4FRONT SOFTWARE INTERNATIONAL INC/CO/, 424B1, 1996-06-14

4FRONT SOFTWARE INTERNATIONAL INC/CO/
424B1, 1996-06-14
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>
PROSPECTUS

[LOGO]
3,000,000 SHARES

4FRONT SOFTWARE INTERNATIONAL, INC.

COMMON STOCK
--------------------

The 3,000,000 shares of Common Stock, no par value per share (the "Common
Stock"), offered hereby (the "Offering") are being sold by 4Front Software
International, Inc. The Common Stock has been approved for quotation on the
Nasdaq National Market under the trading symbol "FFST." The closing bid price of
the Common Stock, as reported by the Nasdaq SmallCap Market on June 13, 1996,
was $6.38 per share. See "Price Range of Common Stock and Dividend Policy." See
"Underwriting" for a discussion of the factors considered in determining the
public offering price.

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

SEE "RISK FACTORS" BEGINNING ON PAGE 7 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.

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS (1) THE COMPANY (2)
<S> <C> <C> <C>
Per Share............................ $5.75 $0.46 $5.29
Total (3)............................ $17,250,000 $1,380,000 $15,870,000
</TABLE>

(1) Excludes the value of warrants to be issued to the Underwriters. Does not
include a 2% non-accountable expense allowance payable to the Underwriters,
of which $25,000 has been paid to date. See "Underwriting" for
indemnification arrangements with the several Underwriters.

(2) Before deducting expenses payable by the Company estimated at $905,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 450,000 additional shares of Common Stock, solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discounts and Commissions and Proceeds to the
Company will be $19,837,500, $1,587,000 and $18,250,500, respectively. See
"Underwriting."
------------------------

The shares of Common Stock offered hereby are being offered by the
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in part.
It is expected that certificates for the shares of Common Stock will be
available for delivery on or about June 19, 1996 at the offices of Kaufman
Bros., L.P., New York, New York.
------------------------

KAUFMAN BROS., L.P. FIRST ALBANY CORPORATION

The date of this Prospectus is June 14, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALLCAP MARKET, THE
NASDAQ NATIONAL MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET-MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ
SMALLCAP MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED. SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING RISK FACTORS AND CONSOLIDATED FINANCIAL STATEMENTS, AND
THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES IN THIS
PROSPECTUS TO A FISCAL YEAR OF THE COMPANY SHALL REFER TO THE TWELVE MONTH
PERIOD COMMENCING FEBRUARY 1 OF SUCH YEAR AND ENDING ON JANUARY 31 OF THE
FOLLOWING YEAR.

THE COMPANY

4Front Software International, Inc. (the "Company" or "4Front"), a United
Kingdom ("UK") based specialized computer services company, provides a wide
range of high-end information technology solutions and services, principally to
Financial Times UK Top 500 companies and government authorities. The Company
provides key elements of distributed computing, including systems development
and integration, storage and client-server solutions and products, as well as
extensive hardware and software support services. In addition, in 1995 the
Company began providing corporate Internet access, website development and
related services, and commenced offering global help desk outsourcing for
desktop software through a partnership. The Company believes it has a
competitive advantage through its ability to provide a single-source solution to
a broad range of corporate computing needs.

Since 1992, 4Front's revenues have grown from approximately $895,000 to over
$32 million in the fiscal year ended January 31, 1996 principally through
strategic acquisitions that furthered the expansion of its existing operations.
The Company's customers include National Westminster Bank plc, British Aerospace
plc, Oracle Corporation UK Ltd., Royal Dutch/Shell Group plc, Orange plc,
British Telecom plc, Alcatel Data Networks Ltd., Sun Microsystems Corp.,
Cambridge University and the British Ministry of Defense.

The Company seeks to capitalize on technological change in the computer
services industry by providing a single source for specialized high-end
solutions to information systems problems that are beyond the expertise of most
in-house management information systems ("MIS") departments. The UK computer
services market, the fastest growing in Europe, is currently estimated at $12
billion annually, according to the 1995 Holway Report on Software and Computing
Services in Europe. This market grew by an estimated 16% in 1995 and is highly
fragmented, with no single company serving more than 5% of the UK.

The Company believes that the demand for its products and services will
continue to grow in the UK and Europe due to a number of factors that reflect
recent worldwide industry trends. Historically, corporations satisfied
information technology requirements through mainframe or stand-alone midrange
systems utilizing hardware and software provided by a single original equipment
manufacturer ("OEM"). Design and development as well as maintenance and support
of these systems could be provided directly by such single-source OEM's in
conjunction with a corporate in-house information technology staff. Accelerating
technological advancement, migration of organizations toward multivendor
distributed networks, and globalization of information technology needs have
contributed to a significant increase in the sophistication and interdependency
of corporate computing systems. The Company believes that, as a result of these
factors, the complexity of system development as well as the breadth of
corporate computing needs have surpassed the abilities and available time of
many in-house MIS departments, and have led to a greater acceptance of
outsourcing. The Company also believes that customers are reluctant to outsource
computer services directly to OEMs, which may be perceived by customers as
favoring the OEMs' own product line. Meanwhile, the increased corporate use of
information technology for operational as well as mission critical applications
have increased the use of complex, customized corporate computing systems that
are beyond the expertise of most horizontal integrators and value added
resellers ("VARs"). Furthermore, many OEMs now rely on independent service
organizations such as the Company to provide distribution, integration and
warranty/post warranty maintenance and support services.

The Company intends to continue providing a single source for a wide array
of corporate network and computing services through an operating and growth
strategy that consists of the following principal

3
<PAGE>
elements: (i) further penetration of the growing UK and European computer
services market; (ii) identification and acquisition of complementary businesses
in order to expand its product offerings and geographic reach; (iii) expansion
of its hardware maintenance and technology support capabilities; and (iv)
leverage of its existing infrastructure and customer relationships in order to
further develop new business lines.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company........... 3,000,000 shares
Common Stock to be outstanding after
completion of this Offering.................. 6,058,747 shares (1)
Use of Proceeds............................... For general corporate purposes, including
working capital, and repayment of existing
debt obligations. See "Use of Proceeds."
Nasdaq National Market Symbol................. FFST
</TABLE>

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

(1) Excludes 3,388,753 shares of Common Stock consisting of 2,010,338 shares of
Common Stock issuable upon the exercise of stock options outstanding at a
weighted average exercise price of $4.37 per share and 1,378,415 shares of
Common Stock issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $4.42 per share. Also excludes 450,000
additional shares of Common Stock which may be sold pursuant to the
Underwriters' over-allotment option and warrants to be issued to the
Underwriters to purchase 300,000 shares of Common Stock. See "Shares
Eligible for Future Sale" and "Underwriting."

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE PREDECESSOR COMPANY (1) THE COMPANY (1)
------------------------------------------- --------------------------------------------------------
NINE MONTHS YEAR ENDED ONE MONTH YEAR ENDED YEAR ENDED YEAR ENDED THREE MONTHS
ENDED DEC. 31, DEC. 31, ENDED JAN. JAN. 31, JAN. 31, JAN. 31, ENDED APRIL 30,
1991 1992 31, 1993 1994 1995 1996 1995
--------------- ----------- ------------- ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS DATA (2):
Revenues.................... $ 1,078 $ 895 $ 10 $ 2,837 $ 11,240 $ 32,249 $ 4,645
Cost of revenues............ (565) (341) (3) (1,281) (6,814) (20,808) (2,799)
Write down of software
development costs.......... 0 0 0 0 0 (755) 0
------- ----------- ------------- ----------- ----------- ----------- -------
Gross profit................ 513 554 7 1,556 4,426 10,686 1,846
------- ----------- ------------- ----------- ----------- ----------- -------
Income (loss) before
interest expense, income
taxes and share of results
in equity investee......... (233) (536) (93) 376 645 559 262
Share of results in equity
investee (3)............... 0 0 0 0 0 (761) 0
Net income (loss)........... $ (263) $ (592) $ (98) $ 304 $ 355 $ (652) $ 114
------- ----------- ------------- ----------- ----------- ----------- -------
------- ----------- ------------- ----------- ----------- ----------- -------
Net income (loss) per share
(4)........................ $ (1.17) $ (1.92) $ (0.10) $ 0.25 $ 0.20 $ (0.24) $ 0.05
------- ----------- ------------- ----------- ----------- ----------- -------
------- ----------- ------------- ----------- ----------- ----------- -------
Weighted average number of
shares(4).................. 225 309 1,014 1,198 1,813 2,743 2,535

OTHER DATA:
Adjusted income (loss)
before interest expense,
income taxes and before
share of results in equity
investee and write down of
software development costs
(5)........................ $ (233) $ (536) $ (93) $ 376 $ 645 $ 1,314 $ 262
Adjusted net income (loss)
before write down of
software development costs
and write down of
investment in and advances
to equity investee (6)..... (263) (592) (98) 304 355 685 114
Adjusted net income (loss)
per share before write down
of software development
costs and write down of
investment in and advances
to equity investee......... $ (1.17) $ (1.92) $ (0.10) $ 0.25 $ 0.20 $ 0.25 $ 0.05

<CAPTION>
THREE MONTHS
ENDED APRIL 30,
1996
---------------
<S> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS DATA
Revenues.................... $ 10,550
Cost of revenues............ (7,279)
Write down of software
development costs.......... 0
---------------
Gross profit................ 3,271
---------------
Income (loss) before
interest expense, income
taxes and share of results
in equity investee......... 416
Share of results in equity
investee (3)............... (52)
Net income (loss)........... $ 198
---------------
---------------
Net income (loss) per share
(4)........................ $ 0.07
---------------
---------------
Weighted average number of
shares(4).................. 3,011
OTHER DATA:
Adjusted income (loss)
before interest expense,
income taxes and before
share of results in equity
investee and write down of
software development costs
(5)........................ $ 416
Adjusted net income (loss)
before write down of
software development costs
and write down of
investment in and advances
to equity investee (6)..... 198
Adjusted net income (loss)
per share before write down
of software development
costs and write down of
investment in and advances
to equity investee......... $ 0.07
</TABLE>

<TABLE>
<CAPTION>
APRIL 30, 1996
(UNAUDITED)
-------------------------
ACTUAL AS ADJUSTED(7)
--------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets...................................................................... $ 13,688 $ 25,535
Current liabilities................................................................. 14,737 11,619
Total assets........................................................................ 18,078 29,925
Capital lease obligations, less current portion..................................... 78 78
Stockholders' equity................................................................ 3,263 18,228
</TABLE>

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

(1) The results of operations for the periods ended December 31, 1991, December
31, 1992 and January 31, 1993 represent the results of 4Front Group PLC and
its subsidiaries (the Predecessor Company), a United Kingdom company, which
was acquired by the Company in January 1993.

5
<PAGE>
(2) The Company has grown substantially through acquisitions, which materially
affect the comparability of the financial data reflected herein. The Summary
Consolidated Financial Information includes the results of operations of the
primary operating divisions of the Company which were acquired effective
January 1994, November 1994 and April 1995, and which were accounted for
under the purchase method of accounting. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

(3) Consists of the Company's share of operating loss in the equity investee
(the "ActionTrac Joint Venture") of $(179,000) in the fiscal year ended
January 31, 1996, and $(52,000) in the three months ended April 30, 1996,
and write down of the Company's investment in and advances to the ActionTrac
Joint Venture of $(582,000) in the fiscal year ended January 31, 1996. See
"Risk Factors -- Partnership with ActionTrac, Inc."

(4) The number of shares and the net income (loss) per share for the period
ended December 31, 1991, have been restated to reflect a 1 for 133.3
reverse-stock split effective November 1992.

(5) Income (loss) before interest expense, income taxes and share of results in
the ActionTrac Joint Venture, excluding the write down of software
development costs.

(6) Excludes the write downs of investment in and advances to the ActionTrac
Joint Venture $(582,000) and the write down of software development costs
$(755,000) in the fiscal year ended January 31, 1996. Includes the share of
operating loss of the ActionTrac Joint Venture of $(179,000) in the fiscal
year ended January 31, 1996, and $(52,000) in the three months ended April
30, 1996. See "Risk Factors -- Partnership with ActionTrac, Inc."

(7) Adjusted to reflect the sale of 3,000,000 shares of Common Stock by the
Company in the Offering and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."

UNLESS OTHERWISE NOTED, ALL FINANCIAL INFORMATION, SHARE AND PER SHARE DATA
IN THIS PROSPECTUS ASSUME NO EXERCISE OF (i) THE OVER-ALLOTMENT OPTION GRANTED
IN CONNECTION WITH THIS OFFERING OR (ii) OTHER OUTSTANDING WARRANTS AND OPTIONS.
ALTHOUGH THE FINANCIAL RESULTS OF ALL OF THE COMPANY'S SUBSIDIARIES WILL
CONTINUE TO BE REPORTED ON A CONSOLIDATED BASIS, THE COMPANY'S ORDINARY BUSINESS
OPERATIONS ARE DIVIDED AMONG ITS OPERATING SUBSIDIARIES. THE COMPANY'S OPERATING
SUBSIDIARIES CONDUCT THEIR OPERATIONS IN BRITISH POUNDS STERLING (L). FOR
FINANCIAL REPORTING PURPOSES, BRITISH POUNDS ARE CONVERTED INTO U.S. DOLLARS AT
THE PREVAILING RATE AS OF THE DATE OR AT THE WEIGHTED AVERAGE FOR THE PERIOD
COVERED. UNLESS SPECIFICALLY STATED OTHERWISE HEREIN, ALL CONVERSIONS OF BRITISH
POUNDS INTO U.S. DOLLARS REFERENCED IN THIS PROSPECTUS HAVE BEEN CONVERTED USING
A CONVERSION RATE OF 1.5751 DOLLARS PER POUND IN RESPECT OF OPERATIONS DURING
THE YEAR ENDED JANUARY 31, 1996 AND AT A RATE OF 1.511 DOLLARS PER POUND IN
RESPECT OF THE JANUARY 31, 1996 BALANCE SHEET. FOR THE THREE MONTHS ENDED APRIL
30, 1995 AND 1996 THE BALANCE SHEET CONVERSION RATE WAS 1.580 AND 1.501,
RESPECTIVELY, AND THE STATEMENT OF OPERATIONS CONVERSION RATE WAS 1.567 AND
1.512, RESPECTIVELY.

6
<PAGE>
RISK FACTORS

THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING THE COMMON
STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED BELOW:

FUTURE OPERATING RESULTS UNCERTAIN. Although the Company had net income of
$304,000 and $355,000 in the fiscal years ended January 31, 1994 and 1995,
respectively, the Company had a net loss of $652,000 in the fiscal year ended
January 31, 1996, primarily due to write-downs relating to capitalized software
development costs and the Company's investment in the ActionTrac International
partnership. As of January 31, 1996, and April 30, 1996, the Company had an
accumulated deficit of approximately $3.9 million and $3.7 million,
respectively. The revenue growth rates and profitability experienced by the
Company in recent periods may not be indicative of its future growth and
profitability and there can be no assurances that the Company will again become
or remain profitable. The Company plans to continue to expand its level of
operations, resulting in increased fixed costs and operating expenses. The
Company's operating results and net income will be adversely affected to the
extent that net sales and gross profits do not increase sufficiently to offset
such increased expenses, of which there can be no assurance. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

FLUCTUATIONS IN QUARTERLY AND ANNUAL OPERATING RESULTS. The Company's
quarterly and annual operating results have in the past varied and may in the
future vary significantly depending on factors such as the effect of Company
acquisitions, the size, timing and recognition of revenue from significant
orders, increased competition, the timing of new product releases by the Company
and its competitors, market acceptance of the Company's products, changes in the
Company's and its competitors' pricing policies, the mix of license and service
revenue, budgeting cycles of its customers, seasonality, changes in operating
expenses, changes in Company strategy, personnel changes, foreign currency
exchange rates, changes in the outlook for new products and services and general
economic factors. For the fiscal year ended January 31, 1996, approximately 80%
of the Company's growth in revenue was attributable to the Company's acquisition
of Compass. In addition, as the gross margins of the Company's operating
divisions will vary both among themselves and over time, changes in the revenue
mix from these operating divisions may affect quarterly operating results. The
Company therefore believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and that such comparisons should not
be relied upon as indications of future performance. Further, it is possible
that in some future quarter the Company's revenue or operating results will be
below the expectations of public market analysts and investors. In such event,
the price of the Company's Common Stock could be materially adversely affected.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

GROWTH STRATEGY; ACQUISITION OF COMPLEMENTARY BUSINESSES. A significant
component of the Company's growth strategy depends on the Company's ability to
acquire complementary businesses. Competition for the acquisition of computer
service companies is becoming increasingly competitive. Although the Company
has, since May 1994, been successful in acquiring computer services companies,
there can be no assurance that suitable additional acquisitions can be
identified, consummated or successfully integrated into the Company's
operations. The Company has used a combination of cash and Common Stock for
acquisitions. In the event that potential acquisition candidates are unwilling
to accept the Company's securities as consideration, the Company will be
required to use more cash resources to continue its acquisition program. In
addition, if sufficient financing is not available as needed on terms acceptable
to the Company, the Company's acquisition program could be adversely affected.

INTEGRATION OF NEW ACQUISITIONS; ABILITY TO MANAGE GROWTH. As a result of
both acquisitions and internal growth, the Company has recently experienced a
period of rapid growth and expansion. The Company's growth and expansion has
placed, and could continue to place, a significant strain on the Company's
personnel and other resources. The Company expects to continue to grow,
primarily by the

7
<PAGE>
acquisition of companies which offer services, products or both, which are
complementary to the Company's existing business operations. See "-- Growth
Strategy; Acquisition of Complementary Businesses." Acquisitions involve
numerous risks, including difficulties in the assimilation of the operations of
the acquired companies, the diversion of management's attention from other
business concerns, risks of entering markets in which the Company has limited or
no direct experience and the potential loss of key employees of the acquired
companies. There can be no assurance that any acquisition will result in
long-term benefits to the Company or that the Company's management will be able
to effectively manage the resulting businesses. In addition, the Company's
future success will depend in part on its ability to manage potentially rapid
growth as it increases its production capacity and broadens distribution of its
products. To accommodate this recent growth and to compete effectively and
manage future growth, if any, the Company will be required to continue to
implement and improve its operational, financial and management information
systems, procedures and controls on a timely basis and to expand, train,
motivate and manage its workforce. There can be no assurance that the Company's
personnel, systems, procedures and controls will be adequate to support the
Company's existing and future operations. The failure to implement and improve
the Company's operational, financial and management systems or to expand, train,
motivate or manage employees could have a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that the Company's recent growth can be sustained. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Strategy."

ABILITY TO RESPOND TO TECHNOLOGICAL CHANGE. The market for computer systems
and products is characterized by constant technological change, frequent new
product introductions and evolving industry standards. The Company's future
success is dependent upon the continuation of a number of trends in the computer
industry, including the migration by information technology end-users to
multivendor and multisystem computing environments, the overall increase in the
sophistication and interdependency of computing technology, and a focus by
information technology managers on cost-efficient management. The Company
believes these trends have resulted in a movement by both end-users and OEMs
toward outsourcing and an increased demand for product and support services
providers that have the ability to provide a broad range of multivendor product
and support services. There can be no assurance these trends will continue into
the future. Any failure by the Company to anticipate or respond adequately to
technological developments and customer requirements could have a material
adverse effect on the Company's business, operating results and financial
condition. There can be no assurance that the Company will be able to achieve
these objectives.

DEPENDENCE ON MANAGEMENT AND KEY PERSONNEL. The Company is dependent on its
executive officers, including Anil Doshi, its Chairman of the Board and Chief
Executive Officer, and Mark Ellis, its President and Chief Operating Officer.
See "Management." In addition, the success of the Company's business depends in
large part on its ability to attract and retain highly skilled personnel to
conduct the Company's business. Competition for such personnel is intense, and
there can be no assurance that the Company will be successful in attracting and
retaining such personnel. Although the Company has entered into employment
agreements which include non-competition provisions with Messrs. Doshi and Ellis
and certain other key personnel, and has obtained key man insurance policies for
key executive officers, the loss of certain key employees or the Company's
inability to attract and retain other qualified employees could have a material
adverse effect on the Company.

PARTNERSHIP WITH ACTIONTRAC, INC. The Company is involved in a start-up
venture, ActionTrac International (the "ActionTrac Joint Venture"), with a U.S.
private company, ActionTrac, Inc., which provides software help desk outsourcing
in North America, to provide such services in the rest of the world. The
activities of the ActionTrac Joint Venture are centered on the computer
help-desk market, which is a relatively young and undeveloped market in the U.S.
and Europe. The Company's strategy for providing the ActionTrac Joint Venture's
help-desk service to customers requires that the Company enter into various
subcontracting agreements with others and depends upon the subsequent success of
these subcontractors in performing these services in an efficient and economic
manner. While the Company

8
<PAGE>
believes that such subcontractors will have an economic motivation to perform
their contractual obligations, there can be no assurances that such obligations
will always be discharged satisfactorily. The ActionTrac Joint Venture presently
has limited revenues, is not yet profitable, and there can be no assurances that
it will ever be profitable. Under generally accepted accounting principles, the
Company is required to recognize its share of the ActionTrac Joint Venture's
income or loss. As a result, the Company's share of the equity investee loss
with respect to the ActionTrac Joint Venture was approximately $179,000 for the
fiscal year ended January 31, 1996. In connection with the ActionTrac Joint
Venture, the Company made a direct investment in ActionTrac, Inc., which is
itself not currently profitable, and there can be no assurances that it will
ever be profitable.

COMPETITION; LIMITED BARRIERS TO ENTRY. The computer services industry is
intensely competitive and is composed of literally hundreds of companies, many
of which have capital, marketing expertise and personnel resources far superior
to that of the Company. There can be no assurance that the Company will be able
to compete successfully in the future or that competitive pressures will not
result in price reductions or other developments in the Company's market which
could have a material adverse effect on the Company. See "Competition." In
addition, barriers to entry in the markets in which the Company operates are
limited, and there can be no assurance that existing or new competitors will not
develop products or provide services that are superior to the Company's products
or services or achieve greater market acceptance.

POSSIBLE EXPANSION OF OPERATIONS WITHIN EUROPE. The Company will seek to
expand its geographic market beyond the UK by selling its products and services
in Europe. The Company's operations within Europe will be subject to additional
risks associated with international operations such as protection of
intellectual property and subjection to the rules and regulations of additional
jurisdictions. The Company will seek, where appropriate, to enter into
relationships with local partners as a way of mitigating the risks of operating
in these additional countries. There can be no assurance, however, of the
Company's ability to identify and enter into favorable arrangements with
prospective local partners or to otherwise overcome the risks associated with
geographic expansion.

FOREIGN EXCHANGE AND RELATED RISKS. The Company markets its products to
European and other foreign countries but conducts its business primarily in
British pounds. The purchase prices received by the Company for its products
will be affected by the foreign exchange rates for British pounds relative to
the foreign currency. Changes in the exchange rates between British pounds (in
which the Company's business is conducted) and U.S. dollars (in which the
Company's financial statements are presented) may significantly affect the
results of operations and other financial information concerning the Company as
presented in the Company's financial statements. The Company monitors exchange
rate fluctuations between the British pound (in which form approximately 90% of
the Company's revenues are received) and U.S. dollars (which are used for
approximately 30%-40% of the Company's purchases) and will seek to minimize the
risk of such fluctuations by entering into hedge transactions in which dollars
are bought forward to match obligations as they come due. As the Company's
business expands into Europe, to the extent its sales are denominated in
currencies other than the British pound or U.S. dollar, the Company will be
required to adopt similar procedures to protect itself against risks of currency
fluctuations.

FOREIGN TAX RATES. The Company and/or its subsidiaries are subject to
taxation in a number of different jurisdictions, including the U.S. and the UK
and, if the Company is successful in expanding its market to Europe, it may
become subject to taxation in additional jurisdictions. See "-- Possible
Expansion of Operations within Europe." In addition, transactions among the
Company and its foreign subsidiaries may become subject to U.S. and foreign
withholding taxes. Applicable tax rates in foreign jurisdictions differ from
those of the U.S., and are subject to periodic change. The extent, if any, to
which the Company will receive credit in the U.S. for taxes paid in foreign
jurisdictions will depend upon the application of limitations set forth in the
Internal Revenue Code, as well as the provisions of any tax treaties which may
exist between the U.S. and such foreign jurisdictions.

