VIASOFT INC /DE/, 424B1, 1997-09-18

VIASOFT INC /DE/
424B1, 1997-09-18
PREPACKAGED SOFTWARE

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<PAGE> 1
Filed pursuant to Rule 424(b)(1)
Reg. No. 333-33815
Reg. No. 333-35779

1,400,000 SHARES

[VIASOFT LOGO]

COMMON STOCK
(PAR VALUE $.001 PER SHARE)

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

Of the 1,400,000 shares of Common Stock offered, 1,120,000 shares are being
offered hereby in the United States and 280,000 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting."

Of the 1,400,000 shares of Common Stock offered, 1,270,000 shares are being
sold by VIASOFT, Inc. and 130,000 shares are being sold by the Selling
Stockholders. See "Selling Stockholders." The Company will not receive any of
the proceeds from the sale of shares by the Selling Stockholders.

The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "VIAS." On September 16, 1997, the last reported sale price of
the Common Stock on the Nasdaq National Market was $55.50 per share. See "Price
Range of Common Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
------------------------

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

<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
--------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Per Share............ $54.75 $2.75 $52.00 $52.00
Total(3)............. $76,650,000 $3,850,000 $66,040,000 $6,760,000
</TABLE>

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

(2) Before deducting estimated expenses of $680,000, payable by the Company.

(3) The Company and certain Selling Stockholders have granted the U.S.
Underwriters an option for 30 days to purchase up to an additional 168,000
shares of Common Stock at the offering price per share, less the
underwriting discount, solely to cover over-allotments in the United States.
Additionally, the Company and certain Selling Stockholders have granted the
International Underwriters a similar option with respect to an additional
42,000 shares as part of the concurrent international offering. If such
options are exercised in full, the total offering price, underwriting
discount, proceeds to the Company and proceeds to Selling Stockholders will
be $88,147,500, $4,427,500, $76,180,000 and $7,540,000, respectively. See
"Underwriting."
------------------------

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
September 22, 1997 against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.
WESSELS, ARNOLD & HENDERSON
SOUNDVIEW FINANCIAL GROUP, INC.
VOLPE BROWN WHELAN & COMPANY
------------------------

The date of this Prospectus is September 17, 1997.
<PAGE> 2

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

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
COMMON STOCK, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. IN ADDITION, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS, IF ANY)
ALSO MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET, IN ACCORDANCE WITH RULE 103 UNDER THE SECURITIES
EXCHANGE ACT OF 1934. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by VIASOFT, INC. ("VIASOFT" or the "Company")
with the Securities and Exchange Commission (the "Commission") are hereby
incorporated by reference in this Prospectus:

(1) The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996 (File No. 0-25472);

(2) The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended September 30, 1996, December 31, 1996 and March 31, 1997
(File No. 0-25472);

(3) The Company's Current Report on Form 8-K dated December 5, 1996
(File No. 0-25472), as amended by its Current Report on Form 8-K/A dated
February 12, 1997; and

(4) The description of the Common Stock to be registered hereunder set
forth under the caption "Description of Securities" in the Registrant's
Form S-1 Registration Statement No. 33-88366, filed pursuant to the
Securities Act of 1933, as amended (the "Securities Act").

All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
("the Exchange Act"), after the date of this Prospectus and prior to the
termination of the offering covered by this Prospectus shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in any
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.

The Company will provide, without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been or may be incorporated by reference
in this Prospectus, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Such requests
should be directed to Catherine R. Hardwick, Secretary, VIASOFT, Inc., 3033
North 44th Street, Phoenix, Arizona 85018, telephone (602) 952-0050.
------------------------

VIASOFT(R), Analytical Engine(TM), Application Knowledge Repository(TM),
Existing Systems Workbench(R), ESW(R), VIA/Insight(R), Visual Recap(TM),
VIA/SmartEdit(R), VIA/SmartTest(R), VIA/Renaissance(TM), VIA/SmartDoc(R),
VIA/Alliance(R), VIA/SmartAccess(R), VIASOFT's Insourcing(TM), US2000(TM),
VIASOFT's Enterprise 2000(TM), VIASOFT's Estimate 2000(TM), VIASOFT's FastPath
2000(SM), VIASOFT's Impact 2000(SM), VIASOFT's Operation 2000(SM), VIASOFT's
Plan 2000(SM), Bridge 2000(TM), ESW/PC(TM), VIASOFT's Legacy Transitions(SM) and
Rochade(TM) are trademarks and service marks of the Company. This Prospectus
also includes trade names, trademarks and references to intellectual property
owned by other companies. Fortune 1000 is a trademark of Time, Inc.

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<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and Notes thereto appearing
elsewhere or incorporated by reference in this Prospectus. Prospective investors
should carefully consider the information set forth under the heading "Risk
Factors." Except as otherwise specified, all information in this Prospectus
assumes no exercise of the Underwriters' over-allotment options. See
"Underwriting."

The following summary contains forward-looking statements that involve
risks and uncertainties. Such forward-looking statements include, but are not
limited to, statements regarding future events and the Company's plans and
expectations. The Company's actual results may differ materially from such
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below in "Risk Factors," as well as
those discussed elsewhere in this Prospectus and in the documents incorporated
herein by reference. See "Special Note on Forward-Looking Statements."

THE COMPANY

VIASOFT provides enterprise application management solutions that help
large organizations worldwide understand, manage and evolve the large-scale
software applications that support their fundamental business processes. These
business solutions are provided through a highly integrated suite of software
products and specialized professional services. Organizations that rely on
mainframe systems must continuously modify, maintain and redevelop existing
software applications to address changing information requirements resulting
from the ongoing evolution of business practices. The Company's products and
services are designed to reduce substantially the cost of maintaining and
redeveloping existing mainframe applications, improve the quality and
maintainability of these applications and assist in implementing specialized or
complex redevelopment initiatives, such as the year 2000 century date
conversion.

The Company's principal business solutions are based on VIASOFT's
proprietary technology, the Existing Systems Workbench ("ESW"), an integrated
suite of software tools. ESW supports the IBM MVS operating system and includes
products that are available individually or as a complete suite. VIASOFT's
business solutions, which combine the Company's products and professional
services offerings, include (i) VIASOFT's Enterprise 2000, including its
FastPath 2000 solution and Bridge 2000 product, for addressing the year 2000
problem, (ii) VIASOFT's Insourcing for reducing the costs and improving the
productivity of managing enterprise applications, and (iii) VIASOFT's Legacy
Transitions for reusing and evolving enterprise applications for the
implementation of distributed computing environments and packaged software
applications.

The Company's objective is to enhance its position as a leading provider of
enterprise application management solutions for large organizations worldwide. A
key element of the Company's strategy is to provide integrated business
solutions for its customers. The Company believes that the integration of
services with its product offerings is an effective strategy for addressing the
complex maintenance and redevelopment requirements of large organizations and
will promote long-term relationships with the Company's installed base of
customers. The Company also intends to capitalize on the year 2000 century date
conversion opportunity through expanded product and service offerings,
cooperative marketing relationships with third parties and leveraging year 2000
customer relationships to sell other products and services. Additional key
elements of the Company's strategy include the ongoing enhancement of its
technological leadership position, the acquisition of businesses, products and
technologies that complement its existing products and services and the
expansion of its worldwide sales and distribution channels, both directly and
through third-party relationships.

As part of the Company's strategy to broaden its enterprise application
management solutions, the Company acquired Rottger & Osterberg Software-Technik
GmbH ("R&O") in December 1996.

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<PAGE> 4

R&O develops, markets and supports repository software tools through its Rochade
product line, together with related repository-based services and solutions.
Rochade is based on an open repository software technology that is designed to
help businesses capture, manage, monitor, disseminate, reuse and change their
information technology assets in both mainframe systems and distributed
computing environments. VIASOFT is developing and enhancing the Rochade
repository technology for integration with VIASOFT's product line and
professional services solutions. The Company believes that the Rochade
repository technology will provide significant additional benefits to customers
as part of a suite of integrated products and solutions, compared to
repositories offered as stand-alone products.

The Company markets its products and services primarily to Fortune 1000
companies and similarly sized business and governmental organizations worldwide.
The Company's marketing efforts are implemented through its domestic and
international direct sales forces, through a number of foreign independent
distributors located in Europe, the Far East, South Africa and Latin America and
through strategic relationships with third parties as part of its
Solution/Technology Provider program. Representative customers of the Company
include Abbott Laboratories, American General Life Insurance Co., BMW AG,
Boeing, Inc., Charles Schwab & Co., Citibank, N.A., Consolidated Rail, Deutsche
Bank AG, Goldman, Sachs & Co., MasterCard International, Incorporated, Motorola,
Inc., Pfizer, Inc., PTT Telecom B.V., T. Rowe Price Investments, Telstra
Corporation Ltd., and U.S. West.

RISK FACTORS

For a discussion of considerations relevant to an investment in the Common
Stock, see "Risk Factors".

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by:
The Company........................ 1,270,000 shares
The Selling Stockholders........... 130,000 shares
Common Stock to be outstanding after
the Offering(1).................... 18,992,772 shares
Use of Proceeds...................... Addition of direct sales and research and development
personnel, marketing initiatives, potential
acquisitions of businesses, products and technologies,
enhancement and integration of the Rochade product
line, working capital and other general corporate
purposes.
Nasdaq National Market Symbol........ VIAS
</TABLE>

- ---------------
(1) Based on 17,722,772 shares outstanding as of June 30, 1997 and excludes (a)
1,410,272 shares of Common Stock issuable upon exercise of outstanding stock
options, (b) 164,284 shares of Common Stock reserved for future issuance
under the 1994 Equity Incentive Plan, (c) 285,642 shares of Common Stock
reserved for future issuance under the Employee Stock Purchase Plan, and (d)
350,000 shares of Common Stock reserved for future issuance under the
Outside Directors Stock Option Plan.

4
<PAGE> 5

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
---------------------------- PRO FORMA
1995 1996 1997 JUNE 30, 1997(1)
------- ------- -------- ----------------
(IN THOUSANDS, EXCEPT (UNAUDITED)
PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license fees................................... $14,311 $17,824 $ 40,292 $ 42,727
Maintenance fees........................................ 12,059 14,305 21,010 23,157
Professional services fees.............................. 4,387 11,307 23,832 25,081
Other................................................... 194 121 178 300
------- ------- -------- -------
Total revenues................................... 30,951 43,557 85,312 91,265
------- ------- -------- -------
Operating expenses:
Cost of software license and maintenance fees(2)........ 2,661 2,788 4,345 5,471
Cost of professional services fees...................... 4,052 8,025 18,316 19,529
Sales and marketing..................................... 13,517 18,137 31,573 33,193
Research and development................................ 3,193 4,237 7,893 9,135
Write-off of purchased in-process research and
development(3)........................................ -- -- 26,958 --
General and administrative(2)........................... 2,643 3,567 6,319 6,802
------- ------- -------- -------
Total operating expenses......................... 26,066 36,754 95,404 74,130
------- ------- -------- -------
Income (loss) from operations............................. 4,885 6,803 (10,092) 17,135
Total other income (expense).............................. 490 1,257 718 712
------- ------- -------- -------
Income (loss) before income taxes......................... 5,375 8,060 (9,374) 17,847
Provision for income taxes................................ 183 1,843 6,062 6,155
------- ------- -------- -------
Net income (loss)......................................... $ 5,192 $ 6,217 $(15,436) $ 11,692
======= ======= ======== =======
Earnings (loss) per common and common share
equivalent(4)........................................... $ .36 $ .36 $ (.90) $ .64
======= ======= ======== =======
Weighted average number of common and common share
equivalents outstanding(4).............................. 14,584 17,391 17,212 18,270
======= ======= ======== =======
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
AS ADJUSTED(5)
ACTUAL (UNAUDITED)
------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................................... $ 8,501 $ 8,501
Working capital............................................................... 9,856 75,216
Total assets.................................................................. 64,601 129,961
Deferred revenue (current).................................................... 18,227 18,227
Deferred revenue (long-term).................................................. 230 230
Total stockholders' equity.................................................... 28,696 94,056
</TABLE>

- ---------------
(1) Gives pro forma effect to the acquisition by the Company of all of the
outstanding capital stock of R&O as if the acquisition had occurred at the
beginning of the period presented. The pro forma results exclude the
approximate $27.0 million purchased in-process research and development
charge. See "Pro Forma Combined Financial Data," "Management's Discussion
and Analysis of Consolidated Financial Condition and Results of Operations"
and Note 2 to Consolidated Financial Statements.
(2) For the period from December 5, 1996, the date of the R&O acquisition,
through June 30, 1997, cost of software license and maintenance fees and
general and administrative expense included amortization of $233,000 and
$311,000, respectively, of intangible assets acquired with the R&O
acquisition.
(3) See Note 2 to Consolidated Financial Statements and "Management's Discussion
and Analysis of Consolidated Financial Condition and Results of Operations."
(4) 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 the 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 to Consolidated Financial
Statements.
(5) Adjusted to give effect to the receipt of estimated net proceeds from the
sale of 1,270,000 shares of Common Stock offered by the Company hereby at
the public offering price of $54.75 per share, after deducting underwriting
discounts and estimated offering expenses. See "Use of Proceeds" and
"Capitalization."

5
<PAGE> 6

RISK FACTORS

Except for historical information contained herein, this Prospectus
contains forward-looking statements that involve risks and uncertainties. Such
forward-looking statements include, but are not limited to, statements regarding
future events and the Company's plans and expectations. The Company's actual
results may differ materially from such statements. Factors that cause or
contribute to such differences include, but are not limited to, those discussed
below as well as those discussed elsewhere in this Prospectus and in the
documents incorporated herein by reference. See "Special Note on Forward-Looking
Statements."

The Common Stock offered hereby involves a high degree of risk. In addition
to the other information in this Prospectus, the following risk factors, among
others, should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby.

DEPENDENCE ON YEAR 2000 MARKET

The growth in the Company's professional services fees in fiscal 1996 and
1997 resulted primarily from increased demand for VIASOFT's Enterprise 2000
services as awareness of the year 2000 century date conversion problem has
grown. In the fiscal years ended June 30, 1996 and 1997, VIASOFT's Enterprise
2000 services represented 74% and 72%, respectively, of the Company's
professional services revenue. In addition, this demand has also accounted for a
significant portion of software license revenue for the same periods as
customers have acquired the Company's software products to help address their
year 2000 concerns. The Company has experienced this growth in both the domestic
and international markets. Should the demand for the Company's year 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 revenues would be materially and adversely affected. The Company
anticipates that demand in the year 2000 market will decline, perhaps rapidly,
following the year 2000. It is the Company's strategy to leverage customer
relationships and knowledge of customer application systems derived from its
year 2000 services solutions to market other products and services beyond the
year 2000 market. However, there can be no assurance that this strategy will be
successful, and should the Company be unable to market other products and
services as demand in the year 2000 market declines, whether as a result of
competition, technological change or other factors, the Company's business,
results of operations and financial condition will be materially and adversely
affected.

VOLATILITY OF COMMON STOCK PRICE

The Company's stock price has been highly volatile since its initial public
offering. The Company believes that factors such as awareness of the year 2000
problem, 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 continue 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 and securities analysts' expectations of continued growth
and the higher price/earnings ratio at which the Company's stock may trade, any
shortfall in meeting such 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. See "Price Range of Common
Stock."

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<PAGE> 7

PRODUCT CONCENTRATION; DEPENDENCE ON MAINFRAME SYSTEMS

Most of the Company's software license fee revenues and maintenance fee
revenues are derived from products in the Company's primary product line, the
Existing Systems Workbench. In addition, a substantial portion of the Company's
professional services fee revenues is derived from customers that also license
ESW products. 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.
The Company's principal software products and services are designed for users of
IBM and IBM-compatible mainframe computers utilizing IBM's MVS/XA or MVS/ESA
operating systems. Future revenues from sales of products and services and
recurring maintenance revenues are therefore dependent on continued use of such
mainframe computers and related operating system software. In addition, because
VIASOFT products require the use of IBM's MVS operating systems, the Company
will be required to adapt its products to any changes made to these IBM
operating systems in the future. The Company's inability to adapt to future
changes in the MVS operating systems, or delays in doing so, could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "-- Ability to Respond to Technological Change." All of
the software license and maintenance revenues and all professional services fees
of R&O have been related to R&O's Rochade product line. See "-- Ability to
Assimilate Acquired Business."

FLUCTUATING QUARTERLY RESULTS

The Company has experienced significant quarterly and other fluctuations in
revenues and operating results and expects these fluctuations to continue in the
future. The Company believes that these fluctuations have been attributable to
the budgeting and purchasing practices of its customers, the length of the
customer product evaluation process for the Company's products, the timing of
its customers' 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 revenues and results of operations may
also be affected by seasonal trends which have resulted in higher revenues in
the Company's second and fourth fiscal quarters and lower revenues in its first
and third fiscal quarters. This seasonality is a result of many customers'
annual purchasing and budgetary practices, the Company's sales commission
practices, lower revenues in the summer months (particularly in Europe) when
many businesses make fewer purchases, 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 professional
services personnel. Future revenues and operating results may fluctuate as a
result of these and other factors, including the demand for the Company's
products and services, the timing and cost of new product and service
introductions and product enhancements, changes in the mix of products and
services sold and in the mix of sales by distribution channels, timing of any
acquisitions and associated costs, the size and timing of customer orders,
changes in pricing policies by the Company or its competitors, the timing of
collection of accounts receivable and related reported days' sales outstanding,
changes in foreign currency exchange rates, competitive conditions in the
industry and general economic conditions. Furthermore, as a result of these and
other factors, it is likely that in some future quarter the Company's revenues
or operating results will be below the expectations of securities analysts or
investors, in which case the price of the Common Stock could likely be
materially and adversely affected. See "Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations."

Historically, the Company has had little or no backlog. Quarterly revenues
and operating results therefore 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 fees in the last month
of each quarter, frequently in the last week. A significant portion of the
Company's

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<PAGE> 8

operating expenses is relatively fixed, since personnel levels and other
expenses are based upon anticipated revenues. Because a substantial portion of
the Company's 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, many of which are not within the Company's control, can
cause significant variations in operating results from quarter to quarter.
Accordingly, 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. See "Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations."

