<PAGE>
================================================================================
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-K/A
                                    (AMENDED)

(Mark One)

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

                  FOR THE FISCAL YEAR ENDED JUNE 30, 2001

                                       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: 0-19024
                                 -------------

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

                  OHIO                                        31-1083175
     (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                     Identification Number)

                          2800 CORPORATE EXCHANGE DRIVE
                              COLUMBUS, OHIO 43231
              (Address of principal executive offices and zip code)
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (614) 523-7000

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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
    SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK,
                                  NO PAR VALUE

         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 the 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.
|-|

         The aggregate market value of voting and non-voting common equity held
by non-affiliates of the registrant, based on the closing price for the
registrant's common stock in the Nasdaq National Market on September 25, 2001,
was approximately $17,408,013. This calculation does not reflect a determination
that certain persons are affiliates of the registrant for any other purpose. As
of September 24, 2001, 7,568,218 shares of the issuer's common stock, without
par value, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Items 10,11,12 and 13 of Part III incorporate information by reference
from the definitive proxy for the registrant's Annual Meeting of Stockholders to
be held on November 7, 2001.

================================================================================
<PAGE>


                        FRONTSTEP, INC. AND SUBSIDIARIES
                 FISCAL YEAR 2001 FORM 10-K/A AND ANNUAL REPORT

This Amendment No 1 to Form 10-K/A ("Form 10-K/A") amends Item 6, 7 and 8 of
our Annual Report on Form 10-K for the fiscal year ended June 30, 2001
including the consolidated financial statements therein, that was originally
filed on September 28, 2001.

As described in Note 3 to consolidated financial statements, a restatement has
been made to correct the previously reported financial results due to an
isolated error in third-party software used by the Company which affected the
timing of recognition of revenue from renewals of the Company's maintenance and
support contracts. In addition, the Company has made reclassifications of
certain charges out of restructuring to either cost of revenue or selling,
general and administrative expenses. This amendment does not otherwise update
the other information in the originally filed Form 10-K to reflect events after
the original filing date.


                                      INDEX
<TABLE>
<CAPTION>

                                                                                                                      PAGE

                                     PART I

<S>              <C>                                                                                          <C>
Item 1.           Business......................................................................................        3
Item 2.           Properties....................................................................................       12
Item 3.           Legal Proceedings.............................................................................       12
Item 4.           Submission of Matters to a Vote of Securities Holders.........................................       12

                                                       PART II

Item 5.           Market for Registrant's Common Equity and Related Stockholder Matters.........................       12
Item 6.           Selected Financial Data.......................................................................       13
Item 7.           Management's Discussion and Analysis of Financial Condition and Results of Operations.........       14
Item 7A.          Quantitative and Qualitative Disclosures about Market Risk....................................       26
Item 8.           Financial Statements and Supplementary Data...................................................       30
Item 9.           Changes and Disagreements with Accountants on Accounting and Financial Disclosure.............       56

                                                      PART III

Item 10.          Directors and Executive Officers of the Registrant............................................       57
Item 11.          Executive Compensation........................................................................       57
Item 12.          Security Ownership of Certain Beneficial Owners and Management................................       57
Item 13.          Certain Relationships and Related Transactions................................................       57

                                                       PART IV

Item 14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................       58
</TABLE>


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

                           FORWARD-LOOKING STATEMENTS

         In addition to historical information, this Annual Report on Form
10-K/A contains forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current beliefs, plans, objectives and
expectations of the Company's management. The words "expect," "anticipate,"
"intend," "plan," "believe," "estimate," "would" and similar expressions
identify forward-looking statements. These statements are not guarantees of
future performance and are subject to certain risks and uncertainties that could
cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in the sections entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Factors That May Affect Future Results and Market Price of Stock". Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's opinions only as of the date hereof. We undertake no
obligation to revise or update or publicly release the results of any revision
or update to these forward-looking statements. Readers should carefully review
the risk factors described in other documents we file from time to time with the
Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q
to be filed in the coming year.

                                       2
<PAGE>




                                     PART I

ITEM 1. BUSINESS

OVERVIEW

         Frontstep, Inc. is a leading global provider of integrated enterprise
software solutions for mid-sized manufacturing and distribution companies and
business units of larger companies. Until November 2000, the Company was known
as Symix Systems, Inc. The name was changed to reflect an increasingly more
diverse product offering than historically offered that redefines the business
system needs of mid-market companies as they seek to be more efficient and to
collaborate more effectively with their customers and suppliers in an
increasingly more competitive and global environment. Throughout this document,
we may refer to our company as "Frontstep" or as the "Company".

         Since the second quarter of fiscal 2000, Frontstep, and the enterprise
applications software industry in general, have experienced changing market
conditions resulting from a recession in many manufacturing industries and a
lessening of demand for traditional enterprise software. Well before these
market changes began to affect our results of operations, we began to enhance
our products and services to meet the new business systems challenges that our
customers are facing.

         The software solutions we provide to our customers include a
comprehensive suite of integrated software and services that (1) support the
traditional back office management and resources of an enterprise ("ERP"), (2)
support customer relationship management ("CRM") and other front office business
activities and (3) support an enterprise's supply chain management activities.
The software products associated with each of these solutions typically provide
a customer with a comprehensive business system that is typically their primary
system. Over the last two years, we have advanced the architecture of these
products to include the use of the Internet as a backbone that provides an
enterprise the ability to collaborate effectively with their customers and
suppliers in a global economy. More specifically, we develop, market and support
the following products:

                   Extended Enterprise Resource Planning. Traditional ERP
          applications for discrete manufacturing and industrial distribution
          with an add-on suite of products that allows for collaborative
          operations and financial business processes across an entire
          enterprise with analytical capabilities that turn data into
          information that support the business management of an enterprise.

                   Front office. A suite of products that foster customer
          loyalty and retention by combining customer relationship management
          with order management capabilities such as configuration, advanced
          pricing and rapid order entry.

                   Supply chain. A suite of products that provide a solution for
          order management with inventory and capacity visibility and production
          scheduling based on actual material and capacity constraints. These
          products allow for dynamic adjustments for unplanned events,
          exceptions and disruptions.

                   Enterprise Application Integration. Open applications
          architecture that allows for the continued use of legacy systems in a
          shared, integrated environment with newer, network-centric processes
          and systems.

         Our reputation for successful installations and implementations of our
software products is a function of our discipline and product capabilities and
sets the Company apart from its competition. Our solutions are intended to be
rapidly deployable, scalable, flexible and reliable, resulting in a comparative
low total cost of ownership and a rapid return on investment. We believe that
our approach to solving customer business systems issues in this manner results
in enhanced customer relationships, increased productivity, improved operating
efficiency, including maximizing supply chain performance and comparative lower
total cost of ownership. More specifically:

                   Improved customer relationships. The Company's enterprise,
          front office and supply chain solutions integrate customer
          requirements with sales, marketing, engineering, manufacturing and
          customer service information, in order to achieve more accurate
          planning and scheduling decisions, rapid response times, better
          on-time deliveries, improved order fulfillment, improved field service
          delivery and overall customer satisfaction.

                                       3
<PAGE>

              Improved supply chain performance. The Company's digital supply
          chain approach utilizes Internet technology in a distributed
          environment to provide real-time collaborative multi-site order
          planning and visibility for an enterprise with its important suppliers
          and customers. An improved supply chain results in enhanced customer
          service, improved asset management such as lower inventories and
          receivables and lower transaction costs.

              Reduced total cost of ownership. The Company's solutions are
          designed to minimize the total cost of implementing, operating and
          maintaining enterprise systems and to maximize operating efficiency,
          thereby providing tangible return on investments made by the customer.
          Our software runs on standard hardware platforms, providing users with
          the flexibility to leverage existing technology systems and to
          optimize system configurations. The modular design of the Company's
          software allows manufacturers and distributors to implement systems
          quickly and easily and provides the flexibility to add additional
          functionality or change business process models as customer needs and
          business requirements change.

              Reduced time to benefit. We believe our ability to implement
          software solutions rapidly and to reduce our customer's time to
          benefit is a key competitive advantage. The Company attempts to reduce
          implementation time in three ways. First, we employ a structured
          implementation methodology that separates the solution implementation
          process into distinct and manageable phases, in order to ensure
          coordination throughout the implementation process. Second, our
          proprietary business process modeling tool enables customers to map
          the appropriate systems and procedures necessary to increase the speed
          of the deployment process. Third, we maintain strategic relationships
          with numerous business partners, which enable the Company to provide a
          solution that addresses enterprise system needs in an integrated
          fashion with minimal customer disruption.

         As a result of these factors, which we believe sets us apart from our
competition, Frontstep has been one of the mid-market leaders in the enterprise
software industry for more than 20 years, particularly with manufacturing
companies and more recently with distribution companies. We provide our
customers with the software products we have developed, professional consulting
services associated with the installation of our products and related training
for customer personnel. We have more than 4,400 customer sites and a worldwide
network of 28 offices in 16 countries. Our offices are equipped to provide our
services, support our products and, in several countries around the world,
translate our products into other languages. The Company's principal executive
offices are located at 2800 Corporate Exchange Drive, Columbus, Ohio 43231, and
its telephone number is (614) 523-7000.

THE ENTERPRISE APPLICATIONS SOFTWARE INDUSTRY

         We are in the enterprise applications software industry. This industry
is large and has many companies that provide various types of software to meet
general or specific business needs. We develop and market products that solve
business system needs for the manufacturing and distribution industries,
specifically for mid-sized companies or divisions of larger companies. This
portion of the enterprise applications market has been characterized
historically as enterprise resource planning. Enterprise resource planning has
generally been available since the early 1990's when corporate reengineering
began and primarily supports the control and management of operations of a
manufacturing enterprise. It has its roots with material requirements planning
software and inventory control software that were utilized in the 1980's as a
means of managing inventories production schedules. More recently, our industry
has been described as Collaborative Commerce by industry analysts, to more
accurately reflect a changing business systems model for manufacturing and
distribution companies.

         Our customers do business in an extremely competitive manufacturing
environment. Changing technologies and the prospects for growth of
business-to-business commerce on the Internet are dramatically altering the
manner in which these customers will do business in the coming years. These
changes are also impacting business systems requirements to support these new
ways of doing business. We believe that maximizing manufacturing efficiency and
productivity, managing customer relationships, managing distribution channels,
improving procurement and supplier relationships and improving performance of
supply chains are essential requirements for the economy of the 21st century as
companies seek to increase global reach, innovation, productivity and
profitability.

         We believe that mid-market companies will rethink their business models
and change the way they do business to remain competitive. As they change,
business systems requirements will include an enterprise management software
solution that integrates front office capabilities such as e-business, customer
relationship management and supply change management, with

                                       4
<PAGE>

more traditional ERP applications. We also believe that, in the mid-market, the
solution must be rapidly deployable, scalable and flexible, resulting in a
comparative low total cost of ownership and rapid return on investment. Since
1998, the Company has been investing in the development of such software
products and capabilities and the open architecture required to meet these new
challenges for our customers.

         According to AMR Research, a software market analysis firm, the
worldwide marketplace for each of the major product markets and projected annual
growth rates are estimated to be approximately as follows:

<TABLE>
<CAPTION>
                                                   WORLDWIDE          WORLDWIDE
         SOFTWARE MARKET                         REVENUES 2000      REVENUES 2004    GROWTH RATE
         ---------------                         -------------      -------------    -----------
                                                          (IN BILLIONS)
<S>                                                <C>              <C>                   <C>
         e-commerce............................    $    2.0         $    17.0             53%
         Supply chain management...............         4.0              23.0             41%
         Customer relationship management......         5.0              23.0             36%
         Enterprise resource planning..........        16.0              24.0              8%
</TABLE>

STRATEGY

         Our objective is to become the leading provider of collaborative
software solutions for mid-sized manufacturing and distribution companies and
subsidiaries and divisions of larger companies. Our customer focus includes both
single location and multi-location manufacturers and distributors, including
those with facilities around the world. Our product focus includes our
traditional ERP solution now extended to incorporate front office and
supply-chain solutions that will meet all of an enterprise's primary business
system requirements. The key components of our strategy include:

               Deliver a comprehensive integrated enterprise solution. We
          believe that we have one of the broadest product footprints available
          to mid-market manufacturing and distribution companies. While we are
          well known for our ERP software solution, we have invested heavily
          over the last several years in product acquisition and new product
          development of this comprehensive product suite. Our efforts have also
          included the integration of these products to facilitate ease of use.
          Our belief is that mid-market companies typically have limited
          resources and prefer a single vendor to provide them with their
          primary business system. As a result, we believe that we can compete
          with larger, better capitalized competitors on both price and
          functionality of our offerings.

               Embrace a simple technology platform for ease of use. We are
          committed to delivering a simple, but powerful technology solution to
          better manage and leverage our costs of development and maintenance
          and to simplify our customers' information technology environment. We
          have chosen Microsoft as our primary technology platform for all of
          our newer network-based products. This standard technology, used by
          many of the Company's customers in other aspects of their business,
          allows customers to leverage their technology investments and
          capabilities by using our software. Our ERP software uses the Progress
          Software Corporation database and tools and we have standardized and
          simplified the integration of these two technologies for our
          customers. We intend to continue leveraging our product technology and
          costs from the advancements of each of our technology platform
          providers.

               Provide superior installation and support services. We are
          committed to serving our customers beyond the sale of our products
          with excellence in professional services and support. The Company's
          worldwide professional services organization, which employs
          approximately 200 consultants and managers, uses a structured
          implementation methodology. Services include project management,
          implementation, product education, technical consulting, programming
          and system integration services and ongoing maintenance and support.
          Our methodology and capabilities allow customers to rapidly and
          efficiently install and maximize the benefits of the Company's
          software products. The Company considers its ability to implement its
          software solution rapidly a key competitive factor.

               Leverage our leadership position in the mid-market. We believe
          that we are a leading provider of enterprise system solutions to
          mid-market manufacturers. We have been serving the mid-market for 22
          years and have more than 300,000 users at 4,400 customer sites around
          the world. We service and support these customers from our worldwide
          network of 28 offices in 16 countries. We intend to leverage our
          experience and customer base to enhance our leadership position in the
          mid-sized manufacturing and distribution market.

                                       5
<PAGE>
                   Build a global alliance of partners. Over the last few years,
          we have developed alliances with strategic partners for technology to
          expand the breadth of our product capabilities, to expand our ability
          to market and sell our products and to support our customers after the
          product sale. Microsoft, Progress, Cognos Incorporated and
          PricewaterhouseCoopers are two notable alliances we have undertaken to
          date. We also have an exceptional network of preferred business
          partners around the world that provide consulting and installation
          services to expand our ability to serve our customers. We believe
          these alliances bring the best of many disciplines to our customers
          while allowing us to maintain control over our costs of doing
          business. We intend to continue to pursue additional important
          alliances with industry leading companies that will further enhance
          the Company's offerings and capabilities.

                   Advance our products rapidly. We have rapidly advanced our
          products and capabilities as technologies and business systems
          requirements have dramatically changed over the last few years. Since
          fiscal 1998, we have heavily invested in both the acquisition and
          development of our products and product capabilities. We believe that
          over $50 million has been invested in acquired and developed software
          along with research and development expenditures. We are committed to
          ensuring that the Company's products are technologically advanced and
          best-of-class in the mid-market.

PRODUCTS

         The software solutions we provide to our customers include a
comprehensive suite of integrated software and services that (1) support the
traditional back office management and resources of an enterprise through ERP,
(2) support customer relationship management and other front office business
activities and (3) support an enterprise's supply chain management activities.
The software products associated with each of these solutions are comprised of
the following:

                  Syteline ERP. SyteLine is the Company's hallmark Enterprise
         Resource Planning product for mid-sized discrete manufacturing
         companies that provides a comprehensive operations and financial
         business process solution to an enterprise. SyteLine's functionality
         includes support for customer service, order processing, inventory
         control and purchasing, manufacturing production management, production
         planning & scheduling, cost management, project control, accounting
         functions and financial administration.

                  SyteLine ERP has been configured to operate with add-on
         capabilities that include:

                  -        Configuration--product configuration for sales order
                           and manufacturing

                  -        Advanced Planning and Scheduling (APS)--real-time
                           inventory and capacity planning

                  -        Business Intelligence--data analysis and charting

                  -        Workflow Automation--business process definition and
                           execution

                  -        Advanced Forms--design and deployment of custom laser
                           printed forms

                  -        Business Process Management--process documentation
                           tool for implementation and ISO compliance

                  SyteLine is designed to operate with all of our other products
         to create a collaborative and integrated business management solution
         to meet all of the front office and back office needs of an enterprise.

                  SyteDistribution is the Company's ERP product designed for
         mid-sized distributors to meet their unique operational process demands
         to better control inventories, shipments and orders among enterprises.

                  Frontstep Front Office Solutions. Frontstep's Front Office
         solution is a single interface point for customers, employees, sales
         representatives and channel partners to view and execute marketing and
         sales activity pertaining to prospects and customer orders. Front
         Office Solutions improve customer service, lower costs and increases
         revenues. Front Office Solutions are integrated with SyteLine and are
         architected for integration with other ERP systems.



                                       6
<PAGE>

         Front Office products include:

                  -        Customer Relationship Management ("CRM")--sales force
                           automation (SFA), contact & customer management,
                           marketing, customer service and order management
                           tools

                  -        Active Link--application integration, business
                           process automation and collaboration platform

                  -        Customer Center--B2B storefront

                  -        Intelligence--business intelligence tools and data
                           marts for data mining

                  -        Web Configuration--product and sales order
                           configuration

                  -        Advanced Pricing--web based pricing application

                  Frontstep Supply Chain Solutions. Frontstep's Supply Chain
         Solutions provide the fastest way for companies to align supply with
         demand and deliver on time. Our solution provides the capability to
         improve customer service by synchronizing customer orders with
         inventory and capacity. This solution lowers operational costs and
         improves on-time deliveries by automating inventory sourcing and
         manufacturing planning activities through real-time synchronization of
         demand and supply across multi-site operations and suppliers.

         Supply Chain products include:

                  -        Supply Chain Center--starting point when accessing
                           sourcing and promising engines to balance supply and
                           demand between multiple sites and suppliers

                  -        Intelligent Sourcer--sourcing engine between multiple
                           sites or suppliers based on rules to balance demand
                           and supply

                  -        Point Promiser--promising engine for
                           Available-to-Promise (ATP) collaboration that
                           balances inventory availability

                  -        Capacity Promiser--promising engine for Capacity
                           Promise (CP) collaboration that balances selected
                           materials and rate based capacity

                  -        Advanced Planning and Scheduling (APS)--promising
                           engine for Capable-to-Promise (CTP) collaboration
                           that balances materials and capacity in real-time,
                           connects to other promising engines for cascading
                           supply chain synchronization

                  Frontstep Knowledge Zone. Frontstep Knowledge Zone is our
         subscription-based, on-line education service. Users can access
         education for Frontstep solutions anytime and anywhere they have
         Internet access. It is a convenient, low cost alternative to hardcopy
         training manuals and classroom education.

SERVICES AND SUPPORT

         We maintain a worldwide professional services organization of over 200
employees and a network of more than 50 business partners and strategic
alliances which offer to our customers a full range of services to support
installation, ongoing operations and to maximize the benefits of our software
products. These services include, but are not limited to, project management,
implementation support, product education, technical consulting, programming and
system integration services and ongoing maintenance and product support. We
employ our own structured services methodology to manage and support customer
implementation.



                                       7
<PAGE>

         Our services are priced separately and fees for our services are not
included in the price for our software products. These services are billed as
incurred. Although we attempt to minimize customization of our software
products, we do provide professional programming services to modify our software
products to address specific customer requirements. These modifications may
include designing and programming complete applications or integrating our
software products with legacy systems.

         Maintenance and support services include product enhancements and
updates, upgrades to new versions, telephone support during extended business
hours, full-time emergency support and access to our customer support service
center on our Internet home page. Fees for maintenance and support services
generally are billed annually in advance and revenue is deferred and recognized
ratably over the term of the maintenance and support agreement.

SALES AND DISTRIBUTION

         We currently license our software to customers primarily based on a
license fee for each concurrent session or concurrent execution of its software
products. We receive additional license fees whenever a customer increases the
number of concurrent sessions, usually as a result of the growth of the
customer's business or expansion to other sites. Sales opportunities are
generated through a combination of in-house telemarketing, leads from consulting
partners, advertising, trade shows and direct contacts by sales representatives.
Our product offerings are sold to customers through two primary channels:

               Direct sales. This sales channel is comprised of direct sales
          representatives selling to manufacturers and distributors and focuses
          on selling the total business system under the Frontstep brand name.
          This channel targets the Company's traditional mid-sized manufacturing
          and distribution markets. We presently have over 50 direct sales
          representatives located around the world.

               Business partners. This sales channel is comprised of more than
          50 third-party business partner firms that resell the Company's entire
          suite of products. These partners include consulting firms and
          application service providers that specialize in the Company's
          products.

         We derive our revenues and service our customers in 16 countries around
the world. We derived approximately 22%, 20% and 22% of our fiscal 2001, 2000
and 1999 revenues, respectively, from sales outside of North America. The
distribution of total revenue, operating income and identifiable assets
attributable to each of our geographic market areas for fiscal years 2001, 2000
and 1999 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                             ASIA/
                                                                       NORTH AMERICA       EUROPE           PACIFIC
                                                                       -------------       ------           -------
<S>                                                                    <C>              <C>               <C>
         FISCAL 2001
         Total revenue........................................         $    91,508      $    14,736       $    10,832
         Operating income (loss)..............................             (25,190)            (189)           (2,238)
         Long-lived assets....................................               6,822              312               512

         FISCAL 2000
         Total revenue........................................         $   103,065      $    13,941       $    11,902
         Operating income (loss)..............................              (5,737)          (3,904)           (1,155)
         Long-lived assets....................................               7,135              383               468

         FISCAL 1999
         Total revenue........................................         $   100,950      $    16,400       $    11,722
         Operating income (loss)..............................               7,728           (1,383)              709
         Long-lived assets....................................               7,330              392               475
</TABLE>



                                       8
<PAGE>




PRODUCT DEVELOPMENT

         We devote a significant percentage of our resources to identifying the
needs of our customers in developing new features and enhancements to existing
products and designing and developing new products. We perform all of our
development activities with our own professional development and product support
organization of more than 250 professionals located at the Company's facility in
Columbus, Ohio and in other development centers around the world.

         Our practice is to release updates and major enhancements on a regular
basis since the market for our products is characterized by rapid technological
change, evolving industry standards in computer hardware and software
technology, changes in customer requirements and frequent new product
introductions and enhancements.

         We are committed to product and technological excellence and to meeting
the changing needs of mid-sized customers. As a result, we commit a substantial
portion of our revenues to research and development and to building new
products, which are typically capitalized as developed. Total research and
product development costs, including amounts capitalized, were $18.4 million,
$22.7 million and $15.1 million for the fiscal years ended June 30, 2001, 2000
and 1999, respectively. Additions to capitalized software were $5.1 million,
$7.0 million and $4.9 million for the same respective periods and were
capitalized in accordance with applicable accounting standards.

COMPETITION

         The market for enterprise solutions is intensely competitive, rapidly
changing and highly fragmented, which has become even more fragmented with
technology changes and the perceived opportunities for e-business applications.
This market is also significantly affected by new product offerings and other
market activities. We have a large number of competitors that vary in size,
computing environments and overall product scope. Within our market, the primary
competition comes from independent software vendors in three distinct groups:
(1) traditional enterprise software developers, including J.D. Edwards & Co.,
QAD, Inc., Oracle Corporation, IFS and Epicor Software Corporation; (2) large
software developers focusing on more specialized point solutions such as CRM
software or supply chain management; and (3) newer companies specializing in
internet commerce and e-business solutions.

