VIASOFT INC /DE/, 10-K, 1996-09-30

VIASOFT INC /DE/
10-K, 1996-09-30
PREPACKAGED SOFTWARE

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended
June 30, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission File Number 0-25472

VIASOFT, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-2892506
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3033 North 44th Street, Phoenix, Arizona 85018
(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code (602) 952-0050

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

At August 30, 1996, the aggregate market value of common stock held by
non-affiliates of the Registrant was approximately $388,707,758 based upon the
closing sale price of the Common Stock on such date, as reported on The Nasdaq
Stock Market, and as adjusted for the two-for-one stock split in the form of a
stock dividend as of that date.

At August 30, 1996, the number of shares of Common Stock outstanding was
16,793,124, as adjusted for the stock split effective as of that date.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the 1996 Annual
Meeting of Stockholders are incorporated by reference in Part III.
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VIASOFT, INC.

TABLE OF CONTENTS
Page
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PART I

Item 1. Business....................................................... 1

Item 2. Properties..................................................... 13

Item 3. Legal Proceedings.............................................. 14

Item 4. Submission of Matters to a Vote of Security Holders............ 14

Executive Officers of the Registrant........................... 14

PART II

Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters................................... 15

Item 6. Selected Consolidated Financial Data........................... 17

Item 7. Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations........................... 18

Item 8. Consolidated Financial Statements and Supplementary Data....... 23

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures.......................... 40
PART III

Item 10.Directors and Executive Officers
of the Registrant............................................. 41

Item 11.Executive Compensation......................................... 41

Item 12.Security Ownership of Certain Beneficial Owners
and Management................................................ 41

Item 13.Certain Relationships and Related Transactions................. 41

PART IV

Item 14.Exhibits, Financial Statement
Schedules and Reports on Form 8-K............................. 42

SIGNATURES................................................................. 45

VIASOFT, Analytical Engine, Application Knowledge Repository, AKR, Existing
Systems Workbench, ESW, VIA/Export, VIA/Insight, VIA/Partition, VIA/Renaissance,
VIA/SmartEdit, VIA/SmartDoc, VIA/SmartTest, VIA/Recap, VIA/Alliance,
VIA/SmartAccess, VIA/ValidDate, VIASOFT's Estimate 2000, VIASOFT's Insourcing,
VIASOFT's Enterprise 2000, VIASOFT's Impact 2000, VIASOFT's Plan 2000, VIASOFT's
Operation 2000, VIASOFT's Legacy Transitions and ESW/PC are trademarks, service
marks or registered trademarks of the Company. This report also includes trade
names, trademarks and references to intellectual property owned by other
companies.
<PAGE>
PART I

Item 1. Business

General

VIASOFT, Inc. ("VIASOFT" or the "Company") provides business solutions
designed to help Fortune 1000 and similarly sized organizations worldwide
understand, manage and evolve the software applications that run their
businesses. These solutions consist of a highly integrated suite of software
products and specialized professional consulting services.

All of the Company's business solutions are based on VIASOFT's proprietary
technology, the Existing Systems Workbench ("ESW"), an integrated suite of
software development tools. ESW, which is also the Company's primary software
product line, supports the IBM MVS operating system, providing a broad spectrum
of technology for use on mainframe computers. VIASOFT's business solutions
include VIASOFT's Insourcing for reducing costs and improving the productivity
of managing enterprise applications, VIASOFT's Enterprise 2000 for solving the
year 2000 problem, and VIASOFT's Legacy Transitions for reusing and evolving
enterprise applications for new initiatives.

During the last fiscal year, the Company has seen significant growth in the
demand for its products and services in the year 2000 market. VIASOFT's
Enterprise 2000 accounted for 75% of professional services revenue during fiscal
1996. The demand for year 2000 solutions is also driving a significant portion
of product license revenue. For further discussions of the year 2000 market and
its effect on Company performance, see "VIASOFT Service Solutions,"
"Competition," "Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations" and "Factors that May Affect Future
Results."

VIASOFT was founded in 1983 under the name Software Renovation Technology as
a California corporation. In 1986, the Company changed its name to VIASOFT, Inc.
and reincorporated in Delaware. The Company's executive offices are located at
3033 North 44th Street, Phoenix, Arizona 85018, and its telephone number is
(602) 952-0050.

VIASOFT Products

VIASOFT offers a range of products that enable organizations to maintain and
redevelop their existing COBOL applications. Substantially all of the Company's
software license revenues are provided by its primary product line, the Existing
Systems Workbench ("ESW").

Existing Systems Workbench

ESW is an integrated suite of software tools based on the Company's core
technology, the Analytical Engine and the Application Knowledge Repository. ESW
products are available as a complete suite or as individual products that
address each phase of the existing applications maintenance and redevelopment
life-cycle.

The Analytical Engine extracts and builds comprehensive information on
programs and applications, including overall structure, logic, data and control
flow, data definitions and usage, cross references, interface information,
standards exceptions, system metrics and business functions. This information is
automatically stored in the Application Knowledge Repository, which makes the
information immediately available for use with all ESW products.

The Analytical Engine and Application Knowledge Repository support an
integrated suite of products with a common look and feel that promotes
management of multi-task projects without interruption and eliminates the need
to switch between different vendors' products for separate tasks. The Analytical
Engine and Application Knowledge Repository technology were designed to promote
integration and extensibility. The Company
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believes these features enable it to develop new ESW capabilities, features and
technologies more efficiently and effectively than competitors with
non-integrated product lines. The Company plans to continue to build on the core
ESW technology to address customers' existing applications requirements as they
evolve.

Each component product of ESW is described below:

VIA/Alliance: Application Understanding. VIA/Alliance is designed to
determine the scope of an application and the number of changes required to
deliver a specified enhancement by analyzing different components of an
application and revealing the interrelationships between these components. For
example, if an organization needs to modify one of its applications for tracking
parts by increasing a part number field from nine to twelve digits, VIA/Alliance
can be used to report the number and location of required code changes and other
application components affected by the proposed changes. VIA/Alliance is also
used to plan and estimate maintenance, enhancement and redevelopment projects
and to facilitate projects involving file or database conversions, enabling and
populating repositories, or integrating new applications and packaged software.
In September 1995, the Company introduced a new release of VIA/Alliance designed
to make installation easier and faster, enhance its automated impact analysis
capabilities, improve support for CICS, IMS and DB2, reduce CPU and storage
requirements and provide support for Computer Associates International, Inc.'s
Endevor/MVS source management environment. A new export facility to Texas
Instruments Inc.'s Composer by IEF application development environment was also
included in this release.

Visual/Recap: Portfolio Analysis and Reporting. Visual/Recap is the decision
support component of VIASOFT's Existing Systems Workbench. It consists of two
components: a graphical analysis and adhoc reporter, and an MVS-based portfolio
analysis tools. Visual/Recap allows information systems managers to measure and
gauge objectively the quality, complexity and business value of applications and
programs by providing industry-accepted measurements and standards, including
automation of the counting of function points. Using Visual/Recap, managers can
support feasibility and cost benefit analyses of proposed projects, estimation
of maintenance costs and productivity, allocation of resources and scheduling of
new software development projects.

VIA/Insight: Program Understanding. VIA/Insight automates the process of
analyzing and understanding complex COBOL logic. VIA/Insight is designed to
enable users to view and track COBOL program logic interactively. VIA/Insight
reveals information concerning a program's organization, structure, data
relationships and logical execution paths, in addition to program anomalies and
exceptions. Program execution is simulated by VIA/Insight to reveal logical
execution paths without data and without executing the program. These facilities
are intended to automate routine maintenance tasks and allow programmers to
assess the impact of changes, estimate the time changes will take and determine
the level of difficulty involved in making proposed changes.

VIA/SmartEdit: Code Change. VIA/SmartEdit is designed to implement desired
program changes without introducing undesirable side effects. This is
accomplished by providing automated, COBOL-intelligent change facilities and
automatic syntax checking in the MVS operating system's ISPF editing
environment. VIA/SmartEdit automatically identifies program components directly
and indirectly related to a proposed program change. The Company believes that
VIA/SmartEdit enables programmers to respond to change requests more rapidly and
with greater confidence in the results than with manual methods.

VIA/Renaissance: Program Re-Engineering. VIA/Renaissance is designed to
isolate and extract specific business functions from a program such as reports,
calculations, computational variables, input/output definitions and transactions
and generate compilable, executable programs or modules. The results provided by
this technology assist in reuse of existing COBOL code, enabling customers to
build libraries of reusable and shared code for new development, modularization
or redevelopment projects. In addition, re-engineered programs or modules can be
transferred to different platforms as part of a system conversion or
client/server implementation.

VIA/SmartTest: Code Testing. VIA/SmartTest is designed to promote speed and
accuracy in code testing and debugging. VIA/SmartTest is designed to analyze a
program's structure, data relationships and execution paths and reveals both the
locations and the underlying causes of bugs and structural problems in program
code. VIA/SmartTest is also designed to allow programmers to monitor and change
program logic, data values and memory interactively from within the test
session, and automatically apply COBOL changes to the source code
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without recompiling. VIA/SmartTest utilizes extensive program information in the
Application Knowledge Repository for access at any time, and provides test
coverage statistics designed to promote thorough testing. VIA/SmartTest is
capable of testing code in multiple languages and environments including COBOL,
PL/I, Assembler and Intersolv's APS programs running in TSO, Batch, Dialog
Manager, IMS and CICS regions. A new option offered during fiscal 1996 is Test
Coverage Analysis (TCA). This option is a mainframe-based structural testing
tool that creates a systematic approach for assessing the quality of testing
performed in the internal operation of programs.

VIA/SmartDoc: Program Documentation. VIA/SmartDoc is designed to synthesize
comprehensive program information directly from the source code and organize it
into convenient reports, graphical charts and listings. VIA/SmartDoc provides
advanced source listings, program structure charts, enhanced data cross-
reference reports, control flow and data flow information and a variety of
industry-accepted software metrics concerning complexity, architecture and
software quality. VIA/SmartDoc is designed to show how and where data items are
defined, modified and used, including how direct and indirect relationships are
referenced, which is useful for field modifications, impact analysis and quality
assurance. By documenting the logic and data flow of COBOL programs,
VIA/SmartDoc provides programmers with the information required to plan and
conduct program re-engineering projects, systems consolidation and migration,
and routine maintenance.

ESW for Windows

VIASOFT offers two products to incorporate personal computers ("PCs") and
workstations operating on the Windows platform into the maintenance and
redevelopment of their existing COBOL applications: ESW/PC and VIA/SmartAccess.
ESW/PC enables users to transfer selected ESW maintenance and redevelopment
functionality from the mainframe to PCs. VIASOFT licenses ESW/PC and markets it
under the Company's private label under an agreement with SEEC, Inc. ("SEEC").
To maintain and redevelop existing mainframe applications in the PC environment,
it is necessary to transfer source code from the mainframe to the PC for
processing and then return the processed source code to the mainframe
environment. VIASOFT's VIA/SmartAccess product is designed to provide a bridge
between the mainframe and the PC by automatically identifying, downloading, and
uploading source code, copy members and database definitions required for
processing on the PC platform.

To date, licenses of the Company's Windows products have not been material
to the Company's results of operations and the Company does not expect
significant sales in the future. See "Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations" and Note 8 of Notes
to Consolidated Financial Statements. In the first quarter of fiscal 1996, the
Company discontinued, due to insufficient market demand, its offering of certain
products that provided selected ESW functionality through cooperative processing
products for IBM's OS/2 environment. The Company did not have any assets as of
June 30, 1995 related to the OS/2 product line.

VIASOFT's Estimate 2000

The Company recently introduced VIASOFT's Estimate 2000 as a separately
available software product and as a new component of VIASOFT's Enterprise 2000
solution. Estimate 2000 is a tool for analyzing and assessing the size of the
programming effort required for year 2000 date conversions. Estimate 2000 is
designed to evaluate year 2000 conversion projects in the IBM MVS COBOL,
Assembler and PL/I mainframe environments, and also provides comprehensive
reports for both management and technical levels. Estimate 2000 is also capable
of analyzing the impact of programming projects unrelated to the year 2000
market that require location of specified numerical or other fields.
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VIASOFT Service Solutions

The Company's specialized professional services provide processes,
technology and expertise to address the complex, large-scale maintenance and
redevelopment requirements of large organizations. VIASOFT's service offerings
have grown significantly, representing 26%, 14% and 10% of total revenues in
fiscal 1996, 1995 and 1994, respectively.

VIASOFT's Enterprise 2000

VIASOFT's Enterprise 2000 is a combination of professional services, the
Company's ESW technology, other Company tools and occasionally third-party
resources designed to help customers address the year 2000 century date
conversion requirements for existing applications. Many existing software
applications employing date representations utilize representations limited to
the last two digits of the year. For example, the year 1996 is typically stored
as "96." These two-digit representations will create problems for existing
systems that perform calculations using dates after 1999. For example, the
representation "00" may be interpreted as "1900," rather than "2000." These
existing applications must be modified to implement date representations that
identify the correct century.

VIASOFT's Enterprise 2000 offering employs a three-phase process designed to
assess the impact of the century date transition on existing applications,
prepare a comprehensive conversion strategy, then implement the necessary
changes. These three phases, Impact 2000, Plan 2000 and Operation 2000, are
offered individually or as a complete program. Through Impact 2000, VIASOFT
determines the scope, size and level of effort needed to implement the year 2000
changes. The Company's Plan 2000 offering identifies the project goals, prepares
a detailed work plan and executes a pilot project. Through Operation 2000,
VIASOFT can manage the implementation and testing of the changes.

The Company's new product, VIASOFT's Estimate 2000, is a component of the
Enterprise 2000 solution that helps automate the analysis of programs and
assessment of the size of the programming effort required for year 2000 date
conversions. See "Products - VIASOFT's Estimate 2000."

VIASOFT's Insourcing

Ongoing application maintenance and redevelopment consumes a large portion
of an organization's information systems personnel and computing resources. Many
organizations seek productivity improvements to address these concerns, and some
organizations may contract with an outside provider, or "outsource," all or part
of their applications maintenance and development. To assist organizations that
desire to increase productivity in their maintenance and redevelopment
activities while avoiding the loss of control over their systems associated with
outsourcing, the Company has developed a solution known as VIASOFT's Insourcing.
VIASOFT's Insourcing combines VIASOFT's ESW technology with onsite professional
services to enable customers to successfully implement enhanced, repeatable
processes for maintenance and redevelopment of existing applications. The
Company believes that the combination of its expertise, technology and
professional services can free significant existing customer programming
resources for redeployment by increasing productivity and reducing the costs of
maintaining existing applications.

VIASOFT's Legacy Transitions

Many organizations have implemented, or are considering, a transition from
exclusive reliance on mainframe computers to the use of the mainframe together
with a client/server or other distributed processing environment for certain
applications. VIASOFT has developed services and technology designed to enable
organizations to reuse existing COBOL applications in new computing
architectures, including client/server environments, and to integrate existing
mainframe applications with these architectures. The Company believes that use
of its technology and services should improve customers' ability to leverage
their existing COBOL applications by increasing flexibility to integrate
mission-critical mainframe applications with new architectures and systems, or
by migrating and reusing existing COBOL code in these new environments.
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The Company has completed successful customer engagements using VIASOFT's
Legacy Transitions solution and is continuing to apply development resources to
these efforts. Revenues from this service solution have not been material to
date.

Training

The Company provides a variety of training services designed to enable
customers to utilize fully the Company's technology solutions. These training
offerings are generally conducted at the customer's site by specialists, and
range from introductory courses in using the Company's products to advanced
techniques courses. The Company also offers customized training for specific
customers and instructs customer personnel to conduct ongoing training of their
information systems staff. In addition to training services, in fiscal 1996 the
Company introduced its first CBT (Computer-Based Training) CD-ROM. ESW Tips and
Techniques is a task-oriented, instructional CD-ROM for Existing Systems
Workbench. It is designed for programmers, supervisors and analysts who are
looking for an efficient, flexible tool for learning how to apply the
functionality of ESW. Revenues from the CD-ROM have not been material to date.