RISKS FROM INTERNATIONAL OPERATIONS

Approximately 25% and 32% of the Company's total revenues in the fiscal
years ended June 30 1996 and 1997, respectively, were attributable to
international sales. The Company believes that international business will
continue to account for a significant portion of its revenues, due in part to
continued expansion of its ESW product line internationally and the recent
acquisition of R&O. In R&O's fiscal year ended December 31, 1995 and the
nine-month period ended September 30, 1996, approximately 73% and 60% of its
total revenues were from sources outside North America, respectively.
International operations are subject to a number of risks, including longer
accounts receivable payment cycles, exchange rate fluctuations, difficulty in
enforcing agreements and collecting accounts receivable, tariffs and other
restrictions on foreign trade, U.S. export requirements, withholding and other
tax consequences, economic and political instability, restrictions on
repatriation of earnings and the burdens of complying with a wide variety of
foreign laws. The Company has experienced longer payment cycles from some of its
foreign distributors. Sales made through the Company's foreign distributors are
denominated in U.S. dollars except in Italy, where they are denominated in lira.
Sales by the Company's foreign subsidiaries are principally denominated in the
currencies of the countries where sales are made. The Company experienced losses
of approximately $704,000 from foreign currency fluctuations in the fiscal year
ended June 30, 1997. The Company has not to date sought to hedge the risks
associated with fluctuations in foreign exchange rates. The Company continues to
evaluate the relative costs and benefits of hedging and may seek to hedge these
risks in the future, if appropriate. The Company's foreign operations are also
affected by general economic conditions in its international markets. A
prolonged economic downturn in its foreign markets could have a material adverse
effect on the Company's business. In addition, the laws of certain countries do
not protect the Company's products and intellectual property rights to the same
extent as do the laws of the United States. There can be no assurance that the
factors described above will not have an adverse effect on the Company's future
international revenues and, consequently, on the Company's business, results of
operations and financial condition. See "Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations," "Business -- Sales,
Marketing and Distribution" and Note 9 to Consolidated Financial Statements.

In addition, approximately 9% and 5% of the Company's total revenues and
35% and 13% of international revenues were realized through the sales and
marketing efforts of its independent distributors in the fiscal years ended June
30, 1996 and 1997, respectively. The efforts expended and results achieved by
independent distributors are less within the control of the Company than its
direct sales operations. A reduction in sales by the Company's distributors or a
termination of their relationships with the Company could have a material
adverse effect on the Company's international revenues, its business, results of
operations and financial condition.

DEPENDENCE ON ACQUISITIONS

The Company expects to continue its strategy of identifying, acquiring and
developing businesses, products and technologies to enhance and expand its
software 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,

8
<PAGE> 9

including increasing competition for attractive acquisition candidates in the
Company's markets, the technological enhancement and incorporation of acquired
products into existing product lines and services, 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 undisclosed liabilities of any acquired companies, the failure
to achieve anticipated benefits such as cost savings and synergies, as well as
the diversion of management's 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 its ability to
identify, complete and integrate strategic acquisitions on favorable terms. See
"-- Ability to Assimilate Acquired Business."

ABILITY TO ASSIMILATE ACQUIRED BUSINESS

VIASOFT is in the process of integrating the Rochade repository technology
acquired from R&O into VIASOFT's software product and solution offerings. The
cost of these efforts is expected to approximate $2.2 million, of which
approximately $500,000 has been incurred to date. VIASOFT is also enhancing the
Rochade product line and marketing it to VIASOFT's customer base and marketing
its ESW product line and professional service solutions to the customer base of
R&O. Costs associated with these and other integration activities will continue
to be incurred by the Company, including product and service development costs
and additional marketing and sales costs, among others. These costs will
increase the Company's operating expenses in the periods in which they are
incurred over and above amounts already reserved. In addition, many of the
operations of the Company and R&O are continuing to be integrated in order to
achieve planned cost savings and synergies. There may be substantial
difficulties associated with integrating the technology and operations of the
Company and R&O, and there can be no assurance that this integration will be
accomplished expeditiously or successfully or that the anticipated benefits from
these activities, such as improved product performance, cost savings, synergies,
and increased penetration of the two companies' respective customer bases, will
be realized. The integration of certain technology and operations will continue
to require the dedication of management resources that may temporarily distract
attention from the day-to-day business of the Company. The business of the
Company may also be disrupted by employee uncertainty and lack of focus during
this integration. The Company has experienced some attrition of R&O employees
and there can be no assurance that the Company will be able to retain key
technical, managerial and other employees. Failure to complete the integration
of the technology and operations of the Company and R&O on a timely basis and as
planned could have a material adverse effect on the Company's business,
financial condition and results of operations.

ABILITY TO MANAGE CHANGE

The Company has experienced changes in its operations and in the software
industry in the last several fiscal years that have placed increased demands on
its managerial, operational and financial resources. The Company expects its
business and the industry as a whole to continue to undergo rapid change. The
Company's integration of the Rochade business, its plans to continue expansion
of its professional services offerings, particularly in the year 2000 market,
and its plans to continue expansion of its international operations, together
with ongoing required product development and future acquisition activity in
response to changes in the industry and customer needs, will require VIASOFT to
manage effectively its operations in a rapidly changing environment. The
Company's future performance will depend in part on its ability to manage change
in both its domestic and international operations and will require the Company
to continue to hire additional management, technical and professional services
personnel, particularly in the professional services and year 2000 areas. The
Company has experienced difficulties in recruiting and retaining qualified
personnel and anticipates that these efforts will become increasingly difficult,
as industry sources predict an insufficient supply of programmers and
consultants to meet demand, especially in the year 2000

9
<PAGE> 10

market. The failure of the Company's management team to manage changing
technological and business conditions as well as the growth of its own business,
should it occur, could have a material adverse impact on the Company's business,
results of operations and financial condition.

INTENSE COMPETITION

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. The market for the type of professional services
provided by the Company is also highly competitive. With the growth of the year
2000 market, significant competition has emerged and is expected to increase in
the next few years. The professional services segment of the market is
characterized by low barriers to entry. The principal competitive factors
affecting the year 2000 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: software
vendors, consulting organizations and system integrators and outsourcers.
Software vendors provide tools targeted for the year 2000 market. Competitive
factors include tools' compatibility with customers' platforms and languages,
vendors' ability to deliver training and ongoing support during customers'
implementation of the tools, and the value of the tools to an organization
beyond the year 2000. Consulting organizations that compete in the year 2000
market range from large, generalized consulting firms to 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
offerings. Large systems integrators and outsourcing firms have also entered the
year 2000 market to include year 2000 conversion services with the maintenance
and data processing services they already provide to their existing market and
customer base. Some integrators/outsourcers offer licensed tools from software
vendors.

Most of the Company's competitors and potential competitors have
substantially greater financial, marketing, recruiting and technology resources
than the Company. Major competitors for software product license sales include
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 compatibility 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. Major competitors
of the Company's professional services business are primarily the consulting
organizations of the Big Six accounting firms. Other competitors of the
Company's professional services business include Data Dimensions, Inc.,
Electronic Data Systems Corporation and IBM's Integrated Systems Solutions Corp.
The principal competitive factors affecting the market for the Company's
professional services include responsiveness to customer needs, availability and
productivity of personnel, the ability to demonstrate achievement of results,
depth of technical skills, price and reputation.

The Company's ability to compete successfully in the sale of both its
products and services will depend in large part upon its ability to implement
successfully its strategy of selling products and services as a total solution
as well as its ability to attract new customers, sell new products and services,
deliver and support product enhancements to its existing customers and respond
effectively to continuing technological change by developing and acquiring new
products and services. There can be no assurance that the Company will be able
to compete successfully in the future, nor that future competition for product
sales and professional services will not have a material adverse effect on the
business, results of operations and financial condition of the Company. See
"Business -- Competition."

10
<PAGE> 11

RISKS ASSOCIATED WITH PROFESSIONAL SERVICES

During the fiscal years ended June 30, 1996 and 1997, fees from the
Company's professional services grew significantly and constituted 26% and 28%
of the Company's consolidated revenues, respectively. 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. The Company has experienced
difficulties in recruiting and retaining qualified personnel and anticipates
that these efforts will become increasingly difficult, as industry sources
predict an insufficient supply of programmers and consultants to meet demand,
especially in the year 2000 market. In addition, a portion of the Company's
professional services fees is derived from fixed-price contracts, which are more
difficult to manage profitably due to greater risk of cost overruns,
particularly in the relatively new year 2000 market. The Company experienced
declines in its professional services margins in the fourth quarter of fiscal
1997, due primarily to revised estimates of revenue recognized under percentage
of completion contracts and decreased utilization of personnel associated with
the transition to its new FastPath 2000 services methodology. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations". There
can be no assurance that the Company will be able to maintain professional
services margins consistently at historical levels.

ABILITY TO RESPOND TO TECHNOLOGICAL CHANGE

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 technological developments and evolving industry standards as
well as respond to changes in customer needs. There can be no assurance that the
Company will be successful in developing or acquiring product enhancements or
new products to address changing technologies and customer requirements
adequately, that it can introduce such products on a timely basis, or that any
such products or enhancements will be successful in the marketplace. The
Company's delay or failure to develop or acquire technological improvements or
to adapt its products to technological change would have a material adverse
effect on the Company's business, results of operations and financial condition.
In addition, most of the Company's products and services are purchased by
customers using mainframe systems, and the Company's business is largely
dependent on its core product line designed for mainframe systems. The computing
needs of organizations worldwide increasingly include alternative computing
platforms, including client/server and other distributed computing networks,
LANs, mid-range computers, workstations and PCs. A significant shift in the way
the Company's customers use computing platforms could have a material adverse
effect on the Company's business. See " -- Product Concentration; Dependence on
Mainframe Systems."

RISKS ASSOCIATED WITH PRODUCTS CURRENTLY UNDER DEVELOPMENT

The Company is currently developing and enhancing certain products that are
unfinished, untested and unproven in the marketplace. These products include,
but are not limited to: enhancements to integrate and complement the Rochade
line of products acquired by the Company in connection with its acquisition of
R&O; products designed to extend certain language support for the Company's
products; and additional options and language support for the Company's new
Bridge 2000 product. There can be no assurance that these products will be
completed and commercially introduced at the times scheduled by the Company, or
that if completed and introduced, that these products will function in
accordance with the Company's and its customers' current expectations or be able
to compete successfully in the marketplace. The Rochade product line, Bridge
2000 and certain of the Company's products under development address mission-
critical applications that operate continuously, and have required the Company
to develop and maintain 24-hour, 7-day per week support capability. The Company
does not have extensive

11
<PAGE> 12

experience in providing continuous customer support, which requires additional
personnel, management and infrastructure resources. The Company will be subject
to the risks associated with its products' increased support requirements,
including increased risks of customer dissatisfaction and the need to recruit,
train, retain and manage qualified personnel to provide continuous support
services. See "-- Dependence on Key Personnel;" and "Business -- Bridge
2000; -- Product Development."

DEPENDENCE ON KEY PERSONNEL

The Company's success will depend in part upon the retention of key senior
management and technical personnel. The Company does not have employment
agreements with most of its key personnel, nor does it maintain key man life
insurance on any of these persons. In July 1997, the Company's Chief Technology
Officer, Michael A. Wolf, resigned as officer and director of VIASOFT and
entered into a 13-month consulting agreement to provide strategic consulting
services to the Company. Several senior management personnel are relatively new
to the Company and the Company's success will depend in part on the successful
assimilation and performance of these individuals. The Company believes that its
future success will also depend upon its ability to attract and retain
additional highly skilled technical, professional services, management and
marketing personnel, including in particular a vice president of technology. The
market for these individuals has historically been, and the Company expects that
it will continue to be, intensely competitive. The Company has experienced
difficulties in recruiting and retaining qualified personnel and anticipates
that these efforts will become increasingly difficult, as industry sources
predict an insufficient supply of programmers and consultants to meet demand,
especially in the year 2000 market. The loss of one or more of its key employees
or the Company's inability to attract and retain other qualified employees could
have a material adverse effect on the Company's business.

PRODUCT LIABILITY

The Company markets its products and services to customers for managing the
maintenance and redevelopment of mission-critical computer software systems. In
addition, a large and increasing portion of the Company's business is devoted to
addressing the year 2000 problem, which affects the performance and reliability
of many mission-critical systems. The Company's agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product and service liability claims. It is possible, however, that
the limitation of liability provisions contained in the Company's customer
agreements may not be effective as a result of existing or future federal,
state, local or foreign laws or ordinances or unfavorable judicial decisions.
Although the Company has not experienced any material product or service
liability claims to date, the sale and support of its products and services may
entail the risk of such claims, particularly in the year 2000 market, which
could be substantial in light of the use of its products and services in
mission-critical applications. A successful product or service liability claim
brought against the Company could have a material adverse effect upon the
Company's business, operating results and financial condition.

IMPORTANCE OF PROPRIETARY RIGHTS

The Company regards its software products and some of the methodology and
processes it uses in connection with performing professional services as
proprietary and attempts to protect them under a combination of copyright, trade
secret and trademark laws and contractual restrictions on employees and third
parties. Despite these precautions, it may be possible for unauthorized parties
to copy the Company's software or to reverse engineer or obtain and use
information the Company regards as proprietary. The Company has no patents and
existing trade secret and copyright laws provide only limited protection.
Certain provisions of the license and distribution agreements generally used by
the Company, including provisions protecting against unauthorized

12
<PAGE> 13

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. There can be no assurance that the protections put in
place by the Company will be adequate.

In 1996, the Company acquired the date bridging technology incorporated in
its new Bridge 2000 product, together with a pending patent application. The
Company is continuing to prosecute the patent application. However, there can be
no assurance that a patent will issue as a result of this application, nor as to
the extent of the protection any such patent might afford.

Significant and protracted litigation may be necessary to protect the
Company's intellectual property rights, to determine the scope of the
proprietary rights of others or to defend against claims of infringement.
Although the Company is not currently involved in any litigation with respect to
intellectual property rights, infringement claims against software developers
are likely to increase as the number of functionally similar products in the
market increases. There can be no assurance that third-party claims, with or
without merit, alleging infringement will not be asserted against the Company in
the future. Such assertions can be time-consuming and expensive to defend and
could require the Company to discontinue the use of certain software or
processes, to cease the manufacture, use and sale of infringing products and
services, to incur significant litigation costs and expenses and to develop or
acquire noninfringing technology or to obtain licenses to the alleged infringing
technology. There can be no assurance that the Company would be able to develop
or acquire alternative technologies or to obtain such licenses or, if licenses
were obtainable, that the terms would be commercially acceptable to the Company.
See "Business -- Intellectual Property."

SIGNIFICANT UNALLOCATED NET PROCEEDS

The Company intends to use the net proceeds of this offering for the
addition of direct sales and research and development personnel, marketing
initiatives, potential acquisitions of businesses, products and technologies
complementary to the Company's business and enhancement and integration of the
Rochade product line. In addition, a portion of the net proceeds will be used
for general corporate purposes, including working capital. Although the Company
from time to time engages in discussions with respect to possible acquisitions,
it has no present understandings, commitments or agreements, nor is it currently
engaged in any negotiations, with respect to any such transaction. Pending such
uses, the Company intends to invest the net proceeds from this offering in
short-term, investment-grade, interest-bearing securities. The Company has no
other specific uses for the proceeds of this offering, and the exact uses of
such proceeds will be subject to the discretion of management. See "Use of
Proceeds."

DILUTION

Investors purchasing shares of Common Stock in this offering will incur
immediate and substantial dilution in the net tangible book value of the Common
Stock from the offering price and will incur additional dilution upon the
exercise of stock options and warrants. See "Capitalization."

ANTI-TAKEOVER EFFECT OF CHARTER AND BYLAWS

Certain provisions of the Company's Amended and Restated Bylaws impose
certain procedures and limitations applicable to stockholders' meetings,
proposals of business and nominations of directors that could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company. These provisions
may limit the price that certain investors may be willing to pay in the future
for shares of the Company's Common Stock. These provisions may also reduce the
likelihood of an acquisition of the Company at a premium price by another person
or entity. In addition, under the Company's Restated Certificate of
Incorporation, the Board of Directors has the authority to fix the rights and

13
<PAGE> 14

preferences of, and issue shares of, Preferred Stock without further action of
the stockholders. Therefore, Preferred Stock could be issued, without
stockholder approval, that could have voting, liquidation and dividend rights
superior to that of existing stockholders. The issuance of Preferred Stock could
adversely affect the voting power of holders of Common Stock and the likelihood
that such holders would receive dividend payments and payments on liquidation
and could have the effect of delaying, deferring or preventing a change in
control of the Company. The Company has no present plan to issue any shares of
Preferred Stock.

POTENTIAL FUTURE SALES OF COMMON STOCK

Sales of a substantial number of shares of Common Stock in the public
market, whether by purchasers in this offering, other stockholders of the
Company, including affiliates of the Company or former stockholders of R&O,
could adversely affect the prevailing market price of the Common Stock, and
could impair the Company's future ability to raise capital through an offering
of its equity securities. Immediately after the completion of this offering
(assuming no exercise of the Underwriters' over-allotment option) there will be
18,992,772 shares of Common Stock outstanding (based on the shares outstanding
as of June 30, 1997), substantially all of which will be freely tradeable in the
public markets, subject in certain cases to the volume and other limitations set
forth in Rule 144 or 145 promulgated under the Securities Act. The Company and
directors and executive officers of the Company and the Selling Stockholders,
who together hold 908,750 shares of Common Stock (including options exercisable
within 60 days of June 30, 1997), have signed lockup agreements with the
representatives of the Underwriters and have agreed to be subject to lockup
restrictions ("Lockup"), unless released by Goldman, Sachs & Co. See
"Underwriting". Subject to certain exceptions, the Lockup prohibits the
disposition of any shares of Common Stock by the Company or by directors and
executive officers of the Company until the date 90 days after the date of this
Prospectus. Any shares subject to the Lockup may be released at any time with or
without notice to the public.