INTELLECTUAL PROPERTY. Certain of the Company's operations are dependent in
part upon their software development methodology and other proprietary
intellectual property rights. See "Business --

9
<PAGE>
Product Development." The Company relies upon a combination of trade secret,
nondisclosure and other contractual arrangements, technical measures and
copyright and trademark laws to protect its proprietary rights. The Company
holds no patents or registered copyrights. The Company generally enters into
confidentiality agreements with its employees, consultants, clients and
potential clients and limits access to and distribution of its proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to deter misappropriation of its proprietary
information or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights. In addition,
although the Company believes that its services and products do not infringe on
the intellectual property rights of others, there can be no assurance that such
a claim will not be asserted against the Company in the future.

COPYRIGHT ISSUES. In connection with the Company's performance of most
hardware maintenance, the computer system which is being serviced must be turned
on for the purpose of service or repair. When the computer is turned on, the
resident operating system software and, in some cases diagnostic software, is
transferred from a peripheral storage device or a hard disk drive into the
computer's random access memory. Within the past several years, several OEMs in
the U.S. have commenced litigation against independent service organizations in
which they have claimed such transfer constitutes the making of an unauthorized
"copy" of such software by the independent service organization which infringes
on the software copyrights held by the OEMs. Although the Company is not a party
in any such case, and is unaware of any such claims made in the UK to date,
litigation of this nature can be time consuming and expensive, and there can be
no assurance the Company will not be a party to similar litigation in the
future, or that such litigation would be resolved on terms that do not have a
material adverse effect on the Company.

BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS. The Company currently has
no specific plan for a significant portion of the proceeds of this Offering. See
"Use of Proceeds." Accordingly, management will have broad discretion in the use
of such proceeds. In addition, the Company's intended uses of the net proceeds
of this Offering are estimates only and there could be significant variation in
the use of proceeds due to changes in business, technology or the economy.

CONCENTRATION OF SHARE OWNERSHIP. After the sale of the 3,000,000 shares of
Common Stock offered hereby, the executive officers and directors of the
Company, together with their affiliates, will own beneficially approximately 33%
of the outstanding Common Stock (31% assuming exercise in full of the
Underwriters' over-allotment option). As a result, management of the Company may
continue to maintain control of the Company's Board of Directors and thereby
control the Company's policies and operations. In addition, the Company will
have outstanding options and warrants to acquire an aggregate of 3,388,753
shares of Common Stock, of which 1,288,600 will be held by current executive
officers and directors and their affiliates. See "Management." To the extent
that some or all of the options and warrants are exercised, they will decrease
the percentage of ownership of the Company by the persons who purchase Common
Stock in the Offering. The holders of such options and warrants may be expected
to exercise such instruments at a time when the Company would be able to obtain
needed capital by a new offering of securities on terms more favorable than
those provided for by such options and warrants. The possibility of the sale of
all of the shares of Common Stock issuable upon exercise of the options and
warrants may adversely affect the market price of the Common Stock offered
hereby.

POSSIBLE VOLATILITY OF STOCK PRICE; POTENTIAL LIMITED TRADING MARKET. There
has been significant volatility in the market price of computer services
companies. Factors such as variations in the Company's quarterly operating
results, announcements regarding technological developments or new products by
the Company or others, developments affecting the Company or its competitors,
suppliers or customers or general economic or stock market conditions unrelated
to the Company's operating performance may have a significant impact on the
market price of the Common Stock. Although the Company's Common Stock has been
quoted on the Nasdaq SmallCap Market since January 1996, and has been approved
for quotation on the Nasdaq National Market, subject to official notice of
issuance, there can be no assurances that an active public market for the Common
Stock will be sustained after the Offering.

10
<PAGE>

Historically, the Common Stock has been thinly traded. This low trading
volume may have had a significant effect on the market price of the Common
Stock, which may not be indicative of the market price in a more liquid market.
The share price on the Nasdaq SmallCap Market was only one of the factors
considered by the Company and the Underwriters in determining the offering price
for the shares of Common Stock offered hereby. See "Underwriting."

DILUTION. This Offering will result in immediate, substantial dilution to
new investors. See "Dilution."

POSSIBLE ISSUANCE OF ADDITIONAL SHARES. The Company has authorized capital
of 30,000,000 shares of Common Stock. As of the date of this Prospectus, there
are 3,058,747 shares of Common Stock outstanding, an additional 2,010,338 shares
of Common Stock subject to issuance pursuant to outstanding stock options, and
an additional 1,378,415 shares of Common Stock subject to issuance pursuant to
outstanding warrants, leaving a balance of 23,552,500 shares of Common Stock
available for future issuance (including shares of Common Stock to be issued in
this Offering). The directors may issue Common Stock beyond that already issued
and that offered hereby, either for cash or for services or as employee
incentives. To the extent that additional common stock is issued either for
assets or for cash, or pursuant to an employee stock bonus program or other
stock plan, the percentage of the Company's issued and outstanding Common Stock
and the percentage represented by the various securities outstanding convertible
into Common Stock will be reduced and the issuance may cause additional dilution
in the book value per share of such outstanding shares. See "Management --
Equity Incentive Plan" and "Shares Eligible for Future Sale."

NO DIVIDENDS. The Company has never paid cash dividends on its Common Stock
and anticipates that for the foreseeable future, all earnings, if any, will be
retained for the operation and expansion of the Company's business.

11
<PAGE>
THE COMPANY

COMPANY HISTORY

The Company is a Colorado corporation; its principal corporate offices are
located at 5650 Greenwood Plaza Blvd., Suite 107, Englewood, Colorado 80111, and
its phone number is (303) 721-7341. The Company's operational offices are
located at 4Front House, Colonial Business Park, Colonial Way, Watford,
Hertfordshire, England, WD2 4PR, telephone +44 (0) 1923-816266.

ACQUISITIONS AND PARTNERSHIP
K2 ACQUISITION

Effective January 14, 1994, the Company acquired K2 Group Plc ("K2") and its
Xanadu Systems Ltd subsidiary ("Xanadu") for aggregate consideration of
$923,000, of which $625,000 was paid through the issuance of 212,500 shares of
Common Stock, inclusive of contingent consideration of 112,500 shares of Common
Stock and $141,250 in cash. K2 was founded in 1988 and has formed the basis for
the Company's systems integration development activities, which had revenues of
approximately $5 million in the fiscal year ended January 31, 1996. Xanadu was
founded in 1990 and has formed the basis for the Company's network computing
activities, which had revenues of approximately $7.7 million in the fiscal year
ended January 31, 1996.

CI ACQUISITION

Effective November 1, 1994 the Company acquired all of the assets of CI
Support Limited ("CI") a provider of hardware maintenance and support services,
for $159,000. Revenues from the Company's hardware maintenance and support
services were approximately $2.8 million in the fiscal year ended January 31,
1996. The CI acquisition allowed the Company to directly provide maintenance
services to its customers which had been previously contracted out to third
parties. The CI acquisition also expanded the Company's support services.

COMPASS ACQUISITION

Effective April 6, 1995 the Company acquired Compass Computer Group
("Compass"), a supplier of computer hardware and software products founded in
1982, for consideration of $1,265,648, of which $385,648 was paid through the
issuance of 192,556 shares of Common Stock and options on 53,639 shares of
Common Stock, inclusive of contingent consideration of 108,836 shares of Common
Stock and options on 29,959 shares of Common Stock. The addition of Compass to
the Company's information storage systems operations has enabled the Company to
become one of the leading suppliers within the UK of high capacity storage
solutions and multi-processor servers to corporate and government users.
Revenues from the Company's information storage systems operations were
approximately $17 million in the fiscal year ended January 31, 1996. The Compass
acquisition also expanded the Company's systems integration and support business
and provided the basis for the Company's corporate Internet services. The
Company was obligated to operate Compass on a stand alone basis until December
1995. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

12
<PAGE>
ACTIONTRAC JOINT VENTURE

The ActionTrac Joint Venture was formed in August, 1994, to commercialize
ActionTrac Inc.'s proprietary help-desk systems, services and software outside
the U.S., Canada and Mexico. The ActionTrac Joint Venture's two equal partners
are 4Front Holdings, Inc., a wholly owned subsidiary of the Company, and
ActionTrac Holdings, Inc., a wholly owned subsidiary of ActionTrac, Inc. The
Company contributed $500,000 to the working capital of the ActionTrac Joint
Venture and invested $500,000 in ActionTrac, Inc. The ActionTrac Joint Venture
currently has limited revenues. See "Risk Factors -- Partnership with
ActionTrac, Inc."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $14,965,000 ($17,293,750 if the
over-allotment option is exercised in full), after deducting underwriting
discounts and commissions and estimated offering expenses.

The Company plans to use approximately $1.1 million of the net proceeds from
this Offering to repay existing indebtedness under an outstanding bridge loan.
The bridge loan was originally part of a $790,000 bridge loan completed by the
Company in January 1995 and originally due in May 1995. In June 1995,
approximately $530,000 of this amount was extended as part of a new bridge loan
of approximately $1,030,000, which came due December 14, 1995. $50,000 of this
amount has been repaid, with the remaining principal balance of $980,000 bearing
interest at 10% and maturing on the first to occur of July 14, 1996, or the
completion of this Offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

The Company plans to use approximately $2,000,000 of the net proceeds from
this Offering to pay down the outstanding balance of a line of credit which the
Company has with a UK bank. This line of credit bears interest at 2.5% above the
bank's base rate. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

The Company plans to use approximately $750,000 of the net proceeds from
this Offering to fund the further development of its network communications
venture, which is designed to exploit the business opportunities of the Internet
by supplying support services related to Internet use. See "Business -- Products
and Services -- Network Communications." The Company also plans to use
approximately $500,000 of the net proceeds from this Offering for product
development purposes.

The Company intends to use the remainder of the net proceeds for working
capital, including expansion of its sales and marketing efforts, and other
general corporate purposes. The Company may also use a portion of the net
proceeds of this Offering to make one or more acquisitions of businesses which
can be integrated into the Company's existing operating structure. However, the
Company has no specific agreements or commitments, and is not currently engaged
in any negotiations, for any such acquisitions. Additional purposes of this
Offering are to increase the Company's capital, to create a broader public
market for the Company's Common Stock and to facilitate future access by the
Company to public equity markets.

Pending such uses, the net proceeds will be invested in government
securities and other short-term, investment grade, interest-bearing instruments
or used to further reduce existing indebtedness. The actual amount of net
proceeds expended for any purpose may vary significantly from the estimated or
budgeted amounts set forth above.

13
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Since January 3, 1996, the Company's Common Stock has been quoted on the
Nasdaq SmallCap Market under the symbol "FFST." Between March 1995 and January
1996, the Company's Common Stock had been traded under the symbol "FFST" on the
over-the-counter Bulletin Board ("OTC"). Prior to March 1995, there had been no
active trading market for the Common Stock. The Common Stock has been approved
for quotation on the Nasdaq National Market under the trading symbol "FFST" upon
official notice of issuance.

The following table sets forth, for the periods indicated, the high and low
reported sales prices of shares of the Common Stock as reported by OTC prior to
January 3, 1996 and by the Nasdaq SmallCap Market thereafter.

<TABLE>
<CAPTION>
1995 HIGH LOW
- ------------------------------------------------------------ ------ ------
<S> <C> <C>
First Quarter (from March 1995)............................. $ 5.88 $ 5.00
Second Quarter.............................................. 5.88 4.00
Third Quarter............................................... 5.00 3.50
Fourth Quarter.............................................. 6.88 3.50

1996 HIGH LOW
- ------------------------------------------------------------ ------ ------
<S> <C> <C>
First Quarter............................................... $ 6.88 $ 4.38
Second Quarter (through June 13, 1996)...................... 8.50 4.25
</TABLE>

On June 13, 1996, the last reported sale price for the Common Stock was
$7.00 per share.

The estimated number of beneficial owners of the Company's common stock is
2,250 and the number of stockholders of record on June 13, 1996, was 1,659.

The Company has never declared or paid any cash dividends on shares of its
capital stock. The Company currently intends to retain any future earnings for
use in its business and does not anticipate paying any cash dividends in the
future. Any future declaration of dividends will be subject to the discretion of
the Board of Directors of the Company, will be subject to applicable law and
will depend upon the Company's results of operations, earnings, financial
condition, contractual limitations, cash requirements, future prospects and
other factors deemed relevant by the Company's Board of Directors.

14
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at April
30, 1996, and as adjusted to reflect the receipt by the Company of the net
proceeds from the sale of 3,000,000 shares of the Common Stock offered by the
Company hereby.

<TABLE>
<CAPTION>
APRIL 30, 1996
(UNAUDITED)
------------------------
AS
HISTORICAL ADJUSTED (1)
---------- ------------
<S> <C> <C>
Line of credit -- bank............................ $2,017,991 $ 0

Notes payable..................................... 1,301,234 201,234

Capital lease obligations, current portion........ $ 45,897 $ 45,897
---------- ------------
---------- ------------

Capital lease obligations, less current portion... $ 78,150 $ 78,150
Stockholders' equity:
Common Stock, no par value, 30,000,000 shares
authorized, 3,058,747 shares issued and
outstanding, actual; 6,058,747 shares issued
and outstanding, as adjusted (2)............... 6,973,210 21,938,210
Accumulated (deficit)........................... (3,680,416) (3,680,416)
Cumulative foreign currency transaction
adjustment..................................... (30,284) (30,284)
---------- ------------
Total stockholders' equity.................... 3,262,510 18,227,510
---------- ------------
Total capitalization........................ $3,340,660 $18,305,660
---------- ------------
---------- ------------
</TABLE>

- ------------------------
(1) Excludes 450,000 additional shares of Common Stock which may be sold
pursuant to the Underwriters' over-allotment option.

(2) Excludes 3,388,753 shares of Common Stock consisting of 2,010,338 shares of
Common Stock issuable upon the exercise of stock options outstanding at a
weighted average exercise price of $4.37 per share and 1,378,415 shares of
Common Stock issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $4.42 per share. Also excludes 450,000
additional shares of Common Stock which may be sold pursuant to the
Underwriters' over-allotment option and warrants to be issued to the
Underwriters to purchase 300,000 shares of Common Stock. See "Shares
Eligible for Future Sale" and "Underwriting."

DILUTION

The net tangible book value of the Company at April 30, 1996 was $678,861,
or $0.22 per share. "Net tangible book value per share" represents the amount of
total tangible assets less total liabilities divided by the number of shares of
Common Stock outstanding. Without taking into account any other changes in the
pro forma net tangible book value after April 30, 1996, other than to give
effect to the receipt of the net proceeds from the sale of the shares of Common
Stock offered by the Company hereby at an offering price of $5.75 per share, the
pro forma net tangible book value of the Company at April 30, 1996 would have
been $16,214,980, or $2.68 per share. This represents an immediate increase of
pro forma net tangible book value of $2.46 per share to existing stockholders
and an immediate dilution of $3.07 per share to new investors. The following
table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Offering price per share.......................... $ 5.75
Net tangible book value per share before
offering....................................... 0.22
Increase per share attributable to new
investors...................................... 2.46
------
Pro forma net tangible book value per share after
offering......................................... 2.68
------
Dilution per share to new investors............... $ 3.07
------
------
</TABLE>

15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following selected consolidated financial data of the Company as of and
for the year ended January 31, 1996 are derived from the financial statements
that have been audited by KPMG. The following selected consolidated financial
data of the Company as of the nine months ended December 31, 1991, the year
ended December 31, 1992, the one month ended January 31, 1993 and the years
ended January 31, 1994 and January 31, 1995 are derived from the financial
statements of the Company that have been audited by AJ. Robbins, PC. The results
of operations set out below for the periods ended December 31, 1991, December
31, 1992 and January 31, 1993 represent the results of 4Front Group PLC and its
subsidiaries (the Predecessor Company), a United Kingdom company, which was
acquired by the Company in January 1993. The unaudited selected statements of
operations data for the three months ended April 30, 1995 and 1996 and the
balance sheet data at April 30, 1996 have been prepared on the same basis as the
audited financial statements of the Company included herein and, in the opinion
of the Company, include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the information set forth therein. The
results for the three months ended April 30, 1996 are not necessarily indicative
of the results to be achieved for the full fiscal year.

This data should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
THE COMPANY
THE PREDECESSOR COMPANY -----------------------------------------------------
---------------------------------- THREE THREE
NINE MONTHS YEAR ONE MONTH YEAR YEAR YEAR MONTHS MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, JAN. 31, JAN. 31, JAN. 31, JAN. 31, APRIL 30, APRIL 30,
1991 1992 1993 1994 1995 1996 1995 1996
----------- -------- --------- -------- -------- -------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1):
Revenues............................... $1,078 $ 895 $ 10 $ 2,837 $11,240 $32,249 $ 4,645 $ 10,550
Cost of revenues....................... (565) (341) (3) (1,281) (6,814) (20,808 ) (2,799) (7,279)
Write down of software development
costs................................. 0 0 0 0 0 (755 ) 0 0
----------- -------- --------- -------- -------- -------- --------- ---------
Gross profit........................... 513 554 7 1,556 4,426 10,686 1,846 3,271
----------- -------- --------- -------- -------- -------- --------- ---------
Selling general and administrative... (714) (1,031) (97) (1,117) (3,565) (9,566 ) (1,502) (2,712)
Depreciation and amortization........ (32) (59) (3) (63) (216) (560 ) (82) (143)
Income (loss) before interest expense,
income taxes and share of results in
equity investee....................... (233) (536) (93) 376 645 559 262 416
Share of results in equity investee
(2)................................. 0 0 0 0 0 (761 ) 0 (52)
Net income (loss) (3).................. $ (263) $ (592) $ (98) $ 304 $ 355 $ (652 ) $ 114 $ 198
----------- -------- --------- -------- -------- -------- --------- ---------
----------- -------- --------- -------- -------- -------- --------- ---------
Net income (loss) per share (3)........ $(1.17) $ (1.92) $(0.10) $ 0.25 $ 0.20 $ (0.24 ) $ 0.05 $ 0.07
----------- -------- --------- -------- -------- -------- --------- ---------
----------- -------- --------- -------- -------- -------- --------- ---------
Weighted average number of shares
(3)................................... 225 309 1,014 1,198 1,813 2,743 2,535 3,011

OTHER DATA:
Adjusted income (loss) before interest
expense, income taxes and before share
of results in equity investee and
write down of software development
costs (4)............................. $ (233) $ (536) $ (93) $ 376 $ 645 $ 1,314 $ 262 $ 416
Adjusted net income (loss) before write
down of software development costs and
write down of investment in and
advances to equity investee (5)....... (263) (592) (98) 304 355 685 114 198
Adjusted net income (loss) per share
before write down of software
development costs and write down of
investment in and advances to equity
investee.............................. $(1.17) $ (1.92) $(0.10) $ 0.25 $ 0.20 $ 0.25 $ 0.05 $ 0.07
</TABLE>

16
<PAGE>
<TABLE>
<CAPTION>
THE PREDECESSOR COMPANY THE COMPANY
------------------------------ ------------------------------------------
DEC. 31, DEC. 31, JAN. 31, JAN. 31, JAN. 31, JAN. 31, APR. 30,
1991 1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.................................. $ 0 $ 24 $ 744 $5,041 $6,588 $ 13,464 $13,688
Current liabilities............................. 42 76 1,485 5,892 7,008 14,750 14,737
Total assets.................................... 0 24 844 6,203 9,887 17,943 18,078
Long-term debt (including capital lease
obligations)................................... 0 0 350 403 74 93 78
Stockholders' equity (deficit).................. (1,105) (1,387) (992) (92) 2,805 3,101 3,263
</TABLE>

- ------------------------
(1) The Company has grown substantially through acquisitions, which materially
affect the comparability of the financial data reflected herein. The
Selected Consolidated Financial Information includes the results of
operations of the primary operating divisions of the Company which were
acquired effective January 1994, November 1994 and April 1995, and which
were accounted for under the purchase method of accounting. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

(2) Consists of the Company's share of the operating loss of the equity investee
(the "ActionTrac Joint Venture") of $(179,000) in the fiscal year ended
January 31, 1996, and $(52,000) in the three months ended April 30, 1996 and
the write down of the Company's investment in and advances to the ActionTrac
Joint Venture of $(582,000) in the fiscal year ended January 31, 1996. See
"Risk Factors -- Partnership with ActionTrac, Inc."

(3) The number of shares and the net income (loss) per share for the period
ended December 31, 1991, have been restated to reflect a 1 for 133.3 reverse
stock split effective November 1992.

(4) Income (loss) before interest expense, income taxes and share of results in
the ActionTrac Joint Venture, excluding the write down of software
development costs.

(5) Excludes the write downs of investment in and advances to the equity
investee (the "ActionTrac Joint Venture") $(582,000) and the write down of
software development costs $(755,000) in the fiscal year ended January 31,
1996. Includes the share of operating loss of the ActionTrac Joint Venture
of $(179,000) in the fiscal year ended January 31, 1996, and $(52,000) in
the three months ended April 30, 1996. See "Risk Factors -- Partnership with
ActionTrac, Inc."

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED
ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."

OVERVIEW

The Company is a UK based specialized computer services company which
provides a wide range of high-end information technology solutions and services,
principally to Financial Times UK Top 500 companies and government authorities.
The Company provides key elements of distributed computing, including systems
development and integration, storage and client-server solutions and products,
as well as extensive hardware and software support services. In addition, in
1995 the Company began providing corporate Internet access, website development
and related services, and commenced offering global help desk outsourcing for
desktop software through the ActionTrac Joint Venture. The Company believes it
has a competitive advantage as a single-source, multivendor, multiple service
solution provider to a broad range of corporate computing needs.

The Company's main operating subsidiaries were acquired in 1994 (K2, Xanadu
and CI) and 1995 (Compass). The K2, Xanadu, CI and Compass acquisitions have
been accounted for under the purchase method of accounting and on a consolidated
basis in the Company's financial statements for periods ending after the
effective date of such acquisitions. K2 and Xanadu, which were acquired
effective January 14, 1994 for aggregate consideration of $923,000, of which
$625,000 was paid through the issuance of 212,500 shares of Common Stock,
inclusive of contingent consideration of 112,500 shares of Common Stock and
$141,250 in cash. These acquisitions accelerated the development of the
Company's systems integration activities and network computing activities,
respectively. Effective November 1, 1994, the Company acquired all of the assets
of CI for $159,000. This acquisition allowed the Company to directly provide
hardware maintenance services which had previously been contracted out by the
Company to third parties. The CI acquisition also expanded the Company's support
services. See "The Company."

Effective April 6, 1995, the Company completed its most significant
acquisition, Compass, for consideration of $1,265,648, of which $385,648 was
paid through the issuance of 192,556 shares of Common Stock and options on
53,639 shares of Common Stock, inclusive of contingent consideration of 108,836
shares of Common Stock and options on 29,959 shares of Common Stock. Compass is
a supplier of high-end information storage solutions. The acquisition of Compass
has enabled the Company to become one of the leading suppliers within the UK of
high capacity storage solutions and multi-processor servers to corporate and
government users. The Compass acquisition also expanded the Company's systems
integration and support business and provided the basis for the Company's
corporate Internet services. For the fiscal year ended March 31, 1995, Compass'
revenues were $18.9 million and Compass had a gross profit of $4.9 million, or
26%.

The Company's gross margin has historically been, and is anticipated to be,
affected by several factors, including the Company's mix of products and
services and the stage in the life cycle of the Company's products. Prices of
new products tend to be higher and, thus have a higher gross margin, than older
products which tend to sell for lower prices. A variety of other factors may
also lead to significant fluctuations in the Company's gross margin, such as the
timing of new product or service offerings, seasonality of demand and general
economic conditions. In general, the Company obtains the highest gross margin
from hardware maintenance. The next most profitable categories measured by gross
margin are systems integration, followed by network computing and information
storage systems. However, the Company believes that the acquisition of Compass'
lower margin information storage systems business, by substantially increasing
its revenue base, as well as its range of product and service offerings, has
enhanced the Company's long-term prospects.

