
as the flexibility to support multi-site, multi-supplier, multi-platform
environments found in client/server systems. The Company's ERP applications
products are designed to meet the challenges faced by manufacturers in today's
marketplace by providing users with full ERP capability and broad functionality
across a variety of sectors in the manufacturing industry.

MANUFACTURING PRODUCTS

<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NEW PRODUCTS REJUVENATED PRODUCTS LEGACY PRODUCTS
- ------------------------------------------------------------------------------------------------------------
MTMS Windows(1) MTMS Enquiry MTMS
MTMS CoPilot MTMS Insight
- ------------------------------------------------------------------------------------------------------------
41 installed customers(2) 350 installed customers(2) 65 installed customers
- ------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Released in the fourth quarter of 1998.
(2) Certain customers are licensed for more than one product and, as a result,
are represented more than once in the number of installed customers.

37
<PAGE> 40

MTMS Windows, the most recent version of the Company's manufacturing
products, is a Windows-based fully-integrated enterprise-wide management and
control system which provides full ERP capabilities and broad functionality.
MTMS Windows contains 13 main application modules and over 1,200 programs. It
incorporates all features of the Aremis Architecture, including a GUI client.
MTMS Windows was developed and released in phases resulting in the final full
release in the fourth quarter of 1998. There are currently six customers using
MTMS Windows.

MTMS consists of an integrated enterprise-wide management and control
system which provides full ERP capabilities and broad functionality and operates
in a UNIX environment. Its extensive functionality, which operates on powerful
UNIX platforms, makes it compatible with larger ERP systems. MTMS was acquired
in connection with the Company's 1995 acquisition of BEC Group Limited and
subsequently rejuvenated. MTMS contains the same application modules and
programs as MTMS Windows but does not incorporate all features of the Aremis
Architecture.

The following table describes the main application modules of MTMS Windows
and MTMS and their primary customer benefits:

<TABLE>
<CAPTION>
APPLICATION MODULES PRIMARY CUSTOMER BENEFITS
------------------- -------------------------
<S> <C>
- - Manufacturing Data Management - Enables the creation and access of parts details, bills
of material, process routes and any other resources that
are fundamental to the control of the manufacturing
process
- - Production Planning - Assists in the control of production via daily targets
with actual inventory and labor entries
- - Resource Planning - Allows the preparation of corporate business plans and
undertaking of thorough planning using the key resource
planning module
- - Production - Facilitates ordering and controlling work in progress
throughout production
- - Inventory - Allows the user to define and control inventory
requirements, record unplanned inventory movements, track
inventory in all stages of the manufacturing process and
generate product forecasts, which in turn can be used in
creating the master schedule
- - Purchasing - Allows users to fully integrate purchase orders,
material requirements planning, quality control and
purchase invoice validation
- - Sales - Provides the user with optional methods of entering
purchase orders to accommodate the different requirements
across the manufacturing industry
- - Marketing - Assists the user in processing sales leads prior to
quotation and producing selective mailings to prospective
customers with active follow-up
- - Financial Management - Provides year-end and interim financial reporting for a
variety of accounts, including inventory, fixed assets and
contracts
- - System Software - Provides the framework upon which the MTMS customer
implementation is built and maintained; includes modules
to parameterize system functions, set defaults and
provide options for creating and maintaining basic
system data
- - Quality Control - Provides users with a set of comprehensive modules for
managing quality control of raw materials and finished
products
- - Environment - Contains the control mechanism to support a range of
database facilities
</TABLE>

MTMS CoPilot is a project management package currently offered by the
Company that integrates the MTMS and MTMS Windows products within the
enterprise. MTMS CoPilot reconfigures MTMS functions to fit a customer's
business model and customizes the appearance and behavior of the system in line
with the

38
<PAGE> 41

customer's business procedures. The Company believes that MTMS CoPilot, which
allows manufacturing customers to review and improve working practices in a
strategic area on a timely basis, is the primary driver of the Company's success
with its MTMS products.

MTMS Enquiry is a Windows-based report writer suite. MTMS Enquiry is
designed to interact with the Company's MTMS products, enabling users to create
sophisticated reports and make inquiries in a single, unified Windows-based
graphical environment.

MTMS Insight is a Windows-based information management system that provides
users with high speed, graphical navigation of multidimensional information.
MTMS Insight is designed to interact with the Company's MTMS products to provide
users with multidimensional reporting and analysis capability. With MTMS
Insight, a user can create numerous graphs, charts and reports based on MTMS
data.

MANUFACTURING SALES AND MARKETING

The Company distributes its products directly in the United Kingdom, United
States, Argentina and Mexico through a direct sales force of 12 employees in
five offices and utilizes independent distributors in 14 additional countries.
The Company does not grant exclusive distribution rights to any of its
distributors and carefully manages its sales territories to avoid conflicts
between distributors. Products sold through distributors are generally supported
by the Company through a maintenance agreement between the Company and the
distributor.

Sales cycles for the Company's manufacturing products vary substantially
depending on, among other things, the size of the organization, the degree of
integration, consulting and training required, the status of the customer's
implementation of a hardware system and whether the customer has employed a
consultant to assist it in its purchasing decisions. The MTMS sales cycle is
generally three to nine months from the time an initial sales presentation is
made to a prospective customer to the time a license agreement is executed.
License fees for MTMS products range from approximately $50,000 to $500,000
depending upon the size of the customer and number of applications licensed. The
license fees for MTMS Enquiry and MTMS Insight are approximately $1,100 per
user. MTMS CoPilot is an MTMS implementation tool and is not licensed
separately. It is licensed with MTMS for an additional $15,000.

MANUFACTURING CUSTOMERS

The Company is becoming a significant supplier of ERP software to mid-sized
organizations in the United Kingdom and Europe and markets its manufacturing
products in 18 countries worldwide. Within the manufacturing industry, the
Company has a significant presence in a number of submarket sectors including
machinery, transportation, chemicals, food and beverage, fabricated metal
products and textiles. The Company has approximately 450 manufacturing customers
in 18 countries. The following is a list of representative customers as of April
2, 1999:

<TABLE>
<S> <C>
Nabisco Biscuit Co. Watts Industries Europe BV
Telefon AB LM Ericsson Fernz Corporation Ltd.
Alcan Aluminum Limited Spartan Electronics Florida Inc.
ABB Kent plc Joy Tomkins Group plc
Mining Machinery Kvaerner Energy Ltd.
Rotork Controls, Ltd. Rheem Manufacturing Company
</TABLE>

MANUFACTURING COMPETITION

The Company's principal competitors in the manufacturing industry include
QAD Inc., Fourth Shift, Symix, DataWorks, MDIS and a number of smaller
independent companies that have developed or are attempting to develop advanced
planning and scheduling software which complement or compete with
enterprise-wide applications software or manufacturing resource planning
applications. The Company also believes that large enterprise-wide applications
software vendors such as Oracle, SAP, Baan, and PeopleSoft are increasing their
marketing efforts to mid-sized manufacturing companies. The principal
competitive

39
<PAGE> 42

factors affecting the market for the Company's products in the manufacturing
industry are Year 2000 and Euro compliance, product functions, ease of
implementation, customer service, training and price. The Company believes its
MTMS product allows the Company to compete effectively in the manufacturing
industry because of the product's ease of implementation provided through MTMS
CoPilot, its enhanced functions and ability to run on the NT platform and its
incorporation of the Aremis Architecture. In addition, the Company offers
extensive training and support for its manufacturing products. See
"Business -- The AremisSoft Solution." The Company believes that its ability to
compete in the manufacturing industry will be further enhanced by the ability of
MTMS Windows to offer Euro compliance.

HEALTHCARE

The healthcare industry in the United Kingdom, Europe and North America is
characterized by government regulation and rising healthcare costs. Rising costs
have resulted in pressures to reduce costs without sacrificing the quality of
care and have caused significant legislative and regulatory changes in the
healthcare industry. The pressure to reduce costs has encouraged physicians to
join group practices to share administrative costs and achieve economies of
scale. The Company believes that this movement toward group practices has
accelerated the trend toward automation, as group practices require more
efficient and productive management systems. Physician practice management
systems are now available that automate insurance processing and third party
claims, store clinical information and integrate the operations of physician
practices with larger healthcare organizations.

The healthcare industry in the United Kingdom is regulated by the National
Health Service ("NHS"), a government agency. Healthcare services are currently
provided primarily through health authorities and general practitioner ("GP")
fundholders. Health authorities ensure that the healthcare services provided
meet the needs of residents in their designated areas. GP fundholders are groups
of physicians who combine practices to manage a budget for staff, provide
hospital referrals, drug costs, community nursing services and management costs.
Groups of GP fundholders who work together and pool their budgets are known as
"Multifunds."

After April 1, 1999, the GP fundholding structure is expected to terminate
and be replaced by newly created primary care groups ("Primary Care Groups").
Each Primary Care Group is expected to be responsible for approximately 100,000
individuals within a certain territory, based on natural geographical
communities and will have a budget based upon its territory's population and
available resources.

The Company's healthcare products sold in the United Kingdom are regulated
by the NHS through an accreditation process. The NHS introduced Requirements for
Accreditation ("RFA") in April 1993 and the current version, RFA4, was reprinted
in April 1998. RFAs ensure that computer systems provide consistent core
functions and conform to NHS standards. It was recommended that existing systems
be upgraded and that health authorities and GP fundholders would only be
reimbursed for the cost of such systems if they were accredited to RFA4. The
Aremis Architecture is accredited to RFA4.

In April 1999, a new Information Management and Technology Strategy
("IMTS") is expected to be published by the NHS. The IMTS is expected to set the
information technology standards for the next seven years, including
specifications for Primary Care Groups. The purpose of the IMTS is to ensure
that all Primary Care Groups will have in place an auditable clinical system
with the ability to provide management information. In addition, the NHS
recently recommended that major investments in information technology systems to
support Primary Care Groups not be made before the IMTS is published. As a
result, the Company anticipates that it may experience a delay in customer
purchases of its healthcare products pending such publication. See "Risk
Factors -- Government Regulation of Healthcare Product Specifications."

The IMTS is expected to be the basis for drafting an updated RFA, which
will be referred to as "RFA5." The Company, among others, is actively involved
with the NHS in the development of the new specifications. The Company believes
it is well-positioned to respond to the new specifications and provide its
existing and potential customers in the healthcare industry with enterprise-wide
applications software that will meet their specific needs and comply with
applicable requirements. In the future, the NHS is expected to only reimburse
physicians groups for purchases of information technology systems that meet RFA5
accreditation criteria.
40
<PAGE> 43

The information technology group of the NHS is also working on a project
called PRODIGY, the purpose of which is to test the concept of computer-aided
support for physicians prescription decisions. PRODIGY's proposed computer
system would contain advice on therapeutic options and is intended to work in
tandem with existing physician clinical systems. The system provides decision
support to the physician immediately after an initial diagnosis has been made by
presenting a prescribing recommendation on the condition diagnosed. It is
anticipated that the NHS will specify system requirements for computer aided
decision support as part of RFA5. The Company is one of five organizations
involved in preparing the specifications.

HEALTHCARE PRODUCTS

<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NEW PRODUCTS REJUVENATED PRODUCTS LEGACY PRODUCTS
- ------------------------------------------------------------------------------------------------------------
GCS for Windows(1) GCS AMSyS-v4
AMSyS-v5 Genisyst Clinical System
Genisyst 2.8 GENI Links
Genisyst 4 (NT) GENI
CHARM
Fundman Windows 95
Fundman Windows 3.1
Fundholding
Infolog
- ------------------------------------------------------------------------------------------------------------
50 installed customers 1,939 installed customers(2) 560 installed customers(2)
- ------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Released in the fourth quarter of 1998.
(2) Certain customers of the Company have been licensed for more than one
product or version of a product and, as a result, are represented more than
once in the number of installed customers.

Global Clinical System for Windows ("GCS for Windows") was released in the
fourth quarter of 1998. GCS for Windows operates on a PC/NT platform and
provides healthcare providers with a navigation system for managing medical and
administrative tasks routinely encountered by physicians, physician groups and
community hospitals. GCS for Windows is a Windows-based integrated clinical
system compatible with both Windows 95 and Windows 3.1, facilitating integration
with other systems. It utilizes many features of the Aremis Architecture,
incorporating object-oriented and touch screen technologies. GCS for Windows
consists of nine fully-integrated application modules.

Global Clinical System ("GCS") operates in Windows 95 and contains the same
application modules as GCS for Windows. Because GCS does not incorporate
object-oriented technology, a key feature of the Aremis Architecture, it is
expected to be gradually phased out in connection with the release of GCS for
Windows.