14
<PAGE> 15

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

Except for historical information contained herein, this Prospectus
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act and the Company intends that
such forward-looking statements be subject to the safe harbors created thereby.
Such forward-looking statements involve risks and uncertainties and include, but
are not limited to, statements regarding future events and the Company's plans
and expectations. The Company's actual results may differ materially from such
statements. Factors that cause or contribute to such differences include, but
are not limited to, those discussed above in "Risk Factors", as well as those
discussed elsewhere in this Prospectus and the documents incorporated herein by
reference. Although the Company believes that the assumptions underlying its
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the results
contemplated in such forward-looking statements will be realized. In addition,
as disclosed above under "Risk Factors", the business and operations of the
Company are subject to substantial risks which increase the uncertainties
inherent in the forward-looking statements included in this Prospectus. The
inclusion of such forward-looking information should not be regarded as a
representation by the Company or any other person that the future events, plans
or expectations contemplated by the Company will be achieved.

THE COMPANY

VIASOFT was formed under the name Software Renovation Technology as a
California corporation in 1983. In 1986, the Company changed its name to
VIASOFT, Inc. and reincorporated in Delaware. When used in this Prospectus,
unless the context requires otherwise, the terms "Company" and "VIASOFT" refer
to Software Renovation Technology and VIASOFT, Inc. and all of VIASOFT's
subsidiaries. The Company's executive offices are located at 3033 North 44th
Street, Phoenix, Arizona 85018, and its telephone number is (602) 952-0050.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,270,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$65.4 million ($75.5 million if the Underwriters' over-allotment option is
exercised in full), at the public offering price of $54.75 per share, after
deducting estimated underwriting discounts and offering expenses. The Company
will not receive any proceeds from the sale of Common Stock by the Selling
Stockholders.

The Company intends to use the net proceeds of this offering for the
addition of direct sales and research and development personnel, marketing
initiatives, potential acquisitions of businesses, products and technologies and
enhancement and integration of the Rochade product line. In addition, a portion
of the proceeds will be used for general corporate purposes, including working
capital. With respect to acquisitions, the Company will seek to acquire
businesses, products and technologies complementary to the Company's business.
Although the Company from time to time engages in discussions with respect to
possible acquisitions, it has no present understandings, commitments or
agreements, nor is it currently engaged in any negotiations, with respect to any
such transaction. Pending such uses, the Company intends to invest the net
proceeds from this offering in short-term, investment-grade, interest-bearing
securities.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its capital stock.
The Company currently anticipates that it will retain future earnings, if any,
to fund the development and growth of its business and does not anticipate
paying any cash dividends in the foreseeable future.

15
<PAGE> 16

PRICE RANGE OF COMMON STOCK

The following table presents quarterly information on the price range of
the Common Stock (Nasdaq National Market symbol "VIAS") beginning at the
Company's initial public offering in fiscal 1995. The prices have been adjusted
to give retroactive effect to the Company's two-for-one stock split that was
payable on September 13, 1996 to stockholders of record as of August 30, 1996.
This information indicates the high and low reported sale prices on the Nasdaq
National Market.

<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
FISCAL 1995:
Third quarter (beginning March 1, 1995).................... 4 7/8 3 7/8
Fourth quarter............................................. 7 1/2 4 1/4
FISCAL 1996:
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 1997:
First quarter.............................................. 49 1/4 14 3/8
Second quarter............................................. 61 39 1/8
Third quarter.............................................. 65 1/4 27 1/4
Fourth quarter............................................. 55 3/8 30 3/8
FISCAL 1998
First quarter (through September 16, 1997)................. 65 1/4 47
</TABLE>

As of June 30, 1997, there were approximately 309 holders of record of the
Common Stock. A recent last reported sale price on the Nasdaq National Market
for the Common Stock is set forth on the cover page of this Prospectus.

16
<PAGE> 17

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1997, on an actual basis and as adjusted to give effect to the receipt of
the estimated net proceeds from the sale of 1,270,000 shares of Common Stock
offered hereby (at the public offering price of $54.75 per share). This table is
qualified in its entirety by the more detailed information and financial
statements contained elsewhere or incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
LONG-TERM OBLIGATIONS:
Deferred revenue, recognized after one year................. $ 230 $ 230
-------- ---------
Other long-term liabilities................................. 138 138
-------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, 2,000,000 authorized, 0 shares issued and
outstanding at June 30, 1997 and as adjusted............. -- --
Common Stock, 24,000,000 authorized, 17,722,772 and
18,992,772 issued and outstanding at June 30, 1997 and as
adjusted, respectively(1)................................ 18 19
Capital in excess of par value.............................. 43,970 109,329
Common stock subscriptions receivable....................... (55) (55)
Accumulated deficit......................................... (14,930) (14,930)
Cumulative translation adjustment........................... (307) (307)
-------- ---------
Total stockholders' equity.......................... 28,696 94,056
-------- ---------
Total capitalization................................ $ 29,064 $ 94,424
======== =========
</TABLE>

- ---------------
(1) Does not include, as of June 30, 1997 (a) 1,410,272 shares of Common Stock
issuable upon exercise of outstanding stock options, (b) 164,284 shares of
Common Stock reserved for future issuance under the 1994 Equity Incentive
Plan, (c) 285,642 shares of Common Stock reserved for future issuance under
the Employee Stock Purchase Plan, and (d) 350,000 shares of Common Stock
reserved for future issuance under the Outside Directors Stock Option Plan.

17
<PAGE> 18

PRO FORMA COMBINED FINANCIAL DATA

The following pro forma financial data of the Company presents the
Company's unaudited pro forma combined statements of operations for the fiscal
years ended June 30, 1996 and 1997, adjusted to give effect to the R&O
acquisition as if it had been consummated as of the beginning of each respective
period.

On December 5, 1996, the Company acquired all of the capital stock of R&O.
The Company initially paid $10.8 million in cash and issued approximately
425,000 shares of restricted Common Stock valued at $12.8 million to the selling
stockholders of R&O. Additional consideration of $2.0 million was paid on
February 28, 1997 based on the achievement of certain financial performance
criteria. The Company also assumed liabilities of approximately $9.4 million and
recorded other direct costs of approximately $3.8 million related to the
acquisition. The acquisition has been accounted for as a purchase in accordance
with Accounting Principles Board Opinion No. 16. See "Management's Discussion
and Analysis of Consolidated Financial Condition and Results of Operations" and
Note 2 to Consolidated Financial Statements.

PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996 YEAR ENDED JUNE 30, 1997
--------------------------------------------------- ---------------------------------------------------
BUSINESS PRO FORMA PRO FORMA BUSINESS PRO FORMA PRO FORMA
HISTORICAL ACQUIRED ADJUSTMENTS COMBINED HISTORICAL ACQUIRED ADJUSTMENTS COMBINED
---------- -------- ----------- --------- ---------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software license
fees............. $ 17,824 $11,318 $ -- $29,142 $ 40,292 $ 2,435 $ -- $42,727
Maintenance fees... 14,305 4,262 -- 18,567 21,010 2,147 -- 23,157
Professional
services fee..... 11,307 3,448 -- 14,755 23,832 1,249 -- 25,081
Other.............. 121 169 -- 290 178 122 -- 300
-------- ------- ------- ------- -------- ------- ------- -------
Total revenues... 43,557 19,197 -- 62,754 85,312 5,953 -- 91,265
-------- ------- ------- ------- -------- ------- ------- -------
Operating expenses:
Cost of software
license and
maintenance
fees............. 2,788 1,787 400(1) 4,975 4,345 959 167(1) 5,471
Cost of
professional
services fees.... 8,025 4,214 (221)(2) 12,018 18,316 1,374 (161)(2) 19,529
Sales and
marketing........ 18,137 6,022 (721)(2,4) 23,438 31,573 2,243 (623)(2,4) 33,193
Research and
development...... 4,237 4,077 (257)(2,4) 8,057 7,893(5) 1,511 (269)(2,4) 9,135
General and
administrative... 3,567 2,598 (495)(1,2,3,4) 5,670 6,319 1,311 (828)(1,2,3,4) 6,802
-------- ------- ------- ------- -------- ------- ------- -------
Total operating
expenses....... 36,754 18,698 (1,294) 54,158 68,446 7,398 (1,714) 74,130
-------- ------- ------- ------- -------- ------- ------- -------
Income (loss) from
operations......... 6,803 499 1,294 8,596 16,866 (1,445) 1,714 17,135
-------- ------- ------- ------- -------- ------- ------- -------
Total other income
(expense).......... 1,257 (308) 227(6) 1,176 718 (144) 138(6) 712
-------- ------- ------- ------- -------- ------- ------- -------
Income (loss) before
income taxes....... 8,060 191 1,521 9,772 17,584 (1,589) 1,852 17,847
Provision for income
taxes.............. 1,843 -- 394(7) 2,237 6,062 -- 93(7) 6,155
-------- ------- ------- ------- -------- ------- ------- -------
Net income (loss).... $ 6,217 191 $ 1,127 $ 7,535 $ 11,522 $(1,589) $ 1,759 $11,692
======== ======= ======= ======= ======== ======= ======= =======
Earnings per common
and common share
equivalent......... $ .36 $ .42 $ .64 $ .64
======== ======= ========
Weighted average
number of common
and common share
equivalents
outstanding........ 17,391 425(8) 17,816 18,086(9) 184(8) 18,270
======== ======= ======= ======== ======= =======
</TABLE>

- ---------------
(1) To adjust amortization expense to reflect amortization of the cost in excess
of the fair value of net assets acquired over a 5-year period and for
amortization of other identifiable intangible assets over the appropriate
periods.
(2) To adjust payroll and employee benefits related to the reduction of
duplicate or redundant positions identified by the Company as part of the
acquisition.
(3) To adjust other operating expenses to reflect expenditures which would not
have been incurred had the acquisition of R&O occurred at the beginning of
the respective periods.
(4) To reflect a reduction in expenses related to excess office space that would
not have been incurred by the Company had the acquisition occurred at the
beginning of the periods presented.
(5) Excludes a charge of approximately $27.0 million for write-off of purchased
in-process research and development.
(6) To adjust interest expense to reflect the payoff of R&O debt assumed in the
acquisition, as of the beginning of the periods presented.
(7) To adjust income taxes to reflect the tax effect of the adjustments
described above.
(8) To adjust weighted average number of common and common share equivalents
outstanding as if the Common Stock issued in connection with the acquisition
of R&O had been outstanding since the beginning of the periods presented.
(9) Adjusted to include additional common share equivalents as a result of
excluding a charge of approximately $27.0 million for write-off of purchased
in-process research and development. See Note (5) above.

18
<PAGE> 19

The foregoing unaudited pro forma combined financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto. The
unaudited pro forma combined financial data is provided for illustrative
purposes only and is not necessarily indicative of the combined results of
operations that would have been reported had the R&O acquisition occurred on the
dates indicated, nor does it represent a forecast of the combined results of
operations for any future period. No pro forma adjustments have been included
herein which reflect the potential effect of (i) any efficiencies which may be
obtained by combining the Company and R&O operations or (ii) the costs of
restructuring, integrating or consolidating their operations. Certain statements
in this Prospectus concerning the R&O acquisition, including descriptions of the
acquisition and pro forma financial information, are forward-looking statements
that involve risks and uncertainties. There can be no assurance that the R&O
acquisition will have the desired benefits or that it will not have an adverse
effect on the Company's business, financial condition or results of operations.
Actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include, among others, those
discussed herein under "Risk Factors" and "Special Note on Forward-Looking
Statements," as well as those discussed elsewhere in this Prospectus and in the
documents incorporated herein by reference.

19
<PAGE> 20

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 Consolidated Financial
Condition and Results of Operations" included elsewhere herein. The selected
consolidated financial data presented below has 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, 1997 and 1996 and for each of the three years in the
period ended June 30, 1997 also is included elsewhere herein. The consolidated
statements of operations data for the years ended June 30, 1994 and 1993 and the
consolidated balance sheet data as of June 30, 1995, 1994, and 1993 are derived
from audited financial statements not included herein.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------
PRO FORMA
JUNE 30,
1993 1994 1995 1996 1997 1997(1)
------- ------- ------- ------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license fees........................................... $11,343 $13,029 $14,311 $17,824 $ 40,292 $42,727
Maintenance fees................................................ 7,645 10,041 12,059 14,305 21,010 23,157
Professional services fees...................................... 1,341 2,715 4,387 11,307 23,832 25,081
Other........................................................... 313 199 194 121 178 300
------- ------- ------- ------- -------- -------
Total revenues............................................ 20,642 25,984 30,951 43,557 85,312 91,265
------- ------- ------- ------- -------- -------
Operating expenses:
Cost of software license and maintenance fees(2)................ 2,254 1,544 2,661 2,788 4,345 5,471
Cost of professional services fees.............................. 1,626 2,522 4,052 8,025 18,316 19,529
Sales and marketing............................................. 13,308 11,993 13,517 18,137 31,573 33,193
Research and development........................................ 3,692 3,291 3,193 4,237 7,893 9,135
Write-off of purchased in-process research and development(3)... -- -- -- -- 26,958 --
General and administrative(2)................................... 2,406 2,480 2,643 3,567 6,319 6,802
------- ------- ------- ------- -------- -------
Total operating expenses.................................. 23,286 21,830 26,066 36,754 95,404 74,130
------- ------- ------- ------- -------- -------
Income (loss) from operations..................................... (2,644) 4,154 4,885 6,803 (10,092) 17,135
Total other income (expense)...................................... (350) (22) 490 1,257 718 712
------- ------- ------- ------- -------- -------
Income (loss) before income taxes................................. (2,994) 4,132 5,375 8,060 (9,374) 17,847
Provision for income taxes........................................ 278 487 183 1,843 6,062 6,155
------- ------- ------- ------- -------- -------
Net income (loss)................................................. $(3,272) $ 3,645 $ 5,192 $ 6,217 $(15,436) $11,692
======= ======= ======= ======= ======== =======
Earnings (loss) per common and common share equivalent(4)......... $ (.28) $ .29 $ .36 $ .36 $ (.90) $ .64
======= ======= ======= ======= ======== =======
Weighted average number of common and common share equivalents
outstanding(4).................................................. 11,620 12,720 14,584 17,391 17,212 18,270
======= ======= ======= ======= ======== =======
</TABLE>

<TABLE>
<CAPTION>
JUNE 30,
-------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................... $ 1,025 $ 4,099 $ 7,680 $ 5,009 $ 8,501
Working capital (deficit)............................................... (2,654) 1,149 17,950 25,388 9,856
Total assets............................................................ 9,551 14,257 32,614 46,591 64,601
Deferred revenue (current).............................................. 6,127 7,679 8,482 9,985 18,227
Deferred revenue (long term)............................................ 28 182 185 298 230
Total stockholders' equity (deficit).................................... (690) 3,039 20,423 28,259 28,696
</TABLE>

(2) For the period from December 5, 1996, the date of the R&O acquisition,
through June 30, 1997, cost of software license and maintenance fees and
general and administrative expense included amortization of $233,000 and
$311,000, respectively, of intangible assets acquired in the R&O
acquisition.

(3) See Note 2 to Consolidated Financial Statements and "Management's Discussion
and Analysis of Consolidated Financial Condition and Results of Operations."

(4) 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 the 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 to Consolidated Financial
Statements.

20
<PAGE> 21

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

Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and the Company's plans and expectations. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed above in "Risk Factors", as well as those discussed
elsewhere in this Prospectus or incorporated herein by reference. See "Special
Note on Forward-Looking Statements."

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 companies and similarly-sized business and
governmental 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 through foreign subsidiaries and independent distributors in other
international markets.

The Company licenses software products directly to customers and to
distributors for resale. Software license fees 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 on a
percentage of completion basis, which is generally as the related services are
provided.

On December 5, 1996, the Company acquired all of the outstanding shares of
capital stock of R&O pursuant to a stock purchase agreement with the
stockholders of R&O. R&O develops, markets and supports repository software
tools through its Rochade product line, together with related repository based
services and solutions. The Company accounted for the R&O acquisition as a
purchase and allocated approximately $27.0 million of the purchase price to
in-process research and development, resulting in a significant charge to the
Company's results of operations during the year ended June 30, 1997. Total
revenues of R&O were $12.5 million for the period from the acquisition date to
June 30, 1997.

21
<PAGE> 22

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Revenues:
Software license fees.................................... 46.2% 40.9% 47.2%
Maintenance fees......................................... 39.0 32.8 24.6
Professional services fees............................... 14.2 26.0 28.0
Other.................................................... 0.6 0.3 0.2
----- ----- -----
Total revenues................................... 100.0 100.0 100.0
----- ----- -----
Operating expenses:
Cost of software license and maintenance fees............ 8.6 6.4 5.1
Cost of professional services fees....................... 13.1 18.4 21.4
Sales and marketing...................................... 43.7 41.6 37.0
Research and development................................. 10.3 9.7 9.3
Write-off of purchased in-process research and
development........................................... -- -- 31.6
General and administrative............................... 8.5 8.3 7.4
----- ----- -----
Total operating expenses......................... 84.2 84.4 111.8
----- ----- -----
Income (loss) from operations.............................. 15.8 15.6 (11.8)
Total other income, net.......................... 1.6 2.9 0.8
----- ----- -----
Income (loss) before income taxes.......................... 17.4 18.5 (11.0)
Provision for income taxes................................. 0.6 4.2 7.1
----- ----- -----
Net income (loss)................................ 16.8% 14.3% (18.1)%
===== ===== =====
</TABLE>

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1997 AND JUNE 30, 1996

REVENUES

Total revenues were $85,312,000 for the fiscal year ended June 30, 1997, an
increase of 95.9% from $43,557,000 for the fiscal year ended June 30, 1996.
Software license fees were $40,292,000 for the fiscal year ended June 30, 1997,
an increase of 126.1% from $17,824,000 for the fiscal year ended June 30, 1996.
Software license fees increased both domestically and internationally as a
result of the demand for the Company's tools to assist in addressing the year
2000 century date change problem. The increase in international software license
fees was attributable primarily to a 386.6% improvement in results from the
Company's direct operations over the same period in the prior year, due
primarily to sales of the Company's year 2000 solutions in the United Kingdom
and growth of the German and Australian operations. In addition, license fees
increased due to the acquisition of R&O, which contributed license fees of
$7,398,000 since the December 5, 1996 acquisition date. See Note 9 to
Consolidated Financial Statements.