         A number of companies offer products that are similar to our products
and are directed at the market for enterprise software and compete against us on
a regular basis. Many of the these competitors have more established and larger
marketing and sales organizations, significantly greater financial, technical
and other resources and a larger installed base of customers than the Company.
We believe that we compete favorably against our competition in the following
areas, which we consider to be the most important considerations for potential
customers:

         -        knowledge of and experience with mid-sized businesses

         -        focus on discrete manufacturing and industrial distribution
                  vertical markets

         -        breadth of our comprehensive enterprise application solutions

         -        collaboration and workflow automation across the enterprise
                  and outside the enterprise with customers and suppliers

         -        rapid implementation

         -        competitive pricing

         -        corporate reputation based on more than 20 years of experience

         -        size of installed user base



                                       9
<PAGE>




PROPRIETARY TECHNOLOGY

         Our ability to compete is dependent in part upon our internally
developed, proprietary intellectual property. We regard our products as
proprietary trade secrets and confidential information. We rely upon our license
agreements with customers, distribution agreements with distributors and our own
security systems, confidentiality procedures and employee agreements to maintain
the trade secrecy of our products. For all of our significant products, we have
registered with appropriate Federal agencies for protection of our programs,
documentation and other written materials under copyright and trademark laws .
Please see also "Item 7. Factors That May Affect Future Results And Market Price
Of Stock - Our success is dependent in part upon our proprietary technology and
other intellectual property".

EMPLOYEES

         As of June 30, 2001, we employed 680 persons of which 213 were employed
in international operations outside of North America. None of our employees are
represented by a labor union. We have never experienced a work stoppage and
believe that our employee relations are good.

EXECUTIVE OFFICERS OF THE REGISTRANT

         The Company's executive officers are as follows:
<TABLE>
<CAPTION>
         NAME                         AGE                       TITLE
         ----                         ---                       -----
<S>                                   <C>        <C>
         Lawrence J. Fox.......       45         Chairman of the Board

         Stephen A. Sasser.....       52         President, Chief Executive Officer and
                                                 Director

         Lawrence W. DeLeon....       46         Executive Vice President, Worldwide Field
                                                 Operations

         Stephen A. Yount......       46         Executive Vice President, Business
                                                 Development and Channel Operations

         Daryll L. Wartluft....       60         Executive Vice President, Products Group

         Robert D. Williams....       46         Vice President, Human Resources

         Jorge L. Lopez........       46         Vice President, Strategic Planning and
                                                 Corporate Development

         Carolyn J. Morris.....       57         Vice President, Marketing

         Daniel P. Buettin.....       48         Vice President, Finance, Chief Financial
                                                 Officer and Secretary
</TABLE>

         Lawrence J. Fox founded a predecessor to Frontstep in 1979 as a sole
proprietorship. He has held his present office as Chairman of the Board since a
predecessor to the Company was incorporated in 1984. From 1984 to 1998, Mr. Fox
also served as Chief Executive Officer of the Company.

         Stephen A. Sasser has held the positions of President and Chief
Executive Officer of the Company since January 1999. Mr. Sasser previously
served the Company, from the time that he joined the Company in July 1995 until
January 1999, as President and Chief Operating Officer. Mr. Sasser has served as
a director of the Company since July 1995. Prior to joining Frontstep, from 1994
to 1995, Mr. Sasser served as Vice President of International Operations for
Trilogy Software, a provider of sales and marketing software. From 1992 to 1994,
Mr. Sasser was Group Vice President of the Systems Management Division and
Pacific Rim Operations of Legent Corporation ("Legent"), a provider of systems
management software products and services.


                                       10
<PAGE>


From 1987 through its acquisition by Legent in 1992, Mr. Sasser served as
President of the Data Center Management Division of Goal Systems International,
Inc. ("Goal Systems") which designed, developed, and marketed systems management
software products.

         Lawrence W. DeLeon has held the position of Executive Vice President
Worldwide Field Operations since August 2000. Mr. DeLeon previously served the
Company as Vice President, Chief Financial Officer and Secretary from the time
that he joined the Company in 1995 to July 2000. From 1991 to 1995, Mr. DeLeon
served in various capacities at Legent, including Treasurer for Goal Systems,
Europe, Vice President-Finance and Administration and Vice President-Central
Europe.

         Stephen A. Yount has held the position of Executive Vice President
Business Development and Channel Operations since August 2000. Mr. Yount served
the Company from August 1998 to July 2000, as Vice President of America's Field
Operations, and from the time that he joined the Company in May 1996 until
August 1998, as Vice President of America's Sales and Services. From 1995 to May
1996, he was Vice President of Sales at Tyecin Systems, a provider of
client-server manufacturing software for the semi-contractor market. From 1993
to 1995, Mr. Yount served as Vice President of Sales and Services at Neuron
Data, a client-server application development software company. From 1987 to
1993, he served in various senior sales positions at Legent.

         Daryll L. Wartluft has held the position of Executive Vice President
Frontstep Product Group since August 2000. Mr. Wartluft previously served as
Vice President and General Manager, SyteLine Division from the time that he
joined the Company in May 1998 until July 2000. From 1995 to 1998, he was
President and Chief Executive Officer and a director of Pivotpoint Inc., an ERP
software and services provider. From 1994 to 1995, he served as Group Vice
President of Applications Management Division of Legent. Prior to that time, he
held various management positions with Group Bull Worldwide Information Systems,
a provider of systems management software products and services, and
International Business Machines Corporation, a provider of advanced information
technology and services.

         Robert D. Williams joined the Company in September 1995 as Vice
President, Human Resources. Prior to that time, he served as Director, Human
Resources/Associate Relations of Legent from August 1992 to August 1995. From
March 1990 to August 1992 he was Executive Director of Human Resources and
Administrative Services of Goal Systems.

         Jorge L. Lopez joined the Company in November 1996 as Vice President of
Corporate Development/Strategic Planning. From 1995 to November 1996, Mr. Lopez
served as Vice President of Marketing for Salesoft Inc., a provider of automated
sales and marketing software. From 1989 to 1995, Mr. Lopez served as Vice
President of Strategic Alliances for Avalon Software, Inc. an enterprise
resource planning software and services company. Prior to that time, Mr. Lopez
held various marketing and technical positions with International Business
Machines Corporation, a provider of advanced information technology and
services.

         Carolyn J. Morris joined the Company November 2000 as Vice President,
Marketing. From March 2000 to November 2000, Mrs. Morris served as Chief
Executive Officer of Wireless Dynamics, a manufacturer of internet access
equipment. From May 1996 to March 2000, Mrs. Morris was Chief Operating Officer
of Nobix, Inc., a manufacturer of client-server software. Prior to 1996, Mrs.
Morris founded and managed Maxwest Inc., a management consulting firm
specializing in executive support for startup companies.

         Daniel P. Buettin joined the Company in August 2000 as Vice President,
Finance, Chief Financial Officer and Secretary. Mr. Buettin served from 1995 to
August 2000 as Vice President and Chief Financial Officer of MPW Industrial
Services Group, Inc., a publicly-traded services company. Prior to joining MPW,
Mr. Buettin served in various executive positions, including Chief Financial
Officer, with OHM Corporation, a publicly-traded services company, in Findlay,
Ohio, from 1987 to 1995. Mr. Buettin was previously with Arthur Andersen LLP.

         The executive officers of the Company are appointed by and serve at the
pleasure of the Company's Board of Directors. There are no arrangements or
understandings between any officer and any other person pursuant to which the
officer was so appointed.



                                       11
<PAGE>

ITEM 2. PROPERTIES

         Our corporate headquarters and principal administrative, product
development, and sales and marketing operations are located in approximately
87,000 square feet of leased office and storage space in Columbus, Ohio. The
lease agreement commenced in July 1991 and will expire on June 30, 2002. The
lease agreement provides for an annual base rent and operating expenses of
approximately $1.5 million. Additionally, we have 27 leased sales and support
offices throughout the United States and elsewhere.

ITEM 3. LEGAL PROCEEDINGS

         We are subject to legal proceedings and claims which arise in the
normal course of business. While the outcome of these matters cannot be
predicted with certainty, management does not believe the outcome of any of
these legal matters will have a material adverse effect on our business,
financial condition or results of operations.

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

         None.


                                    PART II.

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

         Our common shares are traded in the over-the-counter market and are
quoted on the Nasdaq National Market ("NASDAQ") under the symbol "FSTP". As of
September 10, 2001, we had approximately 213 shareholders of record. The
following table sets forth, for the periods indicated, the range of high and low
sale prices for Frontstep's common shares as reported by NASDAQ:

                                                     PRICE RANGE
                                                     -----------
                                                HIGH              LOW
                                                ----              ---
         FISCAL 2001
              First Quarter..........        $   10.00         $    5.31
              Second Quarter.........             6.88              2.63
              Third Quarter..........             7.13              3.13
              Fourth Quarter.........             3.90              1.89

         FISCAL 2000
              First Quarter..........        $   12.38         $    7.88
              Second Quarter.........            18.50              9.50
              Third Quarter..........            32.75             15.25
              Fourth Quarter.........            20.25              8.13

         We have never paid cash dividends on our shares. We expect that all
future earnings will be retained to finance our operations and for the growth
and development of our business. Accordingly, we do not currently anticipate
paying cash dividends on our shares in the foreseeable future. The payment of
any future dividends will be subject to the discretion of the Board of Directors
of Frontstep and will depend on our results of operations, financial position
and capital requirements, general business conditions, restrictions imposed by
financing arrangements, if any, legal restrictions on the payment of dividends
and other factors the Board of Directors deems relevant. In addition, holders of
Frontstep's outstanding preferred shares may be entitled to receive dividends on
the preferred shares prior to the payment of dividends on the common shares, in
certain cases, under the our Amended Articles of Incorporation. See also "Sale
of Unregistered Securities" immediately below.



                                       12
<PAGE>


SALE OF UNREGISTERED SECURITIES

         In July 2001, we entered into a new credit facility arrangement with
Foothill Capital Corporation. The credit facility includes a $15 million,
three-year term note and a $10 million revolving credit facility. In connection
with the new credit facility arrangement with Foothill, we issued to Foothill a
warrant to purchase 550,000 common shares at an initial exercise price of $3.36
per share, which was the average of the closing bid price for our common shares
for the 10 trading days immediately preceding the closing date for the new
credit facility. The exercise price of the warrants and the number of common
shares issuable upon exercise of the warrants are subject to adjustments from
time to time under the anti-dilution provision contained in the warrants. The
warrants expire in July 2006 and are exercisable at any time prior to its
expiration. The warrants were issued in reliance upon an exemption from
registration under Section 4(2) of the Act and Rule 506 promulgated by the
Commission under the Act. As required by our agreement with Foothill, we intend
to register 687,500 shares for possible issuance upon exercise of the warrants.

ITEM 6.           SELECTED FINANCIAL DATA

         The following selected consolidated financial data as of and for the
years ended June 30, 1997 through 2001 have been derived from the Consolidated
Financial Statements of Frontstep. The selected consolidated financial data
below should be read in conjunction with the Consolidated Financial Statements
and notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Form 10-K/A (in
thousands, except per share data).

<TABLE>
<CAPTION>
                                                                          YEAR ENDED JUNE 30,
                                                     ---------------------------------------------------------------
                                                        2001         2000         1999         1998         1997
                                                     -----------  -----------  -----------  -----------  -----------
                                                      restated
STATEMENT OF OPERATION DATA:
<S>                                                    <C>          <C>          <C>          <C>          <C>
Total revenue                                          $117,076     $128,908     $129,072     $ 97,597     $ 65,772
Cost of revenue                                          58,826       61,856       52,025       35,701       23,690
                                                     -----------  -----------  -----------  -----------  -----------

Gross margin                                             58,250       67,052       77,047       61,896       42,082

Operating expenses:
   Selling, general and administrative                   62,847       57,504       56,801       43,995       30,741
   Research and development                              13,332       15,684       10,217        7,901        5,659
   Amortization of acquired intangibles                   3,285        3,593        2,140        1,479          610
   Restructuring and other charges                        6,403        1,067          835        6,503            -
                                                     -----------  -----------  -----------  -----------  -----------
     Total operating expenses                            85,867       77,848       69,993       59,878       37,010
                                                     -----------  -----------  -----------  -----------  -----------
Operating income (loss)                                 (27,617)     (10,796)       7,054        2,018        5,072
Other (expense) income, net                                (510)        (966)         151         (178)         107
                                                     -----------  -----------  -----------  -----------  -----------
(Loss) income before income taxes                       (28,127)     (11,762)       7,205        1,840        5,179
(Benefit from) provision for income taxes                (2,063)      (1,557)       3,206        3,196        1,916
                                                     -----------  -----------  -----------  -----------  -----------
Net (loss) income                                      $(26,064)    $(10,205)  $    3,999    $  (1,356)   $   3,263
                                                     ===========  ===========  ===========  ===========  ===========

Net (loss) income per common share - diluted         $   (3.46)   $   (1.38)   $     0.55   $   (0.21)   $    0.54
                                                     ===========  ===========  ===========  ===========  ===========

Weighted average shares outstanding - diluted             7,535        7,411        7,264        6,317        6,079

BALANCE SHEET DATA:
Working capital                                       $   2,649     $ 19,348    $  21,926     $ 13,575     $  7,897
Total assets                                             72,593       94,368       90,600       66,382       44,252
Total long-term debt and lease obligations                8,742        3,169        5,759        2,305          530
Total shareholders' equity                               21,003       36,709       42,401       31,301       23,361
</TABLE>

     The Selected Financial Data for the year ended June 30, 2001 has been
restated as described in Note 3 to the Consolidated Financial Statements.


                                       13
<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

         Frontstep is a leading provider of integrated ERP software and services
for mid-market manufacturing and distribution companies and business units of
larger companies. Since the second quarter of fiscal 2000, we have experienced
changing market conditions resulting from a recession in many manufacturing
industries and a lessening of demand for ERP systems. Well before these market
changes began to affect results of operations, we began to enhance our product
offerings beyond traditional ERP systems to participate in higher growth market
segments. These enhancements include a comprehensive suite of integrated
software and services that (1) support the management and resources of an
enterprise, (2) support customer relationship management and other front office
business activities and (3) support an enterprise's supply chain management
activities. In that regard, in fiscal 2000, we created our Frontstep subsidiary
to advance the development of new products and related sales channels to support
these new products and services. In November 2000, the shareholders of the
Company approved a change in the Company's name to Frontstep, Inc. to signal the
completion of this transformation.

         Events of September 11, 2001. On September 11, 2001, the United States
was violently attacked by terrorists in New York City, Washington D.C. and
elsewhere. Frontstep and its employees were not directly affected. Our hearts go
out to the victims and the victims' families of this great American tragedy.

         In the days that have followed since this event, there have been
significant indications of a broad and possibly lasting impact of this event on
our economy and the economy of other countries around the world. It is not yet
clear whether a recession or further slowdown of the economy will occur.

         Furthermore, Frontstep generally records a significant portion of our
revenues, particularly our license fees revenue, in the third month of each
fiscal quarter, often in the last several days of that month. Since the attack
has caused widespread uncertainty at the end of our first quarter of fiscal
2002, the general uncertainty is only exacerbated by the timing.

         As a result of the events of September 11, 2001, and the uncertainty
that has followed, there can be no assurance that we will achieve the financial
results we discuss below for the September 2001 quarter and for the remainder of
fiscal 2002.

         Current Financial Results and Events. While the enterprise applications
software industry has generally been experiencing weak demand and fluctuating
economic conditions for software spending since early in 1999, we did experience
significantly improved license fees revenues and heightened demand for our
products in the quarter ended December 31, 2000. This increase in revenues and
heightened overall demand led us to believe that strategy would lead us to more
successful financial results, with improvements each quarter over comparable
periods in the prior year. However, in the latter portion of the quarter ended
March 31, 2001, customers and potential customers appeared to react to the
slowing economy by electing to defer their buying decisions. As a result, the
Company, the information technology industry in general and many other
enterprise software providers experienced significant shortfalls in revenue
levels and incurred net losses for the March 2001 quarter and subsequent fiscal
quarter as compared to an expectation of continued improvements as were
demonstrated in the quarter ended December 31, 2000.

         Consequently, in April 2001, we initiated a broad restructuring program
in order to reduce the Company's workforce, reduce expenses associated with
non-essential activities and to improve the Company's ability to be profitable
at lower levels of revenue. We reduced our worldwide workforce by approximately
20%, discontinued certain product development and other non-essential
activities, closed certain offices and acted to reduce operating costs. As this
effort is fully realized in the September 2001 quarter, we believe that overall
operating costs, including payroll related employee costs, facility costs, costs
of outside services and software providers and other costs, will be reduced by
$28 million on an annual basis, or approximately 25%. Commencing in the
September 2001 quarter the Company expects to fully realize savings of
approximately $7.0 million per quarter. These savings are expected to occur
through reductions in payroll costs of $4.5 million; facility costs, $0.2
million; and discontinuance of certain capitalized assets and programs, $0.4
million. Additional reductions are expected




                                       14
<PAGE>

through the cost management of other selling, general and administrative
expenses including marketing, contractors, travel, meetings and outside
services, $1.6 million; and other assets write-offs of $0.3 million. In the
quarters ended March 31, 2001 and June 30, 2001 (the "current fiscal quarter"),
we recorded an aggregate of approximately $4.2 million, pre-tax, in related
restructuring charges including termination costs relating to employees,
facility closure costs and contract termination costs. Additionally we recorded
a charge of $6.8 million in bad debt expense to write off accounts receivable
and a $1.9 million charge to license fee cost of sales to write-off capitalized
product costs. We do not believe that the restructuring has had or will have a
significant negative impact to our business operations because our personnel and
facilities were in excess of needed levels.

         As a result of the shortfall in revenues and recorded restructuring and
other charges, we reported operating losses of $15.9 million and $5.0 million,
respectively, for the quarter ended March 31, 2001 and the current fiscal
quarter. However, as a result of the significant reduction in operating costs
from the restructuring, we experienced positive cash flows in the current fiscal
quarter and reported a "normalized" operating profit, when each are adjusted to
exclude the restructuring charges and amortization of acquired intangibles. The
quarter ending September 30, 2001 is expected to be profitable as reported and
cash flows are expected to be positive.

         Previous Quarterly Financial Results and Events. For several quarters
prior to the quarter ended December 31, 2000, we experienced a decline in
revenues related to a sluggish demand for our software products and services. We
believe that this decline was related to the continued industry-wide trend of
delays in new business system purchases caused initially by the Year 2000 market
dynamics and subsequently by a desire by potential customers to better
understand the Internet and the role of e-business solutions on their overall
systems strategy.

         As a result, we recorded operating losses before restructuring and
other charges of $9.7 million, $3.1 million and $1.3 million for the fiscal year
ended June 30, 2000 and for the September 2000 and December 2000 quarters,
respectively. In July 2000, we made several structural changes to discontinue
certain business operations, write off non-performing assets and to restructure
the Company to better focus on its core business strategy. In connection with
these changes, we recorded a $429,000, pre-tax, non-recurring charge in the
fourth quarter of fiscal year 2000 and an additional $2.2 million, pre-tax, in
the September 2000 quarter. Because this restructuring was completed in the
quarter ended September 30, 2000, there were minimal effects to our ongoing
operations. The charge taken in the June 2000 quarter was entirely a non-cash
charge. However, the charge taken in the September 2000 quarter represented cash
outlays for employee termination costs and facility closures. All of these cash
payments were made during the first half of fiscal year 2001.

GENERAL

         The Company's total revenue is derived primarily from licensing
software, providing related services, including installation, implementation,
training, consulting and systems integration and providing maintenance and
support on an annual basis. Revenue is accounted for in accordance with
Statement of Position 97-2, Software Revenue Recognition, as amended and
interpreted from time to time. License fees revenue is generally recognized when
the software product is shipped. Services revenues are recognized as the
services are performed and revenues from maintenance agreements are billed
periodically, deferred and recognized straight-line over the term of the
agreements.

         Cost of license fees revenue includes royalties, amortization of
capitalized software development costs and software delivery expenses. Cost of
service, maintenance and support revenue includes the personnel and related
overhead costs for implementation, training and customer support services,
together with fees paid to third parties for subcontracted services.

         Selling, general and administrative expenses consist of personnel,
facilities and related overhead costs, together with other operating costs of
the Company, including advertising and marketing costs.

         Research and development expenses include personnel and related
overhead costs for product development, enhancement, upgrades, quality assurance
and testing. The amount of such expenses is dependent on the nature and status
of the development process for the Company's products. Development costs
capitalized in a given period are dependent upon the nature and status of the
development process. Upon general release of a product, related capitalized
costs are amortized over three to five years and recorded as license fees cost
of revenue.



                                       15
<PAGE>


RESULTS OF OPERATIONS

         The fiscal year that ended June 30, 2001 is our "current fiscal year"
or "fiscal 2001". The prior year that ended June 30, 2000 is the "prior fiscal
year" or "fiscal 2000". The year ended June 30, 1999 is "fiscal 1999".

RESTATEMENT

         The Company has restated its financial statements for the year ended
June 30, 2001 (the "Restatement") as described in Note 3 to the Consolidated
Financial Statements. The Restatement has been made to correct the previously
reported financial results due to an isolated error in third-party software used
by the Company which affected the timing of recognition of revenue from renewals
of the Company's maintenance and support contracts during those reported
periods. For the year ended June 30, 2001, this restatement reduced revenue by
$1,210,000 or 1.0% of the previously reported revenue of $118,286,000. This
decrease in revenue increased the reported net loss for the year by $1,210,000
or 4.9% of the previously reported net loss of $24,854,000. The balance sheet
account entitled Deferred revenue increased as of June 30, 2001 by $1,210,000 or
6.3% from the previously reported balance of $19,067,000. The financial
statements included herein reflect the restatement. As discussed in Note 3 to
the Consolidated Financial Statements the Company has also made certain
financial statements reclassifications. The following discussion reflects
effects of reclassifications and restatements.



  FISCAL 2001 COMPARED TO FISCAL 2000

         Revenue. Total revenue decreased $10.6 million, or 8.2%, to $117.1
million in fiscal 2001 from $128.9 million in fiscal 2000. The total revenue mix
is shown in the table below (in thousands, except percentage data):


<TABLE>
<CAPTION>
                                                                        Fiscal Years Ended June 30,
                                                              ------------------------------------------------
                                                                               in thousands,
                                                              ------------------------------------------------
                                                                       2001                    2000
                                                              ----------------------- ------------------------
<S>                                                              <C>          <C>        <C>           <C>
             License fees revenue                                $51,309      43.8%      $57,858       44.9%
             Service revenue                                      30,921      26.4%       39,626       30.7%
             Maintenance and support revenue                      34,846      29.8%       31,424       24.4%
                                                              ----------------------- ------------------------
             Total revenue                                      $117,076     100.0%     $128,908      100.0%
                                                              ======================= ========================
</TABLE>


         License fees revenue decreased 11.3% in the current fiscal year from
the prior fiscal year. We believe that the decrease in license fees revenue in
fiscal 2001 is due to the current economic climate that is causing our customers
and potential customers to defer their buying decisions related to large capital
investments, particularly information technology investments. We expect that
license fees revenues will remain stable in the short-term but will not begin to
grow again until the current economic climate improves and demand for our
products improves as a result.

         Service, revenue decreased 22.0%in the current fiscal year from the
prior fiscal year. The decrease is primarily the result of sluggish license fees
revenue experienced by the Company in the last few quarters. Services revenues
in particular are directly dependent on new license purchases by new and
existing customers, which has decreased 11.3%. Maintenance and support revenue
has increased 10.9% due primarily to the steadily improving number of active
customer contracts over the last few years as the base of customers under such
programs has continued to grow.

