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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------
                                    FORM 10-K

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                     FOR THE FISCAL YEAR ENDED JUNE 30, 1998

                                       OR

[ ]   TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM         TO

                         COMMISSION FILE NUMBER 0-25472

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

          DELAWARE                                               94-2892506
(STATE OR OTHER JURISDICTION OF                               (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)

                 3033 NORTH 44TH STREET, PHOENIX, ARIZONA 85018
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 952-0050
                                 ---------------
           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                    Common Stock, $0.001 par value per share
                         Preferred Share Purchase Rights
                                (Title of class)

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

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

    At July 31,  1998,  the  aggregate  market  value of  common  stock  held by
non-affiliates of the Registrant was approximately  $244,734,090  based upon the
closing sale price of the common  stock on such date,  as reported on The Nasdaq
Stock Market.

    At July 31,  1998,  the  number of shares of common  stock  outstanding  was
19,326,796.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Proxy  Statement  for the 1998 Annual  Meeting of
Stockholders are incorporated by reference in Part III.
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<PAGE>
                                  VIASOFT, INC.
                           ANNUAL REPORT ON FORM 10-K
                        FOR THE YEAR ENDED JUNE 30, 1998

                                TABLE OF CONTENTS

                                                                          PAGE
                                                                          ----
PART I

Item 1.   Business                                                          1
Item 2.   Properties                                                       20
Item 3.   Legal Proceedings                                                20
Item 4.   Submission of Matters to a Vote of Security Holders              20

PART II

Item 5.   Market for the Registrant's Common Stock
             and Related Stockholder Matters                               20
Item 6.   Selected Consolidated Financial Data                             21
Item 7.   Management's Discussion and Analysis of Consolidated Financial
             Condition and Results of Operations                           25
Item 8.   Consolidated Financial Statements and Supplementary Data         33
Item 9.   Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosures                                     33

PART III

Item 10.  Directors and Executive Officers of the Registrant               33
Item 11.  Executive Compensation                                           34
Item 12.  Security Ownership of Certain Beneficial Owners and Management   34
Item 13.  Certain Relationships and Related Transactions                   34

PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K  34

SIGNATURES                                                                 37

FINANCIAL STATEMENTS                                                       F-1


    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/ValidDate(R),    VIA/AutoChange(TM),    VIA/AutoTest(TM),
VIA/SmartQuest(TM),    OnMark(TM),    OnMark   2000(TM),   Visual   Process(TM),
ChangeWorks(TM),   Viasoft's   Insourcing(R),   Viasoft's   Enterprise  2000(R),
Viasoft's  Estimate(TM),  Viasoft's  FastPath  2000SM,  Viasoft's Impact 2000SM,
Viasoft's Plan 2000SM, Bridge(TM),  Viasoft's Legacy Transitions SM, Independent
Verification  and  ValidationSM,  IV & VSM and  Rochade(TM)  are  trademarks and
service marks of the Company. This report also includes trade names,  trademarks
and references to intellectual property owned by other companies.
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

OVERVIEW

    Viasoft, Inc., a Delaware corporation ("Viasoft" or the "Company"), provides
business solutions that help organizations worldwide understand, manage, evolve,
reuse, transition and modernize mission-critical applications that support their
fundamental  business  processes.  These business solutions are provided through
integrated software products and specialized professional consulting services.

    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 required to run
the major operations of these organizations. Enormous investments have been made
in these  applications  and  organizations  need to  modernize  and extend their
existing   applications  to  leverage  that  investment  and  address   changing
information  requirements,  as well as migrate to new computer architectures and
languages and integrate into the Web.

    The overall  strategy of the Company is to provide  products and  consulting
services to support the application  modernization  needs of large organizations
worldwide.  Over the years,  Viasoft has come to thoroughly  understand  mission
critical  applications:  how  they  are put  together,  and how to  extract  the
business  value from them.  The  Company's  business  solutions  are designed to
assist its customers in cost  effectively  leveraging  their  investment and the
business value within their existing systems by managing  applications and data,
adding  proven,  repeatable  processes  to  their  development  and  maintenance
initiatives,  improving  the  quality  of  the  applications  and  assisting  in
specialized and complex  redevelopment  initiatives.  With the Existing  Systems
Workbench,  a  comprehensive,  integrated  toolset  that enables  management  of
existing systems,  and the Rochade  repository  product line,  together with the
know-how  gained from  considerable  experience  working with  mission  critical
applications,  the Company has also  established  a solid base on which to build
additional application modernization solutions in the future.

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

VIASOFT PRODUCTS

    Viasoft   offers  a  range  of  products   that   support  its   application
modernization  strategy.  These  products  enable  organizations  to understand,
manage, evolve, reuse, transition and modernize their existing  mission-critical
enterprise  applications.  The Company's three primary product lines include the
Existing Systems Workbench, a comprehensive, integrated toolset that enables the
management of existing systems,  Rochade, an enterprise repository  environment,
and OnMark  2000, a suite of tools for the desktop and  client/server  year 2000
century date conversion.

THE EXISTING SYSTEMS WORKBENCH

    The Existing  Systems  Workbench  ("ESW") is an integrated suite of software
tools  built  around  two  core  technologies,  the  Analytical  Engine  and the
Application Knowledge Repository. ESW products are available as a complete suite
or as individual  products that address each phase of the existing  applications
maintenance and redevelopment life-cycle.

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

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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.

    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
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.

    Along with the  component  products of ESW,  the Company has  developed  and
acquired   complementary   products  that  are  either   customized  to  address
specialized  redevelopment  initiatives  or assist in the ongoing  management of
existing systems. These products are described briefly below:

                                       2
<PAGE>
VIASOFT'S BRIDGE AND CHANGE TOOLS

    VIASOFT'S  BRIDGE  PRODUCTS.  Viasoft  has  bridging  technology  based on a
windowing technique to support large conversion projects of its customers,  such
as the year 2000 and Euro conversions.  The primary benefits of bridging include
the  protection  of  data  integrity,   speed  in  the  conversion  process  and
preservation of historical data, among others. Viasoft's Bridge 2000 is designed
to automatically  translate two-digit date formats in customer data files to the
four-digit  formats  required by programs that have been converted for year 2000
compliance.  Viasoft's Bridge for Euro is a  data-converter  utility designed to
support dual-currency conversion handling.

    CHANGE TOOLS. Viasoft has two product lines of tools designed to analyze and
assess required changes for large  conversion  projects and automate the process
of making those changes.

    VIASOFT'S ESTIMATE. Viasoft's Estimate is a tool for analyzing and assessing
the size of the programming effort required for year 2000 date conversions.  The
Estimate  product is also capable of analyzing  the impact of other  programming
projects  that  require  location of specific  numerical  or other  fields.  For
example,  additional functionality is being added to the product for use in Euro
conversion  projects.  Estimate for Euro is currently planned to be available by
the end of the calendar year.

    VIA/AUTOCHANGE.  VIA/AutoChange  is an interactive tool that guides the user
through the process of changing large  quantities of source code on an automated
basis.  VIA/AutoChange  allows the user to assign a conversion  strategy to each
impacted data item in the  conversion  set and  automatically  apply the desired
changes to the source code.  VIA/AutoChange  also  provides  audit and reporting
capabilities  so the user may  monitor the status of program  changes  that have
been made. The Company is currently  developing  VIA/AutoChange  for Euro, which
will be used in conjunction  with Viasoft's  Bridge for Euro to address the Euro
currency transition.

VIASOFT'S TESTING AND VALIDATION PRODUCTS

    VIA/AUTOTEST.   VIA/AutoTest   automates  the  testing  process  for  single
programs, individual applications or an entire enterprise, by capturing business
functions, and automatically creating scripts for playback. VIA/AutoTest assists
the user in  monitoring  and  managing  the entire  testing  process,  including
regression,  stress, load and performance testing.  VIA/AutoTest allows tests to
be scheduled and conducted in unattended  mode and provides the ability to share
tests across any number of applications.

    VIA/VALIDDATE. VIA/ValidDate tests the manner in which programs will respond
to future dates without altering the operating system. VIA/ValidDate provides an
alternate,  running clock that allows the user to monitor run times for programs
with simulated  dates.  VIA/ValidDate  also provides a logging  facility,  which
enables the user to audit the programs run through the VIA/ValidDate testing.

    VIA/SMARTQUEST.  The  VIA/SmartQuest  products are automated fault diagnosis
tools  that  intercept  abends,   pinpoint  problems  and  present  the  failure
information  to  programmers in a readable  format.  Each of the  VIA/SmartQuest
products,  VIA/SmartQuest for CICS and  VIA/SmartQuest  for Batch,  supports the
COBOL, Assembler and PL/I mainframe environments.

    VIA/SMARTTEST.  The Company also markets VIA/SmartTest,  a component of ESW,
as a separate product in its testing and validation solutions.

    SERENA TESTING  PRODUCTS.  To extend its testing  capabilities,  the Company
entered into a Reseller Agreement with Serena Software  International to provide
the  following  testing  functionality:  (i) source and  version  reconciliation
(Concurrent  Development Facility);  (ii) comparison  capabilities for database,
load module and test comparisons (Comparex); (iii) editing capabilities for year
2000 conversions and complex file and data

                                       3
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management  tasks  (StarTool);  (iv) data-aging  capabilities  that expedite the
testing  process and  protect  the  accuracy  of  date-related  program  changes
(StarWarp) and (v) automated tracking of system and application  dataset changes
as they occur (Synctrac).

ROCHADE

    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.  Rochade enhances
the Company's repository technology by permitting the storage of greater volumes
of  information  at the  enterprise  level.  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.

    The  Company is  currently  marketing  several  enhancements  to the Rochade
repository  technology  that the Company  believes  increase the ease of use and
extend the openness of the repository. These enhancements include EdgeworX Plus,
a fully integrated development environment that builds interactive,  Web-enabled
Rochade  applications,  and the ODBC  Driver,  which  provides  open  access  to
information stored in Rochade by utilizing the SQL language.

    Viasoft is  continuing  to enhance the  Rochade  repository  technology  for
integration with Viasoft's ESW product line and professional services solutions.
The Company believes that the Rochade repository provides 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 permits greater  flexibility to create repository  information models to
accommodate data warehousing,  process management,  project tracking and similar
initiatives.  As an open  enterprise-wide  repository,  Rochade also provides an
additional  foundation  in the  Company's  strategy  to  develop  and market new
integrated products and solutions.

    For example, the Company currently expects to release a new product in early
1999 that is designed to assist customers in inventorying,  tracking,  planning,
analyzing   and   managing   application   resources   across   multi-technology
environments.  This  enterprise-wide  analysis tool will allow customers to view
information  about the  components in their  business  systems and the manner in
which such components are interrelated.  This product integrates Rochade and ESW
technology and is designed to give customers the ability to examine all of their
applications  at the  enterprise  level  to  provide  valuable  information  for
managing and modernizing their applications.

ONMARK 2000

    OnMark 2000 is an end-to-end solution designed to address each phase of year
2000  conversion  for desktop and  client/server  applications.  The OnMark 2000
product  suite  delivers  a  solution  to  address  hardware,   application  and
data-related  year 2000 issues.  The core product within the OnMark 2000 product
suite,  OnMark 2000 Assess,  was acquired by the Company through its acquisition
of EraSoft Technologies, Inc. ("EraSoft"). The Company also entered into license
agreements  with three software  companies for the rights to distribute  certain
desktop software tools that complete the Company's OnMark 2000 product line. See
"Product Development -- Acquisitions and Strategic  Relationships" and Note 2 of
the Consolidated Financial Statements.

    The Company  believes  that the primary  benefits of the OnMark 2000 product
suite are the reduction of time and resources an  organization  must dedicate to
its desktop and  client/server  year 2000  century date  conversion  through the
automated  identification  of  hardware  and  software  that  is not  year  2000
compliant and the leverage of
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information  for reuse by creating an  inventory  portfolio  of all hardware and
software  in an  organization.  Each of the OnMark 2000  products  is  described
briefly below:

    ONMARK 2000 SURVEY.  OnMark 2000 Survey  performs an automated  inventory of
all of the personal  computers in an  organization's  enterprise  throughout the
organization's corporate network.  Customized year 2000 reports are generated to
assist in measuring year 2000 compliance.

    ONMARK  2000  ASSESS.  OnMark  2000  Assess is a risk  assessment  tool that
determines  the  impact of the year 2000  change on the  hardware  and  software
information obtained with OnMark 2000 Survey.  OnMark 2000 Assess is designed to
analyze hardware, software, source code, data files, databases and spreadsheets,
including  spreadsheets  written in  MS-Excel,  Lotus 1-2-3 and Quattro  Pro, to
determine the year 2000 impact on each personal computer in an organization. The
Assess  product  shows  the  data  that may  require  change  for the year  2000
conversion and ranks areas of risk by severity level.

    ONMARK  2000  WORKBENCHES.  The  OnMark  2000  Workbenches  are  interactive
workbenches   that  assist   programmers  in  analyzing  and   remediating   (i)
spreadsheets written in MS-Excel, (ii) databases, forms, tables, queries, macros
and embedded VBA code in MS-Assess and (iii) client/server  applications written
in C/C++, Visual Basic, PowerBuilder and UNIX Shell Scripts.

VIASOFT SERVICES

    Historically,   the  Company's  professional  services  provided  processes,
technology  and  expertise  to  address  complex,  large-scale  maintenance  and
redevelopment  requirements of large organizations.  Most of these projects have
been related to year 2000  conversion.  During the past fiscal year, the Company
focused its efforts in the services  business in two areas:  (i) completion of a
single, large, fixed price engagement for converting  applications for year 2000
compliance, and (ii) performing smaller enablement projects,  designed to assist
and train customers to perform the projects in-house,  with their own resources.
Larger-scale  professional  services projects with the Company's  customers were
referred to services companies and integrators that have strategic relationships
with the Company.  The large,  fixed price  conversion  project was completed in
June 1998. While the Company was disappointed with the financial results of this
two-year  project,  management  considered  the  project a success  because  the
project was completed on time and provided a valuable  reference account for the
Company's larger-scale service capabilities.  In hindsight,  management believes
that  this  limited  focus  of its  services  business  during  fiscal  1998 was
unsuccessful in helping to establish a services  business to complement sales of
its software products.

    Going forward,  management  believes that professional  consulting  services
will  be an  important  component  of the  Company's  application  modernization
strategy,  as customers will need to establish proven,  repeatable processes for
their new development and revitalization  efforts.  To this end, the Company has
refocused its efforts on the services  business and plans to offer a broad range
of solutions.  In addition,  the Company has made management  changes and put an
experienced team in place to consolidate and manage the services organization on
a worldwide basis. Finally, the Company acquired the exclusive rights to market,
sell and enhance a knowledge-driven  process management tool, SHL TRANSFORM. See
Note 11 of the Consolidated  Financial Statements.  Viasoft currently intends to
deliver all of its  current and future  service  solutions  within this  process
management  tool,  which  will  be  called  Visual  Process.  See  "Management's
Discussion  and  Analysis of  Consolidated  Financial  Condition  and Results of
Operations."

    The Company's  current  service  solution  offerings  are briefly  described
below:

VIASOFT'S ENTERPRISE 2000

    Viasoft's  Enterprise 2000 is the umbrella solution offering under which the
Company  markets  its year  2000  analysis,  planning,  conversion  and  testing
solutions. The Company performs these solutions through a

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combination  of  professional  services,  its ESW  technology and its Bridge and
Change tools. A brief description of these solutions follows:

    VIASOFT'S  FASTPATH  2000.  FastPath 2000 is designed to provide the primary
components  of  year  2000  century  date  conversion,  including  inventory  of
components, conversion planning and code changing and testing, on an application
level, rather than an enterprise-wide  level.  FastPath 2000 allows customers to
begin their year 2000 century date conversion by addressing  their most critical
applications,  one at a time.  Viasoft also provides  training  through FastPath
2000 to enable customers to perform planning and conversion tasks using internal
resources.

    VIASOFT'S YEAR 2000 DESKTOP SOLUTION.  The Company has extended its FastPath
2000  methodology to the personal  computer  environment  with its FastPath 2000
Desktop  solution.  FastPath 2000 Desktop utilizes the OnMark 2000 product suite
to  provide  the  primary  components  of year  2000  century  conversion  on an
application level in the personal computer environment.

    CHANGEWORKS. ChangeWorks provides companies with an "assembly line" approach
to in-house code remediation and maintenance. ChangeWorks assists customers that
have  completed the assessment  phase and are ready to begin code  conversion by
customizing  the  change  process  to work in  conjunction  with the  customer's
existing hardware and infrastructure resources.

VIASOFT'S TESTING AND VALIDATION SOLUTIONS

    FASTPATH 2000 TESTING. FastPath 2000 Testing provides testing and validation
for  programs  that have been  changed or impacted by change as a result of year
2000 century date  conversion.  A repeatable  testing process is defined,  which
includes test planning,  test data generation,  script creation,  test execution
and test results comparison, customized for the customer's environment. FastPath
Testing is a component of the full FastPath 2000 solution,  but is also provided
separately for customers  seeking an independent party to plan the testing phase
of year 2000 conversions.

    INDEPENDENT VERIFICATION AND VALIDATION.  Viasoft's Independent Verification
and Validation  ("IV&V")  solution assesses the risk of failure for applications
previously  modified for the year 2000 conversion.  IV&V combines  Viasoft's ESW
technology  and its testing and  validation  products  with onsite  professional
services to provide an  evaluation  of the  conversion  and  testing  activities
performed  to  date.  IV&V  provides  an  independent  evaluation  of:  (i)  the
inventory,  which  verifies  that a  comprehensive  inventory  was  used  during
conversion;  (ii) the impact analysis,  which identifies the impacted components
for each application and compares such components to the impact analysis created
by the customer's conversion team; (iii) code changes, which reviews the changes
made  to  source  code  by  the  conversion   team  and  identifies   errors  or
discrepancies; (iv) test plans and validation of test execution, which evaluates
the year 2000 testing  program  performed by the customer's  conversion team and
(v) the  implementation  plan,  which assesses the code migration  procedures in
place  during the year 2000  conversion  project  and the plan  defined  for the
migration  of the  converted  code  into  production.  The  purpose  of the IV&V
solution is to provide an outside  evaluation  of the  conversion  process used,
primarily for audit purposes.

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 offers 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.