Maintenance fees were $21,010,000 in fiscal 1997, an increase of 46.9% from
$14,305,000 in fiscal 1996. The increase was due in part to the R&O acquisition,
which contributed $3,219,000 in maintenance revenue, with the remainder
attributable to new software licenses, customer system upgrades and increases in
the fees charged for annual maintenance.

Professional services fees were $23,832,000 in fiscal 1997, an increase of
110.8% from $11,307,000 in fiscal 1996. The Company continued to expand its
professional services business throughout most of fiscal 1997 to continue to
meet the increasing demand for its year 2000 solution offerings, VIASOFT's
Enterprise 2000. VIASOFT's Enterprise 2000 solution offerings comprised

22
<PAGE> 23

72.4% and 74.7% of the Company's professional services revenues during fiscal
1997 and 1996, respectively. In addition, R&O contributed $1,818,000 in
professional services fee revenue in fiscal 1997. During the fourth quarter of
fiscal 1997, the Company began to enhance its year 2000 solution offerings. The
Company's initial offering was focused on a three-phase, enterprise level
solution for the year 2000 problem using VIASOFT's Impact 2000, VIASOFT's Plan
2000, and VIASOFT's Operation 2000. In the fourth quarter of fiscal 1997, the
Company introduced VIASOFT's FastPath 2000, which is designed to provide the
primary components of a successful year 2000 conversion on an application level,
rather than an enterprise-wide level. See "Business -- VIASOFT Services --
VIASOFT's Enterprise 2000." This resulted in decreased utilization of personnel
during the quarter due to training required for this new solution. During the
fourth quarter of fiscal 1997, the Company also re-evaluated certain of its
service engagements and determined that the level of effort to complete these
engagements was more than originally estimated. As such, the Company revised the
amount of revenue recognized per day on a percentage of completion basis under
the engagements. The impact was to reduce professional services fees by
approximately $700,000 compared to the third quarter of fiscal 1997. The
combination of these revenue adjustments and the decreased personnel utilization
associated with the FastPath 2000 introduction caused a slowdown in revenue
growth in professional services fees during the fourth quarter of fiscal 1997.
The Company does not anticipate that these factors will affect revenue growth in
fiscal 1998.

COST OF REVENUES

Cost of software license and maintenance fees, which include royalties,
cost of customer support and packaging and product documentation, was $4,345,000
for the fiscal year ended June 30, 1997, an increase of 55.8% from $2,788,000
during the fiscal year ended June 30, 1996. The increase was primarily due to
additional R&O expenses of $1,074,000. Without the R&O costs, these expenses
would have increased 17.3%. Gross margins on software license and maintenance
fees remained relatively consistent at 92.9% compared to 91.3% for fiscal 1997
and fiscal 1996, respectively. The expense increase is primarily due to
additional personnel in the customer support area and increased salaries, as
well as amortization of the purchased research and development from the R&O
acquisition.

Cost of professional services fees, which consists principally of personnel
costs, third-party subcontracting fees, and other costs related to the
professional services business, was $18,316,000 for the fiscal year ended June
30, 1997, an increase of 128.2% from $8,025,000 for the fiscal year ended June
30, 1996. The increase in expenses is a result of 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, and to a lesser extent, additional expenses incurred by R&O of
$1,681,000. The overall gross margin on professional services fees for fiscal
1997 was 23.2% compared to 29.0% for fiscal 1996. Excluding the R&O professional
services business, the gross margin on other professional services business was
24.4%. During the fourth quarter of fiscal 1997, the Company experienced lower
margins as a result of its introduction of FastPath 2000, noted above, and the
related costs incurred to train the professional services organization. In
addition, the percentage of completion revenue adjustments noted above also
reduced the margins on professional services. Overall, the Company expects a
decrease in professional services margins as it continues to integrate the R&O
professional services organization with its own operations.

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 $31,573,000 in fiscal
1997, an increase of 74.1% from $18,137,000 in fiscal 1996. Of this increase,
R&O expenses accounted for $4,027,000. Excluding R&O expenses, sales and
marketing expenses increased 51.9%. This increase is attributable primarily to
an increase in personnel and the associated costs, including higher salaries,
travel and bonuses, as well as

23
<PAGE> 24

general salary increases, increased commissions as a result of revenue growth,
increased marketing costs, and an increase in bad debt expense due to the
absolute dollar increase in accounts receivable. Sales and marketing expenses as
a percentage of total revenues declined to 37.0% in fiscal 1997, compared to
41.6% in fiscal 1996, 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 $7,893,000 for fiscal year ended June 30, 1997, excluding an approximate
$27.0 million charge for purchased in-process research and development in
connection with the R&O acquisition, an increase of 86.3% from $4,237,000 for
the fiscal year ended June 30, 1996. The increase in expenses includes costs
associated with R&O's research and development of $1,728,000. Excluding costs
related to R&O, research and development costs increased 45.5% in fiscal 1997 as
a result of general salary increases, the addition of personnel and the related
cost of recruiting, costs of external consultants and increased expenses for
external service bureau computing costs. As a percentage of total revenues,
research and development costs were 9.3% for fiscal 1997 (excluding the
approximate $27.0 million purchased in-process research and development charge)
compared to 9.7% for the same period in fiscal 1996, due primarily to the
increase in revenue.

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 $6,319,000 in the fiscal year ended June 30, 1997, representing an increase
of 77.2% compared to $3,567,000 in the fiscal year ended June 30, 1996. The
increase included $1,158,000 in general and administrative expenses related to
R&O. Excluding those expenses and the one-time charge of $350,000 incurred in
the third quarter of fiscal 1996 related to the change in the CFO position,
general and administrative expenses increased 60.4%. This increase is a result
of additional legal fees and administrative personnel and their related costs,
general salary increases, additional bonuses, amortization of intangibles
related to the R&O acquisition, increased external consulting costs and
additional insurance costs. As a percentage of total revenues, general and
administrative expenses were 7.4% for fiscal 1997 compared to 8.2% for period in
fiscal 1996, due primarily to the increase in revenues.

OTHER INCOME (EXPENSE)

Interest income in the fiscal year ended June 30, 1997 was $1,309,000,
compared to $1,350,000 in the fiscal year ended June 30, 1996. This decrease was
due primarily to the decrease in funds available for short-term investment as a
result of the R&O acquisition, net of cash generated from operations during the
year. Other expense for the fiscal year ended June 30, 1997 increased to
$546,000 as compared to $82,000 for the same period in fiscal 1996, primarily
due to exchange losses on transactions with the Company's subsidiaries in
Germany and the United Kingdom, which are valued in their local currencies, as
well as certain transactions with its Italian distributor which are valued in
lira. This was primarily a result of the strengthening of the U.S. dollar
against various European currencies during the second half of fiscal 1997. See
"Effects of Inflation and Foreign Currency Exchange Fluctuations."

PROVISION FOR INCOME TAXES

The provision for income taxes was $6,062,000 and $1,843,000 for fiscal
years ended June 30, 1997 and 1996, respectively. The Company's effective tax
rate was 34.5% in fiscal 1997, excluding the effect of the non-deductible
purchased in-process research and development charge, compared to 22.9% in
fiscal 1996. The Company's effective tax rate in fiscal 1997 was affected by the

24
<PAGE> 25

decreased availability of net operating loss carryforwards, which were fully
utilized in fiscal 1996, and certain tax credit carryforwards, which were mostly
utilized in fiscal 1996.

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 40.7% from
$30,951,000 for fiscal 1995. Software license fees were $17,824,000 for fiscal
1996, an increase of 24.5% from $14,311,000 for fiscal 1995. Domestic license
revenues increased 30.7% 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 9.9% 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 18.6% 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.

Professional services fees were $11,307,000 in fiscal 1996, an increase of
157.7% from $4,387,000 in fiscal 1995. The Company continued 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 73.6% 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 55.1% 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 was $2,788,000 in fiscal
1996, an increase of 4.8% 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 incorporated by reference herein.

The cost of professional services fees was $8,025,000 in fiscal 1996, an
increase of 98.1% 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 29.0% in fiscal 1996 compared to 7.6% in fiscal 1995.
This margin improvement

25
<PAGE> 26

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 were $18,137,000 in fiscal 1996, an increase
of 34.2% 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
41.6% in fiscal 1996 compared to 43.7% in fiscal 1995 due primarily to the
increase in revenues.

RESEARCH AND DEVELOPMENT

Total expenditures for research and development were $4,237,000 for fiscal
1996, an increase of 32.7% 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 total revenues,
research and development costs remained relatively constant at 9.7% for fiscal
1996 and 10.3% for fiscal 1995.

GENERAL AND ADMINISTRATIVE

General and administrative expenses were $3,567,000 in fiscal 1996,
representing an increase of 34.9%, 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 21.7%.
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 8.3% and
8.5%, respectively, 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.

PROVISION FOR INCOME TAXES

The provision for income taxes was $1,843,000 and $183,000, resulting in
effective tax rates of 22.9% and 3.4%, 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 to Consolidated Financial
Statements.

26
<PAGE> 27

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited consolidated quarterly
results of operations for each of the eight quarters ended June 30, 1997. In the
opinion of management, this quarterly information has been prepared on the same
basis as the Company's annual audited Consolidated Financial Statements and
includes all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the information for the periods presented when read
in conjunction with the Consolidated Financial Statements of the Company and
Notes thereto. The operating results for any quarter are not necessarily
indicative of the results of the full year or any future quarter.

<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------
FISCAL 1996 FISCAL 1997
---------------------------------------- -----------------------------------------
SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30
-------- ------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license fees.......... $ 3,602 $ 4,674 $ 3,977 $ 5,571 $ 4,714 $ 8,381 $11,380 $15,817
Maintenance fees............... 3,312 3,567 3,608 3,818 4,047 4,853 5,716 6,394
Professional services fees..... 1,491 1,984 2,748 5,084 5,177 6,498 6,765 5,392
Other.......................... 35 32 28 26 38 51 40 49
------- ------- ------- ------- ------- -------- ------- -------
Total revenues........... 8,440 10,257 10,361 14,499 13,976 19,783 23,901 27,652
------- ------- ------- ------- ------- -------- ------- -------
Operating expenses:
Cost of software license and
maintenance fees............. 659 799 683 647 624 953 1,221 1,547
Cost of professional services
fees......................... 1,464 1,514 1,833 3,214 3,921 4,549 5,009 4,837
Sales and marketing............ 3,664 4,201 4,271 6,001 5,168 7,152 8,626 10,627
Research and development....... 936 1,109 1,030 1,162 1,127 1,725 2,210 2,831
Write-off of purchased
in-process research and
development.................. -- -- -- -- -- 26,958 -- --
General and administrative..... 763 762 1,174 868 1,115 1,505 1,862 1,837
------- ------- ------- ------- ------- -------- ------- -------
Total operating
expenses............... 7,486 8,385 8,991 11,892 11,955 42,842 18,928 21,679
------- ------- ------- ------- ------- -------- ------- -------
Income (loss) from operations.... 954 1,872 1,370 2,607 2,021 (23,059) 4,973 5,973
------- ------- ------- ------- ------- -------- ------- -------
Other income (expense):
Interest income................ 306 322 378 344 386 344 249 330
Interest expense............... (3) (2) (4) (2) (1) (52) 9 (1)
Other, net..................... (2) (1) (42) (37) 4 (11) (422) (117)
Total other income
(expense).............. 301 319 332 305 389 281 (164) 212
Income (loss) before income
taxes.......................... 1,255 2,191 1,702 2,912 2,410 (22,778) 4,809 6,185
Provision for income taxes....... 314 551 432 546 854 1,406 1,661 2,124
------- ------- ------- ------- ------- -------- ------- -------
Net income (loss)................ $ 941 $ 1,640 $ 1,270 $ 2,366 $ 1,556 $(24,184) $ 3,148 $ 4,044
======= ======= ======= ======= ======= ======== ======= =======
Earnings (loss) per common and
common share equivalent........ $ 0.06 $ 0.10 $ 0.07 $ 0.13 $ 0.09 $ (1.42) $ 0.17 $ 0.22
======= ======= ======= ======= ======= ======== ======= =======
Weighted average number of common
and common share equivalents
outstanding.................... 17,040 17,092 17,278 17,558 17,668 17,045 18,337 18,460
======= ======= ======= ======= ======= ======== ======= =======
</TABLE>

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 revenues and results of operations may also be affected
by seasonal trends, which have resulted in higher revenues in the Company's
second and fourth fiscal quarters and lower revenues in its first

27
<PAGE> 28

and third fiscal quarters. This seasonality is a result of many customers'
annual purchasing and budgetary practices, the Company's sales commission
practices, lower revenues in the summer months (particularly in Europe) when
many businesses make fewer purchases, 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 several quarters,
the number of working days in a quarter and the utilization rate of professional
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 fees 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, many of which are not within the Company's control,
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. See "Risk Factors -- Fluctuating Quarterly
Results; -- Volatility of Common Stock Price."

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations to date primarily through the private
sale of equity securities, the initial public offering of its common stock in
March 1995, and, since July 1, 1993, from cash flow from operations. At June 30,
1997 the Company had cash and cash equivalents and investments of $28,575,000,
representing a decrease of $229,000 from the total of $28,804,000 at June 30,
1996. See Notes 1, 2 and 3 of Notes to Consolidated Financial Statements.

The Company's net cash provided by operating activities was $15,136,000 and
$7,976,000 for the fiscal years ended June 30, 1997 and 1996, respectively. Net
cash provided from operations in fiscal 1997 was composed primarily of net
income excluding non-cash charges for the write-off of purchased in-process
research and development, depreciation and amortization and a net increase in
working capital. Net cash provided in fiscal 1996 was composed primarily of net
income excluding non-cash charges for depreciation and amortization and
compensation related to the Company's stock plans, and a net increase in working
capital.

The Company's investing activities used cash of $9,371,000 and $11,803,000,
in the fiscal years ended June 30, 1997 and 1996, respectively. In fiscal 1997,
cash was used for the purchase of R&O, net of the cash acquired, and to a lesser
extent, the purchase of furniture, fixtures and equipment, offset in part by
sales or maturities of investments in excess of purchases of investments. In
fiscal 1996, the primary use of cash was for the purchase of investments, net of
investment maturities.

The Company's financing activities used cash of $1,942,000 and provided
cash of $1,158,000 in the fiscal years ended June 30, 1997 and 1996,
respectively. In fiscal 1997, the cash was used for payment of R&O debt
acquired, offset in part by cash provided from the issuance of common stock upon
the exercise of options and through the employee stock purchase plan. 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.

As of June 30, 1997, the Company did not have any material commitments for
capital expenditures. In the fiscal year ending June 30, 1998, the Company
anticipates capital expenditures of approximately $6.0 million, primarily for
computer hardware and software to update the Company's communications equipment
and systems.

The Company expects that the proceeds of this offering and existing working
capital, together with cash from operations, will be sufficient for at least the
next 12 months to meet its capital and liquidity needs for existing operations
and general corporate purposes, as well as the addition of

28
<PAGE> 29

direct sales and research and development personnel, marketing initiatives, and
potential acquisitions of businesses, products and technologies.

EFFECTS OF INFLATION AND FOREIGN CURRENCY EXCHANGE FLUCTUATIONS

The results of operations of the Company for the periods discussed above
have not been significantly affected by inflation or (except as described below)
foreign currency fluctuations. Sales made through the Company's foreign
distributors are denominated in U.S. dollars except in Italy, where they are
denominated in lira. Sales by the Company's foreign subsidiaries are principally
denominated in the currencies of the countries where sales are made. The Company
experienced losses of approximately $704,000 from foreign currency fluctuations
in the fiscal year ended June 30, 1997. The Company's unhedged foreign currency
exposure at June 30, 1997 consisted of the following (in thousands):

<TABLE>
<CAPTION>
UNITED
KINGDOM AUSTRALIA GERMANY NETHERLANDS ITALY OTHER TOTAL
------- --------- ------- ----------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment in
foreign
subsidiaries.......... $ (730) $ 225 $10,311 $(226) $ -- $ 21 $ 9,601
Net short-term
receivables (payables)
with foreign
subsidiaries.......... (1,057) (874) 7,106 (290) -- (191) 4,694
Net receivable from
foreign distributor... -- -- -- -- 406 -- 406
------- ----- ------- ----- ---- ----- -------

Total......... $(1,787) $(649) $17,417 $(516) $ 406 $(170) $14,701
======= ===== ======= ===== ==== ===== =======
</TABLE>

The Company has not to date sought to hedge the risks associated with
fluctuations in foreign exchange rates. The Company continues to evaluate the
relative costs and benefits of hedging and may seek to hedge these risks in the
future, if appropriate. Gains and losses relating to translation of the
financial statements of the Company's foreign subsidiaries are included as a
separate component of stockholders' equity in the Company's Consolidated
Financial Statements. See "Risk Factors -- Risks from International Operations."

29
<PAGE> 30

BUSINESS

Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and the Company's plans and expectations. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed above in "Risk Factors," as well as those discussed
elsewhere in this Prospectus or incorporated herein by reference. See "Special
Note on Forward-Looking Statements."

GENERAL

VIASOFT provides enterprise application management solutions that help
large organizations worldwide understand, manage and evolve the large-scale
software applications that support their fundamental business processes. These
business solutions are provided through a highly integrated suite of software
products and specialized professional consulting services. The Company's
products and services are designed to reduce substantially the cost of
maintaining and redeveloping existing mainframe applications, improve the
quality and maintainability of these applications and assist in implementing
specialized or complex redevelopment initiatives, such as the year 2000 century
date conversion.

