<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934


FOR THE QUARTER ENDED SEPTEMBER 30, 1997          COMMISSION FILE NUMBER 0-26358


                            COMPUTRON SOFTWARE, INC.
             (Exact name of registrant as specified in its charter)

             DELAWARE                                    13-2966911
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


        301 ROUTE 17 NORTH
      RUTHERFORD, NEW JERSEY                               07070
      (Address of principal                              (Zip Code)
        executive offices)

                                 (201) 935-3400
              (Registrant's telephone number, including area code)

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




Number of shares outstanding of the issuer's common stock as of October 15, 1997


                 Class                       Number of Shares Outstanding
Common Stock, par value $0.01 per share               20,839,780
<PAGE>   2
                            COMPUTRON SOFTWARE, INC.


                                      INDEX


<TABLE>
<CAPTION>
                                                                                       PAGE
PART I        FINANCIAL INFORMATION                                                   NUMBER
                                                                                      ------
<S>           <C>                                                                     <C>
              Item 1.  Financial Statements

                       Consolidated Balance Sheets
                       December 31, 1996 and September 30, 1997......................     3
                       Consolidated Statements of Operations
                         Three and nine months ended September 30, 1996 and  1997....     5
                       Consolidated Statements of Cash Flows
                         Nine months ended September 30, 1996 and 1997...............     6
                       Notes to Consolidated Interim Financial Statements............     7

              Item 2.  Management's Discussion and Analysis of Financial
                         Condition and Results of Operations ........................    10

PART II       OTHER INFORMATION

              Item 1.  Legal Proceedings ............................................    26

              Item 6.  Exhibits and Reports on Form 8-K..............................    27

SIGNATURES

              Signatures ............................................................    28
</TABLE>


                                       2
<PAGE>   3
                            COMPUTRON SOFTWARE, INC.
                          CONSOLIDATED BALANCE SHEETS
                     (In thousands, except per share data)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                              December 31,    September 30,
                                                                  1996             1997
                                                              ------------    -------------
<S>                                                           <C>             <C>    
ASSETS
Current Assets:
      Cash and cash equivalents                                 $19,730          $12,253
      Short-term investments                                      1,073              477
      Restricted cash                                             3,081            1,142
      Accounts receivable, less reserves of $5,084
           and $3,642 in 1996 and 1997, respectively             20,340           10,668
      Prepaid expenses and other current assets                   1,988            2,312
                                                                -------          -------
                Total current assets                             46,212           26,852
                                                                -------          -------

Equipment and leasehold improvements, at cost:
      Computer and office equipment                              10,249           10,949
      Furniture and fixtures                                      1,436            1,342
      Leasehold improvements                                        300              585
                                                                -------          -------
                                                                 11,985           12,876
      Less - accumulated depreciation and amortization            7,598            9,042
                                                                -------          -------
                                                                  4,387            3,834
                                                                -------          -------


Capitalized software development costs, less
      amortization of $3,095 and $3,588
      in 1996 and 1997, respectively                              2,068            1,614
Goodwill, less amortization of $535 and $938 in
      1996 and 1997, respectively                                 2,580            1,885
Other assets                                                      1,446            1,303
                                                                -------          -------
                                                                $56,693          $35,488
                                                                =======          =======
</TABLE>

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


                                       3
<PAGE>   4
                            COMPUTRON SOFTWARE, INC.
                          CONSOLIDATED BALANCE SHEETS
                     (In thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                       December 31,       September 30,
                                                                           1996               1997
                                                                       ------------       -------------
<S>                                                                    <C>                <C>     
Current liabilities:
      Current portion of long-term debt                                  $    506           $     30
      Accounts payable                                                      3,975              3,378
      Accrued expenses                                                     17,420             13,019
      Note payable                                                          1,402                 --
      Deferred revenue                                                     18,551             11,145
                                                                         --------           --------
           Total current liabilities                                       41,854             27,572
                                                                         --------           --------

Long-term liabilities:
      Long-term debt, less current portion                                     97                 55
                                                                         --------           --------

Contingencies (Notes 3 and 4)
Common stock subject to repurchase (Note 3)                                    --              5,000
Stockholders' equity:
      Preferred stock, $.01 par value, authorized 5,000 shares,
           no shares issued and outstanding                                    --                 --
      Common stock, $ .01 par value, authorized 50,000
           shares;  20,801 shares issued and outstanding
           at December 31, 1996, and 20,840 shares
           at September 30, 1997                                              208                208
      Additional paid-in capital                                           63,879             63,894
      Accumulated deficit                                                 (49,371)           (60,800)
      Cumulative translation  adjustment                                       26               (441)
                                                                         --------           --------
           Total stockholders' equity                                      14,742              2,861
                                                                         --------           --------
                                                                         $ 56,693           $ 35,488
                                                                         ========           ========
</TABLE>

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


                                       4
<PAGE>   5
                            COMPUTRON SOFTWARE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                Three Months Ended        Nine Months Ended
                                                   September 30,             September 30,
                                                   -------------             -------------
                                                 1996         1997         1996         1997
                                               --------     --------     --------     --------
<S>                                            <C>          <C>          <C>          <C>     
Revenues:
    License fees                               $  3,377     $  3,763     $  9,911     $ 14,275
    Services                                     10,405       12,336       24,766       35,421
                                               --------     --------     --------     --------
      Total revenues                             13,782       16,099       34,677       49,696
                                               --------     --------     --------     --------
Operating expenses:
    Cost of license fees                            468          534        1,725        1,421
    Cost of services                              7,900        7,085       18,763       20,518
    Sales and marketing                           6,416        3,085       18,843       11,466
    Research and development                      3,078        2,573        8,896        7,369
    General and administrative                    4,408        4,005       11,236       11,798
                                               --------     --------     --------     --------
      Total operating expenses                   22,270       17,282       59,463       52,572
                                               --------     --------     --------     --------
Operating loss                                   (8,488)      (1,183)     (24,786)      (2,876)
                                               --------     --------     --------     --------
Other income (expense):
    Costs related to proposed settlement of
       class action litigation                       --       (6,912)          --       (9,185)
    Other income                                    490          166        1,730          714
    Other expense                                   (19)         (18)         (84)         (82)
                                               --------     --------     --------     --------
      Other income (expense), net                   471       (6,764)       1,646       (8,553)
                                               --------     --------     --------     --------
Loss before income taxes                         (8,017)      (7,947)     (23,140)     (11,429)
Income tax provision                                 41           --           74           --
                                               --------     --------     --------     --------
Net loss                                       $ (8,058)    $ (7,947)    $(23,214)    $(11,429)
                                               ========     ========     ========     ========
Net loss per common
    and common stock equivalent                $  (0.39)    $  (0.38)    $  (1.12)    $  (0.55)
                                               ========     ========     ========     ========
Weighted average number of
      common and common equivalent
      shares                                     20,801       20,819       20,811       20,822
                                               ========     ========     ========     ========
</TABLE>