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VIASOFT'S LEGACY TRANSITIONS

    Many  organizations are implementing a transition from exclusive reliance on
mainframe  computers  to the  use of the  mainframe  together  with  distributed
computing  environments  for certain  applications.  Viasoft offers 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.

EDUCATION SERVICES

    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. Computer-based training is also available for some of
the Company's ESW products.

CUSTOMER SUPPORT

    The Company  offers  maintenance  for each of its  products,  entitling  the
customer to receive technical support and advice,  including problem  resolution
services,   installation   assistance,   error   corrections   and  any  product
enhancements  released  during  the  maintenance  period.  Under  the  Company's
standard license agreements, maintenance is renewable on an annual basis, and is
generally  priced  at a  percentage  of  the  then  current  list  price.  While
maintenance  is provided  without charge for the mainframe  products  during the
first year, maintenance fees for personal computer products are charged from the
outset of the contract. In addition,  the Company provides its personal computer
product customers with the option of purchasing  maintenance on a per phone call
basis.  While most mainframe  customers renew  maintenance on an annual basis, a
significant number of PC product customers do not purchase  maintenance services
from the Company.  See  "Management's  Discussion  and Analysis of  Consolidated
Financial  Condition and Results of  Operations." In the fiscal years ended June
30, 1998, 1997 and 1996, maintenance fees represented approximately 25%, 25% and
33%,  respectively,  of the Company's  total  revenues.  Maintenance and support
services  are  provided  primarily  by  telephone  from the  Company's  Phoenix,
Arizona, headquarters and its Westford, Massachusetts office, as well as certain
offices of the Company's international subsidiaries and distributors.

SALES, MARKETING AND DISTRIBUTION

    Viasoft  markets its products and  services  principally  to Global 5000 and
similarly sized business and governmental organizations worldwide. The Company's
sales  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,  and through a
new reseller channel established during fiscal 1998 primarily to sell the OnMark
2000 product line.

DIRECT SALES

    The Company  sells and supports  its products and services in North  America
and portions of South America from its Phoenix, Arizona,  headquarters and eight
primary field offices in the United States. As of June 30, 1998, the Company had
58 salespersons  worldwide,  including 32 located at the Company's  headquarters
and the United States field offices.  These offices cover the territories of the
United States,  Canada,  Mexico,  Central America and certain countries in South
America.  Internationally,  the  Company's  subsidiary  offices sell directly to
customers primarily in Australia,  Austria,  Belgium,  Canada, France,  Germany,
Luxembourg,  the Netherlands,  New Zealand,  Switzerland and the United Kingdom.

                                       7
<PAGE>
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 36 countries through 16 independent  distributors.  To date,
the  Company  has not  offered  significant  professional  services  through its
distributors.

ONMARK 2000 RESELLER CHANNEL

    Along  with the  direct  marketing  of  OnMark  2000  products  through  the
Company's   domestic  offices  and  international   subsidiaries,   the  Company
indirectly markets the OnMark 2000 product line worldwide through a new reseller
channel  established  during  fiscal  1998,  which  includes  master  resellers,
integrators and dealers.  Master  resellers are authorized by Viasoft to license
the Company's  OnMark 2000 products to dealers and end-users  and,  depending on
the nature of the reseller's business, some are limited to a specific geographic
area and some are worldwide.  Integrators  and dealers are authorized by Viasoft
to license the  Company's  OnMark 2000 products to  end-users.  Integrators  are
typically limited to specific territories and dealers are typically assigned for
administrative  purposes to a particular  master reseller.  As of June 30, 1998,
the  Company  had  entered  into  agreements  with  four  master  resellers,  37
integrators and 15 dealers.

COMPETITION

PRODUCTS

    The market for the Company's software products is intensely  competitive and
is  characterized  by rapid change in technology and user needs and the frequent
introduction  of new  products.  Most  of the  Company's  competitors  and  many
potential  competitors  have  substantially  greater  financial,  marketing  and
technology  resources than the Company.  Major  competitors for software product
license  sales  include  Computer  Associates  International,   Inc.,  Compuware
Corporation, Micro Focus Group Public Limited Company, Network Associates, Inc.,
Platinum Technology,  Inc. and WRQ, 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 types 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 Five accounting firms, as
well as Computer Horizons Corp.,  Data Dimensions Inc.,  Electronic Data Systems
Corporation,  IBM's Global Services, Keane, Inc., and Platinum Technology,  Inc.
Other system  integrators  and application  outsourcers  also compete to perform
professional services competitive to Viasoft's solutions and 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  in the  last  several  years,
significant competition has emerged and is expected to continue through the year
2000.  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

                                       8
<PAGE>
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 four
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.,
Compuware  Corporation,  Micro Focus Group Public  Limited  Company and Platinum
Technology, Inc.

    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  offerings.  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.

    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 Global
Services and most Big Five accounting firms.

    DESKTOP YEAR 2000 MARKET. Software vendors are beginning to focus on desktop
year 2000 problems as well as mainframe  issues,  and the Company has started to
see  increasing  competition  to its OnMark  2000  products.  Major  competitors
include Network Associates, Inc., Platinum Technology, Inc. and WRQ, Inc.

PRODUCT DEVELOPMENT

    Historically,  Viasoft's  development of new products has been  accomplished
primarily with in-house development personnel and resources. Beginning in fiscal
1996 and continuing  through 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 continue
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, as well as internal development of new products.

RESEARCH AND DEVELOPMENT

    As of June 30,  1998,  the Company had 181  employees  engaged in  research,
development and support.  Of the Company's  research and development  personnel,
101 were  software and solutions  developers  with the balance  divided  between
customer  support,   documentation,   administration   and  quality   assurance.
Substantially  all of these  employees  are  located  at  either  the  Company's
Phoenix, Arizona,  headquarters,  the OnMark research and development facilities
in  Calgary,  Canada or the  Rochade  research  and  development  facilities  in
Chemnitz  and Munich,  Germany.  In addition to  developing  new  products,  the
Company continually  updates its existing products through  enhancements and new
releases,  develops new  products and  technologies  to  facilitate  its service
solutions  and  integrates  and develops  enhancements  to acquired and licensed
technologies and products.

                                       9
<PAGE>
    During  the  fiscal  years  ended  June 30,  1998  and  1997,  research  and
development   expenditures   were  $16,392,000  and  $7,893,000,   respectively,
excluding  charges for  in-process  research and  development of $8.6 million in
connection with the acquisition of EraSoft and a fault  diagnostic tool marketed
as  VIA/SmartQuest  in fiscal 1998,  and $27.0  million in  connection  with the
acquisition  of Rottger & Osterberg  Software - Technik  GmbH  ("R&O") in fiscal
1997.  Research and  development  expenses in fiscal 1998 include  approximately
$3.2  million in charges for third  party  development  of certain  technologies
included in the OnMark 2000 product suite. The Company  anticipates that it will
continue to commit  substantial  resources  to research and  development  in the
future.  See  "Management's  Discussion and Analysis of  Consolidated  Financial
Condition and Results of Operations"  and Note 2 of the  Consolidated  Financial
Statements.

ACQUISITIONS AND STRATEGIC RELATIONSHIPS

    The  Company  has  continued  its  strategy  to acquire  and/or  license new
products  and  technologies  to  complement,  expand and  enhance  its  existing
products and services.  During the last two fiscal years,  the Company  acquired
two companies.  In the second  quarter of fiscal 1997, the Company  acquired the
core  technology for its Rochade product line through its acquisition of R&O. In
the third quarter of fiscal 1998,  the Company  acquired the core  technology of
its OnMark 2000 product suite through its acquisition of EraSoft.  See Note 2 of
the Consolidated Financial Statements.

    Along with company  acquisitions,  Viasoft has acquired certain products and
technologies that have added to the Company's product and solution offerings. In
the first  quarter of fiscal 1997,  the Company  entered into an agreement  with
Tadiran  Information  Systems,  Ltd. to acquire a date bridging  technology that
developed  into the  Company's  Bridge 2000  product.  In the fourth  quarter of
fiscal 1998, the Company  acquired the rights to  VIA/SmartQuest.  In July 1998,
the Company acquired the exclusive  rights to SHL TRANSFORM,  a knowledge driven
process  management  tool,  from SHL  Systemhouse  Co.  The  Company  expects to
integrate the SHL TRANSFORM product into all its service solutions and market it
under the name Visual Process. See Notes 2 and 11 of the Consolidated  Financial
Statements.

    In addition to company  and  product  acquisitions,  the Company has entered
into  strategic  relationships  to  further  expand  its  product  and  solution
offerings.  The Company's strategic relationships have provided Viasoft with the
right to,  among  other  things,  license  and market  certain  (i)  testing and
assessment  products,  (ii)  products  that  comprise a portion of the Company's
OnMark 2000 product  line and (iii)  products  that address the Euro  conversion
transition. See Note 2 of the Consolidated Financial Statements.

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
presently has very limited patent rights and existing copyright and trade secret
laws offer only  limited  protection.  Certain  provisions  of the  license  and
distribution  agreements  generally  used by the Company,  including  provisions
protecting against  unauthorized use, copying,  transfer and disclosure,  may be
unenforceable  under  the  laws of  certain  jurisdictions  and the  Company  is
required to negotiate limits on these provisions from time to time. In addition,
the laws of some  foreign  countries  do not protect the  Company's  proprietary
rights to the same extent as do the laws of the United  States.  The Company has
been and may be  required  from time to time to enter into  source  code  escrow
agreements  with certain  customers and  distributors,  providing for release of
source  code in the event the  Company  breaches  its  support  and  maintenance
obligations, files bankruptcy or ceases to continue doing business.

    The Company'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
                                       10
<PAGE>
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 "Factors that May Affect Future Results -- Importance of
Proprietary Rights."

EMPLOYEES

    The Company had 561 full-time  employees as of June 30, 1998,  including 219
in sales, sales support and marketing, 181 in research, development and support,
82 in  professional  services  and 79 in domestic  and  international  corporate
operations,  administration and support.  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.  None of the Company's
employees is  represented  by a  collective  bargaining  agreement.  The Company
believes that its relations with its employees are good.

EXECUTIVE OFFICERS OF THE REGISTRANT

    The Company's executive officers and their ages as of August 31, 1998 are as
follows:

          NAME                   AGE      POSITION
          ----                   ---      --------

    Steven D. Whiteman ........  47    Chairman of the Board and
                                         Chief Executive Officer
    Kevin M. Hickey ...........  40    President and Chief Operating Officer
    Mark R. Schonau ...........  42    Senior Vice President, Finance &
                                         Administration, Chief Financial Officer
                                         and Treasurer
    Catherine R. Hardwick .....  39    Vice President, General Counsel and
                                         Secretary
    Colin J. Reardon ..........  45    Senior Vice President, International
                                         Operations
    Jean-Luc G. Valente .......  38    Senior Vice President, Marketing
    Abbott H. Ezrilov .........  57    Vice President, Channel Sales and Vendor
                                         Relationships
    David M. Lee ..............  31    Vice President, Development
    Robert K. Young ...........  39    Vice President, Global Services
    Kevin J. Donoghue..........  38    Vice President, Sales - The Americas

    Steven D. Whiteman has served as Chief  Executive  Officer and a director of
the Company  since  January  1994 and as Chairman of the Board since April 1997.
Mr. Whiteman was President of the Company from May 1993 to April 1998.  Prior to
serving  as  President,  Mr.  Whiteman  served  as Vice  President  of Sales and
Marketing of the Company from December 1990 to May 1993. 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,   Actuate  Software   Corporation  and  NetPro
Computing, Inc.

    Kevin M. Hickey has served as President  and Chief  Operating  Officer since
April 1998.  Prior to serving as President,  Mr. Hickey 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

                                       11
<PAGE>
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
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.

    Abbott H.  Ezrilov  was  named  Vice  President,  Channel  Sales and  Vendor
Relationships in August 1998. Mr. Ezrilov served as Vice President,  Sales - The
Americas from April 1998 through August 1998,  Vice President of Sales from July
1996 through April 1998 and Vice President  Sales,  Western Region from November
1992 through July 1996.

    David M. Lee has served as Vice President, Development since September 1997.
Prior to joining the Company in September  1997,  Mr. Lee was employed by Tivoli
Systems,  Inc., a computer software and information  services company,  where he
served as Manager, Development from January 1993 through September 1997.

    Robert K. Young has served as Vice  President,  Global  Services  since June
1998.  Prior to joining the Company in June 1998,  Mr. Young was employed by IBM
Global Services,  a  software/hardware  services company,  where he served as an
executive from January 1997 through May 1998. Mr. Young was previously  employed
by Lockheed  Martin,  an  aerospace  engineering  company,  where he served as a
manager from May 1986 to January 1996.

    Kevin J. Donoghue was named Vice  President,  Sales - The Americas in August
1998. Mr. Donoghue  served as Vice  President,  Western Region from January 1998
through August 1998, Western Region Sales Director,  August 1996 through January
1998 and Account Manager, Sales Representative from December 1993 through August
1996.  Prior to joining the Company,  Mr. Donoghue was employed by International
Business Machines  Corporation where he served as Account Executive from January
1992 to December 1993,  Marketing Manager from January 1990 to December 1991 and
Marketing  Representative  from June 1983 to  December  1989.

                                       12
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS

DEPENDENCE ON YEAR 2000 MARKET

    Throughout  the  Company's  15-year  existence,  Viasoft's  growth  has been
attributable  to  its  ability  to  assist  its  customers  in  maintaining  and
renovating their existing systems.  However, the growth in the Company's revenue
during fiscal years 1998 and 1997 resulted  primarily from increased  demand for
the  Company's  year 2000 century date  conversion  products and  solutions  for
mainframe  applications  and  desktop  environments.  Should  the demand for the
Company's year 2000 products and solutions decline  significantly as a result of
new technologies, competition or any other factors, the Company's 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  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 quarterly  fluctuations in
results  of  operations,   changing   perceptions  of  the  year  2000  problem,
announcements  of  new  products  and  acquisitions  by  the  Company  or by its
competitors,  changes  in  the  mix  of  revenues  from  software  licenses  and
professional  services,  changes 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, 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 "Market for the Registrant's Common
Stock and Related Stockholder Matters."

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,  the timing and significance of releases by
the Company or its competitors of new enhancements,  products and solutions 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 

                                       13
<PAGE>
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,  as was the case in the third  quarter  of
fiscal 1998. 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  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.

RISKS ASSOCIATED WITH PROFESSIONAL SERVICES

    During the past fiscal year, the Company experienced  difficulty in managing
its  professional  services  business.  See  "Business -- Viasoft  Services" and
"Management's  Discussion and Analysis of Consolidated  Financial  Condition and
Results of Operations." Historically,  the services business had constituted 28%
and 26% of total  revenue in fiscal 1997 and 1996,  respectively.  The Company's
services  business  decreased to 17% of total revenue  during  fiscal 1998.  The
Company is refocusing  its efforts and  broadening  its service  solutions in an
effort to increase its  revenues  attributable  to  professional  services.  The
Company will  continue to be subject to the risks  generally  associated  with a
services  business,   including  volatility  of  workload,   increased  overhead
associated  with services  personnel,  particularly  because the Company will be
adding   staff  to  grow   its   services   business   both   domestically   and
internationally,  and the related  difficulty  in adjusting  costs to respond to
fluctuations  in revenue,  dependence  on the  Company's  ability to attract and
retain  qualified  technical  personnel in a very competitive  market,  managing
profit margins in a lower margin  business than software  product  licensing and
intense  competition in an environment  of rapidly  changing  customer needs and
expectations.  In addition,  customers may require fixed price contracts,  where
profitability  is more difficult to manage due to greater risk of cost overruns.
See "Business -- Viasoft Services" and "Management's  Discussion and Analysis of
Consolidated Financial Condition and Results of Operations."

RISKS FROM INTERNATIONAL OPERATIONS

    Approximately 32%, 32% and 25% of the Company's total revenues in the fiscal
years ended June 30, 1998,  1997 and 1996,  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
the  continued  expansion  of its OnMark  2000,  Rochade and ESW  product  lines
internationally and the Euro conversion transition,  which is expected to have a
significant effect on international organizations.  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 and Spain,  where they are denominated in lira and pesetas,  respectively.
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  $302,000 from foreign currency fluctuations in the fiscal year
ended  June 30,  1998.  The  Company  has not to date  sought to hedge the risks
associated with fluctuations in foreign exchange rates. The Company continues to
evaluate the 

                                       14
<PAGE>
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  7%, 5% and 11% of the Company's  total revenues
and 21%, 15% and 45% of  international  revenues were realized through the sales
and  marketing  efforts of its  international  independent  distributors  in the
fiscal  years  ended June 30,  1998,  1997 and 1996,  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 complement and extend 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 large
part, upon the success of this strategy.  The Company anticipates that demand in
the year 2000 market will  decline  following  the year 2000 and that it will be
dependent,  in large part,  on  acquisitions  to enhance and expand its software
product line and solution  offerings  to replace  revenue it currently  receives
from its year 2000 solutions. Acquisitions involve a number of special risks and
factors,  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 success of the  Company's  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.

PRODUCT CONCENTRATION; DEPENDENCE ON MAINFRAME SYSTEMS

    Historically,  most of the  Company's  software  license  fee  revenues  and
maintenance  fee  revenues  have been  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 have been derived
from customers that also license ESW products. Although the Company expects that
a greater  percentage of its license revenue in fiscal 1999 will be attributable
to OnMark 2000 product  offerings  in  comparison  to fiscal  1998,  the Company
believes that a substantial  portion of its revenues will continue to be derived
from ESW and solutions that  incorporate the ESW  technology.  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.   See  "Management's
Discussion  and  Analysis of  Consolidated  Financial  Condition  and Results of
Operations." 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 

                                       15
<PAGE>
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."

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 OnMark 2000 product line and the Rochade business,
its plans to continue  expansion of its professional  services offerings 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 with specialized expertise.  The Company has experienced  difficulties
in recruiting  and retaining  qualified  personnel  and  anticipates  that these
efforts  will remain  difficult,  as industry  sources  predict an  insufficient
supply of  programmers  and  consultants  to meet  demand.  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
through  the year  2000.  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 four
categories of competitors for Viasoft in the year 2000 market: software vendors,
consulting  organizations,  system  integrators and application  outsourcers and
desktop  software  vendors that 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
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.  Software vendors are also beginning to focus on desktop year
2000  problems  as well as  mainframe  issues.  The  Company  has started to see
increasing  competition  to its  OnMark  2000  products  from  desktop  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,  Micro Focus
Group Public Limited Company,  Network Associates,  Inc.,  Platinum  Technology,
Inc. and WRQ, 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 Five accounting
firms. Other competitors of the Company's professional services business include
Data Dimensions,  Inc.,  Electronic Data Systems  Corporation,  Keane, Inc., 

                                       16
<PAGE>
IBM Global  Services and Platinum  Technology,  Inc. 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.  Major  competitors  to the  Company's  desktop year 2000
products include Network Associates,  Inc., Platinum  Technology,  Inc. and WRQ,
Inc.