         Cost of Revenue. Total cost of revenue as a percentage of total revenue
increased to 50.2% for the current fiscal year from 48.0% for the prior fiscal
year.

         Cost of license fees revenue increased $0.4 million, or 1.8%, to $21.9
million in the current fiscal year from $21.5 million in the prior fiscal year
and as a percentage of license fees revenue, increased to 42.7% in the current
fiscal year





                                       16
<PAGE>

from 37.2% in the prior fiscal year. Both years include $1.9 million of
capitalized software written off as part of restructuring the business. The
percentage increase is primarily attributable to an increase in the number of
third party product vendors included in our new product offerings, discounting
as a result of weakened demand and lower license fees revenue affecting certain
fixed and related costs.

         Cost of service, maintenance and support revenue decreased $3.4
million, or 8.5%, to $36.9 million in the current fiscal year from $40.4 million
in the prior fiscal year and as a percentage of service, maintenance and support
revenue, decreased to 56.2% in the current fiscal year from 56.8% in the prior
fiscal year. The decrease in cost is attributable to a decline in service
revenue resulting from sluggish license fees revenue in the current fiscal year
and the percentage decrease is primarily due to the continued growth of
maintenance and support revenues which have higher margins than services
revenues. As noted above, service revenues in particular are directly dependent
on new license purchases by new and existing customers.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.3 million, or 9.3%, to $62.8 million in the
current fiscal year from $57.5 million in the prior fiscal year. Such expenses
as a percentage of total revenue increased to 53.7% in the current fiscal year
from 44.6% in the prior fiscal year. The increase in costs is attributable to a
$6.8 million charge to write-off accounts receivable in conjunction with the
restructuring that was undertaken during the current fiscal quarter, the full
effect of which will substantially reduce such costs in fiscal 2002. The
increase in the percentage of total revenue is due to the accounts receivable
write-off as well as the decrease in total revenue since many of these costs are
fixed in nature and to the fact that the restructuring did not occur until late
in the current fiscal year.

         Research and Development. Total research and development costs,
including amounts capitalized, decreased $4.3 million or 18.9%, to $18.4 million
for the current fiscal year from $22.7 million for the prior fiscal year and
decreased as a percentage of total revenues to 15.5% in the current fiscal year
from 17.6% in the prior fiscal year. Although total research and development
spending decreased from the prior fiscal year, we are continuing to spend a
substantial portion of total revenues on the development of our expanded product
offerings and product capabilities, development of future releases of our ERP
software and development of interfaces with third-party software products. We
believe that these investments are critical to the success and market acceptance
of our new product offerings and total suite of integrated collaborative
business systems.

         We capitalized development costs of $5.1 million during the current
fiscal year and $7.0 million during the prior fiscal year.

         Restructuring and Other Charges. In April 2001, we announced a broad
restructuring plan in order to reduce the Company's workforce, reduce expenses
associated with non-essential activities and to improve the Company's ability to
be profitable at lower levels of revenue. We reduced our worldwide workforce by
approximately 20%, discontinued certain product development and other
non-essential activities and closed certain office facilities. In relation to
this restructuring plan, we also wrote-off certain accounts receivable and other
non-performing assets. We do not believe that the restructuring has had or will
have a significant negative impact to our business operations because our
personnel and facilities were in excess of needed levels. The results of the
restructuring plan are discussed above

         As a result of the April 2001 restructuring plan, the Company recorded
pre-tax restructuring and other charges of $4.2 million during the year ended
June 30, 2001. Of these charges, $80,000 was non-cash primarily relating to the
write-off of non-performing assets and $4.1 million represented future cash
requirements. The Company expended $2.1 million of the cash requirements within
fiscal 2001 and anticipates the remaining cash requirements of $2.0 million will
be expended primarily in the first two quarters of fiscal year 2002. However,
some cash requirements will stretch into following fiscal periods based upon
contract termination requirements.

The Company's restructuring plan consisted of the following significant items:

-    Employee separation costs of $2.2 million - The Company reduced its
     workforce by approximately 20%, or 162 employees. These costs consist of
     severance for these employees.

-    Contract termination liabilities - $900,000 - The Company elected to
     discontinue its SyteCentre ERP product to focus resources on the Company's
     primary ERP product, SyteLine. The Company also discontinued its ASP
     hosting solution and its internet procurement software due to sluggish
     demand and unprofitable operations. As a result, the Company



                                       17
<PAGE>

     reserved $900,000 to cover anticipated contractual obligations and
     costs associated with customers currently using the discontinued
     products and services.

-    Facility closure costs of $1.2 million - The Company recorded $1.2 million
     of costs associated with closing certain offices in Arizona, California,
     Canada and Asia. Cancelable lease term costs were based on actual
     determinable amounts. For those leases with non-cancelable lease terms, the
     Company assumed that subleases would be obtained after a one-year period.


         In July 2000, the Company announced several structural changes to
discontinue certain business operations, write off non-performing assets and to
restructure the Company to better focus on its core business strategy. These
changes included divesting the Company's FieldPro subsidiary, terminating the
operations of its e-Mongoose, Inc. subsidiary, consolidating the Company's
product development organizations and restructuring the Company's sales
channels. In connection with this announcement, the Company recorded a
non-recurring charge of $429,000, pre-tax, in the three months ended June 30,
2000 and an additional non-recurring charge of $2.2 million , pre-tax, in the
three months ended September 30, 2000. The aggregate pre-tax charge of $2.6
million included non-cash charges of $429,000 related primarily to the sale of
Visual Applications Software, Inc. . The remaining $2.2 million was related to
the reduction of the Company's headcount. The headcount reduction included
approximately 90 employees associated with the operations discussed above and
others terminated as part of the restructuring. The costs were for severance
payments and were paid during the year ended June 30, 2001. No accruals remain
for these costs as of June 30, 2001.

         Benefit from Income Taxes. The benefit from income taxes for the
current and prior fiscal years reflects an effective tax rate of 7.7% and 13.2%,
respectively. The effective tax rate in the current fiscal year differs from the
expected corporate tax rate primarily due to valuation allowances recorded
against the deferred tax assets related to net operating losses incurred
domestically, and in both periods due to foreign losses incurred in countries
where no tax benefits will be received for the losses and the non-deductibility
of the amortization of certain intangibles.

  FISCAL 2000 COMPARED TO FISCAL 1999

         Revenue. Total revenue decreased slightly in fiscal 2000 to $128.9
million from $129.1 million in fiscal 1999. We believe that the decline in total
revenue in fiscal 2000 was due to the industry-wide trend of delays in new
business system purchases caused initially by the Year 2000 market dynamics and
subsequently by continued sluggish demand for ERP software as customers and
potential customers assessed the shifting technologies and the potential for
e-business solutions to support their business needs. The revenue mix is shown
in the table below:


<TABLE>
<CAPTION>
                                                                       FISCAL YEARS ENDED JUNE 30,
                                                              ----------------------------------------------
                                                                              IN THOUSANDS,
                                                              ----------------------------------------------
                                                                      2000                    1999
                                                              ----------------------  ----------------------
<S>                                                           <C>          <C>        <C>          <C>
             License fees revenue                                $57,858      44.9%      $67,423      52.2%
             Service revenue                                      39,626      30.7%       34,857      27.0%
             Maintenance and support revenue                      31,424      24.4%       26,792      20.8%
                                                              ----------------------  ----------------------
             Total revenue                                      $128,908     100.0%     $129,072     100.0%
                                                              ======================  ======================
</TABLE>




         License fees revenue decreased 14.2% in fiscal 2000 from fiscal 1999.
The decrease in fiscal 2000 was due to the industry-wide trend of delays in new
business system purchases. We believe that the purchase delays were caused
initially by the Year 2000 market dynamics and that the purchase delays have
continued as a result of the ERP market's transformation to a broader more
comprehensive business solution.

                                       18
<PAGE>

         Service revenue increased 13.7% in fiscal 2000 from fiscal 1999. The
growth in fiscal 2000 was attributable to continued increases in the number of
licensed software installations worldwide and the expanding product line of the
Company. Maintenance and support revenue increased 17.3% due primarily to the
steadily improving number of active customer contracts over the last few years
as the base of customers under such programs continued to grow.

         Cost of Revenue. Total cost of revenue as a percentage of total revenue
was 48.0% for fiscal 2000 compared to 40.3% fiscal 1999.

         Cost of license fees revenue increased to 37.2% of license fee revenue
in fiscal 2000 from 27.2% in fiscal 1999. The percentage increase was primarily
due to an increase in the rate of amortization on capitalized software expenses.
Additionally, the Company took a $1.9 million charge to write-off certain
capitalized software in conjunction with the Company's restructuring in fiscal
2000. We began amortizing capitalized software costs related to certain new
products late in fiscal 1999.

         Cost of service, maintenance and support was 56.8% of service,
maintenance and support revenue in fiscal 2000 compared to 54.7% in fiscal 1999.
The increase in cost of service, maintenance and support was primarily due to
the use of subcontractors to supplement the work performed by our employees. In
general, the use of subcontractors results in lower margins than the use of our
employees, but provides increased flexibility in meeting customer demands.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.7 million, or 1.2%, to $57.5 million in
fiscal year 2000 from $56.8 million in fiscal year 1999. Such expenses as a
percentage of total revenue increased to 44.6% in fiscal year 2000 from 44.0% in
fiscal year 1999. The increase in costs and percent of total revenue is
attributable to a $714,000 charge to write-off accounts receivable in
conjunction with the restructuring that was undertaken during fiscal year 2000.


         Research and Development. Total research and development costs,
including amounts capitalized, were $22.7 million or 17.6% of total revenue for
fiscal 2000 compared to $15.1 million or 11.7% of total revenue in fiscal 1999.
During fiscal 2000, research and development expenses increased in dollar amount
and as a percentage of total revenues as we continued to invest heavily in the
development of an expanded product offering and the application of new Internet
technologies. In addition, the increase in research and development expense is
due to staff expansion relating to our development of future releases of our
existing products and development focus on interfacing with third-party software
products. Capitalized development costs were $7.0 million and $4.9 million for
the years ended June 30, 2000 and 1999, respectively.

         We incurred nonrecurring charges of approximately $638,000 in fiscal
2000 and $835,000 in fiscal 1999 relating to the write-off of acquired
in-process technology in conjunction with certain acquisitions completed in each
of these fiscal years.

         Restructuring and Other Charges. In July 2000, the Company announced
several structural changes to discontinue certain business operations, write off
non-performing assets which are no longer in use and to restructure the Company
to better focus on our core business strategy. These changes included divesting
the Company's FieldPro subsidiary, terminating the operations of our e-Mongoose,
Inc. subsidiary, consolidating the Company's product development organizations
and restructuring the Company's sales channels. In connection with this
announcement, the Company recorded a non-recurring charge of $429,000, pre-tax,
related primarily to the sale of Visual Applications Software, Inc.


         Provision for (benefit from) Income Taxes. The effective tax rates for
the years ended June 30, 2000 and 1999 were (13.2)% and 44.5%, respectively. The
effective tax rate for fiscal 2000 differs from the expected corporate tax rate
primarily due to a gain on the sale of foreign operations and a valuation
allowance offset to net operating losses of certain foreign subsidiaries. In
addition, the effective tax rates for fiscal years 2000 and 1999 were impacted
by acquisition research and development write-offs, which are not deductible for
income tax purposes, the amount of foreign taxable earnings in countries with
higher effective tax rates and the non-deductibility of the amortization of
goodwill.



                                       19
<PAGE>




QUARTERLY RESULTS
<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED,
                                                                   IN THOUSANDS,
                                           FISCAL 2001                                      FISCAL 2000
                          JUNE 30  MARCH 31   DECEMBER 31   SEPTEMBER 30    JUNE 30    MARCH 31   DECEMBER 31  SEPTEMBER 30
<S>                       <C>       <C>         <C>           <C>           <C>        <C>         <C>           <C>
     Total revenue        $28,821   $26,334     $33,856       $28,065       $30,989    $31,468     $34,380       $32,071
     Gross margin          16,066     9,605      18,801        13,778        13,282     17,340      18,726        17,704
     Operating loss        (4,994)  (15,928)     (1,492)       (5,203)      (10,823)    (2,379)        668         1,738

     % of Total Revenue
     Gross margin            55.7%     36.5%       55.5%         49.1%         42.9%      55.1%       54.5%        55.2%
     Operating loss         (17.3%)   (60.5%)      (4.4%)       (18.5%)       (34.9%)    (7.6%)        1.9%         5.4%
</TABLE>

         The quarterly results for fiscal 2001 have been restated as described
in Note 3 to the Consolidated Financial Statements.

         Our results of operations have fluctuated on a quarterly basis. Our
expenses, with the principal exception of sales commissions and certain
components of cost of revenue, are generally fixed and do not vary with revenue.
As a result, any shortfall of actual revenue in a given quarter would adversely
affect net earnings for that quarter.
FISCAL 2000:

         QUARTER ENDED SEPTEMBER 30, 1999. Total revenue decreased $5.7 million,
or 15.1%, from the prior quarter ended June 30, 1999. Revenues in the September
quarter of each year have historically been less than in the June quarters due
to lesser demand, generally since the June quarter is the end of the Company's
fiscal year and more effort is made to close new business in the June quarter,
including discounting of the Company's products. In addition, the impact of
customers planning for the year 2000 increased demand in prior quarters that
began to fall off in the September quarter of 1999. Gross margin was also down
to 55.2% from 58% due to the fixed nature of these expenses as described above.
Operating income increased to $1.7 million from $0.6 million as a result of
one-time charges in the prior year June quarter for acquired research and
development and a decrease in selling, general and administrative costs in the
September quarter.

         QUARTER ENDED DECEMBER 31, 1999. Total revenue increased $2.3 million,
or 7.2%, from the prior quarter ended September 30, 1999. Generally, revenue
increases in the December quarter of each year are driven by stronger customer
demand at the completion of the calendar year, which is generally our customers'
business year for budgeting and capital purchase decisions. Gross margin was
consistent with prior periods due to fixed nature of expenses as described
above. Operating income decreased $1.1 million, or 61.6%, from the prior quarter
as the Company began to increase research and development efforts to expand its
product offerings and increase its selling, general and administrative costs to
support the marketing efforts for these newer product offerings.

         QUARTER ENDED MARCH 31, 2000. Total revenue decreased $2.9 million, or
8.4%, compared to the prior quarter ended December 31, 1999. This is consistent
with historical results between the December and March quarters of prior years.
Demand is generally the weakest in the March quarter of each year. However,
demand was also negatively affected by a reduction in demand for solutions after
the transition to the year 2000 ("Y2K"), which in prior quarters had caused an
increase in demand for new systems that were Y2K compliant. Gross margin also
decreased $1.4 million, or 7.4%, primarily due to lower revenues as expenses are
generally fixed. The operating loss of $2.4 million resulted from the decline in
revenues and an increase in the Company's costs, mostly selling, general and
administrative costs, to support the Company's efforts to expand its product
offerings and one-time charges for acquired research and development in the
March quarter.

         QUARTER ENDED JUNE 30, 2000. Total revenues decreased $0.5 million, or
1.5%, as the trend in decreasing license revenues continued due to the Y2K
market dynamics discussed above. In addition, demand was weak in a historically
strong




                                       20
<PAGE>

quarter due to potential customer concern for and desire to understand the
impact of the internet and e-business solutions on their business prior to
making purchase decisions. Gross margin decreased $4.1 million, or 23.4%. Gross
margin as a percent of revenues decreased to 42.9% from 55.1% in the March
quarter primarily due to the fixed nature of these expenses, lower total
revenues and a one-time charge of $1.9 million to write-off capitalized software
relating to the discontinuation of e-mongoose. Significant expenditures in
research and development and infrastructure relating to new product development
continued in the June quarter, along with a non-recurring restructuring charge
to discontinue certain activities and to write-off related assets, of $429,000,
which resulted in a $10.8 million operating loss.

FISCAL 2001:

         QUARTER ENDED SEPTEMBER 30, 2000. The Company continued to experience
decreasing revenues, for the same reasons as discussed in the prior quarters
above. Total revenues decreased by approximately $2.9 million, or 9.4%, from the
prior quarter ended June 30, 2000. The Company's operating results also
continued to be impacted by the Company's investments related to new products
and include an additional non-recurring restructuring charge of $2.1 million for
reductions in workforce and related costs, which resulted in an operating loss
of $5.2 million.

         QUARTER ENDED DECEMBER 31, 2000. The Company experienced a $5.8
million, or 20.6%, growth in total revenues due to strong license sales for the
first time since the year earlier December quarter. The strong demand was
partially a result of new product offerings and the related development
expenditures of the prior several quarters. Gross margin increased $5.0 million,
or 36.5%, to 55.5% of revenues compared to 49.1% for the prior quarter. This was
primarily due to strong revenues offsetting the impact of the fixed expenses.
While the Company continued to make significant investment in research and
development relating to these new products and maintain the supporting
infrastructure, the operating loss in the quarter was $1.5 million,
significantly less than recent quarters as a result of the stronger revenues.

         QUARTER ENDED MARCH 31, 2001. Total revenues decreased $7.5 million, or
22.2%, from the prior quarter ended December 31, 2000. While the Company had
anticipated a continued improvement in revenues from stronger demand as was
evidenced in the prior quarter, customers chose to defer planned purchases in
response to economic turmoil and a rapidly slowing economy. The decrease in
revenues directly impacted both gross margin and operating losses due to the
fixed nature of the Company's expenses. Gross margin declined $9.2 million, or
48.9%, to 36.5% of revenues from 55.5% in the prior quarter. This was primarily
due to decreased revenues and the fixed nature of many of the costs associated
with product sales. The Company reported an operating loss of $15.9 million, of
which $580,000 was a non-recurring non-cash restructuring charge. The Company
also incurred one-time non-cash charges totaling $8.8 million for write-offs of
certain accounts receivable and capitalized software related to discontinued
products and services. See the "Overview" section of "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for a discussion
of this restructuring by the Company and its impact on future operating results.

         QUARTER ENDED JUNE 30, 2001. The Company experienced a $2.5 million, or
9.4%, improvement in license revenues compared to the prior quarter ended March
31, 2001. This increase was a result of modest improvements in customer
purchasing behavior following the March quarter. Gross margin improved $6.5
million, or 67.3%, to 55.7% of revenues from 36.5% for the prior quarter. This
improvement was a result of the revenue increase and cost reductions associated
with the restructuring of the business in April 2001. The April restructuring
also significantly reduced the Company's selling, general and administrative
expenses and research and development expenses. The Company reported an
operating loss of $5.0 million of which $3.7 million was a non-recurring charge
for the April restructuring.

For additional discussion of quarterly fluctuations refer to previously filed
quarterly reports on Form 10-Q.
LIQUIDITY AND CAPITAL RESOURCES

         As of June 30, 2001, we had cash and cash equivalents of $1.5 million
and working capital of $3.9 million. During the fiscal year ended June 30, 2001,
we used $3.5 million of cash for operating activities, including the
restructuring and other charges described above. We purchased $4.0 million of
property and equipment and used $5.1 million for capitalized software. Cash was
also used for the payment of $3.4 million on certain debt payments relating to
previous acquisitions. While the revolving credit facility borrowings of the
Company increased from $3.0 million to $8.3 million during the current fiscal
year, borrowings remained relatively constant during the second half of the
fiscal year: $8.6 million at December 31, 2000 and $8.3 million at June 30,
2001.



                                       21
<PAGE>

         In December 2000, we entered into a revolving credit facility with PNC
Bank, National Association (the "Credit Facility") to replace our previous
credit arrangement with Bank One, N.A. The Credit Facility provided the Company
with up to $20.0 million of revolving credit availability for a three-year
period based on qualifying accounts receivable and was secured by our trade
accounts receivable originating within the United States and Canada. Borrowings
under the Credit Facility bore interest at either the Federal Funds rate plus
0.5% or, at our option, the Eurodollar market rate plus 2.75%. The interest rate
is subject to change based on interest rate formulas tied to our net income. The
Credit Facility is subject to customary terms and conditions, including a
financial covenant that we maintain a minimum level of net worth.

         As of March 31, 2001, we were not in compliance with certain covenants
under the Credit Facility as a result of our reported losses and the
restructuring and other charges recorded for the quarter ended as of that date.
Although the bank waived this noncompliance as of March 31, 2001, we recognized
that the borrowing availability under the Credit Facility would not be
sufficient to support our cash needs and to repay the temporary additional
credit that the bank agreed to provide to assist in the restructuring discussed
above. A search for additional financing to meet all of our cash needs was
conducted during the current fiscal quarter.

         In July, 2001, we entered into a new credit facility arrangement with
Foothill Capital Corporation. The credit facility includes a $15 million,
three-year term note and a $10 million revolving credit facility. Availability
under the revolving credit facility is based on and secured by our qualifying
accounts receivable originating within the United States and Canada. Borrowings
under the revolving credit facility bear interest either at the Federal Funds
rate plus 1.5%, or at the Eurodollar market rate plus 3.0%. The term note bears
interest at the rate of 10.5% plus 1.5% per annum added to principal. The term
note is payable in monthly installments commencing October 1, 2001. The
agreement is subject to customary terms and conditions and includes financial
covenants for maintenance of a minimum tangible net worth, a minimum level of
earnings before interest, taxes, depreciation and amortization and a maximum
ratio of debt to earnings before interest, taxes, depreciation and amortization.

         As a result of the restructuring discussed above, which was completed
in the current fiscal quarter, we expect to return to profitability and positive
cash flow from operations commencing in the quarter ending September 30, 2001.
As a result of the new credit facility with Foothill and the expected return to
profitability, we anticipate that cash on hand, cash flow from operations and
available borrowings as described above will be sufficient to satisfy expected
cash needs for the next 12 months.

         While we classified our debt as a short-term liability in our balance
sheet as of March 31, 2001 in accordance with certain accounting literature, we
have now re-classified this debt as a long-term liability in our balance sheet
as of June 30, 2001 since we completed our new credit facility in July 2001.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK

         Changes in demand for our products and services could cause potential
significant fluctuations in our quarterly and annual operating results. Our
operating results may vary significantly from quarter to quarter. Our quarterly
operating results are affected by a number of factors that could materially and
adversely affect our revenues and profitability. These factors also make
estimation of operating results prior to the end of a quarter extremely
uncertain. These factors include:

         -        demand for our products and services

         -        competitive conditions in the software industry

         -        the timing of the introduction or market acceptance of new or
                  enhanced products which we offer or which are offered by our
                  competitors

         -        the potential for delay or deferral of customer purchases of
                  our products in anticipation of product enhancements or new
                  product offerings by us or our competitors

         -        the timing of any acquisitions by us and related write-offs

         -        the mix of our product and services net revenues

                                       22
<PAGE>

         -        the mix of our North American and international net revenues

         -        dependence on a few very large new license sales in each
                  quarter to meet our quarterly goals

         -        general economic conditions and other factors affecting
                  capital expenditures by our customers

         -        the size, timing and structure of significant licenses with
                  our customers

         -        the entry of new competitors and technological advances by
                  competitors

         -        delays in localizing our products for new markets

         -        product life cycles

         The purchase of our products and services may involve a significant
commitment of capital and other resources by our customers. As a result, the
sales cycles for our products and services, from initial evaluation to delivery
or performance, vary from customer to customer. The timing of individual sales
is difficult to predict, and sales can occur in quarters subsequent to those
anticipated by us. In addition, sales through indirect channels, such as through
business partners, are difficult to predict and may have lower profit margins
than direct sales.

         Our revenues in any quarter are substantially dependent on orders
signed and shipped in that quarter. Typically, we realize higher revenues in our
second and fourth fiscal quarters. Generally, we record a majority of our
quarterly revenues in the third month of each quarter, mostly in the latter half
of the third month. We believe that the fluctuations in our operating results is
caused primarily by the budgeting cycles of our customers and established buying
patterns by our customers or potential customers in the industry. As a result,
our quarterly operating results are difficult to predict. In addition, delays in
product delivery or in closings of sales near the end of a quarter could cause
our quarterly operating results to fall substantially short of anticipated
levels.