41
<PAGE> 44

The following table describes the main application modules of GCS for
Windows and GCS and their primary customer benefits:

<TABLE>
<CAPTION>
APPLICATION MODULES PRIMARY CUSTOMER BENEFITS
------------------- -------------------------
<S> <C>
- - Administration Manager - Contains all basic patient record information such as
name, age, sex and address
- - Consultation Manager - Delivers an electronic patient record to the clinician's
desktop, providing the user with the significant medical
history of the patient, consultation history, test results
and tests due
- - Prescription Manager - Provides access to the user's 40 most commonly prescribed
drugs, as well as information on generic types, preferred
drugs, packaging and costs
- - Appointment Manager - Creates an appointment calendar for multiple physicians
across various specialties, tracks patient visits, prints
details and produces statistical reports for physicians
- - Reporting - Generates reports specific to a practice or health
authority, based on a number of factors such as age, sex and
patient profile
- - Training - Provides state-of-the-art training techniques from the
user's screen
- - Communications - Enables a facility to link its system to the NHS intranet,
the local hospital and the health authority
- - Word Processing - Allows users to incorporate data from other modules into
letters and referrals
- - Dispensing - Facilitates the cost-effective issuance of drugs and
prescriptions
</TABLE>

AMSyS-v5 is a DOS-based clinical system released by the Company as a
product rejuvenation for AMSyS-v4 customers. AMSyS-v4 was acquired by the
Company in connection with the acquisition of Advanced Medical Systems Limited
in 1995 and subsequently rejuvenated. AMSyS-v5 does not incorporate all features
of the Aremis Architecture. AMSyS-v5 incorporates primarily the same application
modules as GCS but in a non-Windows format and operates alone or in a PC/LAN
environment.

Genisyst 2.8 and Genisyst 4(NT) are both rejuvenations of a product
acquired by the Company in connection with its 1994 acquisition of Genisyst
Limited. Neither Genisyst 2.8 nor Genisyst 4(NT) incorporate all features of the
Aremis Architecture. Both products incorporate functionality similar to GCS and
provide a nondisruptive transition for customers to new products until these
products are phased out.

CHARM is a UNIX-based system primarily developed for community hospitals
and is principally used by physicians to manage home healthcare visits conducted
by health and social workers. CHARM consists of a central database that allows
the user to collect and maintain patient data and treatment information. The
software is installed on palm tops, which allows users to collect data in the
field and later upload the information into the central database. The Aremis
Architecture version of CHARM is under development and is currently in the
planning stage. It is expected to be released in 2000.

Fundholding and Fundman are accounting applications software. Fundholding
is a multi-user accounting system designed to operate in accordance with the NHS
Fundholding business model. All accounting modules are integrated with various
software applications, reducing the administrative costs associated with
operating a group practice in the Fundholding system. Fundman is a Windows-based
consolidation system for multifund physician practices and contains a total
purchasing module, which is expected to be the prototype model for the new IMTS
specifications.

Infolog is a hand held terminal which is used for remote data capture by
physicians and home healthcare providers. Infolog is a support product used by
licensees of the Company's GCS, Fundman and Fundholding products and enables
electronic data capture, resource management and contract/logistics management
for physicians and home healthcare providers. As of December 31, 1998, the
Company has sold approximately 5,000 units, which are being used by
approximately 3,500 healthcare providers.

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<PAGE> 45

HEALTHCARE SALES AND MARKETING

The Company's healthcare products are marketed and distributed to
organizations in the healthcare industry through a direct sales force of 19
employees in three offices. The healthcare marketing team is managed by a sales
director who allocates geographic territories among sales executives. The
Company is also exploring marketing opportunities in the healthcare industry in
European countries with healthcare industry models similar to that in the United
Kingdom, such as Denmark and Belgium.

In the United Kingdom, demand for the Company's products is generated by
the Company through contacts with physicians, physician groups and regulatory
authorities. In addition, the NHS sponsors a number of strategic initiatives
which can result in significant sales once product specifications are
determined. The NHS also underwrites a percentage of major information
technology initiatives which effectively reduce operating costs for physicians
and Primary Care Groups.

Sales cycles for the Company's healthcare products vary depending upon,
among other things, the degree of integration, consulting and training required
and the status of the customer's implementation of a hardware system. The
typical sales cycle is one to three months from the time an initial sales
presentation is made to a prospective customer to the time a license agreement
is executed. License fees for GCS products range from approximately $20,000 for
single users to $150,000 for multiple user systems, depending upon the number of
applications licensed. License fees for other rejuvenated products vary
depending on the product but are generally lower than GCS license fees.

HEALTHCARE CUSTOMERS

The Company is recognized as one of the top four suppliers of
enterprise-wide applications software to physicians and physician groups in the
United Kingdom. The Company currently has approximately 2,000 healthcare
customers in the United Kingdom. The following is a list of representative
customers as of April 2, 1999:

<TABLE>
<S> <C>
Birmingham Multifund Kingston & Richmond Multifund
Southampton Multifund Potteries Healthcare
Blackburn National Health Trust Lambeth and Lewisham Multifund
Dudley Multifund BHB Hospital Trust
Durham Multifund South Wales GP Group (120 practices)
</TABLE>

HEALTHCARE COMPETITION

The Company's main competitors in the healthcare industry in the United
Kingdom include EMIS, Reuters, AAH Meditel, GPASS, HCSL, Exeter Systems, Medical
Care Systems, Microtest Europe Limited, PCTI Solutions Ltd. and Seetec Medical
Systems. The principal competitive factors affecting the market for the
Company's products in the healthcare industry in the United Kingdom are the
ability to produce products to market in relatively short periods of time and in
compliance with the requirements of physicians, physician groups, community
hospitals and applicable government regulations, including the specifications of
the NHS, access to reliable software support and system implementation and
maintenance costs. Because the Company's GCS and other clinical systems products
are designed to meet then applicable ITMS specifications and are accredited
under the applicable RFA, the Company believes that it is able to compete
effectively in the healthcare market in the United Kingdom. In addition, the
Company's healthcare products provide customers with enhanced functions, ease of
integration, industry-specific applications, rapid implementation, and can be
used with legacy systems and are supported by highly-trained personnel. See
"Business -- The AremisSoft Solution."

As with other markets, the United Kingdom healthcare market has moved
toward open systems and standardized platforms, which the Company believes could
draw new competitors into the market. This could favor competitors with overseas
operations who can achieve economies of scale. In view of the increased
complexity of NHS specification requirements, the number of enterprise-wide
applications software suppliers in the market may also be significantly reduced.

43
<PAGE> 46

HOSPITALITY

The Company's hospitality customers are primarily comprised of hotels,
motels and inns which seek property management systems that allow staff access
to reservation data, guest histories and demographics, simplify check-in and
check-out procedures, automate maintenance and housekeeping schedules and
provide information regarding guest preferences. Property management systems can
also consolidate data from restaurants, bars and other points of sale, which
helps to achieve greater accuracy and fewer delays for guests. One of the most
significant aspects of property management systems is their ability to trace the
source of existing business, identify potential sources of new business and
forecast how often a given guest, or type of guest, will use the establishment
in the future. The Company believes that its customers in the hospitality
industry require systems that are capable of managing guest requirements while,
at the same time, providing access to information which assists the customer in
its sales and marketing efforts.

HOSPITALITY PRODUCTS

<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
NEW PRODUCTS REJUVENATED PRODUCTS LEGACY PRODUCTS
- ----------------------------------------------------------------------------------------------
Aremis 4.0 PMS(1) IGS Hotel (Version 3) IGS Hotel

IGS Hotel (Version 2.5) AccountMaster
IGS Hotel (Version 1.xx) HotelMaster
AccountMaster
- ----------------------------------------------------------------------------------------------
4 installed customers 850 installed customers(2) 350 installed customers(2)
- ----------------------------------------------------------------------------------------------
</TABLE>

(1) Released in the fourth quarter of 1998.
(2) Certain customers are licensed for more than one product and, as a result,
are represented more than once in the number of installed customers.

Aremis 4.0 Property Management System ("Aremis 4.0 PMS") is an enhanced
version of IGS Hotel and was released in October 1998. Aremis 4.0 PMS is a
comprehensive hotel property management system that can be dynamically
configured to match the customer's business model. It offers a wide range of
functionality for both the front and back office operations in a hotel and
incorporates all features of the Aremis Architecture. Aremis 4.0 PMS can be
fully integrated with Microsoft Office. An attractive feature of Aremis 4.0 PMS
is that its scalability allows the Company to target customers that have in
excess of 500 rooms at a given site. Aremis 4.0 PMS consists of six main
application modules.

Aremis 4.0 PMS can also be used as a marketing tool for hotels, providing
its users with a comprehensive database of guest profiles and histories. From
the database, the system can be used to generate personalized letters and other
mailings to corporations and individuals in the database. The database also
enables the user to develop marketing strategies aimed at corporate guests and
other types of marketing campaigns. The information available through Aremis 4.0
PMS allows the hotel to offer a higher level of service through guest
recognition and to target preferred guests during particular periods through
directed marketing efforts.

IGS Hotel Property Management System (Version 3) ("IGS Hotel") is a
client/server based comprehensive hotel property management system that offers a
wide range of functionality for both the front and back office operations in a
hotel and operates in a DOS format. It is a rejuvenation of a product acquired
in connection with the Company's 1993 acquisition of IGS Leisure Technology
Limited. Similar to Aremis 4.0 PMS, IGS Hotel consists of six main application
modules and can be used as a marketing tool but, unlike Aremis 4.0 PMS, does not
incorporate all features of the Aremis Architecture.

44
<PAGE> 47

The following table describes the main application modules of Aremis 4.0
PMS and IGS Hotel and their primary customer benefits:

<TABLE>
<CAPTION>
APPLICATION MODULES PRIMARY CUSTOMER BENEFITS
------------------- -------------------------
<S> <C>
- - Front Office - Assists hotels in managing its front office operations from the point
of reservations until check out
- - History & Marketing - Provides hotels with key profile information on guests and prospects
- - Conferencing & Banqueting - Assists hotels in organizing events and facilitates the complex
reservation process, consolidating billing statements and maintaining
detailed information on guests and events
- - Point of Sale (Restaurant & Bar) - Provides automatic and direct settlement of restaurant and bar charges
onto the appropriate account; advanced inventory module also controls
all aspects of the catering process
- - Interfaces - Allows hotels to interface with a wide range of high quality third-
party hardware and software systems such as room access control
systems, telephone systems, television systems, mini-bar systems and
in-room fax facilities
- - AccountMaster - Provides hotels with a comprehensive range of management accounting and
reporting software designed specifically for the hospitality industry
</TABLE>

AccountMaster is a rejuvenated product which was originally acquired by the
Company in connection with the 1993 acquisition of HotelMaster Limited. It
provides hotels with a basic accounting system tailored for the hospitality
industry and includes functions such as tracking profit and loss and inventory,
generating numerous reports, including a general ledger, sales ledger and audit
reports, and creating receipts. AccountMaster currently incorporates certain
features of the Aremis Architecture.

HOSPITALITY SALES AND MARKETING

The Company's hospitality products are marketed and distributed to
mid-sized organizations in the hospitality industry in the United Kingdom,
Ireland, Cyprus and India through a sales force of 12 employees in two offices.
Each sales team is managed by a sales director who allocates geographic
territories among sales executives. In the Channel Islands and Scotland, the
Company also utilizes distributors on a nonexclusive basis.

Sales cycles for the Company's hospitality products vary substantially
depending on, among other things, the size of the organization, the degree of
integration, consulting and training required, the status of the customer's
implementation of a hardware system, the number of individuals involved in the
purchasing decision and whether the customer has retained a consultant to assist
in the purchasing decision. The sales cycle for IGS Hotel is typically three to
six months from the time an initial sales presentation is made to a prospective
customer to the time a purchase order is received by the Company. License fees
for the Company's property management system products range from approximately
$11,000 to $1.0 million, depending on the size of the customer and number of
applications licensed. The license fee for AccountMaster is approximately
$1,000.