Other Professional Services

Through VIASOFT's Redevelopment Laboratory, the Company provides services
from its Phoenix, Arizona headquarters to customers desiring to implement
specific projects offsite. These services may include re-engineering of
specified programs or modules, COBOL conversion projects and proof of concept
assessments and client/server module development. The Company also provides
portfolio assessment services to establish a baseline from which to measure
changes in productivity and other factors. Revenues from these services have not
been material to date. Additionally, the Company's Redevelopment Laboratory
provides technical assistance to the Solution Providers, which are third-party
service providers with whom the Company has contracted to broaden the
distribution of its products and services in certain markets. See "Sales,
Marketing and Distribution - Solution/Technology Providers."

Customer and Technical Support

The Company offers maintenance for each of its products, entitling the
customer to receive technical support and advice, including problem resolution
services, installation assistance, error corrections and any product
enhancements released during the maintenance period. Under the Company's
standard license agreement for mainframe products, maintenance is provided
without charge for the first year, is renewable on an annual basis, and is
generally priced at a percentage of the then current list price. In the fiscal
years ended June 30, 1996, 1995 and 1994, maintenance fees represented
approximately 33%, 39% and 39%, respectively, of the Company's total revenues.
Maintenance and support services are provided primarily by telephone from
VIASOFT's Phoenix, Arizona, headquarters and the offices of the Company's
international subsidiaries and distributors.

Sales, Marketing and Distribution

VIASOFT markets its products and services principally to Fortune 1000 and
similarly sized organizations worldwide. The Company's marketing efforts are
implemented through its direct sales force, both domestically and
internationally, through its third-party Solution/Technology Providers, both
domestically and internationally, and through a number of foreign independent
distributors located in Europe, the Far East, South Africa, Latin America and
Mexico.

Direct Sales

The Company sells and supports its products and services in North and South
America from its Phoenix, Arizona, headquarters and fourteen field offices in
the United States. As of June 30, 1996, the Company had 30 sales employees
located at Company headquarters and the United States field offices. These
offices cover the territories of Canada, the United States, Mexico, the
remaining countries of Central America and all of South
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America, with the exception of Brazil, where the Company utilizes a distributor.
Internationally, the Company has direct operations in the United Kingdom,
Germany, Australia, Netherlands, Belgium, Luxembourg and Japan. Belgium and
Luxembourg became direct operations in July 1996. As of June 30, 1996, the
Company had a total of 40 employees residing in countries other than the United
States.

International Distributors

VIASOFT markets its products to international customers both directly, as
discussed above, and through independent distributors. Distributors are
authorized by VIASOFT to license the Company's software products to end users.
In addition to its subsidiary offices, the Company markets its products
internationally in 36 countries through 16 independent distributors. To date,
the Company has not offered significant professional services through its
distributors, although in the last year some distributors have also become
Solution Providers.

Solution/Technology Providers

The Company employs third-party relationships to broaden the distribution of
its products and services in certain markets. During fiscal 1996, the Company
established its Solution/Technology Provider Program. These relationships are
with professional services and consulting organizations authorized to use
VIASOFT technology and/or methodology in connection with consulting services
they perform for their customers. Solution Providers are authorized to use both
VIASOFT technology and certain of its service solutions, primarily VIASOFT's
Impact 2000 and VIASOFT's Plan 2000. Technology Providers are authorized to use
VIASOFT technology in performing consulting services for their customers, but
are not authorized to use VIASOFT's service solutions. Generally, the
Solution/Technology Providers pay an initial license fee for the transfer and
use of VIASOFT's service solutions and training in VIASOFT products and
solutions, as well as lease fees or license fees for the use of VIASOFT products
for each engagement with a customer. Some arrangements with Solution Providers
also require payment of royalties on revenue received from performing VIASOFT's
service solutions. These relationships are intended to augment VIASOFT's
internal distribution to expand the reach of its business solutions and obtain
new customers for VIASOFT products. VIASOFT continues to invest resources in
training and supporting these providers. These Solution/Technology Providers are
a relatively new distribution channel for VIASOFT and the Company plans to
pursue additional provider opportunities where appropriate.

Competition

Products

The market for the Company's software products is intensely competitive and
is characterized by rapid change in technology and user needs and the frequent
introduction of new products. Most of the Company's competitors and many
potential competitors have substantially greater financial, marketing and
technology resources than the Company. Major competitors for software product
license sales include Alydaar Software Corporation; Computer Associates
International, Inc.; Compuware Corporation; Intersolv, Inc.; Micro Focus Group
Public Limited Company and Platinum Technology, Inc. The Company believes that
the principal factors affecting competition in its product markets include
compatability with customers' platforms and languages, product functionality,
quality of support, product performance and reliability, ability to respond to
changing customer needs, ease of use and price.

Consulting Services

The market for the type of professional services provided by the Company is
also very competitive. System integrators and application outsourcers, such as
those mentioned above, also compete to perform professional services competitive
to VIASOFT's Insourcing and VIASOFT's Legacy Transitions solutions. These
companies position themselves as long-term business partners, able to lower an
organization's staff and maintenance costs and improve control of information
systems functions with well-established work practices. The principal
competitive factors affecting the market for the Company's professional service
include responsiveness to customer needs,
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availability and productivity of personnel, the ability to demonstrate
achievement of results, depth of technical skills, price and reputation.

The Year 2000 Market

With the growth of the year 2000 market in the last fiscal year,
significant competition has emerged and is expected to increase in the next few
years. The consulting services segment of the market is characterized by low
barriers to entry. The principal competitive factors affecting this market
include functionality, performance and reliability of technology and
methodology, availability and productivity of personnel, the ability to
demonstrate achievement of results, depth of experience in year 2000 projects,
price and reputation. There are generally three categories of competitors for
VIASOFT in the year 2000 market, each focusing on a different market segment.

Software Vendors. Software vendors provide tools targeted for the year 2000
market. Many of these products focus on a particular phase of a year 2000
project, such as inventory and assessment, scanning, parsing, conversion,
testing and documentation. Competitive factors include the tool's compatibility
with its platforms and languages, the vendor's ability to deliver training and
ongoing support during the customer's implementation of the tools, and the value
of the tool to an organization beyond the year 2000. Primary competitors in this
category include Alydaar Software Corporation; Intersolv, Inc.; Micro Focus
Group Public Limited Company; Platinum Technology, Inc. through its affiliation
with ADPAC Corp. and Computer Associates International, Inc.

Consulting Organizations. Competitors in this category are generally small-
to medium-sized consulting firms that have become highly focused on the year
2000 problem. These companies provide supplemental personnel and contract
programming resources to customers and some have licensed tools from software
vendors to enhance their offering. These companies are often selected by
customers based on the skills, experience and process that each firm uses.
Competitors in this category include Data Dimensions, Inc.; Computer Horizons,
Corp.; Keane, Inc.; CIBER, Inc. and Computer Task Group, Inc.

Systems Integrators and Application Outsourcers. Large consulting and
outsourcing firms have also entered the year 2000 market. These are companies
that may already have relationships with customers and are able to include year
2000 conversion services with the maintenance and data processing services they
already provide. They provide a customer with an alternative to managing the
year 2000 conversion project themselves by outsourcing the whole project to an
organization with an established relationship and a working knowledge of the
customer's systems. Some integrators/outsourcers offer licensed tools from
software vendors. Competitors in this category include CapGemini; Computer
Sciences Corp.; Electronic Data Systems Corporation; IBM's Integrated Systems
and Solutions Corp. and most Big Six accounting firms.

Research And Development

VIASOFT is continuing its emphasis on developing new software products and
enhancements in-house, as well as establishing licensing arrangements with third
parties for complementary technologies and acquiring products and technologies
that expand its existing product line. During the fiscal years ended June 30,
1996, 1995 and 1994, research and development expenditures were approximately
$4,237,000, $3,193,000 and $3,291,000, respectively. The Company anticipates
that it will continue to commit substantial resources to research and
development in the future.

Internal Development

VIASOFT's development of new products has been accomplished primarily with
in-house development personnel and resources. As of June 30, 1996, the Company
had 62 employees engaged in product development; of these, 37 were software
developers with the balance divided between customer support, documentation, and
quality assurance. All of these employees are located at the Company's Phoenix,
Arizona, headquarters. In addition to developing new products, the Company
continually updates its existing products through enhancements and new releases.
The Company also continues to develop new products and technologies to
facilitate its service solutions.
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Licensing Arrangements

In fiscal 1996, the Company entered into licensing arrangements with several
vendors to provide additional language support for its ESW products, such as
PL/I, Assembler and Natural, as well as a variety of COBOL dialects. VIASOFT
plans to incorporate these technologies in its own products to allow customers
with various languages within their application portfolios to use ESW. See Note
8 of Notes to Consolidated Financial Statements.

Product Acquisitions

The Company is continuing its efforts to identify products and technologies
that are complementary to the Company's products and services. VIASOFT recently
purchased a process management technology to serve as the delivery platform for
its methodologies and processes that are incorporated into its service
solutions, such as VIASOFT's Insourcing, VIASOFT's Impact 2000 and VIASOFT's
Plan 2000. In August 1996, the Company acquired certain technology to be used as
a new "date bridging" product designed primarily to help reduce time, complexity
and cost of adapting large interrelated applications for the year 2000, by
enabling organizations to make changes to their applications without making
changes to the data files at the same time. It will also be designed to enable
historical and archival data to be accessed beyond year 2000 without having to
convert the files and to help resolve the coordination problem of moving data
information within and between companies. See Note 8 of Notes to Consolidated
Financial Statements.

Product Protection

VIASOFT relies on a combination of copyright, trade secret and trademark
laws, and contractual provisions to establish and protect its rights in its
software products and proprietary technology. The Company protects the source
code version of its products as a trade secret and as an unpublished copyrighted
work. Despite these precautions, it may be possible for unauthorized parties to
copy certain portions of the Company's products or reverse engineer or obtain
and use information that the Company regards as proprietary. The Company has no
patents and existing copyright and trade secret laws offer only limited
protection. Certain provisions of the license and distribution agreements
generally used by the Company, including provisions protecting against
unauthorized use, copying, transfer and disclosure, may be unenforceable under
the laws of certain jurisdictions and the Company is required to negotiate
limits on these provisions from time to time. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights to the same
extent as do the laws of the United States. The Company has been and may be
required from time to time to enter into source code escrow agreements with
certain customers and distributors, providing for release of source code in the
event the Company breaches its support and maintenance obligations, files
bankruptcy or ceases to continue doing business. The Company licenses some of
its products for PCs pursuant to "shrink-wrap" license agreements that are not
negotiated with or signed by licensees and may therefore be unenforceable in
certain jurisdictions.

The Company recently acquired certain "datebridging" technology which is
the subject of a patent application. The Company is currently evaluating the
technology and the patent application and anticipates that it will continue to
prosecute the patent application. At this time there is no estimate of when, if
ever, a patent will issue or the extent of the protection, if any, any such
patent might afford.

The Company's competitive position may be affected by its ability to protect
its proprietary information. However, because the software industry is
characterized by rapid technological change, the Company believes that patent,
trademark, copyright, trade secret and other legal protections are less
significant to the Company's success than other factors such as the knowledge,
ability and experience of the Company's personnel, new product and service
development, frequent product enhancements, customer service and ongoing product
support.

While the Company has no knowledge that it is infringing the proprietary
rights of any third party, there can be no assurance that such claims will not
be asserted in the future with respect to existing or future products. Any such
assertion by a third party could require the Company to pay royalties, to
participate in costly litigation and
8
<PAGE>
defend licensees in any such suit pursuant to indemnification agreements, or to
refrain from selling an alleged infringing product or service.

Employees

The Company had 266 full-time employees as of June 30, 1996, including 107
in sales and marketing, 62 in research, development and support, 66 in
professional services and 31 in corporate operations and administration. The
future success of the Company will depend in large part upon its continued
ability to attract and retain highly skilled and qualified personnel.
Competition for such personnel is intense in the computer software industry,
particularly for talented software developers, service consultants and sales and
marketing personnel. Management anticipates that as the year 2000 approaches,
it will become more and more difficult to recruit and retain experienced
programmers and consultants, as industry sources generally estimate that there
will not be a sufficient number of such persons to fill the demand created by
the year 2000 problem. None of the Company's employees is represented by a
collective bargaining agreement. The Company believes that its relations with
its employees are good.

Factors that May Affect Future Results

The Company's future success will depend significantly on its ability to
enhance its current products and develop or acquire and market new products that
keep pace with rapidly changing technological developments and evolving industry
standards and customer needs. The Company continued to invest resources in
developing new releases and new enhancements and during fiscal 1996 released
VIASOFT's Estimate 2000 and a new option for VIA/SmartTest - Test Coverage
Analysis ("TCA"), as well as new releases of a number of products. In addition
to in-house development efforts, the Company is actively seeking to acquire new
technology to support its solutions for the year 2000 problem and additional
language support for its products. During fiscal 1996, the Company licensed
technology to provide additional language support software for certain of its
products, which the Company plans to incorporate into VIASOFT's products for
release in fiscal 1997. The Company is also continuing to develop service
solutions designed for the integration of existing applications with alternative
distributed processing architectures, including client/server. The Company's
results of operations will be dependent, in part, on the successful introduction
and market acceptance of these and additional new products and enhancements.

During fiscal 1995 and 1996 the Company's professional services grew
significantly and revenues from these services now constitute 26% of the
Company's revenues. With the growing percentage of revenue coming from
professional services, a lower margin business than software product licensing,
the Company will be subject to the risks associated with such service
businesses, including volatility of workload and dependence on the Company's
ability to attract and retain qualified technical personnel in an increasingly
competitive market. In addition, a portion of the Company's professional
services revenue is derived from fixed-price contracts, which are more difficult
to profitably manage as they are subject to greater risk of cost overruns,
particularly in the relatively new year 2000 market.

The growth in fiscal 1996 in the professional services revenue is primarily
in response to increasing demand for VIASOFT's Enterprise 2000 in a marketplace
that continues to expand as awareness in corporate information systems
departments of the year 2000 date change problem grows. In addition to
increasing the Company's professional services fees, this demand has also driven
software license revenue as customers acquire the Company's products to help
address their year 2000 concerns. The Company has experienced this growth in
both the domestic and international markets, but by far the majority of the
increase has been in the domestic marketplace since it appears that
international awareness of the year 2000 problem lags behind the domestic
market. Should the demand for the Company's Enterprise 2000 solutions and
products decline significantly as a result of new technologies, competition, or
any other factors, the Company's professional services fees and license revenue
would be materially and adversely affected.

The Company is experiencing increased competition, particularly in the year
2000 market. New and established companies continue to develop and market
competitive products and services, particularly processes and methodologies
designed to assist customers in preparing their applications for the century
date turnover.
9
<PAGE>
Many competitors and potential competitors have significantly greater financial,
marketing, recruiting and technological resources than the Company, and to
succeed the Company will have to successfully distinguish its products and
services from those of its current and future competitors.

Substantially all of the Company's software license fee revenues and all
maintenance fee revenues are derived from products in the Company's primary
product line, the Existing Systems Workbench. If license sales, maintenance
renewals or pricing levels of ESW products were to decline materially, whether
as a result of technological change, competition or any other factors, the
Company's business, results of operations and financial condition would be
materially and adversely affected. Sales of the Company's products for use on
PCs have not been significant to date and the Company believes it is likely
that this trend will continue in the future.

The Company's international revenues were 25%, 27%, and 26% of the Company's
consolidated total revenues for the fiscal years ended June 30, 1996, 1995 and
1994, respectively. The risks inherent in conducting international business
generally include exposure to currency fluctuations, longer payment cycles,
greater difficulties in enforcing agreements and the burdens of complying with a
wide variety of foreign laws. Sales made through the Company's foreign
subsidiaries are denominated in the currencies of the countries where sales are
made. Sales made through its foreign distributors are denominated in U.S.
dollars except in Italy, where sales are denominated in Lira. The Company has
not sought to hedge the risks associated with foreign exchange rate
fluctuations, but will continue to monitor the size of its foreign currency
positions and fluctuations in exchange rates and may seek to hedge these risks
in the future, as the Company deems appropriate. See "Management's Discussion
and Analysis of Consolidated Financial Condition and Results of Operation -
Other Income Expense." In addition, the Company has changed its distribution
channel during the last two years in certain countries, including Germany and
The Netherlands, and is now selling direct into those territories from regional
sales offices, rather than through distributors. The Company also implemented
direct sales channels in Belgium and Luxembourg in July 1996. The Company may
encounter difficulties, delays and risks in transitioning customers and
integrating and managing these new overseas operations.