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


                                       5
<PAGE>   6
                            COMPUTRON SOFTWARE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 (In thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                      Nine Months Ended
                                                                                      -----------------
                                                                           September 30, 1996    September 30, 1997
                                                                           ------------------    ------------------
<S>                                                                        <C>                   <C>      
Net loss                                                                         $(23,214)             $(11,429)
Adjustments to reconcile net loss to net                                                        
    cash flows used in operating activities -                                                   
             Proposed non-cash class action litigation costs                           --                 5,000
             Depreciation and amortization                                          2,908                 2,422
             Provision for doubtful accounts                                        1,105                   300
             Loss on sale of equipment and leasehold improvements                      --                    27
Changes in current assets and liabilities net                                                   
of effect of acquisitions:                                                                      
             Restricted cash                                                       (2,924)                1,939
             Accounts receivable                                                     (301)                9,372
             Prepaid expenses and other current assets                               (733)                 (324)
             Accounts payable and accrued expenses                                  5,153                (3,694)
             Deferred revenue                                                       1,961                (7,406)
                                                                                 --------              --------
Net cash flows used in operating activities                                       (16,045)               (3,793)
                                                                                 --------              --------
Cash flows from investing activities:                                                           
             Other assets                                                              61                   143
             Capitalized software development costs                                (1,088)                   --
             Purchase of equipment and leasehold improvements                      (1,864)               (1,248)
             Proceeds from sale of equipment and leasehold improvements                --                    75
             Net cash paid for acquisitions in France and Germany                  (1,373)                   --
             Cash paid for acquisition costs                                         (211)                   --
             Short-term investments                                                (3,344)                  596
                                                                                 --------              --------
Net cash flows used in investing activities                                        (7,819)                 (434)
                                                                                 --------              --------
Cash flows from financing activities:                                                           
             Proceeds from exercise of stock options                                   82                    15
             Repayment of notes payable                                            (1,564)               (1,402)
             Payments of long term debt                                              (563)                 (518)
             Decrease in liabilities related to acquisitions                         (750)               (1,304)
                                                                                 --------              --------
Net cash flows used in financing activities                                        (2,795)               (3,209)
                                                                                 --------              --------
Foreign currency exchange rate effects                                                 46                   (41)
                                                                                 --------              --------
Net decrease in cash and cash equivalents                                         (26,613)               (7,477)
Cash and cash equivalents, beginning of period                                     45,119                19,730
                                                                                 --------              --------
Cash and cash equivalents, end of period                                         $ 18,506              $ 12,253
                                                                                 ========              ========
Supplemental disclosures of cash flow information                                               
and noncash financing activities:                                                               
             Cash paid during the period for -                                                  
                         Interest                                                $     84              $     27
                                                                                 ========              ========
                         Income taxes                                            $     87              $     37
                                                                                 ========              ========
             Capital lease obligations incurred                                  $     43              $     --
                                                                                 ========              ========
</TABLE>

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


                                       6
<PAGE>   7
                            COMPUTRON SOFTWARE, INC.
               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(1)  OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

The Company designs, develops, markets and supports client/server financial,
workflow, plant maintenance and archival data management software solutions to
manage mission-critical applications in large organizations operating across a
broad range of industries worldwide.

Basis of Presentation:

The accompanying unaudited consolidated financial statements include the
accounts of Computron Software, Inc. and its wholly owned foreign subsidiaries
located in Australia, Canada, France, Germany, Hong Kong, Poland, Singapore, and
the United Kingdom (collectively, the "Company"). These financial statements
have been prepared by the Company in accordance with generally accepted
accounting principles and in the opinion of management, contain all adjustments,
consisting only of those of a normal recurring nature, necessary for a fair
presentation of these financial statements.

These consolidated financial statements should be read in conjunction with the
financial statements and related notes included in the Company's 1996 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.

The results of operations for the three and nine months ended September 30,
1997, are not necessarily indicative of results to be expected for any future
periods.


(a)  REVENUE RECOGNITION

The Company recognizes revenue from non-cancelable software licenses upon
product shipment, provided collection is probable and no significant vendor and
post-contract customer obligations remain at the time of shipment. License fees
for contracts which contain uncertainties regarding collection or contain
significant vendor obligations are deferred and recognized when collection is
deemed probable and/or such obligations have been satisfied. The Company
accounts for insignificant vendor obligations by deferring a portion of the
revenue and recognizing it when the related services are performed. Post
contract support (maintenance) service fees are typically billed separately and
are recognized on a straight line basis over the life of the applicable
agreement. The Company recognizes service revenues from consulting and
implementation services, including training, provided by both its own personnel
and by third parties, upon performance of the services.


                                       7
<PAGE>   8
                            COMPUTRON SOFTWARE, INC.
               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(b) CASH AND CASH EQUIVALENTS

Cash equivalents are stated at cost, which approximates market, and consist of
short-term, highly liquid investments with original maturities of less than
three months.

(2) RESTATED FINANCIAL RESULTS

The Company has restated its consolidated financial statements for each of the
four years ended December 31, 1995, and certain unaudited quarters therein, and
for each of the three unaudited quarters ended September 30, 1996. In the
opinion of management, all material adjustments necessary to correct the
financial statements have been recorded.

A summary of the impact of such restatements on the unaudited financial
statements for the three and nine month periods ended September 30, 1996, is as
follows:

<TABLE>
<CAPTION>
                          THREE MONTHS ENDED         NINE MONTHS ENDED
                          SEPTEMBER 30, 1996        SEPTEMBER 30, 1996
                          ------------------        ------------------
                       Previously       As       Previously       As
                       ----------       --       ----------       --
                        Reported     Restated     Reported     Restated
                        --------     --------     --------     --------
<S>                    <C>           <C>         <C>           <C>     
Total Revenue           $ 13,594     $ 13,782     $ 36,846     $ 34,677
Loss from operations      (8,626)      (8,488)     (22,905)     (24,786)
Net Loss                  (8,196)      (8,058)     (21,333)     (23,214)
Net Loss per share         (0.39)       (0.39)       (1.03)       (1.12)
</TABLE>


(3) SUBSEQUENT EVENT - PROPOSED LITIGATION SETTLEMENT

During 1996, the Company and certain of its current and former officers and
directors were named as defendants in nine class action civil suits. The suits
were filed in the United States District Court for the District of New Jersey
and have been consolidated by court order into one suit captioned In re
Computron Software, Inc. Securities Litigation, Master File No. 96-1911 (AJL). A
Fourth Amended Consolidated Class Action Complaint was filed on May 28, 1997, on
behalf of all purchasers of Computron Common Stock during the period from August
24, 1995, to January 27, 1997. The complaint asserts claims under Sections 11
and 15 of the Securities Act of 1933, Sections 10 (b) and 20 (a) of the
Securities Exchange Act of 1934, as amended, Rule 10b-5 of the Securities and
Exchange Commission promulgated thereunder, and seeks unspecified compensatory
damages, attorneys' fees and costs. The Court entered a stipulated order
certifying the plaintiff class to include purchasers of Computron Common Stock
from August 24, 1995, to January 27, 1997, including certain subclasses therein.

On October 28, 1997 the Company announced that a settlement, which is still
subject to final documentation and court approval, was reached with lead counsel
representing the certified class in the class action. As its share of the
settlement, the Company will pay $1 million in cash, and an additional $5
million, which may be paid in the form of newly issued Computron common stock
or, at the option of the Company, in cash.