45
<PAGE> 48

HOSPITALITY CUSTOMERS

The Company is a leading supplier of property management systems to hotels
in the United Kingdom. AremisSoft currently has approximately 1,200 hospitality
customers in the United Kingdom, Cyprus and India, including major hotel chains
with multiple sites. The Company's current customer base consists of inns and
hotels with 500 rooms or less. The following is a list of representative
customers as of April 2, 1999:

<TABLE>
<S> <C>
Forte Limited Jarvis Hotels plc
Whitbread plc (Travel Inn) Jurys Hotel Group plc
Bass plc (Toby Inns) Millennium & Copthorne Hotels plc
Regal Hotel Group plc Thistle Hotels plc
Friendly Hotels plc Cliveden plc
</TABLE>

HOSPITALITY COMPETITION

In the hospitality industry, the Company's principal competitor in the
United Kingdom is Innsite Hotel Services Ltd. With respect to the other markets
in Europe in which the Company sells its products, the principal competitor is
MICROS-Fidelio International. The principal competitive factors affecting the
market for the Company's products in the hospitality industry are product
functions, ease of implementation and use, return on the customers' investment,
customer service, training and price. The Company's hospitality products provide
customers with, among other things, enhanced functions, ease of integration,
industry-specific applications, rapid implementation, ability to operate with
legacy systems and highly-trained product support services. See "Business -- The
AremisSoft Solution."

CONSTRUCTION

Historically, the construction industry in the United Kingdom has been
characterized by fragmentation, lack of investment in technology, focus on cost
rather than quality and a lack of standardization with respect to contracts,
insurance and related matters. As a result, significant changes in the United
Kingdom construction industry have begun to occur and more are expected to occur
in the future. Many of these expected changes focus on improving efficiency and
incorporating information and communication technology into the decision-making
and control processes.

Businesses in the construction industry typically seek enterprise-wide
applications software that provides purchasing control, inventory, estimating,
job costing, project management, purchase orders, invoicing, accounting, service
and maintenance, payroll, inventory control and sales and marketing functions.
As a result, the Company believes that many organizations in the construction
industry are shifting away from in-house applications toward more sophisticated,
third-party enterprise-wide applications software. In addition, the Company
believes that a substantial number of organizations in the construction industry
are seeking solutions related to Year 2000 and Euro compliance and plan to
upgrade or replace their existing information technology systems.

CONSTRUCTION PRODUCTS

<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
NEW PRODUCTS REJUVENATED PRODUCTS LEGACY PRODUCTS
- --------------------------------------------------------------------------------------------------------------
ViXEN Windows ViXEN Plus & ODBC ViXEN
- --------------------------------------------------------------------------------------------------------------
Expected release in second quarter of 60 installed customers(1) 300 installed customers(1)
1999
- --------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Certain customers are licensed for more than one product and, as a result,
are represented more than once in the number of installed customers.

ViXEN Windows, the most recent version of the Company's ViXEN Contracting
System and currently under development, is a fully-integrated Windows-based
management and control system designed specifically for contracting companies
across a variety of industries. It incorporates many features of the Aremis
Architecture, including ODBC compliance and GUI. ViXEN Windows consists of 13
fully-integrated main

46
<PAGE> 49

application modules and over 600 programs. The Company is currently testing a
Beta version of the product and expects to release ViXEN Windows in the second
quarter of 1999.

ViXEN Plus & ODBC ("ViXEN Plus") is a UNIX-based management and control
system for contracting companies consisting of an integrated, modular system
which offers a broad range of functions. ViXEN Plus is a rejuvenation of the
ViXEN product acquired by the Company in connection with the Company's 1995
acquisition of Briter Computer Systems Limited. The product was rejuvenated to
operate in a multi-user environment and consists of the same principal
application modules as ViXEN Windows but does not incorporate a substantial
number of the Aremis Architecture features.

The following table describes the main application modules of ViXEN Windows
and ViXEN Plus and their primary customer benefits:

<TABLE>
<CAPTION>
APPLICATION MODULES PRIMARY CUSTOMER BENEFITS
------------------- -------------------------
<S> <C>
- - Services and Maintenance - Controls various tasks related to servicing and
maintaining equipment and facilities, allowing users to
record and manage numerous customer address and plant
equipment parameters
- - Job Costing - Enables users to record and analyze costs of each job;
serves as the hub of the ViXEN contracting system and is
fully-integrated with each other application module
- - Purchase Orders - Allows users to produce printed orders, to calculate
prices and discounts automatically and to record the value
of outstanding orders as part of work in progress
- - Estimating - Enables users to create a quote based on the resources
required for the job and to perform sensitivity analyses
based on changes in labor rates, overhead, task factors,
wastage, allowances, increased cost percentages and
desired profit margin
- - Inventory Control - Allows users to maintain control of inventory changes by
providing detailed information on inventory levels, goods
ordered from suppliers and incoming and outgoing
transactions
- - Price File Database - Provides users with instant access to current prices on
frequently used products for a variety of purposes,
including estimating, material requisitions, purchase
orders, inventory control and small works invoicing
- - Client Reconciliation - Assists users in the complex tasks of recording,
reconciling and accounting for interim applications, client
certificates, deferred value-added taxes and discounts and
retentions on contracts
- - Subcontractor Reconciliation - Provides the same functionality for subcontractors as
Client Reconciliation provides for contractors
- - Sales Ledger - Allows users to automatically post invoices through the
Job Costing module and to perform sales analyses
- - Purchase Ledger - Allows users to log invoices, validate input data, specify
payment options, make automatic payments and produce
invoices and checks
- - Nominal Ledger - Provides users with extensive reporting modules in a
variety of formats based on a user-defined structure
- - Payroll - Processes the wage and salary payments of various types of
employees
- - System Management - Embraces a range of necessary features, integrating other
ViXEN modules in a UNIX environment
</TABLE>

CONSTRUCTION SALES AND MARKETING

The Company distributes its construction products through a direct sales
force of six employees in two offices. Similar to the Company's marketing
strategy in the healthcare and hospitality markets, the sales force is divided
into teams, each of which is managed by a sales director who allocates
geographic territories among sales executives.

47
<PAGE> 50

Sales cycles for the Company's construction products vary substantially
depending on, among other things, the size of the organization, the degree of
integration, consulting and training required, the status of the customer's
implementation of a hardware system and whether the customer has retained a
consultant to assist in the purchasing decisions. The sales cycle for ViXEN
Windows is six to 12 months from the time an initial sales presentation is made
to a prospective customer to the time a purchase order is received by the
Company. License fees for a ViXEN contracting system range from approximately
$80,000 to $500,000 depending on the size of the customer and the number of
applications licensed.

CONSTRUCTION CUSTOMERS

The Company is a major supplier of enterprise-wide applications software to
the electrical/mechanical contracting sector of the construction industry in the
United Kingdom. Ten of the recently privatized electricity supply companies
(seven of which are now owned by United States companies) in the United Kingdom
are customers of the Company, together with most of the major electrical and
mechanical contracting companies representing a customer base of over 350
contractors. The following is a list of representative customers as of April 2,
1999:

<TABLE>
<S> <C>
London Electricity plc Midlands Electricity plc
Southern Electric plc Norweb Contracting
East Midlands Electricity South Western Electricity
Yorkshire Electricity N G Bailey & Co., Ltd
CWS Engineering Services Ltd. ROMEC
</TABLE>

CONSTRUCTION COMPETITION

In the construction market, larger competitors tend to operate across the
entire construction spectrum and offer enterprise-wide applications software to
suit every division, such as construction, contracting, security and service and
maintenance. The Company's principal competitors in the construction industry
are Misys plc, FCG Computer Systems/Red Sky Software Ltd., MicaBuild Products,
Estimation Inc., Database, and Engineering Technology. The principal competitive
factors affecting the market for the Company's products in the construction
industry are Year 2000 and Euro compliance, the ability to collect marketing
data, effective organization of pricing and buying information, accurate
invoicing and profit control. The Company's ViXEN product offers, among other
things, Year 2000 compliance, enhanced functions, ease of integration,
industry-specific applications and rapid implementation. See "Business -- The
AremisSoft Solution." ViXEN's application modules provide a comprehensive
package covering all basic customer requirements, significantly reducing the
customer's need to interface with third-party products. See
"Business -- Targeted Markets -- Construction -- Construction Products." The
Company believes that the range of functions and Year 2000 compliance of the
ViXEN product strengthens the Company's ability to compete effectively in the
construction industry in the United Kingdom.

PRODUCT DEVELOPMENT AND QUALITY ASSURANCES

Since its formation, the Company has made substantial investments in
research and development. New generations of software products are continually
being designed and developed to provide improved performance and enhanced
functions while utilizing the most recent proven technology. The Company's
research and development expenses were approximately $6.4 million for 1996 and
$6.2 million for each of 1997 and 1998.

The Company maintains research and development centers in both the United
Kingdom and India. The Company's operation in the United Kingdom concentrates
primarily on new product design and prototyping using the Aremis Architecture.
Coding, integration and testing are performed at the Company's software
development and support facility in India where employees are divided into teams
for each Targeted Market. The Company's teams in India also focus on
enhancements and error corrections to existing products.

Use of the software development and support facility in India provides
AremisSoft with access to highly skilled software engineers. In contrast, the
available pool of appropriately skilled software professionals in
48
<PAGE> 51

Europe and the United States is decreasing as a result of Year 2000 and other
projects including, the conversion to the Euro. Further, the cost of recruiting
and training software developers in C++ and Java is substantially more expensive
in Europe and North America. The Company believes its facility in India provides
it with a significant advantage over its competitors in Western Europe and the
United States, even with the additional communications and management overhead
associated with remote development.

All of AremisSoft's employees in India are full-time employees. The Company
does not employ contractors or fixed term temporary personnel in India. In order
to retain key personnel the Company operates a number of incentive programs,
including subsidized housing, car allowances, and generous overseas allowances
and bonuses for employees working on special projects. Currently, the Company
utilizes a three-shift system at its facility in India, thereby allowing the
Company to ensure key projects are delivered on time and to specification and
facilitating customer access to software staff. The Company's software
engineering research division also evaluates and develops new technologies and
methodologies for the future benefit of the Company's broad range of products.
Currently, these include hand held, EDI, imaging, Internet/intranet, voice
activation, touchscreen and multimedia technology.

CUSTOMER SERVICE AND SUPPORT

The Company provides the following services to its customers in an effort
to promote rapid and efficient implementation, product consultation and
technical support:

Installations and Training. Installations are planned and overseen by
specialist project managers in accordance with customer requirements and
pre-installation consultation is provided when necessary. The Company offers a
fully-integrated training program to support customer implementation of the
Company's products to help ensure successful installations.

Customer Support. The Company provides a high level of customer support
through its software development and support facility in India in addition to
the local support provided on a daily basis. Support and product information are
also provided through the Company's Web page. In addition, the Company supports
user groups in the United Kingdom and North America to enhance the support and
development of the Company's products as well as its image.

Business Review Services. AremisSoft recently introduced a business review
service to ensure that its customer organizations recognize and respond to
market trends. These reviews assess the factors influencing the performance of a
business with respect to the management of required information services. As
part of the service, the Company produces a comprehensive report containing
recommendations for change and the related costs and benefits.

PROPRIETARY RIGHTS AND LICENSING

The Company's success is dependent upon its proprietary technology and
other intellectual property. The Company has submitted an application for
federal registration of the AremisSoft tradename, trademark and logo with the
United States Patent and Trademark Office. The Company has not registered any
copyrights nor received or applied for any patents for its products, technology
or other intellectual property. No assurances can be given that the Company's
trademarks will be registered as a result of pending or future applications or,
if registered, they will provide meaningful protection or other commercial
advantages to the Company. The Company relies primarily on a combination of the
protections provided by applicable copyright, trademark and trade secret laws,
as well as on confidentiality procedures and licensing arrangements, to
establish and protect its rights in its software. The Company also enters into
confidentiality agreements with certain employees, distributors and customers
and limits access to and distribution of the source codes for its products and
other proprietary technology. The Company believes that the foregoing measures
afford only limited protection. Despite the Company's efforts, it may be
possible for third parties to copy certain portions of the Company's products or
reverse engineer or obtain and use information that the Company regards as
proprietary. In addition, the laws of certain countries, such as the United
Kingdom and India, do not protect the Company's proprietary rights to the same
extent as do the laws of the United States. Accordingly, no assurances can be

49
<PAGE> 52

given that the Company will be able to protect its proprietary software against
unauthorized third-party copying or use, which could have a material adverse
effect on the Company's business, operating results and financial condition.
Policing, enforcing and protecting unauthorized use of the Company's products
and intellectual property is difficult, and while the Company is unable to
determine the extent to which piracy of its software products may exist,
software piracy can be expected to be a problem. In addition, no assurances can
be given that the Company's competitors will not independently develop
technology similar to that of the Company. Moreover, litigation may be necessary
in the future to enforce the Company's intellectual property rights, to protect
the Company's trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on the
Company's business, operating results and financial condition. See "Risk
Factors -- Intellectual Property Rights."