The Company's revenues and operating results are subject to quarterly and
other fluctuations resulting from a variety of factors, including the effect of
budgeting and purchasing practices of its customers, the length of the customer
evaluation process for Company products, the timing of customer system
conversions, and, to a lesser extent, the Company's sales commission practices,
which are based partly on quarterly incentives and annual quotas, and other
factors. The Company's professional services revenues tend to fluctuate due to
the completion or commencement of significant projects, which may continue over
multiple quarters, the number of working days in a quarter and the utilization
rate of consulting services personnel. The Company has little or no backlog.
Therefore, quarterly revenues and operating results depend primarily on the
volume and timing of orders received during the quarter, which are difficult to
forecast. The Company has often recognized a substantial portion of its license
revenues in the last month of the quarter, frequently in the last week. A
significant portion of the Company's operating expenses is relatively fixed,
since personnel levels and other expenses are based upon anticipated revenues.
Because a substantial portion of these revenues may not be generated until the
end of each quarter, the Company may not be able to reduce spending in response
to sales shortfalls or delays. These factors can cause significant variations in
operating results from quarter to quarter. The Company believes that quarter to
quarter comparisons of its financial results are not necessarily meaningful and
should not be relied upon as an indication of future performance.

The Company expects to continue its strategy of identifying, acquiring and
developing products and technologies for the year 2000 market and plans to
continue to expand the language capabilities for its current products. The
Company also plans to pursue other acquisitions of specific products,
technologies and businesses to enhance and expand its ESW product line and
solution offerings, including acquisitions that could be material in size and
scope. The Company believes that the continued success of its existing
businesses, as well as its future growth depends, in part, upon the success of
this strategy. Acquisitions involve a number of special risks and factors,
including increasing competition for attractive acquisition candidates in the
Company's markets, the incorporation of acquired products into existing product
lines, the assimilation of the operations and personnel of the acquired
companies, adverse short-term effects on reported operating results, the
amortization of acquired intangible assets, the assumption of liabilities of any
acquired companies, as well as the diversion of management's
10
<PAGE>
attention during the acquisition and integration process. The Company does not
have significant experience in the identification and management of acquisitions
and the success of its acquisition strategy will depend on the effective
management of the foregoing risks and to identify and complete strategic
acquisitions on favorable terms.

Historically, the Company's stock price has been volatile. The Company
believes factors such as quarterly fluctuations in results of operations,
announcements of new products and acquisitions by the Company or by its
competitors, change in revenue or earnings estimates by securities analysts,
developments in litigation affecting the Company, changes in accounting
principles or their application and other factors may cause the market price of
the Company's stock to fluctuate, perhaps substantially. In addition, stock
prices for many technology companies fluctuate widely for reasons that may be
unrelated to operating results. Due to market expectations of continued growth
and the higher price/earnings ratio at which the Company's stock may trade, any
shortfall in expectations may have a rapid and significant adverse effect on the
trading price of the Company's stock. These fluctuations, as well as general
economic, market and other conditions may adversely affect the market price of
the Company's stock in the future. Fluctuations in the market price of the
Company's stock may in turn adversely affect the Company's ability to complete
any targeted acquisitions, its access to capital and financing and its ability
to attract and retain qualified personnel.

Special Note on Forward-Looking Statements

Certain statements in this Form 10-K relate to future events and expectations
and as such constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks and uncertainties and other important
factors that may cause the actual results, performance or achievements of the
Company to be materially different from those described in or contemplated by
such forward-looking statements. Such factors include, in addition to any
uncertainties specifically identified in the text surrounding such statements,
the Company's ability to enhance existing products and develop or acquire new
products and technology to keep pace with technological developments and
evolving industry standards and to respond to changes in customer needs; the
Company's ability to manage the growth of its professional services business;
changes in the potential size of the year 2000 market or the anticipated growth
in that market; the Company's ability to effectively compete to sell products,
as well as services, to customers in the year 2000 market; the performance of
the Company's distributors and members of its Solution/Technology Provider
program; increased competition and the ability of the Company to distinguish
itself from its competitors; risks inherent in conducting international
business; the Company's ability to manage acquisitions; charges, costs and
uncertainties related to acquisitions; general economic and business conditions;
and other risks detailed from time to time in the Company's Securities and
Exchange Commission filings.

Item 2. Properties

The Company's principal administrative, research and development, customer
support and marketing facilities are located in approximately 42,000 square feet
of space in Phoenix, Arizona. The Company occupies these premises under a lease
agreement expiring December 31, 1999, subject to certain renewal options. The
Company anticipates that additional space will be required in spring or summer
of 1997 and expects to move a portion of the employees currently located at the
corporate headquarters to a new facility.

In addition, the Company maintains field offices in fourteen locations
within the United States located in leased space aggregating approximately
15,000 square feet as of June 30, 1996. The Company also leases an aggregate of
approximately 4,600 square feet of space as of June 30, 1996 in the United
Kingdom, Belgium, Germany, Japan, Argentina, the Netherlands and Australia for
operations of its international branch offices and subsidiaries. Additional
space is required in the United Kingdom. The Company has identified new space
for both its offices in the United Kingdom and anticipates moving to the new
locations at the end of calendar year 1996.

The Company believes that its facilities are adequate for its current needs,
subject to identified expansion plans, and that suitable additional space will
be available as needed.
11
<PAGE>
Item 3. Legal Proceedings

VIASOFT is subject to certain legal proceedings and claims that arise in the
conduct of its business. In the opinion of management, the amount of liability,
if any, as a result of these claims and proceedings is not likely to have a
material effect on the financial condition or results of operations of the
Company.

In addition, the Company filed a lawsuit in Maricopa County Superior Court,
Phoenix, Arizona, against its former Chief Financial Officer, Alvin E. Holland,
Jr., on April 9, 1996. Mr. Holland was employed by the Company from January 1996
through April 8, 1996, when he was dismissed. Subsequently, the Company
voluntarily dismissed the state court lawsuit and filed a lawsuit against Mr.
Holland in the United States District Court, Phoenix, Arizona, on May 20, 1996.
The Company's lawsuit against Mr. Holland seeks a declaratory judgment that the
Company properly terminated Mr. Holland's at-will employment, that sufficient
cause existed to terminate Mr. Holland's employment and that the Company is not
liable or indebted to Mr. Holland for any amount. The Company also has asserted
a claim against Mr. Holland for failure to repay approximately $36,000 on a
promissory note Mr. Holland executed in favor of the Company. Finally, the
Company's complaint seeks recovery of profit Mr. Holland realized on purchases
and sales of securities in violation of Section 16(b) of the Securities and
Exchange Act of 1934. Mr. Holland has asserted the following counterclaims
against the Company in the litigation: wrongful termination in retaliation for
reporting violations of law, wrongful termination in retaliation for refusing to
participate in violations of law, breach of contract for failure to pay
compensation due and defamation. The litigation is at a very early stage; no
discovery has yet occurred. The Company believes that Mr. Holland's
counterclaims are without merit and intends to contest vigorously the
counterclaims and to pursue a judicial resolution of the Company's claims
against Mr. Holland.

Item 4. Submission of Matters to a Vote of Security Holders

The Company did not submit any matters to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.

Executive Officers of the Registrant

The Company's executive officers and their ages are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Steven D. Whiteman 45 Chief Executive Officer, President and Director
Michael A. Wolf 44 Executive Vice President, Chief Technology Officer and Director
Mark R. Schonau 40 Vice President, Finance & Administration;
Chief Financial Officer; Treasurer
Catherine R. Hardwick 37 General Counsel and Secretary
Kevin M. Hickey 38 Senior Vice President, Americas' Operations
Colin J. Reardon 43 Vice President, International Operations
Jean-Luc G. Valente 36 Vice President, Marketing
</TABLE>

Steven D. Whiteman has served as President of the Company since May 1993 and
Chief Executive Officer and a director since January 1994. Prior to holding
these offices, Mr. Whiteman served as Vice President of Sales and Marketing of
the Company from December 1990. Before joining VIASOFT, Mr. Whiteman served as
Senior Vice President, Sales and International Operations of Systems Center,
Inc., from January 1989 to October 1990.

Michael A. Wolf has served as Chief Technology Officer of the Company since
October 1993, Executive Vice President since May 1993 and a director since
January 1994. Mr. Wolf served as Vice President of Development of the Company
from November 1984 to May 1993, and Secretary from March 1986 to April 1994.
12
<PAGE>
Mark R. Schonau was appointed Vice President, Finance & Administration,
Chief Financial Officer and Treasurer of the Company on September 25, 1996. He
had consulted with the Company for a short period of time prior to his
employment. Before joining VIASOFT, Mr. Schonau served as Chief Financial
Officer, Corporate Secretary, and Treasurer of CyCare Systems, Inc., from
October 1989 to August 1996.

Catherine R. Hardwick has served as Secretary and General Counsel of the
Company since January 24, 1996. Prior to holding these offices, Ms. Hardwick
served as Corporate Counsel for the Company from February 1995. Before joining
the Company, Ms. Hardwick practiced law with the law firm of Meyer, Hendricks,
Victor, Osborn & Maledon, P.A. in the areas of corporate and securities law and
intellectual property licensing.

Kevin M. Hickey has served as Senior Vice President, Americas' Operations
since January 1994. Mr. Hickey joined VIASOFT in February 1993 to manage the
domestic sales organization of the Company. Prior to joining VIASOFT, Mr. Hickey
had been employed by International Business Machines Corporation as a Business
Unit Executive in the Phoenix office from January 1991 through January 1993, as
an Administrative Assistant from November 1989 to December 1990, and as
Marketing Manager from January 1988 through October 1989.

Colin J. Reardon has served as Vice President, International Operations of
the Company since August 1994. Prior to joining VIASOFT, Mr. Reardon served as
Vice President of International Marketing of Sterling Software, Inc., from July
1993 through July 1994. Mr. Reardon was previously employed by Systems Center,
Inc., where Mr. Reardon served as Vice President of European Operations from
November 1992 through June 1993 and Managing Director of its United Kingdom
operations from July 1988 through October 1992.

Jean-Luc G. Valente has served as Vice President, Marketing of the Company
since August 16, 1996. Prior to joining VIASOFT, Mr. Valente had been employed
by Computer Associates International, Inc. as Vice President, Strategic
Marketing in Islandia, New York from June 1993 through April 1996; as a Managing
Director in Barcelona, Spain, from April 1992 through June 1993; and as a
Marketing Director in Paris, France, from April 1990 through March 1992.

PART II

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters

The Company's Common Stock has been traded on The Nasdaq Stock Market under
the symbol VIAS since the Company's initial public offering in March 1995. Prior
to that offering, there was no public market for the Common Stock of the
Company. The Company has never paid cash dividends on its capital stock and
currently anticipates that it will retain future earnings, if any, to fund the
development and growth of its business. During fiscal year 1996, the Company's
agreement for its bank line of credit prohibited, without bank approval, payment
of cash dividends on capital stock. The Company did not renew the line of
credit, which expired in July 1996. See Note 4 of Notes to Consolidated
Financial Statements.

The number of holders of record of the Company's Common Stock was
approximately 293 at August 30, 1996. In addition, there are approximately 4,500
beneficial owners of Common Stock.
13
<PAGE>
The following table sets forth the range of high and low closing sales
prices for the Company's Common Stock for the periods indicated, all as reported
on The Nasdaq Stock Market. The prices have been adjusted to give retroactive
effect to the Company's 2-for-1 stock split that was effective August 30, 1996.

Fiscal Year Ended June 30, 1996 High Low
---- ---

First quarter 8 1/2 4 15/16

Second quarter 7 13/16 5 3/4

Third quarter 14 1/4 6 5/8

Fourth quarter 34 1/2 10 3/4

Fiscal Year Ended June 30, 1995 High Low
---- ---

Third quarter 4 7/8 3 7/8

Fourth quarter 7 1/2 4 1/4
14
<PAGE>
Item 6. Selected Consolidated Financial Data

The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included herein. The selected consolidated financial data
presented below have been derived from the Company's consolidated financial
statements which have been audited by Arthur Andersen LLP, independent public
accountants, whose report covering the financial statements as of June 30, 1996
and 1995 and for each of the three years in the period ended June 30, 1996 also
is included elsewhere herein. The consolidated statement of operations data for
the years ended June 30, 1993 and 1992 and the consolidated balance sheet data
as of June 30, 1994, 1993, and 1992 are derived from audited financial
statements not included herein.

<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Software license fees ................ $ 17,824 $ 14,311 $ 13,029 $ 11,343 $ 10,493
Maintenance fees ..................... 14,305 12,059 10,041 7,645 6,098
Professional services fees ........... 11,307 4,387 2,715 1,341 1,064
Other ................................ 121 194 199 313 177
-------- -------- -------- -------- --------
Total revenues ................... 43,557 30,951 25,984 20,642 17,832
-------- -------- -------- -------- --------
Operating expenses:
Cost of software license and
maintenance fees ................... 2,788 2,661 1,544 2,254 1,512
Cost of professional services fees ... 8,025 4,052 2,522 1,626 1,021
Sales and marketing .................. 18,137 13,517 11,993 13,308 10,159
Research and development ............. 4,237 3,193 3,291 3,692 3,521
General and administrative ........... 3,567 2,643 2,480 2,406 2,252
-------- -------- -------- -------- --------
Total operating expenses ......... 36,754 26,066 21,830 23,286 18,465
-------- -------- -------- -------- --------
Income (loss) from operations .......... 6,803 4,885 4,154 (2,644) (633)
-------- -------- -------- -------- --------
Other income (expense):
Interest income ...................... 1,350 508 73 33 78
Interest expense ..................... (11) (27) (66) (109) (20)
Other, net ........................... (82) 9 (29) (274) 45
-------- -------- -------- -------- --------
Total other income (expense) ..... 1,257 490 (22) (350) 103
-------- -------- -------- -------- --------
Income (loss) before income taxes ...... 8,060 5,375 4,132 (2,994) (530)
Provision for income taxes ............. 1,843 183 487 278 150
-------- -------- -------- -------- --------
Net income (loss) ...................... $ 6,217 $ 5,192 $ 3,645 $ (3,272) $ (680)
======== ======== ======== ======== ========
Earnings (loss) per common and common
share equivalent(1) ................ $ .36 $ .36 $ .29 $ (.28) $ (.06)
======== ======== ======== ======== ========
Weighted average number of common and
common share equivalents
outstanding(1) ..................... 17,391 14,584 12,720 11,620 11,060
======== ======== ======== ======== ========
</TABLE>

- ----------
(1) Reflects the conversion of all issued and outstanding shares of preferred
stock into 8,847,814 shares of Common Stock upon the closing of the
Company's initial public offering on March 8, 1995. Also reflects effect of
a two-for-one stock split effected in the form of a dividend, with a record
date of August 30, 1996. See Note 1 of Notes to Consolidated Financial
Statements.
15
<PAGE>
June 30,
------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
Balance Sheet Data:
Cash and cash equivalents .. $ 5,009 $ 7,680 $ 4,099 $ 1,025 $ 570
Working capital (deficit) .. 25,388 17,950 1,149 (2,654) 582
Total assets ............... 46,591 32,614 14,257 9,551 9,134
Deferred revenue (current) . 9,985 8,482 7,679 6,127 4,683
Deferred revenue (long term) 298 185 182 28 70
Total stockholders' equity . 28,259 20,423 3,039 (690) 2,324

Item 7. Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations

Overview

The Company derives its revenues primarily from software license fees,
software maintenance fees and professional services fees. The Company's software
is licensed primarily to Fortune 1000 and similarly sized organizations
worldwide. Professional services are provided in conjunction with software
products and are also provided separately to similar large organizations. The
Company's products and services are marketed through its United States sales
force, both domestically and in Canada and Latin America, and in other
international markets through a foreign branch and subsidiaries and independent
distributors.