                                       8
<PAGE>   9
The overall settlement includes consideration totaling $15 million for the
benefit of class members, which includes $6 million of consideration from the
Company, and a total of $9 million in cash from certain of its present and
former officers and directors, its former auditors, and the insurance companies
that provided the Company with directors and officers liability insurance. In
return for the payments by the insurance companies, the settlement also resolves
a separate lawsuit brought by the Company against the insurance companies.

To the extent that the settlement includes stock, class members will receive a
non-transferable right to resell the stock received in the settlement to a
payment agent during an exercise period in December 1998 at a price to be
negotiated. The number of shares to be issued and the price at which class
members can exercise their right to resell the shares remain subject to
negotiation. The resale right will expire at the end of the exercise period, or
earlier as to any shares issued in the settlement that are sold by class
members.

The resale right will also expire earlier than the exercise period if
Computron's common stock trades on NASDAQ or a national securities exchange for
20 consecutive trading days at a price exceeding the exercise price of the
resale right. The Company will arrange a $5 million guarantee from a financial
institution representing the maximum amount payable to class members upon
exercise of their rights to resell the stock. In addition to professional fees
related to the litigation, the Company has recorded a $6 million charge to other
income (expense) during the quarter ended September 30, 1997, reflecting the
Company's share of the estimated settlement amount.

(4) CONTINGENCIES

Historically, the Company has been involved in other disputes and/or litigation
encountered in its normal course of business. The Company believes that the
ultimate outcome of these proceedings will not have a material adverse effect on
the Company's business, financial condition and results of operations or cash
flows.


                                       9
<PAGE>   10
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


OVERVIEW

This Report contains statements of a forward-looking nature within the meaning
of the safe harbor provisions of section 21E of the Securities Exchange Act of
1934 relating to future events or the future financial performance of the
Company. Investors are cautioned that such statements are only predictions and
that actual events or results may differ materially. In evaluating such
statements, investors should specifically consider the various factors
identified in this Report and in the Company's 1996 Annual Report on Form 10-K
filed with the Securities and Exchange Commission which could cause actual
results to differ materially from those indicated by such forward-looking
statements, including the matters set forth under the caption "Certain Factors
That May Affect Future Results and Financial Condition and the Market Price of
Securities" below.

The Company's revenues are derived from license fees and services. Revenues for
services and training are recognized upon performance of the services. The
Company's license agreements generally do not provide a right of return.
Historically, the Company's backlog has not been substantial, since products are
generally shipped as orders are received.

The Company has experienced, and may in the future experience, significant
fluctuations in its quarterly and annual revenues and results of operations. The
Company believes that domestic and international operating results will continue
to fluctuate significantly in the future as a result of a variety of factors,
including the timing of revenue recognition related to significant license
agreements, the lengthy sales cycle for the Company's products, the proportion
of revenues attributable to license fees versus services, the utilization of
third parties to perform services, the amount of revenue generated by resales of
third party software, changes in product mix, demand for the Company's products,
the size and timing of individual license transactions, the introduction of new
products and product enhancements by the Company or its competitors, changes in
customers' budgets, competitive conditions in the industry and general economic
conditions.

Following the December 31, 1994 audit, the Company received a management letter
from its independent public accountants that identified material weaknesses in
the Company's internal control environment. During 1995, the Company experienced
significant turnover of its senior financial and accounting personnel which
management believes delayed the implementation of certain improvements and
resulted in material weaknesses in these same areas. Upon completion of the
December 31, 1995 audit, the Company again received a management letter from its
independent public accountants that identified material weaknesses similar to
those included in the 1994 management letter. In addition, the independent
public accountants recommended that the Company implement an internal accounting
control plan, approved by the Audit Committee of the Board of Directors, which
addresses these weaknesses and reorganize and upgrade the contracts
administration processes, procedures, controls and personnel to ensure proper
revenue recognition and financial reporting.

Upon completion of the December 31, 1996 audit, the Company received a
management letter which communicated material weaknesses similar to certain of
those included in the 1994 and 1995 management letters along with certain other
recommendations. In response to the independent


                                       10
<PAGE>   11
public accountant's concerns and as a result of turnover in its accounting and
finance departments, the Company has hired senior executives with software
industry experience, including a Chief Executive Officer, a Senior Vice
President of Operations, a Chief Financial Officer, a Vice President of Finance
and Administration, a Corporate Controller, several international Controllers
and Managing Directors and Corporate Counsel. The Company expects to further
strengthen the Company's financial management and internal controls during the
remainder of 1997.

The Company has restated its consolidated financial statements for each of the
four years in the period ended December 31, 1995, and certain unaudited quarters
therein and for each of the three unaudited quarters ended September 30, 1996.
The Company incurred net losses of $2.4 million for 1994, $8.6 million for 1995,
and $31.8 million for 1996, and reported a net loss of $11.4 million for the
nine months ended September 30, 1997. As of September 30, 1997, the Company had
an accumulated deficit of $60.8 million. There can be no assurance that the
Company will be profitable in the future.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain operating
data as a percentage of total revenues:

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED      NINE MONTHS ENDED
                                              SEPTEMBER 30,          SEPTEMBER 30,
                                              -------------          -------------
                                            1997        1996        1997        1996
                                           ------      ------      ------      ------
<S>                                        <C>         <C>         <C>         <C>  
Revenues:
License fees ..........................      24.5%       23.4%       28.6%       28.7%
Services ..............................      75.5        76.6        71.4        71.3
                                           ------      ------      ------      ------
Total revenues ........................     100.0       100.0       100.0       100.0

Operating expenses:
Cost of license fees ..................       3.4         3.3         5.0         2.9
Cost of services ......................      57.3        44.0        54.1        41.3
Sales and  marketing ..................      46.6        19.2        54.3        23.1
Research and  development .............      22.3        16.0        25.7        14.8
General and administrative ............      32.0        24.9        32.4        23.7
                                           ------      ------      ------      ------
     Total operating expenses .........     161.6       107.4       171.5       105.8

              Operating loss ..........     (61.6)       (7.4)      (71.5)       (5.8)
Other income (expenses):
Costs related to proposed settlement of
               class action litigation         --       (42.9)         --       (18.5)
Other income ..........................       3.4         0.9         4.7         1.3
                                           ------      ------      ------      ------
Total other income (expense), net .....       3.4       (42.0)        4.7       (17.2)
                                           ------      ------      ------      ------
              Loss before income taxes      (58.2)      (49.4)      (66.8)      (23.0)
Provision for income taxes ............       0.3          --         0.2          --
                                           ------      ------      ------      ------
              Net loss ................     (58.5%)     (49.4%)     (67.0%)     (23.0%)
                                           ======      ======      ======      ======
</TABLE>

TOTAL REVENUES

Total revenues increased 16.8% and 43.3% for the three and nine months ended
September 30, 1997, compared to the corresponding prior year periods. The
increase was attributable to an


                                       11
<PAGE>   12
increase in both license fees and services revenue including total revenues of
$5.1 million from one customer which represented 10.2% of total revenue during
the nine months ended September 30, 1997. In addition, a separate customer
accounted for $1.7 million or 10.4% of total revenues during the three months
ended September 30, 1997. Results of operations for the three and nine month
periods ended September 30, 1997 include amounts associated with operations in
France and Germany which were acquired during the second and third quarters of
1996, respectively.