    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."

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.

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 further  integrate and  complement the
Rochade  line of products  acquired  by the  Company,  including a product  that
integrates  the Rochade and ESW  technology  with a  graphical  user  interface;
products  to address  the Euro  conversion  transition  for  existing  mainframe
applications and desktop  environments  and testing and assessment  products and
solutions.  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.

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.  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,  sales
managers and product management personnel.  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 remain
difficult.  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.

                                       17
<PAGE>
PRODUCT LIABILITY

    The  Company  provides  business  solutions  that help  large  organizations
worldwide  understand,   manage,   evolve,   reuse,   transition  and  modernize
mission-critical enterprise applications that support their fundamental business
processes.  In addition, a large 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.
The Company maintains errors and omissions insurance,  but there is no guarantee
that the insurance policy would cover any or all claims made against the Company
or that the coverage  provided  would be adequate.  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 very limited
patent rights 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 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.  To the  extent  that the  Company
increases its international activities, its exposure to unauthorized copying and
use of its products and proprietary information may increase.  Also, the Company
licenses a portion of its desktop software under  "click-wrap" and "shrink-wrap"
licenses.  Certain click-wrap or shrink-wrap  license provisions  protecting the
Company  against  unauthorized  use,  copying,  transfer and  disclosure  of the
licensed  program may be unenforceable  under the laws of certain  jurisdictions
and foreign countries. In addition,  there is generally more software piracy and
copyright  infringement in the PC software  business,  which the Company entered
when it introduced  OnMark 2000.  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 Bridge 2000 product,  together with a pending patent application.  In fiscal
1998, the Company acquired a pending patent  application for certain  technology
in the  EraSoft  acquisition.  The Company is  continuing  to  prosecute  patent
applications on both of these technologies.  However,  there can be no assurance
that a patent will issue as a result of either 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 

                                       18
<PAGE>
or, if licenses were obtainable, that the terms would be commercially acceptable
to the Company. See "Business -- Intellectual Property."

ANTI-TAKEOVER EFFECT OF CHARTER, BYLAWS AND STOCKHOLDER RIGHTS PLAN

    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
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. In addition,  the Company adopted a stockholder  rights plan in
fiscal 1998 that could delay or make more  difficult a merger,  tender  offer or
proxy  contest  involving  the  Company  that  the  Board of  Directors  has not
approved.  See "Market for the Registrant's Common Stock and Related Stockholder
Matters."

YEAR 2000 CONSIDERATIONS

    The Company has  established and continues to evaluate and update its formal
program to address any potential year 2000 compliance issues relating to its (i)
internal operating systems, (ii) vendors, facilities and other third parties and
(iii)  software  products  that it  licenses  to  customers.  The success of the
Company's compliance program will depend in a large part on the efforts of third
parties with whom the Company does business and whose  activities are not within
the Company's control.  The Company has not completed its evaluation of the year
2000 readiness of those third parties. In addition, to date, the Company has not
completed  its  contingency  plans  in the  event  that its  internal  operating
systems, distributors,  resellers, vendors, facilities or products, or any other
components of its business  operations,  fail to operate in compliance  with the
year 2000 century date change.  The Company  expects to develop its  contingency
plans by the end of fiscal 1999. The cost of the Company's year 2000  compliance
program  has not had  and is not  expected  to  have a  material  effect  on the
Company's results of operations or liquidity. However, there can be no assurance
that the Company will not experience material adverse  consequences in the event
that the  Company's  year  2000  compliance  program  is not  successful  or its
distributors,  resellers,  vendors or landlords are unable to resolve their year
2000 compliance issues in a timely manner. In addition,  if any of the Company's
products are not year 2000 compliant in a timely manner, the Company's sales may
decline  materially,  customers  and those with whom they do business may assert
product  liability and other  claims,  and the  Company's  business,  results of
operations and financial  condition would be materially and adversely  affected.
See "Management's  Discussion and Analysis of Consolidated  Financial  Condition
and Results of Operations."

                   SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

    Except for historical  information contained herein, this Form 10-K contains
express or implied 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.  Additional written or oral  forward-looking  statements may be
made by the  Company  from  time to time in  filings  with  the  Securities  and
Exchange  Commission,  in its  press  releases,  quarterly  conference  calls or
otherwise.   The  words   "believes",   "expects",   "anticipates",   "intends",
"forecasts",  "projects",  "plans", "estimates" and similar expressions identify
forward-looking  statements. Such statements reflect the Company's current views
with respect to future events and financial  performance or operations and speak
only as of the date the statements  are made.  Such  forward-looking  statements
involve  risks and  uncertainties  and readers are  cautioned not to place 

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<PAGE>
Undue reliance on forward-looking  statements.  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 "Factors
That May Affect Future  Results," as well as those  discussed  elsewhere in this
Form 10-K  including in the Notes to  Consolidated  Financial  Statements and in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  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.  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 undertakes no obligation to publicly update, review or
revise any  forward-looking  statements  to reflect any change in the  Company's
expectations  with  regard  thereto  or any  change  in  events,  conditions  or
circumstances on which any such statements is based.

ITEM 2. PROPERTIES

    The Company's principal  administrative and marketing facilities are located
in approximately  34,000 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  37,000 square feet of
space in Phoenix,  Arizona.  The Company  occupies  these premises under a lease
agreement expiring on May 31, 2001.

    In addition,  the Company  maintains field offices and executive suite sales
offices   within  the  United  States   located  in  leased  space   aggregating
approximately 18,000 square feet as of June 30, 1998. The Company also leased an
aggregate of  approximately  47,000  square feet of space as of June 30, 1998 in
Australia,  Belgium,  Canada,  France,  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.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

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

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

    The Company's  common stock has been traded on The Nasdaq Stock Market under
the symbol VIAS since the Company's initial public offering in March 1995. Prior
to that  offering,  there  was no  public  market  for the  common  stock of the
Company.  The Company  has never paid cash  dividends  on its capital  stock and
currently  anticipates that it will retain future earnings,  if any, to fund the
development and growth of its business.

    The  number  of  holders  of  record  of  the  Company's  common  stock  was
approximately 399 on July 31, 1998. In addition,  there are approximately 12,500
beneficial owners of common stock on July 31, 1998.

    The following table presents quarterly information on the price range of the
common  stock for the last two 

                                       20
<PAGE>
fiscal years.  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.

                                                  HIGH            LOW
                                                  ----            ---
      FISCAL 1998:
        First quarter.........................    65 1/4        47
        Second quarter........................    54 5/8        32 1/2
        Third quarter.........................    43 7/8        25 3/4
        Fourth quarter........................    29 3/8        12 3/8


      FISCAL 1997:                                               
        First quarter.........................    49 1/4        14 3/8
        Second quarter........................    61            39 1/2
        Third quarter.........................    65 1/4        27 1/4
        Fourth quarter........................    55 3/8        30 3/8

    In April 1998, the Board of Directors adopted a Shareholder Rights Plan (the
"Rights  Plan")  and  declared  a  non-taxable  dividend  of one  Right  on each
outstanding share of the Company's common stock to stockholders of record on May
8, 1998. The Rights Plan is designed to enable all  stockholders to receive fair
and  equal  treatment  in any  proposed  takeover  of the  Company.  Each  Right
initially will entitle the holder to purchase one one-thousandth of a share of a
new series of junior participating preferred stock of the Company at an exercise
price of  $180.00.  The  Rights  will  become  exercisable  if a person or group
acquires 15% or more of the Company's  outstanding  common stock or commences or
announces a tender offer or exchange  offer for 15% or more of the common stock,
unless in the case of a tender or exchange  offer the Board of Directors  delays
exercisability.  If a person or group  acquires  15% or more of the  outstanding
common stock,  all holders of Rights other than the acquirer will be entitled to
purchase,  at the then-current exercise price of the Rights, a number of Viasoft
common  shares having a market value of twice the exercise  price.  In addition,
after such a 15% stock  acquisition,  if the  Company is acquired in a merger or
other business  combination  transaction,  or sells 50% or more of its assets or
earning  power,  each Right will entitle its holder (other than the acquirer) to
purchase,  at the  then-current  exercise  price of the Rights,  a number of the
acquiring  company's  common  shares having a market value of twice the exercise
price. Until the Rights become exercisable, the Rights will trade as a unit with
the common stock.  At any time before a person or group has acquired  beneficial
ownership of 15% or more of the Company's  outstanding  common stock, the Rights
are  redeemable  for one cent per Right at the option of the Board of Directors.
The terms of the Rights  may be  amended  at any time by the Board of  Directors
without the consent of the  holders,  with certain  exceptions.  The Rights will
expire on April 20, 2008, unless otherwise extended by the Board of Directors.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

    The  following  selected  consolidated  financial  data  should  be  read in
conjunction  with the  Company's  Consolidated  Financial  Statements  and Notes
thereto and  "Management's  Discussion  and Analysis of  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,  1998 and 1997 and for each of the three years in the
period ended June 30, 1998 also is included  elsewhere herein.  The consolidated
statements of operations data for the years ended June 30, 1995 and 1994 and the
consolidated  balance  sheet data as of June 30, 1995 and 1994 are derived  from
audited financial statements not included herein.

                                       21
<PAGE>
<TABLE>
<CAPTION>
                                                                    YEAR ENDED JUNE 30,
                                                  ---------------------------------------------------
STATEMENT OF OPERATIONS DATA:                        1998       1997       1996      1995       1994
                                                     ----       ----       ----      ----       ----
                                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                               <C>        <C>         <C>       <C>       <C>
Revenues:
  Software license fees .......................   $ 65,122   $ 40,292    $17,824   $14,311   $ 13,029
  Maintenance fees ............................     28,865     21,010     14,305    12,059     10,041
  Professional services fees ..................     19,615     23,832     11,307     4,387      2,715
  Other .......................................         85        178        121       194        199
                                                  --------   --------    -------   -------   --------
        Total revenues ........................    113,687     85,312     43,557    30,951     25,984
                                                  --------   --------    -------   -------   --------
Operating expenses:
  Cost of software license and maintenance fees     12,737      4,345      2,788     2,661      1,544
  Cost of professional services fees ..........     18,537     18,316      8,025     4,052      2,522
  Sales and marketing .........................     42,131     31,573     18,137    13,517     11,993
  Research and development ....................     16,392      7,893      4,237     3,193      3,291
  Write-off of purchased in-process
    research and development(1) ...............      8,559     26,958       --        --         --
  General and administrative ..................      7,849      6,319      3,567     2,643      2,480
                                                  --------   --------    -------   -------   --------
        Total operating expenses ..............    106,205     95,404     36,754    26,066     21,830
                                                  --------   --------    -------   -------   --------
Income (loss) from operations .................      7,482    (10,092)     6,803     4,885      4,154
Total other income (expense) ..................      4,595        718      1,257       490        (22)
                                                  --------   --------    -------   -------   --------
Income (loss) before income taxes .............     12,077     (9,374)     8,060     5,375      4,132
Provision for income taxes ....................      4,142      6,062      1,843       183        487
                                                  --------   --------    -------   -------   --------
Net income (loss) .............................   $  7,935   $(15,436)   $ 6,217   $ 5,192   $  3,645
                                                  ========   ========    =======   =======   ========
Basic earnings (loss) per common share (2) ....   $    .42   $   (.90)   $   .38   $   .38   $    .30
                                                  ========   ========    =======   =======   ========
Weighted average number of common
    shares outstanding (2) ....................     18,999     17,212     16,390    13,660     12,116
                                                  ========   ========    =======   =======   ========
Diluted earnings (loss) per common and
    common share equivalent(2) ................   $    .40   $   (.90)   $   .36   $   .36   $    .29
                                                  ========   ========    =======   =======   ========
Weighted average number of common
    and common share equivalents outstanding(2)     19,799     17,212     17,391    14,584     12,720
                                                  ========   ========    =======   =======   ========

                                                                        JUNE 30,
                                                  ---------------------------------------------------
                                                    1998        1997        1996      1995      1994
                                                    ----        ----        ----      ----      ----
                                                                      (IN THOUSANDS)
BALANCE SHEET DATA:                                                                                   
Cash and cash equivalents......................  $  37,809    $  8,501   $  5,009   $  7,680  $  4,099
Working capital................................     96,257       9,856     25,388     17,950     1,149
Total assets...................................    162,377      64,601     46,591     32,614    14,257
Deferred revenue (current).....................     20,843      18,227      9,985      8,482     7,679
Deferred revenue (long term)...................        542         230        298        185       182
Total stockholders' equity.....................    115,858      28,696     28,259     20,423     3,039
</TABLE>
----------
(1)  See  Note  2  to  Consolidated   Financial   Statements  and  "Management's
     Discussion and Analysis of Consolidated  Financial Condition and Results of
     Operations."

(2)  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 Notes 1 and 6 to  Consolidated
     Financial Statements.

                                       22
<PAGE>
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, 1997 and 1996,  adjusted to give effect to the R&O acquisition as if it
had been consummated as of the beginning of each 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)

                                      YEAR ENDED JUNE 30, 1996
                       ---------------------------------------------------------
                                   BUSINESS       PRO FORMA           PRO FORMA
                       HISTORICAL  ACQUIRED      ADJUSTMENTS          COMBINED 
                       ----------  --------      -----------          --------
                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues:
  Software license
    fees ...........    $17,824    $ 11,318        $   --              $29,142
  Maintenance fees .     14,305       4,262            --               18,567
  Professional
    services fee ...     11,307       3,448            --               14,755
  Other ............        121         169            --                  290
                        -------    --------        --------            -------

    Total revenues .     43,557      19,197            --               62,754
                        -------    --------        --------            -------

Operating expenses:
  Cost of software
    license and
    maintenance
    fees ...........      2,788       1,787             400(1)           4,975
  Cost of
    professional
    services fees ..      8,025       4,214            (221)(2)         12,018
  Sales and
    marketing ......     18,137       6,022            (721)(2,4)       23,438
  Research and
    development ....      4,237       4,077            (257)(2,4)        8,057
  General and
    administrative .      3,567       2,598            (495)(1,2,3,4)    5,670
                        -------    --------        --------            -------
    Total operating
      expenses .....     36,754      18,698          (1,294)            54,158
                        -------    --------        --------            -------
Income (loss) from
  operations .......      6,803         499           1,294              8,596
                        -------    --------        --------            -------
Total other income
  (expense) ........      1,257        (308)            227(6)           1,176
                        -------    --------        --------            -------
Income (loss) before
  income taxes .....      8,060         191           1,521              9,772
Provision for income
  taxes ............      1,843        --               394(7)           2,237
                        -------    --------        --------            -------
Net income (loss) ..    $ 6,217    $    191        $  1,127            $ 7,535
                        =======    ========        ========            =======
Diluted earnings per
  common and common
  share equivalent .    $   .36                                        $   .42 
                        =======                                        ======= 
Weighted average
  number of common
  and common share
  equivalents
  outstanding ......     17,391                         425(8)          17,816
                        =======                    ========            =======

                                         YEAR ENDED JUNE 30, 1997
                            --------------------------------------------------
                                      BUSINESS    PRO FORMA          PRO FORMA
                       HISTORICAL     ACQUIRED   ADJUSTMENTS          COMBINED
                       ----------     --------   -----------          --------
                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Revenues:
  Software license
    fees ...........    $40,292       $  2,435     $   --              $42,727
  Maintenance fees .     21,010          2,147         --               23,157
  Professional
    services fee ...     23,832          1,249         --               25,081
  Other ............        178            122         --                  300
                        -------       --------     --------            -------
    Total revenues .     85,312          5,953         --               91,265
                        -------       --------     --------            -------
Operating expenses:
  Cost of software
    license and
    maintenance
    fees ...........      4,345            959          167(1)           5,471
  Cost of
    professional
    services fees ..     18,316          1,374         (161)(2)         19,529
  Sales and
    marketing ......     31,573          2,243         (623)(2,4)       33,193
  Research and
    development ....      7,893(5)       1,511         (269)(2,4)        9,135
  General and
    administrative .      6,319          1,311         (828)(1,2,3,4)    6,802
                        -------       --------     --------            -------
    Total operating
      expenses .....     68,446          7,398       (1,714)            74,130
                        -------       --------     --------            -------
Income (loss) from
  operations .......     16,866         (1,445)       1,714             17,135
                        -------       --------     --------            -------
Total other income
  (expense) ........        718           (144)         138(6)             712
                        -------       --------     --------            -------
Income (loss) before
  income taxes .....     17,584         (1,589)       1,852             17,847
Provision for income
  taxes ............      6,062           --             93(7)           6,155
                        -------       --------     --------            -------
Net income (loss) ..    $11,522       $(1,589) $      1,759            $11,692
                        =======       ========     ========            =======
Diluted earnings per
  common and common
  share equivalent .    $   .64                                        $   .64
                        =======                                        =======
Weighted average
  number of common
  and common share
  equivalents
  outstanding ......     18,086(9)                      184(8)          18,270
                        =======                    ========            =======
---------
                                       23
<PAGE>
(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.

    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 Form 10-K 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  "Factors That May Affect  Future  Results" and "Special
Note on  Forward-Looking  Statements," as well as those  discussed  elsewhere in
this Form 10-K and in the documents incorporated herein by reference.

                                       24
<PAGE>
ITEM 7. 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 "FACTORS THAT MAY AFFECT FUTURE  RESULTS",  AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THIS FORM 10-K 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 Global 5000 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 domestic and international direct sales  organizations,  through a number of
foreign independent  distributors  located in Europe, the Far East, South Africa
and Latin America,  and through a new reseller channel established during fiscal
1998 primarily to sell the OnMark 2000 product line.