18
<PAGE>
The Company was obligated to operate Compass as a stand alone entity until
satisfaction of the acquisition earn out in December 1995. See "Certain
Transactions -- Acquisitions." As a result, the Company has only recently
commenced activities related to the full integration of its and Compass'
operations, personnel and business. Among the integration related actions being
taken by the Company are the combination of Compass' support and maintenance
operations with the Company's existing hardware maintenance business and the
combination of Compass' software business with the Company's existing systems
integration business. However, the Company anticipates that the benefit of
resulting cost savings in personnel, inventory and facilities will not be fully
realized until later in the fiscal year ending January 31, 1997.

The Company, through a wholly-owned subsidiary, is a partner in a
partnership named ActionTrac International (the "ActionTrac Joint Venture"),
which holds the worldwide rights outside the U.S., Canada and Mexico to exploit
the proprietary help-desk systems, services and software of ActionTrac, Inc.
Under the terms of the ActionTrac International partnership agreement, the
agreement became effective when the Company made its required capital
contribution of $500,000 in August, 1994. The investment in the ActionTrac Joint
Venture has been accounted for using the equity method under which the Company's
results include a 50% share of the ActionTrac Joint Venture's operating profits
or losses. During the fiscal years ended January 31, 1995 and 1996, the Company
made further advances to the ActionTrac Joint Venture aggregating $18,432 and
$477,664, respectively. During the last quarter of the fiscal year ended January
31, 1996, due to the accelerated pace of technological change (including recent
advances in telecommunication systems and help desk software technology) and the
increasing diversity in the market for help desk services, the Company
re-evaluated the net realizable value of its investment in and advances to the
ActionTrac Joint Venture. As a result, the Company recorded a write down of
$581,770.

Consistent with generally accepted accounting principles, the Company
charges all costs of establishing the technical feasibility of its software
products to expense as incurred. Thereafter, the Company capitalizes software
development costs through the date of general commercial release of the
applicable product. The Company amortizes its capitalized software development
costs over a period of three years. During the fiscal years ended January 31,
1994, 1995 and 1996, the Company capitalized software development costs of
$140,207, $277,792 and $337,185, respectively, in relation to its "StreamZ"
communication software product. Capitalization ceased in November 1995, when
StreamZ became available for general commercial release. During the last quarter
of the fiscal year ended January 31, 1996, due to recent advances in
communication software technology and announcements by major software companies
of new products with enhanced security features, the Company re-evaluated the
net realizable value of its capitalized software development costs. As a result,
accelerated amortization of $755,184 was recorded to write down all previously
capitalized software development costs in the year ended January 31, 1996.

The Company experiences revenue growth from three principal sources:
expansion of its existing operations, the acquisition of contracts and
businesses of other service providers and expansion into new operating areas.
The acquisition of contracts and businesses has generally provided the Company
with an opportunity to realize economies of scale because the Company's increase
in costs related to facilities and personnel has not increased in the same
proportion as the increase in revenues resulting from the acquisition.

RESULTS OF OPERATIONS

Because of the effect upon the Company's results of operations for the years
ended January 31, 1994, 1995 and 1996 and for the three month periods ended
April 30, 1995 and 1996 of acquisitions made during those periods and writedowns
of certain asset carrying values, direct comparison of the Company's results of
operations for these periods will not, in the view of management of the Company,
prove meaningful. Instead, a summary of the elements which management of the
Company believes essential to an analysis of the results of operations for such
periods is presented below.

19
<PAGE>
The following table sets forth statement of operations data as a percentage
of revenue for the periods indicated:

<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
-------------------------------------------- THREE MONTHS ENDED APRIL 30,
ADJUSTED --------------------------------
1994 1995 1996 1996 (1) 1995 1996
--------- --------- --------- ----------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues....................................... 100% 100% 100% 100% 100% 100%
Cost of revenues........................... (45.2) (60.6) (64.5) (64.5) (60.3) (68.9)
Write down of software development costs... 0 0 (2.3) 0 0 0
--------- --------- --------- ----- ----- -----
Gross profit................................... 54.8 39.4 33.2 35.5 39.7 31.1
--------- --------- --------- ----- ----- -----
Selling, general and administrative
expenses.................................. (39.4) (31.7) (29.7) (29.7) (32.3) (25.7)
Depreciation and amortization.............. (2.2) (1.9) (1.7) (1.7) (1.8) (1.4)
--------- --------- --------- ----- ----- -----
Total operating expense.................... (41.6) (33.6) (31.4) (31.4) (34.1) (27.1)
--------- --------- --------- ----- ----- -----
Income (loss) before interest expense, income
taxes and share of results in equity
investee...................................... 13.2 5.8 1.8 4.1 5.6 4.0
--------- --------- --------- ----- ----- -----
Write down of investment in and advances to
equity investee........................... 0 0 (1.8) 0 0 0
Share of operating (loss) of equity
investee.................................. 0 0 (0.6) (0.6) 0 (0.5)
Interest expense, net...................... (2.3) (1.3) (0.8) (0.8) (2.4) (1.0)
--------- --------- --------- ----- ----- -----
Net income (loss) before income taxes.......... 10.9 4.5 (1.4) 2.7 3.2 2.5
Income taxes............................... (0.2) (1.3) (0.6) (0.6) (0.7) (0.6)
--------- --------- --------- ----- ----- -----
Net income (loss).............................. 10.7 3.2 (2.0) 2.1 2.5 1.9
--------- --------- --------- ----- ----- -----
--------- --------- --------- ----- ----- -----
</TABLE>

- ------------------------
(1) Adjusted 1996 to show results of the Company excluding the write down of
software development costs and write down of investment in and advances to
the ActionTrac Joint Venture.

THREE MONTHS ENDED APRIL 30, 1996 COMPARED WITH THE THREE MONTHS ENDED APRIL 30,
1995.

REVENUES

Revenues for the three months ended April 30, 1996 were $10.6 million, an
increase of $6.0 million, or approximately 130.4% compared to $4.6 million for
the three months ended April 30, 1995. Approximately $5.0 million of this
increase resulted from the Company's acquisition of Compass effective April 6,
1995. In the three months ended April 30, 1995 only $1.4 million of revenues
resulting from the Compass acquisition were included in the Company's results.
The remaining $1.0 million of this increase came from the expansion of the
Company's existing business from $3.2 million for the three months ended April
30, 1995, to $4.2 million for the three months ended April 30, 1996,
representing an increase of 31.2%.

GROSS PROFIT

Gross profit for the three months ended April 30, 1996 was $3.3 million, an
increase of $1.5 million or 83.3% compared to $1.8 million for the three months
ended April 30, 1995. Gross margin decreased from 39.7% for the three months
ended April 30, 1995 to 31.1% for the three months ended April 30, 1996. This
decrease in gross margin arose primarily as a result of the inclusion for the
three months ended April 30, 1996 of Compass' information storage systems
business, which historically has had significantly lower gross margins than the
other areas of the Company's operations.

20
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses were $2.7 million, an increase
of $1.2 million, or 80.0% compared to $1.5 million for the three months ended
April 30, 1995. As a percentage of revenues, selling, general and administrative
expenses decreased to 25.7% from 32.3% in the three months ended April 30, 1995.
Selling expenses increased from $1.0 million to $1.7 million primarily as a
result of increased expenses relating to new product launches. The Company also
increased marketing activity for its expanded maintenance business following the
Compass acquisition and in established product lines. General and administrative
expenses increased from $0.5 million to $1.0 million primarily as a result of a
growth in infrastructure necessary to support the expansion of the Company's
businesses.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense for the three months ended April 30,
1996 was $143,000, an increase of $61,000, or 74.4% compared to $82,000 for the
three months ended April 30, 1995. This increase arose principally from the
acquisition of Compass. Depreciation was $81,000, an increase of $12,000 or
17.4%, from $69,000 for the prior period. Amortization of goodwill from
acquisitions was $62,000, an increase of $48,000, or 342.9%, from $14,000 for
the prior period. An amortization period of ten years is utilized with respect
to goodwill arising from acquisitions.

INCOME (LOSS) BEFORE INTEREST EXPENSE, INCOME TAXES AND SHARE OF RESULTS IN
EQUITY INVESTEE

Income (loss) before interest expense, income taxes and share of results in
equity investee ("IBITI") for the three months ended April 30, 1996 was
$416,000, an increase of $154,000, or 58.5%, as compared to $262,000 for the
three months ended April 30, 1995. As a percentage of revenues, IBITI decreased
to 3.9% in the three months ended April 30, 1996 as compared to 5.6% for the
three months ended April 30, 1995.

EQUITY INVESTEE LOSS

Equity investee loss was $52,173 for the three months ended April 30, 1996
reflecting the Company's proportion attributable to the ActionTrac Joint
Venture. There was no such loss during the three months ended April 30, 1995, as
the Joint Venture commenced operations in May 1995. In February 1996, the
Company entered into a franchise agreement with respect to Australia and New
Zealand pursuant to which it received $55,000 of which $13,750 was recognized in
this period.

INTEREST

Interest expense for the three months ended April 30, 1996 was $104,000, a
decrease of $5,000, or 4.8% compared to $109,000 for the three months ended
April 30, 1995. This decrease arose principally as a result of reduction in
outstanding bank debt. See "--Liquidity and Capital Resources."

FISCAL YEAR ENDED JANUARY 31, 1996 COMPARED WITH FISCAL YEAR ENDED JANUARY 31,
1995
REVENUES

Revenues for the fiscal year ended January 31, 1996 were $32.2 million, an
increase of $21.0 million, or approximately 186.9% compared to $11.2 million for
the year ended January 31, 1995. Approximately $17.3 million of this increase
resulted from the Company's acquisition of Compass effective April 6, 1995, none
of which revenues were included in the Company's results for the fiscal year
ended January 31, 1995. The remaining $3.7 million of this increase came from
the expansion of the Company's existing business from $11.2 million for the
fiscal year ended January 31, 1995 to $14.9 million for the fiscal year ended
January 31, 1996, representing an increase of 33.1%.

GROSS PROFIT

Gross profit for the fiscal year ended January 31, 1996 was $10.7 million,
an increase of $6.3 million, or 143.2% compared to $4.4 million for the year
ended January 31, 1995. Gross margin decreased from 39.4% for the fiscal year
ended January 31, 1995 to 33.2% for the fiscal year ended January 31, 1996. This
decrease in gross margin arose primarily as a result of the inclusion for the
final ten months of the fiscal year ended January 31, 1996 of Compass'
information storage systems business, which generated 53.7% of the Company's
total revenues during the 1995 fiscal year, and which historically has had
significantly

21
<PAGE>
lower gross margins than the other areas of the Company's operations. In
addition, the Company was obligated to operate Compass as a stand alone entity
until December 1995, pursuant to the terms of the Compass acquisition, and could
not commence activities related to the full integration of its and Compass'
operations, personnel and business. The decrease also reflects a reduction of
2.3% as a result of the write down of software development costs.

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses were $9.6 million, an increase
of $6.0 million, or 166.7% compared to $3.6 million for the year ended January
31, 1995. As a percentage of revenues, selling, general and administrative
expenses decreased to 29.7% from 31.7% in the fiscal year ended January 31,
1995. Selling expenses increased from $2.6 million to $5.9 million primarily as
a result of increased expenses relating to new product launches. The Company
also increased marketing activity for its expanded maintenance business
following the Compass acquisition and in established product lines. General and
administrative expenses increased from $1.0 million to $3.7 million primarily as
a result of a growth in infrastructure necessary to support the expansion of the
Company's businesses.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense for the fiscal year ended January 31,
1996 was $560,000, an increase of $344,000, or 159.9% compared to $216,000 for
the fiscal year ended January 31, 1995. This increase arose principally from the
acquisition of Compass. Depreciation was $356,000, an increase of $223,000 or
167.7%, from $133,000 for the prior period. Amortization of goodwill from
acquisitions was $204,000, an increase of $121,000, or 145.7%, from $83,000 for
the prior period. An amortization period of ten years is utilized with respect
to goodwill arising from acquisitions.

INCOME (LOSS) BEFORE INTEREST EXPENSE, INCOME TAXES AND SHARE OF RESULTS IN
EQUITY INVESTEE

IBITI for the fiscal year ended January 31, 1996 was $559,000, a decrease of
$86,000, or 13.3%, as compared to $645,000 for the fiscal year ended January 31,
1995. As a percentage of revenues, IBITI decreased to 1.8% in the fiscal year
ended January 31, 1996 as compared to 5.8% for the fiscal year ended January 31,
1995.

IBITI (excluding write-downs) for the fiscal year ended January 31, 1996 was
$1.3 million, an increase of $669,000, or 103.7%, as compared to $645,000 for
the fiscal year ended January 31, 1995. As a percentage of revenues, IBITI
decreased to 4.1% in the fiscal year ended January 31, 1996 as compared to 5.8%
for the fiscal year ended January 31, 1995.

WRITE DOWN OF SOFTWARE DEVELOPMENT COSTS

Capitalized software development costs relate to the development of the
StreamZ product aimed at providing a cost-effective communication solution for
critical business applications. Due to recent advances in communication software
technology and announcements by major software companies of new products with
enhanced security features, the Company re-evaluated the net realizable value of
its capitalized software development costs. As a result, accelerated
amortization of $755,000 was recorded during 1996 to write down all previously
capitalized software development costs. Notwithstanding this accounting
re-evaluation, the Company is continuing to market the associated software.

WRITE DOWN OF INVESTMENT IN EQUITY INVESTEE AND EQUITY INVESTEE LOSS

Due to the accelerated pace of technological change (including recent
advances in telecommunications systems and help desk software technology) and
the increasing diversity in the market for help desk services the Company
re-evaluated the net realizable value of its investment in and advances to the
ActionTrac Joint Venture. As a consequence, during the fiscal year ended January
31, 1996, the Company recognized write downs of $582,000. Notwithstanding this
accounting re-evaluation, the Company, through the ActionTrac Joint Venture is
continuing to market the help desk services. Equity investee loss was $179,000
for the fiscal year ended January 31, 1996, reflecting the Company's proportion
attributable to the ActionTrac Joint Venture. There was no such loss during the
prior fiscal year, as the Joint Venture commenced operations in May 1995.

22
<PAGE>
INTEREST

Interest expense for the fiscal year ended January 31, 1996 was $258,000, an
increase of $104,000, or 67.5% compared to $154,000 for the fiscal year ended
January 31, 1995. This increase arose principally as a result of bridge
financing arrangements relating to the acquisition of Compass. See "-- Liquidity
and Capital Resources."

FISCAL YEAR ENDED JANUARY 31, 1995 COMPARED WITH FISCAL YEAR ENDED JANUARY 31,
1994

REVENUES

Revenues for the fiscal year ended January 31, 1995 were $11.2 million, an
increase of $8.4 million, or approximately 300.0% compared to $2.8 million for
the fiscal year ended January 31, 1994. This increase resulted primarily from
the inclusion for the first time for a full fiscal year of the revenues from the
systems integration development and network computing operations obtained by the
Company in its acquisition of K2 and Xanadu, respectively, as to which only two
weeks of revenues were included in the Company's results for the fiscal year
ended January 31, 1994. In addition, a smaller part of this increase was also
due to the inclusion, from November 1, 1994, of the hardware maintenance and
support revenues associated with the acquisition of CI.

GROSS PROFIT

Gross profit for the fiscal year ended January 31, 1995 was $4.4 million, an
increase of $2.8 million, or approximately 175.0% compared to $1.6 million for
the fiscal year ended January 31, 1994. Gross profit decreased as a percentage
of revenues from 54.8% for the fiscal year ended January 31, 1994 to 39.4% for
the fiscal year ended January 31, 1995. The decrease in gross margin was
primarily due to the increased proportion of specialized hardware product sales,
which historically have had lower margins, in the Company's overall sales mix.

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses for the fiscal year ended
January 31, 1995 were $3.6 million, an increase of $2.5 million, or
approximately 227.3% compared to $1.1 million for the fiscal year ended January
31, 1994. As a percentage of revenues these expenses decreased to 31.7% from
39.4% in the fiscal year ended January 31, 1994. Selling expenses increased from
$840,000 to $2.6 million primarily as a result of increased expenses relating to
new product launches. General and administrative expenses increased from
$277,000 to $1.0 million primarily as a result of a growth in infrastructure
necessary to support the expansion of the Company.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expenses for the fiscal year ended January 31,
1995 were $216,000, an increase of $153,000, or approximately 242.9% compared to
$63,000 for the fiscal year ended January 31, 1994. Depreciation of assets was
$133,000, an increase of $72,000 or 118.0% from $61,000 for the prior period.
Amortization of goodwill from acquisitions was $83,000, an increase of $81,000,
from $2,000 for the prior period.

INCOME (LOSS) BEFORE INTEREST EXPENSE, INCOME TAXES AND SHARE OF RESULTS IN
EQUITY INVESTEE

IBITI for the fiscal year ended January 31, 1995 was $645,000, an increase
of $270,000, or 72.0%, as compared to $375,000 for the fiscal year ended January
31, 1994. As a percentage of revenues, IBITI decreased to 5.8% in the fiscal
year ended January 31, 1995 as compared to 13.2% for the fiscal year ended
January 31, 1994.

INTEREST

Interest expense for the fiscal year ended January 31, 1995 was $154,000, an
increase of $88,000, or approximately 134.1% compared to $66,000 for the fiscal
year ended January 31, 1994. This increase arose principally as a result of
additional borrowings.

23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of capital have been cash flow generated
from operations, private placements of equity and notes payable (bridge loans),
primarily from its controlling stockholders and related parties, and borrowings
from banks. The Company does not believe that stockholder advances are currently
necessary in order to fund ongoing operations.

As of April 30, 1996, the Company had a line of credit with a commercial
lending institution in the amount of L450,000 ($680,000), of which $563,000 was
outstanding as of April 30, 1996, and $540,000 outstanding as of May 17, 1996.
Interest is charged at 1.5% above bank base rate on amounts less than L100,000
and at 3.0% above bank base rate on amounts greater than L100,000. In October
1994, a pre-existing line of credit in the amount of L180,000 ($272,000) was
converted into a two year term loan, requiring repayment of principal at L8,075
($12,800) per month, of which (giving effect to applicable exchange rates then
in effect) $70,000 in principal was outstanding as of April 30, 1996. The
outstanding credit facilities are secured by the assets of the Company and, in
the case of the term loan only, by a stockholder guarantee, and are periodically
reviewed by the issuing institutions. Management expects to be able to maintain
these credit arrangements for the foreseeable future, although no assurances may
be given. Additional borrowings by the Company are reflected in the form of
outstanding notes payable with an aggregate balance of $321,000 as of April 30,
1996. A majority of the outstanding balance is secured by assets of the Company.
The Company intends to use a portion of the net proceeds from this offering to
repay this indebtedness. See "Use of Proceeds."

Compass has a L997,000 ($1.5 million) line of credit (overdraft protection)
with a UK bank of which (giving effect to applicable exchange rates then in
effect) $1,385,000 was outstanding as of April 30, 1996, and $1,187,000 was
outstanding as of May 17, 1996. Advances are collateralized by all the assets of
Compass. This facility bears interest at 2.5% above the bank's base rate. This
line of credit is subject to periodic review. The Company intends to use a
portion of the net proceeds from this Offering to repay this indebtedness. See
"Use of Proceeds."

The Company has an arrangement with a UK factoring company pursuant to which
it can receive advance payments on eligible accounts receivable. The Company
pays the factoring company an administrative fee of 0.22% of the receivable
balance and interest at 2.25% above the bank's base rate. The Company retains
the risk of collection under this arrangement.

During the 1996 fiscal year and the three months ended April 30, 1996, cash
generated by operations has been sufficient to satisfy the Company's internal
working capital needs. Management believes that the Company will continue to
generate cash in amounts sufficient to both conduct operations at their current
level and to fund internal growth. However, additional funding from outside
sources, such as the proceeds from the sale by the Company of the Common Stock
offered hereby, will be required in order to fund additional expansion and
growth by acquisition. Management believes that, with the completion of the
Compass acquisition, the Company's outstanding commercial debt is relatively
low, and anticipates that additional funding may become available through an
expansion of its credit lines although no assurance can be given that such
additional funding will in fact be available.

The $880,000 cash portion of the Compass acquisition was funded primarily
from the proceeds of a $790,000 bridge loan which was completed in January, 1995
and a private equity placement completed in May, 1995 in which gross proceeds of
approximately $630,000 were raised. This bridge loan, plus interest, was
initially due on May 31, 1995. $145,000 of this bridge loan was repaid and
$115,000 was converted into equity as offered in the private placement and the
remaining $530,000 was exchanged for new bridge notes as part of a $1.0 million
bridge loan which was completed by the Company in June, 1995. The proceeds of
this June, 1995 bridge loan were used to fund acquisition costs and to provide
additional working capital for the Company. This bridge loan, plus interest, was
originally due on December 14, 1995. $50,000 of this amount was repaid, with the
balance extended to the first to occur of June 14, 1996 or the completion of
this Offering. The Company plans to use a portion of the funds raised in this
Offering to repay the remaining outstanding balance of this bridge loan. See
"Use of Proceeds."

24
<PAGE>
In November 1995, the Company completed a private placement with a single
corporate investor in which gross proceeds of $450,000 were raised for working
capital purposes.

Outstanding advances from stockholders are shown on the Company's balance
sheet as stockholder advances. Outstanding advances as of April 30, 1996 were
$392,000. These outstanding advances do not bear interest, and are payable on
demand.

For the year ended January 31, 1996, the Company's working capital deficit
increased from $0.4 million to $1.3 million. The Company's working capital
deficit decreased from $1.3 million at January 31, 1996 to $1.05 million at
April 30, 1996.

Cash increased from $1.2 million at January 31, 1995 to $1.4 million at
January 31, 1996. Cash in hand during the period together with cash generated
through operations was used to maintain and develop current operations, to
retire or substantially reduce the Company's previous debt obligations, to fund
software development costs and to fund the Company's acquisition of Compass and
investment in the ActionTrac Joint Venture.

Net cash provided (used) by operating activities during the year ended
January 31, 1996 was $3.6 million and during the three months ended April 30,
1996 was $(593,000), which reflected the net effect of an increase in accounts
payable, deferred revenues, accrued liabilities, inventories and accounts
receivable, combined with depreciation and amortization and write-downs and
charges. Net cash used by investing activities was $2.7 million for the year
ended January 31, 1996 and was $86,000 for the three months ended April 30,
1996, primarily reflecting cash used for the acquisition of Compass, investment
in the ActionTrac Joint Venture, computer software development costs and the
purchase of equipment. Net cash used by financing activities was $522,000 for
the year ended January 31, 1996 and was $114,000 for the three months ended
April 30, 1996, resulting primarily from repayment of bank lines of credit and
payments of outstanding obligations, offset by the receipt of net proceeds from
the sale of common stock and from the issuance of notes payable.

The Company monitors exchange rate fluctuations between the British pound
(in which form approximately 90% of the Company's revenues are received) and
U.S. dollars (which are used for approximately 30% - 40% of the Company's
purchases) and will seek to minimize the risk of such fluctuations by entering
into hedge transactions in which dollars are bought forward to match obligations
as they come due.

The Company believes that the proceeds from the sale by the Company of the
Common Stock offered hereby, together with cash flow from operations and
borrowing availability under its credit facilities, will satisfy the Company's
anticipated working capital requirements through at least the next twelve
months. See "Use of Proceeds." Thereafter, if cash generated from operations is
insufficient to satisfy the Company's capital requirements, the Company may be
required to raise additional funds. There can be no assurance that additional
financing will be available on favorable terms or at all. To the extent the
Company raises additional capital by issuing equity or convertible debt
securities, ownership dilution to the Company's shareholders will result. In the
event that adequate funds are not available, the Company's business may be
adversely affected.

25
<PAGE>
BUSINESS

4Front Software International, Inc., a UK based specialized computer
services company, provides a wide range of high-end information technology
solutions and services, principally to Financial Times UK Top 500 companies and
government authorities. The Company provides key elements of distributed
computing, including systems development and integration, storage and
client-server solutions and products, as well as extensive hardware and software
support services. In addition, in 1995 the Company began providing corporate
Internet access, website development and related services, and commenced
offering global help desk outsourcing for desktop software through the
ActionTrac Joint Venture. Since 1992, 4Front's revenues have grown from
approximately $895,000 to over $32 million in the year ended January 31, 1996
principally through the expansion of its existing operations and through the
strategic acquisition of other UK computer service companies with established
sales channels. The Company's strategy is to be a single source of a wide range
of specialized information technology ("IT") products and services. The
Company's customers include National Westminster Bank plc, British Aerospace
plc, Oracle Corporation UK Ltd., Royal Dutch/Shell Group plc, Orange plc,
British Telecom plc, Alcatel Data Networks Ltd., Sun Microsystems Corp.,
Cambridge University and the British Ministry of Defense.