The Company derived approximately $6.7 million and $21.9 million, or 41.4% and
44.1% of its total revenues, from customers outside of the United States for the
three and nine months ended September 30, 1997, respectively, compared to $5.8
million, and $12.9 million, or 42.0% and 37.2%, respectively, for the
corresponding prior year periods. The Company expects that revenues from
customers outside the United States will continue to represent a significant
percentage of its total revenues in the future. Most of the Company's
international license fees and services revenue are denominated in foreign
currencies. The Company does not currently hedge its foreign exchange exposure.
With respect to the Company's sales that are US dollar-denominated, decreases in
the value of foreign currencies relative to the US dollar could make the
Company's products less price competitive.

LICENSE FEES

License fees include revenues from software license agreements entered into
between the Company and its customers with respect to both the Company's
products and third party products resold by the Company. License fees increased
11.4% and 44.0% for the three and nine month periods ended September 30, 1997,
respectively, as compared to the prior year periods. The increase for the nine
months ended September 30, 1997 includes license revenues of $3.5 million from
one customer or 24.5% of total license revenues for the nine month period. In
addition, license revenue of $1.4 million from a different customer accounted
for 35.9% of total license revenue for the three months ended September 30,
1997.

SERVICES REVENUE

Services revenue includes fees from software maintenance agreements, training,
installation and consulting services. Maintenance fees are billed separately and
are recognized ratably over the period of the maintenance agreement. Training,
installation and consulting service revenues are recognized as the services are
performed. Services revenue increased 18.6% or $1.9 million and 43.0% and $10.7
million for the three and nine months ended September 30, 1997, as compared to
prior year periods. The increases were attributable to increased training,
consulting and maintenance services which resulted from a larger installed base
of the Company's products and acquired operations in France and Germany which
represented $2.7 million and $8.4 million of service revenues during the three
and nine months ended September 30, 1997, compared to $2.9 million and $5.0
million for the comparable 1996 periods.

COST OF LICENSE FEES

Cost of license fees consists primarily of amortization of capitalized software
development costs, amounts paid to third parties with respect to products resold
by the Company in conjunction with licensing of the Company's products and, to a
lesser extent, the costs of product media, duplication, manuals and shipping.


                                       12
<PAGE>   13
The dollar cost of license fees increased during the three months ended
September 30, 1997, as compared to the corresponding prior year period due to
increased costs associated with sales of third party software. However, such
costs decreased during the nine month period ended September 30, 1997. Cost of
license fees for the nine months ended September 30, 1996, included amounts
associated with third party software resold to customers and for costs recorded
on contracts, while the associated license revenues were deferred due to
uncertainties with respect to collections

COST OF SERVICES

Cost of services consists primarily of personnel costs for training,
implementation, consulting and customer support. These costs include training
third party service and support organizations for the Company's products. The
following table sets forth, for the periods indicated, the relationship of cost
of services and services revenue:

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED      NINE MONTHS ENDED
                                                    SEPTEMBER 30,           SEPTEMBER 30,
                                                    -------------           -------------
                                                  1996        1997        1996        1997
                                                -------     -------     -------     -------
                                                   (IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S>                                             <C>         <C>         <C>         <C>    
Services revenue ...........................    $10,405     $12,336     $24,766     $35,421
Cost of services ...........................      7,900       7,085      18,763      20,518
Cost of services as a percentage of services
revenue ....................................       75.9%       57.4%       75.8%       57.9%
</TABLE>

For the three and nine months ended September 30, 1997, cost of services as a
percentage of services revenue decreased compared to the three and nine months
ended September 30, 1996, primarily as a result of efficiencies obtained through
the outsourcing of training services and a significant increase in maintenance
revenue for which there are lower associated customer support costs as compared
to implementation and consulting activities.

SALES AND MARKETING

Sales and marketing expenses consist primarily of salaries and commissions as
well as travel and promotional expenses. The following table sets forth, for the
periods indicated, the relationship of sales and marketing expenses to total
license fee revenues:

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED          NINE MONTHS ENDED
                                                          SEPTEMBER 30,              SEPTEMBER 30,
                                                          -------------              -------------
                                                        1996         1997          1996          1997
                                                      ---------    ---------     ---------     ---------
                                                            (IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S>                                                   <C>          <C>           <C>           <C>      
Sales and marketing expense ......................    $   6,416    $   3,085     $  18,843     $  11,466
Percentage increase (decrease) over the comparable
     period in the prior year ....................         45.6        (51.9)         41.0         (39.1)
Sales and marketing expense as a percentage
     of total license fee revenue ................        190.0%        82.0%        190.1%         80.3%
</TABLE>

Sales and marketing expenses decreased as a percentage of total license fee
revenue for the three and nine months ended September 30, 1997, as compared to
the prior year periods, primarily due to a decrease in personnel of
approximately 39% as of September 30, 1997, as compared to September 30, 1996,
sales and marketing programs initiated during the 1996 periods which were not
repeated in 1997, and an increase in license fee revenues during the 1997
periods.


                                       13
<PAGE>   14
RESEARCH AND DEVELOPMENT

Research and development expenses consist primarily of engineering personnel
costs, costs of third party equipment and software for development purposes and
costs of outside consultants hired by the Company to assist its product
development efforts. Research and development expenses are generally charged to
operations as incurred. However, certain software development costs are
capitalized in accordance with Statement of Financial Accounting Standards No.
86. Such capitalized software development costs are generally amortized over
periods not exceeding three years.

Research and development expenses (net of capitalized software development
costs) decreased 16.4% and 17.2%, respectively during the three and nine month
periods ended September 30, 1997, as compared to the prior year periods. The
Company capitalized software developments costs of $.2 million and $1.1 million
in the three and nine months ended September 30, 1996 and none in the 1997
periods. The rate of capitalization of software development costs may fluctuate
depending on the mix and stage of development of the Company's product
development and engineering projects.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of administrative,
executive and financial personnel costs, and outside professional fees. General
and administrative expenses represented 24.9% and 23.7% of total revenues for
the three and nine months ended September 30, 1997, compared to 32.0% and 32.4%
of total revenues for the three and nine months ended September 30, 1996.
General and administrative expenses increased 5.0% for the nine months ended
September 30, 1997, as compared to prior year period, primarily due to acquired
infrastructures in France and Germany. General and administrative expenses for
the three and nine months ended September 30, 1997, include $1.1 million and
$3.7 million associated with the acquired operations in France and Germany,
compared to $.3 million and $.7 million for the comparable 1996 periods. These
increases were offset in part by decreases in the Company's provision for
doubtful accounts and professional fees during the 1997 periods.

COSTS RELATED TO PROPOSED SETTLEMENT OF CLASS ACTION LITIGATION

Litigation and proposed settlement costs associated with the class action civil
suit resulted from the commencement of discovery during 1997 and the tentative
settlement agreement announced on October 28, 1997 (see Note 3).

OTHER INCOME (EXPENSE)

Other income (expense) net decreased to ($6.8) million and ($8.6) million for
the three and nine months ended September 30, 1997, respectively, compared to
$.5 million and $1.6 million for the comparable prior year periods due to lower
invested balances of cash, cash equivalents and short-term investments, and the
costs related to the proposed settlement of the class action litigation (see
note 3).