    Revenue is  recognized  in  accordance  with  Statement  of  Position  97-2,
"Software Revenue Recognition." Accordingly,  revenue from software licensing is
recognized when delivery of the software has occurred,  a signed  non-cancelable
license agreement has been received from the customer or a purchase order from a
reseller  after  receipt of an executed  reseller  agreement  and any  remaining
obligations under the license agreement are insignificant. 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 generally as related services are
provided.  Professional  services  do  not  involve  significant  customization,
modification or production of the licensed software.

                                       25
<PAGE>
RESULTS OF OPERATIONS

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

                      YEAR ENDED JUNE 30,
                                                          1998     1997     1996
                                                          ----     ----     ----
      Revenues:                                                    
        Software license fees...........................    57%     47%      41%
        Maintenance fees................................    26      25       33
        Professional services fees......................    17      28       26
        Other...........................................     0       0        0
                                                           ---     ---      ---
                Total revenues..........................   100     100      100
                                                           ---     ---      ---
      Operating expenses:                                                  
        Cost of software license and maintenance fees...    11       5        7
        Cost of professional services fees..............    16      22       18
        Sales and marketing.............................    37      37       41
        Research and development........................    14       9       10
        Write-off of purchased in-process research and
           development..................................     8      32       --
        General and administrative......................     7       7        8
                                                           ---     ---      ---
                Total operating expenses................    93     112       84
                                                           ---     ---      ---
      Income (loss) from operations.....................     7     (12)      16
                Total other income, net.................     4       1        3
                                                           ---     ---      ---
      Income (loss) before income taxes.................    11     (11)      19
      Provision for income taxes........................     4       7        4
                                                           ---     ---      ---
                Net income (loss).......................     7%    (18)%     15%
                                                           ===     ====     ===

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1998 AND JUNE 30, 1997

REVENUES

    Total  revenues  were  $113,687,000  in fiscal 1998, an increase of 33% from
$85,312,000  in fiscal 1997.  Software  license fees were  $65,122,000 in fiscal
1998, an increase of 62% from $40,292,000 in fiscal 1997.  Software license fees
increased both  domestically  and  internationally  primarily as a result of the
continued  demand for the Company's  tools to assist in addressing the year 2000
century date change  problem both for the  mainframe  and desktop  environments.
Mainframe  license revenue  increased year over year and desktop license revenue
from OnMark 2000,  introduced in the third quarter of fiscal 1998, accounted for
$16,586,000  of total license  revenue in fiscal 1998.  The Company  anticipates
desktop  license  revenue to continue to  increase  as a  percentage  of license
revenue and, as a result,  mainframe license revenue may decrease as the Company
capitalizes on the growing opportunities in the desktop marketplace.

     Maintenance  fees were  $28,865,000 in fiscal 1998, an increase of 37% from
$21,010,000 in fiscal 1997. The increase was due to the R&O acquisition, as well
as new software  licenses,  customer  system  upgrades and increases in the fees
charged  for annual  maintenance.  With the  Company's  entry  into the  desktop
software  market with the OnMark 2000 product  line, it has  experienced  that a
large  number of OnMark  customers do not purchase  maintenance  services.  As a
result,  there could be some erosion in maintenance revenue growth to the extent
that license sales of OnMark 2000 continue to grow as a percentage of revenues.

     Professional  services fees were  $19,615,000 in fiscal 1998, a decrease of
18% from $23,832,000 in fiscal 1997.  Historically,  the Company's  professional
services  provided  processes,  technology  and  expertise  to address  complex,
large-scale  maintenance and redevelopment  requirements of large organizations.
Most of these projects have been related to year 2000 conversion.  During fiscal
1998,  the Company  focused its efforts in the  services  business in two areas:
completion  of  a  single,   large,   fixed  price   engagement  for  converting
applications  for  year  2000  compliance,  and  performing  smaller  enablement
projects,  designed  to assist  and train  customers  to  perform  the  

                                       26
<PAGE>
projects in-house, with their own resources.  Larger scale professional services
projects were referred to services companies and integrators that have strategic
relationships with the Company.

     Professional  services  fees  decreased  in fiscal 1998 due to this limited
focus of the services  business  which,  in hindsight,  management  believes was
unsuccessful in helping to establish a services  business to complement sales of
its software products.  As a result of the Company's focus on selling enablement
projects,  the number and size of services engagements  performed in fiscal 1998
declined,  resulting  in lower  revenues,  year-over-year.  Also,  the  revenues
recognized from the single large year 2000 conversion project decreased compared
to the  previous  year.  The  Company  re-evaluated  this  project in the fourth
quarter  of fiscal  1997 and  determined  that the level of effort  required  to
complete  the  engagement  was more than  originally  estimated,  resulting in a
decrease in the amount of revenue  recognized  for that  contract  during fiscal
1998. The project was completed in June 1998.

     Going forward,  management  believes that professional  consulting services
will  be an  important  component  of the  Company's  application  modernization
strategy, and the Company has refocused its efforts on the services business and
plans  to  offer a broad  range  of  solutions.  Management  believes,  from its
experience  in  fiscal  1998,   that   customers  in  this  market  demand  more
comprehensive project management and professional  services, as well as software
products.  In addition to continuing  to provide its  enablement  services,  the
Company  will also  refocus the  services  business to target  large  consulting
projects  and make its project  management  expertise  available to customers to
manage large application conversion or re-engineering  projects. The Company has
made management  changes and put an experienced team in place to consolidate and
manage the services organization on a worldwide basis.  Management believes that
these efforts will increase its revenues attributable to professional  services.
The Company will  closely  monitor its progress in this area from both a revenue
generation and profitability standpoint. See "Business - Viasoft Services."

COST OF REVENUES

    Cost of software  license and maintenance  fees,  which includes  royalties,
cost  of  customer  support  and  packaging  and  product   documentation,   was
$12,737,000 in fiscal 1998, an increase of 193% from  $4,345,000 in fiscal 1997.
Gross margins on software license and maintenance fees decreased to 86% compared
to 93% in fiscal 1998 and 1997,  respectively.  The expense  increase and margin
decrease are primarily due to additional royalty expenses, which represented 49%
of cost of software license and maintenance fees, in fiscal 1998, as compared to
12% in fiscal  1997.  The  increase  in  royalty  expense is due to sales of the
OnMark 2000 product line,  which require payments of royalties to third parties.
Other products require payment of royalties to third parties, but sales of these
products are not as  significant as OnMark 2000.  Increases in customer  support
personnel and their related costs,  increased salaries and outside  consultants,
amortization of the purchased  research and development from the R&O and EraSoft
acquisitions and increased costs of product  documentation as a result of higher
sales volumes and new version releases of existing  products  contributed to the
increase  in cost of  software  license  and  maintenance  fees.  At this  time,
management  anticipates  that the cost of  license  and  maintenance  fees  will
continue  to  increase   and  the  gross   margin  will   continue  to  decrease
year-over-year due to increased sales of products  requiring  royalties to third
parties.

     Cost of professional services fees, which consists principally of personnel
costs,  third  party  subcontracting  costs,  and  other  costs  related  to the
professional  services business,  was $18,537,000 in fiscal 1998, an increase of
1% from  $18,316,000  in fiscal  1997.  The  increase in expenses is primarily a
result of  additional  personnel and their related  costs,  higher  salaries and
travel  expenses  offset  by  reduced  subcontractor  costs and  bonuses  due to
decreased  revenues.  The overall gross margin on professional  services fees in
fiscal 1998 was 6% compared to 23% in fiscal 1997.  The decrease in margins is a
result of the decline in services  revenue  discussed  above.  Also, the Company
added resources to the fixed-price contract discussed above in order to complete
the project in time.  Management  believes  that  services  margins will improve
during fiscal 1999 as changes in the services business model are implemented.

                                       27
<PAGE>
SALES AND MARKETING

     Sales  and  marketing  expenses,   which  consist  primarily  of  salaries,
commissions  and related  benefits  and  administrative  costs  allocated to the
Company's  sales and marketing  personnel,  were  $42,131,000 in fiscal 1998, an
increase of 33% from  $31,573,000 in fiscal 1997.  This increase is attributable
primarily to an increase in  personnel,  including  the R&O  personnel,  and the
associated costs,  higher salaries,  increased  travel,  marketing and promotion
costs and the cost of recruiting qualified sales and marketing personnel.  Sales
and marketing  expenses as a percentage of total revenues was 37% in both fiscal
1998 and 1997.

RESEARCH AND DEVELOPMENT

     Research and development  expenditures consist primarily of personnel costs
of the research and development  staff and the facilities,  computing,  benefits
and other  administrative  costs  allocated to such  personnel  and  third-party
development  costs.  Research and development  expenditures  were $16,392,000 in
fiscal  1998,  an  increase  of 108%  from  $7,893,000  in  fiscal  1997.  These
expenditures   exclude  charges  for  in-process  research  and  development  of
approximately  $8.5 million in connection  with the acquisition of EraSoft and a
fault diagnostic  testing technology license in fiscal 1998 and $27.0 million in
connection  with  the  acquisition  of R&O in  fiscal  1997.  See  Note 2 to the
Consolidated  Financial  Statements.  Research  and  development  expenses  also
include  approximately  $3.2 million in charges for the  development  of certain
technologies  included in OnMark 2000, see Note 2 to the Consolidated  Financial
Statements.  Research and development costs in fiscal 1998 were $16,392,000,  an
increase of 108% over the same period in fiscal 1997.  These increases  resulted
from  the  $3.2  million  charge  noted  above,  additional  personnel  and  the
associated costs,  including EraSoft and R&O research and development  staff, as
well as general  salary  increases,  external  consulting  costs and the cost of
recruiting  personnel.   As  a  percentage  of  total  revenues,   research  and
development  costs were 14% in fiscal 1998 compared to 9% for the same period in
fiscal 1997.  The increase in research and  development  cost as a percentage of
revenue is primarily due to the $3.2 million in charges noted previously and the
costs associated with the increase in personnel.

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  $7,849,000  in fiscal  1998,  representing  an increase of 24% compared to
$6,319,000   in  fiscal  1997.   This   increase  is  a  result  of   additional
administrative  personnel,  including R&O  personnel,  and their related  costs,
general salary  increases,  amortization  of intangibles  related to the R&O and
EraSoft acquisitions,  additional legal and consulting fees and travel costs. As
a percentage of total revenues,  general and  administrative  expenses was 7% in
both fiscal 1998 and 1997.

OTHER INCOME (EXPENSE)

    Interest  income in fiscal 1998 was  $4,917,000,  compared to  $1,309,000 in
fiscal 1997. This increased was due primarily to interest income  generated from
the  $75,361,000  raised from the  Company's  public  offering  of common  stock
completed on September  22, 1997.  Other  expense in fiscal 1998 was $317,000 as
compared to an expense of $546,000 in fiscal 1997, as foreign currency  exchange
losses  decreased in fiscal 1998. See "Effects of Inflation and Foreign Currency
Exchange Fluctuations."

PROVISION FOR INCOME TAXES

     The provision for income taxes was $4,142,000 and $6,062,000 in fiscal 1998
and 1997, respectively. The Company's effective tax rate was 34% in fiscal 1998,
compared to 35%, excluding the effect of the nondeductible  purchased in-process
research and development charge, for the same period in 1997.

                                       28
<PAGE>
COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1997 AND JUNE 30, 1996

REVENUES

     Total  revenues  were  $85,312,000  in fiscal year 1997, an increase of 96%
from  $43,557,000  in fiscal 1996.  Software  license fees were  $40,292,000  in
fiscal 1997, an increase of 126% from $17,824,000 in fiscal year 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 387%  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  2 to  Consolidated  Financial
Statements.

     Maintenance  fees were  $21,010,000 in fiscal 1997, an increase of 47% 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
111% 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 72% and
75% 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.  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.

COST OF REVENUES

    Cost of software  license and maintenance fees was $4,345,000 for the fiscal
1997, an increase of 56% from  $2,788,000  during the fiscal 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%.  Gross  margins on software
license and maintenance fees remained  relatively  consistent at 93% compared to
91% 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 was  $18,316,000  in fiscal  1997,  an
increase of 128% from  $8,025,000 in fiscal 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%  compared to 29% for fiscal
1996.  Excluding the R&O  professional  services  business,  the gross margin on
other  professional  services  business  was 24%.  During the fourth  quarter of
fiscal  1997,  the  Company  experienced  lower  margins  as  a  result  of  its
introduction  of FastPath

                                       29
<PAGE>
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 were $31,573,000 in fiscal 1997, an increase of
74% 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
52%. This increase is attributable primarily to an increase in personnel and the
associated  costs,  including  higher salaries,  travel and bonuses,  as well as
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% in fiscal 1997,  compared to 42%
in fiscal 1996, due primarily to the increase in revenues.

RESEARCH AND DEVELOPMENT

    Total  expenditures  for research and development  were $7,893,000 in fiscal
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% from  $4,237,000  in fiscal 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 46% 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%  for  fiscal  1997  (excluding  the
approximate $27.0 million purchased  in-process research and development charge)
compared  to 10% for the same  period  in  fiscal  1996,  due  primarily  to the
increase in revenue.

GENERAL AND ADMINISTRATIVE

    General and  administrative  expenses  were  $6,319,000 in fiscal year 1997,
representing  an increase of 77% compared to $3,567,000 in fiscal year 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%. 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% for fiscal  1997  compared to 8% for period in
fiscal 1996, due primarily to the increase in revenues.

OTHER INCOME (EXPENSE)

    Interest  income in fiscal 1997 was  $1,309,000,  compared to  $1,350,000 in
fiscal 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  fiscal  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 1997
and 1996, respectively. The Company's effective tax rate was 35% in fiscal 1997,
excluding the effect of the  non-deductible  purchased  

                                       30
<PAGE>
in-process research and development charge,  compared to 23% in fiscal 1996. The
Company's  effective  tax rate in  fiscal  1997 was  affected  by the  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.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 1998, the Company had cash and cash equivalents and investments
of  $103,605,000,  representing  an  increase of  $75,030,000  from the total of
$28,575,000  at June 30,  1997.  The  increase  is  primarily  a  result  of the
successful  completion of the Company's  public  offering of its common stock on
September 22, 1997, which raised $75,361,000.

    The Company's net cash provided by operating  activities was $13,842,000 and
$15,136,000  for fiscal  1998 and 1997,  respectively.  Net cash  provided  from
operations  for fiscal  1998 was  composed  primarily  of net  income  excluding
non-cash  charges  for  the  write-off  of  purchased  in-process  research  and
development  for the EraSoft  acquisition  and  license of the fault  diagnostic
technology,  see Note 2 to the Consolidated  Financial Statements,  depreciation
and amortization,  and offset by an increase in working capital,  primarily from
an increase in accounts  receivable  and prepaid  assets.  Net cash  provided by
operations for fiscal 1997 was composed primarily of net loss offset by non-cash
charges for the write-off of the purchased  in-process  research and development
related  to the  R&O  acquisition,  see  Note 2 to  the  Consolidated  Financial
Statements, depreciation and amortization, and a net increase in working capital
primarily as a result of an increase in deferred revenue.

     The Company's investing  activities used cash of $60,263,000 and $9,371,000
in fiscal 1998 and 1997,  respectively.  In fiscal  1998,  cash was used for the
purchase of  investments  in excess of  investment  maturities,  and to a lesser
extent,  business and technology  acquisitions,  see Note 2 to the  Consolidated
Financial  Statements  and the purchase of  furniture,  fixtures,  equipment and
software,  as well as for the  acquisition  of a customer list for the Company's
new direct operation in France.  In fiscal 1997, the primary use of cash was for
the purchase of R&O and to a lesser extent, the purchase of furniture,  fixtures
and equipment, offset by investment maturities exceeding purchases.

     The Company's  financing  activities  provided cash of $76,002,000 and used
cash of $1,942,000 in fiscal 1998 and 1997,  respectively.  In fiscal 1998, cash
was primarily provided by the completion of the Company's public offering of its
common  stock,  net of offering  costs.  This was offset by  $2,181,000  used to
repurchase 135,000 shares under the Company's stock repurchase program announced
in April 1998. See Note 6 to the Consolidated  Financial  Statements.  In fiscal
1997,  cash was used primarily for payment of R&O debt acquired,  offset in part
by the sale of common stock  through the employee  stock  purchase  plan and the
exercise of stock options.

     As of June 30, 1998, the Company did not have any material  commitments for
capital   expenditures.   In  fiscal  1999,  the  Company   anticipates  capital
expenditures of approximately  $9.7 million,  of which $5.0 million is estimated
to be spent for  completion of two internal  software  systems  projects and the
remainder  is for  computer  hardware  and  software  to  continue to update the
Company's  network  infrastructure.  See  Note 1 to the  Consolidated  Financial
Statements. In addition, the Company anticipates continuing its stock repurchase
program in fiscal 1999.

     On September  22, 1997,  the Company  received net proceeds in an amount of
$75,361,000  from a public offering of 1,465,000 shares of its common stock. The
Company expects that the proceeds of this offering and existing working capital,
together  with cash from  operations,  will be  sufficient  for the  foreseeable
future to meet its capital  and  liquidity  needs for  existing  operations  and
general corporate purposes,  potential acquisitions of businesses,  products and
technologies,  the stock repurchase  program,  as well as the addition of direct
sales and professional services personnel.

YEAR 2000 CONSIDERATIONS

    The  Company  is aware of the  problems  associated  with the year 2000 date
change and has  established  and continues to evaluate and update its program to
address any potential year 2000  compliance  issues relating to its

                                       31
<PAGE>
(i)  internal  operating  systems,  (ii)  vendors,  facilities  and other  third
parties, and (iii) software products that it licenses to customers.

    INTERNAL OPERATING SYSTEMS.  The Company has completed its assessment of all
of its  major  internal  operating  systems  (including  non-IT  assets)  and is
continuing  to monitor any new additions to its internal  operating  systems for
year 2000  compliance.  As a result of such  assessment  and because of changing
business   requirements  as  well,  the  Company  is  currently  installing  new
enterprise-wide  systems  relating  to the  Company's  accounting  and  customer
relationship management needs, each of which has been warranted by the vendor to
be year 2000  compliant.  To date, the Company has incurred  approximately  $2.0
million  in costs of the $7.0  million  budgeted  by the  Company  for these two
projects.  The customer support and sales automation  system is currently up and
running  and the  Company is in the  process of rolling it out to the  Company's
international subsidiaries,  which is currently scheduled to be completed by the
third quarter of fiscal 1999. The Company  expects the  installation  of the new
accounting  system to be completed  by the end of fiscal  1999.  The Company has
just  started a review of its desktop year 2000 issues  which  include  software
packages and PC  hardware.  The Company is using its own product  suite,  OnMark
2000, to assess its desktop concerns.  The Company expects this assessment to be
complete by the third quarter of fiscal 1999. If the  Company's  major  internal
operating systems are not year 2000 compliant in a timely manner,  the Company's
business  operations would be materially and adversely  affected and the Company
may be  required to incur  unanticipated  expenses  to remedy any  problems  not
addressed by these compliance efforts.