THE UK AND EUROPEAN INFORMATION TECHNOLOGY MARKET

According to the 1995 Holway Report on Software and Computing Services in
Europe, the UK computer services market, the fastest growing in Europe, is
currently estimated at $12 billion annually. This market grew by an estimated
16% in 1995 and is highly fragmented, with no single company serving more than
5% of the UK.

Historically, large European organizations satisfied IT requirements through
mainframe or stand-alone midrange systems utilizing hardware software produced
by a single OEM. Maintenance, support and development of these systems were
usually provided directly by the OEMs or, in certain instances, by an
organization's in-house technical support staff. However, a number of recent
developments have resulted in a movement by many organizations away from this
traditional reliance on OEMs and in-house technical support staff toward global
independent providers of multivendor computer hardware maintenance and
technology support services.

European computing environments have become increasingly complex as a result
of rapid worldwide changes in technology. The principal factor contributing to
the growing complexity has been the migration of large organizations from
centralized computing environments characterized by single vendor mainframe or
stand-alone systems to a decentralized, geographically diverse environment
characterized by multivendor and multisystem distributed networks. This has
resulted in greater expense and substantial inefficiencies for organizations in
developing and supporting their computer systems.

The Company believes that, as a result of these factors, the complexity of
system development as well as the breadth of corporate computing needs have
surpassed the abilities and the available time of many in-house MIS departments,
and have led to a greater acceptance of outsourcing. The Company also believes
that customers are reluctant to outsource computer services directly to OEMs,
which may be perceived by customers as favoring the OEMs' own product line.
Meanwhile, the increased corporate use of information technology for operational
as well as mission critical applications have increased the use of complex,
customized corporate computing systems that are beyond the expertise of most
horizontal integrators and VARs. Furthermore, many OEMs now rely on independent
service organizations such as the Company to provide distribution, integration
and warranty/post warranty maintenance and support services.

As a result, business and government organizations must increasingly look to
multiple third-party vendors employing skilled information technology
professionals to define, develop and install complex customized information
systems and to provide applications software and comprehensive solutions to
their information systems needs. These organizations are also turning to
third-party vendors to provide information technology services in order to
maximize the effectiveness of their in-house systems and personnel.

26
<PAGE>
THE 4FRONT SOLUTION

The Company has positioned itself as a single source for a wide range of
specialized high-end information technology solutions and services which its
customers cannot readily obtain from their in-house MIS departments and which
are not ordinarily offered together by most value added resellers and horizontal
distributors. In addition, as an independent provider of solutions and services,
the Company is able to offer products from a range of OEMs and is therefore not
viewed by its customers as favoring one OEM's product over another, except on
the basis of quality. The Company combines strong technical expertise and "best
of breed" products in order to design and implement customized IT solutions and
to improve the productivity of its customers' existing IT assets.

The Company reviews its product offerings on a continuous basis in order to
ensure that it is able to provide the most advanced and cost-effective
solutions. The Company believes that the European and UK markets are highly
receptive to new technologies developed in the U.S. which the Company seeks to
offer. By providing advanced, high-end solutions to a broad base of customers,
the Company is able to offer cost-efficient integrated systems solutions
utilizing knowledge and expertise which the Company believes cannot be
effectively maintained by an in-house MIS department. The products and services
offered by the Company are designed primarily to enhance the effectiveness of,
rather than replace, in-house MIS departments, thereby creating a partnership
approach for the managers of such departments and an incentive to utilize the
products and services of the Company.

STRATEGY

The Company's strategy is to be a single source of a wide range of
specialized IT products and services. The key elements of the Company's business
strategy are to:

FURTHER PENETRATE THE GROWING UK AND EUROPEAN MARKETS

The Company intends to expand the market for its products and services by
expanding its sales and support staff and increasing its marketing efforts. In
addition, the Company intends to leverage its existing UK infrastructure and
customer base to penetrate the European market.

IDENTIFY AND ACQUIRE COMPLEMENTARY BUSINESSES TO EXPAND PRODUCT OFFERINGS
AND GEOGRAPHIC REACH

The Company intends to continue expanding its customer base as a single
source service provider by acquiring businesses that will enhance its suite of
specialized services. The Company believes it can continue to identify and
acquire complementary businesses in strategic operational and geographic areas.

EXPAND HARDWARE MAINTENANCE AND TECHNOLOGY SUPPORT CAPABILITIES

The Company intends to continue expanding the breadth of hardware products
which it services. By building on its proven ability to provide a single-source
solution to a wide array of customers' multivendor support needs in complex IT
environments, the Company believes it can distinguish itself from other computer
support providers that may not possess the resources to match the breadth of
vendors whose products are directly serviced by the Company. In addition, the
Company provides customers with a broad range of technology support services,
including software support, network support, management information services and
planning support. The Company plans to expand these capabilities through
internal development and acquisitions.

LEVERAGE EXISTING INFRASTRUCTURE AND CUSTOMER RELATIONSHIPS TO FURTHER
DEVELOP NEW BUSINESS LINES

The Company draws from its specific areas of expertise and existing customer
base to develop new service offerings. For example, in 1995 the Company began to
exploit the business opportunities of the Internet by supplying corporate
Internet access, website development and related services. The Company also
began to provide global help desk outsourcing for desktop software through the
ActionTrac Joint Venture in 1995.

27
<PAGE>
PRODUCTS AND SERVICES

The Company provides a comprehensive array of products and services to
customers across a broad range of computing environments, including mainframes,
midrange and distributed systems, workgroups, PCs and related peripherals. The
Company prices its products and services on either a fixed fee or per incident
basis. Pricing is based on the Company's cost and the existing competitive
environment. The Company customizes its contracts to the individual customer
based generally on the nature of the customer's requirements, the term of the
contract and the combination of services that are provided. Products and
services are also bundled to match the requirements of customers, and can
include hardware and software sales and support, user software support, network
support, management information services, services management, planning support,
training and ancillary support services.

In choosing the products which it offers, the Company uses the expertise of
its management to identify desirable new or technologically innovative products
which fit its business model and then seeks rights to market them throughout
Europe. The majority of these products originate in the U.S., and are almost
always sourced directly from the hardware manufacturer or software author. In
such circumstances the Company seeks the right to both market and support the
product within the territory it serves. These distribution agreements are
typically non-exclusive and of one year's duration and automatically renew at
the end of that term.

INFORMATION STORAGE SYSTEMS

The Company is a leading supplier within the UK of high capacity storage
solutions and multi-processor servers to corporate and government users. It
sells both direct to the corporate marketplace and through a well established
reseller channel. The storage operation offers products which range from the
straightforward supply of magnetic discs to high capacity subsystems, RAID
arrays, magnetic tape drives and autoloaders, optical storage devices including
high capacity drives and autochangers. All products are available with the
appropriate enabling software. The Company sells products from, among others,
Seagate, Raidtec, Fujitsu, ATG Cygnet, Sun and Silicon Graphics, and has a
reputation for offering top end products featuring the leading available
technology.

Other products supplied include high performance servers and local and wide
area networking components such as bridges, routers, gateways and ISDN
(Integrated Services Digital Networks), with the associated network software
protocols such as TCP/IP, NFS and IPX/SPX.

The Company began providing information storage systems, and corporate
Internet access services in 1995 with its acquisition of Compass Computer Group.
See "The Company" and "-- Network Communications."

NETWORK COMPUTING

The Company provides sophisticated enterprise wide network computing
solutions to its customers. For example, the Company provides high-end display
terminal systems used on brokerage trading desks. The Company is also a leading
supplier in the UK market for "network access terminals", which are used as an
alternative to desktop PC networks to link to a shared internal computing
system, or to an external network such as the Internet.

The product range of the Company also includes connectivity and
communication hardware and software, Internet access services, terminal
emulation software, electronic mail, workstations, super file and database
servers and, recently, the Multia multi-purpose display device from Digital
Equipment Corporation. The Company also supplies products from Hewlett Packard
and NCD, connectivity products from FTP and communications servers from U.S.
Robotics. The Company's product line is interrelated and compatible, and many of
the Company's customers will purchase the Company's entire product line.

As the market identification of the Company's brands has increased,
manufacturers have, in the last one or two years, been increasingly willing to
provide direct financial assistance to the Company in order

28
<PAGE>
to launch their products. Such assistance ranges from direct subsidy of sales
personnel to contribution of promotional expenditures. The Company currently has
five such marketing support arrangements. See "-- Sales and Marketing."

SYSTEMS INTEGRATION AND DEVELOPMENT

The Company offers open systems based development services for distinct
markets and applications, with particular expertise in the accounting,
distribution and work flow management areas. Using its technical expertise, the
Company analyzes systems integration problems faced by its customers, and
recommends and implements solutions to these problems. The solutions offered by
the Company combine the high value technical skills of the Company's personnel
with a wide range of specialized software and hardware products. These products
include both shrink-wrapped and custom application software together with file
servers, computer operating systems, network operating systems, display
stations, printers, local and wide area networking components, and storage and
archiving devices. The Company packages groups of products, including its own
proprietary software, in order to provide integrated turnkey systems for a
number of distinct markets and applications.

The Company creates custom software for use by the individual customer, if
required to meet the business need. By offering this service the Company is able
to attract customers for whom shrink-wrapped software is inadequate and, in the
course of developing such software, is able to create proprietary packages which
can be used to attract future customers seeking similar solutions. This also
strengthens the Company's ability to increase and retain a greater flow of
recurring support revenue.

HARDWARE MAINTENANCE AND SUPPORT

The Company provides full on-site maintenance and support services through a
team of field service engineers supported by technical repair specialists, all
tailored to the customers' requirements. Unlike most in-house information
technology departments, the Company can service mission critical installations
by providing guaranteed response times and up to 24 hour a day support, seven
days a week. The Company also provides a board-level repair service from its
test center and main offices. The Company's technical specialists also offer
consulting services to advise clients of the most effective ways to enhance the
performance of their systems, and to recommend appropriate upgrades and
additions where necessary.

The Company, which is ISO9002 certified, supports the majority of the
industry leading hardware platforms including IBM, Sun, DEC and Hewlett-Packard,
as well as associated peripherals such as printers and storage devices. The
Company typically provides maintenance and support under service contracts with
terms ranging from one month to three years. During the past year, these
contracts have had renewal rates of approximately 80%, giving the Company a
consistent level of recurring revenues in this area. The Company also repairs
and refurbishes computer parts and assemblies at its Newbury facility. These
services are provided not only for services customers but also OEMs,
distributors and other third-party maintenance companies on a limited basis.

The hardware maintenance and support services provided by the Company are
viewed as complementary to the Company's other operational areas, and the
Company believes they are an important element in attracting customers for its
other products and services. Prior to the acquisition of CI in 1994, the Company
had contracted to supply its customers with such services through unaffiliated
third parties.

SOFTWARE SUPPORT

The Company has, since 1995, provided a full range of software help desk
services in the UK and Europe through the ActionTrac Joint Venture. The
ActionTrac Joint Venture markets a comprehensive, advanced, telephone support
and problem solving service known as ActionCall, primarily to large corporate
entities paying a fixed fee per user. End-users designated by subscribers to the
ActionCall service can, by using a toll-free telephone line, obtain unlimited
multi-lingual help desk support. ActionCall is intended to offer a cost
efficient help desk alternative to the increasingly large body of computer end
users for whom comprehensive in-house or supplier support is uneconomical or
simply unavailable.

29
<PAGE>
ActionCall uses proprietary software to provide a help desk management
system that customizes support services to the end user and provides
productivity feedback to corporate MIS departments. ActionCall can thereby be
used as a management tool by its customers, both at the management and end user
levels, to anticipate and avoid problems before they arise, to deploy personnel
more efficiently and to reduce the hidden costs of computer management.

The ActionTrac Joint Venture utilizes subcontractors for the actual
international delivery of help desk services. The Company believes that there
are a number of large organizations that have underutilized internal software
support staff available for similar subcontracting agreements. By initially
limiting itself to acting as a marketing organization and by using
subcontractors as necessary for help desk staffing, the ActionTrac Joint Venture
is able to provide immediate and comprehensive multilingual help desk services
without the necessity of a substantial infrastructure investment. The Company
believes that the use of subcontractors will also allow for significant
potential cost-effective expansion of the ActionCall customer base. However, the
ActionTrac Joint Venture retains control over the marketing and international
development of the ActionCall service.

The ActionTrac Joint Venture's marketing efforts are currently focused on
the European market but the ActionTrac Joint Venture intends to franchise the
rights to market the ActionCall service in the rest of the world (excluding
North America, to which the Company's partner has exclusive rights). The first
franchise arrangement, for Australia and New Zealand, was concluded in February
1996.

NETWORK COMMUNICATIONS

The Company currently provides Internet access and develops Internet
websites for a corporate client base. The Company has contracted over 500
subscribers since its operational inception in 1995, following the Compass
acquisition. The Company plans to combine its networking and communications
expertise with emerging Internet applications to introduce a range of related
services. Among the services which the Company intends to offer are: remote data
warehousing and back-up services for proprietary customer-developed or globally
accessible stores of data; the guaranteed secure transmission and storage of
confidential information. The Company also intends to provide Intranet services
linking customers' employees to corporate resources using the Internet and other
specialized services.

The Company is a founder of the Internet Service Providers Association in
the UK and believes that its customer relationships as well as its technical
expertise provide it with a competitive advantage in providing Internet services
to corporate customers. The Company plans to utilize strategic alliances with
telephone companies and utilities to provide the Internet infrastructure and
access, with a view to developing a business-to-business online community of UK
corporations via the Internet. However, no such potential strategic alliances
have been identified and there is no assurance that the Company will be able to
identify or consummate any such strategic alliances.

The Company intends to remove Internet access barriers for customers, and to
establish completely open networks through the Company's access points. The
Company believes that its Internet services will attract new customers for its
broad array of network computing and communications products and services.

30
<PAGE>
CUSTOMERS

The Company's customers consist mainly of large and medium sized businesses,
divisions of larger corporations, and government authorities. The following is a
representative list of customers of the Company:

<TABLE>
<S> <C>
INFORMATION STORAGE SYSTEMS NETWORK COMPUTING
- ----------------------------------------- -----------------------------------
National Westminster Bank plc Royal Dutch/Shell Group plc
Baydel Limited Fujitsu Telecommunications Ltd.
British Ministry of Defense Oracle Corporation UK Ltd.
Sun Microsystems Corp. Nuclear Electric plc
Siemens AG. Orange plc

SYSTEMS INTEGRATION DEVELOPMENT HARDWARE MAINTENANCE AND SUPPORT
- ----------------------------------------- -----------------------------------
Alcatel Data Networks Ltd. British Aerospace plc
Bechtel Limited Cambridge University
UK Automobile Association Oracle Corporation UK Ltd.
Sir Norman Foster Architectural
Partnership British Telecom plc
UK Government Department of Employment Sedgewick, Noble, Lowndes Ltd.

SOFTWARE SUPPORT NETWORK COMMUNICATIONS
- ----------------------------------------- -----------------------------------
Dunlop plc Royal Commission for Historic
Navstar Corp. Monuments of England
Sumitomo Finance International plc Thames Water plc
Pilkington Glass Ltd. Japanese Embassy to UK
Wessex Water plc World Resource Association
</TABLE>

During the fiscal year ended January 31, 1996, the largest single customer
accounted for approximately 5% of the Company's total revenues.

SALES AND MARKETING

Using its technical expertise and access to new technology developed
primarily in the U.S., the Company identifies products and services which it
believes would be of interest to its customer base and markets these products
and services to current and prospective customers as part of a systems solution.
The Company emphasizes its ability to provide highly qualified locally based
personnel to implement cost-effective solutions which it supplies. The Company
also contrasts the specialized niche focus of its operations to the generalist
focus of the largest firms.

The Company sells its services through both direct and indirect sales
channels. The Company's direct sales force is primarily focused on large and
multinational corporate customers and is organized by operating groups based on
the Company's products and services. Direct sales channels include field sales,
telemarketing and direct mail. Indirect sales channels include sales through
subdistributors and VARs where the Company's products are constituent parts of
the VARs' overall solutions. Product support relationships also exist with OEMs
such as DEC, Hewlett-Packard, Novell, FTP and EMC(2).

The Company's sales representatives focus on providing technology solutions,
which include meeting the hardware maintenance, software support and network
component needs of customers, OEMs or software developers, and delivering
solutions to the broader IT requirements of the Company's customers.

PRODUCT DEVELOPMENT

The Company engages in development activities primarily in connection with
the creation of software products and applications and maintains a staff of
computer engineers for this purpose. The Company develops products on its own to
meet a perceived market need as well as on a custom basis for a particular
customer. For example, the Company developed "TaskForce in Government", a
software

31
<PAGE>
product which manages job processing, specifically for local and central
government bodies. The Company will also create custom software for use by the
individual customer, if required to meet the business need. By offering this
service the Company is able to attract customers for whom shrink-wrapped
software is inadequate and, in the course of developing such software, is able
to create proprietary packages which can be used to attract future customers
seeking similar solutions. The Company is also able to provide recurring
revenues through support services for its proprietary products.

EMPLOYEES

As of April 30, 1996 the Company employed a total of 174 employees including
63 in sales and marketing, 34 in engineering, 31 in technical support and the
balance in logistics, management and administration in the UK and the U.S. The
staff numbers will expand in connection with the Company's growth on an as
needed basis. The Company's employees are not represented by a labor union, and
the Company has not had any work stoppages, strikes, or organization attempts.
The Company believes that its employee relations are good.

COMPETITION

The overall computer services industry is intensely competitive and is
composed of literally hundreds of companies, many of whom have capital,
marketing expertise and personnel resources far superior to that of the Company.
The Company competes primarily with a wide range of small and medium size
companies that operate both in the niche markets which the Company serves and in
the computer services industry generally. The Company also competes with larger
European computer service and consultancy firms such as Hoskyns, Andersen
Consulting and P & P. See "Risk Factors -- Competition."

The Company believes that the principal competitive factors in the industry
are breadth of service offerings, quality of products supplied, expertise in
niche markets, price and service. The Company believes that its ability to offer
single source solutions and to remain competitive in these markets will depend
largely upon its ability to recruit and retain highly skilled personnel. See
"Risk Factors -- Dependence on Management and Key Personnel."

The Company believes that it is able to successfully compete with large
European computer service and consultancy firms due to its focus and
concentration in specified niche markets and the Company's high level of
specialized skills and services. The Company also believes that it is able to
obtain a competitive advantage with respect to both larger and smaller
competitors in the niche markets which it serves through its proprietary systems
and customized software and its reputation in specialist markets.

FACILITIES

The Company does not own any real property. The Company leases office space
in Englewood, Colorado for its corporate headquarters and in England in Newbury,
Watford, Warrington and Aylesbury for its operations, as follows:

<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE LEASE EXPIRATION
- ------------------------------------------------------- --------------- -------------------
<S> <C> <C>
Newbury................................................ 42,000 September, 2007
Watford................................................ 9,500 August, 2013
Warrington............................................. 3,500 December, 2012
Aylesbury.............................................. 3,000 June, 2000
Englewood.............................................. 500 month to month
</TABLE>

Current payments under these leases aggregate approximately $631,000 per
year. The Company believes that these facilities are adequate for both current
and foreseeable future needs.

LEGAL PROCEEDINGS

The Company is not party to any material pending legal proceedings.

32
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are listed below,
together with brief summaries of their business experience and certain other
information.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------ --- ------------------------------------------------------------
<S> <C> <C>
Anil Doshi 51 Chairman of the Board, Chief Executive Officer, and Director
of the Company
Mark Ellis 42 President, Chief Operating Officer and Director of the
Company
Kenneth Newell 52 Chief Executive Officer of 4Front Group and Director of the
Company
Philip Mendonca 37 Chief Financial Officer of the Company
Craig Kleinman 38 Secretary and Director of the Company
Simon Andrews 38 General Manager, Software Support
Peter Bolton 41 General Manager, Network Computing
Terence Burt 39 Managing Director, Systems Integration Development
Joel William 46 Managing Director, Information Storage Systems
Jervis
Mark McVeigh 35 General Manager, Hardware Maintenance and Support
Brian V. Murray 48 Director of the Company
Arthur Keith Ross 44 Director of the Company
</TABLE>

ANIL DOSHI is Chairman of the Board of Directors, Chief Executive Officer
and a Director of the Company. Mr. Doshi co-founded Communic8 Software (the
Company's predecessor in interest) in January 1990 and served as its Chairman
from April 1992 to March 1993. Mr. Doshi is a Fellow of the Institute of
Chartered Accountants in England and Wales, and he is also an Associate of the
Institute of Taxation. From January 1990 until October 1990, Mr. Doshi served as
Deputy Chairman of PPI Enterprises, Inc., a New York based holding company. From
1986 to 1990, Mr. Doshi served as a consultant to Polly Peck International,
PPI's parent company.

MARK ELLIS is President, Chief Operating Officer and Director of the
Company. Mr. Ellis co-founded Communic8 Software and served as a director from
January 1992 until March 1993. From September 1988 to January 1991, Mr. Ellis
served as the President of PPI Enterprises, Inc., a New York based holding
company. As President of PPI Enterprises, he managed the Company's American
expansion program and negotiated a number of acquisitions in the U.S., including
the $875 million acquisition of Del Monte Tropical Fruit from RJR Nabisco. Mr.
Ellis attended St. John's College at Cambridge University in England and
received a B.A. in Law in 1975, an L.L.B. in 1976, and an M.A. in Law in 1978.

KENNETH NEWELL was a co-founder of K2 Group Plc (now 4Front Group Plc, the
Company's wholly-owned UK operating subsidiary) in 1988 and has been its Chief
Executive since 1990. Mr. Newell was appointed a Director of the Company in
April, 1996. Prior to establishing K2 he worked for four years at Star Computer
Group, a publicly listed UK Company and one of the early implementers of the
open systems computing concept in the UK, where he held a number of positions,
including Sales Director from 1985-1988. Mr. Newell is a Fellow of the Institute
of Chartered Secretaries and Administrators following study at the City of
London College.

PHILIP MENDONCA has been Chief Financial Officer of the Company since April
1996. From 1994 to 1995 Mr. Mendonca was Finance Director and Company Secretary
for NB Selection Ltd. a leading UK executive recruitment firm. Previously Mr.
Mendonca had, since 1989, been a management consultant with Ernst & Young
Management Consultants. Mr. Mendonca received a BA in Economics and Accountancy
from Lancaster University. Mr. Mendonca is a Fellow of the Institute of
Chartered Accountants in England and Wales, and qualified as an accountant with
KPMG.

33
<PAGE>
CRAIG KLEINMAN is Secretary and a Director of the Company. Mr. Kleinman had
served as Chief Financial Officer of the Company until the appointment of Mr.
Mendonca in April 1996. During the past five years, Mr. Kleinman has been a
shareholder in the certified public accounting firm Kleinman, Guerra & Company,
PC. Mr. Kleinman received a B.S. degree in accounting from the University of
Colorado in 1978 and is a member of the American Institute of Certified Public
Accountants and the Colorado Society of Certified Public Accountants.

SIMON ANDREWS is General Manager of the Company's software support
operations. Mr. Andrews was also a co-founder of K2 Group Plc in 1988. Mr.
Andrews had previously worked at Star Computer Group as customer services
director.

PETER BOLTON has been General Manager of the Company's network computing
division since 1996. Mr. Bolton has been employed by the Company since 1990 with
the exception of a brief period between 1994 and 1995 when he was employed by
Verity Software, a major provider of text software used widely on the Internet.

TERENCE BURT was a co-founder of K2 Group Plc (now 4Front Group Plc) in 1988
and has been Managing Director of the Company's systems integration division
since 1990. Mr. Burt joined Star Computer Group in 1982 where he was initially
Customer Services Director before moving into the acquisitions team which he
headed for two years prior to co-founding K2. Mr. Burt graduated from the
University of Hertfordshire where he qualified as an Associate of the
Association of Cost and Management Accountants.