                                       14
<PAGE>   15
LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1997, the Company had cash, cash equivalents, restricted cash
and short-term investments of $13.9 million and a working capital deficit of $.7
million. As of September 30, 1997, the Company maintains $7 million in lines of
credit with two banks which may be used for borrowings or letters of credit. As
the Company borrows or secures letters of credit, such amounts will be secured
by the pledge of an equal amount of certificates of deposit. The lines of credit
expire during 1998. At September 30, 1997, the Company had no borrowings under
the line of credit and there were $1.3 million of outstanding letters of credit
under these facilities.

The Company's operating activities used cash of $16.0 million and $3.8 million
for the nine months ended September 30, 1996 and 1997, respectively. Net cash
used in operations in the nine months ended September 30, 1996 was comprised
primarily of the net loss offset by depreciation and amortization and increases
in accounts payable and accrued expenses. Net cash used in operations during the
nine months ended September 30, 1997 was comprised of the net loss and decreases
in accounts payable and accrued expenses and deferred revenue offset by
depreciation and amortization expense, decreases in accounts receivable and the
proposed non-cash class action litigation costs.

The Company's investing activities used cash of $7.8 million and $.4 million for
the nine months ended September 30, 1996 and 1997, respectively. The principal
uses of cash during 1996 were increases in short-term investments, capitalized
software costs and equipment purchases. The principal uses of cash during 1997
were equipment purchases offset by decreases in short term investments.

Cash used by financing activities was $2.8 million and $3.2 million during the
nine months ended September 30, 1996 and 1997, respectively and related mainly
to the repayment of debt associated with acquisitions.

The Company has no significant capital commitments. The Company's aggregate
minimum operating lease payments for the remainder of 1997 and 1998 are expected
to be approximately $3.1 million.

During 1996, the Company and certain of its current and former officers and
directors were named as defendants in nine civil suits filed as class actions on
behalf of individuals claiming to have purchased Computron Common Stock during
the time period from August 24, 1995 through January 27, 1997. The suits were
filed in the United States District Court for the District of New Jersey and
have been consolidated by court order into one suit captioned In re Computron
Software, Inc. Securities Litigation, Master File No-96-1911 (AJL). See "Item 1
of Part II. Legal Proceedings."

On October 28, 1997 the Company announced that a settlement, which is subject to
final documentation and Court approval, was reached with lead counsel
representing the certified class in the class action. In addition to
professional fees related to the litigation, the Company has recorded a $6
million charge to other income (expense) during the quarter ended September 30,
1997, reflecting the Company's share of the estimated settlement amount (see
note 3).

The Company expects that its operating cash flow will be sufficient to fund the
Company's working capital requirements (including the common stock subject to
repurchase) through 1998.


                                       15
<PAGE>   16
However, the Company's ability to achieve this result is affected by the extent
of cash generated from operations and pace at which the Company utilizes its
available resources. In addition, the Company expects to arrange a $5 million
guarantee from a financial institution representing the maximum amount payable
to class members upon exercise of their rights to resell the stock. Accordingly,
the Company may in the future be required to seek additional sources of
financing, including borrowing and/or the sale of equity securities. No
assurance can be given that any such additional sources of financing or
guarantees will be available on acceptable terms or at all.

NEW ACCOUNTING STANDARD

In March 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share, SFAS No. 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock. This statement is effective for fiscal years ending after December 15,
1997 and early adoption is not permitted. When adopted, the statement will
require restatement of prior years' earnings per share. The Company will adopt
this statement for its fiscal year ended December 31, 1997. In addition, the
Company believes that the adoption of SFAS No. 128, including the effect on
prior periods will not have a material effect on its financial statements.

QUARTERLY RESULTS

The Company has experienced, and may in the future continue to experience,
significant quarter to quarter fluctuations in results of operations and
revenues. Such fluctuations may result in volatility in the price of the
Company's Common Stock. Quarterly revenues and results of operations may
fluctuate as a result of a variety of factors, including the lengthy sales cycle
for the Company's products, the proportion of revenue attributable to license
fees versus services, the amount of revenue generated by resales of third party
software, changes in product mix, demand for the Company's products, the size
and timing of individual license transactions, the introduction of new products
and product enhancements by the Company or its competitors, changes in customer
budgets, competitive conditions in the industry and general economic conditions.
Further, the license of the Company's products generally involves a significant
commitment of capital, and may be delayed due to time-consuming authorization
procedures within an organization. For these and other reasons, the sales cycles
for the Company's products are typically lengthy and subject to a number of
significant risks over which the Company has little or no control, including
customers' budgetary constraints and internal authorization reviews. The Company
has historically operated with relatively little backlog, since its products are
generally shipped as orders are received. The Company has historically
recognized a substantial portion of its revenues in the last month of a quarter,
with these revenues frequently concentrated in the last week of the quarter.
License fees in any quarter are substantially dependent on orders booked and
shipped in the last month and last week of that quarter. Delays in the timing of
recognition of specific revenues may adversely and disproportionately affect the
Company's results of operations because a high percentage of the Company's
operating expenses are relatively fixed, and planned expenditures are based
primarily on sales forecasts and only a small percentage of the Company's
operating expenses vary with its revenues. Accordingly, the Company believes
that period to period comparisons of results of operations are not necessarily
meaningful and should not be relied upon as an indication of future results of
operations. There can be no assurance that the Company will be profitable in any
future quarter.


                                       16
<PAGE>   17
The Company's business has experienced and is expected to continue to experience
significant seasonality, due in part to customer buying patterns. These
fluctuations are caused primarily by customer budgeting and purchasing patterns,
and by the Company's sales commission policies which compensate sale personnel
on the basis of quarterly and annual performance quotas. The Company believes
this pattern may continue in the future.

Due to the foregoing factors, it is likely that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. Such an event would have a material adverse effect on
the price of the Company's Common Stock.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION AND THE
MARKET PRICE OF SECURITIES

The Company's future business, results of operations and financial condition are
also dependent on the Company's ability to successfully develop, manufacture,
market and support its products in order to meet customer demands. Inherent in
this process are a number of factors that the Company must carefully manage in
order to be successful. A discussion of certain of these factors is set forth
below.

History of Operating and Net Losses

The Company generated a net loss of $8.6 million for 1995, $31.8 million for
1996 and reported a net loss for the nine months ended September 30, 1997 of
$11.4 million. The Company also incurred a net loss for each of the five years
in the period ended December 31, 1994. As of September 30, 1997, the Company had
an accumulated deficit of $60.8 million. There can be no assurance that the
Company will be profitable in the future.