    VENDORS,  FACILITIES  AND OTHER  THIRD  PARTIES.  The  Company is  currently
evaluating  the year 2000  readiness of its  material  vendors,  facilities  and
distributors  and resellers with respect to IT, as well as non-IT,  assets.  The
Company  has  forwarded   questionnaires   to  many  of  its  material  vendors,
distributors and resellers and will evaluate responses on a case-by-case  basis.
The Company will place the emphasis of its review on its primary  vendors,  such
as payroll services, computer services and phone systems. The Company is also in
the process of beginning its  assessment  of the year 2000  readiness of each of
its facilities. As part of this assessment, the Company will contact each of the
landlords of its primary  office  locations to determine  (i) the status of year
2000 compliance at each property, (ii) contingency plans at each property in the
event that the year 2000  compliance  issues are not  resolved on a timely basis
and (iii)  associated costs of year 2000 compliance that may affect the Company.
In the event that the  Company's  distributors  and  resellers are not year 2000
compliant in a timely  manner,  the Company could  experience  material  adverse
consequences  with respect to the  marketing  and sale of its products and, as a
result, the Company's  business,  results of operations and financial  condition
would be materially and adversely  affected.  If the Company's  major vendors or
facilities  are not year  2000  compliant  in a  timely  manner,  the  Company's
business  operations would be materially and adversely  affected and the Company
may be required to incur unanticipated expenses to remedy any problems.

    PRODUCTS.   The  Company's   development   of  products  and  technology  is
accomplished through (i) in-house  development,  and (ii) acquisition or license
from third  parties.  See  "Business  -- Product  Development."  The Company has
completed  and  continues  to evaluate and update its  assessment  of all of its
internally developed and third-party developed products for year 2000 readiness,
and  believes  that all of such  products  have been  designed  to  satisfy  the
Company's year 2000  specifications.  The Company will continue to monitor newly
developed or acquired  products for year 2000 compliance.  In the event that any
of the Company's developed or acquired products are not year 2000 compliant in a
timely manner, the Company's sales may decline  materially,  customers and those
with whom they do business may assert  product  liability and other claims,  and
the Company's  business,  results of operations and financial condition would be
materially and adversely affected. See "Factors That May Affect Future Results -
Product Liability."

    To date,  the Company has not completed its  contingency  plans in the event
that  its  internal  operating  systems,  vendors,   facilities,   distributors,
resellers or products, or any other components of its business operations,  fail
to operate in  compliance  with the year 2000 century  date change.  The Company
expects to develop its contingency plans by the end of fiscal 1999.

    The cost of the Company's  year 2000  compliance  program has not had and is
not expected to have a material effect on the Company's results of operations or
liquidity.  However,  there  can be no  assurance  that  the  Company  

                                       32
<PAGE>
will  not  experience  material  adverse  consequences  in the  event  that  the
Company's  year  2000  compliance  program  is not  successful  or its  vendors,
facilities,  distributors  or  resellers  are unable to resolve  their year 2000
compliance  issues in a timely  manner.  See  "Factors  That May  Affect  Future
Results -- Year 2000 Considerations."

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 and Spain,  where
they  are  denominated  in  local  currency.  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  $302,000
from foreign currency fluctuations in fiscal 1998 compared to $704,000 in fiscal
1997.  The  Company's  unhedged  foreign  currency  exposure  at June  30,  1998
consisted of the following (in thousands):
<TABLE>
<CAPTION>
                  NET SHORT-TERM
                  --------------
              RECEIVABLES (PAYABLES)                         NET RECEIVABLES
              ----------------------                         ---------------
                   WITH FOREIGN        NET INVESTMENT IN      FROM FOREIGN
                   ------------        -----------------      ------------
                   SUBSIDIARIES      FOREIGN SUBSIDIARIES     DISTRIBUTORS     TOTAL
                   ------------      --------------------     ------------     -----
<S>                  <C>                    <C>                <C>            <C>    
Canada               $ 1,611                $ 7,183            $   --         $ 8,794
United Kingdom         1,457                 (1,014)               --             443
Australia              1,011                    243                --           1,254
Germany               (7,535)                11,407                --           3,872
France                 2,227                   (249)               --           1,978
Belgium                  576                   (384)               --             192
Netherlands              232                    (82)               --             150
Mexico                    29                    (19)               --              10
Spain                     --                     --               685             685
Italy                     --                     --               712             712
                    --------                -------            ------         -------
       TOTAL        $   (392)               $17,085            $1,397         $18,090
                    ========                =======            ======         =======
</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 "Factors That May Affect Future Results -- Risks From
International Operations."

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference  is made to the  Consolidated  Financial  Statements,  the  Notes
thereto and Report of Independent Public Accountants  thereon commencing at page
F-1 of this Report, which Consolidated  Financial  Statements,  Notes and Report
are incorporated herein by reference.

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOuNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURES

    None.
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The  information  concerning  the  directors of the Company set forth in the
Proxy Statement to be delivered to stockholders in connection with the Company's
1998 Annual Meeting of Stockholders under the heading "Election of Directors" is
incorporated  herein  by  reference,   as  is  the  information  concerning  the
directors,  officers,  and more 

                                       33
<PAGE>
than  10%   stockholders  of  the  Company  under  the  heading  "Section  16(a)
Compliance." The name, age and position of each executive officer of the Company
set forth under the heading  "Business -- Executive  Officers of the Registrant"
in Part I of this report is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

    (a) THE  FOLLOWING  DOCUMENTS  ARE FILED AS A PART OF THIS ANNUAL  REPORT ON
        FORM 10-K:

    (1) Consolidated Financial Statements.

        See  Index  to  Consolidated  Financial  Statements  on page F-1 of this
        report.

    (2) Consolidated Financial Statement Schedules.

        Report of Independent Public Accountants. See page F-2 of this report.

        Schedule I, Valuation and Qualifying Accounts and Reserves. See page 
        F-24 of this report.

    (3) Exhibits:

        The following exhibits are filed herewith or incorporated by reference.

EXHIBIT            
NUMBER                      DESCRIPTION OF EXHIBIT
------                      ----------------------
2.1        Stock Purchase Agreement among Viasoft,  Inc.,  LfA-Gesellschaft  fur
           Vermogensverwaltung mbH (LfA-GV),  Werner Dreesbach,  Elga Dreesbach,
           Christoph  Rottger,  and Valerie  Rottger,  dated  November  11, 1996
           (incorporated  herein by  reference  to Exhibit 2.1 to the  Company's
           Form 8-K dated December 20, 1996)
2.2(5)     Stock Purchase  Agreement dated as of the 12th day of January,  1998,
           between Viasoft,  Inc., Michael Howatt Mabey, Nashirali Samanani, and
           certain  other sellers  (incorporated  herein by reference to Exhibit
           2.1 to the  Company's  Form 10-Q for the quarter  ended  December 31,
           1997)
                                       34
<PAGE>
3.1        Restated   Certificate  of  Incorporation   (incorporated  herein  by
           reference to Exhibit 10.20 to the Company's Form 10-K for fiscal year
           1995)
3.2        Amended and Restated  Bylaws of the Company  (incorporated  herein by
           reference to Exhibit 3(e) to the Company's  Registration Statement on
           Form S-1 (Registration No. 33-88366))
3.3        Certificate   of   Amendment   to   the   Restated   Certificate   of
           Incorporation,  filed  November  17,  1997  (incorporated  herein  by
           reference  to  Exhibit  3.1(a)  to the  Company's  Form  10-Q for the
           quarter ended December 31, 1997)
3.4        Restated  Certificate of  Incorporation,  as amended through November
           17, 1997  (incorporated  herein by reference to Exhibit 3.1(b) to the
           Company's Form 10-Q for the quarter ended December 31, 1997)
4.1        Form  of  Certificate  for  Common  Stock  (incorporated   herein  by
           reference to Exhibit 4(a) to the Company's  Registration Statement on
           Form S-1 (Registration No. 33-88366))
4.2        Form of Warrant to  Purchase  Common  Stock  (incorporated  herein by
           reference to Exhibit 4(b) to the Company's  Registration Statement on
           Form S-1 (Registration No. 33-88366))
4.3        Rights Agreement, dated as of April 20, 1998, between the Company and
           Harris  Trust and Savings Bank  (incorporated  herein by reference to
           Exhibit 1 to the Company's Form 8-A dated April 22, 1998)
4.4(1)     Certificate of Designation of Series A Junior Participating Preferred
           Stock
10.1       Office  Lease  dated June 5, 1992  between the Company and the Mutual
           Life Insurance Company of New York, as amended  (incorporated  herein
           by reference to Exhibit 10(e) to the Company's Registration Statement
           on Form S-1 (Registration No. 33-88366))
10.2(2)    Form of Indemnification Agreement between the Company and each of its
           directors  (incorporated  herein by reference to Exhibit 10(f) to the
           Company's  Registration  Statement on Form S-1  (Registration No. 33-
           88366))
10.3(2)    Viasoft,   Inc.  1986  Stock  Option  Plan  (incorporated  herein  by
           reference to Exhibit 10(g) to the Company's Registration Statement on
           Form S-1 (Registration No. 33-88366))
10.4(2)    1994 Equity  Incentive  Plan  (incorporated  herein by  reference  to
           Exhibit  10(l) to the  Company's  Registration  Statement on Form S-1
           (Registration No. 33-88366))
10.5(2)    Employee  Stock  Purchase  Plan, as amended  (incorporated  herein by
           reference  to  Exhibit  10(m) to  Amendment  No.  2 to the  Company's
           Registration Statement on Form S-1 (Registration No. 33-88366))
10.6(2)    Employment  Agreement  dated July 28,  1994  between  the Company and
           Colin J. Reardon  (incorporated  herein by reference to Exhibit 10(o)
           to the Company's  Registration  Statement on Form, S-1  (Registration
           No. 33-88366))
10.7(2)(3) Viasoft FY97 Executive Bonus Plan  (incorporated  herein by reference
           to Exhibit  10.1 to the  Company's  Form 10-Q for the  quarter  ended
           September 30, 1996)
10.8(2)(3) FY  97   Incentive   Plan  for  Senior   Vice   President,   Americas
           (incorporated  herein by reference  to Exhibit 10.2 to the  Company's
           Form 10-Q for the quarter ended September 30, 1996)
10.9(2)(3) FY 97 Incentive  Plan for Vice  President,  International  Operations
           (incorporated  herein by reference  to Exhibit 10.3 to the  Company's
           Form 10-Q for the quarter ended September 30, 1996)
10.10(2)(3)Consulting and Employment  Agreement  between the Company and Mark R.
           Schonau  (incorporated  herein by  reference  to Exhibit  10.4 to the
           Company's Form 10-Q for the quarter ended September 30, 1996)
10.11      Outside Director Stock Option Plan (incorporated  herein by reference
           to Exhibit A of the Company's Definitive Schedule 14A Proxy Statement
           for the 1995 Annual Meeting of Stockholders)
10.12(2)   Employee Stock Purchase Plan (as amended and restated as of April 24,
           1997)  (incorporated  herein by reference to the Company's  Form 10-K
           for fiscal year 1997)
10.13      Assignment,  Assumption and Novation  Agreement  dated  September 12,
           1997 and
                                       35
<PAGE>
           Assignment,  Assumption  and Novation  Agreement  dated  December 19,
           1996, relating to Londen Center Lease Agreement  (incorporated herein
           by reference to the Company's Form 10-K for fiscal year 1997)
10.14(2)(4)Viasoft FY98 Executive Bonus Plan  (incorporated  herein by reference
           to Exhibit  10.1 to the  Company's  Form 10-Q for the  quarter  ended
           September 30, 1997)
10.15(2)(4)FY 98 Incentive  Plan  for  Executive  Vice  President  (incorporated
           herein by reference to Exhibit  10.2 to the  Company's  Form 10-Q for
           the quarter ended September 30, 1997)
10.16(2)(4)FY 98 Incentive  Plan  for  Senior  Vice   President,   International
           Operations  (incorporated  herein by reference to Exhibit 10.3 to the
           Company's Form 10-Q for the quarter ended September 30, 1997)
10.17(2)   Consulting  Agreement  between  the Company and Michael A. Wolf dated
           August 1, 1997  (incorporated  herein by reference to Exhibit 10.4 to
           the Company's Form 10-Q for the quarter ended September 30, 1997)
10.18(2)   Viasoft,  Inc.  Deferred  Compensation Plan  (incorporated  herein by
           reference to Exhibit 10.5 to the Company's  Form 10-Q for the quarter
           ended September 30, 1997)
10.19(1)(2)Amendment  No. 1 to the Viasoft,  Inc.  Deferred  Compensation  Plan,
           dated as of June 30, 1998
10.20(2)   Viasoft,  Inc. 1997 Equity  Incentive  Plan  (incorporated  herein by
           reference  to Appendix B of the  Company's  Definitive  Schedule  14A
           Proxy Statement for the 1997 Annual Meeting of Stockholders)
10.21(2)   Viasoft,  Inc. 1997 Equity Incentive Plan, amended and restated as of
           January 21, 1998 (incorporated  herein by reference to Exhibit 4.1 to
           the Company's  Registration  Statement on Form S-8  (Registration No.
           333-47571))
11(1)      Computation of Earnings per Share
21(1)      Subsidiaries of the Company
23(1)      Consent of Arthur Andersen LLP
24(1)      Powers of Attorney
27(1)      Financial Data Schedules

----------
(1)  Filed herewith

(2)  Management contract or compensation plan or arrangement

(3)  Portions  omitted and filed  separately  with the Commission  pursuant to a
     grant of Confidential Treatment by order dated January 6, 1997.

(4)  Portions  omitted and filed  separately  with the Commission  pursuant to a
     grant of Confidential Treatment by the Commission dated November 25, 1997.

(5)  Portions  omitted and filed  separately  with the Commission  pursuant to a
     grant of Confidential Treatment by order dated February 27, 1998.

    (b) REPORTS ON FORM 8-K.

    The  Company  filed a  Current  Report on Form 8-K with the  Securities  and
Exchange Commission on April 23, 1998 with respect to the Company's  declaration
of a dividend of one preferred share purchase right for each  outstanding  share
of the Company's  common stock on May 8, 1998, in accordance  with the Company's
Stockholder Rights Plan.

    (c) EXHIBITS.

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

    (d) FINANCIAL STATEMENT SCHEDULES.

    See Item 14(a)(2) above.

                                       36
<PAGE>
                                   SIGNATURES

    Pursuant  to the  requirements  of  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934,  the  registrant has caused this report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, this 4th day
of September, 1998.

                                             Viasoft, Inc.

                                             By: /s/ STEVEN D. WHITEMAN
                                                --------------------------
                                                     Steven D. Whiteman
                                                     Chief Executive Officer

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

       SIGNATURE                         TITLE                      DATE
       ---------                         -----                      ----

/s/ STEVEN D. WHITEMAN
------------------------------
    Steven D. Whiteman            Chief Executive Officer,     September 4, 1998
                                  Director
/s/ MARK R. SCHONAU
------------------------------
    Mark R. Schonau               Chief Financial Officer,     September 4, 1998
                                  Chief Accounting Officer
* JOHN J. BARRY III
------------------------------
  John J. Barry III               Director                     September 4, 1998

* ALEXANDER S. KULI
------------------------------
  Alexander S. Kuli               Director                     September 4, 1998

* J. DAVID PARRISH
------------------------------
  J. David Parrish                Director                     September 4, 1998

* ARTHUR C. PATTERSON
------------------------------
  Arthur C. Patterson             Director                     September 4, 1998

* By: /s/ STEVEN D. WHITEMAN
------------------------------
         Attorney-in-Fact

                                       37
<PAGE>

                         VIASOFT, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



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
Schedule I - Valuation and Qualifying Accounts and Reserves
  Years Ended June 30, 1998, 1997 and 1996............................ F-24

                                      F-1
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Viasoft, Inc.
and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Viasoft, Inc. (a
Delaware  corporation)  and  Subsidiaries  as of June 30, 1998 and 1997, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for each of the three  years in the  period  ended  June 30,  1998.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial  position of Viasoft,  Inc. and
Subsidiaries  as of June 30, 1998 and 1997, and the results of their  operations
and their  cash flows for each of the three  years in the period  ended June 30,
1998, in conformity with generally accepted accounting principles.

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


                                                ARTHUR ANDERSEN LLP

Phoenix, Arizona,
  July 31, 1998

                                      F-2
<PAGE>
                         VIASOFT, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                               JUNE 30,
                                                                          ------------------
                                                                          1998          1997
                                                                          ----          ----
                                     ASSETS
<S>                                                                   <C>           <C>     
Current assets:
  Cash and cash equivalents (Note 1) ..............................    $  37,809     $  8,501
  Investments, at amortized cost (Note 3) .........................       63,294       12,697
  Accounts receivable (less allowance for doubtful accounts of
    $815 and $678, at June 30, 1998 and 1997 respectively) ........       33,227       21,240
  Prepaid expenses and other (Notes 4 and 8) ......................        7,774        2,954
                                                                       ---------     --------
         Total current assets .....................................      142,104       45,392
                                                                       ---------     --------
Furniture and equipment, net (Note 1) .............................        7,609        4,279
Other assets (Notes 2 and 8):
  Investments, at amortized cost (Note 3) .........................        2,502        7,377
  Intangible assets, net (Note 1) .................................        6,751        4,675
  Other ...........................................................        3,411        2,878
                                                                       ---------     --------
         Total other assets .......................................       12,664       14,930
                                                                       ---------     --------
         Total assets .............................................    $ 162,377     $ 64,601
                                                                       =========     ========

                               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable ................................................    $   1,733     $  2,016
  Accrued compensation ............................................        4,390        3,309
  Accrued income taxes payable ....................................        5,113        3,276
  Other accrued expenses ..........................................       13,768        8,709
  Deferred revenue (Note 1) .......................................       20,843       18,227
                                                                       ---------     --------
         Total current liabilities ................................       45,847       35,537
                                                                       ---------     --------
Deferred revenue, recognized after one year (Note 1) ..............          542          230
                                                                       ---------     --------
Other long term liabilities .......................................          130          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, 48,000,000 shares authorized;
    19,456,133 and 17,722,772 shares issued at June 30, 1998
    and 1997, respectively (Notes 5 and 6) ........................           19           18
  Capital in excess of par value ..................................      125,626       43,970
  Common stock subscriptions receivable (Note 6) ..................          (31)         (55)
  Accumulated deficit .............................................       (6,995)     (14,930)
  Cumulative translation adjustment (Note 1) ......................         (580)        (307)
  Treasury stock, at cost, 135,000 shares (Note 6) ................       (2,181)          --
                                                                       ---------     --------
         Total stockholders' equity ...............................      115,858       28,696
                                                                       ---------     --------
         Total liabilities and stockholders' equity ...............    $ 162,377     $ 64,601
                                                                       =========     ========
</TABLE>
  The accompanying notes are an integral part of these consolidated statements.