The Company enters into license arrangements that provide for the
nonexclusive license of the Company's software. The Company's license agreements
generally allow the use of its software solely by the customer for internal
purposes without the right to sublicense or transfer the software to third
parties. Such licenses generally are perpetual, but subject to termination for
breach or on notice, and contain confidentiality and nondisclosure provisions, a
limited warranty covering the software, and indemnification for the customer
from any infringement action related to the software.

Although the Company is not aware that any of its products infringes upon
the proprietary rights of third parties, no assurances can be given that third
parties will not claim infringement by the Company with respect to current or
future products. Any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company. The Company may also initiate claims or litigation against third
parties for infringement of the Company's proprietary rights or to establish the
validity of the Company's proprietary rights. Litigation to determine the
validity of any claims could result in significant expense to the Company and
divert the efforts of the Company's technical and management personnel from
productive tasks, whether or not such litigation were determined in favor of the
Company. See "Risk Factors -- Intellectual Property Rights."

The Company has in the past and may in the future resell certain software
that it licenses from third parties. In addition, the Company may in the future
jointly develop software in which the Company will have co-ownership or
cross-licensing rights. No assurances can be given that these third-party
software licenses will continue to be available to the Company on terms that
provide the Company with the third-party software it requires to provide
adequate functionality in its products, on terms that adequately protect the
Company's proprietary rights or on terms that are commercially favorable to the
Company. The loss of or inability to maintain to obtain any of these software
licenses, including a loss as a result of a third-party infringement claim,
could result in delays or reductions in product shipments until equivalent
software, if any, could be identified, licensed and integrated, which could have
a material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors -- Intellectual Property Rights."

EMPLOYEES

As of April 2, 1999, the Company had 520 full-time employees. Of these
employees, 274 are based in the Company's offices in the United Kingdom and 186
are based in the Company's software development and support facility in New
Delhi, India. The remaining 60 employees are in various facilities in other
locations. Of the Company's employees in the United Kingdom, 59 are in the
manufacturing division, 97 are in the healthcare division, 84 are in the
hospitality division and 34 are in the construction division. None of the
Company's employees is represented by any collective bargaining agreements and
the Company has never experienced a work stoppage. The Company considers its
relationship with its employees to be good and has not experienced any
interruptions of operations due to labor disagreements.

50
<PAGE> 53

PROPERTIES

The Company leases various facilities in the United Kingdom, United States,
Ireland, India, Mexico, Argentina and Cyprus which house the Company's
administration, sales, marketing, support and research and development
functions. The Company does not own any of its facilities.

The following table sets forth certain information concerning the Company's
principal facilities as of December 31, 1998:

<TABLE>
<CAPTION>
APPROXIMATE
LEASE SQUARE
LOCATION FUNCTION EXPIRATION FOOTAGE
-------- -------- ---------- -----------
<S> <C> <C> <C>
London, United Kingdom Principal Executive Offices 2002 1,725
New Delhi, India Research and Development, 1999 7,620
Customer Support
Blackburn, United Kingdom Manufacturing Division 2010 12,000
Westmont, New Jersey Manufacturing Division 2000 4,200
Hitchin, United Kingdom Healthcare Division 2000 7,125
Woking, United Kingdom Hospitality Division 2012 7,430
Alton, United Kingdom Construction Division 2005 4,500
Nicosia, Cyprus Sales and Marketing 2004 4,000
</TABLE>

As a result of the Company's acquisitions from 1993 through 1996, the
Company has also been assigned relatively small leaseholdings elsewhere in the
United Kingdom and in the United States, Ireland, India, Mexico, Argentina and
Cyprus which expire on various dates from 1999 through 2013. The Company does
not currently own any of these facilities and does not intend to renew these
leases beyond the current expiration dates. The Company believes that its
current facilities will be sufficient to meet its needs for the next 12 months.
See Note 8 of Notes to Consolidated Financial Statements for information
regarding the Company's obligations under its leases.

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<PAGE> 54

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The Board of Directors of the Company consists of three directors, all of
whom are elected for one-year terms at each annual meeting of stockholders. The
number of directors of the Company is expected to be increased to seven upon
completion of the Offering. Holders of shares of Common Stock have no right to
cumulative voting in the election of directors. Consequently at each annual
meeting, a majority of the stockholders will be able to elect all of the
directors. The Company's executive officers are elected annually by the Board of
Directors, however, they may be removed at any time by the Board of Directors.

The following table sets forth certain information with respect to the
current directors, executive officers and key employees of the Company as of
April 2, 1999:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Dr. Lycourgos K. Kyprianou...... 44 Chairman of the Board and Chief Executive Officer
Roys Poyiadjis.................. 33 President, Chief Financial Officer and Vice
Chairman of the Board
Noel R. Voice................... 57 Chief Operating Officer, General Manager of
Healthcare Systems, Secretary and Director
M.C. Mathews.................... 35 General Manager of Group Software Development and
Director Nominee
Barry J. Crowe.................. 55 General Manager of Manufacturing Systems
Michael Gadbury................. 51 General Manager of Hospitality Systems
Brian Rogers.................... 58 General Manager of Construction Systems
Dann V. Angeloff................ 63 Director Nominee
George H. Ellis................. 50 Director Nominee
H. Tate Holt.................... 47 Director Nominee
</TABLE>

Dr. Lycourgos K. Kyprianou has served as the Company's Chairman of the
Board, Chief Executive Officer and Secretary since October 1997 and has served
as Chairman of the Board and Managing Director of the Company's subsidiaries and
predecessors since 1978. Dr. Kyprianou is the sole founder of the Company's
worldwide business, including the software development and support facility in
India. Dr. Kyprianou obtained a Doctorate in Philosophy (Computer Science) from
Cambridge University in 1979 and a bachelor of science with first class honors
in Computer Science from the University of London in 1977.

Roys Poyiadjis has served as the Company's President and Vice Chairman of
the Board since June 1998 and its Chief Financial Officer since October 1998.
From 1997 to 1998, Mr. Poyiadjis served as a partner of Alpha Capital Limited,
an investment banking firm primarily focused on investments in technology
companies. From 1995 to 1996, he served as a director of Lehman Brothers
International Ltd. and from 1993 to 1995 he served as an associate with Morgan
Stanley & Co. International Limited. Mr. Poyiadjis received a Masters in
Business Administration from the London Business School in 1993 and a bachelor
of science (Honors) in Communications Engineering from the University of Kent in
1989.

Noel R. Voice has served as a director of the Company since June 1998 and
as its Chief Operating Officer, General Manager of Healthcare Systems and
Secretary since October 1997. From 1992 to 1997, he served as the Senior Vice
President of Administration of the Company's United Kingdom operations. From
1987 to 1989, he was Managing Director of Cara Consulting Ltd., a United Kingdom
hotel systems company. From 1987 to 1992 he was founder and Managing Director of
Noble Marketing Ltd., a sales and marketing consulting firm. Prior to that, he
served in various senior sales and marketing positions with Motorola Information
Systems (United Kingdom) (1983-1985), Philips N.V. (1980-1983) and IBM (United
Kingdom) Ltd. (1970-1980).

M.C. Mathews is expected to be appointed as a director of the Company after
completion of the Offering and has served as the Company's General Manager of
Group Software Development since October 1997.

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<PAGE> 55

Since 1995, he has served as the Managing Director of Software Engineering of LK
Global Software Engineering (India) Private Limited ("LK Global (India)"), a
subsidiary of the Company, and from 1992 to 1995, he served as its Group Project
Manager. Prior to joining the Company in 1990, Mr. Mathews was employed as a
programmer with Alphabetics Ltd., an IBM distributor in India. Mr. Mathews has a
bachelor of science (honors) and master of science in physics from Kerala and
Delhi Universities, respectively.

Barry J. Crowe has served as the Company's General Manager of Manufacturing
Systems since October 1997. Since 1995, Mr. Crowe served as Project Manager,
Account Manager and Managing Director of LK Global Manufacturing Systems (UK)
Limited, a subsidiary of the Company. From 1992 to 1995, he was a Managing
Director of BEC Group Limited, a manufacturing computer systems company that was
acquired by the Company in 1995. From 1988 to 1991, he served as a consultant
for the BM Group, plc, a construction company. Prior to that, he was General
Manager and Construction Director of the Beazer Group, plc, a construction
company. Mr. Crowe is a Chartered Structural Engineer.

Michael Gadbury has served as the Company's General Manager of Hospitality
Systems since October 1997. From 1996 to 1998, he served as Director of
International Business Development of LK Global Hospitality Systems (UK)
Limited, a subsidiary of the Company, and from 1993 to 1996, he served as its
Managing Director. From 1984 to 1993, he was a Managing Director of IGS Leisure
Technology Limited, a hotel computer systems company. IGS Leisure Technology
Limited was acquired by the Company in 1993.

Brian Rogers has served as the Company's General Manager of Construction
Systems since October 1997. From 1995 to the present, he has served as Managing
Director of LK Global Construction Systems (UK) Limited, a subsidiary of the
Company. From 1978 to 1995, Mr. Rogers served as Managing Director for Briter
Computer Systems Limited, a manufacturing computer systems company that was
acquired by LK Global Construction Systems (UK) Limited in 1995.

Dann V. Angeloff is expected to be appointed as a director of the Company
after the completion of the Offering. Mr. Angeloff is the founder and President
of The Angeloff Company, a corporate financial advisory firm, a position he has
held since 1976. He also currently serves as a director of Public Storage, Inc.,
a New York Stock Exchange company, Nicholas/Applegate Growth Equity Fund,
Nicholas/Applegate Mutual Funds and various private companies. Mr. Angeloff is a
former Trustee of the University of Southern California and is a University
counselor. He received a bachelor of science degree in finance and a masters
degree in business administration from the University of Southern California.

George H. Ellis is expected to be appointed as a director of the Company
after the completion of the Offering. Mr. Ellis currently serves on the board of
directors of various private companies. Since 1996, he has provided consulting
services to various technology related companies. From 1986 to 1996, he was the
Chief Financial Officer of Sterling Software, Inc., a New York Stock Exchange
listed software company. Mr. Ellis is a certified public accountant and received
a bachelor of science in accounting from Texas Tech University.

H. Tate Holt is expected to be appointed as a director of the Company after
the completion of the Offering. Mr. Holt is currently President of Holt &
Associates, a growth management consulting firm, and has held that position
since July 1990. From 1987 to 1990, he served as Senior Vice President of
Automatic Data Processing ("ADP"). Mr. Holt has over 20 years of experience in
various senior sales, marketing and general management positions at IBM, Triad
Systems Corporation and ADP. Mr. Holt is also a director of DBS Industries, Inc.
and Onsite Energy Corporation. Mr. Holt has a bachelor of arts degree from
Indiana University.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors will establish an Audit Committee and a Compensation
Committee upon the completion of the Offering. The functions of the Audit
Committee will include recommending to the Board of Directors the retention of
independent auditors, reviewing the scope of the annual audit undertaken by the
Company's independent auditors and the progress and results of their work, and
reviewing the Company's financial statements, internal accounting and auditing
procedures and corporate program to ensure compliance with applicable laws. The
functions of the Compensation Committee will include reviewing and approving

53
<PAGE> 56

executive compensation policies and practices, reviewing salaries and bonuses
for certain officers of the Company, administering the Company's 1998 Stock
Option Plan (the "Stock Option Plan") and other benefit plans, and considering
such other matters as may from time to time be referred to the committee by the
Board of Directors. The Board has appointed the following directors to serve as
members of the Audit Committee and the Compensation Committee upon completion of
the Offering: H. Tate Holt, George H. Ellis, Dann V. Angeloff, Dr. Lycourgos K.
Kyprianou and Roys Poyiadjis.

COMPENSATION OF THE BOARD OF DIRECTORS

Directors of the Company who are not also employees of the Company or one
of its subsidiaries will receive $20,000 per year plus $1,000 for each Board
meeting attended and $1,000 for each committee meeting attended. No other
director will receive cash compensation for services as a director. All
directors will, however, be reimbursed for their expenses incurred in attending
meetings. Each outside director also will receive, at the time of such
director's appointment or election to the board a one time grant of options to
purchase 30,000 shares of Common Stock and, for each year of service as a
director thereafter, options to purchase 20,000 shares of Common Stock. All
options will be granted at an exercise price equal to the fair market value of
the Common Stock on the date of grant and will vest at the rate of 33 1/3% per
year commencing on the grant date.