Potential for Significant Fluctuations in Quarterly Operating Results;
Seasonality

The Company has experienced, and may in the future experience, significant
quarter to quarter fluctuations in revenues and results of operations. Such
fluctuations may result in volatility in the price of the Company's Common
Stock. Quarterly revenues and results of operations may fluctuate as a result of
a variety of factors, including the lengthy sales cycle for the Company's
products, the proportion of revenues attributable to license fees versus
services, the utilization of third parties to perform services, the amount of
revenue generated by resales of third party software, changes in product mix,
demand for the Company's products, the size and timing of individual license
transactions, the introduction of new products and product enhancements by the
Company or its competitors, changes in customer budgets, competitive conditions
in the industry and general economic conditions. Further, the license of the
Company's products generally involves a significant commitment of capital and
may be delayed due to time-consuming authorization procedures within an
organization. For these and other reasons, the sales cycles for the Company's
products are typically lengthy and subject to a number of significant risks over
which the Company has little or no control, including customers' budgetary
constraints and internal authorization reviews. The Company has historically
operated with little backlog, since its products are generally shipped as orders
are received. The Company has historically recognized a substantial portion of
its revenues in the last month of a quarter, with these revenues frequently
concentrated in the last week of the quarter. License fees in any quarter are
substantially dependent on orders booked and shipped in the last month and last
week of that quarter. Delays in the timing of recognition of specific revenues
may adversely and disproportionately affect the


                                       17
<PAGE>   18
Company's results of operations because a high percentage of the Company's
operating expenses are relatively fixed, and planned expenditures, such as
continued expansion of the Company's sales force, are based primarily on sales
forecasts and only a small percentage of the Company's operating expenses vary
with its revenues. Accordingly, the Company believes that period to period
comparisons of results of operations are not necessarily meaningful and should
not be relied upon as an indication of future results of operations. There can
be no assurance that the Company will be profitable in any future quarter.

The Company's business has experienced and is expected to continue to experience
significant seasonality, due in part to customer buying patterns. These
fluctuations are caused primarily by customer budgeting and purchasing patterns
and by the Company's sales commission policies which compensate sales personnel
on the basis of quarterly and annual performance quotas. The Company believes
this pattern may continue in the future.

Due to the foregoing factors, it is likely that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. Such an event would have a material adverse effect on
the price of the Company's Common Stock.



                                       18
<PAGE>   19
Litigation

During 1996, the Company and certain of its current and former officers and
directors were named as defendants in nine class action civil suits. The suits
were filed in the United States District Court for the District of New Jersey
and have been consolidated by court order into one suit captioned In re
Computron Software, Inc. Securities Litigation, Master File No. 96-1911 (AJL).
See Note 3 and "Item I of Part II, Legal Proceedings" for further discussion.

On October 28, 1997 the Company announced that a settlement, which is subject to
final documentation and Court approval, was reached with lead counsel
representing the certified class in the class action. In addition to
professional fees related to the litigation, the Company has recorded a $6
million charge to other income (expenses) during the quarter ended September 30,
1997, reflecting the Company's share of the estimated settlement amount (see
note 3).

Historically, the Company has been involved in other disputes and/or litigation
encountered in its normal course of business. The Company believes that the
ultimate outcome of these proceedings will not have a material adverse effect on
the Company's business, financial condition and results of operations or cash
flows.

Management Changes

During the past three years, the Company has experienced significant growth.
This growth has placed a significant strain on the Company's management,
administrative and operational resources and financial control systems.
Simultaneously, the Company has experienced significant turnover of executive
management. The Company has recently added a number of key officers, including
its President and Chief Executive Officer, Executive Vice President and Chief
Financial Officer and Vice President, Finance and Administration, in February
1997 and a senior Vice President of Operations and several Managing Directors
through October 15, 1997. The Company's future results of operations will depend
in part on its ability to strengthen its senior management group, and on the
ability of its officers and key employees to improve its management,
administrative, operational and financial reporting systems and to expand,
train, manage and retain its employee base. The Company's inability to manage
these issues effectively could have a material adverse effect on the quality of
the Company's products, the Company's ability to retain key personnel and the
Company's business and financial condition and results of operations.

Reporting, Operating and Control Environment

Following the audits of the Company's consolidated financial statements for 1994
and 1995, the Company received management letters from its independent public
accountants, which enumerated material weaknesses in the Company's financial and
accounting processes, controls, reporting systems and procedures. The Company's
independent public accountants highlighted the Company's need for additional
financial and accounting personnel with software industry experience. In
addition, the Company's independent public accountants noted (i) the need for
uniformity in the language of its contracts and recommended that the Company
standardize the


                                       19
<PAGE>   20
terms of its license agreements and expand its internal contract review and
approval procedures, (ii) deficiencies in the organization of customer and
contract files and recommended that the Company improve and standardize record
keeping, (iii) the need for expanded and formalized accounts receivable
collection procedures, (iv) the need for improved documentation and record
keeping relating to consulting service projects, and (v) the need to develop
policies and procedures to accurately identify the date when technological
feasibility of developed software has been attained and to improve the
documentation and record keeping for capitalized software development costs and
to do so on a timely basis. In addition, the 1995 letter, recommended that the
Company implement improved internal accounting control procedures approved by
the Audit Committee of the Board of Directors and reorganize and upgrade the
contracts administration processes, procedures and personnel to ensure proper
revenue recognition and financial reporting.

Upon completion of the December 31, 1996, audit, the Company received a
management letter which communicated material weaknesses similar to certain of
those included in the 1994 and 1995 management letters along with other
recommendations. In response to the independent public accountant's concerns and
as a result of turnover in its accounting and finance departments, the Company
has hired senior executives with software industry experience, including a Chief
Executive Officer, a Senior Vice President of Operations, a Chief Financial
Officer, a Vice President of Finance and Administration, a Corporate Controller,
several international Controllers and Managing Directors and Corporate Counsel.
The Company expects to further strengthen the Company's financial management and
internal controls during the remainder of 1997.

Intense Competition

The financial applications and business software market is intensely competitive
and rapidly changing. A number of companies offer products similar to the
Company's products and target the same customers as the Company. The Company
believes its ability to compete depends upon many factors within and outside its
control, including the timing and market acceptance of new products and
enhancements developed by the Company and its competitors, product
functionality, performance, price, reliability, customer service and support,
sales and marketing efforts and product distribution. The primary competition
for Computron Financials are the financial applications software offered by
Oracle Corporation, PeopleSoft, Inc. and SAP AG. The principal competitors for
the Company's Computron Workflow and Computron COOL software are products
offered by Eastman Software (formerly Wang Software) and FileNet Corporation.
The Company has entered into an agreement with Eastman pursuant to which Eastman
has the right to license Computron COOL software to third parties under its own
private label and modify such software. Most of the Company's competitors are
substantially larger than the Company and have significantly greater financial,
technical and marketing resources and established, extensive direct and indirect
channels of distribution. As a result, they may be able to respond more quickly
to new or emerging technologies and changes in customer requirements, or to
devote greater resources to the development, promotion and sale of their
products than the Company. The Company's products also compete with products
offered by other vendors, and with proprietary software developed by third-party
professional service organizations and management information systems
departments of potential customers. Due to the relatively low barriers to entry
in the software market, the Company expects additional competition from other
established and emerging companies as the client/server applications software
market continues to develop and expand. The Company also expects that
competition will increase as a result of software industry consolidations. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their


                                       20
<PAGE>   21
products to address the needs of the Company's prospective customers.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share. Increased competition
is likely to result in price reductions, reduced gross margins and loss of
market share, any of which would have a material adverse effect on the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors or that competitive pressures will not have a material
adverse effect on the Company's business, results of operations and financial
condition.