         Adverse economic conditions in the general business economy or
specifically in the manufacturing industries we serve could result in reduced
purchases of our products and services. Our customers are primarily discrete
manufacturers and industrial products distributors in discrete manufacturing
environments. Our business depends substantially upon the capital expenditures
of our customers. Capital expenditures by our customers are somewhat dependent
upon the demand for their manufactured products and the strength of their
financial condition. A recession or other adverse economic event in general or
one that specifically affects manufacturers could cause them to curtail or delay
capital expenditures for computer software products. Any significant changes in
the timing or amount of capital expenditures by manufacturers could have a
material adverse effect on our business, operating results and financial
condition.

         Industries in which our customers operate have been affected by
weakened demand for their products for approximately one to two years and we
believe that the demand for our products and services has already been
significantly impacted, which has negatively affected our financial results and
financial condition. However, there can be no assurance that economic conditions
relating to our customers or potential customers will not become more severe.

         Any decrease in our licensing activity is likely to result in reduced
services revenue in future periods. Our service, maintenance and support revenue
is derived from our installation, implementation, training, consulting, systems
integration and software product maintenance and support services. Typically a
decrease in our service, maintenance and support revenue follows a decrease in
our licensed software installations. Our ability to maintain or increase our
service, maintenance and support revenue depends in large part on our ability to
increase our software licensing activity.

         The market for our products is characterized by rapid technological
change, evolving industry standards in computer hardware and software
technology, changes in customer requirements and frequent new product
introductions and enhancements. The introduction of products embodying new
technologies and the emergence of new industry standards can cause customers to
delay their purchasing decisions and render existing products obsolete and
unmarketable. The life cycles of our software products are difficult to
estimate. Consequently, our future success will depend, in part, upon our
ability to continue




                                       23
<PAGE>

to enhance our existing products and to develop and introduce in a timely manner
new products with technological developments that satisfy customer requirements
and achieve market acceptance. There can be no assurance that we will
successfully identify new product opportunities and develop and bring new
products to market in a timely and cost-effective manner or that products,
capabilities or technologies developed by others will not render our products or
technologies obsolete or noncompetitive or shorten the life cycles of our
products. If we are unable to develop on a timely and cost-effective basis new
software products or enhancement to existing products, or if our products or
enhancements do not achieve market acceptance, our business, operating results
and financial condition may be materially adversely affected.

         We derive a significant portion of our business from operations that
are subject to foreign economic conditions and currency fluctuations. We derive
a significant portion of our business from international sales. We expect to
continue to expand our international operations, which will require significant
management attention and financial resources. Our international operations are
subject to various risks, including the following:

         -        the impact of a recession in foreign countries, particularly
                  in Europe and the Asia/Pacific regions

         -        cultural and language difficulties associated with serving
                  customers and localizing products

         -        staffing and management problems related to foreign operations

         -        exchange controls and reduced protection for intellectual
                  property in some countries

         -        political instability

         -        unexpected changes in foreign regulatory requirements

         -        difficulties in collecting accounts receivable and longer
                  collection periods

         -        restrictions on the repatriation of foreign earnings

         -        the impact of local economic conditions and practices

         -        fluctuations in foreign exchange rates

         -        potential adverse foreign tax consequences

         Termination of agreement with Progress would cause a disruption of
service to our customers and may result in lower operating margins or a loss of
business. Our core product, SyteLine, is written in Progress, a proprietary
programming language which we license from Progress Software Corporation. We
market and distribute Progress in connection with the sale of our products under
a non-exclusive agreement with Progress. The agreement may be terminated by
either party upon 90 days' written notice to the other party. In addition, the
agreement may be terminated immediately by either party if a material breach of
the agreement by the other party continues after 30 days' written notice. Our
relationship with Progress involves other risks which could have a material
adverse effect on our business, operating results or financial condition,
including the following:

         -        the failure of Progress to continue its business relationship
                  with us

         -        the failure of Progress to develop, support or enhance
                  Progress in a manner that is competitive with enhancements of
                  other programming languages

         -        delays in the release of Progress products or product
                  enhancements that require a delay in the release of our
                  products or product enhancements

         -        the loss of market acceptance of Progress and its relational
                  database management system

                                       24
<PAGE>

         -        our inability to migrate our software products to other
                  programming languages on a timely basis if Progress is no
                  longer available

         Conversion of our outstanding Series A preferred shares and exercise of
our outstanding warrants could result in substantial dilution of your
investment, a detrimental effect on our liquidity and ability to raise
additional capital, and a significant decline in the market value of our common
shares. As of September 24, 2001, we had approximately 7,568,218 common shares
outstanding and we had approximately 1,587,412 additional common shares reserved
for issuance upon conversion of our outstanding Series A preferred shares and
upon exercise of our outstanding warrants and employee and director stock
options. Our Series A preferred shares and outstanding warrants and stock
options also contain or are subject to various anti-dilution and similar
provisions which may require us to issue additional common shares in certain
circumstances. If these securities are converted or exercised, other holders of
our common shares may experience significant dilution in the market value of our
common shares held by them. If the holders were to sell all or a substantial
amount of those common shares into the open market, the sales could have a
negative effect on the market price of our common shares. The sales also might
make it more difficult for us to sell equity or equity-related securities in the
future at a price we deem appropriate.

         We have no intention of paying cash dividends. We have never paid any
cash dividends on our common shares. We currently intend to retain all future
earnings, if any, for use in our business and we do not expect to pay any cash
dividends in the foreseeable future. In addition, dividend payments to holders
of our common shares are subject to the rights of holders of our preferred
shares. As long as our Series A preferred shares are outstanding, no dividends
may be declared or paid on our securities that rank junior to our Series A
preferred shares, including our common shares, unless all required cumulative
dividends are paid or a sum sufficient for the payment of the dividends is set
apart for such payment.

         Turnover in our senior management or other key employees could have a
material adverse effect on our business, operating results and financial
condition. Our success depends to a significant extent upon senior management
and other key employees. The loss of one or more key employees could have a
material adverse effect on our business. We do not have employment agreements
with our executive officers, except Stephen A. Sasser, our President and Chief
Executive Officer, and we do not maintain key man life insurance on our
executive officers. We believe that our future success will depend in part on
our ability to attract and retain highly skilled technical, managerial, sales,
marketing, service and support personnel. Competition for personnel in the
computer software industry has historically been intense. There can be no
assurance that we will be successful in attracting and retaining key personnel,
and the failure to do so could have a material adverse effect on our business,
operating results and financial condition.

         Our success is dependent in part upon our proprietary technology and
other intellectual property. Our ability to compete is dependent in part upon
our internally developed proprietary intellectual property. We regard our
products as proprietary trade secrets and confidential information. We rely
largely upon a combination of copyright, trade secret and trademark laws,
license agreements with our customers, distribution agreements with our
distributors, and our own security systems, confidentiality procedures and
employee agreements to maintain the confidentiality and trade secrecy of our
products. In certain cases, we also seek to protect our programs, documentation
and other written materials through registration of our trademarks and service
marks and copyrights of our products under trademark and copyright laws in the
United States and certain other countries, but we have not secured registration
of all our marks and copyrights. None of our products are patented.

         There can be no assurance that our means of protecting our proprietary
rights in the United States or abroad are adequate or that competitors will not
independently develop similar technology. In addition, the laws of some foreign
countries do not protect our proprietary rights as fully as do the laws of the
United States, and effective copyright, trademark and trade secret protection
may not be available in other jurisdictions. Preventing or detecting
unauthorized use of our products is difficult. Despite our efforts, it may be
possible for third parties to copy certain portions or reverse engineer our
products, or to obtain and use our proprietary or confidential information.

         We also rely on certain other technology which we license from third
parties, including software that is integrated with internally developed
software and used in our products to perform key functions. No assurance can be
given that the steps taken by us will prevent misappropriation of our technology
or that our license agreements will be enforceable. In addition, litigation may
be necessary in the future to enforce our intellectual property rights, to
protect our trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Any such litigation, even if not



                                       25
<PAGE>

meritorious, could result in substantial costs and diversion of resources and
could have a material adverse effect on our business, operating results and
financial condition.

         We may be exposed to property rights infringement claims. Although we
do not believe that our products infringe the proprietary rights of third
parties, there can be no assurance that infringement or invalidity claims,
including claims for indemnification resulting from infringement claims, will
not be asserted or prosecuted against us. Regardless of the validity or the
successful assertion of such claims, defending against such claims could result
in significant costs and diversion of resources which could have a material
adverse effect on our business, operating results and financial condition. In
addition, the assertion of such infringement claims could result in injunctions
preventing us from distributing certain products, which would have a material
adverse effect on our business, operating results and financial condition. If
any claims or actions are asserted against us, we may seek to obtain a license
to such intellectual property rights. There can be no assurance, however, that
such a license would be available to us on reasonable terms or at all.

         We may be exposed to product liability claims. Our products may contain
undetected operating errors due to the complex nature of our software. Such
operating errors are usually resolved through regular maintenance and updating
processes. However, our products also may contain more serious operating errors
or failures that may not be detected until the products have been delivered to
customers. As a result of serious operating errors or failures, our customers
could suffer major business interruptions or other problems that could lead to
claims for damages against us. Such operating errors or failures could also
delay the scheduled release of new or enhanced products or diminish the market
acceptance of our products. As a result, our financial results of operations and
financial condition may be materially adversely affected.

         Our future revenue is substantially dependent upon our installed
customer base. In the past, we have depended on our installed customer base for
additional future revenue from services, support and maintenance and licensing
of additional products. Our maintenance and support agreements generally are
renewable annually at the option of the customer. Fees for maintenance and
support services are billed 12 months in advance, and maintenance and support
revenue is deferred and recognized ratably over the term of the maintenance and
support agreement. There can be no assurance that current installed customers
will renew their maintenance and support in future periods, continue to use the
Company for professional services or purchase additional products; each of which
would have a material negative impact on our financial results and financial
condition.

         We may not be able to maintain or expand our relationships with
business partners. We believe that we need to maintain and expand our
relationships with our existing business partners and enter into relationships
with additional business partners in order to expand the distribution of our
products. Many of our business partners also sell products that compete with our
products. There can be no assurance that we will be able to maintain effective,
long-term relationships with our business partners or that selected business
partners will continue to meet our sales needs. Further, there can be no
assurance that our business partners will not market software products in
competition with our products in the future or will not otherwise reduce or
discontinue their relationships with us. If we fail to maintain successfully our
existing business partner relationships or to establish new business partner
relationships in the future, our business, operating results and financial
condition could be materially and adversely affected.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Foreign Exchange. Frontstep's revenues originating outside of North
America were 22%, 20% and 22% of our total revenues for fiscal years 2001, 2000
and 1999, respectively. By geographic region, revenues originating in Europe
were 12%, 11% and 13% of total revenues for fiscal years 2001, 2000 and 1999,
respectively. Revenues originating in Asia Pacific were 9% of total revenues for
fiscal years 2001, 2000 and 1999. International sales are made mostly from our
foreign sales subsidiaries in the local countries and are typically denominated
in the local currency of each country. These subsidiaries also incur most of
their expenses in the local currency. Accordingly, all foreign subsidiaries use
the local currency as their functional currency.

         Our exposure to foreign exchange rate fluctuations arises in part from
intercompany accounts in which costs of software, including certain development
costs, incurred in the United States are charged to our foreign sales
subsidiaries. These intercompany accounts are typically denominated in the
functional currency of the foreign subsidiary in order to centralize foreign
exchange risk with the parent company in the United States. We are also exposed
to foreign exchange rate fluctuations as the financial results of foreign
subsidiaries are translated into U.S. dollars in consolidation. Foreign currency
gains and losses will continue to result from fluctuations in the value of the
currencies in which we conduct our operations as compared to the U.S.



                                       26
<PAGE>

dollar and future operating results will be affected by gains and losses from
foreign currency exposure. We do not currently hedge against losses arising from
our foreign currency exposure. We have considered the potential impact of a
hypothetical 10% adverse change in foreign exchange rates and we believe that
such a change would not have a material impact on financial results or financial
condition in the coming fiscal year.

         Interest Rates. We invest our surplus cash in financial instruments
such as short-term marketable securities and interest-bearing time deposits. We
also incur interest at variable rates, dependent upon the prime rate or LIBOR
rate that may be in effect from time to time. We have considered the potential
impact of a hypothetical one hundred basis point adverse change in interest
rates and we believe that such a change would not have a material impact on
financial results or financial condition in the coming fiscal year.



                                       27
<PAGE>




ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Frontstep, Inc.

         We have audited the accompanying consolidated balance sheet of
Frontstep, Inc. and subsidiaries as of June 30, 2001 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year ended June 30, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Frontstep,
Inc. and subsidiaries at June 30, 2001, and the results of their operations and
their cash flows for the year ended June 30, 2001, in conformity with accounting
principles generally accepted in the United States of America.

         As discussed in note 3 to the accompanying consolidated financial
statements, the accompanying consolidated balance sheet as of June 30, 2001, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the year then ended, have been restated.


/s/ KPMG LLP

Columbus, Ohio
August 13, 2001, except for Note 3, which is as of September 27, 2002



                                       28
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS


Board of Directors
Frontstep,Inc.

We have audited the accompanying consolidated balance sheet of Frontstep, Inc.
(formerly Symix Systems, Inc.) and Subsidiaries as of June 30, 2000 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the two years in the period ended June 30, 2000. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Frontstep, Inc.
and Subsidiaries at June 30, 2000, and the consolidated results of their
operations and cash flows for each of the two years in the period ended June 30,
2000, in conformity with accounting principles generally accepted in the United
States.



                                        /s/ Ernst & Young

Columbus,Ohio
July 27, 2000






                                       29
<PAGE>




                                FRONTSTEP, INC.

                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                   JUNE 30,
                                                                                                   --------
                                                                                            2001             2000
                                                                                            ----             ----
                                                                                           RESTATED
                                                                                                (IN THOUSANDS,
                                                                                              EXCEPT SHARE DATA)
<S>                                                                                     <C>               <C>
                                                       ASSETS
Current assets:
   Cash and cash equivalents....................................................        $     1,512       $    11,868
   Trade accounts receivable, net...............................................             31,446            36,956
   Prepaid expenses.............................................................              3,756             2,610
   Income taxes receivable......................................................                 47             1,867
   Deferred income taxes........................................................              2,026             1,510
   Inventories..................................................................                738               861
   Other current assets.........................................................                979               988
                                                                                        -----------       -----------
                                                                                             40,504            56,660
Capitalized software, net.......................................................             15,094            18,329
Intangibles, net................................................................              7,911             9,113
Property and equipment, net.....................................................              7,646             7,986
Other assets....................................................................              1,438             2,280
                                                                                        -----------       -----------
Total assets....................................................................        $    72,593       $    94,368
                                                                                        ===========       ===========

                                        LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses........................................        $    15,610       $    13,613
   Deferred revenue.............................................................             20,278            18,223
   Current portion of long-term obligations.....................................              1,967             5,476
                                                                                        -----------       -----------
                                                                                             37,855            37,312
Noncurrent liabilities:
   Long-term debt...............................................................              8,337             3,000
   Deferred income taxes........................................................              2,891             4,167
   Other .......................................................................                405               169
                                                                                        -----------       -----------
                                                                                             11,633             7,336
Minority interest...............................................................              2,101             2,146
Series A Convertible Participating Preferred Stock, no par value................                 --            10,865
Shareholders' equity:
   Series A Convertible Participating Preferred Stock, no par value; 1,000,000
      shares authorized; 566,933 shares issued and outstanding at June 30, 2001;
      liquidation preference $13,606,392........................................             10,865                --
   Common stock; no par value; 20,000,000 shares authorized; 7,872,418 and
      7,807,857 shares issued at June 30, 2001 and 2000, respectively, at stated
      capital amounts of $0.01 per share........................................                 79                78
   Additional paid-in capital...................................................             37,470            37,216
   Treasury stock, at cost; 304,200 shares......................................             (1,320)           (1,320)
   Retained earnings (deficit)..................................................            (22,772)            3,292
   Accumulated other comprehensive loss.........................................             (3,318)           (2,557)
                                                                                        -----------       -----------
                                                                                             21,004            36,709
                                                                                        -----------       -----------
Total liabilities and shareholders' equity......................................        $    72,593       $    94,368
                                                                                        ===========       ===========
</TABLE>


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



                                       30
<PAGE>




                                FRONTSTEP, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                      YEAR ENDED JUNE 30,
                                                                                      -------------------
                                                                          2001               2000             1999
                                                                          ----               ----             ----
                                                                        RESTATED
                                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                    <C>              <C>               <C>
Revenue:
   License fees...............................................         $    51,309      $    57,858       $    67,423
   Service....................................................              30,921           39,626            34,857
   Maintenance and support....................................              34,846           31,424            26,792
                                                                       -----------      -----------       -----------
      Total revenue...........................................             117,076          128,908           129,072

Cost of revenue:
   License fees...............................................              21,885           21,504            18,317
   Service, maintenance and support...........................              36,941           40,352            33,708
                                                                       -----------      -----------       -----------
      Total cost of revenue...................................              58,826           61,856            52,025
                                                                       -----------      -----------       -----------
Gross margin..................................................              58,250           67,052            77,047

Operating expenses:
   Selling, general and administrative........................              62,847           57,504            56,801
   Research and development...................................              13,332           15,684            10,217
   Amortization of acquired intangibles.......................               3,285            3,593             2,140
   Restructuring and other charges............................               6,403            1,067               835
                                                                       -----------      -----------       -----------
      Total operating expenses................................              85,867           77,848            69,993
                                                                       -----------      -----------       -----------
Operating income (loss).......................................             (27,617)         (10,796)            7,054
Interest expense..............................................                (623)            (782)             (324)
Other income (expense), net...................................                 113             (184)              475
                                                                       -----------      -----------       -----------
Income (loss) before income taxes.............................             (28,127)         (11,762)            7,205
Provision for (benefit from) income taxes.....................              (2,063)          (1,557)            3,206
                                                                       -----------      -----------       -----------
Net income (loss).............................................         $   (26,064)     $   (10,205)      $     3,999
                                                                       ===========      ===========       ===========
Net income (loss) per common share:
   Basic .....................................................         $     (3.46)     $     (1.38)      $      0.60
                                                                       ===========      ============      ===========
   Diluted....................................................         $     (3.46)     $     (1.38)      $      0.55
                                                                       ===========     =============      ===========

Shares used in computing per share amounts:
   Basic .....................................................               7,535            7,411             6,711
   Diluted....................................................               7,535            7,411             7,264
</TABLE>


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




                                       31
<PAGE>




                                 FRONTSTEP, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                          ACCUM.
                                        PREFERRED STOCK   COMMON STOCK   ADDITIONAL            RETAINED    OTHER
                                        ---------------   ------------     PAID-IN   TREASURY  EARNINGS   COMPR.
                                     SHARES     AMOUNT   SHARES   AMOUNT   CAPITAL     STOCK   (DEFICIT)   LOSS     TOTAL
                                     ------     ------   ------   ------   -------     -----   ---------   ----     -----
<S>             <C>                      <C>    <C>       <C>    <C>      <C>       <C>        <C>       <C>      <C>
Balance at July 1, 1998........          125    $1,031    6,778  $    68  $ 23,937  $  (1,320) $  9,498  $(1,912) $31,302
Issuance of common stock:
   Acquisitions................           --        --      619        6     5,566         --        --      --     5,572
   Stock option exercises......           --        --       75        1       656         --        --      --       657
   Employee stock purchase plan           --        --       38       --       533         --        --      --       533
Tax benefit on stock options
   exercised...................           --        --       --       --       330         --        --      --       330
Exercise of convertible preferred
   shares......................         (125)   (1,031)     144        1     1,341         --        --      --       311
   Net income..................           --        --       --       --        --         --     3,999      --     3,999
   Foreign currency translation
    adjustment.................           --        --       --       --        --         --        --    (302)     (302)
                                                                                                                  -------
Comprehensive income:..........                                                                                     3,697
                                    --------    ------  -------  -------  --------  ---------  --------  ------   -------
Balance at June 30, 1999.......           --        --    7,654       76    32,363     (1,320)   13,497  (2,214)   42,402
Issuance of common stock:
   Acquisitions................           --        --       --       --         3         --        --      --         3
   Stock option exercises......           --        --      118        2     1,009         --        --      --     1,011
   Employee stock purchase plan           --        --       35       --       577         --        --      --       577
Tax benefit on stock options
   exercised...................           --        --       --       --       754         --        --      --       754
Issuance of common stock
   warrants....................           --        --       --       --     2,510         --        --      --     2,510
   Net loss ...................           --        --       --       --        --         --   (10,205)     --   (10,205)
   Foreign currency translation
    adjustment.................           --        --       --       --        --         --        --    (343)     (343)
                                                                                                                  -------
Comprehensive loss:............                                                                                   (10,548)
                                    --------    ------  -------  -------  --------  ---------  --------  ------   -------
Balance at June 30, 2000.......           --        --    7,807       78    37,216     (1,320)    3,292  (2,557)   36,709
Issuance of common stock:
Stock option exercises.........           --        --        2       --        60         --        --      --        60
Employee stock purchase plan...           --        --       63        1       194         --        --      --       195
Convertible preferred stock
   transferred from temporary
   equity......................          567    10,865       --       --        --         --        --      --    10,865
   Net loss, restated..........           --        --       --       --        --         --   (26,064)     --   (26,064)
   Foreign currency translation
    adjustment.................           --        --       --       --        --         --        --    (761)     (761)
                                                                                                                  -------
Comprehensive loss, restated...                                                                                   (26,825)
                                    --------    ------  -------  -------  --------  ---------  --------  ------   -------
Balance at June 30, 2001,
   restated....................          567    $10,865   7,872  $    79  $ 37,470  $  (1,320) $(22,772) $(3,318) $21,003
                                    ========    ======= =======  =======  ========  =========  ========  =======  =======
</TABLE>


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



                                       32
<PAGE>




                                FRONTSTEP, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED JUNE 30,
                                                                                      -------------------
                                                                          2001               2000             1999
                                                                          ----               ----             ----
                                                                        RESTATED
                                                                                        (IN THOUSANDS)
<S>                                                                    <C>              <C>               <C>
CASH FLOW FROM OPERATING ACTIVITIES:
   Net income (loss)..........................................         $   (26,064)     $   (10,205)      $     3,999
   Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
      Depreciation............................................               4,149            3,618             3,221
      Amortization............................................               7,333            7,811             5,289
      Restructuring and other charges.........................               6,403            1,067               835
      Deferred income taxes...................................              (1,792)          (2,333)              362
      Tax benefit on stock options exercised..................                  --              754               330
      Write-off of capitalized software.......................               1,913            1,868                --
      Changes in operating assets and liabilities, net of restructuring and
         other charges:
         Accounts receivable..................................               5,214            7,403           (11,392)
         Prepaid expenses and other assets....................                (837)             140            (1,964)
         Accounts payable and accrued expenses................              (3,928)          (3,409)            1,535
         Deferred revenue.....................................               2,274            1,267             3,996
         Income taxes payable/receivable......................               1,820           (1,331)             (407)
                                                                       -----------      -----------       -----------
Net cash provided by (used in) operating activities...........              (3,515)           6,650             5,804

CASH FLOW FROM INVESTING ACTIVITIES:
   Purchases of property and equipment........................              (3,996)          (4,496)           (3,624)
   Additions to capitalized software..........................              (5,074)          (7,009)           (4,871)
   Proceeds from sale of subsidiary...........................                  --            2,585                --
   Purchase of subsidiaries, net of acquired cash.............                  --           (2,116)           (1,069)
                                                                       -----------      -----------       -----------
Net cash used in investing activities.........................              (9,070)         (11,036)           (9,564)

CASH FLOW FROM FINANCING ACTIVITIES:
   Proceeds from issuance of convertible preferred stock, net.                  --           10,865                --
   Proceeds from issuance of common stock warrants, net.......                  --            2,510                --
   Proceeds from issuance of common stock, net................                 253              654               674
   Proceeds from long-term obligations........................              76,090           40,964            30,086
   Payments on long-term obligations..........................             (74,026)         (44,076)          (27,882)
                                                                       -----------      -----------       -----------
Net cash provided by financing activities.....................               2,317           10,917             2,878
Effect of exchange rate changes on cash.......................                 (88)             101                 3
                                                                       -----------      -----------       -----------
Net increase (decrease) in cash and cash equivalents..........             (10,356)           6,632              (879)
Cash and cash equivalents at beginning of year................              11,868            5,236             6,115
                                                                       -----------      -----------       -----------
Cash and cash equivalents at end of year......................         $     1,512      $    11,868       $     5,236
                                                                       ===========      ===========       ===========
</TABLE>


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




                                       33
<PAGE>




                                 FRONTSTEP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (FOR THE YEARS ENDED JUNE 30, 2001, 2000 AND 1999)


NOTE 1--SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation and Description of Business. Frontstep, Inc. and
its subsidiaries ("Frontstep" or the "Company"), is a leading global provider of
business software and services for mid-sized manufacturing, distribution and
other companies, including business units of larger companies. The Company
offers a comprehensive suite of integrated, collaborative network-centric
software and services that (1) support the traditional back office management
and resources of an enterprise ("ERP"), (2) support customer relationship
management ("CRM") and other front office business activities and (3) support an
enterprise's supply chain management activities. The accompanying financial
statements include the accounts of Frontstep after elimination of intercompany
accounts and transactions.