The Company licenses software products directly to customers and to
distributors for resale. Software license revenues are recognized upon delivery
and acceptance of the software, receipt of an executed noncancellable license
agreement from the customer or the distributor's end user and completion of any
significant remaining obligations under the agreement. Revenues from software
licensing related to the Company's obligation to provide certain customer
support are deferred and recognized straight-line over the contract support
period, which is generally one year. Software maintenance contracts are
generally renewable on an annual basis, although the Company also negotiates
long-term maintenance contracts from time to time. Revenues from maintenance
contract renewals are deferred and recognized straight-line over the term of the
contracts. Revenues from professional services fees are recognized as the
related services are provided. See Note 1 of Notes to Consolidated Financial
Statements.
16
<PAGE>
Results Of Operations

The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain expense and income items:

Year Ended June 30,
------------------
1996 1995 1994
---- ---- ----
Revenues:
Software license fees ....................... 41% 46% 50%
Maintenance fees ............................ 33 39 39
Professional services fees .................. 26 14 10
Other ....................................... -- 1 1
---- ---- ----
Total revenues ................................ 100 100 100
---- ---- ----
Operating expenses:
Cost of software license and maintenance fees 6 9 6
Cost of professional services fees .......... 18 13 10
Sales and marketing ......................... 42 44 46
Research and development .................... 10 10 13
General and administrative .................. 8 8 9
---- ---- ----
Total operating expenses ...................... 84 84 84
---- ---- ----
Income from operations ....................... 16 16 16
Total other income, net ....................... 2 2 --
---- ---- ----
Income before income taxes .................... 18 18 16
Provision for income taxes .................... 4 1 2
==== ==== ====
Net income .................................... 14% 17% 14%
==== ==== ====

Comparison of Fiscal Years Ended June 30, 1996 and June 30, 1995

Revenues. Total revenues were $43,557,000 for fiscal 1996, an increase of
approximately 41% from $30,951,000 for fiscal 1995. Software license fees were
$17,824,000 for fiscal 1996, an increase of approximately 25% from $14,311,000
for fiscal 1995. Domestic license revenues increased 31% in fiscal 1996 as
compared to fiscal 1995, primarily as a result of heightened awareness of the
year 2000 date change problem in the domestic marketplace and demand for the
Company's tools to assist in the solution to this problem. Internationally, in
fiscal 1996, the Company's software license fees increased by 10% as compared to
1995, a slower growth than experienced domestically. The Company believes the
slower international growth is primarily attributable to the international
market awareness of the year 2000 problem lagging behind the domestic
marketplace.

In order to broaden its distribution channels, the Company established its
Solution/Technology Provider Program in fiscal 1996. VIASOFT's
Solution/Technology Provider Program licenses VIASOFT's Enterprise 2000 solution
offering (consisting of VIASOFT's Impact 2000, VIASOFT's Plan 2000, and
VIASOFT's Operation 2000) to third-party Solution/Technology Providers,
generally consulting services companies, in exchange for license fees and/or
royalties. In conjunction with a services engagement, VIASOFT will lease or
license certain of its products to the customer or Solution/Technology Provider
in order to provide a total solution to the customer. This program generated
both software license and royalty revenue in fiscal 1996. Domestic software
license revenue generated through this program was approximately $1.6 million.
Royalty revenue is included in professional services fees and is immaterial. As
of June 30, 1996, the Company had 19 Solution/Technology Providers worldwide.

Maintenance fees were $14,305,000 in fiscal 1996, an increase of 19% from
$12,059,000 in fiscal 1995. This increase is primarily a result of new software
licenses, and, to a lesser extent, customer system upgrades and increases in the
fees charged for annual maintenance.
17
<PAGE>
Professional services fees were $11,307,000 in fiscal 1996, an increase of
158% from $4,387,000 in fiscal 1995. The Company continues to expand its
professional services business to meet the growing demand for VIASOFT's
Enterprise 2000 solution offerings created by the year 2000 date change problem.
Enterprise 2000 solution offerings comprised approximately 75% of the Company's
professional services fees in fiscal 1996. Additionally, revenue from the
Company's education services continued to grow in fiscal 1996, improving 55% to
$1,393,000 from $898,000 in fiscal 1995, primarily as a result of a renewed
focus on the sale of education services and increased license sales.

Cost of Revenues. Cost of software license and maintenance fees, which
includes royalties, cost of customer support and product packaging and
documentation, was $2,788,000 in fiscal 1996, an increase of 5% from $2,661,000
in fiscal 1995. The increase was primarily attributable to an increase in the
average number of personnel devoted to customer support, and increased product
documentation costs related to new product releases, offset by savings in
royalties. See Note 8 of Notes to Consolidated Financial Statements.

Cost of professional services fees consists principally of personnel costs,
third-party subcontracting fees, and other costs related to the professional
services business. The cost of professional services fees was $8,025,000 in
fiscal 1996, an increase of approximately 98% from $4,052,000 in fiscal 1995.
The increase is a result of the additional personnel hired and their related
costs as well as third-party costs to deliver the Company's solutions in
response to increased customer demand, both domestically and internationally.
The gross margin on professional services fees improved to 29% in fiscal 1996
compared to 8% in fiscal 1995. This margin improvement reflects the significant
increase in professional service fee income, together with the Company's focus
on improving the management and delivery of its solution offerings.

Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and related benefits and administrative costs allocated to
the Company's sales and marketing personnel. Sales and marketing expenses were
$18,137,000 in fiscal 1996, an increase of approximately 34% from $13,517,000 in
fiscal 1995. This increase is attributable primarily to increased personnel,
higher salaries, increased travel expenses primarily related to the increase in
personnel, increased sales incentive costs, and additional marketing
expenditures. These increases were offset by a decrease in bad debt expense. Bad
debt expense in fiscal 1995 included a third quarter $200,000 increase in the
reserve to provide for a specific account which was subsequently resolved for an
amount that was less than the established reserve. In management's opinion,
there was no need for any bad debt expense in fiscal 1996. Sales and marketing
expenses as a percentage of total revenues declined to 42% in fiscal 1996
compared to 44% in fiscal 1995 due primarily to the increase in revenues.

Research and Development. Research and development expenditures consist
primarily of personnel costs of research and development staff and the
facilities, computing, benefits and other administrative costs allocated to such
personnel and to a lesser extent, third-party development costs. Total
expenditures for research and development were $4,237,000 for fiscal 1996, an
increase of 33% from $3,193,000 for fiscal 1995. This increase was due to the
hiring of additional personnel and their related costs, as well as increased
third-party development costs. As a percentage of sales, research and
development costs remained constant at 10% for fiscal 1996 and 1995.

General and Administrative. General and administrative expenses include the
costs of finance and accounting, legal, human resources, corporate information
systems and other administrative functions of the Company. General and
administrative expenses were $3,567,000 in fiscal 1996, representing an increase
of 35%, as compared to $2,643,000 in fiscal 1995. In the third quarter of fiscal
1996, the Company incurred approximately $350,000 in one time charges,
consisting primarily of severance and relocation costs, related to a change in
the Chief Financial Officer position. Without these one time costs, general and
administrative expenses would have increased 22%. Excluding the one time charge,
the increases were due to general salary increases, additional personnel and the
related costs associated with those personnel, and external professional service
consulting costs. As a percentage of total revenues, general and administrative
expenses were constant at 8% for fiscal 1996 and 1995.

Other Income (Expense). Other income was $1,257,000 in fiscal 1996 as
compared to $490,000 in fiscal 1995. The increase is primarily due to interest
income which was $1,350,000 in fiscal 1996 compared to $508,000 in fiscal 1995.
This increase was due primarily to an increase in funds available for short term
investment as a result of the Company's initial public offering and from cash
generated from operations. Foreign currency gains and losses were negligible in
fiscal 1996 and 1995.
18
<PAGE>
Provision for Income Taxes. The provision for income taxes was $1,843,000
and $183,000, resulting in effective tax rates of 23% and 3%, in fiscal 1996 and
1995, respectively. The Company's effective tax rates were affected by the
availability of net operating loss carryforwards and certain tax credit
carryforwards, which reduced the Company's federal tax liability for fiscal 1996
and eliminated the Company's federal tax liability in fiscal 1995. See Note 5 of
Notes to Consolidated Financial Statements.

Comparison of Fiscal Years Ended June 30, 1995 and June 30, 1994

Revenues. Total revenues were $30,951,000 in fiscal 1995, an increase of
approximately 19% from $25,984,000 in fiscal 1994. Software license fees were
$14,311,000 in fiscal 1995, an increase of approximately 10% from $13,029,000 in
fiscal 1994. This increase was attributable primarily to an increase in
international software license revenues of 34% due to increases in sales by most
of the Company's international distributors as well as the Company's direct
international operations. Domestic software license revenues were substantially
unchanged for fiscal 1995 compared to fiscal 1994. Maintenance fees were
$12,059,000 in fiscal 1995, an increase of 20% from $10,041,000 in fiscal 1994,
as a result of new software licenses, customer system upgrades and increases in
the fees charged for annual maintenance. Professional services fees were
$4,387,000 in fiscal 1995, an increase of 62% from $2,715,000 in fiscal 1994 as
the Company continued to expand its professional services business in response
to the demand for its Insourcing and Enterprise 2000 services offerings. Other
revenues remained unchanged in fiscal 1995 as compared to fiscal 1994.

Cost of Revenues. Cost of software license and maintenance fees was
$2,661,000 in fiscal 1995, an increase of 72% from $1,544,000 in fiscal 1994.
Cost of software license and maintenance fees as a percentage of total revenues
increased to 9% in fiscal 1995 from 6% in fiscal 1994. These increases were
attributable primarily to a $530,000 increase in royalty expense under the
Company's license agreement for its ESW/PC product and to a lesser extent
additional product documentation costs, general salary increases and an increase
in the number of personnel devoted to customer support. ESW/PC is licensed from
SEEC, Inc., a privately held software company, and marketed under the VIASOFT
label pursuant to an agreement that provides for certain minimum prepaid
royalties. During the quarter ended December 31, 1994, the Company evaluated the
remaining balance of the prepaid royalty under the ESW/PC agreement in light of
the actual license and maintenance revenues to date as well as estimated license
and maintenance revenues, and determined that an adjustment of approximately
$250,000 was necessary to state the prepaid royalties at their estimated net
realizable value at December 31, 1994. In addition, commencing in the second
quarter of fiscal 1995, the Company began amortizing prepaid royalties under the
agreement based on the greater of the amount determined on a straight-line basis
over the 26 months remaining in the initial 3-year contract term, or actual
royalties incurred on license and maintenance revenues. See Note 8 of Notes to
Consolidated Financial Statements. Cost of professional services fees consists
principally of personnel costs and other costs related to the services business
to meet demand for its Enterprise 2000 and Insourcing services offerings. The
cost of professional services fees was $4,052,000 in fiscal 1995, an increase of
approximately 61% from $2,522,000 in fiscal 1994, as the Company increased
personnel and other resources to continue the expansion of the Company's
professional services business to meet the demand for its Enterprise 2000 and
Insourcing services offerings. The cost of professional services fees as a
percentage of professional services revenues declined to 92% in fiscal 1995, as
compared to 93% in fiscal 1994, as a result of an increase in professional
service fee revenue.

Research and Development. Research and development expenditures consist
primarily of personnel costs of research and development staff and the
facilities, computing, benefits and other administrative costs allocated to such
personnel. Total expenditures for research and development were $3,193,000 in
fiscal 1995, a decrease of 3%
19
<PAGE>
from $3,291,000 in fiscal 1994. This decrease was due to decreases in various
operating costs and in the average number of research and development personnel
in fiscal 1995 as compared to fiscal 1994.

General and Administrative. General and administrative expenses include the
costs of finance and accounting, human resources, corporate information systems
and other administrative functions of the Company. General and administrative
expenses were $2,643,000 in fiscal 1995, an increase of 7% from $2,480,000 in
fiscal 1994. These increases were due to general salary increases, increases in
contract administration and other personnel, and increased insurance fees offset
by savings in certain professional fees. As a percentage of total revenues,
general and administrative expenses decreased to 8% in fiscal 1995 compared to
9% in fiscal 1994.

Other Income (Expense). Interest expense was $27,000 in fiscal 1995, a
decrease of 59% from $66,000 in fiscal 1994, due to repayment in January 1994 of
borrowings from certain major stockholders. Interest income in fiscal 1995 was
$508,000, compared to interest income of $73,000 in fiscal 1994. This increase
was due primarily to an increase in funds available for short term investment as
a result of the Company's initial public offering and cash generated from
operations. In fiscal 1995, the Company experienced a gain of $10,000 due to
foreign currency fluctuations compared to a loss of $12,000 in fiscal 1994
primarily due to fluctuations in the Italian Lira.

Provision for Income Taxes. The provision for income taxes was $183,000 and
$487,000 in fiscal 1995 and 1994, respectively, consisting of state and foreign
taxes. The availability of net operating loss carryforwards and certain tax
credits effectively eliminated the Company's liability for federal taxes in both
years. Net operating loss carryforwards for federal tax purposes totaled
approximately $1,096,000 at June 30, 1995, expiring between 2006 and 2008. The
Company also has other federal tax credit carryforwards of $1,168,000 available
to offset federal taxes, expiring between 2000 and 2004. See Note 5 of Notes to
Consolidated Financial Statements. In addition, in fiscal 1995, the Company
received notification from the Australian tax authorities of refunds of
Australian withholding taxes remitted in previous years. This amounted to a
credit to tax expense of approximately $125,000 in fiscal 1995.

Liquidity And Capital Resources

The Company has funded its operations to date primarily through the private
sale of equity securities, its initial public offering of the Company's common
stock in March 1995, and, since July 1, 1993, from cash flow from operations. At
June 30, 1996, the Company had cash and cash equivalents and investments of
$28,804,000, representing an increase of $8,249,000 from the total of
$20,555,000 at June 30, 1995. See Notes 1 and 2 of Notes to Consolidated
Financial Statements.

The Company had a loan agreement with a bank providing a $1,000,000 line of
credit, secured by substantially all the assets of the Company. See Note 4 of
Notes to Consolidated Financial Statements. The term of the loan agreement
extended through July 2, 1996. The line of credit was not renewed. The Company
did not have any amounts outstanding under this line of credit at June 30, 1996
or 1995, or at any time during the fiscal years then ended.

During the first quarter of fiscal 1995, the Company entered into a
$525,000 general office and computer equipment line of credit with a financial
institution which provides for financing up to 90% of the costs of such
equipment domestically. Borrowings under this arrangement, if any, will bear
interest at the three year U.S. Treasury Bill rate, plus 4.4 percentage points.
See Note 3 of Notes to Consolidated Financial Statements for additional
discussion.

The Company's net cash provided by operating activities was $7,976,000 and
$4,908,000 for the fiscal years ended June 30, 1996 and 1995, respectively. Net
cash provided in fiscal 1996 was composed primarily of net income plus
depreciation and amortization and increases in accounts payable and accrued
expenses, accrued income taxes, deferred revenues and accrued compensation
offset in part by increases in accounts receivable, due to increased revenues,
other assets, and in prepaid royalties and expenses. Net cash provided in fiscal
1995 was composed primarily of net income plus depreciation and amortization and
increases in deferred revenues and
20
<PAGE>
accounts payable and accrued expenses, offset in part by an increase in accounts
receivable, prepaid royalties and expenses, and deposits and other assets, and
decreases in accrued compensation.

The Company's investing activities used cash of $11,803,000 and
$13,350,000, in the fiscal years ended June 30, 1996 and 1995, respectively. In
fiscal 1996, the primary use of cash was for the purchase of investments net of
investment maturities. In fiscal 1995, the primary use of cash was for the
purchase of investments with the proceeds of the Company's initial public
offering.

The Company's financing activities provided cash of $1,158,000 and
$12,040,000 in the fiscal years ended June 30, 1996 and 1995, respectively. In
fiscal 1996, cash was provided primarily by the sale of common stock through the
employee stock purchase plan and the exercise of stock options. In fiscal 1995,
cash was provided principally from the net proceeds of the Company's initial
public offering.