Dependence on Principal Products

Substantially all of the Company's revenues are derived from the licensing of
Computron Financials, Computron Workflow, Computron COOL, Maintenance and Work
Management and fees from related services. These products and services are
expected to continue to account for substantially all of the Company's revenues
for the foreseeable future. Accordingly, the Company's future results of
operations will depend, in part, on achieving broader market acceptance of these
products and services, as well as the Company's ability to continue to enhance
these products and services to meet the evolving needs of its customers. A
reduction in demand or increase in competition in the market for financial
applications or business software, or decline in sales of such products and
services, could have a material adverse effect on the Company business, results
of operations and financial condition.

New Products and Rapid Technological Change; Risk of Product Defects,
Development Delays and Lack of Market Acceptance

The financial applications and business software market is characterized by
rapid technological change, changes in customer requirements, frequent new
product introductions and enhancements and emerging industry standards. The
introduction of products embodying new technologies and emergence of new
industry standards can render existing products obsolete and unmarketable.
Accordingly, the life cycles of the Company's products are difficult to
estimate. The Company's future success will depend in part upon its ability to
enhance its current products and to develop and introduce new products that
respond to evolving customer requirements and keep pace with technological
development and emerging industry standards, such as new operating systems,
hardware platforms, interfaces and third party applications software. There can
be no assurance that the Company will be successful in developing and marketing
product enhancements or new products that respond to technological change,
changes in customer requirements, or emerging industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of such products and
enhancements, or that any new products or enhancements that it may introduce
will achieve market acceptance. The inability of the Company, for technological
or other reasons, to develop and introduce new products or enhancements in a
timely manner in response to changing customer requirements, technological
change or emerging industry standards, would have a material adverse effect on
the Company's business, results of operations and financial condition.

Software products as complex as those offered by the Company often encounter
development delays and may contain undetected errors or failures when introduced
or when new versions are released. The Company has in the past experienced
delays in the development of software by third parties which software is being
licensed to and implemented by customers who are simultaneously licensing and
implementing the Company's products. Those delays have resulted in delays in the


                                       21
<PAGE>   22
development and shipment of the Company's products. There can be no assurance
that, despite testing by the Company and by current and potential customers,
errors will not be found in new products or enhancements after commencement of
commercial shipments, or that the Company will not experience development
delays, resulting in loss of or delay in market acceptance of a new product or
enhancement, which could have a material adverse effect on the Company's
business, results of operations and financial condition.

Dependence on Proprietary Rights; Risks of Infringement

The Company's success is heavily dependent upon its proprietary technology. The
Company regards its software as proprietary, and relies primarily on a
combination of contract, copyright and trademark law, trade secrets,
confidentiality agreements and contractual provisions to protect its proprietary
rights. The Company has no patents or patent applications pending, and existing
trade secrets and copyright laws afford only limited protection. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. Policing unauthorized use
of the Company's products is difficult, and while the Company is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. The Company makes source code
available to certain of its customers under limited circumstances which may
increase the likelihood of misappropriation or other misuse of the Company's
software. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. There can be no assurance that the steps taken by the Company to protect
its proprietary rights will be adequate or that the Company's competitors will
not independently develop technologies that are substantially equivalent or
superior to the Company's technologies.

The Company has obtained a Federal registration for its trademark "COMPUTRON" in
the United States. In addition, the company has certain common law rights in
relation to its other trademarks, service marks and product names. Although the
Company believes that its trademarks and service marks are distinct, there can
be no assurances that the Company will be able to protect its trademarks and
service marks.

The Company is not aware that any of its products, trademarks or other
proprietary rights infringe the proprietary rights of third parties. However,
there can be no assurance that third parties will not assert infringement claims
against the Company in the future with respect to current or future products. As
the number of software products in the industry increases and the functionality
of these products further overlap, the Company believes that software developers
may become increasingly subject to infringement claims. Any such claims, with or
without merit, can be time consuming and expensive to defend, cause product
shipment delays or require the Company to enter into royalty or licensing
agreements. Such royalty and license agreements, if required, may not be
available on terms acceptable to the Company, or at all, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.

Risks Associated with International Operations

The Company derived approximately $9.1 million, $14.2 million, and $21.3 million
or 28.0%, 26.9%, and 39.2% of its total revenues, from customers outside of the
United States in 1994, 1995, and 1996, respectively. The Company derived
approximately $12.8 million and $21.9 million or 37.2 % and 44.1% of its total
revenues, from customers outside of the United States for the nine


                                       22
<PAGE>   23
months ended September 30, 1996, and 1997, respectively. The Company expects
that such revenues will continue to represent a significant percentage of its
total revenues in the future. The Company believes that its continued growth and
profitability will require expansion of its sales in international markets. The
Company intends to continue to expand its operations outside of the United
States and enter additional international markets, which will require
significant management attention and financial resources. During 1996, the
Company acquired certain operations, customers and products of AT&T ISTEL, in
Essen, Germany, and the Financial Software Service Division of Generale de
Service Informatique, in Paris, France. There can be no assurance, however, that
the Company will be able to maintain or increase international market demand for
its products and services. Most of the Company's international license fees and
services revenue are denominated in foreign currencies. The Company does not
currently hedge its foreign exchange exposure. With respect to the Company's
sales that are U.S. dollar-denominated, decreases in the value of foreign
currencies relative to the U.S. dollar could make the Company's products less
price competitive. Additional risks inherent in the Company's international
business activities generally include unexpected changes in regulatory
requirements, tariffs and other trade barriers, costs of localizing products for
foreign countries, lack of acceptance of localized products in foreign markets,
longer accounts receivable payment cycles, difficulties in managing
international operations, potentially adverse tax consequences, restrictions on
repatriation of earnings and the burdens of complying with a wide variety of
foreign laws. There can be no assurance that such factors will not have a
material adverse effect on the Company's future international revenues and,
consequently, on the Company's business, results of operations and financial
condition.

Expansion of Indirect Channels

An integral part of the Company's strategy is to expand indirect marketing
channels using systems integrators and to increase the proportion of the
Company's customers licensed through such indirect channels. The Company is
currently investing, and intends to continue to invest, significant resources to
develop indirect marketing channels. There can be no assurance that the Company
will be able to attract and retain systems integrators that will be able to
market the Company's products effectively and will be qualified to provide
timely and cost-effective customer support and service. The Company's agreements
with such third parties are generally not exclusive and many of those third
parties also market competitive products. In many cases, these agreements may be
terminated by either party at any time without cause. The inability to attract
and retain systems integrators could have a material adverse effect on the
Company's business, results of operations and financial condition.

Reliance on Certain Relationships

The Company relies on relationships with a number of consultants, systems
integrators and software and hardware vendors to enhance its product development
and marketing and sales efforts, to implement the Company's software products
and to support its customers. These relationships, many of which are not the
subject of formal written agreements, provide marketing and sales leads to the
Company's direct sales force, assistance in the Company's product development
process and assistance in the service and implementation of the Company's
products. There can be no assurance that these companies, most of which have
significantly greater financial and marketing resources than the Company, will
not develop or market software products which compete with the Company's
products in the future or will not otherwise discontinue their relationships
with or support of the Company. The failure by the Company to maintain its
existing relationships, or to establish new relationships in the future, because
of a divergence of interests,


                                       23
<PAGE>   24
acquisition of one or more of these third parties or other reason, could have a
material adverse effect on the Company's business, results of operations and
financial condition.