The Company's principal business solutions are based on VIASOFT's
proprietary technology, the Existing Systems Workbench, an integrated suite of
software development tools. ESW, which is also the Company's primary software
product line, supports the IBM MVS operating system and includes products that
are available individually or as a complete suite. VIASOFT's business solutions,
which combine the Company's products and professional services offerings,
include (i) VIASOFT's Enterprise 2000, including its FastPath 2000 solution and
Bridge 2000 product, for addressing the year 2000 problem, (ii) VIASOFT's
Insourcing for reducing the costs and improving the productivity of managing
enterprise applications and (iii) VIASOFT's Legacy Transitions for reusing and
evolving enterprise applications for the implementation of distributed computing
environments and packaged software applications. As part of the Company's
strategy to broaden its enterprise application management solutions, the Company
acquired R&O in December 1996 and is in the process of integrating R&O's
repository technology into VIASOFT's solutions offerings.

The Company markets its products and services to Fortune 1000 companies and
similarly sized business and governmental organizations worldwide. As of June
30, 1997, the Company had approximately 850 customers with licenses to the
Company's products and current maintenance contracts. Representative customers
of the Company include Abbott Laboratories, American General Life Insurance Co.,
BMW AG, Boeing, Inc., Charles Schwab & Co., Citibank, N.A., Consolidated Rail,
Deutsche Bank AG, Goldman, Sachs & Co., MasterCard International, Incorporated,
Motorola, Inc., Pfizer, Inc., PTT Telecom B.V., T. Rowe Price Investments,
Telstra Corporation Ltd., and U.S. West.

INDUSTRY BACKGROUND

Worldwide, large business and governmental organizations rely on
large-scale computer applications to help manage their businesses. These
applications, many of which are mission-critical, contain the core knowledge and
processes that support the major operations of these organizations. Examples of
such applications include insurance claims processing systems, on-line banking
systems, manufacturing systems and utility and telephone billing systems.

Mission-critical applications are primarily run on large, mainframe
computers using programs written in COBOL and a variety of other mainframe
programming languages. According to industry estimates, there are over 13,000
IBM and IBM-compatible MVS mainframe sites worldwide. Organizations that rely on
mainframe systems must continuously modify, maintain and redevelop

30
<PAGE> 31

existing software applications to address changing information requirements
resulting from the ongoing evolution of business practices. The cost of these
efforts is enormous.

In addition to ongoing maintenance and redevelopment requirements,
organizations periodically have a need to implement specialized, complex
application redevelopment initiatives to accommodate changed circumstances or
business requirements. In recent years, many large businesses and governmental
organizations have begun to address the year 2000 century date conversion
problem, which is a large-scale redevelopment requirement. Many existing
software applications employ date representations limited to the last two digits
of the year. For example, the year 1997 is typically stored as "97." These
two-digit representations create problems for existing systems that perform
calculations using dates after 1999. For example, "00" may be interpreted as
"1900," rather than "2000." These existing applications must be modified to
implement date representations that identify the correct century.

Large organizations are also seeking to leverage investments in existing
systems by integrating their mainframe systems with distributed computing
environments. The Company believes that this integration will continue to be
gradual, especially as it relates to mission-critical applications, because
mainframes have the demonstrated capability to run complex applications with
speed, security and reliability. Organizations have made large investments in
mainframe systems and the personnel to maintain and redevelop these systems, and
much of the core business knowledge of large organizations is already embedded
in existing mainframe applications. As a result, the Company expects many large
organizations will continue to pursue a strategy to retain many key
mission-critical applications on the mainframe, migrate all or part of other
existing applications to distributed computing environments and pursue new
application development in both mainframe and distributed computing
environments. In addition, the Company believes that organizations will seek to
reuse existing mainframe applications in distributed computing environments to
leverage long-standing existing systems investments.

Industry estimates suggest that many large organizations dedicate between
40% and 60% of their application development resources to maintenance and
redevelopment of existing applications. The use of such a large proportion of
organizations' resources in maintenance and redevelopment limits the resources
available for other tasks, such as developing new applications and addressing
specialized initiatives. Consequently, many large organizations are seeking to
improve the maintenance and redevelopment process in order to reduce costs and
improve productivity and return on their information systems investment. This
has resulted in an increasing demand for automated software tools. In addition,
many organizations are also seeking to improve maintenance and redevelopment
methodologies and train personnel to take full advantage of available
technology.

The limited functionality of many existing processes and tools, together
with the inability of some organizations to fully utilize available technology,
has created increasing demand for integrated software development tools and
professional services to help organizations fully utilize available technology
and improve their own maintenance and redevelopment processes. In addition, the
growing awareness of the size and complexity of the year 2000 problem has
created demand for technology and professional services that provide integrated
solutions. The Company believes that many organizations will be unable to
address their year 2000 conversion requirements in a timely manner using
internal resources alone and that demand for integrated solutions from outside
professionals, such as those provided by VIASOFT, will continue to grow.

31
<PAGE> 32

COMPANY STRATEGY

VIASOFT's objective is to enhance its position as a leading provider of
enterprise application management solutions for large organizations worldwide.
To achieve its business objective, the Company is pursuing the following
strategies:

PROVIDE INTEGRATED BUSINESS SOLUTIONS

VIASOFT markets its products and professional services together to provide
comprehensive business solutions for its customers. The Company believes that
the integration of its products with its services offerings is an effective
strategy for addressing the complex maintenance and redevelopment requirements
of large organizations. This strategy is also designed to create long-term
relationships with the Company's installed base of customers, through which
VIASOFT strives to develop subsequent opportunities to market new products and
services.

CAPITALIZE ON THE YEAR 2000 OPPORTUNITY

The Company intends to continue to expand its product and service offerings
to meet the year 2000 century date conversion requirements of its customers. For
example, in June 1997 VIASOFT released its Bridge 2000 date bridging product to
enable organizations to change applications to accommodate the century date
change without making simultaneous changes to data files. The Company also plans
to increase its utilization of third-party strategic relationships with
professional services, consulting and other organizations to expand the
distribution of its year 2000 solutions and respond to anticipated demand.
Further, VIASOFT intends to leverage the customer relationships and knowledge of
customer application systems developed through its year 2000 services solutions
to market other products and services to assist in maintenance and redevelopment
of those systems.

ENHANCE TECHNOLOGY LEADERSHIP

The Company believes that it is the technology leader in its markets. The
Company intends to continue to expand the functionality of its products by
internally developing new products and enhancements that build on both its core
technology and its experience with maintenance and redevelopment processes. The
Company plans to pursue additional opportunities for acquisitions of, or
investments in, businesses, products and technology that complement its existing
product line or allow expansion into new product and service areas, such as the
acquisition of R&O. Management believes that opportunities exist to capitalize
on the Company's development expertise to enhance and integrate acquired
businesses, products and technologies into the Company's product and service
solutions.

ENHANCE AND INTEGRATE ROCHADE TECHNOLOGY

VIASOFT's strategy is to develop and enhance the Rochade repository
technology for integration with VIASOFT's ESW product line and professional
services solutions. The Company believes that the Rochade repository technology
will provide significant additional benefits to customers as part of a suite of
integrated products and solutions, compared to repositories offered as
stand-alone products. VIASOFT believes that this open, enterprise-wide
repository will create a working model of its customers' information assets,
providing a foundation on which to develop and market new integrated products
and solutions. The R&O acquisition also presents an opportunity for VIASOFT to
market the enhanced Rochade product line to VIASOFT's existing customer base and
to market VIASOFT's products and services to R&O's customer base.

EXPAND EXISTING WORLDWIDE SALES AND DISTRIBUTION CHANNELS

The Company intends to target new and existing customers, both domestically
and internationally, by expanding its direct sales organization and through
increased relationships with

32
<PAGE> 33

distributors and other third parties. The Company has established its
Solution/Technology Provider program pursuant to which approximately 30
professional organizations are authorized to use VIASOFT technology and/or
methodology in engagements with their customers.

VIASOFT CUSTOMERS

The Company's products and services are used by information technology
departments of Fortune 1000 companies and similarly sized business and
governmental organizations worldwide. At June 30, 1997, the Company had
approximately 850 customers with licenses to the Company's products and current
maintenance contracts. The Company believes that the following customers, each
of which accounted for at least $100,000 in revenue during the 12 months ended
June 30, 1997, are representative of the organizations that make up the
Company's domestic and international customer base.

BANKING
- --------------------------

ABN/AMRO Bank
Citibank, N.A.
Commerzbank AG
Commonwealth Bank of Australia
Deutsche Bank AG
The Governor and Company of the Bank of Scotland
National Australia Bank Limited
PNC Bank National
Association
Union Bank of California

TELECOMMUNICATIONS
- --------------------------

BellSouth Telecommunications, Inc.
PTT Telecom B.V.
Saskatchewan Telephone (SASKTEL)
Telstra Corporation Ltd.
US West

INSURANCE
- --------------------------

American General Life Insurance Co.
Ameritas Life Insurance
Franklin Life Insurance
John Alden Life Insurance
Munich American
Reinsurance Co.
Universal Underwriters, Inc.
Zurich Australian Insurance Group

MANUFACTURING
- --------------------------

Boeing, Inc.
BMW AG
Matsushita Electronic
Corporation of America
Motorola, Inc.
Nissan North America, Inc.
Sara Lee Knit Products

GOVERNMENT
- --------------------------

Arizona Department of Administration
Arizona Department of Revenue
Arizona Department of Transportation
City of Phoenix
Social Security
Administration
State of Arkansas
State of California
State of Illinois --
Department of
Employment Security
State of Missouri: Office of Information Technology
State of New Jersey
State of Tennessee

FINANCIAL SERVICES
- --------------------------

Charles Schwab & Co.
Goldman, Sachs & Co.
MasterCard International, Incorporated
T. Rowe Price Investments
VISA International

OTHER
- --------------------------

AAA Michigan
Abbott Laboratories
ADP Corp.
Alamo Rent-A-Car, Inc.
CNF Transportation, Inc.
Consolidated Rail
Corporation (Conrail)
Florida Power & Light
Pfizer, Inc.
Phillips Petroleum Company
Union Pacific Railroad

VIASOFT PRODUCTS

VIASOFT offers a range of products that enable organizations to understand,
manage and evolve their existing mission-critical enterprise applications. The
Company's primary product line is the Existing Systems Workbench, which to date
has accounted for substantially all of the Company's software license revenue.

THE EXISTING SYSTEMS WORKBENCH

ESW is an integrated suite of software tools built around 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.

33
<PAGE> 34

[APPLICATION KNOWLEDGE REPOSITORY CHART]

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 enables 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 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 briefly 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.
VIA/Alliance is also used to plan and estimate maintenance, enhancement and

34
<PAGE> 35

redevelopment projects and to facilitate projects involving file or database
conversions, enabling and populating repositories, or integrating new
applications and packaged software.

VISUAL/RECAP: PORTFOLIO ANALYSIS AND REPORTING. Visual/Recap is the
decision support component of ESW. 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.

VIA/INSIGHT: PROGRAM UNDERSTANDING. VIA/Insight automates the process of
analyzing and understanding complex COBOL logic. VIA/Insight is designed to
enable users 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 provide
automated, COBOL-intelligent change facilities and automatic syntax checking in
the MVS operating system's editing environment. VIA/SmartEdit automatically
identifies program components directly and indirectly related to a proposed
program change.

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 without
recompiling.

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/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
VIA/Renaissance 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.

ROCHADE

Through the Company's December 1996 acquisition of R&O, VIASOFT acquired
R&O's Rochade technology and product line. Rochade is based on an open,
enterprise-wide repository software technology that is designed to help
businesses better capture, manage, monitor, disseminate, reuse and change their
information technology for both mainframe computers and distributed computing
environments. Rochade provides a unified, open method for viewing and sharing
information about systems, tools, techniques and processes across platforms that
is easily accessible to a broad range of users, allowing users to search, query
and report on business data as they need it.

The Company believes that an enterprise-wide repository is necessary to
fully manage cross-application dependencies, plan and execute large-scale
conversion projects, and extend information models to accommodate new
application components, languages, and execution environments. The Company
believes that its acquisition of Rochade will enhance the Company's repository
technology by permitting the storage of greater volumes of information at the
enterprise level.

35
<PAGE> 36

Rochade is designed to allow more efficient access to, and understanding and
management of, customers' applications and data utilizing a variety of computer
languages, operating systems and non-VIASOFT products.

VIASOFT is enhancing the Rochade repository technology for integration with
VIASOFT's product line and professional services solutions. The Company believes
that the Rochade repository technology will provide significant additional
benefits to customers as part of a suite of integrated products and solutions,
compared to repositories offered as standalone products. VIASOFT also believes
Rochade will permit greater flexibility to create repository information models
to accommodate data warehousing, process management, project tracking and
similar initiatives. In addition, Rochade, an open enterprise-wide repository,
will provide an additional foundation in the Company's strategy to develop and
market new integrated products and solutions.

BRIDGE 2000

The Company introduced its new date bridging product, Bridge 2000, in June
1997. Bridge 2000 is designed to help reduce the time, complexity and cost of
modifying large, interrelated applications for the year 2000 date change by
enabling customers to convert the source code of programs without being required
to simultaneously expand date fields in their databases. Bridge 2000
automatically translates two-digit date formats in customer data files to the
four-digit formats required by programs that have been converted for year 2000
compliance.

Bridge 2000 uses dynamic bridging technology that automatically expands
data during the execution of a program. Date fields are expanded using century
windowing techniques, through which Bridge 2000 adds a customer-defined century
designation to each two-digit date field, based on its value. For example, a
window could direct that years 00 to 60 in the date field be interpreted as 2000
to 2060, while the years 61 to 99 would be interpreted as 1961 to 1999.

The Company believes the primary benefits of Bridge 2000 for customers are:
(i) the ability to plan and implement the year 2000 date conversion effort one
program at a time; (ii) the ability to postpone data file conversion until after
year 2000, if necessary, resulting in significant time savings that can be used
to convert mission-critical applications prior to the year 2000 deadline; (iii)
protection from the exchange and transfer of non-compliant data from outside
sources, such as trading partners and customers; and (iv) the ability to access
historical and archival data beyond the year 2000 without conversion of the data
files. In addition, Bridge 2000 is designed to minimize secondary maintenance
problems presented by competing alternative technologies, because program source
code modified to use Bridge 2000 requires no subsequent changes once data files
have been converted.

Bridge 2000 is available individually and as an additional component of the
Company's broader ESW and year 2000 product lines. The Company is also using
Bridge 2000 in its Enterprise 2000 services offering, particularly with the
introduction of FastPath 2000. See "Business -- VIASOFT's Enterprise 2000." In
addition, Bridge 2000 can be utilized in connection with the products and
services of other vendors. The Company plans to market Bridge 2000 to its
existing installed customer base and to new customers in the year 2000 market.

VIASOFT'S ESTIMATE 2000

VIASOFT's Estimate 2000 is a separately available software product and a
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 to provide 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.

36
<PAGE> 37

PRODUCT DEVELOPMENT

The Company continues to acquire, develop and enhance technology for its
existing product lines. For example, VIASOFT entered into licensing arrangements
with several vendors to provide additional language support for its ESW products
and Estimate 2000. The Company is in the process of developing and enhancing the
licensed technology to provide ESW functionality for customer applications
utilizing PL/I, Assembler, Natural and a variety of COBOL dialects. The Company
is conducting beta tests and currently expects to begin introduction of this
additional language capability in its ESW product line in the first half of
fiscal 1998. See "Risk Factors -- Risks Associated with Products Currently Under
Development."

The Company recently acquired the rights to distribute a package of testing
software programs, which it plans to market under the name "VIA/AutoTest."
VIA/AutoTest is designed to provide an enterprise-wide, automated testing
solution, including application regression testing capabilities. VIA/AutoTest
enables customers to plan, manage and execute the test cases that determine
proper application functioning. The Company believes testing will play a key
role in successful year 2000 conversion projects and is enhancing its offering
of testing products and methodologies to meet year 2000 needs, as well as to
provide strategic value beyond the year 2000 market. The Company currently
expects to release VIA/AutoTest in the first half of fiscal 1998.

VIASOFT SERVICES

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 14%, 26% and 28% of total revenues in the
fiscal years ended June 30, 1995, 1996 and 1997, respectively.

VIASOFT'S ENTERPRISE 2000

VIASOFT's Enterprise 2000 is designed to help customers address the year
2000 century date conversion requirements for existing applications through a
combination of professional services, the Company's ESW technology, its new
Bridge 2000 product, other Company technology and methodologies and third-party
resources. VIASOFT's Enterprise 2000 accounted for 15%, 74% and 72% of total
professional services revenue during the fiscal years ended June 30, 1995, 1996
and 1997, respectively.

When organizations first began to consider the year 2000 problem, customers
were most interested in surveying the impact of the problem on their own
applications. In response, VIASOFT developed a three-phase process designed to
address customers' year 2000 conversion needs at the enterprise level. Through
VIASOFT's Impact 2000, VIASOFT determines the scope, size and level of effort
needed to implement the year 2000 changes. In VIASOFT's Plan 2000, the Company
identifies the project goals, prepares a detailed work plan and executes a pilot
project. Through VIASOFT's Operation 2000, VIASOFT manages the implementation
and testing of the required changes.

Recently, customers have begun to seek strategies to convert
mission-critical applications as rapidly as possible, without the delays
associated with enterprise-wide impact and planning approaches. In addition, as
time passes, certain year 2000 conversion strategies, such as field expansion,
may not be feasible on a timely basis for all applications. Customers are also
seeking ways to leverage conversion resources, as available personnel have
decreased and the costs have increased. VIASOFT has responded to these customer
needs and industry changes by enhancing its year 2000 solutions to provide an
additional enablement methodology for its customers called FastPath 2000.
FastPath 2000 is designed to provide the primary components of a successful year
2000 conversion on an application level, rather than on an enterprise-wide
level. These include inventory of components, conversion planning, and change
coding and testing. Utilizing FastPath 2000, customers can begin their year 2000
conversion by addressing their most critical applications,

37
<PAGE> 38

one at a time. Through FastPath 2000, VIASOFT also provides the training to
enable customers to perform the planning and conversion tasks using internal
resources. VIASOFT also has integrated Bridge 2000 into its FastPath 2000
solution to offer dynamic bridging as another near-term conversion strategy. See
"VIASOFT Products -- Bridge 2000."