         Founded in 1979, Frontstep is headquartered in Columbus, Ohio. The
Company has more than 4,000 customers that it serves from 28 sales and service
offices in North America, Europe and the Pacific Rim, as well as through
independent software and support business partners worldwide. The Company
recently changed its name from Symix Systems, Inc. to Frontstep, Inc.

         Revenue Recognition. The Company's total revenue is derived primarily
from licensing software, providing related services, including installation,
implementation, training, consulting and systems integration and providing
maintenance and support on an annual basis. Revenue is accounted for in
accordance with Statement of Position 97-2, Software Revenue Recognition, as
amended and interpreted from time to time.

         Revenue is derived principally from the sale of internally produced
software products and maintenance and support agreements from software sales.
The Company licenses software generally under non-cancelable license agreements
and provides product support services and periodic updates including training,
installation, consulting and maintenance. License fees revenue is generally
recognized when a non-cancelable license agreement has been signed, the software
product has been shipped, there are no uncertainties surrounding product
acceptance, the fees are fixed and determinable and collection is considered
probable. For customer license agreements, which meet these recognition
criteria, the portion of the fees related to software licenses, which is
determined using the residual method, will generally be recognized in the
current period, while the portion of the fees related to services is recognized
as the services are performed. The amount allocated to services revenues is
based on the Company's standard rate per hour. Revenue from maintenance and
support agreements, which is determined based on renewal rates, is billed
periodically, deferred and recognized ratably over the life of the agreements.
In the event revenue is contingent upon customer acceptance criteria, the
Company defers that revenue until the contingencies are resolved.

         Inventories. Inventories consist primarily of software-related products
that are held for resale. The Company values inventory at the lower of cost or
market. Cost is determined using the specific identification method.



                                       34
<PAGE>




         Capitalized Software. Capitalized software is stated at the lower of
cost or net realizable value. The Company capitalizes the cost of developing its
software products in accordance with Statement of Financial Accounting Standards
("SFAS") No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed. Capitalized software costs are amortized by the
straight-line method using estimated useful lives of three to five years.
Amortization expense was $3,763,000, $4,033,000, and $2,980,000 for the years
ended June 30, 2001, 2000 and 1999, respectively. In addition, during fiscal
year 2001, the Company wrote off $1,913,000 of capitalized software as part of
restructuring operations(see Note 2).

Capitalized software is summarized as follows:

                                              Year ended June 30,
                                           2001                 2000
                                       ==============      ==============
                                                (in thousands)
 Capitalized cost of:
      Internally developed software          $25,106             $22,196
      Acquired software                       11,608              10,459
                                       --------------      --------------
 Total capitalized software at cost           36,714              32,655
      Accumulated amortization                21,620              14,326
                                       --------------      --------------
 Capitalized software, net                   $15,094             $18,329
                                       ==============      ==============


         Intangibles. Intangibles consist principally of goodwill resulting from
acquisitions accounted for using the purchase method of accounting. The
intangible assets are amortized using the straight-line method over a period of
three to ten years. Accumulated amortization of intangibles as of June 30, 2001
and 2000 was $2,262,000 and $1,047,000, respectively.


         Property and Equipment. Property and equipment, including assets under
capital leases, are recorded at cost and include expenditures which
substantially increase the useful lives of the assets. Maintenance and repairs
that do not improve or extend the life of the respective assets are expensed as
incurred. Depreciation is provided over the estimated useful lives of the
respective assets using the straight-line method. Amortization of capital leases
is provided over the lease terms using the straight-line method.

         Depreciation and amortization on the Company's property and equipment
has been computed based on the following useful lives:

                                                                 YEARS
                                                                 -----
         Furniture and fixtures.........................         3 to 7
         Computers and other equipment..................         2 to 7
         Leasehold improvements.........................        5 to 10

         Income Taxes. Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.

         Foreign Currency Translation. The Company has determined that the
functional currency of each foreign operation is the local currency. The effects
of translation rate changes related to assets and liabilities located outside
the United States are included as a component of other comprehensive income
(loss). Foreign currency transaction gains and losses are included in "other
income (expense), net" on the Consolidated Statements of Operations.



                                       35
<PAGE>

         Comprehensive Income. The Company believes that the only item in
addition to net income that would be included in comprehensive income is the
foreign currency translation adjustment. Comprehensive income (loss) for the
years ended June 30, 2001, 2000 and 1999 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                         YEAR ENDED JUNE 30,
                                                                         ------------------
                                                               2001
                                                            RESTATED             2000            1999
                                                            --------             ----            ----
<S>                                                        <C>              <C>               <C>
         Net income (loss)........................         $  (26,064)      $   (10,205)      $     3,999
         Foreign currency translation adjustment..               (761)             (343)             (302)
                                                           ----------       -----------       -----------
         Comprehensive net income (loss)..........         $  (26,825)      $   (10,548)      $     3,697
                                                           ==========       ===========       ===========
</TABLE>

         Stock-based Compensation. The Company applies the intrinsic value-based
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations, in
accounting for its fixed plan stock options. As such, compensation expense would
be recorded on the date of grant and amortized over the period of service, only
if the current market price of the underlying stock exceeded the exercise price.
SFAS No. 123, Accounting for Stock-Based Compensation, established accounting
and disclosure requirements using a fair value-based method of accounting for
stock-based employee compensation plans. As allowed by SFAS No. 123, the Company
has elected to continue to apply the intrinsic value-based method of accounting
described above, and has adopted the disclosure requirements of SFAS No. 123.

         Statement of Cash Flows. The Company considers all demand deposits and
highly liquid investments with an original maturity of three months or less as
cash equivalents. Cash paid for (received from) income taxes, net of refunds,
for fiscal 2001, 2000 and 1999 was $(2,251,000), $1,756,000 and $2,381,000,
respectively. Cash paid for interest was $671,000, $782,000 and $320,000 for
fiscal 2001, 2000 and 1999, respectively.

         Financial Instruments. Financial instruments consist primarily of cash,
accounts receivable, accounts payable and long-term debt. The carrying value of
all financial instruments at June 30, 2001 and 2000 approximated their fair
value.

         Long-lived Assets. The Company accounts for long-lived assets in
accordance with the provisions of SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future undiscounted net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

         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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

         Reclassifications. Certain reclassifications have been made to prior
year amounts to conform to the 2001 presentation.

         Effect of New Accounting Standards. In July 2001, the FASB issued SFAS
No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001, as well as all purchase
method business combinations completed after June 30, 2001. SFAS No. 141 also
specifies criteria intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill. SFAS
No. 142 will require that goodwill and intangible assets with indefinite useful
lives no longer be amortized, but instead tested for impairment at least
annually.

         The Company has adopted the provisions of SFAS Nos. 141 and 142
effective with the beginning of the Company's new fiscal year 2002, which began
on July 1, 2001. SFAS No. 141 requires upon adoption of SFAS No. 142, that the
Company evaluate its existing intangible assets and goodwill that were acquired
in a prior purchase business combination and to make any necessary
reclassifications in order to conform with the new criteria in SFAS No. 141 for
recognition apart from goodwill.




                                       36
<PAGE>

Effective with adoption of SFAS No. 142, the Company is required to reassess the
useful lives and residual values of all intangible assets acquired and make any
necessary amortization period adjustments by the end of the three months ended
September 30, 2001.

         As of June 30, 2001, the Company has unamortized intangibles in the
amount of $7,911,000 which will be subject to the transition provisions of SFAS
Nos. 141 and 142. Because of the extensive effort needed to comply with adopting
SFAS Nos. 141 and 142, it is not practicable to reasonably estimate the impact
of adopting these Statements on the Company's financial statements at the date
of this report, including whether it will be required to recognize any
transitional impairment losses as a cumulative effect of a change in accounting
principle.

         The Financial Accounting Standards Board recently issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS No. 143 requires that the fair
value of a liability for an asset retirement obligation be recognized in the
period in which it is incurred if a reasonable estimate of fair value can be
made. The statement is required to be adopted for fiscal years beginning after
June 15, 2002. Because of the effort necessary to comply with the adoption of
SFAS No. 143, it is not practicable for management to estimate the impact of
adopting this Statement at the date of this report.

NOTE 2--RESTRUCTURING AND OTHER CHARGES

         Fiscal 2001 Restructuring Charges. In April 2001, the Company announced
a broad restructuring plan to reduce operating costs by reducing its worldwide
workforce by approximately 20%, or 162 employees, all of which were direct
employees involved in all aspects of the Company's business, both domestic and
international; discontinuing certain product development and other non-essential
activities, including terminating activities related to its SyteCentre product
and exiting certain license agreements; and closing certain office facilities in
Arizona, California, Canada and Asia.

         As a result of this restructuring plan, the Company recorded pre-tax
restructuring charges of $580,000 and $3,660,000 in the three months ended March
31, 2001 and June 30, 2001, respectively. These restructuring charges are
recorded as a separate line in the consolidated statements of operations. The
Company's restructuring plan consisted of the following significant items:

-    Employee separation costs of $2,182,000 - The Company reduced its workforce
     by approximately 20%, or 162 employees. These costs consist primarily of
     severance for these employees.

-    Contract termination liabilities - $900,000- The Company elected to
     discontinue its SyteCentre ERP product to focus resources on the Company's
     primary ERP product, SyteLine. The Company also discontinued its ASP
     hosting solution and its internet procurement software due to sluggish
     demand and unprofitable operations. As a result, the Company reserved
     $900,000 to cover anticipated contractual obligations to customers
     currently using the discontinued products and services.

-    Facility closure costs - $1,158,000 - The Company recorded $1,158,000 of
     costs associated with closing certain offices in Arizona, California,
     Canada and Asia. For those leases with non-cancelable lease terms, the
     Company assumed that subleases would be obtained after a one-year period.


         The following table displays a rollforward of the accruals established
for the restructuring and other charges from the announcement of the plan to
June 30, 2001 (in thousands):

<TABLE>
<CAPTION>
(In Thousands)                                            Initial Charge      Amounts used in      Accrual balance at
                                                                                fiscal 2001          June 30, 2001
                                                        ------------------- --------------------- ---------------------
<S>                                                      <C>                  <C>                    <C>
Termination costs related to employees                        $2,182               $1,770                 $412
Exit costs:
   Facility closure costs                                     1,158                 280                   878
   Contract termination liabilities                            900                  120                   780
Total                                                        $ 4,240              $ 2,170                $2,070
                                                        =================== ===================== =====================
</TABLE>


                                       37
<PAGE>



         The amounts used of $2,170,000 reflects cash payments of $2,090,000 and
non-cash utilization of $80,000. The remaining accrual of $2,070,000, which is
included in accounts payable and accrued expenses in the Consolidated Balance
Sheets, represents cash payments expected to be completed primarily in the year
ending June 30, 2002. However, some cash requirements will stretch into
following fiscal periods based upon contract termination requirements.


         FISCAL 2001 OTHER CHARGES In relation to this restructuring plan, the
Company also wrote-off certain accounts receivable and other non-performing
assets. These charges have been reclassified to be reported separately from the
restructuring charge in the Statement of Operations. The accounts receivable
write-offs were recorded to reflect accounts deemed to be uncollectible due to
economic and other situations that occurred subsequent to the recording of the
sales related to those receivables. The non-performing assets are no longer in
use. These charges are:

-    Accounts receivable write-offs - $6,840,000 - As part of the restructuring,
     the Company elected to discontinue certain product lines and focus on more
     profitable endeavors. During the third quarter of the year, the Company
     realized this would result in related collection issues. Thus, the Company
     wrote off $3,460,000 in receivables related to discontinued products and
     services. Additionally, in the third quarter ended March 31, 2001 the
     Company recorded other charges of $3,380,000 to write-off customer
     receivables as a result of customer bankruptcies and solvency issues. These
     charges are reported in Operating expenses: selling, general and
     administrative in the Statement of Operations for the year ended June 30,
     2001.

-    Capitalized software write-offs - $1,913,000 - The Company elected to
     discontinue its SyteCentre ERP product to focus resources on the Company's
     primary ERP product, SyteLine. The Company also discontinued its ASP
     hosting solution and its internet procurement software due to sluggish
     demand and unprofitable operations. As a result, the Company wrote-off
     $1,463,000 of capitalized internally developed software relating to
     SyteCentre and $450,000 of capitalized purchased software relating to
     internet procurement products. These charges are reported in Cost of
     revenue; License fees in the Statement of Operations for the year ended
     June 30, 2001.


         Fiscal 2000 Restructuring Charges. In July 2000, the Company announced
several structural changes to discontinue certain business operations, write off
non-performing assets which are no longer in use and to restructure the Company
to better focus on its core business strategy. These changes included divesting
the Company's FieldPro subsidiary, terminating the operations of its e-Mongoose,
Inc. subsidiary, consolidating the Company's product development organizations
and restructuring the Company's sales channels. In connection with this
announcement, the Company recorded a non-recurring charge of $429,000, pre-tax,
in the three months ended June 30, 2000 and an additional non-recurring charge
of $2,163,000, pre-tax, in the three months ended September 30, 2000. The
aggregate pre-tax charge of $2,592,000 included non-cash charges of $429,000
related primarily to the sale of Visual Applications Software, Inc., all of
which was expended in Fiscal 2000, and $2,163,000 to reduce the Company's
headcount. The headcount reduction included approximately 90 employees
associated with the operations discussed above and others terminated as part of
the restructuring. All severance payments were paid during the year ended June
30, 2001 and no accruals remain for these costs as of June 30, 2001.

The following table displays a rollforward of the accruals at June 30, 2000 and
June 30, 2001 established for the structural changes:

<TABLE>
<CAPTION>
2000
(In Thousands)                                          Initial Charge in     Amounts Used in     Accrual at June 30,
                                                               2000             Fiscal 2000               2000
                                                        ------------------- --------------------- ---------------------
<S>                                                            <C>                  <C>           <C>
Loss on sale of Visual Applications Software,
Inc. assets                                                    $429                 $429                   --
                                                        ------------------- --------------------- ---------------------

                                                        =================== ===================== =====================
</TABLE>




                                       38
<PAGE>



<TABLE>
<CAPTION>

2001
(In Thousands)                                          Initial Charge in     Amounts Used in     Accrual at June 30,
                                                               2001             Fiscal 2001               2001
                                                        ------------------- --------------------- ---------------------
<S>                                                     <C>                  <C>                   <C>
Termination costs to employees                                $2,163               $2,163                  --
</TABLE>


         FISCAL 2000 OTHER CHARGES In relation to the fiscal 2000 restructuring
plan, the Company also wrote-off certain accounts receivable and other
non-performing assets. These charges have been reported separately from the
restructuring charge in the Statement of Operations. The accounts receivable
write-offs were recorded to reflect accounts deemed to be uncollectible due to
economic and other situations that occurred subsequent to the recording of the
sales related to those receivables. The non-performing assets are no longer in
use. These charges are:

-    Accounts receivable write-offs - The Company wrote off $714,000 in
     receivables related to the discontinuation of the e-mongoose products.
     These charges are reported in Operating expenses: Selling, general and
     administrative in the Statement of Operations for the year ended June 30,
     2000.

-    Capitalized software write-offs - The Company wrote-off $1,868,000 of
     capitalized internally developed software relating to e-mongoose. These
     charges are reported in Cost of revenue; License fees in the Statement of
     Operations for the year ended June 30, 2000.

NOTE 3 - Restatement and Reclassifications

         The Company has restated its financial statements for the year ended
June 30, 2001. The restatement has been made to correct the previously reported
financial results due to an isolated error in third-party software used by the
Company which affected the timing of recognition of revenue from renewals of the
Company's maintenance and support contracts during those reported periods.

         For the year ended June 30, 2001, this restatement reduced revenue by
$1,210,000 or 1.0% of the previously reported revenue of $118,286,000. This
decrease in revenue increased the reported net loss for the year by $1,210,000
or 4.9% of the previously reported net loss of $24,854,000. The balance sheet
account entitled Deferred revenue increased as of June 30, 2001 by $1,210,000 or
6.3% from the previously reported balance of $19,067,000. The financial
statements included herein reflect the restatement.

         The Company uses certain third-party software to calculate and account
for revenues from renewals of its maintenance and support services contracts.
The error, which was isolated and occurred only in a certain specific process,
caused affected billing records to accelerate the timing of recognition of
revenue, and consequently understate the amount of deferred revenue to be
recognized in subsequent periods. Due to the limited number of records affected,
the error was difficult to detect. After detection by Company personnel in July
2002, the third-party software provider identified the nature of the error and
assisted the Company in determining which maintenance and support records had
been affected. The error was associated with a specific version of the software
and affected only the period from July 2000 to March 2002. The Company had
already installed a newer version of the software which properly accounts for
revenue recognition in the specific affected process.

         In relation to the Company's 2001 restructuring plan described in Note
2, the Company wrote-off certain accounts receivable and other non-performing
assets. Originally these charges were recorded as a part of restructuring and
other charges in the Statement of Operations. Now these amounts have been
reclassified to selling, general and administrative expenses and cost of
revenue, respectively.

         The restatement and reclassifications by reporting period is presented
in the table and accompanying financial statements below (in thousands):

<TABLE>
<CAPTION>
--------------------------------------------  ---------------- -------------- --------------- -------------- --------------
                                              TOTAL REVENUE    ADJUSTMENT     TOTAL           NET INCOME     NET INCOME
                                              AS PREVIOUSLY    OF REVENUE     REVENUE, AS     (LOSS), AS     (LOSS), AS
                                              REPORTED                        ADJUSTED        PREVIOUSLY     ADJUSTED
                                                                                              REPORTED
REPORTING PERIOD
--------------------------------------------  ---------------- -------------- --------------- -------------- --------------
<S>                                           <C>               <C>          <C>            <C>             <C>
Quarter ended September 30, 2000 (unaudited)      $28,033           $32          $28,065        $(3,549)        $(3,517)
--------------------------------------------  ---------------- -------------- --------------- -------------- --------------
</TABLE>



                                       39
<PAGE>

<TABLE>
<S>                                     <C>               <C>             <C>            <C>             <C>
Quarter ended December 31, 2000 (unaudited)     $34,063         $(207)         $33,856         $(957)         $(1,164)
------------------------------------------- ---------------- -------------- --------------- -------------- --------------
Quarter ended March 31, 2001 (unaudited)        $27,172         $(838)         $26,334        $(15,348)      $(16,186)
------------------------------------------- ---------------- -------------- --------------- -------------- --------------
Quarter ended June 30, 2001 (unaudited)         $29,018         $(197)         $28,821        $(5,000)        $(5,197)
------------------------------------------- ---------------- -------------- --------------- -------------- --------------
YEAR ENDED JUNE 30, 2001                       $118,286        $(1,210)        $117,076       $(24,854)      $(26,064)
------------------------------------------- ---------------- -------------- --------------- -------------- --------------
</TABLE>




                                       40

<PAGE>
                                 FRONTSTEP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   as adjusted
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>

                                                          YEAR ENDED JUNE 30, 2001
                                                      ---------------------------------
                                                           2001              2001
                                                      ----------------  ---------------
                                                                              AS
                                                                           PREVIOUSLY
                                                         AS RESTATED        REPORTED
                                                      ----------------  ---------------
<S>                                                         <C>              <C>
Revenue:
         License fees                                       51,309           51,309
         Services                                           30,921           30,921
         Maintenance and support                            34,846           36,056
                                                      ----------------  ---------------
               Total revenue                               117,076          118,286

Cost of revenue:
         License fees                                       21,885           19,972
         Service, maintenance and support                   36,941           36,941
                                                      ----------------  ---------------
               Cost of revenue                              58,826           56,913
                                                      ----------------  ---------------

Gross margin                                                58,250           61,373
                                                              49.8%            51.9%

Operating expenses:
         Selling, general and administrative                62,847           56,007
         Research and product development                   13,332           13,332
         Amortization of intangibles                         3,285            3,285
         Restructuring and other charges                     6,403           15,156
                                                      ----------------  ---------------
               Total operating expenses                     85,867           87,780
                                                      ----------------  ---------------

Operating income (loss)                                    (27,617)         (26,407)
                                                             -23.6%           -22.3%
Other income (expense), net                                   (510)            (510)
                                                      ----------------  ---------------

Income (loss) before income taxes                          (28,127)         (26,917)

Provision for income taxes                                  (2,063)          (2,063)
                                                       ----------------  ---------------

Net income (loss)                                        $ (26,064)      $  (24,854)
                                                      ================  ===============

Net income (loss) per share                              $   (3.46)      $    (3.30)
                                                      ================  ===============
Net income (loss) per share, assuming dilution           $   (3.46)      $    (3.30)
                                                      ================  ===============

Weighted average shares outstanding                          7,535            7,535
Weighted average shares outstanding, assuming dilution       7,535            7,535


</TABLE>


                                       41
<PAGE>
                                 FRONTSTEP, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


                                                       AS OF JUNE 30,
                                                    2001              2001
                                               --------------------------------
                                                                 AS PREVIOUSLY
                                                 AS RESTATED        REPORTED
                                               ----------------  --------------
                  ASSETS

Current assets:
   Cash and cash equivalents                           $ 1,512         $ 1,512
   Trade accounts receivable, net                       31,446          31,446
   Prepaid expenses                                      3,756           3,756
   Income tax receivable                                    47              47
   Deferred income taxes                                 2,026           2,026
   Inventories                                             738             738
   Other current assets                                    979             979
                                               ----------------  --------------
                                                        40,504          40,504
Capitalized software, net                               15,094          15,094
Intangibles, net                                         7,911           7,911
Equipment and improvements, net                          7,646           7,646
Deposits and other assets                                1,438           1,438
                                               ----------------  --------------
     Total assets                                     $ 72,593        $ 72,593
                                               ================  ==============
   LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses              $ 15,610        $ 15,610
   Deferred revenue                                     20,278          19,067
   Current portion of long-term obligations              1,967           1,967
                                               ----------------  --------------
                                                        37,855          36,644

Noncurrent liabilities:
   Long-term obligations                                 8,337           8,337
   Deferred income taxes                                 2,891           2,891
   Other                                                   405             405
                                               ----------------  --------------
                                                        11,633          11,633

Minority interest                                        2,102           2,102
Preferred stock                                             --              --

Shareholders' equity:
   Preferred stock                                      10,865          10,865
   Common stock                                             79              79
   Additional paid-in capital                           37,470          37,470
   Common stock in treasury, at cost                    (1,320)         (1,320)
   Retained earnings (deficit)                         (22,773)        (21,562)
   Accumulated other comprehensive loss                 (3,318)         (3,318)
                                               ----------------  --------------
                                                        21,003          22,214
                                               ----------------  --------------
     Total liabilities and shareholders'
        equity                                        $ 72,593        $ 72,593
                                               ================  ==============
Weighted average shares outstanding                      7,535           7,535
Weighted average shares outstanding,
  assuming dilution                                      7,535           7,535




                                       42
<PAGE>

                                 FRONTSTEP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>

                                                                  YEAR ENDED
                                                                    JUNE 30,
                                                            --------------------------
                                                               2001          2001
                                                            ------------  ------------
                                                                               As
                                                                As         Previously
                                                             Restated       Reported
<S>                                                         <C>             <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)                                           $ (26,064)      $(24,854)
Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
    Depreciation                                                4,149         4,149
    Amortization                                                7,333         7,333
    Restructuring and other charges                             6,403        15,156
    Deferred income taxes                                      (1,792)       (1,792)
    Write-off of capitalized software                           1,913            --
    Changes in operating assets and liabilities, net of
        restructuring and other charges:
        Accounts receivable                                     5,214         (1,626)
        Prepaid expenses and other assets                        (837)          (837)
        Accounts payable and accrued expenses                  (3,928)        (3,928)
        Deferred revenue                                        2,274          1,064
        Income taxes payable/receivable                         1,820          1,820
                                                            ------------  ------------
Net cash provided by (used in) operating activities            (3,515)        (3,515)

CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment                            (3,996)        (3,996)
Additions to capitalized software                              (5,074)        (5,074)
Purchase of subsidiaries, net of acquired cash                     --             --
                                                            ------------  ------------
Net cash used in investing activities                          (9,070)        (9,070)

CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net                         253           253
Proceeds from long-term obligations                              76,090        76,090
Payments on long-term obligations                               (74,026)      (74,026)
                                                            ------------  ------------
Net cash provided by financing activities                         2,317         2,317
Effect of exchange rate changes on cash                             (88)          (88)
                                                            ------------  ------------
Net decrease in cash and cash equivalents                       (10,356)      (10,356)
Cash and cash equivalents at beginning of period                 11,868        11,868
                                                            ------------  ------------
Cash and cash equivalents at end of period                      $ 1,512       $ 1,512
                                                            ============  ============

</TABLE>


                                       43
<PAGE>

<TABLE>
<S>                                                                                     <C>              <C>
         Other.................................................................               3,112             3,087
                                                                                        -----------      ------------
                                                                                        $    15,610      $     13,613
                                                                                        ===========      ============
</TABLE>


NOTE 7--OPERATING LEASE COMMITMENTS

         The Company has entered into certain operating lease agreements for the
rental of office facilities and computer equipment. The facility leases provide
for annual rentals which are subject to escalation for increased operating
costs.