                                      F-3
<PAGE>
                         VIASOFT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                                 YEAR ENDED JUNE 30,
                                                         ---------------------------------
                                                             1998        1997        1996
                                                             ----        ----        ----
<S>                                                      <C>          <C>         <C>
Revenues:
  Software license fees ..............................   $  65,122    $ 40,292    $ 17,824
  Maintenance fees ...................................      28,865      21,010      14,305
  Professional services fees .........................      19,615      23,832      11,307
  Other ..............................................          85         178         121
                                                         ---------    --------    --------
          Total revenues .............................     113,687      85,312      43,557
                                                         ---------    --------    --------
Operating expenses:
  Cost of software license and maintenance fees ......      12,737       4,345       2,788
  Cost of professional services fees .................      18,537      18,316       8,025
  Sales and marketing ................................      42,131      31,573      18,137
  Research and development ...........................      16,392       7,893       4,237
  Write-off of purchased in-process research and
     development .....................................       8,559      26,958          --
  General and administrative .........................       7,849       6,319       3,567
                                                         ---------    --------    --------
          Total operating expenses ...................     106,205      95,404      36,754
                                                         ---------    --------    --------
Income (loss) from operations ........................       7,482     (10,092)      6,803
                                                         ---------    --------    --------
Other income (expense):
  Interest income ....................................       4,917       1,309       1,350
  Interest expense ...................................          (5)        (45)        (11)
  Other income (expense), net ........................        (317)       (546)        (82)
                                                         ---------    --------    --------
          Total other income .........................       4,595         718       1,257
                                                         ---------    --------    --------
Income (loss) before income taxes ....................      12,077      (9,374)      8,060
  Provision for income taxes .........................       4,142       6,062       1,843
                                                         ---------    --------    --------
Net income (loss) ....................................   $   7,935    $(15,436)   $  6,217
                                                         =========    ========    ========

Basic earnings (loss) per common share (Notes 1 and 7)   $     .42    $   (.90)   $    .38
                                                         =========    ========    ========
Weighted average number of common shares
  outstanding (Notes 1 and 7) ........................      18,999      17,212      16,390
                                                         =========    ========    ========
Diluted earnings (loss) per common and common share
equivalent (Notes 1 and 7) ...........................   $     .40    $   (.90)   $    .36
                                                         =========    ========    ========
Weighted average number of common and common share
equivalents outstanding (Notes 1 and 7) ..............      19,799      17,212      17,391
                                                         =========    ========    ========
</TABLE>
  The accompanying notes are an integral part of these consolidated statements.

                                      F-4
<PAGE>
                         VIASOFT, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                       COMMON STOCK                        COMMON
                                                    -------------------      CAPITAL IN     STOCK       ACCUMULATED 
                                                                NUMBER       EXCESS OF   SUBSCRIPTIONS   EARNINGS   
                                                    AMOUNT    OF SHARES      PAR VALUE    RECEIVABLE     (DEFICIT)   
                                                    ------    ---------      ---------    ----------     ---------   
<S>                                               <C>       <C>             <C>           <C>         <C>      
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 4) ............................       --              --           170         --             -- 
  Compensation relating to stock plans ........       --              --           202         --             -- 
  Payments on common stock subscriptions
    receivable (Note 6) .......................       --              --            --        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 4) ............................       --              --         1,199         --             -- 
  Payments on common stock subscriptions
    receivable (Note 6) .......................       --              --            --          4             -- 
  Net loss ....................................       --              --            --         --        (15,436)
  Translation adjustment ......................       --              --            --         --             -- 
                                                     ---      ----------      --------      -----       --------
Balance at June 30, 1997 ......................       18      17,722,772        43,970        (55)       (14,930)
  Sale of common stock, net ...................       --          90,239           980         --             -- 
  Secondary offering, net (Note 6) ............        1       1,465,000        75,360         --             -- 
  Treasury stock purchased (Note 6) ...........       --              --            --         --             -- 
  Exercise of options, net ....................       --         178,122         1,818         --             -- 
  Income tax  benefit  relating  to stock plans
   (Note 4)....................................       --              --         3,498         --             -- 
  Payments on common stock subscriptions
    receivable (Note 6) .......................       --              --            --         24             -- 
  Net income ..................................       --              --            --         --          7,935
  Translation adjustment ......................       --              --            --         --             -- 
                                                     ---      ----------      --------      -----       --------
Balance at June 30, 1998 ......................      $19      19,456,133      $125,626      $ (31)      $ (6,995)
                                                     ===      ==========      ========      =====       ========

                                                                      TREASURY STOCK                          
                                                   CUMULATIVE     ----------------------
                                                   TRANSLATION                   NUMBER                  
                                                   ADJUSTMENT      AMOUNT      OF SHARES      TOTAL     
                                                   ----------      ------      ---------      -----     
                                                                                                                  
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 4) ............................         --            --            --            170
  Compensation relating to stock plans ........         --            --            --            202
  Payments on common stock subscriptions
    receivable (Note 6) .......................         --            --            --            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 4) ............................         --            --            --          1,199
  Payments on common stock subscriptions
    receivable (Note 6) .......................         --            --            --              4
  Net loss ....................................         --            --            --        (15,436)
  Translation adjustment ......................       (331)           --            --           (331)
                                                     -----       -------       -------      ---------
Balance at June 30, 1997 ......................       (307)           --            --         28,696
  Sale of common stock, net ...................         --            --            --            980
  Secondary offering, net (Note 6) ............         --            --            --         75,361
  Treasury stock purchased (Note 6) ...........         --        (2,181)      135,000         (2,181)
  Exercise of options, net ....................         --            --            --          1,818
  Income tax  benefit  relating  to stock plans         
    (Note 4) ..................................         --            --            --          3,498
  Payments on common stock subscriptions
    receivable (Note 6) .......................         --            --            --             24
  Net income ..................................         --            --            --          7,935
  Translation adjustment ......................       (273)           --            --           (273)
                                                     -----       -------       -------      ---------
Balance at June 30, 1998 ......................      $(580)      $(2,181)      135,000      $ 115,858
                                                     =====       =======       =======      =========
</TABLE>
  The accompanying notes are an integral part of these consolidated statements.

                                      F-5
<PAGE>
                         VIASOFT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                YEAR ENDED JUNE 30,
                                                        ---------------------------------
                                                           1998        1997        1996
                                                           ----        ----        ----
<S>                                                     <C>          <C>         <C>
OPERATING ACTIVITIES:
  Net income (loss) .................................   $   7,935    $(15,436)   $  6,217
                                                        ---------    --------    --------
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities
   Write-off of purchased in-process research and
     development ....................................       8,559      26,958          --
   Depreciation and amortization ....................       3,698       1,826         695
   Compensation expense related to stock plans ......          --          --         202
   Loss on disposal of fixed assets .................          --          26           6
   Changes in operating assets and liabilities net
        of effect of businesses acquired:
     Increase in accounts receivable ................     (11,852)     (3,188)     (4,358)
     Increase in prepaid expenses and other assets         (5,983)     (3,180)     (1,184)
     Increase  (decrease) in accounts payable and
        other accrued expenses ......................       2,269      (2,343)      2,203
     Increases in accrued compensation ..............       1,081       1,818         625
     Increases in accrued income taxes payable ......       5,335       2,651       1,954
     Increase in deferred revenue ...................       2,800       6,004       1,616
                                                        ---------    --------    --------
          Total adjustments .........................       5,907      30,572       1,759
                                                        ---------    --------    --------
       Net cash provided by operating activities ....      13,842      15,136       7,976
                                                        ---------    --------    --------
INVESTING ACTIVITIES:
  Capital expenditures ..............................      (5,655)     (2,747)       (987)
  Cash paid for businesses acquired, net of cash
     acquired (Note 2) ..............................      (8,958)    (10,225)         --
  Cash paid for acquisition of customer list ........        (530)         --          --
  Sale or maturity of investments ...................      66,482      36,098      32,890
  Purchase of investments ...........................    (111,602)    (32,497)    (43,706)
                                                        ---------    --------    --------
          Net cash used in investing activities .....     (60,263)     (9,371)    (11,803)
                                                        ---------    --------    --------
FINANCING ACTIVITIES:
  Proceeds from issuance of common stock ............      78,978       2,196       1,046
  Payments of short term debt (Note 2) ..............          --      (4,099)         --
  Principal payments on obligations under capital
     leases .........................................          --         (43)        (87)
  Payments for offering costs .......................        (819)         --          --
  Payments received on common stock subscriptions
     receivable .....................................          24           4         199
  Purchase of treasury stock ........................      (2,181)         --          --
                                                        ---------    --------    --------
          Net cash provided by (used in) financing
            activities ..............................      76,002      (1,942)      1,158
                                                        ---------    --------    --------
Effect of exchange rate changes on cash .............        (273)       (331)         (2)
                                                        ---------    --------    --------
Net increase (decrease) in cash and cash equivalents       29,308       3,492      (2,671)
Cash and cash equivalents, beginning of year ........       8,501       5,009       7,680
                                                        ---------    --------    --------
Cash and cash equivalents, end of year ..............   $  37,809    $  8,501    $  5,009
                                                        =========    ========    ========
Supplemental cash flow information:
  Interest paid .....................................   $      --    $     46    $     11
  Income taxes paid .................................   $   2,444    $  2,934    $    450
  Income tax benefit related to stock plans .........   $   3,498    $  1,199    $    170
</TABLE>
  The accompanying notes are an integral part of these consolidated statements.

                                      F-6
<PAGE>
                         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  business
solutions that help enable organizations  worldwide understand,  manage, evolve,
reuse,  transition and modernize  mission-critical  enterprise 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  markets its products and services  through its United  States sales
force, both  domestically and in Canada,  and through a network of resellers for
its  desktop   solutions.   The  Company   operates   through  its  wholly-owned
subsidiaries in Australia,  the United Kingdom,  Germany,  France,  Belgium, the
Netherlands,  Canada  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  International,  Inc., Viasoft Pty.
Ltd.  (Viasoft Pty);  Viasoft U.K. Limited  (Viasoft UK); Viasoft  International
GmbH (Viasoft Germany); Viasoft Software Development & Co., KG, Viasoft Software
Development  Geschaftsfuhrungs  GmbH, Viasoft France,  S.A.S.  (Viasoft France),
Viasoft de Mexico, S.A. de C.V.; Viasoft Benelux and Viasoft Canada Company. 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  97-2,
"Software Revenue Recognition." Accordingly,  revenue from software licensing is
recognized when delivery of the software has occurred,  a signed  non-cancelable
license agreement has been received from the customer or a purchase order from a
reseller  after  receipt of an executed  reseller  agreement  and any  remaining
obligations under the license agreement are insignificant. 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 generally as related services are
provided.  Professional  services  do  not  involve  significant  customization,
modification or production of the licensed software.

    Revenue generated by domestic operations from sales to unaffiliated  foreign
customers was 7%, 5% and 11% of total revenues in the years ended June 30, 1998,
1997  and  1996,  respectively.   See  Note  9  to  the  Consolidated  Financial
Statements.
                                      F-7
<PAGE>
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 classified as
held-to-maturity  and 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.

CONCENTRATIONS OF CREDIT RISK

    Financial instruments which potentially expose the Company to concentrations
of credit  risk,  as defined by  Statement  of  Financial  Accounting  Standards
("SFAS") No. 105, consist primarily of trade accounts receivable.  The Company's
customer  base  is  primarily  Global  5000  and  similarly-sized  organizations
worldwide, and the Company's reseller and international distributor network. The
Company does not require collateral upon delivery of its products.

FURNITURE, EQUIPMENT AND SOFTWARE

    Furniture,  equipment  and  software  is  stated  at cost.  Depreciation  is
computed using the straight-line method based upon the estimated useful lives of
two to five years.  In March 1998,  the American  Institute of Certified  Public
Accountants  released SOP 98-1,  "Accounting for the Costs of Computer  Software
Developed  or  Obtained  for  Internal  Use,"  which  establishes   guidance  on
accounting for the costs of computer software developed or obtained for internal
use.  The  Company  adopted  this  statement  in  fiscal  1998 and  there was no
cumulative  catch up upon  adoption.  The Company  amortizes  its  software on a
straight-line  basis over its estimated useful life of five years.  Depreciation
and amortization expense was $2,414,000,  $1,266,000 and $664,000,  in the years
ended June 30, 1998,  1997,  and 1996,  respectively.  Furniture,  equipment and
software consist of the following (in thousands):

                                                               JUNE 30,
                                                          ------------------
                                                           1998       1997
                                                           ----       ----
     Computer equipment.................................. $ 7,169    $ 4,789
     Office furniture and equipment......................   4,068      2,986
     Capitalized software for internal use...............   1,926         --
     Capitalized leased equipment........................     380        279
                                                          -------    -------
       Total.............................................  13,543      8,054
     Less:  Accumulated depreciation and amortization....  (5,934)    (3,775)
                                                          --------   --------
     Net furniture, equipment and software............... $ 7,609    $ 4,279
                                                          =======    =======
INTANGIBLE ASSETS

    The Company has recorded  certain  intangible  assets in connection with the
acquisition  of various  businesses  or licensing of software (see Note 2 to the
Consolidated Financial  Statements).  Intangible assets consist of the following
(in thousands):

                                                                JUNE 30,
                                                           -----------------
                                                             1998      1997
                                                             ----      ----

      Purchased software.................................  $ 3,680    $2,000
      Cost in excess of fair value of net assets 
        acquired ("goodwill")............................    2,441     1,519
      Assembled workforce................................    1,130       900
      Customer lists.....................................    1,330       800
                                                           -------    ------
        Total............................................    8,581     5,219
      Less:  Accumulated amortization....................   (1,830)     (544)
                                                           --------   -------
      Net intangible assets..............................  $ 6,751    $4,675
                                                           =======    ======
                                      F-8
<PAGE>
    Amortization  expense was $1,286,000,  $544,000 and $0 in fiscal 1998, 1997,
and 1996,  respectively.  Amortization  of  purchased  software of $611,000  and
$233,000  in fiscal  1998 and 1997,  respectively,  is  included  in the cost of
software  license  and  maintenance  fees.  All other  amortization  is shown in
general and administrative expense.

    In accordance  with SFAS 121,  "Accounting  for the Impairment of Long-Lived
Assets and for Long-Lived  Assets to be Disposed Of", all noncurrent assets both
tangible and intangible that are to be held and used are reviewed for impairment
whenever events or changes in  circumstances  indicated that the carrying amount
of the asset in question may not be recoverable.

PRODUCT DEVELOPMENT

    Under  the  criteria  set  forth in SFAS 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 SFAS 52,  "Foreign  Currency  Translation."  The net
foreign currency  transaction gain (loss) in the years ended June 30, 1998, 1997
and 1996, was approximately ($302,000),  ($704,000), and $16,000,  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

    In February 1997, the Financial  Accounting  Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share," which superseded Accounting Principles Board
Opinion No. 15. SFAS No. 128 was effective for financial  statements  for fiscal
years  ending  after   December  15,  1997  and  required   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  Consolidated  Statement  of
Operations  sets forth the restated basic and diluted  earnings (loss) per share
for all periods  presented.  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.

    On August 19, 1996, the Company's Board of Directors  approved a two-for-one
stock split of its  outstanding  common  stock,  to be effected in the form of a
stock  dividend.  Each holder of shares of the Company's  common stock on August
30, 1996  received one  additional  share of common stock for every one share of
stock held.  All share and per share  information  presented in these  financial
statements reflects the effect of this event.

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.

                                      F-9
<PAGE>
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

    The FASB issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No.
131,  "Disclosures about Segments of an Enterprise and Related  Information," in
June  1997.  In  February  1998,  the  FASB  issued  SFAS No.  132,  "Employers'
Disclosures about Pensions and Other Postretirement  Benefits" and in June 1998,
the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The Company is required to adopt these Statements during its fiscal
year ending June 30, 1999 or later.  The adoption of these new standards are not
expected to have a material impact on the Company's financial statements.

DEPENDENCE ON YEAR 2000

    The  growth in the  Company's  revenue  during  fiscal  years  1998 and 1997
resulted  primarily  from  increased  demand for the Company's year 2000 century
date conversion  products and solutions for mainframe  applications  and desktop
environments.  Should  the  demand  for the  Company's  year 2000  products  and
solutions decline significantly as a result of new technologies,  competition or
any other  factors,  the Company's  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  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.

PRODUCT LIABILITY

    The  Company  provides  business  solutions  that help  large  organizations
worldwide  understand,   manage,   evolve,   reuse,   transition  and  modernize
mission-critical enterprise applications that support their fundamental business
processes.  In addition, a large 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.
The Company maintains errors and omissions insurance,  but there is no guarantee
that the insurance policy would cover any or all claims made against the Company
or that the coverage  provided  would be adequate.  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.

2. ACQUISITIONS AND LICENSING AGREEMENTS

ERASOFT TECHNOLOGIES, INC.

    On January 12, 1998, the Company  acquired all of the outstanding  shares of
capital stock of EraSoft for cash and certain contingent  payments pursuant to a
stock purchase  agreement with the stockholders of EraSoft.  EraSoft  developed,
marketed and supported  year 2000  assessment  and analysis  software  tools for
desktop computing.
                                      F-10
<PAGE>
EraSoft was founded in 1996 and was headquartered in Calgary, Alberta, Canada.