EXECUTIVE COMPENSATION

The following table summarizes all compensation earned by or paid to the
Company's Chairman of the Board and Chief Executive Officer for services
rendered in all capacities to the Company and its subsidiaries during the year
ended December 31, 1996, 1997 and 1998. No options to purchase Common Stock were
awarded to any executive officer or director of the Company during the year
ended December 31, 1998 and no options were outstanding as of that date. No
other executive officer's total annual compensation for services rendered in all
capacities to the Company and its subsidiaries during the years ended December
31, 1996, 1997 and 1998, exceeded $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION(1)(2) SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
--------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Dr. Lycourgos K. Kyprianou 1998 $250,000 $200,000 -- --
Chairman of the Board and Chief 1997 $250,000 $200,000 -- --
Executive Officer 1996 $200,000 $150,000 -- --
</TABLE>

- ---------------
(1) As translated into United States dollars based upon the average conversion
rate in effect during each fiscal year.

(2) Does not include payment of business related expenses of $350,000, $250,000
and $250,000 during 1996, 1997 and 1998, respectively.

1998 STOCK OPTION PLAN

In October 1997, the Company's Board of Directors adopted the Stock Option
Plan, which provides for awards in the form of options, including incentive
stock options ("ISOs") and nonstatutory stock options ("NSOs"). Directors,
officers, employees and consultants of the Company will be eligible for the
grant of NSOs, while only employees will be eligible for the grant of ISOs.
Options will have a term of up to ten years from the date of grant. The Company
has reserved 1,500,000 shares of Common Stock for issuance under the Stock
Option Plan. In connection with the Offering, the Company expects to issue
options to purchase an aggregate of 860,000 shares of Common Stock to certain
officers, directors and employees of the Company at an exercise price per share
equal to the initial public offering price.

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<PAGE> 57

The Stock Option Plan will be administered by the Compensation Committee
after completion of the Offering. The consideration for each award under the
Stock Option Plan will be established by the Compensation Committee, but in no
event will the option exercise price for ISOs be less than 100% of the fair
market value of the Common Stock on the date of grant. Awards for employees will
have such terms and be exercisable in such manner and at such time as the
Compensation Committee may determine. However, each ISO and NSO must expire no
later than ten years from the date of grant.

The Board of Directors may amend the Stock Option Plan as desired without
further action by the Company's stockholders except as required by applicable
law. The Stock Option Plan will continue in effect, unless terminated by the
Board of Directors, for a term of ten years from its original adoption date.

As of April 2, 1999, there were no outstanding options to purchase Common
Stock.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Dr. Kyprianou and
Messrs. Poyiadjis and Voice, which will become effective upon completion of the
Offering. The employment agreements for Dr. Kyprianou and Mr. Poyiadjis expire
on December 31, 2001. The employment agreement for Mr. Voice expires on December
31, 1999. Each of the employment agreements may be terminated by the Company or
the employee without cause (as defined in the employment agreements) upon 30
days notice, or for cause without notice. Under the employment agreements, Dr.
Kyprianou and Messrs. Poyiadjis and Voice are entitled to minimum annual
compensation of $250,000, $200,000, and $100,000, respectively. Under their
employment agreements, each of Dr. Kyprianou and Mr. Poyiadjis is entitled to
receive a severance benefit equal to one times his annual compensation if
terminated without cause and 2.99 times his annual compensation if terminated
without cause within 180 days after a "change in control" of the Company. For
purposes of Dr. Kyprianou's and Mr. Poyiadjis' employment agreements, "change in
control" is defined as an event involving one transaction or a series of related
transactions in which (i) the Company issues securities equal to more than 50%
of the issued and outstanding capital stock of the Company to any individual,
firm, partnership, or other entity, including a "group" within the meaning of
Section 13(d)(3) of the Exchange Act, (ii) the Company issues securities equal
to more than 50% of the issued and outstanding capital stock of the Company in
connection with a merger, consolidation or other business combination (other
than for purposes of a reincorporation), (iii) the Company is acquired in a
merger or other business combination transaction in which the Company is not the
surviving corporation (other than a reincorporation) or (iv) more than 50% of
the Company's consolidated assets or earning power are sold or transferred.

Effective in January 1996, the Company's subsidiary, LK Global Information
Systems, B.V., entered into an employment agreement with Dr. Kyprianou, which
provides for an annual salary and expense allowance in the aggregate amount of
approximately $700,000. The agreement will terminate upon completion of the
Offering.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Upon the completion of the Offering, the Compensation Committee of the
Board of Directors will consist of five directors, including Dr. Kyprianou, the
Company's Chief Executive Officer, and Roys Poyiadjis, the Company's President
and Chief Financial Officer. All matters concerning executive compensation in
1998 were addressed by the full Board of Directors of the Company, the members
of which were Dr. Kyprianou, Roys Poyiadjis and Noel Voice. Dr. Kyprianou was
also the Chief Executive Officer of the Company in 1998 and Roys Poyiadjis and
Noel Voice were the President and Chief Operating Officer, respectively, of the
Company in 1998.

In May 1998, the Company loaned $2.6 million to Dr. Kyprianou. The loan
matures on May 15, 2000, and is an unsecured personal obligation of Dr.
Kyprianou. The loan bears interest at the rate of LIBOR plus 2% per annum. The
Company believes that the terms of the loan are comparable to those that could
have been obtained in arms-length bargaining with an unrelated third party. As
of April 2, 1999, the unpaid principal balance of the loan was approximately
$1.9 million.

55
<PAGE> 58

During the third and fourth quarters of 1998, Roys Poyiadjis, the Company's
President and Chief Financial Officer, made loans to the Company in the
aggregate principal amount of approximately $1.7 million. The loans are
reflected in a promissory note dated December 31, 1998, which matures on
December 31, 2001, bears interest at the rate of LIBOR plus 2% per annum and is
unsecured. All interest accrues to principal and is payable at maturity. As of
April 2, 1999, the aggregate unpaid balance of the loans, including accrued and
unpaid interest, was approximately $1.8 million.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company has adopted provisions in its Certificate of Incorporation that
limit the liability of its directors for monetary damages for breach of their
fiduciary duty as directors, except for liability that cannot be eliminated
under the DGCL. The DGCL provides that directors of a company will not be
personally liable for monetary damages for breach of their fiduciary duty as
directors, except for liability (i) for any breach of their duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) that
arises under Section 174 of the DGCL for unlawful payment of dividends or
unlawful stock repurchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit.

The Company's Certificate of Incorporation and bylaws also provide for
indemnification of the Company's directors and officers to the fullest extent
permitted by the DGCL. The Company intends to enter into separate
indemnification agreements with its directors and certain of its officers that
could require the Company, among other things, to indemnify such persons against
certain liabilities that may arise by reason of their status or service as
directors or officers and to advance their expenses as a result of any
proceeding against them as to which they could be indemnified. The Company
believes that the limitation of liability provision in its Certificate of
Incorporation and the indemnification agreements will facilitate the Company's
ability to continue to attract and retain qualified individuals to serve as
directors and officers.

The employment agreements with each of Dr. Kyprianou and Messrs. Poyiadjis
and Voice also provide that the Company will indemnify such individuals for any
losses, costs, damages or expenses incurred as a direct consequence of the
discharge of their duties or by reason of their status as agents of the Company.

56
<PAGE> 59

CERTAIN TRANSACTIONS

During the third and fourth quarters of 1998, Roys Poyiadjis, the Company's
President and Chief Financial Officer, made loans to the Company in the
aggregate principal amount of approximately $1.7 million. The loans are
reflected in a promissory note dated December 31, 1998, which matures on
December 31, 2001, bears interest at the rate of LIBOR plus 2% per annum and is
unsecured. All interest accrues to principal and is payable at maturity. As of
April 2, 1999, the aggregate unpaid balance of the loans, including accrued and
unpaid interest, was approximately $1.8 million. The purpose of the loans made
by Mr. Poyiadjis was to provide the Company with additional working capital.

On May 15, 1998 the Company loaned $2.6 million to Dr. Kyprianou, which is
evidenced by a promissory note. The loan was made to Dr. Kyprianou in order to
provide temporary liquidity to Dr. Kyprianou. The loan matures on May 15, 2000,
and is an unsecured personal obligation of Dr. Kyprianou. The loan bears
interest at the rate of LIBOR plus 2% per annum. The Company believes that the
terms of the loan are comparable to those that could have been obtained in
arms-length bargaining with an unrelated third party. As of April 2, 1999, the
unpaid principal balance of the loan was approximately $1.9 million.

In 1996, Dr. Kyprianou transferred all of the shares of capital stock of LK
Global Information Systems (Cyprus) to the Company as a contribution to capital,
completing the consolidation of the Company's operating entities into LK Global
Information Systems, B.V., which was also wholly owned by Dr. Kyprianou.

The Company is a party to employment agreements with Dr. Kyprianou and
Messrs. Poyiadjis and Voice. See "Management -- Employment Agreements."

The Company has entered into registration rights agreements with Dr.
Kyprianou and Mr. Poyiadjis. See "Shares Eligible for Future
Sale -- Registration Rights."

The Company intends to enter into indemnification agreements with each of
its directors and executive officers. See "Management -- Limitation of Liability
and Indemnification Matters."

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<PAGE> 60

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of April 2, 1999, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, for
(i) each person or entity known by the Company to own beneficially more than
five percent of the then outstanding shares of Common Stock, (ii) each of the
Company's directors, (iii) the Company's Chief Executive Officer, (iv) director
nominees and (v) all directors and executive officers as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE AFTER THE
OFFERING(2)(6) OFFERING(2)(3)(6)
-------------------- --------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT NUMBER PERCENT
--------------------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
Dr. Lycourgos K. Kyprianou(4)...................... 4,693,630 46.9% 4,693,630 35.3%
Roys Poyiadjis(5).................................. 584,190 5.8% 584,190 4.4%
Noel R. Voice...................................... -- -- -- --
M. C. Mathews...................................... -- -- -- --
Dann V. Angeloff................................... -- -- -- --
George H. Ellis.................................... -- -- -- --
H. Tate Holt....................................... -- -- -- --
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(TEN PERSONS).................................... 5,277,820 52.7% 5,277,820 39.7%
</TABLE>

- ---------------
(1) Unless otherwise indicated, the address for each listed stockholder is 60
Bishopsgate, London EC2N 4AJ, England.

(2) Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Securities and Exchange Act of 1934, as amended (the "Exchange Act").
Unless otherwise indicated in these footnotes and any applicable community
property laws, each stockholder has sole voting and investment power with
respect to the shares of Common Stock beneficially owned.

(3) Percentages are calculated assuming no exercise of the Underwriter's
over-allotment option.

(4) Represents shares held by LK Global (Holdings) N.V., for which Dr. Kyprianou
has sole voting and investment power.

(5) Represents shares held by Temco Ltd, for which Mr. Poyiadjis has sole voting
and investment power.

(6) Does not include shares of Common Stock issuable upon exercise of options
the Company intends to issue to certain officers, directors and employees of
the Company in connection with the Offering. See "Management -- 1998 Stock
Option Plan."

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company's Certificate of Incorporation provides for authorized capital
stock of 100,000,000 shares, consisting of 85,000,000 shares of Common Stock,
$.001 par value per share ("Common Stock"), and 15,000,000 shares of Preferred
Stock, $.001 par value per share ("Preferred Stock"). As of April 2, 1999, there
were 10,000,051 shares of Common Stock issued and outstanding held by 113
stockholders of record and there were no shares of Preferred Stock outstanding.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders and do not have
preemptive rights. The Company's Certificate of Incorporation does not provide
for cumulative voting for the election of directors. Subject to preferences that
may be applicable to any then outstanding Preferred Stock, holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." All outstanding shares of Common Stock are, and the Common Stock to be
outstanding upon completion of the

58
<PAGE> 61

Offering will be, fully paid and nonassessable. In the event of any liquidation,
dissolution or winding up of the affairs of the Company, the holders of Common
Stock will be entitled to share ratably in the assets of the Company remaining
after the payment or provision for payment of all of the Company's debts and
obligations and liquidation payments to holders of outstanding shares of
Preferred Stock. See "-- Preferred Stock." Holders of Common Stock have no
preemptive or conversion rights or other subscription rights and there are no
redemption or sinking fund provisions applicable to the Common Stock.