JOEL WILLIAM JERVIS has been the Managing Director of the Company's
information storage systems division since 1994. Prior to joining Compass in
July 1994 Mr. Jervis was Executive Chairman of DCM Holdings Plc during which
time it grew from a L1.3 million business in 1989 to a L6 million business in
1992, at which time the business was sold to Kode International Plc. Mr. Jervis
served as a Director of Kode International Plc prior to joining Compass. Mr.
Jervis is an electronics engineer, starting his career with Burroughs in both
Australia and the UK.

MARK MCVEIGH has been the General Manager of the Company's hardware
maintenance and support division since 1994. Previously, Mr. McVeigh was
employed by the Company's then-owned DesignBase subsidiary, which was divested
in 1994. Mr. McVeigh received a BA degree in Business Studies from the
University of Lancashire in 1984.

BRIAN V. MURRAY has been a Director of the Company since April, 1996. Mr.
Murray is a Senior Managing Director with Bear, Stearns & Co. Inc. Mr. Murray
has been employed by Bear, Stearns & Co. Inc. since 1978, and has been involved
in the international banking division since 1985. Mr. Murray received a B.S. in
Economics from Villanova University in 1970 and an MBA with honors from the
University of Chicago in 1975. Mr. Murray has been a chartered financial analyst
since 1978.

ARTHUR KEITH ROSS has been a Director of the Company since February, 1996.
Mr. Ross is currently a private investor. From 1986 to 1994, Mr. Ross was a
partner in the London law firm Clifford Chance, which he joined in 1984. Mr.
Ross headed the Clifford Chance South East Asian office in Singapore from 1988
to 1991. Mr. Ross attended Christ's College at Cambridge University in England
and received a BA in Law in l973 and an MA in Law in 1976.

Directors of the Company hold office until the next annual meeting of
stockholders or until their successors are elected and qualified. There are no
family relationships between any directors or current officers of the Company.
Officers serve at the discretion of the Board of Directors.

The Board of Directors has three standing committees, the Audit Committee,
the Compensation Committee and the Executive Committee. The Board of Directors
does not have a nominating committee. Messrs. Doshi, Ross and Murray currently
serve on the Audit Committee. Messrs. Doshi, Ross, Murray and Ellis serve on the
Compensation Committee, the purpose of which is to establish salary and bonus
compensation levels for the Company's executive officers. The Executive
Committee, which consists of Mr. Doshi and Mr. Ellis, may act on behalf of the
full Board except in reference to amending the

34
<PAGE>
Company's Certificate of Incorporation or By-laws, adopting a plan of merger or
consolidation, recommending to the shareholders the sale, lease or other
disposition of all or substantially all of the property and assets of the
Company other than in the usual and regular course of business, recommending to
the shareholders a voluntary dissolution of the Company or a revocation thereof.

EXECUTIVE COMPENSATION
The tables and discussion below set forth information about the compensation
awarded to, earned by, or paid to the Company's chief executive officer and four
other most highly compensated executive officers during the fiscal years ended
January 31, 1996, 1995 and 1994. Except as noted below, no executive officer of
the Company or any of its then existing subsidiaries earned compensation in
excess of $100,000 during any of these periods.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- -------------------------
FISCAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR (1) SALARY BONUS OPTIONS COMPENSATION (2)
- ------------------------------------------------------------ ------ -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Anil Doshi ................................................. 1995 $ 38,196 $ -0- 120,000 $ -0-
Chief Executive Officer(3) 1994 -0- -0- 150,000 -0-(4)
1993 -0- -0- -0- 7,200
Kenneth Newell ............................................. 1995 $107,107 $23,626 109,300 $29,580
Chief Executive -- 4Front Group 1994 90,993 -0- 90,700 28,064
1993(5) 2,950 -0- -0- 1,130
Terence Burt ............................................... 1995 $ 94,506 $39,378 98,050 $13,368
Managing Director -- Systems Integration Development 1994 84,920 11,503 66,950 13,053
1993(5) 2,950 -0- -0- 555
Peter Wellings (6) ......................................... 1995 $ 90,568 $31,502 -0- $17,137
Former Managing Director -- Network Computing 1994 92,000 33,600 34,800 14,880
1993(5) 3,375 -0- -0- 375
Mark McVeigh ............................................... 1995 $ 66,154 $47,253 20,000 $11,025
General Manager -- Hardware Maintenance and Support 1994 47,253 12,600 20,000 9,264
1993 45,000 -0- -0- 7,440
</TABLE>

- ------------------------
(1) Represents the period beginning February 1 of the year indicated and ending
January 31 of the following year.

(2) As to Mr. Doshi, represents contributions made by the Company to Mr. Doshi's
Executive Pension Plan. As to Messrs. Newell, Burt, Wellings and McVeigh,
represents the dollar value of car allowance, insurance benefits and
contributions to voluntary money purchase pensions plans.

(3) Mr. Doshi entered into an employment agreement with the Company in November
1995, which provides for an annual base salary of $150,000. See "--
Employment Agreements." Prior to this date, Mr. Doshi did not receive any
salary compensation for services to the Company.

(4) Does not include a consulting fee of $150,000 incurred by the Company to
Aliki Financial Corp., in which Mr. Doshi has a 65% interest. Such charge
has not yet been paid by the Company. See "Certain Transactions -- Advances
from Affiliates."

(5) Compensation received subsequent to January 14, 1994, the effective date of
the Company's acquisition of 4Front Group (formerly K2 Group).

(6) Mr. Wellings resigned from his position with the Company in February 1996.

35
<PAGE>
The following table sets forth certain summary information concerning
individual option grants of stock options made during the fiscal year ended
January 31, 1996, to each of the Company's executive officers named in the
Summary Compensation Table.

OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED EXERCISE PRICE TERM (5)
OPTIONS TO EMPLOYEES IN PER SHARE EXPIRATION ------------------------
NAME GRANTED (1) FISCAL YEAR (2) ($/SH) (3) DATE (4) 5% 10%
- ------------------------- ----------- ----------------- ----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Anil Doshi............... 120,000 16.5% $ 5.00 7/31/00 $ 165,768 $ 366,306
Kenneth Newell........... 109,300 15.1% $ 5.00 7/31/00 $ 150,988 $ 333,644
Terence Burt............. 98,050 13.5% $ 5.00 7/31/00 $ 135,447 $ 299,303
Peter Wellings........... -0- -- -- -- -- --
Mark McVeigh............. 20,000 2.8% $ 5.00 7/31/00 $ 27,628 $ 61,051
</TABLE>

- ------------------------
(1) All options granted to the named officers were non-qualified options.

(2) Based on an aggregate of options to purchase 725,463 shares during the
fiscal year.

(3) All options were granted at market value at date of grant.

(4) All options have a fixed term of five years and are fully vested.

(5) Potential gains are reported net of the option exercise price, but before
taxes associated with exercise. These amounts represent certain assumed
rates of appreciation only. Actual gains on stock option exercises are
dependent on the future performance of the Common Stock and overall stock
market conditions. The amounts reflected in this table may not necessarily
be achieved.

The following table sets forth at January 31, 1996, the number of options
and the value of unexercised options held by each of the executive officers
named in the Summary Compensation Table who held options at January 31, 1996. No
options were exercised in the fiscal year ended January 31, 1996.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END (#)
---------------- ------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE (1)
- ------------------------------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Anil Doshi................................. 270,000 / 0 $ 420,000 / n/a
Kenneth Newell............................. 200,000 / 0 $ 290,700 / n/a
Terence Burt............................... 165,000 / 0 $ 231,950 / n/a
Peter Wellings............................. 34,000 / 0 $ 69,600 / n/a
Mark McVeigh............................... 40,000 / 0 $ 60,000 / n/a
</TABLE>

- ------------------------
(1) Based on the last sale price of $6.00 on the Nasdaq SmallCap Market at
fiscal year-end.

EMPLOYMENT ARRANGEMENTS
Messrs. Doshi and Ellis have entered into employment agreements with the
Company commencing November 1, 1995. These agreements are terminable at any time
after an initial term of three years on one years' notice. Under such
agreements, Messrs. Doshi and Ellis are entitled to base annual salaries of
$150,000 and $140,000, respectively, plus pension contributions not to exceed 7%
of such base salaries. Prior to the execution of such employment agreements,
neither Messrs. Doshi nor Ellis had received salary compensation for services
performed for the Company and its affiliates.

36
<PAGE>
As a condition to the K2 acquisition, each of Messrs. Newell, Burt and
Andrews entered into employment agreements with 4Front Group at salaries of
L60,000 ($91,000), L55,000 ($83,000) and L48,000 ($73,000), respectively.
Effective February 1, 1995 these annual salaries were adjusted upwards to
L68,000 ($103,000), L60,000 ($91,000) and L55,000 ($83,000), respectively. These
agreements are terminable upon one year's notice, which notice can be served no
earlier than the first anniversary of the effective date of the agreement. These
agreements are guaranteed by the Company, and are subject to buyout rights in
the event of a change in the control of 4Front Group.

As a condition to the Compass acquisition, each of Messrs. Richard Sharpe
and Joel Jervis entered into employment agreements with Compass at salaries of
L25,000 ($38,000) and L60,000 ($91,000), plus car allowance, respectively. The
agreements provided, as to Mr. Sharpe, for pension contributions of at least
L15,000 ($23,000) per annum, and as to Mr. Jervis, a bonus of up to L6,000
($9,000) per quarter dependent upon the achievement of certain profit goals and
pension contributions of not less than 5% of annual salary. In December, 1995,
Mr. Sharpe entered into a new employment agreement with the Company's 4Front
Group PLC subsidiary which replaced his prior agreement with Compass upon
substantially the same terms, except for an additional pension contribution of
L15,000 ($23,000) for the twelve month period commencing April 6, 1996 only. In
April 1996, Mr. Sharpe terminated his employment agreement with the Company and
entered into a consulting agreement with the Company on substantially similar
terms. Compensation under Mr. Jervis' agreement is subject to annual review and
increase, is terminable upon one year's notice, and is guaranteed by the
Company.

No other executive officer is currently party to an employment agreement
with the Company. As appropriate, other employment contracts may be entered into
with other key executives.

COMPENSATION OF DIRECTORS
Mr. Ross and Mr. Murray, two of the Company's non-employee directors,
receive compensation of $10,000 per year for services as a director. No other
director receives any compensation for services as a director.

STOCK OPTIONS AND BENEFIT PLANS

In September and November 1994 the Company issued a total of 1,260,875
options to management, employees and consultants, exercisable for five years at
an exercise price of $4.00 per share.

In August and November 1995 the Company issued a total of 725,463 options to
management, employees and consultants, exercisable for five years at an exercise
price of $5.00 per share. Of the options granted, 120,000, 120,000, 60,000,
20,000, 109,300, 98,050, 5,000 and 20,000 were granted to Messrs. Doshi, Ellis,
Kleinman, Ross, Newell, Burt, Andrews and McVeigh, respectively.

The Company, through its K2 subsidiary, operates contributory, non-defined
pension plans for the benefit of Messrs. Andrews, Burt, and Newell, to which it
makes periodic contributions of approximately L12,000 ($18,000) per annum.

1996 EQUITY INCENTIVE PLAN

On May 20, 1996 the Company's Board of Directors adopted the 4Front Software
International, Inc., 1996 Equity Incentive Plan (the "Plan") subject to approval
by the Company's stockholders. The Plan provides for grants of stock options
("Plan Options") to certain non-executive directors, officers, employees,
consultants, independent contractors and advisors of the Company or its
subsidiaries or affiliates. Subject to adjustment in certain circumstances as
discussed below, the Plan authorizes up to 200,000 shares of Common Stock for
issuance pursuant to the terms of the Plan. Of this total number, a maximum of
20,000 shares may be issued to participants who are directors of the Company. If
and to the extent Plan Options expire or are terminated for any reason without
being exercised, the shares of Common Stock subject to such Plan Options again
will be available for purposes of the Plan. Grants under the Plan may consist
of: (i) options intended to qualify as incentive stock options ("ISOs") within
the meaning of the Internal Revenue Code of 1986, as amended (the "Code"), (ii)
so-called "non-qualified stock options" that are not intended to so qualify
("NQSOs"), or (iii) a combination thereof. As of May 21, 1996, approximately 169
employees were eligible to participate in the Plan. As of May 21, 1996, no Plan
Options have been granted. However, subject to stockholder approval, the Company

37
<PAGE>
intends to grant approximately 130,000 Plan Options at the public offering price
hereof. The Plan is administered by a Committee of the board (the "Committee"),
which may be the Compensation Committee. This Committee plans to grant Plan
Options either as ISOs or as NQSOs, and allows the Committee to establish, as to
any participant, the number of Plan Options, exercise price, exercise term
(subject to a maximum of ten years), and other terms and conditions. Subject to
the foregoing, the option exercise price for each share covered by a Plan Option
may not be less than 85% of the fair market value of a share of Common Stock on
the date of grant of such Plan Option; however, in the case of an ISO, the price
shall be no less than 100% of the fair market value of a share of Common Stock
at the time such option is granted; and in the case of an ISO granted to a ten
percent stockholder, the exercise price will be no less than 110% of the fair
market value of the Common Stock on the date of grant. The recipient may pay the
exercise price by (i) cancellation of indebtedness of the Company to the
participant, (ii) by surrender of shares of the Company's Common Stock that have
been owned by the participant for more than six months and have been paid for
within the meaning of SEC Rule 144, or were obtained by the participant in the
public market; and are clear of all liens, claims, encumbrances and security
interests; (iii) by waiver of compensation due to the participant for services
rendered; provided a public market exists for the Company's stock, through a
same day sale of the shares acquired upon exercise of an Option, subject to
applicable securities laws; and (iv) by any combination of the foregoing.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the year ended January 31, 1996, no Compensation Committee or other
Board committee performing equivalent functions was in existence, and all
decisions of the Board concerning executive officer compensation were made by
the full Board at meetings of the Board of Directors at which all current
directors were present. Messrs. Doshi and Ellis were directors and executive
officers of the Company at such times and, as directors, participated in
deliberations regarding executive compensation. The Board has subsequently
established a Compensation Committee which currently consists of Messrs. Doshi,
Ellis, Ross and Murray.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Bylaws of the Company contain certain provisions permitted under the
Colorado Corporations Code relating to the liability of directors and officers.
The provisions eliminate a director's or officer's liability for monetary
damages for a breach of fiduciary duty as a director or officer, except for
liability in certain circumstances involving wrongful acts, such as the breach
of a director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. Further, the Company's Bylaws contain
provisions to indemnify the Company's directors and officers to the fullest
extent permitted by the Colorado Corporations Code, including payment in advance
of a final disposition of a director's or officer's expenses and attorneys' fees
incurred in defending any action, suit or proceeding. The Company believes that
these provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors and officers.

In 1987, the Company entered into an indemnification agreement with Craig
Kleinman in order to create a direct contractual obligation on the part of the
Company to reimburse Mr. Kleinman against any and all expenses and liabilities
incurred as a result of Mr. Kleinman's service as an officer and director of the
Company to the full extent provided by law and by the Company's Articles of
Incorporation and Bylaws (except in the case of fraud or the receipt by the
indemnified party of personal profit or advantage to which he was not legally
entitled).

38
<PAGE>
CERTAIN TRANSACTIONS

ACQUISITIONS
On November 23, 1992, an acquisition agreement was entered into between the
Company and Mortlake (then known as 4Front Group), pursuant to which the Company
acquired all of the outstanding shares of Mortlake in exchange for the issuance
of 785,000 shares of the Company's common stock. Messrs. Doshi, Ellis, Anthony
Malpas and Keith Shipton, who at that time held all of the outstanding stock of
Mortlake, received 408,200, 219,800, 78,500 and 78,500 newly issued shares of
the Company's common stock, respectively, in this transaction.

On February 1, 1993, immediately following the acquisition by the Company of
Mortlake, Messrs. Doshi and Ellis purchased all of the outstanding shares of
DesignBase from Messrs. Malpas, Forest-Moore and Shipton in exchange for a total
of 120,000 shares of the Company's common stock which were then held
individually by Messrs. Doshi and Ellis. The DesignBase shares were then
contributed to Mortlake by Messrs. Doshi and Ellis without payment and
DesignBase therefore became a wholly owned subsidiary of Mortlake. In September
1994 (effective February 1, 1994) the Company sold DesignBase, along with the
Company's CommsWare Limited subsidiary, to a company controlled by Anthony
Malpas in exchange for a one-year promissory note in the amount of $23,613
(representing the book value of the net assets of these companies) and the
assumption of $620,743 in payables owed by these companies to the Company.
Payment of these payables has been guaranteed by Mr. Doshi and Aliki Financial
Corp. ("Aliki"), in which Messrs. Doshi and Ellis have interests of 65% and 35%,
respectively.

Effective January 14, 1994, the Company purchased all of the outstanding
shares of K2 Group Plc (now 4Front Group) and Xanadu from the shareholders
thereof, including Messrs. Newell, Burt and Andrews, with whom the Company
executed employment agreements as a condition of such acquisition. See
"Management -- Executive Compensation -- Employment Agreements". The terms of
the acquisition required a payment of additional consideration if certain profit
goals were met by the acquired company. All such goals were met and during the
1994 fiscal year the Company paid, as additional consideration for the
acquisition, a total of $141,250 and issued 62,500 shares of Common Stock to the
selling shareholders. The Company also, as a part of this acquisition, entered
into an agreement with the selling shareholders whereby such shareholders were
given the right, commencing March 31, June 30 and October 31, 1995 and ending in
each case on November 30, 1995 to require the Company to purchase up to 10%, 10%
and 80%, respectively, of the shares of common stock of the Company issued by
the Company to such shareholders if, as of the referenced commencement date, the
Company's Common Stock was not admitted to trading on the Nasdaq SmallCap Market
or on any recognized stock exchange in North America or Europe. Effective
October 21, 1994, the Company entered into an agreement with such selling
shareholders whereby the Company issued a further 50,000 shares of Common Stock
to the selling shareholders in consideration of a waiver by such shareholders of
the foregoing repurchase rights.

As part of the acquisition by the Company of Compass in 1995, the Company
agreed to the conditional issuance of (i) a total of 108,836 additional shares
of common stock to Richard Sharpe, until April 1996 the Company's General
Manager of Network Communications and currently a Consultant to the Company, his
wife and two trusts of which the Sharpes are beneficiaries and (ii) options to
purchase an additional 29,959 shares of the Company's Common Stock at $0.01 per
share to Joel Jervis, all based on the post-acquisition earnings of Compass for
the period ending March 31, 1996. In December 1995, the Company entered into an
agreement with the prior shareholders of Compass and Mr. Jervis whereby the
conditions to the issuance of these additional shares were deemed satisfied,
resulting in the immediate issuance of these conditional shares and options.
Such options were exercised by Mr. Jervis in April, 1996.

ADVANCES FROM AFFILIATES

As of April 30, 1996, a total of $391,842 remained outstanding and owed to
Aliki and/or Messrs. Doshi and Ellis, primarily representing advances made to
fund the operations of the Company, but also including $150,000 owed to Aliki
for payment of consulting services rendered by Aliki to the Company in 1994 in
connection with fund raising and acquisitions. These payables are noninterest

39
<PAGE>
bearing and unsecured, due on demand. Repayment is subordinated to payment by
the purchaser of DesignBase and CommsWare of all payables to the Company assumed
in connection with the sale by the Company of DesignBase and CommsWare in 1994.
Payment of such assumed payables has been guaranteed by Mr. Doshi and Aliki.

In November, 1992, the Company issued a convertible debenture to Mr. Doshi
evidencing the Company's indebtedness to him in the amount of $350,000 with
interest at 12% per annum, convertible at any time into shares of the Company's
Common Stock at $5.00 per share at any time until April 30, 1993 and at $7.50
per share thereafter, and repayable on January 15, 1994. The debenture was
subsequently amended to change the maturity date until May 31, 1995, and to
change the conversion terms to provide for the issuance of 1.6 shares of Common
Stock and 1.6 share purchase warrants (of which 62.5% will be exercisable at
$2.00 per share and the balance will be exercisable at $7.50 per share) for
every $5.00 converted. This debenture was converted in full in July 1994,
resulting in the issuance to Mr. Doshi of 112,000 shares of Common Stock, 70,000
warrants exercisable at $2.00 and 42,000 warrants exercisable at $7.50.

OTHER TRANSACTIONS

In October 1994, the Company had a pre-existing line of credit in the amount
of L180,000 which was converted into a two year loan, requiring repayment of
principal at L7,500 per month, of which $107,607 principal was outstanding as of
January 31, 1996. This outstanding facility is secured by the assets of the
Company and by Mr. Doshi's guarantee. Additional borrowings by the Company with
an aggregate balance of $141,000 as of January 31, 1994 were secured, in part,
by personal assets of Mark Ellis. During the Company's 1994 fiscal year this
balance was paid in full via the surrender of L90,000 of such assets by Mr.
Ellis. None of the foregoing named guarantors has received consideration from
the Company for providing such security or guarantees.

In connection with a bridge financing completed in January 1995, the Company
issued a promissory note in the principal amount of $480,000 bearing interest at
10% per annum to Jayantilal V. Doshi, the father of Anil Doshi. As further
consideration for this loan, Mr. J. V. Doshi received 12,000 shares of Common
Stock and warrants to purchase an additional 120,000 shares at an exercise price
of $4.50 per share. This bridge loan, plus interest, was initially due on May
31, 1995. In June, 1995 the $480,000 principal amount of this loan, plus an
additional $500,000, was exchanged by Mr. J. V. Doshi for a promissory note in
the principal amount of $980,000, bearing interest at 10%, due on or before
December 14, 1995. In connection with this additional loan, Mr. J. V. Doshi was
issued 24,500 shares of Common Stock and warrants to purchase 245,000 additional
shares at an exercise price of $4.50 per share. Effective December 14, 1995,
this promissory note was amended to provide for a maturity date at the earlier
of (i) June 14, 1996 or (ii) the consummation of a public offering of the
Company's Common Stock. On May 29, 1996, the promissory note was amended to
provide for a maturity date at the earlier of (i) July 14, 1996 or (ii) the
consummation of a public offering of the Company's Common Stock.

Prior to his appointment as a non-executive director of the Company, Mr.
Ross purchased 15,000 shares of the Company's Common Stock and warrants to
purchase 15,000 shares for total consideration of $66,000 in the Company's May,
1995 private placement of securities. In June, 1995, Mr. Ross loaned $50,000 to
the Company, in consideration of which the Company issued to Mr. Ross 1,250
shares of Common Stock and warrants to purchase 12,500 shares. The $50,000 loan
has been repaid to Mr. Ross, with interest.

The Company believes that all transactions with related parties have been
upon terms at least as favorable to the Company as those which would have been
available to the Company from unrelated parties.

40
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 13, 1996, and as adjusted to
reflect the sale of the shares offered hereby, assuming no exercise of the
Underwriter's over-allotment option, (i) by each of the Company's executive
officers and directors, (ii) by all officers and directors as a group and (iii)
by each person who is known by the Company to own beneficially more than 5% of
the Company's Common Stock.

<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP
------------------------
NUMBER OF SHARES BEFORE AFTER
BENEFICIAL OWNER -- NAME AND ADDRESS BENEFICIALLY OWNED (1) OFFERING OFFERING
- --------------------------------------------------------- ---------------------- ----------- -----------
<S> <C> <C> <C>
Anil Doshi (**) ......................................... 954,700(2) 27.6% 14.8%

Mark Ellis (**) ......................................... 542,300(3) 16.3% 8.6%

Kenneth Newell (**) ..................................... 262,578(4) 8.1% 4.2%

Philip Mendonca (**) .................................... -0- * *

Craig Kleinman (**) ..................................... 82,500(5) 2.6% 1.3%

Simon Andrews (**) ...................................... 85,044(6) 2.7% 1.4%

Peter Bolton (**) ....................................... 5,000(7) * *

Terence Burt (**) ....................................... 227,582(8) 7.1% 3.7%

Joel William Jervis (**) ................................ 53,639 1.8% 0.9%

Mark McVeigh (**) ....................................... 47,000(9) 1.5% 0.8%

Brian Murray (**) ....................................... 2,500 * *

Arthur Keith Ross (**) .................................. 185,950(10) 5.9% 3.0%

Richard Ian Sharpe (**) ................................. 192,556(11) 6.3% 3.2%

Sierra Overseas ......................................... 242,000(12) 7.4% 3.9%
One Maritime Plaza
Suite 700
San Francisco
California 94111

All Directors and Executive Officers as a Group (12 2,408,793(2)(3)(4) 55.4% 32.8%
persons)................................................ (5)(6)(7)(8)
(9)(10)(11)
</TABLE>

- ------------------------
* Less than 1%

** Address is 4 Colonial Business Park, Colonial Way, Watford, Herts WD2 4PR
England

(1)All shares are beneficially owned, such persons have sole investment and
voting power subject to applicable community property and similar laws,
unless otherwise indicated.