As of June 30, 1996, the Company did not have any material commitments for
capital expenditures.

The Company anticipates that its capital expenditures and working capital
requirements for the foreseeable future will be funded from existing cash and
cash equivalents and investments together with internally generated funds. The
Company believes that the existing cash and investment balances and cash
generated from operations will be sufficient to meet the Company's liquidity
needs for at least the next two years.
21
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data

VIASOFT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

Report of Public Independent Accountants ................................ 24

Consolidated Balance Sheets as of June 30, 1996 and 1995 ................ 25

Consolidated Statements of Operations for the years ended
June 30, 1996, 1995 and 1994 ................................... 26

Consolidated Statements of Stockholders' Equity for the years ended
June 30, 1996, 1995 and 1994 ................................... 27

Consolidated Statements of Cash Flows for the years ended
June 30, 1996, 1995 and 1994 ................................... 28

Notes to Consolidated Financial Statements .............................. 29
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To VIASOFT, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of VIASOFT,
Inc. (a Delaware corporation) and Subsidiaries as of June 30, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VIASOFT, Inc. and
Subsidiaries as of June 30, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1996, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Phoenix, Arizona,
August 1, 1996 (except with respect to the stock
split discussed in Note 1 and the agreement with
Tadiran Information Systems, Ltd. discussed in
Note 8, as to which the date is August 30, 1996).
23
<PAGE>
VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

<TABLE>
<CAPTION>
June 30,
--------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 1) .................................. $ 5,009 $ 7,680
Investments, at amortized cost (Note 2) ............................. 23,795 12,875
Accounts receivable (less allowance for doubtful accounts
of $279 and $391, at June 30, 1996 and 1995 respectively)............ 13,335 8,686
Prepaid expenses and other (Notes 5 and 8) .......................... 1,130 673
-------- --------
Total current assets ............................................ 43,269 29,914
-------- --------
Furniture and equipment (Notes 1 and 3):
Computer equipment .................................................. 2,692 1,818
Office furniture and equipment ...................................... 1,905 1,585
Capitalized leased equipment ........................................ 264 587
-------- --------
Total furniture and equipment ................................... 4,861 3,990
Less: Accumulated depreciation ...................................... (2,895) (2,335)
-------- --------
Furniture and equipment, net .................................... 1,966 1,655
-------- --------
Other assets (Note 5) .................................................. 1,356 1,045
-------- --------
Total assets .................................................... $ 46,591 $ 32,614
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable .................................................... $ 1,456 $ 481
Accrued compensation ................................................ 1,491 866
Accrued income taxes payable ........................................ 1,824 40
Other accrued expenses .............................................. 3,100 2,007
Deferred revenue (Note 1) ........................................... 9,985 8,482
Current maturities of obligations under capital leases (Note 3) ..... 25 88
-------- --------
Total current liabilities ....................................... 17,881 11,964
-------- --------
Deferred revenue, recognized after one year (Note 1) ................... 298 185
-------- --------
Obligations under capital leases, less current maturities (Note 3) ..... 18 42
-------- --------
Other long term liabilities ............................................ 135 --
-------- --------
Commitments and contingencies (Notes 2 and 8)
Stockholders' equity:
Preferred stock, $.001 par value, 2,000,000 shares authorized, 0
shares issued and outstanding ..................................... -- --
Common stock, $.001 par value, 24,000,000 shares authorized;
16,718,556 and 15,949,096 shares issued and outstanding at June 30,
1996 and 1995, respectively (Notes 6 and 7) ....................... 17 16
Capital in excess of par value ...................................... 27,771 26,354
Common stock subscriptions receivable (Note 7) ...................... (59) (258)
Accumulated earnings (deficit) ...................................... 506 (5,711)
Cumulative translation adjustment (Note 1) .......................... 24 22
-------- --------
Total stockholders' equity ...................................... 28,259 20,423
======== ========
Total liabilities and stockholders' equity ...................... $ 46,591 $ 32,614
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
24
<PAGE>
VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

Year Ended June 30,
----------------------------
1996 1995 1994
-------- -------- --------
Revenues:
Software license fees ....................... $ 17,824 $ 14,311 $ 13,029
Maintenance fees ............................ 14,305 12,059 10,041
Professional services fees .................. 11,307 4,387 2,715
Other ....................................... 121 194 199
-------- -------- --------
Total revenues .......................... 43,557 30,951 25,984
-------- -------- --------
Operating expenses:
Cost of software license and maintenance fees 2,788 2,661 1,544
Cost of professional services fees .......... 8,025 4,052 2,522
Sales and marketing ......................... 18,137 13,517 11,993
Research and development .................... 4,237 3,193 3,291
General and administrative .................. 3,567 2,643 2,480
-------- -------- --------
Total operating expenses ................ 36,754 26,066 21,830
-------- -------- --------
Income from operations ......................... 6,803 4,885 4,154
-------- -------- --------
Other income (expense):
Interest income ............................. 1,350 508 73
Interest expense ............................ (11) (27) (66)
Other income (expense), net ................. (82) 9 (29)
-------- -------- --------
Total other income (expense) ............ 1,257 490 (22)
-------- -------- --------
Income before income taxes ..................... 8,060 5,375 4,132
Provision for income taxes .................. 1,843 183 487
-------- -------- --------
Net income ..................................... $ 6,217 $ 5,192 $ 3,645
======== ======== ========
Earnings per common and common share equivalent
(Note 1)..................................... $ .36 $ .36 $ .29
======== ======== ========
Weighted average number of common and common
share equivalents outstanding (Note 1) ..... 17,391 14,584 12,720
======== ======== ========

The accompanying notes are an integral part of these consolidated statements.
25
<PAGE>

VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share information)
(Note 1)

Series B Preferred Stock Common Stock Common
-------------------------- ------------------------- Capital in Stock
Number Number Excess of Subscriptions
Amount of Shares Amount of Shares Par Value Receivable
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1993 ................... $ 12,703 13,271,898 $ 3 2,892,084 $ 1,253 $ (101)
Common stock issued for services rendered -- -- -- 14,000 11 --
Sale of common stock (Note 7) ........... -- -- -- 283,332 155 (154)
Exercise of options in exchange for
promissory note (Note 7) ............ -- -- -- 181,920 27 (27)
Exercise of options ..................... -- -- -- 67,366 16 --
Conversion of Series B preferred stock .. -- (3) -- 6 -- --
Payments on common stock
subscriptions receivable .............. -- -- -- -- -- 17
Net income .............................. -- -- -- -- -- --
Translation adjustment .................. -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1994 ................... 12,703 13,271,895 3 3,438,708 1,462 (265)
Conversion of preferred stock .............. (12,703) (13,271,895) 9 8,847,814 12,694 --
Sale of common stock, net ............... -- -- 4 3,434,658 12,136 --
Exercise of options ..................... -- -- -- 227,916 62 --
Payments on common stock
subscriptions receivable .............. -- -- -- -- -- 7
Net income .............................. -- -- -- -- -- --
Translation adjustment .................. -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1995 ................... -- -- 16 15,949,096 26,354 (258)
Sale of common stock, net ............... -- -- -- 214,722 747 --
Exercise of options, net ............... -- -- 1 279,734 195 --
Exercise of warrants .................... -- -- -- 275,004 103 --
Income tax benefit relating to stock
plans (Note 5) ........................ -- -- -- -- 170 --
Compensation relating to stock plans
(Note 7) ............................. -- -- -- -- 202 --
Payments on common stock
subscriptions receivable (Note 7) ..... -- -- -- -- -- 199
Net income .............................. -- -- -- -- -- --
Translation adjustment .................. -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1996 ................... $ $ 17 16,718,556 $ 27,771 $ (59)
=========== =========== =========== =========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
Cumulative
Accumulated Translation
Deficit Adjustment Total
----------- ----------- -----------
<S> <C> <C> <C>
Balance at June 30, 1993 ................... $ (14,548) -- (690)
Common stock issued for services rendered -- -- 11
Sale of common stock (Note 7) ........... -- -- 1
Exercise of options in exchange for
promissory note (Note 7) ............ -- -- --
Exercise of options ..................... -- -- 16
Conversion of Series B preferred stock .. -- -- --
Payments on common stock subscriptions
receivable .......................... -- -- 17
Net income .............................. 3,645 -- 3,645
Translation adjustment .................. -- 39 39
----------- ----------- -----------
Balance at June 30, 1994 ................... (10,903) 39 3,039
Conversion of preferred stock .............. -- -- --
Sale of common stock, net ............... -- -- 12,140
Exercise of options ..................... -- -- 62
Payments on common stock
subscriptions receivable .............. -- -- 7
Net income .............................. 5,192 -- 5,192
Translation adjustment .................. -- (17) (17)
----------- ----------- -----------
Balance at June 30, 1995 ................... (5,711) 22 20,423
Sale of common stock, net ............... -- -- 747
Exercise of options, net ............... -- -- 196
Exercise of warrants .................... -- -- 103
Income tax benefit relating to stock
plans (Note 5) ........................ -- -- 170
Compensation relating to stock plans
(Note 7) ............................. -- -- 202
Payments on common stock subscriptions
receivable (Note 7) .................. -- -- 199
Net income .............................. 6,217 -- 6,217
Translation adjustment .................. -- 2 2
----------- ----------- -----------
Balance at June 30, 1996 ................... $ 506 $ 24 $ 28,259
=========== =========== ===========
</TABLE>
26
<PAGE>
VIASOFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net income ............................................... $ 6,217 $ 5,192 $ 3,645
-------- -------- --------
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation and amortization .......................... 695 638 663
Compensation expense related to stock plans ............ 202 -- --
Loss on disposal of fixed assets ....................... 6 16 --
Common stock issued for services rendered .............. -- -- 11
Changes in operating assets and liabilities:
Increase in accounts receivable .................... (4,358) (1,165) (1,398)
Increase in prepaid expenses and other assets ...... (1,184) (857) (555)
Increase (decrease) in accounts payable and other
accrued expenses ................................. 2,203 622 (349)
Increase (decrease) in accrued compensation ........ 625 (262) 660
Increase (decrease) in accrued income taxes
payable .......................................... 1,954 (82) 233
Increase in deferred revenue ....................... 1,616 806 1,706
-------- -------- --------
Total adjustments ................................ 1,759 (284) 971
-------- -------- --------
Net cash provided by operating activities ............ 7,976 4,908 4,616
-------- -------- --------
Investing activities:
Capital expenditures ..................................... (987) (722) (342)
Investments/maturities ................................... 32,890 -- --
Purchase of investments .................................. (43,706) (12,628) --
-------- -------- --------
Net cash used in investing activities ............. (11,803) (13,350) (342)
-------- -------- --------
Financing activities:
Principal payments on obligations under capital leases ... (87) (171) (272)
Payments for offering costs .............................. -- (636) --
Payments on notes payable to stockholders ................ -- -- (1,000)
Proceeds from issuance of common stock ................... 1,046 12,840 16
Payments received on common stock subscriptions
receivable............................................ 199 7 17
-------- -------- --------
Net cash provided by (used in) financing activities .. 1,158 12,040 (1,239)
-------- -------- --------
Effect of exchange rate changes on cash ..................... (2) (17) 39
-------- -------- --------
Net (decrease) increase in cash and cash equivalents ........ (2,671) 3,581 3,074
Cash and cash equivalents, beginning of year ................ 7,680 4,099 1,025
-------- -------- --------
Cash and cash equivalents, end of year ...................... 5,009 $ 7,680 $ 4,099
======== ======== ========
Supplemental cash flow information:
Interest paid ............................................ $ 11 $ 27 $ 115
Income taxes paid ........................................ $ 450 $ 409 $ 85
Capital lease obligations incurred ....................... $ -- $ 93 $ --
Income tax benefit related to stock plans ............... $ 170 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
27
<PAGE>
VIASOFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:

OPERATIONS

VIASOFT, Inc. and its subsidiaries, VIASOFT Pty. Ltd. (VIASOFT Pty);
VIASOFT International, Inc.; VIASOFT U.K. Limited (VIASOFT UK); VIASOFT
International GmbH (VIASOFT Germany); and VIASOFT de Mexico, S.A. de C.V., and
branches, VIASOFT Belgium and VIASOFT Netherlands (collectively, the "Company")
are engaged in developing, marketing and supporting computer software which is
used by businesses worldwide to enhance the maintenance and redevelopment
process for existing applications, reduce maintenance costs and improve quality
in their existing applications. The Company also provides professional services
to large corporations and public entities to help them effectively manage and
automate the evolution of their existing applications. The Company operates
through its wholly-owned subsidiaries in Australia, the United Kingdom, Germany
and Mexico, branch offices in Belgium and the Netherlands and an established
network of semi-exclusive distributors in other international markets.

SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The accompanying consolidated financial statements include the accounts of
VIASOFT, Inc. and its subsidiaries. The subsidiary books are prepared in local
currency and converted at time of consolidation to U.S. dollars using the
exchange rate at the balance sheet date. All significant intercompany accounts
and transactions have been eliminated.

Revenue Recognition

Revenue is recognized in accordance with Statement of Position 91-1,
"Software Revenue Recognition." Accordingly, revenue from software licensing is
recognized when delivery of the software has occurred, a signed noncancellable
license agreement has been received from the customer and any remaining
obligations under the license agreement are insignificant. Revenue related to
insignificant obligations is deferred and recognized as the obligations are
fulfilled. Revenue from software license fees related to the Company's
obligation to provide certain post-contract customer support without charge for
the first year of the license is unbundled from the license fee at its fair
value and is deferred and recognized straight-line over the contract support
period. Revenue from annual or other renewals of maintenance contracts
(including long-term contracts) is deferred and recognized straight-line over
the term of the contracts. Revenue from professional services is generally
billed on a time and materials basis. Professional services do not involve
significant customization, modification or production of the licensed software.
Such professional services fees are recognized as the related services are
provided.

Revenue generated by domestic operations from sales to unaffiliated foreign
customers was 11%, 15% and 15% of total revenues in the years ended June 30,
1996, 1995 and 1994, respectively. See Note 9.

Cash and Cash Equivalents

The Company's policy is to invest cash in excess of operating requirements
in income-producing investments. The Company's investments include commercial
paper, corporate bonds, and U.S. Treasury bills, all of which are stated at
amortized cost, which approximates fair market value. For purposes of the
statements of cash flows, the Company considers all investments with a maturity
of three months or less when purchased to be cash equivalents.
28
<PAGE>
Concentrations of Credit Risk

Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Statement of Financial Accounting
Standards No. 105, consist primarily of trade accounts receivable. The Company's
customer base is primarily Fortune 1000 and similarly-sized organizations
worldwide, and the Company's international distributor network. The Company does
not require collateral upon delivery of its products.

Furniture And Equipment

Furniture and equipment is stated at cost. Depreciation is computed using
the straight-line method based upon the estimated useful lives of three to seven
years. Depreciation expense was $664,000, $558,000 and $609,000 in the years
ended June 30, 1996, 1995, and 1994, respectively.

Product Development

Under the criteria set forth in Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed" ("SFAS No. 86"), capitalization of software development
costs begins upon the establishment of technological feasibility of the product.
The establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs require considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic product lives and changes in
software and hardware technology. Amounts related to internal software
development that could be capitalized under this statement were immaterial. In
addition, the Company has and plans to continue to purchase software from third
parties. Purchased software is also accounted for in accordance with SFAS No.
86.

Foreign Currency Translation

Financial information relating to the Company's foreign subsidiaries is
reported in accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation." The net foreign currency translation gain (loss)
in the years ended June 30, 1996, 1995 and 1994, was approximately $16,000,
$10,000, and $(12,000), respectively. The gains or losses resulting from the
translation of the financial statements of the Company's foreign subsidiaries
have been included as a separate component of stockholders' equity.

Earnings Per Share

Earnings per share is computed by dividing net income by the weighted
average number of common and common share equivalents assumed outstanding during
the period. Primary and fully diluted earnings per share are considered to be
the same in all periods presented since the effect of certain potentially
dilutive securities is immaterial. For purposes of these calculations, the
Series B preferred stock, which was converted into 8,847,814 shares of common
stock upon the closing of the Company's initial public offering on March 8,
1995, has been assumed to have been converted on a one-for-three basis into
shares of common stock as of the beginning of each year presented to give effect
to the one-for-three reverse split of the common stock in December 1994.