The Company also licenses software from third parties which is incorporated into
its products. These licenses expire from time to time. In addition, the Company
generally does not have access to source code for the software supplied by these
third parties. Certain of these third parties are small companies that do not
have extensive financial and technical resources. If any of these relationships
were terminated or if any of these third parties were to cease doing business,
the Company may be forced to expend significant time and development resources
to replace the licensed software. Such an event would have a material adverse
effect upon the Company's business, results of operations and financial
condition.

Control by Existing Stockholders

At December 31, 1996, the Company's senior management, directors and affiliates
together beneficially owned approximately 65.6 % of the outstanding shares of
Common Stock. As a result, these stockholders are able to exercise control over
matters requiring stockholder approval, including the election of directors, and
mergers, consolidations and sales of all or substantially all of the assets of
the Company. This may prevent or discourage tender offers for the Company's
Common Stock unless the terms are approved by such stockholders.

Reliance on Key Personnel

The Company's future success will depend to a significant extent upon a number
of key management and technical personnel. The loss of the services of one or
more key employees could have a material adverse effect on the Company's
business. The Company is a party to employment agreements with certain key
personnel. In addition, the Company is the beneficiary of key-person life
insurance on the lives of certain key personnel. The Company believes that its
future success will also depend in large part upon its ability to attract and
retain highly skilled technical, management, sales and marketing personnel.
Competition for such personnel is intense, and the services of qualified
personnel are difficult to obtain and replace. There can be no assurance that
the Company will be successful in attracting and retaining the personnel
necessary to develop, market, service and support its products and conduct its
operations successfully. The inability of the Company to attract, hire,
assimilate and retain such personnel, or to increase revenues at a rate
sufficient to absorb the resulting increased expenses, would have a material
adverse effect on the Company's business, results of operations and financial
condition.

Possible Volatility of Stock Price

The trading price of the Company's Common Stock has been, and in the future
could be, subject to significant fluctuations in response to variations in
quarterly operating results, the gain or loss of significant contracts, changes
in earning estimates by analysts, announcements of technological innovations or
new products by the Company or its competitors, general conditions in the
software and computer industries and other events or factors. In addition, the
stock market in general has experienced extreme price and volume fluctuations
which have affected the market price of the securities of many companies in
industries similar or related to that of the Company and which have been
unrelated to the operating performance of such companies. These market
fluctuations may adversely affect the market price of the Company's Common
Stock.


                                       24
<PAGE>   25
Anti-Takeover Effect of Certain Charter and By-Law Provisions and Delaware Law

The Company's Fourth Amended and Restated Certificate of Incorporation
authorizes the Board of Directors to issue, without stockholder approval,
5,000,000 shares of Preferred Stock with voting, conversion and other rights and
preferences that could materially and adversely affect the voting power or other
rights of the holders of Common Stock. Although the Company has no current plans
to issue any shares of Preferred Stock, the issuance of Preferred Stock or of
rights to purchase Preferred Stock could be used to discourage an unsolicited
acquisition proposal. In addition, the possible issuance of Preferred Stock
could discourage a proxy contest, make more difficult the acquisition of a
substantial block of the Company's Common Stock or limit the price that
investors might be willing to pay in the future for shares of the Company's
Common Stock. Certain provisions of the Company's by-laws and of Delaware law
applicable to the Company could delay or make more difficult a merger, tender
offer or proxy contest involving the Company.


                                       25
<PAGE>   26
                            COMPUTRON SOFTWARE, INC.

                                     Part II

                                Other Information

ITEM 1. LEGAL PROCEEDINGS

During 1996, the Company and certain of its current and former officers and
directors were named as defendants in nine class action civil suits. The suits
were filed in the United States District Court for the District of New Jersey
and have been consolidated by court order into one suit captioned In re
Computron Software, Inc. Securities Litigation, Master File No. 96-1911 (AJL). A
Fourth Amended Consolidated Class Action Complaint was filed on May 28, 1997, on
behalf of all purchasers of Computron Common Stock during the period from August
24, 1995, to January 27, 1997. The complaint asserts claims under Sections 11
and 15 of the Securities Act of 1933, Sections 10 (b) and 20 (a) of the
Securities Exchange Act of 1934, as amended, Rule 10b-5 of the Securities and
Exchange Commission promulgated thereunder, and seeks unspecified compensatory
damages, attorneys' fees and costs. The Court entered a stipulated order
certifying the plaintiff class to include purchasers of Computron Common Stock
from August 24, 1995, to January 27, 1997, including certain subclasses therein.

On October 28, 1997 the Company announced that a settlement, which is still
subject to final documentation and court approval, was reached with lead counsel
representing the certified class in the class action. As its share of the
settlement, the Company will pay $1 million in cash, and an additional $5
million, which may be paid in the form of newly issued Computron common stock
or, at the option of the Company, in cash.

The overall settlement includes consideration totaling $15 million for the
benefit of class members, which includes $6 million of consideration from the
Company, and a total of $9 million in cash from certain of its present and
former officers and directors, its former auditors, and the insurance companies
that provided the Company with directors and officers liability insurance. In
return for the payments by the insurance companies, the settlement also resolves
a separate lawsuit brought by the Company against the insurance companies.

To the extent that the settlement includes stock, class members will receive a
non-transferable right to resell the stock received in the settlement to a
payment agent during an exercise period in December 1998 at a price to be
negotiated. The number of shares to be issued and the price at which class
members can exercise their right to resell the shares remain subject to
negotiation. The resale right will expire at the end of the exercise period, or
earlier as to any shares issued in the settlement that are sold by class
members.

The resale right will also expire earlier than the exercise period if
Computron's common stock trades on NASDAQ or a national securities exchange for
20 consecutive trading days at a price exceeding the exercise price of the
resale right. The Company will arrange a $5 million guarantee from a financial
institution representing the maximum amount payable to class members upon
exercise of their rights to resell the stock. In addition to professional fees
related to the litigation, the Company has recorded a $6 million charge to other
income (expense) during the quarter ended September 30, 1997, reflecting the
Company's share of the estimated settlement amount.


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<PAGE>   27
Historically, the Company has been involved in other disputes and/or litigation
encountered in its normal course of business. The Company believes that the
ultimate outcome of these proceedings will not have a material adverse effect on
the Company's business, financial condition and results of operations or cash
flows.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      a)    Exhibits

            10.17 Termination Agreement between the Company and Andreas Typaldos

            10.18 Consulting Agreement between the Company and Andreas Typaldos

      b)    Reports on Form 8-K - Changes in Registrant's Certifying Accountant
            filed on July 28, 1997


                                       27
<PAGE>   28
                            COMPUTRON SOFTWARE, INC.


                                    SIGNATURE


      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                 COMPUTRON SOFTWARE, INC.




Date:  November 12, 1997    By:  :      /s/    Michael R. Jorgensen
                                 -----------------------------------------------
                                 Michael R. Jorgensen
                                 Executive Vice President, Chief Financial
                                 Officer, and Treasurer (Principal Financial and
                                 Accounting Officer)


                                       28