(2)Includes 20,000 shares and 20,000 warrants owned by Aliki Financial Corp.,
in which Mr. Doshi has a 65% interest. Also includes 270,000 shares
purchasable pursuant to immediately exercisable options and 112,000 shares
purchasable pursuant to immediately exercisable warrants.

(3)Includes 20,000 shares and 20,000 warrants owned by Aliki Financial Corp.,
in which Mr. Ellis has a 35% interest. Also includes 270,000 shares
purchasable pursuant to immediately exercisable options.

41
<PAGE>
(4)26,737 of such shares are held directly by Mr. Newell and 7,051 shares are
held directly by Mr. Newell's wife; Lex Nominees International holds 28,790
shares as nominee for a Jersey resident settlement established for the
benefit of Mr. Newell and his wife and children. Also includes 200,000
shares purchasable pursuant to immediately exercisable options.

(5)Includes 75,000 shares purchasable pursuant to immediately exercisable
options.

(6)5,875 of such shares are held directly by Mr. Andrews and 5,875 shares are
held directly by Mr. Andrews' wife; Lex Nominees International holds the
remaining 28,794 shares as nominee for a Jersey resident settlement
established for the benefit of Mr. Andrews and his wife and children. Also
includes 44,500 shares purchasable pursuant to immediately exercisable
options.

(7)Includes 5,000 shares purchasable pursuant to immediately exercisable
options.

(8)441 of such shares are held directly by Mr. Burt and 33,347 shares are held
directly by Mr. Burt's wife; Lex Nominees International holds the remaining
28,794 shares as nominee for a Jersey resident settlement established for
the benefit of Mr. Burt and his wife and children. Also includes 165,000
shares purchasable pursuant to immediately exercisable options.

(9)Includes 40,000 shares purchasable pursuant to immediately exercisable
options.

(10)Includes 87,100 shares purchasable pursuant to immediately exercisable
options and warrants.

(11)85,395 of such shares are held directly by Mr. Sharpe, 84,306 shares are
held directly by Mr. Sharpe's wife, 7,618 shares are held by Richard Ian
Sharpe, Patricia Mary Sharpe and Allied Dunbar Pensions Services Limited,
and 15,237 shares are held by Tangara Limited, Trustees of the R Sharpe Life
Interest Settlement.

(12)Includes 130,000 shares purchasable pursuant to immediately exercisable
warrants and 60,000 shares purchasable pursuant to immediately exercisable
options.

42
<PAGE>
DESCRIPTION OF SECURITIES

GENERAL

The Company is authorized to issue 30,000,000 shares of Common Stock, no par
value.

COMMON STOCK

Holders of Common Stock are entitled to one vote, either in person or by
proxy, for each share held of record on all matters submitted to a vote of
shareholders. Except as otherwise provided by law, action can be taken by a
majority of shares entitled to vote at a meeting. Holders of Common Stock are
entitled to dividends when and as may be declared by the Board of Directors out
of funds legally available therefore, and, in the event of liquidation or
dissolution of the Company, are entitled to share ratably in the assets of the
Company remaining after payment of liabilities and payment in respect of any
preferred stock. Holders of Common Stock have no conversion, preemptive or other
subscription rights, and there are no redemption or sinking fund provisions with
respect to the Common Stock. The outstanding shares of Common Stock of the
Company are fully paid and nonassessable.

TRANSFER AGENT

The transfer agent and registrar for the Common Stock is American Securities
Transfer Incorporated. Its telephone number is (303) 234-5300.

LISTING

The Common Stock has been approved for quotation on the Nasdaq National
Market under the trading symbol FFST subject to official notice of issuance.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have 6,058,747 shares of
Common Stock outstanding, assuming no exercise of warrants and options to
purchase approximately 3,388,753 shares of Common Stock outstanding as of the
date of this Prospectus. Of these shares, the 3,000,000 shares sold in the
offering will be freely tradeable without restriction or further registration
under the Securities Act, unless they are purchased by an "affiliate" of the
Company as that term is defined in Rule 144 under the Securities Act (which
sales would be subject to certain limitations and restrictions described below).

The remaining 3,058,747 shares of Common Stock held by existing shareholders
may be sold in the public market only if registered or pursuant to an exemption
from registration such as Rules 144 or 144(k) promulgated under the Securities
Act. Except for those shares sold in the Offering, 2,264,749 shares of the
Company's Common Stock outstanding after the Offering will be subject to
contractual lock-up agreements with the Company or the Underwriters.
Specifically, each of the Company's executive officers, directors and
shareholders holding 5% or more of the Company's Common Stock, who together hold
an aggregate of 1,364,749 shares of the Company's Common Stock, as well as
holders of approximately 900,000 additional shares of Common Stock, have
executed lock-up agreements providing that they will not offer, sell, contract
to sell, grant any option to purchase or otherwise dispose of, or agree to
dispose of, any shares of Common Stock (other than as permitted in this
offering) until six months after the date of this Prospectus at which time an
aggregate of 220,000 of these shares will be released from the lock-up. The
remaining 2,044,749 shares held by these persons will be released from the
lock-up twelve months after the date of this Prospectus.

Taking into account these lock-up agreements and provisions, the number of
shares outstanding prior to the offering that will be available for sale in the
public market will be as follows: (a) approximately 75,000 previously registered
shares of Common Stock will be eligible for sale as of the date of this
Prospectus; (b) approximately 220,000 shares of Common Stock will be eligible
for sale beginning six months after the date of this Prospectus; (c)
approximately 2,044,749, shares of Common Stock will be eligible for sale
beginning twelve months after the date of this Prospectus; and (d) approximately
718,998 remaining shares of Common Stock will be eligible for sale from the date
of this Prospectus through November 1997 upon expiration of their respective
two-year holding periods.

43
<PAGE>

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least two
years (including the holding period of any prior owner except an affiliate) is
entitled to sell in "brokers' transactions" or to market makers, within any
three-month period a number of shares that does not exceed the greater of (a)
one percent of the number of shares of Common Stock then outstanding
(approximately 60,587 shares immediately after this Offering) or (b) the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding the required filing of a Form 144 with respect to such sale. Sales
under Rule 144 are subject to the availability of current public information
about the Company. Under Rule 144(k), a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least three
years, is entitled to sell such shares without having to comply with the manner
of sale, public information, volume limitation or notice filing provisions of
Rule 144. Unless otherwise restricted "144(k)" shares may therefore be sold
immediately upon the completion of this Offering. In addition, Rule 144A would
permit the resale of restricted securities to qualified institutional buyers,
subject to compliance with conditions of the Rule.

The Company is unable to estimate the number of shares that may be sold
under Rule 144 or otherwise because this will depend on the market price for the
Common Stock of the Company, the individual circumstances of the sellers and
other factors. Future sales of shares of Common Stock, or the availability for
sale of substantial amounts of Common Stock, or the perception that such sales
could occur, could adversely affect prevailing market prices for the Common
Stock and could impair the Company's future ability to raise capital through an
offering of its equity securities.

WARRANTS AND OPTIONS

SERIES A WARRANTS. A total of 487,000 Series A Warrants are outstanding as
of the date of this Prospectus. 225,000 Series A Warrants were issued to all
then existing shareholders of the Company in November 1992; 192,000 were issued
in connection with a private placement completed by the Company in 1993 (the
"1993 Placement"); and 70,000 were issued to Mr. Anil Doshi upon the conversion
in July 1994 of a convertible debenture previously issued to Mr. Doshi (the
"Doshi Debenture") (see "Certain Transactions -- Advances from Affiliates").
Each Class A Warrant entitles the holder to purchase one share of Common Stock
at any time prior to December 31, 1997 at a price of $2.00 per share. The
Company has the right to redeem each Class A Warrant for $0.01 if the Company's
Common Stock trades at $9 or more per share for 14 consecutive trading days
prior to December 31, 1997.

SERIES B WARRANTS. A total of 157,200 Series B Warrants are outstanding as
of the date of this Prospectus. 115,200 were issued in connection with the 1993
Placement and 42,000 were issued to Mr. Doshi upon the conversion of the Doshi
Debenture. The terms of the Series B Warrants are identical to those of the
Series A Warrants, except that the exercise price of the Series B Warrants is
$7.50 per share.

OTHER WARRANTS. In connection with a private placement completed in 1994,
the Company issued warrants exercisable at any time prior to August 9, 1997 into
15,425 shares of the Company's Common Stock at $4.00 per share. In connection
with a bridge financing completed by the Company in January 1995 the Company
issued warrants exercisable at any time prior to January 31, 2000 into 197,500
shares of the Company's Common Stock at $4.50 per share. In connection with an
additional bridge financing completed by the Company in May 1995 the Company
issued warrants exercisable between September 1996 and June 2000 into 257,500
shares of the Company's Common Stock at $4.50 per share. In connection with a
private placement completed in May 1995, the Company issued warrants exercisable
at any time prior to May 2000 into 143,957 shares of the Company's Common Stock
at $6.50 per share, along with additional warrants to persons assisting in the
offering exercisable for 6,500 shares of the Company's Common Stock upon
identical terms. In connection with a private placement completed in November
1995, the Company issued warrants exercisable at any time from October 1996 to
October 2001 into 100,000 shares of the Company's Common Stock at $7.50 per
share. Also in November 1995, as payment for services rendered, the Company
issued warrants exercisable at any time from November 1996 to November 2001 into
13,333 shares of the Company's Common Stock at $7.50 per share.

44
<PAGE>
INCENTIVE OPTIONS. In November 1994 the Company issued options to purchase
a total of 1,260,875 shares of the Company's Common Stock to various employees
and consultants. These options are exercisable at the price of $4.00 per share,
and expire between September and November, 1999. In August and November 1995,
the Company issued additional options to purchase a total of 725,463 shares of
the Company's Common Stock to various employees and consultants, which options
are exercisable at the price of $5.00 per share, and expire August 1, 2000.

OTHER OPTIONS. In August, 1995 options to purchase 24,000 shares of the
Company's Common Stock at the price of $4.40 per share (expiring five years from
issuance) were issued to a consultant pursuant to a contractual obligation.

45
<PAGE>
UNDERWRITING

The Underwriters named below have severally agreed, subject to the terms and
conditions contained in the Underwriting Agreement, to purchase from the Company
the number of shares of Common Stock set forth opposite their respective names.

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
------------------------------ -----------
<S> <C>
Kaufman Bros., L.P............ 1,800,000
First Albany Corporation...... 1,200,000
-----------
Total..................... 3,000,000
-----------
-----------
</TABLE>

The Underwriting Agreement provides that the several Underwriters are
obligated to purchase all of the 3,000,000 shares of Common Stock offered by the
Underwriters hereby (other than shares which may be purchased under the
over-allotment option), if any are purchased. The Underwriters have advised the
Company that the Underwriters propose to offer the shares to the public
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession of
$0.24 per share and that such dealers may reallow a concession of $0.10 per
share to certain other dealers. After the public offering, the offering price
and the concessions may be changed by the Underwriters.

The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day after the date of the Underwriting Agreement, to
purchase up to 450,000 additional shares of Common Stock at the public offering
price less underwriting discounts and commissions, all as set forth on the cover
page of this Prospectus. The Underwriters may exercise the option only to cover
over-allotments, if any, in the sale of shares of Common Stock in this Offering.
To the extent that the Underwriters exercise the option, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them as shown in the foregoing table bears to the 3,000,000 shares of Common
Stock offered hereby.

The Company has agreed to pay to the Underwriters a non-accountable expense
allowance of two percent of the gross proceeds of the Offering ($345,000 if the
Underwriters' over-allotment option is not exercised and $396,750 if the
Underwriters' over-allotment option is exercised in full), of which $25,000 has
been paid to date. If the Offering is not consummated, the Underwriters will be
entitled to be reimbursed for actual out-of-pocket expenses, on an accountable
basis only, up to $50,000, inclusive of the amount paid to date. The Company has
also agreed to pay all expenses in connection with registering or qualifying the
Common Stock offered hereby for sale under the laws of the states in which the
Common Stock is sold by the Underwriters (including expenses of counsel retained
for such purposes by the Underwriters) as well as certain expenses associated
with information meetings.

The Company has agreed to sell to the Underwriters, or their designees,
warrants (the "Underwriters' Warrants") to purchase an aggregate of 300,000
shares of the Company's Common Stock at an aggregate purchase price of $300.00.
The exercise price per Underwriters' Warrant, subject to anti-dilution
adjustment, is equal to 165% of the public offering price per share of Common
Stock offered hereby. The Underwriters' Warrants expire on the fifth anniversary
of the closing date of the Offering. The Underwriters' Warrants may not be
transferred or exercised for one year from the closing date of the Offering,
except for transfers to officers of the Underwriters or members of the
underwriting or selling group and/or their officers or partners, if any. The
Underwriters' Warrants become exercisable during the four-year period commencing
one year from the closing date of the Offering (the "Warrant Exercise Term").
During the Warrant Exercise Term, the holders of the Underwriters' Warrants are
given, at nominal cost, the opportunity to profit from an increase in the market
price of the Company's Common Stock. The Company has granted the Underwriters
certain registration rights with respect to the Underwriters' Warrants. All
registration rights will terminate seven years from the closing date of the
Offering.

46
<PAGE>
Except as set forth below, the Company, its officers and directors, and
stockholders who hold in excess of 5% of the Company's Common Stock, as well as
holders of approximately 900,000 additional shares of Common Stock, have agreed
that they will not, directly or indirectly, offer, sell, offer to sell, contract
to sell, grant any option to purchase or otherwise sell or dispose (or announce
any offer, sale, offer or sale, contract of sale, grant of any option to
purchase or any other sale or disposition) any shares of Common Stock or other
capital stock of the Company or any securities convertible into, or exercisable
or exchangeable for, any shares of Common Stock or other capital stock of the
Company for a period of 365 days after the date of this Prospectus without the
prior written consent of Kaufman Bros., L.P., on behalf of the Underwriters.
Notwithstanding the foregoing, upon notice to the Kaufman Bros., L.P., 220,000
shares in the aggregate may be sold 180 days after the date of this Prospectus.
See "Shares Eligible for Future Sale."

The public offering price of the Common Stock offered hereby was determined
through negotiations between the Company and the Underwriters. Among the factors
considered in making such determination were the prevailing market conditions,
the Company's fiscal and operating history and condition, the Company's
prospects and the prospects of its industry, the management of the Company, the
market price of securities for companies in businesses similar to that of the
Company and the recent trading activity and prices of shares of Common Stock on
the Nasdaq SmallCap Market.

Kaufman Bros., L.P. became registered as a broker-dealer in July, 1995.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.

LEGAL MATTERS

Certain legal matters with respect to the legality of the issuance of the
Common Stock offered hereby will be passed upon for the Company by Miller &
Holguin, Los Angeles, California. As of the date of this Prospectus, Miller &
Holguin beneficially own 32,083 shares of the Company's Common Stock and hold
options and warrants for the purchase of an additional 22,708 shares of the
Company's Common Stock. Certain legal matters will be passed upon for the
Underwriters by Fulbright & Jaworski L.L.P., New York, New York.

EXPERTS

The consolidated financial statements as of January 31, 1996 and for the
year ended January 31, 1996, included in this Prospectus and the Registration
Statement have been audited by KPMG, independent auditors, as stated 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 said firm
as experts in auditing and accounting. The consolidated financial statements as
of January 31, 1995 and for each of the years in the two year period ended
January 31, 1995, included in this Prospectus and the Registration Statement
have been audited by AJ. Robbins, PC., independent auditors, as stated 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 said firm
as experts in auditing and accounting.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), with
respect to the Common Stock offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement
and to the schedules and exhibits filed therewith. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such

47
<PAGE>
reference. A copy of the Registration Statement may be inspected without charge
at the principal office of the Commission, 450 5th Street, N.W., Washington,
D.C. 20549, and copies of the material contained therein may be obtained from
the Commission upon payment of applicable copying charges.

The Company is subject to the reporting and other informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Commission.
Such reports and other information may be inspected and copied at the public
reference facilities maintained by the Commission at the offices of the
Commission at Room 1024, 450 5th Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at 7 World Trade Center, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained by written
request to the Public Reference Section of the Commission at 450 5th Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Common Stock is quoted on
the Nasdaq SmallCap Market and copies of the aforementioned materials may be
inspected at the office of the National Association of Securities Dealers, Inc.,
at 1735 K Street, N.W., Washington, D.C. 20006.

The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov. that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.

The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors and make
available copies of quarterly reports for the first three quarters of each
fiscal year containing unaudited financial information.

48
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----

<S> <C>
Independent Auditors' Report Covering the Consolidated Financial Statements as of and for the year ended
January 31, 1996.......................................................................................... F-2

Independent Auditors' Report Covering the Consolidated Financial Statements as of January 31, 1995 and for
each of the years in the two year period ended January 31, 1995........................................... F-3

Consolidated Financial Statements:

Consolidated Balance Sheets as of January 31, 1995 and 1996 and April 30, 1996 (unaudited)............... F-4

Consolidated Statements of Operations for the Years Ended January 31, 1994, 1995 and 1996 and for the
three month periods ended April 30, 1995 and 1996 (unaudited)........................................... F-5

Consolidated Statements of Changes in Stockholders' Equity for the Years Ended January 31, 1994, 1995 and
1996 and for the three month period ended April 30, 1996 (unaudited).................................... F-6

Consolidated Statements of Cash Flows for the Years Ended January 31, 1994, 1995 and 1996 and for the
three month periods ended April 30, 1995 and 1996 (unaudited)........................................... F-7

Notes to the Consolidated Financial Statements........................................................... F-9
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
4Front Software International, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of 4Front
Software International, Inc. and subsidiaries as of January 31, 1996 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards 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 audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of 4Front
Software International, Inc. and Subsidiaries as of January 31, 1996 and the
results of their operations and their cash flows for the year then ended, in
conformity with United States generally accepted accounting principles.

KPMG
Chartered Accountants
Registered Auditors

London, England
April 9, 1996

F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
and Stockholders
4Front Software International, Inc.
and Subsidiaries

We have audited the consolidated balance sheet of 4Front Software
International, Inc., and Subsidiaries as of January 31, 1995, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the years in the two year period ended January 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of 4Front
Software International, Inc. and Subsidiaries as of January 31, 1995, and the
results of their operations and their cash flows for each of the years in the
two year period ended January 31, 1995, in conformity with generally accepted
accounting principles.

AJ. Robbins PC
Certified Public Accountants
and Consultants
Denver, Colorado
April 24, 1995

F-3
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
APRIL 30
1996
JANUARY 31 JANUARY 31 --------------
1995 1996
-------------- -------------- (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash........................................................... $ 1,242,249 $ 1,391,644 $ 561,410
Accounts receivable, net of allowance for doubtful accounts of
$33,000, $79,000 and $90,000 respectively..................... 3,371,138 7,533,188 7,921,124
Deposits....................................................... 61,783 37,250 34,164
Inventories.................................................... 1,286,094 3,339,998 3,838,941
Prepaid expenses............................................... 178,600 396,623 315,103
Deferred offering costs........................................ 260,253 338,595 571,119
Income taxes receivable........................................ -- 160,166 159,064
Other current assets........................................... 188,205 266,582 287,006
-------------- -------------- --------------
Total current assets......................................... 6,588,322 13,464,046 13,687,931
PROPERTY AND EQUIPMENT, net...................................... 433,584 905,976 917,333
INVESTMENT IN AND ADVANCES TO EQUITY INVESTEE.................... 518,432 248,048 239,125
RECEIVABLE, RELATED PARTY........................................ 634,905 644,356 644,356
INTANGIBLE ASSETS, net........................................... 711,281 2,074,400 2,012,530
OTHER ASSETS..................................................... 1,000,575 606,594 576,380
-------------- -------------- --------------
TOTAL ASSETS..................................................... $ 9,887,099 $ 17,943,420 $ 18,077,655
-------------- -------------- --------------
-------------- -------------- --------------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................... $ 2,339,528 $ 6,644,065 $ 7,026,679
Accrued liabilities............................................ 661,337 1,559,673 1,406,804
Stockholder advances........................................... 619,672 391,842 391,842
Lines of credit -- bank........................................ 607,090 1,482,763 2,017,991
Notes payable (including amounts with related party of
$480,000, $980,000 and $980,000, respectively)................ 1,779,147 1,695,403 1,301,234
Capital lease obligations, current portion..................... 60,913 54,888 45,897
Income taxes payable........................................... 179,341 374,688 427,053
Deferred revenue............................................... 760,834 2,546,604 2,119,495
-------------- -------------- --------------
Total current liabilities.................................... 7,007,862 14,749,926 14,736,995
CAPITAL LEASE OBLIGATIONS, less current portion.................. 74,306 92,718 78,150
-------------- -------------- --------------
TOTAL LIABILITIES................................................ 7,082,168 14,842,644 14,815,145
-------------- -------------- --------------

COMMITMENTS AND CONTINGENCIES:

STOCKHOLDERS' EQUITY:
Common stock, no par value, 30,000,000 shares authorized,
2,511,325, 3,005,108 and 3,058,747 shares issued and
outstanding, respectively..................................... 5,810,709 6,972,674 6,973,210
Accumulated (deficit).......................................... (3,226,648) (3,878,599) (3,680,416)
Cumulative foreign currency translation adjustment............. 220,870 6,701 (30,284)
-------------- -------------- --------------
Total stockholders' equity................................... 2,804,931 3,100,776 3,262,510
-------------- -------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................... $ 9,887,099 $ 17,943,420 $ 18,077,655
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JANUARY 31,
---------------------------------------------
1994 1995 1996
------------- -------------- -------------- FOR THE THREE MONTHS ENDED
APRIL 30,
-----------------------------
1995 1996
------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................................. $ 2,836,539 $ 11,240,081 $ 32,248,697 $ 4,644,935 $ 10,550,238
------------- -------------- -------------- ------------- --------------
Cost of revenues......................... 1,281,453 6,814,383 20,807,858 2,798,776 7,279,141
Write down of software development
costs................................... -- -- 755,184 -- --
------------- -------------- -------------- ------------- --------------
GROSS PROFIT............................. 1,555,086 4,425,698 10,685,655 1,846,159 3,271,097
------------- -------------- -------------- ------------- --------------

OPERATING EXPENSES:
Selling, general and administrative
expenses.............................. 1,116,802 3,565,063 9,566,257 1,502,211 2,712,078
Depreciation........................... 61,212 132,743 356,379 68,551 80,959
Amortization........................... 1,696 82,870 203,938 13,628 61,870
------------- -------------- -------------- ------------- --------------
Total operating expenses............. 1,179,710 3,780,676 10,126,574 1,584,390 2,854,907
------------- -------------- -------------- ------------- --------------

INCOME BEFORE INTEREST EXPENSE, INCOME
TAXES AND SHARE OF RESULTS IN EQUITY
INVESTEE................................ 375,376 645,022 559,081 261,769 416,190

INTEREST INCOME (EXPENSE):
Interest income........................ -- 11,624 14,189 -- 3,841
Interest expense....................... (65,577) (153,518) (258,421) (109,386) (103,614)
------------- -------------- -------------- ------------- --------------
Total interest expense............... (65,577) (141,894) (244,232) (109,386) (99,773)
------------- -------------- -------------- ------------- --------------
INCOME BEFORE INCOME TAXES AND SHARE OF
RESULTS IN EQUITY INVESTEE.............. 309,799 503,128 314,849 152,383 316,417

SHARE OF RESULTS IN EQUITY INVESTEE:
Write down of investment in and
advances to equity investee........... -- -- (581,770) -- --
Share of operating (loss) of equity
investee.............................. -- -- (179,246) -- (52,173)
------------- -------------- -------------- ------------- --------------
Total share of results in equity
investee............................ -- -- (761,016) -- (52,173)
------------- -------------- -------------- ------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES........ 309,799 503,128 (446,167) 152,383 264,244
INCOME TAXES............................. 5,561 148,000 205,784 38,096 66,061
------------- -------------- -------------- ------------- --------------
NET INCOME (LOSS)........................ $ 304,238 $ 355,128 $ (651,951) $ 114,287 $ 198,183
------------- -------------- -------------- ------------- --------------
------------- -------------- -------------- ------------- --------------
NET INCOME (LOSS) PER COMMON SHARE....... $ 0.25 $ 0.20 $ (0.24) $ 0.05 $ 0.07
------------- -------------- -------------- ------------- --------------
------------- -------------- -------------- ------------- --------------
Weighted average number of common shares
outstanding............................. 1,198,202 1,812,853 2,742,614 2,534,580 3,011,068
------------- -------------- -------------- ------------- --------------
------------- -------------- -------------- ------------- --------------
</TABLE>

See accompanying notes to the consolidated financial statements.