VIASOFT'S INSOURCING

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, time and effort required to maintain existing applications.

VIASOFT'S LEGACY TRANSITIONS

Many organizations have implemented a transition from exclusive reliance on
mainframe computers to the use of the mainframe together with distributed
computing environments for certain applications. VIASOFT has developed services
and technology designed to enable organizations to reuse existing mainframe
applications in new computing architectures, including distributed computing
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 mainframe
applications by increasing flexibility to integrate mission-critical
applications with new architectures and systems, or by migrating and reusing
existing mainframe code in these new environments.

CUSTOMER SUPPORT AND TRAINING

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, 1995, 1996 and 1997, maintenance fees represented
approximately 39%, 33% and 25%, respectively, of the Company's total revenues.
Maintenance and support services are provided primarily by telephone from
VIASOFT's Phoenix, Arizona, headquarters and R&O's Westford, Massachusetts and
German locations, as well as certain offices of the Company's international
subsidiaries and distributors.

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.

SALES, MARKETING AND DISTRIBUTION

VIASOFT markets its products and services principally to Fortune 1000 and
similarly sized business and governmental organizations worldwide. The Company's
marketing efforts are implemented through its domestic and international direct
sales organizations, through a number of foreign independent distributors,
located in Europe, the Far East, South Africa, and Latin America,

38
<PAGE> 39

and through strategic relationships with third parties as part of its
Solution/Technology Provider program.

DIRECT SALES

The Company sells and supports its products and services in North and South
America from its Phoenix, Arizona, headquarters and 11 primary field offices in
the United States. As of June 30, 1997, the Company had 55 salespersons
worldwide, including 36 located at the Company's headquarters and the United
States field offices. These offices cover the territories of Canada, the United
States, Mexico, Central America and all of South America, with the exception of
Brazil, where the Company utilizes a distributor. Internationally, the Company
sells directly to customers in the following territories: Australia, Austria,
Belgium, Germany, Luxembourg, the Netherlands, New Zealand, Switzerland and the
United Kingdom.

INTERNATIONAL DISTRIBUTORS

VIASOFT markets its products to international customers both directly 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 Rochade and/or the ESW product line
internationally in 37 countries through 16 independent distributors. To date,
the Company has not offered significant professional services through its
distributors, although in both fiscal 1996 and 1997 some distributors became
Solution/Technology Providers.

SOLUTION/TECHNOLOGY PROVIDERS

The Company utilizes third-party relationships to broaden the distribution
of its products and services in certain markets. During fiscal 1996, the Company
established a program which provides for non-exclusive relationships with
professional services and consulting organizations, computer and software
integration companies and hardware and software vendors ("Solution/Technology
Providers") who are authorized to use VIASOFT technology and/or methodology,
principally VIASOFT's Enterprise 2000, in connection with services they perform
for their customers. 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. In addition, customers of certain
Solution/Technology Providers that have not previously licensed the Company's
products pay lease fees or license fees for the use of VIASOFT products in each
engagement with a Solution/ Technology Provider. These relationships are
intended to augment VIASOFT's own distribution channels 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. The
Company currently has Solution/Technology Provider relationships with
approximately 30 companies and intends to continue to devote resources to expand
this distribution channel.

FEDERAL GOVERNMENT MARKETING INITIATIVE

In February 1997, the Company announced a new marketing initiative focused
on the federal government. To assist agencies of the federal government in their
year 2000 projects, VIASOFT is offering US2000, a solution comprising ESW and
certain process management and year 2000 methodologies. Licenses of this
solution, together with maintenance services, are offered to agencies of the
federal government in one-year, renewable contracts at a significantly reduced
license fee. US2000 has not generated significant revenues to date and there can
be no assurance as to the timing or magnitude of any revenue that may be
generated.

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

39
<PAGE> 40

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 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
compatibility 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 highly competitive. Major competitors of the Company's services business
are primarily the consulting organizations of the Big Six accounting firms.
Other competitors of the Company's services business include Data Dimensions,
Inc., Electronic Data Systems Corporation, and IBM's Integrated Systems
Solutions Corp. Other system integrators and application outsourcers 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. Many smaller local or regional organizations
also compete in the services market, which is fragmented and characterized by
low barriers to entry. The Company's principal competitors and many potential
competitors have significantly greater financial, marketing, recruiting and
technological resources than the Company. The principal competitive factors
affecting the market for the Company's professional services include
responsiveness to customer needs, 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, 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 customers' platforms and languages, the vendor's ability to deliver
training and ongoing support during the customers' implementation of the tools,
and the value of the tool to an organization beyond the year 2000. Primary
competitors in this category include Computer Associates International, Inc.;
Intersolv, Inc.; Micro Focus Group Public Limited Company; and Platinum
Technology, Inc. through its affiliation with ADPAC Corp. In addition, several
companies have announced the availability of certain "change factory" products,
designed to automate conversion of software code, which may become a competitive
factor in the future.

CONSULTING ORGANIZATIONS. Competitors in this category range from large,
generalized consulting firms to 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 Andersen
Consulting LLP, CIBER, Inc.; Computer Horizons, Corp.; Computer Task Group,
Inc.; Data Dimensions, Inc., Ernst & Young LLP; and Keane, Inc.

40
<PAGE> 41

SYSTEMS INTEGRATORS AND APPLICATION OUTSOURCERS. Large systems integrators
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 Solutions Corp. and most Big Six accounting firms.

RESEARCH AND DEVELOPMENT

Historically, VIASOFT's development of new products has been accomplished
primarily with in-house development personnel and resources. As of June 30,
1997, the Company had 124 employees engaged in product development. Of the
Company's research and development personnel, 86 were software developers with
the balance divided between customer support, documentation, and quality
assurance. Substantially all of these employees are located at either the
Company's Phoenix, Arizona, headquarters or the R&O research and development
facilities in Germany. 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.

Beginning in fiscal 1996 and continuing in the current year, VIASOFT has
expanded its strategy to acquire and/or license new products and technologies to
complement, expand and enhance its existing products and services. The Company
expects to increase its reliance on this strategy and plans to continue to
devote research and development resources to the enhancement and integration of
acquired and licensed technologies. See "Business -- Bridge 2000" and
"-- Product Development."

During the fiscal years ended June 30, 1996 and 1997, research and
development expenditures were $4,237,000 and $7,893,000, respectively, excluding
a one-time charge of approximately $26.9 million in the second quarter of fiscal
1997 related to the purchase of in-process technology from R&O. The Company
anticipates that it will continue to commit substantial resources to research
and development in the future.

INTELLECTUAL PROPERTY

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.

In 1996, Company acquired the date bridging technology incorporated in its
new Bridge 2000 product, together with a pending patent application. The Company
is continuing to prosecute the

41
<PAGE> 42

patent application. However, there can be no assurance that a patent will issue
as a result of such application, nor as to the extent of the protection, if 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 defend licensees in any such suit pursuant
to indemnification agreements, or to refrain from selling an alleged infringing
product or service. See "Risk Factors -- Importance of Proprietary Rights."

EMPLOYEES

The Company had 447 full-time employees as of June 30, 1997, including 172
in sales and marketing, 124 in research, development and support, 98 in
professional services and 53 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.

PROPERTIES

The Company's principal administrative and marketing facilities are located
in approximately 38,000 square feet of space in Phoenix, Arizona. The Company
occupies these premises under a lease agreement expiring on December 31, 1999,
subject to certain renewal options. The Company's research and development and
customer support facilities are located in approximately 24,000 square feet of
space in Phoenix, Arizona. The Company occupies these premises under a lease
agreement expiring on May 31, 2001. In August 1997, the Company signed a letter
of intent to lease an additional 13,000 square feet in this facility, expiring
May 31, 2001.

In addition, the Company maintains field offices and executive suite sales
offices within the United States and Canada located in leased space aggregating
approximately 22,000 square feet as of June 30, 1997. The Company also leased an
aggregate of approximately 55,000 square feet of space as of June 30, 1997 in
Australia, Belgium, Germany, Japan, the Netherlands and the United Kingdom for
operations of its international branch offices and subsidiaries.

The Company believes that its facilities are adequate for its current needs
and that suitable additional space will be available as needed.

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.

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<PAGE> 43

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executive officers and their ages as of July
31, 1997 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------ --- -------------------------------------------------
<S> <C> <C>
Steven D. Whiteman............ 46 Chairman of the Board, President and Chief
Executive Officer
Kevin M. Hickey............... 39 Executive Vice President and Chief of Operations
Mark R. Schonau............... 41 Senior Vice President, Finance & Administration,
Chief Financial Officer and Treasurer
Catherine R. Hardwick......... 38 Vice President, General Counsel and Secretary
Colin J. Reardon.............. 44 Senior Vice President, International Operations
Jean-Luc G. Valente........... 36 Senior Vice President, Marketing
John J. Barry, III............ 57 Director
Alexander S. Kuli............. 52 Director
J. David Parrish.............. 54 Director
Arthur C. Patterson........... 53 Director
</TABLE>

Steven D. Whiteman has served as President of the Company since May 1993,
as Chief Executive Officer and a director since January 1994 and as Chairman of
the Board since April 1997. 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., a developer and marketer of
network and systems management software, from January 1989 to October 1990. Mr.
Whiteman is a director of Unify Corporation.

Kevin M. Hickey has served as Executive Vice President and Chief of
Operations since July 1997. Mr. Hickey served as Senior Vice President, Americas
Operations of the Company from January 1994 to July 1997. 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.

Mark R. Schonau has served as Senior Vice President, Finance &
Administration, since July 1997 and as Chief Financial Officer and Treasurer
since September 1996. Mr. Schonau also served as Vice President, Finance &
Administration, from September 1996 to July 1997. 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., a healthcare software company, from October
1989 to August 1996.

Catherine R. Hardwick has served as Vice President of the Company since
July 1997 and as Secretary and General Counsel of the Company since January
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.

Colin J. Reardon has served as Senior Vice President, International
Operations of the Company since July 1997. Mr. Reardon served as Vice President,
International Operations of the Company from August 1994 to July 1997. Prior to
joining VIASOFT, Mr. Reardon served as Vice President of International Marketing
of Sterling Software, Inc., a systems management software and services company,
from July 1993 through July 1994. Mr. Reardon was previously employed by Systems

43
<PAGE> 44

Center, Inc., a developer and marketer of network and systems management
software, 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 Senior Vice President, Marketing, since
July 1997. Mr. Valente served as Vice President, Marketing, from April 1996
through July 1997. Prior to joining the Company in April, 1996, Mr. Valente was
employed by Computer Associates International, Inc., a software manufacturer,
where he served as Vice President, Strategic Marketing from July 1993 through
April 1996, Regional Marketing Manager from March 1992 through June 1993 and a
Marketing Director, from March 1991 through March 1992.

John J. Barry, III has served as a director of the Company since August
1991. Mr. Barry presently provides strategic and management consulting services
to senior management in the information technology and other industries. From
May 1991 through December 1996 Mr. Barry served as the Chairman, President and
CEO of Petroleum Information Corporation, an energy industry information
solutions company in Houston, Texas. From January 1989 through June 1990, Mr.
Barry served as President and Chief Operating Officer of Systems Center, Inc., a
developer and marketer of network and systems management software. From 1985
through 1988, Mr. Barry served as President and Chief Executive Officer of The
Systems Center, Inc., a software data transfer company. Mr. Barry serves on the
boards of directors of several privately held companies.

Alexander S. Kuli has served as a director of the Company since January
1994. Mr. Kuli is currently Vice President, Worldwide Sales for Tivoli Systems,
Inc., a vendor of distributed software products, a position held since January
1993. Prior to joining Tivoli, Mr. Kuli served as Vice President, Worldwide
Sales for Candle Corporation, a vendor of mainframe systems performance
management software, from October 1985 through December 1992.

J. David Parrish has served as a director of the Company since January
1994. Mr. Parrish is an independent consultant in the software services
industry. Mr. Parrish served as the Senior Vice President for Walker Interactive
Systems, Inc., a financial application software company, from November 1989 to
August 1997. Prior to joining Walker Interactive Systems in November 1989, Mr.
Parrish was a partner with Price Waterhouse with responsibility for its Western
Region package implementation consulting practice.

Arthur C. Patterson has served as a director of the Company since September
1984. He served as President of the Company from October 1984 to June 1985. Mr.
Patterson is a founder and General Partner of Accel Partners, a venture capital
firm. Mr. Patterson also serves on the board of directors of LGT Global Group of
Investment Companies, PageMart Wireless, Inc., and Unify Corporation, as well as
several other privately held software and telecommunication companies.

Effective July 17, 1997, A. LeRoy Ellison and Michael A. Wolf resigned as
directors of the Company and Mr. Wolf resigned as Executive Vice President and
Chief Technology Officer of the Company. The Company and Mr. Wolf have entered
into a 13-month agreement for Mr. Wolf to provide strategic consulting services
to the Company.

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<PAGE> 45

SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of Common Stock as of June 30, 1997, and as adjusted to reflect the
sale of the Common Stock being offered hereby, by the Company and the Selling
Stockholders:

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING(1)(2)
--------------------- SHARES BEING ---------------------
SELLING STOCKHOLDERS NUMBER PERCENT OFFERED(2) NUMBER PERCENT
- ---------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
John J. Barry, III................ 36,412 * 10,000 26,412 *
Director
A. LeRoy Ellison(3)............... 412,564 2.3% 50,000 362,564 1.9%
Former Director
Kevin M. Hickey(4)................ 36,827 * 20,000 16,827 *
Officer
J. David Parrish(5)............... 27,336 * 13,000 14,336 *
Director
Mark R. Schonau(6)................ 35,207 * 12,000 23,207 *
Officer
Silverman Heller Associates(7).... 16,000 * 5,000 11,000 *

Steven D. Whiteman(8)............. 313,009 1.8 20,000 293,009 1.5%
Director and Officer
</TABLE>

- ---------------
* Represents beneficial ownership of less than 1%

(1) Except as otherwise noted, and subject to community property laws where
applicable, each person named in the table has sole voting and investment
power with respect to all shares shown as beneficially owned by him.

(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 210,000 shares of Common Stock. Of the 210,000 shares
covered by the Underwriters' over-allotment option, 195,000 shares are
offered by the Company, 10,000 shares are offered by Mr. Whiteman and 5,000
shares are offered by Mr. Schonau.

(3) These shares are held by the Allen Leroy Ellison Family Trust of which Mr.
Ellison is trustee and a beneficiary.

(4) Includes 28,915 shares that Mr. Hickey may acquire upon the exercise of
options exercisable within 60 days of June 30, 1997.

(5) Includes 26,668 shares that Mr. Parrish may acquire upon the exercise of
options exercisable within 60 days of June 30, 1997.

(6) Includes 35,000 shares that Mr. Schonau may acquire upon the exercise of
options exercisable within 60 days of June 30, 1997.

(7) Silverman Heller Associates is an investor relations consultant to the
Company.

(8) Includes 36,000 shares held by a trust for the benefit of Steven D. and
Beverly C. Whiteman, of which Mr. Whiteman is trustee, and 81,251 shares
that Mr. Whiteman may acquire upon the exercise of options exercisable
within 60 days of June 30, 1997.

45
<PAGE> 46

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered by the
Company and the Selling Stockholders will be passed upon by Osborn Maledon,
P.A., Phoenix, Arizona. Pillsbury Madison & Sutro LLP, Menlo Park, California,
is acting as counsel for the Underwriters in connection with certain legal
matters relating to the shares of Common Stock offered hereby.

EXPERTS

The Consolidated Financial Statements and schedules of VIASOFT, Inc. at
June 30, 1996 and 1997, and for each of the three years in the period ended June
30, 1997, and the Consolidated Financial Statements of Rottger & Osterberg
SoftwareTechnik GmbH and subsidiaries for the years ended December 31, 1994 and
1995 and the nine months ended September 30, 1996, incorporated by reference in
this Prospectus and the related Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of such firm as experts in accounting and auditing in giving said
reports.

AVAILABLE INFORMATION

VIASOFT is subject to the informational requirements of the Exchange Act
and in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities of the Commission located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at 7
World Trade Center, Suite 1300, New York, New York 10048, and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained at prescribed rates from the Public Reference Section of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Such
materials and other information concerning the Company are also filed
electronically with the Commission and are accessible via the World Wide Web at
http://www.sec.gov. The Common Stock is traded on the Nasdaq National Market.

The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act, with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit or incorporated by reference
to the Registration Statement of which this Prospectus forms a part, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
thereto. Copies of the Registration Statement and the exhibits and schedules
thereto may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549.

46
<PAGE> 47

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VIASOFT, INC. AND SUBSIDIARIES
Report of Independent Public Accountants............................................ F-2
Consolidated Balance Sheets......................................................... F-3
Consolidated Statements of Operations............................................... F-4
Consolidated Statements of Stockholders' Equity..................................... F-5
Consolidated Statements of Cash Flows............................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>

F-1
<PAGE> 48

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, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of VIASOFT, Inc. and Subsidiaries
as of June 30, 1997 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1997, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Phoenix, Arizona,
July 29, 1997.