Effective December 1, 1994, the Board of Directors declared a one-for-three
reverse stock split of the Company's common stock. On August 19, 1996, the
Company's Board of Directors approved a two-for-one stock split of its
outstanding common stock, to be effected in the form of a stock dividend. Each
holder of shares of the Company's common stock on August 30, 1996 received one
additional share of common stock for every one share of stock held. All share
and per share information presented in these financial statements and annual
report reflects the effect of these events.
29
<PAGE>
Recently Issued Accounting Standards

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which is required to be adopted by the Company in fiscal 1997, is not expected
to have a material effect on the Company's financial position or its results of
operations upon adoption. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," is required to be adopted by the
Company in fiscal 1997. Pursuant to the provisions of Statement of Financial
Accounting Standards No. 123, the Company will continue to account for
transactions with its employees pursuant to Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees." Therefore, this Statement is
not expected to have a material effect on the Company's financial position or
its results of operations when adopted.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The estimated fair value of financial instruments has been determined by
the Company using available market information and valuation methodologies.
Considerable judgment is required in estimating fair values. Accordingly, the
estimates may not be indicative of the amounts the Company could realize in a
current market exchange. The carrying amounts of cash, receivables and accounts
payable approximate fair values.

2. INVESTMENTS:

The Company's investments are all classified as held-to-maturity and consist of
the following (in thousands):

June 30, 1996
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
U.S. Treasury securities $ 13,846 $ 1 $ (11) $ 13,836
Government-backed securities 6,580 -- (6) 6,574
Corporate bonds 3,369 -- (50) 3,319
========= ========== ========== ==========
Total $ 23,795 $ 1 $ (67) $ 23,729
========= ========== ========== ==========

June 30, 1995
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
U.S. Treasury securities $ 12,262 $ 25 -- $ 12,287
Commercial paper 613 -- -- 613
--------- ---------- ---------- ----------
Total $ 12,875 $ 25 -- $ 12,900
========= ========== ========== ==========

All of the Company's investments at June 30, 1996 and 1995 will mature or
matured within one year, respectively.

In July, 1996, the Company retained the services of an outside investment
advisor to manage its investment portfolio. It is anticipated that in fiscal
1997, certain of the Company's investments will be classified as trading or
available-for-sale securities.
30
<PAGE>
3. OBLIGATIONS UNDER CAPITAL LEASES:

The Company leases various equipment under noncancellable lease agreements
expiring through fiscal year 1998. The leases have been capitalized using
various implicit interest rates. The following is a schedule of future minimum
lease payments under the leases, together with the present value of the future
minimum lease payments for each of the years ending June 30 (in thousands):

1997............................................................. $ 28
1998............................................................. 19
-----
Total minimum lease payments..................................... 47
Less:
Amount representing interest.................................. (4)
Current maturities............................................ (25)
-----

Present value of long-term obligations under capital leases...... $ 18
=====

During the first quarter of fiscal 1995, the Company entered into a
$525,000 general office and computer equipment line of credit with a financial
institution which provides for financing up to 90% of the costs of such
acquisitions domestically. The amount available under the line of credit is
reduced by prior outstanding equipment loans from the financial institution,
which aggregated approximately $47,000 and $105,000 as of June 30, 1996 and
1995, respectively. Additional borrowings under this arrangement, if any, will
bear interest at the three year U.S. Treasury Bill rate, plus 4.4 percentage
points.

4. NOTES PAYABLE:

During fiscal 1994, the Company entered into an agreement with Silicon
Valley Bank (the "Agreement") for a revolving line of credit, evidenced by a
promissory note, which provided for up to $1,000,000 of operating capital.
Advances under the Agreement were based upon 70% of eligible accounts
receivable, as defined, and bore interest at prime plus 1% and matured July 2,
1996. The Agreement contained certain restrictive covenants which included,
among other things, restrictions on dividends, incurring additional debt,
changes to the Company's operations and lending or investing other than in the
normal course of business. The Agreement also required the Company to maintain a
specified minimum tangible net worth, minimum profitability levels and a minimum
quick ratio. No amounts were outstanding under the Agreement at June 30, 1996 or
1995, or at any time during the years then ended. The line of credit was not
renewed upon expiration in July 1996.

5. INCOME TAXES:

Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." SFAS
No. 109 requires the use of an asset and liability approach in accounting for
income taxes. Deferred tax assets and liabilities are recorded based on the
differences between the financial statement and tax bases of assets and
liabilities and the tax rates in effect when these differences are expected to
reverse. Upon adoption of SFAS No. 109, there was no cumulative effect of the
change in accounting principle.
31
<PAGE>
The provision for income taxes consists of the following (in thousands):

Year Ended June 30,
-----------------------------
1996 1995 1994
------- ------- -------
Current:
Federal ..................................... $ 1,184 $ 120 $ 80
State ....................................... 454 129 70
Foreign ..................................... 275 54 417
Deferred ....................................... 322 (120) (80)
Utilization of net operating loss and tax credit
carryforwards ............................... 1,464 2,295 1,853
Change in valuation allowance .................. (1,856) (2,295) (1,853)
------- ------- -------
Provision for income taxes ..................... $ 1,843 $ 183 $ 487
======= ======= =======

For the year ended June 30, 1996, income tax benefits of $170,000 were
allocated to additional paid-in capital for tax benefits associated with the
exercise of nonqualified stock options and the disqualifying disposition of
incentive stock options.

The components of deferred taxes are as follows (in thousands):
Year Ended June 30,
------------------
Deferred tax liabilities: 1996 1995
------- -------
Prepaid royalty .......................................... $ 34 $ 147
Accelerated tax depreciation ............................. 94 87
Other .................................................... 15 15
------- -------
Total .................................................. 143 249
------- -------
Deferred tax assets:
Foreign tax credits ...................................... 168 544
Tax effect of regular U.S. net operating loss carryforward -- 438
Research and experimentation credits ..................... -- 424
Alternative minimum tax credit carryforward .............. -- 200
Software development costs capitalized for tax ........... 511 --
Allowance for doubtful accounts .......................... 117 156
Vacation accrual ......................................... 146 152
Deferred revenue ......................................... 42 79
Other .................................................... 122 364
------- -------
Total .................................................. 1,106 2,357
------- -------
Net deferred tax asset .................................. 963 2,108
Valuation allowance ..................................... -- (1,856)
------- -------
Deferred tax asset ...................................... $ 963 $ 252
======= =======

Management believes that it is more likely than not that the Company will
generate sufficient taxable income to realize the deferred tax assets and,
therefore, has eliminated the valuation allowance as of June 30, 1996. The
Company has recognized a tax benefit as a result of the change in the valuation
allowance of $1,856,000. The deferred tax asset presented in the balance sheet
at June 30, 1995, is shown net of a valuation allowance of $1,856,000.
32
<PAGE>
A reconciliation of the U.S. federal statutory rate to the Company's
effective tax rate is as follows:

Year Ended June 30,
--------------------
1996 1995 1994
---- ---- ----
Statutory federal rate .................... 34% 34% 34%
Effect of permanent differences ........... 2 1 1
Foreign taxes ............................. 4 1 10
State taxes, net of federal benefit ....... 4 1 1
Tax credit carryforwards .................. (14) -- --
Benefit of net operating loss carryforwards (7) (34) (34)
---- ---- ----
23% 3% 12%
==== ==== ====

The Company utilized its entire net operating loss carryforward during the
year ended June 30, 1996.

The Company used $424,000 of research and experimentation credits, $529,000
of foreign tax credits, and $207,000 of alternative minimum tax credits during
the year ended June 30, 1996. At June 30, 1996, the Company had foreign tax
credits of $168,000 expiring through 2000.

6. STOCK PLANS:

1994 Equity Incentive Plan

The 1994 Equity Incentive Plan ("1994 Plan") was adopted by the Board of
Directors ("the Board") in August 1994, approved by the stockholders in November
1994, and became effective March 1, 1995. The 1994 Plan will terminate 10 years
after its effective date. The 1994 Plan authorizes awards of incentive stock
options to employees and non-qualified stock options, stock appreciation rights,
performance units, restricted stock and other common stock-based awards to
officers, directors, employees, and consultants of the Company and its
subsidiaries. A total of 1,400,000 shares of common stock is reserved for
issuance under the 1994 Plan. The options currently outstanding under the 1994
Plan will vest as to 25% of the shares subject thereto on the first anniversary
of issuance and will vest at the rate of 6.25% of such shares per quarter of
continuous service thereafter.

The 1994 Plan is administered by a committee appointed by the Board
consisting of at least two non-employee directors, who have the exclusive
authority to administer and interpret the 1994 Plan. The committee shall have
the power to, among other things, designate participants, determine types of
awards to be granted and the price, timing, terms and duration of awards.

Employee Stock Option Plan

The Company has an approved stock option plan ("1986 Plan") for employees
and consultants covering 2,000,000 shares of Company common stock. Options
granted under the 1986 Plan may be either incentive stock options, as defined in
Section 422 of the Internal Revenue Code or nonstatutory stock options, at the
discretion of the Board of Directors and as reflected in the terms of the
written option agreement. Options become exercisable over periods of up to five
years and must be exercised within five to six years of the date of grant.
Effective March 8, 1995, no further share grants may be made pursuant to this
Plan.

Employee Stock Purchase Plan

The Company's Employee Stock Purchase Plan ("Purchase Plan") became
effective at the time of the Company's initial public offering. The Company has
reserved 400,000 shares of common stock for issuance under the Purchase Plan,
and will allow eligible employees to purchase shares of common stock, at
semiannual intervals, through periodic payroll deductions. The purchase price
per share is eighty-five percent (85%) of the lower of (i) the fair market value
of the common stock on the participant's entry date into the offering period or
(ii) the fair market value on the semi-annual purchase date. The purchase price,
amount of shares purchased, and value of stock purchased are all subject to
certain limitations on an individual and aggregate basis, as defined in the
33
<PAGE>
Purchase Plan. The Purchase Plan will terminate on the earlier of (i) the date
on which all shares available for issuance under the Plan have been issued or
(ii) December 31, 2003, unless earlier terminated by the Committee designated by
the Board in accordance with the provisions of the Plan.

As of June 30, 1996, 185,278 shares remained available for purchase through
the Purchase Plan and there were 216 employees eligible to participate, of which
92%, or 198, participated. Employees purchased 214,722 shares during the year at
prices ranging from $3.40 to $5.79. Total cash received by the Company was
$747,000. The Purchase Plan is non-compensatory, therefore, no charges to income
were recorded.

Outside Director Stock Option Plan

The Company's Outside Director Stock Option Plan ("Director Plan") was
approved by the stockholders and became effective on November 15, 1995. The
Director Plan authorizes non-discretionary grants of nonstatutory stock options
to non-employee directors of the Company. A total of 400,000 shares of common
stock is reserved for issuance under the Director Plan. Each person who is
elected for the first time as an Outside Director shall be, upon the date of his
first election, automatically granted an option to purchase 20,000 shares. Each
Outside Director shall receive an option to purchase 10,000 shares at the fair
market value established on the grant date upon re-election to the Board of
Directors. The options begin vesting one year after the date of grant in three
equal annual installments and expire five years after the date of grant. The
Plan will terminate on the tenth anniversary of the date it became effective.
The Director Plan is administered by a committee appointed by the Board.

401(k) Plan

The Company has a contributory retirement plan ("the 401(k) Plan") covering
eligible United States resident employees with at least 30 days of service and
who are a minimum of 21 years old. The 401(k) Plan is a calendar year plan. The
401(k) Plan is designed to provide tax-deferred income to the Company's
employees in accordance with the provisions of Section 401(k) of the Internal
Revenue Code.

The 401(k) Plan provides that each participant may contribute up to 15% of
their respective salaries, not to exceed the statutory limit. The Company
elected, effective January 24, 1996, to make a discretionary matching
contribution of $120,000 for the 1995 plan year to all participants who were
employed by the Company on the effective date and who had made contributions to
the 401(k) Plan during the 1995 plan year. This match was allocated based upon
the employees' contributions for the 1995 plan year as a percentage of the total
contributions of all eligible employees. For the 1996 plan year, the Company
elected to make a 20% matching contribution of employee contributions of up to a
maximum of $3,000 per participant. Through June 30, 1996, the Company had made
contributions of approximately $65,000 for the 1996 plan year.

Under the terms of the 401(k) Plan, the Company may also make discretionary
profit sharing contributions. Profit sharing contributions, if any, are
allocated among all active participants based upon each employee's contributions
for the plan year as a percentage of total employee contributions for the plan
year.

Other

The Board granted a total of 8,000 nonstatutory options at $4.00 per share
to three employees on February 15, 1995. These options vest over a five year
period. During fiscal 1996, 1,000 of these options were exercised.

The Board granted 20,000 nonstatutory options at $4.43 per share to an
outside investor relations consultant ("consultant") in April 1995. The options
vest 50% on November 1, 1995 and 50% on November 1, 1996. During fiscal 1996,
4,000 of these options were exercised.
34
<PAGE>
The following summarizes the activity under the Company's stock option
plans:

<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------
1996 1995
--------------------------- -------------------------
Option Option
Number Price Number Price
1994 PLAN of Shares Per Share of Shares Per Share
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Options outstanding, beginning of year........... 552,000 $4.00-$4.82 --
Granted.......................................... 446,800 $6.38-$11.07 552,000 $4.00-$4.82
Canceled/expired................................. (265,834) $4.00-$8.88 --
Exercised........................................ (26,166) $4.00 --
-------- --------
Options outstanding, end of year................. 706,800 $4.00-$11.07 552,000 $4.00-$4.82
======== ========
Options exercisable, end of year................. 116,634 $4.00-$4.82 --
======== ========
Options available for grant...................... 667,034 848,000
======== ========
1986 PLAN
Options outstanding, beginning of year........... 777,214 $.15-$4.00 944,150 $.15-$2.93
Granted.......................................... -- -- 107,404 $2.93-$4.00
Canceled/expired................................. (88,516) $.38-$3.75 (76,292) $.15-$1.88
Exercised........................................ (274,182) $.15-$4.00 (198,048) $.15-$1.88
-------- --------
Options outstanding, end of year................. 414,516 $.38-$4.00 777,214 $.15-$4.00
======== ========
Options exercisable, end of year................. 136,386 $.38-$4.00 257,738 $.15-$2.93
======== ========
Options available for grant...................... none none
======== ========
</TABLE>

7. CAPITAL STOCK:

Effective in December 1994, the Board of Directors declared a one-for-three
reverse stock split of the Company's common stock. Effective August 30, 1996,
the Board of Directors declared a two-for-one stock split of the Company's
common stock, to be effected in the form of a stock dividend. All share and per
share amounts have been restated to reflect these splits.

Effective in connection with the Company's initial public offering in March
1995, each three shares of Series B preferred stock then outstanding, were
converted into one share of the Company's common stock. At that time, the Series
B preferred stock was retired.

During the year ended June 30, 1994, the Company entered into stock
purchase agreements with three officers and a director to sell an aggregate of
283,334 shares of common stock at the fair market value on the date of the
agreements ($.38 to $.75 per share) in exchange for full recourse promissory
notes aggregating $153,750. In addition, options for the purchase of 181,920
shares were exercised by an officer/director in exchange for a full recourse
promissory note in the amount of $27,015. The unpaid balance on the notes is
reflected in stockholders' equity as common stock subscriptions receivable at
June 30, 1996.

8. COMMITMENTS AND CONTINGENCIES:

Legal Proceedings

The Company filed a lawsuit against its former chief financial officer,
Alvin E. Holland, Jr., requesting the court for a declaration that Mr. Holland's
employment was properly terminated for cause, and that the Company owes him no
additional compensation; for failure to repay a $36,000 loan; and disgorgement
of any profits he
35
<PAGE>
made from selling stock in violation of Section 16(b) of the Securities and
Exchange Act of 1934. Mr. Holland filed counterclaims against the Company
including charges of wrongful termination, breach of contract for failure to pay
alleged compensation due under an employment agreement, and defamation. Mr.
Holland's complaint cites in excess of $10 million in damages.