F-5
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK CURRENCY
---------------------------- ACCUMULATED TRANSLATION
SHARES AMOUNT (DEFICIT) ADJUSTMENT TOTAL
------------ -------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1993.......... 1,130,000 $ 2,708,719 $ (3,886,014) $ 185,444 $ (991,851)
Stock issued in private placement,
net of offering costs............. 72,000 205,753 -- -- 205,753
Additional stock issuable under
1993 private placement............ 115,200 -- -- -- --
Stock issued to acquire K2 Group... 100,000 400,000 -- -- 400,000
Net income for the year............ -- -- 304,238 -- 304,238
Foreign currency translation
adjustment........................ -- -- -- (10,486) (10,486)
------------ -------------- --------------- ------------- --------------
BALANCE, JANUARY 31, 1994.......... 1,417,200 3,314,472 (3,581,776) 174,958 (92,346)
Conversion of debenture............ 112,000 350,000 -- -- 350,000
Exercise of stock options.......... 57,500 38,352 -- -- 38,352
Stock issued in private placement,
net of offering costs............. 773,625 1,768,385 -- -- 1,768,385
Stock issued for services.......... 18,750 75,000 -- -- 75,000
Additional shares issued to acquire
K2 Group.......................... 112,500 225,000 -- -- 225,000
Stock issued to bridge loan
holders........................... 19,750 39,500 -- -- 39,500
Net income for the year............ -- -- 355,128 -- 355,128
Foreign currency translation
adjustment........................ -- -- -- 45,912 45,912
------------ -------------- --------------- ------------- --------------
BALANCE, JANUARY 31, 1995.......... 2,511,325 5,810,709 (3,226,648) 220,870 2,804,931
Stock issued to acquire Compass.... 192,556 385,112 -- -- 385,112
Stock issued to bridge loan
holders........................... 25,750 51,500 -- -- 51,500
Stock issued in private placement,
net of offering costs............. 262,144 665,353 -- -- 665,353
Stock issued for services.......... 13,333 60,000 -- -- 60,000
Net (loss) for the year............ -- -- (651,951) -- (651,951)
Foreign currency translation
adjustment........................ -- -- -- (214,169) (214,169)
------------ -------------- --------------- ------------- --------------
BALANCE, JANUARY 31, 1996.......... 3,005,108 6,972,674 (3,878,599) 6,701 3,100,776
Exercise of stock options.......... 53,639 536 -- -- 536
Net income for period
(unaudited)....................... -- -- 198,183 -- 198,183
Foreign currency translation
adjustment........................ -- -- -- (36,985) (36,985)
------------ -------------- --------------- ------------- --------------
BALANCE, APRIL 30, 1996
(UNAUDITED)....................... 3,058,747 $ 6,973,210 $ (3,680,416) $ (30,284) $ 3,262,510
------------ -------------- --------------- ------------- --------------
------------ -------------- --------------- ------------- --------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JANUARY 31, FOR THE THREE MONTHS ENDED
------------------------------------------- APRIL 30,
1994 1995 1996 ----------------------------
------------- ------------- ------------- 1995 1996
------------- -------------
(UNAUDITED) (UNAUDITED)
------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM (TO) OPERATING
ACTIVITIES:
Net income (loss)..................... $ 304,238 $ 355,128 $ (651,951) $ 114,287 $ 198,183
Adjustments to reconcile net income
(loss) to net cash
provided (used) by operating
activities
Depreciation........................ 61,212 132,743 356,379 68,551 80,959
Amortization........................ 1,696 82,870 203,938 13,628 61,870
Write down of software development
costs.............................. -- -- 755,184 -- --
Write down of investments in and
advances to equity
investee........................... -- -- 581,770 -- --
Share of operating (loss) of equity
investee........................... -- -- 179,246 -- 52,173
Stock issued for services........... -- 75,000 60,000 -- --
(Gain) loss on disposal of fixed
assets............................. -- -- (35,851) 6,448 (19,448)
(Increase) decrease in accounts
receivable......................... (570,717) (251,000) (525,404) 209,713 (387,936)
(Increase) decrease in deposits..... (221,262) 232,252 24,533 1,338 3,086
(Increase) decrease in
inventories........................ (104,606) 226,718 (347,923) (380,170) (498,943)
(Increase) decrease in prepaid
expenses........................... (60,891) 63,729 (71,492) (63,512) 81,520
Increase in income taxes............ 54,887 124,454 204,781 33,206 53,467
(Increase) in other current
assets............................. (37,500) (72,369) (78,377) (153,594) (20,424)
(Increase) decrease in receivable --
related party...................... (8,015) (626,890) (9,451) 3,199 --
Increase (decrease) in accounts
payable............................ 466,723 (597,205) 1,876,174 210,129 382,614
Increase (decrease) in accrued
liabilities........................ 171,268 (314,381) 542,589 148,705 (152,869)
Increase (decrease) in deferred
revenue............................ 5,083 88,572 515,312 131,076 (427,109)
------------- ------------- ------------- ------------- -------------
Net cash provided (used) by
operating activities............... 62,116 (480,379) 3,579,457 343,004 (592,857)
------------- ------------- ------------- ------------- -------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JANUARY 31, FOR THE THREE MONTHS ENDED
------------------------------------------- APRIL 30,
1994 1995 1996 ----------------------------
------------- ------------- ------------- 1995 1996
------------- -------------
(UNAUDITED) (UNAUDITED)
------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM (TO) INVESTING
ACTIVITIES:
Purchase of equipment................. (48,724) (248,445) (405,634) (35,736) (101,762)
Proceeds from disposal of equipment... -- 287,069 177,517 12,245 28,894
Acquisition of subsidiaries, including
related expenses..................... (11,442) (391,280) (1,614,111) (76,735) --
Investment in Actiontrac, Inc......... -- (500,000) -- -- --
Investment in and advances to equity
investee............................. (60,157) (410,173) (444,704) (109,217) (43,250)
Software development costs............ (140,207) (277,792) (383,112) (97,730) --
(Increase) decrease in other assets... -- 35,924 (24,018) 416 30,214
------------- ------------- ------------- ------------- -------------
Net cash (used) by investing
activities......................... (260,530) (1,504,697) (2,694,062) (306,757) (85,904)
------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM (TO) FINANCING
ACTIVITIES:
(Decrease) increase in lines of
credit-bank.......................... (2,082) 19,568 (653,463) (362,684) 535,228
Proceeds from notes payable........... -- 1,506,364 500,000 -- --
Repayment of notes payable............ (14,676) (459,039) (583,744) (417,024) (394,169)
(Repayment of) proceeds from
stockholders' advances............... (172,033) 412,526 (227,830) (2,300) --
(Increase) in deferred offering
costs................................ (219,088) (25,131) (78,342) (168,158) (232,524)
Payments of capital lease
obligations.......................... -- (82,657) (143,805) (28,578) (23,559)
Net proceeds from exercise of share
options.............................. -- -- -- -- 536
Net proceeds from issuance of common
stock................................ 205,753 1,806,737 665,353 154,760 --
------------- ------------- ------------- ------------- -------------
Net cash (used) provided by
financing activities............... (202,126) 3,178,368 (521,831) (823,984) (114,488)
------------- ------------- ------------- ------------- -------------
Effect of exchange rate changes on
cash................................. (3,153) 45,912 (214,169) (13,637) (36,985)
------------- ------------- ------------- ------------- -------------
Net (decrease) increase in cash....... (403,693) 1,239,204 149,395 (801,374) (830,234)
Cash at beginning of period........... 406,738 3,045 1,242,249 1,242,249 1,391,644
------------- ------------- ------------- ------------- -------------
Cash at end of period................. $ 3,045 $ 1,242,249 $ 1,391,644 $ 440,875 $ 561,410
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------

Supplemental disclosure of cash flow
information:
Cash paid for interest expense........ $ 65,577 $ 153,518 $ 258,421 $ 90,123 $ 103,614
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-8
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1996 AND APRIL 30, 1996
(INFORMATION FOR THE THREE-MONTH PERIODS ENDED APRIL 30, 1995 AND 1996 IS
UNAUDITED)

1. NATURE OF BUSINESS
4Front Software International, Inc. and subsidiaries (the "Company" or "4
Front") is a UK based specialised computer services company. The Company
provides key elements of distributed computing, including systems development
and integration, storage and client-server solutions and products, as well as
hardware and software support and help desk services.

2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries from the date of acquisition. All significant
intercompany balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and assumptions.

The accompanying interim unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.

In the opinion of management, the accompanying interim unaudited condensed
consolidated financial statements contain all material adjustments consisting
only of normal recurring adjustments necessary to present fairly the financial
condition, the results of operations, the changes in stockholders' equity and
cash flows of 4Front Software International Inc. for the interim periods
presented.

The results of the three months ended April 30, 1995 and 1996 are not
necessarily indicative of the results of operations for the full year.

The Company's wholly owned subsidiaries are as follows; all of the
subsidiaries, unless otherwise indicated, are registered in England:

<TABLE>
<S> <C>
ACTIVE SUBSIDIARIES
K2 SYSTEMS PLC 4FRONT GROUP PLC
XANADU SYSTEMS LIMITED CCG HOLDINGS LIMITED
4FRONT SERVICES LIMITED COMPASS COMPUTER GROUP LIMITED
(formerly CI Support Limited)
MORTLAKE SOFTWARE PLC 4FRONT HOLDINGS, INC. (A DELAWARE
CORPORATION)

INACTIVE SUBSIDIARIES
MITRE TECHNOLOGY LIMITED COMMUNIC8 LIMITED
COMMUNIC8 SOFTWARE EUROPE LIMITED K2 DESIGN LIMITED
Closed during fiscal 1995 Sold during fiscal 1995
DESIGN BASE PROPERTIES LIMITED COMMSWARE LIMITED
Sold during fiscal 1995 Sold during fiscal 1995
</TABLE>

F-9
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) REVENUE RECOGNITION

Revenue from the sale of computer hardware and software is generally
recognised when the product is shipped and in the case of software licenses only
after the license has been signed and further obligations are not significant.
Where fixed fee contracts involve significant obligations after shipment of the
product, revenue is recognised on the percentage-of-completion method of
accounting.

Revenues from engineering, implementation and training are recognised as the
services are performed. Revenues from maintenance agreements are recognised
ratably over the terms of the agreements.

In all such cases, the Company only recognizes revenue when collection of
the related receivable is probable.

b) DEPOSITS

Amounts paid by the Company as advances against future purchases of software
are recorded as deposits until such time as the software is received.

c) INVENTORIES

Inventories are stated at the lower of cost (first in, first out method) or
market value. Inventories consist primarily of computer hardware, software and
work in progress. Work in progress represents labour and material costs incurred
for customer software projects.

d) DEFERRED OFFERING COSTS

Deferred offering costs represent costs incurred for proposed offerings of
common stock. Costs are charged against the proceeds of the offering, if
successful, or to operations, if unsuccessful.

e) DEPRECIATION

Property and equipment are stated at cost. Equipment held under capital
leases is stated at the present value of minimum lease payments at the inception
of the lease. The Company provides for depreciation of equipment using the
straight-line method over the estimated useful lives of the respective assets,
which range from three to five years. Equipment held under capital leases is
amortized using the straight-line method over the lease term.

f) INVESTMENT IN AND ADVANCES TO EQUITY INVESTEE

The investment in the ActionTrac International partnership has been
accounted for using the equity method under which the Company's results include
its 50% share of the partnership's operating profits or losses in accordance
with the terms of the partnership agreement.

g) FOREIGN CURRENCY TRANSLATION

The Company considers the pound sterling to be the functional currency of
its UK operations. The reporting currency of the Company is the US dollar;
accordingly, all amounts included in the consolidated financial statements have
been translated into US dollars.

<TABLE>
<CAPTION>
YEARS ENDING JANUARY 31, THREE MONTHS ENDING
APRIL 30,
------------------------------- ----------------------------
EXCHANGE RATES 1994 1995 1996 1995 1996
- ------------------------ --------- --------- --------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Average................. 1.50 1.544 1.575 1.567 1.512
Period end.............. 1.50 1.588 1.511 1.580 1.501
</TABLE>

F-10
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
All assets and liabilities of the UK operations are translated into US
dollars using the exchange rates in effect on reporting dates for assets and
liabilities. Income and expenses are translated at averaged rates in effect for
the periods presented. The cumulative currency translation adjustment is reflect
as a separate component of stockholders' equity on the consolidated balance
sheet.

Foreign currency transaction gains and losses are included in the
consolidated results of operations for the periods presented. To date,
transaction gains and losses have not been significant.

h) INTANGIBLE ASSETS

In connection with acquisitions accounted for under the purchase method (see
note 4), the Company recorded goodwill based on the excess of the purchase price
paid (cost of the acquisition) over the estimated fair value of the identifiable
tangible assets and liabilities of the acquiree on the date of purchase.
Goodwill is reported at cost, net of accumulated amortization, and is being
amortized over its estimated useful life of ten years.

i) SOFTWARE DEVELOPMENT COSTS

The Company charges all costs of establishing technological feasibility of
software products to research and development expense as incurred. Thereafter,
software development costs are capitalized and reported at the lower of
unamortized cost or net realisable value. Capitalisation of software development
costs ceases and amortization over the estimated useful life (not to exceed
three years) of the product commences when the product is available for general
release to customers. Any write down resulting from the periodic testing of net
realizable value is recorded as accelerated amortization.

The total amounts of software development costs capitalized during the years
ended January 31, 1994, 1995 and 1996, all of which relate to the StreamZ
communication software product, were $140,207, $277,792, and $337,185
respectively, and $97,730 and $0 for the three month periods ending April 30,
1995 and 1996, respectively.

j) INCOME TAXES

The company records income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognised for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognised in income in the period that includes the
enactment date. Valuation allowances are recognized for deferred tax assets if
it is considered more likely than not that all or some portion of the deferred
tax assets will not be realized. Income tax expense is tax payable for the
current period and the change during the year in deferred tax assets and
liabilities.

k) DEFERRED REVENUE

Deferred revenue is comprised of maintenance and support fees to be earned
in the future on agreements existing and billed for at the balance sheet date.

l) NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share is calculated by dividing net income
(loss) by the weighted average number of common stock and common stock
equivalents outstanding during the period. When common stock equivalents have an
anti-dilutive effect on earnings (loss) per share, they are excluded from the
calculation. Separate disclosure of primary and fully diluted net income (loss)
per common share is not presented as they are not materially different.

F-11
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
m) CONCENTRATION OF CREDIT RISK

At January 31, 1995 and 1996, cash includes L691,806 ($1,098,588) and
L919,278, ($1,389,030) respectively and at April 30, 1996 L374,106 ($561,384)
held in demand deposit accounts in United Kingdom banks where deposits are not
insured by the government. These balances are subject to foreign currency
fluctuations, which in the past have not been material.

n) COSTS RELATING TO THE ISSUANCE OF STOCK WARRANTS AND OPTIONS

The cost resulting from the issuance of warrants and options to employees
under a compensatory plan is based on their intrinsic value at the measurement
date, which is equivalent to the excess of the fair market value of the
Company's common stock over the exercise price of the related warrants or
options.

The cost resulting from the issuance of warrants and options to
non-employees as part of transactions involving the exchange of products or
services, or contracts to provide such, is based on their intrinsic value at the
date of grant.

o) RECLASSIFICATIONS

Certain amounts in the prior year consolidated financial statements have
been reclassified for comparative purposes to conform with the current year
presentation. These reclassifications had no effect on results of operations.

p) ADOPTION OF NEW STANDARDS

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation. The Statement establishes financial accounting and reporting
standards for stock-based employee compensation plans. The Statement defines a
fair value based method of accounting for stock option plans whereby
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period. Under the new Statement, companies
may continue to measure compensation cost of stock-based plans using the current
accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees. Companies electing to remain with the accounting
in Opinion No. 25 must make pro forma disclosures of net income and earnings per
share as if the fair value based method of accounting defined if the Statement
were applied. The Statement is effective in 1996 and the Company has adopted its
provisions as of February 1, 1996. The Company has adopted the alternative
accounting treatment allowed by the Standard and measures compensation cost in
accordance with the provisions in Opinion No. 25. The adoption of the Statement
has no effect on the Company's results of operations, financial position or cash
flows.

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. The Statement
establishes accounting standards for the determination of impairment of
long-lived assets, certain identifiable intangibles and goodwill. The Statement
requires the long-lived assets and certain intangibles be reviewed for
impairment using an estimate of future undiscounted cash flows compared to the
carrying amount of the assets. If impaired, an impairment loss shall be
recognized for the amount which the carrying amount exceeds the fair value of
the assets. The Statement is effective in 1996 and the Company has adopted its
provisions as of February 1, 1996. The adoption of the Statement has no material
impact on the results of operations, financial position or cash flows of the
Company.

4. ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES
In February 1993 CommsWare Limited ("CommsWare") was formed as a
wholly-owned subsidiary and the Company acquired 100% of DesignBase Properties
Limited ("DesignBase") through an internal

F-12
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES (CONTINUED)
reorganisation of management shareholdings. During February 1994, the Company
sold its investment in CommsWare and DesignBase to a company controlled by a
stockholder for the net book value of the net assets of approximately $23,613
and the assumption of $620,743 of liabilities. The resulting receivable is
non-interest bearing, due in 1996, and is guaranteed by another stockholder (see
note 18).

Effective January 14, 1994, the Company purchased all of the outstanding
shares of K2 Group Plc and subsidiaries ("K2"), a United Kingdom Company, plus
the 25% minority interest in a 75% owned subsidiary (Xanadu Systems Limited) of
K2. Consideration for the K2 and Xanadu shares consisted of the issuance of
100,000 shares of the Company's common stock and the payment of $156,750
(L105,222) to the selling stockholders (including $15,550 (L10,445) used by K2
to retire all outstanding K2 stock options), plus an agreement to pay an
additional $141,250 (L94,778) to the selling stockholders and to deliver an
additional 62,500 shares of common stock in the event that certain profit
targets were achieved for the six month period ending April 1994 and the year
ending October 31, 1994. These profit targets were met and the Company
accordingly paid the additional amount and issued the additional shares. The
Company also issued a further 50,000 shares of common stock to selling
stockholders in consideration for a waiver by them of certain conditional rights
which might have required the Company to repurchase the shares of common stock
issued in the acquisition in specified circumstances.

K2, through its wholly owned subsidiaries which include K2 Systems Plc,
Mitre Technology Limited, K2 Design Limited, and Xanadu Systems Limited, is a
direct sales company in the United Kingdom that supplies computer solutions for
accounting, distribution and office automation, develops customized software,
provides hardware and software support, distributes X Terminals, workstations
and connectivity software and supplies, and document image processing software
and hardware.

During November 1994 the Company sold its investment in K2 Design Limited to
an unrelated entity for the net book value of the assets of $8,700.

Effective November 1, 1994 the Company purchased all of the outstanding
shares of CI Support Limited ("CI"), a specialist hardware maintenance company,
for $159,000 (L102,500) from a company controlled by the stockholders of the
Company. CI is a hardware and network maintenance company which was formed by
three stockholders of the Company ("NBH") to acquire an existing client base
from an affiliated company. CI was operated by NBH for approximately one month
prior to selling all of the outstanding stock in CI to the Company. The Company
has recorded its investment in CI at the historical cost of NBH. On April 1,
1996 CI changed its name to 4Front Services Limited.

Effective March 31, 1995, the K2 Group Plc became the principal holding
company of the UK operations and changed its name to 4Front Group Plc. At the
same time, 4Front Group Plc changed its name to Mortlake Software Limited.

Effective April 6, 1995, the Company acquired all the common stock of CCG
Holdings Limited ("CCG") for cash consideration of L550,000 ($880,000) together
with the issuance of 83,720 shares of common stock and an agreement to deliver
up to an additional 108,836 shares of common stock valued at $2 per share in the
event that certain profit targets were achieved. In addition, the Managing
Director of CCG received options on 23,680 shares of common stock exercisable at
$0.01 and was also entitled to receive additional options on up to 29,959 shares
of common stock exercisable at $0.01 upon similar terms as to the entitlement of
the CCG sellers to the performance related shares detailed above. On December
13, 1995 the board of directors of the Company deemed that all of the profit
targets had been achieved and additional shares and options were duly issued.

The business of CCG, carried out through its principal and wholly owned
subsidiary, Compass Computer Group Limited (Compass), is the supply of computer
hardware and software products for use

F-13
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES (CONTINUED)
within the commercial, industrial, scientific and government market places. It
specialises in data storage systems, high end computers, networking products and
associated technical consultancy and support together with maintenance services,
all provided throughout the UK.

5. INVENTORIES
Inventories consist of the following:

<TABLE>
<CAPTION>
JANUARY 31
----------------------------- APRIL 30
1995 1996 1996
------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Computer hardware.............................. $ 1,054,416 $ 2,823,753 $ 3,341,306
Computer software.............................. 96,698 374,341 403,097
Work in progress............................... 134,980 141,904 94,538
------------- -------------- --------------
$ 1,286,094 $ 3,339,998 $ 3,838,941
------------- -------------- --------------
------------- -------------- --------------
</TABLE>

6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:

<TABLE>
<CAPTION>
JANUARY 31
---------------------------- APRIL 30
1995 1996 1996
------------ -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Vehicles........................................ $ 264,097 $ 337,282 $ 224,901
Furniture, fixtures and equipment............... 173,943 349,309 305,911
Computer equipment.............................. 309,242 1,416,779 1,310,456
------------ -------------- --------------
747,282 2,103,370 1,841,268
Less accumulated depreciation................... (313,698) (1,197,394) (923,935)
------------ -------------- --------------
$ 433,584 $ 905,976 $ 917,333
------------ -------------- --------------
------------ -------------- --------------
</TABLE>

7. INVESTMENT IN AND ADVANCES TO EQUITY INVESTEE
On December 7, 1993, the Company and ActionTrac, Inc., a United States
corporation specialising in help desk products and services for the computer
software industry, formed a partnership named ActionTrac International
(ActionTrac) which is equally owned by the Company and ActionTrac, Inc.
ActionTrac holds the world rights outside the United States, Canada and Mexico
to the proprietary help desk systems, services and software of ActionTrac, Inc.
The purpose of the partnership is to expand ActionTrac, Inc.'s current North
American operations on a worldwide basis. On May 13, 1994 ActionTrac established
ActionTrac UK Limited as a wholly owned UK subsidiary.

Under the terms of the partnership agreement, the Company was required to
make a capital contribution of $500,000, which was used to establish ActionTrac
UK Limited and to develop the UK help desk operations, and ActionTrac, Inc.
contributed a ten year renewable license for the help desk software. During the
years ended January 31, 1995 and 1996, the Company made further advances to the
partnership amounting to $18,432 and $477,664, respectively. In conjunction with
its participation in the ActionTrac partnership the Company acquired 500,000
shares of restricted ActionTrac, Inc. common stock at $1 per share.

Development of the UK help desk was completed and ActionTrac UK Limited
commenced operations on May 1, 1995. The Company's share of the partnership's
operating loss for the period from May 1, 1995 to January 31, 1996 amounted to
$179,246.