PREFERRED STOCK

The Company's Certificate of Incorporation authorizes 15,000,000 shares of
undesignated Preferred Stock, none of which is currently outstanding. The Board
of Directors has the authority, without further action by the stockholders, to
issue from time to time the Preferred Stock in one or more series and to fix the
number of shares, designations, preferences, powers and relative participating,
optional or other special rights and the qualifications or restrictions thereof.
The preferences, powers, rights and restrictions of different series of
Preferred Stock may differ with respect to dividend rates, amounts payable on
liquidation, voting rights, conversion rights, redemption provisions, sinking
fund provisions and other matters. The issuance of Preferred Stock could reduce
the amount of earnings and assets available for distribution to holders of
Common Stock or affect adversely the rights and powers, including voting rights,
of the holders of Common Stock, and may have the effect of delaying, deferring
or preventing a change in control of the Company. The Company has no present
plan to issue any shares of Preferred Stock.

WARRANTS AND OPTIONS

The Company has issued warrants to purchase an aggregate of 51,117 shares
of the Company's Common Stock at an exercise price of $8.56 per share. The
Warrants are immediately exercisable, have a term of two and one-half years
expiring on April 10, 2000, and were issued in payment of finder's fees in
connection with a private placement by the Company of preferred stock in October
1997. The number of shares issuable upon exercise of the Warrants is subject to
adjustment in the event of certain dividends and other distributions, issuances
of convertible securities and stock splits, stock dividends and similar events.

In connection with the Offering, the Company has agreed to issue to
Cruttenden Roth Incorporated, as representative for the Underwriters, warrants
(the "Representative's Warrants") to purchase up to 330,000 shares of Common
Stock. The Representative's Warrants are exercisable for a period of four years,
beginning one year from the date of this Prospectus. The Representative's
Warrants are exercisable at a price equal to 150% of the initial public offering
price per share. The number of shares covered by the Representative's Warrants
and the exercise price are subject to adjustment in certain circumstances to
prevent dilution. The Representative's Warrants are nontransferable for a period
of one year following the date of this Prospectus, except to (i) members of the
selling group for the Offering or their respective officers and/or partners and
(ii) officers and/or partners of the Representative. The holders of the
Representative's Warrants will have, in that capacity, no voting, dividend or
other shareholder rights.

As of April 2, 1999, the Company had 1,500,000 shares of Common Stock
reserved for future grants under the Stock Option Plan and no options were
outstanding. In connection with the Offering, the Company intends to grant
options to certain officers, directors and employees of the Company to purchase
860,000 shares of Common Stock in the aggregate at an exercise price per share
equal to the initial public offering price.

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CERTIFICATE OF INCORPORATION
AND BYLAW PROVISIONS

Certain provisions of the Company's Certificate of Incorporation and Bylaws
summarized in the following paragraphs may be deemed to have anti-takeover
effects. These provisions may have the effect of discouraging a future takeover
attempt that is not approved by the Board of Directors but that individual
Company stockholders may deem to be in their best interests or by which
stockholders may receive a substantial premium for their shares over then
current market prices. As a result, stockholders who might desire to participate
in such a transaction may not have an opportunity to do so. Such provisions will
also make the removal of the current Board of Directors or management of the
Company more difficult. The following is a description of certain of the
provisions of the Certificate of Incorporation and Bylaws of the Company.
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<PAGE> 62

Authorized Shares

The Certificate of Incorporation authorizes the issuance of 85,000,000
shares of Common Stock and 15,000,000 shares of Preferred Stock. Following the
completion of the Offering, the Board of Directors will have the authority to
authorize issuance of any authorized and unissued shares of Common Stock and
Preferred Stock. The Board of Directors has sole authority to determine the
terms of any one or more series of Preferred Stock, including voting rights,
conversion rates and liquidation preferences. As a result of the ability to fix
voting rights for a series of Preferred Stock, the Board has the power,
consistent with its fiduciary duty, to issue a series of Preferred Stock to
persons friendly to management in order to attempt to block a post-tender offer
merger or other transaction by which a third party seeks control, and thereby
assist management in retaining its position. The Company's Board of Directors
currently has no plans for the issuance of additional shares of Preferred Stock
or Common Stock.

Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors

The Bylaws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board or a committee
thereof, of candidates for election as directors (the "Nomination Procedure")
and with regard to other matters to be brought by stockholders before an annual
meeting of stockholders of the Company (the "Business Procedure"). The
Nomination Procedure requires that a stockholder give no fewer than 60 nor
greater than 90 days advance written notice, in proper form, of a planned
nomination for the Board of Directors to the Secretary of the Company. The
requirements as to the form and timing of the notice are specified in the
Bylaws. If the Chairman of the Board of Directors determines that a person was
not nominated in accordance with the Nomination Procedure, such person will not
be eligible for election as a director. Under the Business Procedure, a
stockholder seeking to have any business conducted at an annual meeting must
give no fewer than 60 nor greater than 90 days advance written notice, in proper
form, to the Secretary of the Company. The requirements as to the form and
timing of the notice is specified in the Bylaws. If the Chairman of the Board of
Directors determines that the other business was not properly brought before the
meeting in accordance with the Business Procedure, the business will not be
conducted at the meeting.

Although the Bylaws do not give the Board of Directors any power to approve
or disapprove stockholder nominations for the election of directors or of any
other business desired by stockholders to be conducted at an annual or any other
meeting, the Bylaws (i) may have the effect of precluding a nomination for the
election of directors or precluding the conduct of business at a particular
annual meeting if the proper procedures are not followed or (ii) may discourage
or deter a third party from conducting a solicitation of proxies to elect its
own slate of directors or otherwise attempting to obtain control of the Company,
even if the conduct of such solicitation or such attempt might be beneficial to
the Company and its stockholders.

Delaware Law

The Company is subject to Section 203 of the DGCL which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any interested stockholder, as defined
below, for a period of three years following the time that such stockholder
became an interested stockholder, unless (i) prior to such time, the Board of
Directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (a) by persons who are directors and
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (iii) at or after such
time, the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder. For purposes of Section
203 of the DGCL, an "interested stockholder" is defined as any person that is
(a) the owner of 15% or more of the outstanding voting stock of the corporation
or (b) an affiliate or associate of the corporation who was the owner of 15% or
more of the outstanding voting stock of the corporation at any time

60
<PAGE> 63

within the three-year period immediately prior to the date on which it is sought
to be determined whether such person is an interested stockholder. Section 203
of the DGCL may have the effect of delaying, deterring or preventing a change in
control of the Company without further action by the Company's stockholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Olde Monmouth
Stock Transfer Co., Inc., Atlantic Highlands, New Jersey.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there was no established public market for the
Common Stock and no prediction can be made as to the effect, if any, that future
sales of shares of Common Stock or the availability of shares for future sale
will have on the market price prevailing from time to time. Sales of substantial
amounts of Common Stock could adversely affect the prevailing market price of
the Common Stock and could impair the Company's ability to raise capital through
an offering of its equity securities. See "Risk Factors -- Shares Eligible for
Future Sale; Registration Rights."

GENERAL

Upon the completion of the Offering, the Company will have issued and
outstanding 13,300,051 shares of Common Stock (13,795,051 if the Underwriters'
over-allotment option is exercised in full). The shares of Common Stock sold in
the Offering will be freely tradeable by persons other than affiliates of the
Company without restriction under the Securities Act. Approximately 8,133,635 of
the shares to be outstanding upon the completion of the Offering, other than the
3,300,000 shares being offered hereby, are subject to the lock-up agreements
described below or are "restricted securities" within the meaning of Rule 144
under the Securities Act. Upon the expiration of the lock-up period described
below, approximately 1,561,232 additional shares will be eligible for sale in
the public market, approximately 6,572,403 of which will be subject to certain
restrictions under Rule 144. The shares of Common Stock outstanding immediately
prior to the Offering which are restricted securities may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available. As described below under "-- Registration Rights,"
the Company has granted registration rights covering approximately 6,317,414 of
such shares.

In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of restricted securities from the
Company or any affiliate of the Company, a person (or persons whose shares are
aggregated) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) 1% of the number of then
outstanding shares of Common Stock (approximately 133,000 shares immediately
after the completion of the Offering) or (ii) the average weekly trading volume
of the Common Stock 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 sales provisions, notice requirements and the
availability of current public information about the Company. If two years have
elapsed since the date of acquisition of restricted securities from the Company
or any affiliate of the Company, and the acquiror or subsequent holder thereof
is deemed not to have been an affiliate of the Company at any time during the 90
days preceding a sale, such person (or persons whose shares are aggregated)
would be entitled to sell such shares in the public market under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, notice
requirements and the availability of current public information requirements. An
"affiliate" of an entity is a person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with such entity and may include officers and directors, principal stockholders
and certain stockholders with special relationships. The foregoing is a summary
of Rule 144 and is not intended to be a complete description of it.

The Company, all of the Company's executive officers and directors and
certain other stockholders of the Company will agree that, without the prior
written consent of Cruttenden Roth Incorporated, on behalf of the Underwriters,
they will not, during the period ending 180 days from the date of this
Prospectus, register for sale, sell, offer, contract to sell, grant an option
for sale or otherwise dispose of or transfer any capital stock of
61
<PAGE> 64

the Company or any securities convertible into or exchangeable for capital stock
of the Company. However, these restrictions do not apply to the grant of a
security interest or pledge of securities to a bank or financial institution,
any transfer to family members, equity owners or entities controlled by a
transferring stockholder so long as the intended transferee agrees to be bound
by the restrictions prior to transfer. See "Underwriting."

The Company intends to file one or more registration statements under the
Securities Act to register shares of Common Stock that will be reserved for
issuance upon exercise of options that may be granted under the Stock Option
Plan. Other than the shares and options to purchase shares subject to the
lock-up agreements, shares registered under the Securities Act will be freely
transferable upon issuance unless acquired by affiliates of the Company.

REGISTRATION RIGHTS

The following summary of certain material provisions of certain
registration rights agreements is qualified in its entirety by reference to each
such registration rights agreement, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part. See "Available
Information."

Upon the completion of the Offering, the holders of approximately 1,039,594
shares of Common Stock, or their permitted transferees, are entitled to certain
rights with respect to the registration of such shares under the Securities Act.
In addition, the Company has granted certain registration rights with respect to
approximately 63,084 shares of Common Stock issuable upon conversion of the
Convertible Promissory Note. Registration of such shares under the Securities
Act would result in such shares becoming freely tradable without restriction
under the Securities Act (except for shares purchased by affiliates of the
Company) immediately upon the effectiveness of a registration statement covering
such registrable shares. Pursuant to their registration rights, the holders
thereof may require the Company to register under the Securities Act all or a
portion of their shares, subject to the right of underwriters, if any, to
exclude shares in an offering. If the Company proposes to register any of its
securities under the Securities Act either for its own account or the account of
any holders of securities exercising registration rights, holders of shares
registrable pursuant to registration rights are entitled to notice of such
registration and are entitled to include such registrable shares therein,
subject to certain terms and conditions, including the right of underwriters, if
any, to exclude shares in an offering. The Company will pay all expenses
relating to the performance of, or compliance with its obligations with respect
to the foregoing registration rights. However, the holders of such registration
rights will be responsible for underwriters' discounts and selling commissions
related to the shares being sold pursuant to such registration rights and the
fees and expenses of their counsel in connection therewith.

Pursuant to their employment agreements, the Company has entered into
registration rights agreements with Dr. Lycourgos K. Kyprianou and Roys
Poyiadjis, who beneficially owned in the aggregate 5,277,820 shares of Common
Stock as of April 2, 1999. Pursuant to their registration rights agreements, Dr.
Kyprianou and Mr. Poyiadjis have the right to require the Company to use its
best efforts to register under the Securities Act all or a portion of their
shares, subject to the right of underwriters, if any, to exclude shares in an
offering. They also have the right to participate in equity offerings initiated
by the Company, subject to certain terms and conditions. The Company will pay
all expenses relating to the performance of, or compliance with the Company's
obligations under such registration rights agreements. In either case, however,
Dr. Kyprianou and Mr. Poyiadjis will be responsible for underwriters' discounts
and selling commissions with respect to the shares being sold pursuant to such
registration rights agreements and the fees and expenses of their counsel in
connection with such registration. Dr. Kyprianou and Mr. Poyiadjis' rights under
their registration rights agreements are assignable to parties who agree to be
bound thereby.