         Amounts expensed under all operating lease agreements were
approximately $5,401,000, $4,822,000 and $4,415,000 for the years ended June 30,
2001, 2000 and 1999, respectively.

         The future minimum lease payments required under noncancelable
operating leases for the five years ending June 30 are: 2002, $3,651,000; 2003,
$1,512,000; 2004, $957,000; 2005, $492,000; 2006, $45,000; 2007 and thereafter,
$0.

NOTE 8--LONG-TERM OBLIGATIONS

         Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                                  JUNE 30,
                                                                                                  --------
                                                                                             2001             2000
                                                                                             ----             ----
<S>                                                                                  <C>              <C>
         Revolving credit facility.............................................         $     8,337      $      3,000
         PSI acquisition note payable..........................................               1,573             5,000
         Present value of minimum capital lease payments.......................                 742               277
         Infomentum acquisition note payable...................................                  --               264
         Other.................................................................                  57               104
                                                                                        -----------      ------------
                                                                                             10,709             8,645
         Less current maturities...............................................               1,967             5,476
                                                                                        -----------      ------------
                                                                                        $     8,742      $      3,169
                                                                                        ===========      ============
</TABLE>

         In December 2000, the Company entered into a revolving credit facility
with PNC Bank, National Association (the "Credit Facility") to replace the
Company's credit agreement with Bank One, N.A. The Credit Facility, as amended,
provides the Company with up to $20,000,000 of revolving credit availability for
a three-year period based on qualifying accounts receivable and is secured by
the Company's trade accounts receivable originating within the United States and
Canada. Borrowings under the Credit Facility currently bear interest at either
the Federal Funds rate plus 0.5% or, at our option, the Eurodollar market rate
plus 2.75%. At June 30, 2001, the rate was 7.75%. The interest rate is subject
to change based on interest rate formulas tied to the Company's net income. The
Credit Facility is subject to customary terms and conditions, including a
financial covenant that the Company maintain a minimum level of net worth. The
Company also pays a commitment fee for unused portions of the Credit Facility of
0.25%.

         In July 2001, the Company executed a new credit facility with Foothill
Capital Corporation, which consists of a $15,000,000 three-year term note and a
$10,000,000 revolving line of credit, to replace the Credit Facility. See Note
20.

         In July 2001, the Company paid $600,000, plus accrued interest, of the
PSI acquisition note payable. The remaining $973,000 is due in six equal monthly
installments, plus interest at 10.0% per annum, commencing October 1, 2001.

         The aggregate maturities of long-term debt for the five years ending
June 30 are: 2002, $1,967,000; 2003, $372,000; 2004, $8,370,000; 2005 and
thereafter, $0.


                                       45

<PAGE>

NOTE 4--ACCOUNTS RECEIVABLE

         Accounts receivable is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                  JUNE 30,
                                                                                                  --------
                                                                                             2001             2000
                                                                                             ----             ----
<S>                                                                                     <C>              <C>
         Accounts receivable...................................................         $    32,877      $     39,031
         Less allowance for doubtful accounts..................................               1,431             2,075
                                                                                        -----------      ------------
                                                                                        $    31,446      $     36,956
                                                                                        ===========      ============
</TABLE>

         The following is a summary of activity in the allowance for doubtful
accounts (in thousands):

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED JUNE 30,
                                                                                      ------------------
                                                                           2001              2000             1999
                                                                           ----              ----             ----

<S>                                                                    <C>              <C>              <C>
         Beginning balance....................................         $    2,075       $     1,500      $      1,063
         Provision for bad debts..............................              9,731             3,255             1,270
         Account write-offs, net..............................           (10,375)           (2,680)             (833)
                                                                       ----------       -----------      -----------
         Ending balance.......................................         $    1,431       $     2,075      $      1,500
                                                                       ==========       ===========      ============
</TABLE>

NOTE 5--PROPERTY AND EQUIPMENT

         Property and equipment is summarized as follows (in thousands):
<TABLE>
<CAPTION>
                                                                                                  JUNE 30,
                                                                                                  --------
                                                                                             2001             2000
                                                                                             ----             ----
<S>                                                                                  <C>              <C>
         Furniture and fixtures................................................         $     3,655      $      3,568
         Computers and other equipment.........................................              21,720            18,410
         Leasehold improvements................................................               1,827             1,535
                                                                                        -----------      ------------
                                                                                             27,202            23,513
         Less accumulated depreciation and amortization........................              19,556            15,527
                                                                                        -----------      ------------
                                                                                        $     7,646      $      7,986
                                                                                        ===========      ============
</TABLE>

NOTE 6--ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts payable and accrued expenses are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
                                                                                                  JUNE 30,
                                                                                                  --------
                                                                                             2001             2000
                                                                                             ----             ----
<S>                                                                                     <C>              <C>
         Accounts payable......................................................         $     5,579      $      5,134
         Accrued payroll and related costs.....................................               2,441             2,827
         Third party royalties.................................................               2,408             2,565
         Restructuring and other charges.......................................               2,070                --
</TABLE>



                                       44
<PAGE>





NOTE 9--INCOME TAXES

         The components of the provision for (benefit from) income taxes are
summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED JUNE 30,
                                                                                      --------------------
                                                                           2001             2000              1999
                                                                           ----             ----              ----
<S>                                                                    <C>              <C>               <C>
         Current:
              Federal.........................................         $       --       $      (516)      $     1,927
              State and local.................................                 --               (17)              475
              Foreign.........................................                (23)              541               582
                                                                       ----------       -----------       -----------
                                                                              (23)                8             2,984
         Deferred:
              Federal.........................................             (1,778)           (1,399)              131
              State and local.................................               (262)             (206)               43
              Foreign.........................................                 --                40                48
                                                                       ----------       -----------       -----------
                                                                           (2,040)           (1,565)              222
                                                                       ----------       -----------       -----------
                                                                       $   (2,063)      $    (1,557)      $     3,206
                                                                       ==========       ===========       ===========
</TABLE>

The significant components of the Company's deferred tax asset and liability are
as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                  JUNE 30,
                                                                                                  --------
                                                                                             2001             2000
                                                                                             ----             ----
<S>                                                                                     <C>              <C>
         Current deferred tax asset:
            Allowance for doubtful accounts....................................         $       195      $      1,105
            Accrued liabilities................................................               1,831               405
                                                                                        -----------      ------------
                                                                                        $     2,026      $      1,510
                                                                                        ===========      ============

         Long-term deferred tax (asset) liability:
            Capitalized software...............................................         $     5,072      $      4,966
            Intangibles........................................................               1,038             1,313
            Capitalized leases.................................................                 422               422
            Accrued liabilities................................................                 239               540
            Book over tax depreciation.........................................                (605)             (702)
            Domestic losses....................................................              (9,776)           (1,938)
            Foreign losses.....................................................                (682)             (682)
            Tax credits........................................................              (1,935)             (434)
                                                                                        -----------      ------------
                                                                                             (6,227)            3,485
            Less valuation allowance...........................................               9,118               682
                                                                                        -----------      ------------
                                                                                        $     2,891      $      4,167
                                                                                        ===========      ============
</TABLE>

         The long-term deferred tax assets pertaining to foreign losses are net
operating loss carryforwards for certain foreign subsidiaries. The Company has
set a valuation allowance for the foreign net operating loss carryforwards,
domestic tax credits and the majority of the domestic net operating loss
carryforwards. Management believes it is more likely than not that the remaining
deferred tax assets will be recovered through taxable income from future
operations.

         Deferred taxes are not provided on unremitted earnings of subsidiaries
outside the United States because it is expected that the earnings are
permanently reinvested and such determination is not practicable. Such earnings
may become taxable upon the sale or liquidation of these subsidiaries or upon
the remittance of dividends.


                                       46

<PAGE>





         Differences arising between the provision for (benefit from) income
taxes and the amount computed by applying the statutory federal income tax rate
to income before income taxes are as follows:

<TABLE>
<CAPTION>
                                                                                                 YEAR ENDED JUNE 30,
                                                                                                 -------------------
                                                                                            2001        2000        1999
                                                                                            ----        ----        ----
<S>                                                                                         <C>         <C>         <C>
         Federal tax at statutory rate..................................................       (34)%       (34)%       34%
         State and local income taxes net of federal tax benefit........................        (4)         (3)         4
         Foreign operations taxes at rates different from U.S. federal statutory rate...         3           7          6
         Disposition of foreign operation...............................................        --           5         --
         Nondeductible acquisition research and development write off...................        --           2          4
         General business credits.......................................................        (2)                    (7)
         Nondeductible permanent differences............................................         1           4          3
         Valuation allowance recorded against deferred tax assets.......................        29           6         --
                                                                                          --------   ---------     ------
                                                                                                (7)%       (13)%       44%
                                                                                          ========   =========     ======
</TABLE>

         The Company has domestic net operating losses for tax purposes of
$490,000, $347,000, $37,000, $752,000, $1,344,000, $1,779,000 and $20,316,000
which expire in fiscal years 2008, 2010, 2012, 2013, 2018, 2019 and 2021,
respectively.

NOTE 10--STOCK OPTION PLANS

         The Company has a non-qualified stock option plan (the "Plan") that
provides for the granting of up to 2,653,070 options to officers and other key
employees for common shares at purchase prices of not less than the fair market
value on the date of the grant as determined by the Stock Option Committee of
the Board of Directors. Options under the Plan generally vest over periods of up
to four years and must be exercised within ten years of the date of grant. As of
June 30, 2001, 1,077,322 options are outstanding at a weighted average exercise
price of $9.43.

         Shareholder approval was obtained on November 17, 1999 for a separate
non-qualified stock option plan (the "1999 Plan"). The 1999 Plan provides for
the granting of up to 600,000 options to officers and key employees for common
shares at purchase prices of not less than the fair market value on the date of
the grant as determined by the Stock Option Committee of the Board of Directors.
Options under the 1999 Plan generally vest over periods of up to four years and
must be exercised within ten years of the date of the grant. As of June 30,
2001, 523,550 options are outstanding at a weighted average exercise price of
$7.41.

         The Company also has a non-qualified stock option plan for Key
Executives (the "Key Executives Plan"). A total of 400,000 common shares are
designated for issuance under the Key Executives Plan. The Stock Option
Committee of the Board of Directors is authorized to set the price and terms and
conditions of the options granted under the Key Executives Plan. Options under
the Key Executives Plan must be exercised within ten years of the date of the
grant. As of June 30, 2001, 400,000 options are outstanding at a weighted
average exercise price of $3.81.

         The Company also has a stock option plan for Outside Directors (the
"Outside Directors Plan"). The Outside Directors Plan provides for the issuance
of options for 20,000 shares of stock to each Outside Director upon his/her
election to the Board of Directors. A total of 200,000 common shares may be
issued under the Outside Directors Plan. Options under the Outside Directors
Plan vest immediately and must be exercised within ten years of the date of
grant. As of June 30, 2001, 80,000 options are outstanding at a weighted average
exercise price of $6.58.

         Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company has accounted for its employee stock options granted under
that statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 2001, 2000 and 1999: risk-free interest rates
of 5.0%, 6.5% and 6.0%, respectively; no dividend yield; volatility factor of
the Company's common shares of 1.0, 0.9 and 0.5, respectively; and expected life
of each option of 7 years, 7 years and 6 years, respectively.



                                       47

<PAGE>

         If the Company had elected to recognize compensation cost based on the
fair value of options at the grant date (which includes shares issuable under
the Employee Stock Purchase Plan--see Note 11) as prescribed by SFAS No. 123,
the following table displays what reported net income (loss) and per share
amounts would have been (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                 PRO FORMA YEAR ENDED JUNE 30,
                                                                                 -----------------------------
                                                                           2001
                                                                        RESTATED              2000            1999
                                                                        --------              ----            ----
<S>                                                                    <C>              <C>               <C>
         Net income (loss)....................................         $ (27,895)       $  (11,402)       $     2,955
         Net income (loss) per share, assuming dilution.......             (3.70)            (1.54)              0.41
</TABLE>

         The pro forma financial effects of applying SFAS No. 123 may not be
representative of the pro forma effects on reported results of operations for
future years.

         The following table summarizes stock option activity:

<TABLE>
<CAPTION>
                                                                                                             WEIGHTED-
                                                                                                              AVERAGE
                                                                                           NUMBER OF      EXERCISE PRICE
                                                                                          OPTIONS (#)      PER SHARE ($)
                                                                                         ------------      ------------
<S>                                                                                    <C>                    <C>
         Outstanding at July 1, 1998...........................................           1,619,535              7.17
              Granted..........................................................             263,050             15.92
              Cancelled........................................................             (52,425)            11.81
              Exercised........................................................             (74,888)             6.90
                                                                                        ------------
         Outstanding at June 30, 1999..........................................           1,755,272              8.26
              Granted..........................................................             377,100              9.69
              Cancelled........................................................             (79,150)            13.00
              Exercised........................................................            (117,300)             6.73
                                                                                        ------------
         Outstanding at June 30, 2000..........................................           1,935,922              8.44
              Granted..........................................................             351,000              5.95
              Cancelled........................................................            (204,550)            11.39
              Exercised........................................................              (1,500)             5.66
                                                                                        ------------
         Outstanding at June 30, 2001..........................................           2,080,872              7.73
                                                                                        ===========
</TABLE>

         The weighted average fair value of options granted during the years
ended June 30, 2001, 2000 and 1999 was $5.12, $5.92 and $5.39, respectively. At
June 30, 2001, 351,884 shares remained available for grant.

         The following table summarizes information regarding stock options
outstanding as of June 30, 2001:

<TABLE>
<CAPTION>
                                                     OPTIONS OUTSTANDING                          OPTIONS EXERCISABLE
                                                     -------------------                          -------------------
                                                         WEIGHTED
                                                          AVERAGE
                                                         REMAINING         WEIGHTED                              WEIGHTED
                                                        CONTRACTUAL         AVERAGE                               AVERAGE
       RANGE OF EXERCISE                                   LIFE            EXERCISE                              EXERCISE
           PRICE ($)               OPTIONS (#)            (YEARS)          PRICE ($)        OPTIONS (#)          PRICE ($)
           ---------               ----------             -------          ---------        -----------          --------
<S>                                <C>                   <C>              <C>              <C>                  <C>
             3.81                     417,500               4.2              3.81             400,000              3.81
           3.82-5.66                  489,500               4.8              5.14             379,000              5.00
           5.67-7.56                  321,250               7.6              6.61             115,250              7.25
           7.57-9.31                  373,850               5.7              7.90             287,450              7.81
          9.32-14.81                  307,572               7.0             11.46             171,147             11.87
          14.82-18.63                  72,750               6.0             18.42              55,750             18.44
          18.64-24.06                  98,450               6.4             20.64              53,325             20.65
                                   ----------                                              ----------
          3.81-24.06                2,080,872               5.7              7.73           1,461,922              7.29
                                   ==========                                              ==========
</TABLE>



                                       48


<PAGE>

NOTE 11--EMPLOYEE BENEFIT PLANS

         The Company has a 401(k) plan that covers substantially all employees
over 21 years of age. The Company contributes to the plan based upon employee
contributions and may make additional contributions at the discretion of the
Board of Directors. The Company made contributions to this plan of approximately
$837,000, $683,000 and $608,000, for the years ended June 30, 2001, 2000 and
1999, respectively.

         The Company has an employee stock purchase plan that is in accordance
with Section 423 of the Internal Revenue Code whereby participants are eligible
to purchase common shares of the Company during the plan year. The purchase
price for a common share is determined by the Compensation Committee of the
Board of Directors prior to the effective date. The purchase price may not be
less than 90% of the per share fair market value of the Company's common shares
on either the effective date or the option date for the offering, whichever is
the lesser. Substantially all employees are eligible to participate. During the
plan period ended December 31, 2000, the plan did not have any more shares
available for purchase. Until the Compensation Committee of the Board of
Directors approves additional shares, this plan will remain inactive.

NOTE 12--ACQUISITIONS

         On June 10, 1999, the Company acquired Distribution Architects
International, Inc. ("DAI") for 619,000 common shares of the Company and
$813,000 in cash. DAI is a provider of supply chain management applications for
distribution organizations. Pursuant to the acquisition agreement, DAI was
merged with and into a wholly-owned subsidiary of the Company incorporated in
Ohio, and each share of DAI common stock was converted into the right to receive
0.1313 common shares of the Company. Each DAI option outstanding immediately
prior to the merger was canceled and terminated. The holder of each option was
entitled to receive that number of Frontstep shares equal to $2.17 (the per
share value of DAI stock as agreed to by DAI and Frontstep) less $1.242 (the
stock option exercise price), multiplied by the number of shares of DAI covered
by the option, and divided by $18.50. The transaction was accounted for as a
purchase and resulted in a one-time, non-recurring charge of $835,000 relating
to the write-off of acquired in-process technology of DAI.

         On February 9, 2000, the Company acquired Profit Solutions, Inc.
("PSI"), a Minnesota corporation and provider of Web-centric customer
relationship management applications with sales, marketing, service and business
intelligence functionality, for approximately $2,100,000 in cash paid at closing
and $5,000,000 in unsecured, subordinated promissory notes, of which, $1,573,000
remained payable as of June 30, 2001. The transaction was accounted for as a
purchase and resulted in a one-time, non-recurring charge of $638,000 relating
to the write-off of acquired in-process technology of PSI.

         The Company believes that the in-process technologies acquired in
conjunction with the acquisitions of DAI and PSI are being developed as part of
the Company's extended ERP, front-office and supply-chain solutions consistent
with the expectations established at the time of acquisition.

         The following table sets forth the unaudited consolidated pro forma
results of operations for the periods indicated giving effect to the
acquisitions noted above as if such acquisitions had occurred at the beginning
of the periods indicated. The non-recurring charges of $835,000 and $638,000 are
excluded from pro forma net income (loss). No pro forma information is required
for the year ended June 30, 2001 since these acquisitions occurred in prior
years.

<TABLE>
<CAPTION>
                                                                                              YEAR ENDED JUNE 30,
                                                                                              ------------------
                                                                                              2000            1999
                                                                                              ----            ----
                                                                                           (IN THOUSANDS, EXCEPT PER
                                                                                                  SHARE DATA)

<S>                                                                                     <C>              <C>
         Revenue...............................................................         $   129,333      $    140,034
         Net income (loss).....................................................             (10,888)            2,828
         Net income (loss) per share, assuming dilution........................               (1.47)             0.39
</TABLE>



                                       49

<PAGE>


NOTE 13--EARNINGS PER SHARE

         The following table sets forth the computation of basic and diluted
earnings (loss) per share (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED JUNE 30,
                                                                                      ------------------
                                                                            2001
                                                                         RESTATED            2000             1999
                                                                         --------            ----             ----
<S>                                                                    <C>              <C>               <C>
          Numerator for basic and diluted income (loss)
              per share -- net income (loss)..................         $  (26,064)      $   (10,205)      $     3,999
                                                                       ===========      ============      ===========

          Denominator:
              Weighted average common shares outstanding......              7,535             7,411             6,654
              Contingently issuable shares....................                 --                --                57
                                                                       ----------       -----------       -----------
                  Denominator for basic income (loss) per share             7,535             7,411             6,711
              Effect of dilutive employee stock options.......                 --                --               553
                                                                       ----------       -----------       -----------
                  Denominator for diluted income (loss)
                    per share.................................              7,535             7,411             7,264
                                                                       ==========       ===========       ===========
          Basic net income (loss) per share...................         $    (3.46)      $      (1.38)     $      0.60
                                                                       ===========      =============     ===========
          Diluted net income (loss) per share.................         $    (3.46)      $      (1.38)     $      0.55
                                                                       ===========      =============     ===========
</TABLE>

NOTE 14--MINORITY INTEREST

         In June 1998, Frontstep Computer Systems (Singapore) Pte. Ltd., a
wholly-owned subsidiary of the Company, sold previously unissued shares of
common stock (representing a 13.3% interest in that subsidiary) for $2,000,000.
No gain or loss was recognized on the sale of the subsidiary stock.

         The Company and the minority interest investor also entered into a put
option agreement which provides that during a six month period commencing
September 1, 2001, the minority interest investor has the right to put its
shares in the subsidiary to the Company at a formula price as provided in the
put agreement, not to be less than $2,000,000. The minority interest in the
subsidiary will be adjusted to its expected redemption value each year as a
credit or charge to income until the put is exercised or the redemption period
expires.

         In September 1999, the Company formed a new subsidiary, Frontstep Japan
Ltd., of which 15% of the initial capitalization was contributed by a minority
interest investor. The investment is recorded on the accompanying balance sheet
as minority interest.