F-14
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. INVESTMENT IN AND ADVANCES TO EQUITY INVESTEE (CONTINUED)
Due to the accelerated pace of technological change (including recent
advances in telecommunications systems and help desk software technology) and
the increasing diversity in the market for help desk services the Company
re-evaluated the net realisable value of its investment in and advances to the
ActionTrac International partnership. As a result the Company has recorded a
write down of $581,770 in the year to January 31, 1996. In the three months
ended April 30, 1996 the Company advanced $43,250 to the partnership and
accounted for $(52,173) as its 50% share of the loss of the partnership for the
three month period ended April 30, 1996.

8. OTHER ASSETS
Other assets consist of the following:

<TABLE>
<CAPTION>
JANUARY 31
-------------------------- APRIL 30
1995 1996 1996
------------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Investment in ActionTrac, Inc., at cost............ $ 500,000 $ 500,000 $ 500,000
Software development costs......................... 417,999 -- --
Other.............................................. 82,576 106,594 76,380
------------- ----------- ------------
$ 1,000,575 $ 606,594 $ 576,380
------------- ----------- ------------
------------- ----------- ------------
</TABLE>

Capitalized software development costs relate to the development of the
StreamZ product aimed at providing a cost-effective communication solution for
critical business applications. Due to recent advances in communication software
technology and current announcements by major software companies of new products
with enhanced security features, the Company re-evaluated the net realisable
value of its capitalized software development costs. As a result, accelerated
amortisation of $755,184 was recorded during 1996 to write off all previously
capitalized software development costs.

9. ACCRUED LIABILITIES
Accrued liabilities are as follows:

<TABLE>
<CAPTION>
JANUARY 31
-------------------------- APRIL 30
1995 1996 1996
----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Valued Added Tax................................... $ 390,472 $ 1,011,989 $ 1,029,929
Payroll taxes...................................... 266,415 523,811 350,927
Other.............................................. 4,450 23,873 25,948
----------- ------------- -------------
$ 661,337 $ 1,559,673 $ 1,406,804
----------- ------------- -------------
----------- ------------- -------------
</TABLE>

F-15
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. LINES OF CREDIT -- BANK

<TABLE>
<CAPTION>
JANUARY 31
-------------------------- APRIL 30
1995 1996 1996
----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
The Company has a L450,000 (approximately $680,000) line of credit
(overdraft protection) with a United Kingdom bank. This facility is
due for review in May 1996. Interest is charged at 1.5% above bank
base rates on amounts under L100,000 ($150,000) and 3% above bank base
rates on amounts greater than L100,000. Bank base interest rate was 6%
at January 31, 1996. The facility was not utilised at January 31, 1996
and the Company had cash reserves within the facility. The line of
credit is collateralized by the assets of the Company................. $ 356,542 $ -- $ 562,899
The Company has a bank loan with a United Kingdom bank. The loan is
repaid at a rate of L8,075 (approximately $12,800) per month. Interest
is charged at 1.5% above the bank base rate of 6% at January 31, 1996.
The loan is collateralized by the assets of the Company and guaranteed
by a principal stockholder............................................ 250,548 107,607 70,395
The Company has a L997,000 (approximately $1,500,000) line of credit
(overdraft protection) with a United Kingdom bank which includes
L150,000 ($227,000 approximately) VAT and duty deferment on the import
of goods into the United Kingdom. Interest is charged at 2.5% above
bank base rate of 6% at January 31, 1996. The line of credit is
secured on all assets of Compass and a first charge on the life
assurance policy of a director of Compass in the sum of L750,000
($1,133,000 approximately)............................................ -- 1,375,156 1,384,697
----------- ------------- -------------
$ 607,090 $ 1,482,763 $ 2,017,991
----------- ------------- -------------
----------- ------------- -------------
</TABLE>

F-16
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. NOTES PAYABLE
Notes payable are as follows:

<TABLE>
<CAPTION>
JANUARY 31
---------------------------- APRIL 30
1995 1996 1996
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to a United Kingdom factoring company representing
advance payments on eligible trade receivables. The Company remains
liable for the advance payments in the event the receivables are not
collected. The Company pays the factoring company an administrative
fee of 0.22% of the receivable balance and interest at 2.25% above
bank base rates. Bank base rate was 6% at January 31, 1996.......... $ 989,147 $ 715,403 $ 321,234
Notes payable on bridge financing for the Company acquisition program
and working capital (see notes 17 and 18). The notes bear interest
at a rate of 10% per annum and are due on the first to occur of June
14, 1996 or the date of successful consummation of a public offering
of the Company's common stock....................................... 790,000 980,000 980,000
------------- ------------- -------------
$ 1,779,147 $ 1,695,403 $ 1,301,234
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

12. CONVERTIBLE DEBENTURE
In November 1992 the Company's majority stockholder converted $350,000 of
advances to a convertible debenture. The debenture was convertible into 1.6
shares of common stock and 1.6 purchase warrants (of which 62.5% will be
exercisable at $2 per share and the balance will be exercisable at $7.50 per
share) for every $5 converted. The debenture was non-interest bearing through
July 31, 1994 and was converted on July 31, 1994 into 112,000 shares and 112,000
warrants.

13. INCOME TAXES
The Company files a separate US federal income tax return for its domestic
operations and a UK income tax return for each of its foreign subsidiaries. The
United Kingdom subsidiaries compute taxes at rates in effect in that country.
Deferred federal income taxes are not provided on the undistributed earnings of
the Company's foreign subsidiaries to the extent the Company intends to
permanently reinvest such earnings in the United Kingdom.

At January 31, 1996 the Company has available for future use approximately
$380,000 of net operating loss carryforwards expiring from 2004 through 2011.

F-17
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. INCOME TAXES (CONTINUED)
The provision for income taxes is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
--------- ----------- -----------
<S> <C> <C> <C>
Current:
US Federal.............................................. $ -- $ 30,000 $ --
State and local......................................... -- -- --
Foreign................................................. 5,561 148,000 205,784
--------- ----------- -----------
5,561 178,000 205,784
--------- ----------- -----------
Deferred:
US Federal.............................................. -- (30,000) --
State and local......................................... -- -- --
Foreign................................................. -- -- --
--------- ----------- -----------
-- (30,000) --
--------- ----------- -----------
Total provision for income taxes...................... $ 5,561 $ 148,000 $ 205,784
--------- ----------- -----------
--------- ----------- -----------
</TABLE>

Income tax expense for the years ended January 31, 1994, 1995 and 1996
differed from the amounts computed by applying the UK statutory tax rate of 33%
to pre-tax income (loss) as a result of the following:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED JANUARY 31,
--------------------------------------
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Expected tax at UK rate of 33%.................................. $ 102,234 $ 166,032 $ (147,235)
Effect of write-downs of non-revenue items...................... -- -- 500,346
Use of net operating loss carryforwards......................... -- -- (156,000)
Other, net...................................................... (96,673) (18,032) 8,673
----------- ----------- ------------
Actual tax charge............................................... $ 5,561 $ 148,000 $ 205,784
----------- ----------- ------------
----------- ----------- ------------
</TABLE>

The tax effects of temporary differences and net operating loss
carryforwards that give rise to deferred tax assets and (liabilities) are as
follows at January 31:

<TABLE>
<CAPTION>
1995 1996
---------- ------------
<S> <C> <C>
Net operating loss carryforwards............................................. $ 56,000 $ 144,000
Other deferred tax assets.................................................... -- 82,000
---------- ------------
Total deferred tax assets.................................................... 56,000 226,000
Valuation allowance.......................................................... (56,000) (226,000)
---------- ------------
Deferred tax assets, net..................................................... -- --
Total deferred tax (liabilities)............................................. $ -- $ --
---------- ------------
---------- ------------
</TABLE>

Due to the uncertainty surrounding the ability of the Company, primarily its
domestic operations, to generate taxable income in future periods, the Company
has recorded a valuation allowance against its otherwise recognisable deferred
tax assets.

At April 30, 1996 the Company has provided income tax of $66,061 on the
profits of its operations, (April 30, 1995 $38,096.)

F-18
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases vehicles under capital leases which expire over the next
two years. The gross amount of capital leases included in property and equipment
is as follows:

<TABLE>
<CAPTION>
JANUARY 31
------------------------ APRIL 30
1995 1996 1996
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Vehicles, gross...................................... $ 177,435 $ 214,154 $ 183,999
Less accumulated depreciation........................ (78,558) (58,678) (43,091)
----------- ----------- ------------
Net.................................................. $ 98,877 $ 155,476 $ 140,908
----------- ----------- ------------
----------- ----------- ------------
</TABLE>

Future minimum lease payments under capital leases together with the present
value of net minimum lease payments at January 31, 1996 are as follows:

<TABLE>
<S> <C>
1997............................................................. $ 67,253
1998............................................................. 68,536
1999............................................................. 35,252
---------
Total minimum lease payments..................................... 171,041
Less amount representing interest................................ (23,435)
---------
Present value of net minimum lease payments...................... 147,606
---------
Less current portion............................................. 54,888
---------
$ 92,718
---------
---------
</TABLE>

The Company also has certain non-cancellable operating leases for premises
and various equipment and vehicles. Total rental expenses for operating leases
for the years ending January 31, 1994, 1995 and 1996 amounted to $59,000,
$347,836 and $961,455 respectively.

The principal lease commitments for premises are as follows:

-the Company's K2 subsidiary leases an office/warehouse facility in Watford,
England for $197,000 (L124,000) per year. The lease, on which there are
periodic reviews, expires August 2013.

-the Company's CI subsidiary occupies an office/warehouse facility in
Aylesbury, England for $22,000 (L14,600) expiring June 2000.

-the Company's Compass subsidiary leases an office/warehouse facility in
Newbury, England for L258,000 ($390,000) per year. The lease which expires
in September 2007 is subject to periodic reviews. The Compass subsidiary
also leases an office/warehouse in Warrington England for L12,550 ($22,000)
per year. The lease on which there are periodic reviews expires in December
2012.

F-19
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Obligations under operating leases are as follows for each of the years
ending January 31:

<TABLE>
<S> <C>
1997........................................................... $1,093,848
1998........................................................... 974,804
1999........................................................... 715,120
2000........................................................... 613,725
2001........................................................... 600,530
Thereafter..................................................... 5,736,657
----------
Total.......................................................... $9,734,684
----------
----------
</TABLE>

LITIGATION

The Company is involved in various claims and legal proceedings arising in
the ordinary course of business. In the opinion of management, the ultimate
settlement of these matters will not have a material adverse effect on the
Company's consolidated financial position or consolidated results of its
operations.

15. STOCKHOLDERS' EQUITY

RECENT STOCK TRANSACTIONS

During 1993 and 1994 the Company received $960,000 ($679,962 net of offering
costs) from the sale of 192,000 shares of common stock and 192,000 common stock
purchase warrants, in a private placement offering. Pursuant to the terms of
this offering, investors subsequently received an additional 115,200 shares of
common stock and 115,200 common stock purchase warrants without payment of
further consideration. The 192,000 common stock purchase warrants are
exercisable through December 31, 1997 at $2.00 per share. The 115,200 common
stock purchase warrants are exercisable through December 31, 1997 at $7.50 per
share. The warrants are redeemable by the Company on 30 days notice to the
warrant holders for $0.01 per warrant if the common stock closes at $9.00 per
share or more for 14 consecutive trading days.

On January 14, 1994 the Company acquired all of the outstanding shares of K2
and subsidiaries, a United Kingdom company, plus the 25% minority interest in a
75% owned subsidiary (Xanadu) of K2 in exchange for 100,000 shares of the
Company's common stock and cash consideration payable to the selling
stockholders.

On July 31, 1994 the Company's Chairman converted a $350,000 convertible
debenture into 112,000 shares and 112,000 warrants (see note 12). Of the common
stock purchase warrants, 70,000 are exercisable at $2.00 per share and 42,000
are exercisable at $7.50 per share and they all expire in December 1997.

On July 31, 1994 the current and former officers and directors of the
Company exercised 57,500 options to purchase common stock of the Company for
$38,352 (see note 16).

During 1994 the Company received $3,094,500 ($1,768,385 net of offering
costs) from the sale of 773,625 shares of common stock in a private placement
offering. In connection with this offering the Company agreed to issue 15,425
underwriter warrants, exercisable until August 1997 at $4 per share.

As of January 31, 1995 the Company's counsel, Miller & Holguin, converted
$75,000 of fees into 18,750 shares of the Company's common stock valued at $4.00
per share.

Following the acquisition of K2 Group Plc, the Company issued an additional
112,500 of the Company's common stock to the former owners of K2 Group Plc,
being partly the performance related

F-20
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. STOCKHOLDERS' EQUITY (CONTINUED)
additional consideration payable in accordance with the terms of the acquisition
and partly consideration for the waiver of conditional repurchase rights
contained in the original acquisition agreement (see note 4).

On January 31, 1995 the Company issued 19,750 shares of common stock as part
of a bridge financing valued at $2.00 per share (see note 17). In connection
with the bridge financing the Company issued warrants convertible at any time
prior to January 31, 2000 into 197,500 shares of the common stock at $4.50 per
share.

Effective April 6, 1995 the Company acquired all of the outstanding shares
of CCG Holdings Limited (Compass) in exchange for 192,556 shares of the
Company's common stock and cash consideration payable to the selling
stockholders.

During May 1995 the Company issued 25,750 shares of common stock as part of
a bridge financing valued at $2.00 per share. In connection with this bridge
financing the Company issued warrants convertible at any time from September
1996 to June 2000 into 257,500 shares of common stock at $4.50 per share (see
note 17).

During 1995 the Company received $1,166,074 ($665,353 net of offering costs)
from the sale of 262,144 shares of common stock in private placement offerings.
In connection with these placements the Company issued warrants convertible at
any time prior to May 2000 into 150,457 shares of common stock at $6.50 per
share and futher warrants convertible between October 1996 and October 2001 into
100,000 shares of common stock at $7.50 a share.

In November 1995, the Company's Counsel, Miller & Holguin, converted $60,000
of fees into 13,333 shares of the Company's common stock valued at $4.50 per
share and were issued with warrants convertible at any time from November 1996
to November 2001 into 13,333 shares of common stock at $7.50 a share.

The number of warrants outstanding are summarised as follows at January 31:

<TABLE>
<CAPTION>
1995 1996
------------------ -----------------
NUMBER OF SHARES OF COMMON STOCK
DATE CONVERTIBLE CONVERSION PRICE TO BE ISSUED ON CONVERSION
<S> <C> <C> <C>
Prior to December 31, 1997................... $ 2.00 487,000 487,000
Prior to December 31, 1997................... 7.50 157,200 157,200
Prior to August 9, 1997...................... 4.00 15,425 15,425
Prior to January 31, 2000.................... 4.50 197,500 197,500
September 1996 to June 2000.................. 4.50 -- 257,500
Prior to May 2000............................ 6.50 -- 150,457
October 1996 to October 2001................. 7.50 -- 113,333
</TABLE>

16. STOCK OPTIONS
Pursuant to a non-qualified plan approved by the Board of Directors in 1989,
all employees of the Company may be granted options to purchase common stock of
the Company at a price not less than the fair market value on the date of grant.
The term of the option shall be no longer than five years from the date the
option is granted. The Company has reserved 75,000 of the authorised but
unissued shares of common stock for issuance upon exercise of the options.
Pursuant to the above plan 57,500 options were granted as of July 27, 1989 to
current and former officers and directors of the Company. The options were
exercised in July 1994 for $38,352.

F-21
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. STOCK OPTIONS (CONTINUED)
In September and November 1994 the Company, through another stock option
plan, has issued 1,260,875 options to management, employees and consultants to
purchase common stock at an exercise price of $4.00 per share. These options are
exercisable through periods ending September and November 1999.

In August and November 1995 the Company through another stock option plan
has issued 725,463 options to management, employees and consultants to purchase
common stock at an exercise price of $5.00 per share. These options are
exercisable through August and November 2000.

In August 1995, options to purchase 24,000 shares of common stock at a price
of $4.40 per share (expiring August 2000) were issued to a consultant pursuant
to a contractual obligation.

On May 20, 1996 the Company's Board of Directors approved The 1996 Equity
Incentive Plan which is subject to approval by the Company's stockholders. The
plan provides for grants of stock options to certain nonexecutive directors,
officers, employees, and independent consultants.

17. BRIDGE FINANCING
The cash portion of the Compass acquisition was funded primarily from the
proceeds of a $790,000 bridge loan which was completed in January, 1995 and a
private equity placement completed in May, 1995 in which gross proceeds of
approximately $630,000 were raised. This bridge loan, plus interest, fell due on
May 31, 1995. Some of the balance of the May, 1995 placement proceeds were
utilized to repay certain participants in the January, 1995 bridge loan, while
the other participants either converted their bridge loan into equity as offered
in the private equity placement or, in the case of the holders of approximately
$530,000 of the January, 1995 bridge loan amount, chose to extend their
participation into a new bridge loan of $1,030,000 which was completed by the
Company in June, 1995. The proceeds of this June, 1995 bridge loan were used to
fund acquisition costs and to provide additional general working capital for the
Company. This bridge loan, plus interest, was originally due on December 14,
1995. $50,000 of this amount was repaid, with the balance extended to the first
to occur of June 14, 1996 or the completion of a public offering of the
Company's Common Stock (see notes 11 and 15).

18. RELATED PARTY TRANSACTIONS
In addition to transactions with related parties discussed throughout the
notes to the consolidated financial statements, the following related party
transactions have taken place.

CONTROL OF THE COMPANY

Principal ownership and control of the Company rests with the Chairman of
the Board and Chief Executive Officer.

RECEIVABLE-RELATED PARTY

As of January 31, 1995 and 1996 the Company is owed $634,905 and $644,356
respectively by a company controlled by a stockholder. The receivable is
non-interest bearing, due in 1996 and guaranteed by another stockholder (see
Note 4).

STOCKHOLDERS ADVANCES

As of January 31, 1995 and 1996 the Company's majority stockholders were
owed $619,672 and $391,842 respectively, in non-interest, unsecured advances,
due on demand, subordinated to the collection of a receivable from a company
controlled by a stockholder (see Note 4).

F-22
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. RELATED PARTY TRANSACTIONS (CONTINUED)
ACCOUNTING SERVICES

During the periods ended January 31, 1994, 1995, 1996 the Company
compensated one of its officers/stockholders for services in the amount of
approximately $14,600, $19,472 and $29,818 respectively. At January 31, 1995 and
1996, $9,032 and $0 respectively, was owed to this related party.

OFFICE SPACE

The Company rents office space in Denver, Colorado provided by an
officer/stockholder of the Company at $500 per month. The lease is on a
month-to-month basis.

PRIVATE PLACEMENT COSTS

During the years ended January 31, 1995 and 1996 the Company's
Chairman/Chief Executive Officer paid offering costs and costs related to the
ActionTrac partnership on behalf of the Company of $180,000 and $0 respectively.
As of January 31, 1995 and 1996 these amounts have been included in stockholder
advances.

BRIDGE LOANS

A relative of the Company's Chairman participated in the bridge financing
arrangements described in note 17 and as of January 31, 1995 and 1996 was owed
$480,000 and $980,000, respectively. In addition, the relative received a total
of 36,500 shares of Common Stock and warrants representing 365,000 shares of
Common Stock in connection with the bridge loan arrangements of January and June
1995.

OTHER

Prior to his appointment as a non-executive director of the Company, Mr.
A.K. Ross purchased 15,000 shares of the Company's Common Stock and warrants to
purchase 15,000 shares for total consideration of $66,000 in the Company's May,
1995 private placement of securities. In June, 1995, Mr. Ross loaned $50,000 to
the Company, in consideration of which the Company issued to Mr. Ross 1,250
shares of Common Stock and warrants to purchase 12,500 shares. The $50,000 loan
has been repaid to Mr. Ross, with interest.

In April 1996 Mr. J. Jervis the Managing Director of Compass, exercised his
options to purchase 53,639 shares of Common Stock at the exercise price of $0.01
(see note 4).

19. PENSION PLAN
The Company sponsors, through its 4Front Group subsidiary, a money purchase
pension plan (voluntary) covering its Chairman/Chief Executive Officer and Chief
Operating Officer. The Company makes periodic contributions of approximately
$18,000 (L12,000) per year under the plan, although no contribution was made in
the year ended January 31, 1996. The Company through its Compass, K2 and CI
subsidiaries also sponsor money purchase pension plans (voluntary) covering
certain directors and employees. There are no accrued pension contributions at
January 31, 1995 and 1996 under any plan.

F-23
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20. FOREIGN OPERATIONS
Included in the accompanying consolidated financial statements are the
following amounts for the United Kingdom operations at:

<TABLE>
<CAPTION>
JANUARY 31,
----------------------------- APRIL 30,
1995 1996 1996
------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Cash.................................................... $ 1,099,477 $ 1,389,030 $ 561,384
Accounts receivable..................................... 3,371,138 7,533,188 7,921,124
Inventories............................................. 1,286,094 3,339,998 3,838,941
Deposits................................................ 61,783 37,250 34,164
Other current assets.................................... 327,305 620,469 549,056
Income taxes receivable................................. -- 160,166 159,064
Property and equipment, net............................. 433,584 905,976 917,333
Receivable, related party............................... 634,905 644,356 644,356
Other assets............................................ 500,575 106,594 76,380
------------- -------------- --------------
$ 7,714,861 $ 14,737,027 $ 14,701,802
------------- -------------- --------------
------------- -------------- --------------
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JANUARY 31, APRIL 30
1994 1995 1996 -----------------------------
------------- -------------- -------------- 1995 1996
------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 2,836,539 $ 11,240,081 $ 32,248,697 $ 4,644,935 $ 10,550,238
Cost of revenues........ 1,281,453 6,814,383 20,807,858 2,798,776 7,279,141
Write down of software
development costs...... -- -- 755,184 -- --
Expenses................ 1,225,888 4,021,652 10,262,447 1,528,456 2,720,925
Income taxes............ 5,561 148,000 205,784 38,096 66,061
------------- -------------- -------------- ------------- --------------
Net income.............. $ 323,637 $ 256,046 $ 217,424 $ 279,607 $ 484,111
------------- -------------- -------------- ------------- --------------
------------- -------------- -------------- ------------- --------------
</TABLE>

During the year ended January 31, 1994, two customers accounted for 12% and
10% of total revenues.

During the year ended January 31, 1995 and 1996 no customers accounted for
10% or more of total revenues.

F-24
<PAGE>
4FRONT SOFTWARE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

21. SUPPLEMENTAL INFORMATION TO CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
NON-CASH INVESTING AND FINANCING ACTIVITIES

<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
-------------------------------------
1994 1995 1996
----------- ----------- ----------- THREE MONTHS
ENDED
APRIL 30
1996
------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Stock issued to acquire K2 Group............................ $ 400,000 $ 225,000 $ -- $ --
Debt issued to acquire K2 Group............................. 298,000 -- -- --
----------- ----------- ----------- ------------
Total consideration issued to acquire K2 Group.............. $ 698,000 $ 225,000 $ -- $ --
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Deferred offering costs financed by stockholder advances.... $ 14,136 $ -- $ -- $ --
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Convertible debenture exchanged for stock................... $ -- $ 350,000 $ -- $ --
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Stock issued to bridge financing holders.................... $ -- $ 39,500 $ 51,500 $ --
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Purchase of equipment financed with capital lease
obligations................................................ $ -- $ 120,154 $ 72,294 $ --
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Stock issued to acquire Compass............................. $ -- $ -- $ 385,112 $ --
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>

F-25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
The Company.................................... 12
Use of Proceeds................................ 13
Price Range of Common Stock and Dividend
Policy........................................ 14
Capitalization................................. 15
Dilution....................................... 15
Selected Consolidated Financial Information.... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 18
Business....................................... 26
Management..................................... 33
Certain Transactions........................... 39
Principal Stockholders......................... 41
Description of Securities...................... 43
Shares Eligible for Future Sale................ 43
Underwriting................................... 46
Legal Matters.................................. 47
Experts........................................ 47
Available Information.......................... 47
Index to Financial Statements.................. F-1
</TABLE>

3,000,000 SHARES
COMMON STOCK

[LOGO]

4FRONT SOFTWARE
INTERNATIONAL, INC.

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

PROSPECTUS

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

KAUFMAN BROS., L.P.
FIRST ALBANY CORPORATION

JUNE 14, 1996

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