At any time during the period in which the Representative's Warrants are
exercisable, the holders of the Representative's Warrants have the right,
subject to certain limitations, to require the Company on one occasion to
register under the Securities Act at the Company's expense, the shares of Common
Stock issuable upon exercise of the Representative's Warrants. Such holders also
may request that such shares be included in any public offering of Common Stock
of the Company at the Company's expense. In any underwritten offering of the
Company's capital stock, if the underwriters determine that marketing factors
require a limitation on the number of shares to be sold for the account of
shareholders, then the Company may limit or exclude from the registration such
shares of Common Stock.
62
<PAGE> 65

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom Cruttenden Roth
Incorporated ("Cruttenden Roth") is acting as Representative, have severally
agreed to purchase from the Company and the Company has agreed to sell to the
Underwriters, the respective number of shares of Common Stock set forth opposite
each Underwriter's name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Cruttenden Roth Incorporated................................ 2,600,000
Advest, Inc................................................. 100,000
C.E. Unterberg, Towbin...................................... 100,000
Value Investing Partners.................................... 100,000
BlueStone Capital Partners, L.P............................. 50,000
ISG Capital Markets, LLC.................................... 50,000
John G. Kinnard & Company, Incorporated..................... 50,000
Pennsylvania Merchant Group................................. 50,000
RM Stark Co., Inc........................................... 50,000
Trautman, Kramer & Company, Inc............................. 50,000
First Security Van Kasper................................... 50,000
H.C. Wainwright & Co., Inc.................................. 50,000
---------
Total............................................. 3,300,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent, including
the absence of any material adverse change in the Company's business, the
receipt of certain certificates, opinions and letters from the Company's counsel
and independent public accountants and the repayment by the Company from the net
proceeds of the Offering of $5.0 million of indebtedness outstanding under the
Company's bank credit facilities. The nature of the Underwriters' obligation is
such that they are committed to purchase and pay for all the shares of Common
Stock if any are purchased.

The Company has been advised by the Representative that the Underwriters
propose to offer the shares of Common Stock directly to the public on the terms
set forth on the cover page of this Prospectus. The Underwriters may allow
selected dealers, a concession of not more than $.22 per share, and the
Underwriters may allow, and such selected dealers may reallow, a concession of
not more than $.10 per share to other dealers. After the initial public offering
of the shares, the public offering price and other selling terms may be changed
by the Representative. No change in such terms shall change the amount of
proceeds to be received by the Company as set forth on the cover page of this
Prospectus.

The Company has granted an option to the Underwriters, exercisable for a
period of 45 days after the date of this Prospectus, to purchase up to an
additional 495,000 shares of Common Stock at the same price per share as the
initial shares to be purchased by the Underwriters to cover over-allotments, if
any. To the extent that the Underwriters exercise this option, each of the
Underwriters will be committed, subject to certain conditions, to purchase such
additional shares of Common Stock in approximately the same proportion as set
forth in the above table.

The Representative has advised the Company that it does not expect any
sales of the shares of Common Stock offered hereby to be made to discretionary
accounts controlled by the Underwriters.

The Company has agreed to issue to the Representative at the closing of the
Offering warrants (the "Representative's Warrants") to purchase up to 330,000
shares of Common Stock at an exercise price per share equal to 150% of the
initial per share public offering price. The Representative's Warrants are
exercisable for a period of four years beginning one year from the date of this
Prospectus and contain standard

63
<PAGE> 66

net-issuance provisions. The holders of the Representative's Warrants will have
no voting, dividend or other shareholder rights until the Representative's
Warrants are exercised. The terms of the Representative's Warrants were
established as the result of negotiations between the Company and the
Representative. If the Representative's Warrants are exercised, the
Representative may realize additional compensation. By their terms, the
Representative's Warrants will be restricted from sale, transfer, assignment or
hypothecation, except to persons that are officers of the Representative. The
number of shares covered by the Representative's Warrants and the exercise price
thereof are subject to adjustment in certain events to prevent dilution. In
addition, the Company has granted certain rights to the holders of the
Representative's Warrants to register the Representative's Warrants and the
Common Stock underlying the Representative's Warrants under the Securities Act.

The Company has agreed to pay Cruttenden Roth a nonaccountable expense
allowance equal to 2% of the aggregate price of the shares of Common Stock
offered hereby (including with respect to shares of Common Stock underlying the
over-allotment option, if and to the extent it is exercised) set forth on the
front cover of this Prospectus. The Representative's expenses in excess of the
nonaccountable expense allowance, including their legal expenses, will be borne
by the Representative.

The Company and its officers and directors who own shares of Common Stock
have entered into lock-up agreements with the Representative which provide that
they will not offer, sell or otherwise dispose of any Common Stock for a period
of 180 days after the commencement of the Offering without the prior written
consent of Cruttenden Roth. Cruttenden Roth has no present intention to release
the locked-up shares prior to expiration of the 180-day period although
Cruttenden Roth may release the locked-up shares prior to expiration of such
period. The granting of any release would be conditioned, in the judgment of
Cruttenden Roth, on such sale not materially adversely impacting the prevailing
trading market for the Common Stock on the Nasdaq National Market. Specifically,
factors such as average trading volume, recent price trends, and the need for
additional public float in the market for the Common Stock would be considered
in evaluating such a request. See "Shares Eligible For Future Sale."

Prior to the Offering, there has been no established trading market for the
Common Stock. Consequently, the initial public offering price for the Common
Stock offered hereby has been determined by negotiations between the Company and
the Representative. Among the factors considered in such negotiations were the
preliminary demand for the Common Stock, the prevailing market and economic
conditions, the Company's results of operations, estimates of the business
potential and prospects of the Company, the present state of the Company's
business operations, an assessment of the Company's management, the
consideration of these factors in relation to the market valuation of comparable
companies in related businesses, the current condition of the markets in which
the Company operates, and other factors deemed relevant. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to the Offering
at or above the initial public offering price.

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

The Underwriting Agreement provides that the Company will indemnify the
Underwriters and their controlling persons against certain liabilities under the
Securities Act or will contribute to payments the Underwriters and their
controlling persons may be required to make in respect thereof.

64
<PAGE> 67

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby and other legal
matters in connection with the Offering will be passed upon for the Company by
Bartel Eng Linn & Schroder, Sacramento, California. Certain legal matters in
connection with the Offering will be passed upon for the Company by Pillsbury
Madison & Sutro LLP, Sacramento, California. Certain legal matters in connection
with the Offering will be passed upon for the Underwriters by Loeb & Loeb LLP,
Los Angeles, California.

EXPERTS

The Consolidated Financial Statements of the Company as of December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998, appearing in this Prospectus and in the Registration Statement, have been
audited by Pannell Kerr Forster, chartered accountants, independent auditors, as
set forth in their report thereon appearing elsewhere herein, and in the
Registration Statement, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.

CHANGE IN ACCOUNTANTS

Pannell Kerr Forster acted as the Company's independent auditors until May
15, 1998, at which time Ernst & Young was engaged as the Company's auditors. In
connection with the audits of the previous two years and subsequent interim
periods, there were no disagreements with Pannell Kerr Forster on any matters of
accounting principles or practices, financial statement disclosure, or audit
scope or procedure which disagreements if not resolved to their satisfaction
would have caused them to make reference in connection with their opinion to the
subject matter of the disagreements. In December 1998, Pannell Kerr Forster,
chartered accountants, was again engaged as the Company's independent auditors.
Accordingly, the engagement of Ernst & Young, chartered accountants, was
discontinued effective December 16, 1998. Both decisions to change independent
accountants were approved by the Company's Board of Directors. During their
engagement for the 1997 fiscal year and subsequent interim periods, Ernst &
Young issued no audit report which was qualified or modified as to uncertainty,
audit scope or accounting principles, or which contained adverse opinions or
disclaimers of opinion on any of the Company's financial statements and there
were no disagreements with Ernst & Young on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which disagreements if not resolved to their satisfaction would have caused them
to make reference in connection with their opinion to the subject matter of the
disagreements.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement," which term encompasses all amendments,
exhibits and schedules thereto) under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is hereby made to the exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified by such
reference. The Registration Statement, including exhibits thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material, when filed, may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a web site (address http://www.sec.gov) that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission.

65
<PAGE> 68

Upon the completion of the Offering, the Company will become subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports and other information with the Commission in accordance with
the Commission's rules. Such reports and other information concerning the
Company may be inspected and copied at the public reference facilities and
regional offices of the Commission referred to above.

66
<PAGE> 69

GLOSSARY OF TERMS

AS/400. A series of mini computers, often referred to as mid-range systems.

C++. An object-oriented extension of the C programming language. The core
of C++ programming is commonly extended on different operating system platforms
to support specific features.

Character User Interface ("CUI"). A methodology for presenting information
on computer screens in a text-based format to applications utilizing the
characters of a keyboard and without a graphical user interface.

Client/Server. A type of computer network communication. The communication
is analogous to a customer (client) who sends an order (request) on an order
form to a supplier (server) who dispatches the goods and an invoice (response).
The order form and invoice are, in this example, part of the "protocol" used to
communicate.

Distributed Object Computing. A software architecture in which the software
representing an object can transparently execute on either a local or remote
server. This allows transparent centralization of logic processing.

Enterprise Resource Planning ("ERP"). A planning system to permit
enterprise-wide management of material and human resources and the integration
of sales, forecasting, financing and other functions across a manufacturing
organization.

Graphical User Interface ("GUI"). A methodology for presenting information
on computer screens in a graphical format that is easier to understand than
text-based formats and that is consistent between applications based on the same
graphical user interface.

Java. A platform-independent programming language built as a method to
provide services over the Internet. Commonly, websites provide a Java
application (called an applet) which is downloaded by the client and executed on
the client machine. Java is specifically built so that an application can be run
on any kind of system, so separate versions are not needed. Java also has some
security features built in to make it more difficult for destructive applets to
be written.

Local Area Network ("LAN"). A group of one or more computers connected
together for the purpose of sharing data and networked resources such as
printers, modems and fax servers.

Object Orientated Programming. A rapidly emerging desired feature of
applications software. Object-oriented technology consists of component objects
that are essentially building blocks of small, discrete pieces of functionality.
These component objects can be configured to create complete applications and
enable software developers to rapidly create and modify systems to provide the
desired functionality for specific markets or individual customers.

Open Architecture. An architecture with expansion slots that are capable of
accommodating additional components and functionality.

Open Database Connectivity ("ODBC"). A standard for providing computer
access to a variety of database systems and other data applications.

Operating System. Software allowing the user and the installed application
programs to communicate with the computer hardware. The basic computer system is
generally an MS-DOS operating system. Other operating systems include Windows,
Windows NT, Windows 95, Novell Netware and UNIX.

OS/2. An operating system marketed by IBM that provides multitasking
features, allowing computers to perform several tasks at the same time.

UNIX. An operating system originally developed by AT&T and now available in
several versions from various vendors. UNIX is designed to run on a wide variety
of computer hardware.

Visual Basic. A programming language providing rapid and efficient
prototyping and executable code for distribution to end users.

67
<PAGE> 70

Visual Basic for Applications. A programming language based on Visual Basic
which can be used to script and automate Windows applications.

Wide Area Network ("WAN"). A group of computers linked together to cover a
large geographical area in order to share information and facilitate
communication among users.

Windows, Windows NT, Windows 95. Operating systems developed by Microsoft
Corporation which provide multitasking features and access to a variety of
Internet and intranet information.

68
<PAGE> 71

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Changes in Stockholders' Equity
(Deficit)................................................. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 72

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
AremisSoft Corporation

We have audited the accompanying consolidated balance sheets of AremisSoft
Corporation as of December 31, 1998 and 1997, and the related consolidated
statements of operations, changes in stockholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1998. 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 auditing standards generally
accepted in the United States for financial statements as of December 31, 1998
and 1997 and for the two years then ended and, in accordance with United Kingdom
auditing standards for financial statements for the year ended December 31, 1996
which do not differ materially from auditing standards generally accepted in the
United States. 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 AremisSoft
Corporation at December 31, 1998 and 1997, and the consolidated results of its
operations and its consolidated cash flows for each of the three years in the
period ended December 31, 1998, in conformity with accounting principles
generally accepted in the United States.

As described in note 1 to the consolidated financial statements, the
Company has restated its previously issued 1996 consolidated financial
statements.