F-2
<PAGE> 49

VIASOFT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 30,
--------------------
1996 1997
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 1)............................................ $ 5,009 $ 8,501
Investments, at amortized cost (Note 3)....................................... 23,795 12,697
Accounts receivable (less allowance for doubtful accounts of $279 and $678, at 13,335 21,240
June 30, 1996 and 1997 respectively)........................................
Prepaid expenses and other (Notes 5 and 8).................................... 1,130 2,954
------- --------
Total current assets................................................... 43,269 45,392
------- --------
Furniture and equipment (Note 1):
Computer equipment............................................................ 2,692 4,789
Office furniture and equipment................................................ 1,905 2,986
Capitalized leased equipment.................................................. 264 279
------- --------
Total furniture and equipment.......................................... 4,861 8,054
Less: Accumulated depreciation................................................ (2,895) (3,775)
------- --------
Furniture and equipment, net................................................ 1,966 4,279
------- --------
Other assets (Notes 2 and 8):
Investments, at amortized cost................................................ -- 7,377
Intangible assets, net........................................................ -- 4,675
Other......................................................................... 1,356 2,878
------- --------
Total other assets..................................................... 1,356 14,930
------- --------
Total assets........................................................... $46,591 $ 64,601
======= ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 1,456 $ 2,016
Accrued compensation.......................................................... 1,491 3,309
Accrued income taxes payable.................................................. 1,824 3,276
Other accrued expenses........................................................ 3,100 8,709
Deferred revenue (Note 1)..................................................... 9,985 18,227
Current maturities of obligations under capital leases (Note 4)............... 25 --
------- --------
Total current liabilities.............................................. 17,881 35,537
------- --------
Deferred revenue, recognized after one year (Note 1)............................ 298 230
------- --------
Obligations under capital leases, less current maturities (Note 4).............. 18 --
------- --------
Other long term liabilities..................................................... 135 138
------- --------
Commitments and contingencies (Note 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 17 18
17,722,772 shares issued and outstanding at June 30, 1996 and 1997,
respectively (Notes 6 and 7)................................................
Capital in excess of par value................................................ 27,771 43,970
Common stock subscriptions receivable (Note 7)................................ (59) (55)
Accumulated earnings (deficit)................................................ 506 (14,930)
Cumulative translation adjustment (Note 1).................................... 24 (307)
------- --------
Total stockholders' equity............................................. 28,259 28,696
------- --------
Total liabilities and stockholders' equity............................. $46,591 $ 64,601
======= ========
</TABLE>

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

F-3
<PAGE> 50

VIASOFT, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Revenues:
Software license fees.................................... $14,311 $17,824 $ 40,292
Maintenance fees......................................... 12,059 14,305 21,010
Professional services fees............................... 4,387 11,307 23,832
Other.................................................... 194 121 178
------- ------- --------
Total revenues................................... 30,951 43,557 85,312
------- ------- --------
Operating expense:
Cost of software license and maintenance fees............ 2,661 2,788 4,345
Cost of professional services fees....................... 4,052 8,025 18,316
Sales and marketing...................................... 13,517 18,137 31,573
Research and development................................. 3,193 4,237 7,893
Write-off of purchased in-process research and
development........................................... -- -- 26,958
General and administrative............................... 2,643 3,567 6,319
------- ------- --------
Total operating expense.......................... 26,066 36,754 95,404
------- ------- --------
Income (loss) from operations.............................. 4,885 6,803 (10,092)
------- ------- --------
Other income (expense):
Interest income.......................................... 508 1,350 1,309
Interest expense......................................... (27) (11) (45)
Other income (expense), net.............................. 9 (82) (546)
------- ------- --------
Total other income............................... 490 1,257 718
------- ------- --------
Income (loss) before income taxes.......................... 5,375 8,060 (9,374)
Provision for income taxes............................... 183 1,843 6,062
------- ------- --------
Net income (loss).......................................... $ 5,192 $ 6,217 $(15,436)
======= ======= ========
Earnings (loss) per common and common share equivalent
(Note 1)................................................. $ .36 $ .36 $ (.90)
======= ======= ========
Weighted average number of common and common share
equivalents outstanding (Note 1)......................... 14,584 17,391 17,212
======= ======= ========
</TABLE>

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

F-4
<PAGE> 51

VIASOFT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(NOTE 1)
<TABLE>
<CAPTION>
SERIES B
PREFERRED STOCK COMMON STOCK COMMON
---------------------- ------------------- CAPITAL IN STOCK ACCUMULATED
NUMBER NUMBER EXCESS OF SUBSCRIPTIONS EARNINGS
AMOUNT OF SHARES AMOUNT OF SHARES PAR VALUE RECEIVABLE (DEFICIT)
-------- ----------- ------ ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994................ 12,703 13,271,895 $ 3 3,438,708 $ 1,462 $(265) $ (10,903)
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, net.............. -- -- -- 227,916 62 -- --
Payments on common stock subscriptions
receivable (Note 7)................. -- -- -- -- -- 7 --
Net income............................ -- -- -- -- -- -- 5,192
Translation adjustment................ -- -- -- -- -- -- --
-------- ----------- ---- ---------- -------- ----- ---------
Balance at June 30, 1995................ -- -- 16 15,949,096 26,354 (258) (5,711)
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............................ -- -- -- -- -- -- 6,217
Translation adjustment................ -- -- -- -- -- -- --
-------- ----------- ---- ---------- -------- ----- ---------
Balance at June 30, 1996................ -- -- 17 16,718,556 27,771 (59) 506
Sale of common stock, net............. -- -- -- 299,636 1,281 -- --
Exercise of options, net.............. -- -- -- 279,468 914 -- --
Shares issued in connection with
acquisition of R&O Software-Technik
(Note 2)............................ -- -- 1 425,112 12,805 -- --
Income tax benefit relating to stock
plans (Note 5)...................... -- -- -- -- 1,199 -- --
Payments on stock subscriptions
receivable (Note 7)................. -- -- -- -- -- 4 --
Net loss.............................. -- -- -- -- -- -- (15,436)
Translation adjustment................ -- -- -- -- -- -- --
-------- ----------- ---- ---------- -------- ----- ---------
Balance at June 30, 1997................ -- -- $ 18 17,722,772 $ 43,970 $ (55) $ (14,930)
======== =========== ==== ========== ======== ===== =========

CUMULATIVE
TRANSLATION
ADJUSTMENT TOTAL
---------- --------
<S> <C> <C>
Balance at June 30, 1994................ $ 39 $ 3,039
Conversion of preferred stock........... -- --
Sale of common stock,net.............. -- 12,140
Exercise of options, net.............. -- 62
Payments on common stock subscriptions
receivable (Note 7)................. -- 7
Net income............................ -- 5,192
Translation adjustment................ (17) (17)
---- --------
Balance at June 30, 1995................ 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
Translation adjustment................ 2 2
---- --------
Balance at June 30, 1996................ 24 28,259
Sale of common stock, net............. -- 1,281
Exercise of options, net.............. -- 914
Shares issued in connection with
acquisition of R&O Software-Technik
(Note 2)............................ -- 12,806
Income tax benefit relating to stock
plans (Note 5)...................... -- 1,199
Payments on stock subscriptions
receivable (Note 7)................. -- 4
Net loss.............................. -- (15,436)
Translation adjustment................ (331) (331)
---- --------
Balance at June 30, 1997................ $ (307) $ 28,696
==== ========
</TABLE>

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

F-5
<PAGE> 52

VIASOFT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)..................................... $ 5,192 $ 6,217 $(15,436)
-------- -------- --------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Write-off of purchased in-process research and
development...................................... -- -- 26,958
Depreciation and amortization...................... 638 695 1,826
Compensation expense related to stock plans........ -- 202 --
Loss on disposal of fixed assets................... 16 6 26
Changes in operating assets and liabilities net
of effect of business acquired:
Increase in accounts receivable.................. (1,165) (4,358) (3,188)
Increase in prepaid expenses and other assets.... (857) (1,184) (3,180)
Increase (decrease) in accounts payable and other
accrued expenses.............................. 622 2,203 (2,343)
Increase (decrease) in accrued compensation...... (262) 625 1,818
Increase (decrease) in accrued income taxes
payable....................................... (82) 1,954 2,651
Increase in deferred revenue..................... 806 1,616 6,004
-------- -------- --------
Total adjustments............................. (284) 1,759 30,572
-------- -------- --------
Net cash provided by operating activities........ 4,908 7,976 15,136
-------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures.................................. (722) (987) (2,747)
Cash paid for business acquired, net of cash acquired
(Note 2)........................................... -- -- (10,225)
Sale of investments................................... -- 32,890 36,098
Purchase of investments............................... (12,628) (43,706) (32,497)
-------- -------- --------
Net cash used in investing activities......... (13,350) (11,803) (9,371)
-------- -------- --------
FINANCING ACTIVITIES:
Payments of short term debt (Note 2).................. -- -- (4,099)
Principal payments on obligations under capital
leases............................................. (171) (87) (43)
Payments for offering costs........................... (636) -- --
Proceeds from issuance of common stock................ 12,840 1,046 2,196
Payments received on common stock subscriptions
receivable......................................... 7 199 4
-------- -------- --------
Net cash provided by (used in) financing
activities.................................. 12,040 1,158 (1,942)
-------- -------- --------
Effect of exchange rate changes on cash................. (17) (2) (331)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents.... 3,581 (2,671) 3,492
Cash and cash equivalents, beginning of year............ 4,099 7,680 5,009
-------- -------- --------
Cash and cash equivalents, end of year.................. $ 7,680 $ 5,009 $ 8,501
======== ======== ========
Supplemental cash flow information:
Interest paid......................................... $ 27 $ 11 $ 46
Income taxes paid..................................... $ 409 $ 450 $ 2,934
Capital lease obligations incurred.................... $ 93 $ -- $ --
Income tax benefit related to stock plans............. $ -- $ 170 $ 1,199
</TABLE>

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

F-6
<PAGE> 53

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

OPERATIONS

VIASOFT, Inc. and its subsidiaries (the "Company") provide enterprise
application management solutions that help large organizations worldwide
understand, manage and evolve the large-scale software applications that support
their fundamental business processes. 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, Belgium and Mexico 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 VIASOFT Pty. Ltd. (VIASOFT Pty); VIASOFT
International, Inc.; VIASOFT U.K. Limited (VIASOFT UK); VIASOFT International
GmbH (VIASOFT Germany); VIASOFT de Mexico, S.A. de C.V.; VIASOFT Benelux and
Rottger & Osterberg Software-Technik GmbH. 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 for balance sheet items and an average
exchange rate during the period presented for income and expense items. 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 non-cancellable
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. Revenues from professional services fees are
recognized on a percentage of completion basis, which is generally as related
services are provided. 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 15%, 11% and 5% of total revenues in the years ended June 30,
1995, 1996 and 1997, 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.

F-7
<PAGE> 54

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 $1,266,000, $664,000, and $558,000 in the years
ended June 30, 1997, 1996, and 1995, 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", 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. 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. Amounts that could have been capitalized under
this statement after consideration of the above factors were immaterial, and
therefore no internal software development costs have been capitalized by the
Company to date.

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 transaction gain (loss)
in the years ended June 30, 1995, 1996 and 1997, was approximately $10,000,
$16,000, and ($704,000), 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 (loss) per share is computed by dividing net income (loss) by the
weighted average number of common and common share equivalents assumed
outstanding during the period. Shares issuable upon the exercise of employee
stock options that are considered anti-dilutive are not included in the weighted
average number of common and common share equivalents outstanding. Primary and
fully diluted earnings (loss) per share are considered to be the same in all
periods presented. 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

F-8
<PAGE> 55

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 reflects the effect of this event.

In February, 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which supersedes Accounting Principles Board Opinion
No. 15, the existing authoritative guidance. SFAS No. 128 is effective for
financial statements for fiscal years ending after December 15, 1997 and, when
adopted, requires restatement of all prior-period earnings per share data
presented. The new statement modifies the calculations of primary and fully
diluted earnings per share and replaces them with basic and diluted earnings per
share. The following table sets forth the proforma effect on net income (loss)
per common share for the fiscal years ended June 30, 1997 and 1996,
respectively, assuming the Company had adopted SFAS No. 128 on July 1, 1995:

<TABLE>
<CAPTION>
YEAR ENDED JUNE
30,
------------------
1996 1997
------- --------
(SHARES IN
THOUSANDS)
<S> <C> <C>
Earnings (loss) per common and common share equivalent
As reported........................................... $ .36 ($ .90)
Pro forma-basic....................................... $ .38 ($ .90)
Pro forma-diluted..................................... $ .36 ($ .90)
Weighted average number of common and common share
equivalents outstanding
As reported........................................... 17,391 17,212
Pro forma-basic....................................... 16,237 17,212
Pro forma-diluted..................................... 17,391 17,212
</TABLE>

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.

RECENTLY ISSUED ACCOUNTING STATEMENTS

During 1997, the Financial Accounting Standards Board released SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130, which is effective for
fiscal years beginning after December 15, 1997, establishes standards for
reporting and display of comprehensive income and

F-9
<PAGE> 56

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

its components in an entity's financial statements. The objective of SFAS No.
130 is to report a measure of all changes in the equity of an enterprise that
result from transactions and other economic events of the period. Comprehensive
income is the total of net income and all other nonowner changes in equity. SFAS
No. 130 does not address issues of recognition or measurement for comprehensive
income and its components, therefore, it will not have an impact on the
financial condition or results of operation of the Company upon adoption.

DEPENDENCE ON YEAR 2000

2. ACQUISITION OF ROTTGER & OSTERBERG SOFTWARE-TECHNIK GMBH ("R&O")

On December 5, 1996, the Company acquired all of the outstanding shares of
capital stock of R&O for cash, common stock and the assumption of certain
liabilities pursuant to a stock purchase agreement with the stockholders of R&O.
R&O develops, markets and supports repository software tools through its Rochade
product line, together with related repository-based services and solutions. R&O
was founded in 1976, is headquartered in Munich, Germany and has operations in

F-10
<PAGE> 57

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Europe and the United States. The aggregate cost of the R&O acquisition
consisted of the following (in thousands):

<TABLE>
<S> <C>
Cash...................................................... $12,800
Common stock.............................................. 12,805
Assumption of liabilities and acquisition costs........... 13,200
-------
Total................................................ $38,805
=======
</TABLE>

The Company issued 425,112 unregistered shares of its Common Stock pursuant
to Regulation S in connection with this transaction, subject to certain
restrictions imposed under the stock purchase agreement and applicable
securities laws. Included in the cost of the acquisition was a payment of $2.0
million made to the former stockholders of R&O in February 1997 for meeting
certain performance criteria. The Company also committed to pay additional cash
consideration of $2.0 million (or, at each former R&O stockholder's election,
additional shares of Common Stock with an equivalent market value) if certain
financial performance criteria were met for the period from January 1, 1997
through June 30, 1997. This contingent earnout was not achieved and no further
payments are due under the purchase agreement.

The R&O acquisition has been accounted for as a purchase in accordance with
Accounting Principles Board Opinion Nos. 16 and 17 and, accordingly, the
purchased assets and assumed liabilities were recorded at their estimated fair
values at the acquisition date. The Company received an appraisal of the
intangible assets which indicated that approximately $27.0 million of the
acquired intangible assets was in-process research and development that had not
yet reached technological feasibility. Because there can be no assurance that
the Company will be able to successfully complete the development and
integration of the in-process research and development into its suite of
software products or that the acquired technology has any alternative future
use, the acquired in-process research and development was charged to expense by
the Company in its quarter ended December 31, 1996. In order to bring the
in-process software products to commercial availability, the Company estimated
that it will need to spend up to $2.6 million on product integration and
performance improvements. The Company allocated the aggregate cost of the
acquisition as follows (in thousands):

<TABLE>
<S> <C>
Accounts receivable....................................... $ 4,672
Other assets.............................................. 1,956
In-process research and development....................... 26,958
Purchased research and development........................ 2,000
Other intangible assets................................... 3,219
-------
$38,805
=======
</TABLE>

Other intangible assets consist of customer list ($900,000), assembled
workforce ($800,000) and cost in excess of net assets acquired ($1,519,000). The
customer list, assembled workforce and cost in excess of net assets acquired are
being amortized on a straight-line basis over eight, seven and five year
periods, respectively.

F-11
<PAGE> 58

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following unaudited pro forma combined condensed statements of
operations for the fiscal years ended June 30, 1997 and 1996 give effect to the
R&O acquisition as if it had been consummated as of the beginning of each
respective period (in thousands except per share data):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997
------- -------
(UNAUDITED)
<S> <C> <C>
Total revenues......................................... $62,754 $91,265
Income before income taxes............................. 9,772 17,847
Net income............................................. 7,535 11,692
Earnings per share..................................... $ .42 $ .64
</TABLE>

The pro forma combined condensed statements of operations exclude the
effect of the approximate $27.0 million charge related to the write-off of
purchased in-process research and development. The unaudited pro forma combined
financial data is provided for illustrative purposes only and is not necessarily
indicative of the combined results of operations that would have been reported
had the R&O acquisition occurred on the dates indicated, nor does it purport to
project the results of operations of the Company for the current year or for any
future period.

3. INVESTMENTS

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

<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities.................... $ 5,648 $ -- $(109) $ 5,539
Government-backed securities................ 8,500 -- (34) 8,466
Corporate bonds............................. 5,926 44 -- 5,970
------- ---- ------ --------
Total............................. $20,074 $ 44 $(143) $ 19,975
======= ==== ====== ========
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
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
======= ==== ==== ========
</TABLE>

The following table reflects the investment maturities at June 30, 1997 (in
thousands):

<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
-------- ----------
<S> <C> <C>
Under one year................................................. $12,697 $ 12,714
Greater than one year and less than five years................. 7,377 7,261
------- --------
$20,074 $ 19,975
======= ========
</TABLE>

All of the Company's investments at June 30, 1996 matured within one year.

F-12
<PAGE> 59

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. OBLIGATIONS UNDER CAPITAL LEASES

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 as of June 30, 1996. There are no
outstanding loans under the current agreement. Additional borrowings under this
arrangement, if any, will bear interest at the three year U.S. Treasury Bill
rate, plus 4.4 percentage points.

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.

The provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal........................................... $ 120 $ 1,184 $ 4,834
State............................................. 129 454 909
Foreign........................................... 54 275 2,057
Deferred............................................ (120) 322 (1,738)
Utilization of net operating loss and tax
credit carryforwards.............................. 2,295 1,464 --
Change in valuation allowance....................... (2,295) (1,856) --
------- ------- -------
Provision for income taxes.......................... $ 183 $ 1,843 $ 6,062
======= ======= =======
</TABLE>

For the year ended June 30, 1997, income tax benefits of $1,199,000 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.