    The aggregate cost of the EraSoft acquisition consisted of the following (in
thousands):

              Cash.................................................  $7,795
              Assumption of liabilities and acquisition costs......   1,926
              Additional consideration.............................     246
                                                                     ------
                               Total...............................  $9,967
                                                                     ======

    The terms of the agreement with EraSoft provide for additional consideration
to be paid if the revenue from licenses of EraSoft's  products  exceeds  certain
targeted  levels  between  the date of the  acquisition  and June 30,  2000.  In
addition,  the former  stockholders  of  EraSoft  will also  receive  additional
consideration  based on revenue from EraSoft products licensed during the period
from the acquisition  date to June 30, 2000.  Additional  consideration  will be
paid in cash and  recorded  as an  adjustment  to cost in excess  of net  assets
acquired  when earned and will be amortized  either  using the revenue  ratio or
straight-line  method  through June 30, 2000,  whichever  results in the greater
amount of  amortization  during  the  period.  In June  1998,  the first of such
additional  consideration was earned in the amount of $625,000.  This amount was
accrued at June 30,  1998 and will be paid  during  the first  quarter of fiscal
1999 per the terms of the contract.

    The  acquisition  was  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  $7.2  million  of the
acquired  intangible assets was in-process research and development that had not
yet reached technological  feasibility.  Because there was no assurance that the
Company would 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  had any  alternative  future use, the acquired
in-process research and development was charged to expense by the Company in its
quarter  ended  March  31,  1998.  The  Company  intends  to use  the  purchased
technology for  enhancements  to OnMark 2000 and in other product lines as well,
and has now added new  initiatives  to fully  exploit the value of the purchased
technology.  As a result,  the Company  estimates the remaining  investment  and
development  work  required to bring the  in-process  technology  to  commercial
availability  in each of these  initiatives  will aggregate  approximately  $2.6
million over the next year.  The Company  allocated  the  aggregate  cost of the
acquisition as follows (in thousands):

              Accounts receivable.......................      $   381
              Other assets..............................          540
              In-process research and development.......        7,240
              Purchased software........................        1,280
              Other intangible assets...................          526
                                                              -------
                                                              $ 9,967
                                                              =======

    Other intangible assets consist of assembled  workforce  ($230,000) and cost
in excess of net assets acquired ($296,000). The assembled workforce and cost in
excess of net assets acquired are being amortized on a straight-line  basis over
seven and five year periods, respectively.

LICENSING AGREEMENTS

    In May,  1998,  the  Company  entered  into an  agreement  to license  fault
diagnostic  testing  software.  The license has a bargain  purchase option after
five years to purchase the software for one dollar. The Company made payments to
the owners of the  technology  per the terms of the  agreement for the exclusive
rights to the software,  a portion of which was considered to be in-process when
delivered.  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 June 30,
1998.  The  Company  paid  approximately  $1.7  million  for the  license of the
software and related  costs,  of which

                                      F-11
<PAGE>
$1.3 million was written off as purchased  in-process  research and development.
The remaining  amount of $400,000 was  capitalized as purchased  software and is
being amortized over five years. The Company estimates the remaining  investment
and development  work required to bring the in-process  technology to commercial
availability  in each of these  initiatives  will aggregate  approximately  $1.0
million over the next year. In addition,  the Company will pay royalties to each
of the  former  owners  of the  software  based  upon  revenue  from the  future
licensing  of the  software  as set  out in  the  agreement.  See  Note 8 to the
Consolidated Financial Statements.

    As  part  of  the   Company's   strategy  to  enter  into  the  desktop  and
client/server  arena,  the Company entered into license  agreements with several
software  companies in the second  quarter of fiscal 1998 and January,  1998 for
the rights to distribute  additional  desktop  software tools.  The Company made
payments to these  companies for development of the software tools in accordance
with the Company's requirements as set out in the agreements. Payments were made
based on the effective date of each agreement and delivery and acceptance of the
different  versions of the products,  all of which occurred during the Company's
fiscal third quarter ended March 31, 1998. The Company  expensed these payments,
approximately $3.2 million, as research and development during the quarter ended
March 31, 1998.  In addition,  the Company will pay  royalties to each  software
vendor based upon sales activity as set out in the agreements. See Note 8 to the
Consolidated Financial Statements.

ROTTGER & OSTERBERG SOFTWARE-TECHNIK GMBH

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

              Cash.............................................   $12,800
              Common stock.....................................    12,805
              Assumption of liabilities and acquisition costs..    13,200
                                                                  -------
                       Total...................................   $38,805
                                                                  =======

    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 was no assurance that the
Company would 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  had 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. The Company allocated the aggregate cost of the
acquisition as follows (in thousands):

                                      F-12
<PAGE>

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

    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.

    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):

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

    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 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, 1998
                                          ----------------------------------------------
                                                         GROSS       GROSS    
                                           AMORTIZED  UNREALIZED  UNREALIZED  
                                             COST        GAINS      LOSSES    FAIR VALUE
                                             ----        -----      ------    ----------

     <S>                                 <C>           <C>        <C>        <C>      
     U.S. Treasury securities..........    $ 10,478      $ 20       $  --      $  10,498
     Government-backed securities......      54,318        29         (11)        54,336
     Corporate bonds...................       1,000        --          --          1,000
                                           --------      ----       -----      ---------
               Total...................    $ 65,796      $ 49       $ (11)     $  65,834
                                           ========      ====       ------     =========

                                                          JUNE 30, 1997
                                          ----------------------------------------------
                                                         GROSS       GROSS    
                                           AMORTIZED  UNREALIZED  UNREALIZED  
                                             COST        GAINS      LOSSES    FAIR VALUE
                                             ----        -----      ------    ----------

     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>

                                      F-13
<PAGE>
    The following table reflects the investment maturities (in thousands):
<TABLE>
<CAPTION>
                                                             JUNE 30,
                                          ------------------------------------------------
                                                   1998                     1997
                                          -----------------------  -----------------------
                                            AMORTIZED               AMORTIZED     
                                             COST     FAIR VALUE      COST      FAIR VALUE
                                             ----     ----------      ----      ----------

     <S>                                  <C>        <C>           <C>          <C>    
      Under one year....................... $63,294    $63,332       $12,697      $12,714
      Greater than one year and less 
        than five years....................   2,502      2,502         7,377        7,261
                                            -------    -------       -------      -------
                                            $65,796    $65,834       $20,074      $19,975
                                            =======    =======       =======      =======
</TABLE>

4. INCOME TAXES

    Effective July 1, 1993, the Company adopted SFAS 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):

                                                       YEAR ENDED JUNE 30,
                                                -----------------------------
                                                 1998        1997       1996
                                                 ----        ----       ----
      Current:                                                       
        Federal...............................  $ 3,634    $ 4,834    $ 1,184
        State.................................      829        909        454
        Foreign...............................    3,408      2,057        275
      Deferred................................   (3,729)    (1,738)       322
      Utilization of net operating loss and 
       tax credit carryforwards...............       --         --      1,464
      Change in valuation allowance...........       --         --     (1,856)
                                                -------    -------    -------
      Provision for income taxes..............  $ 4,142    $ 6,062    $ 1,843
                                                =======    =======    =======

    For the year ended June 30,  1998,  1997 and 1996,  income tax  benefits  of
$3,498,000,  $1,199,000 and $170,000, respectively, 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 and
shares purchased under the employee stock purchase plan.

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

                                                                JUNE 30,
                                                           -----------------
                                                             1998      1997
                                                             ----      ----
      Deferred tax liabilities:                                         
        Accelerated tax depreciation...................    $  (11)    $   89
        Other..........................................        16         58
                                                            -----     ------
                Total..................................         5        147
                                                            -----     ------
      Deferred tax assets:                                            
        Foreign tax credits                                      --    1,485
        Software development costs capitalized 
          for tax......................................       106        249
        Bad debt reserve...............................       200        304
        Vacation accrual...............................       289        193
        Intangibles amortization.......................       619        136
        Purchased software.............................     3,326         --
        Other..........................................       211        252
                                                            -----     ------
                Total..................................     4,751      2,619
                                                            -----     ------
      Net deferred tax asset...........................    $4,746     $2,472
                                                           ======     ======

                                      F-14
<PAGE>
    A  reconciliation  of the  U.S.  federal  statutory  rate  to the  Company's
effective tax rate is as follows:

                                                           YEAR ENDED JUNE 30,
                                                           -------------------
                                                           1998   1997   1996
                                                           ----   ----   ----

      Statutory federal rate.............................   35%   (35)%   34%
      Write-off of in-process R&D........................   --     89     --
      Write-off of foreign  intangibles  capitalized 
         for tax.........................................  (12)    --     --
      Effect of permanent differences....................    1      2      2
      Foreign taxes......................................    3      2      4
      State taxes, net of federal benefit................    4      6      4
      Tax credits........................................   (2)    (3)   (14)
      Foreign losses not benefited.......................    5     --     --
      Benefit of net operating loss carryforward.........   --     --     (7)
      Other..............................................   --      4     --
                                                           ---    ---    ---
                                                            34%    65%    23%
                                                           ===    ===    ===

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

5. STOCK PLANS

1997 EQUITY INCENTIVE PLAN

    The 1997 Equity Incentive Plan ("1997 Plan"), which replaced the 1994 Equity
Incentive  Plan ("1994 Plan"),  was adopted by the Company's  Board of Directors
(the "Board") in September 1997, and was approved by the Company's  stockholders
and became effective in November 1997. The 1997 Plan was amended and restated by
the Board in January 1998 and will terminate 10 years after the effective  date.
The 1997 Plan  authorizes  awards of incentive  stock  options to employees  and
non-qualified  stock  options,  restricted  stock and other  common  stock-based
awards  to  officers,   directors,   employees,   consultants   and  independent
contractors or advisers of the Company and its subsidiaries.  Under the terms of
the 1997 Plan,  the option  price may not be less than 100%  (subject to certain
restrictions)  of the fair market  value of the  Company's  stock on the date of
grant for incentive stock options and non-qualified stock options, respectively.
A total of 850,000  shares,  plus certain  shares of the Company's  common stock
that (i) were  available  for future awards under the 1994 Plan on the effective
date of the 1997 Plan,  and (ii) are  subject to awards  under the 1994 Plan but
are  forfeited,  terminate,  expire or lapse for any reason,  are  reserved  for
issuance under the 1997 Plan. The options  currently  issued under the 1997 Plan
vest over the following schedule:  (a) 25% of the total number of shares subject
to an option become  exercisable on the first  anniversary of the date of grant;
and  thereafter  (b) 6.25% of the total  number of shares  subject  to an option
become  exercisable  at the end of each  three-month  period  until  all  shares
subject to an option are  exercisable  on the fourth  anniversary of the date of
grant.

    The  1997  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 1997 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.

1994 EQUITY INCENTIVE PLAN

    The 1994 Plan was adopted by the Board of Directors  (the "Board") in August
1994,  approved by the stockholders in November 1994, and became effective March
1, 1995.  The 1994 Plan will  terminate 10 years after 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 was reserved for issuance under the 1994 Plan.
The options  currently  issued  under the 1994 Plan 

                                      F-15
<PAGE>
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.  Effective November
14, 1997, no further share grants may be made pursuant to this Plan.

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.

OUTSIDE DIRECTOR STOCK OPTION PLAN

    The  Company's  Outside  Director  Stock Option Plan  ("Director  Plan") was
approved by the  stockholders  and became  effective on November  15, 1995.  The
Director Plan authorizes non-discretionary grants of non-qualified stock options
to  non-employee  directors of the Company.  A total of 400,000 shares of common
stock is reserved  for  issuance  under the  Director  Plan.  Each person who is
elected for the first time as an Outside Director shall be, upon the date of his
first election, automatically granted an option to purchase 20,000 shares 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.

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
semi-annual 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, 1998,  195,403 shares remained available for purchase through
the Purchase Plan and there were 541 employees eligible to participate, of which
406  participated.  Employees  purchased 90,239 shares during the year at prices
ranging  from  $14.82  to  $34.85.  Total  cash  received  by  the  Company  was
approximately $1,901,000.  The Purchase Plan is non-compensatory,  therefore, no
charges to income were recorded.

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.

                                      F-16
<PAGE>
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. 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.  The Company
elected to make  discretionary  profit sharing  contributions of $180,000 in the
1997 plan  year and  $120,000  for each of the 1996 and 1995  plan  years to all
participants  who were  employed by the Company on the effective  date.  For the
1998 plan year,  the  Company  elected to make a 50%  matching  contribution  of
employee contributions of up to a maximum of $3,000 per participant. The Company
had made contributions of approximately $271,000 for the 1997 plan year.

OTHER

    The  following  summarizes  the activity  under the  Company's  stock option
plans:
<TABLE>
<CAPTION>
                                              YEAR ENDED JUNE 30,
                        -----------------------------------------------------------------
                                1998                  1997                     1996
                        --------------------  --------------------   --------------------
                                   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...............  1,410,272    $14.40   1,144,316    $  4.59   1,381,214     $2.31
Granted..............  1,139,218     31.36     611,150      29.18     446,800      9.57
Canceled/expired.....   (345,029)    42.05     (65,728)     28.51    (378,884)     5.05
Exercised............   (178,122)     5.08    (279,466)      3.28    (305,348)     1.00
                        --------             ---------               --------      

Options
  outstanding, end
  of year............  2,026,339     20.03   1,410,272      14.40   1,143,782      4.59
                       =========             =========              =========
Options
  exercisable, end
  of year............    563,714     10.55     310,126       3.54     259,058      2.35
                       =========             =========              =========
Options available
  for grant..........    568,100               514,284              1,067,034   
                       =========             =========              =========
Weighted average
  fair value of
  options
  granted............               $31.36                $ 29.18                 $9.57
                                    ======                =======                 =====
</TABLE>

    In May 1998,  the Board of  Directors  authorized  the  Company to offer all
employees with outstanding  options at an exercise price of $49.00 per share the
opportunity  to exchange these options for new options on a three for two basis.
Each new  option  was  issued  under  the 1997 Plan at the  market  price on the
effective date of exchange.  As a result,  options  covering 190,450 shares were
canceled and 126,968 options were granted on May 5, 1998.

                                      F-17
<PAGE>
               OPTIONS OUTSTANDING AND EXERCISABLE BY PRICE RANGE
                               AS OF JUNE 30, 1998
<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>            <C>      
$ 0.38 - 14.75       780,920            3.85             $  6.47          397,995        $    4.19
$15.88 - 30.69       659,243            7.71               21.84           92,025            16.46
$33.50 - 45.25       586,176            7.55               36.07           73,694            37.54
                   ---------                             -------          -------        ---------
$ 0.38 - 45.25     2,026,339            6.18             $ 20.03          563,714        $   10.55
                   =========                             =======          =======        =========
</TABLE>

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123

    During  1995,  the FASB  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  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 1998 and 1997,  using the  Black-Scholes
option pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
                                  1998                        1997                        1996
                        -------------------------  --------------------------  --------------------------
                                     PURCHASE                     PURCHASE                    PURCHASE
                         OPTIONS      PLAN          OPTIONS         PLAN         OPTIONS        PLAN
                         -------      ----          -------         ----         -------        ----
<S>                       <C>          <C>           <C>            <C>           <C>           <C>  
Risk free interest rate   5.49%        5.37%         6.02%          5.47%         6.00%         5.30%
Expected dividend yield     --          --             --                --             --             --
Expected lives            4.11 years    .5 years     4.06 years      .5  years    4.06 years     .5 years
Expected volatility      78.53%       79.53%        80.00%         76.80%        69.00%        74.40%
</TABLE>

    The total value and  compensation  expense which would have been recorded 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>
                                            FAIR VALUE                    COMPENSATION EXPENSE
                                    ------------------------------    -----------------------------
                                    OPTION PLANS     PURCHASE PLAN    OPTION PLANS    PURCHASE PLAN
                                    ------------     -------------    ------------    -------------
                                                             (IN THOUSANDS)
<S>                                  <C>                <C>            <C>                <C> 
Year ended June 30, 1998............  $17,570            $789           $4,750             $750
Year ended June 30, 1997............   $8,823            $870           $2,745             $664
Year ended June 30, 1996............   $1,955            $376             $185             $213
</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 basic
and diluted  earnings (loss) per common and common share  equivalent  would have
been as follows:

                                      F-18
<PAGE>
<TABLE>
<CAPTION>
                                                                     YEAR ENDED JUNE 30,
                                                                -----------------------------
                                                                  1998       1997        1996
                                                                  ----       ----        ----
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                             <C>        <C>          <C>
Net income (loss):                                                       
   As reported..............................................    $7,935     $(15,436)    $6,217
   Pro forma................................................     4,321      (17,669)     5,910
Earnings (loss) per common and common share equivalent:
   As reported - basic......................................       .42         (.90)       .38
   As reported - diluted....................................       .40         (.90)       .36
   Pro forma - basic........................................       .23         (.90)       .36
   Pro forma - diluted......................................       .21        (1.02)       .35
</TABLE>

    The effects of applying SFAS No. 123 for providing pro forma disclosures for
1998,  1997 and 1996 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.

6. CAPITAL STOCK

    In April 1998,  the Board of  Directors  authorized  the  repurchase  of the
Company's common stock up to 1,000,000  shares. As of June 30, 1998, the Company
had repurchased 135,000 shares for approximately $2,181,000.

    In April 1998, the Board of Directors adopted a Shareholder Rights Plan (the
"Rights  Plan")  and  declared  a  non-taxable  dividend  of one  Right  on each
outstanding share of the Company's common stock to stockholders of record on May
8, 1998. The Rights Plan is designed to enable all  stockholders to receive fair
and  equal  treatment  in any  proposed  takeover  of the  Company.  Each  Right
initially will entitle the holder to purchase one one-thousandth of a share of a
new series of junior participating preferred stock of the Company at an exercise
price of  $180.00.  The  Rights  will  become  exercisable  if a person or group
acquires 15% or more of the Company's  outstanding  common stock or commences or
announces a tender offer or exchange  offer for 15% or more of the common stock,
unless in the case of a tender or exchange  offer the Board of Directors  delays
exercisability.  If a person or group  acquires  15% or more of the  outstanding
common stock,  all holders of Rights other than the acquirer will be entitled to
purchase,  at the then-current exercise price of the Rights, a number of Viasoft
common  shares having a market value of twice the exercise  price.  In addition,
after such a 15% stock  acquisition,  if the  Company is acquired in a merger or
other business  combination  transaction,  or sells 50% or more of its assets or
earning  power,  each Right will entitle its holder (other than the acquirer) to
purchase,  at the  then-current  exercise  price of the Rights,  a number of the
acquiring  company's  common  shares having a market value of twice the exercise
price. Until the Rights become exercisable, the Rights will trade as a unit with
the common stock.  At any time before a person or group has acquired  beneficial
ownership of 15% or more of the Company's  outstanding  common stock, the Rights
are  redeemable  for one cent per Right at the option of the Board of Directors.
The terms of the Rights  may be  amended  at any time by the Board of  Directors
without the consent of the  holders,  with certain  exceptions.  The Rights will
expire on April 20, 2008, unless otherwise extended by the Board of Directors.