NOTE 15--PREFERRED STOCK

         The Company's Amended Articles of Incorporation authorize 1,000,000
shares of preferred stock, no par value. The Board of Directors is authorized to
determine the rights and preferences of these shares. Effective May 10, 2000,
the Company consummated a private placement of 566,933 shares of Series A
Convertible Participating Preferred Stock and warrants to purchase 453,546
common shares (the "Transaction"). Net proceeds realized from the Transaction
were $13,375,000.

         The preferred shares are convertible to common shares at any time, in
whole or in part, at the holder's option at an initial conversion rate of two
shares of common for one share of preferred. The conversion rate is subject to
adjustment on the fourth anniversary of the Transaction if the average daily
price of the Company's common shares, weighted by trading volume, for the forty
consecutive trading days immediately preceding the fourth anniversary ("Average
Weighted Price") is less than $12 per share. The adjusted conversion rate is
determined by dividing $24 by the Average Weighted Price. This potential
adjustment to the conversion rate represents a contingent beneficial conversion
feature. Assuming the Average Weighted Price on the fourth anniversary was equal
to the closing price of the Company's common shares on June 30, 2001 ($3.46),
the adjusted conversion rate would be 6.94 shares of common for one share of
preferred. This would result in a corresponding preferred dividend charge of
approximately $25,700,000. The conversion rate is also subject to adjustment
based on anti-dilution provisions. Mandatory





                                       50

<PAGE>

conversion occurs if, at any time after the second anniversary of the
Transaction, the daily price of the Company's common shares exceeds $24 for each
and every day of any period of forty consecutive trading days.

         The Company may, at its option, redeem all, but not less than all, of
the outstanding preferred shares within thirty days after the fourth anniversary
of the Transaction for $30.72 per preferred share plus accumulated, but unpaid,
dividends, if any.

         Holders of the preferred shares have a liquidation preference whereby
upon voluntary or involuntary liquidation/dissolution/winding-up of the Company
the preferred holders have a preference against the assets of the Company
available for distribution. The liquidation preference is equal to the greater
of a) $24 per preferred share outstanding plus accumulated, but unpaid,
dividends, if any, or b) the amount that would be received by a holder of the
number of common shares underlying the preferred shares if all the preferred
shares were converted to common shares immediately prior to
liquidation/dissolution/winding-up.

         The warrants are exercisable at $15 per share and expire five years
from the date of the Transaction. The exercise price is subject to adjustment on
the fourth anniversary of the Transaction if the Average Weighted Price is less
than $15 per share. The adjusted exercise price is the greater of a) the Average
Weighted Price or b) 75% of the exercise price. The exercise price is also
subject to adjustment based on anti-dilution provisions. Mandatory exercise
occurs if, at any time after the second anniversary of the Transaction, the
daily price of the Company's common shares exceeds $24 per share for each and
every day in any period of forty consecutive trading days. The Company has
determined that the fair value of the warrants on the date of the Transaction,
net of issuance costs, was $2,510,000. This value was determined using a
Black-Scholes option pricing model with the following assumptions: risk-free
interest rate of 6.5%, no dividend yield, volatility factor of .827, and option
life of 5 years.

         Under applicable securities exchange rules, the Company was required to
obtain shareholder approval prior to issuing common shares if the adjusted price
at the time of conversion of the preferred shares and/or exercise of the common
stock warrants is less than the market price of the Company's common shares on
the date of the Transaction ($9.1875 per share). The Company submitted to its
shareholders at the Company's annual meeting on November 8, 2000, a proposal to
approve the issuance of common shares upon conversion of the preferred shares
and/or exercise of the warrants, at an adjusted conversion price per share if
required, which is less than the market price per common share on the date of
the Transaction. This approval was obtained. Because the Company had not
obtained shareholder approval as of June 30, 2000, the proceeds from the
issuance of the preferred shares were classified as temporary equity. Due to the
shareholder approval, the preferred shares have been reclassified to permanent
equity in the June 30, 2001 balance sheet.

NOTE 16--BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

         The Company designs, develops, markets and supports business software
and services for mid-sized manufacturing, distribution and other companies,
including business units of larger companies. The Company operates exclusively
in this market and, therefore, only reports on one primary segment.

         Summarized financial information attributable to each of the Company's
geographic areas is shown in the following table (in thousands):

<TABLE>
<CAPTION>
                                                                                      NORTH
                                                                                    AMERICA,
                                                                                    EXCLUDING
                                                                        UNITED       UNITED                       ASIA/
                                                                        STATES       STATES         EUROPE       PACIFIC
                                                                        ------      --------       -------       -------

         FISCAL 2001 - RESTATED
<S>                                                                    <C>          <C>          <C>          <C>
         Total revenue............................................     $  87,405    $   4,103    $  14,736    $  10,832
         Operating income (loss) before amortization of intangibles
              and special charges.................................       (18,099)       2,115          259       (2,204)
         Operating income (loss)..................................       (27,305)       2,115         (189)      (2,238)
         Long-lived assets........................................         6,793           29          312          512
</TABLE>



                                       51

<PAGE>




<TABLE>
<CAPTION>
                                                                                      NORTH
                                                                                    AMERICA,
                                                                                    EXCLUDING
                                                                        UNITED       UNITED                       ASIA/
                                                                        STATES       STATES         EUROPE       PACIFIC
                                                                        -----       -------         ------       -------
<S>                                                                    <C>          <C>          <C>          <C>
         FISCAL 2000
         Total revenue............................................     $  98,739    $   4,326    $  13,941    $  11,902
         Operating income (loss) before amortization of intangibles
              and special charges.................................        (3,564)       1,881       (3,376)      (1,077)
         Operating income (loss)..................................        (7,618)       1,881       (3,904)      (1,155)
         Long-lived assets........................................         7,099           36          383          468

         FISCAL 1999
         Total revenue............................................     $  95,696    $   5,254    $  16,400    $  11,722
         Operating income (loss) before amortization of intangibles
              and special charges.................................         8,569        1,469         (806)         797
         Operating income (loss)..................................         6,259        1,469       (1,383)         709
         Long-lived assets........................................         7,085          245          392          475
</TABLE>


NOTE 17--COMMITMENTS AND CONTINGENCIES

         The Company is subject to claims and lawsuits in the ordinary course of
its business. It is the Company's policy to vigorously defend any action brought
against it, to the fullest extent, in the normal legal process. In the opinion
of management, the outcome of these actions, which is not clearly determinable
at the present time, are either adequately covered by insurance, or if not
insured, will not, in the aggregate, have a material adverse effect upon the
Company's financial position or its results of future operations.

NOTE 18--SALE OF VISUAL APPLICATIONS SOFTWARE

         Effective June 21, 2000, the Company sold certain assets of its Visual
Applications Software, Inc. subsidiary for $2,915,000. The Company has
recognized a $429,000 net loss in connection with the sale of which
approximately $1,200,000 includes write-off of purchased goodwill. The costs
related to the disposition of Visual Applications Software, Inc. are included in
"restructuring and other charges" in the Consolidated Statements of Operations
for the year ended June 30, 2000.

NOTE 19--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

This quarterly data reflects the restatement and reclassifications as described
in Note 3.

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED
                                                                                -------------------
                                                              JUNE 30         MARCH 31       DECEMBER 31       SEPTEMBER 30
                                                              -------         --------       -----------       ------------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>               <C>              <C>             <C>
         FISCAL 2001 - RESTATED
              Total revenue...........................    $    28,821       $   26,334       $    33,856     $     28,065
              Gross margin............................         16,066            9,605            18,801           13,778
              Operating loss..........................         (4,994)         (15,928)           (1,492)          (5,203)
              Net loss................................         (5,197)         (16,186)           (1,164)          (3,517)
              Basic loss per common share.............          (0.69)           (2.14)            (0.16)           (0.47)
              Diluted loss per common share...........          (0.69)           (2.14)            (0.16)           (0.47)
</TABLE>




                                       52
<PAGE>
Frontstep, Inc.
Restated Income Statement
Year ended June 30, 2001 by quarter
(all numbers in 000's except per share data)


<TABLE>
<CAPTION>

                                                        Q1 01                      Q2 01                      Q3 01
                                               ----------------------      ---------------------     -------------------
  Revenue:                                        as            as            as            as          as          as
                                               reported      restated      reported      restated    reported    restated
                                               --------      --------      --------      --------    --------    --------
<S>                                              <C>          <C>           <C>          <C>           <C>        <C>
        License fees                           $ 11,881       11,881        17,185       17,185        10,724     10,724
        Services                                     --        7,953            --        8,041            --      7,154
        Maintenance and support                  16,152        8,231        16,878        8,630        16,448      8,456
                                               --------       ------        ------       ------        ------     ------
              Total revenue                      28,033       28,065        34,063       33,856        27,172     26,334

Cost of revenue:
        License fees                              4,445        4,445         5,489        5,489         4,624      6,537
        Service, maintenance and support          9,842        9,842         9,566        9,566        10,192     10,192
                                               --------       ------        ------       ------        ------     ------
              Cost of revenue                    14,287       14,287        15,055       15,055        14,816     16,729
                                               --------       ------        ------       ------        ------     ------

Gross margin                                     13,746       13,778        19,008       18,801        12,356      9,605

Operating expenses:
        Selling, general and administrative      12,263       12,263        15,991       15,991        14,388     20,388
        Research and product development          3,718        3,718         3,471        3,471         3,737      3,737
        Amortization of intangibles                 837          837           831          831           828        828
        Restructuring and other charges           2,163        2,163            --           --         8,493        580
                                               --------       ------        ------       ------        ------     ------
              Total operating expenses           18,981       18,981        20,293       20,293        27,446     25,533
                                               --------       ------        ------       ------        ------     ------

Operating income (loss)                          (5,235)      (5,203)       (1,285)      (1,492)      (15,090)   (15,928)

Other income (expense), net                          73           73          (122)        (122)         (258)      (258)
                                               --------       ------        ------       ------        ------     ------

Income (loss) before income taxes                (5,162)      (5,130)       (1,407)      (1,614)      (15,348)   (16,186)

Provision for income taxes                       (1,613)      (1,613)         (450)        (450)           --         --
                                               --------       ------        ------       ------        ------     ------

Net income (loss)                              $ (3,549)      (3,517)         (957)      (1,164)      (15,348)   (16,186)
                                               ========       ======        ======       ======       =======    =======


        Shares outstanding                        7,504        7,504         7,505        7,505         7,563      7,563
                                               ========       ======        ======       ======       =======    =======
        EPS                                    $  (0.47)       (0.47)        (0.13)       (0.16)        (2.03)     (2.14)
                                               ========       ======        ======       ======       =======    =======


</TABLE>

<TABLE>
<CAPTION>

                                                         Q4 01                        FY 01
                                                ---------------------       ---------------------
  Revenue:                                         as            as             as          as
                                                reported      restated       reported    restated
                                                --------      --------       --------    --------
<S>                                               <C>          <C>             <C>         <C>
        License fees                            $ 11,519       11,519          51,309      51,309
        Services                                      --        7,773              --      30,921
        Maintenance and support                   17,499        9,529          66,977      34,846
                                                --------       ------         -------     -------
              Total revenue                       29,018       28,821         118,286     117,076

Cost of revenue:
        License fees                               5,414        5,414          19,972      21,885
        Service, maintenance and support           7,341        7,341          36,941      36,941
                                                --------       ------         -------     -------
              Cost of revenue                     12,755       12,755          56,913      58,826
                                                --------       ------         -------     -------

Gross margin                                      16,263       16,066          61,373      58,250

Operating expenses:
        Selling, general and administrative       13,365       14,205          56,007      62,847
        Research and product development           2,406        2,406          13,332      13,332
        Amortization of intangibles                  789          789           3,285       3,285
        Restructuring and other charges            4,500        3,660          15,156       6,403
                                                --------       ------         -------     -------
              Total operating expenses            21,060       21,060          87,780      85,867
                                                --------       ------         -------     -------

Operating income (loss)                           (4,797)      (4,994)        (26,407)    (27,617)

Other income (expense), net                         (203)        (203)           (510)       (510)
                                                --------       ------         -------     -------

Income (loss) before income taxes                 (5,000)      (5,197)        (26,917)    (28,127)

Provision for income taxes                            --           --          (2,063)     (2,063)
                                                --------       ------         -------     -------

Net income (loss)                               $ (5,000)      (5,197)        (24,854)    (26,064)
                                                ========       ======         =======     =======


        Shares outstanding                         7,568        7,568           7,535       7,535
                                                ========       ======         =======     =======
        EPS                                     $  (0.66)       (0.69)          (3.30)      (3.46)
                                                ========       ======         =======     =======

</TABLE>


                                       53
<PAGE>

                                 FRONTSTEP, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


<TABLE>
<CAPTION>

                                          SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,    DECEMBER 31,    MARCH 31,      MARCH 31,
                                              2000           2000          2000            2000           2000           2000
                                          ----------------------------------------------------------------------------------------
                                               AS       AS PREVIOUSLY         AS        AS PREVIOUSLY       AS       AS PREVIOUSLY
                                            RESTATED      REPORTED         RESTATED       REPORTED       RESTATED      REPORTED
                                            --------    -------------    -----------   --------------   ---------    -------------
<S>                                          <C>              <C>            <C>           <C>           <C>          <C>

                 ASSETS

Current assets:
   Cash and cash equivalents                 $ 4,163          $ 4,163        $ 1,331       $ 1,331        $ 1,214         $  1,214
   Trade accounts receivable, net             38,089           38,089         43,736        43,736         31,441           31,441
   Prepaid expenses                            3,068            3,068          3,163         3,163          3,507            3,507
   Income tax receivable                       1,955            1,955          2,170         2,170             --               --
   Deferred income taxes                       1,510            1,510          1,510         1,510          1,458            1,458
   Inventories                                   838              838            878           878            738              738
   Other current assets                        1,780            1,780            700           700          1,718            1,718
                                            --------    -------------    -----------    ----------    -----------    -------------
                                              51,403           51,403         53,488        53,488         40,076           40,076

Capitalized software, net                     17,526           17,526         17,460        17,460         15,208           15,208
Intangibles, net                               9,322            9,322          8,860         8,860          8,355            8,355
Equipment and improvements, net                8,002            8,002          8,530         8,530          8,155            8,155
Deposits and other assets                      2,535            2,535          2,723         2,723          1,504            1,504
                                            --------   --------------    -----------    ----------    -----------    -------------
     Total assets                           $ 88,788         $ 88,788       $ 91,061      $ 91,061       $ 73,298         $ 73,298
                                            ========   ==============    ===========    ==========    ===========    =============

  LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued expenses    $ 12,718         $ 12,718       $ 14,083      $ 14,083       $ 14,859         $ 14,859
   Deferred revenue                           16,975           17,007         18,372        18,197         17,525           16,512
   Current portion of long-term
     obligations                               2,852            2,852          1,967         1,967         10,202           10,202
                                            --------   --------------    -----------    ----------    -----------    -------------
                                              32,545           32,577         34,422        34,247         42,586           41,573

Noncurrent liabilities:
   Long-term obligations                       6,982            6,982          8,578         8,578             --               --
   Deferred income taxes                       3,452            3,452          3,082         3,082          2,495            2,495
   Other                                          --               --            351           351            267              267
                                            --------   --------------    -----------    ----------    -----------    -------------
                                              10,434           10,434         12,011        12,011          2,762            2,762

Minority interest                              2,110            2,110          2,071         2,071          2,109            2,109
Preferred stock                                   --               --             --            --             --               --

Shareholders' equity:
   Preferred stock                            10,865           10,865         10,865        10,865         10,865           10,865
   Common stock                                   78               78             78            78             79               79
   Additional paid-in capital                 37,226           37,226         37,276        37,276         37,470           37,470
   Common stock in treasury, at cost          (1,320)          (1,320)        (1,320)       (1,320)        (1,320)          (1,320)
   Retained earnings (deficit)                  (225)            (257)        (1,389)       (1,214)       (17,575)         (16,562)
   Accumulated other comprehensive loss       (2,925)          (2,925)        (2,953)       (2,953)        (3,678)          (3,678)
                                            --------   --------------    -----------    ----------    -----------    -------------
                                              43,699           43,667         42,557        42,732         25,841           26,854
                                            --------   --------------    -----------    ----------    -----------    -------------
     Total liabilities and shareholders'
       equity                               $ 88,788         $ 88,788       $ 91,061      $ 91,061       $ 73,298         $ 73,298
                                            ========   ==============    ===========    ==========    ===========    =============

</TABLE>

                                       54
<PAGE>
                                 FRONTSTEP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED          SIX MONTHS ENDED          NINE MONTHS ENDED
                                                           SEPTEMBER 30,               DECEMBER 31,               MARCH 31,
                                                        ------------------          ----------------          -----------------
                                                         2000          2000         2000         2000         2001          2001
                                                      ------------  ----------   -----------  -----------  ------------  ----------
                                                                        As                        As                         As
                                                                    Previously                Previously                 Previously
                                                      As Restated    Reported    As Restated   Reported    As Restated    Reported
                                                      ------------  ----------   -----------  -----------  ------------  ----------
<S>                                                   <C>           <C>          <C>           <C>          <C>          <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)                                     $(3,517)      $(3,549)     $ (4,681)     $(4,506)     $(20,867)    $(19,854)
    Adjustments to reconcile net income (loss)
        to net cash provided by (used in)
        operating activities:
    Depreciation                                        1,081         1,081         2,189        2,189         3,129        3,129
    Amortization                                        1,925         1,925         3,658        3,658         5,500        5,500
    Restructuring and other charges                     2,163         2,163         2,163        2,163        10,656       10,656
    Deferred income taxes                                (716)         (716)       (1,085)      (1,085)       (2,146)      (2,146)
    Write-off of capitalized software                      --            --            --            --           --           --
    Changes in operating assets and liabilities,
        net of restructuring and other charges:
        Accounts receivable                            (1,647)       (1,647)       (6,890)      (6,890)       (1,431)      (1,431)
        Prepaid expenses and other assets              (1,744)       (1,744)         (854)        (854)       (1,075)      (1,075)
        Accounts payable and accrued expenses          (2,864)       (2,864)       (1,779)      (1,779)       (1,287)      (1,287)
        Deferred revenue                               (1,143)       (1,111)          209           34          (493)      (1,506)
        Income taxes payable/receivable                   (14)          (14)         (366)        (366)        2,215        2,215
                                                      -------       -------      --------      -------      --------     --------
    Net cash used in operating activities              (6,476)       (6,476)       (7,436)      (7,436)       (5,799)      (5,799)

    CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment                    (1,095)       (1,095)       (2,806)      (2,806)       (3,362)      (3,362)
    Additions to capitalized software                  (1,395)       (1,395)       (2,593)      (2,593)       (3,738)      (3,738)
                                                      -------       -------      --------      -------      --------     --------
    Net cash used in investing activities              (2,490)       (2,490)       (5,399)      (5,399)       (7,100)      (7,100)

    CASH FLOW FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock, net             8             8            58           58           253          253
    Proceeds from long-term obligations                 3,814         3,814        28,735       28,735        53,946       53,946
    Payments on long-term obligations                  (2,660)       (2,660)      (26,557)     (26,557)      (52,122)     (52,122)
                                                      -------       -------      --------      -------      --------     --------
    Net cash provided by financing activities           1,162         1,162         2,236        2,236         2,077        2,077
    Effect of exchange rate changes on cash                99            99            62           62           168          168
                                                      -------       -------      - -------     --------     ---------    ---------
    Net increase (decrease) in cash and
        cash equivalents                               (7,705)       (7,705)      (10,537)     (10,537)      (10,654)     (10,654)
    Cash and cash equivalents at beginning of period   11,868        11,868        11,868       11,868        11,868       11,868
                                                      -------       -------      --------      -------      --------     --------
    Cash and cash equivalents at end of period        $ 4,163       $ 4,163      $  1,331      $ 1,331      $  1,214     $  1,214
                                                      =======       =======      ========      =======      ========     ========

</TABLE>

<TABLE>
<CAPTION>
                                                                 TWELVE MONTHS ENDED
                                                                      JUNE 30,
                                                                 -------------------
                                                                  2001         2001
                                                                ----------  -----------
                                                                                 As
                                                                             Previously
                                                               As Restated    Reported
                                                               -----------  -----------
<S>                                                             <C>          <C>
CASH FLOW FROM OPERATING ACTIVITIES:                             (26,064)   $ (24,854)
Net income (loss)
    Adjustments to reconcile net income (loss)
        to net cash provided by (used in)
        operating activities:
    Depreciation                                                   4,149        4,149
    Amortization                                                   7,333        7,333
    Restructuring and other charges                                6,403       15,156
    Deferred income taxes                                         (1,792)      (1,792)
    Write-off of capitalized software                              1,913        1,913
    Changes in operating assets and liabilities,
        net of restructuring and other charges:
        Accounts receivable                                        5,214       (1,626)
        Prepaid expenses and other assets                           (837)        (837)
        Accounts payable and accrued expenses                     (3,928)      (3,928)
        Deferred revenue                                           2,274        1,064
        Income taxes payable/receivable                            1,820        1,820
                                                                --------    ---------
    Net cash used in operating activities                         (3,515)      (3,515)

    CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment                               (3,996)      (3,996)
    Additions to capitalized software                             (5,074)      (5,074)
                                                                --------    ---------
    Net cash used in investing activities                         (9,070)      (9,070)

    CASH FLOW FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock, net                      253          253
    Proceeds from long-term obligations                           76,090       76,090
    Payments on long-term obligations                            (74,026)     (74,026)
                                                                --------    ---------
    Net cash provided by financing activities                      2,317        2,317
    Effect of exchange rate changes on cash                          (88)         (88)
                                                                --------    ---------
    Net increase (decrease) in cash and
        cash equivalents                                         (10,356)     (10,356)
    Cash and cash equivalents at beginning of period              11,868       11,868
                                                                --------    ---------
    Cash and cash equivalents at end of period                  $  1,512    $   1,512
                                                                ========    =========

</TABLE>

                                       55
<PAGE>



<TABLE>
<CAPTION>

                                                                                THREE MONTHS ENDED
                                                                                ------------------
                                                              JUNE 30         MARCH 31       DECEMBER 31       SEPTEMBER 30
                                                              -------         --------       -----------       ------------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>               <C>              <C>             <C>
         FISCAL 2000
              Total revenue...........................    $    30,989       $   31,468       $    34,380     $     32,071
              Gross margin............................         13,282           17,340            18,726           17,704
              Operating income (loss).................        (10,823)          (2,379)              668            1,738
              Net income (loss).......................         (9,534)          (1,854)              288              895
              Basic income (loss) per common share....          (1.27)           (0.25)             0.04             0.12
              Diluted income (loss) per common share..          (1.27)           (0.25)             0.04             0.12
</TABLE>

NOTE 20--SUBSEQUENT EVENTS

         In July 2001, the Company executed a new credit facility with Foothill
Capital Corporation (the "Foothill Credit Facility"). The Foothill Credit
Facility includes a $15,000,000, three-year term note and a $10,000,000
revolving credit facility. Availability under the Foothill Credit Facility is
based on and secured by qualifying accounts receivable originating within the
United States and Canada. The revolving credit facility bears interest either at
the Federal Funds rate plus 1.5%, or at the Eurodollar market rate plus 3.0%.
The term note bears interest at the rate of 10.5% plus 1.5% per annum added to
principal. The term note is payable in monthly installments commencing October
1, 2001. The Foothill Credit Facility is subject to customary terms and
conditions and includes financial covenants for maintenance of a minimum
tangible net worth, a minimum level of earnings before interest, taxes,
depreciation and amortization and a maximum ratio of debt to earnings before
interest, taxes, depreciation and amortization. The proceeds from the Foothill
Credit Facility were used to repay, in full, the Company's Credit Facility.