The Company believes that Mr. Holland's counterclaims are without merit.
The Company intends to vigorously defend these claims, and believes it will
ultimately prevail in its lawsuit against Mr. Holland. This claim when finally
concluded, in the opinion of management, based on the information it presently
possesses, will not have a material adverse effect on the Company's consolidated
financial position.

Commitments

On August 27, 1996, the Company entered into an agreement with Tadiran
Information Systems, Ltd. ("Tadiran"), an Israeli company, to purchase a date
bridging product ("the Product"), as well as a patent application, copyrights,
and a covenant not to compete related to the Product. The purchase price of the
Product is $2,300,000 payable in installments based on delivery dates for
different releases of the Product which will occur between September 1996 and
March 1997. The purchase of the Product will be capitalized in accordance with
SFAS No. 86 and amortized over the useful life of the product, which is
estimated to be 46 months, or using the revenue ratio method, whichever results
in the greater amortization expense in the applicable reporting period. In
addition to the purchase price, royalties in the amount of 15% on the first
$2,000,000 in sales, 12% for the next $8,000,000, and 10% for any additional
sales of software licenses for the Product are due to Tadiran. The Company also
has the right to commission a future version of the software for an agreed upon
time and materials rate.

In January 1996, the Company entered into an agreement with a third party
to provide subcontracting services on certain of the Company's professional
services engagements. The agreement sets forth minimum commitments for the
Company's use of the subcontracting services. The Company is required to pay a
total of $1,640,000 for the period January 1, 1996, through December 31, 1996,
and $464,000 for the period January 1, 1997, through March 31, 1997. The Company
will make monthly payments over the term of the agreement, based upon the number
of billable days worked by the subcontracted consultants at an agreed upon daily
rate. If the total payments made during each period do not meet the minimum
utilization requirement, the Company is required to pay the remaining amount due
for each period in the month following the end of the period. Through June 30,
1996, the Company has paid a total of $593,000 under this agreement. Management
believes that the minimum utilization requirements of the contract will be met.

In December 1995, the Company entered into a perpetual license agreement
with a third party which grants the Company a non-exclusive worldwide license to
use, adapt, modify, reproduce, market, promote, license and sublicense certain
of the third party's programs and materials. The agreement calls for certain de
minimus up front license payments, and for prepaid royalties, and additional
royalty payments through June 30, 2002. The prepaid royalties will be amortized
using a formula based upon future product sales through the earlier of full
amortization or June 30, 2002.

During November 1993, the Company entered into a five-year agreement with
SEEC, Inc. ("Licensor") which grants the Company a license to use, market and
reproduce certain of Licensor's products under the Company's label. The license
is generally exclusive for an 18-month period, subject to certain private label
retained rights of the Licensor, and is subject to extension by mutual
agreement. The Company will pay to the Licensor a royalty of 30% of any license
or maintenance fees related to the covered products up to a maximum of $2
million. Thereafter, the Company is obligated to pay the Licensor a royalty of
25% of license fees and 30% of maintenance fees related to the products. Under
this agreement, the Company prepaid a minimum royalty of $40,000 per month for
the first nine months and $60,000 per month for the next nine months. Prepaid
royalties are generally nonrefundable, except in the case of certain defaults by
the Licensor. During the quarters ended December 31, 1995 and 1994, the Company
evaluated the remaining balance of the prepaid royalty in light of the actual
license and maintenance revenues to date as well as estimated license and
maintenance revenues, and determined that adjustments of approximately $100,000
and $250,000 were necessary to state the prepaid royalties at their estimated
net realizable
36
<PAGE>
value at December 31, 1995 and 1994. In addition, commencing in the second
quarter of fiscal 1995, the Company began amortizing prepaid royalties under the
agreement based on the greater of the amount determined on a straight-line basis
over the 26 months remaining in the initial three-year contract term, or actual
royalties incurred on license and maintenance revenues. As of June 30, 1996, all
prepaid royalties under the agreement have been fully amortized. The Company is
entitled to receive a royalty of 5% of all Licensor sales of certain Licensor
products enhanced by the Company, up to $1,000,000, but in no event less than
$100,000 during the term of the agreement. The agreement is subject to
termination by the Licensor after the third and fourth years if the Company does
not make required annual minimum royalty payments of $1,000,000 during the 12
months preceding the third and fourth anniversaries of commencement of the
agreement, and is subject to five successive one year renewals after the end of
the five-year initial term if the Company continues to meet the $1,000,000
annual minimum royalty targets. The required minimum royalty payment will not be
met and SEEC will have the option to terminate the agreement effective November,
1996. The Company has had and continues to have discussions with the Licensor
regarding negotiating new terms to the existing agreement, but management does
not believe that termination of the agreement will be material to the Company's
financial performance because sales of ESW/PC have been de minimis.

The Company leases its corporate office facilities in Phoenix, Arizona. On
August 15, 1994, the Company extended the office lease at its present facility,
which will expire on December 31, 1999. Rental expense relating to this lease
amounted to approximately $583,000, $487,000, and $472,000, in the years ended
June 30, 1996, 1995, and 1994, respectively.

The Company has entered into several office leases for sales offices in
various cities and countries. These leases expire at various dates through
calendar year 2000. Rental expense relating to these leases amounted to
approximately $575,000, $415,000, and $492,000 in the years ended June 30, 1996,
1995, and 1994, respectively.

The Company is also party to a data processing agreement under which it
utilizes certain computer equipment and software of an independent third party.
The eighteen month agreement expires in January 1997. Payments under this
agreement were approximately $673,000, $794,000, and $689,000, in the years
ended June 30, 1996, 1995, and 1994 respectively. The base monthly charge for
usage is approximately $44,000, subject to adjustment for excess usage as
defined in the agreement.

The future minimum rental payments under all noncancellable operating
leases for each of the years ending June 30 are as follows (in thousands):

Year ending June 30:
1997............................. $ 1,271
1998............................. 844
1999............................. 802
2000............................. 416
2001............................. 45
Thereafter....................... 0
-------
$ 3,378
=======

9. FOREIGN OPERATIONS AND GEOGRAPHIC INFORMATION:

The Company operates in one industry segment which includes the
development, marketing and support of an integrated line of software products
for use by businesses worldwide to enhance the maintenance and redevelopment
process for existing applications, reduce maintenance costs and improve quality
in their existing applications. The Company also provides professional services
to large corporations and public entities to help them effectively manage and
automate the evolution of their existing applications.
37
<PAGE>
Sales and marketing activities related to software license fees,
maintenance fees and professional services fees are conducted in North America
and certain foreign locations, principally the United Kingdom, Europe and
Australia. Revenue and income before provision for income taxes for each of the
years in the three year period ended June 30, 1996, and identifiable assets at
June 30, 1996, 1995, and 1994, are as follows (in thousands):

Year Ended June 30,
-------------------------------
1996 1995 1994
-------- -------- --------
Revenue(1):
North America-domestic ................ $ 32,878 $ 22,517 $ 19,329
International-principally distributors:
Europe .............................. 3,097 2,744 2,631
All others .......................... 1,721 1,785 1,276
Foreign subsidiaries and branches ..... 5,861 3,905 2,748
-------- -------- --------
Total revenue ..................... $ 43,557 $ 30,951 $ 25,984
======== ======== ========
Income Before Income Taxes(1):
North America ......................... $ 8,517 $ 5,317 $ 3,768
Foreign subsidiaries and branches ..... (457) 58 365
-------- -------- --------
Income before income taxes ........ $ 8,060 $ 5,375 $ 4,133
======== ======== ========
Identifiable Assets(1):
North America ......................... $ 43,370 $ 30,087 $ 12,790
Foreign subsidiaries and branches ..... 3,221 2,527 1,467
-------- -------- --------
Total assets ...................... $ 46,591 $ 32,614 $ 14,257
======== ======== ========

- ---------------
(1) Includes VIASOFT Pty and VIASOFT UK for all periods, VIASOFT de Mexico,
S.A. de C.V. since its formation on April 1, 1994, VIASOFT Germany since
its formation on October 1, 1994, and VIASOFT Netherlands since its
formation on July 1, 1995.
38
<PAGE>
10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
September 30 December 31 March 31 June 30
------------ ----------- ------------ -------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Fiscal 1996:
Revenue ....................................... $ 8,440 $10,257 $10,361 $14,499
Income from operations ........................ 954 1,872 1,370 2,607
Net income .................................... 941 1,640 1,270 2,366
Earnings per common and common share equivalent $ .06 $ .10 $ .08 $ .14

Fiscal 1995:
Revenue ....................................... $ 6,317 $ 8,014 $ 7,605 $ 9,015
Income from operations ........................ 624 1,462 1,015 1,784
Net income .................................... 576 1,325 1,047 2,244
Earnings per common and common share equivalent $ .05 $ .10 $ .07 $ .13

Fiscal 1994:
Revenue ....................................... $ 6,513 $ 6,256 $ 6,047 $ 7,168
Income from operations ........................ 1,327 1,283 658 886
Net income .................................... 1,089 1,127 638 791
Earnings per common and common share equivalent $ .09 $ .09 $ .05 $ .06
</TABLE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures

None.
39
<PAGE>
PART III

Item 10. Directors and Executive Officers of the Registrant

The information concerning the directors of the Company set forth in the
Proxy Statement to be delivered to stockholders in connection with the Company's
1996 Annual Meeting of Stockholders under the heading "Election of Directors" is
incorporated herein by reference, as is the information concerning the
directors, officers, and more than 10% stockholders of the Company under the
heading "Section 16(a) Compliance." The name, age and position of each executive
officer of the Company set forth under the heading "Executive Officers of the
Registrant" in Part I of this report is incorporated herein by reference.

Item 11. Executive Compensation

The information concerning executive compensation set forth in the Proxy
Statement under the heading "Management" is incorporated herein by reference.
Information contained in the Proxy Statement under the captions "Report of the
Compensation Committee" and "Company Stock Performance Graph" is not
incorporated by reference herein.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information concerning security ownership of certain beneficial owners
and management set forth in the Proxy Statement under the heading "Security
Ownership of Certain Beneficial Owners and Management" is incorporated by
reference herein.

Item 13. Certain Relationships and Related Transactions

The information concerning certain relationships and transactions set forth
in the Proxy Statement under the heading "Certain Transactions" is incorporated
herein by reference.
40
<PAGE>
PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) The following documents are filed as a part of this Annual Report
on Form 10-K:

(1) Consolidated Financial Statements.

See Index to Consolidated Financial Statements at
Item 8.

(2) Consolidated Financial Statement Schedules.

Report of Independent Public Accountants. See page
45 of this report.

Schedule I, Valuation and Qualifying Accounts and
Reserves. See page 46 of this report.

(3) Exhibits:

The following exhibits are filed herewith or
incorporated by reference.

Exhibit
Number Description of Exhibit
------- ----------------------

3.1 Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 10.20 to the Company's Form 10-K for fiscal
year 1995)

3.2 Amended and Restated Bylaws of the Company (incorporated herein
by reference to Exhibit 3(e) to the Company's Registration
Statement on Form S-1 (Registration No. 33-88366))

4.1 Form of Certificate for Common Stock (incorporated herein by
reference to Exhibit 4(a) to the Company's Registration Statement
on Form S-1 (Registration No. 33-88366))

4.2 Form of Warrant to Purchase Common Stock (incorporated herein by
reference to Exhibit 4(b) to the Company's Registration Statement
on Form S-1 (Registration No. 33-88366))

4.3 Series B Preferred Stock Purchase Agreement dated as of September
28, 1984 among the Company and the purchasers named therein
(incorporated herein by reference to Exhibit 4(c) to the
Company's Registration Statement on Form S-1 (Registration No.
33-88366))

4.4 Series A Preferred Stock Subscription Agreements dated June 1,
1984 and Amendments thereto dated September 25, 1984, among the
Company and the purchasers named therein (incorporated herein by
reference to Exhibit 4(d) to the Company's Registration Statement
on Form S-1 (Registration No. 33-88366))

10.1 Business Loan Agreement dated February 15, 1994 between the
Company and Silicon Valley Bank, as amended (incorporated herein
by reference to Exhibit 10(a) to the Company's Registration
Statement on Form S-1 (Registration No. 33-88366))

10.2 Letter Agreement between the Company and M & I First National
Leasing Corp. dated September 9, 1994 and form of equipment lease
documents (incorporated herein by reference
41
<PAGE>
to Exhibit 10(b) to the Company's Registration Statement on Form
S-1 (Registration No. 33-88366))

10.3(3) International Software Marketing and License Agreement dated
November 29, 1993 between SEEC, Inc. and the Company, as amended
(incorporated herein by reference to Exhibit 10(d) to the
Company's Registration Statement on Form S-1 (Registration No.
33-88366))

10.5 Office Lease dated June 5, 1992 between the Company and the
Mutual Life Insurance Company of New York, as amended
(incorporated herein by reference to Exhibit 10(e) to the
Company's Registration Statement on Form S-1 (Registration No.
33-88366))

10.6(2) Form of Indemnification Agreement between the Company and each of
its directors (incorporated herein by reference to Exhibit 10(f)
to the Company's Registration Statement on Form S-1 (Registration
No. 33-88366))

10.7(2) VIASOFT, Inc. 1986 Stock Option Plan (incorporated herein by
reference to Exhibit 10(g) to the Company's Registration
Statement on Form S-1 (Registration No. 33-88366))

10.8(2) Form of Incentive Stock Option Agreement under 1986 Stock Option
Plan (incorporated herein by reference to Exhibit 10(h) to the
Company's Registration Statement on Form S-1 (Registration No.
33-88366))

10.9(2) Form of Incentive Stock Option Agreement under 1986 Stock Option
Plan for officers of the Company (incorporated herein by
reference to Exhibit 10(i) to the Company's Registration
Statement on Form S-1 (Registration No. 33-88366))

10.10(2) Form of Non-Qualified Stock Option Agreement under 1986 Stock
Option Plan (incorporated herein by reference to Exhibit 10(j) to
the Company's Registration Statement on Form S-1 (Registration
No. 33-88366))

10.11(2) Form of Restricted Stock Purchase Agreement for officers and
directors of the Company (incorporated herein by reference to
Exhibit 10(k) to the Company's Registration Statement on Form S-1
(Registration No. 33-88366))

10.12(2) 1994 Equity Incentive Plan (incorporated herein by reference to
Exhibit 10(l) to the Company's Registration Statement on Form S-1
(Registration No. 33-88366))

10.13(2) Employee Stock Purchase Plan, as amended (incorporated herein by
reference to Exhibit 10(m) to Amendment No. 2 to the Company's
Registration Statement on Form S-1 (Registration No. 33-88366))

10.14(2) Employment Agreement dated July 28, 1994 between the Company and
Colin J. Reardon (incorporated herein by reference to Exhibit
10(o) to the Company's Registration Statement on Form S-1
(Registration No. 33-88366))

10.15(2)(4) FY 1996 Executive Bonus Plan (incorporated herein by reference to
Exhibit 10.20 to the Company's Form 10-K for fiscal year 1995)

10.16(2)(4) FY 1996 Compensation Plan for Senior Vice President, Sales and
Marketing - Americas (incorporated herein by reference to Exhibit
10.21 to the Company's Form 10-K for fiscal year 1995)

10.17(2)(4) FY 1996 Compensation Plan for Vice President, International
Operations (incorporated herein by reference to Exhibit 10.22 to
the Company's Form 10-K for fiscal year 1995)
42
<PAGE>
10.18(2)(4) Confidential Severance Agreement between the Company and Hal L.
Carr, Jr. (incorporated herein by reference to Exhibit 10.23 to
the Company's Form 10-K for fiscal year 1995)

10.19(2) Confidential Severance Agreement between the Company and Albert
J. Boos, Jr. (incorporated herein by reference to Exhibit 10.1 to
the Company's Form 10-Q for the quarter ended March 31, 1996)

11(1) Computation of Earnings per Share

21(1) Subsidiaries of the Company

23.1(1) Consent of Arthur Andersen LLP

24(1) Powers of Attorney

27(1) Financial Data Schedules

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

(1) Filed herewith
(2) Management contract or compensation plan or arrangement
(3) Portions omitted and filed separately with the Commission pursuant to a
grant of Confidential Treatment by order dated February 28, 1995
(4) Portions omitted and filed separately with the Commission pursuant to a
request for Confidential Treatment dated September 26, 1995, as amended by
letter dated March 13, 1996

(b) Reports on Form 8-K.