F-13
<PAGE> 60

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of deferred taxes are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE
30,
-----------------
1996 1997
------ ------
<S> <C> <C>
Deferred tax liabilities:
Prepaid royalty................................................ $ 34 $ --
Accelerated tax depreciation................................... 94 89
Other.......................................................... 15 58
------ ------
Total.................................................. 143 147
------ ------
Deferred tax assets:
Foreign tax credits............................................ 168 1,485
Software development costs capitalized for tax................. 511 249
Bad debt reserve............................................... 117 304
Vacation accrual............................................... 146 193
Deferred revenue............................................... 42 28
Intangibles amortization....................................... -- 136
Other.......................................................... 122 224
------ ------
Total.................................................. 1,106 2,619
------ ------
Net deferred tax asset........................................... $ 963 $2,472
====== ======
</TABLE>

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 recognized a tax benefit as a result of the change in the valuation
allowance of $1,856,000 for the year ended June 30, 1996.

A reconciliation of the U.S. federal statutory rate to the Company's
effective tax rate is as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal rate......................................... 34% 34% 35%
Write-off of in-process R&D.................................... -- -- (89)
Effect of permanent differences................................ 1 2 (2)
Foreign taxes.................................................. 1 4 (2)
State taxes, net of federal benefit............................ 1 4 (6)
Tax credit carryforwards....................................... -- (14) 3
Benefit of net operating loss carryforwards.................... (34) (7) --
Other.......................................................... -- -- (4)
--- --- ---
3 % 23% (65)%
=== === ===
</TABLE>

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

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

F-14
<PAGE> 61

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

March 1, 1995. The 1994 Plan will terminate 10 years after the 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 issued under the 1994 Plan vest as to 25% of the shares
subject thereto on the first anniversary of the date of grant and 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 has 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 or
non-qualified stock options, at the discretion of the Board of Directors and as
reflected in the terms of the written option agreement. Options vest 20% per
year over 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 800,000 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. On May 1, 1997, the
Purchase Plan was expanded to include the international employees of the Company
and its subsidiaries. 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 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, 1997, 285,642 shares remained available for purchase through
the Purchase Plan and there were 399 employees eligible to participate, of which
87%, or 347, participated. Employees purchased 299,636 shares during the year at
prices ranging from $3.40 to $36.13. Total cash received by the Company was
approximately $1,281,000. The Purchase Plan is non-compensatory, therefore, no
charges to income were recorded.

OUTSIDE DIRECTOR STOCK OPTION PLAN

The Company's Outside Directors Stock Option Plan ("Directors Plan") was
approved by the stockholders and became effective on November 15, 1995. The
Directors 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 Directors Plan. Each person who is
elected for the first time as an Outside Director shall be, upon the date of his
first

F-15
<PAGE> 62

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

election, automatically granted an option to purchase 20,000 shares at the fair
market value of the shares on the grant date. 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 shares 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 Directors 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 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
his or her respective salary, not to exceed the statutory limit. The Company
elected to make discretionary matching contributions of $120,000 for each of the
1995 and 1996 plan years 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
plan year. This match was allocated based upon the employees' contributions in
each 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. The Company had made contributions of approximately $98,000 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 the 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 nonqualified stock options at $4.00 per
share to three employees on February 15, 1995. These options vest over a five
year period. During fiscal 1997, 5,000 of these options were exercised.

The Board granted 20,000 nonqualified stock options at $4.43 per share to
an outside investor relations consultant ("consultant") in April 1995. The
options vested 50% on November 1, 1995 and 50% on November 1, 1996. The options
have been fully exercised.

F-16
<PAGE> 63

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following summarizes the activity under the Company's stock option
plans as well as those issued outside the plans (see above):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------
1995 1996 1997
----------------------- ----------------------- ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
OPTION OPTION OPTION
NUMBER PRICE NUMBER PRICE NUMBER PRICE
OF SHARES PER SHARE OF SHARES PER SHARE OF SHARES PER SHARE
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options
outstanding,
beginning of
year............. 982,704 $0.58 1,381,214 $2.31 1,144,316 $4.59
Granted............ 687,404 3.95 446,800 9.57 611,150 29.18
Canceled/expired... (61,512) 0.48 (378,884) 5.05 (65,728) 28.51
Exercised.......... (227,382) 0.28 (305,348) 1.00 (279,466) 3.28
--------- --------- ---------
Options
outstanding, end
of year.......... 1,381,214 2.31 1,143,782 4.59 1,410,272 14.40
========= ========= =========
Options
exercisable, end
of year.......... 257,683 0.54 259,058 2.35 310,126 3.54
========= ========= =========
Options available
for grant........ 848,000 1,067,034 514,284
========= ========= =========
Weighted average
fair value of
options
granted.......... $9.57 $29.18
========= =========
</TABLE>

OPTIONS OUTSTANDING AND EXERCISABLE BY PRICE RANGE
AS OF JUNE 30,1997

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF OPTIONS REMAINING AVERAGE OPTIONS AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.38 - $ 3.38...... 236,272 2.35 $ 1.18 112,314 $ 0.73
$ 3.75 - $ 3.75...... 6,668 3.34 3.75 2,668 3.75
$ 4.00 - $ 4.00...... 347,973 3.66 4.00 150,243 4.00
$ 4.81 - $ 6.38...... 58,687 4.23 6.32 19,442 6.29
$11.06 - $17.00...... 447,672 4.93 14.02 25,459 11.12
$33.50 - $45.25...... 313,000 5.40 38.23 -- --
--------- ---- ------ ------- ------
$ 0.38 - $45.25...... 1,410,272 4.25 $14.40 310,126 $ 3.54
========= ==== ====== ======= ======
</TABLE>

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123

During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to

F-17
<PAGE> 64

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

continue to measure compensation cost related to stock options issued to
employees under these plans using the method of accounting prescribed by
Accounting Principles Board Opinion No. 25 (APB No. 25), "Accounting for Stock
Issued to Employees." Entities electing to continue accounting for stock-based
compensation under in APB No. 25 must make pro forma disclosures of net income
(loss) and earnings (loss) per share, as if the fair value based method of
accounting defined in SFAS No. 123 has been applied.

The Company has elected to account for its stock-based compensation plans
under APB No. 25; therefore, no compensation cost is recognized in the
accompanying financial statement for stock-based employee awards. However, the
Company has computed for pro forma disclosure purposes the value of all options
and Purchase Plan shares granted during 1996 and 1997, using the Black-Scholes
option pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
1996 1997
----------------------------- -----------------------------
OPTIONS PURCHASE PLAN OPTIONS PURCHASE PLAN
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Risk free interest rate 6.00% 5.30% 6.02% 5.47%
Expected dividend yield -- -- -- --
Expected lives 4.06 years .5 years 4.06years .5 years
Expected volatility 69.00% 74.40% 80.00% 76.80%
</TABLE>

The total value of options and Purchase Plan shares granted was computed to
be the following approximate amounts, which would be amortized on the
straight-line basis over the vesting period:

<TABLE>
<CAPTION>
OPTION PLANS PURCHASE PLAN
------------ -------------
<S> <C> <C>
Year ended June 30, 1997................... $ 8,822,819 $ 870,119
Year ended June 30, 1996................... $ 1,955,126 $ 376,028
</TABLE>

If the Company had accounted for its stock-based compensation plans using a
fair value based method of accounting, the Company's net income (loss) and
earnings (loss) per common and common share equivalent would have been as
follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997
------ --------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Net income (loss):
As reported.................................................. $6,217 $(15,436)
Pro forma.................................................... 5,910 (17,669)
Earnings (loss) per common and common share equivalent:
As reported.................................................. .36 (.90)
Pro forma.................................................... $ .35 $ (1.02)
</TABLE>

The effects of applying SFAS No. 123 for providing pro forma disclosures
for 1996 and 1997 are not likely to be representative of the effects on reported
net income (loss) and earnings (loss) per common and common share equivalent for
future years, because options vest over several years and additional awards
generally are made each year.

7. CAPITAL STOCK

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

F-18
<PAGE> 65

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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, 1997.

8. COMMITMENTS AND CONTINGENCIES

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 and certain additional
enhancements to the product. The purchase price of the Product was $2,300,000
payable in installments based on delivery dates for different releases of the
Product which occurred between September, 1996 and March, 1997. The purchase
price of the enhancements was $695,000, payable in installments based upon
delivery which occurred between February and July, 1997. The Company has paid
the entire purchase price for all products and enhancements which had been
delivered. The purchase of the Product will be capitalized in accordance with
SFAS No. 86 and amortized over the greater of the useful life of the product,
which is estimated to be 36 months, or using the revenue ratio method, whichever
results in a greater amount of amortization in the applicable reporting period.

In addition to the purchase price, royalties on sales of software licenses
for the Product are due to Tadiran in the amount of 15% of the first $2,000,000
in sales, 12% for the next $8,000,000, and 10% for any additional sales.
Royalties due to Tadiran as of June 30, 1997 were $169,000. The Company also has
the right to commission a future version of the software for an agreed upon time
and materials rate.

During November 1993, the Company entered into a five-year agreement with
SEEC, Inc. ("Licensor") which granted the Company a license to use, market and
reproduce certain of Licensor's products under the Company's label. The Company
agreed to 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. 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 were generally nonrefundable, except in the case of certain defaults
by the Licensor. As of June 30, 1996, all prepaid royalties under the agreement
were fully amortized. As of June 1997, the agreement had been terminated.

The Company leases its corporate office facilities in two locations in
Phoenix, Arizona. On August 15, 1994, the Company extended the office lease at
one of its facilities, which will expire on December 31, 1999. On December 19,
1996, the Company entered into a lease at another location in Phoenix, Arizona
which will expire on May 31, 2001. Rental expense relating to these leases
amounted to approximately $487,000, $583,000 and $786,000 in the years ended
June 30, 1995, 1996, and 1997, respectively.

The Company has entered into several office leases for sales offices in
various cities and countries. These leases expire at various dates through 2000.
Rental expense relating to these leases amounted to approximately $415,000,
$575,000, and $684,000 in the years ended June 30, 1995, 1996, and 1997,
respectively.

F-19
<PAGE> 66

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company is 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 1999. Expenses under this agreement
were approximately $794,000, $673,000, and $860,000 in the years ended June 30,
1995, 1996, and 1997, respectively. The base monthly charge for usage is
approximately $59,000, subject to adjustment for excess usage as defined in the
agreement.

The Company is party to a facilities management agreement under which it
leases certain office equipment and utilizes personnel of an independent third
party to manage its corporate office and produce the Company's product
documentation. The agreement expires in October 1998. Payments under this
agreement were approximately $362,000 in the year ended June 30, 1997. The base
monthly charge is approximately $31,000 subject to an adjustment for 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):

<TABLE>
<S> <C>
Year ending June 30:
1998.................................................... $ 3,452
1999.................................................... 2,962
2000.................................................... 1,817
2001.................................................... 1,280
2002.................................................... 520
Thereafter.............................................. 408
-------
$10,439
=======
</TABLE>

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.

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 (loss) before provision for income taxes for each
of the years in the three year period ended June 30, 1997, and identifiable
assets at June 30, 1995, 1996, and 1997, are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Revenue(1):
North America-domestic........................... $22,517 $32,878 $ 57,728
International-principally distributors:
Europe........................................ 2,744 3,097 2,581
All others.................................... 1,785 1,721 1,520
Foreign subsidiaries and branches................ 3,905 5,861 23,483
------- ------- --------
Total revenue............................ $30,951 $43,557 $ 85,312
======= ======= ========
</TABLE>

F-20
<PAGE> 67

VIASOFT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Income (Loss) Before Income Taxes(1):
North America.................................... $ 5,317 $ 8,517 $(17,860)
Foreign subsidiaries and branches................ 58 (457) 8,486
------- ------- --------
Income (loss) before income taxes........ $ 5,375 $ 8,060 $ (9,374)
======== ======== =========
Identifiable Assets(1):
North America.................................... $30,087 $43,370 $ 50,527
Foreign subsidiaries and branches................ 2,527 3,221 14,074
------- ------- --------
Total assets............................. $32,614 $46,591 $ 64,601
======== ======== =========
</TABLE>

- ---------------
(1) Includes VIASOFT, VIASOFT UK, and VIASOFT de Mexico, S.A. de C.V. for all
periods, VIASOFT Germany since its formation on October 1, 1994, VIASOFT
Netherlands since its formation on July 1, 1995, Viasoft Benelux since its
formation on July 1, 1996, and the operations of R&O since its acquisition
on December 5, 1996.

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 1997:
Revenue................................. $ 13,976 $ 19,783 $ 23,901 $27,652
Income (loss) from operations........... 2,021 (23,059) 4,973 5,973
Net income (loss)....................... 1,556 (24,184) 3,148 4,044
Earnings (loss) per common and common $ .09 $ (1.42) $ .17 $ .22
share equivalent.....................

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 $ .06 $ .10 $ .08 $ .14
equivalent...........................

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 $ .05 $ .10 $ .07 $ .13
equivalent...........................
</TABLE>

F-21
<PAGE> 68

UNDERWRITING

Subject to the terms and conditions of an underwriting agreement, (the
"Underwriting Agreement"), the Company and the Selling Stockholders have agreed
to sell to each of the underwriters named below (the "U.S. Underwriters"), and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Wessels, Arnold &
Henderson, L.L.C., SoundView Financial Group, Inc. and Volpe Brown Whelan &
Company, LLC are acting as representatives, has severally agreed to purchase
from the Company and the Selling Stockholders, the respective number of shares
of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
-------------------------------------------------------------------- ----------------
<S> <C>
Goldman, Sachs & Co. ............................................... 448,000
Wessels, Arnold & Henderson, L.L.C. ................................ 179,200
SoundView Financial Group, Inc. .................................... 134,400
Volpe Brown Whelan & Company, LLC................................... 134,400
Crowell, Weedon & Co. .............................................. 56,000
Deutsche Morgan Grenfell Inc. ...................................... 56,000
Piper Jaffray Inc. ................................................. 56,000
Punk, Ziegel & Knoell............................................... 56,000
---------
Total..................................................... 1,120,000
=========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $1.55 per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $0.10 per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.

The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the international offering (the "International Underwriters" and, collectively
with the U.S. Underwriters, the "Underwriters") providing for the concurrent
offer and sale of 280,000 shares of Common Stock in an offering outside the
United States. The offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
offering made hereby is a condition to the closing of the international
offering, and vice versa. The representatives of the International Underwriters
are Goldman, Sachs International, Wessels, Arnold & Henderson, L.L.C., SoundView
Financial Group, Inc. and Volpe Brown Whelan & Company, LLC.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the international
offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually

U-1
<PAGE> 69

agreed. The price of any shares so sold shall be the initial public offering
price, less an amount not greater than the selling concession.

The Company and certain Selling Stockholders have granted the U.S.
Underwriters an option exercisable for 30 days after the date of this Prospectus
to purchase up to an aggregate of 168,000 additional shares of Common Stock
solely to cover over-allotments, if any. If the U.S. Underwriters exercise their
over-allotment option, the U.S. Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 1,120,000 shares of Common Stock offered. The Company and
certain Selling Stockholders have granted the International Underwriters a
similar option to purchase up to an aggregate of 42,000 additional shares of
Common Stock.

The Company and the Selling Stockholders have agreed that, during the
period beginning from the date of this Prospectus and continuing to and
including the date 90 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) which are substantially similar to the shares of
Common Stock or which are convertible into or exchangeable for securities which
are substantially similar to the shares of Common Stock without the prior
written consent of Goldman, Sachs & Co., except for the shares of Common Stock
offered in connection with the concurrent U.S. and international offerings.

In connection with the offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions, "passive" market making (see below) and purchases
to cover syndicate short positions created in connection with the offering.
Stabilizing transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Common Stock; and
syndicate short positions involve the sale by the Underwriters of a greater
number of Common Stock than they are required to purchase from the Company in
the offering. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the securities sold in the offering for their account may be reclaimed by the
syndicate if such Common Stock is repurchased by the syndicate in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Common Stock, which may be higher than the price
that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the Nasdaq National Market, in the over-the-counter market or otherwise.

As permitted by Rule 103 under the Exchange Act, certain Underwriters (and
selling group members, if any) that are market makers ("passive market makers")
in the Common Stock may make bids for or purchases of the Common Stock in the
Nasdaq National Market until such time, if any, when a stabilizing bid for such
securities has been made. Rule 103 generally provides that (1) a passive market
maker's net daily purchases of the Common Stock may not exceed 30% of its
average daily trading volume in such securities for the two full consecutive
calendar months (or any 60 consecutive days ending within the 10 days)
immediately preceding the filing date of the registration statement of which
this Prospectus forms a part, (2) a passive market maker may not effect
transactions or display bids for the Common Stock at a price that exceeds the
highest independent bid for the Common Stock by persons who are not passive
market makers and (3) bids made by passive market makers must be identified as
such.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.

This Prospectus may be used by Underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
international offering, to persons located in the United States.

U-2
<PAGE> 70

=======================================================

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IN CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference................................. 2
Prospectus Summary.......................... 3
Summary Consolidated Financial
Information............................... 5
Risk Factors................................ 6
Special Note on Forward-Looking
Statements................................ 15
The Company................................. 15
Use of Proceeds............................. 15
Dividend Policy............................. 15
Price Range of Common Stock................. 16
Capitalization.............................. 17
Pro Forma Combined Financial Data........... 18
Selected Consolidated Financial Data........ 20
Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations..................... 21
Business.................................... 30
Management.................................. 43
Selling Stockholders........................ 45
Legal Matters............................... 46
Experts..................................... 46
Available Information....................... 46
Consolidated Financial Statements........... F-1
Underwriting................................ U-1
</TABLE>

=======================================================
=======================================================
1,400,000 SHARES

VIASOFT, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
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[VIASOFT LOGO]

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GOLDMAN, SACHS & CO.

WESSELS, ARNOLD &
HENDERSON

SOUNDVIEW FINANCIAL
GROUP, INC.

VOLPE BROWN WHELAN &
COMPANY

REPRESENTATIVES OF THE UNDERWRITERS
=======================================================