/s/ Pannell Kerr Forster

London, England
March 5, 1999, except for note 6 as to which the date is April 12, 1999

F-2
<PAGE> 73

AREMISSOFT CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 239 $ 149
Accounts receivable, less allowances for doubtful accounts
of $971 and $639 at December 31, 1997, and 1998,
respectively............................................ 9,458 16,166
Other receivables......................................... 670 903
Inventory................................................. 1,070 787
Deposits paid on service and maintenance contracts........ -- 3,531
Prepaid expenses and other assets......................... 2,169 1,135
-------- --------
Total current assets........................................ 13,606 22,671
Loan receivable-related party............................... -- 1,886
Property and equipment, net................................. 2,040 1,774
Purchased and developed software, net of accumulated
amortization of $5,729 and $6,075 at December 31, 1997,
and 1998, respectively.................................... 764 1,284
Intangible assets, net of accumulated amortization of
$12,766 and $13,036 at December 31, 1997 and 1998,
respectively.............................................. 832 337
-------- --------
Total assets................................................ $ 17,242 $ 27,952
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 4,244 $ 3,669
Accrued payroll taxes..................................... 3,236 586
Accrued value added taxes................................. 1,579 1,649
Accrued income taxes...................................... 72 2,059
Current portion of capital lease obligations.............. 40 55
Other accrued expenses.................................... 4,507 2,946
Bank loans and short-term demand facility................. 7,207 15,530
Deferred revenue.......................................... 5,692 6,693
-------- --------
Total current liabilities................................... 26,577 33,187
Long-term debt.............................................. 10,096 --
Loan and accrued interest payable-related party............. -- 1,781
Capital lease obligations, less current portion............. 103 93
-------- --------
Total Liabilities........................................... 36,776 35,061
Stockholders' equity (deficit):
Series A convertible preferred stock, par value $0.001;
authorized 2,100 shares; 1,137 and no shares issued and
outstanding at December 31, 1997 and 1998, respectively;
liquidating preference at par value..................... 1 --
Series B convertible preferred stock, par value $0.001;
authorized 3,500 shares; no shares issued and
outstanding, liquidating preference at par value........ -- --
Common stock, par value $0.001; authorized 75,000 shares;
7,569 and 10,000 shares issued and outstanding at
December 31, 1997 and 1998, respectively................ 8 10
Additional paid-in capital................................ 17,767 27,107
Accumulated deficit....................................... (35,376) (32,201)
Accumulated other comprehensive income (loss)............. (1,934) (2,025)
-------- --------
Total stockholders' equity (deficit)........................ (19,534) (7,109)
-------- --------
Total liabilities and stockholders' equity (deficit)........ $ 17,242 $ 27,952
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 74

AREMISSOFT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1996 1997 1998
--------------- -------------- ---------
(AS RESTATED --
SEE NOTE 1)
<S> <C> <C> <C>
Revenues:
Software licenses......................................... $ 12,052 $17,024 $26,416
Maintenance and services.................................. 15,839 18,990 21,680
Hardware and other........................................ 6,541 6,360 4,525
-------- ------- -------
Total revenues.......................................... 34,432 42,374 52,621
-------- ------- -------
Cost of revenues:
Software licenses......................................... 1,555 2,079 2,654
Maintenance and services.................................. 5,393 5,377 5,319
Hardware and other........................................ 5,760 5,147 2,817
Amortization of purchased software and capitalized
software
development costs....................................... 2,327 70 265
-------- ------- -------
Total cost of revenues.................................. 15,035 12,673 11,055
-------- ------- -------
Gross profit................................................ 19,397 29,701 41,566
Operating expenses:
Sales and marketing....................................... 15,182 17,834 21,594
Research and development.................................. 6,409 6,233 6,207
General and administrative................................ 5,605 5,227 4,868
Write-off of offering costs............................... -- -- 1,592
Amortization of intangible assets......................... 5,144 97 74
Write-off of intangible assets............................ 505 -- --
-------- ------- -------
Total operating expenses................................ 32,845 29,391 34,335
-------- ------- -------
Profit (loss) from operations............................... (13,448) 310 7,231
Other income (expense):
Interest expense, net..................................... (1,906) (1,895) (2,030)
-------- ------- -------
Income (loss) before income taxes........................... (15,354) (1,585) 5,201
Income tax expense (benefit)................................ (50) 35 2,026
-------- ------- -------
Net income (loss)........................................... $(15,304) $(1,620) $ 3,175
======== ======= =======
Basic and diluted earnings (loss) per share................. $ (2.04) $ (0.21) $ 0.35
======== ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 75

AREMISSOFT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL COMPREHENSIVE STOCKHOLDERS'
--------------- --------------- PAID-IN ACCUMULATED INCOME EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT (LOSS) (DEFICIT)
------ ------ ------ ------ ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995 (AS
RESTATED -- SEE NOTE 1)........... -- $-- 7,504 $ 8 $ 6,059 $(18,452) $ 19 $(12,366)
Stockholder contribution............ -- -- -- -- 5,305 -- -- 5,305
Net loss............................ -- -- -- -- -- (15,304) -- (15,304)
Currency translation adjustment..... -- -- -- -- -- -- (2,738) (2,738)
------ --- ------ --- ------- -------- ------- --------
BALANCES AT DECEMBER 31, 1996 (AS
RESTATED -- SEE NOTE 1)........... -- -- 7,504 8 11,364 (33,756) (2,719) (25,103)
Issuance of common stock in
connection with the acquisition of
the net assets of Juno (Note 1)... -- -- 65 -- -- -- -- --
Issuance of Series A preferred
stock, net of costs of $609....... 1,137 1 -- -- 6,403 -- -- 6,404
Net loss............................ -- -- -- -- -- (1,620) -- (1,620)
Currency translation adjustment..... -- -- -- -- -- -- 785 785
------ --- ------ --- ------- -------- ------- --------
BALANCES AT DECEMBER 31, 1997....... 1,137 1 7,569 8 17,767 (35,376) (1,934) (19,534)
Issuance of common stock, net of
costs of $1,046................... -- -- 1,294 1 9,340 -- -- 9,341
Conversion of preferred stock into
common stock...................... (1,137) (1) 1,137 1 -- -- -- --
Net income.......................... -- -- -- -- -- 3,175 -- 3,175
Currency translation adjustment..... -- -- -- -- -- -- (91) (91)
------ --- ------ --- ------- -------- ------- --------
BALANCES AT DECEMBER 31, 1998....... -- $-- 10,000 $10 $27,107 $(32,201) $(2,025) $ (7,109)
====== === ====== === ======= ======== ======= ========

COMPREHENSIVE
INCOME
(LOSS)
-------------
<S> <C>
BALANCES AT DECEMBER 31, 1995 (AS
RESTATED -- SEE NOTE 1)........... $
Stockholder contribution............ --
Net loss............................ (15,304)
Currency translation adjustment..... (2,738)
--------
BALANCES AT DECEMBER 31, 1996 (AS
RESTATED -- SEE NOTE 1)........... (18,042)
Issuance of common stock in
connection with the acquisition of
the net assets of Juno (Note 1)... --
Issuance of Series A preferred
stock, net of costs of $609....... --
Net loss............................ (1,620)
Currency translation adjustment..... 785
--------
BALANCES AT DECEMBER 31, 1997....... (835)
Issuance of common stock, net of
costs of $1,046................... --
Conversion of preferred stock into
common stock...................... --
Net income.......................... 3,175
Currency translation adjustment..... (91)
--------
BALANCES AT DECEMBER 31, 1998....... 3,084
========
</TABLE>

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

F-5
<PAGE> 76

AREMISSOFT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1997 1998
--------------- ------- -------
(AS RESTATED --
SEE NOTE 1)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $(15,304) $(1,620) $ 3,175
Adjustments to reconcile net income (loss) to net cash
(used in) operating activities:
Depreciation.............................................. 958 977 695
Amortization of capitalized software and intangible
assets.................................................. 7,471 167 339
Write-off capitalized software and intangible assets...... 505 -- --
Changes in assets and liabilities, net of acquisitions
Accounts receivable..................................... 1,106 2,933 (6,602)
Other receivables....................................... 832 (461) (226)
Inventory............................................... (477) 163 295
Deposits paid on service and maintenance contracts...... -- -- (3,531)
Prepaid expenses and other assets....................... 653 (2,595) 1,059
Accounts payable........................................ 422 788 (622)
Deferred revenue........................................ (1,290) (5,726) 937
Accrued taxes payable................................... 1,679 1,242 (647)
Other accrued expenses.................................. 2,191 103 (1,611)
-------- ------- -------
Net cash (used in) operating activities................... (1,254) (4,029) (6,739)
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment..................... (1,130) (684) (373)
Capitalized software development costs.................. (223) (515) (325)
Loan to related party (net)............................. -- -- (1,886)
Payment for acquisitions, net of cash acquired.......... (3,256) -- --
Proceeds from disposal of property and equipment........ 549 228 4
-------- ------- -------
Net cash (used in) investing activities................... (4,060) (971) (2,580)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of stock..................... -- 6,404 9,341
Stockholder contribution................................ 5,305 -- --
Long-term borrowings.................................... 1,936 33 511
Principal payments of long-term borrowings.............. (1,732) (2,040) (2,850)
Loan from related party................................. -- -- 1,781
Principal payments of capital lease obligations......... (353) (55) (30)
Short-term demand facility.............................. 1,301 186 372
-------- ------- -------
Net cash provided by financing activities................. 6,457 4,528 9,125
-------- ------- -------
Net increase (decrease) in cash and cash equivalents...... 1,143 (472) (194)
Effect of foreign currency exchange rates on cash and cash
equivalents............................................. (531) (156) 104
Cash and cash equivalents, at beginning of year........... 255 867 239
-------- ------- -------
Cash and cash equivalents, at end of year................. $ 867 $ 239 $ 149
======== ======= =======
Supplemental disclosure:
Interest paid........................................... $ 1,887 $ 1,900 $ 2,188
Assets acquired under capital leases.................... -- $ 138 $ 34
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 77

AREMISSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

AremisSoft Corporation ("AremisSoft")develops, markets, implements and
supports enterprise-wide applications software targeted to mid-sized
organizations in the manufacturing, healthcare, hospitality and construction
industries.

Organization and Basis of Presentation

In October 1997, AremisSoft, under its previous name of Juno Acquisitions,
Inc., a Nevada corporation, ("Juno"), entered into a Plan and Agreement of
Reorganization (the "Plan") with LK Global Information Systems, B.V. ("LK
Global"), a company incorporated in The Netherlands. Under the terms of the
Plan, Juno acquired all of the issued and outstanding common stock of LK Global
in exchange for 7,503,920 shares of its common stock (the "1997 Acquisition").
Prior to the 1997 Acquisition, Juno had no significant operations.

LK Global is accounted for as the acquirer and as the surviving accounting
entity because the former stockholder of LK Global received approximately 99% of
the voting rights in the combined corporation. The shares issued by Juno have
been accounted for as if those shares comprised the historical share capital of
LK Global. The outstanding capital stock of Juno, at the date of the 1997
Acquisition, has been accounted for as shares issued by LK Global to acquire the
net assets of Juno.

Because LK Global is the accounting survivor, the financial statements
presented for all periods are those of LK Global and its subsidiaries
(collectively the "Company") with a change in name to AremisSoft Corporation
shortly after the 1997 reorganization. All intercompany accounts and
transactions are eliminated in consolidation.

Prior to its proposed public offering of common stock (see note 13),
AremisSoft will reincorporate in Delaware. As a result of this reincorporation,
shareholders of the Nevada corporation will effectively become shareholders of
the newly formed Delaware corporation. As of December 31, 1998, the Delaware
corporation had no operations, no assets and no liabilities, contingent or
otherwise.

In connection with the formation of LK Global in March 1995, the
stockholder of LK Global Information Systems (UK) plc exchanged all of the
ordinary shares of the latter for 84,000 shares of LK Global common stock. This
exchange between LK Global and LK Global Information Systems (UK) plc was
accounted for at book value because the exchange of shares was between
enterprises under common control. At the time of the share exchange, LK Global
was a recently formed holding company with no separate operations, while LK
Global Information Systems (UK) plc was a holding company for all United Kingdom
subsidiaries. LK Global and LK Global Information systems (UK) plc were directly
or indirectly wholly owned by Dr. Kyprianou, the Company's Chief Executive
Officer, before and after the exchange of shares.

Restatement

In connection with the preparation of the consolidated financial statements
of AremisSoft related to AremisSoft's change in corporate domicile from the
Netherlands to the United States, management was required to prepare its
financial statements to conform with United States generally accepted accounting
principals ("GAAP") and to adopt accounting policies commonly followed for
publicly held United States software companies. Subsequent to the issuance of
the 1996 financial statements, the Company determined that adjustments would be
required to such financial statements relative to the accounting for revenue
recognition, software development costs, amortization of intangible assets and
recognition of expenses in the proper period because (i) revenues had been
recorded on the sale of certain products and maintenance

F-7
<PAGE> 78
AREMISSOFT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

contracts at the end of 1996 before the earnings process was completed, (ii) the
establishment of technological feasibility and the related capitalized software
development costs were not being accounted for, in some instances, in accordance
with SFAS No. 86 "Accounting for Costs of Computer Software to be Sold, Marketed
or Leased," (iii) certain intangible assets were being written off over a period
in excess of their estimated useful life, and (iv) certain general and
administrative costs were not accrued for at year's end.