The Company has filed no reports on Form 8-K during the
quarter ended June 30, 1995.

The list of Exhibits required by Item 601 of Regulation
S-K is included in Item 14(a)(3) above.

(d) Financial Statement Schedules.

See Item 14(a)(2) above.
43
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, this 26th
day of September, 1996.

VIASOFT, Inc.

By: /s/ Steven D. Whiteman
-------------------------------------
Steven D. Whiteman
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:

Signature Title Date
- --------- ----- ----

/s/ Steven D. Whiteman Chief Executive Officer, September 26, 1996
- -------------------------- Director
Steven D. Whiteman

/s/ Mark R. Schonau Chief Financial Officer, September 26, 1996
- -------------------------- Chief Accounting Officer
Mark R. Schonau

* John J. Barry III Director September 26, 1996
- --------------------------
John J. Barry III

* A. LeRoy Ellison Director September 26, 1996
- --------------------------
A. LeRoy Ellison

* Robert C. Kagle Director September 26, 1996
- --------------------------
Robert C. Kagle

* Alexander S. Kuli Director September 26, 1996
- --------------------------
Alexander S. Kuli

* J. David Parrish Director September 26, 1996
- --------------------------
J. David Parrish

* Arthur C. Patterson Director September 26, 1996
- --------------------------
Arthur C. Patterson

/s/ Michael A. Wolf Director September 26, 1996
- --------------------------
Michael A. Wolf

*By: /s/ Steven D. Whiteman
- ---------------------------
Steven D. Whiteman
Attorney-in-Fact
44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To VIASOFT, Inc. and Subsidiaries:

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of the
financial statements is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

Phoenix, Arizona,
August 1, 1996
45
<PAGE>
VIASOFT, INC. AND SUBSIDIARIES

SCHEDULE I
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

YEARS ENDED JUNE 30, 1996, 1995, AND 1994

<TABLE>
<CAPTION>
Additions
--------------------------------
Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Period Expenses Accounts Deductions(1) Period
-------------- -------------- -------------- ---------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year Ended June 30,
1996 $ 391 -- -- $ 112 $ 279
Year Ended June 30,
1995 181 210 -- -- 391
Year Ended June 30,
1994 130 87 -- 36 181
</TABLE>

- -------
(1) Write-off of uncollectable amounts.
46
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Page
------ ---------------------- ----
<S> <C> <C>
3.1 Restated Certificate of Incorporation Incorporated herein by reference to
Exhibit 10.20 to the Company's Form 10-K
for fiscal year 1995

3.2 Amended and Restated Bylaws of the Company Incorporated herein by reference to
Exhibit 3(e) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

4.1 Form of Certificate for Common Stock Incorporated herein by reference to
Exhibit 4(a) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

4.2 Form of Warrant to Purchase Common Stock Incorporated herein by reference to
Exhibit 4(b) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

4.3 Series B Preferred Stock Purchase Agreement Incorporated herein by reference to
dated as of September 28, 1984 among the Company Exhibit 4(c) to the Company's
and the purchasers named therein Registration Statement on Form S-1
(Registration No. 33-88366)

4.4 Series A Preferred Stock Subscription Agreements Incorporated herein by reference to
dated June 1, 1984 and Amendments thereto dated Exhibit 4(d) to the Company's
September 25, 1984, among the Company and the Registration Statement on Form S-1
purchasers named therein (Registration No. 33-88366)

10.1 Business Loan Agreement dated February 15, 1994 Incorporated herein by reference to
between the Company and Silicon Valley Bank, as Exhibit 10(a) to the Company's
amended Registration Statement on Form S-1
(Registration No. 33-88366)

10.2 Letter Agreement between the Company and M & I Incorporated herein by reference to
First National Leasing Corp. dated September 9, Exhibit 10(b) to the Company's
1994 and form of equipment lease documents Registration Statement on Form S-1
(Registration No. 33-88366)

10.3(3) International Software Marketing and License Incorporated herein by reference to
Agreement dated November 29, 1993 between SEEC, Exhibit 10(d) to the Company's
Inc. and the Company, as amended Registration Statement on Form S-1
(Registration No. 33-88366)

10.5 Office Lease dated June 5, 1992 between the Incorporated herein by reference to
Company and the Mutual Life Insurance Company of Exhibit 10(e) to the Company's
New York, as amended Registration Statement on Form S-1
(Registration No. 33-88366)
</TABLE>
47
<PAGE>
<TABLE>
<S> <C> <C>
10.6(2) Form of Indemnification Agreement between the Incorporated herein by reference to
Company and each of its directors Exhibit 10(f) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

10.7(2) VIASOFT, Inc. 1986 Stock Option Plan Incorporated herein by reference to
Exhibit 10(g) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

10.8(2) Form of Incentive Stock Option Agreement under Incorporated herein by reference to
1986 Stock Option Plan Exhibit 10(h) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

10.9(2) Form of Incentive Stock Option Agreement Incorporated herein by reference to
under 1986 Stock Option Plan for officers of Exhibit 10(i) to the Company's
the Company Registration Statement on Form S-1
(Registration No. 33-88366)

10.10(2) Form of Non-Qualified Stock Option Agreement Incorporated herein by reference to
under 1986 Stock Option Plan Exhibit 10(j) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

10.11(2) Form of Restricted Stock Purchase Agreement for Incorporated herein by reference to
officers and directors of the Company Exhibit 10(k) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

10.12(2) 1994 Equity Incentive Plan Incorporated herein by reference to
Exhibit 10(l) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

10.13(2) Employee Stock Purchase Plan, as amended Incorporated herein by reference to
Exhibit 10(m) to Amendment No. 2 to the
Company's Registration Statement on Form
S-1 (Registration No. 33-88366)

10.14(2) Employment Agreement dated July 28, 1994 Incorporated herein by reference to
between the Company and Colin J. Reardon Exhibit 10(o) to the Company's
Registration Statement on Form S-1
(Registration No. 33-88366)

10.15(2)(4) FY 1996 Executive Bonus Plan Incorporated herein by reference to
Exhibit 10.20 to the Company's Form 10-K
for fiscal year 1995

10.16(2)(4) FY 1996 Compensation Plan for Senior Vice Incorporated herein by reference to
President, Sales and Marketing - Americas Exhibit 10.21 to the Company's Form 10-K
for fiscal year 1995
</TABLE>
48
<PAGE>
<TABLE>
<S> <C> <C>
10.17(2)(4) FY 1996 Compensation Plan for Vice President, Incorporated herein by reference to
International Operations Exhibit 10.22 to the Company's Form 10-K
for fiscal year 1995

10.18(2)(4) Confidential Severance Agreement between the Incorporated herein by reference to
Company and Hal L. Carr, Jr. Exhibit 10.23 to the Company's Form 10-K
for fiscal year 1995

10.19(2) Confidential Severance Agreement between the Incorporated herein by reference to
Company and Albert J. Boos, Jr. Exhibit 10.1 to the Company's Form 10-Q
for the quarter ended March 31, 1996

11(1) Computation of Earnings per Share 51

21(1) Subsidiaries of the Company 52

23.1(1) Consent of Arthur Andersen LLP 53

24(1) Powers of Attorney 54

27(1) Financial Data Schedules 60
</TABLE>

EXHIBIT 11

VIASOFT, INC. AND SUBSIDIARIES

COMPUTATION OF EARNINGS PER SHARE
(in thousands except per share data)

<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------
1996(2) 1995(2) 1994(2)
------- ------- -------
<S> <C> <C> <C>
Primary:
Common shares outstanding, beginning of period .......... 15,949 3,438 2,892
Effect of Weighting Shares:
Warrants and employee stock options outstanding ....... 1,001 924 604
Sale of common stock, net ............................. 137 1,146 127
Employee stock options exercised ...................... 305 228 249
Conversion of preferred stock(1) ....................... -- 8,848 8,848
------- ------- -------
Weighted average number of common and common share
equivalents outstanding (2) .......................... 17,392 14,584 12,720
======= ======= =======
Net income .............................................. $ 6,217 $ 5,192 $ 3,645
======= ======= =======
Earnings per common and common share equivalent ......... $ 0.36 $ 0.36 $ 0.29
======= ======= =======

Fully diluted:
Common shares outstanding, beginning of period .......... 15,949 3,438 2,892
Effect of Weighting Shares:
Warrants and employee stock options outstanding ....... 1,192 1,062 895
Sale of common stock, net ............................. 137 1,146 127
Employee stock options exercised ...................... 305 228 249
Conversion of preferred stock(1) ....................... -- 8,848 8,848
------- ------- -------
Weighted average number of common and common share
equivalents outstanding(2) ........................... 17,583 14,722 13,011
======= ======= =======
Net income .............................................. $ 6,217 $ 5,192 $ 3,645
======= ======= =======
Earnings per common and common share equivalent ......... $ 0.35 $ 0.35 $ 0.28
======= ======= =======
</TABLE>

(1) Conversion of preferred stock was assumed in 1994.
(2) Reflects effect of the December, 1994 one-for-three reverse stock split and
the August 30, 1996 two-for-one stock split.

EXHIBIT 21

Subsidiaries of VIASOFT, Inc.

Jurisdiction
of
Incorporation
-------------

VIASOFT International, Inc. Delaware

VIASOFT U.K. Limited* England

VIASOFT International GmbH* Germany

VIASOFT Pty. Ltd.* Australia

VIASOFT Benelux, S.A.* Belgium

VIASOFT de Mexico, S.A. de C.V. Mexico

VIASOFT (FSC), Ltd. Barbados

*Subsidiaries denoted with an asterisk are indirect subsidiaries of
VIASOFT, Inc. and are owned directly by the subsidiary under which its name is
listed.

EXHIBIT 23.1

ARTHUR
ANDERSEN

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 33-89868, as amended and 33-89870, as amended.

ARTHUR ANDERSEN LLP

Phoenix, Arizona,
September 24, 1996.

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned does hereby
constitute and appoint Steven D. Whiteman, Michael A. Wolf or Catherine R.
Hardwick (with full power of substitution), his true and lawful attorney-in-fact
and agent, in any and all capacities, to do any and all acts and things and to
execute any and all documents, forms and reports which said attorney-in-fact and
agent may deem necessary or advisable to enable VIASOFT, Inc., a Delaware
corporation (the "Corporation") to sign an annual report on Form 10-K for the
fiscal year ended June 30, 1996 and to file the same with all exhibits thereto,
and all documents in connection therewith, and to comply with the Securities
Exchange Act of 1934 and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, and the undersigned does
hereby ratify and confirm all that said attorney-in-fact and agent shall do or
cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has subscribed these presents on
this 6th day of September, 1996.

/s/ John J. Barry III
-------------------------------------------------
Signature

John J. Barry III
-------------------------------------------------
Printed Name

/s/ Patricia F. Wonderley
-------------------------------------------------
Witness

STATE OF TEXAS )
---------------------------
) ss.
County of Harris )
---------------------------

On this 6th day of September, 1996, before me, the undersigned Notary
Public, personally appeared John J. Barry III, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that he
executed the same for the purposes therein contained.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

/s/ Gwen F. McCreary
-------------------------------------------------
Notary Public
My commission expires:

April 1, 1997
- -------------------------
<PAGE>
POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has subscribed these presents on
this 6th day of September, 1996.

/s/ A. LeRoy Ellison
-----------------------------------------------
Signature

A. LeRoy Ellison
-----------------------------------------------
Printed Name

/s/ D.E. Rosner
-----------------------------------------------
Witness

STATE OF COLOARDO. )
-----------------
) ss.
County of Archuleta )
-----------------

On this 6th day of September, 1996, before me, the undersigned Notary
Public, personally appeared A. LeRoy Ellison, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

/s/ Barbara J. Rosner
-----------------------------------------------
Notary Public
My commission expires:

August 5, 1997
- -----------------------
<PAGE>
POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has subscribed these presents on
this 5th day of September, 1996.

/s/ Robert C. Kagle
-------------------------------------------------
Signature

Robert C. Kagle
-------------------------------------------------
Printed Name

/s/ Susan L. Dooley
-------------------------------------------------
Witness

STATE OF CALIFORNIA )
---------------------------
) ss.
County of San Mateo )
---------------------------

On this 5th day of September, 1996, before me, the undersigned Notary
Public, personally appeared Robert C. Kagle, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

/s/ Marissa E. Matusich
--------------------------------------------------
Notary Public
My commission expires:

August 18, 1997
- ---------------------------
<PAGE>
POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has subscribed these presents on
this 9th day of September, 1996.

/s/ Alexander S. Kuli
--------------------------------------------------
Signature

Alexander S. Kuli
--------------------------------------------------
Printed Name

/s/ Sue Schenek
--------------------------------------------------
Witness

STATE OF TEXAS )
---------------------------
) ss.
County of Travis )
---------------------------

On this 9th day of September, 1996, before me, the undersigned Notary
Public, personally appeared Alexander S. Kuli, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that he
executed the same for the purposes therein contained.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

/s/ Linda G. Hamann
--------------------------------------------------
Notary Public
My commission expires:

December 20, 1999
- ------------------------
<PAGE>
POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has subscribed these presents on
this 6th day of September, 1996.

/s/ J. David Parrish
-------------------------------------------------
Signature

J. David Parrish
-------------------------------------------------
Printed Name

/s/ Pamela A. Carroll
-------------------------------------------------
Witness

STATE OF CALIFORNIA )
---------------------------
) ss.
County of San Francisco )
---------------------------

On this 6th day of September, 1996, before me, the undersigned Notary
Public, personally appeared J. David Parrish, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that he executed
the same for the purposes therein contained.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

/s/ Pamela a. Carroll
-------------------------------------------------
Notary Public
My commission expires:

December 3, 1999
- ------------------------
<PAGE>
POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has subscribed these presents on
this 5th day of September, 1996.

/s/ Arthur C. Patterson
-------------------------------------------------
Signature

Arthur C. Patterson
-------------------------------------------------
Printed Name

/s/ Judith V. Maurer
-------------------------------------------------
Witness

STATE OF CALIFORNIA )
---------------------------
) ss.
County of San Francisco )
---------------------------

On this 5th day of September, 1996, before me, the undersigned Notary
Public, personally appeared Arthur C. Patterson, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that he
executed the same for the purposes therein contained.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

/s/ Judith Maurer
-------------------------------------------------
Notary Public
My commission expires:

August 2, 1999
- -----------------------

<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1996
<PERIOD-START> JUL-01-1994 JUL-01-1995
<PERIOD-END> JUN-30-1995 JUN-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 7,680 5,009
<SECURITIES> 12,875 23,795
<RECEIVABLES> 8,686 13,335
<ALLOWANCES> 391 279
<INVENTORY> 0 0
<CURRENT-ASSETS> 29,914 43,268
<PP&E> 3,990 4,862
<DEPRECIATION> 2,335 2,895
<TOTAL-ASSETS> 32,614 46,591
<CURRENT-LIABILITIES> 11,964 17,881
<BONDS> 0 0
0 0
0 0
<COMMON> 16 17
<OTHER-SE> 20,399 28,234
<TOTAL-LIABILITY-AND-EQUITY> 32,614 46,591
<SALES> 30,757 43,436
<TOTAL-REVENUES> 30,951 43,557
<CGS> 6,713 10,813
<TOTAL-COSTS> 26,066 36,754
<OTHER-EXPENSES> (9) 82
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (481) (1,339)
<INCOME-PRETAX> 5,375 8,060
<INCOME-TAX> 183 1,843
<INCOME-CONTINUING> 5,192 6,217
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,192 6,217
<EPS-PRIMARY> 0.36 0.36
<EPS-DILUTED> 0.36 0.36

</TABLE>