         In connection with the Foothill Credit Facility, Foothill Capital
Corporation was granted 550,000 warrants to purchase common stock priced at the
current market price as of the close of the deal ($3.36 per share), which expire
in July 2006. The warrants will be recorded as a debt discount and are subject
to certain anti-dilution provisions as defined in the agreement. The Company has
determined the relative fair value of the warrants to be $1,276,000. This was
determined using a Black-Scholes option pricing model, adjusted to take into
consideration certain features of the warrants such as anti-dilution provisions,
with the following assumptions: risk-free interest rate of 5.0%; no dividend
yield; volatility factor of 1.0; and option life of 5 years.


         Additionally, in July 2001, the Company adjusted the price of 453,546
existing warrants to purchase common stock issued in fiscal year 2000 pursuant
to the preferred stock private placement, with an original exercise price of $15
per share to $3.36 per share. Because this change in price was due to
contractual provisions already in place at the inception of the arrangement,
there is no impact on the company's financial statements.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         The Company filed a current report on Form 8-K, dated November 8, 2000,
to report under Item 4 (Changes in Registrant's Certifying Accountant) that
effective November 8, 2000, the registrant appointed KPMG LLP as its Certifying
Accountant. Ernst & Young LLP was previously the principal accountants for
Frontstep. The decision to change accountants was approved by the Audit
Committee and the Board of Directors.

         In connection with the audits of the two fiscal years ended June 30,
2000 and during the subsequent interim period through September 30, 2000, there
were no disagreements with Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to their satisfaction would have
caused them to make reference in connection with their opinion to the subject
matter of the disagreement.


                                       56
<PAGE>




                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this Item is incorporated by reference to
the section entitled "Election of Directors" which appears in our Definitive
Proxy Statement for the Annual Meeting of Shareholders, to be held on November
7, 2001, to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A of the Securities Exchange Act of 1934 within 120 days after the
end of our fiscal year. Certain other information required by this Item with
respect to executive officers of the Company is set forth in Part I hereof under
"Item 1. Business -- Executive Officers of the Registrant".

ITEM 11.          EXECUTIVE COMPENSATION

         The information required by this Item is incorporated by reference to
the section entitled "Compensation, Meetings and Committees of Directors" and
"Executive Compensation" which appear in our Definitive Proxy Statement for the
Annual Meeting of Shareholders, to be held on November 7, 2001, to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A of the
Securities Exchange Act of 1934 within 120 days after the end of our fiscal
year.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item is incorporated by reference to
the section entitled "Principal Holders of Securities" which appears in our
Definitive Proxy Statement for the Annual Meeting of Shareholders, to be held on
November 7, 2001, to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the Securities Exchange Act of 1934 within 120
days after the end of our fiscal year.

ITEM 13.          CERTAIN BENEFICIAL RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item is incorporated by reference to
the section entitled "Executive Compensation--Certain Transaction and
Relationships" which appears in our Definitive Proxy Statement for the Annual
Meeting of Shareholders, to be held on November 7, 2001, to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A of the Securities
Exchange Act of 1934 within 120 days after the end of our fiscal year.



                                       57
<PAGE>

                                     PART IV

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

<TABLE>
<S>                  <C>
                  (a)(1)  The following consolidated financial statements of the
                           Company and its subsidiaries are included in Item 8:

                  Reports of Independent Auditors
                  Consolidated Balance Sheets as of June 30, 2001 and 2000
                  Consolidated Statements of Operations for the Years Ended June 30, 2001, 2000 and 1999
                  Consolidated Statements of Shareholders' Equity for the Years Ended June 30, 2001, 2000 and 1999
                  Consolidated Statements of Cash Flows for the Years Ended June 30, 2001, 2000 and 1999
                  Notes to Consolidated Financial Statements
</TABLE>

                  (a)(2) All schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
either not required under the related instructions, are inapplicable and
therefore have been omitted, or the required information is provided in the
Consolidated Financial Statements of the Company and its subsidiaries or Notes
thereto.

                  (a)(3)  Exhibits

                  The following exhibits are included in this Annual Report on
                  Form 10-K:
<TABLE>
<CAPTION>

EXHIBIT NO.                       DESCRIPTION                                                       PAGE
-----------                       -----------                                                       ----
<S>               <C>                                                           <C>
3(a)(1)            Amended Articles of Incorporation of                         Incorporated herein by reference to
                   Frontstep, Inc. (f/k/a Symix Systems,                        Exhibit 3(a)(1) to Registrant's Annual Report
                   Inc.) (the "Registrant") (as filed on                        on Form 10-K for the fiscal year ended
                   February 8, 1991)                                            June 30, 1997 (File No. 0-19024)


3(a)(2)            Certificate of Amendment to the                              Incorporated herein by reference to
                   Amended Articles of Incorporation of                         Exhibit 3(a)(2) to Registrant's Annual Report
                   the Registrant (as filed on July 16, 1996)                   on Form 10-K for the fiscal year ended June 30,
                                                                                 1997 (File No. 0-19024)

3(a)(3)            Certificate of Amendment to the                              Incorporated herein by reference to
                   Amended Articles of Incorporation,                           Exhibit 3(a)(3) to Registrant's Quarterly
                   as amended, of the Registrant (as filed                      Report on Form 10-Q for the fiscal quarter
                   with the Ohio Secretary of State on                          ended March 31, 2000 (File No. 0-19024)
                   May 10, 2000)

3(a)(4)            Certificate of Amendment to the Amended                      Incorporated herein by reference to
                   Articles of Incorporation, as amended, of the                Exhibit 3(a)(4) to Registrant's Quarterly
                   Registrant (as filed with the Ohio Secretary                 Report on Form 10-Q for the fiscal quarter
                   of State on November 8, 2000)                                ended September 30, 2000 (File No. 0-19024)

3(a)(5)            Amended Articles of Incorporation, as amended,               Incorporated herein by reference to
                   of the Registrant (reflecting amendments through             Exhibit 3(a)(5) to Registrant's Quarterly
                   November 8, 2000 for purposes of Securities and              Report on Form 10-Q for the fiscal quarter
                   Exchange Commission reporting compliance only)               ended September 30, 2000 (File No. 0-19024)
</TABLE>


                                       58
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                       DESCRIPTION                                      PAGE
-----------                       -----------                                      ----
<S>            <C>                                               <C>
3(b)           Amended Regulations of the Registrant             Incorporated herein by reference to
                                                                 Exhibit 3(b) to the Registration Statement
                                                                 on Form S-1 of Registrant, as filed with the
                                                                 Securities and Exchange Commission on
                                                                 February 12, 1991 (Registration
                                                                 No. 33-38878)

4(a)(1)        Amended Articles of Incorporation of the          Incorporated herein by reference to
               Registrant (as filed on February 8, 1991)         Exhibit 3(a)(1) to Registrant's Annual
                                                                 Report on Form 10-K for the fiscal year
                                                                 ended June 30, 1997 (File No. 0-19024)


4(a)(2)        Certificate of Amendment to the Amended           Incorporated herein by reference to
               Articles of Incorporation of the Registrant       Exhibit 3(a)(2) to Registrant's Annual
               (as filed on July 16, 1996)                       Report on Form 10-K for the fiscal year
                                                                 ended June 30, 1997 (File No. 0-19024)

4(a)(3)        Certificate of Amendment to the Amended           Incorporated herein by reference to
               Articles of Incorporation, as amended,            Exhibit 3(a)(3) to Registrant's Quarterly
               of the Registrant (as filed with the Ohio         Report on Form 10-Q for the fiscal quarter
               Secretary of State on May 10, 2000)               ended March 31, 2000 (File No. 0-19024)

4(a)(4)        Certificate of Amendment to the Amended           Incorporated herein by reference to
               Articles of Incorporation, as amended, of the     Exhibit 3(a)(4) to Registrant's Quarterly
               Registrant (as filed with the Ohio Secretary      Report on Form 10-Q for the fiscal quarter
               of State on November 8, 2000)                     ended September 30, 2000 (File No. 0-19024)

4(a)(5)        Amended Articles of Incorporation, as             Incorporated herein by reference to
               amended, of the Registrant (reflecting            Exhibit 3(a)(5) to Registrant's Quarterly
               amendments through November 8, 2000 for           Report on Form 10-Q for the fiscal quarter
               purposes of Securities and Exchange               ended September 30, 2000 (File
               Commission reporting compliance only)             No. 0-19024)

4(b)           Amended Regulations of the Registrant             Incorporated herein by reference to
                                                                 Exhibit 3(b) to the Registration Statement
                                                                 on Form S-1 of Registrant, as filed with the
                                                                 Securities and Exchange Commission on
                                                                 February 12, 1991 (Registration
                                                                 No. 33-38878)

4(c)           Investor Rights Agreement, dated as of            Incorporated herein by reference to
               May 10, 2000, among the Registrant, the           Exhibit 4(c) to Registrant's Quarterly
               Investors identified therein and Lawrence J.      Report on Form 10-Q for the fiscal quarter
               Fox                                               ended March 31, 2000 (File No. 0-19024)
</TABLE>


                                       59

<PAGE>
<TABLE>
<CAPTION>

EXHIBIT NO.                  DESCRIPTION                                       PAGE
-----------                  -----------                                       ----
<S>          <C>                                                 <C>
4(d)          Amendment to Investor Rights Agreement              Incorporated herein by reference to
                                                                  Exhibit 4(c) to Registrant's Current Report
                                                                  on Form 8-K, as filed with the Securities
                                                                  and Exchange Commission on August 30,
                                                                  2000 (File No. 0-19024)

4(e)**        Warrant for the Purchase of Shares of               Previously filed
              Common Stock of the Registrant issued to
              Morgan Stanley Dean Witter Venture
              Partners IV, L.P. and Exhibit A, identifying
              other identical warrants issued to the
              Investors identified on Exhibit A, for the
              number of common shares identified on
              Exhibit A, on the dates indicated

4(f)          Assignment and Assumption Agreement, by             Incorporated herein by reference to
              and between Morgan Stanley Dean Witter              Exhibit 4(g) to Registrant's Quarterly
              Equity Funding, Inc. and the Originators            Report on Form 10-Q for the fiscal quarter
              Investment Plan, L.P., dated November 24,           ended December 31, 2000 (File No. 0-
              2000                                                19024)

4(g)**        Common Share Purchase Warrant, dated                Previously filed
              July 17, 2001, issued to Foothill Capital
              Corporation

4(h)**        Registration Rights Agreement, dated                Previously filed
              July 17, 2001, by and between the Registrant
              and Foothill Capital Corporation

4(i)          Share Exchange Agreement, dated                     Incorporated herein by reference to
              January 9, 1997                                     Exhibit 99 to Registrant's Current Report on
                                                                  Form 8-K, as filed with the Securities and
                                                                  Exchange Commission on January 24, 1997
                                                                  (File No. 0-19024)

10(a)         Lease Agreement dated April 3, 1991 for             Incorporated herein by reference to
              corporate offices located at 2800 Corporate         Exhibit 10(c) to Registrant's Annual Report
              Exchange Drive, Columbus, Ohio                      on Form 10-K for the fiscal year ended
                                                                  June 30, 1991 (File No. 0-19024)

10(b)         Amendment to corporate offices lease                Incorporated herein by reference to
                                                                  Exhibit 10(b) to Registrant's Annual Report
                                                                  on Form 10-K for the fiscal year ended
                                                                  June 30, 1998 (File No. 0-19024)

10(c)         Second Amendment to corporate offices lease         Incorporated herein by reference to
                                                                  Exhibit 10(c) to Registrant's Annual Report
                                                                  on Form 10-K for the fiscal year ended
                                                                  June 30, 1998 (File No. 0-19024)
</TABLE>



                                       60
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                       DESCRIPTION                                           PAGE
-----------                       -----------                                           ----
<S>              <C>                                                  <C>
10(d)             Third Amendment to corporate offices lease            Incorporated herein by reference to
                                                                        Exhibit 10(c) to Registrants' Annual Report
                                                                        on Form 10-K for the fiscal year ended
                                                                        June 30, 1994 (File No. 0-19024)

10(e)             Fourth Amendment to corporate offices lease           Incorporated herein by reference to
                                                                        Exhibit 10(e) to Registrant's Annual Report
                                                                        on Form 10-K for the fiscal year ended
                                                                        June 30, 1998 (File No. 0-19024)

10(f)             Fifth Amendment to corporate offices lease            Incorporated herein by reference to
                                                                        Exhibit 10(f) to Registrants' Annual Report on
                                                                        Form 10-K for the fiscal year ended June 30,
                                                                        1998 (File No. 0-19024)

10(g)             Sixth Amendment to corporate offices lease            Incorporated herein by reference to
                                                                        Exhibit 10(g) to Registrant's Annual Report
                                                                        on Form 10-K for the fiscal year ended
                                                                        June 30, 2000 (File No. 0-19024)

10(h)             Eighth Amendment to corporate offices                 Incorporated herein by reference to
                  lease, with Seventh Amendment to corporate            Exhibit 10(h) to Registrant's Annual Report
                  offices lease attached as "Exhibit A"                 on Form 10-K for the fiscal year ended
                                                                        June 30, 2000 (File No. 0-19024)

10(i)             Progress Software Application Partner                 Incorporated herein by reference to
                  Agreement dated February 8, 1995                      Exhibit 10(e) to Registrant's Quarterly Report
                                                                        on Form 10-Q for the fiscal quarter ended
                                                                        March 31, 1995 (File No. 0-19024)

10(j)             Amendment to Progress Software                        Incorporated herein by reference to
                  Application Partner Agreement dated July 1, 1997      Exhibit 10(h) to Registrants' Annual Report
                                                                        on Form 10-K for the fiscal year ended
                                                                        June 30, 1998 (File No. 0-19024)

10(k)             Second Amendment to Progress Software                 Incorporated herein by reference to
                  Application Partner Agreement dated July 1, 1998      Exhibit 10(i) to Registrants' Annual Report on
                                                                        Form 10-K for the fiscal year ended June 30,
                                                                        1998 (File No. 0-19024)

10(l)*            Stock Option Plan for Outside Directors               Incorporated herein by reference to
                                                                        Exhibit 10(i) to Registrant's Annual Report on
                                                                        Form 10-K for the fiscal year ended June 30,
                                                                        1993 (File No. 0-19024)

10(m)*            Non-Qualified Stock Option Plan for Key Executives    Incorporated herein by reference to
                                                                        Exhibit 10(a) to Registrant's Quarterly Report
                                                                        on Form 10-Q for the fiscal quarter ended
                                                                        March 31, 1996 (File No. 0-19024)
</TABLE>



                                       61

<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.                       DESCRIPTION                                          PAGE
-----------                       -----------                                          ----
<S>               <C>                                                   <C>
10(n)*            Non-Qualified Stock Option Plan for Key               Incorporated herein by reference to
                  Employees, as amended                                 Exhibit 10(a) to Registrant's Annual Report
                                                                        on Form 10-K for the fiscal year ended
                                                                        June 30, 1993 (File No. 0-19024)

10(o)*            1999 Non-Qualified Stock Option Plan for              Incorporated herein by reference to
                  Key Employees                                         Exhibit 10(n) to Registrant's Annual Report
                                                                        on Form 10-K for the fiscal year ended
                                                                        June 30, 1999 (File No. 0-19024)

10(p)*            Sasser Employment Agreement                           Incorporated herein by reference to
                                                                        Exhibit 10(b) to Registrant's Quarterly Report
                                                                        on Form 10-Q for the fiscal quarter ended
                                                                        March 31, 1996 (File No. 0-19024)

10(q)*            Amendment to Sasser Employment Agreement              Incorporated herein by reference to
                                                                        Exhibit 10(p) to Registrant's Annual Report
                                                                        on Form 10-K for the fiscal year ended
                                                                        June 30, 1999 (File No. 0-19024)

10(r)*            Second Amendment to Sasser Employment                 Incorporated herein by reference to
                  Agreement                                             Exhibit 10(q) to Registrant's Annual Report
                                                                        on Form 10-K for the fiscal year ended
                                                                        June 30, 1999 (File No. 0-19024)

10(s)*            Stock Option Agreement between the                    Incorporated herein by reference to
                  Registrant and Stephen A. Sasser                      Exhibit 10(c) to Registrant's Quarterly Report
                  dated January 17, 1996                                on Form 10-Q for the fiscal quarter ended
                                                                        March 31, 1996 (File No. 0-19024)

10(t)             Employee Stock Purchase Plan, as approved             Incorporated herein by reference to
                  on July 8, 1996 and as amended on                     Exhibit 10(a)(a) to Registrant's Annual Report
                  November 11, 1998                                     on Form 10-K for the fiscal year ended
                                                                        June 30, 2000 (File No. 0-19024)

10(u)**           Loan and Security Agreement, by and                   Previously filed
                  among the Registrant, Frontstep Solutions
                  Group, Inc., brightwhite solutions, inc. and
                  Frontstep Canada, Inc., as Borrowers, and the
                  Lenders signatory thereto, as Lenders, and
                  Foothill Capital Corporation, as Arranger and
                  Administrative Agent

10(v)**           Common Share Purchase Warrant, dated                  Previously filed at Exhibit 4(g)
                  July 17, 2001, issued to Foothill Capital
                  Corporation
</TABLE>


                                       62
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.                   DESCRIPTION                                 PAGE
-----------                   -----------                                 ----
<S>            <C>                                               <C>
10(w)**        Registration Rights Agreement, dated                Previously filed at Exhibit 4(h)
               July 17, 2001, by and between the Registrant
               and Foothill Capital Corporation

10(x)**        Pledge and Security Agreement (Foreign),            Previously filed
               dated July 17, 2001, made by the Registrant
               and Frontstep Solutions Group, Inc., in favor
               of Foothill Capital Corporation, as agent
               for certain Lenders

10(y)**        Pledge and Security Agreement (Domestic),           Previously filed
               dated July 17, 2001, made by the Registrant and
               Frontstep Solutions Group, Inc., in favor of
               Foothill Capital Corporation, as agent for
               certain Lenders

10(z)**        Copyright Security Agreement, dated                 Previously filed
               July 17, 2000, made by the Registrant, Frontstep
               Solutions Group, Inc. and brightwhite
               solutions, inc., in favor of Foothill Capital
               Corporation, as agent for certain Lenders

10(a)(a)**     Trademark Security Agreement, dated                 Previously filed
               July 17, 2001, made by the Registrant,
               Frontstep Solutions Group, Inc., and
               brightwhite solutions, inc., in favor of
               Foothill Capital Corporation, as agent
               for certain Lenders

10(a)(b)**     Intercompany Subordination Agreement,               Previously filed
               dated July 17, 2001, made among the
               Registrant, Frontstep Solutions Group, Inc.,
               brightwhite solutions, inc., Frontstep Canada,
               Inc., and other future obligors, and Foothill
               Capital Corporation, as agent for certain Lenders

10(a)(c)       Securities Purchase Agreement, dated as of          Incorporated herein by reference to
               May 10, 2000, between the Registrant and the        Exhibit 10(a) to Registrant's Quarterly Report
               Investors identified therein                        on Form 10-Q for the fiscal quarter ended
                                                                   March 31, 2000 (File No. 0-19024)

10(a)(d)       Investor Rights Agreement, dated as of              Incorporated herein by reference to
               May 10, 2000, among the Registrant, the             Exhibit 4(c) to Registrant's Quarterly Report
               Investors identified therein and Lawrence J. Fox    on Form 10-Q for the fiscal quarter ended
                                                                   March 31, 2000 (File No. 0-19024)

10(a)(e)       Amendment to Investor Rights Agreement              Incorporated herein by reference to
                                                                   Exhibit 4(c) to Registrant's Current Report on
                                                                   Form 8-K, as filed with the Securities and
                                                                   Exchange Commission on August 30, 2000
                                                                   (File No. 0-19024)
</TABLE>


                                       63
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                   DESCRIPTION                                          PAGE
-----------                   -----------                                          ----
<S>             <C>                                              <C>
10(a)(f)**       Warrant for the Purchase of Shares of             Previously filed at Exhibit 4(e)
                 Common Stock of the Registrant issued to
                 Morgan Stanley Dean Witter Venture
                 Partners IV, L.P. and Exhibit A, identifying
                 other identical warrants issued to the Investors
                 identified on Exhibit A, for the number of
                 common shares identified on Exhibit A,
                 on the dates indicated

10(a)(g)         Assignment and Assumption Agreement,              Incorporated herein by reference to
                 by and between Morgan Stanley Dean                Exhibit 4(g) to Registrant's Quarterly

                 Witter Equity Funding, Inc. and the               Report on Form 10-Q for the fiscal quarter
                 Originators Investment Plan, L.P., dated          ended December 31, 2000 (File No. 0-
                 November 24, 2000                                 19024)

21               Subsidiaries of the Registrant                    Previously filed

23               Consents of Independent Auditors                  Filed herein

24               Powers of Attorney                                Previously filed


99(a)            Certifications of Chief Executive Officer and     Filed herein
                 Chief Financial Officer pursuant to Title 18,
                 United States Code, Section 1350, as adopted
                 pursuant to Section 906 of the Sarbanes-Oxley
                 Act of 2002
</TABLE>



*        Indicates management contracts or compensatory plans or arrangements
         that are required to be filed as an exhibit to this Annual Report on
         Form 10-K for the fiscal year ended June 30, 2001

**       Filed as an exhibit to original Annual Report on Form 10-K for the year
         ended June 30, 2001 filed with the Securities and Exchange Commission
         on September 28, 2001.

         (b)      There were no reports on Form 8-K filed during the three
                  months ended June 30, 2001.



                                       64
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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, on the 28th day of
September, 2002.

                                    Frontstep, Inc.

                                    By:  /s/ Stephen A. Sasser
                                        -------------------------------------
                                                 Stephen A. Sasser
                                        President and Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 28th day of September, 2002.

        Signature                                   Title

            *                        Chairman of the Board and Director
----------------------------------
     Lawrence J. Fox

            *                  President, Chief Executive Officer and Director
----------------------------------
    Stephen A. Sasser

            *                              Vice President, Finance, Chief
----------------------------------          Financial Officer and Secretary
    Daniel P. Buettin                Principal Financial and Accounting Officer


            *                                         Director
-----------------------------------
     Duke W. Thomas

            *                                         Director
-----------------------------------
   James A. Rutherford

            *                                         Director
-----------------------------------
   Roger D. Blackwell

            *                                         Director
-----------------------------------
    Guy L. de Chazal

            *                                         Director
-----------------------------------
   Barry M. Goldsmith

*By Power of Attorney

/s/ Daniel P. Buettin
-----------------------------------
 Daniel P. Buettin (Attorney-in-Fact)



                                       65

<PAGE>

                                 CERTIFICATIONS

I, Stephen A. Sasser, certify that:

          1. I have reviewed this report on Form 10-K/A of Frontstep, Inc.;

          2. Based on my knowledge, this report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this report; and

          3. Based on my knowledge, the financial statements, and other
     financial information included in this annual report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     annual report.

Date: September 28, 2002

                                          By:      /s/ STEPHEN A. SASSER
                                            ------------------------------------
                                                     Stephen A. Sasser
                                               President and Chief Executive
                                                           Officer

I, Daniel P. Buettin, certify that:

          1. I have reviewed this report on Form 10-K/A of Frontstep, Inc.;

          2. Based on my knowledge, this report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this report; and

          3. Based on my knowledge, the financial statements, and other
     financial information included in this annual report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     annual report.

Date: September 28, 2002

                                          By:      /s/ DANIEL P. BUETTIN
                                            ------------------------------------
                                                     Daniel P. Buettin
                                               Vice President, Finance, Chief
                                               Financial Officer And Secretary,
                                              Principal Financial and Accounting
                                                           Officer

                                        66