    On  September  22, 1997,  the Company  received net proceeds in an amount of
$75,361,000 from an offering of 1,465,000 shares of its common stock.

    At the shareholder meeting in November 1997, the shareholders  authorized an
additional  24,000,000  shares of common stock.  Total shares authorized at June
30, 1998 are 48,000,000.

     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

                                      F-19
<PAGE>
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, 1998.

7. EARNINGS PER COMMON SHARE

    Earnings  per  common  share  ("EPS")  data were  computed  as  follows  (in
thousands, except per share data):

                                                       YEAR ENDED JUNE 30,
                                                 -------------------------------
                                                   1998       1997         1996
                                                   ----       ----         ----
BASIC EPS:
  Numerator:  Net Income (loss)                  $ 7,935    $ (15,436)   $ 6,217
  Denominator:
    Weighted average common shares outstanding    18,999       17,212     16,390
                                                 -------    ---------    -------
    Basic EPS                                    $   .42    $    (.90)   $   .38
                                                 =======    =========    =======

                                                       YEAR ENDED JUNE 30,
                                                 -------------------------------
                                                   1998        1997        1996
                                                   ----        ----        ----
DILUTED EPS:
  Numerator:  Net Income (loss)                  $ 7,935     $(15,436)   $ 6,217
  Denominator:
     Weighted average common shares outstanding   18,999       17,212     16,390
     Dilutive effect of stock options                800           --      1,001
                                                 -------     --------    -------
  Total shares                                    19,799       17,212     17,391
     Diluted EPS                                 $   .40     $   (.90)   $   .36
                                                 =======     ========    =======

8. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

    The  Company  has entered  into  various  license  agreements  with  several
software companies for the rights to distribute  additional  software tools. The
Company will pay royalties to the software  vendors based upon sales activity as
set out in each of the  agreements.  (See Note 2 to the  Consolidated  Financial
Statements).  In some cases, the Company prepaid certain of the royalties and is
amortizing  the balance of the prepaid based on sales activity as set out in the
agreements.  Total  royalties  accrued and due to third parties at June 30, 1998
was $3,117,000.

    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 $1,288,000,  $786,000, and $583,000 in the years ended
June 30, 1998, 1997, and 1996, respectively.

    The Company has entered  into  several  office  leases for sales  offices in
various cities and countries. These leases expire at various dates through 2010.
Rental expense  relating to these leases amounted to  approximately  $1,389,000,
$684,000,  and  $575,000  in the years  ended  June 30,  1998,  1997,  and 1996,
respectively.

    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 $876,000,  $860,000, and $673,000 in the years ended June 30,
1998,  1997,  and  1996,  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

                                      F-20
<PAGE>
documentation.  The  agreement  expires in  October  1999.  Payments  under this
agreement were  approximately  $628,000 and $362,000 in the years ended June 30,
1998 and 1997. The base monthly charge is  approximately  $38,000  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):

                   Year ending June 30:           
                   1999.....................     $3,130
                   2000.....................      2,036
                   2001.....................      1,371
                   2002.....................        598
                   2003.....................        332
                   Thereafter...............        565
                                                 ------
                                                 $8,032
                                                 ======

    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.

9. FOREIGN OPERATIONS AND GEOGRAPHIC INFORMATION

    The Company operates in one industry segment which includes the development,
marketing  and support of business  solutions  that enable  large  organizations
worldwide  understand,   manage,   evolve,   reuse,   transition  and  modernize
mission-critical applications that support their fundamental business processes.
These business solutions are provided through  integrated  software products and
specialized professional consulting services.

    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, 1998, and identifiable assets at June 30, 1998,
1997, and 1996, are as follows (in thousands):

                                                     YEAR ENDED JUNE 30,
                                                ----------------------------
                                                  1998      1997      1996
                                                  ----      ----      ----
       Revenue(1):                                                     
         North America-domestic..............   $ 77,178   $57,728   $32,878
                                                
         International-principally distributors:                      
          Europe.............................      3,551     2,581     3,097
          All others.........................      4,269     1,520     1,721
         Foreign subsidiaries and branches.       28,689    23,483     5,861
                                                --------  --------   -------
             Total revenue...................   $113,687  $ 85,312   $43,557
                                                ========  ========   =======
       Income (Loss) Before Income Taxes(1):                          
         North America.......................   $  5,923  $(17,860)  $ 8,517
         Foreign subsidiaries and branches...      6,154     8,486      (457)
                                                --------  --------   -------
             Income (loss) before income taxes  $ 12,077  $ (9,374)  $ 8,060
                                                ========  ========   =======
       Identifiable Assets(1):                                        
         North America.......................   $137,727  $ 50,527   $43,370
         Foreign subsidiaries and branches...     24,650    14,074     3,221
                                                --------  --------   -------
                 Total assets................   $162,377  $ 64,601   $46,591
                                                ========  ========   =======
----------
(1) Includes  Viasoft,  Viasoft  Pty.,  Viasoft  UK,  Viasoft  Germany,  Viasoft
    Netherlands  and Viasoft de Mexico,  S.A. de C.V. for all  periods,  Viasoft
    Benelux since its formation on July 1, 1996, the operations of R&O since its

                                      F-21
<PAGE>
    acquisition on December 5, 1996, and Viasoft France,  since its formation on
    September 1, 1997, and Viasoft Canada Company since January 1998.

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 1998:                                                                        
  Revenue.....................................   $ 26,062     $  28,174    $26,805   $32,646
  Income (loss) from operations...............      5,343         6,086     (7,628)    3,681
  Net income (loss)...........................      3,765         5,035     (4,136)    3,271
  Basic earnings (loss) per common share......   $    .21     $     .26    $  (.21)  $   .17
  Diluted earnings (loss) per common and
     common share equivalent..................   $    .20     $    . 25    $  (.21)  $   .16

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
  Basic earnings (loss) per common share......   $    .09     $   (1.42)   $   .18   $   .23
  Diluted earnings (loss) per common and
     common share equivalent..................   $    .09     $   (1.42)   $   .17   $   .22

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
  Basic earnings per common share.............   $    .06     $     .10    $   .08   $   .14
  Diluted earnings per common and
     common share equivalent..................   $    .06     $     .10    $   .07   $   .14
</TABLE>

11. SUBSEQUENT EVENT

    In July 1998,  the Company  acquired  worldwide  marketing  and  development
rights to SHL TRANSFORM, a knowledge-driven  process management and productivity
software toolset and its integrated process management  methodologies,  from the
Online   Knowledge   Group  (OKG)  of   Canadian-based   SHL   Systemhouse   Co.
("Systemhouse"). As part of the agreement, the Company will hire certain current
development  employees  of  Systemhouse,  has the  option  to  purchase  certain
furniture and equipment used by the  Systemhouse  development  employees and has
the exclusive right to remarket the licensed software to Systemhouse's  existing
customers.  As a result,  the  agreement  was  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 $5.0 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 will be charged to expense
by the Company in its quarter  ended  September  30, 1998.  The Company plans to
integrate the  technology  and  methodology  into its entire product and service
lines.  As a result,  the Company  estimates  of the  remaining  investment  and
development  work  required to bring the  in-process  technology  to  commercial
availability  aggregate  of $3.1  million  over  the next  year and a half.  The
aggregate cost of the acquisition consisted of the following (in thousands):

                                      F-22
<PAGE>

           Cash.............................................   $6,000
           Assumption of liabilities and acquisition costs..      885
                                                               ------
                            Total...........................   $6,885
                                                               ======

    The Company  allocated the estimated  aggregate  cost of the  acquisition as
follows (in thousands):

           In-process research and development..............   $5,012
           Purchased software...............................    1,174
           Other intangible assets..........................      699
                                                               ------
                            Total...........................   $6,885
                                                               ======

    Other intangible assets consist of assembled workforce and cost in excess of
net assets acquired.  The purchased software,  assembled workforce,  and cost in
excess of net assets acquired are being amortized on a straight-line  basis over
five, six, and five years, respectively.

    The transaction is structured as a worldwide  perpetual  source code license
and is  exclusive,  subject  to  SHL  TRANSFORM'S  retained  right  to  use  the
technology for its own internal use and in its consulting business. Viasoft will
also pay certain  royalties to  Systemhouse  based on sales of  methodology  and
training components.

                                      F-23
<PAGE>
                                   SCHEDULE I

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                    YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
                                                   ADDITIONS
                                           -----------------------------
                                           CHARGED
                                           TO COSTS   ACQUIRED  CHARGED                 BALANCE
                                BEGINNING    AND        FROM    TO OTHER   DEDUCTIONS   AT END
        DESCRIPTION             OF PERIOD  EXPENSES     R&O     ACCOUNTS      (1)      OF PERIOD
        -----------             ---------  --------     ---     --------      ---      ---------
<S>                             <C>         <C>       <C>       <C>         <C>         <C> 
Allowance for doubtful accounts
Year Ended June 30, 1998         $678        $280      $ --      $ --        $143        $815
Year Ended June 30, 1997          279         525       128       174         428         678
Year Ended June 30, 1996          391          --        --        --         112         279
</TABLE>

-----------
(1) Write-off of uncollectable amounts.
                                      F-24
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT                                                      
NUMBER                 DESCRIPTION OF EXHIBIT                              PAGE
-------          ----------------------------------           ------------------------------
<S>              <C>                                          <C>
 2.1             Stock Purchase Agreement among               Incorporated herein by reference to
                 Viasoft, Inc., LfA-Gesellschaft fur          Exhibit  2.1 to the Company's Form  
                 Vermogensverwaltung mbH (LfA-GV),            8-K dated  December  20,  1996
                 Werner Dreesbach, Elga Dreesbach,             
                 Christoph Rottger, and Valerie Rottger, 
                 dated November 11, 1996
 2.2(5)          Stock Purchase Agreement dated as of the     Incorporated herein by reference to
                 12th day of January, 1998, between           Exhibit 2.1 to the Company's Form
                 Viasoft, Inc., Michael Howatt Mabey,         10-Q for the quarter ended December
                 Nashirali Samanani, and certain other        31, 1997
                 sellers
 3.1             Restated Certificate of Incorporation        Incorporated herein by reference to
                                                              Exhibit 10.20 to the Company's Form
                                                              10-K for fiscal year 1995
 3.2             Amended and Restated Bylaws of the           Incorporated herein by reference to
                 Company                                      Exhibit 3(e) to the Company's
                                                              Registration Statement on Form S-1
                                                              (Registration No. 33-88366)
 3.3             Certificate of Amendment to the Restated     Incorporated herein by reference to
                 Certificate of Incorporation, filed          Exhibit 3.1(a) to the Company's
                 November 17, 1997                            Form 10-Q for the quarter ended
                                                              December 31, 1997
 3.4             Restated Certificate of Incorporation, as    Incorporated herein by reference to
                 amended through November 17, 1997            Exhibit 3.1(b) to the Company's
                                                              Form 10-Q for the quarter ended
                                                              December 31, 1997
 4.1             Form of Certificate for Common Stock         Incorporated herein by reference to
                                                              Exhibit 4(a) to the Company's
                                                              Registration Statement on Form S-1
                                                              (Registration No. 33-88366)
 4.2             Form of Warrant to Purchase Common           Incorporated herein by reference to
                 Stock                                        Exhibit 4(b) to the Company's
                                                              Registration Statement on Form S-1
                                                              (Registration No. 33-88366)
 4.3             Rights Agreement, dated as of April 20,      Incorporated herein by reference to
                 1998, between the Company and Harris         Exhibit 1 to the Company's Form 8-A
                 Trust and Savings Bank                       dated April 22, 1998
 4.4(1)          Certificate of Designation of Series A       Exhibit Page E-4
                 Junior Participating Preferred Stock
10.1             Office Lease dated June 5, 1992              Incorporated herein by reference to
                 between the Company and the Mutual           Exhibit 10(e) to the Company's
                 Life Insurance Company of New York,          Registration Statement on Form S-1
                 as amended                                   (Registration No. 33-88366)
10.2 (2)         Form of Indemnification Agreement            Incorporated herein by reference to
                 between the Company and each of its          Exhibit 10(f) to the Company's
                 directors                                    Registration Statement on Form S-1
                                                              (Registration No. 33-88366)
10.3 (2)         Viasoft, Inc. 1986 Stock Option Plan         Incorporated herein by reference to
                                                              Exhibit 10(g) to the Company's
                                                              Registration Statement on Form S-1
                                                              (Registration No. 33-88366)
10.4 (2)         1994 Equity Incentive Plan                   Incorporated herein by reference to
</TABLE>
                                      E-1
<PAGE>
<TABLE>
<S>              <C>                                          <C>
                                                              Exhibit 10(l) to the Company's
                                                              Registration Statement on Form S-1
                                                              (Registration No. 33-88366)
10.5(2)          Employee Stock Purchase Plan, as             Incorporated herein by reference to
                 amended                                      Exhibit 10(m) to Amendment No. 2 to
                                                              the Company's Registration
                                                              Statement on Form S-1 (Registration
                                                              No. 33-88366)
10.6(2)          Employment Agreement dated July 28,          Incorporated herein by reference to
                 1994 between the Company and Colin J.        Exhibit 10(o) to the Company's
                 Reardon                                      Registration Statement on Form S-1
                                                              (Registration No. 33-88366)
10.7(2)(3)       Viasoft FY97 Executive Bonus Plan            Incorporated herein by reference to
                                                              Exhibit 10.1 to the Company's Form
                                                              10-Q for the quarter ended
                                                              September 30, 1996
10.8(2)(3)       FY 97 Incentive Plan for Senior Vice         Incorporated herein by reference to
                 President, Americas                          Exhibit 10.2 to the Company's Form
                                                              10-Q for the quarter ended
                                                              September 30, 1996
10.9(2)(3)       FY 97 Incentive Plan for Vice                Incorporated herein by reference to
                 President, International Operations          Exhibit 10.3 to the Company's Form
                                                              10-Q for the quarter ended
                                                              September 30, 1996
10.10(2)(3)      Consulting and Employment Agreement          Incorporated herein by reference to
                 between the Company and Mark R.              Exhibit 10.4 to the Company's Form
                 Schonau                                      10-Q for the quarter ended
                                                              September 30, 1996
10.11            Outside Director Stock Option Plan           Incorporated herein by reference to
                                                              Exhibit A of the Company's
                                                              Definitive Schedule 14A Proxy
                                                              Statement for the 1995 Annual
                                                              Meeting of Stockholders)
10.12(2)         Employee Stock Purchase Plan (as             Incorporated  herein by reference to
                 amended and restated as of April 24,         the Company's Form 10-K for fiscal
                 1997)                                        year 1997
10.13            Assignment, Assumption and Novation          Incorporated herein by reference to
                 Agreement dated September 12, 1997 and       the Company's Form 10-K for fiscal
                 Assignment, Assumption and Novation          year 1997
                 Agreement dated December 19, 1996,
                 relating to Londen Center Lease 
                 Agreement
10.14(2)(4)      Viasoft FY98 Executive Bonus Plan            Incorporated herein by reference to
                                                              Exhibit 10.1 to the Company's Form
                                                              10-Q for the quarter ended
                                                              September 30, 1997
10.15(2)(4)      FY98 Incentive Plan for Executive Vice       Incorporated herein by reference to
                 President                                    Exhibit 10.2 to the Company's Form
                                                              10-Q for the quarter ended
                                                              September 30, 1997
10.16(2)(4)      FY98 Incentive Plan for Senior Vice          Incorporated herein by reference to
                 President, International Operations          Exhibit 10.3 to the Company's Form
                                                              10-Q for the quarter ended
                                                              September 30, 1997
10.17(2)         Consulting Agreement between the             Incorporated  herein by  reference to
                 Company and Michael A. Wolf dated            Exhibit 10.4 to the Company's Form
                 August 1, 1997                               10-Q for the quarter ended
</TABLE>
                                      E-2
<PAGE>
<TABLE>
<S>              <C>                                          <C>
                                                              September 30, 1997
10.18(2)         Viasoft, Inc. Deferred Compensation Plan     Incorporated herein by reference to
                                                              Exhibit 10.5 to the Company's Form
                                                              10-Q for the quarter ended
                                                              September 30, 1997
10.19(1)(2)      Amendment No. 1 to the Viasoft, Inc.         Exhibit Page E-9
                 Deferred Compensation Plan, dated as of
                 June 30, 1998
10.20(2)         Viasoft, Inc. 1997 Equity Incentive Plan     Incorporated herein by reference to
                                                              Appendix B of the Company's
                                                              Definitive Schedule 14A Proxy
                                                              Statement for the 1997 Annual
                                                              Meeting of Stockholders
10.21(2)         Viasoft, Inc. 1997 Equity Incentive Plan,    Incorporated herein by reference to
                 amended and restated as of January 21,       Exhibit 4.1 to the Company's
                 1998                                         Registration Statement on Form S-8
                                                              (Registration No. 333-47571)
11(1)            Computation of Earnings per Share            Exhibit Page E-10
21(1)            Subsidiaries of the Company                  Exhibit Page E-11
23(1)            Consent of Arthur Andersen LLP               Exhibit Page E-12
24(1)            Powers of Attorney                           Exhibit Page E-13
27(1)            Financial Data Schedules                     Exhibit Page E-17
</TABLE>

----------

(1) Filed herewith

(2) Management contract or compensation plan or arrangement

(3) Portions  omitted and filed  separately  with the  Commission  pursuant to a
    grant of Confidential Treatment by order dated January 6, 1997.

(4) Portions  omitted and filed  separately  with the  Commission  pursuant to a
    grant of Confidential Treatment by the Commission dated November 25, 1997.

(5) Portions  omitted and filed  separately  with the  Commission  pursuant to a
    grant of Confidential Treatment by order dated February 27, 1998.
                                      E-3